2016 Preliminary Results 2016 Preliminary Results 14/03/2017 2 TP - - PDF document

2016 Preliminary Results 2016 Preliminary Results

14/03/2017

John Phizackerley Jo ac e ey

Chief Executive

TP ICAP 2016 Preliminary Results 2

Agenda

Introduction John Phizackerley 2016 highlights John Phizackerley Key financials Andrew Baddeley Business update John Phizackerley Business update John Phizackerley Q & A

3 TP ICAP 2016 Preliminary Results

2016 financial and operational highlights p g g

TP ICAP 2016 Preliminary Results 4

2016 financial highlights

Strong financial progress

• Revenue £891 5m (2015: £796 0m)

Revenues 2012 – 2016 (£m)

• Revenue £891.5m (2015: £796.0m)
• Operating profit £131.5m

(2015: 107.9m)

• Operating margin 14 8%

850.8 803.7 703 5 796.0 891.5

• Operating margin 14.8%

(2015: 13.6%)

• Profit before tax £121.6m

(2015: £93.7m)

703.5

( )

• Basic EPS 42.5p (2015: 32.2p)
• T
• tal dividend 16.85p per share

(2015: 16.85p) ( p)

TP ICAP 2016 Preliminary Results 5

2016 operational highlights

• Completion of acquisition
• Integration under way
• Strategic reorganisation complete
• Introduction of CRM
• New product launches in data business
• Hiring the next generation of brokers
• Conduct and Culture

6 TP ICAP 2016 Preliminary Results

Andrew Baddeley d e adde ey

Chief Financial Officer

TP ICAP 2016 Preliminary Results 7

Key financials y

TP ICAP 2016 Preliminary Results 8

Tullett Prebon Revenue by product group

£m (2015 at constant exchange rates) 2016 2015 Change Energy and Commodities 245.3 221.9 +11% Interest Rate Derivatives 143.6 144.1 +0% Fixed Income 183.0 184.8

• 1%

Treasury Products 194.1 198.6

• 2%

Equities 57.3 50.4 +14% Information Sales and RMS 68.2 56.1 +22% Revenue at constant exchange rates 891.5 855.9 +4% Exchange translation (59.9) g Revenue as reported 891.5 796.0 +12%

TP ICAP 2016 Preliminary Results 9

Tullett Prebon Underlying operating profit and margin by region by region

Underlying operating profit Margin £m 2016 2015 Change 2016 2015 Reported EMEA 97.7 81.2 +20% 20.3% 17.8% Americas 18.2 14.9 +22% 6.5% 6.4% Asia Pacific 15.6 11.8 +32% 11.9% 11.1% 131.5 107.9 +22% 14.8% 13.6%

TP ICAP 2016 Preliminary Results 10

Investment in Operational Capabilities

Increase in management and support costs due to investment in:

• IT Infrastructure including Belfast support services centre
• Legal & Compliance
• Conduct & Risk
• Customer Relationship Management
• HR (recruitment, performance management, training)
• Marketing & Communications

g

TP ICAP 2016 Preliminary Results 11

Tullett Prebon Underlying profit and loss

£m 2016 2015 Revenue 891.5 796.0 Operating profit 131.5 107.9 Net finance expense (9.9) (14.2) Profit before tax 121.6 93.7 Tax (22.1) (17.5) Associates and joint ventures 4.0 2.6 Non-controlling interests (0.5) (0.4) Earnings 103.0 78.4 g Weighted average shares in issue 242.3m 243.6m Basic EPS 42.5p 32.2p

TP ICAP 2016 Preliminary Results 12

Effective rate of tax 18.2% 18.7%

Tullett Prebon Exceptional and acquisition related items

£m 2016 2015 j l l i Major legal actions

• 64.4

Cost improvement programme (5.2) (25.7) ICAP Acquisition related costs (16.8) (12.1) ICAP Integration costs (19.3)

