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March 8, 2011 11:48 pm
A strong performance by Tullett Prebon’s Asia division failed to offset the impact of staff defections and the closure of some US offices at the interdealer broker.
Terry Smith, chief executive, said that after half a decade of strong growth 2010 was “a lot duller”.
For the year to December 31 pre-tax profit fell from £157m to £141m, on revenues down 4 per cent to £909m.
The shares dropped 25p to 400.9p on Tuesday.
Mr Smith said the lower margins earned by competitors were affecting Tullett’s profitability.
“Three-quarters of our competitors are on one-third of our margins. That has a big impact on what you can achieve,” he said.
Operating margin fell from 16.8 per cent to 18 per cent. Diluted earnings per share dipped from 51.2p to 50.3p, and a final dividend of 10.5p is proposed, bringing the total pay-out for the year to 15.75p (15p).
The company struggled in 2010 after more than 50 brokers in its North American dealing desks defected to rival BGC in late 2009 in what Tullett described as a “raid on the business”.
This, combined with the closure of six satellite offices in the region, resulted in a 19 per cent fall in North American revenues last year.
However, Tullett’s Asian business helped offset weakness elsewhere.
Revenues expanded 22 per cent for the region, on a constant exchange rate basis, with average revenue per broker up 13 per cent, reflecting the return of appetite for risk and greater amounts of capital deployed by clients.
Mr Smith said the group would this year focus on investment in new platforms.
The company is setting up an interest rate swap platform, using technology by Millennium IT, the London Stock Exchange-owned technology provider.
It may also launch a platform to trade forward foreign exchange contracts.
Analysts were more positive about the results than the market.
Keith Baird at Oriel Securities thought it was “not a bad effort”.
“On an underlying basis the year was pretty flat. The results mostly reflect market conditions and some actions on [Tullett’s] part,” he said.
Tullett appears to be on target for a better performance in 2011, with underlying revenues in the first two months of the year up 3 per cent on 2010.
James Hamilton and David McCann at Numis Securities said they expected a stronger year in 2011, but warned that cost pressures may weigh on profitability.
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