[PPT] - Annual Results Presentation London, 19 May 2009 These materials do PowerPoint Presentation

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Annual Results Presentation

London, 19 May 2009

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These materials do not constitute an offer to sell or the solicitation of an offer to purchase any security. These materials contain "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current Company expectations and are subject to risks and uncertainties, which could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to: fluctuations in interest rates and foreign currency exchange rates; market acceptance

f new trading technologies; global and regional economic conditions and legislative,

regulatory and political developments; and domestic and international competition in the Company's global markets. Additional information regarding these and other factors is available in the Company's reports available on request from the Company. This document may not be distributed where to do so would be unlawful. This document may not be distributed in the UK except to persons falling within article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001.

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Strong growth in revenue, profit, EPS and dividend Revenue Profit* EPS** +9% +5% +23%

* Pre-tax profit before amortisation and impairment of intangibles arising on consolidation and exceptional items. ** Adjusted basic *** Proposed full year dividend

Financial results

DPS*** +9%

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Matthew Lester Group Finance Director

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Financial summary

Top and bottom line growth in challenging markets
Continuing to invest in growth areas
Investments impact margins
Cost reduction to mitigate bottom line impact
Another year of strong cash generation
Robust balance sheet

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6

Group profit before tax

Prior VAR Year vs PY Year to 31 Mar 09

(2)%

Impact of acquisitions and investments on margin

25% 23% Margin Mar 08 Mar 09 346 9 (24) 361 (1,240) 1,601

£m

5% 330 Profit before tax* 80% 5 Associates n/m (7) Net finance charge 9% 332 Operating profit* (28)% (972) Net operating expenses* 23% 1,304 Revenue

£m

Underlying Growth

4
2

2 4 6 8 10

Revenue Operating profit

3% (3)%

%

* Before amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying growth excludes the impact of foreign exchange and net acquisitions.

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Segmental analysis

(11)ppt 44% Margin 5% 23 Operating profit 30% 52 Revenue Information +0ppt 39% Margin 18% 126 Operating profit 19% 324 Revenue Electronic (including post trade) (3)ppt 17% Margin 4% 212 Operating profit 24% 1,225 Revenue Voice

Headline variance vs prior year £m Year to 31 Mar 09

15
10
5

5 Revenue Operating profit Voice Electronic

Underlying Growth

The above table excludes amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying growth excludes the impact of foreign exchange and net acquisitions.

%

5% (9)% 2% 4% Operating profit Revenue

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Analysis of ICAP operating profit

Voice Electronic Information

6% 35%

Operating profit* Year to 31 March 09

59%

7% 32% 61%

*Operating profit excludes amortisation and impairment of intangibles arising on consolidation and exceptional items.

08/09 £m Post-trade financials (including share of associate) 87 43 Pro-forma revenue Pro-forma operating profit

Traiana

Associates

TriOptima (40% stake)
Reset

Subsidiaries Post-trade business

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EMEA

27% 24% Margin Mar 08 Mar 09 173 (556) 729

Year to 31 Mar 09 £m

4 Operating profit (26) Net operating expenses 20 Revenue

Headline variance vs prior year %

Underlying Growth

2 4 6 8 10

Revenue Operating profit

The above table excludes amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying growth excludes the impact of foreign exchange and net acquisitions.

8% 3%

%

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10

Americas

Underlying Growth

20
15
10
5

5 10

Revenue Operating profit

The above table excludes amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying growth excludes the impact of foreign exchange and net acquisitions.

24% 21% Margin Mar 08 Mar 09 138 (506) 644

Year to 31 Mar 09 £m

7 Operating profit (27) Net operating expenses 22 Revenue

Headline variance vs prior year %

(4)% (13)%

%

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11

Asia Pacific

Underlying Growth

5 10 15

Revenue Operating profit

The above table excludes amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying growth excludes the impact of foreign exchange and net acquisitions.

22% 22% Margin Mar 08 Mar 09 50 (178) 228

Year to 31 Mar 09 £m

39 Operating profit (37) Net operating expenses 37 Revenue

Headline variance vs prior year %

12% 9%

%

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12

Net operating expenses

900 950 1,000 1,050 1,100 1,150 1,200 1,250 1,300 Year to Mar 08 FX & Performance bonus Acquisitions Investments / Increased IT Cost Savings Re-org costs Year to Mar 09

Year to 31 March 09

Acquisitions

Link Brokers
Traiana
Shipping

New initiatives Cash Equities

UK, US & AP

Emerging markets

Brazil

Credit

US CDS

Innovation

Patent
LME

Investments

13%

% point

movement

972 32 94 6 95 1,240 44

£m

The above table excludes amortisation of intangibles arising on consolidation and exceptional items.

