TP ICAP Group plc
LEI: 2138006YAA7IRVKKGE63
12 March 2024
TP
ICAP Group plc ('TP ICAP' or the 'Group')
Financial and preliminary management report for the year
ended 31 December 2023
Nicolas
Breteau, CEO of the Group, said:
"Group revenue increased by 3% in constant currency, building
on last year's strong performance. Our focus on productivity,
contribution and cost management generated an 8% uplift in Group
adjusted EBIT to £300m, the highest level of profit ever achieved
by the Group. Energy & Commodities played a key role in hitting
this important milestone, delivering record growth: revenue up 18%,
and adjusted EBIT up a significant 45%.
Our transformation is progressing well. Fusion is delivering,
with client adoption an important focus. Turning to
diversification, we have consolidated our Credit activities across
the Group; Liquidnet Credit is now being managed by Global Broking
to accelerate delivery of our dealer-to-client proposition. The
opportunity in the large, and growing, electronic Credit market is
substantial.
Parameta Solutions, our highly valuable data business,
continues to grow and develop - winning new clients, and broadening
its distribution and product suite. The Board believes that
Parameta's significant growth prospects, and the intrinsic value of
the business, are not appropriately reflected in our share price.
We are therefore exploring options for unlocking value for
shareholders, whilst retaining ownership of the asset, which
include a potential IPO of a minority stake in the
business.
Dynamic capital management is a key priority. We are starting
today a second buyback programme of £30m, having completed our
initial £30m buyback. We continue to assess opportunities to free
up more cash to pay down debt, and/or return capital to
shareholders, subject to our balance sheet needs. The Board is
recommending a final dividend of 10.0 pence per share, up 27%,
which would bring the total 2023 dividend to 14.8 pence, an
increase of 19%.
We have met, or exceeded, the majority of our revised 2023
targets. Since our Capital Markets Day in 2020, the Group is
growing the top line, is more diversified, more profitable, and
more cash generative. We are committed to creating sustainable
shareholder value by investing for growth in our market-leading
businesses, maximising the value of our strategic assets, and
delivering strong cash generation and dynamic capital
management."
Results for the Period
Statutory
results:
|
FY 2023
|
FY
2022
|
Revenue
|
£2,191m
|
£2,115m
|
EBIT
|
£128m
|
£163m
|
EBIT margin
|
5.8%
|
7.7%
|
Profit before tax
|
96m
|
£113m
|
Profit for the period
|
£74m
|
£103m
|
Basic EPS
|
9.5p
|
13.2p
|
Total dividend per share
|
14.8p
|
12.4p
|
Weighted average shares in issue
(basic)
|
777.7m
|
779.1m
|
Adjusted
results (excluding significant items):
|
FY 2023
|
FY
2022
|
FY
2022
Constant
Currency
|
|
|
|
|
Revenue
|
£2,191m
|
£2,115m
|
£2,119m
|
EBITDA
|
£373m
|
£357m
|
£359m
|
EBIT
|
£300m
|
£275m
|
£277m
|
EBIT Margin
|
13.7%
|
13.0%
|
13.1%
|
Profit before tax
|
£271m
|
£226m
|
|
Profit for the period
|
£227m
|
£194m
|
|
Basic EPS
|
29.2p
|
24.9p
|
|
Weighted average shares in issue
(basic)
|
777.7m
|
779.1m
|
|
A table reconciling Reported to
Adjusted figures is included in the Financial and Operating Review.
The percentage movements referred to in the highlights and CEO
Review are in constant currency (unless stated otherwise). This is
to reflect the underlying performance of the business, before the
impact of foreign exchange movements year-on-year. Constant
currency refers to prior year comparatives being retranslated at
current year foreign exchange rates. Approximately 60% of the
Group's revenue and approximately 40% of costs are US Dollar
denominated.
Financial
highlights
Good revenue
performance, tight cost management
· Group revenue up
3% (+4% in reported currency). Builds on 7% increase in 2022 (+13%
in reported currency);
· Global
Broking1 ('GB') revenue flat, following an exceptional
2022;
· GB productivity
up: contribution per broker increased 12%2;
· Energy &
Commodities ('E&C') record revenue performance, up 18%;
double-digit growth in Oil, Power, Gas;
· Parameta
Solutions revenue increased 8%; 11% growth in H2 2023;
· Liquidnet
division1 revenue declined 1%. Cash Equities revenue
down 9%: Global commission wallet at lowest level in 9+
years3. Cash Equities grew 13% in Q4 2023; revenue from
rest of division4 up 10%;
· Liquidnet
integration complete; cost base right-sized. £43m cost savings
(annualised) delivered, exceeding £30m target. Adjusted EBIT for
division of £10m (2022: £2m).
Increased
margins, higher profitability
· Group adjusted
EBIT up 8% (+9% in reported currency) to £300m, a record level
(2022: £277m). Focus on productivity, contribution, and tight cost
control;
· Adjusted EBIT
margin increased to 13.7% (2022: 13.1%);
· Reported EBIT,
including £76m Liquidnet net impairment (non-cash), down 21%, in
reported currency, to £128m (2022: £163m).
1.
|
Liquidnet Credit (both primary and
secondary market trading protocols, including Dealer-to-Client
('D2C')) is now reported as part of Global Broking. FY 2023
disclosures are on this basis, with FY 2022 results restated, to
ensure a like-for-like comparison year-on-year. £9m of Credit
revenue in 2022 have been reclassified from Liquidnet to Global
Broking.
|
2.
|
Contribution per broker increased by
7% when excluding Russian provisions in 2022.
|
3.
|
Source: McLagan, Q3 2023.
|
4.
|
Multi-asset (equity derivatives,
rates, futures and advisory services) Agency Execution offering,
including COEX Partners, MidCap Partners, and Relative Value
desks.
|
Strategic
highlights
Transformation
Fusion on track
· Fusion
implemented on 44% of in-scope GB desks;
· Key launches:
Interest Rate Options, European Government Bonds, Inflation and FX
Options;
· Adoption
progressing well: unique client logins (Rates) up 24%, FX up
16%;
· Building API
connectivity in response to client needs; 43 of top 50 dealer
clients API-integrated.
Diversification
Energy & Commodities
('E&C')
· Energy Transition
o New battery
metals desk; first Brazilian carbon credit trade, major market for
voluntary carbon credits;
o More data
& analytics solutions with Parameta: real-time oil pricing and
Energy Transition data.
Parameta Solutions
Strategic
developments
· Consolidation of
companies subject to regulatory approvals; enables division to
pursue more commercial/strategic opportunities;
· Exploring
options for unlocking value, which include a potential IPO of a
minority stake.
Business
developments
· Interest Rate
Swap Volatility Indices launched with GB; Liquefied Natural Gas
('LNG') Indices launched with E&C;
· Expanded E&C
products: ICAP Australia, PVM US Domestic Crude;
· Historic Risk
Free Rates product launched;
· Leveraging
Fusion Connect as a direct distribution channel.
Liquidnet division
Diversifying
cash equities proposition
· Increased market
share in Europe and the US; 100 new clients added;
· Client retention
rate of 93%;
· Launched new
pre-trade analytics product, marking entry into Listed
Derivatives;
· Revenue
increased 13% in Q4 2023, momentum continued in 2024.
Growing
multi-asset offering
· Continued growth
in rest of division5: revenue up 10%
to £138m, driven by a
strong performance from Relative Value desks.
5.
|
Multi-asset (equity derivatives,
rates, futures and advisory services) Agency Execution offering,
including COEX Partners, MidCap Partners, and Relative Value
desks.
|
Liquidnet Credit
Strategic
developments
· Group Credit
activities merged: Liquidnet Credit, including Dealer-to-Client
('D2C'), now led by GB, building on close collaboration with
Liquidnet. Leveraging GB's deep sell-side relationships;
Business
developments
· 7 sell-side
institutions now live across secondary market platform
protocols;
· Unique 'Targeted
Axe' protocol in pilot phase: dealers provided with targeted means
of sourcing buy-side liquidity;
· Partnership with
BondIT, a leading provider of investment technology, to provide
credit analytics.
Dynamic
capital management
Reducing
leverage ratio; re-financed January 24 bond
· 2023 leverage
ratio6: 1.9x (2022: 2.0x);
· Re-financed
January 2024 bond; new £250m issuance, five times
over-subscribed.
Final
dividend up 27%
•
|
Board recommending a final dividend per share of
10.0 pence. Total full year dividend of 14.8 pence, up 19% (2022:
12.4 pence);
|
•
|
Final dividend to be paid to eligible
shareholders on 24 May 2024. Ex-dividend and record dates: 11 April
2024 and 12 April 2024, respectively.
|
New £30m
buyback programme; initial £30m buyback completed
· Group
announcing, starting today, a second buyback of £30m;
· Initial £30m
buyback, completed on 3 January 2024;
· Alongside
balance sheet requirements, assessing opportunities to free up more
cash to pay down debt, and/or return additional capital to
shareholders.
6.
|
Total debt (excluding finance lease
liabilities) divided by adjusted EBITDA as defined by Rating
Agency.
|
2020 Capital
Markets Day: Strategic and financial delivery
Growing
revenues, more diversified business, highly cash generative, Global
Broking future-proofed
· Group revenue
grew 5%7 a year on average since 2019;
· Non-Broking
revenue more than doubled from 11% to 23%. Parameta Solutions
revenue up 40%;
· Cash
conversion8 ratio increased from 61% in 2019 to 124% in
2023 (2022: 156%);
· Fusion rollout,
a key GB transformation driver, on track for completion by end
2025.
Financial
targets9 delivered
· Met/exceeded
majority of revised 2023 targets, including:
o
GB10:
§ Contribution margin
of 39.8% (2023 target: 39% to 40%);
§ Adjusted EBIT
margin of 17.8% (2023 target: 17% to 19%).
o
E&C:
§ Contribution margin
of 33.6% (2023 target: 33% to 35%);
§ Adjusted EBIT
margin of 15.5% (2023 target: 13% to 15%).
o Group cash
conversion: 124% (2023 target: c.80%).
7.
|
Excluding the Liquidnet acquisition,
Group revenue grew on average by 2% a year since
2019.
|
8.
|
Defined as: Free cash flow divided
by adjusted earnings attributable to the equity holders of the
parent.
|
9.
|
Group adjusted EBIT margin target
updated from 18% to 14% at FY 2022 results, to reflect pandemic
impact, and difficult stock market conditions. All other 2023 CMD
targets unchanged, with updated guidance in relation to each target
provided at FY 2022 results.
|
10.
|
For comparison with 2023 CMD
targets, Liquidnet Credit is excluded from Global Broking, to
ensure a like-for-like basis. The contribution margin also excludes
the 2023 reclassification of technology costs (£6m) from front
office costs to management & support costs.
|
Outlook
As ever, our outlook is largely subject to
market conditions. Whilst we expect interest rates to decrease
during 2024, we believe they will remain elevated versus recent
history. This, combined with uncertainty around the pace and
quantum of interest rate cuts, elections globally, and ongoing
geopolitical events, will continue to drive volatility that is
supportive of our Global Broking and Energy & Commodities
businesses, where we anticipate trading volumes to remain solid.
Liquidnet and Parameta Solutions showed an improving growth
trajectory in the second half of 2023 - providing good momentum
into 2024.
The movement in foreign exchange rates, in
particular Sterling vs US Dollar (60% of Group revenue/40% of Group
costs are US Dollar-denominated) will continue to impact our
results - with GBP strengthening having a negative impact, and vice
versa.
Against this backdrop, we will stay focused on
developing, and growing, strong client franchises; transforming and
diversifying the Group; and managing our capital dynamically. Tight
cost management will continue to be a core focus. We expect that
growth in our total management & support costs will broadly
track the level of average UK inflation expected in 2024.
Consequently, we anticipate remaining well placed to deliver
sustainable shareholder value over the medium term.
Trading in the first two months of the year has
been good. We remain comfortable with current market expectations
for full year 2024.
2023 results
presentation
The Group will hold an in-person presentation
and Q&A at 09:00 GMT today in the Peel Hunt auditorium at 100
Liverpool Street, London, EC2M 2AT. For those unable to attend in
person, the presentation will also be broadcast via a live video
webcast.
A recording of the presentation will also be
available via playback on our website after the event at
https://tpicap.com/tpicap/investors/reports-and-presentations.
Forward
looking statements
This document contains forward looking
statements with respect to the financial condition, results and
business of the Group. By their nature, forward looking statements
involve risk and uncertainty and there may be subsequent variations
to estimates. The Group's actual future results may differ
materially from the results expressed or implied in these
forward-looking statements.
Enquiries:
Group Company
Secretary
Vicky
Hart
Email: companysecretarial@tpicap.com
Analysts and
investors
Dominic
Lagan
Direct: +44 (0) 20 3933
0447
Email: dominic.lagan@tpicap.com
Media
Richard Newman
Direct: +44 (0)
7469 039 307
Email: richard.newman@tpicap.com
About TP
ICAP
•
|
TP ICAP connects buyers and sellers in global
financial, energy and commodities markets.
|
•
|
We are the world's leading wholesale market
intermediary, with a portfolio of businesses that provide broking
services, data & analytics and market intelligence, trusted by
clients around the world.
|
•
|
We operate from more than 60 offices across 28
countries, supporting brokers with award-winning and market-leading
technology.
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
CEO
REVIEW
INTRODUCTION
We are a world-leading provider of market
infrastructure and data-led solutions. We connect institutional
clients to global financial, energy and commodities markets,
creating deep liquidity, and unique data, in the
process.
Our objective is to deliver sustainable
shareholder value. We aim to do so through leveraging our strong
franchise, and delivering our strategy, which has three key
pillars: transformation, diversification and dynamic capital
management. We are making good progress on all fronts.
Now is an opportune time to assess (a) our
progress in 2023 and (b) delivery of our key 2023 targets and
progress since the Capital Markets Day ('CMD') we held in 2020,
when we set out the main elements of our strategy. I will cover
both of these topics in detail.
DELIVERING IN 2023
Market
developments
The era of easy money is over. Interest rates
in the US and UK are at 22 and 15-year highs, respectively. Whilst
these conditions were favourable for Global Broking, the
exceptional trading volumes in 2022 did not recur at the same level
in 2023.
Energy markets were buoyant, following a
challenging 2022. ICE Gasoil average volatility reduced from 61%
(an historic high) last year to 37% in 2023. The Energy Transition
gained momentum as well. The International Energy Agency ('IEA')
estimates renewables will provide approximately half of the world's
electricity by 2030.11 Our brokers are active across all
these sectors - traditional and renewables - so we are well
positioned for the future.
Equity market conditions were challenging.
Block trading declined in Europe and the US which are key markets
for Liquidnet. According to McLagan data, in Q3 2023 the global
commission wallet for equities was at its lowest level in over nine
years. In the fourth quarter, however, there were signs of
improvement. In November, for example, according to the Bank of
America Global Fund Manager's Survey, equities allocations were
overweight for the first time since April 2022.
The demand for high quality over-the-counter
('OTC') financial markets data is growing. Global spend on
financial market data was $37bn in 2022, and industry players
forecast that 2023 growth will exceed historical
rates12. Other key trends include a growing demand for
ESG/energy-related data, independent fair valuations of OTC
derivatives, and benchmarks and indices.
11.
|
World Energy Outlook, October 2023;
International Energy Agency.
|
12.
|
Burton-Taylor Consulting
survey.
|
Business
performance
Growing
revenues, market-leading positions, tight cost
management
Group revenue was up 3% (+4% in reported
currency), building on the 7% increase in 2022 (+13% in reported
currency). As expected, total revenue generated by Global
Broking13, our largest division, was flat, following an
exceptional 2022. Energy & Commodities ('E&C') delivered
record revenue growth of 18%. Double-digit growth was delivered
across the three main asset classes: Oil, Gas, and
Power.
Liquidnet revenue declined by 1%. Cash
equities revenue decreased by 9% in 2023, but grew 13% in the
fourth quarter. This trend continued in 2024. The rest of the
division14 performed well, with revenue up 10%, driven
by a strong performance from Relative Value.
Parameta Solutions recorded an 8% increase in
revenue. The division's growth rate moved up to 11% in the second
half, with good momentum in 2024. Parameta is a high-quality
franchise with a compelling business model, characterised by 96%
subscription-based revenue and a 98% client renewal
rate.
All our divisions are market leaders:
Parameta, for example, is the leading provider in the OTC data
market. In Liquidnet, we hold the number one position in the EMEA
5x Large-in-Scale market. Our share of this market increased from
34.3% in 2022 to 35.9%15. Our US market share (top 5
Agency Alternative Trading System venues), where we are the second
largest player, also increased (2022: 23.2%; 2023:
24.0%16).
Cost management is another important driver of
our performance. We delivered £43m in annualised Liquidnet
integration cost synergies, substantially exceeding our target
(£30m).
Contribution
up, increased profitability
Our Group contribution margin17
increased to 38.7% (2022: 37.6%18). Adjusted EBIT was up
8%, or 9% in reported currency, to £300m (2022: £277m), the highest
ever level, and a significant Group milestone. This was driven by a
8% uplift in Global Broking through a greater focus on
contribution, and a reduction in average broker headcount. GB
revenue per broker was up 5%; broker contribution increased by
12%19. Double-digit revenue growth in E&C generated
a substantial 45% increase in its adjusted EBIT.
Group adjusted EBIT margin increased to 13.7%
(2022: 13.1%). Reported EBIT, including a £76m
Liquidnet impairment (non-cash, net of £10m tax relief), was down
21% to £128m (2022: £163m). The impairment in the
carrying value of the Liquidnet goodwill and acquired intangible
assets primarily reflects challenging block equity market
conditions, and an increase in the discount rate used to value the
business, in line with higher interest rates.
13.
|
Liquidnet Credit (both primary and
secondary market trading protocols, including Dealer-to-Client
('D2C')) is now reported as part of Global Broking. FY 2023
disclosures are on this basis, with FY 2022 results restated, to
ensure a like-for-like comparison year-on-year. £9m of Credit
revenue in 2022 have been reclassified from Liquidnet to Global
Broking.
|
14.
|
Multi-asset (equity derivatives,
rates, futures and advisory services) Agency Execution offering,
including COEX Partners, MidCap Partners, and Relative Value
desks.
|
15.
|
Source: Bloomberg.
|
16.
|
Source: Financial Industry
Regulatory Authority ('FINRA').
|
17.
|
Contribution represents revenue less
the direct costs of generating that revenue. Contribution is
calculated as the sum of Broking contribution and Parameta
Solutions contribution. Contribution margin is contribution
expressed as a percentage of reported revenue and is calculated by
dividing contribution by reported revenue.
|
18.
|
Prior year numbers have been
restated to reflect a £32m reclassification of technology costs
from front office costs to management & support costs, to
better reflect the nature of these costs. The reclassification
impacts Liquidnet (£26m), Global Broking (£6m) and Group
only.
|
19.
|
Contribution per broker increased by
7% when excluding Russian provisions in 2022.
|
Transformation
Fusion on
track
Fusion, our electronic platform, provides best
in class functionality, and connectivity, via a single portal, to
our deep liquidity pools. Clients use Fusion for aggregated
liquidity, price discovery, and seamless execution.
The Fusion roll-out is on track: it is now
live on 44% of in-scope Global Broking desks. Key desk launches in
Rates included Interest Rate Options, ICAP European Government
Bonds and ICAP Inflation. In FX, Fusion was implemented in
one-month Non-Deliverable Forwards and FX options.
In Energy & Commodities, we are
consolidating Energy Transition products liquidity onto one screen.
Fusion is live in the green certificates market, the voluntary
carbon market, and the Australian renewables/gas markets. The use
of technology in the highly mature OTC Oil market is more nascent.
There is client demand, however, for real-time pricing screens. We
are expanding our capabilities by partnering with a third party
technology company to deliver these screens.
Adoption of
Fusion
Our brokers are driving client adoption. Our
sales team adopt an agile approach throughout this process. They
determine the critical success factors for each desk rollout,
including client demand, market maturity, market conditions, and
liquidity profile. The pace of client adoption is encouraging. The
number of unique client logins for Rates, our largest Global
Broking asset class, increased by 24% in 2023, while FX was up
16%.
Clients are increasingly moving away from
web-based connectivity. Responding to this feedback, we focused on
delivering API connectivity, and other protocol enhancements, to
Fusion-enabled desks. API integration and
Straight-Through-Processing ('STP') further cements the client
relationship, and ensures a seamless rollout of future platform
enhancements. In 2023, 43 of our top 50 clients were fully
integrated into Fusion via an API connection.
An important element of the process,
therefore, is gathering client feedback to better understand future
requirements. Other examples include chat-based systems,
'click-to-trade' functionality, workflow automation and data
aggregation. Responding to these needs, we purchased a minority
stake in ipushpull, a UK fintech firm and our strategic Fusion
partner.
Diversification
Our diversification strategy means winning new
clients, expanding into different asset classes and geographies,
and generating more non-broking revenue.
