Annual Report and
Accounts 2019
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We provide access to global
financial and commodities
markets, improving price
discovery, flow of liquidity
and distribution of data,
working with and supporting
the communities in which we
operate and facilitating
economic growth.
> Our brokers match buyers and sellers of financial,
energy and commodities products and facilitate
price discovery, execution and risk management.
> We provide independent data to participants in
the financial, energy and commodities markets,
including live and historical pricing content,
and advanced valuation and risk analytics.
> We are a trusted partner to our clients, enabling
them to transact with confidence.
Contents
Strategic report:
Financial and strategic highlights
At a glance
Our business model
Chairman’s statement
Chief Executive Officer’s review
Market factors
Strategy
Case studies
Key performance indicators
Financial and operating review
Viability statement and
going concern
Risk management
Principal risks and uncertainties
Resources, relationships
and responsibilities
Governance report:
Compliance with the UK
Corporate Code 2018
Chairman’s introduction
to governance
Board of Directors
Corporate governance report
How the Board has satisfied
its section 172 duty
Report of the Nominations
and Governance Committee
Report of the Audit Committee
Report of the Risk Committee
Report of the Remuneration
Committee
Directors’ report
Statement of Directors’
Responsibilities
Financial statements:
Independent Auditor’s Report
to the Members of TP ICAP plc
Consolidated:
Income Statement
Statement of Comprehensive
Income
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
Company:
Balance Sheet
Statement of Changes in Equity
Notes to the Financial Statements
Shareholder information
Group undertakings
Glossary
1
2
4
6
8
13
14
15
18
20
33
34
36
40
46
47
50
52
57
66
70
75
78
100
105
106
113
114
115
116
118
119
177
178
179
182
184
191
Cautionary Statement
This Annual Report has been prepared for, and only for,
the members of the Company, as a body, and no other
persons. The Company, its Directors, employees, agents
or advisers do not accept or assume responsibility to any
other person to whom this document is shown or into
whose hands it may come and such responsibility is
expressly disclaimed. By their nature, the statements
concerning the risks and uncertainties facing the Group
in this Annual Report involve uncertainty since future
events and circumstances can cause results and
developments to differ materially from those
anticipated. The forward-looking statements reflect
knowledge and information available at the date of
preparation of this Annual Report and the Company
undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report
should be construed as a profit forecast.
Financial and strategic highlights
Strategic report Governance report
Financial statements
1
Revenue – statutory (£m)
Contribution (£m) (APM)2
1,757
1,763
1,833
670
679
694
2017
2018
2019
2017
2018
2019
Operating profit – statutory (£m)
Operating profit – underlying1 (£m) (APM)2
142
263
276
279
102
93
2017
2018
2019
2017
2018
2019
Operating margin – statutory (%)
Operating margin – underlying1 (%) (APM)2
7.7
15.0%
15.7%
15.2%
5.8
5.3
2017
2018
2019
2017
2018
2019
Profit before tax – statutory (£m)
Profit before tax – underlying1 (£m) (APM)2
93
233
245
230
72
62
2017
2018
2019
2017
2018
2019
Basic earnings per share – statutory (p)
Basic earnings per share – underlying1 (p)
(APM)2
15.8
33.3
34.2
33.8
12.0
5.7
2017
2018
2019
2017
2018
2019
Operational performance:
> Group revenue of £1,833 grew 4% on a
reported basis (1% at constant currency).
> Group improved underlying and reported
operating profitability.
> Global Broking revenue decreased 1%
on a reported basis (3% at constant
currency), as resilient Rates were offset
by weaker Credit and Equities businesses.
> Energy & Commodities revenue increased
15% on a reported basis (11% at constant
currency) on strong organic growth,
strategic hires, Axiom acquisition and
favourable markets.
> Institutional Services revenues
increased 23% on a reported basis
(21% at constant currency).
> Data & Analytics revenues increased
15% on a reported basis (11% at
constant currency).
Strategic highlights:
> Successfully completed the three-year
ICAP integration programme, generating
£80m in synergy savings3.
> Increased earnings diversification through
growth in non-broking businesses.
> Built a new executive leadership structure
to streamline revenue generation.
> Evolving medium-term strategic themes
focusing on aggregation,
electronification and diversification.
Dividend:
> Interim dividend of 5.6p per share
declared on 8 November 2019.
> Final dividend recommended of 11.25p
per share due to be paid 19 May 2020.
> Total dividends in respect of 2019: 16.85p
(2018: 16.85p).
1 Underlying results represent the results excluding
acquisition disposal and integration costs and
exceptional items. Please refer to page 21 of the
Annual Report.
2 Alternative Performance Measures (‘APM’) are
defined and explained on pages 18 and 19.
3 Synergy savings reflect the reduction of underlying
staff and other costs as a result of implementing
the integration programme. Staff cost savings are
a result of both individuals leaving the Group or
transferring to integration related roles that will
cease once integration is complete.
www.tpicap.com
2
Strategic report
At a glance
We are a global firm of professional
intermediaries that plays a central
role in the world’s wholesale financial,
energy and commodities markets.
Our brands
We operate a global portfolio of highly respected brands, each with a separate and distinct client offering.
Global Broking
Energy & Commodities
Institutional Services
Data & Analytics
Our vision, purpose, method and values
Our vision
What we want to be
Our purpose
What we want to do
To be the most trusted and respected data and market execution
provider in the financial, energy and commodities products that
we transact.
We provide access to global financial and commodities markets,
improving price discovery, flow of liquidity and distribution of
data, working with and supporting the communities in which
we operate and facilitating economic growth.
Our method
How we accomplish our purpose
Our values
How we seek to act
Our people utilise their skills and experience, combined with
a strong technology offering, to work in close partnership with
a diverse range of clients to deliver services. We continually
enhance our services and our operations as our clients’ needs
and preferences change and as markets and the regulatory
environment evolve.
How we conduct ourselves as individuals and as a Group is as
important as the products and services we provide. We want to
have a business culture that allows us to serve our clients in the
best possible way, and holds up to the most intense scrutiny.
Our values, which underpin everything we do, are:
Honesty
Integrity
Respect
Excellence
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
3
How we transact
Read more about how we
transact in our business
model on pages 4 and 5.
1
Oil
It’s January
and Brian is
looking to buy
a plane ticket
to Portugal in
August for his
summer holiday.
The airline sells
the ticket to
Brian for £200.
Mortgages
Sophia is
moving house
and wants
to get a five
year fixed rate
mortgage.
FX
Motion car
company,
based in the UK,
needs to ensure
it has enough
steel to meet
demand for its
cars over the
next year. The
price of steel is
in US Dollars.
Financial Information
Rosie has a
pension with
ABC Pension
Fund managers
and receives
a statement
every year. This
statement sets
out the value of
all her pension
fund assets.
2
3 TP ICAP
4
To fly Brian there
in August the airline
needs to spend
money on fuel.
Rather than run
the risk of the price
of fuel increasing
by the time the
plane takes off in
August, the airline
fixes the price of
fuel now in January.
She finds a
good deal
from her bank
who give her a
mortgage to
help her buy
her new home.
Motion is worried
that the US Dollar
might increase in
value over that
time. Motion
want to have
certainty about
the US Dollar
price it will pay
for the steel so it
goes to its bank to
get a fixed price.
$
To get an accurate
value, ABC
Pension Fund
needs financial
information and
market prices on
everything Rosie
owns. ABC Pension
Fund gets this
information from
financial data
providers.
To get a fixed
price for the fuel
the airline uses
a derivative. TP
ICAP helps the
airline’s bank buy
that derivative at
the best price.
£
In August
Brian jets off
to Portugal.
To protect
themselves from
potential interest
rate rises, the bank
buys a financial
product to help
them hedge their
risk (an interest rate
swap). They use TP
ICAP to get the best
price for this interest
rate swap.
£
Their bank uses
TP ICAP to
buy a foreign
exchange
derivative that
fixes the price
of US Dollars
compared to
the pound.
The financial data
providers have in
turn been provided
the information
from TP ICAP. TP
ICAP has a rich
supply of financial
data from tens
of thousands of
transactions we
execute every day.
$
£
Sophia moves
into her new
home.
Motion have
certainty over
the price of
steel and is
able to meet
production
demand.
ABC Pension
Fund provides
an up to date
pension fund
statement for
Rosie.
www.tpicap.com 4
Strategic report
Our business model
We provide our clients with a
wide choice of execution services,
data products and analytics.
Our resources
What we do
We allocate our resources in the most
efficient and sustainable way possible
to increase shareholder value.
We act as an intermediary between buyers and sellers of complex financial
products, enabling them to trade efficiently and effectively. There are three
main models in which we derive broking revenue:
People
Our people are key to our
success, and their relationships
and expertise sets them apart
Our pools of liquidity
The liquidity we can access
enables us to provide efficient
execution services at the best
price for our clients
Financial strength
Our financial strength and
credit worthiness provides
security to clients and allows us
to invest in growing our business
Data
We have a competitive
advantage as a leading
provider of OTC pricing data
International network
We are able to service our
clients across the world’s
three geographic regions,
in 26 countries
Name Passing
Around three quarters
of the Group’s broking
revenue is derived from
Name Passing activities,
where the Group
identifies and introduces
buyers and sellers
who wish to transact
between themselves
and where the Group’s
exposure is limited to
outstanding invoices
for commission from
its clients.
Matched Principal
Around one fifth of the
Group’s broking revenue
is derived from Matched
Principal activities,
where the Group is the
counterparty to both
the buyer and seller of
a matching trade. The
Group bears the risk of
counterparty default
during the period
between execution and
settlement of the trade.
Executing Broker
The remainder of
the Group’s broking
revenue is derived
from operating as an
Executing Broker, where
the Group executes
transactions on certain
regulated exchanges
in respect of client
orders, and then
‘gives-up’ the trade
to the relevant client
(or its clearing member).
Data Sales
We package and sell OTC pricing data generated from our broking activities,
enabling our clients to manage their portfolios and make investment decisions.
What makes us relevant
We provide an essential service to clients by enabling them to trade a wide range
of financial, energy and commodities products in numerous markets and regions.
These trades are often bespoke in nature, complex, and of a high nominal value.
The access our brokers have to the largest pools of liquidity makes us relevant
to our customers.
The Group’s business model is based on providing an intermediation service
to clients, which can be provided with minimal credit and market risk.
Read more about how we transact
through real world examples in our
infographic on page 3 of this report.
Strategic report Governance report
Financial statements
3
How we transact
Read more about how we
transact in our business
model on pages 4 and 5.
1
Oil
It’s January
and Brian is
looking to buy
a plane ticket
to Portugal in
August for his
summer holiday.
The airline sells
the ticket to
Brian for £200.
Mortgages
Sophia is
moving house
and wants
to get a five
year fixed rate
mortgage.
FX
Motion car
company,
based in the UK,
needs to ensure
it has enough
steel to meet
demand for its
cars over the
next year. The
price of steel is
in US Dollars.
Financial Information
Rosie has a
pension with
ABC Pension
Fund managers
and receives
a statement
every year. This
statement sets
out the value of
all her pension
fund assets.
www.tpicap.com
2
3 TP ICAP
4
To fly Brian there
in August the airline
needs to spend
money on fuel.
Rather than run
the risk of the price
of fuel increasing
by the time the
plane takes off in
August, the airline
fixes the price of
fuel now in January.
She finds a
good deal
from her bank
who give her a
mortgage to
help her buy
her new home.
Motion is worried
that the US Dollar
might increase in
value over that
time. Motion
want to have
certainty about
the US Dollar
price it will pay
for the steel so it
goes to its bank to
get a fixed price.
$
To get an accurate
value, ABC
Pension Fund
needs financial
information and
market prices on
everything Rosie
owns. ABC Pension
Fund gets this
information from
financial data
providers.
To get a fixed
price for the fuel
the airline uses
a derivative. TP
ICAP helps the
airline’s bank buy
that derivative at
the best price.
£
In August
Brian jets off
to Portugal.
To protect
themselves from
potential interest
rate rises, the bank
buys a financial
product to help
them hedge their
risk (an interest rate
swap). They use TP
ICAP to get the best
price for this interest
rate swap.
£
Their bank uses
TP ICAP to
buy a foreign
exchange
derivative that
fixes the price
of US Dollars
compared to
the pound.
The financial data
providers have in
turn been provided
the information
from TP ICAP. TP
ICAP has a rich
supply of financial
data from tens
of thousands of
transactions we
execute every day.
$
£
Sophia moves
into her new
home.
Motion have
certainty over
the price of
steel and is
able to meet
production
demand.
ABC Pension
Fund provides
an up to date
pension fund
statement for
Rosie.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
5
How we are organised
The value we create
Our business is organised into five divisions across three regions. Within
our client facing divisions we have a portfolio of highly respected brands,
each with a separate and distinct offering.
Data & Analytics
Our Data & Analytics division
provides unique data sets of OTC
pricing products to enable clients
to analyse, record, trade and
manage their portfolios.
Corporate Centre
Our Corporate centre division provides
support staff and infrastructure to
our business divisions, including
technology, compliance, risk, finance,
HR, legal and other essential services.
Global Broking
Our Global Broking division services
markets in Rates, FX & Money Markets,
Emerging Markets, Equities and
Credit products.
Energy & Commodities
Our Energy & Commodities division
services markets in oil, gas, power,
renewables, precious and non-precious
metals, soft commodities and coal.
Institutional Services
Our Institutional Services division
provides broking and execution
services to a range of institutions
such as asset managers, hedge
funds and insurance companies.
Where we operate
Americas
Revenue
£687m
(2018: £636m)
EMEA
Revenue
Asia Pacific
Revenue
£900m
(2018: £886m)
£246m
(2018: £241m)
Shareholders
We aim to create long-term
shareholder value across the
market cycle
Clients
We provide exceptional
customer service, liquidity,
data and efficient pricing that
enable our clients to achieve
the outcomes they want.
We constantly adapt our
offering to suit clients’
evolving requirements
Employees
We aim to provide a respectful
workplace that supports
innovation, high performance
and continuing personal and
professional development
Regulators
We engage with regulators
to improve the functioning
of financial markets to
provide liquidity in diverse
market conditions
Society
We have a well-developed
corporate and social
responsibility programme as
well as a highly successful charity
day that has raised almost
£150m over the last 27 years
www.tpicap.com 6
Strategic report
Chairman’s statement
Dear fellow Shareholder,
2019 marked my inaugural year as Chairman
of TP ICAP. Hence, I am pleased to report that
we were able to improve our underlying and
reported operating profit, despite the mixed
geopolitical environment and investment
in the ICAP integration programme.
Overall, we delivered on our key priorities:
> We successfully completed the three-year
ICAP integration programme, generating
£80m of synergies, in line with prior
year’s guidance;
> We strengthened our revenue base with
resilient Global Broking results amidst a
mixed external environment, supported
by growth in our other businesses, namely
Energy & Commodities, Data & Analytics
and Institutional Services;
> We built a new leadership and executive
governance structure that streamlines
revenue generation responsibilities,
whilst reinforcing other important
internal processes;
> We implemented a new risk framework
that lays the foundation for development
of our internal capital allocation and
control processes;
> We developed our ESG policies
(see Resources, Relationships and
Responsibilities section) to highlight
our growing ESG commitment;
> We continued to take necessary measures
to ensure that, following the anticipated
exit of the UK from the European Union,
we will continue to service our clients and
provide them liquidity across Europe; and
> We resolved legacy legal issues, and
enhanced our compliance functions,
including investments in cyber-security
and surveillance.
Looking to the future for TP ICAP, our recent
Board deliberations on strategy highlighted
that liquidity aggregation, electronification
and technology, revenues and earnings
diversification, and people, conduct and
compliance were paramount and integral
to our long-term aspiration.
Richard Berliand
Chairman
These strategic themes highlight our goal of
creating long-term value for our shareholders
by growing market share, increasing
operating margins and diversifying our
earnings mix. This will help us retain our
position as the world’s largest inter-dealer
broker by revenue.
Trading and dividend
Reported revenues of £1,833m in 2019 (2018:
£1,763m) were 4% higher than in 2018 (1%
higher on constant currency rates), while
underlying operating profit increased 1% to
£279m (2018: £276m). On a statutory basis,
operating profit increased 53% to £142m
(2018: £93m) as this year was characterised
by lower integration costs, as we reached the
end of the ICAP integration programme.
Despite a slow operating environment, our
improved performance reflected better
activity levels in our Rates business offset
somewhat by market-wide weakness in our
Equity and Credit businesses. The activity
in our Energy & Commodities and Data &
Analytics businesses has been very
satisfying, while Institutional Services’ strong
growth continues in line with our increased
capabilities and enlarged clientele. These
results are a strong indication of the ongoing
benefits of business model diversification.
The Board declared an interim dividend
of 5.6 pence per share paid on the 8th
November 2019 and is recommending
a final dividend of 11.25 pence per share
to be paid on 19th May 2020 (with a record
date of 3rd April 2020).
Board changes
There were a number of Board changes
in 2019, including my appointment as
Chairman of the Board, all of which
were overseen by the Nominations
and Governance Committee.
I am delighted that Angela Crawford-Ingle
will be joining the Board of the Company.
She brings a wealth of relevant and recent
financial experience, not only from her
previous executive roles, but also from her
more recent non-executive positions. Angela
will become Chair Designate of the Audit
Committee, assuming the Chair of that
Committee on Roger Perkin’s retirement
from the Board in 2021.
I am also pleased to welcome Mark Hemsley
to the Board; he brings extensive market
infrastructure experience. Mark will be
joining the Risk and Nominations and
Governance Committees.
These appointments come after a rigorous
process to identify and recruit candidates
that can complement our Board’s skillset
and will bring invaluable experience as we
embark on a new medium-term strategy.
These same considerations remain key as
we further strengthen the Board, as does
our commitment to cultural, ethnic and
gender diversity.
Angela Knight, after nine years of service
has decided not to seek re-election at the
2020 Annual General Meeting, in line with
Corporate Governance requirements; and
David Shalders had to step down in October
following his appointment by London Stock
Exchange Group plc. I would like to thank
them both for their valuable contribution to
our Group and wish them well for the future.
Environmental, Social and Governance
(‘ESG’)
At TP ICAP, we want to ensure that our
business not only delivers value for our
shareholders but also our other stakeholders
and wider society. In particular we cannot
ignore understandable concerns about
climate change. Therefore, one of my top
priorities as Chairman is to intensify and
raise awareness of our ESG efforts.
I expect that this will be a multi-year
journey. Initially focused on preparing
and implementing new ESG policies
within a new ESG framework, we intend
to improve our tracking of related
performance metrics and reporting,
thus holding ourselves accountable,
and allowing our stakeholders to monitor
our progress and ongoing commitment.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
7
Proposed change to corporate
structure
The Group has seen meaningful
growth in the size of its Asia Pacific
and Americas business due to the
acquisition of the global hybrid voice
broking and information businesses of
ICAP in 2016. As a result, the Group
announced proposals in December 2019
to adjust its corporate structure to better
align it to the global footprint of the
business. The Board expects this to
provide greater financial flexibility
for the Group, enhance governance
and improve competitiveness.
In order to implement this change,
TP ICAP plc is proposing to incorporate
a new Group holding company in Jersey.
The proposed change will not have an
impact on the Group’s tax domicile
and the location of its primary stock
exchange listing will remain in the UK.
In addition, the Board believes that
the credit rating of the Group and its
outstanding bonds will not be impacted
by the proposal.
Finally, the Board is not currently
expecting there to be any impact on
the location of employees as a result of
the proposal. The proposal is subject to
shareholder and regulatory approval.
As part of our efforts we will continue
to challenge and re-examine these ESG
commitments, in particular as they relate
to climate change and to societal
expectations. Some tangible progress
was made in 2019, as follows:
Environment
As part of our increasing efforts to reduce
our carbon footprint, in 2019, we made
appreciable reductions in our greenhouse
gas emissions through rationalisation of
our building portfolio, which we aim to
continue in 2020 as we move into our
new London headquarters.
Social
Now in its 28th year, ICAP Charity Day
continues to make an enormous impact, with
£4.6m raised in 2019 supporting numerous
charities. We are also in the second year of
our partnership with National Numeracy,
helping people improve their confidence
with numbers in the UK. Finally, we have
increased focus on diversity and inclusion
within the business, with management
challenged to drive change and take
meaningful steps towards an increased
proportion of women in the front office
and in senior management roles.
Corporate Governance
The Board remains committed to high
standards of corporate governance and
instilling the right culture, behaviour and
approach to how we do business. This
year, we have made significant progress
enhancing our Group’s risk management
and governance frameworks.
I believe that ESG is not just a “nice-to-have”,
but rather it is our responsibility towards
future generations. To find out more please
read our Resources, Relationships and
Responsibilities section starting on pages 40
to 45 and the Governance Report on pages
46 to 105.
Engagement with stakeholders
I’m keen to continue my dialogue and engage
meaningfully with the Group’s stakeholders
regarding operational, governance and
remuneration issues, strategic developments,
and succession planning.
Since the start of my tenure as Chairman of
TP ICAP, I have met with a good number of
our shareholders and other stakeholders,
including employees, advisors, regulators
and clients. This has helped me to gather
important feedback to improve our business
and is something that I will continue to do.
Outlook and many thanks
The executive leadership team has now been
in place for a little over 18 months. During
this period, considerable work has been
done to bring the integration to a conclusion,
deliver strong 2019 results, as well as to lay
the foundations for the Company’s future
growth. I would like to express my gratitude
and appreciation to Nicolas, his fellow
executive committee members and our
TP ICAP employees for their hard work and
commitment during the year, which now
allows us to be on the front foot and focus
on the future development of our business.
I expect that our announced June Strategy
update will provide us with an opportunity
to highlight the underpinnings for our
disciplined growth approach. This should
support our long-term aspirations to grow
revenues, expand profit margins and
diversify earnings.
Finally, I would like to thank all our
shareholders for your ongoing support
throughout the Group’s integration period.
We will continue to work tirelessly to ensure
that our business model remains compelling
in the future. The industry is continually
changing and evolving, so we have to be
proactive and adapt. We look forward to
your feedback and also to welcoming you
at our AGM on 13 May 2020.
Richard Berliand
Chairman
10 March 2020
www.tpicap.com 8
Strategic report
Chief Executive Officer’s review
Dear fellow Shareholder,
At the start of the 2019, I identified four
priorities to deliver to provide us with the
solid platform from which we could grow
our business. Those priorities were to
complete the integration, build a strong
management team, review and enhance our
risk management framework and prepare
our business for Brexit. I am pleased to
report that we have accomplished each
of these. We have done so while also
growing our revenue base in a challenging
external environment and building our
strategic framework.
The Group now has the foundations from
which we can deliver long term, sustainable
profitable growth.
Financial Performance
The Group delivered a resilient performance
in 2019, with strong growth in our non-Global
Broking businesses as our diversification
strategy continued to bear fruit. While
Global Broking faced challenging conditions
in the first half of the year, as our main
clients saw a significant drop in trading,
we delivered a strong performance in
the second half.
Revenues grew by 4% on a reported basis,
1% on a constant currency basis, to £1,833m.
We achieved an underlying operating profit
of £279m, up 1% on the prior year. On a
statutory basis, operating profit increased
53% to £142m from £93m the prior year
partially due to lower integration costs and
lower impairment of intangible assets. Our
underlying operating profit margin of 15.2%
was 0.5% lower than in 2018 mainly due to
foreign exchange headwinds.
On a statutory basis, the operating margin
was 7.7%, from 5.3% in the prior year.
The margin improvement was partially
offset by the settlement of two legacy
legal cases for £18m.
Nicolas Breteau
Chief Executive Officer
Regional Performance
Performance across our regions was resilient,
with all regions seeing growth in revenue on
a reported basis. In EMEA, revenues were up
2%, on a reported basis, 1% on a constant
currency basis, with growth in Energy &
Commodities, Institutional Services and
Data & Analytics, offsetting a small decline
in Global Broking revenues. In the Americas,
revenue was up 8% on a reported basis,
3% on a constant currency basis, driven
by a strong performance in Energy &
Commodities and revenue growth in
Global Broking despite the difficult market
conditions. In Asia Pacific, revenue grew
by 2% on a reported basis, down 1% on
a constant currency basis, as a very strong
performance in Energy & Commodities
offset a decline in Global Broking revenues.
Global Broking
Global Broking is our largest division
covering Rates, Credit, Equities, Foreign
Exchange & Money Markets, where we have
market leading positions. We offer clients a
range of ways to interact with us – through
voice, hybrid or fully electronic venues –
depending on the nature of the market,
product and transaction.
Our current execution methodologies
include: voice; voice and indication of
interest screen; volume matching sessions;
e-auctions; Request for Quote (‘RFQ’);
streaming; Central Limit Order Book
(‘CLOB’); algorithmic trading; and odd lot
matching.
Global Broking delivered a resilient
performance in 2019, as revenues increased
in the second half following the first six
months when a number of macro-issues had
a negative impact on market volatility and
volumes. We saw a strong pick up in markets
in the third quarter with trading again
slowing down in the fourth quarter. As a result,
revenues for the 12 months were £1,262m
down 1% on a reported basis from £1,272m in
2018, and 3% on a constant currency basis.
“In 2019 we completed
our integration,
strengthened
management and
governance, and we
are now turning to our
growth strategy”
Despite the continued low interest rate
environment, the Rates business, our largest
asset class in Global Broking, performed well in
the year, growing revenue from 2018, primarily
due to a strong third quarter. Conditions in
Credit, Equities, FX and Money Markets
remained challenging as Credit suffered the
impact of reduced issuance and there was
subdued activity in the other asset classes.
During 2019 we reorganised and
strengthened the management teams in
London and New York, continued to hire
key talent across our broking businesses as
well as ensuring stability in existing teams.
Our focus remains on aggregating liquidity,
which means providing the client with a
single point of entry to multiple liquidity
pools, and in developing our hybrid and pure
electronic business. Allowing clients to access
liquidity through one screen creates a
superior user experience, giving them insight
to a greater pool of liquidity via a login and
connectivity. It benefits TP ICAP by using any
one brand’s leadership position in a product
to improve the overall competitive position
of the other brand.
In Rates, we successfully launched a hub
for both brands in Singapore, Japan
and Australia. The hub also provides an
enhanced electronic workflow, making
trade capture and Straight Through
Processing (‘STP’) seamless. In Credit, we
have successfully run pure electronic
matching sessions and launched two new
platforms in the US during the first half of
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
9
the year. One was a portfolio optimisation
bond platform and the other was Crosstrade,
which enables asset management firms to
transition bonds between funds.
We are also diversifying our revenue
streams. In June we launched a Digital Assets
Markets business, initially operating in the
cryptoasset derivatives space, and are
currently exploring further opportunities
to grow in this asset class. In December, we
announced our intention to acquire Louis
Capital Markets. Louis Capital specialises in
cash equities and equity derivatives, fixed
income and small cap advisory services. It
has a strong franchise in Continental Europe
and will complement our existing offering.
Our post-trade services group continues
to perform well. In Matchbook, which helps
our clients’ manage basis risk in their
trading portfolios, we are seeing strong
profit growth. Matchbook is currently in the
process of rolling out three new products. We
acquired ClearCompress, a fintech company
that provides a bilateral compression service
in cleared and uncleared interest rate swaps,
and that business is now trading and fully
integrated into our Risk Management
Services business.
We will maintain our commitment
to increase the electronification and
innovation to meet the changing
demands of our client base.
Energy & Commodities
Energy & Commodities is our second
largest division and operates through the
Tullett Prebon, ICAP and PVM brands in
all the key commodities markets including
oil, gas, power, renewables, ferrous metals,
base metals, precious metals, soft
commodities and coal. Clients include
regional banks, corporates, hedge funds
and trading companies.
It was a strong year for the business with
revenues up 15% on a reported basis (up
11% on a constant currency basis) at £379m,
up from £331m in the prior year, due to a
combination of positive markets, strategic
hires and the acquisition of Axiom at the end
of 2018. Oil revenues increased by 9% year
on year, with increased market activity
driven by events in the Middle East. Our
Power and Gas businesses both had strong
years with revenues up as they benefited
from favourable market conditions.
The energy and commodities broking
industry remains fragmented, with many
smaller players, particularly in the US.
Energy & Commodities has a core
competency of acquiring and integrating
acquisitions into its existing business and
we believe there continue to be opportunities
to do so, where such opportunities meet our
investment criteria.
We continue to look to diversify our client
offering. In April we hired a new team to run
the ICAP Weather Derivatives business. In
August we entered into a joint venture with
Enmore Investment Group to offer brokerage
in the Chinese OTC, cleared and physical
commodities markets. While we see this as
a long term investment opportunity, we are
pleased with the progress so far. The JV has
onboarded clients, is conducting trading
activity predominantly in iron ore swaps
and physical forwards and is making good
progress on LPG and naphtha. We are
actively looking to increase broker headcount.
Testing on our electronic whiteboard has
progressed well and we will be looking to
roll out it out to all brokers in 2020. The
whiteboard enables the efficient capture
of multiple data points from client
interaction. When fully deployed it will
enable better sharing of liquidity across
the desks, automatic calculation of spreads,
and STP of executed trades. It will also feed
through to the machine learning application
which is currently being tested with a small
number of users across the division. This
machine learning application will equip our
brokers with tailored analytics, personalised
feeds of news, pricing, historical patterns of
activity and correlations, providing a better
service to clients.
Institutional Services
Institutional Services (‘IS’) provides venue
agnostic, agency execution services to
buy-side clients including hedge funds,
asset managers, and other non-bank
financial institutions.
IS assists clients in the increasingly complex
task of trade and venue selection, order
routing and post-trade analytics across listed
derivatives, FX, government bonds, cleared
interest rate swaps and, as of December
2019, cash equities. The year saw continued
expansion of the client portfolio and,
notably, significant progress in meeting
demand for increased automation through
the entire trade lifecycle.
While the non-bank, agency execution
model remains in its infancy, we expect
to see the total market size for this service
type to grow. It is becoming an accepted
proposition which reflects certain economic
shifts on both the client and traditional
dealer side as well as growing belief that
post trade reporting can do more than meet
regulatory minimums when provided by
a non-risk taking agent. The changes are
very pronounced in some markets where
competitive pressures are seeing market
structure become highly fluid.
The business had good momentum with
full year revenues of £75m, up 23% on a
reported basis, 21% on a constant currency
basis, compared to 2018. Growth was driven
by its client demand in our core product
offering in FX, listed derivatives, relative
value execution and cleared interest rate
swaps. We are well positioned for further
growth in 2020, driven by prudent
geographic expansion of established
business lines as well as expected traction in
recently established new products. We also
expect to see greater scale benefits resulting
from improvements in our deployment of FIX
messaging over the past year.
In addition to our existing growth initiatives,
we will continue to hire individuals who will
help us achieve our next growth objectives.
www.tpicap.com 10
Strategic report
Chief Executive Officer’s review continued
We are pleased with our client acquisition
rate, but it is evident that documentation
backlogs across the industry are creating
longer lead times to full client engagement.
While this may result in a lag in corresponding
revenue expansion, we are comfortable
that ultimately, this proves supportive for
a substantial agency execution business such
as IS with access to the broader resources of
the TP ICAP Group.
Data & Analytics
Our Data & Analytics business provides
unbiased data products that facilitate
trading, enhance transparency, reduce risk
and improve operational efficiency. We
are a leading provider of neutral Over The
Counter (‘OTC’) pricing data. We have
pricing, reference data and analytical tools
for major asset classes and markets. We pride
ourselves on our rigorous quality assurance
processes, which ensure the integrity and
robustness of our products. In 2019, we
successfully unified Tullett Prebon, ICAP and
PVM data distribution and beta tested our
new FIX delivery service (known as SurFix)
for client launch in H1 2020.
It was another strong year of growth for
the Data & Analytics business, with a 15%
revenue increase on a reported basis, 11% on
a constant currency basis, to £135m, up from
£117m in the prior year. Growth was driven
by the launch of new products, through the
acquisition of new clients and via expanding
our relationship with existing clients, as well
as seeing new regulatory requirements drive
a growing demand for data.
New clients wins in 2019 include Non-Bank
Liquidity providers, Hedge Funds, Asset
Managers, Asset Owners, and Channel
Partners spread across Europe, the Americas
and Asia.
Our momentum in new product launches
continued throughout the year, with 16 new
products launched in 2019, compared to
four in 2018. We continue to look to expand
our distribution partners and in the year
launched our first product on AWS Data
Exchange. We have continued to strengthen
the senior management team and during
the year recruited a new Chief Technology
Officer and a new Head of Global Sales
as well as building out the product
management function and Channel
Management functions.
While we are pleased with the growth
momentum demonstrated by Data &
Analytics, we believe that there is more
value that can be captured by the business
as we move up the value chain and we
continue to see it as a key driver of TP ICAP’s
diversification strategy. While we have seen
good organic growth within the D&A
business, we see selective opportunities
to accelerate that development.
Operational delivery
We outlined our four key priorities at the start
of the year: completing the integration of the
ICAP voice business; the implementation of a
new global risk management framework;
preparing for Brexit; and ensuring we had
the right senior management team.
The integration
Since my appointment as CEO, I have been
clear that the successful completion of the
integration of the two businesses by the end
of 2019 was a priority. I am pleased to say
that this has been successfully completed.
We have achieved a synergy run rate of
£80m, against the revised target of £75m.
We had previously stated that we expected
the total cost of integration to be £160m,
and in total integration costs were £164m.
The integration has been a significant focus
of the business and, now complete, it
provides the Group with an infrastructure
that is scalable, will allow future innovation,
and will allow us to streamline our post-trade
processing to increase efficiency and reduce
operational risk.
We have integrated senior management
structures across the businesses, regions and
corporate functions. We have introduced
single HR and Finance platforms across the
Group and have carried out a major office
consolidation programme at key hubs
including New York, Singapore, Hong Kong
and for the Energy & Commodities business
in London, and are due to move into our
new London head office this year.
With regard to IT, we now have eight data
centres globally, down from 15 and have
migrated 245 business desks to the combined
technology platforms, 131 of which were
migrated this year. The build out of our
shared service centre in Belfast continues
and we now have just under 300 employees
there carrying out a number of different
functions including operations, IT services,
HR and procurement.
We have stated our intention to reduce the
number of legal entities within the Group.
On completion of the ICAP transaction we
had well over 200 separate legal entities,
and we expect to reduce this number
materially. The reduction in legal entities
will simplify governance, accounting and
audit processes as well as reduce future
governance costs significantly. It will also
streamline internal liquidity management
making the flow of funds within the group
easier and more efficient.
The senior management team
One of my first priorities upon appointment
was to establish a strong senior management
team that could drive the business forward.
This team was in place at the start of 2019,
and I have since focused on strengthening the
next layer of management to help implement
and drive our new growth strategy, as well
as ensuring we had the right structure and
reporting lines for the company.
We have been fortunate to hire a number of
experienced and high calibre individuals to
help drive our strategy. In 2019 we hired a
new Global Head of Strategy, Global Head
of HR, Chief Information Officer and Group
Head of Compliance and early in 2020 hired
a new Chief Transformation Officer, who
will be responsible for putting in place the
implementation plan for our strategy.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
11
We will be broadening our existing
geographic operating profit disclosure.
From now, we will be reporting underlying
operating profit for each business line.
Responsibility for revenue generation
naturally sits with the four global business
divisions who are more closely aligned with
their clients and needs. We have appointed
regional CEOs to oversee culture, risk,
governance and the regional maintenance
functions to ensure that the support and
control infrastructure in each region has the
capability to assist revenue generation and
enhance the success of our business.
These new appointments strengthen our
governance significantly, resulting in a more
streamlined senior management team with
clearer responsibilities and accountability.
New risk framework
In 2019, we undertook a review of our global
risk management framework to take into
account the increased scale and diversity
of our business and to respond to regulatory
expectations. As a result of this work,
we introduced our new Enterprise Risk
Management Framework (‘ERMF’) in the
second half of the year.
The ERMF comprises three mutually
reinforcing components: a sound risk
management structure, a comprehensive risk
management and governance structure and
a range of risk management processes. The
Group is undertaking a range of actions to
develop and embed its risk management
framework in response to changes in the
business and regulatory feedback. The
framework continues to evolve with the
objective of improving the Group’s risk
management capability and supporting
the delivery of the Group’s business strategy.
A robust risk framework will enable us to
play our role in maintaining the integrity
and professionalism of the markets where
we operate. It is also a competitive
differentiator, particularly as we go out
to win new clients who in their selection
of service providers look beyond liquidity
and pricing.
Brexit
Preparation for all Brexit eventualities has
been a critical focus for TP ICAP. Ensuring
that we are in a position to continue to
service our clients has been a significant
regulatory and operational challenge.
To achieve this, we have set up and
capitalised a new company in Paris called
TP ICAP Europe and moved our French,
German, Spanish and Danish trading
branches to sit under this company. This
means that the business we currently
transact from these offices is protected
in the event of a hard Brexit.
We have set up three new EU venues – one
multilateral trading facility (‘MTF’) and two
organised trading facilities (‘OTF’) – so that
our EU activity can be conducted on MiFID II
compliant venues. These venues are now
authorised and conducting business.
For the business we transact for EU based
clients through our broking desks located
in the UK, we have plans in place to protect
this business by putting more front office
staff in our EU offices and changing some
of our workflows.
We are yet to know what the terms of
leaving are and how that may impact our
business but are prepared for all presently
foreseeable outcomes. In the meantime,
we continue to liaise with our clients to
understand what plans they have so that
we can continue to provide them with a high
quality service. Ultimately, the distribution
of our brokers between the UK and EU will
depend on our clients’ requirements but with
the proposed acquisition of Louis Capital,
which we announced in December, we will
significantly increase our footprint in
Continental Europe with an additional
70 brokers. We continue to expect the UK
to remain a major centre for financial,
energy and commodities markets.
Building the business of the future
Our goal is to be the world’s largest
provider of inter-dealer OTC marketplaces
by ensuring that our offering evolves,
and remains relevant to our customers.
Additionally, we plan to continue to diversify
our earnings by expanding the product
range and customer base for our data and
analytics offering, as well as for our
institutional agency broking services.
The markets in which we operate are
changing, as are the demands of our
customers, and it is imperative that we
adapt to capitalise on these changes. We
have previously identified the following as
the key pillars of our strategic framework:
> Electronification and technology;
> Liquidity aggregation;
> Diversification; and
> People, conduct and compliance.
The Group’s key financial performance
indicators include:
> Revenue growth;
> Earnings diversification (i.e. earnings
growth excluding Global Broking growth);
> Contribution margin;
> Underlying operating profit margin; and
> Underlying earnings per share.
Electronification and technology
We intend to grow our profits by improving
the efficiency of our client-facing services
and internal operations across the Group.
The integration we have just completed
represents a major step on our technology
journey as we eliminated legacy platforms
and begin streamlining our processes.
We will introduce new technology to add
value to our clients: from onboarding new
customers, to streamlining the trade lifecycle.
The degree and manner of electronification
will depend on the nature of the market
and product.
www.tpicap.com 12
Strategic report
Chief Executive Officer’s review continued
self-quarantine requirements. These
measures will adapt and change as we
receive advice from health organisations
and governments and in this way we will
endeavour to ensure the wellbeing of all
our colleagues, their families and others,
as well as continue to provide unbroken
service to our clients.
Near-term outlook
The overall macroeconomic backdrop
remains uncertain driven largely by
Covid-19, global growth and ongoing
Brexit negotiations. While this environment
impacts our clients’ activity, the resulting
volatility also creates market opportunities
that give us confidence for the future.
Concluding comments
I am pleased with the progress we have
made in 2019. We delivered on our four
priorities and have made significant strides
in developing the strategy that will ensure
we can deliver sustainable, profitable
growth in the future. I am excited about the
opportunities for TP ICAP. We have achieved
a considerable amount in the past 12 months
and this has only been possible through the
hard work and dedication of our employees.
I would like to thank them all for their very
valuable contribution throughout the year.
Nicolas Breteau
Chief Executive Officer
10 March 2020
Liquidity aggregation
In 2019 we were the largest inter-dealer
broker by revenue, and we intend to remain a
global leader by using technology to
improve market depth – specifically, our
customers’ ability to access, and interact
with, the liquidity available across the
Group’s separate and competing brands.
Diversification
We will seek to continue to leverage our OTC
markets expertise and capability to further
diversify our revenues. The Group aims to
continue to invest in Data & Analytics
division where we are already a leading
provider of OTC data products and services.
We accelerated the introduction of new
products in 2019, and aim to launch
additional datasets, to grow the customer
base for our data, as well as to create and
commercialise a suite of more sophisticated
value-added analytics products, targeted
at a growing number of regulatory and
other use cases.
The majority of our execution-related
revenues derive from customers in the
inter-dealer market. However, through our
Institutional Services division, we have been
growing our presence in the institutional
market (i.e., asset managers and hedge
funds). We will continue to invest in this
business, by expanding our product and
regional footprint, and broadening and
deepening our customer relationships.
People, conduct and compliance
The Group aims to continue to attract,
develop and retain the best-in-class for our
staff and provide a respectful and enjoyable
workplace for our colleagues that supports
innovation, high performance with
continuing personal and professional
development. A robust culture of conduct
and compliance is essential to our position
as a trusted operator in highly regulated
markets. In 2019, we appointed our regional
CEOs whose focus includes ensuring high
standards of conduct, compliance and
improve the communication with various
regulatory bodies.
Introduction of a new Jersey
incorporated holding company
TP ICAP has seen meaningful growth
in the size of its Asia Pacific and Americas
business due to the acquisition of ICAP in
2016. As a result, the Board has reviewed
the appropriateness of the Group’s
international corporate and governance
structure. Following the review, we are
proposing to incorporate a new Group
holding company in Jersey. The proposed
new structure is subject to shareholder and
regulatory approvals.
We believe that the proposal will result in
a corporate structure that should provide
greater financial flexibility for the Group,
support the effective governance of the
business and improve the competitiveness
of the Group. As a key part of the proposal,
the Group’s tax domicile and location of its
primary stock exchange listing would remain
in the UK. Shares in the new Group holding
would continue to be listed on the Premium
segment of the Main Market of the London
Stock Exchange and are expected to be
eligible for FTSE index inclusion.
We do not believe our credit rating or
outstanding bonds will be affected by the
proposal, and nor do we expect there to be
any impact on the location of employees. We
intend to publish a prospectus and circular
summarising the proposal in Q2 2020 and,
subject to receiving the requisite third party
consents we expect the domiciliation to be
complete before the end of H1 2020.
Coronavirus
At the time of writing we have seen an
increase in the number of people who
have been infected with Covid-19, or the
coronavirus, in many parts of the world.
The situation is constantly evolving, and
we are monitoring its global spread.
Our people are our business, and we are
doing all that we can to safeguard them.
In line with best practice guidelines we
have put precautions and measures in
place including travel restrictions and
Annual Report and Accounts 2019 Market factors
Strategic report Governance report
Financial statements
13
Market factors, implications and our response
Our business is influenced by a number of external factors. A summary of some key market factors which currently affect TP ICAP and are
expected to continue in the coming years, is set out below:
Market factor Description
Implications for TP ICAP
TP ICAP’s response
Competitive
environment
TP ICAP has a wide range of
international competitors in the
market infrastructure space,
including inter-dealer brokers,
exchanges and electronic
platforms.
Regulation
TP ICAP operates under the
jurisdiction of a number of
different regulators. The overall
trend globally continues to be
towards increasing levels of
regulatory oversight.
Technological
advances
Technological advances
potentially enable a new
generation of competitors
to disrupt existing players.
Advances in technology bring
changes in how our clients’
businesses are run and in the
risks they face. Similar matters
directly impact our own business.
Competition has intensified
due to new participants and a
difficult economic backdrop.
In addition, certain rivals have
discounted heavily to retain and
win new business, as well as
offering significant remuneration
packages to attract new staff.
The trends in global regulation
place an additional resource and
cost requirement on TP ICAP.
They also increase the chance
of regulatory action being faced
by the Group, as well as greater
levels of scrutiny.
Technology has the potential
to provide both positive and
negative outcomes to the Group.
Improved technology allows us
to enhance the services we
provide to clients, improving
efficiency and profitability. It
also presents challenges if the
Group’s technology strategy
is not in line with overall
market developments.
TP ICAP has adopted a proactive approach
to client engagement and client experience,
and has focused on the organisation
becoming a more attractive place to work
for all its employees. Additionally, we continue
to defend ourselves aggressively against
poaching attacks.
We continue to invest in our risk and
compliance frameworks and in our staff to
ensure we have the right skills to advise and
direct our business on the implications of the
changing regulatory environment.
Following the integration of ICAP, we will
increase the amount of investment we make
in technology upgrades, as technology is
paramount to our long-term ambitions.
We will seek to partner with companies
who specialise in technology to improve
the time-to-market of new functionality.
We have developed a high-quality
development expertise in-house in our
Belfast centre which will complement our
teams in all our major offices, to roll out
enriched platforms quickly to our front
office, support staff and clients.
Big data
developments
Significant volumes of data can be
collected and analysed far more
quickly and cheaply than in the
past. Combined with machine
learning tools, this can enable
deeper and faster market and
behavioural insights to be formed.
Much of the data we have
gathered in the past and
present could now be developed
into sophisticated products in
a way that was not feasible or
cost effective in the past.
We aim to develop ourselves or partner
selectively with specialist companies that
can assist us to develop and launch tools that
enable us to use our extensive library of data.
This will be supplemented with other sources
to improve and increase the products and
services we provide our brokers and clients.
www.tpicap.com 14
Strategic report
Strategy
TP ICAP operates at the heart of global
wholesale over-the-counter (‘OTC’) and
exchange-traded markets. We are active
across all major financial, energy and
commodities asset classes, providing both
data and execution services. Our goal is to
retain our position as the world’s largest
provider of inter-dealer OTC marketplaces –
including both broker-supported voice and
hybrid execution services and fully electronic
platforms – by ensuring that our offering
evolves, and remains relevant to our
customers. In addition, we intend to continue
to diversify our earnings mix by expanding
the product range and customer base for
our data and analytics offering, as well as
for our institutional agency broking services.
vary across product markets, reflecting
relevant structural characteristics, such as
relative size, maturity, homogeneity,
regulatory regime and regional attributes.
Liquidity aggregation
In recent years, the completion of certain
acquisitions – most notably of ICAP’s voice
broking division – enabled us to enhance
the breadth of our inter-dealer brokerage
franchise. In 2019, TP ICAP was the largest
inter-dealer broker by revenue. We intend to
remain a global leader by using technology
to improve market depth – specifically, our
customers’ ability to access, and interact
with, the liquidity available across the
Group’s separate – and competing – brands.
To continue serving our customers well,
we must continue to evolve, in line – and
sometimes in advance of – changes in
market structure and the associated needs
of market participants. We have identified
the following as the key themes of our
strategic framework:
> Electronification and technology;
> Liquidity aggregation;
> Diversification; and
> People, conduct and compliance.
Electronification and technology
We intend to enhance our medium-term
profitability potential by better using
technology to improve the efficiency
of our client-facing services and internal
operations, across the Group. The post-
merger integration of the Tullett Prebon
and ICAP operating platforms – which we
completed in 2019 – represented a major
step on our technology journey. Our
integration work resulted in the elimination
of legacy platforms and the streamlining
of several processes. Going forward, we will
increase our focus on deploying technology
in value-added customer-facing use cases –
from the onboarding of new customer
relationships, to streamlining the trade
lifecycle (order initiation to straight-through
processing (‘STP’)). We note that our
approach to electronification will necessarily
Diversification
We will seek to continue to leverage our OTC
markets expertise and capability to further
diversify our revenues. The Group aims to
continue to invest in its Data & Analytics
division. We are a leading provider of OTC
data products and services. Over 2019, we
expanded the number of datasets we make
available to customers, and we expect to
launch further data products in 2020. Over
the next several years, we will be aiming
to launch additional datasets, to grow the
customer base for our data, as well as to
create and commercialise a suite of more
sophisticated value-added analytics
products, targeted at a growing number
of regulatory and other use cases. The
majority of our execution-related revenues
derive from customers in the inter-dealer
market. However, through our IS and Energy
& Commodities divisions, we have been
growing our presence with non-bank
customers, such as corporates, asset
managers and hedge funds. We will continue
to invest in these segments, by expanding
our product and regional footprint.
People, conduct and compliance
The Group aims to attract, develop and
retain the best-in-class talent and provide
a respectful and enjoyable workplace that
supports innovation, teamwork, high
performance with continuing personal
and professional development. A robust
culture of conduct and compliance is
essential to our position as a trusted
operator in highly regulated markets. Our
newly created regional CEO positions ensure
high standards of conduct, compliance and
improve the communication with various
regulatory bodies.
Financial performance
Whilst recognising that our near-term
financial performance in any given
reporting period will reflect operating
conditions (including market direction,
and price volatility), over the medium term,
we expect our strategic foci to deliver:
> higher percentage of low-touch
(i.e. electronic) broking revenues;
> further diversification of earnings; and
> underlying operating margin expansion.
As a core provider of global OTC market
infrastructure and services, we believe
it is necessary and appropriate to plan over
a multi-year horizon, and so to maintain an
appropriate cross-cycle level of investment,
such that the Group may ensure its ability
to adapt and evolve in line with both
the demands of our customers, and the
expectations of regulators. The key financial
indicators we track may fluctuate over
reporting periods. Where possible, we
endeavour to provide useful context to assist
investors in understanding underlying trends.
Key financial performance indicators
The Group’s Key financial performance
indicators include:
> Revenue growth;
> Earnings diversification (i.e. excluding
Global Broking);
> Contribution margin;
> Underlying operating profit margin; and
> Underlying earnings per share.
Refer to the KPI section on pages 18 and 19
for further details.
Annual Report and Accounts 2019 Case study: Technology
Strategic report Governance report
Financial statements
15
Technology has changed the
way our industry operates.
In our Energy & Commodities business we
have developed an electronic whiteboard,
due to be rolled out in 2020, which enables
the efficient capture of multiple data
points from client interaction. When fully
deployed it will enable better sharing
of liquidity across the desks, automatic
calculation of spreads, and Straight
Through Processing of executed trades.
It will also feed through to a machine
learning application which is currently
being tested with a small number of
users across the division.
Technology has had a significant impact
on the way we conduct our business. We
offer a range of electronic and hybrid
methodologies to allow our clients to
execute trades, depending on the markets
in which they operate.
We are continuing to invest in technology
to make the execution experience quicker
and more efficient for our clients. For
example, in our Global Broking Credit
business, we have successfully run pure
electronic matching sessions and launched
two new platforms in the US in 2019.
One was a portfolio optimisation bond
platform and the other was Crosstrade,
which enables asset management firms
to transition bonds between funds.
We also acquired a fintech company,
ClearCompress, that provides a market
leading bilateral compression service in
cleared and uncleared interest rate swaps.
www.tpicap.com 16
Strategic report
Case study: People
A dynamic culture with a
strong emphasis on conduct
and integrity.
In 2019, we restructured the reporting lines
of senior management to ensure greater
accountability and efficiency within
the business.
This was driven by the growing complexity
and importance the support infrastructure
plays in the success of our principal business
divisions, as well as by the tightening of the
regulatory agenda and particularly the
introduction of the FCA’s Senior Managers
and Certification Regime.
Given these factors, we determined that
we needed to appoint Regional CEOs,
independent from business divisions.
These Regional CEOs now have a remit
to oversee culture, risk and governance in
their respective region, but will not have
responsibility for brokers or revenues.
The Regional CEOs report directly to the
Group CEO. They have oversight of the
regional support functions alongside the
global support function heads to ensure
that the infrastructure in each region has
the capability to support revenue generation
and enhance the success of our growing
range of businesses.
Annual Report and Accounts 2019 Case study: Diversify
Strategic report Governance report
Financial statements
17
The markets we operate in are
constantly evolving, creating
opportunities for us.
The markets in which we operate
are changing constantly, creating
opportunities for TP ICAP to offer
new services, acquire new clients and
ultimately diversify our revenue streams.
TP ICAP has been closely monitoring
the development of digital assets as
we recognise the transformational effect
that the underlying distributed ledger
technology could have across our industry.
A working group was set up at the end of
2017 to identify opportunities, evaluate
potential disruption and determine how
we could best service our existing and
future clients in this area.
In October 2018 we launched our Digital
Assets business, initially providing our
clients with OTC liquidity in the CME
Bitcoin Future. This has now expanded to
include the CME Bitcoin Options and the
ICE (Bakkt) Bitcoin Futures and Options.
Digital Assets is part of TP ICAP’s
Electronic Markets division, based in
London with desks in Asia and the US
expected to follow.
We are continually evaluating other digital
asset opportunities and are exploring how
our global network of trading venues can
provide institutional solutions to clients
within this asset class. Digital Assets are
working collaboratively across our
businesses, such as with the Data &
Analytics division to identify data driven
opportunities in this nascent asset class.
www.tpicap.com 18
Strategic report
Key performance indicators
Financial KPIs
Non-financial KPI
1 Revenue growth
(%)
2 Underlying operating profit margin
3 Contribution
(%)
(£m)
4 Underlying earnings per share (‘EPS’)
5 Ratiooffrontofficetosupport
(p)
function employees
4%
4%
15.0
15.7
15.2
655
679
694
33.3
34.2
33.8
1.34
1.29
1.29
2017
0%
2018
2019
KPI definition
Revenue growth is defined as the annual
growth of total reported revenues. Group
revenues are shown on page 22.
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
KPI definition
Underlying operating profit margin
is calculated by dividing underlying
operating profit by revenue for the period.
A reconciliation of underlying operating
profit to statutory operating profit
is shown on page 21.
KPI definition
Contribution is calculated as revenue
(at constant exchange rates) less broker
compensation and other front office costs.
It also includes the revenue of the data
business less direct costs. See contribution
section on page 26.
Comment
Revenue growth reflects not only the market
conditions we operate in but also our ability
to further diversify and strengthen our
franchise. Revenue growth in the past has
been driven not only by volatility and market
conditions but also by targeted acquisitions.
2019 saw mixed market conditions with
Global Broking revenues declining 1%, but
the other three divisions growing double-
digit. Overall the Group grew revenue by 4%.
Comment
Underlying operating profit margin is a
measure of the profitability of the business
and is principally driven by revenue, broker
compensation and other administrative
expenses. The underlying operating margin
in 2019 has slightly reduced due to minor
increases in operating expenses and some
FX headwinds.
Link to our strategy
> Liquidity aggregation
> Electronification
> Diversification
Link to our strategy
> Electronification
> Diversification
> People, conduct and compliance
Comment
Contribution measures the profitability of
our business. The absolute level is important
as contribution less management support
costs flows through to operating profit.
By increasing the level of contribution the
business increases returns to shareholders.
During the year the Group increased
contribution by 2% on a reported basis on
higher revenues, partially offset by higher
front-office costs.
Link to our strategy
> Liquidity aggregation
> Electronification
> Diversification
> People, conduct and compliance
KPI definition
KPI definition
Underlying earnings per share is calculated
Ratio of front office to support function
by dividing the underlying profit after tax
employees is calculated by dividing the
by the basic weighted average number of
number of front office revenue generating
shares in issue. A reconciliation to statutory
employees by the number of support
EPS is shown on page 20.
function employees.
Comment
Comment
Over the long term, growth in shareholder
The ratio of front office employees to
value and returns is linked to growth in
support function employees is an indicator
underlying EPS, which measures the
of the efficiency of our business model. The
underlying profitability of the Group after
ratio of front office employees to support
tax and interest costs. The increase in
function employees remained the same
underlying EPS in 2019 reflects the improved
compared to 2018 reflecting an increase of
underlying performance of the business
compliance personnel, offset by reductions
year-on-year.
in other support headcount.
> People, conduct and compliance
> People, conduct and compliance
Link to our strategy
> Technology
Link to our strategy
> Technology
> Diversification
Annual Report and Accounts 2019
Strategic report Governance report
Financial statements
19
Financial KPIs
Non-financial KPI
1 Revenue growth
(%)
2 Underlying operating profit margin
3 Contribution
(%)
(£m)
4 Underlying earnings per share (‘EPS’)
5 Ratiooffrontofficetosupport
(p)
function employees
4%
4%
15.0
15.7
15.2
655
679
694
33.3
34.2
33.8
1.34
1.29
1.29
2017
2019
0%
2018
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
KPI definition
KPI definition
KPI definition
Revenue growth is defined as the annual
Underlying operating profit margin
growth of total reported revenues. Group
is calculated by dividing underlying
Contribution is calculated as revenue
(at constant exchange rates) less broker
revenues are shown on page 22.
operating profit by revenue for the period.
compensation and other front office costs.
A reconciliation of underlying operating
It also includes the revenue of the data
profit to statutory operating profit
business less direct costs. See contribution
is shown on page 21.
section on page 26.
Comment
Comment
Comment
Revenue growth reflects not only the market
Underlying operating profit margin is a
Contribution measures the profitability of
conditions we operate in but also our ability
measure of the profitability of the business
our business. The absolute level is important
to further diversify and strengthen our
and is principally driven by revenue, broker
as contribution less management support
franchise. Revenue growth in the past has
compensation and other administrative
costs flows through to operating profit.
been driven not only by volatility and market
expenses. The underlying operating margin
By increasing the level of contribution the
conditions but also by targeted acquisitions.
in 2019 has slightly reduced due to minor
business increases returns to shareholders.
2019 saw mixed market conditions with
increases in operating expenses and some
During the year the Group increased
Global Broking revenues declining 1%, but
FX headwinds.
the other three divisions growing double-
digit. Overall the Group grew revenue by 4%.
Link to our strategy
> Liquidity aggregation
> Electronification
> Diversification
Link to our strategy
> Electronification
> Diversification
> People, conduct and compliance
contribution by 2% on a reported basis on
higher revenues, partially offset by higher
front-office costs.
Link to our strategy
> Liquidity aggregation
> Electronification
> Diversification
> People, conduct and compliance
KPI definition
Underlying earnings per share is calculated
by dividing the underlying profit after tax
by the basic weighted average number of
shares in issue. A reconciliation to statutory
EPS is shown on page 20.
KPI definition
Ratio of front office to support function
employees is calculated by dividing the
number of front office revenue generating
employees by the number of support
function employees.
Comment
Over the long term, growth in shareholder
value and returns is linked to growth in
underlying EPS, which measures the
underlying profitability of the Group after
tax and interest costs. The increase in
underlying EPS in 2019 reflects the improved
underlying performance of the business
year-on-year.
Comment
The ratio of front office employees to
support function employees is an indicator
of the efficiency of our business model. The
ratio of front office employees to support
function employees remained the same
compared to 2018 reflecting an increase of
compliance personnel, offset by reductions
in other support headcount.
Link to our strategy
> Technology
> People, conduct and compliance
> Diversification
Link to our strategy
> Technology
> People, conduct and compliance
All our KPIs, are Alternative Performance
Measures (APM) as defined by Financial
Reporting Council (FRC). We provide
these to offer additional, insights into
the Group’s financial results. These are
clearly defined below.
The rationale for using each APM is:
> Revenue growth (%) – This shows
the annual reported revenue growth.
This highlights our potential ability to
bolster our revenues based on different
economic cycles
> Underlying operating profit margin (%) –
This shows the operating profit margin
excluding exceptional, acquisition,
integration and disposal-related items.
As the nature of these items is either
non-recurring (e.g. integration costs) or
deal-dependent (e.g. amortisation of
intangible assets), the underlying
operating profit margin shows our
recurring profitability capacity;
> Contribution – This is an important
measure of our profitability; as it provides
a view of front-office revenues less
compensation and other direct costs
(e.g. settlement and clearing fees).
Increased contribution leads to
increased returns for the shareholders
> Underlying earnings per share (‘EPS’) –
This shows the basic EPS of the Group
excluding exceptional, acquisition,
integration and disposal-related items.
As the nature of these items is either
non-recurring (e.g. integration costs) or
deal-dependent (e.g. amortisation of
intangible assets), the underlying EPS
shows our recurring earnings capacity;
and
> Ratio of front office to support function
employees – This has been an important
KPI during the ICAP integration
programme, as it has been indicative of
the efficiency of our business model as we
looked to reduce the headcount support
staff. In recent years, the reduction of this
ratio was less pronounced as our planned
support function decreases were offset
by growing investment in risk and
regulatory functions.
www.tpicap.com
20
Strategic report
Financial and operating review
Robin Stewart
Chief Financial Officer
Introduction
2019 has been a year marked by challenging conditions in financial markets with generally muted levels of volatility. From a TP ICAP perspective we have
completed the ICAP integration and now focus on our medium term strategy, focusing on liquidity aggregation, electronification and diversification.