• Acquisition related share-based payment charge

(16.3) (10.5) Amortisation of intangible assets arising on acquisition (1.4) (1.2) Other acquisition and disposal items (2.8) (0.9) Acquisition related finance expense (6.6) (2.0) q p Pension Scheme Settlement Gains 3.6

• (64.8)

12.0

TP ICAP 2016 Preliminary Results 13

Tax relief/(charge) 5.0 (7.5)

Tullett Prebon Earnings, EPS and Dividends

£m 2016 2015 Underlying Earnings 103.0 78.4 Exceptional and acquisition related items (net of tax) (59.8) 4.5 Reported Earnings 43.2 82.9 Weighted average shares in issue 242.3m 243.6m Underlying EPS 42.5p 32.2p

• Full year dividend 16.85p (2015: 16.85p)

Reported EPS 17.8p 34.0p

TP ICAP 2016 Preliminary Results 14

TP ICAP 2016 Unaudited Pro forma C 0 6 U aud ted

• o

a

TP ICAP 2016 Preliminary Results 15

TP ICAP 2016 Pro forma Income Statement

Dec-16 TP Dec-16 ICAP1 Dec-16 Pro forma1 Revenue 891.5 795.1 1,686.6 Operating profit 131.5 108.0 239.5 Operating profit margin 14.8% 13.6% 14.2% Finance income 5.3 3.0 8.3 Finance costs (15.2) (1.0) (16.2) Profit before tax 121.6 110.0 231.6 Tax (22.1) (30.0) (52.1) Eff ti t t 18 2% 27 3% 22 5% Effective tax rate 18.2% 27.3% 22.5% Share of JVs and associates less non-controlling interests 3.5 4.9 8.4 Net income pre exceptionals 103.0 84.9 187.9 Total exceptionals (59.8)

• (59.8)

p ( ) ( ) Net income after exceptionals 43.2 84.9 128.1 Weighted average basic shares in issue 242.3 310.3 552.6 Underlying Basic EPS 42.5p 27.4p 34.0p

TP ICAP 2016 Preliminary Results 16

1 Unaudited

Reported EPS 17.8p 27.4p 23.2p

TP ICAP 2016 Revenue

TP ICAP

£234m

Tullett Prebon ICAP

£131m £234m 14% £103m £481m £842m 50% £361m

£1,687m

£131m 15% £103m 13% £481m 54% £361m 45%

£892m £795m

£280 £611m 36%

EMEA Americas EMEA Americas EMEA Americas Asia Pacific

£280m 31% £331m 42%

Americas Asia Pacific Americas Asia Pacific

TP ICAP 2016 Preliminary Results 17 Note: Unaudited pro forma

With the transaction complete, integration has begun

Signing November 2015 Closing December 2016 Execution Design Foundation

• Strategic vision
• Set-up integration project organisation
• Implement Day 1 organisational structure and deliver

Strategic vision

• High level business

model

• Business plan, target

synergies and baseline Set up integration project organisation and structure overall integration plan

• Design detailed target operating

models

• Design new governance structure and
• Implement Day 1 organisational structure and deliver

‘quick wins’

• Embed governance structure and
• rganisational model
• Integrate operational and IT platforms

y g facts g g accountabilities

• Secure synergy commitment and

timetable for realisation g p p

• Monitor and drive attainment of synergies
• Build new teams; reassure, retain and motivate key talent;

establish a new working environment and a new culture

• Develop and embed CRM across business lines
• Consolidate Risk & Financial management and reporting
• Rationalise office footprint and vendors

TP ICAP 2016 Preliminary Results 18

TP ICAP Synergies

Synergies of £80m by 2019 with a stretch target to achieve £100m by 20201

90 100

Illustrative Cumulative Synergies

1

£10m £60m £80m £100m 100.0 20

50 60 70 80

£ million

241.0 20 50

10 20 30 40

ns

10 2017 synergies 2018 synergies 2019 synergies 2020 synergies Cost to Achieve1 £40m £40m £20m £10m