Energy &
Commodities
Well
positioned in mature and transitional markets
Energy & Commodities is the leading OTC
broker. We serve a diverse client base, through our multi-brand
approach: Tullett Prebon, ICAP and PVM. We are well placed to
maximise the expected growth in traditional sectors, like Oil and
Gas. Global demand for oil is increasing - the IEA forecasts demand
will grow by 6% from 2022 to 2028.20
There is a substantial opportunity to grow our
revenues through an even greater focus on Energy Transition
products: renewables, battery metals, carbon credits etc. McKinsey
estimates that demand for carbon credits could increase by a factor
of 15 or more by 2030. The expected growth in battery metals, to
support the electrification of transport, is an exciting
opportunity. The IEA has predicted growth could increase by a
factor of more than 40 between 2020 and 2040.21 To
capitalise on this opportunity, we are launching a Battery Metals
desk, and have recruited one of the most experienced brokers in
this sector to lead it.
E&C is working more closely with Parameta
Solutions to monetise more of its data, in particular the data
being generated through the Energy Transition. Fusion is integral
to this accelerated collaboration.
20.
|
Oil 2023, Analysis and forecast to
2028 - IEA June 2023.
|
21.
|
The Role of Critical Minerals in
Clean Energy Transitions, IEA 2021.
|
Parameta Solutions: the market
leader
Parameta Solutions is the world leader in the
provision of OTC data and analytics.
Strategic
developments
The consolidation of the various Parameta
Solutions companies under a single legal structure will be
completed once we have received the necessary regulatory approvals.
This new structure enables us to explore options to unlock value,
and will also benefit the division commercially, by making it
easier to enter into data contracts with third parties, which is a
key growth focus.
We are focused on optimal shareholder value
creation, including in relation to Parameta Solutions. We believe
that the intrinsic value of Parameta is not appropriately reflected
in our share price, and are therefore exploring options to unlock
value for shareholders, whilst retaining ownership of the asset,
which include a potential IPO of a minority stake in the
business.
Business
developments
The business is expanding its product range,
diversifying its client base, and broadening its distribution
channels - all exciting growth prospects. A good example is the
launch of Liquefied Natural Gas Indices, in collaboration with
E&C and General Index, a leading energy and commodities data
provider. Parameta already administers nine TP ICAP Interest Rate
Swap benchmarks, and recently launched Interest Rate Swap
Volatility indices, in partnership
with Global Broking. An Historic Risk Free Rates product for
successor rates to LIBOR was launched during the year, while the
E&C product suite was expanded to include ICAP Australia and
PVM US Domestic Crude Oil. Parameta Solutions is leveraging Fusion
as a direct distribution channel.
Liquidnet division
Liquidnet is a global, multi-asset,
technology-led agency execution specialist, operating across 49
markets. It consists of a cash equities franchise (acquired by the
Group in 2021), as well as a multi-asset agency execution offering.
A leading buyside player, Liquidnet provides the group with client
and product diversification. We have rightsized the cost base and
strengthened our operational leverage. The cash equities franchise
is ready for any market normalisation. The division ended the year
with an adjusted EBIT of £10m (2022: £2m), driven by the strong
performance from the multi-asset offering (Relative Value in
particular).
Diversifying
cash equities
Liquidnet cash equities is pursuing an 'all
weathers' strategy. This means growing its client base, and product
capabilities, in algorithmic trading, programme trading, and
inter-region trading. We added 100 new clients and grew programme
trading revenue by 26%. Of our clients that traded with us in 2022,
93% were retained in 2023. We also enhanced our algorithm offering.
For example, we launched Surge Opportunity, which enables clients
to identify block trading opportunities through regular alerts. In
turn, we marked our entry into the listed derivatives market by
launching a pre-trade analytics offering.
Liquidnet Credit
Strategic
developments
We made a commercial decision to merge the
Group's Credit activities. As a consequence, the Liquidnet Credit
business, including the Dealer-to-Client ('D2C')
proposition, is now led by Global
Broking22. This enables the business to more effectively
leverage GB's deep sell-side relationships, and accelerate
connectivity: key growth drivers.
Business
developments
The target addressable market in Credit is
substantial, and a major opportunity. Electronification is growing
at pace, with electronic investment grade corporate bond trading
volumes having doubled in five years, whilst high-yield
volumes have almost trebled. Electronic trading accounts for c.40%
of the US market and c.55% in Europe23.
Connecting dealers to the platform is central
to growing liquidity. We now have 7 sell-side institutions
connected across the various secondary market platform protocols,
including two major banks connected on our D2C workflow, with a
further two added to the pipeline. A unique D2C protocol called
'Targeted Axe' is currently in pilot phase, providing dealers with
a targeted way to source buy-side liquidity. We also partnered with
bondIT, a leading provider of next-generation investment
technology, to integrate their credit analytics into our platform.
This enables traders to anticipate market trends, mitigate credit
risk, and make more informed decisions faster.
22.
|
Liquidnet Credit (both primary and
secondary market trading protocols, including Dealer-to-Client
('D2C')) is now reported as part of Global Broking. FY 2023
disclosures are on this basis, with FY 2022 results restated, to
ensure a like-for-like comparison year-on-year. £9m of Credit
revenue in 2022 have been reclassified from Liquidnet to Global
Broking.
|
23.
|
Financial Times, 26 April
2023.
|
Dynamic
capital management
Dynamic capital management is a key priority.
This means reducing our debt, and returning surplus capital to
shareholders, subject to our ongoing investment needs and balance
sheet requirements.
Reducing
debt and leverage
We freed up £100m of cash before the end of
2023, ahead of schedule. Sources of the freed up cash included the
remittance of the pension surplus, following the wind down of our
Defined Benefit Scheme, and the capital released from the
consolidation of US broker-dealer entities.
This cash is being used to reduce debt and
other financing obligations, lowering our future net finance costs,
and increasing our investment grade headroom. Paydown of debt and
other financing obligations to date of £88m includes the
outstanding part of our 2024 bond (£37m, paid in January 2024) and
Liquidnet deferred consideration (£51m, paid in February 2024). The
Group's 2023 leverage ratio24 is 1.9 times (31 December
2022: 2.0 times). The leverage ratio is expected to reduce further
at our HY 2024 results in August.
Clear
dividend policy
We are committed to our dividend policy: a 50%
pay-out ratio of adjusted post-tax earnings for the year as a
whole. The Board is recommending a final dividend per share of 10.0
pence (up 27%). This would bring the total dividend to 14.8 pence
per share, up 19% (2022: 12.4 pence per share). The final dividend
will be paid to eligible shareholders on 24 May 2024, with an
ex-dividend and record date of 11 April 2024 and 12 April 2024,
respectively.
Further
buyback programme of £30m announced; £30m buyback
completed.
Starting today, we are commencing a second
buyback of £30m. A separate RNS is available on our website at
https://tpicap.com/tpicap/regulatory-hub/regulatory-news.
The £30m share buyback programme we announced
at our HY 2023 results on 9 August 2023, was completed on 3 January
2024. A total of 16,925,189 shares were
bought back at a weighted average share price of 177.25 pence per
share. Shares bought back are not included in the share count for
earnings per share and dividends per share purposes.
Subject to our balance sheet and investment
needs, we are assessing opportunities to free up more cash and pay
down more debt, and/or return additional capital to
shareholders.
24.
|
Total debt (excluding finance lease
liabilities) divided by adjusted EBITDA as defined by Rating
Agency.
|
DELIVERING
OUR CAPITAL MARKETS DAY STRATEGY
At our Capital Markets Day ('CMD') in 2020, we
set out a strategy to deliver two key objectives: a) future-proof
our broking businesses, and b) grow the Group, diversify, and
generate more cash.
Future-proofing our broking
businesses
Our starting point back in 2020 was clear. Our
broking markets were changing rapidly, driven by regulatory change,
greater competition, and technology. We aimed to embrace those
changes - and transform Global Broking - through a range of
initiatives, including Fusion, our electronic platform.
Global Broking productivity, with Fusion a
contributory factor, has grown by 23% since 2021. Desks with Fusion
tend to be more productive, and have a higher
contribution.
Growing and
diversifying
Global Broking, and Energy & Commodities,
are market leaders. This was a strong starting point when we
launched our CMD strategy. But, it was not enough. We knew it was
important to grow our top line, bulk up our non-broking businesses,
and generate more cash. I am pleased to say we have done
so.
Group revenue has grown on average by 5% a
year since 201925. Non-broking revenue, with Parameta
Solutions a key driver, has more than doubled: 11% of total revenue
then, and 23% now. The quality of that revenue is another point to
bear in mind. Parameta's revenue base - up 40% since 2019 - is
subscription-based, with high client retention. The Group's cash
conversion ratio has improved from 61% in 2019 to 124% in 2023
(2022: 156%).
The acquisition of Liquidnet provided a
valuable buyside diversification opportunity and the potential to
grow in Credit, especially D2C. The backdrop has been challenging
since the acquisition, however. I would like to acknowledge the
support, and constructive feedback, we have had from shareholders
since then. The Liquidnet Cash Equities franchise is a stronger
business now, with a more developed franchise and better
operational leverage.
25.
|
Excluding the Liquidnet acquisition,
Group revenue grew on average by 2% a year since
2019.
|
Delivering
our key financial targets, including more cash
generation
At our FY 2022 results, we revised our 2023
targets to reflect the impact of the pandemic, and difficult stock
market conditions26 impacting Liquidnet. I am pleased to
note that we have met, or exceeded, the majority of these revised
targets, with some highlights below.
Highlights:
· Global
Broking27:
o Contribution
margin of 39.8% (2023 target: 39% to 40%);
o Adjusted EBIT
margin of 17.8% (2023 target: 17% to 19%).
· Energy &
Commodities:
o Contribution
margin of 33.6% (2023 target: 33% to 35%);
o Adjusted EBIT
margin of 15.5% (2023 target: 13% to 15%).
· Group cash
conversion28: 124% in 2023 (2023 target:
c.80%).
Delivering
sustainable shareholder value
The discipline underpinning our 2020 CMD
strategy is embedded across our Group. So too is a clear approach
to delivering sustainable shareholder value by: a) Investing in key
businesses and maximising our strategic assets, and b) strong cash
generation and dynamic capital management.
Investing in
key businesses for growth, maximising the value of strategic
assets
We are the number one player in Global
Broking, E&C, and OTC data. In Global Broking, our biggest
business, we are in the final phase of our Fusion rollout which
will be completed by the end of 2025. We will increase the
proportion of Fusion-derived revenue with, we believe, a positive
impact on productivity and contribution. Fusion is also central to
our data ambitions with Parameta Solutions. The more business we
transact through Fusion, the more data we monetise.
We will continue to invest in our E&C and
Parameta Solutions businesses. As the leading Oil and Gas broker,
E&C is ready to leverage the IEA's forecast growth in Oil,
mentioned earlier. Energy Transition products, another key area,
are anticipated to grow even more. Parameta Solutions is positioned
to reap the benefits from the significant increase in
Fusion-generated data.
We aim to maximise the value of our strategic
assets. That is why we are actively exploring options to unlock
value in Parameta Solutions, including a potential IPO of a
minority stake of the business.
Strong cash
generation and dynamic capital management
We will maintain our high profit to cash
conversion. Our diversified model - 65% of revenue is generated
outside the UK, 60% is US Dollar denominated - is a key enabler in
this respect. That focus on cash generation is coupled with our
commitment to returning more cash, where possible, to shareholders,
subject to our investment needs and balance sheet requirements. Our
clear dividend policy is very much in place.
We will deliver sustainable shareholder value
by delivering our strategy, including growing our businesses, and
maximising the value of our strategic assets, accompanied by high
levels of cash generation, and dynamic capital management. We look
to the future with confidence.
26.
|
Group adjusted EBIT margin target
updated from 18% to 14% at FY 2022 results, to reflect pandemic
impact, and difficult stock market conditions. All other 2023 CMD
targets unchanged, with updated guidance in relation to each target
provided at FY 2022 results.
|
27.
|
For comparison with 2023 CMD
targets, Liquidnet Credit is excluded from Global Broking, to
ensure a like-for-like basis. The contribution margin also excludes
the 2023 reclassification of technology costs (£6m) from front
office costs to management & support costs.
|
28.
|
Defined as: Free cash flow divided
by adjusted earnings attributable to the equity holders of the
parent.
|
Outlook
As ever, our outlook is largely subject to
market conditions. Whilst we expect interest rates to decrease
during 2024, we believe they will remain elevated versus recent
history. This, combined with uncertainty around the pace and
quantum of interest rate cuts, elections globally, and ongoing
geopolitical events, will continue to drive volatility that is
supportive of our Global Broking and Energy & Commodities
businesses, where we anticipate trading volumes to remain solid.
Liquidnet and Parameta Solutions showed an improving growth
trajectory in the second half of 2023 - providing good momentum
into 2024.
The movement in foreign exchange rates, in
particular Sterling vs US Dollar (60% of Group revenue/40% of Group
costs are US Dollar-denominated) will continue to impact our
results - with GBP strengthening having a negative impact, and vice
versa.
Against this backdrop, we will stay focused on
developing, and growing, strong client franchises; transforming and
diversifying the Group; and managing our capital dynamically. Tight
cost management will continue to be a core focus. We expect that
growth in management & support costs (excluding FX gains or
losses), will broadly track the level of average UK inflation
expected in 2024. Consequently, we anticipate remaining well placed
to deliver sustainable shareholder value over the medium
term.
Trading in the first two months of the year
has been good. We remain comfortable with current market
expectations for full year 2024.
Nicolas
Breteau
Executive Director and Chief Executive
Officer
12 March 2024
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Financial and operating review
All
percentage movements quoted in the analysis of financial results
that follows are in reported currency, unless otherwise stated.
Reported currency refers to prior year comparatives translated
using prior year foreign exchange rates.
Introduction
The Group delivered a good financial
performance: revenue increased 4% to £2,191m (3% ahead in constant
currency), building on the 13% growth in 2022.
In line with our expectations, following a
strong performance in 2022, revenue in our largest division, Global
Broking, was unchanged. Energy & Commodities delivered record
revenue growth of 18%, benefitting from improved market conditions.
This included double-digit growth across all the key asset classes
(Oil, Power and Gas).
Liquidnet revenue (excluding Credit, now
reported as part of our Credit asset class in Global Broking)
declined marginally. Cash Equities revenue was 8% down, but
outperformed the activity in large block market volumes -
Liquidnet's key market segment. We grew our market share in the US
and EMEA regions, underlining the strength of our franchise. Cash
Equities revenue increased by 9% in the fourth quarter, and this
positive momentum has continued so far in 2024.
Parameta Solutions, a world leader in the
provision of OTC data and analytics, grew its revenue by 8% and
continues to benefit from the delivery of multi-channel
distribution and diversification of its client base.
Our focus on cost management
(annualised Liquidnet integration cost synergies of £43m), and
broker productivity (average revenue per broker +10%), increased
our Group contribution margin to 38.7% (2022: 37.6%). We delivered
a record adjusted EBIT of £300m (2022: £275m), up 9%, with EBIT
margin increasing to 13.7% from 13.0%, despite a £11m foreign
currency loss arising from the retranslation of the Group's
monetary assets and liabilities (2022: £14m gain).
The Group incurred significant
items of £153m post-tax in reported earnings (2022: £91m) with the
year-on-year increase driven by the £76m (net of tax) in 2023
impairment of goodwill and acquired intangibles assets in
Liquidnet. The impairment reflects the particularly challenging
equity markets seen over the last two years, as well as an increase
in the discount rate. Significant items excluding the impairment
and income and costs associated with legal and regulatory matters,
were lower than our previous guidance of £85m (pre-tax). Group's
reported EBIT was £128m (2022: £163m).
At our Capital Markets Day in 2020,
we set out our strategy to transform, grow, and diversify the
Group. At the same time, we set out a range of 2023 targets which
we adjusted last year to principally reflect the challenging market
conditions for Liquidnet Equities, and the impact of the pandemic.
We have exceeded the updated guidance for most of these
targets.
Dynamic capital management is an
important strategic priority for us. We freed up our targeted £100m
of cash, which is being used to reduce Group debt. Our leverage
ratio1 is now 1.9 times, and is expected to reduce
further, when we report our half year 2024 results in August. We
delivered strong cash generation, with a cash conversion ratio of
124% (2022: 156%). We announced a second share buyback programme of
£30m, following the completion of the initial £30m programme in
January 2024. Finally, in line with our dividend policy, the Board
is recommending a final 2023 dividend of 10.0 pence per share,
representing a full year 2023 dividend of 14.8 pence per share, up
19.4%.
Robin Stewart
Executive Director and Chief
Financial Officer
12 March 2024
1.
Total debt (excluding finance lease liabilities) dividend by
adjusted EBITDA as defined by Rating Agency.
Key financial
and performance metrics
£m
|
2023
|
2022
Reported2
|
2022
Constant
Currency2
|
Reported
change
|
Constant Currency
Change
|
Revenue
|
2,191
|
2,115
|
2,119
|
4%
|
3%
|
Reported
|
|
|
|
|
|
- EBIT
|
128
|
163
|
165
|
(21%)
|
(22%)
|
- EBIT margin
|
5.8%
|
7.7%
|
7.8%
|
(1.9%)
|
(2.0%)
|
Adjusted
|
|
|
|
|
|
- Contribution
|
848
|
795
|
797
|
7%
|
6%
|
- Contribution margin
|
38.7%
|
37.6%
|
37.6%
|
1.1%
|
1.1%
|
- EBITDA
|
373
|
357
|
359
|
4%
|
4%
|
- EBIT
|
300
|
275
|
277
|
9%
|
8%
|
- EBIT margin
|
13.7%
|
13.0%
|
13.1%
|
0.7%
|
0.6%
|
Average:
|
|
|
|
|
|
- Broker
headcount1
|
2,556
|
2,680
|
2,680
|
(5%)
|
(5%)
|
- Revenue per broker1
(£'000)
|
716
|
652
|
653
|
10%
|
10%
|
- Contribution per
broker1 (£'000)
|
268
|
230
|
230
|
17%
|
17%
|
Period end:
|
|
|
|
|
|
- Broker
headcount1
|
2,523
|
2,613
|
2,613
|
(3%)
|
(3%)
|
- Total headcount
|
5,179
|
5,161
|
5,161
|
-
|
-
|
1.
|
Revenue per broker and contribution per broker are calculated
as external revenue and contribution of Global Broking, Energy
& Commodities and Liquidnet (excluding the acquired Liquidnet
platform) divided by the average broker headcount for the year.
2022 broker headcount restated to include Liquidnet Credit platform
to reflect the Credit platform merger with Global
Broking.
|
2.
|
Prior year numbers have been restated to reflect £32m
reclassification of technology costs from front office costs to
management & support costs to better reflect the nature and
management of these costs.
|
|
Income statement
Whilst not a substitute for IFRS, management
believe adjusted figures provide relevant information to better
understand the underlying business performance. These adjusted
measures, and other alternative performance measures ('APMs'), are
also used by management for planning and to measure the Group's
performance.
2023
£m
|
Adjusted
|
Significant
items
|
Reported
|
Revenue
|
2,191
|
-
|
2,191
|
Employment, compensation and
benefits
|
(1,354)
|
(6)
|
(1,360)
|
General and administrative
expenses
|
(478)
|
(33)
|
(511)
|
Depreciation and impairment of PPE
and ROUA
|
(45)
|
(11)
|
(56)
|
Amortisation and impairment of
intangible assets
|
(28)
|
(130)
|
(158)
|
Operating expenses
|
(1,905)
|
(180)
|
(2,085)
|
Other operating income
|
14
|
8
|
22
|
EBIT
|
300
|
(172)
|
128
|
Net finance expense
|
(29)
|
(3)
|
(32)
|
Profit before tax
|
271
|
(175)
|
96
|
Tax
|
(67)
|
27
|
(40)
|
Share of net profit of associates
and joint ventures
|
25
|
(5)
|
20
|
Non-controlling
interests
|
(2)
|
-
|
(2)
|
Attributable Earnings
|
227
|
(153)
|
74
|
Basic average number of shares
(millions)
|
777.7
|
|
777.7
|
Basic EPS (pence per
share)
|
29.2p
|
|
9.5p
|
Diluted average number of shares
(millions)
|
794.2
|
|
794.2
|
Diluted EPS (pence per
share)
|
28.6p
|
|
9.3p
|
2022
£m
|
Adjusted
|
Significant
items
|
Reported
|
Revenue
|
2,115
|
-
|
2,115
|
Employment, compensation and
benefits
|
(1,296)
|
(24)
|
(1,320)
|
General and administrative
expenses
|
(474)
|
(32)
|
(506)
|
Depreciation and impairment of PPE
and ROUA
|
(49)
|
(9)
|
(58)
|
Amortisation and impairment of
intangible assets
|
(33)
|
(65)
|
(98)
|
Operating expenses
|
(1,852)
|
(130)
|
(1,982)
|
Other operating income
|
12
|
18
|
30
|
EBIT
|
275
|
(112)
|
163
|
Net finance expense
|
(49)
|
(1)
|
(50)
|
Profit before tax
|
226
|
(113)
|
113
|
Tax
|
(58)
|
22
|
(36)
|
Share of net profit of associates
and joint ventures
|
29
|
-
|
29
|
Non-controlling
interests
|
(3)
|
-
|
(3)
|
Attributable Earnings
|
194
|
(91)
|
103
|
Basic average number of shares
(millions)
|
779.1
|
|
779.1
|
Basic EPS (pence per
share)
|
24.9p
|
|
13.2p
|
Diluted average number of shares
(millions)
|
790.6
|
|
790.6
|
Diluted EPS (pence per
share)
|
24.5p
|
|
13.0p
|
|
|
|
|
All
percentage movements quoted in the analysis of financial results
that follows are in constant currency, unless otherwise stated.
