TIDMIAP
RNS Number : 2738Y
ICAP PLC
16 May 2016
News Release
ICAP plc - Full-year results for the year ended 31 March
2016
A transformational year
London - 16 May 2016 - ICAP plc (IAP.L), a leading markets
operator and provider of post trade risk and information services,
announces today its audited results for the year ended 31 March
2016.
Year ended
Year ended 31 March 2015
31 March 2016 (restated)
GBPm GBPm
------------------------- -------------- --------------
Revenue 1,201 1,276
------------------------- -------------- --------------
Trading operating profit 221 252
------------------------- -------------- --------------
Trading profit before
tax 203 229
------------------------- -------------- --------------
Profit before tax 89 95
------------------------- -------------- --------------
Trading EPS (basic) 24.6p 28.7p
------------------------- -------------- --------------
EPS (basic) 10.5p 13.0p
------------------------- -------------- --------------
Dividend per share 22.0p 22.0p
------------------------- -------------- --------------
Trading operating profit
margin (%) 18% 20%
------------------------- -------------- --------------
Highlights:
-- Transaction with Tullett Prebon on track
-- Group revenue down 6% as markets remain challenging;
down 3% excluding closed desks and on a constant
currency basis
-- GBP96 million invested in new product initiatives
-- Trading profit before tax is GBP203 million
(2014/15: GBP229 million), impacted by GBP7
million foreign exchange loss
-- Trading EPS (basic) 24.6p (2014/15: 28.7p)
-- Final dividend payment of 15.4p per share,
maintaining full year dividend at 22.0p per
share
-- Free cash flow conversion rate of 96% in the
year (2014/15: 121%)
-- Acquisition of ENSO Financial Analytics, provider
of a data analytics platform for the buy side
Michael Spencer, Group Chief Executive Officer, said: "It has
been a transformational year for ICAP and I believe that we are now
on the cusp of one of the most exciting eras in the Company's
30-year history. The Transaction to sell our Global Broking and
associated information business to Tullett Prebon remains on track
to complete later this year.
"Our ambition is to create the world's leading multi-product,
global electronic transaction network for OTC products and post
trade services. The new electronic markets, post trade and Euclid
investments businesses, which we will become once the Transaction
completes, will be renamed 'NEX Group plc'; a new name for a new
company that intends to lead the market in technology innovation in
global financial markets.
"Trading conditions continue to be challenging as a result of
the macro economic environment, historically low and negative
interest rates and continued bank deleveraging. These headwinds
have naturally impacted our performance during the year. In the US
in December 2015, we saw the welcome first step in raising interest
rates but in what is likely to be a long and slow journey towards
more normal market conditions.
"ICAP has continually invested in electronic platforms and post
trade services, developing its products and services to remain at
the forefront of our customer's needs. Euclid Opportunities, our
early-stage fintech investment incubator, which finds these new
investments will play a bigger and more important role as we become
NEX Group plc. We recently launched products and functionality
which will extend our reach to a wider customer base, particularly
the buyside. The most important of these are Forwards on EBS
Direct, BrokerTec Direct and triResolve Margin. Euclid
Opportunities completed the acquisition of ENSO which provides
operational insights and key analytics to many of the world's most
successful fund managers, making significant progress towards
developing a key new customer base.
"Overall, the size of our existing and new target markets, the
quality of our mission critical technology and the strength of
customer demand will ensure that NEX Group plc will provide an
outstanding opportunity to deliver long-term profitable growth for
years to come."
Presentation of information
This document comprises the full year results to 31 March 2016
for ICAP plc (ICAP) and its subsidiary undertakings (together
'ICAP' or 'the Group'). It contains the Interim Management Report,
Directors' Statement of Responsibilities and Financial Statements
together with the Independent Auditor's Review Report, as required
by the Financial Conduct Authority's (FCA) Disclosure and
Transparency Rules (DTR). The Financial Statements and related
notes are prepared in accordance with IAS34 Interim Financial
Reporting.
Cautionary statement regarding forward-looking statements
This full year report contains certain forward-looking
statements with respect to the financial condition, results of
operations and business of the Group.
Certain statements that are not historical facts, including
statements about the Group's beliefs and expectations, are
forward-looking statements. Words such as 'expects', 'anticipates',
'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential'
and 'reasonably possible', variations of these words and similar
expressions are intended to identify forward-looking statements.
These statements are based on current plans, estimates and
projections, and therefore undue reliance should not be placed on
them. Forward-looking statements speak only as of the date they are
made, and it should not be assumed that they have been revised or
updated in the light of new information or subsequent events.
Forward-looking statements involve inherent risks and
uncertainties. Readers are cautioned that a number of factors could
cause actual results to differ, in some instances materially, from
those anticipated or implied in any forward-looking statement.
Analysts and investors briefing
There will be a briefing for analysts and investors at 09:30am
(BST) on Monday 16 May 2016 at
2 Broadgate, London EC2M 7UR.
Contacts:
+44 (0) 20 7050
Serra Balls Group Head of Communications 7103
Head of Investor +44 (0) 20 7050
Alex Dee Relations 7123
Neil Bennett/ Rebecca +44 (0) 20 7379
Mitchell Maitland 5151
About ICAP
ICAP is a leading markets operator and provider of post trade
risk mitigation and information services. Group companies provide
services that match buyers and sellers in the wholesale markets in
interest rates, credit, commodities, FX and money markets, emerging
markets and equity derivatives through voice and electronic
networks. Our post trade risk and information services help our
customers manage and mitigate risks in their portfolios.
For more information go to www.icap.com.
Financial performance
In November 2015, ICAP announced that it had entered into a
Transaction which will, when completed, involve the disposal of
ICAP's global hybrid voice broking and information business,
including its associated technology and broking platforms
(including iSwap and Fusion), certain of its joint ventures and its
associates (IGBB), to Tullett Prebon. ICAP shareholders and ICAP
Newco plc ("Newco") will together own approximately 56% of the
issued shared capital of the enlarged Tullett Prebon with 19.9%
retained by Newco.
For the year ended 31 March 2016, the Group's performance is
therefore reported in the consolidated income statement separately
for continuing and discontinued operations (net of tax).
Discontinued performance for the year includes IGBB's performance,
adjusted for certain provisions in the sale and purchase agreement.
The continuing income statement is not reflective of the financials
of Newco going forward. The Group expects to receive dividend
income for its investment in the enlarged Tullett Prebon, which is
expected to be named TP ICAP.
In the review of operations, financial performance is presented
on a Group basis, therefore including both continuing and
discontinued, unless stated otherwise. Discontinued profit after
tax is presented in the income statement on one line. The
discontinued income statement is presented in note 4 to the
financial statements.
GBPm Year ended 31 Year ended 31
March 2016 March 2015
---------------------- -------------------------------- --------------------------------
Continuing Discontinued Group Continuing Discontinued Group
---------------------- ---------- ------------ ------ ---------- ------------ ------
Revenue 460 741 1,201 468 808 1,276
---------------------- ---------- ------------ ------ ---------- ------------ ------
Trading operating
profit 139 82 221 154 98 252
---------------------- ---------- ------------ ------ ---------- ------------ ------
Trading profit before
tax 110 93 203 122 107 229
---------------------- ---------- ------------ ------ ---------- ------------ ------
Profit before tax 27 62 89 47 48 95
---------------------- ---------- ------------ ------ ---------- ------------ ------
For the year ended 31 March 2016, the Group reported revenue of
GBP1,201 million, 6% below the prior year. On a constant currency
basis, revenue from Post Trade Risk and Information was up 5% which
was offset by decreases of 4% in Electronic Markets and 5% in
Global Broking (excluding closed desks).
During the course of the year, the Group's trading performance
was impacted by the ongoing combination of structural and cyclical
factors including historically low and negative interest rates, low
levels of volatility and bank deleveraging resulting in reduced
risk appetite from bank customers. This was partly offset by the
increase in trading activity in emerging market currency pairs on
EBS Market, and greater demand for risk mitigation products such as
triReduce and triResolve.
Consistent with the Group's growth strategy, ICAP continues to
make significant investment in all divisions. During the year the
Group invested GBP96 million in new business lines including
Forwards on EBS Direct, BrokerTec Direct and triResolve Margin.
The Group reported a trading operating profit of GBP221 million,
12% down on the prior year. The Group's trading operating profit
margin reduced to 18% (2014/15: 20%). The decrease in the trading
operating profit includes the negative impact of the year-on-year
adverse movement from FX losses of GBP11 million. Excluding the FX
loss, the trading operating profit reduced by 8% on the prior year.
Additionally, the synergies achieved in the year from the 2014/15
cost savings programme were reinvested during the year in the
development of new products and technological solutions across the
businesses.
The proportion of the Group's trading operating profit generated
from the Electronic Markets and Post Trade Risk and Information
divisions increased to 79%, reflecting a 4 percentage point
increase on the prior year.
Group trading profit before tax of GBP203 million and trading
EPS (basic) of 24.6p were 11% and 14% down on the prior year
respectively. Profit before tax was GBP89 million (2014/15: GBP95
million).
An evolving marketplace
The global regulatory effort to improve the transparency, risk
management and resilience of participants in the world's financial
markets continues to impact the structure of our marketplace. The
strategies and business models of ICAP's traditional bank customer
base have changed in response to the requirements of Basel III, the
Dodd-Frank Act in the US, EMIR in Europe and will continue to
evolve with MiFiD II and other new regulations as they come into
force. Banks and other market participants are turning to
technology to help them manage these challenges and the additional
costs associated with them. Electronic trading is increasingly
prevalent in both interbank and bank to customer markets and our
customers are looking to use technology throughout the trade life
cycle. Against this background of structural changes within
wholesale financial markets and increased regulatory oversight and
disclosure, ICAP's customers are seeking innovative products,
greater liquidity and the best-in-class platforms and services.
This presents an enormous opportunity for the business. At the same
time, the issues created by over-capacity in the voice broking
market have been apparent for a while and were a key driver behind
the Transaction with Tullett Prebon.
Divestment - creating two strengthened and streamlined
businesses
ICAP has a market-leading voice broking business. The roots of
the Company are in voice broking which has been a driver of ICAP's
success for more than 30 years. The volume of voice broking
business across the market has, however, been shrinking for a
number of years and the costs involved have escalated: it has been
obvious for some time that the voice broking industry needs
consolidation. That process began with the merger of BGC and GFI
last year. The sale of ICAP's voice broking business to Tullett
Prebon is a logical and a natural next step. The voice businesses
have complementary strengths and the Transaction will create the
largest global hybrid voice broking business by revenue. This is
the right move for our customers and for the future of the voice
broking industry as a whole.
The Transaction will create a focused financial technology
business. Electronic trading and post trade services provided the
vast majority of the Group's operating profit this year, which is
indicative of how the business and the wider marketplace have
evolved. ICAP's future is as a financial technology company,
focused on electronic markets and post trade services. Its leading
portfolio of products and businesses sit at the heart of financial
market infrastructure and will be ideally placed to meet customers'
changing requirements. The Group will be better positioned to go
into new market segments with innovation and product development
and will benefit from the increased demand made by regulators for
post trade risk mitigation and electronic trading. For some time
ICAP has been progressively diversifying from voice broking.
Since 2002, when ICAP first invested in TriOptima, it has made
strategic investments to develop the next generation of financial
technology for the trading community. BrokerTec was one of the
earliest of these investments back in 2003 and is now the world's
leading electronic trading platform for fixed income markets. EBS
is a leading electronic FX trading business with significant market
share in many currencies. Euclid Opportunities was established
specifically to nurture the growth of early-stage financial
technology companies and the Euclid programme is going to be an
increasingly important part of the Group's future. The aim is to
create the world's leading multi-product global electronic
transaction network for OTC products and post trade services.
Transaction structure
In November 2015, ICAP announced that it had entered into a
Transaction which will, when completed, involve the disposal of its
global hybrid voice broking and information business, including its
associated technology and broking platforms (including i-Swap and
Fusion), certain of its joint ventures and our associates (IGBB),
to Tullett Prebon.
Benefits of the Transaction for ICAP shareholders
The ambition for Newco is to be the world's leading electronic
platform for OTC transactions and post trade services to all
parties: corporates, investment banks, universal banks, asset
managers, hedge funds, high frequency traders, sovereign wealth
funds and central banks. ICAP's revenue from electronic trading and
post trade services is already well diversified, with an increasing
proportion coming from recurring business: 62% of post trade
revenue came from subscriptions this year.
Newco will continue this strategy as it expands the potential
market for these services through product development and greater
penetration of geographic markets and customer segments.
On completion, it is expected that Newco will cease to be
subject to consolidated regulatory capital requirements. The ICAP
Group currently operates under a waiver from those requirements
but, absent the Transaction, it is expected that the FCA would
require significant capital to be retained or raised over a period
of years to eliminate the consolidated capital deficit that
otherwise exists. Based on an assessment of the information
(including on legal advice) provided to the FCA by ICAP in relation
to the projected balance of financial and non-financial business in
Newco, the FCA has indicated that, following the Transaction, Newco
will not be subject to prudential consolidation requirements.
During the negotiations both ICAP and Tullett Prebon found that
they have much in common culturally, which will help with the
integration of the two businesses. TP ICAP will have the scale
required to deliver good margins while continuing to invest in its
people and technology. It will benefit from products ICAP has
developed which include i-Swap, Fusion and Scrapbook. TP ICAP
announced that it expected the savings from combining the two
businesses to exceed GBP60 million annually.
Dividend
The directors recommend a final dividend of 15.4p per share
which will result in a full-year dividend of 22p per share
(2014/15: 22.0p per share). If approved, the final dividend will be
paid on 22 July 2016 to shareholders on the register at the close
of business on 1 July 2016. The shares will be quoted ex-dividend
from 30 June 2016.
Outlook
Despite ongoing subdued market conditions this has been a year
of good progress and positive strategic change for ICAP. Trading
activity since the start of the new financial year, however,
continues to be challenging. The ICAP board is confident that the
transformation of the Group and the continued investment in new
products and technology will result in long-term growth and
improvement in profitability driving sustained shareholder value
creation.
Review of operations
Electronic Markets
EBS BrokerTec is a leading electronic trading business in FX and
fixed income. These platforms offer efficient and effective trading
venues to customers in more than 50 countries across a range of
instruments including spot FX, US Treasuries, European government
bonds and EU and US repo. These electronic platforms are built on
ICAP's bespoke networks connecting participants in financial
markets.
2016 2015 Change
Revenue GBPm GBPm %
-------------------------------- ----- ----- ------
BrokerTec 130 128 2
EBS 126 124 2
Other electronic platforms 6 7 (14)
-------------------------------- ----- ----- --------
Total -- reported 262 259 1
-- constant currency 272 (4)
-------------------------------- ----- ----- --------
Trading operating profit 78 93 (16)
-------------------------------- ----- ----- --------
Trading operating profit margin 30% 36% (6)ppt
-------------------------------- ----- ----- --------
The table above is presented on a total Group basis and,
therefore, includes continuing and discontinued operations. See
note 2 to the financial statements for a breakdown between
continuing and discontinued operations.
For the year ended 31 March 2016, Electronic Markets' revenue
decreased by 4% on a constant currency basis and increased by 1% on
a reported basis to GBP262 million (2014/15: GBP259 million). The
trading operating profit fell to GBP78 million (2014/15: GBP93
million) and the trading operating profit margin decreased to 30%
from 36% as GBP54 million (2014/15: GBP25 million) investment in
the development of new products and functionality on the electronic
trading platforms were charged to the income statement.