Statutory Income Statement
2019
Income statement £m
Revenue
Underlying operating profit
Net charge relating to legal settlements
ICAP integration costs
Impairment of intangible assets arising on consolidation
Amortisation of intangible assets arising on consolidation
Adjustments to acquisition consideration
Charge relating to employee long-term benefits
Charge relating to business reorganisation
Other acquisition and disposal items
Operating profit
Net finance expense
Profit before tax
Tax
Share of net profit of associates and joint ventures
Non-controlling interests
Earnings attributable to the equity holders of the parent
Average number of shares
Basic EPS
2018
Income statement £m
Revenue
Underlying operating profit
Net charge relating to legal settlements
ICAP integration costs
Remeasurement of deferred consideration
Impairment of intangible assets arising on consolidation
Impairment of associate interest
Amortisation of intangible assets arising on consolidation
Charge relating to employee long-term benefits
Charge relating to business reorganisation
Other acquisition and disposal items
Operating profit
Net finance expense
Profit before tax
Tax
Share of net profit of associates and joint ventures
Non-controlling interests
Earnings attributable to the equity holders of the parent
Average number of shares
Basic EPS
Acquisition,
disposal and
integration costs
Underlying
Exceptional
items
1,833
279
–
–
–
–
–
–
–
–
279
(49)
230
(55)
15
(1)
189
559.4m
33.8p
–
–
(34)
(24)
(42)
(6)
–
(9)
(115)
–
(115)
15
–
–
(100)
–
(10)
–
–
–
–
(5)
(7)
–
(22)
–
(22)
–
–
–
(22)
Acquisition,
disposal and
integration costs
Underlying
Exceptional
items
1,763
276
–
–
–
–
–
–
–
–
–
276
(31)
245
(63)
12
(3)
191
558.5m
34.2p
–
–
–
(44)
(5)
(65)
(3)
(40)
–
–
(3)
(160)
–
(160)
10
–
–
(150)
–
–
(3)
–
–
–
–
–
(2)
(18)
–
(23)
–
(23)
14
–
–
(9)
Total
1,833
279
(10)
(34)
(24)
(42)
(6)
(5)
(7)
(9)
142
(49)
93
(40)
15
(1)
67
559.4m
12.0p
Total
1,763
276
(3)
(44)
(5)
(65)
(3)
(40)
(2)
(18)
(3)
93
(31)
62
(39)
12
(3)
32
558.5m
5.7p
Annual Report and Accounts 2019
Strategic report Governance report
Financial statements
21
“ Total revenue of £1,833m was 4% higher than in 2018 on a reported
basis (1% on constant currency basis).”
Our key financial and performance metrics for 2019 are summarised in the table below together with comparatives from the equivalent
period in 2018 on a reported basis.
Total revenue
Underlying operating profit
Underlying operating margin
Statutory operating profit
Statutory operating margin
Broking contribution*
Broking contribution margin*
Data & Analytics contribution*
Data & Analytics contribution margin*
Total contribution
Global Broking underlying operating profit margin
Energy & Commodities underlying operating profit margin
Institutional Services underlying operating profit margin
Data & Analytics underlying operating profit margin
Average broker headcount
Average revenue per broker (£’000)**
Average contribution per broker (£’000)***
Broker headcount – period end
Broker support headcount – period end
Other support headcount – period end
Broker compensation costs: broking revenue****
2019
2018
Change
£1,833m
£279m
15.2%
£142m
7.7%
£626m
36.4%
£68m
50.4%
£694m
17.5%
12.0%
4.0%
43.7%
2,740
620
228
2,784
1,824
300
53.1%
+4%
£1,763m
+1%
£276m
-0.5% pts
15.7%
£93m
+58%
5.3% +2.4% pts
+0%
£624m
-1.1% pts
37.5%
£55m
+24%
47.0% +3.4% pts
+2%
£679m
-2.4% pts
19.9%
9.6% +2.4% pts
1.6% +2.4% pts
41.9% +1.8% pts
+0%
2,727
+3%
604
-0%
229
+4%
2,671
+7%
1,704
-19%
369
52.2% +0.9% pts
* Broking and Data & Analytics contribution and contribution margins are defined in the Contribution & Underlying Profit by Division section. Prior year figures have been
restated due to inter-division revenues in Global Broking and Energy & Commodities, and inter-division front-office costs in Data & Analytics.
** Average revenue per broker is defined as Total Broking revenues excluding inter-division revenues divided by average broker headcount
*** Average contribution per broker represents broking contribution (as defined in the Contribution section) divided by the average broker headcount with the prior year
comparative calculated on the same basis.
**** Broker compensation costs: broking revenue is defined as Total Broking compensation costs divided by Broking revenues excluding inter-division revenues
Average broker headcount was in line to 2,740 in 2019 from 2,727 in 2018, but with 3% increase in average revenue per broker, the resulting
broking revenue was 3% higher than 2018 on a reported basis.
The period-end broking support headcount increased by 7% primarily reflecting in-sourcing (including Belfast), and investing in Risk and
Compliance functions as a response to increasing regulatory demands.
The tables that follow analyse revenue by business division as well as revenue and underlying operating profit by region for 2019 compared
with the equivalent period in 2018, on a reported basis. The table also shows the change on a constant currency basis.
A significant portion of the Group’s activity is conducted outside the UK and the statutory revenue is therefore impacted by the movement in
the foreign exchange rates used to translate the revenue from non-UK operations. The comparative data in the tables below therefore shows
the statutory revenue change, but also the constant currency basis, where the revenues are translated at the same exchange rates as those
used for 2018.
www.tpicap.com 22
Strategic report
Financial and operating review continued
Revenue
Total revenue of £1,833m in 2019 was 4% higher than 2018 on a reported basis, and 1% higher at constant exchange rates.
Revenue by business division
£m
Rates
Credit
FX & Money Markets
Emerging Markets
Equities
Inter-division revenues**
Total Global Broking
Energy & Commodities
Inter-division revenues**
Total Energy & Commodities
Institutional Services*
Data & Analytics
Inter-division eliminations***
Reported Revenues
2019
537
94
201
213
199
18
1,262
379
3
382
75
135
(21)
1,833
2018
523
101
207
213
210
18
1,272
331
2
333
61
117
(20)
1,763
Reported
Change
Constant
Currency
Change
+3%
-7%
-3%
+0%
-5%
0%
-1%
+15%
+50%
15%
+23%
+15%
+5%
+4%
+1%
-10%
-5%
-2%
-7%
0%
-3%
+11%
+50%
11%
+21%
+11%
+5%
+1%
*
For 2018 £24m of revenues have been reclassified from Rates business into Institutional Services as the Global Broking Relative Value (RV) Rates businesses have been
reclassified to move all RV desks under Institutional Services. This is to reflect the mechanics of the underlying business.
Institutional Services growth rate would have been 21% and 19% on a reported and constant currency basis respectively excluding the aforementioned move of the RV desks
**
*** Inter-division charges have been made by Global Broking and Energy & Commodities to reflect the value of proprietary data provided to the Data & Analytics division.
Previous year has been restated in line with the new presentation format. The broking inter-segmental revenues and Data & Analytics inter-segmental costs are eliminated
upon the consolidation of the Group financial results.
Conditions in financial markets have generally been challenging in 2019 with an uncertain environment across the world. Muted volatility
and a flattening yield curve are generally negative pressure for our broking divisions. Despite this macroeconomic backdrop, Global Broking
Rates, Energy & Commodities, Data & Analytics and Institutional Services performance was strong but was offset by subdued performances
in Global Broking’s Credit, Equities and FX & Money Markets.
Inter-division revenue has been recognised in Global Broking and Energy & Commodities to identify the value of data provided to the
Data & Analytics division. Additionally, the Relative Value (‘RV’) businesses from the Rates division in Global Broking have been reclassified
to move all RV desks within the Group under Institutional Services. This leads to a £24m 2018 revenue reclassification from Global Broking
Rates to Institutional Services.
Global Broking revenues were -1% on a reported basis (-3% on a constant currency basis) with Rates division growing by 3% on reported
basis (+1% on constant currency basis). Conditions in credit markets continue to remain challenging, with a number of new competitors,
lack of new issuance as well as restrictions on clients’ balance sheets, resulting in a reduction in Credit revenue of -7% on a reported basis
(-10% on a constant currency basis). Equities and FX & Money Markets both saw revenue declines of -5% (-7% on a constant currency basis)
and -3% (-5% on constant currency basis) respectively compared with prior year due to subdued client activity on lower volume and volatility.
Energy & Commodities revenue increased +15% on a reported basis (+11% on a constant currency basis) compared to 2018 on a reported
basis due to a combination of positive markets, strategic hires and the acquisition of Axiom at the end of 2018. Oil revenues increased by
9% year-on-year, with increased market activity driven by events in the Middle East. Separately, Power & Gas businesses both reported
strong revenue growth as they benefitted from favourable market conditions.
Annual Report and Accounts 2019
Strategic report Governance report
Financial statements
23
Institutional Services revenue has grown by 23% (+21% on a constant currency basis) compared to 2018 at reported basis. The business
performed well in its core products with higher client appetite in relative value execution, FX, listed derivatives, and cleared interest rate
swaps. This was led by client demand resulting from changing market dynamics as investment banks reorganise their sales coverage teams.
New hires and continued improvement in client onboarding processes have also improved the performance of the business. As explained
above; the Relative Value desk from the Rates division in Global Broking has been reclassified to move all RV desks under Institutional
Services. The business would have grown 21% and 19% on a reported and constant currency basis, excluding this reclassification.
Data & Analytics revenue was 15% higher than 2018 at reported basis (11% at constant currency basis) with the business executing a number
of targeted organic growth opportunities during the year that have enabled it to monetise more proprietary data by releasing a higher
number of new products with a larger salesforce. In addition, the division continued to win a number of new clients across hedge funds,
sovereign wealth funds, market data vendors and independent software vendors. Inter-segmental charges have been made by Global
Broking and Energy & Commodities to reflect the value of proprietary data provided to the Data & Analytics division. These inter-division
charges are based on commercial terms benchmarked against third party rates and rates charged by TP ICAP’s broking desks to third parties.
The broking inter-division revenues and Data & Analytics inter-division costs are eliminated upon the consolidation of the Group
financial results.
Revenue by region
£m
EMEA
Americas
Asia Pacific
Reported Revenues
2019
900
687
246
1,833
2018
886
636
241
1,763
Reported
Change
Constant
Currency
Change
+2%
+8%
+2%
+4%
+1%
+3%
-1%
+1%
EMEA
Revenue for the region increased by 2% in 2019 compared with 2018 on a reported basis (+1% at constant currency basis). Global Broking
revenue declined slightly, with Rates being the only asset class to increase revenues year-on-year. The other four asset classes saw small
revenue declines. The first half of the year saw a Brexit-related deadlock leading to a lack of volatility and lower volumes amidst uncertainty.
Equally, the prospect of additional quantitative easing throughout Europe were additional headwinds. However, the third quarter was better
with a significant leap in volatility and trading volumes, with macro-economic developments around the UK elections, US/China trade war
and the first Federal reserve rate cut in 11 years, all contributing to higher volumes.
Revenue from Energy & Commodities increased slightly in the region year-on-year with both Tullett Prebon and ICAP brands reported good
revenue growth, partially offset by declines in PVM. The growth came from fuel oil & middle distillates, precious metals, power & gas, coals,
liquefied natural gas (‘LNG’) and gasoil physical. Institutional Services saw a 25% year-on-year increase. This was due to COEX growth,
specifically in FX options with a larger clientele. Market conditions have been overall favourable.
Americas
Americas increased revenues by 8% in 2019 versus 2018 on a reported basis (+3% at constant currency basis). This was despite difficult market
conditions for TP ICAP’s traditional Global Broking business. Within the Global Broking business, general market conditions worsened during
2018 due to a material volatility decrease leading to reduced client appetite. Rates revenues increased by 2% as USD swaps and Treasuries
markets strengthened in the second half of the year.
Rates continues to be Americas’ largest asset class. Americas’ Equities revenue was down 6% year-on-year in spite of new product development.
This was due to lower volumes and volatility in US Equities market. However, this product continues to be an area of investment and new
product expansion. Emerging Markets and FX & Money Markets businesses saw small revenue declines in 2019. This was due to lower volatility
levels, client de-risking in Forward FX, and some new competitors in Local markets. US fixed income markets remained subdued, as TP ICAP
reported single-digit revenue decline.
www.tpicap.com 24
Strategic report
Financial and operating review continued
The Americas’ Energy & Commodities business performed strongly, with a 23% revenue increase. There were increased revenues in oil
products and ethanol bolstered by the acquisition of Axiom Commodities in November 2018. In addition, we saw strong organic growth
in our traditional power and gas businesses. Energy & Commodities continues to be a targeted growth area for TP ICAP Americas across
all our brands.
Finally, TP ICAP’s Institutional Services performed strongly in 2019. The business continues to expand its product offerings and it remains
an area for growth opportunities.
Asia Pacific
Revenue in Asia Pacific in 2019 versus 2018 increased 2% on a reported basis (-1% at constant currency basis). This reflects difficult conditions
in Global Broking business, offset by very strong revenue growth in Energy & Commodities. Global Broking revenues in the region declined
8% year-on-year with both Tullett Prebon and ICAP brands reporting lower figures compared with 2018. For Tullett Prebon, the decline
primarily reflects the departure of certain credit brokers at the end of 2018. Hong Kong business was impacted from subdued equity
derivatives markets and lower FX activity. In Singapore, rates business was affected by quieter markets and personnel changes. Japan saw
some revenue decline due to fewer central bank stimulating actions compared to the prior year. For the ICAP brand, revenues dropped 6%,
mainly due to the discontinuation of the Korea office in Q1, and the end-2018 closure of Indonesia office. Within specific countries, the ICAP
brand saw meaningful increases in rates revenues in Hong Kong and Singapore, partially offset by subdued equity derivatives markets in
Hong Kong and Japan. In Australia, we saw significant improvements as the brand recovers post the broker departures in 2017.
Overall, conditions in the Energy & Commodities markets in the region were favourable and revenues from these products grew strongly by
31% year-on-year. The Tullett Prebon and PVM brands enjoyed strong revenue increase, supported by the fuel oil business, gasoline and LNG.
The ICAP brand benefitted from increased activity in iron ore options. Moreover, the Australian energy business increased revenue by 61%,
with strong electricity revenues supported by favourable market conditions. In addition, the gas business and the newly established precious
metals desk provided further revenue uplift.
Underlying administrative expenses
Total underlying administrative expenses of £1,570m in 2019 were 5% higher than 2018 on reported and 2% higher at constant currency
basis (see Note 5 in the Financial statements for further details).
Underlying administrative expenses
Broker compensation
Other front office costs
Data & Analytics costs*
Total front office costs *
Other staff costs
Technology and related costs
Premises and related costs
Depreciation and amortisation
Other administrative costs
IFRS 16 adoption
Total management and support costs *
Total underlying costs
2019
£m
900
193
46
1,139
215
59
53
34
77
(7)
431
1,570
2018
£m
Change
£m
Reported
Change
Constant
Currency
Change
859
183
42
1,084
226
52
52
33
52
–
415
1,499
41
10
4
55
(11)
7
1
1
25
(7)
16
71
+5%
+5%
+10%
+5%
-5%
+13%
+2%
+3%
+48%
n.m.
+4%
+5%
+2%
+3%
+7%
+2%
-6%
+11%
0%
0%
+45%
n.m.
+2%
+2%
* Data & Analytics front-office costs (2019: £46m, 2018: £42m) are now included within total front-office costs, whilst previously included within management and support costs.
Prior period has been restated in line with this presentation.
The table above sets out administrative expenses on the basis on which management chooses to view this area, divided principally between
front office costs and management and support costs. Front office costs tend to have a large variable component to them and are directly
linked to the output of our brokers.
Annual Report and Accounts 2019
Strategic report Governance report
Financial statements
25
The largest element of this is broker compensation as well as other front office costs, which include travel and entertainment,
telecommunications and information services, clearing and settlement fees as well as other direct costs. The remaining cost base represents
the management and support costs of the Group.
Overall, the underlying cost base has seen a 5% increase at reported rates to £1,570m in 2019 compared with 2018 (+2% at constant currency
rates). This has been driven by an increase in total front office costs. Broker compensation costs increased by £41m (+£18m at constant
currency rates) during the period reflecting a 3% increase in broking revenue at reporting rates (+1% at constant exchange rates) and an
increase in the broker compensation ratio from 52.2% to 53.1%. The increase in broker compensation reflects the change in revenue mix
between the two periods towards businesses with higher compensation ratio, mainly relating to the strong Energy & Commodities growth.
Other front office costs have increased by 5% (£10m) on a reported basis 3% (£5m) at constant currency rates). Reductions of £5m in
Telecommunications and Information Services costs have been offset by increases in Travel and Entertainment (£2m), Clearing and
Settlement fees (£5m). The increase in front-office Data & Analytics costs of 10% reflect high top-line growth.
The presentation above shows consistent year on year premises and related costs on an IAS 17 basis as we have not adopted IFRS 16 for the
prior year. The current year net IFRS 16 adoption item is made up of £27m reduction in premises costs and an additional £20m depreciation
of right of use assets.
The £11m reduction (£14m reduction at constant currency rates) in other staff costs on a reported basis reflects the further impact of synergy
savings and further staff cost reduction programme pursued during the period, offset by increased headcount in Data & Analytics (£2m),
Belfast in-housing, Cyber security, Risk & Compliance.
Technology and related costs includes the costs of all external technology services, including maintenance contracts, consultancy, market
data services and communications costs. During 2019 these costs increased £7m on a reported basis year-on-year with a modest amount
of cost reductions offset by an £8m increase in third party IT consultancy incurred in respect of Cyber security.
The IFRS 16 adoption reduced administrative expenses relating to operational leases by £7m on a reported basis.
The significant increase in other administrative costs (+£25m on a reported basis, +£24m at constant currency rates) includes an increase
in Data & Analytics costs (£3m), substantial increases in legal fees (£7m) arising in the US from Bond Issuance investigation, Swaps Anti-trust
class case and employee litigation, one-off costs in respect of the Group strategy, Brexit and other FX costs (£8m).
Synergy savings and administrative expenses
As at the end of December 2019 the cumulative annualised synergy savings achieved from the integration programme were £80m,
an increase of £9m on the annualised £71m of synergy savings reported at the end of 2018. Of the £9m additional run rate synergies,
£5m were recognised in the period. The table below shows the movement in underlying administrative expenses between 2019 and 2018
re-categorised to reflect the impact of the movement in synergy savings against other costs between the two periods.
2018
reported
1,499
FX
36
2018
constant
1,535
Synergy
savings
IFRS 16
adjustments
Net cost
decreases
Broker
compensation
New
investments
Planned
increases
FX
headwind
2019
reported
(10)
(7)
(2)
18
13
15
8
1,570
The net cost decrease of £2m includes back-office cost savings, partially offset some increased legal costs in the US (£7m).
Front Office costs have increased by £18m as explained in the paragraphs above, largely driven by the increase in broking revenue between
the two periods, and the increase in the broker compensation ratio.
www.tpicap.com 26
Strategic report
Financial and operating review continued
The new investments include Data & Analytics resourcing (£5m), strategy project (£3m), IT consultancy and project management (£5m).
The planned increases include change & procurement (£2m), compliance (£2m), risk (£3m), Brexit (£2m), other legal costs (£1m) and
cyber-security (£5m). This was in line with our £15m expected spend.
As the ICAP integration is now complete, the Group intends to discontinue the above disclosure in future reports.
Contribution and underlying operating profit by division
Contribution represents the revenue of our businesses less the total front office costs described above. An improvement in the absolute level
of contribution is an important metric in driving earnings growth for the Group. In 2019 the overall level of contribution was +2% at £694m
year-on-year. The overall contribution margin decreased by 0.6 percentage point to 37.9% as higher revenues were more than offset by
higher front office costs. This decline mainly reflects the broker compensation ratio increase, due to revenue shift changes, combined with
higher initial contract payments (‘ICP’) amortisation.
2019
£m
Revenue:
> External
> Inter-division**
Total front-office costs
> External
> Inter-division**
Contribution
Contribution margin (%)
Management and support costs
Other operating income
Underlying operating profit
Underlying operating profit margin (%)
2018
£m
Revenue:
> External
> Inter-division**
Total front-office costs
> External
> Inter-division**
Contribution
Contribution margin (%)
Management and support costs
Other operating income
Underlying operating profit
Underlying operating profit margin (%)
Global
Broking*
Energy &
Commodities
Institutional
Services*
Data &
Analytics
Corporate
Centre
1,262
1,244
18
(775)
(775)
–
487
38.6%
(268)
2
221
17.5%
382
379
3
(261)
(261)
–
121
31.7%
(75)
–
46
12.0%
75
75
–
(57)
(57)
–
18
24.0%
(15)
–
3
4.0%
135
135
–
(67)
(46)
(21)
68
50.4%
(9)
–
59
43.7%
(21)
–
(21)
21
–
21
–
n/a
(64)
14
(50)
n/a
Global
Broking*
Energy &
Commodities
Institutional
Services
Data &
Analytics
Corporate
Centre
1,272
1,254
18
(764)
(764)
–
508
39.9%
(259)
4
253
19.9%
333
331
2
(229)
(229)
–
104
31.2%
(72)
–
32
9.6%
61
61
–
(49)
(49)
–
12
19.7%
(11)
–
1
1.6%
117
117
–
(62)
(42)
(20)
55
47.0%
(6)
–
49
41.9%
(20)
–
(20)
20
–
20
–
n/a
(67)
8
(59)
n/a
Total
1,833
1,833
–
(1,139)
(1,139)
–
694
37.9%
(431)
16
279
15.2%
Total
1,763
1,763
–
(1,084)
(1,084)
–
679
38.5%
(415)
12
276
15.7%
*
**
For 2018 £24m of revenues and all associated costs have been reclassified from Rates business into Institutional Services as the Global Broking Relative Value (RV) Rates
businesses have been reclassified to move all RV desks under Institutional Services. This is to reflect the mechanics of the underlying business. Institutional Services growth
rate would have been 21% and 19% on a reported and constant currency basis respectively excluding the aforementioned move of the RV desks.
Inter-division charges have been made by Global Broking and Energy & Commodities to reflect the value of proprietary data provided to the Data & Analytics division.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
27
Previous year has been restated in line with the new presentation format. The broking inter-segmental revenues and Data & Analytics
inter-segmental costs are eliminated upon the consolidation of the Group financial results. Broker contribution (excluding Data & Analytics)
was in-line with £626m, as higher contribution from Energy & Commodities and Institutional Services, was offset by lower contribution from
Global Broking, due to lower revenues and higher ICP amortisation.
Data & Analytics contribution represents the revenue of the Data & Analytics business less the total front office costs associated with running the
business, including the cost of internally generated data from the broking businesses. In 2019 the overall level of contribution increased by £13m or
24% to £68m. The overall contribution margin increased by 6 percentage points to 50.4% driven by an 15% increase in revenue at reported rates.
Underlying operating profit
For 2019, we have introduced the underlying operating profit (‘UOP’) by division for the first time which is after the allocation of net
management and support costs (excluding Corporate centre) to the different divisions.
For Global Broking, the underlying operating profit decreased to £221m, or 13% versus 2018. This was due to higher front-office costs
reflecting higher compensation ratio as a result of increased retention efforts, as well as increased clearing and settlement costs due to
vendor cost increases. Moreover, other costs were increased due to ongoing legal costs in the US, IT consultancy investments, Cyber and
Risk & Compliance costs. Operating profit margin decreased 2.4 percentage points to 17.5%.
For Energy & Commodities, the underlying operating profit increased to £46m, or 44% versus 2018. This is primarily due to higher revenues,
only partially offset by higher support costs. The underlying operating profit margin improved 2.4 percentage points to 12.0%.
Institutional Services improved its underlying operating profit to £3m. The business has generated necessary scale to improve its profitability,
with very strong revenue growth. The underlying operating profit margin improved to 4.0%, 2.4 percentage point higher year-on-year.
Data & Analytics reported strong underlying operating profit of £59m, or +20% versus 2018. The results benefited from strong revenue
growth and positive operational leverage. As such, the underlying operating profit margin improved to 43.7%, 1.8 percentage points
higher year-on-year.
The underlying operating profit of £279m is 1% higher than the prior year, with an underlying operating profit margin of 15.2%. This is
0.5 percentage points lower than 2018, due to the aforementioned FX headwinds and minor increases in the net management and support costs.
Underlying operating profit by region
The underlying operating profit and underlying operating profit margin by region are shown below and are compared against reported
data for the prior period.
Underlying operating profit
£m
EMEA
Americas
Asia Pacific
Underlying operating profit
Underlying operating profit margin by region
%
EMEA
Americas
Asia Pacific
Underlying operating profit
2019
164
94
21
279
2018
173
81
22
276
2019
18.2%
13.7%
8.5%
15.2%
Change
-5%
+16%
-5%
+1%
2018
19.5%
12.7%
9.1%
15.7%
Overall, underlying profit margin of 15.2% in 2019 was lower than 15.7% 2018 margin, as current year margin has been impacted by a £8m FX loss.
www.tpicap.com 28
Strategic report
Financial and operating review continued
EMEA
Underlying operating profit in EMEA of £164m was 5% lower than 2018, and with revenue up 2% on a reported basis, the underlying
operating profit margin has decreased by 1.3 percentage points, to 18.2%. The decrease reflects adverse FX movement, with slightly
inflated support costs mainly through increased employee in-sourcing of IT consultancy and investment in strengthening risk & compliance.
Americas
In the Americas, the underlying operating profit of £94m is 16% higher than 2018 and the underlying operating profit margin has improved
by 1 percentage point to 13.7% reflecting higher revenue growth.
Asia Pacific
Underlying operating profit in Asia Pacific decreased by £1m to £21m in 2019, while the underlying operating profit margin has reduced by
0.6 percentage points to 8.5% with the benefit of reductions in management and support costs as a result of the integration being more than
offset by revenue decline.
Exceptional and acquisition, disposal and integration items
The Group presents its Consolidated Income Statement in a columnar format on page 20 to aid the understanding of its results by separately
presenting its underlying operating profit before acquisition, disposal and integration costs and exceptional items. Underlying operating
profit is reconciled to profit before tax in the Consolidated Income Statement and is disclosed separately to give a clearer presentation of the
Group’s underlying trading results.
Acquisition, disposal and integration costs are excluded from underlying results as they reflect the impact of acquisitions and disposals
rather than underlying trading performance.
The £34m charge for integration costs related to the acquisition of ICAP includes professional fees and staff costs relating to planning,
setting up and running the integration workstreams and staff severance costs. As at the end of 2019, we successfully completed the ICAP
integration programme, generating £80m annualised synergies.
The major elements of the integration costs in 2019 continued to be staff costs (£20m), which include £8m of severance costs, and other
costs of £11m which include consultancy costs (£10m). The £10m of consultancy cost charged in 2019 is primarily in respect of reviews of the
technology strategy and scope for cost reduction, project management support and analysis, software development and quality assurance
and support for the project to reduce and rationalise the legal entity structure.
A further amount of £42m has been charged through the income statement reflecting the amortisation of intangible assets other than
goodwill arising on acquisitions, reflecting brand value, the value of customer relationships and other intangible assets. This non-cash item
is excluded from underlying results to present the performance of the Group’s acquired businesses consistently with its organically grown
businesses where such intangible assets are not recognised.
In accordance with its obligations under IAS 36 (see also Note 13), the Group has undertaken an impairment review of the carrying value of its
regional cash generating units (‘CGU’) to which goodwill arising on acquisitions, including the acquisition of ICAP, has been allocated. In
determining whether goodwill is impaired under IAS 36, the resulting value of each CGU has been estimated based on its value in use. As a
result of the review, the carrying value of the Asia Pacific CGU has been written down by £24m and this charge is included as an acquisition
related item. This non-cash impairment does not have an impact on the Group’s regulatory capital position, which excludes the carrying
value of intangible assets in the calculation of the Group’s allowable resources.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
29
Other acquisition, disposal and integration costs include a £6m charge for adjustments to acquisition consideration, due to an increase in
the expected deferred consideration on the Axiom and COEX acquisitions due to their strong performance. There are also £9m of other minor
acquisition and disposal items that have been excluded from underlying results, relating to the ClearCompress and Louis Capital acquisition,
plus an increase of a provision acquired during COEX acquisition.
The £10m exceptional charge in 2019 reflects the net settlement of exceptional legal provisions in connection with an FCA regulatory
fine (£15m), a further charge for the settlement of a regulatory investigation in the US (£3m), other legal costs (£1m), offset by a £9m legal
settlement received regarding a settlement from competitors relating to an employment case. Other exceptional items include £5m in
relation to a charge to employee long-term benefits associated mainly with pension scheme past service and closure costs, and £7m in
relation to a charge for business reorganisation including office moves the Group has undertaken. Exceptional items have been excluded
from underlying results as they are non-recurring and do not relate to the underlying performance of the business.
Net finance expense
The underlying net finance expense of £49m is £18m higher than the £31m charged in 2018, driven primarily by the £12m additional interest
from the introduction of IFRS 16. This comprises £55m of interest expense, of which £34m relates to the Group’s Sterling Notes, £3m of bank
facility costs relating to the amortisation of debt issue, £2m relating to the amortisation of debt issue and bank facilities and £1m of other
interest payable. The interest expense includes an one-off charge of £3m for premium paid for the early redemption of £69m for the Sterling
Notes issued in January 2017, and the aforementioned impact from IFRS16 introduction. The expense is offset by £5m of interest income and
£1m of income of finance lease receivables.
Tax
The effective rate of tax on underlying profit before tax is 23.9% (2018: 25.8%). The rate is lower than the prior year due to a greater impact
from the reduced US federal rate of tax (due to the lessening of the impact of measures that broadened the US tax base) and the conclusion
of prior year tax liabilities at less that the amount provided. The effective rate of tax on reported profit before tax is 43% (2018: 62.9%),
reflecting the tax deductibility of certain acquisition, disposal and integration costs and exceptional expenses. The outlook for the underlying
tax rate is for it to be around 25% in 2020, on the basis that during the UK General Election campaign it was indicated that the scheduled
reduction in the UK corporation tax rate would be reversed.
Basic EPS
The average number of shares used for the basic EPS calculation of 559.4m reflects the 563.3m shares in issue less the 2.6m shares held
by the Employee Benefit Trust at the beginning of the year, less the difference between the time apportionment elements of the 2.0m of
shares acquired by the Employee Benefit Trust to satisfy deferred share awards made to senior management, and the 0.1m of deferred
shares meeting their vesting requirements in May. The Employee Benefit Trust has waived its rights to dividends.
Dividend
The Group’s proposed dividend remains at 16.85p (2018: 16.85p). This is in line with our previous intention to keep the dividend per share
stable during TP ICAP’s integration programme. For 2020, we intend to pay at least 16.85p dividend per share, even under a “normal
downturn” scenario. We aim to announce our medium-term capital allocation policy during 2020.
www.tpicap.com
www.tpicap.com 30
Strategic report
Financial and operating review continued
Cash flow
2019
£m
Underlying operating profit
Share based payment charge and pension scheme administration fees
Depreciation and amortisation
Depreciation on leased assets
Non-cash items
Impairment and amortisation of intangible assets arising on consolidation
EBITDA
Change in initial contract prepayments
Working capital
Cash generated from operations
Capital expenditure
Underlying operating cash flow
Interest paid
Tax paid
Underlying free cash flow
Reported net cash flow from operating activities
Cash flow
2018
£m
Underlying operating profit
Share based payment charge and pension scheme administration fees
Depreciation and amortisation
Non-cash items
Impairment and amortisation of intangible assets arising on consolidation
Impairment of associate
EBITDA
Change in initial contract prepayments
Working capital
Cash generated from operations
Capital expenditure
Underlying operating cash flow
Income taxes paid
Interest paid
Underlying free cash flow
Reported net cash flow from operating activities
Acquisition,
disposal and
integration
costs &
exceptional
items
Underlying
Reported
279
6
36
20
1
–
342
(2)
(21)
319
(33)
286
(53)
(73)
160
(137)
3
4
1
6
66
(57)
2
1
(54)
–
(54)
–
9
142
9
40
21
7
66
285
–
(20)
265
–
232
(53)
(64)
148
Acquisition,
disposal and
integration
costs &
exceptional
items
Underlying
Reported
(183)
–
4
6
105
3
(65)
–
–
(65)
11
276
6
35
–
–
–
317
(10)
(29)
278
(73)
205
(41)
(34)
130
93
6
39
6
105
3
252
(10)
(29)
213
(30)
(34)
149
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
31
The cash flow presentation above reconciles the underlying cash flow generation, excluding the impact of acquisition, disposal and
integration costs and exceptional items, to the reported net cash flow from operations. The impact on EBITDA of acquisition, disposal
and integration costs and exceptional items was £57m during the period principally relating to the costs of the integration.
During the period there was small movement in initial contract prepayments. The working capital outflow of £21m has fallen since the half
year (when it was £112m) but still reflects a small increase in trade receivables, reflecting the higher revenue in December 2019 compared with
the prior year, together a reduction in our provisions after settling a legacy legal issue. Capital expenditure has decreased to £33m reflecting
the non-recurrence of prior year’s costs, including office moves in New York, London, Singapore and Belfast. The 2019 expectation was higher
but the slight delay in moving to our new London HQ, led to lower capital expenditure.
After interest paid and underlying taxation paid, the underlying free cash flow for the Group was £160m, an increase of £30m versus 2018.
This increase is driven by lower capital expenditure associated with the prior year office moves, no impact from initial contract prepayments
and smaller increase in trade receivables. The positive impact was partially offset by higher interest paid, due to the higher long-term debt
levels and the impact from the classification of interest under IFRS 16, the costs regarding new bond issuance and early redemption of debt.
Finally, higher taxes paid relate to the fact that US legacy losses were largely exhausted.
Of the £824m cash and financial investments balance at the period end, £723m is held in 61 regulated entities to meet regulatory capital,
margin and other trading requirements as well as accrued profits, £76m is held in non-regulated entities for working capital requirements
as well as accrued profits and £25m is held in corporate holding companies. The £723m of cash held in regulated entities generally remains
held within those Group’s entities for regulatory and operational reasons.
Debt finance
The composition of the Group’s outstanding debt is summarised below.
£m
5.25% Sterling Notes June 2019
5.25% Sterling Notes January 2024
5.25% Sterling Notes May 2026
Revolving credit facility drawn
Unamortised debt issue costs
Accrued interest
Gross Debt pre-IFRS 16
IFRS 16 lease liabilities
Total Debt
At 31 Dec -
2019
At 31 Dec -
2018
–
431
250
–
(2)
11
689
140
829
80
500
–
52
(2)
12
642
–
642
The revolving credit facility was refinanced in December 2018 on improved terms increasing our overall facility to £270m from £250m. The
revolving credit facility now matures in December 2021, and no cash was drawn as at the balance sheet date (2018: £52m). On 24 May 2019,
the Group issued a £250m 5.25% note due 2026 under its £1bn Euro Medium Term Note Programme. The proceeds of this were used to pay
down the revolving credit facility (‘RCF’) drawings, repay the £80m bond that matured in June 2019 and to buy back £69m of the £500m
2024 bonds through a tender offer. As a result, the Group’s core gross debt has increased to £689m.
Exchange rates
The income statements and balance sheets of the Group’s businesses whose functional currencies are not GBP are translated into sterling at
average and period end exchange rates respectively. The most significant exchange rates for the Group are the US dollar and the Euro. The
Group’s current policy is not to hedge income statement or balance sheet translation exposure. Average and period end exchange rates used
in the preparation of the financial statements are shown on the next page.
www.tpicap.com 32
Strategic report
Financial and operating review continued
US dollar
Euro
Average
Period end
2019
$1.28
€1.14
2018
$1.34
€1.13
2019
$1.32
€1.18
2018
$1.28
€1.13
Pensions
The Group had one defined benefit pension scheme in the UK. During 2019, the Trustee commenced proceedings to ‘buy-out’ the Scheme’s
liabilities, a process that will enable the Trustee to exchange the Scheme’s bulk annuity policy for individual policies issued to, and directly
held, by the Scheme’s beneficiaries. To proceed with ‘buy-out’, the Sponsor and Trustee commenced the wind-up of the Scheme. Prior to this,
the Trustee had no right to unilaterally wind-up, or otherwise augment the benefits due to members and based on those limitations the
net surplus was recognised in full by the Group. Under UK legislation, once a Scheme commences wind-up, the assets of the Scheme pass
unconditionally to the Trustee to enable it to settle the Scheme’s liabilities. As a result, the Group has applied the requirement of IFRIC 14,
fully restricting the Group’s recognition of the £52m net surplus by applying an asset recognition ceiling. The asset ceiling is recorded as
a charge in other comprehensive income.
During the wind-up period, the Group will continue to restrict the recognition of the net surplus. Should any member benefits be augmented
during this period, they will represent a past service cost and will be recorded as exceptional costs in the Income Statement (3m in second
half of 2019) as and when those benefits are agreed. Costs associated with the settlement of the Scheme’s liabilities will also be recorded
as exceptional costs in the Income Statement as and when incurred.
Following the full settlement of the Scheme’s liabilities the Scheme will be wound-up and the Sponsor expects to receive the remaining asset.
Any repayment received will also be subject to applicable taxes at that time, currently 35%.
Regulatory capital
The Group’s lead regulator is the FCA. The Group has a waiver from the consolidated capital adequacy requirements under CRD IV. The
Group’s current waiver took effect on 30 December 2016, following the acquisition of ICAP, and will expire on 30 December 2026. Under
the terms of the waiver, each investment firm within the Group must be treated as either a limited activity or a limited licence firm and
comply with its individual regulatory capital resources requirements. TP ICAP plc, as the parent Company, must continue to maintain
capital resources in excess of the sum of the solo notional capital resources requirements for each relevant firm within the Group (the
‘Financial Holding Company test’). The terms of the waiver require the Group to eliminate the excess of its consolidated own funds
requirement compared with its consolidated own funds (‘Excess Goodwill’) over the ten-year period to 30 December 2026. The amount
of the Excess Goodwill must not exceed the amount determined as at the date the waiver took effect (the ‘Excess Goodwill Ceiling’).
The Excess Goodwill Ceiling is reduced to nil in line with a schedule over ten-years to December 2026, with the first reduction of 25%
having occurred at the end of June 2019. The Excess Goodwill Ceiling continues to reduce 25% every 2.5 years on a straight line basis.
The Group expects to reduce its Excess Goodwill in accordance with the declining Excess Goodwill Ceiling. The waiver also sets out
conditions with respect to the maintenance of financial ratios relating to leverage, debt service and debt maturity profile.
The Group’s regulatory capital headroom under the Financial Holding Company test calculated in accordance with Pillar 1 was £1,591m
(2018: £1,605m). Many of the Group’s broking entities are regulated on a ‘solo’ basis, and are obliged to meet the regulatory capital
requirements imposed by the local regulator of the jurisdiction in which they operate. The Group maintains an appropriate excess of
financial resources in such entities.
Information disclosure under Pillar 3 is available on the Group’s website: www.tpicap.com.
IFRS 16 ‘leases’
In line with International Financial Reporting Standards, the Group has applied IFRS 16 for the year ending 31 December 2019. The impact
of this change is set out in Note 2(e) of the Consolidated Financial Statements.
Annual Report and Accounts 2019 Viability statement and going concern
Strategic report Governance report
Financial statements
33
Going concern
The Group has sufficient financial
resources both in the regions and at the
corporate centre to meet the Group’s
ongoing obligations.
After making enquiries, the Directors have a
reasonable expectation that the Company
and the Group have adequate resources to
continue in operational existence for the
foreseeable future. Accordingly, the Annual
Report and Financial Statements continue
to be prepared on the going concern basis.
Viability statement
The Directors have assessed the prospects
for, and viability of, the Group over
a three-year period to the end of
December 2022.
We believe that a three-year time horizon
remains the most appropriate timeframe
over which the Directors should assess the
long-term viability of the Group. This is on
the basis that it has a sufficient degree of
certainty in the context of the current
position of the Group and the assessment
of its principal risks, and it matches the
business planning cycle.
The assessment has been made taking into
account the following:
> the Assessment of the Group’s Principal
Risks, including those that would threaten
the Group’s business model, future
performance, solvency and liquidity.
These risks are also discussed in the risk
management report on pages 36 to 39;
> the Group Internal Audit Opinion that
contains an assessment of the effectiveness
of the Group’s risk management and
internal control systems;
> the Going Concern Review that assesses
whether the Group has access to sufficient
liquidity to meet all of its external
obligations and operate its business,
for a period of at least 12 months from
the date of the Annual Report;
> the Group Review of Capital and
Liquidity Adequacy (‘GRCLA’) that
assesses the capital and liquidity position
of the Group on a consolidated basis, in
both base and stressed conditions;
> the Review of Internal Capital Adequacy
Assessment Processes (‘ICAAP’)
undertaken by certain operating entities
within the Group, most notably the UK
regulated entities; and
> the assessment of the Group’s external
credit rating by Fitch Ratings.
The Directors consider that they have
undertaken a robust assessment of the
prospects of the Group and its principal
risks over a three-year period, and, on the
basis of that assessment, have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due over at least the period
of assessment.
In arriving at this conclusion, the directors
have made the following assumptions:
> the Group maintains access to liquidity
through the Group’s £270m revolving
credit facility (see Note 24 on page 153);
> the Group does not lose its waiver from
consolidated capital adequacy
requirements under CRD IV due to
changes in the regulatory rules (including
any changes arising from the introduction
of the new EU prudential regime for
investment firms and CRD IV);
> the Group reduces its ‘excess goodwill’
in accordance with the terms agreed
with the FCA in the Group’s waiver from
consolidated capital adequacy
requirements under CRD IV (see page 32);
> the Group does not experience any other
material change in its capital or liquidity
requirements as a result of legislative
changes to CRD IV (including any changes
arising from the introduction of the new
EU prudential regime for investment firms
and CRD IV); and
> the Group’s actions to mitigate potential
adverse effects arising from a no deal
Brexit, including the potential
fragmentation of liquidity
and consequential reduction in trading
volumes that could arise in this scenario
are effective.
www.tpicap.com 34
Strategic report
Risk management
Effective risk management is essential
to the financial strength and resilience of
the Group and for delivering its business
strategy. This section provides a summary
of how risk is managed by the Group
through its enterprise risk management
framework (‘ERMF’) and describes the
Group’s principal risks.
Enterprise risk management framework
The purpose of the ERMF is to enable the
Group to understand the risks to which it is
exposed and to manage these risks in line
with its stated risk appetite. The ERMF
achieves this objective through the
implementation of three mutually reinforcing
components: a sound risk management
culture, a comprehensive risk management
and governance structure, and a range of
risk management processes. The Group has
undertaken a range of actions to develop
and implement a new risk management
framework to ensure that its risk
management capability appropriately
reflects the scale and diversity of the Group’s
business activities and is in line with
regulatory requirements.
Risk culture
The Group recognises that in order to ensure
the effective operation of the ERMF, it must
implement an appropriate risk management
culture that fosters the desired risk
management values and behaviours,
and that is aligned to TP ICAP’s values.
This includes promoting an environment
of openness that encourages the reporting
and discussion of risk related matters
and incidents.
The Group seeks to achieve the
implementation of its risk management
culture through a range of actions. These
include the setting of an appropriate
‘tone-from-the-top’, clear communication
of risk management expectations and
responsibilities, and through remuneration
structures that effectively support the
achievement of the desired risk
management behaviours.
First line of defence
Risk management within the business
The first line of defence comprises the
management of the business units and
support functions.
The first line of defence has primary
responsibility for ensuring that the business
operates within risk appetite on a day-to-
day basis.
Second line of defence
Risk oversight and challenge
The second line of defence comprises the
Compliance and Risk functions, which are
separate from operational management.
The Compliance function is responsible
for overseeing the Group’s compliance
with regulatory requirements in all of the
jurisdictions in which the Group operates.
The Risk function is responsible for
overseeing and challenging the business,
support and control functions in their
identification, assessment and management
of the risks to which they are exposed, and
for assisting the Board (and its various
committees) in discharging its overall risk
oversight responsibilities.
Third line of defence
Independent assurance
Internal Audit provides independent
assurance on the design and operational
effectiveness of the Group’s risk management
framework and associated activity.
Risk gmnagement and governance
structure
The Group has implemented a risk
management and governance structure
whereby risks are managed through
a three lines of defence model that
segregates risk management (first line
of defence) from risk oversight (second
line of defence) and independent risk
assurance (third line of defence), with
oversight provided through a formal risk
committee structure.
The Board has overall responsibility for
the management of risk within the Group
which includes:
> defining the nature and extent of the
risks it is willing to take in achieving its
business objectives through formal risk
appetite statements;
> ensuring that the Group has an
appropriate and effective risk
management and internal control
framework; and
> monitoring the Group’s risk profile
against the Group’s defined
risk appetite.
The Group’s risk governance structure
oversees the implementation and
operation of the ERMF across the Group
and comprises the following committees:
> Board Risk Committee;
> Group Risk, Conduct and Culture
Committee; and
> Regional Risk, Conduct and Culture
Committees in EMEA, Americas and
Asia Pacific.
Annual Report and Accounts 2019 Strategic report Governance report
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35
Risk management processes
The ERMF sets out the core risk
management activities
undertaken by the Group to
identify, assess and manage its
risk profile within the prescribed
risk appetite.
Capital and
liquidity
assessment
Stress and
scenario
analysis
Risk
response
Risk
governance
Business
and risk
strategy
Risk
identification
Risk
culture
Risk
appetite
Risk
assessment
and
evaluation
Monitoring
and
reporting
Policies
and controls
Risk strategy and risk appetite
The Board is responsible for setting its risk strategy and risk appetite which together provide the overarching context for the Group’s risk
management activity.
The Risk Strategy defines the risk objectives which must be met for the Group to achieve its Business Strategy and ensure that the Group
focuses on those risk issues which are of most significance to the Group. The Group has defines the following risk objectives:
Category
Financial position
Operational effectiveness
and resilience
Regulatory standing
Reputation
Business strategy
Summary statement
To maintain a robust financial position in both normal and stressed conditions, to be achieved by
maintaining profitability, ensuring capital resources and liquidity resources are sustained at levels that
reflect the Group’s risk profile, and maintaining access to capital markets.
To ensure that operational processes and infrastructure operate effectively and with an appropriate degree
of resilience.
To maintain good standing with all the Group’s regulators and to fully comply with all applicable laws and
regulations to which it is subject.
To maintain the Group’s reputation as an unbiased intermediary in the financial markets, with market
integrity and the fair treatment of clients being at the heart of its business.
To adopt and execute a well-defined business plan which ensures the continued viability and growth of the
Group’s business, and to ensure that the Group does not undertake any activity which could undermine its
ability to meet its strategic goals.
The Risk Appetite Statement provides the Board’s strategic view of the Group’s attitude to, and appetite for, particular risk types to inform
the more detailed articulation and operationalisation of risk appetite throughout the Group. The Group implements its risk appetite
statements through the adoption of risk metrics and thresholds at individual risk level. These thresholds constitute the operational
parameters within which the first line of defence must operate on a day-to-day basis.
The risk strategy and risk appetite are reviewed by the Board on at least an annual basis and more frequently where required to address a
change in the Group’s business or risk profile.
www.tpicap.com 36
Strategic report
Principal risks and uncertainties
Principal risks
The Board Risk Committee, on behalf of the Board, has conducted a robust assessment of the principal risks facing the Group, including those
that would threaten its business model, future performance, solvency or liquidity.
In undertaking this assessment, the Board Risk Committee has considered a wide range of information, including reports provided by the
Group Risk function and senior management, as well as key findings from the Group’s various risk assessment processes.
Risk
Description
Potential impact
Adverse
change to
regulatory
framework
The Group is exposed to the risk of a fundamental
change to the regulatory framework which has a
material adverse impact on its business and
economic model.
> Reduction in broking activity
> Reduced earnings and profitability
> Material change in applicable regulatory
rules and their interpretation including loss
of consolidation waiver
Deterioration
in the
commercial
environment
The risk that due to adverse macro-economic conditions
or geopolitical developments, market activity is
suppressed leading to reduced trading volumes.
> Reduction in broking activity
> Pressure on brokerage rates
> Reduced earnings and profitability
The impact of Brexit is addressed separately below.
The impact
of Brexit
The risk that Brexit leads to a macro-economic
downturn and a consequential reduction in trading
volumes and revenue.
> Reduction in broking activity
> Loss of market share
> Reduced earnings and profitability
Change in risk
exposure since 2018
No change
No change
No change
The risk that the legal entity structure implemented
to comply with the loss of EU passporting rights
results in a fragmentation of liquidity between UK
and EU liquidity pools.
Failure
to respond
to client
requirements
The risk that the Group fails to respond to rapidly
changing customer requirements, including the
demand for enhanced electronic broking solutions
for certain asset classes.
> Loss of market share
> Reduced earnings and profitability
No change
> Proactive engagement with clients through customer
> Operating profit
relationship management process
> Trade volumes
> Clearly defined business development strategy which
> Revenues by region
continues to enhance the Group’s service offering
> New business initiatives
> Electronification and technology
> Liquidity aggregation
> Diversification
Cyber-security
and data
protection
The risk that the Group fails to adequately protect
itself against cyber-attack and/or to adequately
secure the data it holds, resulting in loss of operability
as well as potential loss of critical business or
client data.
> Loss of revenue
> Remediation costs
> Damage to reputation
> Regulatory sanctions
> Payment of damages/compensation
No change
> Ongoing monitoring and assessment of the cyber-
> Electronification and technology
Operational
failure
The Group is exposed to operational risk in nearly
every facet of its role as an interdealer broker,
including from its dependence on:
> Financial loss which could, in extreme cases,
impact the Group’s solvency and liquidity
> Damage to the Group’s reputation as a
No change
> the accurate execution of a large number of
processes, including those required to execute,
clear and settle trades; and
> a complex IT infrastructure.
reliable market intermediary
Mitigation
Key risk indicator
Related principal strategic objectives
> Monitoring of regulatory developments
> Involvement in consultation and rule
> Key regulatory changes
> Electronification and technology
> Status of regulatory change initiatives
> Liquidity aggregation
setting processes
> Defined business strategy that seeks to maintain
> Operating profit
client, geographical and product diversification
> Revenues by region
> Diversification
> People, conduct and compliance
> Electronification and technology
> Liquidity aggregation
> Diversification
> Trade volumes
> Revenue forecast
> Stress testing scenario outcomes
> Brexit revenue-at-risk
> Brexit plan tracking
> Liquidity aggregation
> People, conduct and compliance
> Adoption of a Brexit plan which would
accommodate a range of potential scenarios
(including the failure to secure a UK-EU deal which
maintains access between UK and EU markets)
> Incorporation of new EU subsidiary to hold EU-
> Proactive engagement with European regulators
based business
and clients
threat landscape
> Appropriate framework of systems and controls
> Cyber-security events/losses
to prevent, identify and contain cyber threats
> Vulnerability monitoring
> Client satisfaction surveys
> System outages
> Data loss events
> Appropriate framework of systems and controls
> Risk events
to minimise the risk of operational failure
> Incident and crisis management process
> Business continuity plans and capability
> Reverse stress test process to identify key risks
that could undermine the Group’s viability
> Execution failure
> Settlement fails
> Margin calls
> Electronification and technology
> People, conduct and compliance
Annual Report and Accounts 2019 Strategic report Governance report
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37
Principal risks
The Board Risk Committee, on behalf of the Board, has conducted a robust assessment of the principal risks facing the Group, including those
that would threaten its business model, future performance, solvency or liquidity.
In undertaking this assessment, the Board Risk Committee has considered a wide range of information, including reports provided by the
Group Risk function and senior management, as well as key findings from the Group’s various risk assessment processes.
Risk
Description
Potential impact
Mitigation
Key risk indicator
Related principal strategic objectives
Change in risk
exposure since 2018
Adverse
change to
regulatory
framework
in the
commercial
environment
The Group is exposed to the risk of a fundamental
> Reduction in broking activity
No change
change to the regulatory framework which has a
> Reduced earnings and profitability
material adverse impact on its business and
> Material change in applicable regulatory
economic model.
rules and their interpretation including loss
of consolidation waiver
> Monitoring of regulatory developments
> Involvement in consultation and rule
> Key regulatory changes
> Status of regulatory change initiatives
setting processes
Deterioration
The risk that due to adverse macro-economic conditions
> Reduction in broking activity
No change
or geopolitical developments, market activity is
> Pressure on brokerage rates
suppressed leading to reduced trading volumes.
> Reduced earnings and profitability
> Defined business strategy that seeks to maintain
client, geographical and product diversification
> Operating profit
> Revenues by region
> Trade volumes
> Revenue forecast
> Stress testing scenario outcomes
> Electronification and technology
> Liquidity aggregation
> Diversification
> People, conduct and compliance
> Electronification and technology
> Liquidity aggregation
> Diversification
> Brexit revenue-at-risk
> Brexit plan tracking
> Liquidity aggregation
> People, conduct and compliance
> Adoption of a Brexit plan which would
accommodate a range of potential scenarios
(including the failure to secure a UK-EU deal which
maintains access between UK and EU markets)
> Incorporation of new EU subsidiary to hold EU-
based business
> Proactive engagement with European regulators
and clients
> Proactive engagement with clients through customer
relationship management process
> Clearly defined business development strategy which
continues to enhance the Group’s service offering
Cyber-security
The risk that the Group fails to adequately protect
> Loss of revenue
No change
> Ongoing monitoring and assessment of the cyber-
threat landscape
> Appropriate framework of systems and controls
to prevent, identify and contain cyber threats
The impact of Brexit is addressed separately below.
The impact
The risk that Brexit leads to a macro-economic
> Reduction in broking activity
No change
of Brexit
downturn and a consequential reduction in trading
> Loss of market share
volumes and revenue.
> Reduced earnings and profitability
The risk that the legal entity structure implemented
to comply with the loss of EU passporting rights
results in a fragmentation of liquidity between UK
and EU liquidity pools.
Failure
The risk that the Group fails to respond to rapidly
> Loss of market share
No change
to respond
changing customer requirements, including the
> Reduced earnings and profitability
to client
demand for enhanced electronic broking solutions
requirements
for certain asset classes.
and data
protection
itself against cyber-attack and/or to adequately
> Remediation costs
secure the data it holds, resulting in loss of operability
> Damage to reputation
as well as potential loss of critical business or
> Regulatory sanctions
client data.
> Payment of damages/compensation
Operational
The Group is exposed to operational risk in nearly
> Financial loss which could, in extreme cases,
No change
failure
every facet of its role as an interdealer broker,
impact the Group’s solvency and liquidity
including from its dependence on:
> Damage to the Group’s reputation as a
reliable market intermediary
> the accurate execution of a large number of
processes, including those required to execute,
clear and settle trades; and
> a complex IT infrastructure.
> Appropriate framework of systems and controls
to minimise the risk of operational failure
> Incident and crisis management process
> Business continuity plans and capability
> Reverse stress test process to identify key risks
that could undermine the Group’s viability
> Risk events
> Execution failure
> Settlement fails
> Margin calls
> Operating profit
> Trade volumes
> Revenues by region
> New business initiatives
> Client satisfaction surveys
> System outages
> Data loss events
> Cyber-security events/losses
> Vulnerability monitoring
> Electronification and technology
> Liquidity aggregation
> Diversification
> Electronification and technology
> Electronification and technology
> People, conduct and compliance
www.tpicap.com 38
Strategic report
Principal risks and uncertainties continued
Risk
Description
Potential impact
The risk that the Group fails to protect unauthorised
dissemination of Group’s proprietary data leading to
loss of potential revenue streams.
> Failure to achieve future revenue growth
targets due to non-contractual use of our
market information
> Damage to reputation
Failure to
protect
proprietary
data
Breach of
legal and
regulatory
requirements
Change in risk
exposure since 2018
No change
Mitigation
Key risk indicator
Related principal strategic objectives
> Ongoing audit of licences
> Completion of data
> Diversification
> Appropriate legal remedies incorporated within
> audit plan
licence agreements
> Data audit findings
The Group operates in a highly regulated
environment and is subject to the laws and
regulatory frameworks of numerous jurisdictions.
Failure to comply with applicable legal and
regulatory requirements could result in enforcement
action being taken.
> Regulatory and legal enforcement
No change
> Compliance function to oversee compliance with
> Internal Compliance policy breaches
> People, conduct and compliance
action including censure, fines or loss
of operating licence
> Severe damage to reputation
Counterparty
credit risk
The Group is exposed to counterparty credit
risk arising from outstanding brokerage
receivables, unsettled Matched Principal
trades and cash deposits.
> Financial loss which could, in extreme cases,
impact the Group’s solvency and liquidity
No change
> Counterparty exposures managed against
> Portfolio exposure
> Diversification
thresholds calibrated to reflect counterparty
> Exposure concentration
FX exposure
There is a risk that the Group suffers loss as a result of
a movement in FX rates whether through transaction
risk or translation risk.
> Financial loss which could, in extreme cases,
impact the Group’s solvency and liquidity
No change
> Ongoing monitoring of Group’s FX positions
> Diversification
> FX translation exposure
> FX transaction exposure
Liquidity risk
The Group is exposed to potential margin calls
from clearing houses and correspondent clearers.
The Group also faces liquidity risk through being
required to fund Matched Principal trades which
fail to settle on settlement date.
> Reduction in the Group’s liquidity resources
which could, in extreme cases, impact the
Group’s liquidity
No change
> Broking limits that restrict potential margin exposure
> Margin call profile
> Diversification
> Monitoring of liquidity risk drivers
> Settlement fail – funding
> Group maintains liquidity resources in each operating
requirements
centre to provide immediate access to funds
> Unplanned intra-Group funding calls
> Committed £270m revolving credit facility (‘RCF’)
> RCF draw-down
> Managing bond maturity profile
regulatory obligations
> Regulatory breaches
> Compliance monitoring and surveillance activity
> Employee conduct metrics
> Comprehensive compliance training programme to
ensure that staff are aware of regulatory requirements
> Conduct and Cultural framework to foster high
standards of employee conduct
> Exposure monitoring and reporting by independent
creditworthiness
credit risk function
> Exposure concentration limits to prevent excessive
exposure to one institution
> Aged debt
Annual Report and Accounts 2019 Strategic report Governance report
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39
Risk
Description
Potential impact
Mitigation
Key risk indicator
Related principal strategic objectives
Change in risk
exposure since 2018
> Ongoing audit of licences
> Appropriate legal remedies incorporated within
licence agreements
> Completion of data
> audit plan
> Data audit findings
> Diversification
> Compliance function to oversee compliance with
regulatory obligations
> Compliance monitoring and surveillance activity
> Comprehensive compliance training programme to
ensure that staff are aware of regulatory requirements
> Conduct and Cultural framework to foster high
standards of employee conduct
> Internal Compliance policy breaches
> Regulatory breaches
> Employee conduct metrics
> People, conduct and compliance
> Counterparty exposures managed against
thresholds calibrated to reflect counterparty
creditworthiness
> Portfolio exposure
> Exposure concentration
> Aged debt
> Diversification
> Exposure monitoring and reporting by independent
credit risk function
> Exposure concentration limits to prevent excessive
exposure to one institution
FX exposure
There is a risk that the Group suffers loss as a result of
> Financial loss which could, in extreme cases,
No change
> Ongoing monitoring of Group’s FX positions
> FX translation exposure
> FX transaction exposure
> Diversification
> Broking limits that restrict potential margin exposure
> Monitoring of liquidity risk drivers
> Group maintains liquidity resources in each operating
> Margin call profile
> Settlement fail – funding
requirements
centre to provide immediate access to funds
> Committed £270m revolving credit facility (‘RCF’)
> Unplanned intra-Group funding calls
> RCF draw-down
> Managing bond maturity profile
> Diversification
Failure to
protect
data
Breach of
legal and
regulatory
requirements
The risk that the Group fails to protect unauthorised
> Failure to achieve future revenue growth
No change
dissemination of Group’s proprietary data leading to
targets due to non-contractual use of our
proprietary
loss of potential revenue streams.
market information
> Damage to reputation
The Group operates in a highly regulated
environment and is subject to the laws and
> Regulatory and legal enforcement
No change
action including censure, fines or loss
regulatory frameworks of numerous jurisdictions.
of operating licence
> Severe damage to reputation
Failure to comply with applicable legal and
regulatory requirements could result in enforcement
action being taken.
