TIDMTCAP
RNS Number : 8371S
TP ICAP Group plc
14 March 2023
14 March 2023
TP ICAP Group plc
Financial and preliminary management report for the year ended
31 December 2022
Nicolas Breteau, CEO of the Group, said:
"We delivered a strong performance: high single-digit revenue
growth and an increase in profitability. Significant monetary
tightening in many economies benefited Rates, our largest
business.
Our transformation is going well. We have made good progress
rolling out Fusion, our electronic platform, and are working with
clients to embed it across their systems. Energy & Commodities
has received FCA registration on its spot crypto assets platform
and is expanding its Environmentals business. Parameta Solutions is
growing its client, product and distribution base. A partnership to
provide independent fair valuations of OTC derivatives - a growing
market segment - is being launched today with Numerix, a global OTC
analytics firm. Liquidnet is building out its Primary Markets
offering, and the D2C Credit proposition is live.
Capital management is an important part of our strategy. We
committed to freeing up GBP100m of cash, and reducing debt, by the
end of 2023. Progress has been good with over GBP30m already freed
up in H2 2022. In addition, as previously announced, we continue to
focus on identifying, and returning, any potential surplus capital
to shareholders, subject to the ongoing assessment of our balance
sheet and investment requirements. The Board is recommending a
final dividend per share of 7.9 pence, which would bring the total
for the year to 12.4 pence, a 31% increase.
We have a clear strategic roadmap and a strong franchise. Our
market-leading positions in broking, and our deep liquidity pools,
mean we are well positioned as central banks continue to withdraw
liquidity and interest rates remain elevated."
Results for the Period
Statutory results:
2022 2021
Revenue GBP2,115m GBP1,865m
EBIT GBP163m GBP97m
EBIT margin 7.7% 5.2%
Profit before tax GBP113m GBP24m
Profit for the period GBP103m GBP5m
Basic EPS 13.2p 0.7p
Total dividend per share 12.4p 9.5p
Weighted average shares
in issue (basic) 779.1m 759.3m
Adjusted results (excluding significant items):
2022 2021 2021
Constant
Currency
Revenue GBP2,115m GBP1,865m GBP1,976m
EBITDA GBP357m GBP315m GBP342m
EBIT GBP275m GBP233m GBP255m
EBIT Margin 13.0% 12.5% 12.9%
Profit before tax GBP226m GBP177m
Profit for the period GBP194m GBP148m
Basic EPS 24.9p 19.5p
Weighted average shares
in issue (basic) 779.1m 759.3m
A table reconciling Reported to Adjusted figures is included in
the Financial and Operating Review.
The percentage movements referred to in the sections below are
in constant currency (unless otherwise indicated), 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. Percentage movements in reported currency
reflect the strengthening of the USD against GBP, which has been a
tailwind for the Group in 2022. Approximately 60% of the Group's
revenue (and approximately 40% of costs) are US Dollar
denominated.
Financial highlights
Strong revenue performance
-- Group revenue up 7% (+13% in reported currency);
-- Global Broking (GB) revenue increased 7%. All asset classes
delivered high single digit growth. Higher margin Rates business
performing well;
-- GB productivity up: revenue per broker increased 14%. Market
share up(1) , underlining leadership position;
-- Energy & Commodities (E&C) revenue declined 2% - in
line with exchange volumes. European Gas & Power: most
challenging market conditions for some time;
-- Parameta Solutions(2) revenue up 8%; New partnerships
launched: partnership with Numerix announced today;
-- Liquidnet division(3) revenue up 18%, reflecting 12-month
contribution in 2022 from acquired Liquidnet platform (completed in
March 2021). Like-for-like revenue for Liquidnet platform declined,
reflecting difficult and volatile equity market conditions for
block trading, and global commission wallet lowest since early
2009(4) .
Increased profitability
-- Adjusted EBIT up 8% to GBP275m (2021: GBP255m), driven by
strong Rates performance. Increased 18% in reported currency;
-- Reported EBIT increased 68% (in reported currency) to GBP163m (2021: GBP97m);
-- Adjusted EBIT margin, prior to Russian P&L charges of
GBP21m, increased to 14.0% (2021: 12.9%). Including Russian impact:
13.0%.
__________________________
1 Compared with the two other listed peers for H1 2022 vs
FY 2021.
2 In previous reporting, Parameta Solutions included D&A and
Post Trade Solutions (PTS); The Matchbook and ClearCompress
brands within PTS are now reported under Global Broking,
while e-Repo is now reported in the Liquidnet division.
3 As previously announced in our Q3 Trading Update on 1 November
2022, the Liquidnet division includes the Liquidnet platform
(the acquired business), COEX Partners, ICAP Relative Value,
and from October 2022 onwards, MidCap Partners, following
the transfer into Liquidnet from Global Broking.
4 Source: McLagan
__________________________
Capital management review and cost savings highlights
-- On track to free up GBP100m by end 2023 and reduce debt. Around GBP30m freed up in H2 2022.
-- Ongoing assessment of balance sheet and investment requirements.
-- Achieved target to deliver GBP25m of Group P&L cost
savings by end 2022, alongside continued investment in the
business. On track to deliver at least GBP30m in Liquidnet
integration cost synergies by end 2023; previous target GBP25m.
Delivering 2023 Capital Markets Day targets (subject to market
conditions)
-- Parameta Solutions (50%), despite Covid-19 challenges,
expected to exceed Contribution Margin target by end-2023. Global
Broking (40%) expected to be close(1) to target. E&C (35%)
expected to be relatively close(1) to target.
-- At Adjusted EBIT Margin level, Global Broking (19%) and
E&C (15%) expected to be relatively close to 2023 targets;
Parameta Solutions (45%) expected to exceed target.
-- Contribution Margin target set for new combined Liquidnet
division and overall Group Adjusted EBIT Margin target updated:
o Group Adjusted EBIT Margin: 14% (from 18%); Liquidnet
Contribution Margin: 30%.
_________________________________
1 Guidance that refers to being "close" to target is defined
as within one percentage point of target; "Relatively close"
is defined as being within one to two percentage points
of target.
_________________________________
Strategic highlights
Transforming: Fusion on track.
-- Fusion - on target - implemented on Global Broking desks
covering 40% of in-scope revenue (FY21: 20%).
-- On track to complete rollout across in-scope Global Broking
revenue (55% of total) by end 2025. Dedicated Fusion Sales team
driving client adoption.
-- Fusion implemented across key desks: TP ICAP UK inflation and
interest rate swaps and TP ICAP EUR inflation. Key 2023 launches:
UK Gilts and TP ICAP Sterling IRS: volume matching.
Diversification: Environmentals, Digital Assets, Parameta
Solutions, Liquidnet
-- Environmentals:
o Fusion client-facing screen for environmental markets rolled
out: emissions and green certificates. First trades completed.
-- Digital Assets :
o FCA registration obtained for spot crypto assets institutional
platform.
o Full launch planned for 2023.
o Well received
-- Parameta Solutions:
o First inter-dealer broker authorised by FCA as benchmark
administrator. Administering nine TP ICAP interest rate swaps
benchmarks.
o Launched ClearConsensus in partnership with PeerNova. Helping
institutions to improve fair value assessments, ensuring more
efficient capital allocation.
o Announcing today a partnership with Numerix, leading global
OTC analytics company. Delivering high quality, independent fair
valuations of OTC derivatives.
-- Liquidnet:
o D2C Credit proposition live.
o Diversifying core equities franchise. Successfully launched
pre-market block trading capability at full day VWAP price in Hong
Kong, Japan, Australia.
o Expanded in cross-border, algo trading and programme trading:
new business wins already. Sales footprint extended to Paris,
Madrid, Frankfurt, South Africa.
Dividend
The Board recommends a final dividend per share of 7.9 pence,
bringing the total full year dividend to 12.4 pence per share, up
31% (2021: 9.5 pence per share), in line with our policy. The
policy targets dividend cover of c.2x on adjusted post-tax
earnings: a 50% pay-out ratio for the year.
Outlook
Our market-leading businesses, and our focus on transformation,
diversification and dynamic capital management, mean the Group is
well positioned to benefit from the continued withdrawal of central
bank liquidity. We expect the impact of inflation on our business
in 2023 to be broadly mitigated by our ongoing focus on cost
efficiencies.
Global interest rates are expected to remain elevated in 2023;
we expect that volumes will continue to be solid, but moderated
from the peaks at the beginning of the war in Ukraine. The recent
decline in the European gas price has supported a more liquid, and
stable, market so far this year. A sustained recovery continues to
depend on geopolitical developments.
2022 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.
Please use the following details to attend the presentation
virtually:
Webcast link:
https://streamstudio.world-television.com/854-1116-35180/en
Joining by telephone
United Kingdom (Toll Free) +44 800 640 6441
United Kingdom Toll: +44 20 3936 2999
United States (Local) 1 646 664 1960
All other locations: +44 20 3936 2999
Participant access code : 048201
Participants will be greeted by an operator who will register
their details.
Attendees via the webcast will be able to ask questions on the
phone or by typing them into the online platform.
A recording of the presentation will also available via playback
on our website after the event.
Forward looking statements
This document contains forward looking statements with respect
to the financial condition, results and business of the Company. By
their nature, forward looking statements involve risk and
uncertainty and there may be subsequent variations to estimates.
The Company's actual future results may differ materially from the
results expressed or implied in these forward-looking
statements.
Enquiries:
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.
-- It is 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
Our ambition is to be the world's most trusted, and innovative,
liquidity and data solutions specialist. To achieve this, we are
focused on the delivery of three strategic priorities:
-- Transforming our business
-- Diversification
-- Dynamic capital management.
We aim to deliver sustainable shareholder value in the medium
term. We have a clear strategic roadmap and a strong franchise to
do so. We are well positioned for current market conditions through
our developed business model, market-leading positions, major
geographical presence, deep liquidity pools, and cutting-edge
technology.
Our business performance
Strategic delivery: Future proofing our business
Our operational leverage delivered an increase in profitability
as clients sought out the deep liquidity we provide. As the world
thankfully returned to normality following the challenges posed by
Covid-19, we delivered a smooth return to the office and the
successful execution of important deliverables.
Our markets have been transformed by, for example, regulatory
changes following the Global Financial Crisis, including the move
away from proprietary trading by investment banks. We have embraced
those changes. We have done so through the deployment of new
technology and a client-centric approach with a menu of voice,
hybrid and electronic broking protocol options.
The recent return to elements of the pre-Global Financial Crisis
environment - more elevated interest rates and a bigger role for
private sector liquidity providers - underlines the enduring
relevance of our broking franchise. The role our brokers play,
facilitating liquidity and price discovery, is - and will remain -
a key part of the financial services architecture.
We are seeking to future proof our core broking proposition. We
are doing so through key initiatives like Fusion, our
award-winning, client-focused electronic platform. We are on track
to embed Fusion as the 'go-to' platform for clients. In 2022, we
moved from 20% to 40% of targeted in-scope revenue in Global
Broking covered by Fusion. We are on plan to complete the rollout
by 2025 when it will encompass all the in-scope revenue (55% of
total Global Broking revenue). This is only part of the story,
however. A key focus is the adoption of Fusion by our clients as an
essential daily working tool.
Market developments
Global Broking, particularly Rates, benefitted from the
increased volatility across a range of asset classes. Volatility
was driven by: the terrible events in Ukraine, substantiative
monetary policy tightening, and a marked slowdown in economic
growth. The Federal Reserve, in one year, moved the short-term
target Federal Funds Rate to a range of 4.25% to 4.5%. For two
years, it had been at zero.
Our Energy & Commodities (E&C) division initially
benefitted from volatility too. But, as the year progressed, the
geopolitical impact of war in Ukraine had a pronounced impact on
energy markets, especially European Gas & Power, leading to an
inauspicious trading environment. Excessive volatility - ICE Gasoil
registered an average volatility of 61%, a record high - generated
a major increase in exchange margin requirements and sharp volume
contraction. Average daily volumes on CME West Texas Intermediate
(WTI) - an important benchmark - fell below 1 million contracts for
the first time since 2015.
Equity markets were challenging. In the US and Europe, key
Liquidnet markets, many indices recorded very significant declines
in 2022, accompanied by high levels of volatility, which negatively
impacted block trading. The S&P 500 fell by 19%, its worst
performance since 2008; the Stoxx 600 declined by 13%. Accordingly,
the commission wallet, in the third quarter, was the smallest since
early 2009(1) . Parameta Solutions, on the other hand, benefitted
from growing demand for high quality, financial markets data.
Regulatory change, a key data driver, continues apace. One
interesting example: the annual growth rate for new pages of US
regulation was recently up over 1%(2) . These pages deliver
significant change, and a need for the insights we provide.
Strong revenue performance
At the Group level, we delivered 7%(3) revenue growth. On a
reported currency basis, we recorded 13% revenue growth. Global
Broking delivered a strong performance: revenues up 7%. All Global
Broking asset classes reported high single-digit growth. Energy
& Commodities revenue declined by 2% - in line with exchange
volumes. Revenue at the Liquidnet division(4) was up 18%, driven by
a 12-month contribution in 2022 from the acquired Liquidnet
platform (which completed in March 2021). On a like-for-like basis,
revenue for the Liquidnet platform declined. This reflected the
difficult market conditions (see above) for many asset managers and
subdued larger block trading - an important segment for us.
Parameta Solutions delivered an 8% increase in revenues: it
continued to leverage our high quality, and unique, OTC data.
As a leading liquidity provider, we again recorded market share
gains: for example, in Global Broking(5) . Parameta Solutions
underlined its position as the leading provider of inter-dealer OTC
data - we account for around three quarters(6) of this market.
_____________________
1 Source: McLagan.
2 Source: The GW Regulatory Studies Centre, The George Washington
University.
3 All percentages within the CEO review are in constant currency,
unless otherwise indicated.
4 As previously announced in our Q3 Trading Update on 1 November
2022, the Liquidnet division includes the Liquidnet platform
(the acquired business), COEX Partners, ICAP Relative Value,
and from October 2022 onwards, MidCap Partners, following
the transfer into Liquidnet from Global Broking.
5 Compared with the two other listed peers for H1 2022 vs
FY 2021.
6 Source: TP ICAP estimates
_____________________
Increased profitability and CMD targets update
We saw a substantial increase in market activity at the
short-dated end of the yield curve. This benefitted the Rates
franchise, our biggest, and most profitable, asset class. Coupled
with our operational leverage, this generated an uptick in margin.
Adjusted EBIT was up 8%, or 18% in reported currency. Group revenue
per broker was up 11% driven by the revenue uplift and a reduction
in the average number of brokers. Prior to the impact of the
Russian P&L charge of GBP21m, adjusted EBIT margin increased to
14.0% (2021: 12.9%). Including the Russian impact, adjusted EBIT
margin was 13.0%. The reported EBIT margin increased to 7.7% (2021:
5.2%).
We are also providing today an interim update on our progress
against the three-year targets set out at our Capital Markets Day
in December 2020. For a more detailed discussion, see the Financial
and Operating Review. We will update the market in due course about
our progress in relation to the CMD medium term targets.
Transforming our business
Delivering Fusion
Our transformation is being delivered at pace, including Fusion,
our award-winning electronic platform. Fusion is about providing
more client-led technology, and deeper liquidity. It has a range of
client-centred features, including a single login access, and
access to aggregated liquidity for specific asset classes. Client
benefits include lower cost, greater speed and increased
efficiency. Benefits for us include enhanced profitability, and
stickier client revenue. In our EMEA Rates business, for example,
there was a material outperformance in contribution margin in 2022
for Fusion-derived activity compared to desks without the platform.