Constant currency refers to prior year comparatives being
retranslated at current year foreign exchange rates to support
comparison on an underlying basis.
Revenue by
division
Total Group revenue in 2023 of £2,191m was 3%
higher than the prior year (+4% in reported currency). Global
Broking revenue was broadly in line, with the performance
underpinned by another strong year for Rates and growth in FX and
Money Markets. Energy & Commodities revenue increased by 18%
supported by improved market activity across Oil, Power and Gas.
Supply disruptions caused by the war in Ukraine receded and
European gas prices returned to more normal levels, leading to an
increase in trading activity. In Liquidnet revenue was down 1% due
to challenging equity market conditions, particularly during H1
2023. However, an improvement in equity markets in Q4 saw Cash
Equities revenue rise 13%, providing good momentum for 2024. The
rest of the Liquidnet division delivered strong growth (+12%),
driven by the Relative Value desks. Parameta Solutions revenue was
up 8% as it continued to benefit from growing demand for high
quality financial markets data. Growth accelerated to 11% in H2
2023.
£m
|
2023
|
2022
(restated
reported currency)
|
2022
(restated constant currency)
|
Reported currency change
|
Constant currency change
|
|
By Business Division
|
|
|
|
|
|
|
Rates
|
566
|
567
|
567
|
-
|
-
|
|
FX & Money Markets
|
312
|
302
|
302
|
3%
|
3%
|
|
Equities
|
237
|
246
|
246
|
(4%)
|
(4%)
|
|
Credit2
|
121
|
125
|
125
|
(3%)
|
(3%)
|
|
Inter-division
revenue1
|
22
|
22
|
22
|
-
|
-
|
|
Global Broking3
|
1,258
|
1,262
|
1,262
|
-
|
-
|
|
Energy &
Commodities
|
455
|
384
|
386
|
18%
|
18%
|
|
Inter-division
revenue1
|
3
|
3
|
3
|
-
|
-
|
|
Energy & Commodities
|
458
|
387
|
389
|
18%
|
18%
|
|
Liquidnet2
|
315
|
316
|
318
|
-
|
(1%)
|
|
Data &
Analytics
|
185
|
175
|
175
|
6%
|
6%
|
|
Inter-division
revenue1
|
4
|
-
|
-
|
n/a
|
n/a
|
|
Parameta Solutions3
|
189
|
175
|
175
|
8%
|
8%
|
|
Inter-division
eliminations1
|
(29)
|
(25)
|
(25)
|
(16%)
|
(16%)
|
|
Total Revenue
|
2,191
|
2,115
|
2,119
|
4%
|
3%
|
|
|
|
|
|
|
|
|
1.
|
Inter-division revenue has been recognised in Global Broking
and Energy & Commodities to reflect the value of proprietary
data provided to the Parameta Solutions division. The Global
Broking and Energy & Commodities inter-division revenue and
Parameta Solutions inter-division costs are eliminated upon the
consolidation of the Group's financial
results.
|
2.
|
Liquidnet Credit revenue of £11m is now reported as part of
Global Broking. 2023 disclosures are on this basis, with 2022
results restated, to ensure a like-for-like comparison
year-on-year. £9m of Credit revenue in 2022 has been reclassified
from Liquidnet to Global Broking.
|
2.
|
Parameta Solutions desks transferred into Global
Broking reflecting the change in focus of business activities. 2022
Revenue for Global Broking increased by £2m, Parameta Solutions
reduced by £2m.
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
The table below sets out operating
expenses, divided principally between front office costs and
management and support costs. Front office costs tend to have a
large variable component and are directly linked to the output of
our brokers. The largest element of this is broker compensation as
well as other front office costs, which include travel and
entertainment, telecommunications and information services,
clearing and settlement fees as well as other direct costs. The
remaining cost base represents the management and support costs of
the Group.
£m
|
2023
|
2022
(restated1
reported currency)
|
2022
(restated1
constant currency)
|
Reported
change
|
Constant
currency
change
|
Front office costs
|
|
|
|
|
|
- Global Broking
|
761
|
798
|
799
|
(5%)
|
(5%)
|
- Energy &
Commodities
|
304
|
263
|
264
|
16%
|
16%
|
- Liquidnet
|
207
|
197
|
197
|
5%
|
5%
|
- Parameta
Solutions
|
71
|
62
|
62
|
15%
|
15%
|
Total front office costs2
|
1,343
|
1,320
|
1,322
|
2%
|
2%
|
Management and support
costs
|
|
|
|
|
|
- Employment
costs
|
319
|
297
|
297
|
7%
|
7%
|
- Technology and
related costs
|
93
|
93
|
93
|
-
|
-
|
- Premises and related
costs
|
29
|
28
|
28
|
4%
|
4%
|
- Depreciation and
amortisation
|
73
|
82
|
82
|
(11%)
|
(11%)
|
- Other administrative
costs
|
37
|
46
|
46
|
(20%)
|
(20%)
|
Total management & support costs
|
551
|
546
|
546
|
1%
|
1%
|
- FX
(gains)/losses
|
11
|
(14)
|
(14)
|
n/a
|
n/a
|
Total management & support costs (incl. FX
losses/(gains)
|
562
|
532
|
532
|
6%
|
6%
|
Total adjusted operating costs
|
1,905
|
1,852
|
1,854
|
3%
|
3%
|
Significant items
|
180
|
130
|
128
|
38%
|
41%
|
Total operating expenses
|
2,085
|
1,982
|
1,982
|
5%
|
5%
|
1.
Prior year
numbers have been restated to reflect £32m reclassification of
technology costs from front office costs to management &
support costs to better reflect the nature of these costs. The
reclassification impacts Liquidnet, Global Broking and the
Group.
2.
Includes all
front office costs, including broker compensation, sales
commission, travel and entertainment, telecommunications,
information services, clearing and settlement fees as well as other
direct costs.
Total front office costs of £1,343m increased
by 2% on reported and constant currency basis compared with 2022,
in line with increase in revenue. In 2022 there was a £21m P&L
charge, net of recoveries relating to Russian exposures. Excluding
this charge, the front office costs increased by 3%, Total
management & support costs (excluding FX (gains)/losses) of
£551m remained broadly in line compared with the previous period.
The FX impact from the retranslation of monetary assets and
liabilities reversed from a £14m gain in 2022, to an £11m loss in
2023. We maintained tight cost discipline and the impact of ongoing
inflationary pressures and continuing investment in Liquidnet
Credit was largely offset by the delivery of further cost savings,
which has strengthened our operating leverage. We have now
delivered £43m of annualised Liquidnet integration cost synergies,
exceeding our target of £30m.
Total operating expenses of £2,085m, increased
by 5% compared with 2022. During 2023, we incurred total strategic
IT investment spend amounting to £26m (2022: £22m) comprising £7m
of operating expenses and £19m of capital expenditure. (2022: £8m
operating expenses and £14m capital expenditure).
Capital and
liquidity management
Capital
management
The Group achieved its target of freeing up
c.£100m of cash, six months ahead of schedule. It is being used to
reduce Group debt, thereby reducing our future net finance costs,
and increasing our investment grade headroom.
In April 2023, we issued £250m Sterling Notes
maturing in 2030 under the Group's Euro Medium Term Note ('EMTN')
programme. The proceeds were used to repay £210m of the outstanding
Sterling Notes, in 2023 and the balance at maturity, in January
2024.
Free cash flow generation was strong at £281m
(2022: £302m), representing a 124% cash conversion1
(free cash flow divided by adjusted attributable
earnings).
We announced a share buyback programme of up
to £30m in August 2023 which was executed during the second half of
2023 and completed in the first week of January 2024. We have
announced a second buyback of £30m. The Board remains committed to
identifying and returning any potential surplus capital to
shareholders, subject to the ongoing assessment of our balance
sheet and investment requirements.
1 Cash conversion is defined as reported free cash flow (£281m)
divided by adjusted attributable earnings (£227m).
Liquidity
management
The Group extended the £350m syndicated
Revolving Credit Facility ('RCF') for a further year to May 2026.
In January 2024 the Yen10bn RCF with a Japanese strategic partner
has also been extended to February 2026.
Significant
items
Items that distort comparisons due to their
size, nature or frequency, are excluded in order to provide
additional understanding, comparability and predictability of the
underlying trends of the business, to arrive at adjusted operating
and profit measures.
Significant items are categorised as
below:
Restructuring and related
costs
Restructuring and related costs arise from
initiatives to reduce the ongoing cost base and improve efficiency
to enable the delivery of our strategic priorities. These
initiatives are significant in size and nature to warrant exclusion
from adjusted measures. Costs for other smaller scale restructuring
are retained within both reported and adjusted results.
Disposals,
acquisitions and investments in new businesses
Costs, and any related income, related to
disposals, acquisitions and investments in new business are
transaction dependent and can vary significantly year-on-year,
depending on the size and complexity of each transaction.
Amortisation of purchased and developed software is contained in
both the reported and adjusted results as these are considered to
be core to supporting the operations of the business.
Impairment
The Group conducts its goodwill and intangible
asset impairment test annually in September, or more frequently if
indicators of impairment exist. Impairment assessments are
performed by comparing the carrying amount of a cash generating
unit ('CGU'), to its recoverable amount. Judgement is involved in
estimating the future cash flows of the cash-generating units and
the rates used to discount these cash flows.
Legal and
regulatory matters
Costs, and recoveries, related to
certain legal and regulatory cases are treated as significant items
due to their size and nature. Management considers these cases
separately due to the judgements and estimation involved, the costs
and recoveries of which could vary significantly
year-on-year.
The table below shows the significant items in
2023 vs 2022, of which around 85% of the total 2023 costs are
non-cash.
|
2023
|
2023
|
2023
|
2022
|
2022
|
2022
|
£m
|
Gross
Expense
|
Tax Relief
|
Net Amount
|
Gross
Expense
|
Tax Relief
|
Net Amount
|
|
|
|
|
|
|
|
Restructuring & related costs
|
|
|
|
|
|
|
- Property
rationalisation1
|
15
|
(3)
|
12
|
16
|
(3)
|
13
|
- Liquidnet integration
|
9
|
(2)
|
7
|
9
|
(1)
|
8
|
- Group cost saving
programme
|
-
|
-
|
-
|
21
|
(3)
|
18
|
- Business
restructuring2
|
2
|
-
|
2
|
2
|
-
|
2
|
- Remeasurement of employee group
income protection ('GIP') provision
|
-
|
-
|
-
|
(7)
|
1
|
(6)
|
Subtotal
|
26
|
(5)
|
21
|
41
|
(6)
|
35
|
|
|
|
|
|
|
|
Disposals, acquisitions and investment in new
business
|
|
|
|
|
|
|
- Amortisation of intangible
assets arising on consolidation
|
44
|
(11)
|
33
|
45
|
(10)
|
35
|
- Liquidnet acquisition
related3
|
10
|
(2)
|
8
|
(15)
|
(6)
|
(21)
|
- Foreign exchange
losses
|
(2)
|
1
|
(1)
|
5
|
-
|
5
|
- Adjustment to deferred
consideration4
|
(3)
|
-
|
(3)
|
8
|
-
|
8
|
- Strategic project
costs
|
-
|
-
|
-
|
3
|
-
|
3
|
Subtotal
|
49
|
(12)
|
37
|
46
|
(16)
|
30
|
|
|
|
|
|
|
|
Impairment5
|
|
|
|
|
|
|
- Liquidnet
Goodwill
|
47
|
-
|
47
|
-
|
-
|
-
|
- Liquidnet Customer
relationships
|
39
|
(10)
|
29
|
20
|
-
|
20
|
Subtotal
|
86
|
(10)
|
76
|
20
|
-
|
20
|
|
|
|
|
|
|
|
Legal & regulatory matters6 -
Subtotal
|
11
|
-
|
11
|
5
|
-
|
5
|
|
|
|
|
|
|
|
Total pre-financing cost
|
172
|
(27)
|
145
|
112
|
(22)
|
90
|
- Financing interest expense on
Vendor Loan Notes, amortisation of discount on deferred
consideration and GIP provision
|
3
|
-
|
3
|
1
|
-
|
1
|
Total post-financing cost
|
175
|
(27)
|
148
|
113
|
(22)
|
91
|
Associate
impairment7
|
5
|
-
|
5
|
-
|
-
|
-
|
Total
|
180
|
(27)
|
153
|
113
|
(22)
|
91
|
1.
|
£12m Property rationalisation costs include costs relating to
exiting Liquidnet's Hong Kong and New York
office.
|
2.
|
£2m of Business restructuring costs include the ongoing work
to simplify the Group's legal entity structure and free up
capital.
|
3.
|
£8m of Liquidnet acquisition related costs relating to
settling commercial and regulatory matters arising from the
Liquidnet acquisition.
|
4.
|
£(3)m adjustment to deferred consideration includes the
reduction of deferred consideration on the Liquidnet earnout in the
light of lower performance in the equities
business.
|
5.
|
£76m recognised impairment of the carrying values of goodwill
and acquired customer relationships in Liquidnet as a result of
prolonged adverse changes in equity market conditions, and an
increase in the discount rate that is applied to cash flow
projections.
|
6.
|
£11m Legal & regulatory matters includes costs related to
proceedings issued by the Frankfurt and Cologne Prosecutors, civil
claims relating to 'cum-ex', the defence of LIBOR actions and
settlement, costs related to the Company bringing a warranty claim
against NEX Group and costs related to ongoing regulatory
investigations.
|
7.
|
£5m relates to the impairment of the Group's carrying value
of an associate company on disposal - Corretaje e Informacion
Monetaria Y de Divisas SA ('CIMD').
|
Net finance
expense
The adjusted net finance expense of £29m
(reported net finance expense £32m), is comprised of £46m interest
expense and £14m of net interest on finance leases, offset by £31m
interest income. The net finance expense is £20m lower compared
with £49m in 2022. This is mainly due to:
•
|
£26m increase in interest income following
concerted effort to maximise the interest rate yield on increasing
cash balances;
|
•
|
£7m increase in interest expense from 2030
Sterling Notes refinanced at higher rate (7.875%) compared with the
2024 Sterling Notes repaid (5.25%) and;
|
•
|
£1m decrease in net financing leasing
costs.
|
Tax
The effective rate of tax on adjusted profit
before tax is 24.7% (2022: 25.7%). The effective rate of tax on
reported profit before tax is 41.7% (2022: 31.9%).
Basic
EPS
The average number of shares used for the 2023
Basic EPS calculation is 777.7m (2022: 779.1m). This reflects the
788.7m shares in issue as at 31 December 2022, less the 8.8m shares
held in trust as at 31 December 2022, adjusted for the
time-apportioned movements in shares during 2023. Time-apportioned
movements during the year were an increase of 0.5m in respect of
own shares held in trust and a decrease of 2.7m in respect of
treasury shares acquired through the share buyback.
The TP ICAP plc EBT has waived its rights to
dividends.
The reported Basic EPS for 2023 was 9.5p
(2022: 13.2p) and adjusted Basic EPS for 2023 was 29.2p (2022:
24.9p).
Dividend
The Board is recommending a final
dividend for 2023 of 10.0p, which, when added to the interim
dividend of 4.8p, results in a total dividend for the year of
14.8p, an increase of 19% from the previous year. This aligns to
the Group's dividend policy which targets a dividend cover of
approximately two times on adjusted post-tax earnings. The dividend
distribution during the year is typically based on a pay-out range
of 30-40% of H1 adjusted post-tax earnings with the balance paid in
the final dividend. The final dividend will be paid on 24 May 2024
to shareholders on the register at close of business on 12 April
2024. The ex-dividend date will be 11 April 2024.
The Company offers a Dividend
Reinvestment Plan ('DRIP'), where dividends can be reinvested in
further TP ICAP Group plc shares. The DRIP election cut-off date
will be 02 May 2024.
Targets for
2023 and Guidance for 2024
At the Capital Markets Day ('CMD') in December
2020 we set out financial targets for the end of 2023 and
subsequently updated guidance to reflect progress and updated
following the impact of the pandemic and the challenging equity
market conditions for the Liquidnet platform alongside the Credit
proposition taking longer than planned. As we often highlight, it
is difficult to predict future levels of market activity, given the
highly uncertain macro and geopolitical outlook.
We have met most of our guidance.
Contribution Margin
|
Total
Group
|
GB1,2
|
E&C
|
PS
|
LN1,2
|
Latest guidance
|
|
39% to
40%
|
33% to
35%
|
>50%
|
c.30%
|
2023 Reported
|
|
39.8%
|
33.6%
|
49.2%
|
22.4%
|
|
|
|
|
|
|
Adjusted EBIT Margin
|
Total
Group
|
GB1,2
|
E&C
|
PS
|
LN1,2
|
Latest guidance
|
c.14%
|
17% to
19%
|
13% to
15%
|
>45%
|
|
2023 Reported
|
13.7%
|
17.8%
|
15.5%
|
40.7%
|
|
|
|
|
|
|
|
Cash Conversion
|
Total
Group
|
|
Latest guidance
|
c.80%
|
|
|
|
|
2023 Reported
|
124%
|
|
|
|
|
1.
|
Liquidnet Credit (both primary and secondary market trading
protocols, including Dealer-to-Client ('D2C')) is now reported as
part of Global Broking. FY 2023 disclosures are on this basis, with
FY 2022 results restated, to ensure a like-for-like comparison
year-on-year. For comparison with 2023 CMD targets, Liquidnet
Credit is excluded from Global Broking, to ensure a like-for-like
basis when targets were announced.
|
2.
|
For comparison with 2023 latest
guidance, Liquidnet Credit is excluded from Global Broking, to
ensure a like-for-like basis. The contribution margin also excludes
the 2023 reclassification of technology costs (£6m) from front
office costs into management & support costs for Global Broking
and (£27m) for Liquidnet.
|
Our guidance for 2024 is as
follows:
•
|
Significant items in 2024 are expected to be
c.£65m (pre-tax), excluding potential income and costs associated
with legal and regulatory matters;
|
•
|
Group net finance expense of
c.£25m;
|
•
|
Dividend cover of c.2 times adjusted post-tax
earnings; and
|
•
|
Management & support costs (excluding FX
gains or losses) are expected to grow in line with
inflation.
|
Performance by
Primary Operating Segment (divisional basis)
The Group presents below the results of its
business by Primary Operating Segment with a focus on revenue and
APMs used to measure and assess performance.