Counterparty
The Group is exposed to counterparty credit
> Financial loss which could, in extreme cases,
No change
credit risk
risk arising from outstanding brokerage
impact the Group’s solvency and liquidity
receivables, unsettled Matched Principal
trades and cash deposits.
a movement in FX rates whether through transaction
impact the Group’s solvency and liquidity
risk or translation risk.
Liquidity risk
The Group is exposed to potential margin calls
> Reduction in the Group’s liquidity resources
No change
from clearing houses and correspondent clearers.
which could, in extreme cases, impact the
The Group also faces liquidity risk through being
Group’s liquidity
required to fund Matched Principal trades which
fail to settle on settlement date.
www.tpicap.com 40
Strategic report
Resources, relationships and responsibilities
Evolving our corporate
responsibility strategy
At TP ICAP, we aim to ensure that our
business not only delivers value for our
shareholders, but also for our other
stakeholders such as our employees,
clients, local communities, and the wider
environment. This commitment underpins
our A Voice for All (‘AVFA’) corporate
responsibility strategy, which we
launched in 2018.
Our AVFA strategy originates from our
strategic purpose as a business, focussed
on enhancing economic growth. As one of
the biggest issues affecting economic growth
globally is the rise in social inequality, we
developed AVFA to focus on addressing this
issue through our community and employee
engagement and by championing initiatives
designed to boost social mobility through
education and skills. With social mobility
the central principle of the strategy, its three
pillars of ‘Inspire’, ‘Inform’ and ‘Include’,
continue to underpin our actions.
Over the last year, we have focused on
scaling up our activity under each pillar to
ensure the strategy is fully embedded across
all areas of our business. Looking to 2020, we
will be evolving AVFA further and rolling out
programmes internationally to ensure all
colleagues across the Group can play a part
in achieving our ambitions.
Next year, we will also look beyond ‘A Voice
for All’ to consider the full impact of our
business within society. In order to identify
the environmental, social and governance
(‘ESG’) issues that are material to our
business and to our stakeholders, in 2020 we
will commence a materiality assessment
process to engage our key stakeholders. This
will inform a new framework for managing
our full environmental and societal impact.
We are committed to delivering our
objectives to ensure our business has a
positive impact for our employees, clients,
society and the wider environment we
operate within. This includes achieving
the following:
Inspire
Supporting creative initiatives
that inspire new generations
and gives them the confidence
to succeed.
Inform
Promoting skills development
in the communities in which we
operate to increase
participation in local
economies.
> Through our ‘Everybody Counts’
numeracy campaign, we have set
ourselves the ambition of engaging one
million people across our key markets, to
improve basic numeracy skills. Our
decision to invest in research and projects
to improve numeracy is rooted in our
responsibility as a multinational
company to increase opportunity,
improve productivity and create an
inclusive economy.
> Our work with our strategic charity
partner National Numeracy, has seen us
commit to empowering 250,000 people
in the UK to improve their confidence with
numbers by the end of year 2021. As at
the end of 2018, we had reached 57,642
people and by the end of 2019, we have
already reached a cumulative total of
126,467 people across the UK.
> As signatories of the UK Treasury’s
Women in Finance Charter, we continue
to aspire to increase the proportion of
women in senior management roles to
25% by 2025.
> We are creating a KPI framework
to regularly review performance and
hold ourselves to account on tackling
modern slavery.
> We will conduct a materiality assessment
in 2020 to engage our key stakeholder
groups to inform a new framework for
managing our full environmental and
societal impact and our future non-
financial reporting.
> We are developing a roadmap for
minimising our most material
environmental impacts.
Include
Building the diverse and skilled
workforce that the financial services
sector needs for the future.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
41
‘A Voice for All’ – 2019 activity
Inspire
Inform
Include
We are committed to supporting creative
initiatives that inspire new generations and
gives them the confidence to succeed.
> In 2019, we have continued to volunteer
time to inspiring young people about
careers in the City. This has included visits
to local schools, such as Elm Green in
South London, arranged with the youth
charity, Alford House, where a TP ICAP
volunteer spoke to students about his role
as a broker and the different career
opportunities that the sector offers.
> We piloted a mentoring scheme where
our UK employees volunteered to work
with Leadership Through Sport & Business
(‘LTSB’), a national social mobility charity
which provides underprivileged young
people aged 16-21 with access to
sustainable careers in business and
finance through apprenticeships.
Employees who volunteered made a
commitment to be a mentor for a period
of one year.
> In September 2019, we participated in the
Lord Mayor’s City Giving Day. As part of
the day, our senior female colleagues
participated in Bloomberg’s ‘Girls Take
the City’ event, to inspire the next
generation with their experiences of
working in the City.
> We participated, for a second year,
in the Lord Mayor Appeal’s ‘She Can Be’
initiative in February 2020, which aims
to inspire more young women to pursue
careers in the City. We welcomed year 10
students into our London office to meet
some of our female employees to
understand the varied careers the
City can offer.
We are committed to promoting skills
development in the communities in which
we operate to increase participation in
local economies.
> 2019 marked the second year of our
Everybody Counts numeracy campaign
and our ambition to engage one million
people across our key markets, to improve
basic numeracy skills.
> We celebrated the second year of our
strategic partnership with the UK charity
National Numeracy, whereby we have
committed to empower 250,000 people
in the UK to improve their confidence
with numbers by the end of year 2021.
As of the end of 2019, we had already
successfully reached 126,467 people
across the UK.
> To mark the second National Numeracy
Day in May 2019, we held a roundtable
for senior CSR and Philanthropy leaders
across the financial services sector to
discuss the importance of numeracy
to our industry and the UK economy.
> In November 2019, we launched a new
report with National Numeracy entitled
‘Building a numerate nation: confidence,
belief and skills’ at a reception at the
Bank of England.
> To take the Numeracy agenda forward,
we plan to launch a Financial Services
Numeracy Taskforce in 2020, alongside
some of our industry partners, to tackle
the barriers that prevent confidence with
numbers and consider the impact this has
on the talent pipeline for our sector.
> To expand the breadth of our UK
numeracy partners, in January 2020
we started working with Coram, a charity
that provides support to vulnerable
children and their families, to deliver
a numeracy pilot to schools in
disadvantaged areas across London.
We are committed to building a diverse and
skilled workforce that the financial services
sector needs for the future. To enable
two-way feedback with our employees,
we have continued to run ‘Involve’ and
‘Connect’. These two forums help drive
employee engagement and support our
aim to be the leading employer in our sector.
‘Involve’ is a permanent body made up
of elected employee representatives, who
act as a collective voice, speaking on behalf
of employees on important issues in the
workplace. The forum gives a voice to
employees around collective consultation,
information and communication and
employee feedback.
‘Connect’ is our diversity and inclusion forum
comprised of employees from around the
world. Since its UK launch, at the end of 2017,
and in the US in 2018, we have evolved
‘Connect’ to be the overarching steering and
advisory panel for diversity. ‘Connect’ is in
place to promote employee networks,
encourage the diversity of our Group and
support an inclusive culture.
> Over the last year we rolled out ‘Connect’
to Asia markets and have built-out the
remit of the steering panel and the work
programmes for our five employee
networks supporting: Women; LGBTQ+,
Multi-cultural backgrounds; Sports &
Wellbeing, and Veterans. To demonstrate
our commitment to supporting reservists
and veterans, in June 2019 we signed the
UK Armed Forces Covenant (‘AFC’). We
are extremely proud of the ex-servicemen
and women and reservists among our
colleagues and we were honoured to
receive the bronze certificate from the
AFC Defence Employer Recognition
Scheme. Over the next year, we will apply
to develop our support further and work
towards achieving the silver certificate.
www.tpicap.com 42
Strategic report
Resources, relationships and responsibilities continued
> In 2018 we became a signatory of the UK
Treasury’s Women in Finance Charter with
the Group and continue to aspire to
increase the proportion of women in
senior management roles to 25% by 2025.
> We recognise the need to provide our
colleagues with robust mental health
support and in April 2019, we announced
enhancements to the mental health
support and services we provide across
the business. These include our Employee
Assistance Programme; the Aviva Stress
Helpline; Mental Health Pathway and
additional resources including the NHS
system and the Digital GP Services. Plans
to extend to family members are in
progress. In October we also held a
Mental Health Awareness Day.
that are important to them about
working for the company. Initial sessions
have concluded, and feedback shared
with the Board in October. Employee
focus groups have been formed and an
open exchange of ideas discussed to drive
change on a number of specific areas
raised by employees. This is a rolling
programme of employee engagement
and two further programmes will run in
2020. See pages 58 and 59 for more
information.
Human rights
We continue to fully support the UN Guiding
Principles on Business and Human Rights.
We do not tolerate forced labour or human
trafficking of any kind across our business,
or within our supply chain.
> At the beginning of the year, we launched
new policies under the Family Friendly
initiative covering Maternity, Adoption,
Paternity and Shared Parental Leave for
UK employees.
In September 2019, we published our third
Modern Slavery Statement which sets out
our approach to modern slavery related risk
identification, monitoring and reporting,
and proactive mitigation.
> We recognise that access to medical cover
is important and this year we have
worked to improve cover, for example
with our provider of medical insurance in
the UK to provide an upgrade option for
employees who wanted additional cover
which was effective from October.
> Our UK employee forum ‘Involve’, a
permanent body made up of elected
representatives from our business
functions, continues to represent and
support our employees on important
issues in the workplace and work with
us on employee engagement.
> We rolled out the Workforce
Representation and Engagement
Programme across all regions in order for
the Board to get first-hand insight into the
culture and values of the Group. In
September, we announced the first of a
series of sessions for employees to meet
with their Workforce Engagement
Directors to provide feedback on matters
We have updated our procurement policy
to ensure our suppliers are following the
requirements set out in our Modern Slavery
Statement and we are introducing
mandatory training to all relevant staff.
We have also introduced a new supplier
onboarding process, which includes checks
for sanctions as well as checks for modern
slavery and human trafficking, if we deem
them to potentially be high risk.
Our Governance, Risk, Culture and Conduct
Committee (‘GRCCC’) oversees the delivery
of our strategy to eliminate modern slavery
in our business and supply chains. As part of
this, we will be creating a KPI framework to
review performance and hold ourselves to
account on tackling modern slavery.
Background screening
We continue to ensure our new hire
onboarding process is robust and fit for
purpose. This has now evolved to include
annual re-screening of existing employees
for SMCR purposes as part of our annual
attestation process.
Charitable giving and volunteering
Providing our colleagues with opportunities
to volunteer and fundraise helps us deliver
on the commitments within our ‘A Voice for
All’ strategy and have an impact in the
communities we operate within.
In September 2019, we received a GivX
Award for charitable giving, volunteering
and community support. GivX calculates
the value an organisation adds to the
community and we are very proud to have
been placed in the top three out of the
financial services firms who entered.
Our charitable giving policy supports our
employees’ charitable giving aspirations
with a pool of funding available for
matching or sponsorship and all our
employees are entitled to two days
of paid volunteering leave.
In 2019, our employees delivered 1,643.5
hours of volunteering globally in support
of 33 charitable organisations. Some 1,398.5
of these hours were volunteered during
the business day with a further 245 hours
volunteered during evenings and weekends.
This is an increase on the 1,210 totals in 2018
of hours volunteered.
We continued to support ICAP Charity Day
which in 2019 raised over £4.6m globally
for charitable causes around the world.
Excluding Charity Day funding, in 2019
we made donations of £113,00 globally
to charities around the world.
Learning and talent development
An experienced workforce is key to our
business and its growth and success. We
value employees and seek to develop them
and provide career opportunities for their
personal and professional development.
We seek to deliver development through a
variety of channels to enable employees to
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
43
benefit from online, inhouse and external
training opportunities.
create a sustainable business model
and talent pipeline.
During 2019, we continued to ensure all our
employees received appropriate mandatory,
legal and regulatory training covering such
topics as: anti-money laundering (‘AML’);
anti-bribery and corruption; GDPR;
information security, and Respect@Work.
As part of new industry-wide regulation, an
enhanced regulatory training environment
was launched under the new Senior Manager
and Certification Regime (‘SMCR’). This,
together with the adoption of the Enterprise
Risk Management Framework (‘ERMF’) for
roles with additional risk responsibilities,
bring a greater focus of Compliance and Risk
to both those in regulated roles, as well as
across the organisation.
In addition, we have provided employees in
our major locations with in-house training
programmes on personal effectiveness skills,
core management skills, technical and
market knowledge. The in-house training
calendar is updated on a half yearly basis.
Recruitment
We embrace a culture of diversity and
inclusion and are committed to hiring
individuals with diverse experiences to
build our culture and brand. We hire at
experienced and graduate levels to
In 2019, we introduced a cross-TP ICAP
Internship Programme in London, offering
undergraduates a rotational experience
in our Global Broking and Energy and
Commodities areas. To create a learning
experience, we continued to use an
interactive broking simulation activity as
part of the assessment centre, which gives
the applicants an opportunity to experience
our environment and for us to see their
aptitude for the broking role. It also provides
us with measurable data on their values
and behaviours and whether these reflect
the values of TP ICAP.
The internship, for those who joined us for
the eight-week Summer period, gave them
an extended opportunity to experience
our culture and environment. Successful
applicants from this will be considered for
roles as Trainee Brokers onto our 2020 Early
Career Programme.
Gender pay and diversity
At TP ICAP our people are core to how we
operate. We want to ensure that prospective
employees from diverse backgrounds
view TP ICAP as an inclusive place to
work and that all candidates have an
equal opportunity to join and progress,
irrespective of background or gender.
Culture and conduct
Culture and conduct go to the heart of
everything that we do. How we conduct
ourselves as individuals and as a Group is
as important as the products and services
we provide. We want to have a business
culture that allows us to serve our clients in
the best possible way and holds up to the
most intense scrutiny.
We have four values that underpin
everything that we do. They are: Honesty,
Integrity, Respect and Excellence to support
our employees, we have global policies in
place to ensure we respect the
backgrounds, beliefs and cultures of all
employees, and that the working
environment is free from discrimination,
harassment and bullying. If an employee
becomes disabled, the Group’s policy is to
make reasonable adjustments, including
arranging training, which may be
necessary in order to enable the employee
to continue working for the Group.
For more information about our culture and
conduct, please see pages 46 to 99.
While we are proud of the work we have
done so far to improve equality and diversity,
we know there is still a lot more progress to
be made. Like many financial services
businesses, we have a low ratio of female
to male employees, with women occupying
23% and 18% of our global staff and senior
management roles respectively. As a
business we are committed to continuing
to make progress on this agenda, and we
will continue to work to improve the balance
and to promote opportunities for all.
Our next Gender Pay Gap report will
be produced in April 2020. For more
information, see www.tpicap.com/
responsibility/our-commitments.
Social media and online policy
At TP ICAP we understand the importance
of social media and its impact on society
and our employees. Our Group policy for
social media and online activity is designed
to safeguard our brand, reputation and
employees when communicating on social
media or online. We have set out clear rules
and policies on the use of social media and
online communications and communicated
them to our employees.
We also have a social media best practice
guide and monitor all of the mainstream
social media channels to ensure compliance
with our standards.
Whistleblowing, anti-money laundering
and bribery and corruption
TP ICAP recognises its responsibility to fully
meet its legal and regulatory requirements
to protect the integrity and stability of
the financial markets and makes a
commitment to:
> not being used by criminals to launder
the proceeds of crime, or by sanctioned
individuals and entities;
> help combat terrorist financing;
> comply with economic and trade
sanctions issued by relevant governments
and organisations in every jurisdiction in
which we operate;
www.tpicap.com 44
Strategic report
Resources, relationships and responsibilities continued
> ensure that neither the firm, nor any other
person providing services ‘for and on
behalf of’ it, facilitates tax evasion;
> prohibit the acceptance, or offering of
a bribe in any form;
> prohibit the solicitation of business by the
offering of any form of bribe;
> prohibit the offering of employment, with
the intention of receiving an improper
business advantage; and prohibit the
making of facilitation payments.
TP ICAP strives to maintain the highest
standards of honesty, openness and
accountability and recognises that all those
who work with or within the Group have an
important role to play in achieving this goal.
Accordingly, the Group has implemented
a global whistleblowing policy which
encourages employees and third parties,
to report suspicion of wrongdoing in relation
to TP ICAP, activities including: criminal
activity, failure to comply with legal or
regulatory requirements, miscarriages
of justice, danger to health and safety,
damage to the environment, bribery,
financial fraud, negligence, breach of
TP ICAP’s policies and unauthorised
disclosure of confidential information.
Tax and other social payments
The Group has published a Group Tax
Strategy, which is available on TP ICAP’s
website, www.tpicap.com. The Group Tax
Strategy explains that the Group is
committed to complying with tax laws in
a responsible manner and to having open
and constructive relationships with tax
authorities wherever we operate, and
that the Group’s tax risk appetite is low.
The Group made payments to tax authorities
for 2019 of £507m (2018: £402m), comprising
corporation tax, premises taxes, employer’s
social security payments, income taxes and
social security paid on behalf of employees
in the UK and the US (the main jurisdictions
in which it operates), and VAT/sales taxes
borne and collected. In addition, the Group
makes further tax payments to the tax
authorities in other tax jurisdictions in
which it operates.
HM Treasury has adopted the requirements
set out under CRD IV and issued the Capital
Requirements Country-by-Country Reporting
Regulations 2013. The legislation requires
the publication of additional information,
including certain tax payments, in respect
of the year ended 31 December 2019, by
ICAP Charity Day
Now in its 28th year, ICAP Charity Day
continues to make a big impact on
charity beneficiaries. Once a year, ICAP
donates its revenues and commissions to
charitable causes.
The sums involved are significant. In 2018,
£4.5m was raised globally, and in
December 2019 this figure was £4.6m.
Image right: the donation from ICAP
Charity Day 2019 in the UK will support
Mudlarks’ “Veg Box Social Enterprise.”
Image below: The donation from ICAP
Charity Day 2019 in New York will fund
three vital programmes at Blythedale
Children’s Hospital.
On Charity Day, ICAP offices support local
charities registered in their own country.
Since Charity Day began in 1993, thanks to
the efforts of our colleagues, customers and
suppliers, ICAP Charity Day has raised
almost £150m; benefiting over 2,500
charitable projects around the world and
enabling us to fund programmes and entire
projects across a range of charitable causes.
For more information see
www.icapcharityday.com
31 December 2020. This information will
be available by this date on TP ICAP’s
website www.tpicap.com.
Environment
TP ICAP recognises it has a responsibility
to help protect the environment and respond
to the global climate crisis. This means
minimising the environmental impact of
our operations.
Our most significant environmental impact is
the greenhouse gas (‘GHG’) emissions from
the energy consumption of our leased offices.
Through energy efficiency measures and the
consolidation of our office real estate, we
have reduced our carbon emissions by 44%,
which results in a reduction of emissions per
employee of 1.3 tCO2e compared to 2018’s
figure of 2.8 tCO2e per employee. In
particular, rationalisation of our leased
office portfolio in North America had a
notable impact (54% of the overall
Americas’ carbon emissions in 2018) on
the overall carbon reduction made by
the Company.
Statistics relating to these are further set out
in the Director’s Report (page 100), where we
also publish our annual carbon footprint
figures from our Scope 1 and 2 emissions.
In our 2019 carbon assessment we reported
the Group’s travel emissions, for the first
time, and will continue to do so going
forward with the aim of reducing our overall
business travel.
Our other key area of environmental impact
is our use of resources and our management
of waste. We have reduced single-use
plastics from our London offices, as such
we now provide stainless-steel and
compostable cutlery.
Responsibility for environmental matters
rests with the Board and is included in its
terms of reference. The Chief Executive
Officer is the Board member responsible
for corporate social responsibility across
the Group.
Annual Report and Accounts 2019 Strategic report Governance report
Financial statements
45
Section 172
The Board promotes the success of the Company for the benefit of our members as a whole as well as a broad range of stakeholders that
we recognise are material to the long term success of the business. We have detailed how the Board has complied with its duty within the
Governance section on pages 46 and 57.
Non-financial information statement
We aim to comply with the new Non-financial Reporting requirements contained in sections 414CA and 414CB of the Companies
Act 2006. The table below, and information it refers to, is intended to help stakeholders to understand our position on key
non-financial matters. The Board performs regular review of policies and standards, and where appropriate, reviews the outcome of these
policies and standards.
Reporting requirement
Policies and standards which govern our approach
Environmental matters
> Environment – our commitments
> Corporate s ocial responsibility policy
Employees
Human rights
> Global recruitment policy
> Employee relations policy
> Equal opportunity policy
> Joiners transfers and leavers policy
> Global training and development policy
> Equality, diversity and discrimination – our commitments
> Employee relations policy
> Equal opportunity policy
> Data protection and retention policy
> Global whistleblowing policy
> Physical security policy
> Human rights and freedom of association – our
commitments
> Modern slavery statement
Risk management and additional
information
Resources, relationships and
responsibilities: pages 40 to 44,
Directors’ report: page 103
Resources, relationships and
responsibilities: pages 42-43
Resources, relationships and
responsibilities: page 42
Social matters
> Charitable giving policy
> Corporate social responsibility policy
Resources, relationships and
responsibilities: page 42
Anti-corruption and anti-bribery
> Compliance manual
> Anti-money laundering and counter terrorist financing
Resources, relationships and
responsibilities: page 43
policy
> TP ICAP Americas anti-bribery and corruption policy
> Global whistleblowing policy
> Whistleblowing – our commitments
> Bribery and corruption – our commitments
> Enterprise Risk Management Framework
> Change Management Policy
> Risk Management Handbook
> Tax risk and reporting policy
> Financial risk management policy
Principal risks and uncertainties:
pages 36 to 39
> Our business model, see pages 4 and 5
Our business model: pages 4 and 5
> Key performance indicators, see pages 18 and 19
Key performance indicators: pages
18 and 19
Description of principal risks
andimpactof businessactivity
Description of the business
model
Non-financial key performance
indicators
This Strategic report, from page 1 to 45 has been reviewed and approved by the Board of Directors on 10 March 2020.
Nicolas Breteau
Chief Executive Officer
Robin Stewart
Chief Financial Officer
www.tpicap.com
46
Governance report
Compliance with the UK Corporate
Governance Code 2018 and section 172
Index of Disclosures
Compliance with the Code
The Board reviewed the principles and
provisions of the UK Corporate Governance
Code 2018 (the ‘Code’) and its compliance
with the Code throughout 2019.
Following this review, the Board is pleased
to confirm that the Company has complied
in full with the Code for the financial year
ended 31 December 2019. The Code can
be found on the Financial Reporting
Council (‘FRC’) website, www.frc.org.uk
and further information on compliance
with the Code can be found in this index.
Compliance with
section 172 of the
Companies Act 2006
The Directors confirm that they have
acted in a way that they consider, in good
faith, to be most likely to promote the
success of the Company for the benefit of
its members as a whole, and in doing so
had regard, amongst other matters, to:
> the likely consequences of any decision
in the long term;
> the interests of the Company’s
employees;
> the need to foster the Company’s
business relationships with suppliers,
customers and others;
> the impact of the Company’s
operations on the community and the
environment;
> the desirability of the Company
maintaining a reputation for high
standards of business conduct; and
> the need to act fairly as between
members of the Company.
Detail on how the Directors have had
regard to the factors in section 172 of the
Companies Act 2006 (‘section 172’) when
performing their duties and the Directors’
statement required under section 414CZA
of the Companies Act 2006 are set out on
pages 57 to 61.
Board leadership and
company purpose
The Company should be led by an effective
and entrepreneurial Board that establishes
the Company's purpose, values and strategy,
whilst ensuring that its responsibilities to its
shareholders and stakeholders, including the
workforce, are considered and met.
p2
Company purpose
p52
The role of the Board
p47
Our culture and values
p52
Resources and controls
Engagement with stakeholders p57
p42
Workforce policies
Division of responsibilities
The Board, led by the Chairman who is
responsible for its effectiveness, should be
comprised of Non-executive and Executive
Directors who hold a diverse set of skills,
experience and backgrounds. They each
receive a comprehensive induction, have
sufficient time to meet their Board
responsibilities, and receive support
from the Group Company Secretary,
all of which enable them to carry out
their duties effectively.
The Chairman
Executive and
Non-executive Directors
Board meetings
Effectiveness of the Board/
Support to the Board
p54
p54
p54
p63
Composition, succession
and evaluation
Companies should have an effective
succession plan in place for both the Board
and for members of senior management.
This should take into consideration the skills,
experience and knowledge needed for
maximum effectiveness. The Board, and the
Directors individually, should be evaluated
yearly. Annual evaluation of the Board
should consider its composition, diversity
and its effectiveness. Individual evaluations
should demonstrate whether each Director
continues to contribute effectively.
Board succession
Board diversity
Evaluations
p66
p68
p64
Audit, risk and
internal control
The Board is responsible for determining the
nature and extent of the principal risks the
Company is willing to take in achieving its
strategic objectives, and oversees the risk
management and internal control systems in
place with the support of the Audit and Risk
Committees. The Board is also responsible
for the establishment of policies which ensure
the independence and effectiveness of both
internal and external audit functions.
Audit effectiveness
Financial and
business reporting
Risk management and
internal control
p72
p71
p73
Remuneration
Executive Directors’ remuneration has
been designed to promote the long-term
sustainable success of the Company. No
Executive Director is involved in deciding
his or her own remuneration.
Components of remuneration p84
p78
Procedure
p87
Level of remuneration
Annual Report and Accounts 2019 Chairman’s introduction to governance
Strategic report Governance report Financial statements
47
Richard Berliand
Chairman
Dear fellow Shareholder,
I am pleased to share with you my thoughts
and insights on the Company’s culture,
values and leadership and to brief you
on the progress we have made in the year
on strengthening our core governance
frameworks and programmes across the
Group. I also want to let you know a little
more about the changes proposed during
2020 to the Group's international corporate
and governance structure.
Our values and culture
Since joining the Board early in 2019, and
then becoming Chairman from mid-May,
I have had the pleasure of meeting with as
many colleagues as possible, both managers
and employees, across a number of global
locations where we operate. I have been
impressed with the hard work and
commitment of our people in making us a
trusted and respected data and market
execution provider, playing an important
role in the global financial, capital, energy
and commodities markets. Given this role,
the Company’s core values of honesty,
integrity, respect and excellence remain
integral as we seek to safeguard the business
now and into the future.
The Board remains committed to promoting
a culture with these core values at the heart,
recognising that the Company will only
continue to create value for its key
stakeholders and benefit society if it can
hold up to the most intense scrutiny. To
remain relevant, successful and sustainable,
the Company must demonstrate the
highest possible standards; the conduct
and behaviour of our people is as important
as the products and services that we provide.
During 2019 the Company resolved two
regulatory investigations. In September the
Commodity Futures Trading Commission
(’CFTC’) announced a $13m (equivalent to
£11m) settlement involving Tullett Prebon
Americas Corp (‘TPAC’). The settlement
with the CFTC related to a failure by TPAC
to adequately supervise brokers on the U.S.
Dollar Medium-Term Interest Rate Swaps
Desk between 2013 and 2014 and that
certain of those brokers made false or
misleading statements to TPAC customers
relating to certain executed trades and
bids and offers. The settlement also made
a finding that a TPAC broker made a false
or misleading statement of a material fact,
or omitted to state material facts, to the
CFTC during the investigation. In October
the Financial Conduct Authority (‘FCA’)
fined the Company £15.4m following a
lengthy regulatory investigation relating
to certain trades between 2008 and 2011.
This investigation related to historical trades
and none of the individuals involved in
the relevant broking activities remain
with the Company.
Both of these settlements act as a stark
reminder that we must never be complacent.
The Company has significantly enhanced its
systems and controls over recent years to
comply with regulatory expectations and
will continue to do so. We have enhanced
our compliance training, which is compulsory
for all employees, and have also underlined
our expectations on conduct and behaviour
in our internal communications, including
in CEO and regional leadership ‘town hall’
meetings. In the Spring 2020 the Company
will also launch a new Code of Conduct
which further reinforces those expectations.
I have seen first-hand how important our
core values are in instilling a sense of pride
in our place of work. However, we have seen
how easily this can be undone by the conduct
and behaviour of a few. For this reason,
during the year we have strengthened
the linkage between employee behaviour
and reward. This will be further developed
during 2020 so that, as part of the annual
performance appraisal, a qualitative
conduct review will be supported by a
quantitative assessment of conduct. You
can read more about this in the Report
of the Remuneration Committee later in this
Governance report.
Risk, controls and governance
We have made significant progress
in the year enhancing the Group’s risk
management framework. We now enter
the important embedding phase, with focus
over this period on ensuring that the new
risk framework, its processes and procedures
become part of business as usual for all
managers and employees. More detail on
the Group’s risk management is set out on
pages 34 to 35 as well as in the Report of
the Risk Committee on pages 75 to 77. The
Report of the Audit Committee gives further
detail of the Group’s internal control
environment on page 73.
Also, during 2019 the Board adopted a new
Governance Manual, which set out the key
corporate governance principles throughout
the Group. This comprehensive Governance
Manual was deemed necessary to provide
clarity around the Group’s central and
regional governance structures, and also
put in one place the Company’s delegations
of authority and expenditure control
framework. It documents the operation
and governance of the Group’s UK
regulated entities as we embed the
UK Senior Managers and Certification
Regime applying to those entities from
9 December 2019.
As part of the enhanced risk and governance
framework, recruitment is in hand to
strengthen independent board oversight
at the UK regulated entity level through the
appointment of independent Non-executive
Directors to the UK regulated entity boards.
Further details are set out in the Report of
the Nominations and Governance
Committee on pages 68 to 69.
The Governance Manual sits alongside,
and works with, the Group’s new risk
management framework, and together
these are designed to support the business
in complying with its increasing regulatory
obligations.
www.tpicap.com 48
Governance report
Chairman’s introduction to governance continued
The Governance Manual will also be
essential in reaffirming the regional
governance structures and oversight
that will be required as we change the
Group’s corporate structure later this year,
as described below. Further detail on the
Governance Manual is set out on page 52.
Jersey redomicile
In December the Company announced
its intention to reorganise the Group's
international corporate structure by
incorporating a new Group holding
company in Jersey by means of a Court-
approved scheme of arrangement and
introducing four distinct regional operating
sub-groups. The Board of TP ICAP plc will
become the Board of the new Jersey holding
company and the Company’s shareholders
will become shareholders of the new
company on a one for one basis.
As noted in my opening Chairman's
Statement, the intention of this
reorganisation is not to change the Group's
tax domicile, which will remain in the UK,
but rather to provide greater financial
flexibility for the Group, support the effective
governance of the business and ultimately
to improve our competitiveness. The location
of its primary stock exchange listing will
remain in the UK and it is the Board’s
intention that legal, regulatory and advisory
regimes as they apply to corporate
governance and governance reporting,
including the UK Corporate Governance
Code, will continue to be applied in the same
way as now.
The proposed new structure will be subject
to shareholder and regulatory approvals
and, should they be received, is expected
to complete before the end of June 2020.
Further details of this reorganisation
and the related timetable will be set out
in a separate prospectus and circular that
will be issued to shareholders in due course.
Executive leadership and succession
The executive leadership team of the
Company, led by Nicolas Breteau, has now
been in place for a little over 18 months.
They have made considerable progress as
a team, successfully delivering against
the business, operational and regulatory
priorities of the Company, as well as leading
the Board’s deliberations over the year on
the Company’s future growth strategy.
Each of the three Executive Board members
was previously a senior manager in the
business before joining the Board and this
evidences the importance of good succession
planning. As mentioned in last year’s Annual
Report, the Nominations and Governance
Committee remains focused on ensuring
there is depth and diversity in the Company’s
talent pool to ensure the Company has
the business leaders of tomorrow.
Your evolving Board
In the Autumn, David Shalders stepped down
as a Non-executive Director of the Company
when he took up an executive role at London
Stock Exchange Group plc. David was
Chairman of TP ICAP's Risk Committee,
and I am grateful to Michael Heaney for
agreeing to assume the Chairmanship of
the Risk Committee on an interim basis.
My colleagues and I greatly valued
David’s contribution to Board deliberations,
reflecting his considerable knowledge
and experience of operations, risk and
technology in financial services gained
in senior executive positions outside of
the Group. The Board remains committed
to maintaining a healthy turnover in its
non-executive composition whilst at the
same time ensuring it has the right skills,
knowledge and experience now and for
the future. With this in mind, we commenced
a search for at least one Non-executive
Director who will bring relevant
technological and/or risk knowledge
and experience to the Board.
Roger Perkin, as Chairman of the Audit
Committee, will soon reach nine years’
tenure on the Board and will stand down
in May 2021. With this in mind we engaged
in a search for his successor as Chair of the
Audit Committee.
Following these two searches I am delighted
that Angela Crawford-Ingle and Mark
Hemsley will both join the Board of the
Company on 16 March 2020. A Chartered
Accountant, Angela brings a wealth of
relevant and recent financial experience.
Angela will not only be appointed to the
Board and the Audit, Risk and Nominations
and Governance Committees, but will be
Chair Designate of the Audit Committee,
assuming the Chair of that Committee on
Roger Perkin’s retirement from the Board in
2021. Mark will be appointed to the Board
and the Risk and Nominations and
Governance Committees, and brings
extensive markets and infrastructure
experience. Further information in relation
to Angela and Mark, their knowledge and
experience, as well as their other current
external appointments may be found on
page 51.
We announced last year that Angela Knight,
having completed nearly nine years of
service, would retire from the Board at the
conclusion of the Annual General Meeting
in May 2020. The search has commenced for
a new Non-executive Director who will
assume the role of Senior Independent
Director. Recognising that it may take
some months to find and appoint the right
candidate for this important role, I am
pleased that Roger Perkin has agreed to
take on these responsibilities on an interim
basis following Angela’s departure.
He will also remain Chairman of the
Audit Committee.
Diversity and the Board
The Board remains committed to
cultural, ethnic and gender diversity
when considering the composition of the
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
49
embed these in the Group to ensure that they
permeate into every aspect of the Group’s
operations. This will be especially important
as we reorganise our corporate structure and
change our focus to delivery and execution
of the Company’s strategy for the medium
and long term.
The Board remains alive to its responsibilities
and the societal expectations of large
corporations and will continue to have
regard to the developing interests and
requirements of all the Company’s
stakeholders and society as a whole.
Richard Berliand
Chairman
10 March 2020
Board, recognising that better decisions
are made by diverse boards. We value
and benefit greatly from having different
perspectives, and our commitment to
diversity will continue to be an important
factor in our current and future searches.
We are committed to going beyond just
maintaining the current proportion of female
members on TP ICAP’s Board. Although we
will remain focused on recruiting on merit
and on the best candidate for a role, our
aim is to ensure that the proportion of
women on the Board reaches, and is
maintained at, a minimum of 30% by
the end of 2021 and beyond.
This commitment to diversity extends
beyond the Board and is a key objective
for Nicolas Breteau who, as Chief Executive
Officer, is tasked with ensuring that the
whole Company benefits from the breadth
of perspectives that diversity brings and
building a gender balanced talent pipeline.
In fact, this is considered such an important
issue that each of the Executive Directors’
strategic performance targets includes
a diversity and inclusion objective.
Our key stakeholders and section
172 duty
We have further enhanced the ways
the Board engages directly and indirectly
with our key stakeholders. It is important
for the Board to understand the needs and
expectations of our employees, shareholders,
clients, regulators and suppliers in order
to make better informed decisions
and remain fit for purpose and meet
societal expectations.
Importantly, during the year we completed
our first round of Non-executive Director
led workforce engagement. As we previously
stated, the Board is keen to capture the
thoughts and views of employees in each
of our regions. This has proved a very
worthwhile exercise and will continue in
2020. More detail on workforce and our
other stakeholder engagement, as well as
how the Board has exercised its section 172
duty in its decision making, is set out on
pages 57 to 61.
Environment and climate change
In my statement in the strategic section
of the Annual Report, I committed to
reinforcing, intensifying and raising
awareness of environmental, social
and governance matters. In the Directors’
Report on page 103 you will see our
reporting on greenhouse gas emissions.
The Board is acutely aware of society’s
increasing focus in this area, and this has
become a regular agenda item as we seek
to introduce new initiatives, improve our
environmental reporting and do whatever
we can to safeguard our environment.
Board effectiveness
We recently concluded our annual Board
effectiveness evaluation. The exercise this
year was externally facilitated, in-line with
the requirements set out in the Code. The
Board recognises the value of a structured,
independently facilitated evaluation in
highlighting what the Board does well
and areas that might require improvement.
I am pleased that the results of the
evaluation confirmed that, in the main,
the Board (and its Committees) continued
to operate effectively, with opportunities
for improvement and further development
being identified in a number of areas.
Further detail on the evaluation and actions
agreed for 2020 can be found on page 65.
Compliance with the Code
We have reviewed our governance
framework with reference to the 2018
UK Corporate Governance Code, and a
statement of compliance with the Code
is set out on page 46.
Conclusion
During 2019 we have made significant
progress in improving our risk and corporate
governance frameworks. We will continue to
www.tpicap.com 50
Governance report
Board of Directors
Richard Berliand
Chairman
Appointed
19 March 2019 and
Chairman with effect
from 15 May 2019
N
Nicolas Breteau
Executive Director and
Chief Executive Officer
Appointed
10 July 2018
Robin Stewart
Executive Director and
Chief Financial Officer
Appointed
10 July 2018
Lorraine Trainer
Independent
Non-executive Director
N Re W
Michael Heaney
Independent
Non-executive Director
Appointed
1 July 2018
Appointed
15 January 2018
Angela Knight
Senior Independent
Non-executive Director
Appointed
1 September 2011
N Re Ri W
A N Re Ri
Board skills and experience: Richard combines
a detailed understanding of the financial services
industry and its challenges and opportunities with
recent senior board leadership experience, having
held roles as Senior Independent Director and
Deputy Chairman at other listed financial
institutions. Through his broad business experience
and previous external roles Richard brings extensive
external insight, a deep understanding of relevant
issues and the strong corporate governance
expertise required to lead an effective Board and
develop its strategy. He also brings considerable
experience of engagement with key stakeholders
of the business.
Career: Richard had a 23-year career at JP Morgan
where he served most recently as Managing
Director leading the global cash equities and prime
services businesses. He was also a member of the
board of directors of Rothesay Life plc until
February 2019 and a member of Deutsche Börse
AG’s supervisory board until May 2019.
External appointments:
Senior Independent Director and Chairman of the
Remuneration Committee of Man Group plc
Board skills and experience: Nicolas’ extensive
experience across the global broking industry
complements his in-depth knowledge of the Group’s
operations and markets and enables him to lead the
business and be a key contributor to the Board.
Nicolas continues to lead the implementation and
development of the Board’s strategy and identifies
new opportunities for the continued future
growth of the business. He maintains a productive
dialogue with institutional investors and other
key stakeholders of the business.
Career: Nicolas has held senior managerial roles
at MATIF (later part of Euronext) and most recently
prior to joining TP ICAP, as Chief Executive of
Newedge Group. Before his current appointment,
he was CEO of TP ICAP’s largest business, Global
Broking. Nicolas has also held directorship roles
in Europe, Asia and the Americas at the Futures
and Options Association (UK), Futures Industry
Association (USA), Citic/Newedge (China) and
Altura (Spain).
External appointments:
None
Board skills and Experience: Robin brings to the
Board financial expertise coupled with strong
leadership skills developed both within TP ICAP plc
and the wider industry over more than 20 years.
His comprehensive knowledge of the financial
position of the Group enables him to make a strong
contribution to the Board and when engaging
with investors and other stakeholders. He helps
to drive the operational performance of the
business and provides valuable expertise in
financial risk management.
Career: Robin started his career at Arthur Andersen
and after that he spent 13 years at Dresdner
Kleinwort where he was deputy head of tax. He
joined the Group originally as Head of Tax in 2003
and has since held the roles of Head of Group
Finance and Tax, and Deputy CFO and Financial
Controller at Tullett Prebon plc.
External appointments:
None
Philip Price
Executive Director and
Group General Counsel
Appointed
3 September 2018
Roger Perkin
Senior Independent
Director Designate
A N Ri
Edmund Ng
Independent
Non-executive Director
N Re Ri W
Angela Crawford-Ingle
Independent
Non-executive Director
A N Ri
Mark Hemsley
Independent
Non-executive Director
N Ri
Appointed
1 July 2012
Appointed
1 November 2017
To be appointed
16 March 2020
To be appointed
16 March 2020
Board skills and experience: Philip has significant
experience gained in senior legal and regulatory
roles in the corporate and financial services sector.
His knowledge and expertise enables him to bring
an important perspective to Board discussions
concerning compliance, governance and risk
and he is able to provide valuable insight to the
Board on the complex and fast-paced regulatory
environment in which TP ICAP operates. Having
spent his career variously in London, Europe and
Hong Kong he also brings an understanding and
insight into a number of our key operating markets.
Career: Philip qualified as a solicitor at CMS and
prior to TP ICAP has held senior legal, compliance
and operational roles in hedge funds, private
equity, and investment banking including 10 years
as Managing Director at UBS AG. He joined the
Group as Group General Counsel and Global Head
of Compliance in 2015.
External appointments:
None
Board skills and experience: Roger’s longstanding
financial and accounting career, combined with his
extensive board experience, provide a valuable
skillset as Chairman of the Audit Committee and
member of the Risk Committee and ensure he brings
a high degree of scrutiny, additional challenge and
oversight to the Board. He brings an excellent
understanding of investor expectations as well as
experience in managing relationships with the
investor and financial communities, which will be
invaluable when he assumes the role of Senior
Independent Director at the close of the AGM.
Career: Roger is a qualified accountant and spent
over 40 years at EY before retiring from the firm
in 2009. He was formerly a Non-executive Director
at The Evolution Group plc, Electra Private
Equity plc, Friends Life Group and Nationwide
Building Society.
External appointments:
Non-executive Director of Hargreaves Lansdown plc;
Non-executive Director of AIB Group (UK) plc;
A trustee of three charities: Chiddingstone Castle;
The Conservation Volunteers; and the Charities
Aid Foundation
Board skills and experience: With over 20 years’
experience of the Asian capital markets Edmund
brings a deep understanding of and insight into
one of our key markets at Board level. In addition,
his years of experience at the Hong Kong Monetary
Authority enable Edmund to bring an in-depth
understanding of complex financial regulatory
regimes to the Board. As Workforce Engagement
Director, Edmund also represents very effectively
the views of employees from the APAC region in
Board discussion.
Career: Edmund is currently Chief Investment
Officer and co-founder of Eastfort Asset
Management, which was established in mid-2015
with Brummer & Partners in Sweden. Prior to that
he served as Head of the Direct Investment Division
of Hong Kong Monetary Authority (‘HKMA’) and
Managing Director of Asia Ex-Japan trading
within J.P. Morgan.
External appointments:
Chief Investment Officer and co-founder of Eastfort
Asset Management
Annual Report and Accounts 2019
Richard Berliand
Chairman
Appointed
19 March 2019 and
Chairman with effect
from 15 May 2019
N
Nicolas Breteau
Executive Director and
Chief Executive Officer
Appointed
10 July 2018
Robin Stewart
Executive Director and
Chief Financial Officer
Appointed
10 July 2018
Strategic report Governance report Financial statements
51
Lorraine Trainer
Independent
Non-executive Director
N Re W
Michael Heaney
Independent
Non-executive Director
N Re Ri W
Appointed
1 July 2018
Appointed
15 January 2018
Board skills and experience: Lorraine brings a
fresh perspective to the Board gained from her
long career in HR roles and is also able to draw on
her experience from her other board roles, including
as Chairman of the Remuneration Committee at
Essentra plc. As a strong advocate of diversity
and inclusion, Lorraine has embraced her role
as Workforce Engagement Director and ensures
the views of employees in the EMEA region are
effectively communicated in Board discussions.
Career: Lorraine has had a long career in HR
leadership across financial institutions including
Citibank NA, the London Stock Exchange and
Coutts Natwest Group. She has considerable
experience at board level and has previously
held Non-executive positions at Jupiter Fund
Management, Colt Group and Aegis Group.
External appointments:
Non-executive Director, Senior Independent
Director, Chair of the Remuneration Committee
and member of the Audit Committee of Sonae
SGPS SA; Non-executive Director, Chair of the
Remuneration Committee and member of the
Audit Committee at Essentra plc
Board skills and experience: Michael brings to the
Board significant knowledge of financial markets,
both in the USA and the UK, as well as expertise in
international financial management from his long
career in financial services. His prior experience of
operations and risk management at senior level is
also invaluable in his role as interim Chairman of
the Risk Committee. As Workforce Engagement
Director his perspective ensures that he understands
and brings the views of employees in the Americas
region to Board discussions.
Career: During a distinguished career Michael
served as Global Co-Head of the Fixed Income
Sales and Trading Division for 28 years at Morgan
Stanley, both in New York and London. He was
also a member of Morgan Stanley’s Operating,
Management and Risk Management Committees.
External appointments:
Non-executive Director of Legal & General;
Investment Management Americas; Chairman
of the US Securities and Exchange Commission
Fixed Income Market Structure Advisory Committee
Angela Knight
Senior Independent
Non-executive Director
Appointed
1 September 2011
A N Re Ri
Board skills and experience: Angela brings a
wealth of knowledge and experience, stemming
from her previous chief executive and Non-
executive Director roles. Her prior experience as
a Member of Parliament and Treasury Minister
brings a unique and valuable perspective to Board
discussions. She delivers scrutiny and independent
oversight to the Board.
Career: Angela has had a longstanding career
including Chief Executive roles at Energy UK, the
British Bankers’ Association and the Association
of Private Client Investment Managers and
Stockbrokers, as well as previous Non-executive
Directorships at Lloyds TSB, Scottish Widows
and Brewin Dolphin Holdings plc.
External appointments:
Non-executive Director of Taylor Wimpey PLC;
Non-executive Director of Arbuthnot Latham & Co
Ltd; Non-executive Director of Provident Financial
Group Plc and Board member of Encore Capital
Group Inc
Having served nine years, Angela has indicated
her intention to step down from the Board and
accordingly will not be seeking re-election at this
year’s AGM.
Philip Price
Executive Director and
Group General Counsel
Appointed
3 September 2018
Roger Perkin
Senior Independent
Director Designate
A N Ri
Edmund Ng
Independent
Non-executive Director
N Re Ri W
Angela Crawford-Ingle
Independent
Non-executive Director
A N Ri
Mark Hemsley
Independent
Non-executive Director
N Ri
Appointed
1 July 2012
Appointed
1 November 2017
To be appointed
16 March 2020
To be appointed
16 March 2020
Board skills and experience: Angela will bring
substantial experience to the Board, both from
her executive career, as well as from her other
Non-executive Director roles. She will contribute
scrutiny and oversight to the Board from her
extensive experience of audit of multinational
and listed companies.
Career: Angela, a chartered accountant, was
a Partner specialising in financial services at
PricewaterhouseCoopers for 30 years, during
which time she led the Insurance and Investment
Management Division.
External appointments:
Senior Independent Director and Chair of the
Audit Committee at River and Mercantile Group
plc; Non-executive Director of Openwork Holdings
Limited and Chair of the Audit Committee at
Openwork Limited; Non-executive Director and
member of the Franchise Board and Chair of the
Audit Committee of Lloyd's of London
Board skills and experience: On joining the
Board, Mark will be able to draw on his extensive
experience of capital markets and exchanges from
his executive career in the industry. His knowledge
of large scale technology infrastructure, operations
and oversight of operational transformation in
several international exchanges and trading
platforms will be invaluable to the Board.
Career: Mark was President of Cboe Europe until
his retirement in early 2020. Prior to that he was
Chief Executive Officer at Bats Global Markets,
Managing Director, Market Solutions at LIFFE
and Director Global Technology at Deutsche Bank
GCI. Mark was also a board member and member
of the Audit Committee of EuroCCP NV and was
a member of the ESMA Securities and Markets
Stakeholder Group and Securities and Markets
Consultative Working Group.
External appointments:
None
Key
A Audit Committee
N Nominations and
Governance Committee
Re Remuneration Committee
Ri Risk Committee
Chairman
Member
W Workforce Engagement Director
External appointments: all listed and regulated external
appointments are disclosed.
The Directors’ biographies are also
available at https://www.tpicap.com/
who-we-are/leadership/board-of-
directors
www.tpicap.com
A governance framework is in place,
approved by the Board, setting out the
decision-making and reporting lines across
the Group and authority levels delegated
by the Board to certain committees,
individual Directors and senior
management. During 2019 a new
Governance Manual was adopted,
further developing the governance
framework to provide clarity around the
Group’s central and regional governance
structures, and to document the operation
and governance of the Group’s UK
regulated entities, taking into consideration
governance and regulatory developments,
including the Senior Managers and
Certification Regime. As a part of the
Group’s corporate structure reorganisation
later this year the Governance Manual will
be essential in reaffirming the regional
governance structures and oversight that
will be required.
The Company has clearly defined policies,
processes, procedures and controls which
are subject to continuous review in order
to meet the requirements of the business,
the regulatory environment and the market.
Ultimate decision-making on matters
affecting a legal entity is reserved for
the legal entity board.
52
Governance report
Corporate governance report
Board meetings
The Board has a schedule of eight meetings
a year to discuss the Group’s ordinary course
of business in accordance with a detailed
annual forward agenda developed by
the Chairman and the Group Company
Secretary and agreed by the Board. Every
effort is made to arrange Board meetings
so all Directors can attend. Additional
meetings are arranged on an ad hoc basis,
as required: again, every effort is made to
arrange that all Board members are able
to attend these additional meetings.
However as they are often at relatively
short notice that is not always possible.
2019 Board meeting attendance
Director
Richard Berliand2
Nicolas Breteau
Michael Heaney
Angela Knight
Edmund Ng
Roger Perkin
Philip Price
Robin Stewart
Lorraine Trainer
Rupert Robson3
Stephen Pull4
David Shalders5
Meetings
attended1
6/6
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
2/2
2/2
6/6
1
In addition to the scheduled meetings, four further
ad hoc meetings were held at short notice during the
year in February, September, October and December.
All eligible members were able to attend these
meetings except for Angela Knight in September
who recused herself due to a conflict of interest.
2 Richard Berliand was appointed as a Director of the
Board on 19 March 2019.
3 Rupert Robson stepped down as a Director of the
Board on 15 May 2019.
4 Stephen Pull stepped down as a Director of the
Board on 15 May 2019.
5 David Shalders stepped down as a Director of the
Board on 30 October 2019.
The role of the Board and its committees
The Board is collectively responsible for the
effective oversight of the Company and the
long-term success of its business. The formal
Schedule of Matters Reserved for the Board
describes the role and responsibilities of the
Board in full and is subject to annual review.
The Board delegates some of its
responsibilities to the Audit, Nominations
and Governance, Risk and Remuneration
Committees, through agreed Terms of
Reference which are subject to annual
review. The responsibilities of each
Committee are described in the governance
framework on the page opposite and in
the relevant Committee reports.
Responsibilities are also delegated by the
Board to the Disclosure Committee through
agreed Terms of Reference which are subject
to annual review. The Disclosure Committee
is responsible for considering on an ongoing
basis, in accordance with legal and
regulatory obligations and the Group
Disclosure Policy, whether any recent
developments in the Group’s business
are such that a disclosure obligation has,
or may, arise and makes recommendations
to the Board as appropriate.
The Board also delegates responsibility for
the day-to-day operational management of
the Company to the Chief Executive Officer,
who is supported by the Executive Director
Committee (‘EDC’), Group Executive
Committee (‘GEC’) and the Group Risk,
Culture and Conduct Committee (‘GRCCC’).
The three Group executive level Committees
are chaired by the Chief Executive Officer
and their responsibilities are also described
in the governance framework on the page
opposite. The names, responsibilities and
biographies of members of the GEC can
be found on the Company’s website at
www.tpicap.com/who-we-are/leadership/
group-executive-committee.
The Board Matters Reserved and Committee Terms of Reference can be found at:
https://www.tpicap.com/investors/corporate-governance
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
53
Governance framework
Board
Has principal responsibility for promoting the long-term sustainable success of the Company, generating value for its shareholders and
contributing to wider society.
Provides strategic
leadership
Establishes
and promotes
the Company’s
culture, values
and ethics
Sets the
Group’s
strategy, against
which it monitors
management’s
performance
Determines
the Group’s risk
appetite and
nature and extent of
the principal risks
Ensures that
controls and risk
management
systems are
rigorous
Determines
what matters are
reserved for decision
of the Board
Board Committees
Nominations and
Governance
Responsible for
reviewing the balance
of skills, knowledge,
experience and
diversity of the
Board and UKRE
boards, making
recommendations for
Board, Committee and
UKRE Non-executive
Director appointments
and monitoring
succession plans. Also
has responsibility for
reviewing and making
recommendations
on all matters of
corporate governance.
Remuneration
Responsible for
developing,
maintaining and
recommending to
the Board formal and
transparent policies
on remuneration for the
Company’s employees,
including the Directors’
Remuneration
Policy. Makes
recommendations
to the Board on the
remuneration packages
of the Executive
Directors and other
members of senior
management, in
compliance with policy.
Risk
Reviews and makes
recommendations to
the Board on the
Group’s risk appetite,
risk principles and
policies so the risks are
reasonable and
appropriate for the
Group and can be
managed and
controlled within
the limits of the
Group’s resources.
Ensures adherence
to risk principles
and thresholds.
Audit
Ensures the
governance and
integrity of financial
reporting and
disclosures, reviewing
the controls in place. It
oversees the internal
audit function and the
relationship with the
external auditors,
including monitoring
independence. The
Committee also
reviews the
effectiveness of
internal controls in
the Group.
Executive Director
Responsible for
refining proposals and
reviewing the success
of implementation of
strategy, overseeing
commercial and
financial performance
on a business line and
regional basis, and
monitoring the
progress of risk and
culture activities. The
Committee makes
recommendations to
the Board and Legal
Entities in accordance
with the authority
levels delegated
by the Board.
For more see page 66
For more see page 78
For more see page 75
For more see page 70
Group Executive Committee
Group Risk, Culture and Conduct Committee
Responsible for ensuring the successful implementation of
strategy and monitors the commercial and financial performance
across the regions, global business lines and corporate functions.
Makes recommendations to the EDC regarding strategy.
Responsible for providing executive oversight of the Group’s
enterprise risk management framework, reviewing and
maintaining progress against cultural objectives and monitoring
conduct within the Group. Communicates with and makes
recommendation to the EDC, Risk Committee and Audit
Committee as appropriate.
www.tpicap.com 54
Governance report
Corporate governance report continued
Division of Responsibilities
The roles of the Chairman and Chief
Executive Officer are separate and
a formal Statement of Division of
Responsibilities has been adopted
by the Company.
Chairman: Independent on appointment
and leads the Board by facilitating the
effective contribution of all Directors
and ensuring high standards of corporate
governance. Chairs the Board meetings,
sets the Board agendas and promotes
effective relationships between
the Executive Directors and
Non-executive Directors.
Chief Executive Officer: Accountable to,
and reports to, the Board. Responsible for
developing and implementing the
strategy, setting the cultural tone
throughout the organisation and providing
coherent executive leadership in running
the Group’s operations and activities.
Executive Directors: Support the Chief
Executive Officer in developing and
implementing the Group strategy and
leading the Company, which is consistent
with its purpose, culture and values.
Provide specialist knowledge and
experience to the Board.
Non-executive Directors: Independent
of management, assist in developing
and approving the strategy. Provide
independent advice and constructive
challenge to management, bring relevant
experience and knowledge and serve
on the Board Committees. Support
the Chairman by ensuring effective
governance across the Group and
reviewing the performance of the
Executive Directors.
Senior Independent Director: Discusses
with shareholders any concerns they
have failed to resolve through the normal
channels of Chairman, Chief Executive
Officer or Chief Financial Officer, or
for which such contact is inappropriate.
Provides a sounding board for the
Chairman and is available to act as an
intermediary for other Directors when
necessary. Responsible for reviewing the
effectiveness of the Chairman.
Group Company Secretary: Advises the
Board on matters of corporate governance
and ensures that the correct Board
procedures are followed. All members
of the Board and Committees have access
to the services and support of the Group
Company Secretary.
The Division of Responsibilities can be found at:
https://www.tpicap.com/investors/corporate-governance
The Board’s activities
In addition to the eight scheduled meetings,
four off-cycle Board meetings were held in
2019 at which the Board discussed, among
other matters, ongoing projects and changes
to the Board membership. The Board also
held multiple off-site strategy sessions.
Over the course of the year, the Non-
executive Directors also met without the
Executive Directors present to facilitate full
and frank discussion, where they discussed
the performance of the executive
management team, among other matters.
The Board activities pie chart below and
the table on the page opposite show how
the Board spent its time at Board meetings
during the year, including the key areas
of focus and discussion.
How the Board spent its time during
the year in scheduled meetings (%)
19%
CFO update including dividend
and tax matters
Strategy
CEO updates
Business/management updates
Routine matters
Risk management and audit
7%
including Brexit
Legal and compliance
7%
Corporate governance and policies
7%
Employees, ESG and culture
7%
Operations updates including technology 5%
18%
12%
10%
8%
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
55
Key agenda items discussed by the Board
Some of the key strategic priorities and areas discussed and reviewed by the Board in 2019 are shown below:
Strategic and operational
priorities
Strategy formulation,
implementation and
monitoring
Build and sustain technology
expertise
Develop our people
Enhance operational
expertise
Financial performance,
including results, capital
and liquidity
Corporate governance and
risk, including regulatory
outcomes
Key activities and discussions
> Regular Chief Executive Officer's reports
> Acquisition strategy and post investment reviews
> Regular reports on integration
> Reports from the Americas, EMEA and Asia Pacific regions
> Presentation from the Head of Client Relationship Management
> Strategy Day and further strategy specific sessions (see page 56)
> Discussions on how technology can help grow each global function
> Presentations on technology and cyber risk
> Culture and conduct initiatives
> Employee development
> Workforce engagement meetings with Non-executive Directors
> Gender Pay Gap review
> Whistleblowing updates, in conjunction with the Audit Committee
> Presentation on operations, including updates on Belfast office transition
> Internal and external communications strategy
> Regular reports on integration and integration metrics
> Regular Chief Financial Officer’s reports including financial performance
> Five-year financial plan updates
> Financial strategy
> Approval of the 2019 Group budget and discussion of the 2020 budget setting process
> Approval of 2018 year end results, the Annual Report and Accounts, the AGM circular and dividends
> Approval of interim results and review of trading statements
> Viability statement and going concern
> Pillar 3 disclosures
> Group Insurance renewal
> Reports of the activities of the Audit, Risk, Remuneration and Nominations and Governance Committees
> Withdrawal of the United Kingdom from the European Union and consequences for the Group
> Regular legal and compliance reports
> Corporate restructuring updates
> CRO updates, including on embedding a good risk culture
> Conflicts of interest
> Corporate governance updates, including approval of the Group Governance Manual
> Board appointments
> Board and Committee evaluation
> Board and Committee Terms of Reference reviews
> Securities dealing code update
> Engagement with the FCA
> Review of modern slavery statement
ESG, including stakeholder
engagement
> CSR strategy
> Investor relations reports and shareholder analysis
> Review of the charitable giving policy
> Climate change and environmental sustainability
www.tpicap.com 56
Governance report
Corporate governance report continued
How the Board has set the vision and strategy for the business
Overseeing the strategy of the business is a core Board activity and during the year it was the focus of significant additional debate and
deliberation by the Board, the executive management team and advisers, following the decision to carry out an in-depth strategic review.
During May the strategic review process began with a two-day strategy off-site meeting of senior executives, including the GEC, to consider
ideas and the ambitions of the business. The Board discussed the challenges in the business to achieving these ambitions, including
technology and organisational structure. Following this event, a strategy “blueprint” was created, including the key pillars and enablers of
future growth.
There followed five separate strategy sessions throughout the year, as illustrated below, at which the Board debated various elements of the
strategy to develop the plan. The Board discussed, amongst other topics, trends in the macro-economic environment, the Company’s
strengths and weaknesses, the core principles behind the new proposals and synergies across the business to underpin a renewed strategy.
Senior managers joined the Board to provide insights and stimulate discussion on a number of strategic options. The Board challenged senior
management on whether the business had the capacity, skills and resources to deliver and execute against the plans.
