Interim Results
TULLETT PREBON PLC
INTERIM RESULTS - for the six months ended 30 June 2009
Tullett Prebon plc today announced its preliminary results for the six months
ended 30 June 2009.
Financial Highlights
- Revenue £517.9m (2008: £468.3m) - growth of 11%
- Operating profit £100.6m (2008: £84.2m) - growth of 19%
- Operating margin 19.4% (2008: 18.0%)
- Adjusted Profit before tax1 £92.8m (2008: £73.9m) - growth of 26%
- Adjusted EPS2 28.5p (2008: 22.4p) - growth of 27%
Notes
1. Adjusted PBT is stated before non cash gains and losses in net finance
income/(expense)
2. Adjusted EPS is stated before non cash gains and losses in net finance
income/(expense) net of tax
Commenting on the results, Keith Hamill, Chairman of Tullett Prebon plc, said:
"Our strong financial results for the first half of 2009 reflect the robustness
of the business, the value of the service that it provides to participants in
the world's over-the-counter ("OTC") financial markets, and the benefits of the
actions taken during the second half of last year to reduce fixed costs and to
increase cost flexibility.
Revenue for the first half of £517.9m was up 11%. Operating profit has
increased by 19% to £100.6m, with the operating margin increasing to 19.4%.
Adjusted basic earnings per share for the first half were up 27% to 28.5p.
An interim dividend of 5.0p per share (2008: 4.75p per share) will be paid on
19 November 2009 to shareholders on the register at 30 October 2009."
Terry Smith, Chief Executive, added:
"The world's financial markets remain unsettled, and volatility in interest
rate structures, currency parities and credit spreads seems likely to persist,
whilst government bond issuance will continue to be at high levels. Our bank
clients and their customers will continue to need to trade in flow products and
to hedge risk through the use of derivatives. Transacting business through
IDBs who provide deep liquidity pools, price and volume discovery, anonymity
for trading, and cost advantages is likely to be increasingly attractive for
participants in the wholesale OTC markets.
Our business is well diversified across both products and geographies, and we
have taken action to reduce fixed costs and to increase our flexibility. We
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
TULLETT PREBON PLC
INTERIM MANAGEMENT REPORT - for the six months ended 30 June 2009
Overview
The strong financial results for the first half of 2009 reflect the robustness
of the business, the value of the service that it provides to participants in
the world's over-the-counter ("OTC") financial markets, and the benefits of the
actions taken during the second half of last year to reduce fixed costs and to
increase cost flexibility.
There has been significant structural change in the banking industry and
adjustments to the business models of many of our customers following the
unprecedented events in the world's financial markets during 2008. There has
been a reduction in risk appetite, resulting in a move of capital away from
more complex structured products towards the more traditional "flow" products,
towards cash products rather than derivatives, and towards first derivatives
rather than complex secondary and tertiary derivatives. Volumes in emerging
markets products, volatility products and equity related products have been
lower. Interest rates, foreign exchange rates and credit spreads, however,
have continued to be volatile, and there has been substantial issuance of
government bonds. Our expertise and the depth of our liquidity pools in these
more traditional flow products, and the advantages of voice broking in price
and volume discovery in turbulent market conditions, have been increasingly
attractive to our customers.
Revenue for the first half of 2009 of £517.9m was 11% higher than reported for
the equivalent period last year. The impact of currency movements on the
translation of our non-UK operations is favourable to reported results, and at
constant exchange rates, revenue for the first half of 2009 is 5% lower than
last year.
We have continued to develop our electronic capabilities and market share.
Although we are not present in the pure, black box, electronic execution
markets of spot FX and on-the-run US Treasuries, our hybrid electronic
platforms, which complement voice broking activities across a number of product
groups, continue to increase revenue, and are competitive with similar
platforms provided by our peers. We have a well established process for the
development of new platforms utilising external resources which allows us
quickly and effectively to scale our development activities up and down, and
which provides flexibility in the management of costs. We are well placed to
develop and launch new electronic platforms across all regions when the market
requires.
The objectives of the cost review undertaken towards the end of last year to
increase flexibility in front office costs and to reduce absolute support costs
have been achieved. Broker employment costs expressed as a percentage of
broking revenue are little changed overall despite significant reductions in
revenue in some areas. Non-broker headcount has fallen by 12% since June
2008. The operating margin has improved to 19.4%.
Our key financial and performance indicators for the first half of 2009
compared with those for the first half of 2008 are summarised in the table
below.
Change
2009 2008 Reported Constant
Exchange
Rates
Revenue £517.9m £468.3m +11% -5%
Operating profit £100.6m £84.2m +19% +3%
Operating margin 19.4% 18.0% +1.4% points
Broker headcount (period end) 1,647 1,706 -3%
Average revenue per broker (£'000) 308 272 +13% -4%
Broker employment costs : broking revenue 57.6% 57.5% +0.1% points
Non-broker headcount (period end) 836 945 -12%
Revenue and Operating Profit
The tables below analyse revenue and operating profit for the first half of
2009 compared with the equivalent period in 2008. A significant proportion of
the group's activity 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 non-UK operations. In order to give a more complete
analysis of performance, revenue and operating profit growth rates for the
first half of 2009 shown below are presented both as reported and using
translation exchange rates consistent with those used for 2009. The commentary
below refers to growth rates at constant exchange rates.