BrokerTec
BrokerTec is a global electronic platform for the trading of US
Treasuries, European government bonds and EU and US repo. It
facilitates trading for banks and non-bank professional trading
firms.
For the year ended 31 March 2016, revenue decreased by 4% on a
constant currency basis and increased by 2% on a reported basis to
GBP130 million (2014/15: GBP128 million). This performance reflects
a 3% increase in US Treasury average daily volume to $168 billion,
a 3% decrease in US repo to $212 billion and a 3% decrease in
European repo to EUR175 billion.
Despite a buoyant comparable period, trading activity in
on-the-run US Treasuries increased as a number of macroeconomic
events in global financial markets drove activity in the US
Treasury market. These included the Chinese government's
intervention in its local stock market, a large drop in the oil
price and the speculation of a Federal Reserve rate rise.
Nevertheless, the revenue benefit was partly offset by the
BrokerTec tariff structure which provides for volume-based tiered
pricing.
Trading activity in the secondary market for European government
bonds has improved from the lows experienced at the end of the
previous calendar year. Increasingly, activity is focused around
new bond issuance as banks continue to hold less inventory and as
the ECB quantitative easing programme has reduced bond
availability.
Structural change in the form of new regulations continues to
impact the US repo market and therefore further adjustments to bank
balance sheet funding will be necessary. In the last quarter of
2015/16, trading activity in the European repo market benefited
from increased volatility, demand for good quality collateral and a
lack of supply from the buy side.
EBS BrokerTec continues to innovate and recently beta launched a
new service, BrokerTec Direct, which provides relationship-based,
disclosed liquidity to the fixed income market. BrokerTec Direct
delivers increased trading opportunities by enabling liquidity
providers to stream tailored prices directly to liquidity consumers
in a disclosed environment. The service initially offers US
Treasury actives and will extend to other fixed income products as
well as other countries in the near future. BrokerTec Direct
initially on-boarded four leading liquidity providers and more than
40 liquidity consumers to the platform. Additional market makers
are in the process of being integrated.
EBS
EBS, an electronic FX platform, is a reliable and trusted source
of executable and genuine liquidity across major and emerging
market currencies. It has responded to changing market dynamics by
transitioning from a business with a single offering to one that
can support multiple execution methods and numerous ways of trading
through a common distribution network.
For the year ended 31 March 2016, revenue decreased by 5% on a
constant currency basis and increased by 2% on a reported basis to
GBP126 million (2014/15: GBP124 million). Despite episodic
volatility in G3 currency pairs and high volatility in emerging
markets, average daily volume decreased by 9% to $90 billion as
higher trading activity following central bank actions in the
previous year was not repeated.
EBS Market, the exchange-like central limit order book, remains
the benchmark for the professional FX trading community, connecting
buyers and sellers of currencies in more than 50 countries. EBS
Market's strategic efforts to gain early traction and create
liquidity in both offshore Chinese renminbi (CNH) and
Non-Deliverable Forwards (NDFs) has proved successful with average
daily volume growing by more than 55% in both instruments compared
with the previous year. As a result dollar/ offshore Chinese
renminbi is now the third most actively traded currency pair on the
platform after euro/ dollar and dollar/ yen.
In February, EBS Market announced that it is redesigning its
premium FX market data service, EBS Live, and will move to
streaming real-time market data. The EBS Live Ultra feed will
provide significantly improved price discovery and transparency.
The new service is in response to demand and consultation with
customers who continue to work with EBS because of its deep
liquidity.
EBS eFix, the matching service that enables customers to execute
Fix interest electronically on the EBS Market platform has
continued to demonstrate significant growth. Average daily volume
has increased by more than 260% over the previous year to more than
$1 billion matched per day.
EBS Direct, which launched in November 2013, is a platform that
allows liquidity providers to stream tailored prices directly to
liquidity consumers. Interest in the platform continues to grow and
the platform has more than 33 liquidity providers and 460 liquidity
consumers using the service, compared with 17 and 268 respectively
last year. Average daily volume on the platform increased to $20
billion in the last quarter of 2015/16 compared to $15 billion in
the same period last year. In December, FX forwards and swaps was
launched in beta, a significant part of the FX market in which EBS
has never previously participated, which delivers the ability to
attract corporates and asset managers onto the platform.
Post Trade Risk and Information
The Post Trade Risk and Information division (PTRI) operates
leading market infrastructures for post trade processing and risk
management across a number of asset classes and enables users of
financial products to reduce operational and system-wide risks. The
services offered by the PTRI division enable customers to increase
the efficiency of trading, clearing and settlement and facilitate
the effective management of capital and associated cost.
The portfolio risk services business comprises Reset and
TriOptima which identify, neutralise, reconcile and remove risk
within portfolios of derivatives transactions; Traiana, which
provides pre trade risk and post trade processing solutions; and
the information and data sales business.
During the year, PTRI invested GBP17 million in development in
order to offer new products and enhance the functionality of
existing services, of which GBP9 million was charged to the income
statement.
In March the PTRI division announced that it had successfully
completed a proof of technology test case for a distributed ledger
using blockchain and smart contract technologies. The proof of
technology demonstrated the potential to re-engineer processes and
significantly transform post trade operations, while complying with
new market practices within the post-crisis regulatory environment.
Going forward, the PTRI division will assess how to realise
technology savings using the blockchain technology while ensuring
compliance with regulations intended to make markets safer and more
efficient.
2016 2015 Change
Revenue GBPm GBPm %
-------------------------------- ----- ----- -------
TriOptima 72 67 7
Traiana 53 53 -
Reset 37 39 (5)
Information Services 83 69 20
-------------------------------- ----- ----- -------
Total - reported 245 228 7
- constant currency 233 5
-------------------------------- ----- ----- -------
Trading operating profit 97 97 -
-------------------------------- ----- ----- -------
Trading operating profit margin 40% 43% (3)ppt
-------------------------------- ----- ----- -------
The table above is presented on a total Group basis and,
therefore, includes continuing and discontinued operations. See
note 2 to the financial statements for a breakdown between
continuing and discontinued operations.
For the year ended 31 March 2016, revenue increased by 5% on a
constant currency basis and increased by 7% on a reported basis to
GBP245 million (2014/15: GBP228 million). The trading operating
profit remained flat at GBP97 million (2014/15: GBP97 million) and
the trading operating profit margin reduced by 3 percentage points
to 40%, primarily driven by continued investment in new
solutions.
TriOptima
TriOptima, through triReduce and triResolve, is a leader in risk
mitigation solutions for OTC derivatives, primarily through the
elimination and reconciliation of outstanding transactions. It
continues to benefit from the strategic alignment of its offerings
with the G20 policy objectives of transparency and risk reduction
in the financial system.
For the year ended 31 March 2016, revenue increased by 14% on a
constant currency basis and by 7% on a reported basis to GBP72
million (2014/15: GBP67 million) driven by increased participation
in triReduce portfolio compression cycles and the uptake of the
portfolio reconciliation service, triResolve.
During the year, triReduce terminated $168 trillion of gross
notional outstanding (2014/15: $150 trillion). The more stringent
leverage ratio included within the Basel III rules continues to
drive demand from banks for the triReduce compression service.
Since launch, more than 210 financial institutions worldwide have
participated in eliminating $768 trillion in total notional
outstanding from the OTC derivatives market. This significant
achievement includes compression across a broad spectrum of
products: cleared and uncleared interest rate products in 27
currencies, credit default swaps, commodity swaps, inflation swaps,
cross currency swaps, and FX forwards. Currently TriOptima delivers
triReduce compression for cleared trades in collaboration with
leading clearing houses including LCH, SGX, Nasdaq and CME.
TriOptima also offers triReduce to CLS members for FX forwards.
In March, triReduce announced that 18 SwapClear members had
compressed 40% of outstanding notional and 49% of outstanding
trades in Polish zloty (PLN) interest rate swaps and forward rate
agreements in the largest PLN triReduce compression cycle that
SwapClear has run to date. The local and international participants
eliminated 2.6 trillion PLN/$654 billion dollars in the
multilateral triReduce cycle. In January, triReduce announced the
first inflation swap compression cycle terminating $98 billion
notional in inflation index swaps for the EU.
Strong demand for triResolve, the reconciliation service,
continues to be driven by both standard portfolio reconciliation,
as required by regulation, and the new repository reconciliation
service to validate reported data. For repository reconciliation
triResolve supports interfaces to trade repositories globally. The
number of institutions using the triResolve service has increased
from 1,380 during 2015/16 to more than 1,680 who participate in
384,000 party-to-party reconciliations each month (2014/15:
330,000).
In July 2015, TriOptima announced the launch of triResolve
Margin, a margin processing solution delivered in collaboration
with AcadiaSoft which will enable customers to easily access an
automated, streamlined tool to reduce fragmented and manual
processing. triResolve Margin assists customers in meeting the
challenges posed by the new regulatory requirements for margining
uncleared OTC derivatives by automating the margin process in a
comprehensive, scalable and cost-effective solution. ICAP increased
its investment in AcadiaSoft, a Euclid investment, in July
2015.
Traiana
Traiana operates the leading market infrastructure for pre and
post trade risk management and post trade processing across
multiple asset classes. Its solutions and the Harmony network have
become the market standard for post trade processing of FX,
exchange traded derivatives, fixed income, CDS and synthetic and
cash equity transactions. Traiana's Harmony network connects more
than 750 global banks, broker/dealers, buy side firms and trading
platforms.
For the year ended 31 March 2016, revenue decreased by 4% on a
constant currency basis and remained flat on a reported basis at
GBP53 million (2014/15: GBP53 million) as the reduction in
FX-related volume-based services was only partly offset by the
increase in other subscription based services.
Traiana continues to innovate, grow and diversify its business
into other asset classes, delivering network based solutions for
all financial market participants, while also continuing to
innovate in FX. In August, Traiana reached a key milestone in the
development of its CreditLink service which was used to check
credit limits for an FX NDF trade on a SEF. In September, in
partnership with Bloomberg, Traiana announced plans to develop
straight-through processing infrastructure to further streamline
the workflow of FX options. The solution integrates Traiana's
Harmony messaging network with Bloomberg's trade processing
tools.
In March, ICAP announced that the PTRI division had made a
series of enhancements that will significantly expand its existing
suite of regulatory services to offer customers an end-to-end menu
of products which meet MiFIR/MiFID II cross-asset reporting and
processing obligations. The enhanced solutions leverage
connectivity and build on functionality delivered by Traiana, for
similar requirements under the Dodd-Frank Act, EMIR and other
global regulatory regimes.
The new service suite includes the provision of trade certainty
for venue executed trades, trade and transaction report submission
to Approved Publication Arrangements and Approved Reporting
Mechanisms respectively and global CCP connectivity for OTC
executed trades.
Reset
Reset is a provider of services that reduce the basis risk
within portfolios from fixings in the interest rate, FX and
inflation derivatives and bond markets. Basis risk results from the
structure of the instruments traded and unintended mismatches of
exposure over time.
For the year ended 31 March 2016, revenue decreased by 12% on a
constant currency basis and by 5% on a reported basis to GBP37
million (2014/15: GBP39 million) as the core business continues to
be affected by low short dated interest rate volatility and further
dampened volatility as a result of the ECB's quantitative easing
programme. The reduction in revenue was partly offset by increased
demand for the Reset service in September, as market commentators
speculated about the timing of an increase in US interest rates.
This was repeated in the run-up to the actual rate rise by the
Federal Reserve in December.
ICAP Information Services
ICAP Information Services (IIS) delivers independent data
solutions to financial market participants. ICAP Indices, the index
arm of IIS, develops and publishes a range of transaction-broked
indices. IIS generates subscription-based fees from a diversified
global suite of products and services, while ICAP Indices' fee
structure is based on assets under management of the products which
are linked to the proprietary indices as well as licensing other
index administrators for the use of ICAP data in their indices.
For the year ended 31 March 2016, revenue increased by 14% on a
constant currency basis and 20% on a reported basis to GBP83
million (2014/15: GBP69 million) partly driven by a change to bill
some customers directly, increasing both revenue, and the related
operating expenses. The IIS product and service range includes
real-time and historical data from the Group's electronic trading
venues, EBS and BrokerTec, and the Global Broking division as well
as from partners.
IIS has continued to both broaden its distribution throughout
global financial markets and develop its product suite based on
client demand and market trends. During the period, IIS extended
the delivery of real-time EBS Data directly to clients and through
new licensed distributors.
Euclid Opportunities
ICAP is building a portfolio of early-stage technology
investments within Euclid Opportunities. It identifies and provides
investment to emerging financial technology firms providing new
platforms, business models and technologies that have the potential
to drive efficiency, transparency and scale across the transaction
life cycle for the financial services industry and are
complementary to Newco's products.
During the period, Euclid Opportunities invested in Abide
Financial, a market-leading regulatory reporting specialist,
Digital Asset Holdings, a provider of distributed ledger technology
and Cloud9, a cloud-based trading communication provider. In
addition, Euclid made a further investment in Duco, a global
provider of data control services and AcadiaSoft, an industry
collaboration to automate collateral management.
In April 2016, ICAP announced it had acquired ENSO Financial
Analytics, a portfolio analytics provider to asset managers and
hedge funds. Euclid made its first investment in ENSO in June 2013,
which was followed by a subsequent investment in October 2014 to
enable further growth of the business. ENSO will become a
subsidiary of ICAP's PTRI division.
Global Broking
Global Broking provides services to wholesale markets across a
wide range of geographies and asset classes. ICAP's brokers
leverage their deep customer relationships, help identify potential
trading interest, access liquidity and facilitate price discovery
in a vast array of financial instruments.
Global Broking's revenue by asset class for the year ended 31
March 2016 is set out below:
2016 2015 Change
Revenue by asset class GBPm GBPm %
---------------------------- ----- ----- -------
Rates 244 254 (4)
Commodities 119 116 3
Emerging markets 112 125 (10)
Equities 109 103 6
FX and money markets 68 73 (7)
Credit 35 39 (10)
Closed desks 7 79 n/a
---------------------------- ----- ----- -------
Total - reported 694 789 (12)
- constant currency 805 (14)
---------------------------- ----- ----- -------
Trading operating profit 46 62 (26)
-------------------------------- ------
Trading operating profit margin 7% 8% (1)ppt
-------------------------------- ------
The table above is presented on a total Group basis and,
therefore, includes continuing and discontinued operations. See
note 2 to the financial statements for a breakdown between
continuing and discontinued operations.
The commentary below excludes the impact of closed desks.
For the year ended 31 March 2016 revenue decreased by 5% on a
constant currency basis and by 3% on a reported basis to GBP687
million. The ongoing combination of structural and cyclical
factors, including historically low and negative interest rates,
low levels of volatility, and bank deleveraging resulting in
reduced risk appetite from bank customers, continue to act as
headwinds for the business. Global economic uncertainties and oil
price reductions have generated spikes in activity but overall
market activity remains subdued.
Investments in e-commerce and Global Broking's hybrid footprint
has driven a 14% increase in matching revenue. During the year,
Global Broking launched Scrapbook, allowing customers to
efficiently manage corporate bond positions and, in March 2016,
launched CrossTrade on TrueQuote, a new portal for buyside
customers after a successful pilot.
Rates
The rates business comprises interest rate derivatives,
government bonds and repos. Rate products contribute the largest
share of Global Broking's revenue (35%) of which interest rate
derivatives represent the most significant component. For the year
ended 31 March 2016, revenue decreased by 4% on a reported
basis.