Oversight of the strategy of the business will, of course, continue to remain central to the Board’s activities. In the coming year the Board
intends to monitor and evaluate progress against the renewed strategy execution plans in light of changes in the sector in which we operate
and the views of shareholders, clients and other stakeholders.
May 2019
Senior management off-site meeting
> Firmwide ambition for a renewed strategy established
> Board briefed and discussion on the outcomes of the initial meeting
June 2019
Strategy Day 1
The Board discussed:
> Long-term strategic aspiration and vision
> An overview of the divisions of the business
> The organisational structure, strengths and weaknesses
> Trends in the macro-economic environment
September 2019
Strategy Day 2
The Board discussed:
> Organic strategic initiatives and initial financials
> The client lifecycle
> Electronic business and growing e-markets
> Product offerings
October 2019
Strategy Day 3
The Board discussed:
> Financial modelling to support decision making
> Governance structure of the business
> Execution planning
> Internal and external communications
November 2019
Strategy Day 4
The Board discussed:
> Technology implementation and associated risks
> Initiatives to improve the customer experience
> Organisational changes to enable growth
> Identification of focus areas
January 2020
Strategy Day 5
The Board discussed:
> Focus on 2020 execution of strategic initiatives and associated financials
> Communication plan for vision and strategy
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
57
How the Board has satisfied its section 172 duty
How we engage
On pages 58 to 61 we set out our key
stakeholder groups and the main methods
used to engage with them.
The Board will continue to keep engagement
approaches and mechanisms under review
so that they remain effective.
During the year an initiative to review the
Board paper templates was implemented in
order to support the Board’s endeavours to
better engage with and consider the interests
of our stakeholders. The revisions to the
templates ensure that there are concise,
insightful and digestible information flows
with appropriate focus on section 172
considerations, enabling informed Board
discussions with stakeholder feedback taken
into account where appropriate in the Board’s
decision-making.
How stakeholder interests have
influenced Board decision making
In making its decisions the Board
considers the outcomes of any stakeholder
engagement, the importance of maintaining
a reputation for high standards of business
conduct, the need to act fairly between
members of the Company and the long-term
consequences of any decisions. The following
case studies provide some examples of how
stakeholder interests were taken into account
in Board discussions and decisions during
the year.
In accordance with the requirements of
section 172 and following the publication
of the new UK Corporate Governance Code
in 2018, the Board must have regard to
stakeholders when promoting the success
of the Company and the Board must
demonstrate how it has taken steps during
the year to engage with and have regard
to stakeholders and other factors in its
principal decision-making. This section of the
Governance Report sets out how the Directors
have had regard to the matters set out in
section 172 and forms the Directors’ statement
required under section 414CZA of the
Company’s Act 2006. A similar statement
will be reported in the statutory accounts for
each of our active subsidiaries for the year
ended 31 December 2019.
Our stakeholders
The Board believes that engaging with our
shareholders and wider stakeholder groups
through regular and constructive dialogue is
central to delivery of our strategic objectives
and building a sustainable business. During
2019 we not only increased our focus on
stakeholder engagement, but also increased
our attention on environmental and social
matters. You can read more on this in the
Chairman’s statement on page 49 and in the
Strategic Report on pages 40 to 44.
To better consider the issues, factors and
stakeholders relevant in complying with
section 172, the Board completed a
stakeholder mapping exercise in 2018.
The Board determined our key stakeholder
groups as employees, shareholders, clients,
regulators and suppliers. In addition,
environmental and community matters are
key areas of importance. Each stakeholder
group requires a tailored engagement
approach to foster effective and mutually
beneficial relationships. Understanding our
stakeholders enables the Board to consider
the potential impact of decisions on
each stakeholder group and take account
of their needs and concerns, as a part
of Board discussions.
Case Study – Proposed
change to corporate
structure
During the year the Board considered the
continued appropriateness of the Group’s
international corporate and governance
structure. As a result of this review, the
Board proposed to incorporate a new
Group holding company in Jersey by
means of a Court-approved scheme of
arrangement. As part of the early
decision process the Board consulted with
the Company’s lead regulator, the FCA.
The Board’s advisers prepared detailed
papers on the proposed transaction so
that the Board could consider the effects
of the proposals on employees,
shareholders and clients. The Board also
considered the risks and benefits of the
proposal and meetings were held with
key stakeholders to explain the process.
Feedback helped the Board to satisfy
itself that the introduction of a new
holding company would be beneficial to
the Group’s financial flexibility, effective
governance of the business and the
Group’s competitiveness. The Board
announced the proposals in December
2019, which are subject to regulatory and
shareholder approval.
For further detail see the Chairman’s
statement on page 48.
Case Study – Save As You
Earn scheme and other
share plans
During the year the Remuneration
Committee reviewed wider employee pay
structures. As part of this review, following
feedback from employees, shareholders
and regulators, the introduction of a Save
As You Earn share scheme was considered
to encourage wider share ownership
across the Group. The scheme would
initially be made available to UK
employees and a mechanism for including
international employees will be
investigated. In addition, other share
plans are being put in place to align
employee and stakeholder interests.
www.tpicap.com 58
Governance report
Corporate governance report continued
How we engage – Employees
Feedback from Americas meetings
Feedback from APAC meetings
Why we engage
The Board recognises that engagement with
employees at all levels of the organisation is
vital to understand their needs and ensure
that we retain and develop the best talent.
At the same time, engagement with
employees helps the Board ensure that
the Company's culture, based on its core
values of honesty, integrity, respect and
excellence, is well embedded in the business.
How we engage
During the year employee engagement
was enhanced through the establishment
of a Non-executive Director Employee
Engagement Programme. This was
established following consideration
of the provisions of the Code and FRC
recommendations on approaching workforce
representation. The Board considered it
important to build on existing methods
of employee engagement to obtain direct
feedback and gauge workforce views on a
variety of issues. The Board also agreed that
it was important to glean the views of our
colleagues across all our regions and
therefore appointed three Non-executive
Directors (Michael Heaney, Edmund Ng and
Lorraine Trainer) to each cover a key region
of the business: the Americas, Asia Pacific
and EMEA, respectively. It was agreed that
this employee engagement initiative would
be aimed at all employees including agency
workers and contractors. The approach would
capture regional specific issues and employee
interests and enable them to be shared with
the full Board who would be able to consider
and incorporate employees’ views into its
decision-making process where appropriate.
A plan for workforce engagement was drawn
up with the support of regional heads of
HR and Regional CEOs and launched during
the year. Following a series of local meetings
in each region each of the engagement
Non-executive Directors presented their
feedback reports to the Board at its October
meeting. The Board discussed the emerging
key themes, including training and
opportunities, technology developments,
communications and the work environment,
and considered follow up regional actions
for the programme, including on succession,
personal development, office infrastructure
and the future strategy of the business.
Regional CEOs were tasked with following
up on agreed actions, communicating
progress to employees and updating the
Michael Heaney
Independent
Non-executive Director
Edmund Ng
Independent
Non-executive Director
“I was very interested to take part in the
initial workforce engagement sessions
we held in New York and New Jersey
in October 2019. It was clear to me that
these sessions, as part of our regional
engagement strategy, were highly
motivating for employee participants.
The sessions were oversubscribed, which
indicated to me the level of interest in this
initiative. I was struck by participants’
genuine interest not only in sharing their
own experiences but also in hearing
first-hand from senior leadership about
the direction and strategy of the business.
Amongst topics of interest raised,
communications and technology were
key issues employees wanted to discuss.
As a Non-executive Director, I already
have opportunities to meet and discuss
matters with employees when I visit our
offices. My impression is that this
initiative will be an effective way of
formalising the communication process
to ensure greater consistency in gathering
employee feedback and promoting
a two-way dialogue with the Board.”
Board. It was agreed that the exercise had
been very worthwhile as a mechanism for the
Board to capture workforce sentiment and
areas of concern and interest. You can read
about the Non-executive Directors’ own
impressions from the initial engagement
sessions on these pages.
Other forms of engagement with employees
during the year included the annual
engagement survey, a cultural oversight tool
providing insight into employee sentiment
and engagement levels, as well as listening
breakfasts and planned “town hall” meetings
led by the Chief Executive Officer in our key
regions to update them on the progress of the
business, answer their questions directly and
hear their feedback. Outcomes of these
engagements were reported to the Board,
providing a cultural barometer and feedback
on employees’ views and concerns, along with
periodic updates from HR on talent, succession
planning and leadership development, and
a Whistleblowing report highlighting the
reported areas of concern for some employees.
“I greatly enjoyed the opportunity to
chair the first five employee engagement
sessions held in Hong Kong and
Singapore. Attendees at these sessions
represented a broad spectrum of
employees from across the business.
Wide-ranging discussions were held,
based on the findings from the 2019
Employee Engagement Survey. It was
clear from the feedback that employees
welcomed this initiative with enthusiasm.
I found that the two-way discussions gave
me a good opportunity to engage more
widely with employees in a more informal
environment. Constructive discussion
resulted in a number of suggestions on
business topics and other employee
matters of interest to take away, consider
with the Board and on which to base
action plans. The direct link that I can
provide between the views of the Asia
Pacific employees and the Board should
ensure that we are gathering their
feedback directly, trying to incorporate
them when making business decisions
and delivering some changes to meet
their expectations.”
In the UK there is also an employee
representation forum, chaired by the
Chief Operating Officer, EMEA and made
up of elected individuals. This provides an
opportunity for employees to engage with
members of the executive team on various
issues. Social media is monitored for
employee feedback which is shared
with the Executive Directors.
Feedback and insights from these
engagement mechanisms are discussed in
Board meetings and form a part of the
Board’s decision-making. The Board will
continue to monitor the effectiveness of
informal and structured programmes of
employee engagement across the Group
during the coming year to review our progress,
improve oversight and ensure employees’
views are integrated into the work of the
Board and the strategy of the business while
supporting our people's well-being.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
59
Workforce engagement in the UK
Feedback from EMEA meetings
Lorraine Trainer
Independent
Non-executive Director
“I was delighted to be asked to take on
the role of Workforce Engagement Non-
executive Director, EMEA and be able to help
build on the employee engagement strategy
already in place in the Group. The three
EMEA employee sessions at each of the
London offices were very well attended.
Participants were briefed beforehand as
to the aims of the session and were able
to submit anonymous questions in advance
to help stimulate the debate.
During the sessions a range of topics came
up including career progression and training.
Recognition for a good job was cited by
some. A greater involvement of a wider
range of staff in process changes was also
raised. Comments were also made about the
impact on workload of cost constraints.
I was particularly pleased to see that the
participants were from all levels of the
business. I was impressed by the enthusiasm
shown for this engagement initiative.
Discussions were marked by a willingness
to participate and views were shared with
energy and passion.
The feedback I was able to bring back to the
Board from these sessions will help the Board
make better informed decisions based on
the perspective of the EMEA workforce.
I am looking forward to maintaining the
momentum and developing this initiative
in the coming year.”
While the Company is required to put in place a mechanism for engaging with UK employees, given the geographic spread of the business
the Board decided to include employees across all our regions. The process illustrated in the diagram below is mirrored in the other key
regions of the business. In total three UK workforce engagement sessions were held in London in 2019.
Board appointed
Lorraine Trainer
to lead EMEA
employee
engagement
Board review
of employee
engagement
approach to
monitor progress
Invitations issued
to all employees
(including agency
workers and
contractors)
2020
programme to extend
reach to more locations
and include regular
employee engagement
on the Board agenda
Workforce
engagement
in the UK
Output from
the Employee
Engagement survey
was used to stimulate
discussions at
the inaugural
engagement
sessions
Agreed feedback
and actions
communicated
to employees by
regional CEOs
Initial meetings
held in EMEA,
Americas and Asia
Pacific in
September
and October
Lorraine Trainer’s
report discussed
at October Board
meeting including
feedback and
next steps
www.tpicap.com 60
Governance report
Corporate governance report continued
How we engage – our other key stakeholders
Shareholders
Clients
Regulators
Why we engage
Engagement with and participation from
the Company’s shareholders is of key
importance to the success of the business
and in achieving our aim to create long-term
and sustainable shareholder value.
How we engage
The Chief Executive Officer, Chief Financial
Officer and Chairman hold frequent
meetings with investors to hear their views
on various matters. The Board regularly
receives feedback on these meetings,
along with copies of analysts’ and brokers’
briefings. During the year a Chairman’s
roadshow and individual meetings with
shareholders and sell-side analysts were
held. The Chairman met with shareholders
representing 48% of the shareholder register.
We also engaged with institutional investors
in several other ways, including at the BAML
Financials conference and the Citi Small
and Mid-Cap Growth conference.
All shareholders are invited to attend the
Annual General Meeting (‘AGM’) and all
the Directors normally attend the meeting.
The Chairman welcomes questions from
shareholders, who have an opportunity to
raise issues informally before or at the AGM.
There is a regular reporting and announcement
schedule to ensure that matters of importance
are communicated to investors. The Annual
Report and interim results, together with
information on the Group’s activities,
trading performance, products and recent
developments are on the Company’s website
www.tpicap.com/investors.
All Non-executive Directors are available
to meet shareholders, if requested, and
the Board is regularly updated on
shareholder feedback.
The Board considers shareholders’ interests
and views as a part of all their deliberations
on an ongoing basis, including on the
Company’s strategy, distributions, and
capital and liquidity. An example case
study can be found on page 57 regarding
the proposed change to corporate structure.
Why we engage
Our relationships and engagement with
our clients are fundamental to the success of
the business. Dialogue with our clients helps
the Board to stay informed about clients’
concerns, understand significant change
in the business, predict future trends and
re-align our strategy. Regular and effective
dialogue with our clients enables the Board
to understand their needs and how satisfied
they are with our business.
How we engage
The Board is updated regularly on client
engagement by the Chief Executive
Officer as part of his Board paper. The
client relationship management team
provide holistic coverage of the Company’s
most important clients, both on strategic
and tactical levels, to broaden and
institutionalise relationships and identify
opportunities for TP ICAP to more
comprehensively serve our clients. Client
relationship management reports are
periodically included in the Board agenda.
Client feedback and demands are also
communicated to the Board throughout
the year through the business CEOs.
During the year the Chief Executive Officer
attended meetings with major clients
engaging on the most important drivers
of our clients’ business, and other market
participants in the US, and provided
feedback to the Board on these meetings.
He also met with clients to discuss strategy
and focus on how to increase connectivity to
various TP ICAP platforms. We also attended
the Boca conference in America.
The Board has been considering the output
from this engagement and its potential
implications for the strategic options
formulated under the strategic review
conducted during the year.
Why we engage
Engagement with regulators is key to better
understanding and responding to their views
and concerns and receiving feedback on our
policies and ways of working.
How we engage
As the Group is lead regulated by the FCA we
regularly engage with the FCA’s supervisory
team but, depending on the issues to be
discussed, we may meet with the FCA’s
policy, prudential or competition teams.
We also engage with the FCA and other
regulatory bodies via sector consultation
and round table exercises.
During the year, amongst other meetings
with the FCA, the Chief Executive Officer and
Group General Counsel attended an annual
update meeting with the FCA’s Chief
Executive and Director of Supervision –
Investment, Wholesale and Specialist to
discuss achievements over the last twelve
months and give an early indication of
discussions taking place in connection with
the strategy of the business. The Board
received feedback from that meeting. As
well as engagement with the FCA, the Board
is kept apprised of discussions with
regulators in other jurisdictions in which we
operate through Board presentations and
regular legal and compliance updates at the
Board meetings. The Board was briefed on
the views being expressed by regulators on
how the markets would operate in the event
of a hard Brexit.
The Board and its Committees take the
views of our lead regulator into consideration
during deliberations on the Group's risk and
internal control framework, as well as in the
future design of pay and compensation
structures, including share plans.
In addition to engagement with regulators,
we share our experience and expertise
through engagement with various trade
bodies to help raise standards and
approaches across the sector.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
61
Suppliers
Other stakeholder interests
Why we engage
Engagement with our key infrastructure
suppliers is important for monitoring
performance, managing risk and driving
value. These suppliers provide business
critical infrastructure services and certain
outsourced operations across a wide
spectrum of sectors including IT,
telecommunications, market data
and clearing and settlements.
How we engage
The Board receives periodic updates from
the Head of Procurement on the status of
supplier engagement which includes a status
update on Corporate Social Responsibility
(‘CSR’), ESG and modern slavery matters,
expenditure information, issues and risks
and an update on any strategic initiatives
in progress.
During the year the Board has continued
to monitor progress on formalising our key
strategic supplier management framework.
There has also been a focus on consolidating
our supplier base to monitor performance,
manage risk, influence CSR and ESG matters
and drive value. In addition, the Board has
reviewed purchasing policies which aim to
minimise the risk of modern slavery in our
supply chain and the Board reviewed and
approved the Modern Slavery Statement,
which it does annually.
In 2020 the Board will receive regular
updates on Payment Practices reporting
which will further strengthen its oversight
of and engagement with suppliers.
Community and Environment
The Board is acutely aware of society’s
increasing focus on ESG, especially the
environment and climate change, and
is committed to striving to operate in a
sustainable and responsible way whilst
delivering value for our stakeholders.
Our ‘A Voice for All’ corporate responsibility
strategy, launched in 2018, focuses on our
stakeholders including clients and the wider
society we operate within. Key community
initiatives include our ‘Everybody Counts’
numeracy campaign and further details on
our campaign can be found on pages 40
to 41. In 2020 the Board will continue to
consider the full impact of our business
within society as a whole.
During 2019 the Board increased its focus
on the Group’s environmental management
approach and changes required to meet
best practice among the FTSE 250. Through
2020 the Board will seek to introduce
new initiatives, improve the Group’s
environmental reporting and take further
action to safeguard the environment.
The Board will be regularly updated on
progress against any targets set.
You can read more on this area in the
Chairman’s statement on pages 6 and 7. Our
reporting on greenhouse gas emissions can
be found in the Directors’ Report on page
103 and further details on our environment
and climate responsibilities can be found in
‘Resources, relationships and responsibilities’
in the Strategic Report on pages 40 to 44.
www.tpicap.com 62
Governance report
Corporate governance report continued
Board composition
At the year end the Board comprised nine
Directors: three Executive Directors, five
independent Non-executive Directors, and
a Non-executive Chairman. In compliance
with the Code, over half the Board was
comprised of independent Non-executive
Directors throughout 2019 and this remains
the case as at the date of this report with
a total of five Non-executive Directors.
The Company has also announced that
additional independent Non-executive
Directors, Angela Crawford-Ingle and Mark
Hemsley, will join the Board with effect from
16 March 2020.
The Board recognises that a balanced
Board, with a broad range of skills, experience,
knowledge and diversity, is more likely
to be an effective Board. The Directors’
biographies on pages 50 to 51 and charts on
this page demonstrate the depth and
breadth of the Board’s skills, knowledge,
experience and competencies. The charts
on this page reflect the constitution of
the Board as at 31 December 2019.
Independence of Directors
The Board continually assesses the
independence of each of the Non-executive
Directors and has determined that all the
Non-executive Directors are independent
in character and judgement. The Chairman
was independent on appointment.
None of the Non-executive Directors has
received any remuneration additional to
their Directors’ fees and the reimbursement
of reasonable expenses incurred in the course
of performing their duties. Prior to his
appointment to the Board, Richard Berliand
received a consultancy fee for the period
from 22 January 2019 to 18 March 2019.
Further details in relation to this fee are
provided in the Directors’ Remuneration
Report on page 88. The Board believes
that there are no relationships, conflicts of
interest or other circumstances which are
likely to affect, or could appear to affect,
any Director’s judgement.
Management of conflicts of interests
At the start of each meeting, the Directors
are invited to advise of any conflicts or
potential conflicts in respect of any item
on that meeting’s agenda.
The Nominations and Governance
Committee reviews at each of its meetings
the Company’s Conflicts and Relevant
Situations Register, which sets out
information on Directors’ conflicts that have
either been authorised (in accordance with
section 175 of the Companies Act 2006) or
declared (in accordance with section 177
of the Companies Act 2006), as well as
setting out Directors’ other directorships.
At any time that the Board considers a
Director appointment, the Board is also
invited to consider an extract of the Conflicts
and Relevant Situations Register for the
individual under consideration and is
asked to authorise conflicts as necessary.
Terms of appointment
The terms of the Directors’ service agreements
and letters of appointment, which are aligned
to the provisions of the Code, are summarised
in the Report of the Remuneration Committee
on page 98. Each of the Directors is subject to
election by shareholders at the
first AGM after their appointment by the
Board and subject to annual re-election
by shareholders thereafter. The service
agreements and letters of appointment
are available for inspection during normal
business hours at our registered office,
and at the AGM from 15 minutes prior
to the meeting until its conclusion.
External appointments
The Directors’ other directorships are set
out in the biographies on pages 50 to 51. The
Board continually monitors external
appointments to ensure that all Directors
are able to allocate sufficient time to the
Company to discharge their responsibilities
effectively. The Board allows Executive
Directors to take up appointments with
other companies provided the time involved
is not too onerous and would not conflict
with their duties at TP ICAP. None of the
Executive Directors currently holds any
external appointments.
Composition of the Board
as at 31 December 2019
Gender
Male
Female
7
2
British
French
American
Canadian
6
1
1
1
0-3 years
3-6 years
6+ years
7
0
2
Nationality
Tenure
Skills mapping
9
7
7
6
6
5
Banking
Corporate
transactions
Risk
Regulatory
Strategy
Audit
Corporate
governance 5
Operational 5
Remuneration 5
4
Broking
2
Accounting
1
Technology
Annual Report and Accounts 2019
Strategic report Governance report Financial statements
63
Keeping the Board informed
The Board and its Committees are provided
with appropriate and timely information.
For scheduled meetings, agendas are
drafted based on the previously agreed
forward agenda schedule and are then
reviewed to replace or include supplemental
items to reflect current business priorities.
Additionally, the Chairman of the Board or
the Chairman of each of the Committees
have sessions, in person or by telephone,
with the Group Company Secretary or
relevant function heads to review the
agenda for scheduled meetings.
Wherever possible agenda items for
consideration are accompanied by written
reports and supporting papers. Verbal
updates are permitted where matters are
progressing at a pace to ensure the Directors
have the most current information available.
Board and Committee papers are circulated
sufficiently in advance of meetings to enable
Directors to review them.
The Group has a comprehensive system for
financial reporting on the Group’s financial
position and prospects, which is subject to
rigorous review by both internal and external
audit. Budgets, regular forecasts and
monthly management accounts including
KPIs, income statements, balance sheets
and cash flows are prepared and the Board
reviews consolidated reports of these.
All Board and Board Committee meetings
are minuted. These summarise the
principal points discussed during an item’s
deliberation, record any unresolved concerns
and actions arising from the discussion.
The Group Company Secretary and Group
General Counsel are responsible for ensuring
the Board stays up to date with key changes
in legislation which affect the Company.
There are also procedures in place for taking
independent professional advice at the
Company’s expense, if required.
The Board continually monitors the quality of
the information it receives to ensure it is clear,
comprehensive and helps the Board to carry
out its duties. Board Intelligence was
engaged in 2018 to assist in this regard.
A comprehensive review programme was
instigated in 2019 to review and refine the
information that the Board receives, as well
as how it is presented, including its format
and frequency. To facilitate this review, the
Board considered its priorities which were
then used to focus forward agendas and
Board papers. Further detailed work was
then carried out to develop new Board
and Committee paper templates and the
meetings forward planner. The templates
are based on a Q&A style of reporting,
which helps draw out the key issues and
information needed to facilitate both
informed and engaged debate.
The templates also include guidance to
ensure consideration is given by report
authors when drafting papers to reflect
the impact on and any engagement with
key stakeholders as required by section 172.
Business leaders, report authors and
presenters were provided with training
to provide them with the necessary tools
to write clear, concise and consistent
papers. The templates have now been
in place for a year and, while the new
style is still bedding in, it has already had
a positive impact, enhancing the quality
of reporting and effectiveness of Board
and Committee discussions.
Board training and development
All Directors receive a comprehensive
induction on joining the Board. Further
details on both the general process for the
induction of new Directors and specifically
the induction of the Chairman, who was
the only new Director to join the Board
in 2019, are set out in the Nominations
and Governance Committee Report on
page 68.
The Chairman has overall responsibility
for ensuring Directors continually update
their skills and knowledge, and familiarity
with the Company, so as to fulfil their
role. Each of the Directors is however also
personally responsible for ensuring that
any specialist skills and competencies they
have remain current. The Board and its
main Committees receive briefings from
relevant function heads on any relevant
current developments as part of the normal
Board reporting process.
A schedule of formal training provided to
the Board and its Committees is maintained.
The schedule was last reviewed by the Board
in late 2019 and indicated that in total the
Board and Committees had received over 15
hours of formal training on a wide selection
of topics. These included: the Group’s Brexit
preparations, the UK Senior Managers and
Certification Regime; the UK Corporate
Governance Code 2018; section 172 duty;
new IFRS standards; and cyber risk.
The Board is also kept informed of any
material shareholder correspondence,
broker reports on the Company and
sector, institutional voting agency
recommendations and documents
reflecting current shareholder thinking.
In addition, members of the GEC make
regular presentations to the Board.
The Non-executive Directors are encouraged
to take advantage of external conferences,
seminars and training events, and sign up to
receive briefings issued by professional
advisers on legislative, regulatory and best
practice guidance and updates. They are
also encouraged to meet members of the
management teams both in the UK and
overseas to enhance both their knowledge
and understanding of the Group’s core
business areas. This direct engagement with
staff also helps embed the Non-executive
Directors’ role as workforce engagement
champions and enables them to observe
first-hand the controls, culture and conduct
behaviours in operation.
www.tpicap.com 64
Governance report
Corporate governance report continued
Board evaluation
The 2019 Board and Committees evaluation process was externally facilitated and is illustrated in the following diagram:
2
In advance of
starting her work
with the Board,
Ms Chalmers
reviewed Board
packs and previous
internal evaluation
reports.
3
During December
Ms Chalmers
observed Board and
Committee
meetings. Following
this observation,
Ms Chalmers
conducted an
individual,
structured interview
with each member of
the Board, as well as
the Group Company
Secretary and other
members of senior
management and
the Deloitte Audit
Partner. In
preparation for the
interviews each
interviewee was
given a short scoping
document.
5
The findings and
proposed actions
were presented to
the Board on a
non-attributable
basis for discussion
at the March 2020
Board meeting and
agreement of action
plans. Each
Committee will also
consider at a future
meeting whether a
specific development
or important action
plan is required for
that Committee.
Progress against 2018 actions
The outcome of the 2018 Board evaluation exercise, which was internally facilitated, was reported in detail in last year’s Annual Report. The
main action points arising from that exercise, and action taken in respect of each, are set out in the table below.
2018 evaluation recommendations
Progress made during the year
Enhance cultural oversight
by the Board
Enhance the Board's engagement
on priority matters
Enhance the Board's oversight
of technology and cyber-risk
> The Risk Committee reviewed the dashboard to monitor culture during the year.
> Culture is included as a regular item for consideration within HR presentations to the Board.
> The Workforce Representation and Engagement Programme was launched during the year
and full details are on pages 58 to 59. The Board will continue to review the effectiveness
of this programme.
> Non-executive Director only engagement has been increased by scheduling a number of Non-
executive only dinners.
> Meeting agendas have been reviewed by the Chairman and the Group Company Secretary, with
input from the Chief Executive Officer, including meeting length to ensure that sufficient time is
allocated to business presentations for the discussion of key issues.
> Meeting agendas and key decision papers and presentations have been reviewed by the EDC to
ensure appropriate coverage of priority matters.
> It was determined that, given its importance, technology should be considered by the whole
Board, with regular agenda items.
> Technology was a key discussion item in the various Board strategy sessions.
> Presentations on technology and cyber-risk were received by the Board during the year.
4Ms Chalmers prepared a draft report on her findings which was discussed with the Chairman and the Group Company Secretary.1In June 2019 Clare Chalmers Limited, an independent provider of board effectiveness reviews, was appointed to conduct the external Board evaluation for 2019. Following the appointment, the Chairman and the Group Company Secretary met with Clare Chalmers to scope the process for the Board evaluation exercise and discuss the timetable.Annual Report and Accounts 2019 Strategic report Governance report Financial statements
65
Actions agreed for 2020
The 2019 evaluation process confirmed that the Board and its Committees had areas for improvement and optimisation. The main
recommendations arising from the Board evaluation for 2019, and actions planned during 2020, are set out in the table below.
2019 evaluation recommendations
Actions to be taken during 2020
Enhance the Board's engagement
on the Group's culture and
behaviours
Monitor and evaluate progress in
implementing the Group’s
strategy
Enhance the Board’s composition,
dynamics and processes
> Include culture as a standalone agenda item for regular consideration by the Board, with focus
areas to include ESG, CSR and conduct.
> Evolve the workforce representation and engagement programme to assist the development of
the Group’s culture and diversity, including through follow-up action plans to address feedback
received from employees.
> Build greater trust around remuneration, improving understanding of the current policy and
constraints.
> Continue to maintain open communications with regulators to facilitate better understanding and
robust engagement between both parties.
> Develop appropriate milestones and metrics to monitor progress in executing the Group’s strategy,
which will be kept under regular review by the Board.
> Review the resources available for implementing the new strategic priorities, especially in the drive
towards operational and technological excellence, and supplement them if necessary, with
consideration given to internal talent development and diversity, and with ongoing review by
the Board.
> Continue to consider the appropriateness of the composition of the Board and Committees,
including the skill base and wider diversity, to keep pace with the execution of the Group’s strategy.
> Keep under review the Board and Committee meeting agendas to ensure sufficient focus is on
priority items and time allocations are appropriate to support effective deliberations.
> Facilitate the development of the Board’s common purpose and embrace the change in dynamics
brought about by the addition of new members to the Board.
Specific developments and actions to be taken during 2020 by each of the Board Committees will be considered at future meetings of
the Committees.
Individual performance evaluation
As a separate part of the annual evaluation process, there is a review of the effectiveness and commitment of individual Directors and the
need for any training or development is assessed. This is carried out as follows:
> The Chairman meets with the Non-executive Directors to evaluate the performance of the Chief Executive Officer;
> The Chairman meets each Non-executive Director individually; and
> The Senior Independent Director and the other Non-executive Directors meet to evaluate the Chairman’s performance, having first
obtained feedback from the Chief Executive Officer.
As part of the evaluation, an individual’s commitment of time to the Company in light of their other commitments, as noted in their
biographies on pages 50 to 51, is reviewed. Roger Perkin was subject to rigorous evaluation, in line with the Code, given that he will have
served over seven years by the time of the AGM in May 2020.
All Directors subject to the evaluation were deemed to be effective members of the Board and are recommended for re-election at the AGM.
www.tpicap.com 66
Governance report
Report of the Nominations
and Governance Committee
Richard Berliand
Chairman, Nominations
and Governance Committee
Committee members
Richard Berliand2
Michael Heaney
Angela Knight
Edmund Ng3
Roger Perkin
Lorraine Trainer
Rupert Robson4
Stephen Pull5
David Shalders6
Meetings
attended1
2/2
4/4
4/4
3/4
4/4
4/4
2/2
2/2
3/3
1
In addition to the scheduled meetings, one further
meeting was held at short notice in May. All members
were able to attend the additional meeting except
for Lorraine Trainer due to a previous commitment
which could not be rearranged.
2 Richard Berliand was appointed as a member
and Chairman of the Committee with effect from
15 May 2019.
3 Edmund Ng was unable to attend the January
meeting due to attendance at an urgent
medical appointment.
4 Rupert Robson stepped down as a member
and Chairman of Committee with effect from
15 May 2019.
5 Stephen Pull stepped down as a member of the
Committee with effect from 15 May 2019.
6 David Shalders stepped down as a member of the
Committee with effect from 30 October 2019.
The Committee’s terms of reference
are available on the Company’s
website: www.tpicap.com.
Dear fellow Shareholder,
This year the Committee had its second
full year after significantly widening its
remit and responsibilities to include
oversight of governance matters. I have
summarised below the various matters that
the Committee has dealt with during 2019
and those which have been introduced
for 2020.
Succession planning and diversity
Succession planning and talent review
continues to be a very important
responsibility for the Committee. As part
of last year’s review of the Committee’s
effectiveness, it was resolved to examine
senior management talent and bench
strength more deeply. In March 2019, the
Committee was joined by the Group Head
of HR to review and discuss succession and
talent development. Not only did the
Committee review succession plans for
individual Executive Directors and Group
Executive Committee members, but also
their direct reports, identifying possible
business leaders of the future. As a result
of this review key new roles were filled
internally or recruited externally, including
the Regional CEOs and Group Head of
Compliance. Successors were identified for
the global business line CEOs and other
senior management roles, and the longevity
of the identified successors was debated.
Acknowledging the importance of
identifying TP ICAP’s future senior leaders
and ensuring there is a talent pipeline to
How the Committee spent its time during the year in scheduled meetings (%)
Corporate governance
Routine matters
Executive Director and Senior
Management succession planning
Skills and experience review –
Board and Board Committees
Board member recruitment
(Non-executives)
Stakeholder engagement
42%
16%
14%
14%
8%
6%
draw from, the meeting also considered
formal and structured talent development
initiatives, including a leadership
development training programme and
a global mentoring programme. To
complement these structured initiatives,
the Committee has also sought opportunities
to meet future leaders in a less formal
environment, such as at Board dinners
or drinks receptions.
The Committee is of one mind that an
important element of embedding the right
culture in the organisation is ensuring there
is a strong diversity and inclusion ethos.
We recognise that an individual’s unique
perspectives and different ways of thinking
can stimulate new ideas and potentially
drive efficiencies; therefore, the promotion
of equality, diversity and inclusion across
the Group is an important objective for the
leadership team. This includes at the senior
management level, where we aim to build a
diverse pipeline for succession to leadership
or even Board positions.
Board member recruitment
We set out in 2018 our commitment to
ensuring appropriate refreshment of the
Non-executive Director complement of
the Board, mindful always of our diversity
aspirations. To this end, the Committee will
continue to pay particular attention to the
knowledge, skills and experience needed by
the Board to make it future ready. During
2019, the Committee has been focused on
succession planning for those Non-executive
Board colleagues with tenure of over six
years, and also on seeking to replace key
knowledge, skills and experience recently
lost from the Board.
Board composition, tenure and diversity
was a subject of discussion at Committee
meetings throughout 2019. At the additional
meeting held at short notice in May, the
Committee discussed Board composition,
size and refreshment in light of
Carol Sergeant’s retirement as an
independent Non-executive Director
at the end of 2018. The Committee also
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
67
acknowledged that two longer serving
Board members would be approaching nine
years' tenure as independent Non-executive
Directors over the subsequent few years.
In the Autumn we announced that Angela
Knight would retire as a Director and Senior
Independent Director at the conclusion of
the 2020 AGM, having served nine years on
the Board, and that David Shalders would
step down from the Board on 30 October
2019, having taken up an executive role at
London Stock Exchange Group plc. Roger
Perkin will also reach nine years’ tenure in
Autumn 2021.
As Chairman, I have led the search for their
successors. We were very pleased to confirm
recently that Angela Crawford-Ingle and
Mark Hemsley would be joining the Board
with effect from 16 March 2020. As well as
joining the Audit, Risk and Nominations
and Governance Committees, Angela
will also become Chair Designate of the
Audit Committee, assuming the Chair
of that Committee on Roger Perkin’s
retirement from the Board in 2021.
Mark will join the Risk and Nominations
and Governance Committees.
An important consideration for the
Committee is ensuring there is adequate
overlap between the future envisaged
departure of a Committee Chair and his
or her identified successor. This gives the
Chair designate an opportunity to shadow
the incumbent and learn about the
organisation and role before assuming
those responsibilities. This was of great
value to Lorraine Trainer prior to her
assuming the Chair of the Remuneration
Committee, and we believe that it will be
of equal value to Angela Crawford-Ingle.
Key responsibilities of the Committee
The Board has delegated responsibility
to the Committee for:
Board and Committee membership, and
succession planning
> reviewing the balance, skill, knowledge
and experience of the Board and Board
Committees; making recommendations
to the Board as to necessary and
appropriate adjustments in structure,
size and composition;
> overseeing succession planning
processes for the Board and
senior management;
> making recommendations to the Board
on all proposed new appointments,
elections and re-elections of Directors
at AGMs;
Board performance
> supervising the Board performance
review process; overseeing any remedial
action required as a result of the
Board performance evaluation
process concerning the composition
of the Board;
Director independence
> assessing and making
recommendations to the Board in
relation to the independence of
Non-executive Directors;
Conflicts and related person
transactions
> reviewing conflicts;
I am pleased that Roger Perkin has agreed
to assume the Senior Independent Director
responsibilities on an interim basis once
Angela Knight steps down from the Board.
The search for a further Non-executive
Director position, to assume the Senior
Independent Director role, is ongoing and
has involved a full review of the composition
of the Board with consideration of optimal
Board size, desired skills, knowledge,
experience and diversity. In the meantime
Search process
As for the Chairman succession process
leading to my appointment early in 2019,
the Committee approved the appointment
of Russell Reynolds, an independent search
consultancy with no other connection to the
Company, to conduct the formal process
Governance
> considering various governance
matters, including compliance with the
UK Corporate Governance Code, the
UK Senior Managers and Certification
Regime and/or other relevant
regulatory regimes;
> reviewing key non-pay related
workforce policies and stakeholder
engagement mechanisms;
Social and environmental matters
> reviewing and approving the content
of any social and environmental related
statements or policies;
Conduct
> reviewing and approving the
Company’s Code of Conduct, share
dealing code and related policies;
UK regulated entities ('UKREs')
> agreeing procedures for the selection of
and making recommendations to the
UKRE boards on new appointments of
independent Non-executive Directors
and considering the succession planning
process for the UKRE boards; and
> reviewing the balance, skills, knowledge
and experience, time commitment,
independence and diversity of the
UKRE boards, and making
recommendations as required.
for the Non-executive Director searches.
Candidate specifications were agreed and
used by Russell Reynolds to identify potential
external candidates in the market. These
specifications included expected time
commitments, skills and experience
requirements. The searches have been
based on objective criteria, with due regard
to the Board’s diversity goals, during which
long lists and then shortlists of possible
candidates were prepared. As a part of the
process members of the Committee have
www.tpicap.com 68
Governance report
Report of the Nominations
and Governance Committee continued
been invited to meet individually with
the shortlisted candidates. In respect of
the two completed searches leading to the
Committee formally agreeing to recommend
Angela Crawford-Ingle and Mark Hemsley
to join the Board, all members of the Board
interviewed the preferred candidates.
Induction
The induction process for all newly
appointed Directors involves the appointee
receiving a comprehensive induction
programme and briefing with external
legal advisers on Directors’ duties, roles
and liabilities either prior or soon after
appointment. Access is provided to the
Board and Committee packs (including
minutes and papers) from previous Board
cycles and one-to-one induction meetings
are held with Executive Directors, GEC
members and other senior managers,
including the Group Company Secretary.
Company constitutional, compliance and
governance documentation, as well as
information relating to the Group structure
and the expenditure control framework,
is also provided. The Committee seeks
feedback on the induction process from
newly appointed members of the Board
with a view to improving the programme.
I was the only newly appointed Director
in 2019, and my induction closely followed
this template.
Board skills, experience and diversity
A balanced Board with a broad range of
skills, experience, knowledge and diversity
is more likely to be an effective Board.
The Committee makes recommendations
to the Board on Board appointments and
succession, to ensure there is an appropriate
balance of skills and experience and
progressive refreshing of the Board, at all
times having regard to diversity aspirations.
In the Committee’s consideration of diversity,
we look at it in its broadest sense, not just in
respect of gender, but also age, experience,
ethnicity and geographical expertise.
Despite our focus on recruiting on merit
and the best candidate for any role, we
are nonetheless committed to increasing
the percentage of female Board members.
At the beginning of 2019 the Board’s gender
diversity in terms of proportionality was
temporarily weakened following Carol
Sergeant’s retirement at the end of 2018
and the increased size of the Board, which
returned to more normal levels at the
conclusion of the 2019 AGM. In the second
half of 2019 the proportion of female Board
members was at 22.2%.
During 2019 and 2020 to date, female
candidates have been considered in all
searches for Board members, and we
were delighted to recently confirm Angela
Crawford-Ingle’s appointment to the Board.
We, however, remain committed to going
beyond the current percentage of female
Board members and intend for the next
independent Non-executive Director to be
appointed to be female. As a consequence,
we anticipate that the proportion of women
on the Board will be at least 30% following
Roger Perkin’s retirement from the Board in
2021, a minimum level which we aim to
maintain. Further details on our approach
to Diversity can be found on pages 48 to 49
and 62.
Our ability to increase our female
representation at Board level depends
on the availability of suitable candidates,
and we remain committed to extending
diversity at all levels of the organisation.
The continued entry of diverse candidates
to our sector is vital, as is the retention
and development of current talent within
the Company.
Governance
During the year the Committee has
paid particular attention to the evolving
corporate governance and regulatory
environment, bringing in external subject
matter experts to support the development
of the Board’s priorities for 2019 to 2020
and help in structuring how information
is presented to the Board so that Board
members are better able to comply with
their section 172 duty. Additional areas
of focus have included internal assessment of
the Company’s compliance with the changes
to the UK Corporate Governance Code,
stakeholder engagement, development
of the Group’s governance framework
and oversight of the UK regulated entities.
During 2019 the governance framework
for the Company and its subsidiaries
was further formalised, documenting
the decision-making, reporting lines and
delegated authorities across the Group
into one Group Governance Manual. Among
other matters considered by the Committee
were reviews of the Board’s responsibilities
as a whole, division of responsibilities
between the Chairman and Chief Executive
Officer, and the remit of the Committee
in relation to the Group’s UK regulated
entities. Specific attention was given to
the Committee’s responsibilities in respect
of diversity and inclusion and social and
environmental matters. Further information
on the Group’s governance framework and
specifically the Governance Manual can
be found on page 52.
The regulated entities' governance
The governance of the Group’s UK regulated
entities was a particular area of focus during
2019. As part of the development of the
Group’s governance framework, and having
regard to the introduction of the UK Senior
Managers and Certification Regime in
December 2019, a specific addendum to
the Governance Manual setting out the
governance for the UK regulated entities
was introduced.
The Committee has expanded its remit
for 2020 and will make recommendations
to the UK regulated entity boards on
board appointments and succession, with
consideration for an appropriate balance
of independence, skills, experience and
diversity. The mix of skills, knowledge,
experience, competencies and background
of the UK regulated entity executive board
members has been considered by the
Committee and recommendations made
for areas to strengthen as the Committee
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
69
considers independent Non-executive
Directors for the UK regulated entity boards.
We are committed to ensuring there is
appropriate female representation on the
UK regulated entity boards whilst at the same
time being focused on recruiting on merit.
Stonehaven, an independent search
consultancy with no other connection to
the Company, has assisted the Committee
and Executive Directors in the formal
search for UK regulated entity independent
Non-executive Directors. As a part of
the recruitment process members of
the Committee meet with the
shortlisted candidates.
The Committee recently made
recommendations on the appointments
of an independent Chairman and of an
independent Non-executive Director to the
Group's UK regulated entites, and expects
to make a further recommendation during
the first half of 2020.
Stakeholder engagement
The Committee has considered engagement
with a number of key stakeholders during
the year, including how best to bring the
employee voice into the boardroom, as
reported in the 2018 Annual Report. The
development of the Group’s workforce
engagement programme has been a
particular area of focus for the Committee
and further information may be found on
pages 58 to 59.
Other areas of the Committee’s focus
Social and environmental matters
The 2019 review of the Charitable Giving
and CSR Policies, and discussion on the
Group’s Corporate Social Responsibility
Strategy and Climate Change and
Environmental Sustainability for 2020
was undertaken by the Board with the
Committee members present.
Conduct
The Group’s Code of Conduct, setting
out the Board’s dedication to embedding
and upholding high ethical standards
and integrity in all aspects of its operations
and business, was an area of discussion and
review by the Committee prior to its revision
and approval in March 2020.
Board performance
During 2019 the Committee supervised the
Board performance review process, including
discussion on the process and timings for
the externally facilitated Board evaluation
to be completed at the end of 2019. Clare
Chalmers Ltd was utilised as the external
facilitator and further details on the Board
Evaluation process can be found on pages
64 and 65.
Director independence, conflicts and
related person transactions
During 2019 the Committee assessed
the independence of the Chairman on his
appointment. The Board’s reported and
potential conflicts and relevant situations
were also reviewed at every Committee
meeting. Related party transactions were
considered as situations arose and further
details on Director independence can be
found on page 62.
Ahead of making any appointment decision,
consideration is given to whether, in the
Company's view, the proposed Director
would have sufficient time to fulfil his or
her Board responsibilities given their
other appointments.
Committee effectiveness
Since the internal review of effectiveness
conducted in January 2019, the Committee
has progressed areas identified for
improvement. During the year the
Committee reviewed senior management
talent and bench strength at the GEC and
GEC-1 levels, thus getting an improved view
on the leadership talent pipeline. Progress
was also made with the development and
introduction of Board paper reporting
templates to add focus on key stakeholders
and section 172 duty.
An external review of the Committee’s
effectiveness was conducted in December
2019 to January 2020 which determined that
the Committee was operating well in most
areas. Specific developments and actions to
be taken by the Committee during 2020 will
be considered at a future meeting.
Election and re-election of Directors
The Committee takes into account the results
of the evaluations of individual Directors
(see page 65 for further information) to assist
in determining whether to recommend to the
Board the election or re-election of Directors
at every AGM, as required in accordance
with the Company’s Articles of Association.
The Committee has considered the mix of
skills, knowledge, experience, competencies
and background of the members of the
Board. The Board considers that it exhibits
gender and cultural diversity, and the range
of skills and backgrounds encompasses
financial, commercial, operating, control,
corporate governance, accounting,
regulatory, audit, political and international
attributes. These will be further strengthened
through the current ongoing independent
Non-executive Director recruitment process.
All Non-executive Directors have submitted
themselves for election or re-election at the
2020 AGM with the exception of Angela
Knight. The Committee is pleased to
recommend all Directors putting themselves
forward for election or re-election at the
AGM in 2020, including Angela Crawford-
Ingle and Mark Hemsley, who will be
submitting themselves for election for the
first time in accordance with our Articles of
Association. Given the length of service of
Roger Perkin, his evaluation was subject to
rigorous scrutiny prior to making a
recommendation for his re-election. The
biographies of the Directors standing for
election or re-election can be found on pages
50 to 51 with further detail accompanying
the Notice of the AGM and also on the
Company's website: www.tpicap.com.
Richard Berliand
Chairman
Nominations and Governance Committee
10 March 2020
www.tpicap.com 70
Governance report
Report of the Audit Committee
Roger Perkin
Chairman, Audit Committee
Committee members
Roger Perkin
Angela Knight
Lorraine Trainer
David Shalders1
Meetings
attended
5/5
5/5
5/5
4/4
1 David Shalders attended all meetings prior to
stepping down from the Board on 30 October 2019.
How the Committee spent its time during
the year in scheduled meetings (%)
Internal auditor
External auditor
Annual reporting cycle
Routine matters
Risk management and internal controls
Tax matters
Corporate governance
33%
20%
18%
13%
9%
4%
3%
The Committee’s terms of reference
are available on the Company’s
website: www.tpicap.com.
Dear fellow Shareholder,
The Committee assists the Board in fulfilling
its oversight responsibilities by reviewing
and monitoring the integrity of the financial
information provided to shareholders,
the Company’s systems of internal control
and risk management, the internal and
external audit process, and the process
for compliance with relevant laws
and regulations.
This report sets out how the Committee
discharged its responsibilities during
2019 and explains how the Committee
ensured the integrity of financial reporting
by undertaking a review of the controls in
place. The report also highlights the
Committee’s assessment of significant
financial reporting judgements in
connection with the 2019 financial
statements, and the conclusions reached.
All Committee members are independent
Non-executive Directors with experience in
the financial services sector and I fulfil the
Code requirement of having recent and
relevant financial experience as a qualified
accountant. During the year David Shalders
stepped down from the Board and
Committee on 30 October 2019. I would
like to thank David for his invaluable
contribution during his time as a member
of the Audit Committee.
The Committee reviewed whether the 2019
Annual Report, taken as a whole, is fair
balanced and understandable and provides
the information necessary for shareholders
to assess the Company’s position and
performance, business model and
strategy. We made a ‘fair balanced and
understandable’ recommendation to the
Board, which is explained on page 72.
The Committee believes that it has complied
with the Audit Committee composition
requirements in the Code.
As Chairman, I provide regular reports to the
Board on the activities of the Committee
and how we have discharged our duties.
Outside formal Committee meetings,
I engage regularly with members of
finance and the risk functions, as well as
with external and internal audit, both in
the UK and our principal overseas locations.
This reinforces my understanding of the
challenges facing the Group.
Key responsibilities of the Committee
The Board has delegated responsibility to
the Committee for:
Financial reporting
> considering significant financial
reporting judgements;
> reviewing the Annual Report and
Financial Statements and half-year
results;
> considering Group tax matters;
> reviewing the going concern and the
longer-term viability statement;
External audit
> reviewing the effectiveness of external
audit;
> assessing external auditor
independence;
> developing a policy for non-audit
services provided by the external
auditor;
Risk management and internal control
> considering the effectiveness of the
Group’s systems of risk management
and internal control, including all
material controls;
Internal audit
> approving the internal audit’s risk
assessment, internal audit charter and
annual audit plan;
> considering the results and findings of
internal audit’s work;
> reviewing the effectiveness of internal
audit; and
> reviewing whistleblowing
arrangements.
Annual Report and Accounts 2019
Strategic report Governance report Financial statements
71
Financial reporting
The Committee has reviewed the integrity of the Consolidated Financial Statements included in the half year and year end announcements
of results and the Group’s Annual Report and Accounts.
Significant financial reporting judgements in 2019
We considered a number of judgements in connection with the 2019 Consolidated Financial Statements. These judgements, how the
Committee addressed them and the conclusions we reached, are set out below:
Judgement
Note
Action the Committee took
Conclusions
2(c)
Presentation of
acquisition, disposal
and integration costs
and exceptional items
> Challenged management on the rationale for exclusion of items
from underlying results and ensured the subsequent presentation
was appropriate.
> Reviewed the Annual Report to ensure that undue prominence
was not given to non-statutory measures in line with guidance
from the European Securities and Markets Authority.
> Sought the view of the external auditor and reviewed its
procedures as set out in its report.
The Committee is satisfied that
the definition and presentation
of items excluded from
underlying results were
appropriate and that the
disclosures are appropriate.
Impairment of
goodwill and other
intangibles
13
> Reviewed the basis on which goodwill was allocated to CGUs and
discussed management’s annual impairment assessment.
> Considered the basis for determining the recoverable amount of
each CGU.
> Challenged the methodology and valuation assumptions used.
Considered whether the information provided to the Group’s
external valuation specialists was complete and accurate.
> Reviewed the procedures performed by the external auditor,
including the involvement of its own valuation specialist.
> Considered whether management and the external auditor had
examined potential stress outcomes, particularly in respect of
sensitivities to a reasonably possible change in assumptions.
> Reviewed the carrying amounts of other intangible assets and
discussed management’s annual review of impairment triggers.
The Committee is satisfied with
the process undertaken, that an
impairment charge of £24m is
required in the year to the Asia
Pacific CGU and that the
disclosures are appropriate.
Other items that were less significant but were discussed included: the application of the new lease accounting standard (IFRS 16) as disclosed
in Note 2(e), the Group’s assessment and disclosure of legal cases and regulatory investigations; accounting for the wind-up of the UK pension
scheme; the Group’s reporting of its acquisitions and related remeasurement of outstanding consideration as disclosed in Note 32.
www.tpicap.com 72
Governance report
Report of the Audit Committee continued
Fair, balanced and understandable
Before the 2019 Annual Report was
approved, the Committee was asked to
review and consider the processes and
controls in place to help ensure it presents
a fair, balanced and understandable view
of the business. When conducting these
reviews, the Committee:
> examined the preparation and
review process;
> considered the level of challenge
provided through that process and
whether the Committee agreed with
the results; and
> considered the continuing
appropriateness of the accounting
policies, important financial reporting
judgements and the adequacy and
appropriateness of disclosures.
> Board members received drafts of the
Annual Report for their review and input
which provided an opportunity to discuss
the drafts with both management and
the external Auditor, challenging the
disclosures where appropriate.
We concluded that the processes and
controls were appropriate, and were
therefore able to make the following
assurance to the Board:
> in our view, the Annual Report, taken
as a whole, is fair, balanced and
understandable and provides the
information necessary for shareholders to
assess the Group’s position, performance,
business model and strategy.
Going concern and viability statement
The assumptions relating to the going
concern review and viability statement were
considered, including the medium-term
projections, stress tests and mitigation plans.
On the basis of the review, we advised the
Board that it was appropriate for the Annual
Report and Financial Statements to be
prepared on a going concern basis. We also
reviewed the long-term viability statement
taking into account the Group’s current
position and principal risks and
uncertainties, and advised the Board that
the viability statement and the three-year
period of the assessment were appropriate.
Internal audit
The Committee is responsible for monitoring
and reviewing the effectiveness of the
internal audit function. We approve the
internal audit plan and keep it under review
during the year, to reflect the changing
business needs and to ensure it considers new
and emerging risks.
During 2019, to ensure the audit plan had
been completed effectively, the Committee:
> reviewed the work and reports of internal
audit;
> reviewed how internal audit
recommendations had been
implemented;
> monitored progress against the internal
audit plan during 2019; and
> approved the 2020 Annual Audit Plan.
Internal audit have continued to build the in
house team, implement revised
methodologies and update reporting. In
parallel, the role of our outsource provider,
KPMG, has been progressively reduced and,
subsequent to the year-end, a new co-source
provider, Ernst & Young, has been appointed.
Also subsequent to the year-end our Chief
Internal Auditor, Bernadine Burnell, has
resigned in order to take up a position with
another major financial services company.
We would like to express our sincere thanks to
both Bernadine and KPMG for their
contribution. Mark Pointer, our present Head
of Audit for EMEA, has been appointed as
Bernadine’s successor on an interim basis.
External auditor
Effectiveness
I meet regularly with the external audit
partner throughout the year to ensure that
there are no unresolved issues of concern.
This helps ensure that the external auditor
is able to operate effectively and challenge
management sufficiently when required.
During the year as part of the 2019
effectiveness review of both the
external auditor and the 2019 audit,
the Committee considered:
> the quality of Deloitte’s 2019
external audit;
> the effectiveness of the external audit
process including the expertise, efficiency,
global service delivery and cost
effectiveness of the auditor;
> the external auditor’s plans and feedback
from senior management; and
> effectiveness of management in relation
to the timely identification and resolution
of areas of accounting judgement,
analysing those judgements, the quality
and timeliness of papers, management’s
approach to the value of independent
audit and the booking of any audit
adjustments arising, and the timely
provision of draft public documents
for review by the external auditor and
the Committee.
The Committee is pleased to report that the
effectiveness review of the external auditor
did not identify any significant concerns.
In addition, the Committee concluded that
the 2019 external audit had been effective.
Independence and non-audit services
When considering the 2019 Annual Report,
the Committee reviewed the objectivity and
independence of the external auditor. We
also considered the professional and
regulatory guidance on auditor
independence and Deloitte’s policies and
procedures for managing independence.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
73
Deloitte confirmed that no non-audit
services prohibited by the FRC’s Ethical
Standard were provided to the Group or
Parent Company.
To safeguard the external auditor’s
independence and objectivity, the Company
does not engage Deloitte for any non-audit
services except where it is work that they
must, or are clearly best suited to, perform.
All proposed services must be pre-approved in
accordance with the non-audit services policy,
which is reviewed and approved annually.
The Committee reviewed the level of fees
paid to the external auditor for the various
non-audit services provided during 2019.
During the period under review the non-audit
services performed by the external auditor
amounted to £1.92m, 31% compared to the
£6.14m of audit fees. Non-audit services
primarily relate to regulatory reporting, the
interim review of the Group’s half year
financial statements, audits of subsidiary
financial statements not mandated by law
and reporting accounting services in respect
of the proposed incorporation of a new
Jersey-domiciled Group holding company.
These services are typically, or required to be,
performed by the external auditor. There
were no advisory or consulting services
provided by the external auditor to the
Group.
Audit and non-audit fees (£’000s)
6,141
5,365
1,918
1,327
2018
2019
2018
2019
Audit
Non-audit
More information can be found on page 137
in Note 5 to the Consolidated Financial
Statements .
Risk management and internal control
The Board is responsible for:
External audit
Deloitte has been the Company’s auditor
since its predecessor company listed in 2000.
In 2013, the Board put the external audit
contract out for tender and concluded that
Deloitte should be re-appointed.
During the year, in accordance with normal
rotation practices, Robert Topley the lead
audit partner stepped down and Alan
Chaudhuri was appointed in his place for
the year ended 31 December 2019.
In accordance with prevailing corporate
governance requirements, the audit contract
will be put out to tender at the latest in
2023 in respect of the year ending
31 December 2024. This would allow a full
five-year term for the incoming new lead
audit partner. The Committee will continue
to monitor legal requirements and
developments in best practice with
regard to audit tender arrangements.
The Committee is very aware of the
developments relating to the external
audit process driven by various reviews and
welcomes moves to ensure the continuing
robustness, challenge and independence
provided that they genuinely address
acknowledged quality issues. We have
alerted other major audit firms to the audit
tender process referred to above with a view
to ensuring that, at that time, we will be able
to choose from the widest possible selection
of appropriately skilled and independent
firms, with the geographical reach to audit
us globally.
The Company confirms its compliance
with the requirements of the Statutory
Audit Services for Large Companies
Market Investigation (Mandatory Use
of Competitive Tender Processes and
Audit Committee Responsibilities)
Order 2014 throughout the year ended
31 December 2019.
> setting the Group’s risk appetite;
> ensuring the Group has an appropriate
and effective ERMF; and
> monitoring the ongoing process for
identifying, evaluating, managing
and reporting the significant risks faced
by the Group.
The ERMF and principal risks are described
in the Risk Management section of the
Strategic report on pages 34 to 35.
The Board is also responsible for the Group’s
system of internal control and for reviewing
its effectiveness. The system is designed to
manage rather than eliminate the risk of
failure to achieve business objectives and can
provide only reasonable and not absolute
assurance against misstatement or loss.
The Committee carried out an annual review
of the effectiveness of the internal control
and risk management systems and reported
back to the Board to enable it to discharge
its responsibilities. We conducted a formal
review of the effectiveness of the Group’s
internal control systems for 2019, considering
reports from management, external audit
and the work of the Group Risk and Internal
Audit functions. As a result of both changes
in the business and regulatory feedback, the
Group has undertaken a complete review
and enhancement of its global risk
management framework and ongoing
enhancement of internal control. Further
details can be found in the Report of the
Risk Committee on pages 75 to 77.
The process for identifying, evaluating and
managing the principal risks faced by the
Company is reviewed regularly by the Board
and has been in place for the year under
review and up to the date of approval of the
Annual Report. It is also in accordance with
the FRC’s ‘Guidance on Risk Management,
Internal Control and Related Financial and
Business Reporting’.
www.tpicap.com 74
Governance report
Report of the Audit Committee continued
Committee effectiveness
An external review of the Committee's
effectiveness was conducted in December
2019 to January 2020 which determined that
the Committee was operating well in most
areas. Specific developments and actions to
be taken by the Committee during 2020 will
be considered at a future meeting. During
the year the Committee also conducted a
review of its Terms of Reference.
Roger Perkin
Chairman
Audit Committee
10 March 2020
Whistleblowing
During the year there were several
developments in relation to the Group’s
Whistleblowing arrangements. An
independent reporting facility managed
by a third party was introduced, designed
to enable employees and individuals outside
TP ICAP to raise concerns anonymously.
This was combined with a global “Speak Up”
campaign to raise awareness. The Group’s
Whistleblowing policy has also been
updated against best practice and guidance
published by the relevant statutory and
regulatory authorities. The Committee
received reports of employees' concerns in
December 2019 and March 2020 and made
recommendations to the Board as part of
their ongoing responsibilities, in addition to
the regular Whistleblowing updates received
by the Board. The Committee noted that
there was an increase in reports from
employees during the year which indicates
that employees feel increasingly confident
about raising concerns and that the
campaign to raise awareness has
been successful.
During the coming year the Committee
will continue to review the Whistleblowing
arrangements in conjunction with the Board.
