These materials do not constitute an offer to sell or the - - PDF document

Full Year Results – Year to 31 March 2012

16 May 2012

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 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 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 g y p p ; p 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 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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Solid performance in difficult markets Solid performance in difficult markets

(3)% up 2.05p 1% to 103%

Headline revenue Dividend growth EPS* growth Conversion of profit to cash

* Adjusted basic

3

Iain Torrens

Group Finance Director

4

Group profit before tax Group profit before tax

Underlying growth

Headline results Year to Mar 12 Year to Mar 11 Change vs.

y g g

£m £m prior year

Revenue 1,681 1,741 (3)%

‐ Revenue

Net operating expenses (1,309) (1,366) 4 % Operating profit 372 375 (1)% Net finance charge (24) (28) 14 %

(3%) 1% (2%) (2%)

Net finance charge (24) (28) 14 % Associates 6 3 n/m Profit before tax 354 350 1 %

(4%) Headline FX Underlying 4% Operating profit

Operating profit margin 22% 22%

3% 2% 2% 4% Operating profit 3% (1%) 2% (2%) ‐ 5

The above table is from continuing operations and excludes acquisition and disposal costs and exceptional items. Underlying growth excludes the impact of foreign exchange.

(2%)

ICAP’s diverse business mix ICAP s diverse business mix

ICAP group revenues by asset class

Group revenues by product (£m) Diversified revenue model (%) p y p ( ) ( )

£1,681m £1,741m

10% 10% 19% 21%

Non bank execution Total subscription Bank execution

29% 31% 704 681 Rates 71% 69%

FY11 FY12 Bank execution

Operating profit by business

336 343

FX

FY11 FY12

33% 21% 25% Post Trade

171 167 211 203

Emerging markets Commodities

54% 59%

46% 41% 33% 34% Electronic Voice

137 133 182 154 FY11 FY12

Equities Credit

6

FY11 FY12

FY11 FY12

Voice

Voice

Year to Mar 12 Change vs.

Voice

Commentary Underlying growth

£m prior year

EMEA Revenue 566 (4)% Operating Profit 106 (6)%

(2%) ‐ Revenue

Operating Profit 106 (6)% Margin 19% 0ppt Americas Revenue 478 (10)%

(7%) 2% (5%) (6%) (4%) (2%)

( ) Operating Profit 42 (36)% Margin 9% (3ppt) Asia Pacific

(8%) Headline FX Underlying ‐ Operating profit

Revenue 128 (4)% Operating Profit 6 n/m Margin 5% 9ppt

(11%) (8)% (6%) (4%) (2%)

Total Voice Revenue 1,172 (7)% Operating Profit 154 (11)% Margin 13% (1ppt)

3% (12%) (10%) (8%) 7

The above table is from continuing operations and excludes acquisition and disposal costs and exceptional items.

Americas

Voice margin movement

Americas

Commentary The story in Brazil g y

35 FY10 FY11 FY12 One offs

14 15

15 30 37 5 15 25 Desk Operating Profit Revenue

14 2 1 13 11 12 13

Americas margin movement

(10) (10) (9) (3) (15) (5) £m 10

Market share %

10 FY11 EMEA Americas Asia Pacific FY12 %

g

8 7 8 6 8 10

2 1 10 12 14

2 4 5 3 2 3 2 4 %

12 9 2 4 6 8

8

FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 % BM&F Bovespa Homebroker

FY11 Credit Rates FY12 %

Electronic

Headline Results Year to Mar 12 Change vs.

Electronic

Average daily volumes £m prior year

Revenue 301 (1)% Operating Profit 127 4 %

900 1000

Reported and underlying change (vs. prior year)

Margin 42% 2ppt

600 700 800

YOY up 3%

p y g g ( p y )

300 400 500 10 15

Operating profit

9% 6 4 3 5

Revenue

1% 100 200

Apr‐11 May‐11 Jun‐11 Jul‐11 Aug‐11 Sep‐11 Oct‐11 Nov‐11 Dec‐11 Jan‐12 Feb‐12 Mar‐12

$bn

5 6 11 5

4%

(2) 6 4 (1) 1

(1)%

US Repos EU Repos Spot FX US Treasuries

• Avg. Daily Vols FY10
• Avg. Daily Vols FY11
• Avg. Daily Vols FY12

5 Reported

• perating profit

gain FX Underlying

• perating profit

gain £m (3) Reported revenue gain FX Underlying revenue gain £m

9

The above tables are from continuing operations and exclude acquisition and disposal costs and exceptional items.

Post trade risk & information

Headline Results Year to Mar 12 Change vs.