ICAP's interest rate derivatives franchise remained strong with
i-Swap forming an integral part of the hybrid offering in G3
interest rate swaps. Low interest rates and a reduced risk appetite
from bank customers continued to dampen market activity. Trading
activity in dollar interest rate swaps decreased year-on-year
despite the long awaited increase in the US Federal funds rate in
December which was well anticipated and generated only modest
activity. Revenue from euro interest rate swaps also decreased as
the prior year benefited from the volatility around the
introduction of quantitative easing.
Trading activity in US government bonds increased on the prior
year as global market uncertainty drove a flight to quality
especially in the fourth quarter. Activity in European government
bonds continued to be hampered by a reduction in risk appetite and
bank customers' balance sheet constraints. Global market
uncertainty boosted repo activity in the Americas, a market which
is heavily focused on the short term. The Relative Value business
launched in August 2014 continued to grow and expand its
footprint.
Commodities
The commodities business comprises energy (including refined
products, electricity, natural gas, crude oil, coal and alternative
fuels), environmental markets, forward freight derivatives, metals,
agricultural and soft commodities.
For the year ended 31 March 2016, revenue increased by 3% on a
reported basis. Refined products make up the majority of the oils
business and experienced moderate growth, while the smaller crude
oil business was impacted by reduced hedging activity in addition
to a tough comparable period in 2014/15. Trading activity in iron
ore nearly doubled as extreme volatility broadened the customer
base for hedging instruments in Asia. Growth in trading activity in
freight and US electricity was partly offset by decreased activity
in natural gas, ethanol and coal volumes. UK and European natural
gas was impacted by commission rate pressure from low cost
competitors, while downward price pressure from over supply
continued to hamper the US natural gas market.
After many market participants delayed hedging activity in the
autumn seeking higher winter prices, the second half of the year
saw improved US electricity volumes as necessary hedging could no
longer be deferred. UK and European electricity volumes remained
steady as compared to the prior year.
Emerging markets
ICAP is active in emerging markets across Asia Pacific, Latin
America, central and eastern Europe and Africa. Emerging market
revenue includes domestic activity in local markets and
cross-border activity in globally traded emerging market money and
interest rate products.
For the year ended 31 March 2016, revenue decreased by 10% on a
reported basis.
In addition to low global market volatility, economic and
political concerns dampened trading activity in Latin America and
central Europe. After a strong start to the year, growth in
offshore renminbi related products slowed in the second half
although there was an increase in trading activity in other Asian
products due to uncertainty over the Chinese economy. Matching
sessions continue to boost revenue in NDF's and generate a high
portion of revenue in emerging market credit products.
Equities
The equities business principally comprises equity derivatives.
For the year ended 31 March 2016, revenue increased by 6% on a
reported basis.
Equity market volatility drove revenue growth but extreme
volatility actually led to periods of reduced activity at times.
Summer volatility in the equity markets boosted performance
especially in the Americas, while significant growth in the Hong
Kong equity derivatives marketplace was driven by the volatility in
China. The launch of technology solutions in equity derivatives
continued to improve the market position of the business.
FX and money markets
The FX and money markets business comprises spot, forwards and
cash products. For the year ended 31 March 2016, revenue decreased
by 7% on a reported basis.
Illiquid FX markets driven by the continuation of the low
interest rate environment and a low risk appetite negatively
impacted trading activity. Asia Pacific benefited from a
restructuring of its FX presence in Singapore and Australia. Cash
trading in the Americas remains strong driven by its positioning as
the short-term funding tool of choice in the market.
Credit
The credit business comprises corporate bonds.
For the year ended 31 March 2016, revenue decreased by 10% on a
reported basis. Inventory shift from banks to buy-side, driven by
balance sheet constraints, remains a headwind for the business.
Activity in high yield instruments was stronger than investment
grade bonds as investors sought greater returns.
In response to a lack of liquidity in the corporate bond market,
Global Broking launched Scrapbook and expects to launch I-Sam
(ICAP's sponsored access for corporate bonds initiative) in the
first quarter of 2016/17. Scrapbook allows traders to efficiently
manage corporate bond positions which are available via Global
Broking's e-commerce portal.
Financial review
In November 2015, we announced that we had entered into a
Transaction which will, when completed, involve the disposal of our
global hybrid voice broking and information business, including our
associated technology and broking platforms (including i-Swap and
Fusion), certain of our joint ventures and our associates (IGBB),
to Tullett Prebon. For the year ended 31 March 2016, the Group's
performance is therefore reported in the Group consolidated income
statement separately for continuing and discontinued operations
(net of tax). Discontinued operations consist of financials
attributable to IGBB, adjusted for certain provisions in the SPA.
The table below provides a breakdown of the Group's performance for
the year.
Year ended 31 Year ended 31
March 2016 March 2015
========================= ================================ =================================
Continuing Discontinued Group Continuing Discontinued Group
GBPm GBPm GBPm GBPm GBPm GBPm
Trading operating
profit 139 82 221 154 98 252
Net finance costs (29) 4 (25) (32) 1 (31)
Share of profit of
joint ventures after
tax 1 3 4 (1) 5 4
Share of profit of
associates after tax (1) 4 3 1 3 4
Trading profit before
tax 110 93 203 122 107 229
Tax (23) (20) (43) (26) (18) (44)
Trading profit for
the year 87 73 160 96 89 185
Acquisition and disposal
costs, net of tax (58) - (58) (41) (3) (44)
Exceptional items,
net of tax (7) (27) (34) (15) (42) (57)
Profit for the year 22 46 68 40 44 84
Trading EPS (basic) 24.6p 28.7p
Full year dividend
per share 22.0p 22.0p
========================= ========== ============ ====== =========== ============ ======
Discontinued profit after tax is presented on one line in the
consolidated income statement. A separate discontinued income
statement is presented in note 4.
The Group's GBP221 million trading operating profit (2014/15 -
GBP252 million) converted to a trading profit before tax of GBP203
million (2014/15 - GBP229 million) after deducting net finance
costs of GBP25 million (2014/15 - GBP31 million) and recording a
share of profit of joint ventures and associates after tax of GBP7
million (2014/15 - GBP8 million).
Trading net finance costs were GBP25 million for the year, GBP6
million lower than the prior year primarily reflecting the higher
cost of the EUR300 million eurobond (settled in July 2014) and the
double running of bonds in the prior year.
Trading profit before tax of GBP203 million includes GBP110
million from continuing operations (2014/15 - GBP122 million) and
GBP93 million from discontinued operations (2014/15 - GBP107
million). The continuing income statement is not reflective of the
financials of Newco going forward. The Group expects to receive
dividend income for its investment in TP ICAP.
The GBP26 million decrease in trading profit before tax includes
an GBP11 million year-on-year adverse movement from FX losses.
Excluding the FX loss, trading profit before tax was down 7% on the
prior year. Trading profit before tax was adversely affected by
increased investment in the development of new products and
solutions across the business, which offset the synergies realised
in the year from the prior year cost savings programme.
Tax on trading profit
The Group's tax charge of GBP43 million on trading profit before
tax represents an ETR of 21% (2014/15 - 19%). The ETR primarily
reflects the various statutory tax rates applied to taxable profits
in territories in which the Group operates.
The trading ETR is 2 percentage points higher than the prior
year primarily driven by certain one-off adjustments in the prior
year.
The Group manages its tax affairs in accordance with its tax
strategy. The tax strategy was presented to the Audit Committee
during the year.
Acquisition and disposal costs
Acquisition and disposal costs in the year were GBP74 million
(2014/15 - GBP59 million) before a tax credit of GBP16 million
(2014/15 - GBP15 million).
The continuing acquisition and disposal costs of GBP74 million
include GBP25 million of impairment charges relating to our
investments in certain non-core associates (2014/15 - GBPnil),
GBP38 million of amortisation charges on acquired intangibles
(2014/15 - GBP55 million), and a GBP9 million write down on
reclassification of the shipping business to held for sale. During
the year the Group undertook a review of the recoverability of its
investments in non-core associates, in particular those that are
associated with the voice broking business but will be retained by
Newco. The review resulted in GBP25 million of impairment charges
relating to the Group's investment in Howe Robinson Partners Pte
Ltd, BSN Holdings Limited and Capital Shipbrokers Limited.
Other intangibles attributable to TriOptima were fully amortised
in the prior year which explains the GBP17 million decrease in
amortisation charges in the year.
Exceptional items
The Group discloses separately items that are non-recurring and
material in terms of both size and nature. This allows appropriate
visibility of these items and reflects how information is reviewed
by management. It allows focus on the Group's trading performance,
as well as due attention specifically on the exceptional items.
For the year to March 2016 exceptional items were GBP40 million
(2014/15 - GBP75 million) before a tax credit of GBP6 million
(2014/15 - GBP18 million). This includes GBP9 million relating to
continuing operations (2014/15 - GBP16 million) and GBP31 million
relating to discontinued operations (2014/15 - GBP59 million).
The discontinued exceptional costs represent Transaction-related
costs including costs of sale and separation costs that were
incurred and provided at 31 March 2016. The provision at 31 March
2016 does not include those Transaction-related costs which do not
meet the provision recognition criteria. The GBP9 million
continuing exceptional costs relate to exiting non-core businesses
within Electronic Markets and are therefore presented in the
continuing income statement.
The prior year costs principally related to the prior year
restructuring programme of GBP60 million and the remaining GBP15
million related to regulatory matters including an GBP11 million
provision relating to a EUR14.9 million (GBP10.9 million) fine
imposed by the European Commission for alleged competition
violations in relation to yen Libor.
Trading EPS and dividend
Trading EPS (basic) is calculated based on the trading profit
for the year.
Management believes that trading EPS (basic) is the most
appropriate EPS measurement ratio for the Group as this most
closely reflects the ongoing generation of cash attributable to
shareholders and in turn the Group's ability to fund sustainable
dividends. In line with this the Remuneration Committee considers
trading EPS (basic) in its review of management performance and
uses that metric in the remuneration of the executive directors. A
reconciliation between trading EPS (basic) and EPS (basic) is
presented in note 5 to the financial statements.
The Group reported a trading EPS of 24.60p per share, a decrease
of 14% on the prior year driven by a combination of a decrease in
the trading profit before tax and the increase in the ETR.
The directors recommend a nal dividend of 15.40p per share. If
approved, the nal dividend will be paid on 22 July 2016 to
shareholders on the register at the close of business on 1 July
2016. The shares will be quoted ex-dividend from 30 June 2016.
The full-year dividend will be 22.00p (2014/15 - 22.00p)
including the payment of the 6.60p interim dividend on 5 February
2016. The full-year dividend per share is covered 1.1 times
(2014/15 - 1.3 times) by trading EPS of 24.60p.
Free cash flow
The Groups' free cash flow conversion for the year was 96%
(2014/15 - 121%) of the Group's trading profit. Cash generated from
operating activities before exceptional items of GBP273 million was
GBP69 million lower than the prior year. The decrease was driven by
a combination of a lower trading EBITDA and adverse year-on-year
working capital movements.
Year ended
Year ended 31 March
Free cash flow 31 March 2015
2016 GBPm
GBPm (re-presented)*
================================= ============ ================
Cash generated from operating
activities** 273 342
Interest and tax (57) (66)
================================= ============ ================
Cash ow from trading activities 216 276
Capital expenditure (71) (57)
Dividends from associates, joint
ventures and investments 9 6
================================= ============ ================
Trading free cash flow 154 225
--------------------------------- ------------ ----------------
Free cash flow conversion (%) 96% 121%
--------------------------------- ------------ ----------------
* Before exceptional items
** Re-presented to exclude effects of short-term timing
differences arising from unsettled matched principal trades at 31
March 2016
Application of free cash flow
Cash flow from trading activities of GBP216 million (2014/15 -
GBP276 million) was used to pay GBP141 million in dividends to
shareholders as the Group continues to maintain strong dividend
payments.
Capital expenditure of GBP71 million includes GBP66 million of
investment in technology assets. Additionally, GBP93 million of
cash spend on technology during the year was directly charged to
the income statement. ICAP's market leading position has been
achieved and maintained through substantial investment over many
years in technology and market user infrastructure. ICAP is
committed to maintaining a high level of investment in technology
assets, especially in growth areas in Electronic Markets and Post
Trade Risk and Information, over the coming years as ICAP continues
its drive to improve and widen our product offerings to our
customers.
Balance sheet highlights
The Group's net assets as at 31 March 2016 were GBP1,018 million
(2014/15 - GBP1,018 million). The retained deficit in the year of
GBP73 million (net of GBP141 million dividends) was offset by GBP61
million of gains arising from favourable FX movements and GBP12
million of other favourable movements in reserves.
As at 31 March As at
2016 31 March
2015
-------------------------- ------------------------ ---------
Continuing Held Group Group
GBPm for GBPm GBPm
sale
GBPm
-------------------------- ---------- ----- ----- ---------
Net assets
-------------------------- ---------- ----- ----- ---------
Intangible assets arising
on consolidation 826 83 909 930
-------------------------- ---------- ----- ----- ---------
Cash and cash equivalents 157 359 516 481
-------------------------- ---------- ----- ----- ---------
Borrowings (583) (81) (664) (549)
-------------------------- ---------- ----- ----- ---------
Restricted funds 26 33 59 43
-------------------------- ---------- ----- ----- ---------
Other net assets 60 138 198 113
-------------------------- ---------- ----- ----- ---------
Total net assets 486 532 1,018 1,018
-------------------------- ---------- ----- ----- ---------
The assets and liabilities attributable to IGBB are presented as
held for sale assets and liabilities on the face of the
consolidated balance sheet which net to GBP532 million.
The Group's financial position is presented separately for the
IGBB business from the retained Group in the consolidated balance
sheet. Assets and liabilities attributable to IGBB, subject to
certain provisions in the SPA, are disclosed on the balance sheet
in two separate line items - held for sale assets and held for sale
liabilities. The continuing balance sheet is not reflective of the
balance sheet of the retained Group going forward.
On completion, the Group will receive GBP330 million of cash
from the enlarged Tullett Prebon and will recognise an
available-for-sale investment equal to the fair value of its stake
in the enlarged Tullett Prebon.
The significant balance sheet line items, including intangible
assets arising on consolidation, trade receivables and payables,
cash and cash equivalents and borrowings are discussed below,
together with regulatory capital.
Intangible assets arising on consolidation
The continuing Group's goodwill and other intangible assets
arising from consolidation as at 31 March 2016 were GBP826 million
(2014/15 - GBP930 million). During the year, GBP92 million of
goodwill primarily attributable to IGBB was transferred to held for
sale. Other intangible assets were amortised by GBP38 million
(2014/15 - GBP55 million) during the year.
The board reviewed the Group's goodwill and other intangible
assets arising on consolidation for impairment as at 31 March 2016
and concluded that there was no impairment at that date.
The review was based on certain estimates and assumptions,
including future cash flow projections and discount rates. The
Audit Committee challenged management's judgements and estimates
and has approved the appropriateness of management assumptions.
Trade receivables and payables
The increase in trade receivables and payables is principally
due to a change in clearing arrangements for certain US Treasuries
within BrokerTec. This resulted in an increase in matched principal
receivables and payables.
As at As at
31 March 31 March
2016 2016
GBPm GBPm
-------------------------- --------- ---------
Receivables
-------------------------- --------- ---------
Continuing 59,322 -
-------------------------- --------- ---------
Held for sale assets 20,788 23,351
-------------------------- --------- ---------
80,110 23,351
-------------------------- --------- ---------
Payables
-------------------------- --------- ---------
Continuing (59,322) -
-------------------------- --------- ---------
Held for sale liabilities (20,738) (23,307)
-------------------------- --------- ---------
(80,060) (23,307)
-------------------------- --------- ---------
Net 50 44
-------------------------- --------- ---------
Liquidity and funding
The Group's overall funding position at 31 March 2016 remains
strong.