|
|
|
|
|
|
|
2023
£m
|
GB3,4,5
|
E&C
|
LN,4
|
PS3
|
Corp/
Elim
|
Total
|
Revenue:
|
|
|
|
|
|
|
- External
|
1,236
|
455
|
315
|
185
|
-
|
2,191
|
-
Inter-division1
|
22
|
3
|
-
|
4
|
(29)
|
-
|
|
1,258
|
458
|
315
|
189
|
(29)
|
2,191
|
Total front office costs:
|
|
|
|
|
|
|
- External
|
(761)
|
(304)
|
(207)
|
(71)
|
-
|
(1,343)
|
-
Inter-division1
|
(4)
|
-
|
-
|
(25)
|
29
|
-
|
|
(765)
|
(304)
|
(207)
|
(96)
|
29
|
(1,343)
|
Contribution
|
493
|
154
|
108
|
93
|
-
|
848
|
Contribution margin
|
39.2%
|
33.6%
|
34.3%
|
49.2%
|
-
|
38.7%
|
Net management and support costs:
|
|
|
|
|
|
|
- Management and support
costs
|
(259)
|
(75)
|
(87)
|
(14)
|
(54)
|
(489)
|
- Other operating
income
|
3
|
1
|
-
|
-
|
10
|
14
|
Adjusted EBITDA
|
237
|
80
|
21
|
79
|
(44)
|
373
|
Adjusted EBITDA margin
|
18.8%
|
17.5%
|
6.7%
|
41.8%
|
n/a
|
17.0%
|
- Depreciation and
amortisation
|
(31)
|
(9)
|
(11)
|
(2)
|
(20)
|
(73)
|
Adjusted EBIT
|
206
|
71
|
10
|
77
|
(64)
|
300
|
|
|
|
|
|
|
|
Adjusted EBIT margin
|
16.4%
|
15.5%
|
3.2%
|
40.7%
|
n/a
|
13.7%
|
Average broker
headcount
|
1,815
|
599
|
142
|
|
|
2,556
|
Average sales headcount
|
-
|
-
|
107
|
|
|
107
|
Revenue per broker
(£'000)2
|
681
|
759
|
972
|
|
|
716
|
Contribution per broker
(£'000)2
|
272
|
257
|
262
|
|
|
268
|
|
|
|
|
|
|
|
2022 (reported currency)
£m
|
GB3,4,5
|
E&C
|
LN4,5
|
PS3
|
Corp/
Elim
|
Total5
|
Revenue:
|
|
|
|
|
|
|
- External
|
1,240
|
384
|
316
|
175
|
-
|
2,115
|
-
Inter-division1
|
22
|
3
|
-
|
-
|
(25)
|
-
|
|
1,262
|
387
|
316
|
175
|
(25)
|
2,115
|
Total front office costs:
|
|
|
|
|
|
|
- External
|
(798)
|
(263)
|
(197)
|
(62)
|
-
|
(1,320)
|
-
Inter-division1
|
-
|
-
|
-
|
(25)
|
25
|
-
|
|
(798)
|
(263)
|
(197)
|
(87)
|
25
|
(1,320)
|
Contribution
|
464
|
124
|
119
|
88
|
-
|
795
|
Contribution margin
|
36.8%
|
32.0%
|
37.7%
|
50.3%
|
-
|
37.6%
|
Net management and support costs:
|
|
|
|
|
|
|
- Management and support
costs
|
(242)
|
(65)
|
(93)
|
(7)
|
(43)
|
(450)
|
- Other operating
income
|
2
|
-
|
-
|
-
|
10
|
12
|
Adjusted EBITDA
|
224
|
59
|
26
|
81
|
(33)
|
357
|
Adjusted EBITDA margin
|
17.7%
|
15.2%
|
8.2%
|
46.3%
|
n/a
|
16.9%
|
- Depreciation and
amortisation
|
(36)
|
(10)
|
(25)
|
(2)
|
(9)
|
(82)
|
Adjusted EBIT
|
188
|
49
|
1
|
79
|
(42)
|
275
|
|
|
|
|
|
|
|
Adjusted EBIT margin
|
14.9%
|
12.7%
|
0.3%
|
45.1%
|
n/a
|
13.0%
|
Average broker
headcount
|
1,908
|
632
|
139
|
|
|
2,680
|
Average sales headcount
|
-
|
-
|
119
|
|
|
119
|
Revenue per broker
(£'000)2
|
650
|
607
|
894
|
|
|
652
|
Contribution per broker
(£'000)2
|
243
|
196
|
200
|
|
|
230
|
|
|
|
|
|
|
|
2022 (constant currency)
£m
|
GB3,4,5
|
E&C
|
LN4,5
|
PS3
|
Corp/
Elim
|
Total5
|
Revenue:
|
|
|
|
|
|
|
- External
|
1,240
|
386
|
318
|
175
|
-
|
2,119
|
-
Inter-division1
|
22
|
3
|
-
|
-
|
(25)
|
-
|
|
1,262
|
389
|
318
|
175
|
(25)
|
2,119
|
Total front office costs:
|
|
|
|
|
|
|
- External
|
(799)
|
(264)
|
(197)
|
(62)
|
-
|
(1,322)
|
-
Inter-division1
|
-
|
-
|
-
|
(25)
|
25
|
-
|
|
(799)
|
(264)
|
(197)
|
(87)
|
25
|
(1,322)
|
Contribution
|
463
|
125
|
121
|
88
|
-
|
797
|
Contribution margin
|
36.7%
|
32.1%
|
38.1%
|
50.3%
|
-
|
37.6%
|
Net management and support costs:
|
|
|
|
|
|
|
- Management and support
costs
|
(240)
|
(66)
|
(94)
|
(7)
|
(43)
|
(450)
|
- Other operating
income
|
2
|
-
|
-
|
-
|
10
|
12
|
Adjusted EBITDA
|
225
|
59
|
27
|
81
|
(33)
|
359
|
Adjusted EBITDA margin
|
17.8%
|
15.2%
|
8.5%
|
46.3%
|
n/a
|
16.9%
|
- Depreciation and
amortisation
|
(35)
|
(10)
|
(25)
|
(2)
|
(10)
|
(82)
|
Adjusted EBIT
|
190
|
49
|
2
|
79
|
(43)
|
277
|
|
|
|
|
|
|
|
Adjusted EBIT margin
|
15.1%
|
12.6%
|
0.6%
|
45.1%
|
n/a
|
13.1%
|
Average broker
headcount
|
1,908
|
632
|
139
|
|
|
2,680
|
Average sales headcount
|
-
|
-
|
119
|
|
|
119
|
Revenue per broker
(£'000)2
|
650
|
610
|
895
|
|
|
653
|
Contribution per broker
(£'000)2
|
243
|
198
|
199
|
|
|
230
|
GB = Global Broking; E&C =
Energy & Commodities; LN = Liquidnet; PS = Parameta
Solutions, Corp/Elim = Corporate Centre, eliminations and other
unallocated costs.
1.
|
Inter-division charges have been made by Global Broking and
Energy & Commodities to reflect the value of proprietary data
provided to the Parameta Solutions division. The Global Broking
inter-division revenue and Parameta Solutions inter-division costs
are eliminated upon the consolidation of the Group's financial
results.
|
2.
|
Revenue per broker and contribution per broker are calculated
as external revenue and contribution of Global Broking, Energy
& Commodities and Liquidnet (excluding the acquired Liquidnet
platform) divided by the average brokers for the year. The Group
revenue and contribution per broker excludes revenue and
contribution from Parameta Solutions and Liquidnet
Division.
|
3.
|
Parameta Solutions desks transferred into Global
Broking reflecting the change in focus of business activities. 2022
Revenue for Global Broking increased by £2m, Parameta Solutions
reduced by £2m. Front Office costs for Global Broking increased by
£1m, Parameta Solutions reduced by £1m.
|
4.
|
Liquidnet Credit is now reported as part of Global Broking.
2023 disclosures are on this basis, with 2022 results restated, to
ensure a like-for-like comparison year-on-year. 2022 Revenue for
Global Broking increased by £9m, Liquidnet reduced by £9m. Front
Office costs for Global Broking increased by £17m, Liquidnet
reduced by £17m.
|
5.
|
Prior year numbers have been restated to reflect £32m
reclassification of technology costs from front office costs to
management & support costs to better reflect the nature of
these costs. The reclassification impacts Liquidnet, Global Broking
and the Group.
|
Global
Broking1
Global Broking revenue of £1,258m (which
represents 57% of total Group revenue) was broadly in line with the
strong prior period that saw 7% increase compared with 2021 (in
line in reported currency). Interest rates and market volatility
remained high supporting macro trading activity in Rates and FX
& Money Markets.
Revenue in Rates (comprising 45% of Global
Broking revenue and 26% of total Group revenue) was in line with
2022, as market volatility remained high. FX & Money Markets
revenue increased by 3% driven by strong growth in emerging
markets, while we saw declines in Equities and Credit of 4% and 3%
respectively. In 2023, Liquidnet Credit was merged with Global
Broking to form a new, Group-wide, Credit offering. This new
arrangement will enable us to leverage our deep sell-side
relationships and deepen and accelerate connectivity as well as
drive efficiencies through a shared support infrastructure. 2023
revenue from Liquidnet Credit was £11m (2022: £9m).
Revenue per broker increased by 5%, reflecting
the delivery of the same year-on-year revenue with 5% fewer
brokers. Contribution per broker increased by 12%, or by 7% when
excluding the P&L charge related to Russian exposures in
2022.
Front office costs were 4% lower, due to the
non-recurrence of the £20m P&L charge relating to Russian
exposures in 2022 and lower average broker headcount. The
contribution margin increased to 39.2% compared with 36.7% in the
prior period.
Management and support costs (including
depreciation and amortisation and net of other operating income) of
£287m increased by 5% due to increased investment in the roll out
of Fusion, our electronic platform. Adjusted EBIT was £206m, with a
margin of 16.4% (2022: £190m, 15.1% in constant currency, £188m and
14.9% in reported currency).
Energy &
Commodities
E&C revenue of £458m in 2023, representing
21% of total Group Revenue, was 18% higher, benefitting from
buoyant market conditions. Double-digit growth was delivered across
the key asset classes: Oil, Power and Gas. Trading volumes
increased in European gas and power as the impact of the supply
disruptions caused by the war in Ukraine were mitigated and prices
returned to more normal levels. ICE oil market volumes were up 19%
and gas market volumes up 16%, as the overall macro environment led
to price volatility and increased trading.
Revenue per broker increased by 24% and
contribution per broker increased by 30%.
Front office costs which are variable with
revenue, were 15% higher at £304m. Contribution margin increased to
33.6% (2022: 32.1%).
Management and support costs (including
depreciation and amortisation and net of other operating income) of
£83m increased by 9% due to higher direct management costs and the
adjusted EBIT was £71m, up 45% on the prior period with a margin of
15.5% (2022: £49m, 12.6% in constant currency and 12.7% in reported
currency).
Liquidnet1
Liquidnet's revenue of £315m, which represents
14% of total Group revenue was 1% lower in constant currency
compared with 2022 (in line with reported) with strong performance
in the Relative Value businesses offset by continued challenges in
Equities.
Liquidnet Equities continued to experience
challenging market conditions particularly in the first half of
2023. We took further action on our cost base and have now
delivered £43m of annualised integration synergies (vs our £30m
target), and strengthened our operational leverage significantly.
In the US, block market volumes by the top five Agency Alternative
Trading System ('ATS') venues were down 13% compared with 2022
however, Liquidnet's market share increased from 23.2% to 24.0%. In
Europe, 5x Large in Scale transactions ('LIS') volumes were down
15% in 2023 compared with 2022. In this challenging environment,
Liquidnet's market share increased in 2023 to 35.9% compared with
34.3% in Q4 2022. Liquidnet showed an improving growth trajectory
in the second half of 2023 as investor expectations for a reduction
in global interest rates brought about a higher allocation of funds
flow into Equities, and an increase in institutional block activity
as a result. Cash equities revenue grew 13% in the fourth quarter
of 2023.
The Relative Value businesses performed well
as a result of the US regional banking crisis in Q1 2023, and
rising interest rates throughout the year.
Front office costs of £207m were 5% higher.
This resulted in a contribution margin of 34.3% (2022:
38.1%).
Management and support costs (including
depreciation and amortisation and net of other operating income) of
£98m reduced by 18% mainly from cost management actions and the
adjusted EBIT increased to £10m, at 3.2% margin (2022: £2m, 0.6% in
constant currency and £1m, 0.3% in reported currency).
Parameta
Solutions2
Revenue of £189m, which represents 9% of total
Group revenue, was 8% higher compared with 2022. Revenue in the
second half was 11% higher compared with the prior period,
providing positive momentum for the year ahead. Subscription-based
recurring revenue represents over 96% of total revenue.
Parameta Solutions continues to benefit from
the successful delivery of its strategy focussed on product
development, multi-channel distribution and further diversification
of its client base. Thirty new clients were onboarded in 2023, 80%
of which were non-sell-side clients including buy-side, corporates,
professionals' services and energy & commodities firms. In
addition, we launched two benchmark indices focused on interest
rate swap volatility and the global Liquefied Natural Gas
market.
Management and support costs (including
depreciation and amortisation and net of other operating income) of
£16m increased by £7m from 2022 and the adjusted EBIT was £77m,
with a margin of 40.7% (2022: £79m, 45.1% in reported &
constant currency).
1.
|
Liquidnet Credit is now reported as part of Global Broking.
2023 disclosures are on this basis, with 2022 results restated, to
ensure a like-for-like comparison year-on-year. £9m of Credit
revenue in 2022 have been reclassified from Liquidnet to Global
Broking.
|
2.
|
Parameta Solutions desks transferred into Global Broking
reflecting the change in focus of business activities. 2022 Revenue
for Global Broking increased by £2m, Parameta Solutions reduced by
£2m. Front Office costs for Global Broking increased by £1m,
Parameta Solutions reduced by £1m.
|
Cash flow
The table below shows the changes in cash and
debt for the year ending 31 December 2023 and 31 December
2022.
|
2023
|
2022
|
EBIT reported
|
128
|
163
|
Depreciation, amortisation and other
non-cash items
|
226
|
158
|
Disposal of property, plant and
equipment
|
-
|
12
|
Movement in working
capital
|
|
|
- change in net Matched Principal balances
|
(20)
|
27
|
- change in other working capital balances
|
104
|
62
|
Income taxes paid:
|
|
|
- periodic tax paid
|
(57)
|
(51)
|
- accelerated tax paid
|
(32)
|
-
|
Net interest and loan facility fees
paid
|
(33)
|
(48)
|
Capital expenditure
|
(55)
|
(53)
|
Dividends received from associates
and joint ventures
|
22
|
15
|
Dividends paid to non-controlling
interests
|
(2)
|
(3)
|
Free Cash Flow
|
281
|
302
|
|
|
|
Receipt UK pension surplus, net of
pension tax payment
|
30
|
-
|
Purchase of financial
assets
|
(19)
|
(50)
|
Net other investing
activities
|
7
|
(9)
|
Dividend paid to TP ICAP
shareholders
|
(99)
|
(78)
|
Share buyback
|
(29)
|
-
|
Net borrowings
|
39
|
(47)
|
Payment of lease
liabilities
|
(29)
|
(29)
|
Other financing
activities
|
(10)
|
(6)
|
Total other investing and financing
activities
|
(110)
|
(219)
|
Change in cash
|
171
|
83
|
Foreign exchange
movements
|
(40)
|
38
|
Cash at the beginning of the
year
|
888
|
767
|
Cash at the end of the year
|
1,019
|
888
|
The Group's net cash balance of £1,019m,
increased by £131m in the year.
Free cash flow is presented to show a more
sustainable view of cash generation and to enable the conversion of
adjusted earnings into cash to be better understood. This measure
reflects the cash and working capital efficiency of the Group's
operations, and aligns tax with underlying items and interest
received with the operations of the group.
Free cash flow of £281m (2022: £302m)
represents 124% conversion of adjusted attributable earnings into
cash (2022: 156%). This includes temporary cash outflow of £20m on
changes in Matched Principal balances (2022: £27m inflow) that
arose on delayed settlement of trades and accelerated tax paid of
£32m (2022: £nil) from the UK tax relief, that is expected to
reverse in 2024 and 2025. Adjusting for these 2 items gives a free
cash flow of £333m (2022: £275m) and a conversion of adjusted
attributable earnings into cash of 147% (2022: 142%) caused
principally by the cash inflow on working capital of £104m (2022:
£62m) from a significant improvement in collection of trade
receivables.
Total other investing and financing activities
includes the net receipt of UK pension surplus being, the gross
amount of £46m less the 35% tax levied of £16m, following the
wind-up of the defined benefit pension schemes, a £29m outflow from
the £30m share buyback programme announced in August 2023, a £99m
outflow from increased dividend paid in 2023 and a £39m net cash
inflow from the refinancing of the 2024 Sterling Notes.
The strengthening of GBP, particularly against
the USD, resulted in a foreign exchange loss of £40m (2022: gain of
£38m).
Debt
finance
The composition of the Group's outstanding
debt is summarised below.
|
At 31
December
2023
£m
|
At 31
December
2022
£m
|
5.25% £247m Sterling Notes January
20241
|
37
|
253
|
5.25% £250m Sterling Notes May
20261
|
250
|
250
|
2.625% £250m Sterling Notes November
20281
|
249
|
248
|
7.875% £250m Sterling Notes April
20301
|
251
|
-
|
Sub
Total
|
787
|
751
|
Loan from related party (RCF with
Totan)2
|
-
|
-
|
Revolving credit facility drawn -
banks2
|
-
|
-
|
3.2% Liquidnet Vendor Loan
Notes
|
40
|
43
|
Overdrafts
|
10
|
-
|
Debt (used as part of net (funds)/debt)
|
837
|
794
|
Lease liabilities
|
251
|
279
|
Total debt
|
1,088
|
1,073
|
1.
Sterling Notes are reported at
their par value net of discount and unamortised issue costs and
including interest accrued at the reporting date.
2.
£350m committed revolving
facility ('RCF') and Yen10bn committed facility with The Tokyo
Tanshi Co., Ltd were undrawn as at 31 December
2023.
The Group's gross debt, excluding lease
liabilities, temporarily increased to £837m compared with 31
December 2022. In April 2023, the Group issued a £250m Sterling
Note maturing in April 2030, the proceeds of which were used to
repay £210m of the January 2024 Sterling Notes. The residual
proceeds of the new issue are held as cash and the remaining £37m
of the outstanding 2024 Notes were repaid at maturity in January
2024.
The Group's £350m main bank revolving credit
facility, maturing in May 2026 and Yen10bn Totan facility, maturing
in February 2026 were undrawn as at 31 December.
Exchange
rates
The income statements and balance
sheets of the Group's businesses whose functional currencies are
not GBP are translated into GBP at average and period end exchange
rates respectively. The most significant exchange rates for the
Group are the USD and the Euro. The Group's current policy is not
to enter into formal hedges of income statement or balance sheet
translation exposures. Average and Period End exchange rates used
in the preparation of the financial statements are shown
below.
Foreign exchange translation has had
a mixed impact on the Group's P&L in 2023. The average USD: GBP
rate for the year is unchanged compared with 2022 and hence had a
minimal impact to the Group's revenue and costs. Approximately 60%
of revenue and 40% of costs are in USD. The overall strengthening
of GBP over the 12-month period has generated a significant foreign
exchange loss of £11m at the end of the year compared with a £14m
gain in 2022, on the retranslation of monetary assets and
liabilities at the year end.
|
Average
|
|
Period
End
|
|
2023
|
2022
|
|
2023
|
2022
|
US
Dollar
|
$1.24
|
$1.24
|
|
$1.27
|
$1.19
|
Euro
|
€1.15
|
€1.18
|
|
€1.15
|
€1.16
|
Pensions
The defined benefit pension scheme (the
Scheme) in the UK completed wind-up in H2 2023. Following the
settlement of the Scheme's liabilities, the Trustee distributed the
cash surplus in the Scheme to the Group of £30m, representing £46m
of remaining Scheme assets less applicable taxes at 35% amounting
to £16m.
Regulatory
capital
Group level regulation falls under the Jersey
Financial Services Commission. The FCA is the lead regulator of the
Group's EMEA businesses, which are sub-consolidated under a UK
holding Company, for which the consolidated capital adequacy
requirements under the Investment Firms Prudential Regime ('IFPR')
apply. This sub-group maintains an appropriate excess of financial
resources.
Many of the Group's broking entities are
regulated on a 'solo' basis and are obliged to meet the regulatory
capital requirements imposed by the local regulator of the
jurisdiction in which they operate. The Group maintains an
appropriate excess of financial resources in such
entities.
Climate
change considerations
This year, we have completed a detailed
qualitative, and quantitative, climate scenario analysis to deepen
our understanding of how climate-related issues could affect the
Group and its finances. The analysis concludes that the Group is
not expected to be materially financially impacted by climate
change over the timeframes and climate scenarios considered.
