Annual Financial Report

RNS Number : 0628K
TP ICAP PLC
17 April 2020
 

17 April 2020

 

TP ICAP plc 2019 Annual Report and Notice of 2020 Annual General Meeting

TP ICAP plc (the 'Company') today publishes its 2019 Annual Report and circular to shareholders incorporating the Notice of the 2020 Annual General Meeting. Both documents can be viewed at or downloaded from our website at www.tpicap.com/investors .

Copies of both of these documents, together with the Form of Proxy, will be available as soon as practicable for inspection via the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

The Board has been closely monitoring the developing situation regarding the COVID-19 pandemic. In normal circumstances the Directors greatly value the opportunity to meet shareholders in person at the Annual General Meeting ('AGM'), which is scheduled to be held on 13th May 2020. However, in light of the UK Government's compulsory measures prohibiting public gatherings of more than two people and non-essential travel, shareholders will not be able to attend this year's AGM in person and any shareholder attempting to gain access to the meeting will be refused entrance. In order to facilitate participation by shareholders, the Company has put in place arrangements for shareholders to attend the AGM electronically, ask questions and vote in real time using their computer, tablet, or smartphone. Further information on how to participate in the AGM electronically can be found in the Notice of the 2020 AGM.

If shareholders are either unable or disinclined to attend the AGM electronically, shareholders should vote by appointing the chairman of the meeting as their proxy by submitting the Form of Proxy in hard-copy or online. Details of how to do this are included in the Notice of the 2020 AGM and on the Company's website.

This situation is constantly evolving and the UK Government may change current restrictions or implement further measures relating to the holding of AGMs during the affected period. Any changes to the AGM, including any change to the location of the AGM, will be communicated to shareholders before the meeting through our website at www.tpicap.com/investors , which shareholders are advised to check for updates, and, where appropriate, by RNS announcement.

The following disclosures comply with Disclosure and Transparency Rule 6.3.5. The Company's full year results announcement on 10 March 2020 contained a management report and condensed financial information derived from the TP ICAP Group's audited statutory accounts. A description of risks and uncertainties, details of related party transactions and the Directors' Responsibility Statement, extracted in full unedited text from the Company's 2019 Annual Report, are set out below. This information should be read in conjunction with, and not as a substitute for, reading the Company's 2019 Annual Report. Page numbers and notes in the following appendices refer to page numbers and notes in the Company's 2019 Annual Report.

Appendix A: Principal Risks

The Board Risk Committee, on behalf of the Board, has conducted a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.

 

In undertaking this assessment, the Board Risk Committee has considered a wide range of information, including reports provided by the Group Risk function and senior management, as well as key findings from the Group's various risk assessment processes. 

 


 

Risk

Adverse change to regulatory framework

 

Description

The Group is exposed to the risk of a fundamental change to the regulatory framework which has a material adverse impact on its business and economic model. 

 

Potential impact

Reduction in broking activity

Reduced earnings and profitability

Material change in applicable regulatory rules and their interpretation including loss of consolidation waiver

 

Change in risk exposure since 2018

No change

 

Mitigation

Monitoring of regulatory developments

Involvement in consultation and rule setting processes

 

Key risk indicator

Key regulatory changes

Status of regulatory change initiatives

 

Related principal strategic objectives

Electronification and technology

Liquidity aggregation

Diversification

People, conduct and compliance

 

 


 

Risk

Deterioration in the commercial environment

 

Description

The risk that due to adverse macro-economic conditions or geopolitical developments, market activity is suppressed leading to reduced trading volumes.

 

The impact of Brexit is addressed separately below.

 

Potential impact

Reduction in broking activity

Pressure on brokerage

Reduced earnings and profitability

 

Change in risk exposure since 2018

No change

 

Mitigation

Defined business development strategy that seeks to maintain geographical and product diversification

 

Key risk indicator

Operating profit

Revenues by region

Trade volumes

Revenue forecast

Stress testing scenario outcomes

 

Related principal strategic objectives

Electronification and technology

Liquidity aggregation

Diversification

 


 

Risk

The impact of Brexit

 

Description

The risk that Brexit leads to a macro-economic downturn and a consequential reduction in trading

volumes and revenue.