The gross debt position, including that of IGBB, increased by
GBP115 million to GBP664 million as at 31 March 2016. This position
includes overdrafts of GBP83 million (2014/15 - GBP33 million), net
of fees. The increase relates to the GBP110 million drawdown of the
revolving credit facility (less fees of GBP2 million), the Japanese
yen loan of GBP62 million, a GBP25 million adverse impact of FX and
the GBP50 million increase in overdrafts driven by short-term
timing differences arising as a result of unsettled matched
principal trades as at 31 March 2016, which subsequently reversed
within a few days. The adverse movement was partially offset by a
GBP130 million repayment of the guaranteed subordinated loan notes
in June 2015. As at 31 March 2016, the Group had committed undrawn
headroom under its core credit facilities of GBP315 million
(2014/15 - GBP425 million). The Group agreed an extension of the
maturity date on its revolving credit facility to March 2018.
In November 2015, following the announcement of the Transaction
with Tullett Prebon, Moody's changed its outlook for the Group from
negative to stable while its rating remained as Baa3. Fitch
maintained their rating of BBB (stable) throughout the year.
Net debt
Net debt, including that of IGBB, increased by GBP80 million in
the year to GBP148 million as at 31 March 2016. The increase in net
debt was principally driven by GBP40 million short-term timing
differences arising from unsettled matched principal trades which
reversed subsequently within a few days. The remainder was a result
of a combination of factors including GBP17 million of further
investments in new businesses in the PTRI division and a GBP29
million payment in relation to one-off Transaction-related costs
and payout in relation to last year's global broking restructuring
programme.
Regulatory capital
ICAP operates its business under an investment firm waiver,
which currently runs until December 2017. The waiver modifies the
basis on which regulatory capital is assessed and, at 31 March
2016, ICAP had GBP0.8 billion (2014/15 - GBP0.7 billion) of
headroom on this basis. The effect of the waiver is to exclude
goodwill and other intangibles from the assessment and, in doing
so, allows the Group to undertake acquisitions using debt rather
than equity finance. In the event that the waiver was not renewed,
applying a consolidated approach would increase the regulatory
capital requirement by approximately GBP0.5 billion which, in line
with recent precedent, would most likely be met through retained
profit over time.
Following the disposal of IGBB, it is expected that the retained
Group will not be subject to consolidated regulatory capital
requirements.
ICAP operates 43 regulated subsidiaries globally. Each is
locally capitalised and regulated. Together these entities hold
GBP494 million of cash (including restricted funds) of which GBP348
million (2014/15 - GBP357 million) is held by the Global Broking
businesses. Electronic Markets and Post Trade Risk and Information
hold GBP126 million (2014/15 - GBP55 million) and GBP20 million
(2014/15 - GBP18 million) respectively.
Financial statements
Consolidated income statement
Year ended 31 March 2016
Acquisition
and Exceptional
Trading disposal items Total
Note GBPm costs GBPm GBPm
GBPm
------------------------------- ------- ---------- -------------- -------------- --------
Revenue 1 460 - - 460
------------------------------- ------- ---------- -------------- -------------- --------
Operating expenses 2 (321) (75) (9) (405)
------------------------------- ------- ---------- -------------- -------------- --------
Other income - - - -
------------------------------- ------- ---------- -------------- -------------- --------
Operating profit 1 139 (75) (9) 55
------------------------------- ------- ---------- -------------- -------------- --------
Finance income 1 1 - 2
------------------------------- ------- ---------- -------------- -------------- --------
Finance costs (30) - - (30)
------------------------------- ------- ---------- -------------- -------------- --------
Share of profit of joint
ventures after tax 1 - - 1
------------------------------- ------- ---------- -------------- -------------- --------
Share of profit of associates
after tax (1) - - (1)
------------------------------- ------- ---------- -------------- -------------- --------
Profit before tax from
continuing operations 110 (74) (9) 27
------------------------------- ------- ---------- -------------- -------------- --------
Tax 7 (23) 16 2 (5)
------------------------------- ------- ---------- -------------- -------------- --------
Profit for the year
from continuing operations 87 (58) (7) 22
------------------------------- ------- ---------- -------------- -------------- --------
Profit for the year
from discontinued operations 4 73 - (27) 46
------------------------------- ------- ---------- -------------- -------------- --------
Profit for the year 160 (58) (34) 68
------------------------------- ------- ---------- -------------- -------------- --------
Attributable to:
------------------------------- ------- ---------- -------------- -------------- --------
Owners of the Company 163 (58) (34) 71
------------------------------- ------- ---------- -------------- -------------- --------
Non-controlling interests (3) - - (3)
------------------------------- ------- ---------- -------------- -------------- --------
160 (58) (34) 68
------------------------------- ------- ---------- -------------- -------------- --------
Earnings per ordinary
share (pence)
------------------------------- ------- ---------- -------------- -------------- --------
- basic 5 24.6 10.5
------------------------------- ------- ---------- -------------- -------------- --------
- diluted 5 24.2 10.3
------------------------------- ------- ---------- -------------- -------------- --------
Year ended 31 March 2015
(restated)
Acquisition
and Exceptional
Trading disposal items Total
Note GBPm costs GBPm GBPm
GBPm
------------------------------- ------- ---------- -------------- -------------- --------
Revenue 1 468 - - 468
------------------------------- ------- ---------- -------------- -------------- --------
Operating expenses 2 (313) (58) (16) (387)
------------------------------- ------- ---------- -------------- -------------- --------
Other income (1) - - (1)
------------------------------- ------- ---------- -------------- -------------- --------
Operating profit 1 154 (58) (16) 80
------------------------------- ------- ---------- -------------- -------------- --------
Finance income 2 (1) - 1
------------------------------- ------- ---------- -------------- -------------- --------
Finance costs (34) - - (34)
------------------------------- ------- ---------- -------------- -------------- --------
Share of profit of joint
ventures after tax 1 - - 1
------------------------------- ------- ---------- -------------- -------------- --------
Share of profit of associates
after tax (1) - - (1)
------------------------------- ------- ---------- -------------- -------------- --------
Profit before tax from
continuing operations 122 (59) (16) 47
------------------------------- ------- ---------- -------------- -------------- --------
Tax 7 (26) 18 1 (7)
------------------------------- ------- ---------- -------------- -------------- --------
Profit for the year
from continuing operations 96 (41) (15) 40
------------------------------- ------- ---------- -------------- -------------- --------
Profit for the year
from discontinued operations 4 89 (3) (42) 44
------------------------------- ------- ---------- -------------- -------------- --------
Profit for the year 185 (44) (57) 84
------------------------------- ------- ---------- -------------- -------------- --------
Attributable to:
------------------------------- ------- ---------- -------------- -------------- --------
Owners of the Company 185 (44) (57) 84
------------------------------- ------- ---------- -------------- -------------- --------
Non-controlling interests - - - -
------------------------------- ------- ---------- -------------- -------------- --------
185 (44) (57) 84
------------------------------- ------- ---------- -------------- -------------- --------
Earnings per ordinary
share (pence)
------------------------------- ------- ---------- -------------- -------------- --------
- basic 5 28.7 13.0
------------------------------- ------- ---------- -------------- -------------- --------
- diluted 5 28.1 12.8
------------------------------- ------- ---------- -------------- -------------- --------
Financial statements
Consolidated statement of comprehensive income
Year Year
ended ended
31 31
March March
2016 2015
GBPm GBPm(restated)
--------------------------------------- -------- ----------------
Profit for the year 68 84
---------------------------------------- -------- ----------------
Other comprehensive income/(expense)
from continuing operations
--------------------------------------- -------- ----------------
Items that will be reclassified
subsequently to profit or loss
when specific conditions are met:
--------------------------------------- -------- ----------------
Revaluation gain in the year 1 1
---------------------------------------- -------- ----------------
Cash flow hedges
--------------------------------------- -------- ----------------
- fair value (losses)/gains (20) (37)
---------------------------------------- -------- ----------------
- fair value gains transferred
to income statement 17 29
---------------------------------------- -------- ----------------
(3) (8)
--------------------------------------- -------- ----------------
Exchange differences 44 66
---------------------------------------- -------- ----------------
Deferred tax recognised in other 1 -
comprehensive income
--------------------------------------- -------- ----------------
Other comprehensive income/(expense)
for the year, net of tax, from
continuing operations 43 59
---------------------------------------- -------- ----------------
Other comprehensive income/ (expense)
for the year, net of tax, from
discontinued operations 19 25
---------------------------------------- -------- ----------------
Total comprehensive income/(expense)
for the year 130 168
---------------------------------------- -------- ----------------
Total comprehensive income/(expense)
attributable to:
--------------------------------------- -------- ----------------
Owners of the Company 131 164
---------------------------------------- -------- ----------------
Non-controlling interests (1) 4
---------------------------------------- -------- ----------------
130 168
--------------------------------------- -------- ----------------
Financial statements
Consolidated and Company balance sheet
Group Company
------------------------------- ------- -------------------- ------------------
As As As As
at at at at
31 31 31 31
Note March March March March
2016 2015 2016 2015
GBPm GBPm GBPm GBPm
------------------------------- ------- --------- --------- -------- --------
Assets
------------------------------- ------- --------- --------- -------- --------
Non-current assets
------------------------------- ------- --------- --------- -------- --------
Intangible assets arising
on consolidation 826 930 - -
------------------------------- ------- --------- --------- -------- --------
Intangible assets arising
from development expenditure 88 108 - -
------------------------------- ------- --------- --------- -------- --------
Property and equipment 30 40 - -
------------------------------- ------- --------- --------- -------- --------
Investment in subsidiaries - - 2,315 2,036
------------------------------- ------- --------- --------- -------- --------
Investment in joint
ventures 6 13 - -
------------------------------- ------- --------- --------- -------- --------
Investment in associates 52 68 1 1
------------------------------- ------- --------- --------- -------- --------
Deferred tax assets 13 6 - -
------------------------------- ------- --------- --------- -------- --------
Trade and other receivables 9 5 124 124
------------------------------- ------- --------- --------- -------- --------
Available-for-sale
investments 9 17 - -
------------------------------- ------- --------- --------- -------- --------
1,033 1,187 2,440 2,161
------------------------------- ------- --------- --------- -------- --------
Current assets
------------------------------- ------- --------- --------- -------- --------
Trade and other receivables 59,461 24,411 34 97
------------------------------- ------- --------- --------- -------- --------
Cash and cash equivalents 8 157 481 - -
------------------------------- ------- --------- --------- -------- --------
Restricted funds 8 26 43 - -
------------------------------- ------- --------- --------- -------- --------
Tax receivable - - 1 -
------------------------------- ------- --------- --------- -------- --------
Held for sale assets 4 21,393 21 - -
------------------------------- ------- --------- --------- -------- --------
81,037 24,956 35 97
------------------------------- ------- --------- --------- -------- --------
Total assets 82,070 26,143 2,475 2,258
------------------------------- ------- --------- --------- -------- --------
Liabilities
------------------------------- ------- --------- --------- -------- --------
Current liabilities
------------------------------- ------- --------- --------- -------- --------
Trade and other payables (59,464) (24,378) (510) (279)
------------------------------- ------- --------- --------- -------- --------
Borrowings (64) (163) - -
------------------------------- ------- --------- --------- -------- --------
Tax payable (41) (39) - -
------------------------------- ------- --------- --------- -------- --------
Provisions (8) (20) - -
------------------------------- ------- --------- --------- -------- --------
Held for sale liabilities 4 (20,861) (4) - -
------------------------------- ------- --------- --------- -------- --------
(80,438) (24,604) (510) (279)
------------------------------- ------- --------- --------- -------- --------
Non-current liabilities
------------------------------- ------- --------- --------- -------- --------
Trade and other payables (12) (37) - -
------------------------------- ------- --------- --------- -------- --------
Borrowings (519) (386) (135) (134)
------------------------------- ------- --------- --------- -------- --------
Deferred tax liabilities 7 (67) (73) - -
------------------------------- ------- --------- --------- -------- --------
Retirement benefit
obligations (3) (6) - -
------------------------------- ------- --------- --------- -------- --------
Provisions (13) (19) - -
------------------------------- ------- --------- --------- -------- --------
(614) (521) (135) (134)
------------------------------- ------- --------- --------- -------- --------
Total liabilities (81,052) (25,125) (645) (413)
------------------------------- ------- --------- --------- -------- --------
Net assets 1,018 1,018 1,830 1,845
------------------------------- ------- --------- --------- -------- --------
Equity
------------------------------- ------- --------- --------- -------- --------
Capital and reserves
------------------------------- ------- --------- --------- -------- --------
Called up share capital 66 66 66 66
------------------------------- ------- --------- --------- -------- --------
Share premium account 454 454 454 454
------------------------------- ------- --------- --------- -------- --------
Other reserves 77 79 1 1
------------------------------- ------- --------- --------- -------- --------
Translation 104 43 - -
------------------------------- ------- --------- --------- -------- --------
Retained earnings 276 330 1,309 1,324
------------------------------- ------- --------- --------- -------- --------
Equity attributable
to owners of the Company 977 972 1,830 1,845
------------------------------- ------- --------- --------- -------- --------
Non-controlling interests 41 46 - -
------------------------------- ------- --------- --------- -------- --------
Total equity 1018 1,018 1,830 1,845
------------------------------- ------- --------- --------- -------- --------
The financial statements were approved by the board on 16 May
2016 and signed on its behalf by:
Stuart Bridges
Group Finance Director
Financial statements
Consolidated statement of changes in equity
Attributable
to owners
Year ended Share Share Other Retained of the Non-controlling
31 March capital premium reserves Translation earnings Company interests Total
2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ============= ======= ======== =========== ======== ============ =============== =====
Balance at
1 April 2015 66 454 79 43 330 972 46 1,018
================= ============= ======= ======== =========== ======== ============ =============== =====
Profit for
the year - - - - 71 71 (3) 68
================= ============= ======= ======== =========== ======== ============ =============== =====
Other
comprehensive
income/(expense)
================= ============= ======= ======== =========== ======== ============ =============== =====
Cash flow
hedges - - (3) - - (3) - (3)
================= ============= ======= ======== =========== ======== ============ =============== =====
Exchange
differences - - - 61 - 61 2 63
================= ============= ======= ======== =========== ======== ============ =============== =====
Revaluation
gains realised
in the year - - 1 - - 1 - 1
================= ============= ======= ======== =========== ======== ============ =============== =====
Income tax - - - - 1 1 - 1
================= ============= ======= ======== =========== ======== ============ =============== =====
Total
comprehensive
income/(expense)
for the
year - - (2) 61 72 131 (1) 130
================= ============= ======= ======== =========== ======== ============ =============== =====
Treasury
Shares awarded - - - - 3 3 - 3
================= ============= ======= ======== =========== ======== ============ =============== =====
Other movements
in
non-controlling
interests - - - 4 4 (2) 2
================= ============= ======= ======== =========== ======== ============ =============== =====
Share-based
payments
in the year - - - - 8 8 - 8
================= ============= ======= ======== =========== ======== ============ =============== =====
Dividends
paid
in the year - - - - (141) (141) (2) (143)
================= ============= ======= ======== =========== ======== ============ =============== =====
Balance at
31 March
2016 66 454 77 104 276 977 41 1,018
================= ============= ======= ======== =========== ======== ============ =============== =====
Attributable
to owners
Year ended Share Share Other Retained of the Non-controlling
31 March capital premium reserves Translation earnings Company interests Total
2015 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======= ======= ======== =========== ======== ============ =============== =====
Balance at
1 April 2014 66 454 86 (44) 379 941 42 983
================= ======= ======= ======== =========== ======== ============ =============== =====
Profit for
the year - - - - 84 84 - 84
================= ======= ======= ======== =========== ======== ============ =============== =====
Other
comprehensive
income/(expense)
================= ======= ======= ======== =========== ======== ============ =============== =====
Cash flow
hedges - - (8) - - (8) - (8)
================= ======= ======= ======== =========== ======== ============ =============== =====
Exchange
differences - - - 87 - 87 4 91
================= ======= ======= ======== =========== ======== ============ =============== =====
