TP Icap profit drops as broker takes goodwill charge

TP Icap’s annual profit fell as the interdealer broker took a £65m charge on the reduced value of its assets.

Pre-tax profit for the year to the end of December dropped to £62m from £72m a year earlier. The company reported a £65m cost for impaired goodwill on acquired assets.

Underlying pre-tax profit increased to £245m from £233m as reported revenue held steady at £1.76bn. Revenue rose 3% excluding currency fluctuations.

The company has been through a rocky period since Tullett Prebon bought rival broker Icap for £1.6bn at the end of 2016. After a profit warning in July 2018 it replaced John Phizackerley as chief executive with Nicolas Breteau to complete the integration of the takeover.

Breteau said: “Whilst there is more work to do, real progress has been made with the integration in the past year … The business has delivered resilient results, with growth in revenues at constant exchange rates and underlying operating profits in line with expectations.”

TP Icap reduced its target for merger synergies to £75m from £100m alongside its 2018 profit warning. Breteau said £71m had been achieved with the remaining £4m expected in 2019. The company spent £44m on integration costs in 2018 and the total cost is forecast at £160m.

“This is a significant amount of money and not all of it has been spent as effectively as it should have been,” Breteau said. “However, it is necessary to spend to complete the integration so that we have a scalable platform from which to grow the business.”

Interdealer brokers make money when markets are volatile and their bank customers trade more frequently. TP Icap said markets were generally favourable in 2018 as expectations for interest rates and equities fluctuated. Rates and equities revenue rose 5% and 18% respectively while credit revenues fell 11%.