Half-yearly Report
TULLETT PREBON PLC
INTERIM MANAGEMENT REPORT - for the six months ended 30 June 2008
Highlights
Tullett Prebon plc today announced its interim results for the six months ended
30 June 2008. The highlights are:
- Revenue £468.3m (2007: £371.6m) - growth of 25% at constant
exchange rates
- Operating profit £84.2m (2007: £64.8m) - growth of 30%
- Adjusted* Profit before tax £73.9m (2007: £58.7m)
- Adjusted** EPS 22.4p (2007: 17.2p)
* excluding non cash gains and losses in net finance income/(expense)
** excluding non cash gains and losses in net finance income/(expense), net of
tax, and prior year tax items
A reconciliation of adjusted PBT and adjusted Earnings to the reported figures
is shown in the Business Review.
Commenting on the results, Keith Hamill, Chairman of Tullett Prebon plc, said:
"Our results for the first half of 2008 reflect the benefit of the actions we
have taken over the last 18 months in pursuit of our objectives of accelerating
the rate of revenue growth and developing our electronic broking capabilities,
as well as the favourable market conditions.
Revenue for the first half of £468.3m (2007: £371.6m) was up 25% at constant
exchange rates. Operating profit has increased by 30% to £84.2m (2007: £64.8m)
with the operating margin increasing to 18.0% (2007: 17.4%) despite the
increase in the investment in electronic broking. Adjusted earnings per share
for the first half were 22.4p (2007: 17.2p)."
Terry Smith, Chief Executive, added:
"The outlook for Tullett Prebon is positive. The inter-dealer broker market is
growing and we are well diversified across both products and geographies. There
are considerable opportunities for us, however, to continue to broaden our
product and geographic coverage and to deepen our liquidity pools through both
hiring brokers and acquisitions.
Our customers are operating in extremely challenging market conditions, and our
industry growth rate is expected to be lower in the second half than
experienced in the last 12 months. Nevertheless, as a result of the actions we
have taken, we continue to expect to deliver a good outcome for the year."
Enquiries:
Nigel Szembel, Head of Communications Mobile: 07802 362088
Tullett Prebon plc
Further information on the Company and its activities is available on the
Company's website: www.tullettprebon.com.
Chairman's statement
Our results for the first half of 2008 reflect the benefit of the actions we
have taken over the last 18 months in pursuit of our objectives of accelerating
the rate of revenue growth and developing our electronic broking capabilities,
as well as the favourable market conditions.
We continue to seek to enhance and broaden our product coverage and deepen
liquidity pools, through a combination of new broker hires, acquisitions and
product development. Our focus for these investments is in those product areas
which we believe have the best potential for future revenue growth. In March we
completed the acquisition of Primex Energy Brokers, a leading UK based broker
in a wide range of oil products, which complements and enhances our existing
Energy business. The majority of the brokers we contracted last year have now
joined the business, and our broker headcount stands at 1,706 at the end of
June, 7.5% higher than a year ago.
Revenue for the first half of £468.3m (2007: £371.6m) was up 25% at constant
exchange rates. Operating profit has increased by 30% to £84.2m (2007: £64.8m)
with the operating margin increasing to 18.0% (2007: 17.4%) despite the
increase in the investment in electronic broking.
Financing costs were higher in the first half of 2008 compared to a year ago
reflecting the change in the Company's capital structure following the £301.5m
return of capital to shareholders in March last year. Nevertheless, adjusted
profit before tax was up 26% to £73.9m (2007: £58.7m). Adjusted earnings per
share for the first half were 22.4p (2007: 17.2p). An interim dividend of 4.75p
per share (2007: 4p per share) will be paid on 20 November 2008 to shareholders
on the register at 31 October 2008.
Our customers are operating in extremely challenging market conditions, and our
industry growth rate is expected to be lower in the second half than
experienced in the last 12 months. Nevertheless, as a result of the actions we
have taken, we continue to expect to deliver a good outcome for the year.
Keith Hamill
Chairman
5 August 2008
Business review
The inter-dealer broker business thrives on volatility in financial markets,
and the higher levels of volatility that we experienced from June last year and
throughout the second half of 2007 continued into the first half of 2008.