We are receiving ever more positive Fusion feedback from our
clients.
It has been a productive year for Fusion. As previously noted,
the rollout is on track: 40% of targeted in-scope Global Broking
revenue is on the platform. Highlights include Fusion's
implementation across the TP and ICAP desks covering Inflation and
Interest Rate Swaps. Fusion is live on the TP and ICAP EUR
Inflation desks, including volume matching and Central Limit Order
Book (CLOB) functionality. Our focus in 2023 remains on Rates and
FX, our largest asset classes. We will also commence rolling out
Fusion across Credit, another significant asset class, and TP and
ICAP Sterling Interest Rate Swaps: Volume Matching.
In Energy & Commodities, brokered markets have not been
electronified to any great degree. Our emphasis is therefore on the
internal implementation of a new Order Management System or OMS.
This is an essential prerequisite: it captures all orders and
trades electronically. We continue to implement the rollout of OMS
across our Oil desks, the largest asset class in Energy &
Commodities.
Driving client adoption
The Fusion delivery programme can be broken down into two key
components. In Phase One - from 2020 to end-2023 - the focus is on
IT development and implementation. In the Second Phase - to
end-2025 - there will be an emphasis on adoption by clients. In
fact, the process is already underway. A dedicated Fusion Sales
team has been established in Global Broking to facilitate adoption.
Working closely with our brokers, the team will engage with
existing clients, and new ones too. They will help clients to get
the best out of Fusion, collecting and acting on their feedback,
and delivering a comprehensive marketing programme. We will work
with clients on their Fusion utilisation with a range of internal
KPIs covering pace of delivery, client usage, and return on
investment.
Transformation, of course, is about ensuring we have the
leadership in place to drive every aspect of the change programme.
It was therefore pleasing to announce some new, key senior level
appointments at this important time in our strategic development.
Daniel Fields, previously a Global Head of Markets at Société
Générale, joined in June to lead Global Broking and drive the
Fusion programme. Mark Govoni came on board in May and is leading
our Liquidnet division; Mark was the President of US Brokerage at
Instinet.
Delivering on diversification
We are diversifying our business through a three-pronged
approach focused on: new clients, new asset classes, and more
non-broking revenue.
Parameta Solutions
This strategy is exemplified by Parameta's emphasis on products,
clients and distribution to grow revenue and contribution. There
has again been good progress across these areas. In May, Parameta
became an FCA-authorised benchmark administrator - the first
inter-deal broker to do so. We are now administering the nine TP
ICAP interest rate swaps benchmarks; they cover the mid-price
interest swaps from our Global Broking division. This enables
Parameta to provide more data-driven analysis for clients,
including for risk and compliance purposes: a growing area.
Parameta Solutions announced in August the launch of
ClearConsensus, an enhanced consensus pricing tool tailored to our
global client base. We are delivering this solution in partnership
with PeerNova, a Silicon Valley data management and analytics firm.
This is a compelling proposition - it helps our clients improve
their fair value assessments, enabling more efficient capital
allocation and optimisation.
Maintaining the momentum, Parameta Solutions has announced today
a new partnership with Numerix, a leading global OTC analytics
company. Together with Numerix, Parameta Solutions will provide a
best-of-breed solution to clients. We will do so by leveraging our
market-leading OTC data with Numerix's analytical capability. Our
goal is to ensure that clients have automated, high-quality,
independent fair valuations of OTC derivatives. This is a high
growth sector with a large addressable target market (US$6bn).
Energy & Commodities
We are the leading OTC energy and commodities broker, delivering
for clients through three key brands: Tullett Prebon, ICAP and PVM.
Alongside well-developed market positions in major areas like Oil,
Gas and Power, we are making good progress expanding our revenue
streams in two new segments: renewables and crypto assets.
The energy transition is, of course, already under way. The end
state remains unclear, however, and may remain so for some time to
come. It is clear, though, that there will be a continued, and
important role, for Oil: currently our largest asset class. The
International Energy Agency (IEA), for instance, in its recent
STEPS scenario, sees Oil demand reaching a high point in mid-2030
before slightly moderating at that stage. Natural Gas - another key
asset class for us - was designated at the recent COP27 as a
low-emission energy source.
Emissions credits trading will play a key role during the energy
transition. This is an area we are focusing on: we are building an
environmental hub and developing new products. In February, Tullett
Prebon launched a well-received Brazilian energy desk majoring on
renewables. We also launched a client-facing Fusion screen covering
Green Certificates in Norway, voluntary emissions in Europe, and
Australian renewables. Client reaction is positive; trades have
already been completed through the platform.
Turning to crypto assets, we obtained FCA registration in
December as a crypto asset exchange provider. We are planning to
launch our wholesale marketplace in 2023. Our Fusion-enabled
platform - for institutional clients only - combines our expertise
in operating venues, alongside the industry-leading custodial
expertise provided by Fidelity Digital Assets(SM) . We are also
working closely with a range of market makers, including Virtu
Financial, Flow Traders, Jane Street, Susquehanna and Hudson River
Trading.
Our Digital Assets proposition provides the credible
infrastructure, and assurance, needed for institutions to allocate
capital to this growing asset class. Research by Grayscale
Investments suggests seven out of ten professional investors
believe institutions will hold 60% of all digital assets within
seven years; they currently hold 3% with retail investors owning
97%. Longer-term, we believe blockchain will lead to the
tokenisation of traditional asset classes, resulting in more
efficient, automated trading and settlement. We are well placed to
capitalise on this structural shift. Early client reaction to the
Fusion Digital Assets trading & operating model is
positive.
Liquidnet
Liquidnet is a leading, technology-driven agency execution
specialist with a global Equities and Fixed Income footprint.
Liquidnet's strong, and long established, buyside connectivity
brings us considerable client diversification. So too does the
Dealer-to-Client (D2C) Credit proposition. Our strategy is focused
on: (a) completing the Liquidnet integration, (b) expanding the
product suite to meet the changing needs of clients, and (c)
exploiting new growth opportunities like D2C Credit.
As I touched on earlier, Mark Govoni, joined in May as CEO of
Liquidnet. Mark has reviewed the business, and implemented an
action plan, at an opportune time. The integration programme is
progressing well. The majority of deliverables are completed. We
are on track to complete the integration by the end of 2023 and
deliver at least GBP30m of integration cost synergies, ahead of our
GBP25m target.
Equity markets, in particular block trading, as previously
discussed, were challenging. Against this backdrop, Liquidnet is
focused on growing - and diversifying - its core Equities
franchise. The plan includes an even greater emphasis on developing
existing clients, expanding the product suite into fast growing
market segments, and new client acquisition.
Client development initiatives include the successful launch of
a pre-market block trading capability at the full day
Volume-weighted Average Price (VWAP) in Hong Kong and Australia.
Expansion of the product suite is being delivered through
initiatives designed to exploit changing market features. Expanding
in algorithmic (algo) trading is delivering results with algo
revenue now 31% of total revenue, compared with 29% in 2021. Algo
trading - the ability to process large amounts of data and
automatically execute trades at speed based on intelligent rules -
is growing rapidly. Mordor Intelligence estimates CAGR growth of
just over 10% up to 2028. The US is the biggest market with Asia
the fastest growing segment.
Another focus area is programme trading where Liquidnet has
recorded a number of new business wins. In addition, cross-border
trading now accounts for 18% of total Liquidnet revenue. New client
acquisition has included establishing, for the first time, a
presence in Paris, Madrid, Frankfurt, and South Africa, including
sales capability.
Growing Fixed Income is a priority: it is a substantial
opportunity for the Group. Liquidnet is making good progress on its
Primary Markets Offering, a strategic initiative towards our goal
to electronify the full life cycle of a bond. Liquidnet has
partnered with 30 syndicate banks and increased new issue
announcements coverage (now at 80%). In Secondary, Liquidnet now
has around 450 active firms and average daily liquidity of GBP15bn.
On D2C, the proposition went live, as planned, last summer. All of
the client-facing tech has been built and is in place. Feedback is
good; the key issue now is growing the liquidity on the platform.
Major banks are already connected to the platform, and we are
working with many additional institutions. Covid-19 has had a
material impact on how dealers and potential clients for the
platform have been prioritising projects and IT tasks. We are
pushing hard to be further up their priority list. We have also
identified opportunities for greater collaboration between the
Credit teams in Liquidnet and Global Broking, including leveraging
the latter's extensive dealer connectivity. The D2C opportunity is
substantial, however it will take us longer, given these client
realities, to move within our 3 to 6% target market share
range.
Dynamic capital management
Our focus on capital management - returning, where possible, and
appropriate, surplus capital to shareholders - is an important
element of our strategy. We announced at our H1 2022 results, that
we aimed to free up GBP100m of cash by the end of 2023. Progress
has been good. We have freed up around GBP30m of cash in H2 2022.
We are on track to free up the targeted GBP100m.
We also previously said that we are focused on identifying, and
returning, any potential surplus capital to shareholders, subject
to the ongoing assessment of our balance sheet and investment
requirements.
Our emphasis on capital management is accompanied by a clear
distribution policy: a 50% pay-out ratio of adjusted post-tax
earnings for the year as whole.
Well advantaged with a clear strategic roadmap
We are well positioned as central banks withdraw liquidity and
clients look to us even more than before. Our deep liquidity pools,
scale businesses, and geographical reach and expertise are
significant advantages in a world of elevated interest rates.
Our strategy - transforming, diversifying, and dynamic capital
management - is about delivering sustainable shareholder returns,
now and in the future.
We delivered a strong performance in 2022 and advanced our
strategic agenda.
Our transformation continues at pace. The Fusion rollout is on
track. Our focus is increasingly turning to client adoption of the
platform. A dedicated team, overseen by our senior management in
Global Broking, will drive adoption.
The enduring strength of our core franchise is coupled with the
significant diversification opportunities we are pursuing. The
strategic rationale for Liquidnet remains in place: client and
asset diversification. The prize is substantial. We see real
opportunities in Environmentals and Digital Assets. These
opportunities play to our strengths: deep expertise, true
connectivity and a track record of innovation.
As we move forward in 2023, I want to thank all my colleagues
for their contribution during a year when we delivered a great deal
for stakeholders. We look to the future with confidence.
Outlook
Our market-leading businesses, and our focus on transformation,
diversification and dynamic capital management, mean the Group is
well positioned to benefit from the continued withdrawal of central
bank liquidity. We expect the impact of inflation on our business
in 2023 to be broadly mitigated by our ongoing focus on cost
efficiencies.
Global interest rates are expected to remain elevated in 2023;
we expect that volumes will continue to be solid, but moderated
from the peaks at the beginning of the war in Ukraine. The recent
decline in the European gas price has supported a more liquid, and
stable, market so far this year. A sustained recovery continues to
depend on geopolitical developments.
Nicolas Breteau
Executive Director and Chief Executive Officer
14 March 2023
________________________________________________________________
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 being
at prior year foreign exchange rates.
Introduction
The Group delivered a strong financial performance in 2022.
Group revenue increased 13% to GBP2,115m on a reported basis (7%
ahead in constant currency). Markets were heavily impacted by
geopolitical events, and substantial monetary tightening by Central
Banks all around the world. Against this backdrop, market
volatility increased during the year, driving higher revenue.
Global Broking benefitted from this increased volatility
delivering high single digit revenue growth across all asset
classes and an uplift in overall contribution. Energy and
Commodities (E&C) also initially benefitted from market
volatility; the war in Ukraine however drove the price of European
gas in Q2 and Q3 to levels not seen in some time and this sharply
increased margin requirements for our clients and led to a major
reduction in trading activity. While gas prices have since receded
from the mid-year highs, they remain well above historic averages.
During the year, we took a P&L charge, net of recoveries, of
GBP21m on Russian exposures, primarily in Global Broking. These
unsettled trades resulted from the imposition of sanctions in
February 2022 against Russian clients and counterparties.
In the new combined Liquidnet division (comprising of the
acquired Liquidnet platform, COEX Partners, ICAP Relative Value and
MidCap Partners) , market conditions for the Liquidnet platform
(predominantly Equities) were very challenging. Equity indices
declined significantly across the US and Europe, accompanied by
high volatility levels. This reduced trading activity of larger
blocks in these markets where Liquidnet has a leading position. Our
planned investment in the Dealer-to-Client (D2C) Credit proposition
also impacted profitability. The remaining Liquidnet division
performed well, driven by the growth in the Relative Value business
as well as in Rates, Futures and FX.
Parameta Solutions, our market-leading provider of neutral OTC
data, delivered strong revenue growth. The division continues to
leverage the increased demand for high quality financial markets
data.
Average revenue per broker (productivity) increased by 17% in
2022 compared with 2021 (+11% in constant currency). The average
contribution per broker increased by 17% (+11% in constant
currency).
We ended the year with a contribution margin of 36.1% compared
with 37.6% in 2021 (37.7% in constant currency).
Including the full year cost of the Liquidnet platform and our
investment in the D2C business, the management and support costs
were 4% higher on a reported currency basis (flat in constant
currency). Alongside continued investment in the business, we
maintained a strong focus on cost efficiency and delivered our
targeted Group savings of GBP25m in 2022 which helped offset
inflationary pressures.
Our adjusted EBIT margin increased from 12.5% to 13.0% in
reported currency, or 14.0% excluding charges relating to Russian
exposures (2021: 12.9% in constant currency). The Group's revenue
and EBIT margin benefitted from a foreign exchange (FX) tailwind as
GBP weakened by, on average 10%, against the USD.
The Group reported EBIT of GBP163m increased by 68% from GBP97m
in 2021 benefitting from diversification and strength of our core
franchise.
The Group incurred significant items of GBP113m pre-tax (2021:
GBP153m), of which around 80% are non-cash, in reported earnings.
This is broadly in line with our previous guidance of GBP110m.
We are managing our capital dynamically. The Group is on track
to generate or free up approximately GBP100m of cash by the end of
2023, to reduce debt. We continue to assess our balance sheet and
investment requirements and are committed to identifying, and
returning, any potential surplus capital to shareholders.
Robin Stewart
Executive Director and Chief Financial Officer
14 March 2023
Key financial and performance metrics
GBPm 2022 2021 2021 Reported Constant
Reported Constant change Currency
Currency Change
Revenue 2,115 1,865 1,976 13% 7%
------ ---------- ---------- --------- ----------
Reported
- EBIT 163 97 112 68% 46%
- EBIT margin 7.7% 5.2% 5.7%
Adjusted
- Contribution 763 702 744 9% 3%
- Contribution
margin 36.1% 37.6% 37.7%
- EBITDA 357 315 342 13% 4%
- EBIT 275 233 255 18% 8%
- EBIT margin 13.0% 12.5% 12.9%
------ ---------- ---------- --------- ----------
Average:
- Broker headcount 2,637 2,770 (5%)
- Revenue per
broker(1) (GBP'000) 659 562 592 17% 11%
- Contribution
per broker(1)
(GBP'000) 236 202 212 17% 11%
------ ---------- ---------- --------- ----------
Period end:
- Broker headcount 2,561 2,707 2,707 (5%)
- Total headcount 5,161 5,304 5,304 (3%)
--------------------------- ------ ---------- ---------- --------- ----------
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 brokers for the year. The Group
revenue and contribution per broker excludes revenue and contribution
from Parameta Solutions and Liquidnet Division.
