Tuesday, 19 May 2015

ICAP finals

ICAP is an interdealer broker and provider of post trade risk mitigation and information services.  I have a holding in my income portfolio (epic code: IAP).

ICAP released their full year results today.  A difficult period with revenue down -7.4% to £1,276m and adjusted operating profit falling by -13.1% to £252m, with reported operating profit showing a decrease of -12.6% to £118m.  Adjusted profits though were up 8% in the second half of the year compared to the prior year. 
Adjusted EPS was 28.1p a decline of -13.8% and reported EPS fell -16.9% to 12.8p. A final dividend of 15.4p was declared making an unchanged 22p for the full year.
Free cash flow (FCF) was the one bright spot rising from last year's £75m to £142m, which just covered the dividend payment in the year of £141m.  A foreign exchange translation gain was the main reason for a reduction in the net debt from £89m to £68m.
With little debt on the balance sheet (gearing of 7%) and FCF returning an average of 14% over the last three years on its capital employed, ICAP is able to continue to weather what is an extended difficult period for its business.  They have been able to achieve this through introducing a comprehensive restructuring programme.  
For this current year management have stated "...Since the start of the financial year the external environment has been mixed and we continue to expect near term headwinds...".  Improvements in trading may occur as markets become more volatile during periods of uncertainty, this may be caused by the European in/out referendum in the UK and uncertainty over interest rate decisions in the UK and USA towards the end of the year.  

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