 

The risk that the legal entity structure implemented to comply with the loss of EU passporting rights results in a fragmentation of liquidity between UK and EU liquidity pools.

 

Potential impact

Reduction in broking activity

Loss of market share

Reduced earnings and profitability

 

Change in risk exposure since 2018

No change

 

Mitigation

Adoption of a Brexit plan which would accommodate a range of potential scenarios (including the failure to secure a UK-EU deal which maintains access between UK and EU markets)

Incorporation of a new EU subsidiary to hold EU-based business

Proactive engagement with European regulators and clients

 

Key risk indicator

Brexit revenue-at-risk

Brexit plan tracking

 

Related principal strategic objectives

Liquidity aggregation

People, conduct and compliance



 

 


 

Risk

Failure to respond to client requirements

 

Description

The risk that the Group fails to respond to rapidly changing customer requirements, including the demand for enhanced electronic broking solutions for certain asset classes.

 

Potential impact

Loss of market share

Reduced earnings and profitability

 

Change in risk exposure since 2018

No change

 

Mitigation

Proactive engagement with clients through customer relationship management process

Clearly defined business development strategy which continues to enhance the Group's service offering

 

Key risk indicator

Operating profit

Trade volumes

Revenues by region

New business initiatives

Client satisfaction surveys

 

Related principal strategic objectives

Electronification and technology

Liquidity aggregation

Diversification

 

 


 

Risk

Cyber-security and data protection

 

Description

The risk that the Group fails to adequately protect itself against cyber-attack and/or to adequately secure the data it holds, resulting in loss of operability as well as potential loss of critical business or client data. 

 

Potential impact

Loss of revenue

Remediation costs

Damage to reputation

Regulatory sanctions

Payment of damages/compensation

 

Change in risk exposure since 2018

No change

 

Mitigation

Ongoing monitoring and assessment of the cyberthreat landscape

Appropriate framework of systems and controls to prevent, identify and contain cyber threats



Key risk indicator

System outages

Data loss events

Cyber-security events/losses

Vulnerability monitoring

 

Related principal strategic objectives

Electronification and technology

 

 


 

Risk

Operational failure

 

Description

The Group is exposed to operational risk in nearly every facet of its role as an interdealer broker,

including from its dependence on:

> the accurate execution of a large number of processes, including those required to execute, clear and settle trades; and

>a complex IT infrastructure. 

 

Potential impact

Financial loss which could, in extreme cases, impact the Group's solvency and liquidity

Damage to the Group's reputation as a reliable market intermediary

 

Change in risk exposure since 2018

No change

 

Mitigation

Appropriate framework of systems and controls to minimise the risk of operational failure

Incident and crisis management process

Business continuity plans and capability

Reverse stress test process to identify key risks that could undermine the Group's viability

 

Key risk indicator

Risk events

Execution failure

Settlement fails

Margin calls

 

Related principal strategic objectives

Electronification and technology

People, conduct and compliance

 


 

Risk

Failure to protect proprietary data

 

Description

The risk that the Group fails to protect unauthorised dissemination of Group's proprietary data leading to loss of potential revenue streams.

 

Potential impact

Failure to achieve future revenue growth targets due to non-contractual use of our market information

Damage to reputation

 

Change in risk exposure since 2018

No change

 

Mitigation

Ongoing audit of licenses

Appropriate legal remedies incorporated within licence agreements

 

Key risk indicator

Completion of data

Audit plan

Data audit findings

 

Related principal strategic objectives

Diversification

 


 

Risk

Breach of legal and regulatory requirements

 

Description

The Group operates in a highly regulated environment and is subject to the laws and regulatory frameworks of numerous jurisdictions.

 

Failure to comply with applicable legal and regulatory requirements could result in enforcement action being taken.