Revenue by product group
Change
Constant
2009 2008 Reported Exchange
£m £m Rates
Treasury Products 124.0 127.8 -3% -16%
Interest Rate Derivatives 102.3 114.1 -10% -23%
Fixed Income 188.3 128.4 +47% +24%
Equities 38.8 48.7 -20% -31%
Energy 52.3 40.7 +29% +13%
Information Sales 12.2 8.6 +42% +39%
517.9 468.3 +11% -5%
Revenue in Treasury Products has been held back by lower volumes in FX options,
and in FX forwards, including non-deliverable-forwards, in emerging markets
currencies.
Similarly, the fall in revenue in Interest Rate Derivatives is heavily
influenced by lower revenue in interest rate options and in emerging market
interest rate swaps.
The strong growth in Fixed Income reflects the strength of our franchise and
high volume of activity in government and corporate bonds in both Europe and
North America.
In Equities, revenue from both equity derivatives and cash equities was lower
than a year ago, reflecting lower equity market values and lower activity.
Commodity markets have continued to be volatile and our Energy business has
benefited from this and from the expansion of the product coverage through the
acquisition of Primex in March 2008, which added substantial liquidity in a
wide range of oil products.
Our Information Sales business continues to grow, reflecting increasing demand
from customers for both real time and end of day data, and an expansion of the
customer base.
Revenue by region
Change
Constant
2009 2008 Reported Exchange
£m £m Rates
Europe 289.1 247.4 +17% +16%
North America 183.6 165.3 +11% -17%
Asia Pacific 45.2 55.6 -19% -38%
517.9 468.3 +11% -5%
Revenue in Europe has increased by 16%. Broker headcount in Europe is slightly
higher than last June at 775, and the increase in revenue reflects an increase
in average revenue per broker compared with the same period a year ago. The
business delivered strong revenue growth in Fixed Income and Energy, revenue in
Treasury Products and Interest Rate Derivatives was broadly in line with a year
ago, and revenue in Equities reduced. In Fixed Income the business has
continued to benefit from its leading position in government bonds, and from
gains in market share in corporate bonds and credit derivatives following the
actions taken in 2008 to re-establish our presence in these markets, including
the highly successful launch of Creditdeal our electronic trading platform, in
the last quarter of last year. Energy revenue in Europe benefited from the
expansion of the product coverage through the acquisition of Primex and from
the generally volatile commodity markets.
Revenue in North America has reduced by 17%. Broker headcount has fallen by 7%
since last June, to 526 and average revenue per broker has also fallen compared
with last year. Revenue in Fixed Income was slightly higher than a year ago
despite a reduction in revenue from credit derivatives, with stronger revenue
in government and agency bonds, mortgage backed securities and corporate
bonds. Revenue has fallen in the other product groups, reflecting lower
activity in money markets, in emerging markets products and in cash equities,
and disruption and changes in some of our major customers.
Revenue in Asia has reduced by 38%. Broker headcount in Asia at the end of
June was 346, 8% lower than a year ago, and average revenue per broker has
fallen by one third. We have maintained our market share in our major product
groups across the region, but activity in the markets in Asia slowed down
considerably in the last quarter of last year and market activity continued to
be low throughout the first half of this year. In Treasury Products, volumes in
forward FX, especially in non-deliverable-forwards for non convertible
currencies and in FX options in regional currencies, have been considerably
lower, and activity in most Interest Rate Derivative products in the region has
also been subdued.
Operating profit by region
Change
Constant
2009 2008 Reported Exchange
£m £m Rates
Europe 69.4 51.4 +35% +34%
North America 28.7 23.7 +21% -10%
Asia Pacific 2.5 9.1 -73% -79%
Reported 100.6 84.2 +19% +3%
Operating margin by region 2009 2008
Europe 24.0% 20.8%
North America 15.6% 14.3%
Asia Pacific 5.5% 16.4%
19.4% 18.0%
Operating profit in Europe has increased by 34% with operating margin
increasing to 24.0%. Broker employment costs as a percentage of revenue have
reduced compared to the same period last year reflecting the elimination in the
inefficiency experienced in the first half last year resulting from the large
number of brokers who joined the business building up to their full run rate of
revenues, and the benefit of the actions taken in the second half last year to
improve flexibility in broker compensation. Operating margin in Europe has
also benefited from the increased scale of the business and the actions taken
to reduce support costs.
Operating margin in North America has increased to 15.6% although operating
profit is lower due to the reduction in revenue. The improvement in operating
margin has been achieved despite an increase in broker employment costs as a
percentage of revenue arising from inefficiencies in certain desks due to
revenue declines. As a result of the cost reduction actions taken last year,
support and other costs have been reduced in both absolute terms and as a
percentage of revenue.