Income Statement
The Group presents its reported results in accordance with
International Financial Reporting Standards ('IFRS'). The Group
also presents adjusted (non-IFRS) measures to report performance.
Adjusted results and other alternative performance measures
('APMs') may be considered in addition to, but not as a substitute
for, the reported IFRS results. The Group believes that adjusted
results and other APMs, and should be considered together with
reported IFRS results, provide stakeholders with additional
information to better understand the Group's financial performance
and compare performance from year to year. These adjusted measures
and other APMs are also used by management for planning and to
measure the Group's performance.
Reported results are adjusted for significant items to derive
adjusted results. Adjusted measures exclude significant items to
aid comparability of financial performance from year to year and to
provide additional information to better understand the Group's
financial performance, and should be considered together with
reported IFRS results. Significant items can be either cash or
non-cash costs. A reconciliation from reported to adjusted metrics
is provided in the Group income statement below. Analysis of
performance by Business Division follows the Group income statement
analysis.
2022 Adjusted Significant Reported
items
GBPm
--------- ------------ ---------
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)
--------- ------------ ---------
Earnings 194 (91) 103
========= ============ =========
Basic average number of shares
(millions) 779.1 779.1 779.1
Basic EPS (pence per share) 24.9p (11.7p) 13.2p
Diluted average number of shares 790.6 790.6 790.6
Diluted EPS 24.5p (11.5p) 13.0p
------------------------------------- --------- ------------ ---------
2021 Adjusted Significant Reported
items
GBPm
--------- ------------ ---------
Revenue 1,865 - 1,865
========= ============ =========
Employment, compensation and benefits (1,140) (12) (1,152)
--------- ------------ ---------
General and administrative expenses (420) (56) (476)
--------- ------------ ---------
Depreciation and impairment of
PPE and ROUA (52) (16) (68)
--------- ------------ ---------
Amortisation and impairment of
intangible assets (30) (52) (82)
--------- ------------ ---------
Operating expenses (1,642) (136) (1,778)
--------- ------------ ---------
Other operating income 10 - 10
========= ============ =========
EBIT 233 (136) 97
--------- ------------ ---------
Net finance expense (56) (17) (73)
========= ============ =========
Profit before tax 177 (153) 24
--------- ------------ ---------
Tax (44) 21 (23)
--------- ------------ ---------
Share of net profit of associates
and joint ventures 18 (11) 7
--------- ------------ ---------
Non-controlling interests (3) - (3)
========= ============ =========
Earnings 148 (143) 5
========= ============ =========
Basic average number of shares 759.3 759.3 759.3
Basic EPS 19.5p (18.8p) 0.7p
Diluted average number of shares 768.2 768.2 768.2
Diluted EPS 19.3p (18.6p) 0.7p
--------------------------------------- --------- ------------ ---------
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 2022 of GBP2,115m was 7% higher than the
prior year (+13% in reported currency). Revenue grew across all
divisions with the exception of Energy & Commodities. Global
Broking benefitted from increased market volatility and revenue was
up 7%, growing across all asset classes. Market volatility from the
war in Ukraine resulted in a higher volume of trading activity,
particularly in the first half. This generated higher revenue and
contribution, which more than offset the impact of Russian P&L
charges, which totalled GBP21m in 2022. Energy & Commodities
revenue fell by 2% as markets continued to be very subdued, driven
primarily by the war in Ukraine and the resulting sharp price rises
in European gas and power. Oil markets demonstrated greater
resilience particularly in the US and Asian markets. Revenue in the
Liquidnet division was challenged by volatile equity markets but
grew 18% due to a full year contribution from the Liquidnet
Platform, and growth in the Relative Value business and as well as
in Rates, Futures and FX. Parameta Solutions was up 8% benefitting
from growing demand for high quality financial markets data.
2022 2021 2021 (restated(2) Reported Constant
constant currency currency
currency) change
(restated(2) change
By Business Division reported
currency)
GBPm
Rates 566 509 531 11% 7%
Credit 118 102 109 16% 8%
FX & Money Markets 302 263 277 15% 9%
Equities 243 214 227 14% 7%
Inter-division revenue 22 19 20 16% 10%
--------- ---------------- -------------------- ---------- ----------
Total Global Broking(1) 1,251 1,107 1,164 13% 7%
--------- ---------------- -------------------- ---------- ----------
Energy & Commodities 384 367 393 5% (2)%
Inter-division revenue(3) 3 3 3 n/m n/m
--------- ---------------- -------------------- ---------- ----------
Total Energy & Commodities 387 370 396 5% (2%)
--------- ---------------- -------------------- ---------- ----------
Total Liquidnet
(4) 325 261 275 25% 18%
--------- ---------------- -------------------- ---------- ----------
Total Parameta Solutions
(5) 177 149 164 19% 8%
Inter-division eliminations(3) (25) (22) (23) (14%) (9%)
--------- ---------------- -------------------- ---------- ----------
Total Revenue 2,115 1,865 1,976 13% 7%
========= ================ ==================== ========== ==========
1. In prior year reporting, the revenue breakdown of Global
Broking included Emerging Markets revenue as a separate line item.
This revenue has now been reclassified to the relevant asset
classes within Global Broking. Emerging Markets revenue reported in
2021 of GBP179m has been reclassified as follows: Rates: GBP65m;
Credit GBP20m, FX & Money Markets GBP93m, Equities GBP1m.
2. Post Trade Solutions revenue has been reclassified from
Parameta Solutions to Global Broking and Liquidnet. Post Trade
Solutions revenue reported in 2021 of GBP17m has been reclassified
as follows: Rates (Global Broking): GBP15m & Liquidnet
Platform: GBP2m. MidCap Partners revenue reported in 2021 of GBP13m
has been reclassified out of Global Broking and into Liquidnet.
3. 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.
4. As previously announced in our Q3 Trading Update on 1
November 2022, the Liquidnet division includes the Liquidnet
platform (the acquired business), COEX Partners, ICAP Relative
Value, and from 1 October 2022 onwards, MidCap Partners following
the transfer from Global Broking).
5. In previous reporting, Parameta Solutions included D&A
and Post Trade Solutions (PTS). The Matchbook and ClearCompress
brands within PTS are now reported under Global Broking, while
e-Repo is now reported in the Liquidnet division.
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.
2022 2021 2021 Reported Constant
(restated (restated change currency
(1) reported (1) constant
currency) currency)
GBPm change
Front office costs
* Global Broking(2) 780 694 729 12% 7%
* Energy & Commodities(2) 263 248 266 6% (1%)
* Liquidnet(2) 246 170 182 45% 35%
* Parameta Solutions(2) 63 51 55 24% 15%
--------------- --------- ----------
Total front office
costs 1,352 1,163 1,232 16% 10%
====== =============== =============== ========= ==========
Management and support
costs
* Employment costs 268 226 238 19% 13%
* Technology and related costs 87 79 83 10% 5%
* Premises and related costs 29 28 29 4% 0%
* Depreciation and amortisation 82 82 86 - (5%)
* FX (gains)/losses (14) 11 11 (227%) (227%)
* Other administrative costs 48 53 52 (9%) (8%)
------ --------------- --------------- --------- ----------
Total management
& support costs 500 479 499 4% 0%
====== =============== =============== ========= ==========
Total adjusted operating
costs 1,852 1,642 1,731 13% 7%
====== =============== =============== ========= ==========
Significant items 130 136 n/a (4%) n/a
--------------- --------- ----------
Total operating expenses 1,982 1,778 n/a 11% n/a
====== =============== =============== ========= ==========
1. Post Trade Solutions front office costs have been
reclassified from Parameta Solutions to Global Broking and
Liquidnet. Post Trade Solutions front office costs reported in 2021
of GBP10m has been reclassified as follows: Rates (Global Broking):
GBP9m & Liquidnet Platform: GBP1m.
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 GBP1,352m, which are predominantly
variable with revenue, increased by 10% compared with 2021, (an
increase of 16% in reported currency) include an additional quarter
of Liquidnet and the GBP21m P&L charge relating to Russian
exposures.
Total management and support costs of GBP500m were flat
year-on-year in constant currency. Excluding FX gains / (losses) on
retranslation of net financial assets the costs increased by
5%.
As a result, the total adjusted operating costs were GBP1,852m,
which was 7% higher than 2021 in constant currency (13% in reported
currency). We achieved in-year cost savings of GBP25m as per our
target, including cost savings initiatives on Liquidnet cost
synergies.
During 2022, we incurred total strategic IT investment spend
amounting to GBP22m (GBP8m of operating expenses, GBP14m of capital
expenditure).
Capital and liquidity management
Capital management
TP ICAP successfully redomiciled from the UK to Jersey, Channel
Islands in February 2021. This, together with the progress we are
making on consolidating legal entities, has enabled the Group to
undertake a review to identify opportunities to unlock cash. In
aggregate, we expect to generate or free up approximately GBP100m
of cash by the end of 2023. The exact timing of release for certain
initiatives will be impacted by external (e.g. regulatory)
dependencies. Example initiatives include, but are not limited
to:
-- Consolidation of broker-dealer entities in the US;
-- Distribution of the surplus following the wind-up of the UK
Defined Benefit Pension Scheme (dependent on approval from
Trustees);
-- Proceeds from the Liquidnet purchase price adjustment (see significant items section below)
-- Sale of office space in Paris;
-- Closure of dormant UK regulated entities; and
-- Efficiencies from reorganisation of settlement and clearing arrangements.
We made good progress during the second half of the year and
have already freed up c. GBP30m of cash.
The cash generated or freed up from the above short-term
initiatives will be used for the repayment of debt - to increase
our investment grade credit rating headroom - and to reduce future
finance costs. We are also exercising prudence in the current
environment of rising interest rates.
The Board is committed to identifying and returning any
potential surplus capital to shareholders, subject to the ongoing
assessment of our balance sheet and investment requirements.
Liquidity management
Following our successful debt refinancing in November 2021, we
renewed our Revolving Credit Facility (RCF) for a further three
years on 31 May 2022. The RCF increased from GBP270m to GBP350m,
providing additional liquidity flexibility, and adding new
providers. The terms of the new facility were also improved,
including a reduction in margin from 2.00% to 1.75% over the
reference rate.
Significant items
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 retained in both the reported and
adjusted results as these are considered to be core to supporting
the operations of the business.
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 2022 vs 2021, of
which around 80% of the total 2022 costs are non-cash.
GBPm 2022 2021
Restructuring & related costs
- Property rationalisation 16 25
- Liquidnet integration 9 7
- Group cost saving programme 21 5
- Business restructuring / re-domiciliation(1) 2 3
- Remeasurement of employee long-term
benefits(2) (7) 1
- Other - 1
Subtotal 41 42
Disposals, acquisitions and investment
in new business
- Amortisation of intangible assets arising
on consolidation 45 46
- Liquidnet acquisition related(3) 5 14
- Foreign exchange losses 5 4
- Reversal of US Tax indemnity provision - 13
- Adjustment to deferred consideration 8 2
- Strategic project costs 3 -
Subtotal 66 79
----- -----
Legal & regulatory matters (4) - Subtotal 5 15
----- -----
Total pre-financing and tax 112 136
===== =====
- Financing: Debt refinancing - 16
- Financing: Liquidnet interest expense
on Vendor Loan Notes 1 1
----- -----
Total post-financing cost 113 153
===== =====
Tax relief (22) (21)
Associate write down - 11
----- -----
Total 91 143
===== =====
1. GBP2m of Business restructuring / re-domiciliation costs
include legal entity separation work to operationally separate
Parameta division to enable it to benefit from commercial
partnerships and other venture arrangements.
2. (GBP7m) Remeasurement of employee long-term benefits Group
credit relates to the reduction to the present value of the Group's
income protection liability.
3. GBP5m Liquidnet acquisition related costs mainly includes
GBP20m impairment of customer relationship related intangible
assets as a result of challenging equity market conditions, partly
offset by GBP16m reimbursements following the ruling of an
independent arbitration on the purchase consideration which is
recognised in the income statement.
4. GBP5m Legal & regulatory matters mainly includes costs
related to the cum-ex investigation by the Frankfurt and Cologne
Public Prosecutors in Germany.
Net finance expense
The adjusted net finance expense of GBP49m (reported net finance
expense GBP50m), is comprised of GBP40m interest expense and GBP15m
of net lease financing costs, offset by GBP6m interest income. The
GBP7m reduction compared with GBP56m in 2021 is mainly from:
-- GBP 3m interest cost saved from liability management exercise
in 2021 redeeming 2024 Sterling Notes;
-- GBP2m non-recurring hedging costs incurred in 2021 for Liquidnet acquisition consideration;
-- GBP4m interest income from higher interest on cash balances;
-- Offset by GBP2m increase in net lease financing costs.
Tax
The effective rate of tax on adjusted profit before tax is 25.7%
(2021: 24.9%). The effective rate of tax on reported profit before
tax is 31.9% (2021: 95.8%). The higher rate on reported profit
before tax in the prior year arose primarily due to a GBP16m
increase in the deferred tax liability recognised in respect of
intangible assets arising on consolidation following the
announcement of a future increase in the UK corporation tax rate,
which was included within significant items.
Basic EPS
The average number of shares used for the 2022 Basic EPS
calculation is 779.1m (2021: 759.3m) which reflects 788.7m shares
in issue less 9.1m shares held by the TP ICAP plc Employee Benefit
Trust ('EBT') at 31 December 2021 and 0.5m of the time apportioned
movements in 2022 in shares held by the EBT used to acquire and
settle deferred share awards.
The TP ICAP plc EBT has waived its rights to dividends.
The reported Basic EPS for 2022 was 13.2p (2021: 0.7p) and
adjusted Basic EPS for 2022 was 24.9p (2021: 19.5p).
Dividend
The Board is recommending a final dividend for 2022 of 7.9p,
which, when added to the interim dividend of 4.5p, results in a
total dividend for the year of 12.4p, an increase of 31% from prior
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 23 May 2023 to shareholders on the register at
close of business on 14 April 2023. The ex-dividend date will be 13
April 2023.
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 28 April 2023.
Group Guidance
2020 Capital Markets Day (CMD) targets (for 2023)
At our CMD in December 2020 we set out financial targets for the
end of 2023. As we often highlight, it is difficult to predict
future levels of market activity, given the highly uncertain macro
and geopolitical outlook.
We are making good progress with more to do. Subject to current
market conditions continuing until the end of 2023, we expect
Parameta Solutions to exceed its contribution margin target (50%)
by the end of 2023. We anticipate Global Broking (40%) to be close
to its target, while E&C (35%) is expected to be relatively
close to its target. At the adjusted EBIT margin level, we expect
Parameta Solutions to exceed its target (45%). Global Broking (19%)
and E&C (15%) are expected to be relatively close to their
targets. Guidance that refers to being "close" to target is defined
as within one percentage point of target; "Relatively close" is
defined as being within one to two percentage points of target.
A contribution margin target for the new combined Liquidnet
division has been set at 30% for 2023, and, as a result, the Group
adjusted EBIT margin target has been updated from 18% (the original
CMD target) to 14%. This reflects the impact of the pandemic on the
Group and the challenging equity market conditions for the
Liquidnet platform due to market volatility, alongside the D2C
Credit proposition moving within its targeted 3 to 6% market share
range later than planned.