Revaluation
gains realised
in the year - - 1 - - 1 - 1
================= ======= ======= ======== =========== ======== ============ =============== =====
Total
comprehensive
income/(expense)
for the
year - - (7) 87 84 164 4 168
================= ======= ======= ======== =========== ======== ============ =============== =====
Treasury
Shares awarded - - - - 1 1 - 1
================= ======= ======= ======== =========== ======== ============ =============== =====
Share-based
payments
in the year - - - - 7 7 - 7
================= ======= ======= ======== =========== ======== ============ =============== =====
Dividends
paid
in the year - - - - (141) (141) - (141)
================= ======= ======= ======== =========== ======== ============ =============== =====
Balance at
31 March
2015 66 454 79 43 330 972 46 1,018
================= ======= ======= ======== =========== ======== ============ =============== =====
Financial statements
Company statement of changes in equity
Share Capital
Share premium redemption Retained
capital account reserve earnings Total
Year ended 31 March 2016 GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- ----------- --------- -----
Balance as at 1 April 2015 66 454 1 1,324 1,845
---------------------------- -------- -------- ----------- --------- -----
Profit for the year - - - 123 123
---------------------------- -------- -------- ----------- --------- -----
Total comprehensive income
for the year - - - 123 123
---------------------------- -------- -------- ----------- --------- -----
Dividends paid in the year - - - (141) (141)
---------------------------- -------- -------- ----------- --------- -----
Treasury shares awarded - - - 3 3
---------------------------- -------- -------- ----------- --------- -----
Balance as at 31 March 2016 66 454 1 1,309 1,830
---------------------------- -------- -------- ----------- --------- -----
Share Capital
Share premium redemption Retained
capital account reserve earnings Total
Year ended 31 March 2015 GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- ----------- --------- -----
Balance as at 1 April 2014 66 454 1 1,213 1,734
---------------------------- -------- -------- ----------- --------- -----
Profit for the year - - - 251 251
---------------------------- -------- -------- ----------- --------- -----
Total comprehensive income
for the year - - - 251 251
---------------------------- -------- -------- ----------- --------- -----
Dividends paid in the year - - - (141) (141)
---------------------------- -------- -------- ----------- --------- -----
Treasury shares awarded - - - 1 1
---------------------------- -------- -------- ----------- --------- -----
Balance as at 31 March 2015 66 454 1 1,324 1,845
---------------------------- -------- -------- ----------- --------- -----
Financial statements
Consolidated and Company statement of cash flow
Group Company
----------------------------------- ------------------------- ------------------------------
Year
Year ended Year Year
ended 31 ended ended
31 March 31 31
March 2015 March March
2016 GBPm 2016 2015
GBPm (restated) GBPm GBPm
----------------------------------- ------------ ----------- -------------- --------------
Cash flows from operating
activities 147 199 13 -
------------------------------------ ------------ ----------- -------------- --------------
Cash flows from investing
activities
----------------------------------- ------------ ----------- -------------- --------------
Dividends received from
subsidiaries - - 128 141
------------------------------------ ------------ ----------- -------------- --------------
Dividends received from
associates 6 4 - -
------------------------------------ ------------ ----------- -------------- --------------
Dividends received from
joint ventures 2 1 - -
------------------------------------ ------------ ----------- -------------- --------------
Other equity dividends
received 1 - - -
------------------------------------ ------------ ----------- -------------- --------------
Payments to acquire property
and equipment (17) (9) - -
------------------------------------ ------------ ----------- -------------- --------------
Intangible development
expenditure (54) (48) - -
------------------------------------ ------------ ----------- -------------- --------------
Proceeds from disposal
of available-for-sale investments 1 - - -
------------------------------------ ------------ ----------- -------------- --------------
Acquisition of available-for-sale
investments (5) - - -
------------------------------------ ------------ ----------- -------------- --------------
Acquisition of interests
in subsidiaries - (1) - -
------------------------------------ ------------ ----------- -------------- --------------
Proceeds from disposal
of subsidiaries - 1 - -
------------------------------------ ------------ ----------- -------------- --------------
Acquisition of associates
and joint ventures (17) - - -
------------------------------------ ------------ ----------- -------------- --------------
Net cash flows from investing
activities (83) (52) 128 141
------------------------------------ ------------ ----------- -------------- --------------
Cash flows from financing
activities
----------------------------------- ------------ ----------- -------------- --------------
Dividends paid to non-controlling
interest (2) - - -
------------------------------------ ------------ ----------- -------------- --------------
Proceeds from exercise
of share options 3 - - -
------------------------------------ ------------ ----------- -------------- --------------
Dividends paid to owners
of the Company (141) (141) (141) (141)
------------------------------------ ------------ ----------- -------------- --------------
Repayment of borrowings (126) (259) - -
------------------------------------ ------------ ----------- -------------- --------------
Funds received from borrowing,
net of fees 171 - - -
------------------------------------ ------------ ----------- -------------- --------------
Receipts from subsidiaries - - - -
----------------------------------- ------------ ----------- -------------- --------------
Payments to subsidiaries - - - -
----------------------------------- ------------ ----------- -------------- --------------
Net cash flows from financing
activities (95) (400) (141) (141)
------------------------------------ ------------ ----------- -------------- --------------
Net decrease in cash and
cash equivalents (31) (253) - -
------------------------------------ ------------ ----------- -------------- --------------
Net cash and cash equivalents
at beginning of the year 448 697 - -
------------------------------------ ------------ ----------- -------------- --------------
FX adjustments 16 4 - -
------------------------------------ ------------ ----------- -------------- --------------
Net cash and cash equivalents
at end of the year* 433 448 - -
------------------------------------ ------------ ----------- -------------- --------------
*Net of GBP83m overdraft as at 31 March 2016 (2014/15 -
GBP33m).
Cash flows of discontinued operations
Cash inflows from operating activities of GBP23m, cash outflows
from investing activities of GBP15m and cash outflows from
financing activities of GBP2m were incurred in the year relating to
the discontinued business.
Basis of preparation
Preparation of financial statements
The consolidated financial statements of the Group and the
separate financial statements of ICAP plc have been prepared in
accordance with IFRSs, as issued by the IASB and the
interpretations issued by the IFRS Interpretations Committee
(IFRIC) and their predecessor bodies, and as endorsed by the EU and
the Companies Act 2006 applicable to companies reporting under
IFRS. In publishing the parent Company financial statements here
together with the Group financial statements, ICAP plc has taken
advantage of the exemption in section 408(3) of the Companies Act
2006 not to present its individual income statement, individual
statement of comprehensive income and related notes that form a
part of these financial statements. The financial statements are
prepared in pounds sterling, which is the functional currency of
the Company and presented in millions. ICAP plc is incorporated and
domiciled in the UK.
The significant accounting policies adopted by the Group and the
Company are included within the notes to which they relate.
The preparation of financial statements requires management to
apply judgements and the use of estimates and assumptions about
future conditions. Management considers impairment of goodwill and
other intangible assets arising on consolidation, investment in
joint ventures and associates, contingent liabilities (note 9), and
the presentation of exceptional items (note 3) to be the areas
where increased judgement is required. Further information about
key assumptions concerning the future, and other key sources of
estimation uncertainty, are set out in the relevant notes to the
financial statements. Estimates and assumptions are continuously
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Due to the inherent uncertainty
in making estimates, actual results reported in future periods may
be based on amounts which differ from those estimates. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
In November 2015, the Group announced that it had entered into a
Transaction which will, when completed, involve the disposal of its
global hybrid voice broking and information business, including the
associated technology and broking platforms (including i-Swap and
Fusion), and certain joint ventures and associates (IGBB), to
Tullett Prebon. The disposal is subject to approvals from
regulatory authorities across jurisdictions. The Group is committed
to a plan to sell having signed the SPA with Tullett Prebon and it
is anticipated that the required regulatory approvals will be
obtained and the transaction will complete in 2016.
The IGBB business disposal meets the criteria of IFRS5 for held
for sale classification. The criteria for held for sale are met as
the business is available for sale in its present condition and the
sale is highly probable.
The results of the IGBB business, subject to certain provisions
in the SPA, are presented as discontinued operations in the
consolidated income statement as the sale is a single co-ordinated
plan to dispose of a separate major line of business. The assets
and liabilities attributable to IGBB, also subject to certain
provisions in the SPA, are presented as held for sale assets and
liabilities on the face of the balance sheet.
Presentation of the income statement
The Group maintains a columnar format for the presentation of
its consolidated income statement. The columnar format enables the
Group to continue its practice of improving the understanding of
its results by presenting its trading profit. This is the profit
measure used to calculate trading EPS (note 5) and is considered to
be the most appropriate as it better reflects the Group's trading
earnings. Trading profit is reconciled to profit before tax on the
face of the consolidated income statement, which also includes
acquisition and disposal costs and exceptional items.
The column 'acquisition and disposal costs' includes: any gains,
losses or other associated costs on the full or partial disposal of
investments, associates, joint ventures or subsidiaries and costs
associated with a business combination that do not constitute fees
relating to the arrangement of financing; amortisation or
impairment of intangible assets arising on consolidation; any
re-measurement after initial recognition of deferred contingent
consideration which has been classified as a liability, and any
gains or losses on the revaluation of previous interests. The
column may also include items such as gains or losses on the
settlement of pre-existing relationships with acquired businesses
and the re-measurement of liabilities that are above the value of
indemnification.
Items which are of a non-recurring nature and material, when
considering both size and nature, are disclosed separately to give
a clearer presentation of the Group's results. These are shown as
exceptional items on the face of the consolidated income
statement.
When the Group has disposed of or intends to dispose of a
business component that represents a major line of business or
geographic area of operations, it classifies such operations as
discontinued. The post-tax profit or loss of the discontinued
operations is shown as a single line on the face of the
consolidated income statement, separate from the other results of
the Group. The consolidated income statement for the comparative
periods is restated to show the discontinued operations separate
from those generated by the continuing operations.
Basis of consolidation
The Group's consolidated financial statements include the
results and net assets of the Company, its subsidiaries and the
Group's share of joint ventures and associates.
Subsidiaries
An entity is regarded as a subsidiary if the Group has control
over its strategic, operating and financial policies and intends to
hold the investment on a long-term basis for the purpose of
securing a contribution to the Group's activities.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of acquisition
is measured at fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in the business combination are measured
initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of
the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill. If
the costs of the acquisition are less than the fair value of the
net assets acquired, the difference is recognised directly in the
consolidated income statement.
Fees associated with an acquisition are expensed as incurred.
When the Group increases its investment in an entity resulting in
an associate becoming a subsidiary, the intangibles related to the
acquisition are valued and the element of those not previously
recognised as a share of net assets are recorded as revaluation
gains realised in the year in other comprehensive income. A change
of ownership that does not result in a loss of control is
classified as an equity transaction, with the difference between
the amount by which the non-controlling interest is recorded and
the fair value of the consideration received recognised directly in
equity.
Where the Group has issued a put option over shares held by a
non-controlling interest, the Group derecognises the
non-controlling interests and instead recognises a contingent
deferred consideration liability for the estimated amount likely to
be paid to the non-controlling interest on exercise of those
options. The residual amount, representing the difference between
any consideration paid/payable and the non-controlling interest's
share of net assets, is recognised in equity. Movements in the
estimated liability after initial recognition are recognised within
the consolidated income statement. Where the Group has a call
option over shares held by a non-controlling interest, the Group
continues to recognise the non-controlling interest until it is
certain that the option will be called. At that point the
accounting treatment is the same as for a put option.
The results of companies acquired during the year are included
in the Group's results from the effective date of acquisition. The
results of companies disposed of during the year are included up to
the effective date of disposal.
The Group treats transactions with non-controlling interests as
transactions with equity owners of the Group. For purchases from
non-controlling interests, the difference between any consideration
paid and the relevant share acquired of the carrying value of net
assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in
equity.
On consolidation, the accounting policies of Group companies
(the Company and its subsidiaries) are consistent with those
applied by the Group. Intercompany transactions, balances and
unrealised gains on transactions between Group companies are
eliminated as part of the consolidation process. Unrealised losses
are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
Joint ventures
A joint venture is an entity in which the Group has an interest
and, in the opinion of the directors, exercises joint control over
its operating and financial policies. An interest exists where an
investment is held on a long-term basis for the purpose of securing
a contribution to the Group's activities. Following the adoption of
IFRS11 'Joint Arrangements' and IAS28 'Investments in Associates
and Joint Ventures' on 1 April 2014, investments in joint ventures
are recognised using the equity method. Under this method, such
investments are initially stated at cost, including attributable
goodwill, and are adjusted thereafter for the post-acquisition
change in the Group's share of net assets.
Associates
The Group classifies investments in entities over which it has
significant influence, but not control, and that are neither
subsidiaries nor joint ventures, as associates. Investments in
associates are recognised using the equity method. Under this
method, such investments are initially stated at cost, including
attributable goodwill, and are adjusted thereafter for the
post-acquisition change in the Group's share of net assets.
Foreign currencies
In individual entities, transactions denominated in foreign
currencies are recorded at the prior month closing exchange rate
between the functional currency and the foreign currency. At each
end of the reporting period, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates
prevailing at the end of the reporting period. Exchange differences
are recognised in the consolidated income statement, except for
exchange differences arising on non-monetary assets and liabilities
where these form part of the net investment of an overseas business
or are designated as hedges of a net investment or cash flow and,
therefore, the changes in value resulting from exchange differences
are recognised directly in other comprehensive income. Non-monetary
items carried at historical cost are translated in the balance
sheet at the exchange rate on the original transaction date.
Non-monetary items measured at fair value are translated using the
exchange rate ruling when the fair value was determined.
On consolidation, the results of businesses with non-pound
sterling functional currencies are translated into the
presentational currency of the Group at the average exchange rates
for the year where these approximate to the rate at the date of the
transactions. Assets and liabilities of overseas businesses are
translated into the presentational currency of the Group at the
exchange rate prevailing at the end of the reporting period.
Exchange differences arising are recognised within other
comprehensive income. Cumulative translation differences arising
after the transition to IFRS are taken to the consolidated income
statement on disposal of the net investment.
Goodwill and fair value adjustments arising on the acquisition
of a non-pound sterling entity are treated as assets and
liabilities of that entity and translated into the presentational
currency of the Group at the period closing rate. Where applicable,
the Group has elected to treat goodwill and fair value adjustments
arising before the date of transition to IFRS as denominated in the
presentational currency of the Group.
In the consolidated statement of cash flows, cash flows
denominated in foreign currencies are translated into the
presentational currency of the Group at the average exchange rates
for the year or at the rate prevailing at the time of the
transaction where more appropriate.