Annual Report and Accounts 2019 Report of the Risk Committee
Strategic report Governance report Financial statements
75
Michael Heaney
Interim Chairman, Risk Committee
Dear fellow Shareholder,
Committee members
Michael Heaney1
Angela Knight2
Edmund Ng
Roger Perkin
David Shalders3
Meetings
attended
5/5
4/4
5/5
5/5
4/4
1 Michael Heaney replaced David Shalders as
Chairman of the Risk Committee in October 2019.
2 Angela Knight became a member of the Risk
Committee in January 2019.
3 David Shalders stepped down as Chairman of the
Risk Committee on 30 October 2019.
How the Committee spent its time during
the year in scheduled meetings (%)
Business and functions risk reviews
Update from CRO
Risk framework and
corporate governance
Routine matters
Risk culture
Project risk reviews
33%
22%
21%
9%
9%
7%
The Committee’s terms of reference
are available on the Company’s
website: www.tpicap.com.
On behalf of the Board, I am pleased to
present the Report of the Risk Committee
explaining how the Committee has
discharged its risk oversight responsibilities
during 2019.
I was appointed as interim Committee
Chairman in October 2019, although I have
been a member of the Committee since I was
appointed to the Board in January 2018 and
so am well aware of the Committee’s
activities during the chairmanship of my
predecessor, David Shalders. On this point, I
would like to extend a warm thank you to
David, on behalf of the committee, for the
sterling work undertaken during his tenure.
During 2019 the Committee focused its
attention on the most significant risks
facing the Group, including those arising
from Brexit and integration, as well as cyber
risk and operational resilience.
The Committee also oversaw the
implementation of the Group’s new
Enterprise Risk Management Framework
('ERMF') which has materially enhanced
the Group’s risk management capability
and will support the delivery of the Group’s
business strategy.
In discharging its risk oversight
responsibilities, the Committee has
remained cognisant of the high standards
of risk management expected of market
infrastructure providers and the requirement
to safeguard the interests of its clients,
investors and shareholders.
Key responsibilities of the Committee
The Board has delegated responsibility
to the Committee for:
Setting risk appetite, culture, controls
and policy
> defining the nature and extent of the
risks the Group is willing to take;
> defining the expectations for the
Group’s risk culture;
Monitoring, reporting and advisory
activities
> reviewing the Group’s culture
monitoring arrangements and
promoting a risk-aware culture;
> ensuring the Group has an
appropriate and effective risk
management and internal control
framework;
> overseeing the implementation and
annual monitoring of the ERMF,
including the adoption and
implementation of both risk tolerances
and Risk Management Standards;
> reviewing resourcing within the Three
Lines of Defence;
> reviewing the control environment and
tracking any remedial actions;
> identifying and considering future and
emerging risks, regulatory
developments and relevant mitigants;
> considering the Company's prospects,
current position, principal risks, and
assessing whether there is reasonable
expectation that the Company will
continue to operate and meet its
liabilities as they fall due;
> overseeing the independence and
effectiveness of the Risk and
Compliance functions;
> providing input to the Remuneration
Committee on the alignment of
remuneration to risk performance;
> considering the risks arising from any
strategic initiatives and advising the
Board accordingly; and
> reviewing the appointment or
dismissal of the Chief Risk Officer
(‘CRO’) and Group General Counsel.
www.tpicap.com 76
Governance report
Report of the Risk Committee continued
Key matters considered by the Committee in 2019
Topic
Broking
process
Infrastructure
Matters considered and actions taken by the Committee
Oversight of the key risks arising from the Group’s broking and post-trade activity, including through the review of key
risk data included in the Chief Risk Officer’s reports.
Updates on key aspects of the Group’s technology and other infrastructure, including presentations by the Group Chief
Operating Officer ('COO'). This included oversight of the operational risks arising from the migration of systems and
infrastructure undertaken as part of the broader Integration Programme.
Reports to monitor the Group’s business continuity arrangements and capability. This included monitoring the Group’s
ability to meet its targeted recovery time objectives across all areas of the business and ensuring that action is taken to
address any deficiencies identified.
The status of the Group’s cyber security capability, including updates provided by the COO, and continued to monitor
the Group’s ongoing activity to enhance cyber resilience against increasingly sophisticated cyber-threats.
Cyber security
and data
protection
Human capital The Group’s resourcing profile and the steps taken to address key person dependencies. This included monitoring the
Financial risk
Capital and
liquidity
adequacy
status of succession planning for key senior management positions. In this context, the Committee remained alert to the
challenges posed by the requirement to implement a range of significant business and regulatory change programmes,
and the requirements to ensure sufficient capability and capacity to deliver these programmes.
The Group’s financial risk exposure as part of the CRO and Chief Financial Officer’s ('CFO') report, including its FX and
credit risk exposure. In reviewing the Group’s financial risk profile, the Committee considered the potential impact of a
hard Brexit.
The Group’s capital and liquidity position provided by both the Group CFO and CRO. As part of this activity, the
Committee undertook a Group Review of Capital and Liquidity Adequacy, which assessed the Group’s prudential
position at consolidated Group level, as well as the Internal Adequacy Assessment Process ('ICAAP') submissions
compiled for the Group’s UK regulated entities. This included reviewing and challenging the stress tests undertaken to
assess the Group’s capital and liquidity adequacy in stressed conditions.
The Committee also reviewed the Group Recovery Plan to assess the appropriateness of both the various recovery
actions defined in the plan and the calibration of the recovery indicators adopted to ensure that the Group has
sufficient early warning of any potential deterioration in the Group’s financial position. The recovery plan was updated
in 2019 to reflect the various changes to the Group’s ERMF.
Legal and
compliance
Reports at each meeting from the Group General Counsel and Head of Compliance on key legal and compliance issues.
This included overseeing the Group’s preparations for the introduction of the Senior Managers and Certification Regime
('SMCR') which applied to the Group with effect from 9 December 2019.
The Committee continued to monitor the status of the Group’s surveillance programme to standardise surveillance
capability throughout the Group.
Brexit
The status of the Group’s Brexit response plan, including the contingency plans in place to address a no deal Brexit with
loss of passporting rights between the UK and the EU.
Legal entity
rationalisation
Risk framework The implementation of a number of new risk management processes across the Group as part of the broader roll-out of
The status of the Group’s ongoing project to rationalise its legal entity structure to ensure any associated risks are being
managed effectively.
the new ERMF. This included a new control attestation process and stress testing programme, as well as the
implementation of a new enterprise risk management system.
Risk and
compliance
resourcing
The planned build-out of risk and control personnel to ensure the Group has the capability to deliver the new ERMF and
meet regulatory expectations. The Group made significant progress in this regard during the year, with a significant
number of hires made in Risk, Compliance and first-line control officer roles. These hires included the appointment of a
Group Head of Compliance, a Chief Controls Officer and a Data Protection Officer, all of which constitute new roles for
the Group.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
77
The Group will also continue to oversee the
operation of the new ERMF with particular
areas of focus to include:
> Embedding of the ERMF: Ensuring that
the various components of the new ERMF
are effectively embedded throughout the
Group such that they are operating as
a normal part of day-to-day activity,
with an appropriate risk response being
adopted where required to address any
risk management issues identified; and
> Reinforcing accountability: Ensuring
that employees are undertaking their
designated role(s) under the ERMF
and that the Group’s performance
management process incorporates an
appropriate assessment of employees’
performance of their risk management
responsibilities, with risk-adjustments
made to remuneration where
appropriate. This will also assist
senior management to meet their
obligations under the SMCR regime.
Michael Heaney
Interim Chairman
Risk Committee
10 March 2020
Review of Committee effectiveness
An external review of the Committee's
effectiveness was conducted in December
2019 to January 2020 which determined that
the Committee was operating well in most
areas. Specific developments and actions to
be taken by the Committee during 2020 will
be considered at a future meeting. During
the year the Committee also conducted a
review of its Terms of Reference.
Key priorities for 2020
The Committee will continue to monitor
the key risks faced by the Group to ensure
these are being managed effectively and
in accordance with the Group’s risk appetite.
This will include conducting deep dive
reviews into specific areas of the Group’s
business and risk profile, with a number of
such reviews planned for 2020, including in
relation to operational resilience and the
client life-cycle.
The Committee will also continue to monitor
the key emerging risks to which the Group is
exposed. This includes the challenges arising
from the rapid pace of technological change
and potential changes to market structure,
as well as changes to the regulatory
framework in which the Group operates,
and immediate emerging risks, such as
Covid-19, which the Group continues to
monitor and respond to as appropriate.
The Committee will also continue to
oversee the ongoing initiatives in relation
to conduct and culture, to assess the Group’s
performance against its stated objective
of ensuring that its staff maintain the
expected high standards of personal
and professional conduct.
www.tpicap.com 78
Governance report
Report of the Remuneration Committee
Lorraine Trainer
Chairman, Remuneration Committee
Dear fellow Shareholder,
Committee members
Lorraine Trainer2
Angela Knight
David Shalders3
Edmund Ng4
Michael Heaney
Stephen Pull5
Meetings
attended1
4/4
4/4
3/3
3/4
4/4
2/2
1
In addition to the four scheduled meetings, two
further meetings were held at short notice, in
February and July. All members were able to attend
these additional meetings except Edmund Ng who
was unable to attend in February due to the late
notice and different time zones.
2 Lorraine Trainer became Chairman of the
Remuneration Committee following the AGM on 15
May 2019.
3 David Shalders retired from the Board on 30 October
2019 and attended all meetings prior to that date.
4 Edmund Ng was unable to attend the January
meeting due to an urgent medical appointment.
5 Stephen Pull retired from the Board on 15 May 2019
and attended all meetings prior to that date.
How the Committee spent its time during
the year in scheduled meetings (%)
Executive Director remuneration
Policy and compliance
Remuneration reporting
Senior management remuneration
Routine matters
Corporate governance
Wider workforce remuneration
Executive incentive schemes
29%
18%
16%
12%
9%
8%
6%
2%
The Committee’s terms of reference
are available on the Company’s
website: www.tpicap.com.
On behalf of the Board, I am pleased to
present my first Directors’ Remuneration
Report (‘DRR’) as Chairman, having been
appointed following the 2019 AGM. I would
like to thank my predecessor, Stephen Pull,
for his support during his handover to me.
This report comprises:
> the Chairman’s statement;
> a new 'Remuneration at a Glance'
section, summarising the policy and
its application in 2019 and planned
for 2020; and
> the Annual Report on Remuneration.
Introduction
During late 2018 and early 2019, I was pleased
to be able to accompany Stephen Pull whilst
he consulted extensively on our new Directors’
Remuneration Policy and, on behalf of
the Committee, I would like to thank those
shareholders and proxy advisory bodies who
engaged with us and provided constructive
feedback. The resolution proposing the new
policy received support from 96% of our
shareholders and that proposing the 2018
Annual Report on Remuneration received
support from almost 99% of them.
In implementing the policy during 2019 the
Committee gave very careful consideration
to the establishment of appropriate targets
for the variable incentive arrangements and
I have included more detail below on the
approach we have taken to that in order to
drive performance and support the alignment
of shareholder and management experience.
Key responsibilities of the Committee
The Board has delegated responsibility to the Committee for:
> working with management to formalise
and approve transparent policies on
remuneration for the Company’s
employees, that support the Company’s
long term strategic goals and are
aligned to its culture;
> reviewing remuneration policies to
ensure compliance with corporate
governance and regulatory
requirements;
> ensuring implementation of the
Company’s remuneration policies is
subject to review;
> considering relationships between
incentives and risk to ensure that risk
management and appetite are properly
considered in setting and implementing
the remuneration policy;
> reviewing wider workforce pay and
considering the mechanisms for
explaining to the workforce how
executive pay and any related policies
are aligned with remuneration for the
wider workforce;
> keeping under review the Company’s
gender and ethnic pay gaps and
overseeing the implementation of
actions identified as being required;
> ensuring Executive Director
remuneration is in line with the most
recent Directors’ Remuneration Policy
and that wider workforce pay has been
considered when setting executive pay;
> setting appropriately challenging
incentive targets for the Executive
Directors;
> ensuring risk management events are
reflected in remuneration outcomes;
> determining and approving the rules of
any new employee share scheme or
other equity based long-term incentive
programme or any new performance
related pay schemes and total annual
payments under such schemes; and
> reviewing and approving after
consultation with the Chief Executive,
the level and structure of remuneration
for senior management.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
79
We have also spent some time considering
the remuneration of the Executive Directors
in the context of both the UK-listed
environment and our principal competitors
who are listed overseas but operate and
compete in the same geographies as
TP ICAP plc. This review highlighted the
potential for much higher incentive
opportunities in those overseas-listed
competitors than is the norm in the UK.
The Committee acknowledged the potential
risk of being unable to offer competitive
remuneration packages, relative to our
direct competitors, and the impact this may
have on retention and attraction of talent
in future. This is an area the Committee
will consider further during 2020 and we
anticipate that we will wish to discuss our
conclusions with our major shareholders.
I have also provided further details of our
continued engagement with stakeholders,
including both shareholders and employees.
Key Remuneration Committee activities
in 2019
The Committee’s focus areas this year were:
> finalising the consultation with
shareholders on the new Directors’
Remuneration Policy and submitting
it for approval at the AGM;
> assessing the 2018 performance of the
Executive Directors against the financial
and their personal non-financial metrics;
> determining the financial metrics used
to assess 70% of the Executive Directors’
2019 Bonus and the EPS CAGR range for
the LTIP award made in June 2019;
> setting specific 2019 Strategic
Performance Objectives for each of the
Executive Directors in order to assess 30%
of their 2019 Bonus;
> establishing the 2019 Deferred Bonus
Plan for Senior Management;
> benchmarking the remuneration of the
Executive Directors;
> reviewing the risk-adjusted reward
procedures to ensure conduct and culture
are considered in all reward decisions;
> reviewing the Company’s FCA
Remuneration Policy Statement for 2018
> discussing and agreeing our approach to
compliance with the new UK Corporate
Governance Code 2018 (the 'Code'); and
> undertaking a review of compensation
below Board and senior management level.
Engagement with shareholders
As I mentioned in my introduction, extensive
consultation with our largest shareholders,
the shareholder representative bodies and
the proxy agencies was undertaken during
the process of developing our new
Remuneration Policy at the end of 2018 and
early in 2019. I was involved in many of those
discussions ahead of my formal appointment
as Chairman of the Committee and wanted
to express my personal appreciation for the
extent and quality of that engagement. In
response to the feedback received, we made
some changes to the Policy before submitting
it for approval and were pleased that the
AGM resolution received the support of a very
substantial majority of our shareholders.
During 2019, the Committee has also made
some changes to its approach to ensure that
we continue to be compliant with the new
remuneration provisions introduced as part
of the Code, effective for financial years
from 1 January 2019 onwards. You will see
this in the following paragraphs as well as in
our new ‘Remuneration at a Glance’ section
on page 85.
The alignment of executive remuneration
with wider company pay policy
The employees of TP ICAP are critical to
its long-term success and the Remuneration
Committee is responsible for developing
and maintaining formal and transparent
policies on remuneration for the
Company’s employees.
Our philosophy on remuneration, that
applies to all employees:
> We seek to attract and retain high
performing and motivated employees
and remunerate them with a competitive
base salary.
> We align reward with the delivery of the
Group’s business strategy, values, key
priorities and long term goals.
> We reward behaviours that both create
sustainable results in line with our core
values of honesty, integrity, respect and
excellence and do not encourage
excessive risk taking and are in line with
our current risk conduct framework.
> We align remuneration with the principle
of protection of customers and the
prevention of conflicts of interest.
> We deliver some elements of
compensation as shares in the Company
to align senior employee, Executive and
shareholder interests.
> We provide standard benefits that
apply across all employee groups.
During the year, the Committee reviewed
wider employee pay structures. Also,
following feedback received from
employees, the introduction of an all-
employee share scheme, in order to
encourage and support wider share
ownership across the employee population,
is actively being considered. This would
initially be made available for all UK
employees but the mechanism for making
a similar scheme available internationally
is being investigated.
The Committee also received very useful
feedback on the subject of wider workforce
pay from the discussions undertaken by the
three Non-executive Directors designated
to engage directly with the workforce on
the Board’s behalf. All three of the directors,
myself, Edmund Ng and Michael Heaney,
responsible for EMEA, Asia Pacific and the
Americas, respectively, are members of the
Remuneration Committee. The engagement,
covered in more detail in the Governance
report, has provided valuable insights and,
whilst most of the concerns raised have been
associated with softer issues, such as career
development and training, it has been
helpful to understand some employees’
views on their own remuneration.
www.tpicap.com 80
Governance report
Report of the Remuneration Committee continued
Strategic Rationale: the link between strategic priorities and incentive metrics
The performance measures in the variable incentive arrangements for 2019 were chosen because they support delivery of the strategy and
are critical to the Key Performance Indicators ensuring a transparent link between business performance and remuneration as shown in the
chart below.
Strategic Pillars
Electronification and
technology
Liquidity aggregation
Diversification
People, conduct and
compliance
Key Performance Indicators
Revenue
Growth
Underlying
Operating Profit
Margin
Contribution
(at constant
exchange rates)
Underlying
earnings per
share ('EPS')
Ratio of front
office to
support function
employees
Annual Bonus
Long-term Incentive Plan ('LTIP')
Measure
Link to Strategy
Link to KPIs
Measure
Link to Strategy
Link to KPIs
Underlying
Operating Profit
(£m)
> Key measure of
profitability
> Driven by revenue
growth and
operational excellence
Return on Equity
(%)
> Key measure of
shareholder value
Strategic
Performance
> Each Director has a
range of stretching
personal objectives
linked to delivery of the
strategic pillars
Relative TSR
> Focus on
outperformance of
the market
> Aligns with
shareholder
experience
> Key measure of
shareholder value
EPS (Compound
Annual Growth
Rate)
Annual Report and Accounts 2019
Strategic report Governance report Financial statements
81
How the performance ranges were
established for the variable incentives
Annual Bonus
When the Committee considered the
establishment of stretching target ranges
for the financial metrics in the annual bonus,
it anticipated that 2019 would be a
challenging year with the completion of the
integration being one of the key priorities
and continued uncertainty in the external
market, not least because of Brexit. It wanted
to set challenging targets that would serve
to motivate and incentivise the newly
appointed management team as it
undertook the continued transformation
of the business.
Underlying operating profit ('UOP') accounts
for 50% of the bonus outcome.
The Committee considered that a target
ahead of the UOP achieved in 2018, of
£276m, would be inappropriately
demanding as, at the beginning of the
year, the prospect of delivering at that level
was considered extremely remote. However,
it also felt that it was important that external
expectations for performance were reflected
in the targets and, consequently, set the UOP
at which on-target bonus would be paid at
the then level of market consensus of £260m.
Maximum payout would only be achieved if
the prior year was exceeded, by delivering at
least £280m of UOP, and the threshold was
set at £240m.
Underlying operating profit is one of the
most important drivers of performance in
Return on Equity ('RoE'), which accounts
for 20% of the overall bonus outcome. The
target ranges for RoE were set by reference
to those established for UOP. The RoE range
is from 8.9%, the threshold below which no
bonus is paid, 9.7% at target, up to 10.6%
for maximum pay-out under this element
of the bonus.
LTIP
The Committee has undertaken its annual
review of the metrics and ranges for the LTIP
ahead of the grant to be made in March
2020. In order to optimise alignment both
to shareholder experience and the strategic
focus of the business, a new measure of “New
Business Growth” is being introduced with a
20% weighting. Consequently, the weighting
attributed to EPS will be reduced to 30%,
from its current weighting of 50%. Relative
TSR will be unchanged at 50% of the total.
New Business Growth is defined as the
growth in underlying operating profit of the
sum of Energy & Commodities, Institutional
Services and Data & Analytics. Analyst
market valuations and investor and broker
feedback have shown that our non-Global
Broking businesses are valued on a higher
multiple basis, based on higher growth
and also for our Data & Analytics division
the recurring revenue nature of long-term
subscription contracts.
Diversifying earnings by increasing the
growth outside Global Broking is a key part
of our strategy to drive value to shareholders
and as such is the core rationale behind
this metric.
Against the background of an uncertain
market, the Committee was very pleased
with the excellent performance of the
executives during 2019. The delivery of UOP
of £279m and RoE of 10.4% resulted in
66.5%, out of a possible maximum of 70%,
being achieved on the financial metrics.
The Committee very carefully considered
whether it would be appropriate to exercise
its discretion to adjust the formulaic
outcome. It concluded that the results were
aligned with shareholder experience and
fairly represented the excellent performance
of the executives, having significantly
out-performed the consensus at the time
the targets were set.
During the year, the Executive Directors
successfully completed the three-year ICAP
integration, generating £80m of synergies.
Revenue diversification has increased
through continuous growth in the non-
broking businesses and a new executive
governance model has been implemented to
streamline revenue generation and fortify
other internal processes. Detailed medium-
term strategic priorities have been
developed focussing on aggregation,
electronification and diversification.
The threshold growth rate for New Business
Growth has been set at 10% p.a rising to 16%
p.a for maximum vesting on this metric. The
Committee considered these targets to
represent stretching levels of performance
which, if delivered, would result in significant
shareholder value.
Consequently, the Committee determined
that the Executive Directors' performances
against their strategic and personal
objectives merited a range of outcomes,
from 24% to 27.5%, out of a possible
maximum of 30%, as set out in detail in
the tables on pages 88 to 91.
Details of the targets for Relative TSR, EPS
and New Business Growth are shown on
page 98.
Performance and reward outcomes
for 2019
Annual bonus
In a mixed environment, TP ICAP delivered
improved underlying and reported
profitability in 2019.
LTIP
As reported last year, the Executive Directors
were granted awards under the new LTIP in
2019 and the awards they had held in the
Transformation Long-Term Incentive Plan
(‘T-LTIP’) were simultaneously forfeited.
Consequently, there is no LTIP vesting in the
year. The performance period for the 2019
LTIP award ends on 31 December 2021, with
a subsequent two-year post-vesting holding
period, and will be reflected in the Single
Figure Table in the 2021 Report.
www.tpicap.com 82
Governance report
Report of the Remuneration Committee continued
Salary
The salaries of the Executive Directors have
not been reviewed since their appointments
in 2018. Given the strong performance of
all three executives in 2019, the Committee
has approved increases in their salaries to
account for inflation and which are in line
with the salary budget of 3%, for 2020.
Details of the salaries for each Director
effective from 1 January 2020 are shown
on page 88.
It is important to state that the Company's
pension provision is capped at 6% of a
maximum fixed remuneration of £105,600
and no cash alternative, instead of a pension
contribution, is available to those individuals
who exceed the annual or lifetime
allowances. This means that the Executive
Directors receive minimal or no company
pension contributions, unlike many of their
peers in other FTSE250 companies, and
the Committee took this into consideration
when reviewing benchmark data.
In determining whether the total
remuneration earned by the Executive
Directors in 2019 was appropriate, the
Committee took account of the following:
> salary budgets which were set at 3%;
> the total bonus pool for all bonus-eligible
employees; and
> independent benchmarking of total
remuneration of equivalent roles in similar
organisations. The limited public data
available on the remuneration of
executives in TP ICAP’s direct competitors
shows that their executives have
substantially higher incentive
opportunities than those available at
TP ICAP. The Committee also reviewed
benchmark data for relevant UK-listed
peer groups including the FTSE250 and a
sub-group of FTSE250 Financial Services
companies.
Committee effectiveness
An independent external consultant
undertook a full year evaluation of the
operation and effectiveness of the
Committee during 2019, as part of the
wider Board evaluation. Details of the
outcome are provided in the Corporate
Governance Report.
Conclusions
The Committee has been focussed in 2019 on
the effective implementation of the newly
approved Directors’ Remuneration Policy
with particular consideration being given to
the establishment of appropriate
performance targets for the variable
incentive arrangements. We have also spent
more time, especially in the second half,
considering remuneration arrangements in
the wider workforce and this will be an area
of continued focus in 2020.
As set out earlier in my letter, we also
intend to consider how best to address the
attraction and retention concerns we have
identified, as a result of the higher reward
opportunities in our direct competitors, and
will consult with shareholders in the event
that any changes to the Remuneration Policy
are considered necessary.
I hope that you find the information in this
letter and in the new ’Remuneration at a
Glance’ section that follows to be helpful and
I would welcome any feedback you may
have. I look forward to seeing you at our
AGM and hope that you will support the
resolution for the Directors’ Remuneration
Report 2019.
Lorraine Trainer
Chairman
Remuneration Committee
10 March 2020
Governance
The Directors’ Remuneration Report
has been prepared in accordance with
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013, the
UKLA Listing Rules and the UK Corporate
Governance Code. The Companies Act
2006 requires the auditor to report to the
Company’s members on certain parts
of the Directors’ Remuneration Report
and to state whether in their opinion
those parts of the report have been
properly prepared in accordance with
the regulations.
The Remuneration Committee
Chairman’s statement, the Remuneration
at a Glance section and certain parts of
the Annual Report on Remuneration
(indicated in that report) are unaudited.
Definitions used in this report
‘Executive Director’ means any executive
member of the Board.
‘Senior Management’ means those
members of the Company’s Group
Executive Committee (other than the
Executive Directors) and the first level
of management below that level
including the direct reports to the Chief
Information Officer and the Global Head
of Operations.
‘Broker’ means front office revenue
generators; ‘Control Functions’ means
those employees engaged in functions
such as Compliance, Legal, HR, Finance,
Operations and Risk Control;
‘Remuneration Code’ means the
Remuneration Code of the FCA; and ‘2013
Regulations’ means the Large and
Medium-sized Companies and Groups
(Accounts and Reports) (Amendment)
Regulations 2013.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
83
Remuneration at a Glance
Key drivers of our Executive Remuneration Policy
The Remuneration Policy is designed to attract, motivate and retain employees with the necessary skills and experience to deliver the
strategy, in order to achieve the Group’s objectives and I can confirm that it operated broadly as intended.
As a reminder, the key drivers of our Policy are:
Drivers
Remuneration Policy
How delivered?
Alignment to
culture
Aligns the interests of the Executive Directors with the long-term
interests of shareholders and strategic objectives of the Group
and requires material share ownership to be built up over time
Non-financial objectives account for 30% of the annual bonus
and include delivery of the strategic priorities and embedding
the appropriate culture.
Clarity
Simplicity
Risk
Incentives that support the Group’s business strategy and align
executives to the creation of long-term shareholder value
Half of the bonus is deferred into shares with a three year
vesting period.
Reinforces a strong performance culture, across a range of
performance metrics, including behaviours, risk management,
customer outcomes and the development of the Group’s culture
in line with its values
Shares that vest under the LTIP are subject to a subsequent two
year holding period.
Executive Directors are required to build up shares in TP ICAP
plc and retain them after leaving for a period of two years.
Clear communication of our Remuneration Policy and reward
outcomes to stakeholders
Ensuring that our Remuneration Policy is clear and easily
understood
Complex reward structures are avoided and there is a clear link
between the strategy, KPIs and short and long term incentive
metrics so that the link between business performance and
reward outcomes is transparent.
Provides a balanced package between fixed and variable pay,
and long and short-term elements; and
The non-financial component of the bonus includes a specific
risk management objective.
Ensuring reward processes and policies are compliant with
applicable regulations, legislation and market practice, and are
operated within the bounds of the Board’s risk appetite.
The Remuneration Committee specifically reviews risk issues
before determining the total bonus pool and individual
incentive awards.
The Committee Chairman meets with Control Function heads in
January to consider any events that may require a reward
adjustment.
Predictability
Setting robust and stretching performance targets which
reward exceptional performance; and
Incentive targets are set by reference to budgets and strategic
plans as well as external forecasts, including consensus.
Setting remuneration within the limits established under the
Directors’ Remuneration Policy
Proportionality
Attract, retain and motivate the Executive Directors and senior
employees by providing total reward opportunities which,
subject to individual and Group performance, are competitive
within our defined markets
The Committee has discretion to make downward adjustments
to the amount of bonus earned or LTIP vesting if it considers the
outcomes are not a fair reflection of the overall business
performance.
Ensures that remuneration practices are consistent with and
encourage the principles of equality, inclusion and diversity
The Committee considers internal and external data when
setting remuneration for the Executive Directors.
Wider employee pay is considered when determining that of
our Executive Directors; and
The non-financial component of the bonus includes an
objective to promote Diversity and Inclusion.
Management and shareholder interests are aligned
www.tpicap.com 84
Governance report
Report of the Remuneration Committee continued
Remuneration Policy Summary Table
Purpose & link to
strategy
Key features
Implementation
in 2019
Implementation
in 2020
Salary
Pension &
benefits
Annual bonus
Reflects the scope of
individual
responsibilities to
attract and retain
high calibre
employees.
Provide basic
pension provision
and benefits in line
with other UK-based
employees.
Incentivises delivery
of TP ICAP’s
financial and
strategic targets.
Provides a direct link
between the
achievement of
annual performance
targets and
reward.
Reviewed periodically to ensure
not significantly out of line with
the market.
In line with the pension allowance
available to the wider UK
employee population: currently
6% of fixed remuneration up to a
cap of £105,600.
Medical cover and participation
in any schemes available to all
UK employees.
Annual assessment of
performance against strategic
and financial objectives
On-target performance delivers:
> CEO: 125% salary
> Other EDs: 100% salary
Maximum performance delivers:
> CEO: 250% salary
> Other EDs: 200% salary
Mandatory 50% deferral into
shares with a three-year deferral
period
Malus and clawback apply
No change on 2018:
N Breteau £650,000
R Stewart £425,000
P Price £425,000
(Page 87)
N Breteau and R Stewart
received pension
contributions of £3k and
£9k in 2019. P Price
exceeds the Life Time
Allowance and did not
receive any company
pension contribution
(Page 87)
Performance measures
and weightings:
Underlying Operating
Profit 50%
Return on Equity 20%
Strategic Performance
30%
(Pages 88 to 91)
Increases in line with salary
budget:
N Breteau £670,000
R Stewart £432,500
P Price £437,500
(Page 88)
No change on 2019
No change on 2019
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
85
Purpose & link to
strategy
Key features
Implementation
in 2019
Implementation
in 2020
Long-term
incentive plan
> Align Directors’
interests with
shareholders by
focusing on mid to
longer-term
shareholder
returns
Annual awards of conditional
shares vesting after three years,
subject to performance conditions
Subsequent two-year holding
period (except for any sale to
settle tax liability)
Maximum: 250% salary
Malus and clawback apply
Shareholding
requirements
> Align Directors’
interests with
shareholders by
focusing on longer-
term shareholder
returns, including
after cessation of
employment.
Share ownership requirements:
> CEO: 300% salary
> Other EDs: 200% salary
5 year period to achieve the
requirement
Post-employment: shares at a
level equal to:
> the lesser of 2x base salary or
the actual shareholding in
year one, and
> the lesser of 1x base salary or
the actual shareholding in
year two
Performance measures
and weightings:
> EPS CAGR (30%)
> Relative TSR (50%)
> New Business Growth
(20%)
> Threshold performance
delivers 20% pay-out
with 100% pay-out only
achieved for delivery of
stretching maximum
targets
No change on 2019
Performance measures,
equally weighted:
> EPS CAGR
> Relative TSR
> Threshold performance
delivers 20% pay-out
with 100% pay-out only
achieved for delivery of
stretching maximum
targets
Shareholdings as at
31 December 2019:
> N Breteau 252,193
> R Stewart 105,074
> P Price 147,468
(Page 93)
The full detail of the Executive Directors’ Remuneration Policy, approved in May 2019, can be viewed at www.tpicap.com
Performance/retention periods
TP ICAP plc’s incentive arrangements are designed to ensure good alignment with shareholder experience over the long-term.
2019
2020
2021
2022
2023
2024
Salary
Pensions and benefits
Annual bonus – cash
Annual bonus – deferral
LTIP
Shareholding requirements
Indicates a holding or deferral period
www.tpicap.com
86
Governance report
Report of the Remuneration Committee continued
Malus/Clawback Provisions
Incentive
How Malus and/or Clawback can be applied
Malus and clawback provisions apply to the whole annual bonus and the LTIP which enables the Committee to
recoup pay-outs under the Plan either by reducing or cancelling any unvested deferred awards or reclaiming amounts
paid.
The circumstances where it may apply include:
Bonus and LTIP
> a material or adverse misstatement of performance or a material misstatement of results for the period to which
the bonus related, or
> an Executive Director’s conduct is found to amount to gross misconduct and/or fraud, wilful dishonesty or
accounting malfeasance.
In addition, the Committee may make downward adjustments to the amount of bonus earned or to the LTIP
outcomes if they believe that they are not a fair reflection of the overall business performance or where there has
been a detrimental impact on the reputation of the business.
Illustration of the application of the Remuneration Policy (unaudited)
Total remuneration for each Executive Director for a minimum, target, maximum and maximum plus 50% share price growth is presented in
the charts below.
Illustration of the application of the
Director's Remuneration Policy – CEO
Illustration of the application of the
Director's Remuneration Policy – CFO
)
m
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£5.0
£4.0
£3.0
£2.0
£1.0
£0
£0.68m
100%
Minimum
£4.87m
52%
£4.03m
42%
42%
34%
£2.36m
36%
36%
29%
Target
17%
Maximum
14%
Maximum
+50% Share
Price Increase
)
m
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£3.0
£2.5
£2.0
£1.5
£1.0
£0.5
0
£0.45m
100%
Minimum
£2.93m
55%
£2.39m
45%
36%
29%
£1.42m
38%
30%
32%
Target
19%
Maximum
15%
Maximum
+50% Share
Price Increase
Fixed pay
Annual bonus
Long-term incentives
Fixed pay
Annual bonus
Long-term incentives
Annual Report and Accounts 2019
Strategic report Governance report Financial statements
87
Illustration of the application of the
Director's Remuneration Policy – GGC
)
m
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£3.0
£2.5
£2.0
£1.5
£1.0
£0.5
0
£0.44m
100%
Minimum
£2.96m
55%
£2.41m
45%
36%
30%
£1.43m
38%
31%
31%
Target
18%
Maximum
15%
Maximum
+50% Share
Price Increase
Fixed pay
Annual bonus
Long-term incentives
Annual Report on Remuneration (audited)
The Annual Statement made by the Remuneration Committee Chairman on pages 78 to 87 and this Annual Report on Remuneration
are subject to a shareholders’ advisory vote at the forthcoming AGM. Information in this report on pages 87 to 99 is audited except
where stated.
The single total remuneration for the Executive Directors who held office during the year-ended 31 December 2019 was as follows:
Salary
Taxable benefits3
Pension
Total fixed remuneration
Short-term variable4
Long term variable
Amount vested
Amount due to share price appreciation
Total variable remuneration
Total
Executive Directors
Nicolas Breteau1
Robin Stewart1
Philip Price2
2019
£000
650
3
3
656
1,528
–
–
–
1,528
2,184
2018
£000
312
1
2
315
442
–
–
–
442
757
2019
£000
425
3
9
437
769
–
–
–
769
1,206
2018
£000
204
1
3
208
227
–
–
–
227
435
2019
£000
425
3
–
428
795
–
–
–
795
1,223
2018
£000
140
1
–
141
152
–
–
–
152
293
1. Both Nicolas Breteau and Robin Stewart were appointed to the Board on 10 July 2018; remuneration for 2018 has been pro-rated accordingly.
2. Appointed to the Board on 3 September 2018; remuneration for 2018 has been pro-rated accordingly.
3. Taxable benefits represent private medical insurance.
4. 50% of the short-term variable pay is subject to deferral in ordinary shares.
www.tpicap.com
88
Governance report
Report of the Remuneration Committee continued
The single total remuneration for each of the Non-executive Directors who held office during the year-ended 31 December 2019 was
as follows:
Richard Berliand1
Angela Knight
Roger Perkin
Michael Heaney2
Edmund Ng
Lorraine Trainer3
Rupert Robson4
Stephen Pull4
David Shalders5
Fees
Benefits
Total
2019
£000
285
102
93
138
135
98
94
31
85
2018
£000
–
90
90
121
125
40
250
80
80
2019
£000
–
–
–
–
–
–
–
–
–
2018
£000
–
–
–
–
–
–
–
–
–
2019
£000
285
102
93
138
135
98
94
31
85
2018
£000
–
90
90
121
125
40
250
80
80
1. The remuneration figure of £285k comprises £235k in respect of Richard Berliand’s annual Chairmanship fees pro-rated for the year from his date of appointment and £50k
(excl. VAT) consultancy fees paid to his services company, Richard Berliand Limited. The consultancy fees were paid in respect of services provided between 22 January to
18 March 2019 prior to but in anticipation of his appointment, which are treated as remuneration for qualifying services and accordingly disclosed as part of his remuneration
total.
2. Appointed 15 January 2018.
3. Appointed 1 July 2018.
4. Retired from the Board on 15 May 2019.
5. Retired from the Board on 30 October 2019.
Fixed remuneration (audited)
For 2020, the Executive Directors’ base salaries have been reviewed and modest increases applied, in line with the employee budget.
Executive
Nicolas Breteau
Robin Stewart
Philip Price
Date of Appointment
10 July 2018
10 July 2018
3 September 2018
Base salary
effective from
1 January 2019
Base salary
effective from
1 January 2020
£650,000
£425,000
£425,000
£670,000
£432,500
£437,500
2019 annual bonus (audited)
For 2019, the annual bonus was based 70% on financial performance and 30% on strategic performance, with a maximum opportunity of
2.5x base salary for the CEO and 2x base salary for the CFO/GGC. Details of the 2019 financial measures and weightings, the targets set and
performance against these targets are provided in the table below:
Financial performance measure
Weighting
Threshold
performance
target (25% of
maximum)
Target
performance
target (60% of
maximum)
Maximum
performance
target (100% of
maximum)
Underlying operating profit
Return on Equity
Total for financial metrics
50%
20%
£240m
8.9%
£260m
9.7%
£280m
10.6 %
Actual
performance
achieved
£279m
10.4%
Weighted
payout
(% of maximum
total bonus)
48.7%
17.8%
66.5%
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
89
Details of the 2019 strategic objectives for each Executive Director, along with the corresponding performance assessment, are set out in the
following tables:
Nicolas Breteau
CEO Strategic Objectives
Develop the medium-term Group strategy in the context
of technological innovation. Complete work on re-
branding, harmonising this with medium-term strategic
aims. Achieve effective communication on this topic with
shareholders
Oversee the completion of the integration plan to deliver
the stated £75m run-rate savings. Drive optimisation of
business processes
Restructure the Executive Management Team and overall
governance model for TP ICAP including making
appropriate senior leadership changes to drive the
business forward and fostering the partnership between
support function and business leads
Develop and maintain constructive and positive
relationships and dialogue with regulatory bodies
Drive the delivery of the TP ICAP Risk Management
Framework
Drive and continue to embed the right culture for TP
ICAP with a focus on improving overall employee morale
and engagement
Remuneration Committee Discretion
Weighting1
Score Assessment of performance
7%
4%
3%
3%
4%
4%
5%
6.5% A very thorough and comprehensive process has
been undertaken and will be finalised in Q1 2020
ahead of the planned launch in Q2.
4% Completed and exceeded the target savings
delivering £80m.
3% A smaller Executive Management Team, with a
significant number of senior leadership changes and
new governance model, is operating effectively to
deliver results.
2% Further progress during 2019, especially with the
lead regulator, the FCA.
4% Excellent progress in the year on the design and
roll-out of the framework, allowing the gradual
softening of capital requirements.
3% Role model for the right culture and very effective
advocate through extensive engagement with
employees globally.
5% A strong first full year in role with good financial
results delivered whilst substantial progress has also
been made on the development of the future
strategy, embedding the appropriate culture and
ensuring effective risk management.
Total for strategic metrics
30%
27.5%
1
Expressed in percentage points summing to 30% in total. 30% being the proportion of the total bonus determined by reference to non-financial metrics.
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Governance report
Report of the Remuneration Committee continued
Robin Stewart
CFO Strategic Objectives
Increase the Group’s RCF and refinance the £80m retail
bond that matures in June 2019
Deepen and strengthen the overall finance function.
Oversee the development of a robust cost management
and expense control framework whilst ensuring the
maximisation of impact of the Belfast opportunity
Guide, in line with the Board’s agreed line in this matter,
the 2019 consensus. Engage with analysts to ensure an
orderly approach to understanding the TP ICAP results
for half and full year
Contribute to the simplification of the Group’s legal
entity structure to optimise the regulatory capital
resources whilst remaining alive to any countervailing
considerations
Develop relationships with key investors and analysts to
ensure TP ICAP’s strategy over the short, mid and longer
term is clearly articulated, subject to the Board’s agreed
line on mid and longer term strategy
Support the SREP programme and hold self and team
accountable for understanding and delivering within the
Enterprise Risk Management Framework
Drive and continue to embed the right culture for
TP ICAP with a focus on improving overall employee
morale and engagement
Remuneration Committee Discretion
Weighting1
Score Assessment of performance
4%
4%
4% This objective was fully achieved with the RCF being
increased (by £20m) and the bond issue significantly
over-subscribed.
3% Senior hires in the core Finance and Investor
Relations teams strengthened the function by
year-end; work underway on better cost
management analysis to be finalised in early 2020.
4%
4% This has been well-managed during a period of
transition in the Investor Relations team and eight
sell-side analysts now cover TP ICAP.
3%
2% This project is progressing well and is on track for
completion, under budget, in 2020.
4%
3% Multiple investor meetings have contributed to the
re-building of trust and confidence.
3%
3%
5%
2% Major finance initiatives for Risk 2.0 are on track.
3% Actively role modelled and advocated the
appropriate behaviours and culture.
3% Another good year. Importantly the function has
been strengthened and talent bench deepened.
Although this took longer than anticipated, it is well
positioned for the future.
Total for strategic metrics
30%
24%
1
Expressed in percentage points summing to 30% in total, 30% being the proportion of the total bonus determined by reference to non-financial metrics.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
91
Philip Price
GGC Strategic Objectives
Weighting1
Score Assessment of performance
Complete the roll-out of and validate the new governance
framework to deliver appropriate operational standards
Develop the Legal and Compliance function into a “best in
class” operation
Develop and maintain constructive and positive
relationships and dialogue with regulatory bodies
Lead the response to the FCA’s SREP requirements
Provision of appropriate, risk-based and proportionate
advice to the Board on legal and regulatory requirements
Undertake the lead role on SMCR – ensure TP ICAP is ready
and compliant with requirements
Drive and continue to embed the right culture for TP ICAP
with a focus on improving overall employee morale and
engagement
Remuneration Committee Discretion
3%
2%
3%
6%
4%
4%
3%
5%
3% FCA validation of UK regulated entities structure.
1% Excellent progress in both Compliance and Risk with
appropriate senior hires where skill gaps identified.
3% Improved relationships by increasing transparency
and improving the quality of communication,
especially with the lead regulator, the FCA.
6% Delivery of a successful Enterprise Wide Risk
Management Framework Target Operating Model
to FCA and EY to address concerns arising from
SREP resulting in the reduction by the FCA of the
currently applicable risk and governance scalars to
TP ICAP’s regulated entities’ Individual Capital
Guidance.
4% Trusted advisor providing accurate, timely and
comprehensive advice.
3% Successfully implemented and further work
underway to ensure effectively embedded.
3% A leading advocate for driving the right behaviour
and cultural change.
4% An excellent year in working to build strong
regulatory relationships and close out many
outstanding issues. Continued to strengthen the Risk
and Compliance departments across the firm. The
priority for 2020 is embedding this further
throughout the organisation.
Total for strategic metrics
30%
27%
1
Expressed in percentage points summing to 30% in total, 30% being the proportion of the total bonus determined by reference to non-financial metrics.
Total annual bonus outcome for 2019 performance
The total bonus for each Executive Director for the year to 31 December 2019 is therefore as follows (audited):
Measure
Underlying Operating Profit
Return on Equity
Strategic Performance
Total bonus:
Weighting
CEO bonus
(% Max bonus)
CFO bonus
(% Max bonus)
GGC bonus
(% Max bonus)
50%
20%
30%
100%
48.7%
17.8%
27.5%
94.0%
48.7%
17.8%
24.0%
90.5%
48.7%
17.8%
27.0%
93.5%
50% of the total bonus for each Executive Director will be awarded in Company shares and deferred for three years in accordance with the
Rules of the Executive Director Bonus Plan.
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Governance report
Report of the Remuneration Committee continued
Long-term incentives
Transformation LTIP Units awarded in 2017 (audited)
Awards were originally granted, to the former Executive Directors, under the Transformation LTIP on 19 May 2017, vesting after three years on
19 May 2020 based on performance over the three-year integration period for Tullett Prebon and ICAP, from 1 January 2017 to 31 December
2019. The awards were granted over Units in a plan pool, the value of which is determined at the end of the performance period. To the
extent that the awards vest, the Units will be converted into shares, at an average share price determined shortly prior to the vesting date.
The maximum available pool was £60 million. The current Executive Directors were awarded units under the T-LTIP prior to their
appointment. These awards were relinquished following the 2019 grant under the new LTIP, as a condition of their participation in it, as set
out in the Directors’ Remuneration Policy.
Executive
Director
Nicolas Breteau
Robin Stewart
Philip Price
Units
Units
Units
Nature of
award
Number of
units awarded
Threshold
value
(25% vesting)
Target value
(50% vesting)
Maximum
value
(capped value
at vesting)
8,200
£1.23m
£2.46m
£4.92m
Units
Forfeited
8,200
5,700
£815,000
£1.71m
£3.42m
5,700
4,755
£713,000
£1.43m
£2.85m
4,755
Maximum
Remaining
Units
End of
performance
period
0 31 December
2019
0 31 December
2019
0 31 December
2019
The performance conditions for the T-LTIP awards are as follows:
Performance measure
Absolute TSR2
Underlying EPS3
Threshold
performance
target
(25% vesting)1
8% p.a.
48p
Target
performance
target
(50% vesting)1
11% p.a.
54p
Stretch
performance
target
(100% vesting)1
14% p.a.
60p
Weighting
75%
25%
Straight-line interpolation applies in between levels. None of the award vests if performance does not reach threshold.
1
2 End TSR is based on the average during the first quarter of 2020.
3 For the financial year ending 31 December 2019.
Once vested, Plan Units will be converted into fully paid ordinary shares in the capital of the Company. Any shares received will be subject to
a post-vesting holding period of between one and three years from the date of grant following the vesting date of the Plan Units, such that
one third of shares must be held for one year, one third for two years and one third for three years from the date of grant. Malus (withholding)
and claw-back (recovery) provisions apply to the awards for three years from vesting in exceptional circumstances, including a material
misstatement of performance, a material misstatement of results, or gross misconduct and/or fraud, wilful dishonesty or accounting
malfeasance.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
93
Long Term Incentive Plan (LTIP) (audited)
Conditional Share Awards under the LTIP – subject to performance conditions and retention period
On 26 June 2019, conditional share awards under the LTIP were granted to the Executive Directors. The three year period over which
performance will be measured is 1 January 2019 to 31 December 2021. The performance measures are EPS growth and relative TSR, equally
weighted. 20% will vest at threshold with straight line vesting up to 100% at maximum. Compound annual growth ('CAGR') in EPS of 3% p.a.
is required for threshold vesting rising to 10% p.a. for maximum vesting. For TSR, threshold vesting occurs where TP ICAP's TSR equals the TSR
of the median company at the end of the performance period; maximum vesting occurs where TP ICAP's TSR exceeds the TSR of the
comparator company at the upper quartile.
Executive Director
Nicolas Breteau
Robin Stewart
Philip Price
Date of
Grant
26/06/19
26/06/19
26/06/19
Granted
during the
year1
548,042
358,335
358,335
Face Value
£000
Face Value
% salary
£1,625
£1,063
£1,063
250%
250%
250%
Vesting
Date
June 2022
June 2022
June 2022
End of
Retention
Period
June 2024
June 2024
June 2024
1 The face value of the awards was converted into a number of shares using a share price of £2.9651, being the closing share price on the dealing day immediately preceding the
grant date, adjusted for SDRT and commission to replicate a theoretical purchase price to the Company.
Directors’ interests (audited)
The interests (all beneficial) as at 31 December 2019 in the ordinary share capital of the Company were as follows:
Director
Rupert Robson4
Richard Berliand5
Nicolas Breteau
Robin Stewart
Philip Price
Angela Knight
Roger Perkin
Stephen Pull4
David Shalders6
Edmund Ng
Lorraine Trainer
Michael Heaney
LTIP shares3
-
-
548,042
358,335
358,335
-
-
-
-
-
-
-
Unvested
shares2
–
–
237,193
86,359
115,295
–
–
–
–
–
–
–
Shares1
59,034
50,000
15,000
18,715
32,173
2,150
5,000
30,000
14,016
20,000
10,000
40,000
1 There have been no changes to the holdings between 31 December 2019 and 10 March 2020.
2 Shares awarded under the Deferred Bonus Plan for 2016, 2017 and 2018 as appropriate. Share vesting is governed by the rules of the Plan.
3 LTIP shares are subject to performance conditions, details of which are set out in the table entitled 'Conditional Share Awards under the LTIP'
4 Retired from the Board on 15 May 2019; holding as at 15 May 2019
5 Appointed to the Board on 19 March 2019 and became Chairman on 15 May 2019.
6 Retired from the Board on 30 October 2019; holding as at 30 October 2019.
www.tpicap.com 94
Governance report
Report of the Remuneration Committee continued
Shareholding requirements (unaudited)
Executive Directors must build a holding in minimum value of the Company’s ordinary shares equivalent to 300% of base salary in respect of
the Chief Executive and 200% of base salary for all other Executive Directors. The normal expectation is that this is built up over a maximum
five-year period from appointment to the Board. All Executive Directors who served during the year complied with the Company’s
requirements in respect of their interests in the shares of the Company.
Advice provided to the Remuneration Committee (unaudited)
During 2019, PricewaterhouseCoopers provided external remuneration advice to the Remuneration Committee. They advised on aspects of
our Remuneration Policy and practice, including the benchmarking of directors' compensation, trends in market practice and regulatory
disclosures. PricewaterhouseCoopers was appointed by the Remuneration Committee, initially in November 2018 to provide advice to the
Remuneration Committee on the development of the new Directors’ Remuneration Policy and was subsequently appointed as the sole
advisor to the Committee. In addition, PricewaterhouseCoopers provided tax advice to the Company. PricewaterhouseCoopers is a
signatory to the Remuneration Consultants Group Code of Conduct which requires it to provide objective and impartial advice.
The Remuneration Committee has satisfied itself that the advice provided is independent and objective. The fees payable for advice
provided by PricewaterhouseCoopers in 2019 were £62,970 (excluding VAT). The Committee is satisfied that these fees are appropriate for
the work undertaken.
Allen & Overy LLP provided advice on law and regulation in relation to employee incentive matters. This firm also provided general legal
advice to the Company.
Remuneration Committee
Members of the Remuneration Committee during the year were: Lorraine Trainer (Chairman from 15 May 2019), Angela Knight, Edmund Ng,
Michael Heaney, Stephen Pull (former Chairman, retired from the Board 15 May 2019) and David Shalders (retired from the Board 30 October
2019).
Outside directorships (unaudited)
Nicolas Breteau did not have any outside directorships from which he received any remuneration during 2019.
Robin Stewart did not have any outside directorships from which he received any remuneration during 2019.
Philip Price did not have any outside directorships from which he received any remuneration during 2019.
Payments for loss of office and payments to past Directors
There were no payments made for loss of office or remuneration payments made to former Executive Directors during the year.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
95
Performance graph (unaudited)
A graph depicting the Company’s TSR in comparison to other companies in the FTSE 250 index (excluding investment trusts) in the ten years
to 31 December 2019 is shown below.
The Board believes that the above index is most relevant as it comprises listed companies of similar size.
Total shareholder return
£
)
d
e
s
a
b
e
r
(
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
350
300
250
200
150
100
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
TP ICAP
FTSE 250 Index (excluding Investment Trusts)
Source: Eikon from Refinitiv
This graph shows the value, by 31 December 2019, of £100 invested in TP ICAP on 31 December 2009, compared with the value of £100
invested in the FTSE 250 (excluding investment trusts) Index on the same date.
www.tpicap.com
96
Governance report
Report of the Remuneration Committee continued
Chief Executive Remuneration History (unaudited)
Year ended
Name
31 December 2019
31 December 2018
31 December 2017
31 December 2016
31 December 2015
31 December 2014
31 December 2013
31 December 2012
31 December 2011
31 December 2010
Nicolas Breteau
Nicolas Breteau1
John Phizackerley2
John Phizackerley
John Phizackerley
John Phizackerley
John Phizackerley3
Terry Smith4
Terry Smith
Terry Smith5
Terry Smith5
Terry Smith5
Total
Remuneration
£000
Annual bonus
% of max
payout
LTI % of max
vesting
2,184
757
325
1,6666
3,381
2,250
720
433
2,856
3,153
4,929
4,344
94.0%
56.6%
0%
88%
94%
80%
N/A
N/A
51%
N/A
N/A
N/A
0%
0%
0%
62%6
74%
N/A
N/A
–
–
–
45%
–
For the 6 month period from 10 July 2018. Percentage represents the overall percentage score achieved on individual performance targets.
1
2 Total Remuneration includes base salary received through to termination date of 9 July 2018.
3 For the 4 month period from 1 September 2014.
4 For the 8 month period from 1 January 2014 – 31 August 2014.
5 Variable remuneration was uncapped in the years 2009-2012.
6 2017 reflects the final LTIS paid out in 2018 relating to 2017 reduced by the forfeiture of deferred bonus relating to 2017.
Change in Chief Executive Remuneration (unaudited)
Chief Executive Officer¹
Senior Management2
% change
Salary
% change
Benefits
2%
5%
21%
10%
% change in
annualised
bonus
payment
65%
3%
1 This table shows the change of the CEO’s fixed and variable remuneration compared on a like for like basis to Senior Management employed throughout 2018 and 2019.
The percentage changes take into account the sum of the salary and benefits (including pension) received by both the former and current CEO’s for 2018 and the current CEO
only for 2019. The former CEO did not receive a bonus in 2018.
2 A large portion of the Group’s remuneration is payable to Brokers, who earn a significant portion of their income as contractual bonus based on a formula linked to revenue.
The Remuneration Committee considered that comparison of the CEO’s remuneration with that of Senior Management would accordingly be more meaningful than
comparison with all employees.
3 Year on year benefit change is high as the current CEO participates in the defined contribution Company pension scheme and the former CEO did not participate.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
97
Chief Executive Pay Ratio (unaudited)
The table below compares the 2019 single total figure of remuneration for the CEO with that of the Group's UK employees who are paid at
the 25th percentile (lower quartile), 50th percentile (median) and 75th Percentile (upper quartile).
Year
2019
Method
A
25th percentile
pay ratio
38:1
50th percentile
pay ratio
20:1
75th percentile
pay ratio
9:1
The Committee chose to use Option A to calculate the ratio as the data was available and it considered that approach to be the most
accurate. The employee data was taken as at 31 December 2019; employee means anyone employed under a contract of service. A full-time
equivalent total was created for part-time employees and the remuneration of employees hired during the year was annualised. The resulting
list was then ranked to identify the individuals at the 25th, 50th and 75th percentiles compared to whom the ratios were calculated. The table
below sets out the salary and total pay and benefits for the three identified quartile point employees.
Salary
Total pay and benefits
25th percentile
50th percentile
75th percentile
£55,000
£57,064
£51,667
£109,716
£95,000
£230,554
As this is the first year in which the ratio has been published, the Committee considered that it was too early to draw much insight from it but
noted that the ratio was lower than it may be in future years as the CEO's pay does not include any LTIP vesting in the year.
Relative importance of spend on remuneration (unaudited)
The table below shows the expenditure and percentage change in overall spend on employee remuneration and dividend payments:
£m
Employee remuneration1
Shareholder dividends paid2
2019
1,152
94
2018
1,120
94
% change
3
–
Employee remuneration includes employer’s social security costs and pension contributions.
1
2 Shareholder dividends comprises the dividends paid.
Voting at the 2019 AGM (unaudited)
At the AGM held on 15 May 2019 the following votes were cast in respect of the Report on Directors’ Remuneration and the Directors'
Remuneration Policy:
Approval of the Directors’ Remuneration Report
Approval of the Directors’ Remuneration Policy
For1,2
Against1
Votes
withheld1
Number
%
Number
%
Number
497,072,044
483,902,686
98.95
5,255,105
96.33 18,425,092
1.05
3.67
432,272
431,643
1 Votes ‘For’ and ‘Against’ are expressed as a percentage of votes cast. A ‘Vote withheld’ is not a vote in law.
2 Votes ‘For’ includes those giving the Chairman discretion.
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Governance report
Report of the Remuneration Committee continued
2020 AGM (unaudited)
Copies of the Executive Directors’ employment contracts and the Non-executive Directors’ letters of appointment are available for inspection
at the registered office of the Company during normal business hours and will be available for shareholders to view at the 2020 AGM.
Executive Directors have rolling contracts which may be terminated by either the Company or the Director giving 12 months' notice. Details
of the contractual arrangements for the Non-executive Directors are set out in the Directors' Remuneration Policy, available on the
Company's website.
Implementation of Remuneration Policy in 2020 (unaudited)
Executive Directors
The Executive Directors' salaries have been increased in line with the all-employee budget as disclosed on page 88.
The annual bonus will continue to be based on the existing scorecard of financial and strategic performance targets aligned to the business
strategy, conduct and risk KPIs, with no change to the maximum bonus opportunities of 2.5x base salary and 2x base salary for the Chief
Executive Officer and CFO/GGC respectively. The split between financial and strategic performance targets will, for 2020, be 70% financial
targets and 30% strategic targets. Details of targets will be disclosed retrospectively in the next Directors’ Remuneration Report. 50% of the
total bonus awarded will be deferred into shares vesting after three years.
For the LTIP grant to be made in March 2020, the following performance conditions will apply:
EPS – 30%
EPS growth (CAGR)
Less than 3% p.a.
3% p.a.
10%+ p.a.
Relative TSR – 50%
TSR performance versus comparator group
Below median
Median
Upper quartile or above
Vesting
(% of max)
0%
20%
100%
Vesting
(% of max)
0%
20%
100%
A threshold vesting level of 20% occurs where TP ICAP’s TSR equals the TSR of the median company at the end of the performance period.
The maximum vesting occurs where TP ICAP’s TSR exceeds the TSR of the comparator company at the upper quartile.
New Business Growth – 20%
New Business Growth (CAGR)
Less than 10% p.a.
10% p.a.
16%+ p.a.
Vesting
(% of max)
0%
20%
100%
New Business Growth is defined as the growth in underlying operating profit of the sum of Energy & Commodities, Institutional Services and
Data & Analytics.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
99
Non-executive Directors’ fees (audited)
Non-executive Director (‘NED’) fees have been reviewed for 2020, taking into account the increased responsibilities and time commitment
given the current regulatory environment as well as a review of those fees payable for equivalent roles in similar sized Financial Services
companies in the UK. Committee participation and regional Engagement NED fees will remain unchanged but the base fee will increase to
£70,000 for 2020. The fees for chairing the Audit, Risk and Remuneration Committees have each been increased to £25,000 per annum and
the Senior Independent Director fee has also been increased to £15,000 per annum. The overseas-based NED supplement has simultaneously
been reduced by £10,000. The NED fees for 2020 are as follows:
£m
Chairman
Base fee
Senior Independent Director
Chairman of the Audit, Risk and Remuneration Committees
Membership of the Audit, Risk and Remuneration Committees
Overseas-based NED supplement
Regional Engagement NED
Fees from
1 January 2020
Fees from
1 January 2019
£300,0001
£70,000
£15,000
£25,000
£10,000
£35,000
£10,000
£300,0001
£60,000
£12,500
£22,500
£10,000
£45,000
£10,000
1 The fee for the Chairman of the Board increased with effect from the apppintment of Richard Berliand on 15 May 2019 to £300,000 per annum. The former chairman received
a fee of £250,000 per annum.
Non-executive Directors received no other benefits or other remuneration other than reimbursement of all reasonable and properly
documented travel, hotel and other incidental expenses incurred in the performance of their duties and any tax and social costs arising
thereon. NEDs based overseas will be reimbursed for reasonable costs of travel and accommodation for trips to London to attend Board
meetings. Any UK tax liability thereon will be met by the Company.