The investments we have made to accelerate the rate of revenue growth over the
last 18 months have allowed us to fully benefit from these favourable market
conditions. Revenue growth in the first half of 2008 was 25% at constant
exchange rates. Overall activity levels, measured as voice broking revenue per
working day, were slightly lower in the second quarter than in the first
quarter of this year, but revenue in the second quarter was still 22% higher
than in the same quarter a year ago.
We contracted 125 new brokers in 2007, with a particular focus on building our
presence in the faster growing sectors of the market, and most of these brokers
have now joined the business. The restructuring and extension of our joint
venture in Tokyo, which was completed at the end of last year, has broadened
our product coverage and provides a strong platform for further development of
our activities in both Tokyo and across the region. The acquisition of Primex
in March this year adds extensive oil products broking capability which
complements and enhances our existing Energy business which was previously
focused primarily on gas and power products.
We have continued to invest in the development of our electronic broking
capabilities, supporting both pure and hybrid models. Our main pure electronic
broking platform serving the USD repo market has become well established, with
a market share by volume of 30-40%. We operate a hybrid model in FX options,
with the electronic broking platform supporting voice broking activity in
related products, and this has continued to gain customer acceptance and volume
across all three regions. We have continued the development of new platforms
and expect to launch these in the second half. The gross investment in the
development and management of electronic broking in the first half was £11.5m
(2007: £6.7m).
Our key financial and performance indicators for the first half of 2008
compared with the first half of 2007 are shown below.
Six months ended
30 June 2008 30 June 2007 Change
Revenue £468.3m £371.6m +25%*
Operating margin 18.0% 17.4% +0.6% points
Broker headcount (period end) 1,706 1,587 +7.5%
Average revenue per broker (£'000) 272 228 +18%*
Broker employment costs to broker 57.5% 56.4% +1.1% points
revenue
Broking revenue per support staff 687 566 +20%*
head (£'000)
* expressed at constant exchange rates
Revenue
The tables below analyse revenue for the first half of 2008 compared with the
equivalent period in 2007. A significant proportion of the group's activities
is conducted outside the UK and the reported results are therefore impacted by
the movement in the foreign exchange rates used to translate the results of
overseas operations. Although the impact of movements in exchange rates
compared with those used for the first half of 2007 is relatively small, in
order to give a more meaningful analysis of performance, revenue is presented
below using exchange rates consistent with those used in 2008. The commentary
refers to changes at constant exchange rates.
Revenue by product group Six months ended Six months ended Change
30 June 2008 30 June 2007
£m £m
Treasury Products 127.8 98.7 +29%
Interest Rate Derivatives 114.1 91.0 +25%
Fixed Income 128.4 109.9 +17%
Equities 48.7 36.6 +33%
Energy 40.7 32.4 +26%
Information Sales 8.6 7.1 +21%
At constant exchange rates 468.3 375.7 +25%
Translation - (4.1)
Reported 468.3 371.6 +26%
All the product markets in which we operate have benefited from the higher
levels of volatility compared to the first half last year. In Treasury Products
we have continued to develop our strong position in FX across all three
regions, and have seen particularly good growth in non-deliverable forwards and
in emerging market currencies generally. Cash and deposit markets have also
seen strong volumes. Interest Rate Derivatives markets have been busy,
particularly at the short end, reflecting the volatile interest rate
environment. Investor flight to quality has driven volumes in Fixed Income,
particularly benefiting our strong franchise in European government bonds.
Increasing use of equity derivatives and our developing position in this market
has made Equities the fastest growing product group for us in the first half.
Energy volumes have been strong and we have benefited both from our acquisition
of Primex and the introduction and growth of new products. Our Information
Sales business has benefited from increasing customer demand for both real time
and end of day data and the expansion of the customer base in emerging markets.