Post trade risk & information

Harmony – average daily transactions per month £m g prior year

Revenue 208 13% Operating Profit 91 15%

400 600 800 1,000 1,200 1,400

Reported and underlying change (vs. prior year)

Margin 44% 1ppt

‐ 200 A M J J A S O N D J F M A M J J A S O N D J F M FY11 FY12

Thousands Average daily transactions

Reported and underlying change (vs. prior year) Revenue by product

FY12 FY11 2 15

Operating profit

18% 15%

4 25 30

Revenue

16% 13% 25% 36% Reset and Rematch TriOptima Traiana 25% 38%

12 14 5 10 24 28 20 25

13% 21% 18% Information 20% 17%

Reported

• perating profit

gain FX Underlying

• perating profit

gain

£m

15 Reported revenue gain FX Underlying revenue gain

£m

10

The above tables are from continuing operations and exclude acquisition and disposal costs and exceptional items.

Net operating expenses Net operating expenses

Key movements Fixed vs. variable costs

25 3 20 4 1,350 1,400

FY12 FY11

1,387 20 1,335 1 250 1,300 ,

59% 41% 57% 43% Fixed costs Variable costs

Cost savings (£m)

1,250 Mar-11 Employee costs IT Cost savings Overheads and other costs Mar-12 £m

3 1 Staff

Year to Mar 12 £m Year to Mar 11 £m

16 Overhead IT

Operating expenses 1,335 1,387 Other income (26) (21) Net operating 1 309 1 366 11 Net operating expenses 1,309 1,366

Exchange rate sensitivities Exchange rate sensitivities

Impact of FX on FY12 Transactional(2) Translational(2) Total

Impact of FX on FY12 Operating Profit(1)

Operating Profit(1) £m £m £m

Profit decrease (10) (6) (16)

Impact of FX on FY12 Operating Profit(1)

15 FX impact £(16m) FY13 Hedged Rates % Hedged Hedged Rate 13 (10) 10

USD 82% 1.58 Euro 76% 1.14

13 (6) 5 Estimated impact of 10c movement on FY13 Operating Profit Transactional £m Translational £m Total £m

USD 3 19 22

(3) (5) Underlying Transactional fx Translational fx Reported £m

(1) Operating profit from continuing operations (2) Effective transactional and translational rates for year to 31 March 2012 are $1.60/£ and €1.16/£

USD 3 19 22 Euro 6 4 10

• perating profit

gain

• perating profit

shortfall

12

Earnings – total operations Earnings total operations

Year to Mar 12 Year to Mar 11

Effective tax rate

Mar 12 £m Mar 11 £m % FY11 ETR 26

Profit before tax * 354 350 Effective tax rate 27% 26%

FY11 ETR 26 Settlement of PY matters and

• ther rate / mix changes 1

Effective tax rate 27% 26% Tax (95) (90) Profit for the year * 259 260

FY12 ETR 27

Ordinary shares

Exceptional items

• (15)

Profit for the period from discontinued operations

• 4

No of shares

Acquisition and disposal costs (119) (62) Profit for the year - total operations 140 187 Earnings per share - basic 21 1p 28 7p

• No. of shares

(millions)

Held at 1 April 2011 660 Issued during the year 1

Earnings per share basic 21.1p 28.7p Earnings per share - adjusted basic** 40.1p 39.9p Dividend per share 22.0p 19.95p

Cancelled during the year (1) Repurchased (treasury shares) (14) Held at 31 March 2012 646 13

* From continuing operations and before acquisition and disposal costs and exceptional items. ** From continuing operations

Average for period 649

Acquisition and disposal costs Acquisition and disposal costs

Profit after tax Link

95

300 350 400

• Acquired in 2008 for £176 million
• Integrated with the ICAP business to create the world’s

Total acquisition and disposal costs £119m

354 259 70 18 80 13 140

100 150 200 250

g leading global equity derivatives business

• Operations in London, New York, Hong Kong and Tokyo
• Remains market leading equity derivatives business

Equity derivatives market

100 PBT Tax PAT Amortisation Tax Net goodwill impairments in on Japanese restructuring Profit from total operations £m

• Remains market leading equity derivatives business

Gai r t

Net goodwill impairments (£m)

• Highly competitive market with 40+ competitors
• Lower global volumes as customers have reduced risk
• Move from OTC to exchange trading

(18) 31 (35) (4) Link impairment Other impairment Arkhe tax provision

• Move from OTC to exchange trading
• Significant commission compression

14

(58) provision Arkhe impairment

Movement in free cash flow Movement in free cash flow

Calculation of free cash flow

Year to Mar 12 Year to Mar 11

Cash from continuing operations

£m £m

g p

Cash from ongoing operations 425 363 Interest and tax (113) (86)

26 21

430 450

Short term working capital movements £57m

Cash flow from ongoing operating activities 312 277 Capital expenditure (52) (69) Dividends from associates and investments 8 2

15

410 430

Historic cash conversion

Ongoing free cash flow * 268 210

42 420 425

370 390

300

103%

363

350

Mar-11 Net impact

• f initially

unsettled items Year on year change in restricted funds Cash after timing differences FX on working capital Other Mar-12

£m

218 210 268 150 200 250 300

116% 81% 103%

50 100 £m

15

* Total ongoing free cash flow is ongoing free cash flow adjusted for movements in restricted funds.