The reduction in revenue in Asia Pacific, our smallest region, has resulted in
lower operating margin and operating profit. Asia Pacific has a relatively
higher fixed support base compared to the other two regions, due to the
dispersion of the business over a number of different locations. Although
support costs have been reduced, the extent of the reduction has not matched
the decline in revenue. The broker employment costs to revenue percentage has
also increased compared to the same period last year, again due to lower
revenue.
Financial Review
The results for the first half of 2009 compared with those for the first half
of 2008 are shown in the table below.
2009 2008
£m £m
Revenue 517.9 468.3
Operating profit 100.6 84.2
Cash finance expense (7.8) (10.3)
Adjusted Profit before tax * 92.8 73.9
Tax (32.5) (26.6)
Associates 1.0 0.7
Minority interests (0.5) (0.5)
Adjusted Earnings ** 60.8 47.5
Weighted average number of shares 213.6m 212.3m
Adjusted Earnings per share 28.5p 22.4p
* Adjusted PBT reconciles to reported PBT as follows: 2009 2008
£m £m
Adjusted Profit before tax 92.8 73.9
Non cash finance income/(expense) (1.1) 0.6
Reported Profit before tax 91.7 74.5
** Adjusted Earnings reconciles to reported Earnings as 2009 2008
follows:
£m £m
Adjusted Earnings 60.8 47.5
Non cash finance income/(expense) (1.1) 0.6
Deferred tax on non cash finance income/(expense) 0.4 (0.2)
Reported Earnings 60.1 47.9
Cash Finance Income/(Expense)
The reduction in cash finance income / (expense) reflects lower interest
payable on the bank debt due to lower interest rates and lower average amount
outstanding, partly offset by lower interest receivable on cash balances due to
the lower interest rates.
Taxation
The effective rate of tax on adjusted PBT is 35% (2008: 36%). The reduction in
the effective rate compared with 2008 results from the increase in the
proportion of taxable profits generated in the UK versus the US, together with
the full year benefit of last year's reduction in the UK statutory rate.
Exchange rates
The income statements and balance sheets of the group's non-UK operations are
translated into sterling at average and period end exchange rates
respectively. The most significant exchange rates for the group are the US
dollar and the Euro. Average and period end exchange rates for these
currencies are shown below.
Average Period End
H1 2009 H1 2008 H2 2008 30 June '09 31 Dec '08 30 June '08
US dollar $1.47 $1.99 $1.79 $1.65 $1.44 $1.99
Euro €1.10 €1.30 €1.25 €1.17 €1.03 €1.26
Cash flow and financing
Cash flow before dividends and debt repayments and draw downs is summarised in
the table below.
2009 2008
£m £m
Operating profit 100.6 84.2
Share based compensation (0.2) 2.1
Depreciation and amortisation 4.1 3.9
EBITDA 104.5 90.2
Capital expenditure (net of disposals) (4.1) (7.7)
Working capital (57.4) (18.8)
Operating cash flow 43.0 63.7
Exceptional items - cash payments (6.3) -
Interest (4.4) (5.9)
Taxation (15.0) (16.5)
Defined benefit pension scheme funding (6.3) (1.8)
ESOT transactions 1.5 -
Dividends received from associates / paid to minorities 1.9 0.4
Acquisitions/investments (3.5) (4.1)
Cash flow 10.9 35.8
The normal seasonal pattern of working capital movements is for trade
receivables and net settlement balances to be higher at June than at December,
and operating cash flow for the first half of the year therefore tends to be
lower than operating profit. This pattern has been magnified this year by the
unwind of the unusually high level of bonus accruals at 31 December 2008 as a
result of the high level of activity during the second half last year, and by
an increase in the broker sign-on prepayment balance.
The exceptional items cash payment represents the majority of the remaining
cash outflow arising from the cost reduction actions taken last year.
The increase in defined benefit pension scheme funding reflects the additional
special contributions agreed with the Trustees of the schemes with the aim of
eliminating the actuarial deficits in the pension schemes by 31 December 2010.
Acquisition and investment expenditure mainly comprises deferred consideration
payments relating to the acquisitions of Chapdelaine and Primex.
The movement in cash and debt is summarised below.
£m Cash Debt Net
At 31 December 2008 405.2 (422.6) (17.4)
Cash flow 14.9 (4.0) 10.9
Dividends (17.1) - (17.1)
Debt repayments / draw downs (33.4) 33.4 -
Effect of movement in exchange rates (20.2) 0.4 (19.8)
Movements in fair value / amortisation of - (0.4) (0.4)
costs
At 30 June 2009 349.4 (393.2) (43.8)
Net debt has increased from £17.4m at 31 December 2008 to £43.8m at 30 June
2009 mainly due to the effect of movements in exchange rates on cash balances
held in non-UK operating subsidiaries, principally in the United States.
The group's borrowings at 30 June 2009 comprised the £150m Eurobond due August
2014, £240m of bank debt drawn under an amortising term loan maturing in
January 2012, a small amount of finance leases, and a £4m overdraft relating to
settlement balances. On 6 July 2009 holders of £141.1m of the Eurobond
exchanged their holdings for £141.1m of new notes due July 2016. More details
on the bond exchange are provided in note 13 to the condensed consolidated
financial statements.