Revenue by region Six months ended Six months ended Change
30 June 2008 30 June 2007
£m £m
Europe 247.4 186.4 +33%
North America 165.3 151.1 +9%
Asia Pacific 55.6 38.2 +46%
At constant exchange rates 468.3 375.7 +25%
Translation - (4.1)
Reported 468.3 371.6 +26%
Revenues in Europe increased by 33%. Broker headcount in Europe has increased
by over 10% since June 2007 to 762 at the period end, reflecting the new
brokers we have hired and the 35 brokers added through the acquisition of
Primex. Average revenue per broker has increased by 24%. All product groups in
Europe have seen strong revenue growth. The business continues to benefit from
the focus on volatility products as an asset class and from our leading
position in the FX markets and in European government bonds. One of the
objectives of our broker recruitment last year was to establish a significant
presence in credit and credit default swaps ("CDS") in London. Fifteen credit
and CDS brokers started with the business during the first half and have
quickly established themselves. Our Energy activities in Europe have been
boosted by the acquisition of Primex and the growth in a number of newly
introduced products including soft commodities, emissions, and nuclear fuel
derivatives. Although London continues to be the dominant centre for the
region, our operations in the other financial centres in Europe have grown
faster than the region as a whole, reflecting the benefit of the focus brought
by the new managing director for those centres.
Revenues in North America increased by 9%. Broker headcount in North America,
at 568 at the period end, is 5% lower than at June last year. We have continued
to change the mix of the headcount in the business during the first half, with
increases in Equities and Energy offset by reductions in the more mature parts
of the Fixed Income market where the rate of revenue growth is more modest.
Average revenue per broker is up 16% on last year. The fastest growing product
groups in North America were Treasury Products and Interest Rate Derivatives.
In the former we have seen a strong performance in forward FX particularly in
emerging market currencies including non-deliverable forwards in Latin American
and Asian currencies, and our Fed funds desk was also particularly active. In
the latter we benefited from our leading position in the USD swap market which
saw high volumes in both short and medium term products.
Revenues in Asia increased by 46%. Broker headcount in Asia was 376 at the
period end, an increase of 26% since June last year. Average revenue per broker
has increased by 16%. The three largest financial centres in Asia are
Singapore, Tokyo and Hong Kong, and these offices account for over 80% of our
revenue in the region. The restructured joint venture in Tokyo has broadened
our product coverage with additional market leading desks which have extended
our presence in the local interest rate swap market beyond Yen products and
added forward Yen FX products to our portfolio. Our equity derivatives
activities based in Hong Kong have continued to grow strongly. We have grown
revenue in Treasury Products through our increased coverage of non-deliverable
forwards in several Asian currencies, based from Hong Kong and Singapore, and
from our regional FX Options business which has benefited from the introduction
of the electronic broking platform.
Operating Profit and Margin
In order to present the most meaningful analysis of operating profit and
operating margin the tables below show profits and margins before the group's
investment in the development and management of our electronic broking
capability, which now impacts all three regions. The notes to the consolidated
financial statements show the operating profit by region after including the
investment in electronic broking.
Operating Profit Six months ended Six months ended Change
30 June 2008 30 June 2007
£m £m
Europe 55.1 40.4 +36%
North America 30.6 27.0 +13%
Asia Pacific 10.0 4.1 +144%
Before investment in 95.7 71.5 +34%
electronic broking
Investment in electronic (11.5) (6.7) +72%
broking
Reported 84.2 64.8 +30%
Operating Margin Six months ended Six months ended
30 June 2008 30 June 2007
Europe 22.3% 21.9%
North America 18.5% 17.8%
Asia Pacific 18.0% 11.5%
Before investment in 20.4% 19.2%
electronic broking
Investment in electronic (2.4%) (1.8%)
broking
Reported 18.0% 17.4%
Operating profit, before taking into account the investment in the development
and management of our electronic broking capability, is 34% higher than in the
first half of 2007. The operating margin on this basis is 20.4%, 1.2% points
higher than in 2007. This increase reflects the operating leverage in the voice
broking business, with margins benefiting from higher revenue without a
corresponding increase in support costs.
All three regions have increased operating margins. Operating margins in Europe
have increased despite an increase in the broker compensation to revenue
percentage, as the rate of increase in support costs is much lower than the
growth in revenue. In North America, support costs are lower in absolute terms
than a year ago and contribution margin before support costs is higher.
However, the increase in the overall margin in North America is held back by
the recognition in the first half this year of one off costs associated with
office moves. Although support costs in Asia have increased, particularly
reflecting the change in the joint venture in Tokyo and rising premises costs,
operating margins have benefited from the significant increase in the scale of
the region.
Taking into account the investment in the development and management of our
electronic broking capability, our reported margin in the first half was 18.0%,
up 0.6% points from 2007.