12 (15)

Bonus FX Acquisitions Investments IT

15% (1)% 1%

16%

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Impact of investments

56% 59% Staff compensation as a % of revenue £499k £560k Revenue per voice broker 12% 11% IT Spend as a % of revenue 20% 28% Revenue from new business started or acquired in last 3 years

Year to 31 Mar 08 Year to 31 Mar 09

.

45

Reallocated 2,304 Voice brokers (Mar 09) + 213 Focus areas 2,136 Voice brokers (Mar 08)

Voice broker increases

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Impact of foreign exchange

65

95% @ €1.27/£ Hedged 2009/10 85% @ $1.64/£ Hedged 2009/10

14 1 13 Euro 20

Transactional £m

12

Transactional* £m Total £m Translational £m

Estimated impact at current FX rates for 2009/10 on operating profit*** 51 31 Dollar 42 30 Profit increase

Total £m Translational** £m

Impact on 2008/09

perating profit

* Effective transactional rates for year to 31 March 2009 are $1.92/£ and €1.36/£ ** 2008/09 yearly translational rates of $1.72/£ and €1.21/£ *** Assumes average rates of $1.50/£ and €1.10/£ for 2009/10

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Earnings

* Before amortisation and impairment of intangibles arising on consolidation and exceptional items. Note: At reported exchange rates. Adjusted weighted average number of shares year ended March 09 - 634m (March 08 - 635m) .

15.65p 17.05p Full year dividend (11)

Exceptional items

178 186 Profit for the year 168 175 Attributable to: Equity holders of parent 10 11

Minority interests

26.4p 27.6p Earnings per share – basic (44) (65) Amortisation and impairment of intangibles 31.3p 34.1p Earnings per share – adjusted basic (97) (95) Tax 330 346 Profit before tax*

Year to 31 Mar 08 £m Year to 31 Mar 09 £m

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Movement in free cash flow

229 206 166 Profit pre amortisation* 296 232 190 Free cash flow 26

Year to Mar 08 £m

67 24 Cash > Profit

Year to Mar 09 £m Year to Mar 07 £m Profits vs free cash flow

232 296 Free cash flow 7 5 Dividends from associates and investments (43) (63) Capital expenditure 268 354 Cash flow from operating activities (95) (101) Interest and tax 363 455 Cash from operations

Year to 31 Mar 08 £m Year to 31 Mar 09 £m Calculation of free cash flow

363 455 41 11 7 33

200 250 300 350 400 450 500 Mar-08 Net impact of initially unsettled items Cash impact of exceptional items Operating Increase in cash Mar-09

Cash from operations

Working capital Trading

* Profits after tax excludes amortisation and impairment of intangibles arising on consolidation.

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Net borrowings

Movement in net borrowings

150
100
50

50 100 150 200 250 Mar-08 Free cash Dividends and share buybacks Acquisitions Other Mar-09

(59) (200) 296 (132) (126) (31) £m

Free Cash

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Free cash flow & balance sheet

Equity derivatives Link Principal Acquisitions Post-trade services Reset minority buyout £190m FCF post dividend £(106)m Dividends paid £296m Free cash flow Free cash flow £(126)m £(559)m £433m Net debt 1.4x 31 March 2009 Gross debt Cash Gross debt/EBITDA As at 31 March 09 Strong balance sheet

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Financial summary

Top and bottom line growth in challenging markets
Continuing to invest in growth areas
Investments impact margins
Cost reduction to mitigate bottom line impact
Another year of strong cash generation
Robust balance sheet

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Mark Yallop Group Chief Operating Officer

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A reminder: ICAP goals and strategy

To be the leading global intermediary and post-trade services provider

in the wholesale OTC markets

35% share of overall market revenues
50% of profit derived from electronic broking
To generate superior EPS growth for our investors
Build and maintain close long term relationships with customers
Leverage people and technology in a unique business model
Provide customers with more efficient electronic execution and post-trade services,

reduced integration costs and deep liquidity across a wide product range

Extend product and service innovation
Grow the business, both organically and by selective acquisition

Goals

Strategy

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Improving conditions for our customers

Many ICAP customers reported record trading

results in Q1 2009

Aggregate revenue¹ gains across nine firms;