Approved by the Board and signed on its behalf by
Lorraine Trainer
Chairman
Remuneration Committee
10 March 2020
www.tpicap.com 100
Governance report
Directors’ Report
The Directors present their report together with the audited consolidated Financial Statements for the year ended 31 December 2019.
As permitted by legislation, the following statements required under company law, the UK Listing Authority’s Listing Rules, Disclosure
Guidance and Transparency Rules are set out elsewhere in this Annual Report and are incorporated into this report by reference:
Disclosure
Location
Board of Directors (pages 50 to 51)
Consolidated Income Statement (page 113)
Strategic report (page 1)
Corporate governance report (page 46)
Board of Directors
Results for the year
Dividends
DTR 7 Corporate Governance Statement (excluding DTR 7.2.6,
which is covered by this Directors’ Report)
How the Directors have engaged with and had regard to employees Corporate governance report (pages 58 to 59)
Corporate governance report (pages 60 to 61)
How the Directors have had regard to the need to foster business
relationships with stakeholders
Directors’ share interests
Financial instruments
Viability statement
Going concern statement
Principal risks and uncertainties
Human rights and equal opportunities
Related party transactions
Business activities and performance
Financial position
Key risk analysis
Loans and other provisions
Report of the Remuneration Committee (page 93)
Note 28 to the Consolidated Financial Statements (pages 156 to 162)
Strategic report (page 33)
Strategic report (page 33)
Strategic report (pages 36 to 39)
Strategic report (pages 40 to 45)
Note 38 to the Consolidated Financial Statements (page 175)
Strategic report (pages 1 to 5)
Strategic report (pages 20 to 32)
Strategic report (pages 36 to 39)
Notes 3, 24 and 26 to the Consolidated Financial Statements
(pages 129 to 130 and 153 to 155)
Note 29 to the Consolidated Financial Statements (page 162)
Strategic report (pages 6 to 14)
Page 105
Issued share capital
Future developments
Statement of Directors’ responsibilities
Listing Rule 9.8.4 disclosure
The trustee of the Employee Benefit Trust waived its rights to receive dividends on shares held by them. Information regarding long-term
incentive schemes is contained within the Report of the Remuneration Committee (pages 78 to 99) and incorporated into this report by
reference. Otherwise than as indicated, there are no further disclosures to be made under Listing Rule 9.8.4.
Post balance sheet events
There have been no significant events between 31 December 2019 and the date of approval of this Annual Report which would require a
change to or additional disclosure in the Annual Report.
Directors
The biography for each of the current Directors is set out on pages 50 to 51. Each of these Directors served throughout the year except for
Richard Berliand, who was appointed to the Board of Directors on 19 March 2019, and subsequently appointed as Chairman after the AGM
on 15 May 2019, and Angela Crawford-Ingle and Mark Hemsley, who will be appointed to the Board of Directors on 16 March 2020. Rupert
Robson, Stephen Pull, and David Shalders also served as Directors during the year, Mr Robson and Mr Pull stepping down on 15 May 2019
and Mr Shalders on 30 October 2019.
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
101
With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association (the ‘Articles’), the UK
Corporate Governance Code, the Companies Act 2006 and related legislation. The Articles may be amended by special resolution of the
shareholders and were last amended at the Company’s AGM in May 2017. At each AGM, all the Directors who held office on the date seven
days before the Notice of that AGM must retire from office and each Director wishing to continue to serve must submit themselves for election
or re-election by shareholders. In accordance with corporate governance requirements, having served nine years on the Board, Angela Knight
has indicated her intention to step down and accordingly will not be seeking re-election at the AGM.
Directors’ conflicts
The Directors are required to notify the Company of any potential conflicts of interest that may affect them in their roles as Directors of
TP ICAP. All new potential conflicts of interest are recorded and reviewed by the full Board as they arise, and the Register of Conflicts and
Relevant Situations is reviewed at each scheduled meeting of the Nominations and Governance Committee.
Directors’ indemnity arrangements
The Company maintains liability insurance for its Directors and officers and, to the extent allowed by law and the Company’s Articles of
Association, the Company provides a standard indemnity against certain liabilities that Directors may incur in their capacity as a Director of
the Company. The liability insurance provided to a Director does not provide cover in the event of dishonest or fraudulent activity. The
principal employer of the Tullett Prebon Pension Scheme has given indemnities to the Directors who are trustees of that Scheme.
Share capital and control
The Company has one class of ordinary shares, which carry no right to fixed income. Each share carries the right to one vote at general
meetings of the Company.
No shareholder has any special rights of control over the Company’s share capital and all issued shares are fully paid. The voting rights of the
ordinary shares held by the Tullett Prebon plc Employee Benefit Trust 2007 are exercisable by the trustees in accordance with their fiduciary
duties. The right to receive dividends on these shares has been waived. Details of employee share schemes are set out in Note 31 to the
Consolidated Financial Statements.
Restriction on transfer of securities and voting rights
There are no specific restrictions on the size of a holding nor on the transfer of shares, both of which are governed by the provisions in the
Articles and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result
in restrictions on the transfer of securities or on voting rights, nor are there any arrangements by which, with the Company’s co-operation,
financial rights carried by securities are held by a person other than the holder of those securities.
Powers of the Directors
As granted by shareholders at the 2019 AGM, the Directors have the authority to allot shares and to buy the Company’s shares in the market
up to a maximum of approximately 10% of its issued share capital. At the last AGM, resolutions were passed to authorise the Directors to allot
up to a nominal amount of £93,889,396.50 (subject to restrictions specified in the relevant resolutions) and to purchase up to 56,333,638
ordinary shares.
At the date of this Annual Report, no shares had been purchased in the market under the authority granted at the 2019 AGM. The allotment
and buy-back authorities will expire at the conclusion of the 2020 AGM or, if earlier, on 1 July 2020 unless renewed before that time. These
authorities are set to expire so similar authorities will be proposed at this year’s AGM.
Further powers of the Directors are described in the Schedule of Matters Reserved for the Board, which is available on the Company’s website:
https://www.tpicap.com/investors/corporate-governance.
www.tpicap.com 102
Governance report
Directors’ Report continued
Significant agreements and change of control
The Company’s banking facilities give the lenders the right not to renew loans and to cancel commitments in the event of a change of control.
The Company’s share schemes contain provisions relating to change of control, subject to the satisfaction of relevant performance conditions
and pro-rata for time, if appropriate.
The Company is not aware of any other significant agreements that take effect, alter or terminate upon a change of control of the Company
following a takeover bid, nor any agreements with the Company and its employees or Directors for compensation for loss of office or
employment that occurs because of a takeover bid.
Research and development
The Group uses various bespoke information technology in the course of its business and undertakes research and development in order to
enhance that technology.
Employees
The Group is an inclusive employer and considers diversity to be of utmost importance. We give full and fair consideration to applications we
receive from disabled persons and support those who incur a disability whilst employed at the Group. All opportunities of career progression
and development, including promotions and training, are equally applied to all employees.
All employees recieve information of relevance to them and factors affecting the Group’s performance through emails and our regular
Group-wide newsletter, The Wire. The Group consults employees, taking into account their views in the Board’s decision making processes,
using surveys to encourage employee involvement in the Company’s performance. This is supplemented by the workforce engagement
programme, in which Lorraine Trainer, Edmund Ng and Michael Heaney have been commissioned to represent the Board in engaging with
the workforce in EMEA, Asia Pacific and the Americas respectively. For more information on the progress made over the course of 2019, see
pages 58 to 59.
Political donations
It is the Company’s policy not to make cash contributions to any political party. However, within the normal activities of the Group, there may
be occasions when an activity might fall within the broader definition of ‘political expenditure’ contained within the Companies Act 2006.
Therefore, the Company will seek to obtain shareholder authority at the 2020 AGM to make limited political donations. During 2019, no
political donations were made by the Group (2018: £nil).
Statement of Directors’ responsibilities
The Directors’ Statement regarding their responsibility for preparing the Annual Report is set out on page 105.
Substantial shareholders
As at 31 December 2019, and at the date of this Annual Report, the following table shows the holdings of the Company’s total voting rights
attached to the Company’s issued ordinary share capital, that have been notified to the Company in accordance with DTR 5:
Schroders plc
Jupiter Asset Management
Liontrust Asset Management
Silchester International Investors LLP
Blackrock, Inc.
31 December
2019
%
10 March
2020
%
15.36
8.57
5.07
5.04
4.85
14.25
8.57
5.07
5.04
4.85
Annual Report and Accounts 2019 Strategic report Governance report Financial statements
103
Greenhouse gas emissions
TP ICAP, as an office-based business, is not engaged in activities that are generally regarded as having a high environmental impact. The
Board is, however, acutely aware of society's increasing focus on this area and is committed to safeguarding the environment as much as it
can by adopting and introducing policies and new initiatives at both Board and Group level.
The Group continues to report its carbon footprint according to best practice principles, reporting on scope 1 and scope 2 emissions. This year,
TP ICAP has chosen to include aspects of its scope 3 emissions for the first time. Whilst this provides a greater insight into the organisational
carbon footprint, there are elements of the Group’s scope 3 emissions which are not reported on such as commuting, waste disposal and
investments, consequently the figures presented fall short of a full scope 3 carbon footprint. The estimated Group greenhouse gas emissions
for 2018 and 2019 are set out below:
Global GHG emission data for the period: 2019
Emission source
Scope 1
Combustion of fuel and operation of facilities
Fugitive Emissions
Scope 2
Electricity, heat, steam and cooling purchased for own use
Total
Company's chosen intensity measurement: Emissions reported above per employee
Including Scope 3 emissions – Business Travel only
Total
Company's chosen intensity measurement: Emissions reported above per employee
Tonnes of CO2e
Current
reporting
year
Previous
reporting
year
661
311
6,599
7,571
1.5
3,665
11,236
2.3
2,311
382
10,889
13,583
2.8
n/a
n/a
n/a
The emission statistics were calculated by Anthesis Consulting Group. The analysis included all material sources of emissions for which the
Group is directly responsible. Scope 1 emissions are direct emissions including those from combustion of fuels and owned vehicles. Scope 2
emissions are indirect emissions resulting from electricity purchased for office buildings.
The estimate covers all TP ICAP operations that are consolidated in the financial statements. Data was collected for the Group’s
representative sites of different sizes in each region (representing approximately 51% of the total TP ICAP recorded emissions). This data was
then used in an extrapolation exercise to estimate the consumption across the rest of the Group’s global operations. Data was also collected
for the Group’s managed or owned transport activity. This activity data was then converted to greenhouse gas estimates using the UK
Government’s GHG Conversion Factors for Company Reporting 2017 and the International Energy Agency’s Overseas Electricity factors for
overseas electricity consumption.
Auditor
Deloitte LLP have expressed their willingness to continue in office as auditor and a resolution to re-appoint them will be proposed at the
forthcoming AGM.
www.tpicap.com 104
Governance report
Directors’ Report continued
Disclosure of information to the auditor
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
> so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
> the Director has taken all steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit
information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Annual General Meeting
The AGM of the Company will be held at 2.15 p.m. on 13 May 2020. Details of the resolutions to be proposed at the AGM are set out in a
separate Notice of Meeting together with explanatory notes set out in a separate circular. The Notice of Meeting will be sent to all
shareholders entitled to receive such notice. Only members on the register of members of the Company as at close of business on 11 May 2020
(or two days before any adjourned meeting, excluding non-business days) will be entitled to attend and vote at the AGM. Any proxy must be
lodged with the Company’s registrars or submitted to CREST at least 48 hours, excluding non-business days, before the AGM or any adjourned
meeting thereof.
Resolutions dealing with the Report of the Remuneration Committee, the authority to allot shares, disapplication of pre-emption rights,
authority to buy back shares and to convene general meetings other than annual general meetings on no less than 14 days’ notice will be
put to the AGM as special business.
Approved by the Directors and signed on behalf of the Board.
Richard Cordeschi
Group Company Secretary
10 March 2020
Annual Report and Accounts 2019 Statement of Directors’ Responsibilities
Strategic report Governance report Financial statements
105
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law, the Directors are required to
prepare financial statements for the Group in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the
European Union and Article 4 of the International Accounting Standard (‘IAS’) Regulation and have chosen to prepare the parent company
financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law), including FRS 101 ‘Reduced Disclosure Framework’.
Under company law, the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company for that period.
In the case of Group Financial Statements, IAS 1 requires that Directors:
> select and apply accounting policies properly;
> present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
> provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
> make an assessment of the Company’s ability to continue as a going concern.
In the case of the Parent Company Financial Statements, the Directors are required to:
> select suitable accounting policies and apply them consistently;
> make judgements and estimates that are reasonable and prudent;
> state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the
Financial Statements; and
> prepare the Financial Statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial
Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
Each of the Directors, whose names and functions are listed in the Corporate Governance report on pages 50 to 51 and who are Directors as
at the date of this Statement of Directors' Responsibilities, confirm to the best of their knowledge that:
> the Financial Statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
> the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces; and
> the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position, performance, business model and strategy.
On behalf of the Board
Nicolas Breteau
Chief Executive Officer
10 March 2020
www.tpicap.com 106
106
Financial Statements
Independent Auditor’s Report
to the Members of TP ICAP plc
In our opinion:
>
>
>
>
the financial statements of TP ICAP plc (“the Parent Company”) and its subsidiaries (“the Group”) give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s profit for the year then ended;
the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted
by the European Union;
the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group Financial
Statements, Article 4 of the IAS Regulation.
We have audited the financial statements which comprise:
>
>
>
>
>
>
>
>
>
the Consolidated Income Statement;
the Consolidated Statement of Comprehensive Income;
the Consolidated Balance Sheet;
the Consolidated Statement of Changes in Equity;
the Consolidated Cash Flow Statement;
the related Consolidated Financial Statement Notes 1 to 39;
the Parent Company Balance Sheet;
the Parent Company Statement of Changes in Equity; and
the related Parent Company Financial Statement Notes 1 to 10.
The financial reporting framework that has been applied in the
preparation of the Group Financial Statements is applicable law
and IFRSs as adopted by the European Union.
The financial reporting framework that has been applied in the
preparation of the Parent Company Financial Statements is applicable
law and United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to Group and Parent Company for the
year are disclosed in Note 5 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
> Name Passing revenue;
Impairment of goodwill and other intangibles; and
>
> Presentation and disclosure of integration related items.
Materiality
Scoping
Key audit matters are consistent with the prior year.
The materiality that we used for the Group financial statements was £9.6m which was determined with reference to underlying
profit before tax.
Our Group audit scope focused primarily on six locations (2018: seven locations) with 28 subsidiaries (2018: 30 subsidiaries)
subject to a full scope audit and five subsidiaries (2018: three subsidiaries) subject to specified audit procedures.
In aggregate, these subsidiaries represent the principal business units within each of the Group’s operating segments. These
subsidiaries account for 98% (2018: 97%) of the Group’s total assets, 98% (2018: 99%) of the Group’s total liabilities, 88%
(2018: 87%) of the Group’s revenue and 85% (2018: 87%) of the Group’s expenses.
Changes to the subsidiaries subject to full scope audit and specified audit procedures arise based on their relative contribution
to the Group’s results. There have been no other significant changes to our audit approach compared to prior year.
Significant changes
in our approach
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
106
>
>
>
>
>
>
>
>
>
>
>
>
>
Independent Auditor’s Report
to the Members of TP ICAP plc
In our opinion:
by the European Union;
the financial statements of TP ICAP plc (“the Parent Company”) and its subsidiaries (“the Group”) give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s profit for the year then ended;
the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted
the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group Financial
Statements, Article 4 of the IAS Regulation.
We have audited the financial statements which comprise:
the Consolidated Income Statement;
the Consolidated Statement of Comprehensive Income;
the Consolidated Balance Sheet;
the Consolidated Statement of Changes in Equity;
the Consolidated Cash Flow Statement;
the related Consolidated Financial Statement Notes 1 to 39;
the Parent Company Balance Sheet;
the Parent Company Statement of Changes in Equity; and
the related Parent Company Financial Statement Notes 1 to 10.
The financial reporting framework that has been applied in the
preparation of the Group Financial Statements is applicable law
and IFRSs as adopted by the European Union.
The financial reporting framework that has been applied in the
preparation of the Parent Company Financial Statements is applicable
law and United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to Group and Parent Company for the
year are disclosed in Note 5 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
> Name Passing revenue;
>
Impairment of goodwill and other intangibles; and
> Presentation and disclosure of integration related items.
Key audit matters are consistent with the prior year.
Materiality
Scoping
profit before tax.
The materiality that we used for the Group financial statements was £9.6m which was determined with reference to underlying
Our Group audit scope focused primarily on six locations (2018: seven locations) with 28 subsidiaries (2018: 30 subsidiaries)
subject to a full scope audit and five subsidiaries (2018: three subsidiaries) subject to specified audit procedures.
In aggregate, these subsidiaries represent the principal business units within each of the Group’s operating segments. These
subsidiaries account for 98% (2018: 97%) of the Group’s total assets, 98% (2018: 99%) of the Group’s total liabilities, 88%
(2018: 87%) of the Group’s revenue and 85% (2018: 87%) of the Group’s expenses.
Significant changes
in our approach
Changes to the subsidiaries subject to full scope audit and specified audit procedures arise based on their relative contribution
to the Group’s results. There have been no other significant changes to our audit approach compared to prior year.
Strategic report Governance report
Financial statements
107
107
Conclusions relating to going concern, principal risks and viability statement
Going concern
> We have reviewed the Directors’ statement in Note 2 to the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material
uncertainties to the Group’s and Parent Company’s ability to continue to do so over a period of at least twelve months from
the date of approval of the financial statements.
> We considered as part of our risk assessment the nature of the Group, its business model and related risks including where
relevant the potential impact of Brexit, the requirements of the applicable financial reporting framework and the system of
internal control. We evaluated the directors’ assessment of the Group’s ability to continue as a going concern, including
challenging the underlying data and key assumptions used to make the assessment, and evaluated the directors’ plans for
future actions in relation to their going concern assessment.
> We are required to state whether we have anything material to add or draw attention to in relation to that statement
required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in
the audit.
Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the knowledge we
obtained in the course of the audit, including the knowledge obtained in the evaluation of the Directors’ assessment of the
Group’s and the Parent Company’s ability to continue as a going concern, we are required to state whether we have anything
material to add or draw attention to in relation to:
>
>
>
the disclosures on pages 36 to 39 that describe the principal risks, procedures to identify emerging risks, and an explanation
of how there are being managed or mitigated;
the Directors’ confirmation on page 36 that they have carried out a robust assessment of the principal and emerging risks
facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or
the Directors’ explanation on page 33 as to how they have assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the Group required by Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Going concern is the
basis of preparation
of the financial
statements that
assumes an entity
will remain in
operation for a
period of at least
12 months from the
date of approval
of the financial
statements. We
confirm that
we have nothing
material to
report, add or
draw attention
to in respect of
these matters.
Viability means
the ability of the
Group to continue
over the time
horizon considered
appropriate by
the directors. We
confirm that
we have nothing
material to
report, add or
draw attention
to in respect of
these matters.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Name Passing revenue
Refer to the summary of significant accounting policies on page 122 and “Our business model” on page 4.
Key audit matter
description
Name Passing revenue is earned for the service of matching buyers and sellers of financial instruments.
The Group is not a counterparty to the trade and commissions are invoiced for the service provided by the Group. It accounts for
a majority of the Group’s revenue of £1,833m.
As invoices for services provided are not issued until the end of each month, the cash collection period is typically longer than for
other revenue streams. We identified a risk of material misstatement of revenue, due to fraud or error, related to invoices past
due or where post year-end trade adjustments or credit notes arise.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
108
108
Financial Statements
Independent Auditor’s Report
to the Members of TP ICAP plc continued
How the scope of our
audit responded to
the key audit matter
We obtained an understanding of relevant controls relating to Name Passing invoicing and cash collection.
We confirmed a sample of trades to cash received throughout the year. We agreed a further sample of Name Passing
transactions, which were outstanding at year-end, to cash received post year-end or where amounts remained unpaid to other
evidence to corroborate the validity of the revenue booked.
Key observations
We review communications with counterparties and tested a sample of post year-end trade adjustments and credit notes to
evaluate whether these items were accurate valid.
No issues were identified through our testing of past due Name Passing revenue or in relation to post year-end trade
adjustments and credit notes.
Impairment of goodwill and other intangibles
Refer to the summary of significant accounting policies Note 3 on page 122, accounting estimates and judgements Note 3 on page 131, the
intangible assets arising on consolidation Note 13 on page 141 and the other intangible assets Note 14 on page 143.
Key audit matter
description
As required by IAS 36, goodwill and other intangible assets are reviewed for impairment at least annually. Determining
whether the goodwill of £993m, other intangible assets arising on consolidation of £518m and other intangible assets of £61m
are impaired requires an estimation of the recoverable amount of the Group’s cash generating units (“CGUs”), using the higher
of the value in use or fair value less costs to sell.
The value in use approach was used to assess the recoverable amount of all CGUs.
The value in use approach involves discounting expected future cash flows and hence requires the selection of suitable
discount rates and forecast future growth rates. It is therefore inherently subjective with an increased risk of material
misstatement due to error or fraud. The value in use of each CGU can be sensitive to changes in underlying assumptions. We
focused our testing on the Asia Pacific CGU where we identified increased sensitivity to the forecast future growth rate and
discount rate assumptions.
An impairment of £24m was recorded in the year for the Asia Pacific CGU.
We obtained an understanding of relevant controls relating to the impairment of goodwill and other intangibles. We
performed detailed analysis of the Group’s assumptions used in the annual impairment review, in particular forecast future
growth rates, the cash flow projections and discount rates used by the Group in its impairment tests of the CGUs. We
challenged cash flow forecasts and growth rates by evaluating recent performance, trend analysis and comparing growth
rates to those achieved historically and to external market data where available. We worked with our internal valuations
specialists to independently derive discount rates which we compared to the rates used by the Group and we benchmarked
discount rates to available external peer group data.
How the scope of our
audit responded to
the key audit matter
Key observations
We re-performed the Group’s assessment of whether the impairment tests were sensitive to reasonably possible changes in
assumptions and cash flows to determine whether the Group’s disclosures of sensitivities in the financial statements were
sufficient and appropriate.
We concluded that the Directors’ valuation used in the impairment test and the recognition of an impairment charge in
respect of the Asia Pacific CGUs was appropriate.
The cash flow forecasts used in the annual impairment review were consistent with the most recent financial budgets
approved by the Board and were reasonable in the context of recent business performance. The growth rates used by
management were reasonable and the discount rate was within a reasonable range.
Presentation and disclosure of integration related items
Refer to the basis of preparation Note 2 on page 119 and Note 5 on page 135.
Key audit matter
description
The Group reports profit before “acquisition, disposal and integration related items” of £115m before taxation of which £34m
related to integration.
Judgement is required in determining and applying the Group’s policy on integration related items. There is a risk that items
that reflect the underlying performance of the Group are incorrectly presented as integration related items, whether due to
fraud or error. In addition, there is a risk that undue prominence is given to underlying results compared to the statutory results
of the Group.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
108
Independent Auditor’s Report
to the Members of TP ICAP plc continued
How the scope of our
audit responded to
the key audit matter
We obtained an understanding of relevant controls relating to Name Passing invoicing and cash collection.
We confirmed a sample of trades to cash received throughout the year. We agreed a further sample of Name Passing
transactions, which were outstanding at year-end, to cash received post year-end or where amounts remained unpaid to other
evidence to corroborate the validity of the revenue booked.
We review communications with counterparties and tested a sample of post year-end trade adjustments and credit notes to
evaluate whether these items were accurate valid.
Key observations
No issues were identified through our testing of past due Name Passing revenue or in relation to post year-end trade
Impairment of goodwill and other intangibles
adjustments and credit notes.
Refer to the summary of significant accounting policies Note 3 on page 122, accounting estimates and judgements Note 3 on page 131, the
intangible assets arising on consolidation Note 13 on page 141 and the other intangible assets Note 14 on page 143.
Key audit matter
description
As required by IAS 36, goodwill and other intangible assets are reviewed for impairment at least annually. Determining
whether the goodwill of £993m, other intangible assets arising on consolidation of £518m and other intangible assets of £61m
are impaired requires an estimation of the recoverable amount of the Group’s cash generating units (“CGUs”), using the higher
of the value in use or fair value less costs to sell.
The value in use approach was used to assess the recoverable amount of all CGUs.
The value in use approach involves discounting expected future cash flows and hence requires the selection of suitable
discount rates and forecast future growth rates. It is therefore inherently subjective with an increased risk of material
misstatement due to error or fraud. The value in use of each CGU can be sensitive to changes in underlying assumptions. We
focused our testing on the Asia Pacific CGU where we identified increased sensitivity to the forecast future growth rate and
discount rate assumptions.
An impairment of £24m was recorded in the year for the Asia Pacific CGU.
How the scope of our
audit responded to
the key audit matter
We obtained an understanding of relevant controls relating to the impairment of goodwill and other intangibles. We
performed detailed analysis of the Group’s assumptions used in the annual impairment review, in particular forecast future
growth rates, the cash flow projections and discount rates used by the Group in its impairment tests of the CGUs. We
challenged cash flow forecasts and growth rates by evaluating recent performance, trend analysis and comparing growth
rates to those achieved historically and to external market data where available. We worked with our internal valuations
specialists to independently derive discount rates which we compared to the rates used by the Group and we benchmarked
discount rates to available external peer group data.
We re-performed the Group’s assessment of whether the impairment tests were sensitive to reasonably possible changes in
assumptions and cash flows to determine whether the Group’s disclosures of sensitivities in the financial statements were
Key observations
We concluded that the Directors’ valuation used in the impairment test and the recognition of an impairment charge in
sufficient and appropriate.
respect of the Asia Pacific CGUs was appropriate.
The cash flow forecasts used in the annual impairment review were consistent with the most recent financial budgets
approved by the Board and were reasonable in the context of recent business performance. The growth rates used by
management were reasonable and the discount rate was within a reasonable range.
Presentation and disclosure of integration related items
Refer to the basis of preparation Note 2 on page 119 and Note 5 on page 135.
Key audit matter
description
related to integration.
The Group reports profit before “acquisition, disposal and integration related items” of £115m before taxation of which £34m
Judgement is required in determining and applying the Group’s policy on integration related items. There is a risk that items
that reflect the underlying performance of the Group are incorrectly presented as integration related items, whether due to
fraud or error. In addition, there is a risk that undue prominence is given to underlying results compared to the statutory results
of the Group.
Strategic report Governance report
Financial statements
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109
How the scope of our
audit responded to
the key audit matter
We obtained an understanding of relevant controls relating to the classification of items as integration related.
We reviewed the recognition of integration related items to assess whether it was in line with the Group’s policy.
For a sample of items we obtained supporting evidence to assess whether the items relate to integration or should be
presented as part of the Group’s underlying results.
We challenged the prominence given to underlying results relative to the Group’s statutory results and whether the
presentation was misleading. We read the description of the basis of underlying results and whether it was consistently
applied. We also tested the completeness and accuracy of the reconciliation between underlying and statutory results.
We did not identify any material items that did not meet the Group’s policy on integration related items set out in Note 5.
Key observations
We considered that the presentation of the Group’s underlying results is appropriately explained, is understandable and that
the reconciliation to the Group’s statutory results is complete and accurate. We considered that appropriate prominence has
been given to the statutory results.
Our application of materiality
Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
Basis for determining
materiality and rationale
for the benchmark applied
£9.6m (2018: £10.2m)
We have used a purely profit based measure as a basis for determining materiality as we considered this to be the
most appropriate. Our approach to determining materiality is consistent with the prior year.
For the 2019 Group Financial Statements, we have determined our materiality to be £9.6m on the basis of
approximately 5% of normalised1 underlying profit before tax which equates to less than 1% of total equity.
£4.8m (2018: £4.1m)
For the 2019 Parent Company Financial Statements, we have determined our materiality to be £4.8m by considering
a number of factors including Group materiality and performance materiality and the relative significance of Parent
Company to the Group. This equates to 50% of Group materiality and less than 1% of Parent Company total equity.
Parent Company materiality
Basis for determining
materiality and rationale
for the benchmark applied
Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed
the materiality for the financial statements as a whole. Group performance materiality was set at 70% of Group materiality for the 2019 audit (2018: 70%).
In determining performance materiality we considered that the control environment remains decentralised and reliant on manual processes, and
enhancements are required to the information technology environment. However, we also considered:
> our past experience of the audit, which has indicated a low number of uncorrected misstatements identified in prior periods; and
> our risk assessment, which has indicated no changes in the business that could affect our ability to forecast potential misstatements.
Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.5m (2018: £0.5m), as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
Identification and scoping of components
Our Group audit scope focused primarily on six locations (2018: seven locations) with 28 subsidiaries (2018: 30 subsidiaries) subject to a full scope audit
and five subsidiaries (2018: three subsidiaries) subject to specified audit procedures. These subsidiaries account for 98% (2018: 97%) of the Group’s total
assets, 98% (2018: 99%) of the Group’s total liabilities, 88% (2018: 87%) of the Group’s revenue and 85% (2018: 87%) of the Group’s expenses. The
subsidiaries were selected to provide an appropriate basis of undertaking audit work to address the risks of material misstatement including those
identified above. Our audits of each of the subsidiaries were performed using lower levels of materiality based on their size relative to the Group. The
materiality for each subsidiary audit ranged from £3.4m to £4.0m.
We tested the Group’s consolidation process and carried out analytical procedures to confirm that there were no significant risks of material
misstatement in the aggregated financial information of the remaining subsidiaries not subject to a full scope audit or specified audit procedures.
Our consideration of the control environment
The Group uses a number of different IT systems across components and we worked with our IT specialists to assess General IT controls for relevant
systems. The control environment remains decentralised, reliant on manual processes with improvements required to the IT environment in order for us to
adopt a controls reliance approach. Management continue to implement improvements to the existing environment.
1 We have determined normalised underlying profit before tax of £188m as underlying profit before tax of £230m less amortisation of intangible assets arising on
consolidation of £42m. Amortisation of intangible assets arising on consolidation is a recurring cost and therefore reflects ongoing business performance.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
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110
110
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Financial Statements
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of TP ICAP plc continued
to the Members of TP ICAP plc continued
Revenue
Expenses
Total assets
Total liabilities
12%
12%
2%
2%
15%
15%
8%
8%
86%
86%
77%
77%
2%
2%
98%
98%
2%
2%
98%
98%
Full scope 86%
Specified audit procedures 2%
Full scope
Full scope
Revenue
Revenue
86%
86%
Full scope 77%
Specified audit procedures 8%
77%
77%
Expenses
Expenses
Full scope 98%
Specified audit procedures 0%
Total assets
Total assets
98%
98%
Full scope 98%
Specified audit procedures 0%
Total liabilities
Total liabilities
98%
98%
Specified audit procedures
Specified audit procedures
Analytical procedures only 12%
2%
2%
Analytical procedures only 15%
8%
8%
Analytical procedures only 2%
0%
0%
Analytical procedures only 2%
0%
0%
Analytical procedures only
Analytical procedures only
12%
12%
15%
15%
2%
2%
2%
2%
Working with other auditors
Working with other auditors
The Senior Statutory Auditor visited the US and Singapore during the audit to meet local management and to oversee the audits of the subsidiaries
The Senior Statutory Auditor visited the US and Singapore during the audit to meet local management and to oversee the audits of the subsidiaries
based in the Americas and Asia. The Group audit team performed a remote file review of the work performed by five other component auditors. The
based in the Americas and Asia. The Group audit team performed a remote file review of the work performed by five other component auditors. The
Group audit team maintained dialogue with all component auditors throughout all phases of the audit and received written reports from component
Group audit team maintained dialogue with all component auditors throughout all phases of the audit and received written reports from component
auditors setting out the results of their audit procedures.
auditors setting out the results of their audit procedures.
Other information
Other information
The Directors are responsible for the other information. The other information comprises the information included in the
The Directors are responsible for the other information. The other information comprises the information included in the
Annual Report including the Strategic report and the Governance report, other than the financial statements and our
Annual Report including the Strategic report and the Governance report, other than the financial statements and our
auditor’s report thereon.
auditor’s report thereon.
We have nothing to
We have nothing to
report in respect of
report in respect of
these matters.
these matters.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated.
the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is
a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to
work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other
information include where we conclude that:
information include where we conclude that:
> Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and
> Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group’s position, performance, business model and strategy, is materially inconsistent with our
shareholders to assess the Group’s position, performance, business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
knowledge obtained in the audit; or
> Audit committee reporting – the section describing the work of the Audit Committee does not appropriately address
> Audit committee reporting – the section describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee; or
matters communicated by us to the Audit Committee; or
> Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement
> Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement
required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.
disclose a departure from a relevant provision of the UK Corporate Governance Code.
Responsibilities of Directors
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation
for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend
to liquidate the group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
to liquidate the group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
110
110
Independent Auditor’s Report
Independent Auditor’s Report
to the Members of TP ICAP plc continued
to the Members of TP ICAP plc continued
12%
12%
2%
2%
15%
15%
8%
8%
86%
86%
77%
77%
2%
2%
98%
98%
98%
98%
0%
0%
2%
2%
2%
2%
98%
98%
98%
98%
0%
0%
2%
2%
Revenue
Revenue
Expenses
Expenses
Total assets
Total assets
Total liabilities
Total liabilities
Full scope
Full scope
Specified audit procedures
Specified audit procedures
Analytical procedures only
Analytical procedures only
86%
86%
2%
2%
12%
12%
77%
77%
8%
8%
15%
15%
Working with other auditors
Working with other auditors
The Senior Statutory Auditor visited the US and Singapore during the audit to meet local management and to oversee the audits of the subsidiaries
The Senior Statutory Auditor visited the US and Singapore during the audit to meet local management and to oversee the audits of the subsidiaries
based in the Americas and Asia. The Group audit team performed a remote file review of the work performed by five other component auditors. The
based in the Americas and Asia. The Group audit team performed a remote file review of the work performed by five other component auditors. The
Group audit team maintained dialogue with all component auditors throughout all phases of the audit and received written reports from component
Group audit team maintained dialogue with all component auditors throughout all phases of the audit and received written reports from component
auditors setting out the results of their audit procedures.
auditors setting out the results of their audit procedures.
Other information
Other information
auditor’s report thereon.
auditor’s report thereon.
The Directors are responsible for the other information. The other information comprises the information included in the
The Directors are responsible for the other information. The other information comprises the information included in the
Annual Report including the Strategic report and the Governance report, other than the financial statements and our
Annual Report including the Strategic report and the Governance report, other than the financial statements and our
We have nothing to
We have nothing to
report in respect of
report in respect of
these matters.
these matters.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated.
the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is
a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to
work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other
information include where we conclude that:
information include where we conclude that:
> Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and
> Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group’s position, performance, business model and strategy, is materially inconsistent with our
shareholders to assess the Group’s position, performance, business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
knowledge obtained in the audit; or
> Audit committee reporting – the section describing the work of the Audit Committee does not appropriately address
> Audit committee reporting – the section describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee; or
matters communicated by us to the Audit Committee; or
> Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement
> Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement
required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.
disclose a departure from a relevant provision of the UK Corporate Governance Code.
Responsibilities of Directors
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation
for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend
to liquidate the group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
to liquidate the group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Strategic report Governance report
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111
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws and
regulations are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform
audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations,
we considered the following:
>
>
the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies,
key drivers for directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management, Internal Audit and the Audit Committee about their own identification and assessment of the risks of
irregularities;
> any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
>
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance, including
their assessment of open litigation and regulatory matters as disclosed in note 26 and 35;
> detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
>
>
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
the matters discussed among the audit engagement team including significant component audit teams and involving relevant internal
specialists, including tax, pensions, valuations and IT regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: Name Passing revenue, presentation of integration related items
and the annual impairment test. In common with all audits under ISAs (UK), we are also required to perform specific procedures to
respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and
regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the included the relevant provisions of the UK Companies Act 2006, Listing Rules, pensions
legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with
which may be fundamental to the Group’s ability to operate or to avoid a material penalty, such as prudential regulatory requirements.
Audit response to risks identified
As a result of performing the above, we identified Name Passing revenue, presentation of integration related items and the annual impairment
test as key audit matters related to the potential risk of fraud. The key audit matters section of our report explains the matters in more detail and
also describes the specific procedures we performed in response to those key audit matters. Our procedures to respond to risks identified included
the following:
>
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws
and regulations described as having a direct effect on the financial statements;
> enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential litigation and claims;
> performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with HMRC and
>
regulators, including the FCA;
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business; and
>
> where actual or suspected non-compliance with laws and regulations was identified, we performed specific audit procedures to identify and
address the risks of material misstatement in the financial statements, including making direct enquiries of external legal counsel, reviewing
relevant correspondence with the regulator or judiciary body and reviewing the disclosures in note 26 and note 35 of the financial statements.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
TP ICAP Annual Report and Accounts 2019
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112
112
Financial Statements
Independent Auditor’s Report
to the Members of TP ICAP plc continued
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
>
>
the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the Parent Company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic report or the Directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
> we have not received all the information and explanations we require for our audit; or
> adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns.
>
We have nothing
to report in respect
of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration
have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting
records and returns.
Other matters
Auditor tenure
We were first appointed as auditors by a predecessor company of the Parent Company upon its listing in 2001. We were appointed to audit its
financial statements for the year ending 31 December 2001 and subsequent periods. The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is 19 years, covering the years ending 31 December 2001 to 31 December 2019.
We have nothing
to report in respect
of these matters.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Alan Chaudhuri
(Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
10 March 2020
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
112
>
>
Independent Auditor’s Report
to the Members of TP ICAP plc continued
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the Parent Company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic report or the Directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
> we have not received all the information and explanations we require for our audit; or
> adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
>
the Parent Company financial statements are not in agreement with the accounting records and returns.
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration
have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting
We have nothing
to report in respect
of these matters.
We have nothing
to report in respect
of these matters.
Directors’ remuneration
records and returns.
Other matters
Auditor tenure
We were first appointed as auditors by a predecessor company of the Parent Company upon its listing in 2001. We were appointed to audit its
financial statements for the year ending 31 December 2001 and subsequent periods. The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is 19 years, covering the years ending 31 December 2001 to 31 December 2019.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Alan Chaudhuri
(Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
10 March 2020
Consolidated Income Statement
for the year ended 31 December 2019
Strategic report Governance report
Financial statements
113
113
2019
Revenue
Administrative expenses
Other operating income
Operating profit
Finance income
Finance costs
Profit before tax
Taxation
Profit after tax
Share of results of associates and joint ventures
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share
– Basic
– Diluted
2018
Revenue
Administrative expenses
Other operating income
Operating profit
Finance income
Finance costs
Profit before tax
Taxation
Profit after tax
Share of results of associates and joint ventures
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share
– Basic
– Diluted
Acquisition,
disposal and
integration
costs
(Note 5)
£m
Exceptional
items
(Note 5)
£m
Notes
Underlying
£m
4
5
5,6
8
9
10
17,18
11
11
4
5
6
8
9
10
17,18
11
11
1,833
(1,570)
16
279
6
(55)
230
(55)
175
15
190
189
1
190
33.8p
33.5p
1,763
(1,499)
12
276
5
(36)
245
(63)
182
12
194
191
3
194
34.2p
33.9p
–
(115)
–
(115)
–
–
(115)
15
(100)
–
(100)
(100)
–
(100)
–
(160)
–
(160)
–
–
(160)
20
(140)
–
(140)
(140)
–
(140)
–
(31)
9
(22)
–
–
(22)
–
(22)
–
(22)
(22)
–
(22)
–
(23)
–
(23)
–
–
(23)
4
(19)
–
(19)
(19)
–
(19)
Total
£m
1,833
(1,716)
25
142
6
(55)
93
(40)
53
15
68
67
1
68
12.0p
11.9p
1,763
(1,682)
12
93
5
(36)
62
(39)
23
12
35
32
3
35
5.7p
5.7p
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
114
114
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes
Equity instruments at FVTOCI – net change in fair value
Taxation relating to items not reclassified
Items that may be reclassified subsequently to profit or loss:
Effect of changes in exchange rates on translation of foreign operations
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Notes
37
19
10
2019
£m
68
(52)
1
19
(32)
(44)
(44)
(76)
(8)
(8)
–
(8)
2018
£m
35
(2)
7
1
6
49
49
55
90
86
4
90
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
114
Strategic report Governance report
Financial statements
115
115
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Consolidated Balance Sheet
as at 31 December 2019
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes
Equity instruments at FVTOCI – net change in fair value
Taxation relating to items not reclassified
Items that may be reclassified subsequently to profit or loss:
Effect of changes in exchange rates on translation of foreign operations
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Notes
37
19
10
2019
£m
68
(52)
1
19
(32)
(44)
(44)
(76)
(8)
(8)
–
(8)
2018
£m
35
(2)
7
1
6
49
49
55
90
86
4
90
Non-current assets
Intangible assets arising on consolidation
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment in associates
Investment in joint ventures
Other investments
Deferred tax assets
Retirement benefit assets
Other long term receivables
Current assets
Trade and other receivables
Financial investments
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Lease liabilities
Current tax liabilities
Short term provisions
Net current assets
Non-current liabilities
Interest bearing loans and borrowings
Lease liabilities
Deferred tax liabilities
Long term provisions
Other long term payables
Retirement benefit obligations
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Notes
13
14
15
16
17
18
19
21
37
22
22
20
34
23
24
25
26
24
25
21
26
27
37
29, 30(a)
30(a)
30(a)
30(b)
30(c)
30(c)
30(c)
2019
£m
1,511
61
72
91
58
28
20
3
–
26
1,870
49,371
148
676
50,195
52,065
(49,305)
(11)
(23)
(48)
(21)
(49,408)
787
(678)
(117)
(83)
(26)
(21)
(2)
(927)
(50,335)
1,730
141
17
1,384
(1,205)
1,375
1,712
18
1,730
2018
£m
1,594
69
74
–
53
26
20
4
55
20
1,915
22,798
133
667
23,598
25,513
(22,735)
(144)
–
(55)
(31)
(22,965)
633
(498)
–
(123)
(30)
(64)
(3)
(718)
(23,683)
1,830
141
17
1,384
(1,158)
1,430
1,814
16
1,830
The Consolidated Financial Statements of TP ICAP plc (registered number 5807599) were approved by the Board of Directors and
authorised for issue on 10 March 2020 and are signed on its behalf by
Nicolas Breteau
Chief Executive Officer
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
116
116
Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Equity attributable to equity holders of the parent (Note 30)
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Reverse
acquisition
reserve
£m
Re-
valuation
reserve
£m
Hedging
and
translation
£m
Own
shares
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
equity
£m
Total
£m
141
–
17
–
1,384
–
(1,182)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
141
17
1,384
(1,182)
4
–
1
1
–
–
–
–
–
5
31
–
(11)
–
1,430
67
1,814
67
16 1,830
68
1
(43)
(43)
–
–
–
–
–
–
–
–
2
(7)
–
–
(33)
(75)
(1)
(76)
34
(94)
(3)
–
3
5
(8)
(94)
(1)
(7)
3
5
–
(1)
(8)
(95)
–
–
3
–
(1)
(7)
6
5
(12)
(16)
1,375
1,712
18 1,730
2019
Balance at
1 January 2019
Profit for the year
Other
comprehensive
(loss)/income for
the year
Total comprehensive
(loss)/income for the
year
Dividends paid
Share settlement of
share-based awards
Own shares acquired
for employee trusts
Increase in non-
controlling interests
Credit arising
on share-based
awards
Balance at
31 December 2019
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
116
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Strategic report Governance report
Financial statements
117
117
Equity attributable to equity holders of the parent (Note 30)
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Reverse
Re-
Hedging
acquisition
valuation
reserve
reserve
translation
£m
£m
Own
shares
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
equity
£m
Total
£m
Equity attributable to equity holders of the parent (Note 30)
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Reverse
acquisition
reserve
£m
Re-
valuation
reserve
£m
Hedging
and
translation
£m
Own
shares
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
equity
£m
Total
£m
2018
Balance at
1 January 2018
Adjustment on initial
application of IFRS 9
Adjusted balance at
1 January 2018
Profit for the year
Other
comprehensive
income/(loss) for
the year
Total comprehensive
income for the year
Issue of ordinary shares
Dividends paid
Gain on disposal of
equity instruments at
FVTOCI
Share settlement of
share-based awards
Own shares acquired
for employee trusts
Credit arising
on share-based
awards
Balance at
31 December 2018
139
–
139
–
–
–
2
–
–
–
–
–
17
–
17
–
–
–
–
–
–
–
–
–
1,378
(1,182)
–
–
1,378
–
(1,182)
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
141
17
1,384
(1,182)
1
–
1
–
7
7
–
–
(4)
–
–
–
4
(17)
(10)
1,494
1,820
13
1,833
–
(17)
–
48
48
–
–
–
–
–
–
–
(4)
(4)
(10)
–
1,490
32
1,816
32
–
13
3
(4)
1,829
35
–
–
–
–
–
4
(5)
–
(1)
54
1
55
31
(2)
(94)
86
6
(94)
4
–
(1)
90
6
(95)
4
(4)
–
5
–
–
(5)
5
–
–
–
–
–
–
(5)
5
31
(11)
1,430
1,814
16
1,830
141
–
17
–
1,384
(1,182)
(11)
1,430
1,814
67
67
16 1,830
1
68
2019
Balance at
1 January 2019
Profit for the year
Other
comprehensive
(loss)/income for
the year
Total comprehensive
(loss)/income for the
year
Dividends paid
Share settlement of
share-based awards
Own shares acquired
for employee trusts
Increase in non-
controlling interests
Credit arising
on share-based
awards
Balance at
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
and
£m
31
–
(43)
(43)
–
–
–
–
–
–
–
–
–
2
–
–
(7)
4
–
1
1
–
–
–
–
–
5
(33)
(75)
(1)
(76)
34
(94)
(3)
–
3
5
(8)
(94)
(1)
(7)
3
5
–
(1)
(8)
(95)
–
–
3
–
(1)
(7)
6
5
31 December 2019
141
17
1,384
(1,182)
(12)
(16)
1,375
1,712
18 1,730
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
118
118
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 December 2019
Cash from operating activities
Investing activities
(Purchase)/sale of financial investments
Sale of equity instruments at FVTOCI
Purchase of equity investments at FVTOCI
Interest received
Dividends from associates and joint ventures
Expenditure on intangible fixed assets
Purchase of property, plant and equipment
Deferred consideration paid
Investment in associates
Acquisition consideration paid
Cash acquired with acquisitions
Net cash flows from investment activities
Financing activities
Dividends paid
Dividends paid to non-controlling interests
Dividend equivalents paid on share-based awards
Sale of equity to non-controlling interests
Own shares acquired for employee trusts
Drawdown of revolving credit facility
Repayment of revolving credit facility
Funds received from loans from related parties
Repayment of loans from related parties
Gain on derivative financial instruments
Funds received from issue of Sterling Notes
Repayment/repurchase of Sterling Notes
Bank facility arrangement fees and debt issue costs
Payment of lease liabilities
Net cash flows from financing activities
Net increase in cash and cash equivalents
Net cash and cash equivalents at the beginning of the year
Adjustment on initial application of IFRS 9
Effect of foreign exchange rate changes
Net cash and cash equivalents at the end of the year
Cash and cash equivalents
Overdrafts
Cash and cash equivalents at the end of the year
Notes
33
12
34
34
2019
£m
148
(20)
1
(1)
5
10
(20)
(13)
(12)
(5)
–
–
(55)
(94)
(1)
(1)
6
(7)
39
(91)
35
(38)
3
250
(149)
(2)
(21)
(71)
22
667
–
(13)
676
686
(10)
676
2018
£m
149
4
7
–
3
10
(26)
(47)
(3)
(2)
(18)
1
(71)
(94)
(1)
–
–
(5)
87
(35)
–
–
–
–
–
(3)
–
(51)
27
622
(1)
19
667
680
(13)
667
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
118
Consolidated Cash Flow Statement
for the year ended 31 December 2019
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019
Strategic report Governance report
Financial statements
119
119
Cash from operating activities
Investing activities
(Purchase)/sale of financial investments
Sale of equity instruments at FVTOCI
Purchase of equity investments at FVTOCI
Interest received
Dividends from associates and joint ventures
Expenditure on intangible fixed assets
Purchase of property, plant and equipment
Deferred consideration paid
Investment in associates
Acquisition consideration paid
Cash acquired with acquisitions
Net cash flows from investment activities
Financing activities
Dividends paid
Dividends paid to non-controlling interests
Dividend equivalents paid on share-based awards
Sale of equity to non-controlling interests
Own shares acquired for employee trusts
Drawdown of revolving credit facility
Repayment of revolving credit facility
Funds received from loans from related parties
Repayment of loans from related parties
Gain on derivative financial instruments
Funds received from issue of Sterling Notes
Repayment/repurchase of Sterling Notes
Bank facility arrangement fees and debt issue costs
Payment of lease liabilities
Net cash flows from financing activities
Net increase in cash and cash equivalents
Net cash and cash equivalents at the beginning of the year
Adjustment on initial application of IFRS 9
Effect of foreign exchange rate changes
Net cash and cash equivalents at the end of the year
Cash and cash equivalents
Overdrafts
Cash and cash equivalents at the end of the year
Notes
33
12
34
34
2019
£m
148
(20)
1
(1)
5
10
(20)
(13)
(12)
(5)
–
–
(55)
(94)
(1)
(1)
6
(7)
39
(91)
35
(38)
3
250
(149)
(2)
(21)
(71)
22
667
–
(13)
676
686
(10)
676
2018
£m
149
4
7
–
3
10
(26)
(47)
(3)
(2)
(18)
1
(71)
(94)
(1)
–
–
(5)
87
(35)
–
–
–
–
–
(3)
–
(51)
27
622
(1)
19
667
680
(13)
667
1. General information
TP ICAP plc is a public company limited by shares incorporated in
England and Wales under the Companies Act. The address of the
registered office is given on page 183. The nature of the Group’s
operations and its principal activities are set out in the Directors’
Report on pages 100 to 104 and in the Strategic report on pages 1
to 45.
2. Basis of preparation
(a) Basis of accounting
The Group’s Consolidated Financial Statements have been
prepared in accordance with International Financial Reporting
Standards (‘IFRSs’) adopted by the European Union and comply
with Article 4 of the EU IAS Regulation.
The Financial Statements are presented in Pounds Sterling
because that is the currency of the primary economic environment
in which the Group operates and are rounded to the nearest
million pounds (expressed as £m), except where otherwise
indicated. The significant accounting policies are set out in
Note 3.
The Financial Statements have been prepared on the historical
cost basis, except for the revaluation of certain financial
instruments held at fair values at the end of each reporting period,
as explained in the accounting policies. Historical cost is generally
based on the fair value of the consideration given in exchange for
goods and services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value
of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing
the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these Consolidated
Financial Statements is determined on such a basis, except for
share-based payment transactions that are within the scope of
IFRS 2, leasing transactions that are within the scope of IFRS 16,
and measurements that have some similarities to fair value but
are not fair value, such as net realisable value in IAS 2 or value
in use in IAS 36.
For financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
>
>
>
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities;
Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
Level 3 inputs are unobservable inputs for the asset
or liability.
(b) Basis of consolidation
The Group’s Consolidated Financial Statements incorporate the
Financial Statements of the Company and entities controlled by
the Company made up to 31 December each year. Under IFRS 10
‘Consolidated Financial Statements’, control is achieved where
the Company exercises power over an entity, is exposed to, or
has rights to, variable returns from its involvement with the entity
and has the ability to use its power to affect the returns from
the entity.
The results of subsidiaries acquired or disposed of during the year
are included in the Consolidated Income Statement from
the effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made
to the financial statements of subsidiaries to bring the accounting
policies used into line with those used by the Group. All inter-
company transactions, balances, income and expenses are
eliminated on consolidation.
Non-controlling interests in subsidiaries are identified separately
from the Group’s equity therein. Those interests of non-controlling
shareholders that are present ownership interests entitling their
holders to a proportionate share of net assets upon liquidation
may initially be measured at fair value or at the non-controlling
interests’ proportionate share of the fair value of the acquiree’s
identifiable net assets. Other non-controlling interests are initially
measured at fair value. The choice of measurement is made on
an acquisition by acquisition basis. Subsequent to acquisition,
the carrying amount of non-controlling interests is the amount
of those interests at initial recognition plus the non-controlling
interests’ share of subsequent changes in equity. Total
comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interest
having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result
in a loss of control are accounted for as equity transactions. The
carrying amount of the Group’s interests and the non-controlling
interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any differences between the amount
by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly
in equity and attributed to the owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on
disposal is calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value of
any retained interest and (ii) the previous carrying amount of the
assets, including goodwill, less liabilities of the subsidiary and any
non-controlling interests. Amounts previously recognised in other
comprehensive income in relation to the subsidiary are accounted
for in the same manner as would be required if the relevant assets
or liabilities are disposed of. The fair value of any investment
retained in the former subsidiary at the date when control was
lost is regarded as the fair value on initial recognition for
subsequent accounting under IFRS 9 ‘Financial Instruments’ or,
when applicable, the cost on initial recognition of an investment
in an associate or jointly controlled entity.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
120
120
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
2. Basis of preparation continued
(c) Presentation of the Income Statement
The Group maintains a columnar format for the presentation of
its Consolidated Income Statement. The columnar format enables
the Group to continue its practice of aiding the understanding
profit measure used to calculate underlying EPS (Note 11) and
is considered to be the most appropriate as it better reflects
the Group’s underlying earnings. Underlying profit is reconciled
to profit before tax on the face of the Consolidated Income
Statement, which also includes acquisition, disposal and
integration costs and exceptional items.
The column ‘acquisition, disposal and integration costs’ includes:
any gains, losses or other associated costs on the full or partial
disposal of investments, associates, joint ventures or subsidiaries
and costs associated with a business combination that do
not constitute fees relating to the arrangement of financing;
amortisation of intangible assets arising on consolidation;
any remeasurement after initial recognition of contingent
consideration which has been classified as a liability; and any
gains or losses on the revaluation of previous interests. The column
may also include items such as gains or losses on the settlement
of pre-existing relationships with acquired businesses and
the remeasurement of liabilities that are above the value
of indemnification.
Acquisition related integration costs include costs associated
with exit or disposal activities, which do not meet the criteria of
discontinued operations, including costs for employee and lease
terminations, or other exit activities. Additionally, these costs
include expenses directly related to integrating and reorganising
acquired businesses and include items such as employee retention
costs, recruiting costs, certain moving costs, certain duplicative
costs during integration and asset impairments.
Items which are of a non-routine nature and material, when
considering both size and nature, are disclosed separately to
give a clearer presentation of the Group’s results. These are
shown as ‘exceptional items’ on the face of the Consolidated
Income Statement.
(d) Going concern
The Directors have, at the time of approving the Financial
Statements, a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the Financial Statements. Further
detail is contained in the going concern section and viability
statement included in the Strategic report on page 33.
(e) Adoption of new and revised Standards
The following new and revised Standards and Interpretations
have been adopted in the current year:
IFRS 16 ‘Leases’
>
The Group has adopted IFRS 16 ‘Leases’ as at 1 January 2019,
using the cumulative catch-up approach. Under this transition
method, comparative information has not been restated and
cumulative adjustments on initial application are recognised in
the opening balance sheet as at 1 January 2019. Accordingly,
comparative information presented for 2018 is presented as
previously reported under IAS 17 and related interpretations.
Lessor accounting remains similar to previous accounting policies.
The details of the changes in the Group’s accounting policies as a
lessee are disclosed below.
(i) Definition of a lease
The Group assesses whether a contract is, or contains, a lease
based on the new definition of a lease. Under IFRS 16 a contract
is, or contains, a lease if the contract conveys a right to control
the use of an identified asset for a period of time in exchange
for consideration.
On transition to IFRS 16 the Group elected to apply the practical
expedient not to reassess whether a contract was or contained a
lease. The Group therefore applied IFRS 16 only to contracts that
had been previously identified as leases, in accordance with IAS 17
and IFRIC 4, before 1 January 2019. The Group has applied the
definition of a lease and related guidance set out in IFRS 16 to all
lease contracts entered into or modified on or after 1 January
2019. The Group considers that the new definition in IFRS 16 will
not change significantly the scope of contracts that meet the
definition of a lease.
At inception or on reassessment of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease and non-lease component on the basis of
the relative stand-alone prices. However, for certain leases of
properties the Group has elected not to separate non-lease
components and will instead account for the lease and non-lease
components as a single lease component.
(ii) As a lessee
The distinction between operating leases and finance leases is
removed. Under IFRS 16 the Group now recognises right-of-use
assets and lease liabilities, which the Group has chosen to report
separately on its balance sheet.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases and leases of low value
assets. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over
the lease term.
The Group recognises a right-of-use asset and a lease liability at
the lease commencement date, the date at which power to control
the asset is obtained. The right-of-use asset is initially measured at
cost, and subsequently at cost less any accumulated depreciation
and impairment losses, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally, the Group uses its incremental
borrowing rate as the discount rate.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
120
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
121
121
The lease liability is subsequently increased by the interest cost
on the lease liability and decreased by lease payments made. It is
remeasured when there is a change in the future lease payments
arising from a change in an index or a rate, a change in the
estimate of the amount expected to be payable under a residual
value guarantee, or as appropriate, changes in the assessment
of whether a purchase or extension option is reasonably certain
to be exercised or a termination option is reasonably certain not
to be exercised.
contracts and is required to classify the sub-lease as either a
finance or operating lease by reference to the right-of-use asset
arising from the head lease.
Where sub-lease agreements are assessed as finance leases,
the Group will derecognise the right-of-use asset and record its
interest in finance lease receivables. As required by IFRS 9, an
allowance for expected credit losses will be recognised on the
finance lease receivables.
Lease cash flows, previously presented as operating cash flows,
are split into payments of principal and interest and are presented
as financing and operating cash flows respectively.
(v) Impact on transition
The impact on transition is summarised below:
The Group has applied judgement to determine the lease term for
some lease contracts in which it is a lessee that includes
termination and/or renewal options and for leases which the
Group has enforceable rights that extend the lease agreement.
The assessment of whether the Group is reasonably certain to
exercise such options or whether the Group is able to enforce its
additional rights impacts the lease term, which affects the amount
of lease liabilities and right-of-use assets recognised.
(iii) Transition as at 1 January 2019
At transition, for leases classified as operating leases under IAS 17,
lease liabilities were measured at the present value of the
remaining lease payments, discounted at the Group’s incremental
borrowing rate as at 1 January 2019. The right-of-use assets were
measured at an amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease payments, and any
provisions held in respect of onerous lease contracts.
The Group used the following practical expedients when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17:
> Applied the exemption not to recognise right-of-use assets
>
and lease liabilities for leases with less than 12 months of
remaining lease term;
Relied on previous assessments on whether leases are
onerous;
Excluded initial direct costs from the measuring the right-of-
use asset at the date of initial application; and,
> Used hindsight when determining the lease term if the
>
contract contains options to extend or terminate the lease.
This expedient has been applied in reassessing the lease
terms associated with three significant UK leases. Under an
agreement with the landlord, two property leases will be
terminated once the Group has moved its operations to a
new leased property.
(iv) As a lessor
In contrast to lessee accounting, IFRS 16 substantially carries
forward the lessor accounting requirements in IAS 17. Under
IFRS 16, a lessor continues to classify leases as either finance
leases or operating leases and account for those two types of
leases differently.
The Group sub-leases some of its leased properties. Under
IAS 17, the head lease and sub-lease contracts were classified as
operating leases. Where the Group is an intermediate lessor, it
will account for the head lease and the sub-lease as two separate
www.tpicap.com
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
Right-of-use assets
Finance lease receivables (presented in other
receivables)
Lease liabilities
Property provisions
1 January
2019
£m
101
8
(145)
(1)
When measuring lease liabilities for leases that were classified
as operating leases the Group discounted lease payments using
its incremental borrowing rate as at 1 January 2019, reflecting
the lease term and the type of leased asset. The discount rates
used in the calculation of the lease liability involved estimation.
The weighted-average rate applied was 7.3%.