Adjusted Profit before Tax and Earnings
Six months ended Six months ended
30 June 2008 30 June 2007
£m £m
Revenue 468.3 371.6
Operating profit 84.2 64.8
Cash finance income/(expense) (10.3) (6.1)
Adjusted Profit before tax * 73.9 58.7
Tax (26.6) (22.3)
Associates 0.7 0.2
Minority interests (0.5) (0.3)
Adjusted Earnings ** 47.5 36.3
Weighted average number of shares 212.3m 211.6m
Adjusted Earnings per share 22.4p 17.2p
Six months ended Six months ended
30 June 2008 30 June 2007
* Adjusted PBT reconciles to reported PBT £m £m
as follows:
Adjusted Profit before tax 73.9 58.7
Non cash finance income/(expense) 0.6 (1.6)
Reported Profit before tax 74.5 57.1
Six months ended Six months ended
** Adjusted Earnings reconciles to 30 June 2008 30 June 2007
reported Earnings as follows: £m £m
Adjusted Earnings 47.5 36.3
Non cash finance income/(expense) 0.6 (1.6)
Deferred tax on non cash finance income/ (0.2) (0.1)
(expense)
Prior year tax items - (0.5)
Reported Earnings 47.9 34.1
The calculation of Adjusted EPS is also set out in note 8 to the consolidated
financial statements.
Cash Finance Income/(Expense)
The increase in cash finance income/(expense) reflects the impact for the full
six month period this year of interest payable and fee amortisation on the
facilities drawn down in March 2007 to finance the return of capital, and the
recognition in the first half of 2007 of a £1.1m one-off interest receipt on
reclaimed tax.
Taxation
The effective rate of tax on adjusted PBT is 36.0% (2006: 38.0%). The reduction
in the effective rate compared with 2007 results primarily from the full
benefit of a restructuring of intra-group financing arrangements, which was
implemented during 2007.
Cash Flow
Six months ended Six months ended
30 June 2008 30 June 2007
£m £m
Operating profit 84.2 64.8
Share option plan charges 2.1 2.1
Depreciation and amortisation 3.9 3.7
EBITDA 90.2 70.6
Capital expenditure (net of NBV of (7.7) (2.7)
disposals)
Working capital (18.8) (25.8)
Operating cash flow 63.7 42.1
Interest (5.9) 2.9
Taxation (16.5) (17.0)
Pension funding (1.8) (1.4)
Share option cash flows - 0.4
Transaction costs - (1.0)
Dividends paid (17.0) (12.7)
Dividends paid to minorities/received from 0.4 (0.4)
associates
Acquisitions/investments (4.1) (29.7)
Net cash flow before debt repayments/draw 18.8 (16.8)
downs
Operating cash flow for the first half of 2008 of £63.7m was 51% higher than
that for the first half of 2007. Consistent with the normal seasonal pattern of
working capital movements, operating cash flow for the first half is lower than
operating profit due to the increase in trade receivables from their relatively
low levels at the year end. The net working capital outflow of £18.8m also
reflects the £13.2m increase in the broker sign-on prepayment balance. Capital
expenditure is significantly higher than in the prior period reflecting the
spend associated with London office moves. The interest cash outflow in the
first half of 2008 reflects interest paid on the bank debt, partly offset by
interest received on cash balances. In 2007 the first interest payment on the
bank debt was made in the second half. The dividend payment of £17.0m reflects
the 8p per share final dividend for 2007 paid in May. Acquisition and
investment expenditure in 2008 includes deferred consideration relating to the
acquisition of Chapdelaine and the cash consideration for Primex.
Movement in cash and debt
Cash Debt Net
£m £m £m
At 31 December 2007 290.5 (450.5) (160.0)
Net cash flow before debt repayments/draw 18.8 - 18.8
downs
Debt repayments/draw downs (29.9) 29.9 -
Cash acquired with Primex 1.6 - 1.6
Movements in fair values/amortisation of - 0.2 0.2
costs
Effect of movements in exchange rates 0.5 (0.2) 0.3
At 30 June 2008 281.5 (420.6) (139.1)
Net debt has reduced from £160.0m at 31 December 2007 to £139.1m at 30 June
2008 primarily due to the net cash inflow before debt repayments and draw
downs. Gross debt has reduced by £29.9m primarily due to the scheduled
repayment of bank debt in January.