We are
committed to the
ongoing assessment and management of climate risks and
opportunities. As part of this work, we incorporate climate change
considerations into our financial planning processes to monitor the
impacts of climate-related issues on our financial performance and
position.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Consolidated Income Statement
for the year ended 31 December 2023
|
|
2023
|
2022
|
|
Notes
|
£m
|
£m
|
Revenue
|
3
|
2,191
|
2,115
|
Employment, compensation and benefits
|
|
(1,360)
|
(1,320)
|
General
and administrative expenses
|
|
(511)
|
(506)
|
Depreciation of property, plant and equipment and
ROUA
|
|
(45)
|
(49)
|
Impairment of property, plant and equipment and
ROUA
|
|
(11)
|
(9)
|
Amortisation of intangible assets
|
|
(72)
|
(78)
|
Impairment of Intangible assets
|
|
(86)
|
(20)
|
Total operating
costs
|
4
|
(2,085)
|
(1,982)
|
Other
operating income
|
5
|
22
|
30
|
Earnings before interest and
tax
|
|
128
|
163
|
Finance
income
|
6
|
34
|
8
|
Finance
costs
|
7
|
(66)
|
(58)
|
Profit before
tax
|
|
96
|
113
|
Taxation
|
|
(40)
|
(36)
|
Profit after
tax
|
|
56
|
77
|
Share of
results of associates and joint ventures
|
|
25
|
29
|
Impairment of associates
|
|
(5)
|
-
|
Profit for the
year
|
|
76
|
106
|
|
|
|
|
Attributable
to:
|
|
|
|
Equity
holders of the parent
|
|
74
|
103
|
Non-controlling interests
|
|
2
|
3
|
|
|
76
|
106
|
|
|
|
|
Earnings per
share
|
|
|
|
-
Basic
|
8
|
9.5p
|
13.2p
|
-
Diluted
|
8
|
9.3p
|
13.0p
|
|
|
|
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2023
|
2023
|
2022
|
|
£m
|
£m
|
Profit for the year
|
76
|
106
|
Items that will not be reclassified
subsequently
to
profit or loss:
|
|
|
Remeasurement of defined benefit
pension schemes
|
46
|
-
|
Taxation
|
(16)
|
-
|
|
30
|
-
|
Items that may be reclassified subsequently
to
profit or loss:
|
|
|
(Loss)/gain on translation of
foreign operations
|
(83)
|
153
|
Taxation
|
2
|
(5)
|
|
(81)
|
148
|
Other comprehensive (loss)/income for the
year
|
(51)
|
148
|
Total comprehensive income for the year
|
25
|
254
|
|
|
|
Attributable to:
|
|
|
Equity holders of the
parent
|
24
|
250
|
Non-controlling
interests
|
1
|
4
|
|
25
|
254
|
|
|
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Consolidated Balance Sheet
as
at 31 December 2023
|
|
2023
|
2022
|
|
Notes
|
£m
|
£m
|
Non-current assets
|
|
|
|
Intangible assets arising on
consolidation
|
10
|
1,605
|
1,780
|
Other intangible assets
|
|
110
|
97
|
Property, plant and
equipment
|
|
92
|
110
|
Investment properties
|
|
12
|
-
|
Right-of-use assets
|
|
136
|
165
|
Investment in associates
|
|
51
|
63
|
Investment in joint
ventures
|
|
38
|
34
|
Other investments
|
|
19
|
23
|
Deferred tax assets
|
|
41
|
15
|
Retirement benefit
assets
|
|
3
|
1
|
Other long-term
receivables
|
|
33
|
51
|
|
|
2,140
|
2,339
|
|
|
|
|
Current assets
|
|
|
|
Trade and other
receivables
|
11
|
2,279
|
2,198
|
Financial assets at fair value
through profit or loss
|
12
|
569
|
264
|
Financial investments
|
16
|
189
|
174
|
Cash and cash
equivalents
|
16
|
1,029
|
888
|
|
|
4,066
|
3,524
|
Total assets
|
|
6,206
|
5,863
|
|
|
|
|
Current liabilities
|
|
|
|
Trade and other payables
|
13
|
(2,372)
|
(2,149)
|
Financial liabilities at fair value
through profit or loss
|
12
|
(541)
|
(255)
|
Loans and borrowings
|
14,16
|
(93)
|
(9)
|
Lease liabilities
|
16
|
(28)
|
(29)
|
Current tax liabilities
|
|
(35)
|
(37)
|
Short-term provisions
|
17
|
(14)
|
(9)
|
|
|
(3,083)
|
(2,488)
|
Net current assets
|
|
983
|
1,036
|
|
|
|
|
Non-current liabilities
|
|
|
|
Loans and borrowings
|
14,16
|
(744)
|
(785)
|
Lease liabilities
|
16
|
(223)
|
(250)
|
Deferred tax liabilities
|
|
(51)
|
(85)
|
Long-term provisions
|
17
|
(31)
|
(31)
|
Other long-term payables
|
|
(5)
|
(60)
|
Retirement benefit
obligations
|
|
(4)
|
(3)
|
|
|
(1,058)
|
(1,214)
|
Total liabilities
|
|
(4,141)
|
(3,702)
|
Net assets
|
|
2,065
|
2,161
|
|
|
|
|
Equity
|
|
|
|
Share capital
|
|
197
|
197
|
Other reserves
|
|
(963)
|
(854)
|
Retained earnings
|
|
2,814
|
2,800
|
Equity attributable to equity holders of the
parent
|
|
2,048
|
2,143
|
Non-controlling
interests
|
|
17
|
18
|
Total equity
|
|
2,065
|
2,161
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Consolidated Statement of
Changes in Equity
for the year ended 31 December 2023
|
Equity
attributable to equity holders of the parent
|
|
|
|
Share
capital
|
Re-
organisation
reserve
|
Re-
valuation
reserve
|
Hedging
and
translation
|
Treasury
shares
|
Own
shares
|
Retained
earnings
|
Total
|
Non-controlling
interests
|
Total
equity
|
2023
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Balance at
1
January 2023
|
197
|
(946)
|
5
|
109
|
-
|
(22)
|
2,800
|
2,143
|
18
|
2,161
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
74
|
74
|
2
|
76
|
Other comprehensive
(loss)/income for the
year
|
-
|
-
|
-
|
(80)
|
-
|
-
|
30
|
(50)
|
(1)
|
(51)
|
Total comprehensive (loss)/income
for the year
|
-
|
-
|
-
|
(80)
|
-
|
-
|
104
|
24
|
1
|
25
|
Dividends paid
|
-
|
-
|
-
|
-
|
-
|
-
|
(99)
|
(99)
|
(2)
|
(101)
|
Share settlement of share-based
awards
|
-
|
-
|
-
|
-
|
-
|
9
|
(10)
|
(1)
|
-
|
(1)
|
Own shares acquired for employee
trusts
|
-
|
-
|
-
|
-
|
-
|
(7)
|
-
|
(7)
|
-
|
(7)
|
Own shares acquired/share
buyback
|
-
|
-
|
-
|
-
|
(29)
|
-
|
-
|
(29)
|
-
|
(29)
|
Disposal of equity instruments at
FVTOCI
|
-
|
-
|
(2)
|
-
|
-
|
-
|
2
|
-
|
-
|
-
|
Credit arising on share-based
awards
|
-
|
-
|
-
|
-
|
-
|
-
|
17
|
17
|
-
|
17
|
Balance at
31
December 2023
|
197
|
(946)
|
3
|
29
|
(29)
|
(20)
|
2,814
|
2,048
|
17
|
2,065
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Balance at
1 January 2022
|
197
|
(946)
|
5
|
(38)
|
-
|
(26)
|
2,769
|
1,961
|
17
|
1,978
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
103
|
103
|
3
|
106
|
Other comprehensive
income for the year
|
-
|
-
|
-
|
147
|
-
|
-
|
-
|
147
|
1
|
148
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
147
|
-
|
-
|
103
|
250
|
4
|
254
|
Dividends paid
|
-
|
-
|
-
|
-
|
-
|
-
|
(78)
|
(78)
|
(3)
|
(81)
|
Share settlement of share-based
awards
|
-
|
-
|
-
|
-
|
-
|
7
|
(7)
|
-
|
-
|
-
|
Own shares acquired for employee
trusts
|
-
|
-
|
-
|
-
|
-
|
(3)
|
-
|
(3)
|
-
|
(3)
|
Credit arising on share-based
awards
|
-
|
-
|
-
|
-
|
-
|
-
|
13
|
13
|
-
|
13
|
Balance at
31 December 2022
|
197
|
(946)
|
5
|
109
|
-
|
(22)
|
2,800
|
2,143
|
18
|
2,161
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Consolidated Cash Flow Statement
for the year ended 31 December 2023
|
Notes
|
2023
|
2022
|
|
|
£m
|
£m
|
Net Cash flow from operating activities
|
15
|
270
|
324
|
|
|
|
|
Investing activities
|
|
|
|
Purchase of financial
investments
|
|
(19)
|
(50)
|
Interest received
|
|
30
|
7
|
Dividends from associates and joint
ventures
|
|
22
|
15
|
Expenditure on intangible fixed
assets
|
|
(43)
|
(35)
|
Purchase of property, plant and
equipment
|
|
(12)
|
(18)
|
Sale of property, plant and
equipment
|
|
-
|
12
|
Deferred consideration
paid
|
|
(1)
|
(10)
|
Sale of other
investments
|
|
3
|
-
|
Investment in associates
|
|
(5)
|
-
|
Disposal of associates and joint
ventures
|
|
10
|
1
|
Receipt of pension scheme
surplus1
|
|
46
|
-
|
Net cash flows from investment activities
|
|
31
|
(78)
|
|
|
|
|
Financing activities
|
|
|
|
Dividends paid
|
9
|
(99)
|
(78)
|
Dividends paid to non-controlling
interests
|
|
(2)
|
(3)
|
Own shares acquired/share
buyback
|
|
(29)
|
-
|
Own shares acquired for employee
trusts
|
|
(7)
|
(3)
|
Dividend equivalent paid on equity
share-based awards
|
|
(1)
|
-
|
Net repayment of bank
loans2
|
14
|
-
|
-
|
Net (repayment)/borrowing of loans
from related parties2
|
14
|
-
|
(47)
|
Funds received from issue of
Sterling Notes
|
|
249
|
-
|
Repurchase of Sterling
Notes
|
|
(210)
|
-
|
Bank facility arrangement fees and
debt issue costs
|
|
(2)
|
(3)
|
Payment of lease
liabilities
|
|
(29)
|
(29)
|
Net cash flows from financing activities
|
|
(130)
|
(163)
|
|
|
|
|
Increase in cash and overdrafts
|
|
171
|
83
|
|
|
|
|
Cash and overdrafts at the beginning of the
year
|
|
888
|
767
|
Effect of
foreign exchange rate changes
|
|
(40)
|
38
|
Cash and overdrafts at the end of the year
|
16
|
1,019
|
888
|
|
|
|
|
Cash and cash
equivalents
|
|
1,029
|
888
|
Overdrafts
|
|
(10)
|
-
|
|
|
1,019
|
888
|
1.
|
Represents the cash inflow resulting
from the repayment of the UK pension scheme surplus by the
Trustees. This has been classified as investing activities
reflecting the realisation of the underlying investments held
within the scheme prior to the proceeds being transferred to the
Group, rather than an operational return of historic contributions.
£16m of associated tax is included in 'income tax
paid'.
|
2.
|
The Group utilises credit facilities
throughout the year, entering into numerous short term bank and
other loans where maturities are less than three months. The
turnover is quick and the volume is large and resultant flows are
presented net. Further details are set out in Note 14.
|
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Notes to the Consolidated Financial
Statements
1. General
information
As at 31 December 2023 TP ICAP Group plc (the
'Company') was a public company limited by shares incorporated in
Jersey under the Companies (Jersey) Law 1991. The Company's shares
are listed on the London Stock Exchange with a premium listing. It
is the ultimate parent undertaking of the TP ICAP group of
companies (the 'Group').
2. Basis of
preparation
(a) Basis of
accounting
The financial information included in this
document does not constitute the Group's statutory accounts for the
years ended 31 December 2023 or 2022, but is derived from TP ICAP
Group plc's group accounts for 2023 and 2022. Statutory accounts
for 2022 have been delivered to the Registrar of Companies and
those for 2023 will be delivered following the Company's Annual
General Meeting. The auditor has reported on those accounts;
their reports were unqualified, did not draw attention to any
matters by way of emphasis without qualifying their report and for
2022 did not contain a statement under Article 113A of the
Companies (Jersey) Law 1991.
The Group's Consolidated Financial Statements
have been prepared in accordance with UK adopted
International Accounting Standards in conformity with the
requirements of the Companies (Jersey) Law 1991.
The Financial Statements have been prepared on
the historical cost basis, except for the revaluation of certain
financial instruments.
The Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the going
concern basis continues to be used in preparing these Financial
Statements.
(b) Basis of
consolidation
The Group's Consolidated Financial Statements
incorporate the Financial Statements of the Company and entities
controlled by the Company made up to 31 December each year.
Under IFRS 10 control is achieved where the Company exercises power
over an entity, is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to use its
power to affect the returns from the entity.
(c) Adoption of new and revised Accounting
Standards
The following new and revised
Standards and Interpretations have been endorsed by the UK
Endorsement Board and are effective from 1 January 2023 but they do
not have a material effect on the Group's Consolidated Financial
Statements:
•
|
IFRS 17 'Insurance Contracts' including
Amendments to IFRS 17;
|
•
|
Amendments to IAS 12 'Income Taxes', Deferred
Tax related to Assets and Liabilities arising from a Single
Transaction;
|
•
|
Amendments to IAS 8 'Accounting policies',
Changes in Accounting Estimates and Errors - Definition of
Accounting Estimates;
|
•
|
Amendments to IAS 1 'Presentation of Financial
Statements' and IFRS Practice Statement 2 'Disclosure of Accounting
policies'; and
|
•
|
Amendments to IAS 12 'Income Taxes',
International Tax Reform- Pillar Two Model Rules. In respect of
this amendment the Group has applied the mandatory exception from
recognising and disclosing information about deferred tax assets
and liabilities related to Pillar 2 income taxes.
|
3. Segmental
analysis
Products and services from which reportable segments derive
their revenues
The Group has a matrix management
structure. The Group's Chief Operating Decision Maker ('CODM') is
the Executive Committee ('ExCo') which operates as a general
executive management committee under the direct authority of the
Board. The ExCo members regularly review operating activity on a
number of bases, including by business division and by legal
ownership which is structured geographically based on the region of
incorporation.
The balance of the CODM review of
operating activity and allocation of the Group's resources is
primarily focused on business division and this is considered to
represent the most appropriate view for the assessment of the
nature and financial effects of the business activities in which
the Group engages.
Whilst the Group's Primary Operating
Segments are by business division, individual entities and the
legal ownership of such entities continue to operate with discrete
management teams and decision making and governance structures.
Each regional sub-group has its own independent governance
structure including CEOs, board members and sub-group regional
Conduct and Governance Committees with separate autonomy of
decision making and the ability to challenge the implementation of
Group level strategy and initiatives within its region. For the
EMEA regional sub-group there are independent non-executive
directors on the regional Board that further strengthen the
independence and judgement of the governance framework..
Information regarding the Group's primary
operating segments is reported below:
31
December 2023
|
GB1
|
E&C1
|
LN1
|
PM1
|
Corp1
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
|
|
|
|
|
|
External
|
1,236
|
455
|
315
|
185
|
-
|
2,191
|
Inter-division
|
22
|
3
|
-
|
4
|
(29)
|
-
|
|
1,258
|
458
|
315
|
189
|
(29)
|
2,191
|
Total front office costs
|
|
|
|
|
|
|
External
|
(761)
|
(304)
|
(207)
|
(71)
|
-
|
(1,343)
|
Inter-division
|
(4)
|
-
|
-
|
(25)
|
29
|
-
|
|
(765)
|
(304)
|
(207)
|
(96)
|
29
|
(1,343)
|
Contribution
|
493
|
154
|
108
|
93
|
-
|
848
|
Net management and support
costs
|
(259)
|
(75)
|
(87)
|
(14)
|
(54)
|
(489)
|
Other operating income
|
3
|
1
|
-
|
-
|
10
|
14
|
Adjusted EBITDA
|
237
|
80
|
21
|
79
|
(44)
|
373
|
Depreciation and amortisation
expense
|
(31)
|
(9)
|
(11)
|
(2)
|
(20)
|
(73)
|
Adjusted EBIT
|
206
|
71
|
10
|
77
|
(64)
|
300
|
31 December 2022
|
GB1
|
E&C1
|
LN1
|
PM1
|
Corp1
|
Total
|
|
(restated)
£m
|
£m
|
(restated)
£m
|
(restated)
£m
|
£m
|
£m
|
Revenue:
|
|
|
|
|
|
|
-
External2
|
1,240
|
384
|
316
|
175
|
-
|
2,115
|
- Inter-division
|
22
|
3
|
-
|
-
|
(25)
|
-
|
|
1,262
|
387
|
316
|
175
|
(25)
|
2,115
|
Total front office costs:
|
|
|
|
|
|
|
- External3,
4
|
(798)
|
(263)
|
(197)
|
(62)
|
-
|
(1,320)
|
- Inter-division
|
-
|
-
|
-
|
(25)
|
25
|
-
|
|
(798)
|
(263)
|
(197)
|
(87)
|
25
|
(1,320)
|
Contribution5
|
464
|
124
|
119
|
88
|
-
|
795
|
Net management and support
costs5
|
(242)
|
(65)
|
(93)
|
(7)
|
(43)
|
(450)
|
Other operating income
|
2
|
-
|
-
|
-
|
10
|
12
|
Adjusted
EBITDA5
|
224
|
59
|
26
|
81
|
(33)
|
357
|
Depreciation and amortisation
expense
|
(36)
|
(10)
|
(25)
|
(2)
|
(9)
|
(82)
|
Adjusted EBIT5
|
188
|
49
|
1
|
79
|
(42)
|
275
|
1.
|
GB is Global
Broking, E&C is Energy & Commodities, LN is Liquidnet
(formerly Agency Execution), PM is Parameta Solutions and Corp is
Corporate.
|
Divisional results for 2022 have
been restated to be comparable with 2023's divisional groupings and
changes to management's internal financial reporting, as Liquidnet
Credit is now managed and operated within the Global Broking
division to leverage the credit broking experience and more
effectively leverage the deep relationships and accelerate
connectivity, resulting in the following restatements:
2.
|
Liquidnet front office costs of £32m
were reclassified to management and support costs to align with the
classification of similar costs within the Group.
|
3.
|
Subsequently Liquidnet Credit,
previously reflected in Liquidnet, transferred to Global
Broking:
|
|
> Revenue for Global Broking
increased by £9m, Liquidnet reduced by £9m.
|
|
> Front office costs for Global
Broking increased by £17m, Liquidnet have reduced by
£17m.
|
|
> Management and support costs for
Global Broking increased by £17m. Liquidnet have reduced by
£17m.
|
4.
|
Parameta Solutions desks transferred
to Global Broking:
|
|
> Global Broking revenue increased
by £2m, Parameta Solutions reduced by £2m.
|
|
> Global Broking front office
costs increased by £1m. Parameta Solutions reduced by
£1m.
|
|
> Management and support costs for
Global Broking increased by £1m. Parameta Solutions reduced by
£1m.
|
5.
|
As a result of 2,3 and 4
above,
|
|
> Contribution for Global Broking
decreased by £7m, Liquidnet increased by £40m and Parameta
Solutions reduced by £1m. Total contribution increased by
£32m.
|
|
> Net management and support costs
for Global Broking increased by £18m, Liquidnet increased by £15m,
Parameta Solutions decreased by £1m. Total net management and
support costs by increased by £32m.
|
|
> Adjusted EBITDA for Global
Broking decreased by £25m, Liquidnet increased by £25m. There is no
restatement to the consolidated Group Adjusted EBITDA.
|
|
> Adjusted EBIT for Global Broking
decreased by £25m, Liquidnet increased by £25m. There is no
restatement to the consolidated Group Adjusted EBIT.
|
Analysis of
significant items
31
December 2023
|
Restructuring
and other related
costs
|
Disposals, acquisitions and
investment in new businesses
|
Impairment of intangible
assets arising on consolidation
|
Legal and regulatory
matters
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Employment, compensation and
benefits costs
|
4
|
2
|
-
|
-
|
6
|
Premises and related
costs
|
3
|
-
|
-
|
-
|
3
|
Deferred consideration
|
-
|
(3)
|
-
|
-
|
(3)
|
Charge relating to significant
legal and regulatory settlements
|
-
|
-
|
-
|
19
|
19
|
Net foreign exchange
gains
|
-
|
(2)
|
-
|
-
|
(2)
|
Other general and administration
costs
|
8
|
8
|
-
|
-
|
16
|
Total included within general and
administration costs
|
11
|
3
|
-
|
19
|
33
|
Depreciation and impairment of PPE
and ROUA
|
11
|
-
|
-
|
-
|
11
|
Amortisation and impairment of
intangible assets
|
-
|
44
|
86
|
-
|
130
|
Total included within operating costs
|
26
|
49
|
86
|
19
|
180
|
Other operating income
|
-
|
-
|
-
|
(8)
|
(8)
|
Included in finance
income
|
1
|
2
|
-
|
-
|
3
|
Total significant items before tax
|
27
|
51
|
86
|
11
|
175
|
Taxation on significant
items
|
|
|
|
|
(27)
|
Total significant items after tax
|
|
|
|
|
148
|
Impairment of associates
|
|
|
|
|
5
|
Total significant items
|
|
|
|
|
153
|
31
December 2022
|
Restructuring
and other related
costs
|
Disposals, acquisitions and
investment in new businesses
|
Impairment of intangible
assets arising on consolidation
|
Legal and regulatory
matters
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
Employment, compensation and
benefits costs
|
24
|
-
|
-
|
-
|
24
|
Premises and related
costs
|
1
|
-
|
-
|
-
|
1
|
Deferred consideration
|
-
|
8
|
-
|
-
|
8
|
Charge relating to significant
legal and regulatory settlements
|
-
|
-
|
-
|
6
|
6
|
Pension scheme past service and
settlement costs
|
-
|
-
|
-
|
1
|
1
|
Remeasurement of employee
long-term benefits
|
(7)
|
-
|
-
|
-
|
(7)
|
Gain on disposal of property,
plant and equipment
|
(3)
|
-
|
-
|
-
|
(3)
|
Gain on derecognition of
right-of-use assets/lease liabilities
|
(3)
|
-
|
-
|
-
|
(3)
|
Net foreign exchange
gains
|
-
|
4
|
-
|
-
|
4
|
Other general and administration
costs
|
20
|
5
|
-
|
-
|
25
|
Total included within general and
administration costs
|
8
|
17
|
-
|
7
|
32
|
Depreciation and impairment of PPE
and ROUA
|
9
|
-
|
-
|
-
|
9
|
Amortisation and impairment of
intangible assets
|
-
|
45
|
20
|
-
|
65
|
Total included within operating
costs
|
41
|
62
|
20
|
7
|
130
|
Other operating income
|
-
|
(16)
|
-
|
(2)
|
(18)
|
Included in finance
income
|
-
|
1
|
-
|
-
|
1
|
Total significant items before
tax
|
41
|
47
|
20
|
5
|
113
|
Taxation on significant
items
|
|
|
|
|
(22)
|
Total significant items after
tax
|
|
|
|
|
91
|
Adjusted profit
reconciliation
2023
|
Adjusted
|
Significant
items
|
Reported
|
|
£m
|
£m
|
£m
|
Earnings before interest and
tax
|
300
|
(172)
|
128
|
Net finance costs
|
(29)
|
(3)
|
(32)
|
Profit before tax
|
271
|
(175)
|
96
|
Taxation
|
(67)
|
27
|
(40)
|
Profit after tax
|
204
|
(148)
|
56
|
Share of profit from associates and
joint ventures
|
25
|
(5)
|
20
|
Profit for the year
|
229
|
(153)
|
76
|
2022
|
Adjusted
|
Significant items
|
Reported
|
|
£m
|
£m
|
£m
|
Earnings before interest and
tax
|
275
|
(112)
|
163
|
Net finance costs
|
(49)
|
(1)
|
(50)
|
Profit before tax
|
226
|
(113)
|
113
|
Taxation
|
(58)
|
22
|
(36)
|
Profit after tax
|
168
|
(91)
|
77
|
Share of profit from associates and
joint ventures
|
29
|
-
|
29
|
Profit for the year
|
197
|
(91)
|
106
|
4. Operating
costs
|
|
2023
|
2022
(restated)
|
|
|
£m
|
£m
|
Broker compensation
costs1
|
|
986
|
960
|
Other staff
costs1
|
|
340
|
340
|
Share-based payment
charge
|
|
34
|
20
|
Employee compensation and benefits
|
|
1,360
|
1,320
|
Technology and related
costs
|
|
220
|
216
|
Premises and related
costs
|
|
29
|
28
|
Gains on disposal of property, plant
and equipment
|
|
-
|
(3)
|
Gain on derecognition of
right-of-use assets/lease liabilities
|
|
-
|
(3)
|
Adjustments to deferred
consideration
|
|
(3)
|
8
|
Charge relating to significant legal
and regulatory settlements
|
|
19
|
7
|
Pension scheme past service and
settlement costs
|
|
-
|
1
|
Remeasurement of long-term employee
benefits
|
|
-
|
(7)
|
Acquisition costs
|
|
-
|
6
|
Impairment losses on trade
receivables
|
|
5
|
5
|
Trade receivables expected credit
loss adjustment
|
|
(1)
|
-
|
Net foreign exchange
loss/(gains)
|
|
2
|
(21)
|
Net loss on FX derivative
instruments
|
|
4
|
11
|
Other administrative
costs
|
|
236
|
258
|
General and administrative expenses
|
|
511
|
506
|
Depreciation of property, plant
and equipment
|
|
22
|
23
|
Depreciation of right-of-use
assets
|
|
23
|
26
|
Depreciation of property, plant and equipment
and right-of-use assets
|
|
45
|
49
|
Impairment of property,
plant and equipment
|
|
5
|
5
|
Impairment of right-of-use
assets
|
|
6
|
4
|
Impairment of property, plant and equipment and right-of-use
assets
|
|
11
|
9
|
Amortisation of other intangible
assets
|
|
28
|
33
|
Amortisation of intangible assets
arising on consolidation
|
|
44
|
45
|
Amortisation of intangible assets
|
|
72
|
78
|
Impairment of intangible assets
arising on consolidation - goodwill
|
|
47
|
-
|
Impairment of intangible assets
arising on consolidation - customer relationships
|
|
39
|
20
|
Impairment of intangible assets
|
|
86
|
20
|
|
|
2,085
|
1,982
|
1.