$17.6bn

VaR levels increased
Businesses prospering

– FX – Interest Rates – Flow Credit – Commodities

Overall hedge fund performance² +4.2% year

to date. Stronger growth in emerging markets, fixed income and commodities

“Flow monsters” capturing additional market

share and wider bid-ask spreads

10
5

5 10 15 J P M C S M S D B * B

f

A C i t i G S B N P B a r c a p Q108 Q109

$121 $140 $174 Credit Suisse

* includes credit portfolio VaR

$336 $327 $112 JP Morgan* $115 €141 $105 €134 $99 €118 Morgan Stanley Deutsche Bank $240 $197 $157 Goldman Sachs Q1 09 Q4 08 Q1 08 Average daily trading VaR (USDm) Q1 revenues of bank fixed income trading divisions

$USbn

1. HFRI Fund Weighted Composite Index , 07/05/09.
2. Fixed income, currency and commodities divisions

*excl. writedowns

Source: Company announcements Converted at average FX rates Q1 08 $1=€1.55,£1.99, CHF0.98; Q1 09 $1=€1.30, £1.43, CHF0.87.

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Voice business benefiting from market turmoil

Voice business is benefiting as trading goes

“back to basics”

Value of voice brokers and price discovery

mechanism increased

Customer shift to liquid, high volume flow

products benefits ICAP’s rates business; – High trading volumes as “risky” assets are liquidated – High trading volumes in “safe haven assets”

Shift to longer dated maturities in the interest

rate swap market

Wider spreads in matched principal markets,

as for banks

Structured products remain a very small % of

ICAP business

413 454 499 560 2006 2007 2008 2009

Revenue per voice broker in £000’s Total interest rate swaps volume by deal duration 20 40 60 80 100 >10 year 5-10 year 2-5 year <2 year

Mar 07 Mar 08 Mar 09

%

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ICAP’s electronic business continuing to progress

Resilient performance in electronic broking
Volumes stabilising after very high levels of

last year; prime brokered proportion increasing

Fixed income well positioned to benefit from

government bond issuance

Number of active EBS customers increasing
Some temporary shifts in voice/electronic split

in markets that have not yet gone fully electronic

Medium term trend to electronic trading

boosted by: – cost pressures on banks – the “Geithner effect”

250 300 350 400 A p r

7

J u n

7

A u g

7

O c t

7

D e c

7

F e b

8

A p r

8

J u n

8

A u g

8

O c t

8

D e c

8

F e b

9

A p r

9

Total active EBS customers

0% 5% 10% 15% 20% 25% 30% 35%

A p r

7

J u n

7

A u g

7

O c t

7

D e c

7

F e b

8

A p r

8

J u n

8

A u g

8

O c t

8

D e c

8

F e b

9

A p r

9

Prime % EBS Volume Share

EBS Prime as a % of ADV in USD (bn)

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OTC regulatory reform

Extract from G20 Washington summit communiqué …Supervisors and regulators..should: speed efforts to reduce the systemic risks of CDS and over-the-counter (OTC) derivatives transactions; insist that market participants support exchange traded or electronic trading platforms for CDS contracts; expand OTC derivatives market transparency; and ensure that the infrastructure for OTC derivatives can support growing volumes.

September 2005 NY Fed CDS Industry Group November 07 MIFID October 08 Major Dealers commitments to NY Fed October 08 ICAP OTC White Paper November 08 G20 Summit November 08 EU Working Group

n Derivatives

April 09 G20 Statement

f Intent

May 09 US OTC regulatory reform announcement

Regulatory Reform OTC Derivatives (Letter to Hon. H Reid, May 13) “Market efficiency and price transparency should be improved…by requiring the clearing of standardised contracts through regulated CCPs and by moving the standardised part of these markets onto regulated exchanges and regulated electronic trade execution systems …and by requiring development of a system for timely reporting of trades… “Competition between appropriately regulated OTC derivatives markets and regulated exchanges will make both sets of markets more efficient and thereby serve end users of derivatives.” “I am confident that these amendments…will allow market participants to continue to realise the benefits of both standardised and customised derivatives… “We will need to take care that in doing so we do not call into question the enforceability of OTC derivative contracts

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OTC market structure: the past

Voice broking Dealer 1 Portfolio compression, etc Dealer 3 Dealer 2 Dealer n Ancillary Services Electronic OTC Marketplace

Majority of derivatives trades transacted

by voice intermediation

Minority of derivatives trades transacted

electronically

Significant regulated electronic markets

for cash (FX, govts)

Clearing/Settlement

Majority of trades settled

bilaterally

Some use of CCP in some

markets (e.g. IRS)