Future Developments and Outlook
The outlook for Tullett Prebon is positive. The inter-dealer broker market is
growing and we are well diversified across both products and geographies. There
are considerable opportunities for us, however, to continue to broaden our
product and geographic coverage and to deepen our liquidity pools through both
hiring brokers and acquisitions.
Our customers are operating in extremely challenging market conditions, and our
industry growth rate is expected to be lower in the second half than
experienced in the last 12 months. Nevertheless, as a result of the actions we
have taken, we continue to expect to deliver a good outcome for the year.
Terry Smith
Chief Executive
5 August 2008
consolidated income statement
for the six months ended 30 June 2008
Notes Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Revenue 5 468.3 371.6 753.8
Other operating income 3.4 2.9 14.2
Administrative expenses (387.5) (309.7) (636.2)
Operating profit 5 84.2 64.8 131.8
Finance income 6 9.9 10.1 21.1
Finance costs 7 (19.6) (17.8) (39.1)
Profit before tax 74.5 57.1 113.8
Taxation (26.8) (22.9) (40.3)
Profit of consolidated companies 47.7 34.2 73.5
Share of results of associates 0.7 0.2 0.8
Profit for the period 48.4 34.4 74.3
Attributable to:
Equity holders of the parent 47.9 34.1 73.4
Minority interests 0.5 0.3 0.9
48.4 34.4 74.3
Earnings per share
Adjusted basic 8 22.4p 17.2p 33.5p
Basic 8 22.6p 16.1p 34.7p
Diluted 8 22.4p 15.9p 34.2p
consolidated statement of recognised income and expense
for the six months ended 30 June 2008
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Revaluation of available for sale assets 0.2 0.1 0.1
Gain on net investment hedge - 1.4 1.0
Effect of changes in exchange rates on 0.3 (2.1) 0.2
translation of foreign operations
Actuarial (loss)/gain on defined benefit (13.6) 19.3 19.0
pension schemes
Taxation on items taken directly to 2.7 (4.3) (3.7)
equity
Net (expense)/income recognised directly (10.4) 14.4 16.6
in equity
Profit for the period 48.4 34.4 74.3
Total recognised income and expense for 38.0 48.8 90.9
the period
Attributable to:
Equity holders of the parent 37.5 48.5 90.0
Minority interests 0.5 0.3 0.9
38.0 48.8 90.9
consolidated balance sheet
as at 30 June 2008
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Non-current assets
Goodwill 370.3 356.3 355.9
Other intangible assets 4.1 2.3 2.8
Property, plant and equipment 21.8 17.0 18.7
Interest in associates 2.7 2.8 2.6
Other financial assets 2.9 2.7 2.4
Deferred tax assets 13.3 15.3 15.0
Derivative financial instruments 9.4 9.0 7.2
424.5 405.4 404.6
Current assets
Trade and other receivables 16,756.2 25,147.0 6,923.4
Other financial assets 29.0 27.8 28.3
Cash and cash equivalents 252.5 216.5 262.2
Derivative financial instruments - 3.1 -
17,037.7 25,394.4 7,213.9
Total assets 17,462.2 25,799.8 7,618.5
Current liabilities
Trade and other payables (16,797.4) (25,179.9) (6,972.7)
Interest bearing loans and borrowings (30.4) (31.3) (30.6)
Current tax liabilities (31.2) (24.9) (26.5)
(16,859.0) (25,236.1) (7,029.8)
Net current assets 178.7 158.3 184.1
Non-current liabilities
Interest bearing loans and borrowings (390.2) (418.5) (419.9)
Retirement benefit obligations (14.8) (5.1) (3.9)
Deferred tax liabilities (0.5) (1.1) (0.3)
Long-term provisions (13.7) (10.9) (14.7)
Other long-term payables (17.9) (14.6) (17.5)
(437.1) (450.2) (456.3)
Total liabilities (17,296.1) (25,686.3) (7,486.1)
Net assets 166.1 113.5 132.4
Equity
Share capital 53.8 53.1 53.2
Share premium account 9.9 - -
Reverse acquisition reserve (1,182.3) (1,182.3) (1,182.3)
Other reserves 111.4 110.4 97.3
Retained earnings 1,170.6 1,130.7 1,162.1
Equity attributable to equity holders of 163.4 111.9 130.3
the parent
Minority interests 2.7 1.6 2.1
Total equity 166.1 113.5 132.4
consolidated cash flow statement
for the six months ended 30 June 2008
Notes Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Net cash from operating activities 10 43.5 23.1 82.8
Investing activities
(Purchase)/sale of other financial (0.7) 0.2 (0.3)
assets
Interest received 4.8 6.2 13.2
Dividends received from associates 0.5 - 0.9
Dividends received from fixed asset - - 0.2
investments