OTC Market and Regulatory Developments
Both the US Department of the Treasury and the European Commission have
published proposals to improve the efficiency and robustness of OTC derivatives
markets. There are four recurring themes in these proposals: clearing of
standardised OTC derivatives through central counterparties (CCP), reporting of
trades that are not cleared through a CCP to a central trade data repository,
encouragement for standardised trades to be transacted through regulated
transparent electronic trade execution platforms, and increased supervision and
capital requirements for firms with large OTC exposures.
Whilst the OTC markets proved to be robust throughout the most turbulent period
in recent history, we support proposals for further improvement in the quality
and safety of the infrastructure that supports them, and put forward the
following observations.
After some of the comments made in the immediate aftermath of the failure of
some major institutions last year, we particularly welcome the acknowledgement
in the proposals that bilaterally negotiated, bespoke, derivatives are an
important tool in risk management, and that many instruments cannot be and
should not be standardised or regulated out of existence. We also welcome the
acknowledgement that many areas of the OTC derivatives markets, including the
two largest and most mature sectors, interest rate derivatives and foreign
exchange derivatives, already have well established infrastructure that is fit
for purpose and which operated very effectively during the height of the
crisis.
As we have noted previously, whilst CCP clearing is a way of reducing
counterparty risk it is not a simple solution to the problem. CCP clearing can
be difficult to implement for anything other than very standard instruments,
and the margin requirements which offer protection against failure of an
individual counterparty can absorb significant amounts of participants'
liquidity. Access to CCPs needs to be open to all execution venues to ensure
the efficiency and flexibility of the markets. The ideal number of CCPs is one
from the point of view of efficient cross collateralisation between products.
Unfortunately this conflicts with the view that monopolies should not be
awarded to "for profit" organisations, which is why we believe that a single
CCP operated as a "not for profit" utility, on behalf of the market
participants, is the best solution.
Regulated transparent electronic trade execution platforms are not suitable for
all products, nor are they synonymous with exchange trading. We and other IDBs
operate regulated transparent electronic trade execution platforms for a number
of different products in a number of different geographies, and we have the
capability and expertise to develop and implement platforms for other
products. Competition between trading venues is helpful to market efficiency
and should be encouraged.
Transparency and trade reporting are double edged swords. Too much
transparency can destroy liquidity. Trade reporting to a central depositary
would be useful in allowing regulators to understand total market and
individual participant exposures, but again, experience has demonstrated that
it would be harmful to liquidity if this information were open to all market
participants.
Change is likely to be gradual. Instruments that are currently negotiated on a
bilateral basis between banks will not suddenly migrate to electronic
platforms. The role of voice brokers in providing liquidity will continue to
be required in all but the most standardised of products.
Outlook
The world's financial markets remain unsettled, and volatility in interest rate
structures, currency parities and credit spreads seems likely to persist,
whilst government bond issuance will continue to be at high levels. Our bankclients and their customers will continue to need to trade in flow products and
to hedge risk through the use of derivatives. Transacting business through
IDBs who provide deep liquidity pools, price and volume discovery, and
anonymity for trading, is likely to be increasingly attractive for participants
in the wholesale OTC markets.
Revenue in the second half of last year was boosted by the turbulence in
financial markets following the collapse of Lehman Brothers, and those
conditions are not expected to recur. It remains difficult to forecast market
activity and our performance by product and geography is likely to continue to
be varied.
Our business is well diversified across both products and geographies, and we
have taken action to reduce fixed costs and to increase our flexibility. We
expect to deliver a good outcome for the year.
Condensed Consolidated Income Statement
for the six months ended 30 June 2009
Notes Six months Six months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited)
£m £m £m
Revenue 5 517.9 468.3 943.6
Administrative expenses (419.3) (387.5) (774.1)
Other operating income 2.0 3.4 5.6
Exceptional items - - (19.5)
Operating profit 5 100.6 84.2 155.6
Finance income 6 14.8 9.9 24.8
Finance costs 7 (23.7) (19.6) (43.4)
Profit before tax 91.7 74.5 137.0
Taxation (32.1) (26.8) (43.3)
Profit of consolidated companies 59.6 47.7 93.7
Share of results of associates 1.0 0.7 1.3
Profit for the period 60.6 48.4 95.0
Attributable to:
Equity holders of the parent 60.1 47.9 94.5
Minority interests 0.5 0.5 0.5
60.6 48.4 95.0