TP ICAP 2016 Preliminary Results 19

1 Unaudited

IT Integration

• A large and complex project
• Delivery over the next three years
• Approximately 40% of our synergy target

Four Integration Principles

y y SINGLE IT STACK M AXIM ISE FUNCTIONAL M INIM AL CLIENT

Use existing Tullett Prebon software Design and deliver a standardised IT Deliver a functionally rich solution that maintains Ensure minimal impact to client and broker

SINGLE IT STACK M AXIM ISE SYNERGIES FUNCTIONAL PARITY M INIM AL CLIENT IM PACT

Tullett Prebon software and infrastructure as the foundation for the combined organisation a sta da d sed

• rganisation that yields

financial synergies, low delivery risk, and a strategic platform existing service offering and delivers operational efficiency to c e t a d b o e communities

TP ICAP 2016 Preliminary Results 20

TP ICAP Debt profile, refinancing and interest cost

£m December 2016 June 2016 December 2015 7.04% Sterling Notes July 2016

• 141.1

141.1 5.25% Sterling Notes June 2019 80.0 80.0 80.0 3.5% Bank bridge loan 470.0

• Unamortised issue costs

(3.2) (0.6) (0.9) 546.8 220.5 220.2

Refinancing

• Successful refinancing of bank bridge loan in January 2017 with issue of £500m 5.25% senior unsecured 2024 notes
• Net interest costs expected to be approximately £28m

Committed facility

• £250m RCF currently undrawn

TP ICAP 2016 Preliminary Results 21

TP ICAP Tax, JVs, associates and non-controlling interests

• T

ax rate expected to be approximately 26% going forward

• Increase in rate expected due to:
• Increase in rate expected due to:

— Higher proportion of profits from the US — The full utilisation of losses brought forward in TP that had sheltered i US fit previous US profits

• JVs, associates and non-controlling interests are expected to be broadly

in line with 2016

TP ICAP 2016 Preliminary Results 22

TP ICAP Exceptionals

• PVM acquisition related expenses approximately £9m
• Amortisation of intangibles approximately £29m
• T

ax on exceptionals at underlying tax rate - 26%

TP ICAP 2016 Preliminary Results 23

TP ICAP Balance sheet

£m 2016 2016 Goodwill & other intangibles 1,783.2 Other non-current assets 165.5 Current assets less current and non-current liabilities (167.8) C h d fi i l t 785 6 Cash and financial assets 785.6 Pension assets / obligations 96.7 Deferred tax liabilities (197.3) Interest bearing loans and borrowings (546.8) Net Assets 1,919.1 Shareholders’ equity 1,897.7 Attributable to non-controlling interests 21.4 Attributable to Shareholders 1,919.1

TP ICAP 2016 Preliminary Results 24

TP ICAP Movement in cash and debt

£m Cash Debt Net At 31 December 2015 379 2 (220 2) 159 0 At 31 December 2015 379.2 (220.2) 159.0 Cash flow 35.2

• 35.2

Dividends (40.7)

• (40.7)

Bank facility arrangements fees (3.8) 3.8

• Repayment of Sterling Notes June 2016

(141.1) 141.1

• Drawdown Bridge Facility

470.0 (470.0)

• Amortisation of debt issue costs
• (1.5)

(1.5) Cash acquired with ICAP subsidiaries 383.5

• 383.5

Debt obligation to NEX acquired with ICAP

• (330.0)

(330.0) Debt obligation to NEX acquired with ICAP (330.0) (330.0) Repayment of debt obligation to NEX (330.0) 330.0