|
Broker compensation cost and Other
staff costs for 2022 have been increased and decreased by £72m
respectively, reflecting a reclassification of certain staff as
broking.
|
5. Other operating
income
Other operating income comprises:
|
2023
|
2022
|
|
£m
|
£m
|
Acquisition related
income
|
-
|
16
|
Business relocation
grants
|
2
|
2
|
Employee-related insurance
receipts
|
2
|
4
|
Employee contractual
receipts
|
4
|
-
|
Management fees from
associates
|
1
|
1
|
Legal settlement
receipts
|
8
|
4
|
Other receipts
|
5
|
3
|
|
22
|
30
|
Other receipts include royalties,
rebates, non-employee related insurance proceeds, tax credits and
refunds. Costs associated with such items are included in
administrative expenses. Acquisition-related income relates to
funds received following arbitration in connection with the
purchase of Liquidnet. The arbitration was completed after the one
year measurement period applicable to the acquisition.
6. Finance
income
|
2023
|
2022
|
|
£m
|
£m
|
Interest and similar
income
|
32
|
6
|
Interest on finance
leases
|
2
|
2
|
|
34
|
8
|
7. Finance
costs
|
2023
|
2022
|
|
£m
|
£m
|
Fees payable on bank and other loan
facilities
|
3
|
2
|
Interest on bank and other
loans
|
1
|
2
|
Interest on Sterling Notes January
2024
|
5
|
13
|
Interest on Sterling Notes May
2026
|
13
|
13
|
Interest on Sterling Notes November
2028
|
7
|
7
|
Interest on Sterling Notes April
2030
|
14
|
-
|
Interest on Liquidnet Vendor Loan
Notes
|
1
|
1
|
Other interest
|
3
|
1
|
Amortisation of debt issue and bank
facility costs
|
3
|
2
|
Borrowing costs
|
50
|
41
|
Interest on lease
liabilities
|
16
|
17
|
|
66
|
58
|
8. Earnings per
share
|
2023
|
2022
|
Basic
|
9.5p
|
13.2p
|
Diluted
|
9.3p
|
13.0p
|
The calculation of basic and diluted earnings
per share is based on the following number of shares:
|
2023
No.(m)
|
2022
No.(m)
|
Basic weighted average
shares
|
777.7
|
779.1
|
Contingently issuable
shares
|
16.5
|
11.5
|
Diluted weighted average
shares
|
794.2
|
790.6
|
The earnings used in the calculation basic and
diluted earnings per share, are set out below:
|
2023
|
2022
|
|
£m
|
£m
|
Earnings for the year
|
76
|
106
|
Non-controlling
interests
|
(2)
|
(3)
|
Earnings attributable to equity holders of the
parent
|
74
|
103
|
9. Dividends
|
2023
|
2022
|
|
£m
|
£m
|
Amounts recognised as distributions to
equity holders in the year:
|
|
|
Final dividend for the year ended 31
December 2022
of 7.9p per share
|
62
|
-
|
Interim dividend for the year ended
31 December 2023
of 4.8p per share
|
37
|
-
|
Final dividend for the year ended 31
December 2021
of 5.5p per share
|
-
|
43
|
Interim dividend for the year ended
31 December 2022
of 4.5p per share
|
-
|
35
|
|
99
|
78
|
A final dividend of 10.0 pence per
share will be paid on 24 May 2024 to all shareholders on the
Register of Members on 12 April 2024.
During the year, the Trustees of
the TP ICAP plc EBT and the TP ICAP Group plc EBT waived their
rights to dividends. Dividends are not payable on shares held in
Treasury on the relevant record dates.
10. Intangible assets
arising on consolidation
|
|
Goodwill
|
Other
|
Total
|
|
|
£m
|
£m
|
£m
|
At 1 January
2023
|
|
1,232
|
548
|
1,780
|
Amortisation of acquisition related intangibles
|
|
-
|
(44)
|
(44)
|
Impairment
|
|
(47)
|
(39)
|
(86)
|
Effect of
movements in exchange rates
|
|
(29)
|
(16)
|
(45)
|
At 31 December
2023
|
|
1,156
|
449
|
1,605
|
|
|
|
|
|
At 1
January 2022
|
|
1,180
|
582
|
1,762
|
Amortisation of acquisition related intangibles
|
|
-
|
(45)
|
(45)
|
Impairment
|
|
-
|
(20)
|
(20)
|
Effect of
movements in exchange rates
|
|
52
|
31
|
83
|
At 31
December 2022
|
|
1,232
|
548
|
1,780
|
As at 31 December 2023 the gross
cost of goodwill and other intangible assets arising on
consolidation amounted to £1,453m and £812m respectively (2022:
£1,482m and £833m). Cumulative amortisation and impairment charges
amounted to £297m for goodwill and £363m for other intangible
assets arising on consolidation (2022: £250m and £285m).
Goodwill arising through business
combinations is allocated to groups of individual cash-generating
units ('CGUs'), reflecting the lowest level at which the Group
monitors and tests goodwill for impairment purposes. The
Group's CGUs, as at 31 December, are as follows:
|
2023
|
2022
|
|
£m
|
£m
|
Global Broking - excl Liquidnet -
Credit
|
483
|
489
|
Liquidnet - Credit1
|
72
|
-
|
Global Broking
|
555
|
489
|
Energy & Commodities
|
150
|
156
|
Parameta Solutions
|
334
|
342
|
Liquidnet - Agency Execution
|
41
|
40
|
Liquidnet - Equities
|
76
|
-
|
Liquidnet platform (formerly Liquidnet -
acquired business)1
|
-
|
205
|
Goodwill allocated to CGUs
|
1,156
|
1,232
|
|
|
|
1.
|
Reallocated in 2023 from Liquidnet
platform (formerly Liquidnet - acquired business) to Liquidnet -
Credit and Liquidnet - Equities, as Liquidnet Credit is now managed
and operated within the Global Broking division to leverage the
credit broking experience and more effectively leverage the deep
relationships and accelerate connectivity. Consequently the cash
inflows of Liquidnet Credit are not considered to be independent
from Global Broking and will be considered for impairment purposes
as a single CGU prospectively.
|
In November 2023 segmental responsibility and
managerial reporting for Liquidnet's credit operations were
transferred from the Liquidnet platform (formerly Liquidnet -
acquired business) to Global Broking. As a result, goodwill
allocated to the Liquidnet platform CGU was reallocated to
Liquidnet - Credit and Liquidnet - Equities CGUs, based on the
relative value of those activities. Prior to the reallocation, the
Liquidnet platform CGU was tested for impairment.
The Group's annual impairment testing of its
CGUs is undertaken each September and consequently was completed on
the same basis as in 2022, and prior to the November 2023
re-organisation of the CGUs. Between annual tests the Group reviews
each CGU for impairment triggers that could adversely impact the
valuation of the CGU and, if necessary, undertakes additional
impairment testing.
Determining whether goodwill is impaired
requires an estimation of the recoverable amount of each CGU. The
recoverable amount is the higher of its value in use ('VIU') or its
fair value less cost of disposal ('FVLCD'). VIU is a pre-tax
valuation, using pre-tax cash flows and pre-tax discount rates
which is compared with the pre-tax carrying value of the CGU,
whereas FVLCD is a post-tax valuation, using post-tax cash flows,
post-tax discount rates and other post-tax observable valuation
inputs, which is compared with a post-tax carrying value of the
CGU. The CGU's recoverable amount is compared with its carrying
value to determine if an impairment is required.
The key assumptions for the VIU calculations
are those regarding expected divisional cash flows arising in
future years, divisional growth rates and divisional discount rates
as considered by management. Future projections are based on the
most recent financial projections considered by the Board which are
used to project pre-tax cash flows for the next five years. After
this period a steady state cash flow is used to derive a terminal
value for the CGU.
The key assumptions for FVLCD, using an Income
Approach, are those regarding expected revenue and terminal growth
rates, and the discount rate. Future projections are based on the
most recent financial projections considered by the
Board which are then used to project cash flows for the next five
years and for the terminal value.
Impairment testing as at 30 April
2023
In April 2023 the Liquidnet platform (formerly
Liquidnet - acquired business) was tested for impairment, triggered
by continued falls in equity markets, resultant downward pressure
on the business and expected delay in the market's recovery. The
impairment assessment was performed based on estimating the FVLCD
of the CGU, using the Income Approach, and did not identify any
impairment
Impairment testing as at 30 September
2023
Business divisions (excluding Liquidnet -
platform)
For the 30 September 2023 annual impairment
testing, the recoverable amounts for Global Broking, Energy &
Commodities, Parameta Solutions and Liquidnet - Agency Execution
were based on their VIU. Growth rates on five year projected
revenues, growth rates on terminal value cash flows and discount
rates used in the VIU calculations together with their respective
breakeven rates were as follows:
|
Valuation
Discount
rate
|
Breakeven
Discount
rate
|
Valuation
Revenue
Growth rates
|
Breakeven
Revenue
Growth
rates
|
Valuation
Terminal
Value
Growth rate
|
Breakeven
Terminal
Value
Growth rate
|
September 2023
|
%
|
%
|
%
|
%
|
%
|
%
|
CGU
|
|
|
|
|
|
|
Global Broking
|
13.2%
|
25.2%
|
1.8%
|
(3.2%)
|
1.4%
|
(38.3%)
|
Energy & Commodities
|
13.3%
|
18.2%
|
1.5%
|
(0.4%)
|
1.7%
|
(8.8%)
|
Parameta Solutions
|
13.3%
|
30.2%
|
7.1%
|
(17.0%)
|
3.0%
|
(75.7%)
|
Liquidnet - Agency
Execution
|
13.4%
|
26.3%
|
3.0%
|
(1.6%)
|
2.7%
|
(42.7%)
|
|
Valuation
Discount
rate
|
Breakeven
Discount
rate
|
Valuation
Revenue
Growth rates
|
Breakeven
Revenue
Growth
rates
|
Valuation
Terminal
Value
Growth rate
|
Breakeven
Terminal
Value
Growth rate
|
September 2022
|
%
|
%
|
%
|
%
|
%
|
%
|
CGU
|
|
|
|
|
|
|
Global Broking
|
13.4%
|
17.4%
|
1.0%
|
(1.4%)
|
1.0%
|
(7.0%)
|
Energy & Commodities
|
13.2%
|
16.4%
|
2.1%
|
0.2%
|
2.1%
|
(3.6%)
|
Parameta Solutions
|
13.8%
|
31.1%
|
6.0%
|
(18.1%)
|
3.0%
|
(85.0%)
|
Liquidnet - Agency
Execution
|
13.6%
|
14.5%
|
3.0%
|
2.6%
|
2.0%
|
0.7%
|
No impairments were identified as a result of
the annual testing of these CGUs.
As shown in the table below, with the
exception of Parameta Solutions, the VIU of the CGUs is highly
sensitive to reasonably possible changes of up to 3% in growth
rates. The impact on future cash flows resulting from falling
growth rates does not reflect any management actions that would be
taken under such circumstances. These stresses assume all other
assumptions including gross margins remain unchanged, as there is a
degree of estimation involved in the sensitivity
forecasts.
|
Valuation revenue growth
rate
|
(Surplus)/ impairment at valuation
growth rate -1%
|
(Surplus)/ impairment at valuation
growth rate -3%
|
CGU
|
%
|
£m
|
£m
|
Global Broking
|
1.8%
|
669
|
321
|
Energy & Commodities
|
1.5%
|
46
|
(52)
|
Parameta Solutions
|
7.1%
|
535
|
450
|
Liquidnet - Agency
Execution
|
3.0%
|
45
|
19
|
The Group does not expect climate change to
have a material impact on the financial statements. Climate
scenario sensitivity analysis on the potential impact to the
financial forecasts used in goodwill impairment assessment and
valuation concludes that the Energy & Commodities CGU will
continue to have headroom (excess of the recoverable amount over
the carrying amount of the CGU) in its valuation to withstand the
potential changes in market demand across the Energy &
Commodities asset classes with management taking appropriate
actions.
Liquidnet platform
For the 30 September 2023 annual impairment
testing the recoverable amount for the Liquidnet platform was based
on its FVLCD. The Income Approach was used for the FVLCD
valuation.
|
Valuation
Discount
rate
|
Breakeven
Discount
Rate1
|
Valuation
Revenue
Growth rate
|
Breakeven
Revenue
Growth
Rate1
|
Valuation
Terminal
Value
Growth rate
|
Breakeven
Terminal
Value
Growth rate1
|
Liquidnet platform
|
%
|
%
|
%
|
%
|
%
|
%
|
Liquidnet platform
|
10.7%
|
-
|
11.0%
|
-
|
2.2%
|
-
|
Comprising:
|
|
|
|
|
|
|
Liquidnet - Equities
|
10.7%
|
-
|
6.1%
|
-
|
2.0%
|
-
|
Liquidnet - Credit
|
10.7%
|
-
|
48.3%
|
-
|
3.0%
|
-
|
|
Valuation
Discount
rate
|
Breakeven
Discount
rate
|
Valuation
Revenue
Growth rate
|
Breakeven
Revenue
Growth
rate
|
Valuation
Terminal
Value
Growth rate
|
Breakeven
Terminal
Value
Growth rate
|
Liquidnet platform
|
%
|
%
|
%
|
%
|
%
|
%
|
September 2022
|
10.9%
|
12.3%
|
14.7%
|
13.1%
|
2.4%
|
0.5%
|
December 2021
|
10.8%
|
11.4%
|
3.0%
|
1.7%
|
1.0%
|
0.3%
|
1.
|
As the CGU valuation equates to its
carrying value, breakeven percentages are not relevant.
|
|
|
The valuation revenue growth rate for
Liquidnet platform has decreased from 14.7% in September 2022 to
11.0% as at September 2023. This reflects the challenging market
conditions for Liquidnet - Equities delaying the return of revenue
to pre-Covid levels and in Liquidnet - Credit the development of
the Dealer-to-Client platform proposition taking longer than
planned, as a result the recoverable amount for the Liquidnet
platform was lower than its carrying value resulting in a goodwill
impairment of £47m.
The valuation remains sensitive to reasonably
possible changes in the growth rates and the discount rate. The
most sensitive valuation assumption relates to the growth in cash
flows arising on new Credit business lines. The impact on future
cash flows resulting from falling growth rates does not reflect any
management actions that would be taken under such circumstances.
The Income Approach valuation is based on management forecasts
which are unobservable and is therefore a Level 3 fair value.
Sensitivities to a reasonably possible change of up to 3% in growth
rate assumptions and a 1% increase in discount rate are below.
These stresses assume all other assumptions including gross margins
remain unchanged as there is a degree of estimation involved in the
sensitivity forecasts.
|
Valuation discount rate
|
Incremental impairment at
valuation discount rate +1%
|
Valuation revenue growth
rate
|
Valuation revenue growth rate
resulting in full impairment
|
(Impairment) at valuation growth
rate -1%
|
(Impairment) at valuation growth
rate -3%
|
Liquidnet platform
|
%
|
£m
|
%
|
%
|
£m
|
£m
|
Liquidnet - Equities
|
10.7%
|
(21)
|
6.1%
|
2.9%
|
(27)
|
(76)
|
Liquidnet - Credit
|
10.7%
|
(14)
|
48.3%
|
36.7%
|
(7)
|
(21)
|
Liquidnet - Equities
A combination of growth in the existing
business of 2.8% and new initiatives is forecasted to result in an
overall compound annual revenue growth rate in the Equities
business of 6.1%. Given the higher estimation uncertainty in
forecasting for new business lines, there is an increased risk that
the expected levels of income from the new initiatives may not be
achieved and as a result the recoverable amount of the CGU may
reduce. A 3% reduction in revenue growth rate from 6.1% to 3.1%
would result in a full impairment of £76m, restricted to the
carrying value of goodwill. A scenario of no growth in the existing
business, but where new initiatives are achieved in full, would
result in a £61m impairment. A scenario of expected growth in the
existing business but a 50% success rate in achieving new
initiatives would result in an impairment of £31m.
The Liquidnet - Equities valuation continues
to be closely tied to the performance of the equities volumes
traded in the manner in which they are serviced by the Liquidnet
platform. The market share of Liquidnet - Equities continues to
increase.
Liquidnet - Credit
Liquidnet - Credit valuation is premised upon
the expectation of future events including the number of
participants actively trading on the platform to create sufficient
scale to effectively match trades. It is uncertain as to when
sufficient participation is reached or the mix of how this is met
through new entrants or more active participation of existing
users. The onboarding of counterparties to increase the volume
flows is not certain and it is binary to a significant degree as to
what level achieves the scale for efficient and effective
operation. The valuation revenue growth rate has been adjusted
downwards to reflect this uncertainty.
For the Credit platform, the valuation is
based on revenue growth from the development of the platform,
resulting in a compound annual growth rate of 48.3% (2022: 47%)
over five years. This growth rate has been risk adjusted downwards
to reflect the increased risk of growing revenues from the
currently low levels. A 3% reduction in the growth rate to 45.3%
would result in £21m reduction to the carrying value of the CGU. A
11% reduction in the growth rate to 37% would eliminate goodwill in
Liquidnet - Credit.
Impairment assessment as at 31 December
2023
As at 31 December 2023, following the change
to the CGUs, to Global Broking, Energy & Commodities, Parameta
Solutions, Liquidnet - Agency Execution and Liquidnet - Equities,
the review of the indicators of impairment did not require any
further testing.
Other intangible assets
Other intangible assets at 31
December 2023 represent customer relationships, business brands and
trademarks that arise through business combinations. Customer
relationships are amortised over a period of up to 20 years. Other
intangible assets, along with other finite life assets, are subject
to impairment trigger assessment at least annually. As at 30
September 2023, the Liquidnet platform customer relationships were
subject to a full impairment review, resulting in a impairment of
£39m.
The valuation of customer lists is
based on the 'Multi-period Excess Earnings Methodology' or 'MEEM'.
MEEM is a version of the Income Approach which seeks to estimate
the value by determining the net present value of the forecast
post-tax profits generated by the asset as of the valuation date,
and reflects assumptions regarding customer churn, operating
profits and margins, contributory asset charges, tax rates and
discount rates. As these inputs are unobservable, this is a Level 3
valuation.
Following the adjustment to the
Liquidnet platform customer relationships' carrying value, the
asset will continue to be amortised over its remaining useful life,
but remains sensitive to reasonably possible changes in the
assumptions. As at the date of testing, a reduction in annual
operating profits of £3m from 2024 would impair the asset by £19m,
and a 1% increase in the discount rate to 11.7% would impair the
asset by £5m.
