ICAP reports preliminary 2011-2012 results, revenue down 3% profit up 1%

Preliminary statement for the year ended 31 March 2012 Review of operations For the year ended 31 March 2012, the

Preliminary statement for the year ended 31 March 2012

Review of operations

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For the year ended 31 March 2012, the Group reported revenue of £1,681 million, 3% below the prior year. Uncertainty in the Eurozone and constraints on market liquidity resulted in a fall in voice revenue and a marginally lower performance in our electronic business. In contrast, the post trade risk and information business saw strong growth.

The Group reported an operating profit* of £372 million, down 1% on the prior year. The Group’s operating profit* margin for the year ended 31 March 2012 remained unchanged at 22%.

Profit before tax* of £354 million was up 1% on the prior year. Profit before tax on a statutory basis fell by £16 million to £217 million as a result of an increase in the impairment of goodwill and other intangibles of £92 million.

In 2011/12 due in part to a decline in our voice business we moved closer to our aim to generate operating profit evenly between voice, electronic and post trade risk and information with 41%, 34% and 25% delivered by these businesses respectively.

* From continuing operations before acquisition and disposal costs and exceptional items

Key developments in 2011/12

New financial futures and options team

We created a global financial futures and options team, hiring 31 employees in London, New York, Chicago and Sydney, significantly enhancing our execution brokerage offering. This is a business with excellent structural growth prospects and we are pleased with progress so far.

Customer investment in iSwap

ICAP has a history of partnering with its customers. In November four of the world’s largest swaps dealers (Barclays Capital, Bank of America Merrill Lynch, Deutsche Bank and J.P. Morgan) agreed to co-invest in i-Swap Euro Limited, which operates our electronic interest rate swaps platform. We believe this will greatly enhance the platform’s growth as swaps trading becomes increasingly electronic.

Acquisitions in commodities

In our voice business, we made some small but important acquisitions, such as Island Shipbrokers in Singapore and Sun Commodities, a leading broker of European biofuels, to complement existing businesses. As a result of the Island Shipbrokers acquisition, the Group has acquired a further interest in CTI Shipbrokers (India) resulting in the company becoming a subsidiary rather than an associate.

New electronic trading platforms for interest rate options and equity derivatives

As our customers prepare for the new regulatory environment, we have introduced screen-based trading platforms for interest rate options (DerivX) and equity derivatives (iLinked), which are supported by our established voice service.

Investing in technology

In April 2012, ICAP completed the roll out of a major upgrade of its world leading fixed income electronic broking platform, BrokerTec, which improved its performance significantly. These enhancements have been well received by customers.

Investing in emerging markets

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We continued to invest in emerging markets and asset classes that we believe have significant potential. For example, the offshore renminbi (CNH) will become increasingly important for international trade and investment as China moves towards a fully convertible currency. ICAP’s investment in both voice and electronic broking of CNH allowed us to capture a significant market share in what is a fast-growing market.

Investment in Japan

In Japan, we sold our Japanese government bond business to Central Totan Securities Co Limited and simultaneously purchased a 20% shareholding in the combined business. At the same time, the Group also increased its shareholding in Totan ICAP Co Limited, a leading interest rate derivatives broker.

Expanding our post trade businesses

We offered more services in new asset classes in addition to creating infrastructure support in existing ones, such as Traiana’s comprehensive FX clearing solution. We also added complementary services that work in conjunction with clearing to reduce customer and systemic risk.

Changing competitive environment

As the industry leader, ICAP continues to benefit from greater scale and diversity than its competitors, but the competitive landscape in which we operate is changing. Regulators continue to pursue an ambitious agenda for reform. In the US the Dodd-Frank Act, which will affect a minority of our US voice revenue, is expected to be substantially complete in 2012.

Regulatory reform in Europe and the US is likely to push the model for price discovery and execution towards pure electronic or electronically-assisted voice platforms. This provides customers with the ability to enter orders electronically and to execute trades directly or through a voice broker. These reforms will change the over-the-counter (OTC) landscape. Regulation and new capital requirements are also pushing banks to de-leverage and to move their focus away from long-dated, structured and capital intensive products to high flow, highly-liquid, standardised products which lend themselves to electronic trading.

We are confident that these changes present significant opportunities for ICAP. We have the scale and flexibility to adapt. We have invested in developing the technology and platforms that will be needed to enable our customers to meet new transparency, trading and post trade requirements. We will be ready to roll out swap execution facility (SEF) services in the US once the regulators have finalised the rules.

Cost control

In response to market conditions, we realigned our business resources to ensure they matched customer demand by reducing headcount in areas of lower profitability, while investing and hiring in growth areas such as financial futures and commodities. We also removed £20 million of recurring costs from our cost base. We will continue to review our cost structure and will implement operational efficiencies to ensure the future growth and profitability of the Group.

Management changes

The year saw some changes in ICAP’s senior management team.

Mark Price joined us from Deutsche Bank in October as Group Chief Operating Officer, bringing substantial operational and risk management experience in financial markets. His appointment reflects our commitment to maintaining the strong control and risk management environment we have developed. Mark Yallop, ICAP’s previous Group Chief Operating Officer, left us in September after six successful years. Mark made a significant contribution to the strategic development of our business and we wish him well for the future.

In February 2012, Hugh Gallagher, Chief Executive Officer Asia Pacific, joined our Global Executive Management Group (GEMG). He has played a pivotal role in developing our voice business across the Asia Pacific region and his input and regional expertise will bring a valuable perspective to the senior management team.

We also strengthened the management of EBS in March 2012 by appointing Gil Mandelzis as its Chief Executive Officer. He will retain oversight of Traiana and we have hired a new chief executive officer. Already a member of the GEMG, Gil brings significant FX experience and insight which will be important to EBS as it continues to evolve in this extremely competitive market.

Dividend

Our strong balance sheet and our efficient conversion of profit to cash has enabled the directors to recommend a final dividend of 16.00p per ICAP share which will be paid on 20 July 2012 to shareholders on the register on 29 June 2012. The full-year dividend will be 22.00p per share, an increase of 2.05p per share.

Outlook

In the last quarter of our financial year we saw an improvement in risk appetite in some markets. However activity in April and early May was slow with the ongoing euro crisis and regulatory uncertainty depressing trading volumes. Some resolution on these important issues would help improve market sentiment. We reduced costs last year and are embarking on a structural overhaul that we expect will result in further significant run-rate savings of at least £50 million per annum by the end of March 2014.

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