ICAP Plc Ordinary 10p shares (IAP)

Company overview

ICAP effectively acts as a go between (interdealer broker) for both commercial and investment banking organisations. Financial markets operated in include: derivatives, securities, foreign exchange and energy products.

HL Comment (20 May 2008)

ICAP provides a specialist intermediary broking service to commercial banks and investment banks in the wholesale financial markets. An inter-dealer broker works in these markets to draw together liquidity and to match buyers and sellers so that deals can be executed via its banking customers. The banks pay a commission whenever they use ICAP to complete a deal. Average daily transaction volumes are in excess of 1 trillion US dollars, transacted approximately 50:50 via voice (telephone) and electronic methods. With nearly 3000 staff, the group has a presence in all of the major financial centres around the globe.

The group’s recent full year results (20May08) again saw the company making solid progress, with pre-tax profits rising by 31pc to £330.2m, whilst revenues climbed by 18pc to £1.3 billion. The group was again aided by volatile market conditions as global banks continued to try and steer their way through the unfolding credit crisis. The company experienced high levels of trading activity in foreign exchange, equity and commodity markets. Furthermore, management believe that current market conditions should pinpoint acquisition opportunities, although it also noted that any takeovers would be paid for without calling on shareholders to raise funds.

Acting for negative investors’ concerns, the group is exposed to the fortunes of the US dollar with the majority of its revenues generated in the currency. In addition, potential bolt-on acquisitions raise question marks as to whom and at what price, and also appear to rule out any company desire to conduct a major industry merger – as recently rumoured. Finally, any prolonged downturn in financial markets could eventually see dealing volumes retreat, to the detriment of companies such as ICAP. On the positive, financial markets remain volatile, volumes have to date held up and acquisition opportunities could prove earnings accretive over time. On balance, market consensus opinion is currently favourable in tone.

 

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-03-2008	1,304.40	275.10	24.50	18.20	0.70	27.00	15.65	2.80
31-03-2007	1,106.30	213.80	19.30	21.60	1.50	14.00	12.30	2.30
31-03-2006	919.20	193.00	19.60	20.80	1.90	11.00	10.00	2.20
31-03-2005	812.70	166.80	18.30	14.10	n/a	n/a	8.25	3.00
31-03-2004*	801.40	130.50	n/a	n/a	n/a	n/a	7.40	2.60

* Prior to 31st March 2005, figures were stated under UK Generally Accepted Accounting Principles (GAAP). Recent figures stated under International Financial Reporting Standards (IFRS).