ICAP’s revenues drop 5% in Q3 FY 2016, deal with Tullett Prebon on track

Markets operator and provider of post trade risk mitigation and information services ICAP plc (LON:IAP) has just published a trading statement for the third quarter of its fiscal year to March 31, 2016, with revenues for the period down but the proposed deal with Tullett Prebon Plc (LON:TLPR) being on track.

In November 2015, ICAP agreed to sell its global hybrid voice broking and information business to Tullett Prebon. Earlier in February this year, Tullett Prebon said it received a request for additional information and documentary material from the United States Department of Justice (DOJ) in connection with the transaction. Both companies have since struck a positive note regarding the transaction completion.

Commenting on the planned deal with Tullett Prebon, Michael Spencer, Group Chief Executive Officer of ICAP, said today:

“The transaction to combine our global hybrid voice broking business with Tullett Prebon is proceeding well, and marks a defining moment in the transformation of the Group into a financial technology business. We have laid the foundations for our electronic and post trade businesses to deliver strong, cash generative returns for the future. I remain confident and excited about the range of opportunities ahead of us and our ability to execute our strategy successfully and provide long-term profitable growth.”

The transaction is anticipated to take place during 2016. The Circular will be issued in March 2016 followed by a shareholder vote.

ICAP noted in its statement that group revenue from continuing businesses for the third quarter to December 31, 2015 was 5% lower than in the corresponding period last year, as overall market conditions have remained challenging. The Electronic Markets segment saw revenues in the quarter fall 10% from a year earlier, whereas the revenues in Post Trade Risk and Information increased 8% and those from Global Broking were down 7% in constant currency terms.

Michael Spencer commented on the performance,

“Against the backdrop of a difficult market, our business continues to perform well, particularly the Post Trade division which goes from strength to strength. The decision by the Fed to raise interest rates was very welcome, but we are still operating in an environment of ultra-low interest rates and we have some way to go before we return to more normal market conditions. Risk appetite remains subdued and I see few signs that this will pick up any time soon, even after markets began the year with a short burst of extreme volatility.”

  • Electronic Markets

Revenue decreased by 10% on a constant currency basis (7% on a reported basis) during the third quarter compared to the same period last year. The average daily volumes in US Treasuries on the BrokerTec platform were down 11% to $147 billion.

EBS average daily volume decreased by 35% to $78 billion for the third quarter as Forex volatility was lower than in the same period a year earlier.

On the brighter side, ICAP said that demand for EBS Direct keeps growing with a record month in January with average daily volumes more than $20 billion.

  • Post Trade Risk and Information

Revenues increased 8% in constant currency terms and on a reported basis during the third quarter compared to the same period last year, on the back of continued demand for TriOptima’s compression and reconciliation services.

  • Global Broking

Revenue from continuing businesses decreased by 7% on a constant currency basis and on a reported basis during the third quarter compared to the same period last year.

You can view the full trading statement from ICAP by clicking here.

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