Future accounting developments
At 31 March 2016, the following standards have been issued by
the IASB which are not effective for these consolidated financial
statements:
-- in July 2014, IASB issued IFRS9 'Financial Instruments',
which will replace IAS39 'Financial Instruments: Recognition and
Measurement'. The standard will be effective for annual periods
beginning on or after 1 January 2018. ICAP intends to adopt IFRS9
for its financial statements for the year ending 31 March 2019;
and
-- in May 2014, IASB issued IFRS15 'Revenue from Contracts with
Customers', which will replace IAS18 'Revenue' and IAS11
'Construction Contracts' and other related interpretations on
revenue recognition. The standard will become effective for annual
periods beginning on or after 1 January 2017. ICAP intends to adopt
IFRS15 for its financial statements for the year ending 31 March
2018.
The impact on ICAP's financial statements from the adoption of
these IFRS standards is currently being assessed and will be
disclosed closer to the time of the adoption.
1. Segmental information
The Group has determined its operating segments based on the
management information including trading revenue and trading
operating profit reviewed on a regular basis by the Company's
board. The Group considers the executive members of the Company's
board to be the Chief Operating Decision Maker (CODM). ICAP's three
operating segments are Electronic Markets, Post Trade Risk and
Information and Global Broking.
Revenue comprises brokerage or access fees from its Electronic
Markets business, fees from the provision of Post Trade Risk and
Information services and commission from the Group's Global Broking
division.
Electronic Markets
The Group acts as an intermediary for FX, interest rate
derivatives, fixed income products and CDS through the Group's
electronic platforms. Revenue is generated from brokerage fees
which are dependent on the average trading volumes. The Group also
charges fees to use the electronic trading platform for access to
liquidity in the FX or precious metal markets.
Post Trade Risk and Information (PTRI)
The Group receives fees from the sale of financial information
and provision of PTRI services to third parties. These are stated
net of VAT, rebates and other sales taxes and recognised in revenue
on an accruals basis to match the provision of the service.
Global Broking
Matched principal and stock lending business
Certain Group companies are involved in a non-advisory capacity
as principals in the matched purchase and sale of securities and
other financial instruments between our customers. Revenue is
generated from the difference between the purchase and sale
proceeds and is recognised in full at the time of the commitment by
our customers to sell and purchase the security or financial
instrument. The revenue generated by the stock lending business is
not material to the Group.
Agency business (name give-up)
The Group acts in a non-advisory capacity to match buyers and
sellers of financial instruments and raises invoices for the
service provided. The Group does not act as principal in name
give-up transactions and only receives and transmits orders between
counterparties. Revenue is stated net of rebates and discounts, VAT
and other sales taxes and is recognised in full on the date of the
trade.
Execution on exchange business
The Group also acts as a broker of exchange-listed products,
where the Group executes customer orders as principal and then
novates the trade to the underlying customer's respective clearing
broker for settlement. Revenue is generated by raising an invoice
and is recognised on the trade date.
(a) Revenue relating to the Group's total operations
Year ended 31 March
2016
--------------------------------------------------
Post
Electronic Trade Global
Markets Risk Broking Group
GBPm and GBPm GBPm
Information
GBPm
------------------------------------- ------------- ------------- ---------- --------
Continuing operations:
------------------------------------- ------------- ------------- ---------- --------
Revenue 258 194 8 460
------------------------------------- ------------- ------------- ---------- --------
Trading operating profit/(loss) 86 70 (17) 139
------------------------------------- ------------- ------------- ---------- --------
Profit from joint ventures - - 1 1
------------------------------------- ------------- ------------- ---------- --------
(Loss)/Profit from associates - (3) 2 (1)
------------------------------------- ------------- ------------- ---------- --------
Continuing Trading EBIT* 86 67 (14) 139
------------------------------------- ------------- ------------- ---------- --------
Reconciliation to the consolidated
income statement:
------------------------------------- ------------- ------------- ---------- --------
Continuing operations:
------------------------------------- ------------- ------------- ---------- --------
Trading net finance cost** (29)
------------------------------------- ------------- ------------- ---------- --------
Trading profit before tax 110
------------------------------------- ------------- ------------- ---------- --------
Acquisition and disposal
costs (74)
------------------------------------- ------------- ------------- ---------- --------
Exceptional items (note
3) (9)
------------------------------------- ------------- ------------- ---------- --------
Profit before tax from continuing
operations 27
------------------------------------- ------------- ------------- ---------- --------
Tax on continuing operations (5)
------------------------------------- ------------- ------------- ---------- --------
Profit for the year from
continuing operations 22
------------------------------------- ------------- ------------- ---------- --------
Profit for the year from
discontinued operations,
net of tax (note 4) 46
------------------------------------- ------------- ------------- ---------- --------
Profit for the year 68
------------------------------------- ------------- ------------- ---------- --------
Other segmental information
for total Group (including
discontinued)
------------------------------------- ------------- ------------- ---------- --------
Trading operating profit
margin 30% 40% 7% 18%
------------------------------------- ------------- ------------- ---------- --------
Trading EBIT* 78 95 55 228
------------------------------------- ------------- ------------- ---------- --------
Trading depreciation 5 3 3 11
------------------------------------- ------------- ------------- ---------- --------
Trading amortisation 20 6 11 37
------------------------------------- ------------- ------------- ---------- --------
Trading EBITDA*** 103 104 69 276
------------------------------------- ------------- ---------- --------
Capital expenditure on intangible
developments**** 27 11 15 53
------------------------------------- ------------- ------------- ---------- --------
* Trading EBIT is the trading profit before deducting net finance cost and tax.
** Given the Group's debt financing arrangements are managed
centrally through a treasury function, the ICAP plc board does not
incorporate net finance cost in the assessment of the segments'
performance, therefore this is presented on a total Group
basis.
*** Trading EBITDA is the trading profit before deducting net
finance cost, tax and amortisation, depreciation and impairment
charges.
**** Total capital expenditure on intangible developments for
the Group includes GBP1m (2014/15 - GBP1m) investment made to
develop corporate intangible assets, which are not segment
specific.
The Group did not earn more than 10% of its total revenue from
any individual customer.
The Group earned revenue of GBP352m (2014/15 - GBP434m) and
GBP468m (2014/15 - GBP460m) from entities in the UK and US
respectively. The remainder of GBP381m (2014/15 - GBP382m) came
from various entities outside the UK and US. ICAP's UK regulated
companies, those that are within the scope of CRD IV disclosures,
will disclose certain financial and other information in their
2015/16 financial statements as required under the scope of CRD IV
disclosure requirements.
Year ended 31 March
2015
------------------------------------------------
Electronic Post Global Group
Markets Trade Broking GBPm
GBPm Risk GBPm
and
Information
GBPm
------------------------------------ ------------ ------------- ---------- -------
Continuing operations:
------------------------------------ ------------ ------------- ---------- -------
Revenue 254 187 27 468
------------------------------------ ------------ ------------- ---------- -------
Trading operating profit/(loss) 102 70 (18) 154
------------------------------------ ------------ ------------- ---------- -------
Profit from joint ventures - - 1 1
------------------------------------ ------------ ------------- ---------- -------
(Loss)/Profit from associates - (2) 1 (1)
------------------------------------ ------------ ------------- ---------- -------
Continuing Trading EBIT* 102 68 (16) 154
------------------------------------ ------------ ------------- ---------- -------
Reconciliation to the consolidated
income statement:
------------------------------------ ------------ ------------- ---------- -------
Continuing operations:
------------------------------------ ------------ ------------- ---------- -------
Trading net finance cost** (32)
------------------------------------ ------------ ------------- ---------- -------
Trading profit before tax 122
------------------------------------ ------------ ------------- ---------- -------
Acquisition and disposal
costs (59)
------------------------------------ ------------ ------------- ---------- -------
Exceptional items (note
3) (16)
------------------------------------ ------------ ------------- ---------- -------
Profit before tax from
continuing operations 47
------------------------------------ ------------ ------------- ---------- -------
Tax on continuing operations (7)
------------------------------------ ------------ ------------- ---------- -------
Profit for the year from
continuing operations 40
------------------------------------ ------------ ------------- ---------- -------
Profit for the year from
discontinued operations,
net of tax (note 4) 44
------------------------------------ ------------ ------------- ---------- -------
Profit for the year 84
------------------------------------ ------------ ------------- ---------- -------
Other segmental information
for total Group (including
discontinued)
------------------------------------ ------------ ------------- ---------- -------
Trading operating profit
margin 36% 43% 8% 20%
------------------------------------ ------------ ------------- ---------- -------
Trading EBIT* 93 95 72 260
------------------------------------ ------------ ------------- ---------- -------
Trading depreciation 8 3 4 15
------------------------------------ ------------ ------------- ---------- -------
Trading amortisation 20 6 8 34
------------------------------------ ------------ ------------- ---------- -------
Trading EBITDA*** 121 104 84 309
------------------------------------ ------------ ------------- ---------- -------
Capital expenditure on
intangible developments**** 23 12 12 48
------------------------------------ ------------ ------------- ---------- -------
(b) Revenue relating to the Group's continuing and discontinued
operations
Year ended 31 Year ended 31
March 2016 March 2015
(restated)
-------------------- ---------------------------------------- ------------------------------------------
Continuing Discontinued Total Continuing Discontinued Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------- --------------- -------- ------------- --------------- --------
Revenue
-------------------- ------------- --------------- -------- ------------- --------------- --------
Electronic Markets 258 4 262 254 5 259
-------------------- ------------- --------------- -------- ------------- --------------- --------
Post Trade Risk
and Information 194 51 245 187 41 228
-------------------- ------------- --------------- -------- ------------- --------------- --------
Global Broking 8 686 694 27 762 789
-------------------- ------------- --------------- -------- ------------- --------------- --------
460 741 1,201 468 808 1,276
-------------------- ------------- --------------- -------- ------------- --------------- --------
Trading operating
profit
-------------------- ------------- --------------- -------- ------------- --------------- --------
Electronic Markets 86 (8) 78 102 (9) 93
-------------------- ------------- --------------- -------- ------------- --------------- --------
Post Trade Risk
and Information 70 27 97 70 27 97
-------------------- ------------- --------------- -------- ------------- --------------- --------
Global Broking (17) 63 46 (18) 80 62
-------------------- ------------- --------------- -------- ------------- --------------- --------
139 82 221 154 98 252
-------------------- ------------- --------------- -------- ------------- --------------- --------
Global Broking's trading operating loss from continuing
operations of GBP17m (2014/15 - GBP18m) includes GBP14m (2014/15 -
GBP14m) of central support costs that were charged to the voice
broking business for the reporting of the segmental results but
under the SPA will not transfer to the enlarged Tullett Prebon. The
remaining GBP3m (2014/15 - GBP4m) relates to ICAP's voice broking
business that is outside the IGBB perimeter. Electronic Markets
discontinued operations relates to i-Swap. PTRI discontinued
operations includes part of the ICAP Information Services (IIS),
which provides voice broking generated data to the market
participants.
2. Operating expenses
The table below is presented on a total Group basis, including
discontinued operations.
Profit before tax is stated after Year Year
charging: ended ended
31 31 March
March 2015
2016 GBPm
GBPm
----------------------------------------- ------- ----------
Trading operating expenses
----------------------------------------- ------- ----------
Employee costs* 630 691
----------------------------------------- ------- ----------
Information technology costs** 139 129
----------------------------------------- ------- ----------
Professional and legal fees (including
auditors' remuneration) 43 34
----------------------------------------- ------- ----------
Depreciation and impairment of property
and equipment (excluding IT) 2 6
----------------------------------------- ------- ----------
Governance costs* 21 22
----------------------------------------- ------- ----------
Clearing and settlement fees 17 19
----------------------------------------- ------- ----------
Operating lease rentals - minimum
lease payments 21 23
----------------------------------------- ------- ----------
Exchange adjustments 7 (4)
----------------------------------------- ------- ----------
Other 102 106
----------------------------------------- ------- ----------
Trading operating expenses 982 1,026
----------------------------------------- ------- ----------
Acquisition and disposal costs
----------------------------------------- ------- ----------
Amortisation of intangible assets
arising on consolidation 38 55
----------------------------------------- ------- ----------
Impairment of associate investments*** 25 -
----------------------------------------- ------- ----------
Other acquisition and disposal costs 12 4
----------------------------------------- ------- ----------
Acquisition and disposal costs 75 59
----------------------------------------- ------- ----------
Exceptional items 40 75
----------------------------------------- ------- ----------
Operating expenses 1,097 1,160
----------------------------------------- ------- ----------
Attributable to:
----------------------------------------- ------- ----------
Continuing operations 405 387
----------------------------------------- ------- ----------
Discontinued operations (note 4) 692 773
----------------------------------------- ------- ----------
Auditors' remuneration
----------------------------------------- ------- ----------
Fees payable to the Company's auditors
for the audit of the parent Company's
and consolidated financial statements 0.8 0.8
----------------------------------------- ------- ----------
Fees payable to the Company's auditors
for other services:
----------------------------------------- ------- ----------
- the auditing of any subsidiary
of the Company 3.2 3.0
----------------------------------------- ------- ----------
- audit-related assurance services - 0.2
----------------------------------------- ------- ----------
- taxation compliance services 0.1 -
----------------------------------------- ------- ----------
- taxation advisory services 0.1 0.2
----------------------------------------- ------- ----------
- other assurance services**** 1.0 0.4
----------------------------------------- ------- ----------
- corporate finance transaction 2.4 -
services****
----------------------------------------- ------- ----------
7.6 4.6
----------------------------------------- ------- ----------
* Net employee costs for the year are GBP653 m (2014/15 -
GBP743m). Remaining employee costs of GBP23m are included in
governance costs of GBP17m (2014/15 - GBP17m), exceptional items of
GBP5m (2015/15 - GBP35m) and acquisition and disposal costs of
GBP1m (2014/15 - GBPnil). Governance costs include fees associated
with risk, compliance, internal audit and legal.
** Information technology costs include GBP46m of depreciation
and amortisation charges. The remaining GBP93m of costs incurred
include purchase of assets that are individually below the Group's
capitalisation threshold, maintenance expenditures, certain
enhancements not eligible for capitalisation and research phase
related expenditures. Information technology costs do not include
employee costs relating to the development of software assets that
were not capitalised. These are presented within employee costs
*** Following the identification of impairment indicators under
IAS39, impairment reviews were performed on our investments in
non-core associates, resulting in impairment charges of GBP25m.
**** Other assurance services and corporate finance transaction
services relate to services provided in connection to the disposal
of IGBB.
3. Exceptional items
Exceptional items are non-recurring significant items that are
considered material in both size and nature. These are disclosed
separately to enable a full understanding of the Group's financial
performance.
Year Year
ended ended
31 31
March March
2016 2015
GBPm GBPm
----------------------------------------- ------- -------
Exceptional items before tax
----------------------------------------- ------- -------
Transaction related costs 31 -
----------------------------------------- ------- -------
Other costs - continuing operations 9 -
----------------------------------------- ------- -------
Restructuring programme - employee
termination costs - 35
----------------------------------------- ------- -------
Restructuring programme - property
exits - 18
----------------------------------------- ------- -------
Restructuring programme - other - 7
----------------------------------------- ------- -------
Regulatory matters including associated
legal and professional fees - 15
----------------------------------------- ------- -------
Total exceptional items before tax 40 75
----------------------------------------- ------- -------
Tax credit (6) (18)
----------------------------------------- ------- -------
Total exceptional items after tax 34 57
----------------------------------------- ------- -------
Attributable to:
----------------------------------------- ------- -------
Continuing operations 7 15
----------------------------------------- ------- -------
Discontinued operations (note 4) 27 42
----------------------------------------- ------- -------
The discontinued exceptional items of GBP31m represent
Transaction-related costs arising from the impending disposal of
IGBB, including costs to sale and separation costs that were
incurred and provided as at 31 March 2016. Other exceptional costs
of GBP9m relate to exiting non-core businesses within Electronic
Markets, and are therefore presented in the continuing income
statement.