Our additional guidance for 2023 is as follows:
-- Liquidnet synergies for end of 2023 to realise annualised
cost savings of at least GBP30m, an increase on the previous target
of GBP25m;
-- Significant items in 2023 are expected to be c. GBP85m
(pre-tax), excluding potential income and costs associated with
legal and regulatory matters;
-- The UK corporate tax rate will increase from 19% to 25% in April 2023;
-- Group net finance expense expected to be broadly in line with
2022 despite significant increase in the interest rate
environment;
-- Dividend cover of c. 2 times adjusted post-tax earnings.
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.
2022
GB(1) E&C(1) LN PS(1) Corp/ Total
GBPm Elim
-------------------------- -------- --------- --------- -------- -------- --------
Revenue:
- External 1,229 384 325 177 - 2,115
- Inter-division(1) 22 3 - - (25) -
-------- --------- --------- -------- -------- --------
1,251 387 325 177 (25) 2,115
Total front office
costs:
- External (780) (263) (246) (63) - (1,352)
- Inter-division(1) - - - (25) 25 -
-------- --------- --------- -------- -------- --------
(780) (263) (246) (88) 25 (1,352)
-------- --------- --------- -------- -------- --------
Contribution 471 124 79 89 - 763
Contribution margin 37.6% 32.0% 24.3% 50.3% - 36.1%
Net management and
support costs:
- Management and
support costs (224) (65) (78) (8) (43) (418)
- Other operating
income 2 - - - 10 12
-------- --------- --------- -------- -------- --------
Adjusted EBITDA 249 59 1 81 (33) 357
19.9
Adjusted EBITDA margin % 15.2% 0.3% 45.8% n/m 16.9%
- Depreciation and
amortisation (36) (10) (25) (2) (9) (82)
-------- --------- --------- -------- -------- --------
Adjusted EBIT(3) 213 49 (24) 79 (42) 275
======== ========= ========= ======== ======== ========
Adjusted EBIT margin 17.0% 12.7% (7.4)% 44.6% n/m 13.0%
-------- --------- --------- -------- -------- --------
Average broker headcount 1,856 632 149 n/a n/a 2,637
Average sales headcount - - 318 n/a n/a 318
Revenue per broker
(GBP'000)(2) 662 608 879 n/a n/a 659
Contribution per broker
(GBP'000)(2) 254 196 151 n/a n/a 236
-------- --------- --------- -------- -------- --------
2021 (reported currency)
Corp/
GBPm GB(2) E&C LN(2) PS(2) Elim Total
-------------------------- -------- -------- -------- -------- -------- --------
Revenue:
- External 1,088 367 261 149 - 1,865
- Inter-division(1) 19 3 - - (22) -
-------- -------- -------- -------- -------- --------
1,107 370 261 149 (22) 1,865
Total front office
costs:
- External (694) (248) (170) (51) - (1,163)
- Inter-division(1) - - - (22) 22 -
-------- -------- -------- -------- -------- --------
(694) (248) (170) (73) 22 (1,163)
-------- -------- -------- -------- -------- --------
Contribution 413 122 91 76 - 702
Contribution margin 37.3% 33.0% 34.9% 51.0% - 37.6%
Net management and
support costs:
- Management & support
costs(3) (200) (63) (63) (8) (63) (397)
- Other operating
income 2 - - - 8 10
-------- -------- -------- -------- -------- --------
Adjusted EBITDA(5) 215 59 28 68 (55) 315
Adjusted EBITDA margin 19.4% 15.9% 10.7% 45.6% n/m 16.9%
- Depreciation and
amortisation (29) (9) (25) (2) (17) (82)
-------- -------- -------- -------- -------- --------
Adjusted EBIT(5) 186 50 3 66 (72) 233
16.8
Adjusted EBIT margin % 13.5% 1.1% 44.3% n/m 12.5%
Average broker headcount 1,971 652 147 n/a n/a 2,770
Average sales headcount - - 234 n/a n/a 234
Revenue per broker
(GBP'000)(2) 552 563 695 n/a n/a 562
Contribution per broker
(GBP'000)(2) 210 187 158 n/a n/a 202
-------- -------- -------- -------- -------- --------
2021 (constant currency)
Corp/
GBPm GB(2) E&C LN2,4 PS(2) Elim Total
-------------------------- -------- -------- --------- -------- -------- --------
Revenue:
- External 1,144 393 275 164 - 1,976
- Inter-division(1) 20 3 - - (23) -
-------- -------- --------- -------- -------- --------
1,164 396 275 164 (23) 1,976
Total front office
costs:
- External (729) (266) (182) (55) - (1,232)
- Inter-division(1) - - - (23) 23 -
-------- -------- --------- -------- -------- --------
(729) (266) (182) (78) 23 (1,232)
-------- -------- --------- -------- -------- --------
Contribution 435 130 93 86 - 744
Contribution margin 37.4% 32.8% 33.8% 52.4% - 37.7%
Net management and
support costs:
- Management & support
costs (207) (65) (72) (12) (56) (412)
- Other operating
income 2 - - - 8 10
-------- -------- --------- -------- -------- --------
Adjusted EBITDA (5) 230 65 21 74 (48) 342
Adjusted EBITDA margin 19.8% 16.4% 7.7% 45.1% - 17.3%
- Depreciation and
amortisation (36) (11) (28) - (12) (87)
-------- -------- --------- -------- -------- --------
Adjusted EBIT (5) 194 54 (7) 74 (60) 255
======== ======== ========= ======== ======== ========
Adjusted EBIT margin 16.7% 13.6% (2.5)% 45.1% - 12.9%
-------- -------- --------- -------- -------- --------
Average broker headcount 1,971 652 147 n/a n/a 2,770
Average sales headcount - - 234 n/a n/a 234
Revenue per broker
(GBP'000)(3) 580 603 722 n/a n/a 592
Contribution per broker
(GBP'000)(3) 221 199 166 n/a n/a 213
-------- -------- --------- -------- -------- --------
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. Post Trade Solutions revenue and front office costs have been
reclassified from Parameta Solutions to Global Broking and
Liquidnet. Post Trade Solutions revenue reported in 2021 of GBP17m
has been reclassified as follows: Rates (Global Broking): GBP15m
& Liquidnet Platform: GBP2m. Post Trade Solutions front office
costs reported in 2021 of GBP10m has been reclassified as follows:
Rates (Global Broking): GBP(9)m & Liquidnet Platform: GBP(1)m.
MidCap Partners revenue reported in 2021 of GBP13m (with front
office costs of GBP9m) has been reclassified out of Global Broking
and into Liquidnet.
3. Revenue and contribution per broker are calculated as
external revenue and contribution of Global Broking, Energy &
Commodities and Agency Execution, excluding Liquidnet, divided by
the average brokers for the year. The Group revenue and
contribution per broker excludes revenue and contribution from
Parameta Solutions and Liquidnet.
4. 2021 includes Liquidnet Platform post acquisition results
from 23 March 2021, the date the transaction completed
5. Adjusted EBITDA and Adjusted EBIT for each division has been
restated to remove the IFRS 16 interest charge, previously charged
to divisional Adjusted EBIT. The restatement aligns with IFRS
statutory reporting where the IFRS 16 interest cost is disclosed
within Group finance costs.
Global Broking
Global Broking revenue of GBP1,251m (which represents 59% of
total Group revenue) was 7% higher (13% higher in reported
currency) than 2021, reflecting increased market volatility across
all asset classes and all regions.
Revenue from Rates increased by 7% to GBP566m. Rates is our most
profitable asset class and represents 45% of Global Broking
revenue, and 27% of Group revenue. After more than a decade of low
interest rates, 2022 saw a return to interest rate movements across
most economies. Revenue in FX & Money Markets increased by 9%
to GBP302m in 2022. Revenue from Credit increased by 8% to GBP118m,
whilst Equities increased by 7% to GBP243m.
Front office costs, which are largely variable with revenue, of
GBP780m were 7% higher than 2021. Lower average broker headcount,
cost savings during the year, and a shift towards higher margin
business resulted in higher profitability. The resulting
contribution margin was 37.6% compared with 37.4% in 2021 (37.3% on
a reported basis), including the GBP20m P&L charge relating to
Russian exposures. Excluding this charge, the contribution margin
was 39.2%.
Management and support costs of GBP224m were 8% higher than 2021
due to increased investment in the roll-out of Fusion, our
electronic platform. Depreciation and amortisation expense of
GBP36m was flat to prior year.
The adjusted EBIT of GBP213m resulted in an adjusted EBIT margin
of 17.0% (2021: GBP194m, 16.7% in constant currency, GBP186m and
16.8% in reported currency).
Energy & Commodities (E&C)
E&C revenue of GBP387m in 2022 was 2% lower than in 2021 (5%
higher on a reported basis), due to challenges in the European Gas
& Power market. The number of oil, gas and other energy
products traded on the Intercontinental Exchange ('ICE') reduced by
4% in 2022.
The major reduction in the supply of gas from Russia led to
sharp price rises for gas and power. This resulted in increased
margin requirements for clients and a severe contraction in OTC
bilateral credit lines leading to reduced trading activity. Gas
prices have trended down from the extreme highs in the summer but
are still many times higher than the historical average. Oil
revenue have been more resilient in the US and Asia where the
impact of the war has been less pronounced than in Europe.
Revenue growth from our environmentals business slowed in the
second half; clients were focused on managing the volatility from
the war in Ukraine, rather than the energy transition. Revenue
growth outperformed exchange volumes.
Front office costs of GBP263m were 1% lower. This resulted in a
contribution margin of 32.0% (2021: 32.8% in constant currency and
33.0% in reported).
Management and support costs of GBP65m were flat from 2021,
while depreciation and amortisation decreased by GBP1m.
The adjusted EBIT was GBP49m in 2022, with an adjusted EBIT
margin of 12.7% (2021: GBP54m and 13.6% in constant currency,
GBP50m and 13.5% in reported currency) with the lower revenue more
than offsetting the decline in total costs.
Liquidnet Division(1)
At GBP325m, Liquidnet's revenue (15% of total Group revenue) was
up 18%. This includes a full year contribution from the acquired
Liquidnet platform compared to nine months in 2021 (the acquisition
completed March 2021).
The Liquidnet equities platform experienced challenging market
conditions during the year, including high levels of volatility,
leading to subdued volumes in larger block trading. In the US,
block market volumes by the top 5 Agency Alternative Trading System
(ATS) venues were flat, while in Europe, Large in Scale (LIS)
transaction volumes decreased by 15%. These are the two market
segments in which Liquidnet is most active. Liquidnet's block
market share within the top 5 Agency ATS venues moved from 24.8% in
2021 to 23.2% in 2022. Our European market share of LIS
transactions went from 29.1% to 27.7%.
The rest of the division delivered a strong performance, driven
by the Relative Value business as well as from growth in Rates,
Futures and FX.
Front office costs of GBP246m increased 35%, reflecting a full
year of Liquidnet platform costs and investment to drive future
organic growth in the business. The resulting contribution was
GBP79m (2021: GBP93m in constant currency and GBP91m in reported
currency ) with a contribution margin of 24.3% (2021: 33.8% in
constant currency and 34.9% in reported currency ).
Management and support costs were GBP78m in 2022 compared with
GBP72m for nine months of ownership in 2021.
The adjusted EBIT was GBP(24)m and the adjusted EBIT margin was
(7.4)% (2021: GBP(7)m and (2.5)% in constant currency, GBP3m and
1.1% in reported currency).
___________________
1. As previously announced in our Q3 Trading Update on 1
November 2022, the Liquidnet division includes the Liquidnet
platform (the acquired business), COEX Partners, ICAP Relative
Value, and from 1 October 2022 onwards, MidCap Partners (following
the transfer from Global Broking).
___________________
Parameta Solutions(2)
Revenue of GBP177m was 8% higher than the prior year. 95% of
total Parameta Solutions revenue is subscription-based, and
therefore recurring.
Parameta Solutions is benefiting from the successful delivery of
its sales strategy, including the establishment of a Global
Strategic Accounts function, client segmentation and revenue
diversification. 53 new clients were onboarded in 2022, 90% of
which were non-sell-side clients including buy-side, corporates,
professionals services and energy & commodities firms. This has
been supported by the direct to client distribution strategy where
an online product inventory enables clients to explore content.
Clients are licensing historical, intraday and streaming multi
brand data, set-up to be delivered directly into their cloud
environment or data warehouse.
ClearConsensus, our independent price verification tool that
allows clients to manage risk and optimise capital allocation has
made good progress with additional dealers participating in the
proposition. Client data onboarding has taken longer than initially
anticipated which has delayed revenue generation to 2023. Following
benchmark administrator authorisation, Parameta Solutions now has
licensed clients paying for use of its benchmarks for issuance
activity.
Parameta Solutions onboarded its first client, a prominent bank
in Asia, on its Transaction Cost Analysis (TCA) platform. The rates
evaluated pricing service was launched for non-linear rates with
further expansion of the service scheduled for 2023.
Parameta Solutions has announced two further commercial
partnerships in key high growth areas. The first is with Numerix, a
global leading OTC analytics and derivatives pricing company where
the business will work with them to develop a OTC Derivatives
Valuation service. The second partnership is with General Index, a
challenger benchmark provider in commodity markets, focused on
launching indices covering EU LNG markets.
Front office costs of GBP88m increased by 13%. The resulting
contribution was GBP89m, at a contribution margin of 50.3% (2021:
52.4% in constant currency and 51.0% in reported currency).
Management and support costs were GBP8m in 2022 compared with
GBP12m in 2021.
The adjusted EBIT, also taking into account FX gains and losses,
was GBP79m, which is a margin of 44.6% (2021: GBP74m and 45.1% in
constant currency, GBP66m and 44.3% in reported currency).
__________________
2. In previous reporting, Parameta Solutions included D&A
and Post Trade Solutions (PTS). The Matchbook and ClearCompress
brands within PTS are now reported under Global Broking, while
e-Repo is now reported in the Liquidnet division.
__________________
Cash Flow
The table below shows the changes in cash and debt for the year
ending 31 December 2022 and 31 December 2021.
GBPm 2022 2021
-----------------------------------
EBIT reported 163 97
Depreciation, amortisation and
other non-cash items 178 165
Change in Net Matched Principal
balances 27 (36)
Movements in working capital 62 (17)
Taxes and Interest paid (106) (98)
Operating cash flow 324 111
Capital expenditure (53) (58)
Disposal of property, plant and 12 -
equipment
Acquisition consideration paid - (451)
Cash acquired with acquisition - 202
Deferred consideration paid on
prior acquisitions (10) (14)
(Purchase) / sale of financial
assets (50) 11
Other investing activities 23 21
----------------------------------- ------ ------
Investing activities (78) (289)
Net proceeds from rights issue - 309
Dividends paid to shareholders (78) (47)
Net funds received from issuance
of 2028 Sterling Notes - 247
Repayment of 2024 Sterling Notes
including premium - (200)
Repayment of loan from related
party (47)
Other financing activities (38) (13)
----------------------------------- ------ ------
Financing activities (163) 296
Change in cash 83 118
Foreign exchange movements 38 -
Cash at the beginning of the year 767 649
Cash at the end of the year 888 767
=================================== ====== ======
The Group's net cash inflow from operating activities increased
to GBP324m from GBP111m in 2021 driven primarily by the
following:
-- Reported EBIT increased by GBP66m to GBP163m compared with 2021;
-- GBP27m cash inflow (2021: outflow of GBP36m) from changes in
matched principal financial assets and liabilities;
-- GBP62m cash inflow (2021: outflow of GBP17m) from movements
in working capital including an additional GBP47m bonus accruals
and GBP15m of trade and other payables, as well as GBP12m decrease
in stock lending balances; this was partly offset by a GBP24m
increase in trade and other receivables;
-- GBP106m cash outflow (2021: outflow of GBP98m) from taxes and
interest paid comprises of GBP51m taxes and GBP55m interest
payments. Tax payments increased by GBP12m in line with increased
profit and interest payments reduced by GBP4m as a result of
refinancing activity in 2021 at lower interest rates.