 

Potential impact

Regulatory and legal enforcement action including censure, fines or loss of operating licence

Severe damage to reputation

 

Change in risk exposure since 2018

No change

 

Mitigation

Compliance function to oversee compliance with regulatory obligations

Compliance monitoring and surveillance activity

Comprehensive compliance training programme to ensure that staff are aware of regulatory requirements

Conduct and Cultural framework to foster high standards of employee conduct

 

Key risk indicator

Internal Compliance policy breaches

Regulatory breaches

Employee conduct metrics



 Related principal strategic objectives

People, conduct and compliance

 


 

Risk

Counterparty credit risk

 

Description

The Group is exposed to counterparty credit risk arising from outstanding brokerage receivables, unsettled Matched Principal trades and cash deposits.

 

Potential impact

Financial loss which could, in extreme cases, impact the Group's solvency and liquidity



Change in risk exposure since 2018

No change

 

Mitigation

Counterparty exposures managed against thresholds calibrated to reflect counterparty creditworthiness

Exposure monitoring and reporting by independent credit risk function

Exposure concentration limits to prevent excessive exposure to one institution

 

Key risk indicator

Portfolio exposure

Exposure concentration

Aged debt

 

Related principal strategic objectives

Diversification

 


 

Risk

FX exposure

 

Description

There is a risk that the Group suffers loss as a result of a movement in FX rates whether through transaction risk or translation risk.

 

Potential impact

Financial loss which could, in extreme cases, impact the Group's solvency and liquidity

 

Change in risk exposure since 2018

No change

 

Mitigation

Ongoing monitoring of Group's FX positions

 

Key risk indicator

FX translation exposure

FX transaction exposure

 

Related principal strategic objectives

Diversification

 


 

Risk

Liquidity risk

 

Description

The Group is exposed to potential margin calls from clearing houses and correspondent clearers. The Group also faces liquidity risk through being required to fund Matched Principal trades which fail to settle on settlement date.

 

Potential impact

Reduction in the Group's liquidity resources which could, in extreme cases, impact the Group's liquidity

 

Change in risk exposure since 2018

No change

 

Mitigation

Broking limits that restrict potential margin exposure

Monitoring of liquidity risk drivers

 

Group maintains liquidity resources in each operating centre to provide immediate access to funds

Committed £270m revolving credit facility ('RCF')

 

Key risk indicator

Margin call profile

Settlement fail - funding requirements

Unplanned intra-Group funding calls

RCF draw-down

Managing bond maturity profile

 

Related principal strategic objectives

Diversification

 


 

 

Appendix B: Related party transactions

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.

 

The total amounts owed to and from associates and joint ventures at 31 December 2019, which also represent the value of transactions during the year, are set out below:

 


Amounts owed by related parties

Amounts owed to related parties


2019

£m

2018

£m

2019

£m

2018

£m

Associates

Joint Ventures

 

3

-

 

3

1

 

-

(3)

 

-

(2)

 

 

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

 

During the year, less than £1m of interest was paid on loans from related parties.

 

Directors

Costs in respect of the Directors who were the key management personnel of the Group during the year are set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'. Further information about the individual Directors is provided in the audited part of the Report on Directors' Remuneration on pages 87 to 93. 

 


2019

£m

2018

£m

Short term benefits

6

3

Social security costs

1

-


7

3

 

 

Appendix C: Directors' Responsibility Statement

 

The Directors confirm that to the best of their knowledge that:

 

the Financial Statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

 

ENDS

 

Enquiries:

 

Richard Cordeschi

Group Company Secretary

Richard.Cordeschi@tpicap.com  

+44 (0) 7580 851104

 

For media enquiries please contact:

 

William Baldwin-Charles

Group Media Relations Director

William.Baldwin-Charles@tpicap.com  

+44 (0) 7834 524 833

 

For investor enquiries please contact:

 

Al Alevizakos
Head of Investor Relations and FP&A

Alevizos.Alevizakos@tpicap.com

+44 (0) 7999 912 672

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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