Purchase of available for sale (0.3) - (0.1)
assets
Purchase of intangible fixed assets (2.0) (1.5) (1.1)
Purchase of property, plant and (6.6) (1.1) (5.5)
equipment
Acquisition of subsidiaries net of (2.2) (27.8) (25.9)
cash acquired
Repayment of acquisition - - 0.7
consideration
Net cash used in investment (6.5) (24.0) (17.9)
activities
Financing activities
Dividends paid (17.0) (12.7) (21.1)
Dividends paid to minority interests (0.1) (0.4) (0.9)
Return of capital - (301.5) (301.5)
Purchase of own shares to meet share - 0.4 (10.9)
based awards (net)
Repayment of debt (30.1) - -
Issue of debt - 297.2 297.2
Return of capital transaction costs - (1.0) (1.0)
Repayment of obligations under (0.2) (0.3) (0.5)
finance leases
Net cash used in financing (47.4) (18.3) (38.7)
activities
Net (decrease)/increase in cash and (10.4) (19.2) 26.2
cash equivalents
Net cash and cash equivalents at the 262.1 236.2 236.2
beginning of the period
Effect of foreign exchange rate 0.5 (1.8) (0.3)
changes
Net cash and cash equivalents at the 252.2 215.2 262.1
end of the period
Cash and cash equivalents 252.5 216.5 262.2
Overdrafts (0.3) (1.3) (0.1)
Net cash and cash equivalents 252.2 215.2 262.1
notes to the consolidated financial statements
for the six months ended 30 June 2008
1. General information
Tullett Prebon plc is a company incorporated in England and Wales under the
Companies Act 1985.
The consolidated financial information for the six months ended 30 June 2008
has been prepared in accordance with the Disclosure and Transparency Rules
(DTR) of the Financial Services Authority and with IAS34: Interim Financial
Reporting as adopted by the European Union (EU). This financial information
should be read in conjunction with the Statutory Accounts for the year ended 31
December 2007 which were prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU.
The Statutory Accounts for the year ended 31 December 2007 have been reported
on by the Company's auditors, Deloitte & Touche LLP, and have been delivered to
the Registrar of Companies. The report of the auditors on those accounts was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
The consolidated financial information for the six months ended 30 June 2008
has been prepared using accounting policies consistent with IFRS. The interim
information, together with the comparative information contained in this report
for the year ended 31 December 2007, does not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985. The financial
information is unaudited but has been reviewed by the Company's auditors,
Deloitte & Touche LLP, and their report appears at the end of the interim
financial report.
2. Accounting policies
The financial statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments. The financial
statements are rounded to the nearest hundred thousand pounds (expressed as
millions to one decimal place - £m), except where otherwise indicated.
The methods of computation and accounting policies adopted are consistent with
those followed in the preparation of the Group's annual financial statements
for the year ended 31 December 2007 with the exception of IFRIC 14 `IAS 19 -
The limit on a defined benefit asset, minimum funding requirements and their
interaction' which is expected to be endorsed by the EU before the end of the
year and is therefore required to be implemented for the half year under IAS
34. The interpretation has not had any effect on the recognition of the
retirement benefit obligations by the Group.
3. Related party transactions
Related party transactions are described in the 2007 annual report and accounts
in note 36 to the consolidated financial statements. There have been no
material changes in the nature or value of related party transactions in the
six months ended 30 June 2008.
4. Principal risks and uncertainties
Information on the principal long term risks and uncertainties of the Group is
included in the latest annual report and accounts which are available on the
Company's website (www.tullettprebon.com). Risks and uncertainties which could
have a material impact on the Group's performance over the remaining six months
of the financial year are discussed in the Business Review.