11. Trade and other receivables
|
2023
|
2022
|
|
£m
|
£m
|
Non-current receivables
|
|
|
Finance lease
receivables1
|
27
|
38
|
Other receivables
|
6
|
13
|
|
33
|
51
|
Current receivables
|
|
|
Trade receivables
|
304
|
382
|
Amounts due from clearing
organisation
|
37
|
77
|
Deposits paid for securities
borrowed
|
1,776
|
1,575
|
Finance lease
receivables
|
3
|
2
|
Other
debtors2
|
41
|
45
|
Accrued income
|
11
|
15
|
Owed by associates and joint
ventures
|
4
|
4
|
Prepayments2
|
98
|
94
|
Corporation tax
|
5
|
4
|
|
2,279
|
2,198
|
1.
|
In 2023 £6m of finance lease
receivables were transferred to Investment Properties.
|
2.
|
Prepayments have been reduced by £15m
and other debtors increased by £15m from that reported in 2022
following a reclassification of certain balances.
|
12.
Financial assets and financial liabilities at fair value through
profit or loss
|
2023
|
2022
|
|
£m
|
£m
|
Financial assets at fair value through profit or
loss
|
|
|
Matched Principal financial
assets
|
24
|
9
|
Fair value gains on unsettled
Matched Principal transactions
|
545
|
255
|
|
569
|
264
|
Financial liabilities at fair value through profit or
loss
|
|
|
Matched Principal financial
liabilities
|
-
|
-
|
Fair value losses on unsettled
Matched Principal transactions
|
(541)
|
(255)
|
|
(541)
|
(255)
|
|
|
|
Notional contract amounts of
unsettled
Matched Principal
transactions
|
|
|
Unsettled
Matched Principal Sales
|
125,673
|
104,886
|
Unsettled
Matched Principal Purchases
|
125,645
|
104,876
|
Fair value gains and losses on unsettled
Matched Principal transactions represent the price movement between
trade date and the reporting date on regular way transactions prior
to settlement. Matched Principal transactions arise where
securities are bought from one counterparty and simultaneously sold
to another counterparty. Settlement of such transactions is
primarily on a delivery vs payment basis and typically take place
within a few business days of the transaction date according to the
relevant market rules and conventions.
The notional contract amounts of unsettled
Matched Principal transactions indicate the aggregate value of buy
and sell transactions outstanding at the balance sheet date. They
do not represent amounts at risk.
13.
Trade and other payables
|
2023
|
2022
|
|
£m
|
£m
|
Trade payables
|
40
|
24
|
Amounts due to clearing
organisations
|
6
|
46
|
Deposits received for securities
loaned
|
1,773
|
1,573
|
Deferred consideration
|
51
|
1
|
Other creditors
|
85
|
108
|
Accruals
|
384
|
369
|
Owed to associates and joint
ventures
|
3
|
3
|
Tax and social security
|
28
|
22
|
Deferred income
|
2
|
3
|
|
2,372
|
2,149
|
14. Loans and
borrowings
|
|
Less than
one year
|
Greater than
one year
|
Total
|
2023
|
|
£m
|
£m
|
£m
|
Overdrafts
|
|
10
|
-
|
10
|
Sterling
Notes January 2024
|
|
37
|
-
|
37
|
Sterling
Notes May 2026
|
|
1
|
249
|
250
|
Sterling
Notes November 2028
|
|
1
|
248
|
249
|
Sterling
Notes April 2030
|
|
4
|
247
|
251
|
Liquidnet
Vendor Loan Notes March 2024
|
|
40
|
-
|
40
|
|
|
93
|
744
|
837
|
2022
|
|
|
|
|
Sterling
Notes January 2024
|
|
6
|
247
|
253
|
Sterling
Notes May 2026
|
|
1
|
249
|
250
|
Sterling
Notes November 2028
|
|
1
|
247
|
248
|
Liquidnet
Vendor Loan Notes March 2024
|
|
1
|
42
|
43
|
|
|
9
|
785
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement
facilities and overdrafts
Where the Group purchases securities under
matched principal trades but is unable to complete the sale
immediately, the Group's settlement agent finances the purchase
through the provision of an overdraft secured against the
securities and any collateral placed at the settlement agent. As at
31 December 2023, overdrafts for the provision of settlement
finance amounted to £10m (December 2022: £nil).
Bank credit
facilities and bank loans
The Group has a £350m committed revolving
facility that matures in May 2026. Facility commitment fees of 0.7%
on the undrawn balance are payable on the facility. Arrangement
fees of £3m were paid in 2022 and are being amortised over the
maturity of the facility.
As at 31 December 2023, the revolving credit
facility was undrawn. During the year, the maximum amount drawn was
£40m (2022: £140m), and the average amount drawn was £18m (2021:
£30m). The Group utilises the credit facility throughout the year,
entering into numerous short term bank loans where maturities are
less than three months. The turnover is quick and the volume is
large and resultant flows are presented net in the Group's cash
flow statement in accordance with IAS 7 'Cash Flow'.
Interest and facility fees of £2m were
incurred in 2023 (2022: £3m).
Loans from
related parties
The Group has a Yen 10bn committed facility
with The Tokyo Tanshi Co., Ltd, a connected party, that matures in
August 2025. Facility commitment fees of 0.64% on the undrawn
balance are payable on the facility. Arrangement fees of less than
£1m are being amortised over the maturity of the
facility.
As at 31 December 2023, the Yen 10bn committed
facility amounted to £56m and was undrawn (2022: Yen nil). The
Directors consider that the carrying amount of the loan which is
not held at fair value through profit or loss approximates to its
fair value. During the year, the maximum amount drawn was Yen 8bn,
£45m at year end rates (2022: Yen 10bn, £63m at 2022 year end
rates), and the average amount drawn was Yen 4bn, £24m at year end
rates (2022: Yen 9bn, £57m at 2022 year end rates). The Group
utilises the credit facility throughout the year, entering into
numerous short term bank loans where maturities are less than three
months. The turnover is quick and the volume is large and resultant
flows are presented net in the Group's cash flow statement in
accordance with IAS 7 'Cash Flow'.
Interest and facility fees of £1m were
incurred in 2023 (2022: £1m).
Sterling
Notes: Due January 2024
In January 2017 the Group issued £500m
unsecured Sterling Notes due January 2024. The Notes have a fixed
coupon of 5.25% payable semi-annually, subject to compliance with
the terms of the Notes. In May 2019, the Group repurchased £69m of
the Notes, in November 2021 the Group repurchased £184m of the
Notes and in April 2023 a further £210m of the Notes were
repurchased.
Interest of £5m was incurred in 2023 (2022:
£13m). The amortisation expense of issue costs in 2023 and 2022 was
less than £1m.
At December 2023 the fair value of the Notes
(Level 1) was £38m (2022: £241m).
Sterling
Notes: Due May 2026
In May 2019 the Group issued £250m unsecured
Sterling Notes due May 2026. The Notes have a fixed coupon of 5.25%
paid semi-annually, subject to compliance with the terms of the
Notes.
Interest of £13m was incurred in 2023 (2022:
£13m). The amortisation expense of issue costs in 2023 and 2022 was
less than £1m.
Accrued interest at 31 December 2023 amounted
to £1m (2022: £1m). Unamortised issue costs were £1m as at 31
December 2023 (2022: £1m).
At 31 December 2023 the fair value of the
Notes (Level 1) was £242m (2022: £232m).
Sterling
Notes: Due November 2028
In November 2021 the Group issued £250m
unsecured Sterling Notes due November 2028. The Notes were issued
at a discount of £1m, raising £249m before issue costs. The Notes
have a fixed coupon of 2.625% paid semi-annually, subject to
compliance with the terms of the Notes.
Interest of £7m was incurred in 2023 (2022:
£7m). The amortisation expense of issue costs in 2023 and 2022 was
less than £1m.
Accrued interest at 31 December 2023 amounted
to £1m (2022: £1m). Unamortised discount and issue costs were £2m
(2022: £3m).
At 31 December 2023 the fair value of the
Notes (Level 1) was £210m (2022: £184m).
Sterling
Notes: Due April 2030
In April 2023 the Group issued £250m unsecured
Sterling Notes due April 2030. The Notes were issued at a discount
of £1m, raising £249m before issue costs. The Notes have a fixed
coupon of 7.875% paid semi-annually, subject to compliance with the
terms of the Notes.
Interest of £14m was incurred in 2023. The
amortisation expense of issue costs in 2023 was less than
£1m.
Accrued interest at 31 December 2023 amounted
to £4m. Unamortised discount and issue costs were £3m.
At 31 December 2023 the fair value of the
Notes (Level 1) was £269m.
Liquidnet
Vendor Loan Notes Due March 2024
In March 2021, as part of the purchase
consideration of Liquidnet, the Group issued $50m (£39m at year end
exchange rates (2022: £42m)) unsecured Loan Notes due March 2024.
The Notes have a fixed coupon of 3.2% paid annually.
Interest of £1m was incurred in 2023 (2022:
£1m).
Accrued interest at 31 December 2023 amounted
to £1m (2022: £1m).
At 31 December 2023 the fair value of the
Notes (Level 2) was $45m (£41m) (2022: $44m (£37m)).
15. Reconciliation of
operating result to net cash from operating
activities
|
2023
|
2022
|
|
£m
|
£m
|
Operating profit
|
128
|
163
|
Adjustments for:
|
|
|
- Share-based payment
charge
|
17
|
13
|
- Pension scheme's administration
costs
|
-
|
1
|
- Pension scheme past service and
settlement costs
|
-
|
1
|
- Depreciation of property, plant
and equipment
|
22
|
23
|
- Gain on disposal of property,
plant and equipment
|
-
|
(3)
|
- Impairment of property, plant and
equipment
|
5
|
5
|
- Gain on derecognition of
right-of-use asset/lease liability
|
-
|
(3)
|
- Depreciation of right-of-use
assets
|
23
|
26
|
- Impairment of right-of-use
assets
|
6
|
4
|
- Amortisation of intangible
assets
|
28
|
33
|
- Amortisation of intangible assets
arising on consolidation
|
44
|
45
|
- Impairment of intangible assets
arising on consolidation
|
39
|
20
|
- Impairment of
goodwill
|
47
|
-
|
- Remeasurement of deferred
consideration
|
(3)
|
8
|
- Unrealised foreign exchange
(gain)/loss on Vendor Loan Notes
|
(2)
|
5
|
Net operating cash flow before movement in working
capital
|
354
|
341
|
Decrease/(increase) in trade and
other receivables
|
69
|
(24)
|
(Increase)/decrease in net Matched
Principal related balances
|
(20)
|
27
|
Increase in net balances with
Clearing Organisations
|
-
|
(1)
|
(Increase)/decrease in net stock
lending balances
|
(4)
|
12
|
Increase in trade and other
payables
|
33
|
76
|
Increase/(decrease) in
provisions
|
6
|
(4)
|
Increase in non-current
liabilities
|
-
|
3
|
Net cash generated from operations
|
438
|
430
|
Income taxes paid
|
(89)
|
(51)
|
Income taxes paid on receipt of
pension scheme surplus
|
(16)
|
-
|
Fees paid on bank and other loan
facilities
|
(1)
|
(2)
|
Interest paid
|
(46)
|
(36)
|
Interest paid - finance
leases
|
(16)
|
(17)
|
Net cash flow from operating activities
|
270
|
324
|
16. Analysis of net debt
|
At 1
January
|
Cash
flow
|
Non-cash
items
|
Exchange
differences
|
At 31
December
|
2023
|
£m
|
£m
|
£m
|
£m
|
£m
|
Cash and cash
equivalents
|
888
|
181
|
-
|
(40)
|
1,029
|
Overdrafts
|
-
|
(10)
|
-
|
-
|
(10)
|
|
888
|
171
|
-
|
(40)
|
1,019
|
Financial investments
|
174
|
19
|
-
|
(4)
|
189
|
Sterling Notes January
2024
|
(253)
|
220¹
|
(4)
|
-
|
(37)
|
Sterling Notes May 2026
|
(250)
|
13²
|
(13)
|
-
|
(250)
|
Sterling Notes November
2028
|
(248)
|
7²
|
(8)
|
-
|
(249)
|
Sterling Notes April
2030
|
-
|
(237)3
|
(14)
|
-
|
(251)
|
Liquidnet Vendor Loan
Notes
|
(43)
|
1²
|
-
|
2
|
(40)
|
Total debt excluding lease
liabilities
|
(794)
|
4
|
(39)
|
2
|
(827)
|
Lease liabilities
|
(279)
|
454
|
(27)
|
10
|
(251)
|
Total financing
liabilities
|
(1,073)
|
49
|
(66)
|
12
|
(1,078)
|
Net
(debt)/funds
|
(11)
|
239
|
(66)
|
(32)
|
130
|
|
At 1
January
|
Cash
flow
|
Non-cash
items
|
Exchange
differences
|
At 31
December
|
2022
|
£m
|
£m
|
£m
|
£m
|
£m
|
Cash and cash
equivalents
|
784
|
66
|
-
|
38
|
888
|
Overdrafts
|
(17)
|
17
|
-
|
-
|
-
|
|
767
|
83
|
-
|
38
|
888
|
Financial investments
|
115
|
50
|
-
|
9
|
174
|
Loans from related
parties
|
(51)
|
47⁵
|
-
|
4
|
-
|
Sterling Notes January
2024
|
(252)
|
13²
|
(14)
|
-
|
(253)
|
Sterling Notes May 2026
|
(250)
|
13²
|
(13)
|
-
|
(250)
|
Sterling Notes November
2028
|
(248)
|
7²
|
(7)
|
-
|
(248)
|
Liquidnet Vendor Loan
Notes
|
(38)
|
12
|
(1)
|
(5)
|
(43)
|
Total debt excluding lease
liabilities
|
(839)
|
81
|
(35)
|
(1)
|
(794)
|
Lease liabilities
|
(286)
|
464
|
(18)
|
(21)
|
(279)
|
Total financing
liabilities
|
(1,125)
|
127
|
(53)
|
(22)
|
(1,073)
|
Net debt
|
(243)
|
260
|
(53)
|
25
|
(11)
|
1.
|
Relates to principal repurchased of
£210m reported as cash flow from financing activities plus £10m of
interest paid reported as a cash outflow from operating
activities.
|
2.
|
Relates to interest paid reported as
a cash outflow from operating activities.
|
3.
|
Relates to principal received of
£249m, less £10m of interest reported as cash outflow from
operating activities and £2m debt issue costs reported as a cash
outflow from financing activities.
|
4.
|
Relates to interest paid of £16m
(2022: £17m) reported as cash outflow from operating activities and
principal paid of £49m (2022: £29m) reported as a cash outflow from
financing activities.
|
5.
|
Relates to Totan loan
repayment.
|
Cash and cash equivalents comprise cash at
bank and other short term highly liquid investments with an
original maturity of three months or less. As at 31 December 2023
cash and cash equivalents, net of overdrafts, amounted to £1,019m
(2022: £888m) of which £105m (2022: £104m) represents amounts
subject to restrictions and are not readily available to be used
for other purposes within the Group. Cash at bank earns interest at
floating rates based on daily bank deposit rates. Short term
deposits are made for varying periods of between one day and three
months depending on the immediate cash requirements of the Group,
and earn interest at the respective short term deposit
rates.
Financial investments comprise short term
government securities, term deposits and restricted funds held with
banks and clearing organisations.
Non-cash items represent interest expense, the
amortisation of debt issue costs and recognition/derecognition of
lease liabilities.
17. Provisions
|
Property
|
Re-structuring
|
Legal
and other
|
Total
|
2023
|
£m
|
£m
|
£m
|
£m
|
At 1
January 2023
|
13
|
7
|
20
|
40
|
Charge to
income statement
|
-
|
6
|
12
|
18
|
Utilisation of provisions
|
-
|
(8)
|
(4)
|
(12)
|
Effect of
movements in exchange rates
|
(1)
|
-
|
-
|
(1)
|
At 31 December
2023
|
12
|
5
|
28
|
45
|
|
|
|
|
|
2022
|
|
|
|
|
At 1
January 2022
|
16
|
5
|
22
|
43
|
Charge to
income statement
|
-
|
3
|
2
|
5
|
Utilisation of provisions
|
(3)
|
(1)
|
(5)
|
(9)
|
Effect of
movements in exchange rates
|
-
|
-
|
1
|
1
|
At 31
December 2022
|
13
|
7
|
20
|
40
|
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
£m
|
£m
|
Included in current
liabilities
|
|
|
14
|
9
|
Included in
non-current liabilities
|
|
|
31
|
31
|
|
|
|
45
|
40
|
Property provisions outstanding as at 31
December 2023 relate to provisions in respect of building
dilapidations, representing the estimated cost of making good
dilapidations and disrepair on various leasehold buildings, and are
expected to be utilised over the next 12 years.
Restructuring provisions outstanding as at 31
December 2023 relate to termination and other employee related
costs. The movement during the year reflects the actions taken
under the Group's restructuring initiatives. It is expected that
the remaining obligations will be discharged during
2024.
Legal and other provisions include provisions
for legal claims brought against subsidiaries of the Group together
with provisions against obligations for certain long-term employee
benefits and non-property related onerous contracts. At present the
timing and amount of any payments are uncertain and provisions are
subject to regular review. It is expected that the obligations will
be discharged over the next 17 years.
Critical
judgements and key estimation uncertainties
Swiss LIBOR
Class Action
On 4 December 2017, a class of plaintiffs
filed a Second Amended Class Action Complaint in the matter of
Sonterra Capital Master Fund Ltd. et al. v. Credit Suisse Group AG
et al. naming as defendants, among others, TP ICAP plc, Tullett
Prebon Americas Corp., Tullett Prebon (USA) Inc., Tullett Prebon
Financial Services LLC, Tullett Prebon (Europe) Limited, Cosmorex
AG, ICAP Europe Limited, and ICAP Securities USA LLC (together, the
'Companies'). The Second Amended Complaint generally alleges that
the Companies conspired with certain bank customers to manipulate
Swiss Franc LIBOR and prices of Swiss Franc LIBOR based derivatives
by disseminating false pricing information in false run-throughs
and false prices published on screens viewed by customers in
violation of the Sherman Act (anti-trust) and the Racketeer
Influenced and Corrupt Organizations Act ('RICO'). The Group has
entered into settlement agreements to resolve this matter. On 16
May, 2023, the United States District Court granted preliminary
approval of those settlements. On 27 September 2023, the Court
signed an order granting final class approval of the settlement.
Pursuant to the settlement, the legacy 'Tullett' defendants have
paid US$2.1m (£1.7m) into escrow having provided for this amount
for onward distribution. Separately and consistent with its
indemnity obligations, NEX International Limited (formerly known as
ICAP plc) has, in order to resolve claims against the four 'ICAP'
broker defendants (ICAP Europe Limited, ICAP Securities USA LLC,
NEX Group plc and Intercapital Capital Markets LLC) paid US$2.1m
(£1.7m) into escrow for onward distribution. This has been recorded
as a provision and settlement, together with the receipt of an
indemnification asset from NEX. This matter is now
closed.
Commodities
and Futures Trading Commission - Bond issuances
investigation
ICAP Global Derivatives Limited ('IGDL'), ICAP
Energy LLC ('Energy'), ICAP Europe Limited ('IEL'), Tullett Prebon
Americas Corp. ('TPAC'), tpSEF Inc. ('tpSEF'), TP ICAP E&C
Limited (formerly Tullett Prebon Europe Limited) ('TPE&C')
Tullett Prebon (Japan) Limited ('TPJL') and Tullett Prebon
(Australia) Limited ('TPAL') are currently responding to an
investigation by the CFTC in relation to the pricing of issuances
utilising certain of TP ICAP's indicative broker pricing screens
and certain recordkeeping matters including in relation to employee
use of personal devices for business communications and other books
and records matters. The investigation remains open and the Group
is co-operating with the CFTC in its enquiries. Whilst it is not
possible to predict the ultimate outcome of the investigation, the
Group has made a provision reflecting management's best estimate as
at this date of the cost of settling the investigation. The actual
outcome may differ significantly from management's current
estimate. As the relevant matters occurred prior to the Group's
acquisition of ICAP's Global Broking Business ('IGBB'), the Group
issued proceedings against ICAP's successor company, NEX Group
Limited ('NEX'), in respect of breach of warranties under the sale
and purchase agreement in connection with the IGBB acquisition
insofar as these matters relate to the ICAP entities. Those
proceedings against NEX have been settled on confidential
terms.
Supplier
contractual dispute
The Group is party to numerous contractual
arrangements with its suppliers some of which, in the normal course
of business, may become subject to dispute over a party's
compliance with the terms of the arrangement. In respect of one
such matter the Group has resolved a dispute for an amount within
the previously disclosed provision of £5m (US$6.8m). As the
settlement is commercially sensitive further disclosure is
considered to be prejudicial.
18. Contingent
liabilities
Labour claims
- ICAP Brazil
ICAP do Brasil Corretora De Títulos e Valores
Mobiliários Ltda ('ICAP Brazil') is a defendant in 7 (31 December
2022: 7) pending lawsuits filed in the Brazilian Labour Court by
persons formerly associated with ICAP Brazil seeking damages under
various statutory labour rights accorded to employees and in
relation to various other claims including wrongful termination,
breach of contract and harassment (together the 'Labour Claims').