FY10 FY11 FY12 £m

Net debt Net debt

Movement in net borrowings Cash and debt

150 31 Mar 2012 31 Mar 2011 £m £m T t l f iliti (953) (927) (161) 268 (135) (56) 2 (82) (50) 50 Total facilities (953) (927) Less: undrawn 324 362 Gross debt (629) (565) Cash 547 404 (250) (150)

£79m

Net debt (82) (161) Restricted cash 50 73 Gross debt : EBITDA** 1.4x 1.3x

(148) Net finance expense

(350)

Mar-11 Free cash Dividends Shares repurchased into treasury Other Mar-12

£m

1 2 1 1 27 29 28 3 24 15 17 19 21 23 25

16

** From continuing operations

15 Mar-11 Private placement interest RCF MTM on Eurobond Dividend received Interest income Mar-12

£m

Solid performance in difficult markets Solid performance in difficult markets

• Profit before tax up 1%
• Post trade and electronic now represent 59% of total operating profit

Post trade and electronic now represent 59% of total operating profit

• Group operating profit margin maintained at 22%
• Recurring cost savings of £20m

Adj t d b i EPS 1% t 40 1

• Adjusted basic EPS up 1% to 40.1p
• Strong cash conversion at 103%
• Dividend up 2.05p to 22.0p

17

Mark Price

Group Chief Operating Officer

18

Changing market landscape

I d l t i t di

Markets are evolving and offer structural growth opportunities

g g p

• Increased electronic trading
• Increased competition as products are standardised
• Increased demands for links to clearing and post-trade automation

AUTOMATION g p

• New capital requirements push banks to reduce leverage and focus
• n fewer products
• n fewer products
• New market participants benefit as banks retrench and focus on

ROE RISK MANAGEMENT

• Regulatory change may blur distinction between certain dealer to

financial client and dealer to dealer markets

• Greater availability of post trade pricing data from electronic /

l d k t cleared markets

• Regulatory changes driving increased demand for market data to
• ffset volatile trading conditions

TRANSPARENCY

19

A consistent strategy

GOAL

gy

We aim to be the infrastructure provider to the world’s wholesale financial markets in both GOAL ACHIEVED THROUGH DELIVERING world s wholesale financial markets, in both execution and post trade Broad, innovative service

• ffering

Optimised people, systems and processes WHICH LEADS TO Superior shareholder returns Leading market position

20

Prepared for the new world Prepared for the new world

Market evolution ICAP response

• Expanding electronic product offering
• Comprehensive Voice capability combined with

electronic expertise means premier hybrid offerings AUTOMATION

• Strong and growing post trade presence supporting

automation and risk reduction

• ICAP focused on liquid rather than structured products

DIVER

q p (Rates / FX are our core strengths)

• Our strength in existing broker-to-customer markets

(e.g. Commodities) show we can work with all market ti i t

RSIFIED C

RISK MANAGEMENT participants

• Already operate open architecture electronic product
• fferings in major products

CAPABIL

• ICAP data is largely post trade especially in electronic

trading and this will become increasingly valuable

• Steadily increased data offering to provide valuable,

annuity like revenue stream and complement

LITY

TRANSPARENCY annuity like revenue stream and complement transactional businesses

21

Voice broking development Voice broking development

Market and regulatory changes mean that voice broking will fall into three

ICAP Activity

that voice broking will fall into three business models

• Securities

Global Commodities

– Strengthened presence in Shipping and Asia Pacific region with the acquisition of Island Shipbrokers – Expansion into European alternative fuels via the acquisition of

Voice - no migration

Relatively unchanged

• Securities
• Emerging

markets

• Physical

commodities p p q Sun Commodities

Emerging Markets

– Brazil revenue growing 25%; aiming for run-rate break-even in late FY13

35%

Voice - in migration (to hybrid/

• Predominantly

FY13

42% Rates and CDS

– iSwap already regulated by the FSA as an MTF. Once the rules are published iSwap will also provide a SEF compliant hybrid

hybrid/ electronic)

Regulatory focus

y derivatives

42%

venue for trading USD OTC IRS – CDS index – over 80% of ICAP volumes already traded on hybrid platforms