Earnings per share
Adjusted basic 8 28.5p 22.4p 47.1p
Basic 8 28.1p 22.6p 44.4p
Diluted 8 28.0p 22.4p 44.0p
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2009
Six months Six months Year
ended ended ended
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
£m £m £m
Profit for the period 60.6 48.4 95.0
Other comprehensive income:
Revaluation of available-for-sale assets 0.5 0.2 0.5
Gain / (loss) on net investment hedges 3.6 - (17.2)
Effect of changes in exchange rates on
translation of foreign operations (23.0) 0.4 46.5
Actuarial losses on defined benefit pension
schemes (9.7) (13.6) (9.4)
Taxation (charge) / credit on components of
other comprehensive income (1.3) 2.7 9.7
Other comprehensive income for the period (29.9) (10.3) 30.1
Total comprehensive income for the period 30.7 38.1 125.1
Attributable to:
Equity holders of the parent 30.4 37.5 123.6
Minority interests 0.3 0.6 1.5
30.7 38.1 125.1
Condensed Consolidated Balance Sheet
as at 30 June 2009
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
£m £m £m
Non-current assets
Goodwill 380.9 370.3 387.7
Other intangible assets 6.6 4.1 5.8
Property, plant and equipment 24.6 21.8 27.6
Interest in associates 2.7 2.7 3.5
Other financial assets 5.4 2.9 4.7
Deferred tax assets 15.2 13.3 18.0
Derivative financial instruments - 9.4 -
435.4 424.5 447.3
Current assets
Trade and other receivables 21,328.6 16,756.2 13,547.6
Other financial assets 33.4 29.0 30.2
Cash and cash equivalents 316.0 252.5 375.0
Derivative financial instruments 3.6 - 4.6
21,681.6 17,037.7 13,957.4
Total assets 22,117.0 17,462.2 14,404.7
Current liabilities
Trade and other payables (21,377.8) (16,797.4) (13,648.5)
Interest bearing loans and borrowings (34.0) (30.4) (30.6)
Derivative financial instruments (7.9) - (14.3)
Current tax liabilities (42.8) (31.2) (28.9)
(21,462.5) (16,859.0) (13,722.3)
Net current assets 219.1 178.7 235.1
Non-current liabilities
Interest bearing loans and borrowings (359.2) (390.2) (392.0)
Retirement benefit obligations (12.1) (14.8) (8.5)
Deferred tax liabilities (1.2) (0.5) (0.6)
Long-term provisions (9.8) (13.7) (11.9)
Other long-term payables (12.8) (17.9) (24.9)
(395.1) (437.1) (437.9)
Total liabilities (21,857.6) (17,296.1) (14,160.2)
Net assets 259.4 166.1 244.5
Equity
Share capital 53.8 53.8 53.8
Share premium account 9.9 9.9 9.9
Reverse acquisition reserve (1,182.3) (1,182.3) (1,182.3)
Other reserves 125.3 111.4 139.9
Retained earnings 1,250.0 1,170.6 1,220.8
Equity attributable to equity holders of the
parent 256.7 163.4 242.1
Minority interests 2.7 2.7 2.4
Total equity 259.4 166.1 244.5
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2009
Equity attributable to equity holders of the parent
Share Reverse Re- Hedging
Share Premium Acquisition valuation Merger and Own Retained Minority Total
Capital Account Reserve Reserve Reserve Translation shares earnings Total Interest Equity
£m £m £m £m £m £m £m £m £m £m £m
Balance at 1
January 2009 53.8 9.9 (1,182.3) 1.4 121.5 23.9 (6.9) 1,220.8 242.1 2.4 244.5
Total
comprehensive
income for
the period - - - 0.5 - (19.2) - 49.1 30.4 0.3 30.7
Dividends
paid in the
period (17.1) (17.1) - (17.1)
Sale of own
shares 2.6 (1.1) 1.5 1.5
Shares used
to meet
option
exercises 1.5 (1.5) - -
Debit arising
on
share-based
payment
awards (0.2) (0.2) (0.2)
Balance at 30
June 2009 53.8 9.9 (1,182.3) 1.9 121.5 4.7 (2.8) 1,250.0 256.7 2.7 259.4
Balance at 1
January 2008 53.2 - (1,182.3) 0.9 121.5 (4.4) (20.7) 1,162.1 130.3 2.1 132.4
Total
comprehensive
income for
the period - - - 0.2 - 0.3 - 37.0 37.5 0.6 38.1
Issue of
share capital 0.6 9.9 10.5 10.5
Dividends
paid in the
period (17.0) (17.0) (17.0)
Shares used
to meet
option
exercises 13.6 (13.6) - -
Credit
arising on
share-based
payment
awards 2.1 2.1 2.1
Balance at 30
June 2008 53.8 9.9 (1,182.3) 1.1 121.5 (4.1) (7.1) 1,170.6 163.4 2.7 166.1
Balance at 1
January 2008 53.2 - (1,182.3) 0.9 121.5 (4.4) (20.7) 1,162.1 130.3 2.1 132.4
Total
comprehensive
income for
the year - - - 0.5 - 28.3 - 94.8 123.6 1.5 125.1
Issue of
share capital 0.6 9.9 10.5 10.5
Dividends
paid in the
year (27.2) (27.2) (1.2) (28.4)
Shares used
to meet
option
exercises 13.8 (13.8) - -
Credit
arising on
share-based
payment
awards 4.9 4.9 4.9
Balance at
31 December
2008 53.8 9.9 (1,182.3) 1.4 121.5 23.9 (6.9) 1,220.8 242.1 2.4 244.5
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2009
Notes Six months Six months Year
ended ended ended
30 June 30 June 31
2009 2008 December
2008
(unaudited) (unaudited)
£m £m £m
Net cash from operating activities 10 13.9 43.5 136.0
Investing activities
(Purchase)/sale of other financial assets (4.5) (0.7) 0.9
Interest received 1.2 4.8 11.5
Dividends received from associates 1.9 0.5 0.5
Purchase of available-for-sale assets (0.3) (0.3) (0.1)
Purchase of intangible fixed assets (2.3) (2.0) (3.4)
Purchase of property, plant and equipment (1.8) (6.6) (13.2)
Proceeds on disposal of property, plant
and equipment 0.1 - -
Acquisition of subsidiaries (3.2) (2.2) (3.8)
Net cash used in investment activities (8.9) (6.5) (7.6)
Financing activities
Dividends paid (17.1) (17.0) (27.2)
Dividends paid to minority interests - (0.1) (1.0)
Sale of own shares 1.5 - -
Repayment of debt (30.0) (30.1) (30.1)
Repayment of obligations under finance
leases (3.4) (0.2) (0.3)
Net cash used in financing activities (49.0) (47.4) (58.6)
Net (decrease)/increase in cash and cash