The key investing activities in the year were:
-- GBP53m capital expenditure mainly represents technology and
strategic project spend. This compared with GBP58m in 2021 which
included office development expenditure;
-- GBP12m cash inflow from the disposal of a freehold property in Paris;
-- GBP50m financial assets outflow driven by the purchase of
additional financial assets held as collateral;
-- GBP23m other investing activities mainly includes dividends
from associates and joint ventures.
The primary financing activities in the year were:
-- GBP78m dividend paid to shareholders comprised of the 2021
final dividend of 5.5p and 2022 interim dividend of 4.5p paid in
2022;
-- GBP47m repayment of the loan drawn down from the Totan credit facility;
-- GBP38m other financing activities mainly include finance lease capital repayments.
Foreign exchange gain
-- The weakening of GBP, particularly against the USD in 2022,
has resulted in a retranslation gain of GBP38m.
As a result of the above, the Group's cash balance increased by
GBP121m.
Debt finance
The composition of the Group's outstanding debt is summarised
below.
At 31 At 31 December
December 2021
2022 GBPm
GBPm
----------------------------------------- ---------- ---------------
5.25% GBP247m Sterling Notes
January 2024(1) 253 252
5.25% GBP250m Sterling Notes
May 2026(1) 250 250
2.625% GBP250m Sterling Notes
November 2028(1) 248 248
Loan from related party (RCF
with Totan) - 51
Revolving credit facility drawn - -
- banks
3.2% Liquidnet Vendor Loan Notes 43 38
Settlement Overdrafts - 17
Debt (used as part of net (funds)/debt) 794 856
Lease liabilities 279 286
----------------------------------------- ---------- ---------------
Total debt 1,073 1,142
----------------------------------------- ---------- ---------------
1. Sterling Notes are reported at their par value net of
discount and unamortised issue costs and including interest accrued
at the reporting date.
The Group's gross debt, excluding lease liabilities, has
decreased to GBP794m as a result of the repayment of the related
party loan of GBP51m, and a GBP17m decrease in settlement
overdrafts at 31 December 2022 compared with 31 December 2021.
The Group refinanced its main bank revolving credit facility in
May 2022 increasing its capacity to GBP350m and with a new initial
maturity of May 2025. As at 31 December 2022, this facility was
undrawn. The Group also has access to a Yen10bn Totan facility
that, as at 31 December, was undrawn and has a maturity of February
2025.
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 been a tailwind for the Group
in 2022, caused largely by GBP depreciation against the USD, with
approximately 60% of Group revenue and approximately 40% of costs
in USD, resulting in a currency mismatch. The average and the
period end GBP:USD rate weakened 10% year-on-year.
Average Period End
2 022 2 021 2 022 2 021
--------- ---------
U S Dollar $ 1.24 $ 1.38 $1.19 $1.32
--------- --------- --------- ---------
E uro EUR1 .18 EUR1 .16 EUR1 .16 EUR1 .18
--------- --------- --------- ---------
Pensions
The Group has one defined benefit pension scheme in the UK that
is currently in the process of being wound up. The wind-up of the
Scheme commenced in 2019. During the year the Trustee completed the
buy-out of the Scheme's principal pension liabilities, a process
that transferred each pension obligation from the Scheme to
Rothesay Life. The remaining Scheme's obligations are expected to
be settled in Q2 2023 allowing the wind-up to be completed.
Under UK legislation, once a Scheme commences wind-up, the
assets of the Scheme pass unconditionally to the Trustee to enable
it to settle the Scheme's liabilities. As a result, the Group
applies the requirement of IFRIC 14, fully restricting the Group's
recognition of the GBP45m (31 December 2021: GBP46m) net surplus by
applying an asset recognition ceiling. Changes as a result of the
application of the asset ceiling are recorded in Other
Comprehensive Income.
During the wind-up period, the Group continues to restrict the
recognition of the net surplus. Any benefits augmented during this
time represent a past service cost and are recorded as a
significant item in the Income Statement as and when such benefits
are agreed. Costs associated with the settlement of the Scheme's
liabilities will also be recorded as a significant item in the
Income Statement as and when incurred. There were GBP1m past
service and settlement costs in 2022 (2021: GBP1m).
Following the final settlement of the Scheme's liabilities and
costs, the Scheme will be wound up, and the Group expects to
receive the remaining asset, subject to applicable taxes at that
time, currently 35%.
Regulatory capital
Since February 2021, 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
We are in the process of considering how material
climate-related issues affect our business strategy. In 2022, this
has been carried forward by engagement with senior management
across the business. The high-level climate change impact
assessment has highlighted areas of exposure across our key sites
and business operations. We have also strengthened our
understanding of the exposure of our largest suppliers to climate
change and the level of their own emissions.
Our understanding of the impact of climate change grew as a
result of our engagement in 2022. By the end of 2023, following the
completion of a detailed qualitative, and quantitative, scenarios
analysis, we expect to have mapped out how climate-related issues
could affect financial performance (e.g., revenue, costs) and
financial position (e.g., assets, liabilities) and to have that
understanding inform our business plans.
Consolidated Income Statement
for the year ended 31 December 2022
2022 2021
Notes GBPm GBPm
------------------------------------------- ------ -------- --------
Revenue 3 2,115 1,865
------------------------------------------- ------ -------- --------
Employment, compensation and benefits (1,320) (1,152)
General and administrative expenses (506) (476)
Depreciation and impairment of PPE
and ROUA (58) (68)
Amortisation and impairment of Intangible
assets (98) (82)
Total operating costs 4 (1,982) (1,778)
Other operating income 5 30 10
------------------------------------------- ------ -------- --------
EBIT/Operating profit 163 97
Finance income 6 8 3
Finance costs 7 (58) (76)
------------------------------------------- ------ -------- --------
Profit before tax 113 24
Taxation (36) (23)
------------------------------------------- ------ -------- --------
Profit after tax 77 1
Share of results of associates and
joint ventures 29 7
------------------------------------------- ------ -------- --------
Profit for the year 106 8
=========================================== ====== ======== ========
Attributable to:
Equity holders of the parent 103 5
Non-controlling interests 3 3
------------------------------------------- ------ -------- --------
106 8
=========================================== ====== ======== ========
Earnings per share
- Basic 8 13.2p 0.7p
- Diluted 8 13.0p 0.7p
------------------------------------------- ------ -------- --------
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
GBPm GBPm
-------------------------------------------------- ----- -----
Profit for the year 106 8
-------------------------------------------------- ----- -----
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit pension
schemes - 3
Equity instruments at FVTOCI - net change
in fair value - 1
- 4
-------------------------------------------------- ----- -----
Items that may be reclassified subsequently
to profit or loss:
Fair value movements on net investment
hedge - 3
Effect of changes in exchange rates on
translation
of foreign operations 153 1
Taxation (5) (1)
148 3
-------------------------------------------------- ----- -----
Other comprehensive income for the year 148 7
-------------------------------------------------- ----- -----
Total comprehensive income for the year 254 15
================================================== ===== =====
Attributable to:
Equity holders of the parent 250 12
Non-controlling interests 4 3
-------------------------------------------------- ----- -----
254 15
================================================== ===== =====
Consolidated Balance Sheet
as at 31 December 2022
2022 2021
Notes GBPm GBPm
-------------------------------------------- ------ -------- --------
Non-current assets
Intangible assets arising on consolidation 10 1,780 1,762
Other intangible assets 97 91
Property, plant and equipment 110 123
Right-of-use assets 165 187
Investment in associates 63 51
Investment in joint ventures 34 28
Other investments 23 21
Deferred tax assets 15 17
Retirement benefit assets 1 1
Other long term receivables 51 44
-------------------------------------------- ------ -------- --------
2,339 2,325
-------------------------------------------- ------ -------- --------
Current assets
Trade and other receivables 11 2,198 2,068
Financial assets at fair value through
profit or loss 12 264 158
Financial investments 16 174 115
Cash and cash equivalents 16 888 784
-------------------------------------------- ------ -------- --------
3,524 3,125
-------------------------------------------- ------ -------- --------
Total assets 5,863 5,450
============================================ ====== ======== ========
Current liabilities
Trade and other payables 13 (2,149) (1,977)
Financial liabilities at fair value
through profit or loss 12 (255) (120)
Loans and borrowings 14,16 (9) (77)
Lease liabilities 16 (29) (34)
Derivative financial instruments - (1)
Current tax liabilities (37) (28)
Short term provisions 17 (9) (5)
-------------------------------------------- ------ -------- --------
(2,488) (2,242)
-------------------------------------------- ------ -------- --------
Net current assets 1,036 883
============================================ ====== ======== ========
Non-current liabilities
Loans and borrowings 14,16 (785) (779)
Lease liabilities 16 (250) (252)
Deferred tax liabilities (85) (107)
Long term provisions 17 (31) (38)
Other long term payables (60) (53)
Retirement benefit obligations (3) (1)
-------------------------------------------- ------ -------- --------
(1,214) (1,230)
-------------------------------------------- ------ -------- --------
Total liabilities (3,702) (3,472)
-------------------------------------------- ------ -------- --------
Net assets 2,161 1,978
============================================ ====== ======== ========
Equity
Share capital 197 197
Other reserves (854) (1,005)
Retained earnings 2,800 2,769
-------------------------------------------- ------ -------- --------
Equity attributable to equity holders
of the parent 2,143 1,961
Non-controlling interests 18 17
-------------------------------------------- ------ -------- --------
Total equity 2,161 1,978
============================================ ====== ======== ========
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Equity attributable to equity holders of the parent
Share Reverse Re- Re- Hedging
Share premium Merger acquisition organisation valuation and Own Retained Non-controlling Total
capital account reserve reserve reserve reserve translation shares earnings Total interests equity
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- -------- ----------- ------------- --------- ----------- ------ --------- ------ ---------------- -------
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
================= ======== ======== ======== =========== ============= ========= =========== ====== ========= ====== ================ =======
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- -------- ----------- ------------- --------- ----------- ------ --------- ------ ---------------- -------
Balance at
1 January
2021 141 17 1,384 (1,182) - 4 (41) (27) 1,383 1,679 19 1,698
----------------- -------- -------- -------- ----------- ------------- --------- ----------- ------ --------- ------ ---------------- -------
Profit for
the year - - - - - - - - 5 5 3 8
Other
comprehensive
income for
the year - - - - - 1 3 - 3 7 - 7
----------------- -------- -------- -------- ----------- ------------- --------- ----------- ------ --------- ------ ---------------- -------
Total
comprehensive
income for
the year - - - - - 1 3 - 8 12 3 15
Rights issue 56 259 - - - - - - - 315 - 315
Rights issue
costs - (6) - - - - - - - (6) - (6)
Scheme of
Arrangement:
Cancellation
of existing
shares and
reserves (197) (270) (1,384) 1,182 669 - - - - - - -
Scheme of
Arrangement:
Issue of
ordinary
shares 197 1,418 - - (1,615) - - - - - - -
Capital
reduction - (1,418) - - - - - - 1,418 - - -
Dividends
paid - - - - - - - - (47) (47) (2) (49)
Share settlement
of share-based
awards - - - - - - - 3 (3) - - -
Own shares
acquired for
employee trusts - - - - - - - (2) - (2) - (2)
Decrease in
non-controlling
interests - - - - - - - - - - (3) (3)
Credit arising
on share-based
awards - - - - - - - - 10 10 - 10
----------------- -------- -------- -------- ----------- ------------- --------- ----------- ------ --------- ------ ---------------- -------
Balance at
31 December
2021 197 - - - (946) 5 (38) (26) 2,769 1,961 17 1,978
================= ======== ======== ======== =========== ============= ========= =========== ====== ========= ====== ================ =======
Consolidated Cash Flow Statement
for the year ended 31 December 2022
Notes 2022 2021
GBPm GBPm
------------------------------------------- ------ ------ ------
Net cash flow from operating activities 15 324 111
------------------------------------------- ------ ------ ------
Investing activities
(Purchase)/sale of financial investments (50) 11
Settlement of derivative financial
instruments(1) - 5
Interest received 7 2
Dividends from associates and joint
ventures 15 15
Expenditure on intangible fixed assets (35) (35)
Purchase of property, plant and equipment (18) (23)
Sale of property, plant and equipment 12 -
Deferred consideration paid (10) (14)
Disposal/(investment) in associates
and joint ventures 1 (1)
Acquisition consideration paid - (451)
Cash acquired with acquisitions - 202
Net cash flow from investment activities (78) (289)
------------------------------------------- ------ ------ ------
Financing activities
Dividends paid 9 (78) (47)
Dividends paid to non-controlling
interests (3) (2)
Proceeds of rights issue - 315
Issue costs of rights issue - (6)
Purchase of non-controlling interest - (3)
Own shares acquired for employee trusts (3) (2)
Net repayment of bank loans(2) 14 - (5)
Net (repayment)/borrowing of loans
from related parties(2) 14 (47) 27
Funds received from issue of Sterling
Notes - 249
Repurchase of Sterling Notes(3) - (200)
Bank facility arrangement fees and
debt issue costs (3) (2)
Payment of lease liabilities (29) (28)
------------------------------------------- ------ ------ ------
Net cash flow from financing activities (163) 296
------------------------------------------- ------ ------ ------
Increase in cash and overdrafts 83 118
Cash and overdrafts at the beginning
of the year 767 649
Effect of foreign exchange rate changes 38 -
------------------------------------------- ------ ------ ------
Cash and overdrafts at the end of
the year 16 888 767
------------------------------------------- ------ ------ ------
Cash and cash equivalents 888 784
Overdrafts - (17)
------------------------------------------- ------ ------ ------
888 767
=========================================== ====== ====== ======
1. Relates to foreign exchange derivatives undertaken in 2021 in
respect of acquisition cash flows.
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.
3. Relates to the repurchase of GBP184m of Sterling Notes 2024
(Note 14) plus GBP16m of premium paid in 2021. The premium paid is
reported as part financing activities, rather than operating
activities. Interest paid is reported as a cash outflow from
operating activities.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2022
1. General information
As at 31 December 2022 TP ICAP Group plc (the 'Company') was a
public company limited by shares incorporated in Jersey under the
Companies (Jersey) Law 1991. On 26 February 2021 following a Scheme
of Arrangement, described in Note 2(c), TP ICAP Group plc acquired
the entire share capital of TP ICAP plc, resulting in TP ICAP Group
plc becoming the Group's ultimate parent undertaking.