5. Segmental analysis
The Group's primary reporting format is geographical, and its secondary
reporting format is product group.
Geographical Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Revenue
Europe 247.4 184.4 377.6
North America 165.3 151.5 300.5
Asia 55.6 35.7 75.7
468.3 371.6 753.8
Operating profit
Europe 51.4 40.0 75.5
North America 23.7 20.9 46.8
Asia 9.1 3.9 9.5
84.2 64.8 131.8
Product group Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Revenue
Treasury Products 127.8 96.5 204.0
Interest Rate Derivatives 114.1 89.8 180.1
Fixed Income 128.4 109.3 210.8
Equities 48.7 36.8 81.0
Energy 40.7 32.1 63.2
Information Sales 8.6 7.1 14.7
468.3 371.6 753.8
There are no inter-segment sales included in segment revenue.
6. Finance income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Interest receivable and similar income 5.5 6.8 13.4
Hedge ineffectiveness on net investment 0.1 - 0.2
hedge
Expected return on pension schemes' 4.3 3.3 7.5
assets
9.9 10.1 21.1
7. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Interest payable on bank loans 8.8 5.5 16.0
Interest payable on Eurobond 6.2 6.2 12.4
Other interest payable 0.2 0.3 0.9
Amortisation of debt issue costs 0.6 0.9 1.5
Total borrowing costs 15.8 12.9 30.8
Amortisation of discount on deferred 0.3 0.5 0.9
consideration
Mark to market loss on equity swap - 1.5 0.7
Interest cost on pension schemes' 3.5 2.9 6.7
liabilities
19.6 17.8 39.1
8. Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
Adjusted basic 22.4p 17.2p 33.5p
Basic 22.6p 16.1p 34.7p
Diluted 22.4p 15.9p 34.2p
The calculation of basic and diluted earnings per share is based on the
following number of shares in issue:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
No. (m) No. (m) No. (m)
Weighted average shares in issue 212.3 211.6 211.3
Issuable on exercise of options 1.2 3.1 3.1
Diluted weighted average shares in issue 213.5 214.7 214.4
The earnings used in the calculation of adjusted, basic and diluted earnings
per share, are as described below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Earnings 48.4 34.4 74.3
Minority interest (0.5) (0.3) (0.9)
Earnings for the purposes of the basic 47.9 34.1 73.4
and diluted earnings per share
Adjusted for:
Mark to market loss on equity swap - 1.5 0.7
Gain arising on net investment hedge (0.1) - (0.2)
ineffectiveness
Expected return on pension schemes' (4.3) (3.3) (7.5)
assets
Interest cost on pension schemes' 3.5 2.9 6.7
liabilities
Amortisation of discount on deferred 0.3 0.5 0.9
consideration
Taxation charge on above items 0.2 0.1 0.3
Prior year tax - 0.5 (5.1)
Capital tax charge - - 1.6
Adjusted earnings 47.5 36.3 70.8
9. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Amounts recognised as distributions to
equity holders in the period:
Final dividend for the year ended 31 17.0 - -
December 2007 of 8p per share
Interim dividend for the year ended 31 - - 8.4
December 2007 of 4p per share
Final dividend for the year ended 31 - 12.7 12.7
December 2006 of 6p per share
17.0 12.7 21.1
An interim dividend of 4.75p per share will be paid on 20 November 2008 to all
shareholders on the Register of Members on 31 October 2008.
The trustees of the Tullett Prebon plc Employee Share Ownership Trust and the
trustees of the Tullett Prebon plc Employee Benefit Trust 2007 have waived
their rights to dividends.
10. Notes to the cash flow statement
a. Reconciliation of operating profit to net cash from operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Operating profit 84.2 64.8 131.8
Adjustments for:
Share based compensation 2.1 2.1 2.9
Loss on disposal of property, plant 1.1 - 0.2
and equipment
Depreciation of property, plant and 3.3 3.0 5.8
equipment
Amortisation of intangible assets 0.6 0.7 1.4
(Decrease)/increase in provisions for (1.1) (0.8) 2.8
liabilities and charges
Outflow from retirement benefit (1.8) (1.4) (2.5)
obligations
(Decrease) in non-current liabilities (0.6) (0.3) -
Operating cash flows before movement 87.8 68.1 142.4
in working capital
(Increase) in trade and other (23.0) (19.5) (15.1)
receivables
Decrease/(increase) in net settlement 3.9 (2.9) (2.3)
balances
Increase/(decrease) in trade and other 2.0 (2.3) 19.6
payables
Cash generated from operations 70.7 43.4 144.6
Income taxes paid (16.5) (17.0) (32.9)
Interest paid (10.7) (3.3) (28.9)
Net cash from operating activities 43.5 23.1 82.8
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with maturity of three months or less. Cash at bank earns
interest at floating rates based on daily bank deposit rates. Short-term
deposits are made for varying periods of between one day and one week depending
on the immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates.