The Group estimates the maximum potential aggregate exposure in
relation to the Labour Claims, including any potential social
security tax liability, to be BRL 39.0m (£6.4m) (31 December 2022:
BRL 31.7m (£5.3m)). The Group is the beneficiary of an indemnity
from NEX in relation to any liabilities in respect of two of the 7
Labour Claims insofar as they relate to periods prior to completion
of the Group's acquisition of ICAP Global Broking Business. This
includes a claim that is indemnified by a predecessor to ICAP
Brazil by way of escrowed funds in the amount of BRL 28.0m (£4.6m).
Apart from an estimated loss of £0.1m which has been provided for,
the Labour Claims are at various stages of their respective
proceedings and are pending an initial witness hearing, the court's
decision on appeal or a ruling on a motion for clarification. The
Group intends to contest liability in each of these matters and to
vigorously defend itself. Unless otherwise noted, it is not
possible to predict the ultimate outcome of these actions.
Subsequent to the year end, a provisional settlement, subject to
judicial approval, of BRL 25.0m (£4.0m) was reached in respect of
the indemnified claim covered by escrowed funds.
Flow case -
Tullett Prebon Brazil
In December 2012, Flow Participações Ltda and
Brasil Plural Corretora de Câmbio, Títulos e Valores ('Flow')
initiated a lawsuit against Tullett Prebon Brasil S.A. Corretora de
Valores e Câmbio and Tullett Prebon Holdings do Brasil Ltda
alleging that the defendants have committed a series of unfair
competition misconducts, such as the recruitment of Flow's former
employees, the illegal obtainment and use of systems and software
developed by the plaintiffs, as well as the transfer of technology
and confidential information from Flow and the collusion to do so
in order to increase profits from economic activities. The amount
currently claimed is BRL 400m (£64.1m) (31 December 2022: BRL 354m
(£59.1m)). The Group intends to vigorously defend itself but there
is no certainty as to the outcome of these claims. Currently, the
case is in an early evidentiary phase and awaiting the commencement
of expert testimony.
LIBOR Class
actions
The Group is currently defending the following
LIBOR-related actions:
(i) Stichting LIBOR Class Action
On 15 December 2017, the Stichting Elco
Foundation, a Netherlands-based claim foundation, filed a writ
initiating litigation in the Dutch court in Amsterdam on behalf of
institutional investors against ICAP Europe Limited ('IEL'), ICAP
plc, Cooperative Rabobank U.A., UBS AG, UBS Securities Japan Co.
Ltd, Lloyds Banking Group plc, and Lloyds Bank plc. The litigation
alleges manipulation by the defendants of the JPY LIBOR, GBP LIBOR,
CHF LIBOR, USD LIBOR, EURIBOR, TIBOR, SOR, BBSW and HIBOR benchmark
rates, and seeks a declaratory judgment that the defendants acted
unlawfully and conspired to engage in improper manipulation of
benchmarks. If the plaintiffs succeed in the action, the defendants
would be responsible for paying costs of the litigation, but each
allegedly impacted investor would need to prove its own actual
damages. It is not possible at this time to determine the final
outcome of this litigation, but IEL has factual and legal defences
to the claims and intends to defend the lawsuit vigorously. A
hearing took place on 18 June 2019 on the Defendants' motions to
dismiss the proceedings. On 14 August 2019 the Dutch Court issued a
ruling dismissing ICAP plc from the case entirely but keeping
certain claims against IEL relating solely to JPY LIBOR. On 9
December 2020, the Dutch Court issued a final judgement dismissing
the Foundation's claims in their entirety. In March 2021, the
Foundation filed a writ to appeal this final judgment which remains
pending. The Group is covered by an indemnity from NEX in relation
to any outflow in respect of the ICAP entities with regard to these
matters. It is not possible to estimate any potential financial
impact in respect of this matter at this time.
(ii) Euribor Class Action
On 13 August 2015, ICAP Europe Limited, along
with ICAP plc, was named as a defendant in a Fourth Amended Class
Action Complaint filed in the United States District Court by lead
plaintiff Stephen Sullivan asserting claims of Euribor
manipulation. Defendants briefed motions to dismiss for failure to
state a claim and lack of jurisdiction, which were fully submitted
as of 23 December 2015. On 21 February 2017, the Court issued a
decision dismissing a number of foreign defendants, including the
ICAP Europe Limited and NEX International plc (previously ICAP plc
now NEX International Limited), out of the lawsuit on the grounds
of lack of personal jurisdiction. Because the action continued as
to other defendants, the dismissal decision for lack of personal
jurisdiction has not yet been appealed. However, the plaintiffs
announced on 21 November 2017 that they had reached a settlement
with the two remaining defendants in the case. As a part of their
settlement, the two bank defendants have agreed to turn over
materials to the plaintiffs that may be probative of personal
jurisdiction over the previously dismissed foreign defendants. The
remaining claims in the litigation were resolved by a settlement
which the Court gave final approval to on 17 May 2019. Plaintiffs
filed a notice of appeal on 14 June 2019, appealing the prior
decisions on the motion to dismiss and the denial of leave to
amend. Defendants filed a cross-notice of appeal on 28 June 2019
appealing aspects of the Court's prior rulings on the motion to
dismiss that were decided in the Plaintiffs' favour. These appeals
have been stayed since August 2019 pending a ruling in an unrelated
appellate matter involving similar issues. In December 2021, the
unrelated appeal was decided and the stay of the appeal and cross
appeal was lifted and commencing in May 2022 a briefing schedule
was implemented. The motions have been fully briefed but the appeal
and cross appeal are not anticipated to be ruled upon until
sometime in 2024. It is not possible to predict the ultimate
outcome of this action or to provide an estimate of any potential
financial impact. The Group is covered by an indemnity from NEX in
relation to any outflow in respect of the ICAP entities with regard
to these matters.
ICAP
Securities Ltd, Frankfurt branch - Frankfurt Attorney General
administrative proceedings
On 19 December 2018, ICAP Securities Limited,
Frankfurt branch ('ISL') (now TP ICAP Markets Limited) was notified
by the Attorney General's office in Frankfurt notifying ISL that it
had commenced administrative proceedings against ISL and criminal
proceedings against former employees and a former director of ISL,
in respect of aiding and abetting tax evasion by Rafael Roth
Financial Enterprises GmbH ('RRFE'). It is possible that a
corporate administrative fine may be imposed on ISL and earnings
derived from the criminal offence confiscated. ISL has appointed
external counsel and is in the process of investigating the
activities of the relevant desk from 2006-2009. The Group issued
proceedings against NEX in respect of breach of warranties under
the sale and purchase agreement in connection with the IGBB
acquisition in relation to these matters. The claim against NEX has
been settled on confidential terms. Since the Frankfurt proceedings
are at an early stage, details of the alleged wrongdoing or case
against ISL are not yet available, and it is not possible at
present to provide a reliable estimate of any potential financial
impact on the Group.
ICAP
Securities Limited and The Link Asset and Securities Company
Limited - Proceedings by the Cologne Public
Prosecutor
On 11 May 2020, TP ICAP learned that
proceedings have been commenced by the Cologne Public prosecutor
against ICAP Securities Limited ('ISL') (now TP ICAP Markets
Limited) and The Link Asset and Securities Company Ltd ('Link') in
connection with criminal investigations into individuals suspected
of aiding and abetting tax evasion between 2004 and 2012. It is
possible that the Cologne Public Prosecutor may seek to impose an
administrative fine against ISL or Link and confiscate the earnings
that ISL or Link allegedly derived from the underlying alleged
criminal conduct by the relevant individuals. ISL and Link have
appointed external lawyers to advise them. The Group issued
proceedings against NEX in respect of breach of warranties under
the sale and purchase agreement in connection with the IGBB
acquisition in relation to these matters. The claim against NEX has
been settled on confidential terms. Since the Cologne proceedings
are at an early stage, details of the alleged wrongdoing or case
against ISL and Link are not yet available, and it is not possible
at present to provide a reliable estimate of any potential
financial impact on the Group.
Portigon AG
and others v. TP ICAP Markets Limited and others
TP ICAP plc (now TP ICAP Finance plc) is a
defendant in an action filed by Portigon AG in July 2021 in the
Supreme Court of the State of New York County of Nassau alleging
losses relating to certain so called 'cum-ex' transactions
allegedly arranged by the Group between 2005 and 2007. In June
2022, the Court dismissed the action for lack of personal
jurisdiction. In July 2022, the plaintiffs filed a motion with the
Court for reconsideration as well as a notice of appeal. The
plaintiff's motion for reconsideration was denied and the
plaintiffs have appealed the dismissal of its claims. Portigon's
appeal has been fully briefed and the parties are awaiting a date
from the court in mid-to-late 2024. The Group intends to contest
liability in the matter and to vigorously defend itself. It is not
possible to predict the ultimate outcome of this action or to
provide an estimate of any potential financial impact. The Group
issued proceedings against NEX in respect of breach of warranties
under the sale and purchase agreement in connection with the IGBB
acquisition in relation to these matters. Those proceedings against
NEX have been settled on confidential terms.
MM Warburg
& CO (AG & Co.) KGaA and others v. TP ICAP Markets Limited,
The Link Asset and Securities Company Limited and
others
TP ICAP Markets Limited ('TPIM') and Link are
defendants in a claim filed in Hamburg by Warburg on 31 December
2020, but which only reached TPIM and Link on 26 October 2021. The
claim relates to certain German 'cum-ex' transactions that took
place between 2007 and 2011. In relation to those transactions
Warburg has refunded EUR 185 million to the German tax authorities
and is subject to a criminal confiscation order of EUR 176.5
million. It has also been ordered to repay a further EUR 60.8
million to the German tax authorities and is subject to a related
civil claim for EUR 48.8 million. Warburg's claims are based
primarily on joint and several liability (Warburg having now
dropped claims initially advanced in tort and most of the claims
initially advanced in contract). TPIM and Link filed their defence
in April 2022 and received Warburg's reply to the defence in
September 2022. TPIM and Link filed their rejoinder in response to
Warburg's reply to TPIM and Link's defence on 6 December 2023. The
court has recently scheduled a hearing date for 13 May 2024. TPIM
and Link are contesting liability in the matter and the Group
considers it is able to vigorously defend itself. Whilst it is not
possible to predict the ultimate outcome of this action, the Group
does not expect a material adverse financial impact on the Group's
results or net assets as a result of this case. The Group issued
proceedings against NEX in respect of breach of warranties under
the sale and purchase agreement in connection with the IGBB
acquisition in relation to these matters. Those proceedings against
NEX have been settled on confidential terms.
Securities
Exchange Commission Information Request
In October 2022, Liquidnet Inc. ('Liquidnet')
received an inquiry from the Securities and Exchange Commission
relating to, among other things, compliance with SEC Rule 15c3-5
and audit trail and access permissions to its ATS platforms.
Liquidnet is still in the fact-finding phase and the Group is
co-operating with the SEC in its enquiries. It is not possible to
predict the ultimate outcome of the enquiry or to provide an
estimate of any potential financial impact at this time.
General
note
The Group operates in a wide variety of
jurisdictions around the world and uncertainties therefore exist
with respect to the interpretation of complex regulatory, corporate
and tax laws and practices of those territories. Accordingly, and
as part of its normal course of business, the Group is required to
provide information to various authorities as part of informal and
formal enquiries, investigations or market reviews. From time to
time the Group's subsidiaries are engaged in litigation in relation
to a variety of matters. The Group's reputation may also be damaged
by any involvement or the involvement of any of its employees or
former employees in any regulatory investigation and by any
allegations or findings, even where the associated fine or penalty
is not material.
Save as outlined above in respect of legal
matters or disputes for which a provision has not been made,
notwithstanding the uncertainties that are inherent in the outcome
of such matters, currently there are no individual matters which
are considered to pose a significant risk of material adverse
financial impact on the Group's results or net assets.
The Group establishes provisions for taxes
other than current and deferred income taxes, based upon various
factors which are continually evaluated, if there is a present
obligation as a result of past events, it is probable that an
outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate of the amount of
the obligation can be made.
In the normal course of business, certain of
the Group's subsidiaries enter into guarantees and indemnities to
cover trading arrangements and/or the use of third-party services
or software.
Supplier
contractual disputes
The Group is party to numerous contractual
arrangements with its suppliers some of which, in the normal course
of business, may become subject to dispute over a party's
compliance with the terms of the arrangement. Such disputes tend to
be resolved through commercial negotiations but may ultimately
result in legal action by either or both parties.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Independent Auditors' Report to the Members of TP ICAP Group
plc on the Preliminary Announcement of TP ICAP Group
plc
As the independent auditor of TP ICAP Group
plc we are required by UK Listing Rule LR 9.7A.1(2)R to agree to
the publication of TP ICAP Group plc's preliminary announcement
statement of annual results for the year ended 31 December
2023.
The preliminary statement of annual
results for the year ended 31 December 2023 includes operational
performance, strategic highlights, financial highlights, the
dividend statement, the CEO review, financial review, the
consolidated financial statements and disclosures required by the
Listing Rules. We are not required to agree to the publication of
presentations to analysts.
The directors of TP ICAP Group plc
are responsible for the preparation, presentation and publication
of the preliminary statement of annual results in accordance with
the UK Listing Rules.
We are responsible for agreeing to
the publication of the preliminary statement of annual results,
having regard to the Financial Reporting Council's Bulletin "The
Auditor's Association with Preliminary Announcements made in
accordance with UK Listing Rules".
Status of our audit of the financial
statements
Our audit of the annual financial
statements of TP ICAP Group plc is complete and we signed our
auditor's report on 12 March 2024. Our auditor's report is not
modified and contains no emphasis of matter paragraph.
Our audit report on the full
financial statements sets out the following key audit matters which
had the greatest effect on our overall audit strategy; the
allocation of resources in our audit; and directing the efforts of
the engagement team, together with how our audit responded to those
key audit matters and the key observations arising from our
work:
Impairment of
goodwill and acquisition-related intangible
assets
|
Key audit
matter description
|
The Group holds goodwill of £148m (2022:
£205m) and acquisition-related intangible assets, predominantly
customer relationships, related to the acquisition of the Liquidnet
cash generating unit ("CGU").
As of 30 November 2023, the Group has
disaggregated the Liquidnet Platform CGU (formerly known as
Liquidnet Acquired Business) into the Liquidnet Credit and
Liquidnet Equities CGUs and subsequently Liquidnet Credit has been
merged into the Global Broking Group of CGUs.
As detailed in the Group's accounting policy
(note 3(i) to the Consolidated Financial Statements),
acquisition-related intangible assets are reviewed for indicators
of impairment at each balance sheet date and, if an indicator of
impairment exists, an impairment assessment is performed. Goodwill
is assessed for impairment at least annually, irrespective of
whether or not indicators of impairment exist. The Group performs
its annual impairment assessment at 30 September.
Impairment assessments are performed by
comparing the carrying amount of each CGU, or Group of CGUs, to its
recoverable amount, using the higher of value in use ("VIU") or
fair value less costs to dispose ("FVLCD").
The FVLCD approach was used to assess the
recoverable amount of the Liquidnet Platform CGU and the related
customer relationships, as at 30 September 2023. The impairment
assessment requires management judgement in the estimation of
future cash flows, including revenue growth, contribution margin,
and the selection of a suitable discount rate. As a result, these
assessments are inherently subjective with an increased risk of
material misstatement due to fraud or error. The Group has
recognised an impairment charge of £86m (£76m net of deferred tax).
This impairment reduced the Liquidnet Platform goodwill balance
from £200m to £153m and the Liquidnet client-relationship
intangible assets from £110m to £71m excluding the impact of
deferred tax.
Goodwill and acquisition-related
intangible assets' disclosures are included in the Significant
Items section of the Financial and Operating Review Report on pages
38 and 39 of the Annual Report, the Report of the Audit Committee
in the 2023 Annual Report and Accounts on page 103 of the Annual
Report and Notes 3, 4, 5 and 13 to the Consolidated Financial
Statements.
|
How the
scope of our audit responded to the key audit matter
|
We obtained an understanding of relevant
controls in relation to the impairment review process for goodwill
and acquisition-related intangible assets.
We challenged the assumptions used in the
impairment reviews, in particular the forecast revenue and
contribution growth rates and discount rate used by the Group in
its impairment test of the Liquidnet Platform CGU as at 30
September 2023.
For forecast revenue and contribution growth
rate assumptions, we challenged management's assumptions with
reference to recent performance, including comparing growth rates
to those achieved historically and to external market data, where
available. Working with our valuations specialists, we
independently derived a discount rate and compared this to the rate
used by the Group. Additionally, we benchmarked the discount rate
used by the Group to external peer data.
We performed scenario analysis and stressed
key assumptions with reference to historical performance. We also
assessed for impairment triggers between 30 September 2023 and 31
December 2023 for both the Liquidnet Credit and Liquidnet Equities
CGUs.
Additionally, given the sensitivity of the
FVLCD model to reasonably possible changes in the revenue and
discount rate assumptions, we reviewed management's sensitivity
disclosures in Note 13, including areas of key estimation
uncertainty (Note 3y to the Consolidated Financial
Statements).
For acquisition-related intangible
assets, we evaluated and challenged the accuracy of inputs in the
impairment assessment produced by management and corroborated
inputs to supporting evidence. We also assessed for impairment
triggers between 30 September 2023 and 31 December 2023.
|
Key
observations
|
We concur with
management's conclusion to recognise a £47m impairment of Liquidnet
goodwill and a £39m impairment of customer relationships, and
concluded that the disclosures are reasonable.
|
Name passing
revenue
|
Key audit
matter description
|
Name Passing revenue is earned for the service
of matching buyers and sellers of financial instruments. The Group
is not a counterparty to the trade and commissions are invoiced for
the service provided by the Group.
Name Passing revenue is the Group's largest
revenue stream and accounts for approximately 62% of total revenue
(Note 4 to the Consolidated Financial Statements). In 2023, the
Group recognised Name Passing revenue of £1,361m (2022: £1,310m).
There is a risk that incorrect brokerage rates are used to
calculate revenue and this risk increases where amendments are made
to contractual fees, held in the relevant systems, due to
permissible manual intervention by brokers.
Additionally, there is a longer cash
collection period for Name Passing revenue compared to other
revenue streams. At 31 December 2023, the Group had trade debtors
of £309m (2022: £388m) and the majority of this is related to Name
Passing.
The testing of name passing revenue
and associated debtors represents a significant portion of our
audit effort and is, therefore, considered to be a key audit
matter.
|
How the
scope of our audit responded to the key audit matter
|
We obtained an understanding of
relevant controls relating to the calculation of Name Passing
revenue, invoicing, and cash collection. We observed deficiencies
in the controls over the entry of, and amendments to, brokerage
rates and exception reporting. As a result, we did not rely on
controls and modified the nature and extent of our substantive
procedures. For a sample of trades, we recalculated revenue based
on the contractual rate cards or, where amendments were made,
correspondence with customers to support the change. For paid
invoices, we agreed the amounts to cash received. Where amounts
remained unpaid, we sent letters directly to customers to confirm
the amount outstanding. Where responses were not received, we
inspected correspondence between the Group and the customer to
assess the amount and recoverability.
|
Key
observations
|
Through our testing, we concluded
that Name Passing revenue was appropriately recognised in the
year.
|
These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we did not provide a separate opinion on
these matters.
Procedures performed to agree to the preliminary announcement
of annual results
In order to agree to the publication of the
preliminary announcement of annual results of TP ICAP Group plc we
carried out the following procedures:
(a)
|
checked that the figures in the preliminary
announcement covering the full year have been accurately extracted
from the audited financial statements and reflect the presentation
to be adopted in the audited financial statements;
|
(b)
|
considered whether the information (including
the management commentary) is consistent with other expected
contents of the annual report;
|
(c)
|
considered whether the financial information in
the preliminary announcement is misstated;
|
(d)
|
considered whether the preliminary announcement
includes the minimum information required by UKLA Listing Rule
9.7A.1;
|
(e)
|
where the preliminary announcement includes
alternative performance measures ('APMs'), considered whether
appropriate prominence is given to statutory financial information
and whether:
|
|
•
|
the use, relevance and reliability of APMs has
been explained;
|
|
•
|
the APMs used have been clearly defined, and
have been given meaningful labels reflecting their content and
basis of calculation;
|
|
•
|
the APMs have been reconciled to the most
directly reconcilable line item, subtotal or total presented in the
financial statements of the corresponding period; and
|
|
•
|
comparatives have been included, and where the
basis of calculation has changed over time this is
explained.
|
(f)
|
read the management commentary, any other
narrative disclosures and any final interim period figures and
considered whether they are fair, balanced and
understandable.
|
Use of our
report
Our liability for this report, and for our
full audit report on the financial statements is to the company's
members as a body, in accordance with Article 113A of the Companies
(Jersey) Law, 1991. Our audit work has been undertaken so
that we might state to the company's members those matters we are
required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
and the company's members as a body, for our audit work, for our
audit report or this report, or for the opinions we have
formed.
Fiona Walker FCA
(Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
12 March 2024