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 2022 or 2021, but is derived from TP ICAP Group plc's
group accounts for 2022 and 2021. Statutory accounts for 2021 have
been delivered to the Registrar of Companies and those for 2022
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 2021 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) Corporate reorganisation
In February 2021 the Group adjusted its corporate structure. TP
ICAP Group plc was incorporated in Jersey on 23 December 2019 and
became the new listed holding company of the Group on 26 February
2021 via a court-approved scheme of arrangement under Part 26 of
the UK Companies Act 2006, with the former holding company, TP ICAP
plc subsequently being renamed TP ICAP Limited and now renamed TP
ICAP Finance plc. Under the scheme of arrangement, shares in the
former holding company of the Group were cancelled and the same
number of new ordinary shares were issued to the new holding
company in consideration for the allotment to shareholders of one
ordinary share of 25 pence in the new holding company for each
ordinary share of 25 pence they held in the former holding company.
On 26 February 2021, TP ICAP Group plc effected a reduction of its
share capital by cancelling its share premium and recognising an
equivalent increase in the profit and loss account in reserves.
The share for share exchange between TP ICAP plc and TP ICAP
Group plc was a common control transaction and has been accounted
for using merger accounting principles. Under these principles the
results and cashflows of all the combining entities are brought
into the consolidated financial statements from the beginning of
the financial year in which the combination occurs and comparative
figures also reflect the combination of the entities. The Group's
equity is adjusted to reflect that of the new holding company, but
in all other aspects the Group results and financial position are
unaffected by the change and reflect the continuation of the
Group.
(d) 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 2022 but they do not have a material effect on
the Group's Consolidated Financial Statements:
Ø Amendment to IFRS 3 'Business Combinations';
Ø Amendments to IAS 16 'Property, Plant and Equipment';
Ø Amendments to IAS 37 'Provisions, Contingent Liabilities and
Contingent Assets'; and
Ø Annual Improvements 2018-2020.
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 for TP ICAP
legacy entities plus Liquidnet.
Following the redomiciliation of the Group's parent in February
2021, the operational responsibility of entities was aligned with
their legal ownership and as a result the Group at that time
considered that the Primary Operating Segments continued to be the
geographical regions of incorporation being Americas, EMEA, APAC
and Corporate/Treasury. Liquidnet, acquired in March 2021 with its
own separate international legal structure, was managed separately
by the CODM, representing its own separate primary operating
segment, even though it itself had operations across Americas, EMEA
and APAC and represented a significant component of the Agency
Execution business division, subsequently renamed to Liquidnet
Division.
In 2022, as a consequence of the inclusion of Liquidnet into
Agency Execution, the balance of the CODM review of operating
activity and allocation of the Group's resources had become more
focused on business division. This structure is now considered to
represent the more appropriate view for the purposes of Group
resource allocation and assessment of the nature and financial
effects of the business activities in which the Group engages.
Whilst the Group's Primary Operating Segments are now 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. In the EMEA regional sub-group, in
particular, there are also independent non-executive directors on
the regional Board of directors, which further strengthens the
independence and judgement of the governance framework.
Information regarding the Group's primary operating segments is
reported below:
31 December 2022 GB (1) E&C LN (1) PM (1) Corp(1) Total
(1)
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------- ------ ------- ------- -------- --------
Revenue
External 1,229 384 325 177 - 2,115
Inter-division 22 3 - - (25) -
----------------------------- ------- ------ ------- ------- -------- --------
1,251 387 325 177 (25) 2,115
============================= ======= ====== ======= ======= ======== ========
Total front office costs
External (780) (263) (246) (63) - (1,352)
Inter-division - - - (25) 25 -
----------------------------- ------- ------ ------- ------- -------- --------
(780) (263) (246) (88) 25 (1,352)
============================= ======= ====== ======= ======= ======== ========
Contribution 471 124 79 89 - 763
Net management and support
costs (224) (65) (78) (8) (43) (418)
Other operating income 2 - - - 10 12
------- ------ ------- ------- -------- --------
Adjusted EBITDA 249 59 1 81 (33) 357
Depreciation and impairment
of PPE and ROUA (20) (6) (12) (2) (9) (49)
Amortisation and impairment
of intangibles (16) (4) (13) - - (33)
----------------------------- ------- ------ ------- ------- -------- --------
Adjusted EBIT 213 49 (24) 79 (42) 275
============================= ======= ====== ======= ======= ======== ========
31 December 2021 GB(1) E&C(1) LN(1) PM(1) Corp(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue:
- External(2) 1,088 367 261 149 - 1,865
- Inter-division 19 3 - - (22) -
----------------------------- ------ ------- ------ ------ -------- --------
1,107 370 261 149 (22) 1,865
============================= ====== ======= ====== ====== ======== ========
Total front office costs:
- External(3) (694) (248) (170) (51) - (1,163)
- Inter-division - - - (22) 22 -
----------------------------- ------ ------- ------ ------ -------- --------
(694) (248) (170) (73) 22 (1,163)
============================= ====== ======= ====== ====== ======== ========
Contribution(4) 413 122 91 76 - 702
Net management and support
costs(5) (200) (63) (63) (8) (63) (397)
Other operating income 2 - - - 8 10
----------------------------- ------ ------- ------ ------ -------- --------
Adjusted EBITDA(6) 215 59 28 68 (55) 315
Depreciation and impairment
of PPE and ROUA (16) (5) (14) (2) (15) (52)
Amortisation and impairment
of intangibles (13) (4) (11) - (2) (30)
----------------------------- ------ ------- ------ ------ -------- --------
Adjusted EBIT(6) 186 50 3 66 (72) 233
============================= ====== ======= ====== ====== ======== ========
1 GB is Global Broking, E&C is Energy & Commodities, LN
is Liquidnet (formerly Agency Execution), PM is Parameta Solutions
and Corp is Corporate.
2 Divisional Revenue for 2021 has been restated to be comparable
with 2022's divisional groupings. Revenue for Global Broking
increased by GBP2m, Liquidnet (formerly Agency Execution) increased
by GBP15m and Parameta Solutions reduced by GBP17m. There is no
restatement of Group revenues.
3 Divisional Total front office costs for 2021 have been
restated to be comparable with 2022's divisional groupings. Total
front office costs for Liquidnet (formerly Agency Execution) have
increased by GBP9m and Parameta Solutions reduced by GBP9m. There
is no restatement of Group Total front office costs.
4 As a result of the restatements in footnotes 2 and 3 above,
Divisional contribution for Global Broking increased by GBP2m,
Liquidnet (formerly Agency Execution) increased by GBP6m and
Parameta Solutions reduced by GBP8m. There is no restatement of
Group contribution.
5 As a result of the restatements in footnotes 2 and 3 above,
Divisional net management and support costs for Global Broking
decreased by GBP3m, Parameta Solutions decreased by GBP4m and
Corporate increased by GBP7m. Additionally, Divisional Net
management and support costs have been restated to remove the IFRS
16 interest charge. This restatement aligns with IFRS statutory
reporting where the IFRS 16 interest cost is disclosed within Group
finance costs. As a result Net management and support costs for
Global Broking reduced by GBP8m, Energy & Commodities reduced
by GBP3m, Liquidnet (formerly Agency Execution) reduced by GBP3m,
Parameta Solutions reduced by GBP1m and Corporate increased by
GBP15m. There is no restatement of Group Net management and support
costs.
6 As a result of the above restatements Adjusted EBITDA and EBIT
for Global broking increased by GBP13m, Energy & Commodities
increased by GBP3m, Liquidnet (formerly Agency Execution) increased
by GBP9m, Parameta reduced by GBP3m and Corporate reduced by
GBP22m. There is no restatement to the consolidated Group Adjusted
EBITDA or EBIT.
Analysis of significant items
Disposals,
Restructuring acquisitions
and other and investment Legal
related in new and regulatory
31 December 2022 costs businesses matters Total
GBPm GBPm GBPm GBPm
---------------------------------------- -------------- ---------------- ---------------- ------
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 - 65 - 65
Total included within operating
costs 41 82 7 130
Other operating income - (16) (2) (18)
Included in finance income - 1 - 1
---------------------------------------- -------------- ---------------- ---------------- ------
Total significant items before
tax 41 67 5 113
============== ================ ================
Taxation on significant items (22)
---------------------------------------- ------
Total significant items after
tax 91
======================================== ======
Disposals,
Restructuring acquisitions
and other and investment Legal and
related in new regulatory
31 December 2021 costs businesses matters Total
GBPm GBPm GBPm GBPm
---------------------------------------- -------------- ---------------- ------------ ------
Employment, compensation and
benefits costs 12 - - 12
---------------------------------------- -------------- ---------------- ------------ ------
Premises and related costs 9 - - 9
Deferred consideration - 2 - 2
Charge relating to significant
legal and regulatory settlements - - 6 6
Pension scheme past service and
settlement costs 1 - - 1
Acquisition costs - 8 - 8
Net loss on derivative instruments - 8 - 8
Net foreign exchange gains - (4) - (4)
Other general and administration
costs 4 13 9 26
---------------------------------------- -------------- ---------------- ------------ ------
Total included within general
and administration costs 14 27 15 56
Depreciation and impairment of
PPE and ROUA 16 - - 16
Amortisation and impairment of
intangible assets - 52 - 52
Total included within operating
costs 42 79 15 136
Included in financing items 16 1 - 17
---------------------------------------- -------------- ---------------- ------------ ------
Total significant items before
tax 58 80 15 153
============== ================ ============
Taxation on significant items (21)
---------------------------------------- ------
Total significant items after
tax 132
Impairment of investment in associates
- reflected together with Share
of results of associates and
joint ventures 11
---------------------------------------- ------
Total significant items 143
======================================== ======
Adjusted profit reconciliation
2022 Significant
Adjusted items Reported
GBPm GBPm GBPm
--------------------------------- --------- ------------ ---------
EBIT/operating profit 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
================================= ========= ============ =========
2021 Significant
Adjusted items Reported
GBPm GBPm GBPm
--------------------------------- --------- ------------ ---------
EBIT/operating profit 233 (136) 97
Net finance costs (56) (17) (73)
Profit before tax 177 (153) 24
Taxation (44) 21 (23)
--------------------------------- --------- ------------ ---------
Profit after tax 133 (132) 1
Share of profit from associates
and joint ventures 18 (11) 7
--------------------------------- --------- ------------ ---------
Profit for the year 151 (143) 8
================================= ========= ============ =========
4. Operating costs
2021
2022 (restated)
GBPm GBPm
------------------------------------------- ----- -----------
Broker compensation costs (1) 1,032 917
Other staff costs (1) 268 223
Share-based payment charge 20 12
Employee compensation and benefits 1,320 1,152
----------------------------------------------- ----- -----------
Technology and related costs 216 191
Premises and related costs 28 37
Gains on disposal of property, plant
and equipment (3) -
Gain on derecognition of right-of-use
assets/lease liabilities (3) -
Adjustments to deferred consideration 8 2
Charge relating to significant legal
and regulatory settlements 7 6
Pension scheme past service and settlement
costs 1 1
Remeasurement of long-term employee
benefits (7) -
Acquisition costs 6 20
Impairment losses on trade receivables 5 -
Net foreign exchange losses (21) 3
Net loss on FX derivative instruments 11 12
Other administrative costs 258 204
----------------------------------------------- ----- -----------
General and administrative expenses 506 476
----------------------------------------------- ----- -----------
Depreciation of property, plant and
equipment 23 23
Impairment of property, plant and
equipment 5 10
Depreciation of right-of-use assets 26 29
Impairment of right-of-use assets 4 6
----------------------------------------------- ----- -----------
Depreciation and impairment of property,
plant and equipment and right-of-use
assets 58 68
----------------------------------------------- ----- -----------
Amortisation of other intangible assets 33 30
Impairment of other intangible assets - 6
Amortisation of intangible assets
arising on consolidation 45 46
Impairment of intangible assets arising
on consolidation 20 -
----------------------------------------------- ----- -----------
Amortisation and impairment of intangible
assets 98 82
----------------------------------------------- ----- -----------
1,982 1,778
============================================== ===== ===========
1 Broker compensation cost and Other staff costs for 2021 have
been increased and decreased by GBP35m respectively, reflecting a
reclassification of certain staff as broking.
5. Other operating income
Other operating income comprises:
2022 2021
GBPm GBPm
------------------------------------- ----- -----
Acquisition related income 16 -
Business relocation grants 2 3
Employee related insurance receipts 4 2
Management fees from associates 1 2
Legal settlement receipts 4 1
Other receipts 3 2
------------------------------------- ----- -----
30 10
===================================== ===== =====
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
2022 2021
GBPm GBPm
----------------------------- ----- -----
Interest and similar income 6 2
Interest on finance leases 2 1
8 3
============================= ===== =====
7. Finance costs
2022 2021
GBPm GBPm
------------------------------------------------ ----- -----
Fees payable on bank and other loan facilities 2 2
Interest on bank and other loans 2 2
Interest on Sterling Notes January 2024 13 22
Interest on Sterling Notes May 2026 13 13
Interest on Sterling Notes November 2028 7 1
Interest on Liquidnet Vendor Loan Notes 1 1
Other interest 1 1
Amortisation of debt issue and bank facility
costs 2 2
------------------------------------------------ ----- -----
Borrowing costs 41 44
Interest on lease liabilities 17 14
Amortisation of options premium - 2
Premium on repurchase of Sterling Notes
January 2024 - 16
------------------------------------------------ ----- -----
58 76
================================================ ===== =====
8. Earnings per share
2022 2021
--------- ------ -----
Basic 13.2p 0.7p
Diluted 13.0p 0.7p
--------- ------ -----
The calculation of basic and diluted earnings per share is based
on the following number of shares:
2022 2021
No.(m) No.(m)
Basic weighted average shares 779.1 759.3
Contingently issuable shares 11.5 8.9
Diluted weighted average shares 790.6 768.2
================================= ======== ========
The earnings used in the calculation basic and diluted earnings
per share are set out below:
2022 2021
GBPm GBPm
----------------------------------------- ----- -----
Earnings for the year 106 8
Non-controlling interests (3) (3)
----------------------------------------- ----- -----
Earnings attributable to equity holders
of the parent 103 5
========================================= ===== =====
9. Dividends
2022 2021
GBPm GBPm
----------------------------------------------- ----- -----
Amounts recognised as distributions to
equity holders in the year:
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 -
Final dividend for the year ended 31 December
2020 of 2.0p per share - 16
Interim dividend for the year ended 31
December 2021 of 4.0p per share - 31
----------------------------------------------- ----- -----
78 47
=============================================== ===== =====
A final dividend of 7.9 pence per share will be paid on 23 May
2023 to all shareholders on the Register of Members on 14 April
2023.
During the year, the Trustees of the TP ICAP plc EBT waived
their rights to dividends.
10. Intangible assets arising on consolidation
Goodwill Other Total
GBPm GBPm GBPm
--------------------------------- --------- ------ ------
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
================================== ========= ====== ======
At 1 January 2021 989 474 1,463
Recognised on acquisitions 187 154 341
Amortisation of acquisition
related intangibles - (46) (46)
Effect of movements in exchange
rates 4 - 4
---------------------------------- --------- ------ ------
At 31 December 2021 1,180 582 1,762
================================== ========= ====== ======
As at 31 December 2022 the gross cost of goodwill and other
intangible assets arising on consolidation amounted to GBP1,482m
and GBP833m respectively (2021: GBP1,428m and GBP797m). Cumulative
amortisation and impairment charges amounted to GBP250m for
goodwill and GBP285m for other intangible assets arising on
consolidation (2021: GBP248m and GBP215m).