Dealer 1 Dealer 2 Dealer n Dealer 3

Bilateral Settlement

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OTC market structure: the future

Clearing/Settlement

Majority of vanilla trades given

up to CCP

Structured or exotic trades

settled bilaterally

Transparency for regulators Voice broking Electronic marketplace(s) Trade Information Warehouse(s) Trade reconciliation systems CCP 1 Portfolio compression, etc Dealer 1 Dealer 2 Dealer n Dealer 3 CCP n CCP 2 Dealer n Dealer m OTC Marketplace

Majority Regulated e-markets
Electronic (usually cleared)

– Smaller-medium size, short dated – “Vanilla”

Voice (cleared or bi-lateral)

– Larger size, longer dated – Structured or “exotic”

TIW/Reconciliation

Complete record of all trades
Regulator overview of total firm and

systemic risk

Ancillary Services

Bilateral Settlement

~75% ~25%

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Importance of continued investment in new business

12 20 28 16

5 10 15 20 25 30 35 40 45 50

2005/6 2006/7 2007/8 2008/9 Revenues for New Businesses* 2005/6 – 2008/9 Investment in focus business areas in 08/09 %

* Revenue derived from businesses acquired or started in the previous three years

Cash equities

Launch of global non-conflicted, agency-only cash equity

broker in Europe, the US and Asia, hired 76 staff

Acquired and integrated equity derivatives broker Link

Credit

Investment in new high yield bond desk
Building credit desks in US and Asia and e-platform

Commodities/transport

Integration of leading tanker broker - Capital shipbrokers
Investment in US emissions trading, soft commodities
Investment in LME base metal broking

Emerging markets

Establishing domestic Brazilian business, organically and

through agreement to acquire domestic broker Arkhe

Electronic market

Continued investment in our electronic broking platforms

Post-trade

Investment in development of Traiana and Reset

09/10 08/09 07/08 Significant investment

Emerging Markets
Commodities
Credit
Cash equities

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29 Revenue highlights from our markets *

ICAP’s diverse business mix

ICAP group revenues by asset class (£m) Rates FX Credit Equities Commodities Emerging Markets

Rates +20%: Strong global performance

in plain vanilla interest rate products – swaps, government bonds, options

FX +10%: Increasing number of EBS

customers

Emerging markets +1%: Expansion in

Brazil with acquisition of Arkhe

Credit +23%: Corporate bond revenues

up on wider spreads, structured business subdued

Equities +86%: Integration of Link and

build out of global cash equities

Commodities +21%: Record revenues

in commodities – oil, natural gas and carbon emissions. Dry bulk shipping market down; tanker market more resilient

*Revenues on a headline basis

8% 9% 10% 10% 12% 13% 13% 6% 9% 9% 13% 11% 11% 10% 8% 8% 15% 16% 14% 53% 44% 42% 42% 14%

FY 2005/2006 FY 2006/2007 FY 2007/2008 FY 2008/2009

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ICAP and Post-Trade Services

What are we trying to do?

Cut trade processing costs and increase

capacity

Reduce operational, market and credit risk
Increase customer footprint by offering

“open” platforms How are we going to do it?

Leveraging technology
Exploiting the “network” effect
Aligning with the sell-side
Minimal disruption to existing market

structure and workflows

Focusing on transaction fees, not

software/solution licensing

Leveraging intellectual capital

Post-Trade: a $22bn opportunity ICAP objectives

Listed Markets FX, Cash Rates OTC Derivatives ~$8.0bn ~$5.0bn ~$9.0bn Annual Cost Daily Transactions ~49.0m ~1.0m ~0.3m ~$22.0bn Source: BCG

1 10 100 1,000 1 10 100 1,000 10,000 100,000

2007 Avg. cost per trade ($)

Avg. number of daily trades (K)

Cash equities Listed Derivatives FX Rates FX Derivatives IRD CDS Commodity Derivatives OTC Eq Deriv.

Volume increase = 5 x cost reduction

Post-Trade: why all the bother?