• Effect of movement in exchange rates

33.3

• 33.3

TP ICAP 2016 Preliminary Results 25

At 31 December 2016 785.6 (546.8) 238.8

John Phizackerley

Chief Executive

TP ICAP 2016 Preliminary Results 26

Business update p

TP ICAP 2016 Preliminary Results 27

Tullett Prebon and ICAP broking platforms

TULLETT PREBON TULLETT PREBON TULLETT PREBON

Americas EM EA Asia

ICAP ICAP ICAP Trading tpAGENCY tpCREDITDEAL tpENERGYTRADE tpEQUITYTRADE Trading tpCREDITDEAL tpENERGYTRADE tpFORWARDDEAL tpREPO Trading tpFORWARDDEAL tpREPO tpSWAPDEAL tpTRADEBLADE FXO Trading iSwap ICAP Options ETC (matching engine GTN) Trading i-Swap ICAPinflation ICAPOptions WCLK Trading i-Swap ICAPOptions ETC (matching engine GTN) FUSION ( hi tpFORWARDDEAL tpREPO tpSPOTDEAL tpSWAPDEAL tpTRADEBLADE FXO tpSPOTDEAL tpSWAPDEAL tpTRADEBLADE FXO Algorithmic M atching tpMATCH Algorithmic M atching tpMATCH tpMATCH FXO tpMATCH NDF FUSION (matching engine GTN) iSAM iForwards (Datatec) ETC (matching engine GTN) FUSION (matching engine GTN) FUSION – Equities S b k FUSION (matching engine GTN) iForwards (Datatec) Algorithmic M atching tpMATCH tpMATCH FXO tpMATCH NDF tpMATCH tpMATCH BASIS tpMATCH FXO tpMATCH NDF Auction/ Volume M atching Auction/ Volume M atching tpQUICKDEAL Scrapbook Truequote - Crosstrade ETFX ICAP Energy (Trayport) iForwards (Datatec) Auction/ Volume M atching tpQUICKDEAL tpQUICKDEAL

28 TP ICAP 2016 Preliminary Results

10 arrows

1. Strategically add brokers 2 B ild o r energ b siness 2. Build our energy business 3. Win new all-to-all client business 4. Further monetise Tullett Prebon Information 5. Invest strategically in our IT 6 Adopt a focused and disciplined 6. Adopt a focused and disciplined CRM approach 7. Develop our acquisition and partnership capabilities capabilities 8. Create a robust investment framework 9. Recharge our HR

• 10. Design and market our brand

29 TP ICAP 2016 Preliminary Results

Four global business lines

Global Broking

• Hybrid voice business operating across all major asset classes
• 6 product lines: Rates, FX and Money Markets, Local Markets, Equities and Credit
• Hybrid platforms with rich functionality and variety of execution methods
• Post-trade risk mitigation services business

Energy & Commodities

TP ICAP

• Largest Energy and Commodities franchise
• Diverse customer base
• Highly regarded publications

Business Lines Data & Analytics

• The leading OTC data business by a significant margin
• Reputation for quality assurance
• Breadth and depth of pricing data and suite of sophisticated analytics

Institutional Services

• High-touch, alpha-generating cross asset broking service
• Client base of institutional asset managers and hedge funds
• Building a “one stop shop” service important for many macro funds

30 TP ICAP 2016 Preliminary Results

Building a one stop shop service, important for many macro funds

Global Broking strategic objectives

Maintaining separate brand identities C ti t l it i il iti d diff Co-operating to exploit our similarities and differences Competing and, where appropriate, adopting differing business models per brand

F t ffi ti i ti

A B

Continue to invest in technology and build out electronic presence Front office optimisation

A

Add brokers and services to cover white spaces and deepen existing relationships Accelerate CRM

C D

Hire and develop next generation of talent Embed culture of professional excellence across the business

E F

p

TP ICAP 2016 Preliminary Results 31

Energy & Commodities

Oil Gas Power Renewables Ferrous metals Base metals Precious metals Soft commodities Coal Freight

• Broad range of energy and commodity products
• Natural hedge across our portfolio
• Products covered are both global and domestic

