ICAP: H1 trading update

9:08 a.m. Wed 28 Sep 2005

ICAP, the world's largest interdealer broker said trading for the half year to September 2005 was good. Both electronic and voice broking businesses are said to have shown "excellent" growth compared to last year. Unfortunately comparisons are with a rather poor period last year (ICAP reported a 5% drop in sales and a 4% drop in operating profits in H1 2004), so it is difficult to say whether this simply represents a recovery from last year or real growth.

The broking business does tend to be slightly slower in the summer, resulting in a stronger second half.

The company does indicate that it has increased its market share in both electronic and voice broking, at least in the first three months of the year.

Energy trading and credit derivatives have reportedly shown strong volume growth. The energy markets have been particularly active because of the volatility in oil prices- a trend that is likely to continue into the medium term. Credit derivatives, which arise from securitisation, are an increasingly popular method of risk transfer and looks set to grow further in the medium term.

Prospects at this stage look reasonable and the company is confident of achieving market expectations. The company is also on the lookout for possible acquisitions, which could provide short term upside. Profits (before tax, exceptional items and amortisation) for the year to March 2006 are expected to be within the range of £192m-£202m.

The share trades at 353.5p, on a prospective PE (2005 earnings) of 16.8x which is at the upper end of the sector range. The yield is 2.5%.