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 are as follows:
2022 2021 (reallocated)
GBPm GBPm
------------------------------- ------ -------------------
Global Broking 489 466
Energy & Commodities 156 150
Parameta Solutions 342 336
Liquidnet - Agency Execution 40 39
Liquidnet - acquired business 205 189
------------------------------- ------ -------------------
Goodwill allocated to CGUs 1,232 1,180
=============================== ====== ===================
As a result of the change in the Primary Operating Segments as
at 1 January 2022, from the geographic grouping of CGUs to a
Business Division grouping of CGUs the goodwill allocated to the
regional CGU groupings has been reallocated to each Business
Division based the relative value of those Business Divisions. The
goodwill arising on the Liquidnet acquisition has not been
reallocated and is reviewed and tested as its own group of CGUs.
Immediately prior to the reallocation, the Regional CGUs were
tested for impairment. No impairments were identified.
The Group's annual impairment testing of its CGUs is undertaken
each September. 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. As at 30 June 2022 impairment triggers were identified for
the Global Broking and Liquidnet CGUs which were subject to full
impairment review as at that date.
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.
Impairment assessment and testing as at 30 June 2022
- Global Broking
In June 2022 the Group's Global Broking CGU was subject to
impairment testing, triggered as a result of the impact of
inflation on expected cash flows, coupled with a change in the
discount rate. For the 30 June 2022 impairment test the recoverable
amount of the Global Broking CGU was based on its VIU. Future
projections were based on the most recent financial forecasts
considered by the Board which were used to project cash flows for
the next five years. After this period a steady state cash flow was
used to derive a terminal value for the CGU. Annual growth rates of
0.5% to 2027 and nil thereafter were used with pre-tax discount
rate of 12.5%. The calculations were subject to stress tests
reflecting reasonably possible changes in key assumptions. No
impairment was identified as at 30 June 2022 although the CGU
remained sensitive to reasonable possible changes in the
assumptions.
As at June 2022, changes in discount rates and/or revenue
assumptions, reflecting inherent uncertainties in any long-term
forecasting, including potential effects of Brexit in EMEA and
other structural changes, would impact the respective carrying
value of the CGU. The CGU's value would equate to its carrying
value should the discount rate, revenue growth over the forecast
period, or revenues used in the terminal value fall by the
following:
Valuation Breakeven Valuation Breakeven Changes
Discount Discount Revenue Revenue in
rate rate Growth Growth Terminal
rate rate Value
revenues
CGU % % % % %
---------------- ---------- ---------- ---------- ---------- ----------
Global Broking 12.5% 17.8% 0.5% (1.8%) (15.0%)
================= ========== ========== ========== ========== ==========
- Liquidnet acquired business
As the Liquidnet acquired business was measured on a FVLCD basis
at 31 December 2021, a decline in equity market conditions
triggered an impairment review as at 30 June 2022. The full
impairment test did not identify an impairment although the outcome
is highly sensitive to changes in valuation assumptions. As at 30
June 2022 the recoverable amount for the Liquidnet acquired
business was based on its FVLCD. The Income Approach was used for
the FVLCD valuation under which the CGU had a FVLCD in excess of
its carrying value.
The key assumptions for the Income Approach are those regarding
expected cash flows, CGU growth rates and the discount rate. Future
projections are based on the most recent financial forecasts
considered by the Board which are used to project 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. Annual growth rates on
the existing equities business of 2.8% to 2027 and 1% thereafter
have been used with post tax discount rate of 11.1%. Projected cash
flows for new credit business lines have been projected to 2027 at
an annual growth rate of 62%, based on the development and roll-out
of the Credit platform, with growth thereafter at 2%, and have been
discounted at a post-tax discount rate of 15%, reflecting the
greater uncertainty associated with these projections. The
calculations have been subject to stress tests reflecting
reasonably possible changes in key assumptions.
Under this approach the recoverable amount for Liquidnet
exceeded its carrying value, but was sensitive to changes in the
cash flow projections for new business lines to 2027. An annualised
reduction in the projected revenues for new business lines of c.50%
per annum over the period to 2027, would eliminate the headroom.
The impact on future cash flows resulting from lower new business
inflows or falling growth rates does not reflect any management
actions that would be taken under such circumstances.
Impairment testing as at 30 September 2022
- Business divisions (excluding Liquidnet - acquired
business)
For the 30 September 2022 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 Breakeven Valuation Breakeven Valuation Breakeven
Discount Discount Revenue Revenue Terminal Terminal
rate rate Growth Growth Value Value
rates rates Growth Growth
rate 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%
====================== ========== ========== ========== ========== ========== ==========
Valuation Breakeven Valuation Breakeven Valuation Breakeven
Discount Discount Revenue Revenue Terminal Terminal
rate rate Growth Growth Value Value
rates rates Growth Growth
rate rate
December 2021 % % % % % %
(at date of reallocation
of goodwill)
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
CGU
Global Broking 11.5% 11.7% 0.5% 0.4% 0.0% (0.3%)
Energy & Commodities 11.0% 14.7% 2.0% 0.2% 0.0% (6.4%)
Parameta Solutions 11.3% 20.9% 4.8% (6.0%) 0.0% (24.6%)
Liquidnet - Agency
Execution 13.0% 15.0% 5.0% 4.1% 0.0% (2.0%)
=========================== ========== ========== ========== ========== ========== ==========
No impairments were identified as a result of the 2022 annual
testing.
As shown in the table above, the VIU of the Liquidnet - Agency
Execution CGU is sensitive to reasonably possible changes in the
growth and discount 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.
The Group does not expect climate change to have a material
impact on the financial statements. However, the assessment of the
financial risks and opportunities related to climate change is
ongoing and the Group recognises the increased uncertainty in
forecasting medium and long-term revenues, particular in the Energy
& Commodities ('E&C') division. A 5% decline in E&C
terminal growth rates from 2027 in Oil, Power and Gas, would
eliminate any headroom in the CGU.
- Liquidnet acquired business
For the 30 September 2022 annual impairment testing the
recoverable amounts for the Liquidnet acquired business was based
on its FVLCD. The Income Approach was used for the FVLCD valuation
under which the CGU had a FVLCD in excess of its carrying
value.
The key assumptions for the Income Approach are those regarding
expected cash flows, growth rates and the discount rate. Future
projections are based on the most recent financial budgets
considered by the Board which are used to project 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. Growth rates on the
five year projected revenues, growth rates on terminal value cash
flows and discount rates used in the FVLCD calculations together
with their respective breakeven rates were as follows:
Valuation Breakeven Valuation Breakeven Valuation Breakeven
Discount Discount Revenue Revenue Terminal Terminal
rate rate Growth Growth Value Value
rates rates Growth Growth
rate rate
Liquidnet acquired % % % % % %
business
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
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%
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
The valuation revenue growth rate percentage have increased from
3% in December 2021 to 14.7% as at September 2022. This reflects
management's expectation that the Equities business will return to
a similar revenue projection in 2027, but from a lower starting
position in the September 2022 valuation, resulting in an annual
growth rate of 6.7%. The September 2022 valuation now includes
revenue growth on the roll-out of the Credit platform, resulting in
an annual growth rate of 61% to 2027. As at December 2021, the
valuation did not reflect the projected development of the new
Credit business. The calculations have been subject to stress tests
reflecting reasonably possible changes in key assumptions.
Under this approach the recoverable amount for the Liquidnet
acquired business exceeded its carrying value, but is sensitive to
reasonably possible changes in the growth rates and the discount
rate as indicated in the table above. The most sensitive valuation
assumption relates to the growth in cash flows arising on new
credit business lines. The change in valuation revenue growth rates
from December 2021 to September 2022 The impact on future cash
flows resulting from falling growth rates does not reflect any
management actions that would be taken under such
circumstances,
Impairment assessment as at 31 December 2022
As at 31 December 2022, the review of the indicators of
impairment did not require any further testing.
Other intangible assets
Other intangible assets at 31 December 2022 represent customer
relationships, GBP546m (2021: GBP580m) and business brands and
trademarks, GBP2m (2021: GBP2m) that arise through business
combinations. Customer relationships are being amortised between 10
and 20 years.
Other intangible assets, along with other finite life assets,
are subject to impairment trigger assessment at least annually. As
at 30 September 2022, as a result of difficult equity market
conditions and subdued larger block trading, the Liquidnet customer
relationships were subject to a full impairment review. As a result
of this testing, the value of customer relationships has been
reduced by GBP20m. 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.
Following the adjustment to the customer relationship's carrying
value, the asset will continue to be amortised over its remaining
useful life, but remains sensitive to reasonable possible changes
in the assumptions. A reduction in annual operating profits of
GBP3m from 2023 would impair the asset by GBP19m, and a 1% increase
in the discount rate would impair the asset by GBP8m.
11. Trade and other receivables
2022 2021
GBPm GBPm
----------------------------------------- ------ ------
Non-current receivables
Finance lease receivables 38 30
Other receivables 13 14
----------------------------------------- ------ ------
51 44
========================================= ====== ======
Current receivables
Trade receivables(1) 382 336
Amounts due from clearing organisations 77 73
Deposits paid for securities borrowed 1,575 1,516
Finance lease receivables 2 1
Other debtors(1) 30 34
Accrued income 15 14
Owed by associates and joint ventures 4 5
Prepayments 109 86
Corporation tax 4 3
2,198 2,068
========================================= ====== ======
1 Trade receivables have been reduced by GBP15m and other
debtors increased by GBP15m from that reported in 2021 as a result
of a reclassification of certain non-trading balances due from
brokers.
12. Financial assets and financial liabilities at fair value
through profit or loss
2022 2021
GBPm GBPm
--------------------------------------------- -------- -------
Financial assets at fair value through
profit or loss
Matched Principal financial assets 9 37
Fair value gains on unsettled Matched
Principal transactions 255 121
--------------------------------------------- -------- -------
264 158
============================================= ======== =======
Financial liabilities at fair value through
profit or loss
Matched Principal financial liabilities - (1)
Fair value losses on unsettled Matched
Principal transactions (255) (119)
(255) (120)
============================================= ======== =======
Notional contract amounts of unsettled
Matched Principal transactions 209,762 65,968
============================================= ======== =======
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
2021
2022 (restated)
GBPm GBPm
----------------------------------------- ------ ------------
Trade payables (1) 24 17
Amounts due to clearing organisations 46 47
Finance lease payable - 2
Deposits received for securities loaned 1,573 1,504
Deferred consideration 1 7
Other creditors(1) 108 91
Accruals 369 283
Owed to associates and joint ventures 3 2
Tax and social security 22 22
Deferred income 3 2
2,149 1,977
========================================= ====== ============
1 Trade payables have been reduced by GBP72m and other creditors
increased by GBP72m from those reported in 2021 as a result of
certain non-trading balances due to customers being
reclassified
14. Loans and borrowings
Less than Greater Total
one year than
one year
2022 GBPm GBPm GBPm
------------------------------ ---------- ---------- ------
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
============================== ========== ========== ======
2021
Overdrafts 17 - 17
Loans from related parties 51 - 51
Sterling Notes January 2024 6 246 252
Sterling Notes May 2026 1 249 250
Sterling Notes November 2028 1 247 248
Liquidnet Vendor Loan Notes
March 2024 1 37 38
------------------------------- ---------- ---------- ------
77 779 856
============================== ========== ========== ======
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 2022, overdrafts for the
provision of settlement finance amounted to GBPnil (December 2021:
GBP17m).
Bank credit facilities and bank loans
The Group has a GBP350m committed revolving facility that
matures in May 2025. Facility commitment fees of 0.7% on the
undrawn balance are payable on the facility. Arrangement fees of
GBP3m were paid in 2020 and are being amortised over the maturity
of the facility.
As at 31 December 2022, the revolving credit facility was
undrawn. Amounts drawn down are reported as bank loans in the above
table. Bank loans are denominated in Sterling. During the year, the
maximum amount drawn was GBP140m (2021: GBP130m), and the average
amount drawn was GBP30m (2021: GBP60m). 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 GBP3m were incurred in 2022 (2021:
GBP3m).
Loans from related parties
In August 2020, the Group entered into a Yen 10bn committed
facility with The Tokyo Tanshi Co., Ltd, a related party, that
matures in February 2025. As at 31 December, the Yen 10bn committed
facility equated to GBP63m. Facility commitment fees of 0.64% on
the undrawn balance are payable on the facility. Arrangement fees
of less than GBP1m are being amortised over the maturity of the
facility.
As at 31 December 2022, the facility was undrawn (2021: Yen 8bn
(GBP51m). 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 10bn, GBP63m at year end rates (2021: Yen 10bn,
GBP64m at year end rates), and the average amount drawn was Yen
9bn, GBP57m at year end rates (2021: Yen 8bn, GBP53m at 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 GBP1m were incurred in 2022 (2021:
GBP1m).
Amounts drawn down are reported as loans from related parties in
the above table.
Sterling Notes: Due January 2024
In January 2017 the Group issued GBP500m 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 GBP69m of the Notes and a
further GBP184m were repurchased in November 2021. Repurchases have
been accounted for as extinguishment of the Notes. The repurchase
in 2021 was at a GBP16m premium to the Note's carrying value, which
has been reported as part of finance costs in the Income Statement.
At 31 December 2022, the fair value of the Notes (Level 1) was
GBP241m (2021: GBP264m). Accrued interest at 31 December 2022
amounted to GBP6m (2021: GBP6m). Unamortised issue costs were GBP1m
as at 31 December 2022 (2021: GBP1m).
Interest of GBP13m was incurred in 2022 (2021: GBP22m). The
amortisation expense of issue costs in 2022 and 2021 were less than
GBP1m.
Sterling Notes: Due May 2026
In May 2019 the Group issued GBP250m 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.
At 31 December 2022 the fair value of the Notes (Level 1) was
GBP232m (2021: GBP278m). Accrued interest at 31 December 2021
amounted to GBP1m (2020: GBP1m). Unamortised issue costs were GBP1m
as at 31 December 2022 (2021: GBP1m).
Interest of GBP13m was incurred in 2022 (2021: GBP13m). The
amortisation expense of issue costs in 2022 and 2021 were less than
GBP1m.
Sterling Notes: Due November 2028
In November 2021 the Group issued GBP250m unsecured Sterling
Notes due November 2028. The Notes were issued at a discount of
GBP1m, raising GBP249m before issue costs. The Notes have a fixed
coupon of 2.625% paid semi-annually, subject to compliance with the
terms of the Notes. At 31 December 2022 the fair value of the Notes
(Level 1) was GBP184m (2021: GBP249m). Accrued interest at 31
December 2022 amounted to GBP1m (2021: GBP1m). Unamortised discount
and issue costs were GBP3m (2021: GBP3m).
Interest of GBP7m was incurred in 2022 (2021: GBP1m). The
amortisation expense of issue costs in 2022 and 2021 was less than
GBP1m.
Liquidnet Vendor Loan Notes Due March 2024
In March 2021, as part of the purchase consideration of
Liquidnet, the Group issued $50m (GBP42m at year end exchange
rates) unsecured Loan Notes due March 2024. The Notes have a fixed
coupon of 3.2% paid annually. At 31 December 2022 the fair value of
the Notes (Level 2) was $44m (GBP37m) (2021: $49m (GBP36m)).
Accrued interest at 31 December 2022 was GBP1m (2021: GBP1m).
