TP ICAP Group plc

Ladies and gentlemen, and welcome to the TP ICAP Group's interim results presentation. At this time, all the participants are in listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. If you have dialed in, please press star 9 to raise your hand and star 6 to unmute. Instructions will also follow at the time of the Q&A. I would like to remind all participants that this call is being recorded. Questions will follow after the presentation. I will now hand the call over to Nicola Bresso, the Group CEO to start the presentation. Thank you.

Good morning everyone and thank you for joining us. This is our agenda today. I start with the highlights. Robin will take you to the financial results I then look at the operational performance of each division and wrap up before we take questions. So let's start with the headlines where growth rates are in constant currency. We have delivered a strong first half. Group revenue increased 8% to 1.3 billion with an excellent performance from global broking and disciplined execution across the group. Group adjusted EBIT grew 9% to $196 million and we are proposing an interim dividend of 5.6 pence, an increase of 8%. We've also announced another share buyback of $30 million today. This takes total distributions announced since 2023 to around $660 million, including $110 million of buybacks this year. In addition, we have made good progress on strategic initiatives with the completion of our Vantage Capital Markets acquisition, which adds to our capabilities in Asia Pacific. The launch of our new dealer-to-crime credit platform, RealQ. And excellent progress on transformation plan, where we now expect to exceed our 2027 target a year early. This strong performance shows are we benefiting from successful execution of our three strategic priorities. Diversification, transformation, and dynamic capital management. This strategy has served us well and we now plan to build on it with an emphasis on medium-term revenue growth. Over the next five years, we aim to capitalize on key competitive advantages. First, as an industry leader, we have a unique position at the heart of vast and growing over the counter markets. Second, we have built a diverse business. We serve a broad client base including both the sell side and the buy side. We operate in every major asset class in each region across the world. Third, we've invested in technology to create a scalable market infrastructure platform. Fourth, our value proposition is compelling and is built on strong client relationships. Clients know they can rely on our impartiality along with deep liquidity unique market insight and seamless execution. And fifth, despite our scale, we have additional opportunities to grow organically through products and geographic expansion or via acquisitions. Our ambition is to capitalize on this key strength to drive additional growth and operating leverage. This underpins our commitment to maximize shareholder value over the medium term. So now let me hand over to Robin to take you through the results in detail.

Thank you Nico and good morning everyone. I'll start with the headlines in constant currency. We delivered a strong first half performance. Total revenue grew 8% to 1.3 billion with excellent growth of 11% in global broking. Adjusted EBIT was up 9% at 196 million as we maintained good cost discipline and the Group adjusted EBIT margin increased to 15.2% with a 3% uplift in productivity. Basic adjusted earnings per share grew 10% to 19.3 pence and as you've heard from Nico we've announced an interim dividend of 5.6 pence up 8% together with another share buyback of 30 million. Turning to the Group Income Statement. Net finance cost decreased slightly to 16 million and the effective tax rate was 27%. We delivered adjusted earnings of 140 million before significant items up 8%. Significant items were 36 million as we accelerated investment in our transformation plan to unlock cost efficiencies. Let's turn now to the year-on-year movement in earnings before interest and tax. Adjusted EBIT increased from 180 million last year to 196 million this year. We have restated last year's results using 2026 exchange rates to give the basis for a like-for-like comparison without the impact of foreign exchange. Contribution increased by 22 million and we also benefited from 2 million of front office savings from our transformational plan. back-office savings of 4 million offset inflation, high national insurance contributions and ongoing investment in the business. As a result, net management and support costs are broadly unchanged, turning next to the business divisions where growth rates are shown in constant currency. Revenue in global broking increased 11% to 783 million with our scalable electronic platforms driving higher levels of client engagement and trading activity in supportive market conditions. Adjusted EBIT increased 22% to 159 million and the margin improved from 18.4 to 20.3%. Revenue in energy and commodities of 233 million was up 2%. The adjusted EBIT margin was around 10% in the first quarter, but performance was impacted in the second quarter when conflict in the Middle East dampened activity. As you know, this business made a number of key hires and invested in broker retention in 2025. These additional costs impacted the division's adjusted EBIT, which decreased from 26 to 12 million. This investment positions the division well for future revenue growth and we expect this to feed through when markets recover. In LiquidNet, revenue of $194 million was broadly stable as growth in cash equities was offset by a decline in the multi-asset business against a strong prior year comparator. Adjusted EBIT was also stable at $32 million with a margin of 16.5%. Finally, Parameter Solutions revenue grew 6% to $102 million. The adjusted EBIT margin was 35.3% reflecting planned investment with an improved trend in the second quarter which we expect to continue in the second half. We are transferring certain agency and digital asset activities between divisions to better align and enhance performance. We'll update you on this at the third quarter. Now let's look at cash flow. There was an operating cash outflow of 77 million compared with an inflow of 24 million a year ago. Around 70% of this is due to a change in net settlement balances CAPEX increased by 6 million to 42 million largely due to office fit out costs in our hubs in manila and belfast we also acquired vantage capital markets for a cash consideration of 22 million paid dividends of 88 million and almost completed the 80 million share buyback announced in march the group's net cash balance was 652 million at the end of june compared to 903 million at the year end Turning now to our transformation plan. As you heard from Nico, we now expect to exceed our 2027 target a year ahead of schedule, delivering at least 50 million in annualized savings by the end of this year. This acceleration is reflected in significant items, which I'll cover on the next slide. We've also identified around 15 million of additional savings which we expect to execute in 2027 at no more than one times cost. We'll provide more detail at the full year. As a result of simplifying our business, improving efficiency and unlocking cash from the balance sheet, we are announcing another share buyback today. Any potential returns in the future will be supported by earnings generation. Turning to significant items. These are not included in our adjusted results so we can measure underlying business performance and make more meaningful year-on-year comparisons significant items before tax increased by 1 million to 45 million almost half were non-cash including 18 million for the amortization of intangible assets restructuring and related costs increased by 5 million as we accelerated delivery of our transformation plan and disposals acquisitions and investment reduced by 9 million turning now to our 2026 outlook We expect to achieve adjusted EBIT in line with current market expectations, subject to foreign exchange. We also expect group net finance expense of around 35 million, an effective tax rate of around 27% and significant items of around 80 million before tax, excluding legal and regulatory matters. This is around 10 million higher than previously indicated, reflecting the accelerated delivery of our transformation plan. I'd like to conclude by looking at the medium term you can see here how disciplined execution of our strategy has resulted in a strong track record of growth and increasing operating leverage since 2021 we have delivered compound growth in revenue of more than five percent and adjusted EBIT of nine percent our priority now is to invest in growing our business and delivering against our medium-term ambition for mid-to-high single-digit revenue growth. We will maintain the flexibility to pursue value-accretive acquisitions and will look to return excess cash, not required for other purposes, via share buybacks. With that, I'll now hand you back to Nico.