equivalents (44.0) (10.4) 69.8
Net cash and cash equivalents at the
beginning of the period 374.9 262.1 262.1
Effect of foreign exchange rate changes (18.9) 0.5 43.0
Net cash and cash equivalents at the end
of the period 312.0 252.2 374.9
Cash and cash equivalents 316.0 252.5 375.0
Overdrafts (4.0) (0.3) (0.1)
Net cash and cash equivalents 312.0 252.2 374.9
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2009
1. General information
Tullett Prebon plc is a company incorporated in England and Wales under the
Companies Act 1985.
The condensed consolidated financial information for the six months ended 30
June 2009 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 condensed
financial information should be read in conjunction with the statutory accounts
for the year ended 31 December 2008 which was prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU.
The statutory accounts for the year ended 31 December 2008 have been reported
on by the Company's auditors, Deloitte 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 condensed consolidated financial information for the six months ended 30
June 2009 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 2008, 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 LLP, and their report appears at the end of the interim
financial report.
2. Accounting policies
The condensed consolidated financial statements have been prepared on the
historical cost basis, except for the revaluation of certain financial
instruments. The Group has considerable financial resources both in the
regions and at the corporate centre to comfortably meet the Group's ongoing
obligations. Accordingly, the going concern basis continues to be used in
preparing these condensed consolidated financial statements. The condensed
consolidated financial statements are rounded to the nearest hundred thousand
pounds (expressed as millions to one decimal place - £m), except where
otherwise indicated.
The same accounting policies, presentation and methods of computation are
followed in the condensed financial statements as applied in the Group's latest
annual audited financial statements for the year ended 31 December 2008, except
as described below.
In the current financial year, the Group has adopted International Financial
Reporting Standard 8 'Operating Segments' and International Accounting Standard
1 'Presentation of Financial Statements' (revised 2007).
IFRS 8 requires operating segments to be identified on the basis of internal
reports about the components of the Group that are regularly reviewed by Group
management to allocate resources to the segments and to assess their
performance. The adoption of this standard has not resulted in a change to the
operating segments previously reported under IAS 14 'Segment Reporting'.
IAS 1 (revised) requires the presentation of a statement of changes in equity
as a primary statement, separate from the income statement and statement of
comprehensive income. As a result, a condensed statement of changes in equity
has been included in the primary statements, showing changes in each component
of equity for each period presented.
3. Related party transactions
Related party transactions are described in the 2008 annual report and accounts
in note 37 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 2009.
4. Principal risks and uncertainties
Robust risk management is fundamental to the achievement of the Group's
objectives. The Group maintains a Risk Assessment Framework which identifies
risks within the following eight risk categories: credit risk, market risk,
operational risk, strategic and business risk, financial risk, reputational
risk, governance risk and regulatory, legal and human resource risk. A
detailed explanation of the above risks can be found on pages 18 to 21 of the
latest annual report which is available at www.tullettprebon.com. The directors
do not consider that the principal risks and uncertainties have changed since
the publication of the annual report for the year ended 31 December 2008.
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 Interim Management Report.
5. Segmental analysis
Products and services from which reportable segments derive their revenues
The Group is organised by geographic reporting segments which are used for the
purposes of resource allocation and assessment of segmental performance by
Group management. These are the Group's reportable segments under IFRS 8
'Operating Segments'.
Each geographic reportable segment derives revenue from Treasury Products,
Interest Rate Derivatives, Fixed Income, Equities, Energy and Information
Sales.
Information regarding the Group's operating segments is reported below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited)
Revenue £m £m £m
Europe 289.1 247.4 504.1
North America 183.6 165.3 339.6
Asia 45.2 55.6 99.9
517.9 468.3 943.6
Operating profit
Europe 69.4 51.4 108.1
North America 28.7 23.7 57.8
Asia 2.5 9.1 9.2
Operating profit before exceptional items 100.6 84.2 175.1
Exceptional items - - (19.5)
Reported operating profit 100.6 84.2 155.6
Finance income 14.8 9.9 24.8
Finance costs (23.7) (19.6) (43.4)
Profit before tax 91.7 74.5 137.0
Taxation (32.1) (26.8) (43.3)
Profit of consolidated companies 59.6 47.7 93.7
Share of results of associates 1.0 0.7 1.3
Profit for the period 60.6 48.4 95.0
There are no inter-segmental sales included in segment revenue.