15. Reconciliation of operating result to net cash from operating activities
2022 2021
GBPm GBPm
------------------------------------------------ ----- -----
Operating profit 163 97
Adjustments for:
- Share-based payment charge 13 10
- Pension schemes administration costs 1 1
- Pension scheme past service and settlement
costs 1 1
- Depreciation of property, plant and
equipment 23 23
- (Gain)/loss on disposal of property,
plant and equipment (3) 1
- Impairment of property, plant and equipment 5 10
- Gain on derecognition of right-of-use
asset/lease liability (3) -
- Depreciation of right-of-use assets 26 29
- Impairment of right-of-use assets 4 6
- Amortisation of intangible assets 33 30
- Impairment of intangible assets - 6
- Amortisation of intangible assets arising
on consolidation 45 46
- Impairment of intangible assets arising
on consolidation 20 -
- Remeasurement of deferred consideration 8 2
- Unrealised foreign exchange loss on
Vendor Loan Notes 5 -
Net operating cash flow before movement
in working capital 341 262
(Increase) in trade and other receivables (24) (16)
Decrease/(increase) in net Matched Principal
related balances 27 (36)
(Increase)/decrease in net balance with
Clearing Organisations (1) 12
Decrease in net stock lending balances 12 6
Increase/(decrease) in trade and other
payables 76 (14)
Decrease in provisions (4) (2)
Increase/(decrease) in non-current liabilities 3 (3)
Net cash generated from operations 430 209
Income taxes paid (51) (39)
Fees paid on bank and other loan facilities (2) (2)
Interest paid (36) (42)
Interest paid - finance leases (17) (15)
------------------------------------------------ ----- -----
Net cash flow from operating activities 324 111
================================================ ===== =====
16. Analysis of net debt including lease liabilities
At 1 Cash Non-cash Acquired Exchange At 31
January flow items with acquisitions movements December
2022 GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- ------ --------- ------------------- ----------- ----------
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) 47(1) - - 4 -
Sterling Notes January
2024 (252) 13(2) (14) - - (253)
Sterling Notes May
2026 (250) 13(2) (13) - - (250)
Sterling Notes November
2028 (248) 7(2) (7) - - (248)
Liquidnet Vendor Loan
Notes (38) 1 (1) - (5) (43)
----------------------------- --------- ------ --------- ------------------- ----------- ----------
Total debt excluding
lease liabilities (839) 81 (35) - (1) (794)
Lease liabilities (286) 46 (18) - (21) (279)
----------------------------- --------- ------ --------- ------------------- ----------- ----------
Total financing liabilities (1,125) 127 (53) - (22) (1,073)
----------------------------- --------- ------ --------- ------------------- ----------- ----------
Net debt (243) 260 (53) - 25 (11)
============================= ========= ====== ========= =================== =========== ==========
At 1 Cash Non-cash Acquired Exchange At 31
January flow items with acquisitions movements December
2021 GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- --------- --------- ------------------- ----------- ----------
Cash and cash equivalents 656 129 - - (1) 784
Overdrafts (7) (11) - - 1 (17)
----------------------------- --------- --------- --------- ------------------- ----------- ----------
649 118 - - - 767
----------------------------- --------- --------- --------- ------------------- ----------- ----------
Financial investments 127 (11) - - (1) 115
----------------------------- --------- --------- --------- ------------------- ----------- ----------
Bank loan due within
one year - 5(6) - - (5) -
Loans from related
parties (28) (27) - - 4 (51)
Sterling Notes January
2024 (440) 210(3) (22) - - (252)
Sterling Notes May
2026 (250) 13(2) (13) - - (250)
Sterling Notes November
2028 - (247)(4) (1) - - (248)
Liquidnet Vendor Loan
Notes - - (37) - (1) (38)
----------------------------- --------- --------- --------- ------------------- ----------- ----------
Total debt excluding
lease liabilities (718) (46) (73) - (2) (839)
Lease liabilities (212) 43(5) (26) (91) - (286)
----------------------------- --------- --------- --------- ------------------- ----------- ----------
Total financing liabilities (930) (3) (99) (91) (2) (1,125)
----------------------------- --------- --------- --------- ------------------- ----------- ----------
Net debt (154) 104 (99) (91) (3) (243)
============================= ========= ========= ========= =================== =========== ==========
1 Relates to Total loan repayment.
2 Relates to interest paid reported as a cash outflow from operating activities.
3 Relates to principal repurchased of GBP184m reported as a cash
outflow from financing activities plus GBP26m of interest paid
reported as a cash outflow from operating activities.
4 Relates to principal received of GBP250m less GBP3m of
discount and debt issue costs reported as a cash outflow from
financing activities.
5 Relates to interest paid of GBP17m (2021: GBP15m) reported as
a cash outflow from operating activities and principal paid of
GBP29m (2021: GBP28m) reported as a cash outflow from financing
activities.
6 Relates to currency differences arising on foreign currency drawdowns and repayments.
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 2022 cash and cash equivalents,
net of overdrafts, amounted to GBP888m (2021: GBP767m) of which
GBP104m (2021: GBP77m) represent amounts subject to regulatory
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
Legal
Property Re-structuring and other Total
2022 GBPm GBPm GBPm GBPm
------------------------------------- --------- --------------- ----------- ------
At 1 January 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 13 7 20 40
===================================== ========= =============== =========== ======
2021
------------------------------------- --------- --------------- ----------- ------
At 1 January 7 9 24 40
Charge to income statement 6 6 6 18
Acquired with acquisitions 4 - - 4
Utilisation of provisions (1) (10) (6) (17)
Effect of movements in exchange
rates - - (2) (2)
------------------------------------- --------- --------------- ----------- ------
At 31 December 16 5 22 43
===================================== ========= =============== =========== ======
2022 2021
GBPm GBPm
------------------------------------- --------- --------------- ----------- ------
Included in current liabilities 9 5
Included in non-current liabilities 31 38
------------------------------------- --------- --------------- ----------- ------
40 43
===================================== ========= =============== =========== ======
Property provisions outstanding as at 31 December 2022 relate to
provisions in respect of building dilapidations, representing the
estimated cost of making good dilapidations and disrepair on
various leasehold buildings.
Restructuring provisions outstanding as at 31 December 2022
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 2023.
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 24 years.
Yen LIBOR Class Actions
The Group has entered into settlement agreements with the
plaintiffs in Laydon v. Mizuho Bank, Ltd. et al. and Sonterra
Capital Master Fund, Ltd. et al. in order to settle these class
actions relating to the alleged manipulation of Yen LIBOR and
Euroyen TIBOR benchmark interest rates. The United States District
Court for the Southern District of New York granted preliminary
approval of the settlements on 4 October 2022. Pending final
approval from the class, which the Group believes to be probable,
the Group has paid US$2.4 million (c.GBP2.0 million) into escrow
having provided for this amount. Separately, pursuant to these
settlements and consistent with its indemnity obligations, NEX
International Limited (formerly known as ICAP plc) has paid US$2.4
million (c.GBP2.0 million) into escrow pending final class approval
in order to resolve claims against ICAP plc and ICAP Europe
Limited. This has been recorded as a provision and settlement,
together with the receipt of an indemnification asset from NEX.
18. Contingent liabilities
Bank Bill Swap Reference Rate case
On 16 August 2016, a complaint was filed in the United States
District Court for the Southern District of New York naming Tullett
Prebon plc, ICAP plc, ICAP Australia Pty LTD and Tullett Prebon
(Australia) Pty. Limited as defendants together with various Bank
Bill Swap Reference Rate ('BBSW') setting banks. The complaint
alleges collusion by the defendants to fix BBSW-based derivatives
prices through manipulative trading during the fixing window and
false BBSW rate submissions. On 26 November 2018, the Court
dismissed all of the claims against the TP ICAP defendants and
certain other defendants. On 28 January 2019, the Court ordered
that a stipulation signed by the plaintiffs and the TP ICAP
defendants meant that the TP ICAP defendants were not required to
respond to any Proposed Second Amended Class Action Complaint
('PSAC') that the plaintiffs were seeking to file. On 3 April 2019
the plaintiffs filed a PSAC, however the TP ICAP defendants have no
obligation to respond. The plaintiffs have reserved the right to
appeal the dismissal of the TP ICAP defendants but have not as yet
done so. It is not possible to predict the ultimate outcome of the
litigation or to provide an estimate of any potential financial
impact.
Labour claims - ICAP Brazil
ICAP do Brasil Corretora De Títulos e Valores Mobiliários Ltda
('ICAP Brazil') is a defendant in 7 (2021: 8) 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 32m (GBP5m) (2021: BRL 47m (GBP6m)). The Group is the
beneficiary of an indemnity from NEX in relation to any liabilities
in respect of five of the eight Labour Claims insofar as they
relate to periods prior to completion of the Group's acquisition of
ICAP. This includes a claim that is indemnified by a predecessor to
ICAP Brazil by way of escrowed funds in the amount of BRL 28m
(GBP4m). Apart from an estimated loss of GBP0.1m which has already
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.
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 354m (GBP59m) (2021: BRL 295m (GBP39m)).
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.
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 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 judgment dismissing the
Foundation's claims in their entirety. The Foundation has until
March 2021 to appeal this final judgment. 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.
(ii) 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 RICO. On 16 September 2019, the
Court granted the Companies' motions to dismiss in their entirety.
The plaintiffs appealed the dismissal to the United States Court of
Appeals for the Second Circuit. Based upon a Second Circuit ruling
in an unrelated case, the parties have jointly moved to remand the
case to the United States District Court for the Southern District
of New York for further proceedings. The case is now remanded to
the S.D.N.Y. where the plaintiffs on 23 November 2022, filed a
third amended complaint. In October 2022, the four "ICAP" broker
defendants (ICAP Europe Limited, ICAP Securities USA LLC, NEX Group
plc and Intercapital Capital Markets LLC) reached a settlement in
principle with the plaintiffs which has been approved on a
preliminary basis by the Court. On 27 January 2023, the remaining
"Tullett" defendants (TP ICAP plc, Tullett Prebon Americas Corp,
Tullett Prebon (USA) Inc., Tullett Prebon Financial Services LLC,
Tullett Prebon (Europe) Limited and Cosmorex AG) filed a motion to
dismiss the third amended complaint on various grounds including
statute of limitations and failure to state a claim upon which
relief can be granted. The Companies intend to contest liability in
the matter and
to vigorously defend themselves. It is not possible to predict
the ultimate outcome of this action or to provide an estimate of
any potential financial impact.
(iii) EURIBOR Class Action
On 13 August 2015, the 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 ICAP Europe Limited and ICAP plc,
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 some time in 2023. 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 Limited, Frankfurt branch - Frankfurt Attorney
General administrative proceedings
On 19 December 2018, ICAP Securities Limited, Frankfurt branch
('ISL') 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. This
investigation is complicated as the majority of relevant records
are held by NEX and NEX failed to disclose its engagement with the
relevant authorities prior to the sale of ICAP to Tullett Prebon in
2016. The Group has issued proceedings against NEX in respect of
(i) breach of warranties under the sale and purchase agreement, and
(ii) an indemnity claim under the tax deed entered into in
connection with the IGBB acquisition in relation to these matters.
Since the 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 has issued proceedings against NEX in
respect of (i) breach of warranties under the sale and purchase
agreement, and (ii) an indemnity claim under the tax deed entered
into in connection with the IGBB acquisition in relation to these
matters. Since the 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 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. Argument on the motion for
reconsideration was held in January 2023 and the motion remains
pending with the Court. 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.
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 and are for compensation for the amount it has been
ordered to pay to the tax authorities, the amount of the criminal
confiscation order, the amount claimed against it in the civil
claim and further indemnification and interest. 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.
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'), Tullett Prebon Europe Limited
('TPEL') 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 is still in the fact-finding
phase and the Group is co-operating with the CFTC in its enquiries.
It is not possible to predict the ultimate outcome of the
investigation or to provide an estimate of any potential financial
impact at this time. As the relevant matters that occurred prior to
the Group's acquisition of the ICAP Global Broking Business
('IGBB') from ICAP were not disclosed to the Group prior to
completion of the acquisition, the Group has initiated a court
action against ICAP's successor company, NEX, for breach of
warranty in respect of the ICAP entities.
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 the 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. The Group is currently in commercially
sensitive discussions with a major supplier and until these
discussions have been concluded it is not possible to provide an
estimate of any potential financial impact.
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 2022.
The preliminary statement of annual results for the year ended
31 December 2022 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 14 March
2023. 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 The Group holds goodwill of GBP1,232m (2021: GBP1,180m)
matter and acquisition-related intangible assets of GBP548m
description (2021: GBP582m), of which GBP122m relate to a Liquidnet
client-relationship intangible asset. As a result
of reduced revenue due to lower market volumes in
equity block trading, an impairment of GBP20m was
recognised on the Liquidnet client-relationship intangible
asset, decreasing the balance from GBP144m to GBP122m.
As detailed in the Group's accounting policy 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.
Impairment assessments are performed by comparing
the carrying amount of each cash generating unit
("CGU"), or Groups of CGUs, to its recoverable amount,
using the higher of the value in use ("VIU") or fair
value less costs to dispose ("FVLCD").
The VIU approach was used to estimate the recoverable
amount of the Global Broking, Energy and Commodities,
Parameta Solutions and Agency Execution Groups of
CGUs while the FVLCD approach was used to assess
the recoverable amount of the Liquidnet CGU and the
related customer relationships.
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.
Goodwill and acquisition-related intangible assets'
disclosures are included in the Significant Items
section of the Financial and Operating Review Report
on page 14, the Report of the Audit Committee in
the 2022 Annual Report and Accounts on page 109 and
Notes 3, 4 and 13 to the Consolidated Financial Statements.
------------------------------------------------------------------
How the We obtained an understanding of relevant controls
scope of in relation to the impairment review process for
our audit goodwill and acquisition-related intangible assets.
responded
to the We challenged the assumptions used in the impairment
key audit reviews, in particular the forecast revenue and contribution
matter growth rates for Liquidnet and Agency Execution,
and discount rates used by the Group in its impairment
tests of the divisional Groups of CGUs.
For budgeted 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
discount rates and compared these to the rates used
by the Group. Additionally, we benchmarked the discount
rates used by the Group to external peer data.
We performed scenario analysis; stressed key assumptions
with reference to historical performance; and assessed
for impairment triggers between 30 September 2022
and 31 December 2022.
Additionally, given the sensitivity of the VIU and
FVLCD models to reasonably possible changes in the
revenue and discount rate assumptions, we reviewed
management's sensitivity disclosures in note 13.
We evaluated the impact of climate related risks
on the forecasts prepared by management.
For acquisition related intangible assets, we specifically
tested the assumptions used by management as part
of the impairment review exercise to assess whether
they meet the requirements of IAS 36 "Impairment
of Assets". We challenged the key assumptions around
the impairment triggers identified for the Liquidnet
client-relationship, which we have assessed for reasonableness,
and we evaluated the accuracy of the inputs used
by management.
------------------------------------------------------------------
Key observations We concur with management's conclusion to recognise
a GBP20m impairment with respect to the Liquidnet
customer relationships.
We concur with the directors' conclusion that no
goodwill impairment was required for any of the divisional
Groups of CGUs or the Liquidnet CGU in the current
year and concluded that the disclosures are reasonable.
------------------------------------------------------------------
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
14 March 2023
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March 14, 2023 03:00 ET (07:00 GMT)
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