4. Discontinued operations and held for sale assets and
liabilities
On 11 November 2015, the Group signed a SPA with Tullett Prebon
for the disposal of its IGBB business at which point it met IFRS5
criteria to be classified as held for sale.
The disposal is subject to approvals from regulatory authorities
across jurisdictions as well as finalisation of certain commercial
terms and is expected to be completed in 2016.
The results of the IGBB business, subject to certain provisions
in the SPA, are presented as discontinued operations as the sale is
a single co-ordinated plan to dispose of a separate major line of
business. The assets and liabilities attributable to IGBB, also
subject to certain provisions in the SPA, are presented as held for
sale assets and liabilities on the face of the balance sheet. These
assets and liabilities were transferred to held for sale at
carrying value.
(a) Results of discontinued operations
Acquisition
and
disposal Exceptional
Year ended 31 March 2016 Trading costs items Total
GBPm GBPm GBPm GBPm
------------------------------------ ---------- --------------- -------------- --------
Revenue 741 - - 741
------------------------------------ ---------- -------------- -------------- --------
Operating expenses (661) - (31) (692)
------------------------------------ ---------- -------------- -------------- --------
Other income 2 - - 2
------------------------------------ ---------- -------------- -------------- --------
Operating profit from discontinued
operations 82 - (31) 51
------------------------------------ ---------- -------------- -------------- --------
Net finance income 4 - - 4
------------------------------------ ---------- -------------- -------------- --------
Share of profit of associates
and joint ventures after
tax 7 - - 7
------------------------------------ ---------- -------------- -------------- --------
Profit before tax from
discontinued operations 93 - (31) 62
------------------------------------ ---------- -------------- -------------- --------
Tax (note 7) (20) - 4 (16)
------------------------------------ ---------- -------------- -------------- --------
Profit for the year from
discontinued operations 73 - (27) 46
------------------------------------ ---------- -------------- -------------- --------
Attributable to:
------------------------------------ ---------- -------------- -------------- --------
Owners of the Company 77 - (27) 50
------------------------------------ ---------- -------------- -------------- --------
Non-controlling interests (4) - - (4)
------------------------------------ ---------- -------------- -------------- --------
73 - (27) 46
------------------------------------ ---------- -------------- -------------- --------
Acquisition
and
disposal Exceptional
Year ended 31 March 2015 Trading costs items Total
(restated) GBPm GBPm GBPm GBPm
------------------------------------ ---------- -------------- -------------- --------
Revenue 808 - - 808
------------------------------------ ---------- -------------- -------------- --------
Operating expenses (713) (1) (59) (773)
------------------------------------ ---------- -------------- -------------- --------
Other income 3 - - 3
------------------------------------ ---------- -------------- -------------- --------
Operating profit from discontinued
operations 98 (1) (59) 38
------------------------------------ ---------- -------------- -------------- --------
Net finance income 1 1 - 2
------------------------------------ ---------- -------------- -------------- --------
Share of profit of associates
and joint ventures after
tax 8 - - 8
------------------------------------ ---------- -------------- -------------- --------
Profit before tax from
discontinued operations 107 - (59) 48
------------------------------------ ---------- -------------- -------------- --------
Tax (note 7) (18) (3) 17 (4)
------------------------------------ ---------- -------------- -------------- --------
Profit for the year from
discontinued operations 89 (3) (42) 44
------------------------------------ ---------- -------------- -------------- --------
Attributable to:
------------------------------------ ---------- -------------- -------------- --------
Owners of the Company 90 (3) (42) 45
------------------------------------ ---------- -------------- -------------- --------
Non-controlling interests (1) - - (1)
------------------------------------ ---------- -------------- -------------- --------
89 (3) (42) 44
------------------------------------ ---------- -------------- -------------- --------
(b) Breakdown of assets held for sale
As
at
31
March
2016
GBPm
---------------------------------------- ---------
Non-current assets
---------------------------------------- ---------
Goodwill and other intangibles arising
on consolidation 83
---------------------------------------- ---------
Other 129
---------------------------------------- ---------
Current assets
---------------------------------------- ---------
Trade and other receivables 20,789
---------------------------------------- ---------
Cash and cash equivalents 359
---------------------------------------- ---------
Restricted funds 33
---------------------------------------- ---------
Total held for sale assets 21,393
---------------------------------------- ---------
Current liabilities
---------------------------------------- ---------
Trade and other payables (20,738)
---------------------------------------- ---------
Overdraft (81)
---------------------------------------- ---------
Provisions (12)
---------------------------------------- ---------
Other (4)
---------------------------------------- ---------
Non-current liabilities
---------------------------------------- ---------
Trade and other payables (4)
---------------------------------------- ---------
Provisions (3)
---------------------------------------- ---------
Other (19)
---------------------------------------- ---------
Total held for sale liabilities (20,861)
---------------------------------------- ---------
Net assets held for sale 532
---------------------------------------- ---------
5. Earnings per share
The Group presents basic and diluted earnings per share (EPS)
for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding
during the year, adjusted for own shares held. The Group also
calculates trading EPS (basic and diluted) from the trading profit.
The Group believes that this is the most appropriate measurement
for assessing ICAP's performance since it better reflects the
business's trading earnings.
The diluted EPS is calculated by adjusting share capital in
issue for the additional weighted average number of ordinary shares
that are likely to be issued under various employee share award
schemes as at the balance sheet date.
EPS relating to the Group's total operations (including
discontinued operations)
Year ended 31 Year ended 31
March 2016 March 2015
------------------- ----------------------------------- ----------------------------------
Earnings Earnings Shares Earnings
Trading basic Earnings Shares per GBPm millions per
and diluted GBPm millions share share
pence pence
------------------- ----------- ----------- --------- ---------- ----------- ---------
Trading basic 160 650 24.6 185 645 28.7
------------------- ----------- ----------- --------- ---------- ----------- ---------
Dilutive effect
of share options - 12 (0.4) - 14 (0.6)
------------------- ----------- ----------- --------- ---------- ----------- ---------
Trading diluted 160 662 24.2 185 659 28.1
------------------- ----------- ----------- --------- ---------- ----------- ---------
Year ended 31 Year ended 31
March 2016 March 2015
--------------------- ----------------------------------- ----------------------------------
Earnings Earnings Shares Earnings
Basic and diluted Earnings Shares per GBPm millions per
GBPm millions share share
pence pence
--------------------- ----------- ----------- --------- ---------- ----------- ---------
Basic 68 650 10.5 84 645 13.0
--------------------- ----------- ----------- --------- ---------- ----------- ---------
Dilutive effect
of share options - 12 (0.2) - 14 (0.2)
--------------------- ----------- ----------- --------- ---------- ----------- ---------
Diluted 68 662 10.3 84 659 12.8
--------------------- ----------- ----------- --------- ---------- ----------- ---------
Weighted average number of ordinary shares excludes the weighted
average number of shares held as Treasury Shares of 14m (2014/15 -
15m) and those owned by employee share trusts relating to employee
share schemes on which dividends have been waived, being 5m shares
(2014/15 - 6m).
6. Dividends payable
The Company recognises the final dividend payable only when it
has been approved by the shareholders of the Company in a general
meeting. The interim dividend is recognised when the amount due has
been paid.
Year Year
ended ended
Amounts recognised as distributions 31 31
to equity holders in the year March March
2016 2015
GBPm GBPm
--------------------------------------- ------- -------
Final dividend for the year ended
31 March 2015 of 15.40p per ordinary
share (2014 -15.40p) 99 99
--------------------------------------- ------- -------
Interim dividend for the year ended
31 March 2016 of 6.60p per ordinary
share (2015 - 6.60p) 42 42
--------------------------------------- ------- -------
Total dividend recognised in year 141 141
--------------------------------------- ------- -------
The final dividend for the year ended 31 March 2015 and the
interim dividend for the year ended 31 March 2016 were both
satisfied in full with cash payments of GBP99m and GBP42m
respectively.
The directors have proposed a final dividend of 15.40p per share
for the year ended 31 March 2016. This has not been recognised as a
liability of the Group at the year end as it has not yet been
approved by shareholders. Based on the number of shares in issue at
the year end, the total amount payable would be GBP100m. Therefore,
subject to shareholders' approval of the proposed final dividend of
15.40p per share, the full-year dividend will be 22.00p per share,
which will be covered 1.1 times (2014/15 - 1.3 times) by the
trading EPS (basic) of 24.60per share (2014/15 - 28.70p per
share).
The right to receive dividends has been waived in respect of the
shares held in employee share trusts and no dividend is payable on
Treasury Shares.
7. Tax
Tax on the profit for the year comprises both current and
deferred tax as well as adjustments in respect of prior years. Tax
is charged or credited to the consolidated income statement, except
when it relates to items charged or credited to other comprehensive
income or directly to equity, in which case the tax is also
included in other comprehensive income or directly within equity
respectively.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted, or substantively enacted,
by the end of the reporting period.
Deferred tax is recognised using the liability method, in
respect of temporary differences between the carrying value of
assets and liabilities for reporting purposes and the tax bases of
the assets and liabilities. Deferred tax is calculated at the rate
of tax expected to apply when the liability is settled or the asset
is realised. A deferred tax asset is recognised only to the extent
that it is probable that future taxable profits will be available
against which the asset can be utilised.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries, joint ventures, associates and
intangibles arising on consolidation, except where the timing of
the reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse
in the foreseeable future.
Deferred tax liabilities are offset against deferred tax assets
within the same taxable entity or qualifying local tax group where
there is both the legal right and the intention to settle on a net
basis or to realise the asset and settle the liability
simultaneously.
Calculations of current and deferred tax liability have been
based on ongoing discussions with the relevant tax authorities,
management's assessment of legal and professional advice, case law
and other relevant guidance. Where the expected tax outcome of
these matters is different from the amounts that were recorded
initially, such differences will impact the current and deferred
tax amounts in the period in which such determination is made.
Tax charged to the consolidated income statement in the year
The following tax charge breakdown is based on a total Group
basis (including discontinued operations).
Tax on trading profit Year Year
ended ended
31 31
March March
2016 2015
GBPm GBPm
---------------------------------------- ------- -------
Current tax
---------------------------------------- ------- -------
Current year 56 41
---------------------------------------- ------- -------
Adjustment to prior years (10) (6)
---------------------------------------- ------- -------
46 35
---------------------------------------- ------- -------
Deferred tax
---------------------------------------- ------- -------
Current year (6) 7
---------------------------------------- ------- -------
Adjustment to prior years 3 2
---------------------------------------- ------- -------
(3) 9
---------------------------------------- ------- -------
Tax charge on trading profit 43 44
---------------------------------------- ------- -------
Tax credit on acquisition and disposal
costs
---------------------------------------- ------- -------
Current year (3) -
---------------------------------------- ------- -------
Deferred tax current (13) (15)
---------------------------------------- ------- -------
Total tax credit on acquisition
and disposal costs (16) (15)
---------------------------------------- ------- -------
Tax credit on exceptional costs
---------------------------------------- ------- -------
Current year (6) (16)
---------------------------------------- ------- -------
Adjustment to prior years - (2)
---------------------------------------- ------- -------
Total tax credit on exceptional
costs (6) (18)
---------------------------------------- ------- -------
Total tax charge to the consolidated
income statement 21 11
---------------------------------------- ------- -------
Attributable to:
---------------------------------------- ------- -------
Continuing operations 5 7
---------------------------------------- ------- -------
Discontinued operations (note 4) 16 4
---------------------------------------- ------- -------
The Group's share of profit of associates in the consolidated
income statement is shown net of tax of GBP2m (2014/15 -
GBP2m).
The Group's share of joint ventures in the consolidated income
statement is shown net of tax of GBP1m (2014/15 - GBP1m).
The following reconciliation of the tax charge is based on a
total Group basis (including discontinued operations).
Year Year
ended ended
31 31
March March
2016 2015
GBPm GBPm
--------------------------------------- ------- -------
Trading profit before tax 203 229
--------------------------------------- ------- -------
Tax on trading profit at the standard
rate of Corporation Tax in the UK
of 20% (2014/15 - 21%) 41 48
--------------------------------------- ------- -------
Reconciling items:
--------------------------------------- ------- -------
Expenses not deductible for tax
purposes 8 (1)
--------------------------------------- ------- -------
Non-taxable income (6) (2)
--------------------------------------- ------- -------
Impact of overseas tax rates and
bases 8 1
--------------------------------------- ------- -------
Prior year adjustment to current
and deferred tax (7) (4)
--------------------------------------- ------- -------
Impact of change in rates (1) 2
--------------------------------------- ------- -------
2 (4)
--------------------------------------- ------- -------
Total tax charge on trading profit 43 44
--------------------------------------- ------- -------
Attributable to:
--------------------------------------- ------- -------
Continuing operations 23 26
--------------------------------------- ------- -------
Discontinued operations (note 4) 20 18
--------------------------------------- ------- -------
The Group's 2015/16 effective tax rate on trading profit is 21%
(2014/15 - 19%).
Year Year
ended ended
31 31
March March
2016 2015
GBPm GBPm
--------------------------------------- ------- -------
Profit before tax 89 95
--------------------------------------- ------- -------
Tax on profit at the standard rate
of Corporation Tax in the UK of
20% (2014/15 - 21%) 18 20
--------------------------------------- ------- -------
Reconciling items:
--------------------------------------- ------- -------
Trading profit (see above) 2 (4)
--------------------------------------- ------- -------
Acquisition and disposal costs and
exceptional items not deductible
for tax purposes 5 4
--------------------------------------- ------- -------
Impact of overseas tax rates on
adjusted items (2) (7)
--------------------------------------- ------- -------
Impact of change in rates on adjusted (2) -
items
--------------------------------------- ------- -------
Impact of prior years' adjustments
on adjusted items - (2)
--------------------------------------- ------- -------
3 (9)
--------------------------------------- ------- -------
Total tax charged to the consolidated
income statement 21 11
--------------------------------------- ------- -------
The standard rate of Corporation Tax in the UK changed from 21%
to 20% with effect from 1 April 2015. Further reductions to the
main rate have been enacted reducing it to 19% from 1 April 2017
and 18% from 1 April 2020. Whilst not yet enacted it has been
announced that legislation in Finance Bill 2016 will set the rate
at 17% from 1 April 2020. UK Deferred tax will therefore unwind at
a rate of 19% for periods from 1 April 2017 to 31 March 2019.
For tax expense relating to discontinued operations, see note
4.
Deferred tax balances recognised on the balance sheet
As As
at at
31 31
March March
2016 2015
GBPm GBPm
-------------------------- ------- -------
Deferred tax assets 13 6
-------------------------- ------- -------
Deferred tax liabilities (67) (73)
-------------------------- ------- -------
Net balances (54) (67)
-------------------------- ------- -------
Deferred tax assets of GBP15m and liabilities GBPnil were
transferred to held for sale during the year.
8. Cash
Cash and cash equivalents comprise cash on hand, demand deposits
and other short-term highly liquid investments which are subject to
insignificant risk of change in fair value and are readily
convertible into a known amount of cash with less than three
months' maturity.