TP ICAP 2016 Preliminary Results 41

Data & Analytics

• T

rack record in global OTC financial and commodity markets

• Global customer base
• Regulatory trends positive
• Strong products and technology
• Attractive future growth potential

TP ICAP 2016 Preliminary Results 33

Institutional Services: delivering new revenue streams

Delivery

• Strategic partnerships with prime brokers clearing and

Objective

• Strategic partnerships with prime brokers, clearing and

execution houses

• Strategic partnerships with banks to outsource sales

for certain products

• Acquisition of existing businesses seeking a larger platform

Strategic partnerships to expand

• ur capabilities

1

• Build cross-asset class sales force to cover clients
• Leverage CRM, and expand to include firm-wide sales engine
• Consider how to maximise liquidity and price discovery

Cross-sell full spectrum of products to existing clients

2

• Provide ease of execution
• Understand and adapt to the needs of clients in a changing

market place

Meet operational needs of this new set of clients

3

• Institutional Assets Under Management forecast to rise from $74 trillion in 2014 to $100 trillion by 2020
• This will generate nearly $300 billion in fees by 2020, constituting 45% of the overall capital markets revenue pool

TP ICAP 2016 Preliminary Results 34

(assuming favourable market conditions and current fee structures)1

1: Boston Consulting Group

Strategic areas of focus

CRM 5 Pill CRM: 5 Pillars

A 1

Grow Revenues

Goals Areas of Focus

Prioritise “white space businesses”; cross selling; pricing optimisation; competitive analysis

A B C 2 3

Focus on Performance Improve Client Relationships Standard performance reports, including brokers and desks; Focus at business head level, institutionalise relationships, become strategic partner

B C C 3 4

Drive Commercial Strategy Focus on Performance

D

Understand client priorities by products/regions; product roadmap; marketing positioning p p g challenge business plans

C D F 5

Manage Client Database

E

Client data and reporting; specific campaigns; integrate in firm information architecture

E

TP ICAP 2016 Preliminary Results 35

Conduct and Culture

• Clear focus on Conduct and Culture
• Investment in:

Legal and Compliance

‐

Legal and Compliance

‐

Risk systems and controls

‐

T raining

‐

Regulatory readiness Regulatory readiness

• Investment in new brand and identity

TP ICAP 2016 Preliminary Results 36

2017 Outlook

• Political & Economic uncertainties

Heightened tensions in global relations

• Heightened tensions in global relations
• Ongoing military and terrorism threats
• Expectations for higher US interest rates

p g

• Political turmoil in UK & Europe
• Further growth in Asia

TP ICAP 2016 Preliminary Results 37

Summary

• Good strategic and operational progress in 2016
• Continued monetary, political and economic uncertainty likely to impact 2017
• Business model well-suited to a higher volatility and interest rate world
• TP ICAP is well-placed to:

‐

Deliver synergies

‐

Build the business

‐

Deliver value to shareholders

TP ICAP 2016 Preliminary Results 38

Q & A Q

TP ICAP 2016 Preliminary Results 39

Appendices pp

TP ICAP 2016 Preliminary Results 40

TP ICAP 2016 Operating Profit by Region

TP ICAP

£23m 9%

Tullett Prebon ICAP

£16m 12% 9% £7m 7% £57m 24%

£240m

12% £18m 14% £160m 67% £62m 57%

£132m £108m

£39m 36%

EMEA Americas EMEA Americas EMEA Americas Asia Pacific

£98m 74%

Americas Asia Pacific Americas Asia Pacific

TP ICAP 2016 Preliminary Results 41 Note: Unaudited pro forma

Tullett Prebon Revenue by region

£m 2016 2015 Change d Reported Constant Europe and the Middle East 480.9 455.3 +6% +2% Americas 279.6 234.5 +19% +6% Asia Pacific 131.0 106.2 +23% +9% 891.5 796.0 +12% +4%

TP ICAP 2016 Preliminary Results 42