5. Segmental analysis (continued)
The exceptional items in the year ended 31 December 2008 reflect the cost of
actions taken to reduce operating costs, including the costs of desk closures,
redundancies and the write down of sign-on payments which were considered to be
impaired.
Other segmental information
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited)
Total assets £m £m £m
Europe 8,776.9 8,142.3 1,905.7
North America 13,281.8 9,257.3 12,431.9
Asia 58.3 62.6 67.1
22,117.0 17,462.2 14,404.7
Segmental assets exclude all inter-segment balances.
Product group Six months Six months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited)
Revenue £m £m £m
Treasury Products 124.0 127.8 246.1
Interest Rate Derivatives 102.3 114.1 220.9
Fixed Income 188.3 128.4 282.1
Equities 38.8 48.7 94.2
Energy 52.3 40.7 81.5
Information Sales 12.2 8.6 18.8
517.9 468.3 943.6
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
2009 2008 December
(unaudited) (unaudited) 2008
£m £m £m
Interest receivable and similar income 2.1 5.5 11.5
Hedge ineffectiveness on net investment hedge - 0.1 -
Fair value gain on derivative instruments 9.3 - 4.6
Expected return on pension schemes' assets 3.3 4.3 8.7
Amortisation of discount on deferred
consideration 0.1 - -
14.8 9.9 24.8
7. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
£m £m £m
Interest payable on bank loans 3.1 8.8 17.2
Interest payable on Eurobond 6.2 6.2 12.4
Other interest payable 0.1 0.2 0.3
Amortisation of debt issue costs 0.5 0.6 1.4
Total borrowing costs 9.9 15.8 31.3
Amortisation of discount on deferred
consideration - 0.3 0.5
Fair value loss on derivative instruments 10.3 - 4.5
Interest cost on pension schemes' liabilities 3.5 3.5 7.1
23.7 19.6 43.4
8. Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited)
Adjusted basic 28.5p 22.4p 47.1p
Basic 28.1p 22.6p 44.4p
Diluted 28.0p 22.4p 44.0p
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
2009 2008 December
(unaudited) (unaudited) 2008
No. (m) No. (m) No. (m)
Weighted average shares in issue used for
calculating basic and adjusted basic earnings
per share 213.6 212.3 212.8
Contingently issuable shares 0.6 - 0.6
Issuable on exercise of options 0.6 1.2 1.3
Diluted weighted average shares in issue 214.8 213.5 214.7
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
2009 2008 December
(unaudited) (unaudited) 2008
£m £m £m
Profit for the period 60.6 48.4 95.0
Minority interest (0.5) (0.5) (0.5)
Earnings 60.1 47.9 94.5
Exceptional items - - 19.5
Gain arising on net investment hedge
ineffectiveness - (0.1) -
Expected return on pension schemes' assets (3.3) (4.3) (8.7)
Interest cost on pension schemes' liabilities 3.5 3.5 7.1
Amortisation of discount on deferred
consideration (0.1) 0.3 0.5
Net fair value loss on derivative financial
instruments 1.0 - -
Tax on above items (0.4) 0.2 (5.4)
Prior year tax - - (7.3)
Adjusted earnings 60.8 47.5 100.2
9. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
£m £m £m
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2008 of 8p per share 17.1 - -
Interim dividend for the year ended 31
December
2008 of 4.75p per share - - 10.2
Final dividend for the year ended 31 December
2007 of 8p per share - 17.0 17.0
17.1 17.0 27.2
An interim dividend of 5.0p per share will be paid on 19 November 2009 to all
shareholders on the Register of Members on 30 October 2009.