The Group holds money, and occasionally financial instruments,
on behalf of customers (client monies) in accordance with local
regulatory rules. Since the Group is not beneficially entitled to
these amounts, they are excluded from the consolidated balance
sheet along with the corresponding liabilities to customers.
Restricted funds comprise cash held with a CCP clearing house,
or a financial institution providing ICAP with access to a CCP, and
funds set aside for regulatory purposes, but excluding client
money. The funds represent cash for which the Group does not have
immediate and direct access or for which regulatory requirements
restrict the use of the cash.
The cash note is presented on a Group basis, including cash
attributable to held for sale assets.
(a) Reconciliation of Group profit before tax to net cash flow
from operating activities
Group Group
year year
ended ended
31 31
March March
2016 2015
GBPm GBPm
------------------------------------------- ------- -------
Profit before tax from continuing
operations 27 47
------------------------------------------- ------- -------
Profit before tax from discontinued
operations (note 4) 62 48
------------------------------------------- ------- -------
Operating exceptional items 40 75
------------------------------------------- ------- -------
Share of profit of associates after
tax (3) (4)
------------------------------------------- ------- -------
Share of profit of joint ventures
after tax (4) (4)
------------------------------------------- ------- -------
Amortisation of intangible assets
arising on consolidation 38 55
------------------------------------------- ------- -------
Impairment of investment in associates 25 -
------------------------------------------- ------- -------
Amortisation and impairment of intangible
assets arising from development
expenditure 37 34
------------------------------------------- ------- -------
Depreciation and impairment of property
and equipment 11 15
------------------------------------------- ------- -------
Other acquisition and disposal costs 12 4
------------------------------------------- ------- -------
Share-based payments (trading) 7 6
------------------------------------------- ------- -------
Net finance expense 24 31
------------------------------------------- ------- -------
Increase of trading provision 2 -
------------------------------------------- ------- -------
Operating cash flows before movements
in working capital 278 307
------------------------------------------- ------- -------
Decrease in trade and other receivables 12 33
------------------------------------------- ------- -------
Timing differences on unsettled
match principal trades (40) (29)
------------------------------------------- ------- -------
Increase in restricted funds (17) (4)
------------------------------------------- ------- -------
Increase in trade and other payables - 6
------------------------------------------- ------- -------
Cash generated by operations before
exceptional items 233 313
------------------------------------------- ------- -------
Operating exceptional items paid (29) (48)
------------------------------------------- ------- -------
Cash generated by operations 204 265
------------------------------------------- ------- -------
Interest received 3 4
------------------------------------------- ------- -------
Interest paid (26) (39)
------------------------------------------- ------- -------
Tax paid (34) (31)
------------------------------------------- ------- -------
Cash flow from operating activities 147 199
------------------------------------------- ------- -------
The movement in trade and other receivables and trade and other
payables excludes the impact of the gross-up of matched principal
trades as permitted by IAS7 'Statement of Cash Flows'. The gross-up
has no impact on the cash flow or net assets of the Group. The cash
flow movement in trade and other receivables includes the net
movement on matched principal transactions and deposits for
securities borrowed/loaned.
(b) Net debt
Net debt comprises of total cash less other debt.
Group Group
as as
at at
31 31
March March
2016 2015
GBPm GBPm
--------------------------- ------- -------
Gross debt (664) (549)
--------------------------- ------- -------
Cash and cash equivalents 516 481
--------------------------- ------- -------
Net debt (148) (68)
--------------------------- ------- -------
(c) Total cash
Group Group
as as
at at
31 31
March March
2016 2015
GBPm GBPm
------------------------------- ------- -------
Cash and cash equivalents 516 481
------------------------------- ------- -------
Overdrafts (83) (33)
------------------------------- ------- -------
Net cash and cash equivalents 433 448
------------------------------- ------- -------
Restricted funds 59 43
------------------------------- ------- -------
Total cash 492 491
------------------------------- ------- -------
(d) Cash information by businesses
Post
Electronic Trade Global Central
As at 31 March 2016 Markets Risk Broking treasury Group
GBPm and GBPm GBPm GBPm
Information
GBPm
------------------------------- ------------- ------------- ---------- ----------- --------
Cash and cash equivalents 113 30 354 19 516
------------------------------- ------------- ------------- ---------- ----------- --------
Overdrafts - - (81) (2) (83)
------------------------------- ------------- ------------- ---------- ----------- --------
Net cash and cash equivalents 113 30 273 17 433
------------------------------- ------------- ------------- ---------- ----------- --------
Restricted funds 25 - 33 1 59
------------------------------- ------------- ------------- ---------- ----------- --------
Total cash 138 30 306 18 492
------------------------------- ------------- ------------- ---------- ----------- --------
Discontinued operations hold GBP359m of cash, GBP33m of
restricted funds and GBP81m of overdrafts (see note 4).
As at 31 March 2015 Electronic Post Global Central Group
Markets Trade Broking treasury GBPm
GBPm Risk GBPm GBPm
and
Information
GBPm
------------------------------- ------------ ------------- ---------- ----------- -------
Cash and cash equivalents 62 30 345 44 481
------------------------------- ------------ ------------- ---------- ----------- -------
Overdrafts - - (33) - (33)
------------------------------- ------------ ------------- ---------- ----------- -------
Net cash and cash equivalents 62 30 312 44 448
------------------------------- ------------ ------------- ---------- ----------- -------
Restricted funds 6 - 36 1 43
------------------------------- ------------ ------------- ---------- ----------- -------
Total cash 68 30 348 45 491
------------------------------- ------------ ------------- ---------- ----------- -------
(e) Client money
At 31 March 2016, the Group held client money of GBP12m (2014/15
- GBP10m). This amount, together with the corresponding liabilities
to customers, is not included in the Group's consolidated balance
sheet.
(f) Restricted funds
Restricted funds comprise of cash held at a CCP clearing house
or a financial institution providing ICAP with access to a CCP. The
balance fluctuates based on business events around the year end and
increased during the year by GBP16m to GBP59m at 31 March 2016.
9. Contingent liabilities, contractual commitments and
guarantees
The Group's contingent liabilities include possible obligations
that arise from past events whose existence will be confirmed only
by the occurrence, or non-occurrence, of one or more uncertain
future events not wholly within the control of ICAP. Additionally,
contingent liabilities also include present obligations that have
arisen from past events but are not recognised because it is not
probable that settlement will require the outflow of economic
benefits, or because the amount of the obligations cannot be
reliably measured. Contingent liabilities are not recognised in the
financial statements but are disclosed unless the probability of
the outflow of the Group's economic resources is remote. Judgements
applied in concluding the appropriateness of contingent liabilities
disclosure are confirmed after consultation with external counsel
and discussions with the Audit Committee.
Contingent liabilities
The Company and its subsidiaries continue to co-operate with the
government agencies in Europe and the US relating to their
investigations into the setting of yen Libor. The Company is no
longer a named defendant in the initial US civil litigation against
various yen Libor and euroyen Tibor setting banks. However, the
plaintiff in that litigation was given permission by the court to
add ICAP Europe Limited (IEL) as a defendant, and an amended
complaint doing so was filed on 29 February 2016. IEL intends to
file a motion to dismiss the amended complaint by the 16 May 2016
deadline set by the court for such a motion. On 24 July 2015, a new
litigation was filed on behalf of two additional plaintiffs in the
same court based on similar allegations. The new litigation
includes claims against ICAP plc and IEL, both of which have filed
motions to dismiss for lack of personal jurisdiction and have
joined co-defendants' motion to dismiss for failure to state a
claim. Oral argument on these motions is scheduled for 5 May 2016.
Plaintiffs in the Euribor civil litigation named ICAP plc and IEL
on 13 August 2015 as parties to that pre-existing litigation. ICAP
plc and IEL have joined the other defendants in filing motions to
dismiss for lack of personal jurisdiction and for failure to state
a claim. These motions are fully briefed and the parties are
awaiting scheduling of oral argument. Plaintiffs in one of the US
dollar Libor civil litigations sought permission to add the Company
and IEL as defendants in that case. On 15 April 2016, the court
denied the plaintiffs' request on the grounds that it lacked
personal jurisdiction over the Company and IEL, with the result
that neither company will be added to the litigation. It is not
practicable to predict the ultimate outcome of these inquiries or
the litigations. As a result it is not possible to provide an
estimate of any potential financial impact on the Group.
ICAP continues to co-operate with inquiries by the US government
agencies into the setting of USD ISDAFIX rates. In 2014, civil
lawsuits were filed in the US against USD ISDAFIX setting banks,
where a subsidiary of the Company was originally a named, but was
subsequently replaced by ICAP Capital Markets LLC, as a defendant.
Those suits have now been consolidated into a single action. The
Company intends to defend these litigation claims vigorously. It is
not practicable to predict the ultimate outcome of these inquiries
or the litigation. As a result it is not possible to provide an
estimate of any potential financial impact on the Group.
On 25 November 2015, a civil class action was filed in the
United States District Court for the Southern District of New York
against a number of banks, Tradeweb Markets LLC and ICAP Capital
Markets LLC (ICM) alleging that the defendants together colluded to
prevent buy-side customers from accessing the interest rate swaps
market on electronic, exchange-like platforms. ICM will be filing a
motion to dismiss the complaint for failure to state a claim. On 18
February 2016, a civil class action was filed in the United States
District Court for the Northern District of Illinois against a
number of banks, Tradeweb Markets LLC and ICM alleging that the
defendants boycotted and collusively targeted a series of new
electronic, exchange-like trading platforms that would have allowed
access to buy-side customers. The action asserts claims of
violation of antitrust laws and unjust enrichment. ICAP has not yet
been formally served with the complaint. In addition to these two
class action litigations, ICM has been named as a defendant in
civil litigation filed on 18 April 2016 against a group of banks,
as well as Tradeweb, in the United States District Court for the
Southern District of New York by the Tera Exchange and affiliated
entities. The suit alleges that the defendants conspired to boycott
plaintiff's platform in order to undermine increased competition in
the interest rate swaps market. The action includes claims of
violation of antitrust laws, unjust enrichment, and tortious
interference with business relations. ICM has not yet been formally
served with the complaint. The case has been accepted by the
Southern District of New York as related to the class action
litigation described above. It is not possible to predict the
outcome of these litigations or to provide an estimate of any
potential liability or financial impact on the Group.
Contingent liabilities
From time to time the Group is engaged in litigation in relation
to a variety of matters, and is also required to provide
information to regulators and other government agencies as part of
informal and formal inquiries or market reviews.
Contractual commitments (Operating lease commitments)
At the end of the financial year, the Group had outstanding
commitments for future minimum lease payments under non-cancellable
operating leases which fall due as follows:
As As
at at
31 31
March March
2016 2015
GBPm GBPm
---------------------------- ------- -------
Within one year 24 22
---------------------------- ------- -------
Between one and five years 53 64
---------------------------- ------- -------
After five years 11 17
---------------------------- ------- -------
88 103
---------------------------- ------- -------
The commitments include onerous lease provisions, but before the
estimated receipt of GBP2m under a non-cancellable sublease as at
31 March 2016 (2014/15 - GBP3m). Operating lease commitments relate
to the rental of premises for office space in the UK, US, Israel
and Asia Pacific.
Guarantees
In the normal course of business certain Group companies enter
into guarantees and indemnities to cover clearing and settlement
arrangements and/or the use of third party services/software. It is
not possible to quantify the extent of any potential liabilities,
but there are none currently expected to have a material impact on
the Group's consolidated results or net assets. As at 31 March
2016, the Group (including discontinued operations) has given
GBP231m (2014/15 - GBP373m) of guarantees to counterparties.
10. Related party transactions
The nature of the various services provided to some of the
Group's joint ventures and associates are similar to those
previously reported at 31 March 2015 and there have been no
material transactions during the year to 31 March 2016.
11. Post balance sheet events
On 13 April 2016, ICAP acquired ENSO Financial Analytics, a
leading provider of a data analytics platform for hedge funds and
prime brokers, from its founders (Matthew Bernard, Michael Gentile,
and Dwaine Alleyne) and other minority stakeholders.
The Group made its first investment in ENSO in June 2013,
followed by a subsequent investment in October 2014. ENSO will
become a subsidiary of ICAP's PTRI division. The acquisition was
led by Euclid Opportunities, ICAP's early-stage fintech investment
incubator.
ENSO provides powerful portfolio analytics to the hedge fund and
asset management industry. Its team of prime brokerage, asset
management, technology and data specialists deliver identifiable
and measurable operational insight on counterparty credit risk,
collateral management, and portfolio financing and treasury
functions. With more than $1trn in total assets under advisory,
ENSO provides operational insights and key analytics to many of the
world's most successful fund managers.
Statement of directors' responsibilities for the Annual
Report
The directors are responsible for preparing the Annual Report,
the strategic report, the remuneration report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the Group and Company financial statements
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU. Under company law the directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group for that
period.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- state whether applicable IFRSs as adopted by the EU have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements and the remuneration
report comply with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors confirm that they consider the Annual Report,
taken as a whole, to be fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group and the Company's position and performance, business model
and strategy.
The directors are responsible for the maintenance and integrity
of the information on the Company's website. Legislation in the UK
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' statement pursuant to the FCA's Disclosure and
Transparency Rules
The directors are also required by the Disclosure and
Transparency Rules to include a management report containing a fair
review of the business and a description of the principal risks and
uncertainties facing the Group and the Company. The directors of
the Company who were in office during the year, and up to the date
of signing the Annual Report, were Charles Gregson, Michael
Spencer, Stuart Bridges, Ivan Ritossa, John Sievwright and Robert
Standing. Each of these directors, whose function is listed in the
directors' biographies, confirms that, to the best of their
knowledge and belief:
-- the financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a
whole; and
-- the management report disclosures which are contained in the
strategic report include a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the strategic report. The financial position of the
Group, its cash flow, liquidity position, facilities and borrowing
position are described in the financial review. After reviewing the
Group's annual budget, liquidity requirements, plans and financing
arrangements, the directors are satisfied that the Group and the
Company have adequate resources to continue to operate for the
foreseeable future and confirm that the Group and the Company are
going concerns. For this reason they continue to adopt the going
concern basis in preparing these financial statements.
Viability statement
In addition to the requirement to consider the appropriateness
of preparing the Group's financial statements on a going concern
basis, the directors have an obligation under the Code to make a
statement in the Annual Report with regard to the viability of the
Group, including explaining how they have assessed the prospects of
the Group, the period of time for which they have made the
assessment and why they consider that period to be appropriate.
The Group's viability assessment has been made over a period of
three financial years up to 31 March 2019. This period is currently
covered by the Group's future projections of profitability as
outlined in the Group's strategic plan and the period over which
detailed management information exists. The directors are satisfied
that a three-year period is sufficient to enable a reasonable
assessment of the Group's viability to be made. In making this
assessment, the directors have considered a wide range of
information relating to present and future conditions, including
future projections of profitability, cash flows and capital
resources. The directors also considered the possibility of the
disposal of IGBB not completing within the next three years which
resulted in two sets of viability assessments being performed - one
with and one without the disposal of IGBB. Management made certain
key assumptions as part of these assessments including an extension
of the FCA's consolidation regulatory requirements waiver (which
currently runs until December 2017) should the disposal of IGBB not
complete before 31 December 2016. They also assessed the potential
financial and operational impacts, in severe but plausible
scenarios, of the Group's principal risks and uncertainties.
During the projected three-year period, the directors have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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