Voice - post migration

Already highly l t d/ t t d

• FX
• Government

bonds

• Futures and

ti ICAP

Financial Futures & Options (F&O)

– Strengthen global F&O business by hiring 31 former MF Global employees, – Aiming to be a top 5 futures broker globally (already in the top 3 in

23%

regulated/automated

• ptions

22 ICAP voice revenues Aiming to be a top 5 futures broker globally (already in the top 3 in Europe)

Hybrid: providing execution choices

Reported as Electronic

y p g

Voice Electronic Hybrid

Reported as Voice

+

Voice Electronic Hybrid

Q t d i k t C ti Li idit

+

S i id i d t di

• Quote driven markets
• Anonymous negotiation
• Episodic liquidity
• Fewer market makers
• Continuous Liquidity
• Order driven market
• Many market participants
• Standardized Instruments
• Screen prices provide increased trading

transparency

• Leverage broker ability to identify trading

interest

• Anonymous negotiation or order driven
• Complex instruments
• Periodic trading activity
• Large notional amounts
• Continuous pricing
• Smaller notional amounts
• No broker interface
• Anonymous negotiation or order driven
• Combine voice and electronic liquidity
• Increased automation improves STP and

access to clearing

• Allows additional trading options such as

Allows additional trading options such as Fixings 23

ICAP Credit Webtrader DerivX Options MetalX PriceFeed

Electronic broking Electronic broking

Volumes and operating profit

• Existing growth from EBS and BrokerTec,

supplemented by newer platforms such as iSwap and MyTreasury

£122m £127m 1,000

• We continue to strengthen the business:
• New EBS management team
• Recent successful global BrokerTec upgrade we believe

151

152

£100m

600

800

Recent successful global BrokerTec upgrade we believe provides fastest platform for electronic fixed income trading – market share already climbing

• iSwap: Ready to launch a SEF compliant electronic platform

for USD swap trading

219

260 281 135

400

for USD swap trading

• Growth in emerging markets: increase in CNH and RUB

volumes and launch of new currency pairs Past investment in our leading network connectivity to the

166 220 237

200

• Past investment in our leading network connectivity to the

market provides significant competitive advantage

110

147 130

• 2010

2011 2012 ADV $bn

US Treasury US Repo

24

y p

EU Repo Spot FX Operating profit (£m)

Double digit growth in Post Trade Double digit growth in Post Trade

Revenue growth

• Post trade businesses are focused on ICAP’s

key markets:

• Rates & Credit: TriOptima, Reset & ReMatch and

Information

250

Information Reset / Rematch Traiana TriOptima

£208m

Information

• FX: Traiana and Information
• Growth being fuelled by increasing demand and

l h i

75 200 13%

£184m

regulatory emphasis

• Traiana Harmony averaged 1.1m tickets per day during

FY12, up 25% Y on Y

• TriOptima eliminated $79 Trn notional of interest rate swaps

70 150

p p and CDS, a record year - while also proving its utility within clearing

• Increasing investment in technology in FY13 to

32 37 47 53 100

g gy drive revenue and operating profit

35 43 32 50

• FY11

FY12 £m

Improving efficiency Improving efficiency

Increasing efficiency

1,500 £1,387m £1,335m

• In challenging markets it is essential we focus upon

PBT and our operating margin performance

• We reduced our operating expenses by £52m in

386 375 1 000 Other

• perating

costs

p g p y FY12, of which £20m is recurring

• Over the next two years we intend to:

1,000

• verhaul the structure of the ICAP group
• leverage ICAP’s scale to improve procurement
• rationalise the number of IT systems we use

1,001 960 500 Employee costs

• improve the delivery of shared services to our business lines
• We expect this focus on efficiency to deliver run-rate

savings of at least £50m per annum by March 14 savings of at least £50m per annum by March 14

26

• FY11

FY12 £m

Delivering our core strategy Delivering our core strategy

ICAP is uniquely positioned to benefit from the evolution and structural th k t growth we see across our markets

• Continued focus on markets with

structurally higher growth

• Diversified business with a strong

balance sheet

We aim to be the infrastructure provider to the world’s wholesale financial markets in both GOAL

• In current environment, remain

disciplined on costs and driving efficiency gains

• Expert in operating hybrid and

B d i ti i O ti i d l ACHIEVED THROUGH DELIVERING world s wholesale financial markets, in both execution and post trade

p p g y electronic regulated platforms

• Risk management and innovation

pedigree

WHICH LEADS TO Broad, innovative service

• ffering

Optimised people, systems and processes Superior shareholder returns Leading market position

27

ICAP plc 2 Broadgate, London EC2M 7UR +44 (0) 20 7000 5000 +44 (0) 20 7000 5000 www.icap.com

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