Tullett Prebon reveals declining profits at ICAP acquisition assets

Tullett Prebon has revealed that the voice broking and other businesses it hopes to soon acquire from Icap produced 8% lower revenue and profits down 16% in the year to 31 March.

Tullett has agreed purchased Icap's global hybrid voice broking and information business (IGBB), which includes associated technology and broking platforms and associated businesses, including iSwap and Fusion, with Icap due to end up with a 19.9% in the enlarged Tullett.

The transaction is on track but still remains conditional upon clearances from antitrust authorities in the UK, the United States, Australia and Singapore.

The global broking business, including iSwap, saw revenue fall 10%, but this was largely offset by information services increasing sales 24%.

Revenue from continuing businesses on a constant currency basis, was down 3%, with global broking down 4% and information services up 22%.

Global broking continues to be troubled by historically low and negative interest rates, low levels of volatility, and bank deleveraging, which combine to produce a reduced risk appetite for its services.

"Global economic uncertainties and oil price reductions generated spikes in activity but overall market activity remained subdued," the company said.

Last week Tullett said revenue in its existing business was up 2% in four months to April, or 1% lower at constant exchange rates.

It said trading conditions had remained mixed, with European and Middle East trading volumes subdued, activity levels in the Americas benefitting from investment in energy there, and the performance of Asia Pacific continuing to progress thanks in part to investments in fixed income products.

Broker Numis said it expected the transaction will complete later this year and, once combined, the business is predicrted to generate "significant net synergies of at least £80m over the medium-term as the rationalisation of back office functions and falling broker compensation more than offsets any revenue attrition".

Analysts estimate this will underpin EPS growth of roughly 10% per year, even if markets conditions remain challenging.

"We therefore believe investors will be rewarded with both steady earnings growth and a decent yield of circa 5% whilst they wait for market conditions to improve," Numis added.

Shares in Tullett were slightly on the wrong side of flat, at 329p, on Monday morning.