Lease liabilities
Operating lease commitment at 31 December 2018
as disclosed in the Group’s consolidated
financial statements
- Recognition exemption for leases of low-value assets
- Recognition exemption for leases with less than 12
months of lease term at transition
- Termination and extension options reasonably
certain to be exercised1
Gross lease commitments at 1 January 2019
Lease liabilities recognised at 1 January 2019,
discounted using the incremental borrowing rate
Right-of-use assets
Initial right-of-use assets at amounts equal to the
associated lease liability
- Adjustment for prepaid and accrued lease payments
- Adjustment for provisions held in respect of onerous
leases
- Adjustment for additional property provisions
Amounts recognised as finance lease receivables
1 January
2019
£m
313
(3)
(89)
221
145
145
(29)
(8)
1
(8)
101
1. Operating lease commitments have reduced by a net £89m following a
reassessment of three significant UK leases. Under an agreement with the
landlord, two property leases will be terminated once the Group has moved its
operations to a new leased property. The new lease has a commencement date of
February 2020 at which date a lease liability and right-of-use asset of £65m will
be recognised. The gross lease commitment is £90m.
The Group maintains a columnar format for the presentation of
its Consolidated Income Statement. The columnar format enables
lessee are disclosed below.
continued
for the year ended 31 December 2019
2. Basis of preparation continued
(c) Presentation of the Income Statement
the Group to continue its practice of aiding the understanding
profit measure used to calculate underlying EPS (Note 11) and
is considered to be the most appropriate as it better reflects
the Group’s underlying earnings. Underlying profit is reconciled
to profit before tax on the face of the Consolidated Income
Statement, which also includes acquisition, disposal and
integration costs and exceptional items.
The column ‘acquisition, disposal and integration costs’ includes:
any gains, losses or other associated costs on the full or partial
disposal of investments, associates, joint ventures or subsidiaries
and costs associated with a business combination that do
not constitute fees relating to the arrangement of financing;
amortisation of intangible assets arising on consolidation;
any remeasurement after initial recognition of contingent
consideration which has been classified as a liability; and any
gains or losses on the revaluation of previous interests. The column
may also include items such as gains or losses on the settlement
of pre-existing relationships with acquired businesses and
the remeasurement of liabilities that are above the value
of indemnification.
Acquisition related integration costs include costs associated
with exit or disposal activities, which do not meet the criteria of
discontinued operations, including costs for employee and lease
terminations, or other exit activities. Additionally, these costs
include expenses directly related to integrating and reorganising
acquired businesses and include items such as employee retention
costs, recruiting costs, certain moving costs, certain duplicative
costs during integration and asset impairments.
Items which are of a non-routine nature and material, when
considering both size and nature, are disclosed separately to
give a clearer presentation of the Group’s results. These are
shown as ‘exceptional items’ on the face of the Consolidated
Income Statement.
(d) Going concern
The Directors have, at the time of approving the Financial
Statements, a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the Financial Statements. Further
detail is contained in the going concern section and viability
statement included in the Strategic report on page 33.
(e) Adoption of new and revised Standards
The following new and revised Standards and Interpretations
have been adopted in the current year:
>
IFRS 16 ‘Leases’
The Group has adopted IFRS 16 ‘Leases’ as at 1 January 2019,
using the cumulative catch-up approach. Under this transition
method, comparative information has not been restated and
cumulative adjustments on initial application are recognised in
the opening balance sheet as at 1 January 2019. Accordingly,
comparative information presented for 2018 is presented as
previously reported under IAS 17 and related interpretations.
Lessor accounting remains similar to previous accounting policies.
The details of the changes in the Group’s accounting policies as a
(i) Definition of a lease
The Group assesses whether a contract is, or contains, a lease
based on the new definition of a lease. Under IFRS 16 a contract
is, or contains, a lease if the contract conveys a right to control
the use of an identified asset for a period of time in exchange
for consideration.
On transition to IFRS 16 the Group elected to apply the practical
expedient not to reassess whether a contract was or contained a
lease. The Group therefore applied IFRS 16 only to contracts that
had been previously identified as leases, in accordance with IAS 17
and IFRIC 4, before 1 January 2019. The Group has applied the
definition of a lease and related guidance set out in IFRS 16 to all
lease contracts entered into or modified on or after 1 January
2019. The Group considers that the new definition in IFRS 16 will
not change significantly the scope of contracts that meet the
definition of a lease.
At inception or on reassessment of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease and non-lease component on the basis of
the relative stand-alone prices. However, for certain leases of
properties the Group has elected not to separate non-lease
components and will instead account for the lease and non-lease
components as a single lease component.
(ii) As a lessee
The distinction between operating leases and finance leases is
removed. Under IFRS 16 the Group now recognises right-of-use
assets and lease liabilities, which the Group has chosen to report
separately on its balance sheet.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases and leases of low value
assets. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over
the lease term.
The Group recognises a right-of-use asset and a lease liability at
the lease commencement date, the date at which power to control
the asset is obtained. The right-of-use asset is initially measured at
cost, and subsequently at cost less any accumulated depreciation
and impairment losses, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally, the Group uses its incremental
borrowing rate as the discount rate.
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
122
122
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
2. Basis of preparation continued
(e) Adoption of new and revised Standards continued
(vi) Impact for the year
During the year ended 31 December 2019, the Group, in relation
to leases under IFRS 16, has recognised depreciation and interest
costs, instead of IAS 17 operating lease expenses, as follows:
but not yet effective. The Group has not applied these
Standards or Interpretations in the preparation of these
Financial Statements:
> Amendments to IAS 1 and IAS 8: Definition of Material; and
> Amendments to References to the Conceptual Framework
in IFRS Standards.
Recognised in the Income
Statement during the year ended
31 December 2019
Operating lease
expense under
IAS 17
The following Standards and Interpretations have not been
endorsed by the EU and have not been applied in the preparation
of these Financial Statements:
EMEA
Americas
Asia Pacific
Depreciation
£m
10
5
6
21
Net Interest
Expense
£m
2
8
2
12
As a result of the Group adopting IFRS 16 using the cumulative
catch up approach to transition, prior years have not been
restated. Consequently the results for the year ended
31 December 2019 are not directly comparable with those
reported in the prior year under the previous applicable
accounting standard IAS 17 ‘Leases’.
As at 1 January 2019 and 31 December 2019 the right-of-use assets
and lease liabilities were as follows:
Right-of-use assets by type
Properties
Equipment
Finance lease receivables
(presented in other receivables)
Properties
Lease liabilities
Current lease liabilities
Non-current lease liabilities
31 December
2019
£m
1 January
2019
£m
90
1
91
8
23
117
140
100
1
101
8
17
128
145
> Other New Standards and Interpretations
£m
12
9
7
28
IFRS 17 Insurance Contracts;
>
> Amendment to IFRS 3 Business Combinations; and
> Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate
Benchmark Reform
The Directors do not expect the adoption of the above Standards
and Interpretations will have a material impact on the Financial
Statements of the Group in future periods.
3. Summary of significant accounting policies
(a) Income recognition
Revenue, which excludes sales taxes, includes brokerage including
commissions, fees earned and subscriptions for information sales.
Fee income is recognised when the related services are completed
and the income is considered receivable.
Each geographic segment comprises the following types
of revenue:
(i) Name Passing brokerage, where counterparties to a
transaction settle directly with each other. Revenue for the
service of matching buyers and sellers of financial instruments
is stated net of sales taxes, rebates and discounts and is
recognised in full on trade date;
(ii) Matched Principal brokerage revenue, being the net proceeds
from a commitment to simultaneously buy and sell financial
instruments with counterparties, is recognised on trade date;
(iii) Executing Broker brokerage, where the Group executes
transactions on certain regulated exchanges and then ‘gives-
up’ the trade to the relevant client, or its clearing member.
Revenue for the service of matching buyers and sellers of
financial instruments is stated net of sales taxes, rebates and
discounts and is recognised in full on trade date; and
The following new Standards and Interpretations are effective
from 1 January 2019 but they do not have a material effect in the
Group’s financial statements:
(iv) Fees earned from the sales of price information from financial
and commodity markets to third parties is recognised on an
accruals basis to match the provision of the service.
IFRIC 23 Uncertainty over Income Tax Treatments;
>
> Amendments to IFRS 9: Prepayment Features with Negative
Compensation;
> Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures;
> Annual Improvements to IFRS Standards (2015-2017 Cycle);
and
> Amendments to IAS 19: Plan Amendment, Curtailment
or Settlement.
At the date of authorisation of these Financial Statements, the
following EU endorsed Standards and Interpretations were in issue
In respect of contracts for the provision Data & Analytics, the
Group has applied the practical expedient in IFRS 15, allowing
for the non-disclosure of both the amount of the transaction price
allocated to the remaining performance obligations, and an
explanation of when it expects to recognise that amount. In
relation to these contracts the Group has a right that corresponds
directly with the value of the Group’s performance completed.
Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable. Dividend income from investments is recognised
when the Group’s right to receive the payment is established.
TP ICAP Annual Report and Accounts 2019
TP ICAP Classification: Confidential
Annual Report and Accounts 2019
122
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
2. Basis of preparation continued
(e) Adoption of new and revised Standards continued
but not yet effective. The Group has not applied these
Standards or Interpretations in the preparation of these
(vi) Impact for the year
During the year ended 31 December 2019, the Group, in relation
to leases under IFRS 16, has recognised depreciation and interest
costs, instead of IAS 17 operating lease expenses, as follows:
Financial Statements:
> Amendments to IAS 1 and IAS 8: Definition of Material; and
> Amendments to References to the Conceptual Framework
in IFRS Standards.
Recognised in the Income
Statement during the year ended
Operating lease
expense under
The following Standards and Interpretations have not been
endorsed by the EU and have not been applied in the preparation
IAS 17
of these Financial Statements:
EMEA
Americas
Asia Pacific
31 December 2019
Depreciation
Net Interest
Expense
£m
10
5
6
21
£m
2
8
2
12
£m
12
9
7
28
>
IFRS 17 Insurance Contracts;
> Amendment to IFRS 3 Business Combinations; and
> Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate
Benchmark Reform
The Directors do not expect the adoption of the above Standards
and Interpretations will have a material impact on the Financial
Statements of the Group in future periods.
As a result of the Group adopting IFRS 16 using the cumulative
catch up approach to transition, prior years have not been
restated. Consequently the results for the year ended
31 December 2019 are not directly comparable with those
reported in the prior year under the previous applicable
accounting standard IAS 17 ‘Leases’.
As at 1 January 2019 and 31 December 2019 the right-of-use assets
and lease liabilities were as follows:
3. Summary of significant accounting policies
(a) Income recognition
Revenue, which excludes sales taxes, includes brokerage including
commissions, fees earned and subscriptions for information sales.
Fee income is recognised when the related services are completed
and the income is considered receivable.
Each geographic segment comprises the following types
31 December
1 January
of revenue:
Right-of-use assets by type
Properties
Equipment
Finance lease receivables
(presented in other receivables)
Properties
Lease liabilities
Current lease liabilities
Non-current lease liabilities
2019
£m
90
1
91
8
23
117
140
2019
£m
100
1
101
8
17
128
145
(i) Name Passing brokerage, where counterparties to a
transaction settle directly with each other. Revenue for the
service of matching buyers and sellers of financial instruments
is stated net of sales taxes, rebates and discounts and is
recognised in full on trade date;
(ii) Matched Principal brokerage revenue, being the net proceeds
from a commitment to simultaneously buy and sell financial
instruments with counterparties, is recognised on trade date;
(iii) Executing Broker brokerage, where the Group executes
transactions on certain regulated exchanges and then ‘gives-
up’ the trade to the relevant client, or its clearing member.
Revenue for the service of matching buyers and sellers of
financial instruments is stated net of sales taxes, rebates and
discounts and is recognised in full on trade date; and
> Other New Standards and Interpretations
The following new Standards and Interpretations are effective
(iv) Fees earned from the sales of price information from financial
from 1 January 2019 but they do not have a material effect in the
and commodity markets to third parties is recognised on an
Group’s financial statements:
accruals basis to match the provision of the service.
>
IFRIC 23 Uncertainty over Income Tax Treatments;
> Amendments to IFRS 9: Prepayment Features with Negative
> Amendments to IAS 28: Long-term Interests in Associates and
> Annual Improvements to IFRS Standards (2015-2017 Cycle);
> Amendments to IAS 19: Plan Amendment, Curtailment
Compensation;
Joint Ventures;
and
or Settlement.
In respect of contracts for the provision Data & Analytics, the
Group has applied the practical expedient in IFRS 15, allowing
for the non-disclosure of both the amount of the transaction price
allocated to the remaining performance obligations, and an
explanation of when it expects to recognise that amount. In
relation to these contracts the Group has a right that corresponds
directly with the value of the Group’s performance completed.
Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable. Dividend income from investments is recognised
At the date of authorisation of these Financial Statements, the
following EU endorsed Standards and Interpretations were in issue
when the Group’s right to receive the payment is established.
Strategic report Governance report
Financial statements
123
123
(b) Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured at the aggregate of the fair values
(at the date of exchange) of assets given, liabilities incurred
or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition costs are
recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes
any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition date fair value.
Subsequent changes in such fair values are adjusted against the
cost of the acquisition where they qualify as measurement period
adjustments. The measurement period is the period from the date
of acquisition to the date the Group obtains complete information
about the facts and circumstances that existed as of the
acquisition date, and is subject to a maximum of one year. All
subsequent changes in the fair value of contingent consideration
classified as an asset or a liability are accounted for in accordance
with relevant IFRSs. Changes in the fair value of contingent
consideration classified as equity are not recognised.
Where a business combination is achieved in stages, the Group’s
previously held interests in the acquired entity are remeasured
to fair value at the acquisition date and any resulting gain or loss
is recognised in profit or loss. Amounts arising from interests in
the acquiree prior to the acquisition that have previously been
recognised in other comprehensive income are reclassified to
profit or loss, where such treatment would be appropriate if
that interest was disposed of.
(c) Investment in associates
An associate is an entity over which the Group is in a position to
exercise significant influence. Significant influence is the power
to participate in the financial and operating decisions of the
investee but is not control or joint control over these policies.
The results and assets and liabilities of associates are
incorporated in these Financial Statements based on financial
information made up to 31 December each year using the equity
method of accounting, except when classified as held for sale.
Investments in associates are carried in the balance sheet at cost
as adjusted by post-acquisition changes in the Group’s share of
the net assets of the associate, less any impairment in the value of
individual investments. Losses of the associates in excess of the
Group’s interest in those associates are recognised only to the
extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the
fair values of the identifiable net assets of the associate at the
date of acquisition is recognised as goodwill. Any discount in the
cost of acquisition below the Group’s share of the fair value of the
identifiable net assets of the associate at the date of acquisition
(i.e. discount on acquisition) is credited to profit and loss in the
year of acquisition.
Where a Group company transacts with an associate of the Group,
profits and losses are eliminated to the extent of the Group’s
interest in the relevant associate. Losses may provide evidence
of impairment of the asset transferred in which case appropriate
provision is made for impairment.
The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
(2008) are recognised at their fair value at the acquisition date,
except that:
(d) Interests in joint arrangements
A joint arrangement is a contractual arrangement whereby the
Group and other parties undertake an economic activity that is
subject to joint control.
>
>
>
>
deferred tax assets or liabilities are recognised and measured
in accordance with IAS 12 ‘Income Taxes’;
liabilities or assets related to employee benefit arrangements
are recognised and measured in accordance with IAS 19
‘Employee Benefits’;
acquiree share-based payment awards replaced by Group
awards are measured in accordance with IFRS 2 ‘Share-based
Payments’; and
assets or disposal groups that are classified for sale are
measured in accordance with IFRS 5 ‘Non-current Assets Held
for Sale and Discontinued Operations’.
If the initial accounting for a business combination is incomplete
by the end of the reporting period in which the business
combination occurs, provisional amounts are reported. Those
provisional amounts are adjusted during the measurement period,
or additional assets or liabilities recognised, to reflect the facts
and circumstances that existed as at the acquisition date.
Non-controlling interests in the acquired entity are initially
measured at the non-controlling interest’s proportion of
the net fair value of the assets, liabilities and contingent
liabilities recognised.
Joint ventures are joint arrangements which involve the
establishment of a separate entity in which each party has
rights to the net assets of the arrangement. The Group reports its
interests in joint ventures using the equity method of accounting,
based on financial information made up to 31 December each
year. Investments in joint ventures are carried in the balance sheet
at cost as adjusted by post-acquisition changes in the Group’s
share of the net assets of the joint venture, less any impairment
in the value of individual investments. Losses of the joint venture
in excess of the Group’s interest in those joint ventures are
recognised only to the extent that the Group has incurred legal
or constructive obligations or made payments under the terms
of the joint venture.
(e) Goodwill
Goodwill arising on consolidation represents the excess of the
a subsidiary or associate at the date of acquisition. Goodwill is
initially recognised at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill arising on
acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP amounts at that date.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
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124
124
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
(e) Goodwill continued
Goodwill recognised as an asset is reviewed for impairment at
least annually. Any impairment loss is recognised as an expense
immediately and is not subsequently reversed. For the purpose of
impairment testing goodwill is allocated to each of the Group’s
cash-generating units (‘CGU’) expected to benefit from the
synergies of the combination. CGUs to which goodwill has been
allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than the carrying amount of
any goodwill allocated to the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro
rata on the basis of the carrying amount of each asset in the unit.
Goodwill arising on the acquisition of an associate or joint venture
is included within the carrying value of the associate or the joint
venture. Goodwill arising on the acquisition of subsidiaries is
presented separately in the balance sheet.
On disposal of a subsidiary, associate or joint venture, the
attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
(f) Intangible assets
Software and software development costs
An internally generated intangible asset arising from the Group’s
software development is recognised at cost only if all of the
following conditions are met:
>
>
>
an asset is created that can be identified;
it is probable that the asset created will generate future
economic benefits; and
the development costs of the asset can be measured reliably.
Where the above conditions are not met, costs are expensed
as incurred.
Acquired separately or from a business combination
Intangible assets acquired separately are capitalised at cost and
intangible assets acquired in a business acquisition are capitalised
at fair value at the date of acquisition. The useful lives of these
intangible assets are assessed to be either finite or indefinite.
Amortisation charged on assets with a finite useful life is taken to
the income statement through administrative expenses.
Other than software development costs, intangible assets created
within the business are not capitalised and expenditure is charged to
the income statement in the year in which the expenditure is incurred.
Intangible assets are amortised over their finite useful lives
generally on a straight-line basis, as follows:
Software:
Purchased or developed – up to 5 years
Software licences
Acquisition intangibles:
Brand/Trademarks
Customer relationships
Other intangibles
– up to 5 years
– 2 to 20 years
– over the period of the contract
– over the period of the licence
Intangible assets are subject to impairment review if there are
events or changes in circumstances that indicate that the carrying
amount may not be recoverable.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in the
income statement when the asset is derecognised.
(g) Property, plant and equipment
Freehold land is stated at cost. Buildings, furniture, fixtures,
equipment and motor vehicles are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is provided on all tangible fixed assets at rates
calculated to write off the cost, less estimated residual value
based on prices prevailing at the date of acquisition, of each
asset on a straight-line basis over its expected useful life as
follows:
Furniture, fixtures,
equipment
and motor vehicles
Short and long leasehold
land and buildings
Freehold land
Freehold buildings
– 3 to 10 years
– period of the lease
– infinite
– 50 years
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in income.
(h) Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets with finite lives
to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss. Where the asset
does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the CGU
to which the asset belongs. Intangible assets with indefinite useful
lives are tested for impairment annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less any cost to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present values using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
If the recoverable amount of an asset (or CGU) is estimated to be
less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. Impairment losses are
recognised as an expense immediately. Where an impairment loss
subsequently reverses, the carrying amount of the asset (or CGU)
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Annual Report and Accounts 2019
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Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
Intangible assets are subject to impairment review if there are
(e) Goodwill continued
Goodwill recognised as an asset is reviewed for impairment at
least annually. Any impairment loss is recognised as an expense
immediately and is not subsequently reversed. For the purpose of
impairment testing goodwill is allocated to each of the Group’s
cash-generating units (‘CGU’) expected to benefit from the
synergies of the combination. CGUs to which goodwill has been
allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than the carrying amount of
any goodwill allocated to the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro
rata on the basis of the carrying amount of each asset in the unit.
Goodwill arising on the acquisition of an associate or joint venture
is included within the carrying value of the associate or the joint
venture. Goodwill arising on the acquisition of subsidiaries is
follows:
presented separately in the balance sheet.
On disposal of a subsidiary, associate or joint venture, the
attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
(f) Intangible assets
Software and software development costs
An internally generated intangible asset arising from the Group’s
software development is recognised at cost only if all of the
following conditions are met:
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an asset is created that can be identified;
it is probable that the asset created will generate future
economic benefits; and
the development costs of the asset can be measured reliably.
events or changes in circumstances that indicate that the carrying
amount may not be recoverable.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in the
income statement when the asset is derecognised.
(g) Property, plant and equipment
Freehold land is stated at cost. Buildings, furniture, fixtures,
equipment and motor vehicles are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is provided on all tangible fixed assets at rates
calculated to write off the cost, less estimated residual value
based on prices prevailing at the date of acquisition, of each
asset on a straight-line basis over its expected useful life as
Furniture, fixtures,
equipment
and motor vehicles
– 3 to 10 years
Short and long leasehold
land and buildings
Freehold land
Freehold buildings
– period of the lease
– infinite
– 50 years
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in income.
Where the above conditions are not met, costs are expensed
(h) Impairment of tangible and intangible assets excluding
as incurred.
goodwill
At each balance sheet date, the Group reviews the carrying
Acquired separately or from a business combination
amounts of its tangible and intangible assets with finite lives
Intangible assets acquired separately are capitalised at cost and
to determine whether there is any indication that those assets
intangible assets acquired in a business acquisition are capitalised
have suffered an impairment loss. If any such indication exists,
at fair value at the date of acquisition. The useful lives of these
the recoverable amount of the asset is estimated in order
intangible assets are assessed to be either finite or indefinite.
to determine the extent of the impairment loss. Where the asset
Amortisation charged on assets with a finite useful life is taken to
does not generate cash flows that are independent from other
the income statement through administrative expenses.
assets, the Group estimates the recoverable amount of the CGU
Other than software development costs, intangible assets created
within the business are not capitalised and expenditure is charged to
the income statement in the year in which the expenditure is incurred.
Intangible assets are amortised over their finite useful lives
generally on a straight-line basis, as follows:
Software:
Purchased or developed – up to 5 years
Software licences
– over the period of the licence
Acquisition intangibles:
Brand/Trademarks
– up to 5 years
Customer relationships
– 2 to 20 years
Other intangibles
– over the period of the contract
to which the asset belongs. Intangible assets with indefinite useful
lives are tested for impairment annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less any cost to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present values using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
If the recoverable amount of an asset (or CGU) is estimated to be
less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. Impairment losses are
recognised as an expense immediately. Where an impairment loss
subsequently reverses, the carrying amount of the asset (or CGU)
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is increased to the revised estimate of its recoverable amount,
but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no
impairment loss been recognised for the asset (or CGU) in prior
years. A reversal of an impairment loss is recognised as income
immediately, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
(i) Broker contract payments
Payments made to brokers under employment contracts which
are in advance of the expected economic benefit due to the Group
are accounted for as prepayments and included within trade
and other receivables. Payments made in advance are subject
to repayment conditions during the contract period and the
prepayment is amortised over the shorter of the contract term
and the period the payment remains recoverable. Amounts
that are irrecoverable, or become irrecoverable, are written
off immediately.
Payments made in arrears are accrued and are included within
trade and other payables.
(j) Financial instruments
Financial assets and financial liabilities are recognised on the
Group’s balance sheet when the Group has become a party
to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable to
the acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair value
through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in profit
or loss.
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in their
entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
Classification of financial assets
The classification of financial assets is based both on the business
model within which the asset is held and the contractual cash flow
characteristics of the asset.
Debt instruments that meet the following conditions are measured
subsequently at amortised cost:
>
the financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
>
the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are
measured subsequently at fair value through other comprehensive
income (‘FVTOCI’):
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the financial asset is held within a business model whose
objective is achieved by both collecting contractual cash
flows and selling the financial assets; and
the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently
at fair value through profit or loss (‘FVTPL’).
The Group may make the following irrevocable elections or
designations at initial recognition of a financial asset:
>
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to irrevocably elect to present subsequent changes in fair
value of an equity investment in other comprehensive income
if certain criteria are met; and
to irrevocably designate a debt investment that meets
the amortised cost or FVTOCI criteria as measured at
FVTPL if doing so eliminates or significantly reduces an
accounting mismatch.
Debt instruments at FVTOCI
Debt instruments at FVTOCI are initially measured at fair value
plus transaction costs. Subsequently, changes in the carrying
amount as a result of foreign exchange gains and losses,
impairment gains or losses, and interest income calculated using
the effective interest method are recognised in profit or loss.
All other changes in the carrying amount of these corporate bonds
are recognised in other comprehensive income and accumulated
in the revaluation reserve. When such assets are derecognised,
the cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss.
Equity instruments at FVTOCI
On initial recognition, the Group may make an irrevocable
election, on an instrument-by-instrument basis, to designate
investments in equity instruments as at FVTOCI. Designation at
FVTOCI is not permitted if the equity investment is held for
trading or if it is contingent consideration recognised by an
acquirer in a business combination.
A financial asset is held for trading if:
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it has been acquired principally for the purpose of selling it in
the near term; or
on initial recognition it is part of a portfolio of identified
financial instruments that the Group manages together and
has evidence of a recent actual pattern of short-term profit-
taking; or
it is a derivative, except for a derivative that is a
financial guarantee contract or a designated and
effective hedging instrument.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
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Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
(j) Financial instruments continued
Investments in equity instruments at FVTOCI are initially measured
at fair value plus transaction costs. Subsequently, they are
measured at fair value with gains and losses arising from changes
in fair value recognised in other comprehensive income and
accumulated in the revaluation reserve. The cumulative gain or
loss is not be reclassified to profit or loss on disposal of the equity
investments, instead, it is transferred to retained earnings.
Dividends on these investments in equity instruments are
recognised in profit or loss unless the dividends clearly represent
a recovery of part of the cost of the investment. Dividends are
included as finance income in profit or loss.
The Group has designated all investments in equity instruments that
are not held for trading as at FVTOCI on initial application of IFRS 9.
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured
at amortised cost or FVTOCI are measured at FVTPL. Specifically:
>
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investments in equity instruments are classified as at FVTPL,
unless the Group designates an equity investment that is neither
held for trading nor a contingent consideration arising from
a business combination as at FVTOCI on initial recognition.
debt instruments that do not meet the amortised cost criteria
or the FVTOCI criteria are classified as at FVTPL. Debt
instruments that meet either the amortised cost criteria or the
FVTOCI criteria may be designated as at FVTPL upon initial
recognition if such designation eliminates or significantly
reduces a measurement or recognition inconsistency that
would arise from measuring assets or liabilities or recognising
the gains and losses on them on different bases. The Group
has not designated any debt instruments as at FVTPL.
classified as at FVTOCI, the cumulative gain or loss previously
accumulated in the investments revaluation reserve is reclassified
to profit or loss. On derecognition of an investment in equity
instrument which the Group has elected on initial recognition
to measure at FVTOCI, the cumulative gain or loss previously
accumulated in the revaluation reserve is not reclassified to profit
or loss, but is transferred to retained earnings.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
(‘ECL’) on investments in debt instruments that are measured at
amortised cost or at FVTOCI, lease receivables, trade receivables
and contract assets. The amount of expected credit losses is
updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL for trade receivables.
The expected credit losses on these financial assets are estimated
using a provision matrix based on the Group’s historical credit loss
experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the
current as well as the forecast direction of conditions at the
reporting date, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime
ECL when there has been a significant increase in credit risk since
initial recognition. If the credit risk on the financial instrument has
not increased significantly since initial recognition, the Group
measures the loss allowance for that financial instrument at an
amount equal to 12-month ECL. Lifetime ECL represents the
expected credit losses that will result from all possible default
events over the expected life of a financial instrument. 12-month
ECL represents the portion of lifetime ECL that is expected to
result from default events on a financial instrument that are
possible within twelve months after the reporting date.
Financial assets at FVTPL are measured at fair value at the end
of each reporting period, with any fair value gains or losses
recognised in profit or loss to the extent they are not part of a
designated hedging relationship. The net gain or loss recognised
in profit or loss includes any dividend or interest earned on the
financial asset and is included in finance income.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all
the risks and rewards of ownership of the asset. If the Group
neither transfers nor retains substantially all the risks and rewards
of ownership and continues to control the transferred asset,
the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of
a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
On derecognition of a financial asset measured at amortised cost,
the difference between the asset’s carrying amount and the sum of
the consideration received and receivable is recognised in profit
or loss. On derecognition of an investment in a debt instrument
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument
has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial
instrument at the reporting date with the risk of a default
occurring on the financial instrument at the date of initial
recognition. In making this assessment, the Group considers both
quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward-looking
information that is available without undue cost or effort.
The following information is taken into account when
assessing whether credit risk has increased significantly
since initial recognition:
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an actual or expected significant deterioration in the
financial instrument’s external or internal credit rating;
significant deterioration in external market indicators of
credit risk for a particular financial instrument;
existing or forecast adverse changes in business, financial or
economic conditions that are expected to cause a significant
decrease in the debtor’s ability to meet its debt obligations;
an actual or expected significant deterioration in the
operating results of the debtor; and
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
126
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Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
classified as at FVTOCI, the cumulative gain or loss previously
(j) Financial instruments continued
Investments in equity instruments at FVTOCI are initially measured
at fair value plus transaction costs. Subsequently, they are
measured at fair value with gains and losses arising from changes
in fair value recognised in other comprehensive income and
accumulated in the revaluation reserve. The cumulative gain or
loss is not be reclassified to profit or loss on disposal of the equity
investments, instead, it is transferred to retained earnings.
Dividends on these investments in equity instruments are
recognised in profit or loss unless the dividends clearly represent
a recovery of part of the cost of the investment. Dividends are
included as finance income in profit or loss.
The Group has designated all investments in equity instruments that
are not held for trading as at FVTOCI on initial application of IFRS 9.
Financial assets at FVTPL
accumulated in the investments revaluation reserve is reclassified
to profit or loss. On derecognition of an investment in equity
instrument which the Group has elected on initial recognition
to measure at FVTOCI, the cumulative gain or loss previously
accumulated in the revaluation reserve is not reclassified to profit
or loss, but is transferred to retained earnings.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
(‘ECL’) on investments in debt instruments that are measured at
amortised cost or at FVTOCI, lease receivables, trade receivables
and contract assets. The amount of expected credit losses is
updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL for trade receivables.
The expected credit losses on these financial assets are estimated
using a provision matrix based on the Group’s historical credit loss
Financial assets that do not meet the criteria for being measured
experience, adjusted for factors that are specific to the debtors,
at amortised cost or FVTOCI are measured at FVTPL. Specifically:
general economic conditions and an assessment of both the
investments in equity instruments are classified as at FVTPL,
unless the Group designates an equity investment that is neither
current as well as the forecast direction of conditions at the
reporting date, including time value of money where appropriate.
held for trading nor a contingent consideration arising from
For all other financial instruments, the Group recognises lifetime
a business combination as at FVTOCI on initial recognition.
ECL when there has been a significant increase in credit risk since
debt instruments that do not meet the amortised cost criteria
initial recognition. If the credit risk on the financial instrument has
or the FVTOCI criteria are classified as at FVTPL. Debt
not increased significantly since initial recognition, the Group
instruments that meet either the amortised cost criteria or the
measures the loss allowance for that financial instrument at an
FVTOCI criteria may be designated as at FVTPL upon initial
amount equal to 12-month ECL. Lifetime ECL represents the
recognition if such designation eliminates or significantly
expected credit losses that will result from all possible default
reduces a measurement or recognition inconsistency that
events over the expected life of a financial instrument. 12-month
would arise from measuring assets or liabilities or recognising
ECL represents the portion of lifetime ECL that is expected to
the gains and losses on them on different bases. The Group
result from default events on a financial instrument that are
has not designated any debt instruments as at FVTPL.
possible within twelve months after the reporting date.
Financial assets at FVTPL are measured at fair value at the end
Significant increase in credit risk
of each reporting period, with any fair value gains or losses
In assessing whether the credit risk on a financial instrument
recognised in profit or loss to the extent they are not part of a
has increased significantly since initial recognition, the Group
designated hedging relationship. The net gain or loss recognised
compares the risk of a default occurring on the financial
in profit or loss includes any dividend or interest earned on the
instrument at the reporting date with the risk of a default
financial asset and is included in finance income.
occurring on the financial instrument at the date of initial
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all
recognition. In making this assessment, the Group considers both
quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward-looking
information that is available without undue cost or effort.
the risks and rewards of ownership of the asset. If the Group
The following information is taken into account when
neither transfers nor retains substantially all the risks and rewards
assessing whether credit risk has increased significantly
of ownership and continues to control the transferred asset,
since initial recognition:
the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of
a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
credit risk for a particular financial instrument;
for the proceeds received.
On derecognition of a financial asset measured at amortised cost,
decrease in the debtor’s ability to meet its debt obligations;
the difference between the asset’s carrying amount and the sum of
an actual or expected significant deterioration in the
the consideration received and receivable is recognised in profit
operating results of the debtor; and
or loss. On derecognition of an investment in a debt instrument
an actual or expected significant deterioration in the
financial instrument’s external or internal credit rating;
significant deterioration in external market indicators of
existing or forecast adverse changes in business, financial or
economic conditions that are expected to cause a significant
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significant increases in credit risk on other financial
instruments of the same debtor; an actual or expected
significant adverse change in the regulatory, economic,
or technological environment of the debtor that results in
a significant decrease in the debtor’s ability to meet its
debt obligations.
The Group presumes that the credit risk on a financial asset
has increased significantly since initial recognition when
contractual payments are more than 30 days past due, unless
the Group has reasonable and supportable information that
demonstrates otherwise.
The Group assumes that the credit risk on a financial instrument
has not increased significantly since initial recognition if the
financial instrument is determined to have low credit risk at the
reporting date. A financial instrument is determined to have low
credit risk if:
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The financial instrument has a low risk of default;
The debtor has a strong capacity to meet its contractual
cash flow obligations in the near term; and
> Adverse changes in economic and business conditions in the
longer term may, but will not necessarily, reduce the ability
of the borrower to fulfil its contractual cash flow obligations.
The Group considers a financial asset to have low credit risk
when its credit risk rating is equivalent to the globally understood
definition of ‘investment grade’. The Group considers this to
be Baa3 or higher per Moody’s or BBB- or higher per both
Standard & Poor’s and Fitch.
The Group monitors the effectiveness of the criteria used to
identify whether there has been a significant increase in credit
risk and revises them as appropriate to ensure that the criteria
are capable of identifying significant increase in credit risk
before the amount becomes past due.
Credit-impaired financial assets
A financial asset is ‘credit-impaired’ when one or more events that
have a detrimental impact on the estimated future cash flows of
the financial asset have occurred.
Definition of default
The Group considers a financial asset to be in default when:
activities under the Group’s recovery procedures, taking into
account legal advice where appropriate. Any recoveries made are
recognised in profit or loss.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
For debt securities at FVTOCI, the loss allowance is recognised in
OCI, instead of reducing the carrying amount of the asset.
Impairment losses related to trade and other receivables,
including settlement balances and deposits paid for
securities borrowed, are presented separately in the statement
of profit or loss. Impairment losses on other financial assets
are presented under ‘finance costs’, and not presented
separately in the statement of profit or loss and OCI due
to materiality considerations.
Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial
liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is
recognised and deducted directly in equity. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or
cancellation of the Company’s own equity instruments.
Financial liabilities
All financial liabilities are measured subsequently at amortised
cost using the effective interest method or at FVTPL.
Financial liabilities that arise when a transfer of a financial asset
does not qualify for derecognition or when the continuing
involvement approach applies, and financial guarantee contracts
issued by the Group, are measured in accordance with the specific
accounting policies set out below.
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the borrower is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as
realising security (if any is held); or
the financial asset is more than 90 days past due.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the
financial liability is (i) contingent consideration of an acquirer
in a business combination, (ii) held for trading or (iii) it is
designated as at FVTPL.
The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed
to credit risk.
Write-off policy
The Group writes off a financial asset when there is information
indicating that the debtor is in severe financial difficulty and
there is no realistic prospect of recovery. Trade receivables are
written off if the debtor is in severe financial difficulty or if the
amount is over two years past due, whichever occurs sooner.
Financial assets written off may still be subject to enforcement
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
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Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
(j) Financial instruments continued
A financial liability is classified as held for trading if:
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it has been acquired principally for the purpose of
repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified
financial instruments that the Group manages together and
has a recent actual pattern of short-term profit-taking; or
it is a derivative, except for a derivative that is a
financial guarantee contract or a designated and
effective hedging instrument.
A financial liability other than a financial liability held for trading or
contingent consideration of an acquirer in a business combination
may be designated as at FVTPL upon initial recognition if:
>
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such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets
or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance
with the Group’s documented risk management or investment
strategy, and information about the grouping is provided
internally on that basis; or
it forms part of a contract containing one or more embedded
derivatives, and IFRS 9 permits the entire combined contract
to be designated as at FVTPL.
Financial liabilities at FVTPL are measured at fair value, with
any gains or losses arising on changes in fair value recognised in
profit or loss to the extent that they are not part of a designated
hedging relationship. The net gain or loss recognised in profit or
loss incorporates any interest paid on the financial liability and
is included in ‘other gains and losses’ in profit or loss.
Financial liabilities that are designated as at FVTPL, the
amount of change in the fair value of the financial liability that
is attributable to changes in the credit risk of that liability is
recognised in other comprehensive income, unless the recognition
of the effects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an accounting
mismatch in profit or loss. The remaining amount of change in
the fair value of liability is recognised in profit or loss. Changes in
fair value attributable to a financial liability’s credit risk that are
recognised in other comprehensive income are not subsequently
reclassified to profit or loss; instead, they are transferred to
retained earnings upon derecognition of the financial liability.
Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of
an acquirer in a business combination, (ii) held-for-trading, or (iii)
designated as at FVTPL, are measured subsequently at amortised
cost using the effective interest method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when,
the Group’s obligations are discharged, cancelled or have expired.
The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable
is recognised in profit or loss.
When the Group exchanges with the existing lender one debt
instrument into another one with the substantially different
terms, such exchange is accounted for as an extinguishment
of the original financial liability and the recognition of a new
financial liability. Similarly, the Group accounts for substantial
modification of terms of an existing liability or part of it as
an extinguishment of the original financial liability and the
recognition of a new liability. It is assumed that the terms are
substantially different if the discounted present value of the cash
flows under the new terms, including any fees paid net of any fees
received and discounted using the original effective rate is at least
10% different from the discounted present value of the remaining
cash flows of the original financial liability. If the modification is
not substantial, the difference between: (i) the carrying amount of
the liability before the modification; and (ii) the present value of
the cash flows after modification should be recognised in profit or
loss as the modification gain or loss within other gains and losses.
(k) Derivative financial instruments
Derivative financial instruments, such as foreign currency
contracts and interest rate swaps, are entered into by the Group
in order to manage its exposure to interest rate and foreign
currency fluctuations or as simultaneous back-to-back transactions
with counterparties. The Group does not use derivative financial
instruments for speculative purposes.
Derivatives are initially recognised at fair value at the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each balance sheet date.
The resulting gain or loss is recognised immediately unless the
derivative is designated and effective as a hedging instrument,
in which event the timing of the recognition in profit or loss
depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial
asset whereas a derivative with a negative fair value is recognised
as a financial liability. Derivatives are not offset in the financial
statements unless the Group has both legal right and intention to
offset. A derivative is presented as a non-current asset or a non-
current liability if the remaining maturity of the instrument is more
than twelve months and it is not expected to be realised or settled
within twelve months. Other derivatives are presented as current
assets or current liabilities.
An embedded derivative is a component of a hybrid contract that
also includes a non-derivative host – with the effect that some of
the cash flows of the combined instrument vary in a way similar to
a stand-alone derivative.
Derivatives embedded in hybrid contracts with a financial asset
host within the scope of IFRS 9 are not separated. The entire
hybrid contract is classified and subsequently measured as either
amortised cost or fair value as appropriate.
Derivatives embedded in hybrid contracts with hosts that are not
financial assets within the scope of IFRS 9 are treated as separate
derivatives when they meet the definition of a derivative, their
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>
>
>
>
>
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
liability derecognised and the consideration paid and payable
(j) Financial instruments continued
A financial liability is classified as held for trading if:
is recognised in profit or loss.
it has been acquired principally for the purpose of
repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified
financial instruments that the Group manages together and
has a recent actual pattern of short-term profit-taking; or
it is a derivative, except for a derivative that is a
financial guarantee contract or a designated and
effective hedging instrument.
When the Group exchanges with the existing lender one debt
instrument into another one with the substantially different
terms, such exchange is accounted for as an extinguishment
of the original financial liability and the recognition of a new
financial liability. Similarly, the Group accounts for substantial
modification of terms of an existing liability or part of it as
an extinguishment of the original financial liability and the
recognition of a new liability. It is assumed that the terms are
substantially different if the discounted present value of the cash
flows under the new terms, including any fees paid net of any fees
A financial liability other than a financial liability held for trading or
received and discounted using the original effective rate is at least
contingent consideration of an acquirer in a business combination
10% different from the discounted present value of the remaining
may be designated as at FVTPL upon initial recognition if:
cash flows of the original financial liability. If the modification is
such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets
not substantial, the difference between: (i) the carrying amount of
the liability before the modification; and (ii) the present value of
the cash flows after modification should be recognised in profit or
loss as the modification gain or loss within other gains and losses.
or financial liabilities or both, which is managed and its
(k) Derivative financial instruments
performance is evaluated on a fair value basis, in accordance
with the Group’s documented risk management or investment
strategy, and information about the grouping is provided
internally on that basis; or
Derivative financial instruments, such as foreign currency
contracts and interest rate swaps, are entered into by the Group
in order to manage its exposure to interest rate and foreign
currency fluctuations or as simultaneous back-to-back transactions
>
it forms part of a contract containing one or more embedded
with counterparties. The Group does not use derivative financial
derivatives, and IFRS 9 permits the entire combined contract
instruments for speculative purposes.
to be designated as at FVTPL.
Financial liabilities at FVTPL are measured at fair value, with
any gains or losses arising on changes in fair value recognised in
profit or loss to the extent that they are not part of a designated
hedging relationship. The net gain or loss recognised in profit or
loss incorporates any interest paid on the financial liability and
is included in ‘other gains and losses’ in profit or loss.
Derivatives are initially recognised at fair value at the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each balance sheet date.
The resulting gain or loss is recognised immediately unless the
derivative is designated and effective as a hedging instrument,
in which event the timing of the recognition in profit or loss
depends on the nature of the hedge relationship.
Financial liabilities that are designated as at FVTPL, the
amount of change in the fair value of the financial liability that
is attributable to changes in the credit risk of that liability is
recognised in other comprehensive income, unless the recognition
of the effects of changes in the liability’s credit risk in other
comprehensive income would create or enlarge an accounting
mismatch in profit or loss. The remaining amount of change in
the fair value of liability is recognised in profit or loss. Changes in
A derivative with a positive fair value is recognised as a financial
asset whereas a derivative with a negative fair value is recognised
as a financial liability. Derivatives are not offset in the financial
statements unless the Group has both legal right and intention to
offset. A derivative is presented as a non-current asset or a non-
current liability if the remaining maturity of the instrument is more
than twelve months and it is not expected to be realised or settled
within twelve months. Other derivatives are presented as current
fair value attributable to a financial liability’s credit risk that are
assets or current liabilities.
recognised in other comprehensive income are not subsequently
reclassified to profit or loss; instead, they are transferred to
An embedded derivative is a component of a hybrid contract that
retained earnings upon derecognition of the financial liability.
also includes a non-derivative host – with the effect that some of
the cash flows of the combined instrument vary in a way similar to
Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of
a stand-alone derivative.
an acquirer in a business combination, (ii) held-for-trading, or (iii)
Derivatives embedded in hybrid contracts with a financial asset
designated as at FVTPL, are measured subsequently at amortised
host within the scope of IFRS 9 are not separated. The entire
cost using the effective interest method.
hybrid contract is classified and subsequently measured as either
amortised cost or fair value as appropriate.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when,
Derivatives embedded in hybrid contracts with hosts that are not
the Group’s obligations are discharged, cancelled or have expired.
financial assets within the scope of IFRS 9 are treated as separate
The difference between the carrying amount of the financial
derivatives when they meet the definition of a derivative, their
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risks and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at FVTPL.
If the hybrid contract is a quoted financial liability, instead
of separating the embedded derivative, the Group generally
designates the whole hybrid contract at FVTPL.
An embedded derivative is presented as a non-current asset
or non-current liability if the remaining maturity of the hybrid
instrument to which the embedded derivative relates is more
than twelve months and is not expected to be realised or settled
within twelve months.
(l) Hedge accounting
Derivatives designated as hedges are either ‘fair value hedges’
or ‘hedges of net investments in foreign operations’.
Fair value hedges
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recorded in profit or loss except
when the hedging instrument hedges an equity instrument
designated at FVTOCI in which case it is recognised in other
comprehensive income.
The carrying amount of a hedged item not already measured
at fair value is adjusted for the fair value change attributable
to the hedged risk with a corresponding entry in profit or loss.
For debt instruments measured at FVTOCI, the carrying amount
is not adjusted as it is already at fair value, but the hedging
gain or loss is recognised in profit or loss instead of other
comprehensive income. When the hedged item is an equity
instrument designated at FVTOCI, the hedging gain or loss
remains in other comprehensive income to match that of the
hedging instrument.
Where hedging gains or losses are recognised in profit or loss,
they are recognised in the same line as the hedged item.
Hedge accounting is discontinued when the Group revokes
the hedging relationship, the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The adjustment to the carrying amount of the hedged
item arising from the hedged risk is amortised to profit or loss
from that date.
Net investment hedges
The effective portion of changes in the fair value of derivatives
that are designated and qualify as net investment hedges is
recognised in other comprehensive income and accumulated
in the hedging and translation reserve. The gain or loss relating
to the ineffective portion is recognised immediately in profit
or loss, and is included in financial income or financial
expense respectively.
Gains and losses deferred in the hedging and translation
reserve are recognised in profit or loss on disposal of the
foreign operation.
(m) Settlement balances and stock lending
Certain Group companies engage in Matched Principal brokerage
whereby securities are bought from one counterparty and
simultaneously sold to another counterparty. Settlement of such
transactions are primarily on a delivery vs payment basis (‘DVP’)
and typically take place within a few business days of the
transaction date according to the relevant market rules and
conventions. The amounts due from and payable to counterparties
in respect of as yet unsettled Matched Principal transactions are
shown gross, except where a netting agreement, which is legally
enforceable at all times, exists and the asset and liability are
either settled net or simultaneously.
The Group acts as an intermediary between its customers
for collateralised stock lending transactions. Such trades are
complete only when both the collateral and stock for each side
of the transaction are returned. The gross amounts of collateral
due to and receivable are disclosed in the balance sheet as
deposits paid for securities borrowed and deposits received
for securities loaned.
The Group undertakes Matched Principal broking involving
simultaneous back-to-back derivative transactions with
counterparties. These transactions are classified as financial
instruments at fair value through profit or loss (‘FVTPL’) and are
shown gross, except where a netting agreement, which is legally
enforceable at all times, exists and the asset and liability are
either settled net or simultaneously.
(n) Restricted Funds, Cash and cash equivalents
Cash comprises cash in hand and demand deposits which may
be accessed without penalty. Cash equivalents comprise short
term highly liquid investments with a maturity of less than three
months from the date of acquisition. For the purposes of the
Consolidated Cash Flow Statement, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
The Group holds money, and occasionally financial instruments,
on behalf of customers (client monies) in accordance with local
regulatory rules. Since the Group is not beneficially entitled to
these amounts, they are excluded from the Consolidated Balance
Sheet along with the corresponding liabilities to customers.
Restricted funds comprise cash held with a central counterparty
clearing house (‘CCP’), or a financial institution providing the
Group with access to a CCP, and funds set aside for regulatory
purposes, but excluding client money. The funds represent cash
for which the Group does not have immediate and direct access
or for which regulatory requirements restrict the use of the cash.
(o) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value,
being the consideration received net of issue costs associated
with the borrowing.
After initial recognition, interest bearing loans and borrowings
are measured at amortised cost using the effective interest rate
method. Amortised cost is calculated taking into account any
issue costs and any discounts or premium on settlement. Gains and
losses are recognised in the income statement when the liabilities
are derecognised, as well as through the amortisation process.
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TP ICAP Classification: Confidential
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Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
(p) Provisions
Provisions are recognised when the Group has a present
obligation, legal or constructive, as a result of a past event
where it is probable that this will result in an outflow of economic
benefits that can be reliably estimated.
Provisions for restructuring costs are recognised when the Group
has a detailed formal plan for the restructuring, which has been
notified to affected parties.
(q) Foreign currencies
The individual financial statements of each Group company are
prepared in the currency of the primary economic environment
in which it operates, its functional currency. For the purpose of
the Consolidated Financial Statements, the results and financial
position of each Group company are expressed in Pounds Sterling,
which is the functional currency of the Company and the
presentation currency for the Consolidated Financial Statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the functional currency are
recorded at the rates of exchange prevailing on the dates of the
transactions. Gains and losses arising from the settlement of these
transactions, and from the retranslation of monetary assets and
liabilities denominated in currencies other than the functional
currency at rates prevailing at the balance sheet date, are
recognised in the income statement. Non-monetary assets and
liabilities denominated in currencies other than the functional
currency that are measured at historical cost or fair value are
translated at the exchange rate at the date of the transaction
or at the date the fair value was determined.
For the purpose of presenting Consolidated Financial Statements,
the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet
date. Exchange differences arising are classified as other
comprehensive income and transferred to the Group’s translation
reserve. Such translation differences are recognised as income
or as expense in the year in which the operation is disposed of.
Income and expense items are translated at average exchange
rates for the year, unless exchange rates fluctuate significantly
during that year, in which case the exchange rates at the date
of transactions are used.
(r) Taxation
The tax expense represents the sum of current tax payable
arising in the year, movements in deferred tax and movements
in tax provisions. The tax expense includes any interest and
penalties payable.
The current tax payable arising in the year is based on taxable
profit for the year using tax rates that have been enacted or
substantively enacted by the balance sheet date, and any
adjustment to tax payable in respect of prior years.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences arising between
the carrying amount of assets and liabilities in the Financial
Statements and the corresponding tax basis used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all temporary differences and deferred
tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences may be utilised. Temporary differences
are not recognised if they arise from goodwill or from initial
recognition of other assets and liabilities in a transaction
which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply
when the asset or liability is settled or when the asset is realised.
Deferred tax is charged or credited in the income statement,
except when it relates to items credited or charged directly to
other comprehensive income or equity, in which case the deferred
tax is also dealt with in other comprehensive income or equity.
(s) Leases
Assets held under finance leases, which transfer to the Group
substantially all the risks and benefits incidental to ownership of
the leased item, are capitalised at the inception of the lease at the
fair value of the leased property or, if lower, at the present value
of the minimum lease payments. Lease payments are apportioned
between the finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly
against income.
Capitalised leased assets are depreciated over the shorter of the
estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and
benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in
the income statement on a straight-line basis over the lease term.
(t) Retirement benefit costs
Defined contributions made to employees’ personal pension plans
are charged to the income statement as and when incurred.
For defined benefit retirement plans, the cost of providing the
benefits is determined using the projected unit credit method.
Actuarial gains and losses are recognised in full in the year
in which they occur. They are recognised outside the income
statement and are presented in other comprehensive income.
Past service cost is recognised in profit or loss when the plan
amendment or curtailment occurs, or when the Group recognises
related restructuring costs or termination benefits, if earlier. Gains
or losses on settlement of a defined benefit plan are recognised
when the settlement occurs.
The amount recognised in the balance sheet represents the net of
the present value of the defined benefit obligation as adjusted for
actuarial gains and losses and past service cost, and the fair value
of plan assets. The Trust Deed provides the Group with an
unconditional right to a refund of surplus assets assuming the
full settlement of plan liabilities. In the ordinary course of business
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Annual Report and Accounts 2019
130
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
3. Summary of significant accounting policies continued
generally recognised for all temporary differences and deferred
(p) Provisions
Provisions are recognised when the Group has a present
obligation, legal or constructive, as a result of a past event
where it is probable that this will result in an outflow of economic
benefits that can be reliably estimated.
Provisions for restructuring costs are recognised when the Group
has a detailed formal plan for the restructuring, which has been
notified to affected parties.
(q) Foreign currencies
The individual financial statements of each Group company are
prepared in the currency of the primary economic environment
in which it operates, its functional currency. For the purpose of
the Consolidated Financial Statements, the results and financial
position of each Group company are expressed in Pounds Sterling,
which is the functional currency of the Company and the
presentation currency for the Consolidated Financial Statements.
tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences may be utilised. Temporary differences
are not recognised if they arise from goodwill or from initial
recognition of other assets and liabilities in a transaction
which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply
when the asset or liability is settled or when the asset is realised.
Deferred tax is charged or credited in the income statement,
except when it relates to items credited or charged directly to
other comprehensive income or equity, in which case the deferred
tax is also dealt with in other comprehensive income or equity.
In preparing the financial statements of the individual companies,
transactions in currencies other than the functional currency are
recorded at the rates of exchange prevailing on the dates of the
(s) Leases
transactions. Gains and losses arising from the settlement of these
substantially all the risks and benefits incidental to ownership of
transactions, and from the retranslation of monetary assets and
liabilities denominated in currencies other than the functional
currency at rates prevailing at the balance sheet date, are
recognised in the income statement. Non-monetary assets and
liabilities denominated in currencies other than the functional
currency that are measured at historical cost or fair value are
translated at the exchange rate at the date of the transaction
or at the date the fair value was determined.
the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet
date. Exchange differences arising are classified as other
comprehensive income and transferred to the Group’s translation
reserve. Such translation differences are recognised as income
or as expense in the year in which the operation is disposed of.
Income and expense items are translated at average exchange
rates for the year, unless exchange rates fluctuate significantly
during that year, in which case the exchange rates at the date
of transactions are used.
(r) Taxation
The tax expense represents the sum of current tax payable
arising in the year, movements in deferred tax and movements
in tax provisions. The tax expense includes any interest and
penalties payable.
The current tax payable arising in the year is based on taxable
profit for the year using tax rates that have been enacted or
substantively enacted by the balance sheet date, and any
adjustment to tax payable in respect of prior years.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences arising between
the carrying amount of assets and liabilities in the Financial
Statements and the corresponding tax basis used in the
computation of taxable profit. Deferred tax liabilities are
Assets held under finance leases, which transfer to the Group
the leased item, are capitalised at the inception of the lease at the
fair value of the leased property or, if lower, at the present value
of the minimum lease payments. Lease payments are apportioned
between the finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly
against income.
Capitalised leased assets are depreciated over the shorter of the
Leases where the lessor retains substantially all the risks and
benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in
the income statement on a straight-line basis over the lease term.
(t) Retirement benefit costs
Defined contributions made to employees’ personal pension plans
are charged to the income statement as and when incurred.
For defined benefit retirement plans, the cost of providing the
benefits is determined using the projected unit credit method.
Actuarial gains and losses are recognised in full in the year
in which they occur. They are recognised outside the income
statement and are presented in other comprehensive income.
Past service cost is recognised in profit or loss when the plan
amendment or curtailment occurs, or when the Group recognises
related restructuring costs or termination benefits, if earlier. Gains
or losses on settlement of a defined benefit plan are recognised
when the settlement occurs.
The amount recognised in the balance sheet represents the net of
the present value of the defined benefit obligation as adjusted for
actuarial gains and losses and past service cost, and the fair value
of plan assets. The Trust Deed provides the Group with an
unconditional right to a refund of surplus assets assuming the
full settlement of plan liabilities. In the ordinary course of business
For the purpose of presenting Consolidated Financial Statements,
estimated useful life of the asset or the lease term.
Strategic report Governance report
Financial statements
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the Trustee has no rights to unilaterally wind up, or otherwise
augment the benefits due to members of, the plan. Based on
these rights, any net surplus in the plan would be recognised in
full. Where such rights or do not exist, or are no longer
enforceable, the Group applies the requirements of IFRIC 14
and restricts recognition of the net surplus by applying an
asset recognition ceiling. The asset ceiling is recorded in other
comprehensive income.
(u) Share-based payments
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured
at fair value at the date of grant. The fair value determined at
the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of shares that will eventually vest.
The fair value of share options issued is determined using
appropriate valuation models. The expected life used in the
models has been adjusted, based on management’s best estimate
for the effects of non-transferability, exercise restrictions and
behavioural considerations.
The estimated fair value of shares granted is based on the share
price at grant date, reduced where shares do not qualify for
dividends during the vesting period. Market-based performance
conditions for equity-settled payments are reflected in the initial
fair value of the award.
(v) Treasury shares
Where share capital recognised as equity is repurchased, the
amount of the consideration paid, including directly attributable
costs, net of any tax effects, is recognised as a deduction from
equity. When treasury shares are sold or re-issued subsequently,
the amount received is recognised as an increase in equity, and
the resulting surplus or deficit on the transaction is transferred
to or from retained earnings.
(w) Accounting estimates and judgements
In the application of the Group’s accounting policies, the Directors
are required to make judgements, estimates and assumptions
about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results
may differ from these estimates.
Estimates and assumptions are reviewed on an ongoing basis
and revisions to accounting estimates are recognised in the period
an estimate is revised.
The following are the critical judgements, apart from those
involving estimations, that the Directors have made in the process
of preparing the Financial Statements.
Provisions and contingent liabilities
Provisions are established by the Group based on management’s
assessment of relevant information and advice available at
the time of preparing the Financial Statements. Judgement is
required as to whether a present obligation exists and in
estimating the probability, timing and amount of any outflows.
Judgement is also required as to when contingent liabilities
become disclosable. Outcomes are uncertain and dependent
on future events. Where outcomes differ from management’s
expectations, differences from the amount initially provided
will impact profit or loss in the period the outcome is determined.
Estimating potential legal outcomes is also a significant area of
estimation uncertainty. Note 26 and Note 35 provide details of
the Group’s provisions and contingent liabilities.
Presentation of the Income Statement
The Group maintains a columnar format for the presentation of
its Consolidated Income Statement. The columnar format enables
the Group to continue its practice of aiding the understanding
of its results by presenting its underlying profit separate from
items relating to acquisition, disposal and integration costs,
and exceptional items. Judgement is required to ensure that
profit or loss items are appropriately and consistently classified
and that their classification and description correctly reflects the
presentational objectives of the Group. Note 5 provides details of
the items separately presented in the Group’s Income Statement.
The following key assumptions concerning the future, and other
sources of estimation uncertainty that may have a significant risk
of material adjustment to the carrying amounts of assets and
liabilities are discussed below.
Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets are impaired
requires an estimation of the value in use of the cash-generating
units to which these assets have been allocated. The value in use
calculation requires estimation of future cash flows expected to
arise for the cash-generating unit, the selection of suitable
discount rates and the estimation of future growth rates. During
the year goodwill has been impaired by £24m. Note 13 describes
the assumptions used together with an analysis of the sensitivity
to reasonably possible changes in key assumptions.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
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Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
4. Segmental analysis
Products and services from which reportable segments derive their revenues
The Group is organised by geographic reporting segments which are used for the purposes of resource allocation and assessment of
segmental performance by Group management. These are the Group’s reportable segments under IFRS 8 ‘Operating Segments’.
Revenue arising in each geographic reportable segment is derived from four business divisions: Global Broking, Energy & Commodities,
Institutional Services, and Data & Analytics.
Information regarding the Group’s operating segments is reported below:
Analysis by geographic segment
Revenue
EMEA
Americas
Asia Pacific
Operating profit
EMEA
Americas
Asia Pacific
Underlying operating profit1
Acquisition, disposal and integration costs (Note 5)
Exceptional items (Note 5)
Reported operating profit
Finance income
Finance costs2
Profit before tax
Taxation
Profit after tax
Share of results of associates and joint ventures
Profit for the year
2019
£m
900
687
246
1,833
164
94
21
279
(115)
(22)
142
6
(55)
93
(40)
53
15
68
2018
£m
886
636
241
1,763
173
81
22
276
(160)
(23)
93
5
(36)
62
(39)
23
12
35
Under the IFRS 16 transition approach adopted by the Group, the prior year prepared under IAS 17 has not been restated. Consequently the results for the year ended 31
December 2019 are not directly comparable with those reported for 31 December 2018 (Note 2(e)(vi)).
