ICAP banking on traditionally strong fourth quarter

Inter-dealer broker ICAP reckons full-year pre-tax profits should be within the range of market expectations but added the caveat that this projection is based on the assumption that markets normalise in the last quarter.

"As the banks approach the end of their financial year they are reducing their appetite for risk. This has resulted in activity in our voice business in October and November to date being disappointing, but not surprising. We expect to see a return to more normal activity at the start of the next calendar year," said Michael Spencer, the group's chief executive officer.

Group revenue of £867m in the six months to the end of September was unchanged from the corresponding period of last year. Despite that, adjusted profit before tax edged up 2% to £186m from £183m at the interim stage in 2010.

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Adjusted earnings per share from continuing operations came in a shade short of market expectations of 19.85p at 19.6p, and were down 6% on last year's 20.8p.

Revenue on an underlying basis. which strips out currency fluctuations, acquisition and disposal costs and exceptional items, increased by 3% from last year. The voice broking side saw a 3% fall in revenue over the six month period from last year, but electronic broking saw a 5% increase, while post trade risk and information services enjoyed a 10% increase.

Revenue per broker decreased from £268,000 last year to £263,000 but the number of brokers increased to 2,384 as ICAP hired additional brokers in higher growth areas, such as commodities, who were not yet fully productive at the period end.

As at 30 September 2011. the group had cash and cash equivalents of £527m, up from £404m six months earlier, and gross debt of £740m, up from £565m at the end of March 2011.

The group has a policy of declaring an interim dividend that is 30% of the previous year's total dividend which this time round results in an interim dividend of 6p, up from 5.27p last year.

"The group expects that customers' risk appetite will return to more normal levels in the new year and that the political and economic uncertainty will continue to drive high levels of volatility in the financial markets into our traditionally strong fourth quarter trading period," Spencer said.

Current market expectations are for ICAP's full-year pre-tax profit to be within the range of £358m to £390m, with a median figure of £368m.

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