Thank you, Robin. So now let's look at the highlights for each division, starting with global broking, which delivered a strong first half. Revenue was up 11% to $783 million and adjusted EBIT grew 22%, showing that our scalable platform delivers significant operating leverage. Revenue growth was broad-based with a strong performance across equities, rates and credit. Asia-Pacific was our strongest region. We further enhanced our presence in Asia-Pacific with the acquisition of Vantage Capital Markets. And in June, we launched our new dealer-to-client platform brand, RealQ, which is an important step forward. RealQ brings together Neptune's pre-trade bond data with LiquidNet Credit's trading interest from buy-side clients. Looking ahead, Global Broking will continue to grow its franchise organically, to pursue value-accretive acquisitions, and to use tech and AI to improve efficiency and capture new revenue opportunities. Turning to energy and commodities, revenue was broadly stable at $233 million while profitability was impacted by weak market conditions in the second quarter. Oil and related products account for over 50% of energy and commodities revenue and conflict in the Middle East led to a spike in activity in March when oil futures volumes increased 134%. This strong month was more than offset by negative market conditions in the second quarter. Market futures volumes in June were a third lower than last year as the physical flow of oil was badly interrupted together with all related hedging activity. In other areas such as power, gas and other energy, we delivered good growth. Our energy and commodities business remains well positioned in the longer term. We have recently added new capability in areas of green demand such as agricultural products, freight derivatives and nuclear fuel derivatives. We've expanded our footprint in the UAE and Brazil, two fast-growing regions where physical and derivative activity plays to our strengths. Finally, we have deployed fusion order management and new workflow tools, enabling us to capture high-quality data more efficiently. This benefits clients in parametric solutions as well as energy and commodities. LiquidNet maintained its strong position during the first half Revenue was stable at 194 million and adjusted EBIT margin remained robust at 16.5%. While LiquidNet had a strong first quarter, market conditions were impacted by the Middle East conflict in the second quarter and this reduced activity in the block trading. Our cash equities business demonstrated strong operating leverage with revenue growth of 6% and adjusted EBIT up 10%. There were strong performances in algorithmic trading, which grew 25%, cross-border trading, which increased 13%, and Asia-Pacific, which was at 21%. Growth in cash equities offset a 5% decline in revenues from our multi-asset business against a strong comparator last year, when multi-asset grew 29%. Over the longer term, LiquidNet has a significant revenue and margin potential. First, we continue to diversify both in cash equities and other asset classes. Second, we continue to innovate. Our self-trading tool FirstMate is just one example. This complements the work of our brokers by using AI to help identify trading opportunities and coordinate execution. We see an opportunity to increase operating leverage and margin further as we continue to scale greater volumes. Turning now to a data and analytics business, Parameter Solutions, where revenue increased 6% to 102 million. EBIT margin was lower in the first quarter, as expected, due to planned investment, but we expect it to improve in the second half as the benefits from our investment fit through. This already started in the second quarter when new sales highs began to contribute and our opportunity pipeline strengthened. Our indices continue to gain traction and we are expanding our award-winning swap rate index franchise into additional currencies. With its new sales force now fully embedded, Parameta is expanding its current base, in particular with buy-side clients and in the US. It is also broadening its product offering, drawing on proprietary data from TPI CAP as well as third parties, and using AI to accelerate bringing new products to market. So to conclude, we have seen today how successful execution of our strategy has resulted in a stronger, more resilient business. We're now building on this progress with an emphasis on medium-term growth taking advantage of our competitive strength. We are an industry leader in large and growing over the counter markets which clients need help to navigate. We have a well diversified business placing us at the center of transactions across many products and services for multiple clients across the world. We have a well invested scalable platform capable of supporting future growth and increasing operating leverage. We have a compelling client proposition with strong client relationships built on trust. And we have additional opportunities to grow, both organic and inorganic. In short, we plan to deliver further growth, increase operating leverage, and maximize shareholder value over the medium term by capitalizing on this strength. With that, I now hand back to the operator for questions.

