14th Mar 2023 13:18
(Alliance News) - Analysts on Tuesday said TP ICAP Group PLC's outlook is "reasonably upbeat", as it reports strong annual growth.
Shares in TP ICAP were down 7.2% at 165.50 pence each in London on Tuesday afternoon.
Peel Hunt rates TP ICAP at 'buy', with a target price of 240.0p. Shoe Capital reiterated its 'hold' recommendation, with a target price of 178p.
The London-based financial services firm said revenue in 2022 rose 13% to GBP2.12 billion from GBP1.87 billion in 2021.
"This includes the benefit of a full year’s contribution from Liquidnet. All four divisions contributed to the increase on a reported basis, with a notably strong performance from the Rates business, which now accounts for just over a quarter of the group," said Peel Hut analyst Stuart Duncan.
Pretax profit jumped to GBP113 million from GBP24 million, as basic earnings per share rose to 13.2 pence from just 0.7p a year earlier. Adjusted pretax profit was GBP226 million, up from GBP177 million.
Earnings before interest and tax amounted to GBP163 million, up 68% from GBP97 million in 2021. Adjusted Ebit was up 7.8% to GBP275 million from GBP255 million, driven by strong rates performance.
TP ICAP lifted its final dividend by 44% to 7.9 pence per share. This took its total annual payout to 12.4p per share, up 31% from 9.5p a year prior.
Peel Hunt analyst Stuart Duncan said the final results were slightly above its expectations. Peel Hunt had expected adjusted pretax profit of GBP218 million, with a dividend of 11.3p.
Shoe Capital's Vivek Raja also noted that the results are at the top-range of Shore Capital's estimates. "The core Rates business came back into life in 2022 so these results reflect cyclical recovery," Raja added.
"We delivered a strong performance: high single-digit revenue growth and an increase in profitability. Significant monetary tightening in many economies benefited Rates, our largest business," Chief Executive Officer Nicolas Breteau said.
"Capital management is an important part of our strategy. We committed to freeing up GBP100 million of cash, and reducing debt, by the end of 2023. Progress has been good with over GBP30 million already freed up in H2 2022. In addition, as previously announced, we continue to focus on identifying, and returning, any potential surplus capital to shareholders, subject to the ongoing assessment of our balance sheet and investment requirements."
Looking ahead, TP ICAP said it expects the impact of inflation on the business in 2023 to be broadly mitigated by its focus on cost efficiencies.
"There is a generally positive tone to the outlook comments, recognising the higher trading activity and volumes across most asset classes," said Peel Hunt's Duncan.
Duncan added that it expects Peel Hunt to retain its existing forecasts, recognising "the inherent lack of visibility regarding activity levels." It forecasts pretax profit of GBP261 million and earnings per share of 26.6p. By contrast consensus stands at GBP250 million pretax profit, with earnings per share of 25.4p. 2022 EPS came in at 24.5p.
Shore Capital's Raja agrees that the outlook is "reasonably upbeat."
Raja said: "At this stage we do not envisage making material forecast revisions ... We still think consensus looks too high until Liquidnet demonstrates meaningful growth."
Shore Capital expects TP ICAP's adjusted pretax profit to grow to GBP237 million in 2023, from GBP226 million in 2022. It anticipates revenue to climb to GBP2.19 billion in 2023 from GBP2.12 billion in 2022.
By Sophie Rose, Alliance News reporter
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