~51m

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31 TBD

Post-trade opportunities

Nostro Recs Collateral Management

Accounting Processes Risk Management Operational Processes Pre-Trade and Trade

Static Data Compliance Matching, Affirmation Confirmation Customer Valuations General Ledger Postings VaR, Stress Calcs Risk Management Regulatory Reporting Portfolio/Deal Valuations Deal Entry Deal Pricing

Life Cycle Activity Business Opportunity

Legacy infrastructure/processes

constrain volume growth, increase costs and risk

Major opportunities: Pre-booking,

aggregation, netting, confirmation, limit monitoring, allocation services

Growth of OTC Clearing and related

services

Revenue model

High cost/ risk of managing

collateral; huge manual effort required

No standard industry solution for

buy or sell side

Need for centralised margin service
Counterparty risk management high
n customer agendas
Dealers under pressure to reduce

credit risk, capital, operational risk

Portfolio managers want to reduce

2nd order risks Clearing & Settlement

Fee per transaction processed Transaction fees on deal volumes eliminated or risk reducing trades executed

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Post-trade platform volumes

Nominal volume of Reset matches (US$ trillion)

27 30 49 57 79 87 142 233 269 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 1.1 1.9 2.6 4.5 6.0 7.2 10.0 10.0 10.1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2007 2008 2007 2008

Number of trades (‘000) terminated by TriReduce Average Harmony Message Center transactions per day (000s) Number of trades (m) reconciled by TriResolve

500 652 428 199 56 47 2003 2004 2005 2006 2007 2008 Q1 2009

1,710 62 57 41 45 40 28 22 20 24

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009

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The macro outlook remains encouraging

1. Global “mega trends” still favour our business

Shifting demographics
Economic power migrating towards emerging markets
Mounting pressure on natural resources
Work out of huge trade, financial imbalances
Accelerating pace of change driven by technology
Growth of derivatives to manage risk more efficiently
Consequential impact on equity, commodity/transport, credit markets and

infrastructure supporting all wholesale markets 2. Restructuring of global financial market infrastructure will create huge

pportunities for ICAP

3. Retrenchment in banking will create significant new business

pportunities for an un-conflicted, independent broker

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Key changes in the environment in 2009

Three new themes have emerged in global financial markets 1. Reduction in risk capital

Significant reduction for both buy-side and sell-side
Highly differentiated impact by firm
Highly differentiated impact across business lines
Significant impact on prime broking

2. Increased regulatory oversight

Demand for improved transparency
Increased demand for clearing of OTC markets
Increased scrutiny of business practices
Increased scrutiny over compensation

3. Demand for improved operational and capital efficiency

Need for lower costs
Need for improved post trade operations

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Opportunities in 2009

ICAP Business Investment/Opportunities Themes

Reduction in risk capital and cost Increased regulatory oversight and demand for greater transparency Demand for improved operational and capital efficiency

Increase in commoditised, flow product trading
Wider spreads on cash products
New opportunities in clearing and post trade ………..
Potential consolidation of IDB market
Greater acceptance of electronic trading
Clearing for OTC derivatives
Ancillary post trade services to facilitate regulatory oversight
Greater acceptance of electronic trading
Ancillary post trade services to reduce operational and credit

risk

Global macroeconomic and demographic trends drive investment in our focus areas

Equities – Geographic expansion
Credit – Electronic trading
Emerging markets – Brazil, India, China
Commodities – soft commodities, US emissions, iron ore,

uranium

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ICAP/CLS joint venture: Streamlining FX settlement

The development of FX market posed significant challenges Joint venture reduces risk in the FX markets

New aggregation service will reduce tickets, reduce risk and

increase capacity in a regulated environment, targeting small value high velocity trades

Key FX banks are founding members
Increased transaction based revenues for Traiana
Increased volumes on overall market and EBS increase ICAP

revenues

Traiana becomes a platform for future growth in the global,

regulated FX infrastructure

Prime brokerage volumes 40% of daily FX flow
Algo and high velocity traders trade higher volumes of a

smaller size and retail FX introduced massive new participation

Increased pressure on back office systems and capacity;

unable to cope with volume or changed fast enough

Disconnect between front and back office cost distribution -

front office revenues are ‘per million’ driven, processing is ‘per ticket’

0% 10% 20% 30% 40% 50% Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09

Trend in proportion of small value (<1M.) trades settled through CLS Group

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Summary

ICAP’s business model and diversity of activities is a major

source of strength

Our strategy prepared us well for the current financial crisis
Likely future changes in both execution and post-trade create

significant opportunities for ICAP

Short term performance is lapping an extraordinary 2008
We are sticking to our strategy: investing to take advantage of

these opportunities while keeping tight control on costs

We have a clear record for delivery on strategy

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Annual Results Presentation

London, 19 May 2009

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Investor Relations: Mike Sheard Director of Corporate Affairs +44 (0) 20 7050 7103 mike.sheard@icap.com ICAP plc 2 Broadgate, London EC2M 7UR +44 (0) 20 7000 5000 www.icap.com