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ICAP: H1 results
Interdealer broker ICAP reported an 18% growth in pre-tax profit (before amortisations and exceptional items) for the half year to September 2005. Revenue rose by 12% to £443.9m with strong growth in electronic broking (+24% to £49.3m) and a steady performance in voice broking (revenue +11% to £381.8m).
More active markets and increases in market share (in both electronic and voice broking) were responsible for the better result.
Profit (before tax, amortisation and impairment of intangibles and exceptional items) was £98.2m compared to £83.3m last year. Electronic broking profit rose 65% to £15.5m while voice broking profits rose by 12% to £71.6m.
Strong oil prices have ensured an active energy trading market while securities trading benefited from a generally strong mortgage market although activity levels have fallen since rates have started to rise. Overall, the company has seen its markets growing by 3%-5% in the past few years and the company is confident that this rate of growth can be maintained. In particular, the company expects credit derivative markets to grow by 20-25% driven by hedging needs of banks and new product development, OTC derivatives by 12-15% (driven by increases in assets under management at hedge funds) and energy markets by 19-22% due to volatility in the energy markets.
Growth prospects look good, the share trades at 365.5p, on a prospective PE (2005 earnings) of 17.4x, at the upper end of the sector, factoring in much of the growth. The yield is 2.5%.
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