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 condensed consolidated cash flow statement
Reconciliation of operating profit to net cash from operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31
2009 2008 December
2008
(unaudited) (unaudited)
£m £m £m
Operating profit 100.6 84.2 155.6
Adjustments for:
-Share based compensation (0.2) 2.1 4.9
-Profit on sale of other non-current financial
assets - - (1.3)
-Loss on sale of property, plant and equipment - 1.1 2.0
-Depreciation of property, plant and equipment 3.1 3.3 6.5
-Amortisation of intangible assets 1.0 0.6 1.3
-Exchange gain on other financial assets (0.2) - -
Decrease in provisions for liabilities and
charges (1.0) (1.1) (5.4)
Outflow from retirement benefit obligations (6.3) (1.8) (3.2)
(Decrease)/increase in non-current liabilities (0.2) (0.6) 0.7
Operating cash flows before movement in
working capital 96.8 87.8 161.1
(Increase)/decrease in trade and other
receivables (14.4) (23.0) 13.1
(Increase)/decrease in net settlement balances (8.5) 3.9 5.1
(Decrease)/increase in trade and other
payables (39.4) 2.0 26.1
Cash generated from operations 34.5 70.7 205.4
Income taxes paid (15.0) (16.5) (39.1)
Interest paid (5.6) (10.7) (30.3)
Net cash from operating activities 13.9 43.5 136.0
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and other short term highly
liquid investments with original 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 Condensed Consolidated Cash Flow Statement, cash and
cash equivalents comprise the following:
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited)
£m £m £m
Cash and cash equivalents 316.0 252.5 375.0
Bank overdrafts (4.0) (0.3) (0.1)
312.0 252.2 374.9
11. Analysis of net funds
At Cash Non-cash Exchange At
1 January Flow Items Differences 30 June
2009 2009
£m £m £m £m £m
Cash 229.6 (63.3) (13.3) 153.0
Cash equivalents 142.7 23.3 (5.6) 160.4
Client settlement money 2.7 (0.1) - 2.6
Overdraft (0.1) (3.9) - (4.0)
374.9 (44.0) (18.9) 312.0
Bank loans within one year (30.0) 30.0 (29.7) - (29.7)
Bank loans after one year (238.5) - 29.4 - (209.1)
Loan due within one year - - - - -
Loan due after one year (149.8) - (0.1) - (149.9)
Finance leases (4.2) 3.4 (0.1) 0.4 (0.5)
(422.5) 33.4 (0.5) 0.4 (389.2)
Other financial assets 30.2 4.5 - (1.3) 33.4
Total net funds (17.4) (6.1) (0.5) (19.8) (43.8)
12. Notes to the condensed consolidated statement of changes in equity
Total comprehensive income reserve movements
Equity attributable to equity holders of the parent
Revaluation Hedging and Retained Minority Total
Reserve Translation earnings Total Interest Equity
Six months ended 30 June
2009 £m £m £m £m £m £m
Profit for the period 60.1 60.1 0.5 60.6
Revaluation of
available-for-sale
assets 0.5 0.5 0.5
Gains on net investment
hedges 3.6 3.6 3.6
Exchange differences on
translation of foreign
operations (22.8) 22.8) (0.2) (23.0)
Actuarial losses on
defined benefit pension
schemes (9.7) (9.7) (9.7)
Taxation credit on
components of other
comprehensive income (1.3) (1.3) (1.3)
Total comprehensive
income for the six
months ended 30 June
2009 0.5 (19.2) 49.1 30.4 0.3 30.7
Total comprehensive income reserve movements
Equity attributable to equity holders of the parent
Hedging
Revaluation and Retained Minority Total
Reserve Translation earnings Total Interest Equity
Six months ended 30 June
2008 £m £m £m £m £m £m
Profit for the period 47.9 47.9 0.5 48.4
Revaluation of
available-for-sale
assets 0.2 0.2 0.2
Exchange differences on
translation of foreign
operations 0.3 0.3 0.1 0.4
Actuarial losses on
defined benefit pension
schemes (13.6) (13.6) (13.6)
Taxation credit on
components of other
comprehensive income 2.7 2.7 2.7
Total comprehensive
income for the six
months ended 30 June
2008 0.2 0.3 37.0 37.5 0.6 38.1
Equity attributable to equity holders of the parent
Hedging
Revaluation and Retained Minority Total
Reserve Translation earnings Total Interest Equity
Year ended 31 December
2008 £m £m £m £m £m £m
Profit for the year 94.5 94.5 0.5 95.0
Revaluation of
available-for-sale
assets 0.5 0.5 0.5
Losses on net investment (17.2) (17.2) (17.2)
hedges
Exchange differences on
translation of foreign
operations 45.5 45.5 1.0 46.5
Actuarial losses on
defined benefit pension
schemes (9.4) (9.4) (9.4)
Taxation credit on
components of other
comprehensive income 9.7 9.7 9.7
Total comprehensive
income for the year
ended 31 December 2008 0.5 28.3 94.8 123.6 1.5 125.1
13. Post balance sheet event
£150m Eurobond
On 6 July 2009 holders of £141,144,000 of the Group's £150,000,000 8.25%
Step-up Coupon Subordinated Notes due 12 August 2014 exchanged their holding
for £141,144,000 7.04% Guaranteed Notes due 6 July 2016. The remaining £
8,856,000 8.25% Step-up Coupon Subordinated Notes due 12 August 2014, which are
unsecured, are callable by Tullett Prebon Group Holdings plc at any time after
12 August 2009 ('the Call Date'). After the Call Date these notes will bear
interest calculated at 3.5% over the gross redemption yield of a gilt with a
comparable maturity date.
Directors' Responsibility Statement
The directors confirm, to the best of their knowledge, that the condensed set
of financial statements has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union, and that the interim
management report herein includes a fair review of the information required by
DTR 4.2.7R and DTR 4.2.8R.
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
4 August 2009
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 year report for the six months ended 30 June 2009 which
comprises the condensed consolidated income statement, the condensed
consolidated statement of comprehensive income, the condensed consolidated
balance sheet, the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and related notes 1 to 13. We have
read the other information contained in the half year 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 (UK and Ireland) 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 year report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half year 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 year 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 year 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 year report
for the six months ended 30 June 2009 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 LLP
Chartered Accountants and Statutory Auditors
4 August 2009
London, UK
Friday, 31st May 2024
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