For the purposes of the consolidated cash flow statement, cash and cash
equivalents comprise the following:
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited)
£m £m £m
Cash and cash equivalents 252.5 216.5 262.2
Bank overdrafts (0.3) (1.3) (0.1)
252.2 215.2 262.1
11. Analysis of net funds
At Cash Non-cash Exchange At
1 January flow items differences 30 June
2008 2008
£m £m £m £m £m
Cash in hand and at bank 177.4 5.9 - 0.5 183.8
Cash equivalents 82.4 (16.7) - - 65.7
Client settlement money 2.4 0.6 - - 3.0
Overdraft (0.1) (0.2) - - (0.3)
262.1 (10.4) - 0.5 252.2
Bank loans due within (30.0) 30.0 (29.6) - (29.6)
one year
Bank loans due after (267.9) - 29.3 - (238.6)
one year
Loan due within one year (0.1) 0.1 - - -
Loan due after one year (149.2) - 0.5 - (148.7)
Finance leases (3.2) 0.2 (0.2) (0.2) (3.4)
(450.4) 30.3 - (0.2) (420.3)
Other financial assets 28.3 0.7 - - 29.0
Total net funds (160.0) 20.6 - 0.3 (139.1)
12. Acquisition
Primex Energy Brokers Limited (subsequently renamed Tullett Prebon (Oil)
Limited)
On 14 March 2008 the Group acquired 100% of the share capital of Primex Energy
Brokers Ltd ("Primex"), subsequently renamed Tullett Prebon (Oil) Limited. The
consideration paid on completion was £0.5m in cash and £10.5m in shares. A
further £5.8m in shares is payable in 2011 subject to certain performance
requirements. The goodwill arising on the acquisition was £17.3m at 30 June
2008.
This transaction has been accounted for under the acquisition method of
accounting.
The provisional fair values of assets and liabilities acquired and
consideration paid were as follows:
Book value Fair value
£m £m
Net liabilities acquired
Property, plant and equipment 0.2 0.2
Trade and other receivables 3.0 3.0
Cash and cash equivalents 1.6 1.6
Trade and other payables (3.7) (3.7)
Long-term payable (1.2) (1.2)
(0.1) (0.1)
Goodwill 17.3
Total consideration 17.2
Satisfied by
Shares 10.5
Deferred contingent consideration 5.8
Cash 0.5
Costs of acquisition 0.4
17.2
Net cash inflow arising on acquisition
Cash consideration and costs of acquisition (0.9)
Cash and cash equivalents acquired 1.6
0.7
If the acquisition of Primex had been completed on the first day of the period,
the Group's revenue for the period would have been £3.8m higher and the profit
for the period would have been £0.3m higher. Since the date of acquisition,
Primex has contributed £4.6m to the Group's revenue and £0.4m to the Group's
profit for the period.
13. Share capital
On 14 March 2008, Tullett Prebon plc issued 2,262,196 ordinary shares of 25p
each with a fair value of £10.5m to the former owners of Primex.
On 2 June 2008, Tullett Prebon plc issued 82,569 ordinary shares of 25p at par
value. The shares were allotted to the Tullett Prebon plc Employee Benefit
Trust 2007.
statement of directors' responsibilities
The directors confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 as adopted by the European Union, and that
the interim management report herein includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
By order of the board
Terry Smith
Chief Executive
5 August 2008
independent review report to tullett prebon plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
2008 which comprises the consolidated income statement, the consolidated
balance sheet, the consolidated statement of recognised income and expense, the
consolidated cash flow statement and related notes 1 to 13. We have read the
other information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the company those matters we
are required to state to it in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2008 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
5 August 2008
London, UK
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