Now begin the Q&A. In addition to the Group CEO and CFO joining us for the Q&A, we have the CEOs of Global Broking, Energy and Commodities, LiquidNet and Parameter. If you have dialed into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. I'll allow a moment. Our first question today comes from Ray Malay at Peel Hunt. You may now unmute your line and ask your question. Thank you.

Morning, it's Ray Malay at Peel Hunt. I wonder, Nico, can you help the market understand, obviously, a very strong first half performance, increased cost savings, but no change to full year guidance, but then this confidence in what you can do over the medium term. As you look at the business, How do you think about that medium-term objective compared with current market conditions?

Yes, absolutely. Thanks for your question. Gordon, would you like to start?

Yes, I think for us, the medium-term ambition that we have is very much, we see that predicated on the trend that we've had leading up to this, to our results. We've seen very strong compound growth on the revenue over the last four since 2021 of 5%. We've seen EBIT growth of 9%. And in growing OTC markets, and with all the work and effort that we're doing on transforming the business and creating scalable platform that we have, we see that ambition as something which is very achievable over the over that medium term.

thanks and maybe just help the market think about what what parts of the business do you think will will generate most of that growth over the medium term well I think we have multiple growth engines across business so we think that all divisions will contribute to this growth of revenue but also these delivering more operating leverage. I'll start with Global Broking where we see the benefit of the continuous growth of the OTC markets. In addition, we have still some wide spaces where we're investing and fulfilling some new needs from clients. For example, when it comes to financial optimization for instance so these combined with more technology and AI in the business will contribute to both including the revenue and the operating margin but if I turn to our energy and commodities business we continue to see structural growth our gas and power businesses are doing very well we are convinced that the oil market activity and the hedging in particular will resume so our recent investments will play out in the future and we see also our economy is getting more and more electrified so with more needs for products that we are building if i turn to liquid net here we have good operating leverage we've seen our platform revenue were up 6% on the cash equity and our EBIT margin was up 10% so more leverage and more profitability to come from there and our diversification across multi-assets is also an issue of course in the equity net and last but not least parameter I mean we know that The work we're getting into needs more and more data, not less. So we are very well positioned for that in the future. So I would say, sorry, it's a long answer, but multiple cost engines will cause the difference.

That's great. Thank you.

Thank you. Our next question today comes from Jonas Dolhen at Deutsche Bank. Jonas, you may now unmute your line and ask your question.

Yeah, morning guys, and thanks from Deutsche Bank here. Just two questions for me. On the global broking productivity side, revenue and contribution per broker increased while support costs declined. What evidence suggests this is structural workflow led productivity rather than mainly stronger market activity? And how should we think about the sustainability of 20% margin deposited there? and on Paramita with Q2 margin improving and the trend expected to continue, how should we think about kind of the H2 margin and how this develops over the medium term and is that improvement driven by revenue acceleration or slower investment growth?

Thank you for your question. Maybe first, maybe, Silvina, would you like to answer the question about Q2 and Paramita?

Yes. Thank you very much. much for the interest. Our business has had a stronger Q2 than Q1 and that is a result of the pipeline that we have been building from December of last year through the whole of Q1 and executed strongly in Q2. A new business activity is particularly attractive when it comes to some of our new product introductions uh including the real time oil offerings which has been one of the largest customers signed so far and you might have remember me talking about this new solution um towards um the beginning of this year our index offering is now also hitting really good momentum creating revenue that is AUM length So these are some of the examples of what has been driving the acceleration of growth in Q2 versus Q1, and what will sustain the second half of the year.

Okay, thank you, Silvia.

Dan, she works about... On productivity, obviously, we had a good print staff with growth across the board, and that was both from new businesses and new hires, as well as supportive market conditions. um that translated into a higher profit margin above 20 as you noted i think in terms of the sustainability the reality is that we invest in technology as part of the foundation upon which our business is built and that both contributes to the productivity of individual brokers and the ongoing sustainable profitability of the businesses it's hard to isolate what that means in terms of electronification foundation versus the ongoing growth that we have built and continues to see as an opportunity but in increased productivity

Okay, so there are no further questions on the webinar. Thank you very much everybody. This concludes today's call.