There are major changes at the top ranks of TP ICAP PLC (LON:TCAP), as per an announcement made by the company earlier today.
John Phizackerley is leaving his post as Chief Executive and as a member of the Board of TP ICAP, with the change effective immediately. Mr Phizackerley has been replaced by Nicolas Breteau, who joined Tullett Prebon in 2016 as Chief Commercial Officer and is currently at the helm of TP ICAP’s largest business, Global Broking.
In addition, Robin Stewart has been appointed as Chief Financial Officer on a permanent basis, subject to FCA approval. He joined Collins Stewart Tullett Plc in 2003 as Head of Tax and has been acting as the Company’s Interim Chief Financial Officer since November 2017.
Both Nicolas Breteau and Robin Stewart will become members of the Board with immediate effect.
Commenting on the changes, Rupert Robson, Chairman, said:
“The evolving landscape is driving up costs across our industry. The acquisition of ICAP has given us greater scale to withstand this pressure. The potential for these combined businesses remains extremely compelling and this will be evidenced in the coming years. However, it has become clear that a change of leadership is required to execute our medium-term growth strategy and deliver the detail of the integration process”.
TP ICAP also provided a trading update for the six months to June 30, 2018, warning its earnings per share for 2018 may fail to meet analyst expectations.
The company said its underlying operating profit for 2018 will be impacted by additional ongoing cost headwinds of around £10 million, relating to Brexit, MIFID II, regulatory and legal costs and IT security. Furthermore, market forces are expected to increase broker compensation in 2018 from 50.5% in FY 2017 to at least 51%. Near-term additional UK regulatory capital requirements and the refinancing of the revolving credit facility (RCF) are likely to push higher finance costs in 2018 to around £35 million.
As a result, earnings per share for 2018 are expected to be slightly below the bottom-end of the range of analyst expectations. Let’s note that company-derived consensus, taking all analysts who have updated models since the Preliminary Results in March 2018 is for underlying EPS of 37.0p, with a range of 34.9p to 39.0p.
Revenues for the six months to June 30, 2018, were 3% higher than the prior year at constant exchange rates and 2% lower as reported. This is consistent with 2018 full year revenue guidance provided in March, which remains unchanged. Both the Tullett Prebon and ICAP businesses continue to contribute to TP ICAP’s revenue growth.
The Board has reassessed its approach to the integration and the ongoing investment needs of the business in the light of the evolving industry landscape. As a result, TP ICAP is reducing its synergy target from £100 million to £75 million by the end of 2019 on an annualised basis.
The company forecasts 2019 will see the cost associated with Brexit, regulatory and legal, and IT security increase from the above-mentioned £10 million in 2018 to £25 million. In addition, TP ICAP plans to make strategic organic investments of around £15 million in Global Broking, Energy & Commodities and the Data & Analytics divisions to accelerate the future growth of the TP ICAP business. The increased finance costs mentioned above are expected to rise to around £40 million in 2019.
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