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Michael Spencer

ICAP sees group revenue fall by five per cent in year ended 31 March 2014

ICAP’s group revenue decreased by five per cent to GBP1,397 million against a backdrop of challenging market conditions, according to the company’s full year results for the year ended 31 March 2014.

Group trading operating profit margin was maintained at 21 per cent, with a further GBP25m of annualised cost savings identified during the year.
Some 69 per cent of the group’s operating profit was contributed by the electronic markets and post trade risk and information divisions, up three percentage points on the prior year.
Trading profit before tax decreased by four per cent to GBP272m, in-line with previous guidance.
Michael Spencer (pictured), group chief executive officer, says: “The past year has presented many challenges.  Trading conditions have been and are likely to remain extremely difficult.  We operate in an industry which is undergoing an enormous amount of structural change with the emergence of a new post-financial crisis regulatory landscape.  The trading operations of our bank customers, particularly their FICC franchises, continue to be scaled back as balance sheets are de-levered in response to increased capital requirements.  In addition to these structural developments, cyclical factors such as the low interest rate environment, muted foreign exchange rate volatility and continued uncertainty over the long overdue economic recovery, have inevitably impacted revenue.      
“This was also an extremely difficult year because of the yen Libor investigation.  In September 2013, one of our global broking subsidiaries reached settlement agreements with the CFTC and FCA and paid penalties totalling GBP55 million relating to the involvement of certain brokers assisting bank traders seeking to manipulate yen Libor.  We have learnt lessons from this experience and have taken steps to strengthen the business. 
“Despite the ongoing structural challenges facing the industry, I believe that there are reasons to be optimistic.  ICAP, with its diverse portfolio of businesses, is uniquely positioned to provide the full range of pre trade, execution and post trade services.  I am convinced that the move towards increased electronic trading of derivatives, central clearing and risk mitigation are positive drivers for future growth.  In anticipation of the new market place, we are investing heavily in delivering both new and enhanced product and technological solutions including the ICAP SEF, EBS Direct, TriOptima’s triResolve and Traiana’s CreditLink services.
“ICAP is profitable and cash generative.  Over many years, we have demonstrated our ability to reposition our business to the changing market landscape.  We will continue to pursue our long-term strategy to grow our electronic markets and post trade risk and information businesses and reshape global broking in response to the structural changes in the marketplace.”

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