In relation to leases under IFRS 16:
1. Operating profit includes depreciation of £10m for EMEA, £5m for Americas and £6m for Asia Pacific instead of operating lease expense of £12m for EMEA, £9m for
Americas and £7m for Asia Pacific; and
2. Finance costs include the unwind of discounted lease liabilities of £2m for EMEA, £8m for Americas and £2m for Asia Pacific.
There are no inter-segment sales included in the geographic segment revenue.
TP ICAP plc is domiciled in the UK. Revenue attributable to the UK amounted to £850m (2018: £828m) and the total revenue from other
countries was £983m (2018: £935m).
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
132
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
4. Segmental analysis
Products and services from which reportable segments derive their revenues
The Group is organised by geographic reporting segments which are used for the purposes of resource allocation and assessment of
segmental performance by Group management. These are the Group’s reportable segments under IFRS 8 ‘Operating Segments’.
Revenue arising in each geographic reportable segment is derived from four business divisions: Global Broking, Energy & Commodities,
Institutional Services, and Data & Analytics.
Information regarding the Group’s operating segments is reported below:
Analysis by geographic segment
Revenue
EMEA
Americas
Asia Pacific
Operating profit
EMEA
Americas
Asia Pacific
Finance income
Finance costs2
Profit before tax
Taxation
Profit after tax
Profit for the year
Underlying operating profit1
Acquisition, disposal and integration costs (Note 5)
Exceptional items (Note 5)
Reported operating profit
Share of results of associates and joint ventures
2019
£m
900
687
246
1,833
164
94
21
279
(115)
(22)
142
6
(55)
93
(40)
53
15
68
2018
£m
886
636
241
1,763
173
81
22
276
(160)
(23)
93
5
(36)
62
(39)
23
12
35
Under the IFRS 16 transition approach adopted by the Group, the prior year prepared under IAS 17 has not been restated. Consequently the results for the year ended 31
December 2019 are not directly comparable with those reported for 31 December 2018 (Note 2(e)(vi)).
In relation to leases under IFRS 16:
Americas and £7m for Asia Pacific; and
1. Operating profit includes depreciation of £10m for EMEA, £5m for Americas and £6m for Asia Pacific instead of operating lease expense of £12m for EMEA, £9m for
2. Finance costs include the unwind of discounted lease liabilities of £2m for EMEA, £8m for Americas and £2m for Asia Pacific.
There are no inter-segment sales included in the geographic segment revenue.
TP ICAP plc is domiciled in the UK. Revenue attributable to the UK amounted to £850m (2018: £828m) and the total revenue from other
countries was £983m (2018: £935m).
Strategic report Governance report
Financial statements
133
133
2019
£m
2018
£m
Restated1
537
94
201
213
199
1,244
379
75
135
1,833
221
46
3
59
(50)
279
523
101
207
213
210
1,254
331
61
117
1,763
253
32
1
49
(59)
276
Analysis by division
Revenue by Division
– Rates1
– Credit
– FX & Money Markets
– Emerging Markets
– Equities
Global Broking
Energy & Commodities
Institutional Services
Data & Analytics2
Operating profit
Global Broking
Energy & Commodities
Institutional Services
Data & Analytics
Corporate Centre
Underlying operating profit
1.
In 2019, RV broking business was transferred from Global Broking to Institutional Services. 2018 revenue has been restated to reclassify £24m from Global Broking to
Institutional Services.
2. Contracts for the provision of Data & Analytics services gives the Group a right to revenue which corresponds directly with the value of the performance completed. The
Group has applied the practical expedient in IFRS 15 and has not disclosed either the remaining amount due under the contract nor when the Group expects to recognise
that amount.
Corporate centre represents the cost of group and central functions that are not allocated to the Group’s divisions.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
134
134
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
4. Segmental analysis continued
Other segmental information
Capital additions
EMEA – UK
Americas
Asia Pacific
Depreciation and amortisation
EMEA – UK
EMEA – Other
Americas
Asia Pacific
Share-based compensation
EMEA – UK (including £1m credit relating to acquisitions and integration (2018: nil))
Americas
Asia Pacific
2019
£m
23
4
6
33
2019
£m
32
2
17
10
61
2019
£m
3
1
1
5
2018
£m
33
34
6
73
2018
£m
24
2
11
2
39
2018
£m
3
1
1
5
Segment assets
EMEA – UK
EMEA – Other
Americas
Asia Pacific
Segment liabilities
EMEA – UK
EMEA – Other
Americas
Asia Pacific
Segment assets and liabilities exclude all inter-segment balances.
Non-current
£m
1,081
36
567
186
1,870
Non-current
£m
366
48
374
139
927
Current
£m
10,138
187
39,713
157
50,195
Current
£m
9,795
160
39,408
45
49,408
2019
£m
11,219
223
40,280
343
52,065
2019
£m
10,161
208
39,782
184
50,335
2018
£m
4,179
110
20,873
351
25,513
2018
£m
3,090
95
20,341
157
23,683
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
134
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
135
135
continued
for the year ended 31 December 2019
4. Segmental analysis continued
Other segmental information
Capital additions
EMEA – UK
Americas
Asia Pacific
Depreciation and amortisation
EMEA – UK
EMEA – Other
Americas
Asia Pacific
Americas
Asia Pacific
Segment assets
EMEA – UK
EMEA – Other
Americas
Asia Pacific
Segment liabilities
EMEA – UK
EMEA – Other
Americas
Asia Pacific
Share-based compensation
EMEA – UK (including £1m credit relating to acquisitions and integration (2018: nil))
2019
£m
23
4
6
33
2019
£m
32
2
17
10
61
2019
£m
3
1
1
5
2018
£m
33
34
6
73
2018
£m
24
2
11
2
39
2018
£m
3
1
1
5
Non-current
£m
1,081
36
567
186
1,870
£m
366
48
374
139
927
Non-current
Current
£m
10,138
187
39,713
157
50,195
Current
£m
9,795
160
39,408
45
49,408
2019
£m
11,219
223
40,280
343
52,065
2019
£m
10,161
208
39,782
184
50,335
2018
£m
4,179
110
20,873
351
25,513
2018
£m
3,090
95
20,341
157
23,683
5. Administrative expenses
2019
Broker compensation costs
Other staff costs
Other share-based payment charge/(credit)
Charge relating to employee long-term benefits
Employment costs (Note 7)
Technology and related costs
Premises and related costs
Amortisation of other intangible assets (Note 14)
Depreciation of property, plant and equipment (Note 15)
Depreciation of right-of-use assets (Note 16)
Amortisation of intangible assets arising on consolidation (Note 13)
Impairment of intangible assets arising on consolidation (Note 13)
Adjustments to deferred consideration
Adjustments to provisions and contingent liabilities acquired
Charge relating to legal and regulatory settlements
Pension scheme past service and settlement costs
Acquisition costs
Other administrative costs
Impairment loss on trade receivables
2018
Broker compensation costs
Other staff costs
Other share-based payment charge
Charge relating to employee long-term benefits
Employment costs (Note 7)
Technology and related costs
Premises and related costs
Amortisation of other intangible assets (Note 14)
Depreciation of property, plant and equipment (Note 15)
Amortisation of intangible assets arising on consolidation (Note 13)
Impairment of intangible assets arising on consolidation (Note 13)
Impairment of associate
Adjustments to deferred consideration
Net charge relating to legal settlements
Acquisition costs
Other administrative costs
Impairment loss on trade receivables
Underlying
Front Office
£m
Underlying
Support
£m
Total
Underlying
£m
Acquisition,
disposal and
integration
costs
£m
Exceptional
items
£m
900
19
–
–
919
99
–
1
1
–
–
–
–
–
–
–
–
119
1,139
–
1,139
859
14
–
–
873
94
–
2
–
–
–
–
–
–
–
115
1,084
–
1,084
–
209
6
–
215
59
26
22
12
20
–
–
–
–
–
–
–
77
431
–
431
–
223
5
–
228
52
52
23
10
–
–
–
–
–
–
49
414
1
415
900
228
6
–
1,134
158
26
23
13
20
–
–
–
–
–
–
–
196
1,570
–
1,570
859
237
5
–
1,101
146
52
25
10
–
–
–
–
–
–
164
1,498
1
1,499
–
18
(1)
–
17
–
–
4
–
–
42
24
6
3
–
–
2
17
115
–
115
–
22
–
–
22
–
1
1
–
40
65
3
5
–
3
20
160
–
160
–
2
–
1
3
–
1
–
–
1
–
–
–
–
18
4
–
4
31
–
31
–
–
–
2
2
–
14
–
3
–
–
–
–
3
–
1
23
–
23
Total
£m
900
248
5
1
1,154
158
27
27
13
21
42
24
6
3
18
4
2
217
1,716
–
1,716
859
259
5
2
1,125
146
67
26
13
40
65
3
5
3
3
185
1,681
1
1,682
Segment assets and liabilities exclude all inter-segment balances.
Net foreign exchange loss of £8m (2018: gain £1m) are included in ‘other administrative costs’.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
136
136
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
5. Administrative expenses continued
Acquisition, disposal and integration costs comprise:
ICAP integration costs
– Employee related costs
– Share-based payment credit
– Premises, equipment and other technology costs
– Amortisation of other intangible assets
– Other administrative costs
Acquisition and disposal costs
– Acquisition costs
– Amortisation of intangible assets arising on consolidation
– Impairment of intangible assets arising on consolidation
– Impairment of associate
– Adjustments to deferred consideration (Note 32(c))
– Adjustments to provisions and contingent liabilities acquired
Taxation
2019
£m
16
(1)
–
4
15
34
6
42
24
–
6
3
115
(15)
100
2018
£m
22
–
1
1
20
44
3
40
65
3
5
–
160
(20)
140
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
136
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
137
137
continued
for the year ended 31 December 2019
5. Administrative expenses continued
Acquisition, disposal and integration costs comprise:
ICAP integration costs
– Employee related costs
– Share-based payment credit
– Premises, equipment and other technology costs
– Amortisation of other intangible assets
– Other administrative costs
Acquisition and disposal costs
– Acquisition costs
– Amortisation of intangible assets arising on consolidation
– Impairment of intangible assets arising on consolidation
– Impairment of associate
– Adjustments to deferred consideration (Note 32(c))
– Adjustments to provisions and contingent liabilities acquired
Taxation
2019
£m
2018
£m
16
(1)
–
4
15
34
6
42
24
–
6
3
115
(15)
100
22
–
1
1
20
44
3
40
65
3
5
–
160
(20)
140
Exceptional items comprise:
Charge relating to business reorganisation
Pension Scheme past service and closure costs
Charge relating to employee long-term benefits
Charge relating to legal costs
Charge relating to legal and regulatory settlements
Employment related legal settlement receipt
Taxation
The analysis of auditor’s remuneration is as follows:
Audit of the Group’s annual accounts
Audit of the Company’s subsidiaries and associates pursuant to legislation
Total audit fees
Audit related assurance services¹
Other assurance services²
Total non-audit fees
2019
£m
7
4
1
1
18
31
(9)
22
–
22
2019
£000
462
5,679
6,141
1,034
884
1,918
2018
£m
18
–
2
–
3
23
–
23
(4)
19
2018
£000
448
4,917
5,365
1,239
88
1,327
Audit fees payable to the Company’s auditor and its associates in respect of associated pension schemes
22
18
1 Audit related assurance services relate to services required by law or regulation, assurance on regulatory returns and review of interim financial information.
2 Other assurance services relate to non-statutory audits and other permitted assurance services.
6. Other operating income
Other operating income represents receipts such:
Business relocation grants
Employee related insurance receipts
Management fees from associates
Sub-lease rental income (pre IFRS 16)
Other receipts
Other receipts include royalties, rebates, insurance proceeds, tax credits and refunds.
Costs associated with such items are included in administrative expenses.
2019
£m
3
2
1
–
10
16
2018
£m
1
1
1
2
7
12
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
138
138
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
7. Staff costs
The average monthly number of full time equivalent employees and Directors of the Group was:
EMEA
Americas
Asia Pacific
The aggregate employment costs of staff and Directors were:
Wages, salaries, bonuses and incentive payments
Social security costs
Defined contribution pension costs (Note 37(c))
Other share-based compensation expense
8. Finance income
Interest receivable and similar income
Interest receivable on finance leases (Note 22)
Deemed interest arising on the defined benefit pension scheme surplus (Note 37)
9. Finance costs
Interest and fees payable on bank facilities
Interest payable on Sterling Notes June 2019
Interest payable on Sterling Notes January 2024
Interest payable on Sterling Notes May 2026
Other interest payable
Amortisation of debt issue and bank facility costs
Borrowing costs
Interest payable on lease liabilities (Note 16)
Premium on repurchase of Sterling Notes January 2024
2019
No.
2,272
1,549
1,037
4,858
2019
£m
1,048
84
17
5
1,154
2019
£m
5
1
–
6
2019
£m
3
2
24
8
1
2
40
12
3
55
2018
No.
2,216
1,576
1,042
4,834
2018
£m
1,022
83
15
5
1,125
2018
£m
4
–
1
5
2018
£m
4
4
26
–
1
1
36
–
–
36
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
The average monthly number of full time equivalent employees and Directors of the Group was:
138
7. Staff costs
EMEA
Americas
Asia Pacific
The aggregate employment costs of staff and Directors were:
Wages, salaries, bonuses and incentive payments
Social security costs
Defined contribution pension costs (Note 37(c))
Other share-based compensation expense
8. Finance income
Interest receivable and similar income
Interest receivable on finance leases (Note 22)
Deemed interest arising on the defined benefit pension scheme surplus (Note 37)
9. Finance costs
Interest and fees payable on bank facilities
Interest payable on Sterling Notes June 2019
Interest payable on Sterling Notes January 2024
Interest payable on Sterling Notes May 2026
Other interest payable
Amortisation of debt issue and bank facility costs
Borrowing costs
Interest payable on lease liabilities (Note 16)
Premium on repurchase of Sterling Notes January 2024
1,154
1,125
2019
No.
2,272
1,549
1,037
4,858
2019
£m
1,048
84
17
5
2019
£m
5
1
–
6
2019
£m
24
3
2
8
1
2
40
12
3
55
2018
No.
2,216
1,576
1,042
4,834
2018
£m
1,022
83
15
5
2018
£m
4
–
1
5
2018
£m
4
4
26
–
1
1
–
–
36
36
Strategic report Governance report
Financial statements
139
139
10. Taxation
Current tax
UK corporation tax
Overseas tax
Prior year UK corporation tax
Prior year overseas tax
Deferred tax (Note 21)
Current year
Prior year
Tax charge for the year
The charge for the year can be reconciled to the profit in the income statement as follows:
Profit before tax
Tax based on the UK corporation tax rate of 19% (2018: 19%)
Tax effect of items that are not deductible:
– expenses
– impairment of intangible assets arising on consolidation
Prior year adjustments
Impact of tax rate change
Impact of overseas tax rates
Tax charge/(credit) for the year
The UK corporation tax rate for 2019 is 19% (2018: 19%).
Acquisition,
disposal and
integration
costs
£m
(115)
(22)
Exceptional
items
£m
(22)
(4)
Underlying
£m
230
44
8
–
(3)
–
6
55
–
5
–
–
2
(15)
4
–
–
–
–
–
2019
£m
2018
£m
23
32
(3)
–
52
(12)
–
(12)
40
2019
£m
93
18
12
5
(3)
–
8
40
23
17
(2)
–
38
1
–
1
39
2018
£m
62
12
9
13
(2)
–
7
39
In addition to the income statement charge, the following current and deferred tax items have been included in other comprehensive
income and equity:
2019
Deferred tax credit relating to:
– Decrease in the defined benefit pension scheme surplus (Note 37)
– Other timing differences
Tax credit on items taken directly to other comprehensive
income and equity
2018
Deferred tax credit relating to:
– Decrease in the defined benefit pension scheme surplus
– Other timing differences
Tax credit on items taken directly to other comprehensive
income and equity
Recognised
in other
comprehensive
income
£m
Recognised
in equity
£m
(19)
–
(19)
(1)
–
(1)
–
–
–
–
(1)
(1)
Total
£m
(19)
–
(19)
(1)
(1)
(2)
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
140
140
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
11. Earnings per share
Basic – underlying
Diluted – underlying
Basic
Diluted
The calculation of basic and diluted earnings per share is based on the following number of shares:
Basic weighted average shares
Contingently issuable shares
Diluted weighted average shares
The earnings used in the calculation of underlying, basic and diluted earnings per share are set out below:
Earnings for the year
Non-controlling interests
Earnings
Acquisition, disposal and integration costs (Note 5)
Exceptional items (Note 5)
Taxation (Note 10)
Underlying earnings
2019
33.8p
33.5p
12.0p
11.9p
2019
No.(m)
559.4
4.2
563.6
2019
£m
68
(1)
67
115
22
(15)
189
2018
34.2p
33.9p
5.7p
5.7p
2018
No.(m)
558.5
5.6
564.1
2018
£m
35
(3)
32
160
23
(24)
191
Under the IFRS 16 transition approach adopted by the Group. the prior year prepared under IAS 17 has not been restated. Consequently the results for the year ended 31
December 2019 are not directly comparable with those reported for 31 December 2018 (Note 2(e)(vi)).
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
140
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
The calculation of basic and diluted earnings per share is based on the following number of shares:
The earnings used in the calculation of underlying, basic and diluted earnings per share are set out below:
11. Earnings per share
Basic – underlying
Diluted – underlying
Basic
Diluted
Basic weighted average shares
Contingently issuable shares
Diluted weighted average shares
Acquisition, disposal and integration costs (Note 5)
Earnings for the year
Non-controlling interests
Earnings
Exceptional items (Note 5)
Taxation (Note 10)
Underlying earnings
2019
33.8p
33.5p
12.0p
11.9p
2019
No.(m)
559.4
4.2
563.6
2019
£m
68
(1)
67
115
22
(15)
189
2018
34.2p
33.9p
5.7p
5.7p
2018
No.(m)
558.5
5.6
564.1
2018
£m
35
(3)
32
160
23
(24)
191
Under the IFRS 16 transition approach adopted by the Group. the prior year prepared under IAS 17 has not been restated. Consequently the results for the year ended 31
December 2019 are not directly comparable with those reported for 31 December 2018 (Note 2(e)(vi)).
Strategic report Governance report
Financial statements
141
141
12. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2018 of 11.25p per share
Interim dividend for the year ended 31 December 2019 of 5.6p per share
Final dividend for the year ended 31 December 2017 of 11.25p per share
Interim dividend for the year ended 31 December 2018 of 5.6p per share
2019
£m
63
31
–
–
94
2018
£m
–
–
63
31
94
In respect of the current year, the Directors propose a final dividend of 11.25p per share amounting to £63m which will be paid on
19 May 2020, if approved by shareholders at the Annual General Meeting on 13 May 2020, to all shareholders that are on the Register
of Members on 3 April 2020. This dividend has not been included as a liability in these Financial Statements.
The Trustees of the TP ICAP plc Employee Benefit Trust have waived their rights to dividends.
13. Intangible assets arising on consolidation
At 1 January 2019
Recognised on acquisitions
Remeasurement period adjustments:
– Remeasurement of other intangible assets
– Increase in net assets acquired
Amortisation of acquisition related intangibles
Impairment of acquisition related intangibles
Effect of movements in exchange rates
At 31 December 2019
At 1 January 2018
Recognised on acquisitions
Remeasurement period adjustments
Amortisation of acquisition related intangibles
Impairment of acquisition related intangibles
Effect of movements in exchange rates
At 31 December 2018
Goodwill
£m
1,030
7
(5)
(2)
–
(24)
(13)
993
1,052
31
(2)
–
(65)
14
1,030
Other
£m
564
–
5
–
(42)
–
(9)
518
590
2
2
(40)
–
10
564
Total
£m
1,594
7
–
(2)
(42)
(24)
(22)
1,511
1,642
33
–
(40)
(65)
24
1,594
Other intangible assets at 31 December 2019 represent customer relationships, £506m (2018: £543m), business brands and trade marks,
£10m (2018: £16m), and other intangibles, £2m (2018: £5m) that arise through business combinations. Customer relationships are being
amortised between 10 and 20 years.
Goodwill arising through business combinations is allocated to groups of individual cash-generating units (‘CGUs’), reflecting the lowest
level at which the Group monitors and tests goodwill for impairment purposes. The CGU groupings are as follows:
CGU
EMEA
Americas
Asia Pacific
Goodwill allocated to CGUs
2019
£m
663
262
68
993
2018
£m
654
281
95
1,030
CGUs, to which goodwill has been allocated, are tested for impairment at least annually. During the year the Group undertook
impairment assessments as at 30 June and as at 31 December, triggered as a result of changes in expected CGU cash flows.
Determining whether goodwill is impaired requires an estimation of the recoverable amount of each group of CGUs. The recoverable
amount is the higher of its value in use (‘VIU’) or its fair value less cost of disposal (‘FVLCD’). VIU is a pre-tax valuation, using pre-tax
cash flows and pre-tax discount rates which is compared to the pre-tax carrying value of the CGU, whereas FVLCD is a post-tax
valuation, using post-tax cash flows, post-tax discount rates and other post-tax observable valuation inputs, which is compared to a
post-tax carrying value of the CGU.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
142
142
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
13. Intangible assets arising on consolidation continued
The key assumptions for the VIU calculations are those regarding expected cash flows arising in future years, regional growth rates
and the discount rates. Future projections are based on the most recent financial projections considered by the Board which are used
to project pre-tax cash flows for the next five years. After this period a steady state cash flow is used to derive a terminal value for
the CGU.
As at 30 June 2019 the recoverable amount for each CGU was based on their VIU. Growth rates on underlying revenue, equating to a
0.9% compound annual growth rate over the five year projected period, were used for all CGUs, with pre-tax discount rates of 11.0% for
EMEA, 13.6% for Americas and 11.8% for Asia Pacific. At that time no CGUs were impaired. However the Asia Pacific CGU was sensitive
to reasonably possible changes in the VIU assumptions.
As at 31 December 2019 the recoverable amount for each CGU was based on their VIU. Growth rates on underlying revenues were
2.1% for EMEA, 1.6% for Americas and 1.2% for Asia Pacific over the five year projected period, with pre-tax discount rates of 11.0% for
EMEA, 13.6% for Americas and 11.6% for Asia Pacific. As a result, the recoverable amount for the Asia Pacific CGU was estimated to
be lower than its carrying value by £24m and has been impaired by this amount.
As at 31 December 2019 the Asia Pacific CGU remains sensitive to reasonably possible changes in the VIU assumptions. Further
impairment of the Asia Pacific CGU would be required if there are changes in the applicable assumptions. A reduction in the growth
rate over the period by 0.5% would increase the impairment charge by £17m and a 1% increase in the discount rate would increase
the charge by £10m. The impact on future cash flows resulting from falling growth rates does not reflect any management actions
that would be taken under such circumstances.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
142
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
13. Intangible assets arising on consolidation continued
The key assumptions for the VIU calculations are those regarding expected cash flows arising in future years, regional growth rates
and the discount rates. Future projections are based on the most recent financial projections considered by the Board which are used
to project pre-tax cash flows for the next five years. After this period a steady state cash flow is used to derive a terminal value for
the CGU.
As at 30 June 2019 the recoverable amount for each CGU was based on their VIU. Growth rates on underlying revenue, equating to a
0.9% compound annual growth rate over the five year projected period, were used for all CGUs, with pre-tax discount rates of 11.0% for
EMEA, 13.6% for Americas and 11.8% for Asia Pacific. At that time no CGUs were impaired. However the Asia Pacific CGU was sensitive
to reasonably possible changes in the VIU assumptions.
As at 31 December 2019 the recoverable amount for each CGU was based on their VIU. Growth rates on underlying revenues were
2.1% for EMEA, 1.6% for Americas and 1.2% for Asia Pacific over the five year projected period, with pre-tax discount rates of 11.0% for
EMEA, 13.6% for Americas and 11.6% for Asia Pacific. As a result, the recoverable amount for the Asia Pacific CGU was estimated to
be lower than its carrying value by £24m and has been impaired by this amount.
As at 31 December 2019 the Asia Pacific CGU remains sensitive to reasonably possible changes in the VIU assumptions. Further
impairment of the Asia Pacific CGU would be required if there are changes in the applicable assumptions. A reduction in the growth
rate over the period by 0.5% would increase the impairment charge by £17m and a 1% increase in the discount rate would increase
the charge by £10m. The impact on future cash flows resulting from falling growth rates does not reflect any management actions
that would be taken under such circumstances.
Strategic report Governance report
Financial statements
143
143
Purchased
software
£m
Developed
software
£m
23
2
(1)
(1)
23
(14)
(5)
1
1
(17)
6
18
6
(1)
–
23
(9)
(4)
1
(2)
(14)
9
125
18
(1)
(2)
140
(65)
(22)
1
1
(85)
55
112
20
(10)
3
125
(52)
(22)
10
(1)
(65)
60
Total
£m
148
20
(2)
(3)
163
(79)
(27)
2
2
(102)
61
130
26
(11)
3
148
(61)
(26)
11
(3)
(79)
69
14. Other intangible assets
Cost
At 1 January 2019
Additions
Amounts derecognised
Effect of movements in exchange rates
At 31 December 2019
Accumulated amortisation
At 1 January 2019
Charge for the year
Amounts derecognised
Effect of movements in exchange rates
At 31 December 2019
Carrying amount
At 31 December 2019
Cost
At 1 January 2018
Additions
Amounts derecognised
Effect of movements in exchange rates
At 31 December 2018
Accumulated amortisation
At 1 January 2018
Charge for the year
Amounts derecognised
Effect of movements in exchange rates
At 31 December 2018
Carrying amount
At 31 December 2018
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
144
144
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
15. Property, plant and equipment
Cost
At 1 January 2019
Additions
Disposals
Effect of movements in exchange rates
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Charge for the year
Disposals
Effect of movements in exchange rates
At 31 December 2019
Carrying amount
At 31 December 2019
Cost
At 1 January 2018
Additions
Disposals
Effect of movements in exchange rates
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Charge for the year
Disposals
Effect of movements in exchange rates
At 31 December 2018
Carrying amount
At 31 December 2018
Land, buildings
and
leasehold
improvements
£m
Furniture,
fixtures,
equipment and
motor vehicles
£m
54
11
(2)
(3)
60
(11)
(7)
2
2
(14)
46
36
31
(17)
4
54
(20)
(6)
17
(2)
(11)
43
79
2
(4)
(3)
74
(48)
(6)
3
3
(48)
26
72
16
(12)
3
79
(50)
(7)
12
(3)
(48)
31
Total
£m
133
13
(6)
(6)
134
(59)
(13)
5
5
(62)
72
108
47
(29)
7
133
(70)
(13)
29
(5)
(59)
74
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
144
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
15. Property, plant and equipment
Strategic report Governance report
Financial statements
145
145
16. Right-of-use assets
At 1 January 2019
Additions
Modifications
Depreciation
Impairment
Effect of movements in exchange rates
At 31 December 2019
Land, buildings
and leasehold
improvements
£m
100
18
(4)
(21)
–
(3)
90
Furniture,
fixtures,
equipment and
motor vehicles
£m
1
–
–
–
–
–
1
Total
£m
101
18
(4)
(21)
–
(3)
91
The Group leases several buildings which have an average lease term of 10 years.
Additions to right-of-use assets of £18m in 2019 relate to the renewal of leases on buildings that expired during the current financial
year.
The maturity analysis of lease liabilities is presented in Note 25.
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low value assets
Expense relating to variable lease payments not included in the measurement of the lease liability
Income from sub-leasing right-of-use assets
2019
£m
21
12
2
–
–
1
At 31 December 2019, the Group is committed to £2m for short-term leases (Note 36). The total cash outflow for leases amounts to £33m
(representing principal repayment of £21m and interest of £12m).
Land, buildings
and
Furniture,
fixtures,
leasehold
equipment and
improvements
motor vehicles
£m
54
11
(2)
(3)
60
(11)
(7)
2
2
(14)
46
36
31
(17)
4
54
(20)
(6)
17
(2)
(11)
43
£m
79
2
(4)
(3)
74
(48)
(6)
3
3
(48)
26
72
16
(12)
3
79
(50)
(7)
12
(3)
(48)
31
Total
£m
133
13
(6)
(6)
134
(59)
(13)
5
5
(62)
72
108
47
(29)
7
133
(70)
(13)
29
(5)
(59)
74
Cost
At 1 January 2019
Additions
Disposals
Effect of movements in exchange rates
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Charge for the year
Disposals
Effect of movements in exchange rates
At 31 December 2019
Carrying amount
At 31 December 2019
Cost
At 1 January 2018
Additions
Disposals
Effect of movements in exchange rates
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Charge for the year
Disposals
At 31 December 2018
Carrying amount
At 31 December 2018
Effect of movements in exchange rates
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
146
146
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
17. Investment in associates
At 1 January
Additions
Disposals
Impairment
Share of profit for the year
Dividends received
Effect of movements in exchange rates
At 31 December
Summary financial information for associates
Aggregated amounts (for associates at the year end):
Total assets
Total liabilities
Net assets
Proportion of Group’s ownership interest
Goodwill
Carrying amount of Group’s ownership interest
Aggregated amounts (for associates during the year):
Revenue
Profit for the year
Group’s share of profit for the year
Dividends received from associates during the year
2019
£m
53
5
–
–
11
(8)
(3)
58
267
(87)
180
56
2
58
223
35
11
8
2018
£m
52
2
(1)
(3)
8
(7)
2
53
261
(95)
166
51
2
53
201
25
8
7
Interests in associates are measured using the equity method. All associates are involved in broking activities and have either a 31
December or 31 March year end. The results and assets and liabilities of associates are incorporated in these Financial Statements
based on financial information made up to 31 December each year. No individual associate is material to the Group.
Country of incorporation
and operation
Bahrain
China
England
India
Japan
Malaysia
Spain
United States
1
31 March year end.
Associated undertakings
ICAP (Middle East) W.L.L.
Tullett Prebon SITICO (China) Limited
Enmore Commodity Brokers (Shanghai) Limited
Glia Ecosystems Limited
Zodiac Seven Limited
ICAP IL India Private Limited1
Totan ICAP Co., Ltd1
Central Totan Securities Co. Ltd1
Amanah Butler Malaysia Sdn Bhd
Corretaje e Informacion Monetaria y de Divisas SA
First Brokers Securities LLC1
Percentage
held
49%
33%
49%
20%
41.3%
40%
40%
20%
32.1%
21.5%
40%
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
continued
for the year ended 31 December 2019
17. Investment in associates
146
At 1 January
Additions
Disposals
Impairment
Share of profit for the year
Dividends received
Effect of movements in exchange rates
At 31 December
Summary financial information for associates
Aggregated amounts (for associates at the year end):
Total assets
Total liabilities
Net assets
Goodwill
Revenue
Profit for the year
Proportion of Group’s ownership interest
Carrying amount of Group’s ownership interest
Aggregated amounts (for associates during the year):
Group’s share of profit for the year
Dividends received from associates during the year
and operation
Bahrain
China
England
India
Japan
Malaysia
Spain
United States
1
31 March year end.
ICAP (Middle East) W.L.L.
Tullett Prebon SITICO (China) Limited
Enmore Commodity Brokers (Shanghai) Limited
Glia Ecosystems Limited
Zodiac Seven Limited
ICAP IL India Private Limited1
Totan ICAP Co., Ltd1
Central Totan Securities Co. Ltd1
Amanah Butler Malaysia Sdn Bhd
Corretaje e Informacion Monetaria y de Divisas SA
First Brokers Securities LLC1
2019
£m
53
5
–
–
11
(8)
(3)
58
267
(87)
180
56
2
58
223
35
11
8
2018
£m
52
2
(1)
(3)
8
(7)
2
53
261
(95)
166
51
2
53
201
25
8
7
held
49%
33%
49%
20%
41.3%
40%
40%
20%
32.1%
21.5%
40%
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
147
147
18. Investment in joint ventures
At 1 January
Share of result for the year
Dividends received
Effect of movements in exchange rates
At 31 December
Summary financial information for joint ventures
Aggregated amounts (for joint ventures at the year end):
Total assets
Total liabilities
Net assets
Proportion of Group’s ownership interest
Goodwill
Carrying amount of Group’s ownership interest
Aggregated amounts (for joint ventures during the year):
Revenue
Result for the year
Group’s share of result for the year
Dividends received from joint ventures during the year
2019
£m
26
4
(2)
–
28
22
(4)
18
9
19
28
15
8
4
2
2018
£m
24
4
(3)
1
26
21
(6)
15
7
19
26
14
7
4
3
Interests in joint ventures are measured using the equity method. All joint ventures are involved in broking activities and have a 31
December year end. No individual joint venture is material to the Group.
Interests in associates are measured using the equity method. All associates are involved in broking activities and have either a 31
December or 31 March year end. The results and assets and liabilities of associates are incorporated in these Financial Statements
based on financial information made up to 31 December each year. No individual associate is material to the Group.
Country of incorporation
and operation
Colombia
Country of incorporation
Associated undertakings
Percentage
Mexico
Joint ventures
SET-ICAP FX SA
SET-ICAP Securities S.A.
SIF ICAP, S.A. de C.V.
During the year tpSynrex Ltd was dissolved.
19. Other investments
At 1 January
Additions
Disposals
Revaluation of equity instruments at FVTOCI
Effect of movements in exchange rates
At 31 December
Categorisation of other investments:
Debt instruments at FVTOCI – corporate debt securities
Available-for-sale – corporate debt securities
Equity instruments at FVTOCI
Available-for-sale – equity instruments
Percentage
held
47.9%
47.4%
50%
2019
£m
20
1
(1)
1
(1)
20
2
–
18
–
20
2018
£m
19
–
(7)
7
1
20
2
–
18
–
20
The fair values are based on valuations as disclosed in Note 28(i). Equity instruments comprise securities that do not qualify as
associates or joint ventures.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
148
148
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
20. Financial investments
Debt instruments at FVTOCI – Government debt securities
Investments at amortised cost
– Term deposits
– Restricted funds
2019
£m
87
51
10
148
2018
£m
84
37
12
133
Debt instruments and term deposits are liquid instruments held with financial institutions and central counterparty clearing houses
(‘CCP’) providing the Group with access to clearing services. Restricted funds comprise cash held with financial institutions and CCP’s
together with funds set aside for regulatory purposes. The funds represent cash for which the Group does not have immediate and direct
access or for which regulatory requirements restrict the use of the cash.
21. Deferred tax
Deferred tax assets
Deferred tax liabilities
The movement for the year in the Group’s net deferred tax position was as follows:
At 1 January
Credit to equity on initial application of IFRS 9
Credit/(charge) to income for the year
Credit to other comprehensive income for the year
Recognised with acquisitions
Effect of movements in exchange rates
At 31 December
2019
£m
3
(83)
(80)
2019
£m
(119)
–
12
19
–
8
(80)
2018
£m
4
(123)
(119)
2018
£m
(114)
1
(1)
1
(1)
(5)
(119)
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
148
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
149
149
Debt instruments and term deposits are liquid instruments held with financial institutions and central counterparty clearing houses
(‘CCP’) providing the Group with access to clearing services. Restricted funds comprise cash held with financial institutions and CCP’s
together with funds set aside for regulatory purposes. The funds represent cash for which the Group does not have immediate and direct
access or for which regulatory requirements restrict the use of the cash.
continued
for the year ended 31 December 2019
20. Financial investments
Debt instruments at FVTOCI – Government debt securities
Investments at amortised cost
– Term deposits
– Restricted funds
21. Deferred tax
Deferred tax assets
Deferred tax liabilities
At 1 January
Credit to equity on initial application of IFRS 9
Credit/(charge) to income for the year
Credit to other comprehensive income for the year
Recognised with acquisitions
Effect of movements in exchange rates
At 31 December
The movement for the year in the Group’s net deferred tax position was as follows:
2019
£m
87
51
10
148
2019
£m
3
(83)
(80)
2019
£m
(119)
–
12
19
–
8
2018
£m
84
37
12
133
2018
£m
4
(123)
(119)
2018
£m
(114)
1
(1)
1
(1)
(5)
(80)
(119)
Deferred tax balances and movements thereon are analysed as:
2019
Share-based payment awards
Defined benefit pension scheme
Tax losses
Bonuses
Intangible assets arising on
consolidation
Other timing differences
2018
Share-based payment awards
Defined benefit pension scheme
Tax losses
Bonuses
Intangible assets arising on
consolidation
Other timing differences
At
1 January
£m
Recognised
in equity
£m
Recognised
in profit
or loss
£m
Recognised
in other
comprehensive
income
£m
Recognised
with
acquisitions
£m
Effect of
movements
in exchange
rates
£m
At
31 December
£m
3
(19)
5
1
(114)
5
(119)
2
(20)
2
16
(119)
5
(114)
–
–
–
–
–
–
–
–
–
–
–
1
1
1
–
(3)
6
6
2
12
1
–
3
(15)
10
–
(1)
–
19
–
–
–
–
19
–
1
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
(1)
–
(1)
–
–
1
2
3
2
8
–
–
–
–
(4)
(1)
(5)
4
–
3
9
(105)
9
(80)
3
(19)
5
1
(114)
5
(119)
At the balance sheet date, the Group has gross unrecognised temporary differences of £144m with the unrecognised net tax amount
being £30m (2018: gross £119m and net tax £25m respectively). This includes gross tax losses of £131m with the net tax amount being
£27m (2018: gross £97m and net tax £19m respectively), which are potentially available for offset against future profits. Of the
unrecognised gross losses £41m (2018: £48m) are expected to expire within 20 years and £90m (2018: £49m) have no expiry. Deferred
tax assets have not been recognised in respect of these items since it is not probable that future taxable profits will arise against which
the temporary differences may be utilised.
A deferred tax asset of £3m (2018: £5m) in respect of tax losses has been recognised as at 31 December 2019 as it was considered
probable that future tax profits should arise.
No deferred tax has been recognised on temporary differences associated with unremitted earnings of subsidiaries as the Group is able
to control the timing of distributions and overseas dividends are largely exempt from UK tax. As at the balance sheet date, the Group
had unrecognised deferred tax liabilities of £2m (2018: £2m) in respect of unremitted profits of subsidiaries of £25m (2018: £27m).
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
150
150
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
22. Trade and other receivables
Non-current receivables
Finance lease receivables
Other receivables
Current receivables
Trade receivables
Settlement balances
Deposits paid for securities borrowed
Derivatives at FVTPL
Finance lease receivables
Financial assets
Other debtors
Prepayments
Accrued income
Corporation tax
Owed by associates and joint ventures
2019
£m
7
19
26
301
48,295
652
–
1
49,249
17
91
10
1
3
49,371
2018
£m
–
20
20
283
21,487
900
3
–
22,673
18
90
10
3
4
22,798
The Directors consider that the carrying amount of trade and other receivables which are not held at fair value through profit or loss
approximate to their fair values. No interest is charged on outstanding trade receivables.
For the year ended 31 December 2019 the Group measures the loss allowance for trade receivables at an amount equal to the lifetime
expected credit loss. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default
experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
The following table details the risk profile of trade receivables based on the Group’s provision matrix by region. As the Group’s
historical credit loss experience does not show significantly different loss patterns for different regional customer segments, the
provision for loss allowance based on past due status is not further distinguished between the Group’s different customer base.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
150
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
22. Trade and other receivables
Non-current receivables
Finance lease receivables
Other receivables
Current receivables
Trade receivables
Settlement balances
Deposits paid for securities borrowed
Derivatives at FVTPL
Finance lease receivables
Financial assets
Other debtors
Prepayments
Accrued income
Corporation tax
Owed by associates and joint ventures
The Directors consider that the carrying amount of trade and other receivables which are not held at fair value through profit or loss
approximate to their fair values. No interest is charged on outstanding trade receivables.
For the year ended 31 December 2019 the Group measures the loss allowance for trade receivables at an amount equal to the lifetime
expected credit loss. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default
experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
The following table details the risk profile of trade receivables based on the Group’s provision matrix by region. As the Group’s
historical credit loss experience does not show significantly different loss patterns for different regional customer segments, the
provision for loss allowance based on past due status is not further distinguished between the Group’s different customer base.
2019
£m
7
19
26
–
1
17
91
10
1
3
301
48,295
652
283
21,487
900
49,249
22,673
49,371
22,798
2018
£m
–
20
20
3
–
18
90
10
3
4
Trade receivables
2019
EMEA
Americas
Asia Pacific
Gross balances outstanding
Expected credit loss rate
EMEA
Americas
Asia Pacific
Lifetime ECL
2018
EMEA
Americas
Asia Pacific
Gross balances outstanding
Expected credit loss rate
EMEA
Americas
Asia Pacific
Lifetime ECL
Strategic report Governance report
Financial statements
151
151
Total
£m
Not past due
£m
Less than
30 days
past due
£m
31 – 60
days
past due
£m
61 – 90
days
past due
£m
Greater than
91 days
past due
£m
49
47
18
114
%
1.36
0.69
0.73
54
49
16
119
%
1.67
0.53
0.85
34
17
8
59
%
1.84
1.04
1.29
34
22
11
67
%
2.37
1.12
1.51
21
13
5
39
%
3.71
1.63
2.82
16
12
6
34
%
3.62
1.58
2.28
15
7
3
25
%
4.00
2.37
4.73
10
7
3
20
%
3.99
1.63
3.39
42
20
14
76
%
10.14
7.28
9.35
27
14
13
54
%
13.63
10.28
13.05
161
104
48
313
(12)
301
141
104
49
294
(11)
283
As at 31 December 2019 settlement balances that were due and those that were past due were as follows:
Settlement balances
2019
EMEA
Americas
Total
2018
EMEA
Americas
Total
Total
£m
Not past due
£m
9,636
38,659
48,295
2,387
19,100
21,487
9,636
38,657
48,293
1,605
18,960
20,565
Less than
90 days
past due
£m
Greater than
91 days
past due
£m
–
2
2
779
140
919
–
–
–
3
–
3
Settlement balances arise on Matched Principal brokerage whereby securities are bought from one counterparty and simultaneously
sold to another counterparty. Settlement of such transactions is primarily on a delivery vs payment basis (‘DVP’) and typically take
place within a few business days of the transaction date according to the relevant market rules and conventions. The amounts due
from and payable to counterparties in respect of as yet unsettled Matched Principal transactions are shown gross, except where a
netting agreement (Note 28(d)), which is legally enforceable at all times, exists and the asset and liability are either settled net or
simultaneously. The above analysis reflects only the receivable side of such transactions. Corresponding payable amounts are shown in
Note 23 ‘Trade and other payables’. The Group measures loss allowances for settlement balances under the general approach reflecting
the probability of default based on the credit rating of the counterparty together with an assessment of the loss, after the sale of
underlying instruments, that could arise as a result of default. As at 31 December 2019, the provision for expected credit losses
amounted to less than £1m.
Deposits paid for securities borrowed arise on collateralised stock lending transactions. Such trades are complete only when both
the collateral and stock for each side of the transaction are returned. The above analysis reflects the receivable side of such
transactions. Corresponding deposits received for securities loaned are shown in Note 23 ‘Trade and other payables’. The Group
measures loss allowances for these balances under the general approach reflecting the probability of default based on the credit
rating of the counterparty together with an assessment of the loss, after the sale of collateral, that could arise as a result of default.
As at 31 December 2019, the provision for expected credit losses amounted to less than £1m.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
152
152
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
22. Trade and other receivables continued
Derivatives at FVTPL arise on simultaneous back-to-back derivative transactions with counterparties. The above analysis reflects only
the asset side of such transactions. Corresponding liability amounts are shown in Note 23 ‘Trade and other payables’.
Amounts receivable under finance leases:
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Undiscounted lease payments
Unguaranteed residual values
Less: unearned finance income
Present value of lease payments receivable
Impairment loss allowance
Net investment in the lease
Undiscounted lease payments analysed as:
Recoverable after 12 months
Recoverable within 12 months
Net investment in the lease analysed as:
Recoverable after 12 months
Recoverable within 12 months
2019
£m
1
2
2
2
1
2
10
–
(2)
8
–
8
2019
£m
9
1
2019
£m
7
1
The Group is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are denominated in the respective
functional currencies of the recording entities.
The following table presents the amounts included in profit or loss.
Selling profit/loss for finance leases
Finance income on the net investment in finance leases
The Group’s finance lease arrangements do not include variable payments.
The average effective interest rate contracted approximates 8.64% per annum.
2019
£m
–
1
The directors of the Company estimated the loss allowance on finance lease receivables at the end of the reporting year at an amount equal to
lifetime ECL. None of the finance lease receivables at the end of the reporting year is past due, and taking into account the historical default
experience and the future prospects of the industries in which the lessees operate, the directors of the Company consider that no finance lease
receivable is impaired.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
Derivatives at FVTPL arise on simultaneous back-to-back derivative transactions with counterparties. The above analysis reflects only
the asset side of such transactions. Corresponding liability amounts are shown in Note 23 ‘Trade and other payables’.
continued
for the year ended 31 December 2019
22. Trade and other receivables continued
Amounts receivable under finance leases:
152
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Undiscounted lease payments
Unguaranteed residual values
Less: unearned finance income
Present value of lease payments receivable
Impairment loss allowance
Net investment in the lease
Undiscounted lease payments analysed as:
Recoverable after 12 months
Recoverable within 12 months
Net investment in the lease analysed as:
Recoverable after 12 months
Recoverable within 12 months
The Group is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are denominated in the respective
functional currencies of the recording entities.
The following table presents the amounts included in profit or loss.
Selling profit/loss for finance leases
Finance income on the net investment in finance leases
The Group’s finance lease arrangements do not include variable payments.
The average effective interest rate contracted approximates 8.64% per annum.
The directors of the Company estimated the loss allowance on finance lease receivables at the end of the reporting year at an amount equal to
lifetime ECL. None of the finance lease receivables at the end of the reporting year is past due, and taking into account the historical default
experience and the future prospects of the industries in which the lessees operate, the directors of the Company consider that no finance lease
receivable is impaired.
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
153
153
2019
£m
1
2
2
2
1
2
10
–
(2)
8
–
8
2019
£m
9
1
2019
£m
7
1
2019
£m
–
1
23. Trade and other payables
Trade payables
Settlement balances
Deposits received for securities loaned
Derivatives at FVTPL
Deferred consideration (Note 32(c))
Financial liabilities
Tax and social security
Other creditors
Accruals
Deferred income
Owed to associates and joint ventures
2019
£m
25
48,275
652
–
23
48,975
22
15
289
1
3
49,305
2018
£m
19
21,451
907
3
15
22,395
27
20
289
2
2
22,735
The Directors consider that the carrying amount of trade and other payables which are not held at fair value through profit or loss
approximate to their fair values.
24. Interest bearing loans and borrowings
2019
Sterling Notes January 2024
Sterling Notes May 2026
2018
Bank loans
Sterling Notes June 2019
Sterling Notes January 2024
Less than
one year
£m
Greater than
one year
£m
10
1
11
52
80
12
144
430
248
678
–
–
498
498
Total
£m
440
249
689
52
80
510
642
All amounts are denominated in Sterling and are stated after unamortised transaction costs. An analysis of borrowings by maturity has
been disclosed in Note 28(f).
Bank credit facilities and bank loans
In December 2019 the Company extended its £270m committed revolving facility, that would have matured in December 2021. The new
maturity of the facility is December 2022. Facility commitment fees of 0.8% on the undrawn balance are payable on the new facility,
reduced from 1.0% that were payable on the cancelled facility. Arrangement fees of £3m were incurred in 2018 and will be amortised
over the maturity of the new facility.
As at 31 December 2019, the £270m revolving credit facility was undrawn. Amounts drawn down are reported as bank loans in the
above table. Bank loans are denominated in Sterling and their carrying amount approximated to their fair value.
Interest and facility fees of £3m were incurred in 2019.
Loans from related parties
In April 2019 the Group borrowed Yen 5bn (£35m) due 30 September 2019 from a related party. The loan had a coupon of 6 month
TIBOR + 2.25%. The loan was repaid in September 2019 resulting in a payment of £38m plus interest of less than £1m. The Group held
an associated foreign exchange derivative at FVTPL which resulted in a £3m inflow.
Sterling Notes: Due June 2019
In June 2019 £80m Sterling Notes, due June 2019, were repaid.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
154
154
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
24. Interest bearing loans and borrowings continued
Sterling Notes: Due January 2024
In January 2017 the Group issued £500m unsecured Sterling Notes due January 2024. The Notes have a fixed coupon of 5.25% paid
semi-annually, subject to compliance with the terms of the Notes. In 2019 the Group repurchased Notes with a par value £69m for £72m
including accrued interest. At 31 December 2019 the fair value of the Notes (Level 1) was £475m.Accrued interest at 31 December 2019
amounted to £10m (2018: £12m). Issue costs of £3m were incurred in 2017.
Sterling Notes: Due May 2026
In May 2019 the Group issued £250m unsecured Sterling Notes due May 2026. The Notes have a fixed coupon of 5.25% paid semi-
annually, subject to compliance with the terms of the Notes. At 31 December 2019 the fair value of the Notes (Level 1) was £270m.
Accrued interest at 31 December 2019 amounted to £1m. Issue costs of £1m were incurred in 2019.
25. Lease liabilities
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less: unearned interest
Analysed as:
Non-current
Current
26. Provisions
2019
At 1 January 2019
Charge to income statement
Utilisation of provision
Adoption of IFRS 16:
– onerous lease provisions offset against right-of-use assets
Effect of movements in exchange rates
At 31 December 2019
2018
At 1 January 2018
Charge to income statement
Utilisation of provision
Effect of movements in exchange rates
At 31 December 2018
Included in current liabilities
Included in non-current liabilities
Property
£m
Restructuring
£m
Legal
and other
£m
14
–
–
(7)
(1)
6
5
11
(2)
–
14
10
8
(10)
–
–
8
27
10
(27)
–
10
37
23
(26)
–
(1)
33
29
7
–
1
37
2019
£m
21
26
47
2019
£m
33
25
21
20
15
91
205
(65)
140
2019
£m
(117)
(23)
(140)
Total
£m
61
31
(36)
(7)
(2)
47
61
28
(29)
1
61
2018
£m
31
30
61
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
154
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
24. Interest bearing loans and borrowings continued
Sterling Notes: Due January 2024
In January 2017 the Group issued £500m unsecured Sterling Notes due January 2024. The Notes have a fixed coupon of 5.25% paid
semi-annually, subject to compliance with the terms of the Notes. In 2019 the Group repurchased Notes with a par value £69m for £72m
including accrued interest. At 31 December 2019 the fair value of the Notes (Level 1) was £475m.Accrued interest at 31 December 2019
amounted to £10m (2018: £12m). Issue costs of £3m were incurred in 2017.
Sterling Notes: Due May 2026
In May 2019 the Group issued £250m unsecured Sterling Notes due May 2026. The Notes have a fixed coupon of 5.25% paid semi-
annually, subject to compliance with the terms of the Notes. At 31 December 2019 the fair value of the Notes (Level 1) was £270m.
Accrued interest at 31 December 2019 amounted to £1m. Issue costs of £1m were incurred in 2019.
25. Lease liabilities
Maturity analysis
Less: unearned interest
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Analysed as:
Non-current
Current
26. Provisions
2019
At 1 January 2019
Charge to income statement
Utilisation of provision
Adoption of IFRS 16:
– onerous lease provisions offset against right-of-use assets
Effect of movements in exchange rates
At 31 December 2019
2018
At 1 January 2018
Charge to income statement
Utilisation of provision
Effect of movements in exchange rates
At 31 December 2018
Included in current liabilities
Included in non-current liabilities
Property
Restructuring
and other
£m
14
–
–
(7)
(1)
6
5
11
(2)
–
14
£m
10
8
(10)
–
–
8
27
10
(27)
–
10
Legal
£m
37
23
(26)
–
(1)
33
29
7
–
1
37
2019
£m
21
26
47
2019
£m
33
25
21
20
15
91
205
(65)
140
2019
£m
(117)
(23)
(140)
Total
£m
61
31
(36)
(7)
(2)
47
61
28
(29)
1
61
2018
£m
31
30
61
Strategic report Governance report
Financial statements
155
155
Property provisions outstanding as at 31 December 2019 relate to provisions in respect of building dilapidations, representing the
estimated cost of making good dilapidations and disrepair on various leasehold buildings. Onerous provisions as at 31 December 2018
have been offset against the right-of-use asset arising on the adoption of IFRS 16 (Note 2(e)).
Restructuring provisions outstanding as at 31 December 2019 relate to termination and other employee related costs. The movement
during the year reflects the actions taken under the Group’s integration of ICAP and other business reorganisations. It is expected that
the remaining obligations will be discharged during 2020.
Legal and other provisions include provisions for legal claims brought against subsidiaries of the Group together with provisions
against obligations for certain long-term employee benefits and non-property related onerous contracts. At present the timing and
amount of any payments are uncertain and provisions are subject to regular review. It is expected that the obligations will be
discharged over the next 25 years.
European Commission Yen LIBOR
In February 2015 the European Commission imposed a fine of £13m (€15m) on NEX International Limited (formerly ICAP plc), ICAP
Management Services Limited and ICAP New Zealand Limited for alleged competition violations in relation to the involvement of
certain of ICAP’s brokers in the attempted manipulation of Yen LIBOR by bank traders between October 2006 and January 2011. While
this matter relates to alleged conduct violations prior to completion of the Group’s acquisition of the ICAP global broking business, it is
noted that the fine imposed by the European Commission has been appealed, seeking a full annulment of the Commission’s decision. In
the event that the Commission imposes a fine in excess of €15m such excess will be borne by NEX Group plc (‘NEX’). In November 2017,
the European General Court granted a partial annulment of the Commission’s findings. The Commission appealed this decision in
February 2018 and the Group served its reply during April 2018. A decision from the Courts of Justice of the European Union was
received on 10 July 2019 which determined that the decision of the European Commission in relation to the competition violations still
stands but the decision of the European Commission imposing the fine was annulled. The European Commission is likely to adopt new
articles in relation to a fine however and the Group has retained a £8m (€10m) provision in its accounts in connection with this matter.
CFTC Investigation
In June 2018, the Group recorded an exceptional legal provision in the amount of £8m (US$10m) in connection with an ongoing
regulatory investigation into its subsidiary, Tullett Prebon Americas Corp. (‘TPAC’), relating to alleged broker conduct on the TPAC USD
Medium Term Interest Rate Swaps desk in 2013 and 2014. In September 2019, TPAC settled this matter with the CFTC for an aggregate
amount of £11m (US$13m) and the matter is now concluded.
FCA Investigation
On 11 October 2019 the FCA issued its Final Notice in respect of its investigation into Tullett Prebon Europe Limited (“TPEL”). The FCA
imposed a financial penalty on TPEL of £15m. The matter related to certain trades undertaken between 2008 and 2011 which were
alleged to have no commercial rationale or economic purposes, on which brokerage was paid and the failure by TPEL to discover
certain audio files and produce them to the FCA in a timely manner. The FCA found that certain former managers in TPEL’s Global
Broking Division and in TPEL’s Compliance Department failed to act with due skill, care and diligence. It was found that at the time
there were inadequate systems and controls in place to deal with the risk of improper broker conduct. The investigation also related the
account given by TPEL to the FCA as to how those files were discovered.
27. Other long term payables
Accruals and deferred income
Deferred consideration (Note 32(c))
2019
£m
3
18
21
2018
£m
38
26
64
Under the IFRS 16 transition approach adopted by the Group, the prior year prepared under IAS 17 has not been restated. Consequently
the results for the year ended 31 December 2019 are not directly comparable with those reported for 31 December 2018 (Note 2(e)(vi)). In
2018, accruals and deferred income includes deferred leasehold rental accruals that build up during rent free periods which are
subsequently utilised over the rental payment period of the lease.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
156
156
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
28. Financial instruments
(a) Financial and liquidity risk
The Group does not take trading risk and does not hold proprietary trading positions. Consequently, the Group is exposed to trading
book market risk only in relation to incidental positions in financial instruments arising as a result of the Group’s failure to match clients’
orders precisely. The Group has limited exposure to non-trading book market risk, specifically to interest rate risk and currency risk. Thus
the overall approach to the planning and management of the Group’s capital and liquidity is to ensure the Group’s solvency, i.e. its
continued ability to conduct business, deliver returns to shareholders, and support growth and strategic initiatives. This risk profile
meets the necessary conditions for an investment firm consolidation waiver and the Group benefits from a waiver under the CRD IV
provisions, the details of which are set out in the Regulatory Capital section of the Strategic report on page 32.
The Group seeks to ensure that it has access to an appropriate level of cash, other forms of marketable securities and liquidity facilities
to enable it to finance its ongoing operations on cost effective terms. Cash and cash equivalent balances are held with the primary
objective of capital security and availability, with a secondary objective of generating returns. Funding requirements are monitored
by the Group’s Finance and Treasury functions.
As a normal part of its operations, the Group faces liquidity risk through the risk of being required to fund transactions that fail to settle
on the due date. From a risk perspective, the most problematic scenario concerns ‘fail to deliver’ transactions, where the business has
received a security from the selling counterparty (and has paid cash in settlement of the same) but is unable to effect onward delivery
of the security to the buying counterparty. Such settlement ‘fails’ give rise to a funding requirement, reflecting the value of the security
which the Group has ‘failed to deliver’ until such time as the delivery leg is finally settled, or the security sold, and the business has
received the associated cash.
The Group has addressed this funding risk by arranging overdraft facilities to cover ‘failed to deliver’ trades, either with the relevant
settlement agent/depository or with a clearing bank. Under such arrangements, the facility provider will fund the value of any ‘failed
to deliver’ trades until delivery of the security is effected. Certain facility providers require collateral (such as a cash deposit or parent
company guarantee) to protect them from any adverse mark-to-market movement and some also charge a funding fee for providing
the facility.
The Group is also exposed to potential margin calls. Margin calls can be made by central counterparties under the Matched Principal
broking model when not all legs of a matched principal trade are settled at the central counterparty or when there is a residual balance
or confirmation error. Margin calls can be made by the Group’s clearers or correspondent clearers under the Executing Broker broking
model when there is a trade error or a counterparty is slow to confirm their trade. These margin calls occur mainly in the US and UK.
In the event of a liquidity issue arising, the firm has recourse to existing global cash resources, after which it could draw down on its
£270m committed revolving credit facility as additional contingency funding.
(b) Capital management
The Group’s policy is to maintain a capital base and funding structure that maintains creditor, regulator and market confidence and
provides flexibility for business development while also optimising returns to shareholders. The capital structure of the Group consists
of debt, as set out in Note 24, cash and cash equivalents, other current financial assets and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 29 and 30.
The Group has an investment firm consolidation waiver under which it is required to monitor its compliance with a Financial Holding
Company test which takes into account the Company’s shareholders’ funds and the aggregated credit risk, market risk and fixed
overhead requirements of the Company’s subsidiaries. A number of the Company’s subsidiaries are individually regulated and are
required to maintain capital that is appropriate to the risks entailed in their businesses according to definitions that vary according
to each jurisdiction.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
156
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
28. Financial instruments
(a) Financial and liquidity risk
The Group does not take trading risk and does not hold proprietary trading positions. Consequently, the Group is exposed to trading
book market risk only in relation to incidental positions in financial instruments arising as a result of the Group’s failure to match clients’
orders precisely. The Group has limited exposure to non-trading book market risk, specifically to interest rate risk and currency risk. Thus
the overall approach to the planning and management of the Group’s capital and liquidity is to ensure the Group’s solvency, i.e. its
continued ability to conduct business, deliver returns to shareholders, and support growth and strategic initiatives. This risk profile
meets the necessary conditions for an investment firm consolidation waiver and the Group benefits from a waiver under the CRD IV
provisions, the details of which are set out in the Regulatory Capital section of the Strategic report on page 32.
The Group seeks to ensure that it has access to an appropriate level of cash, other forms of marketable securities and liquidity facilities
to enable it to finance its ongoing operations on cost effective terms. Cash and cash equivalent balances are held with the primary
objective of capital security and availability, with a secondary objective of generating returns. Funding requirements are monitored
by the Group’s Finance and Treasury functions.
As a normal part of its operations, the Group faces liquidity risk through the risk of being required to fund transactions that fail to settle
on the due date. From a risk perspective, the most problematic scenario concerns ‘fail to deliver’ transactions, where the business has
received a security from the selling counterparty (and has paid cash in settlement of the same) but is unable to effect onward delivery
of the security to the buying counterparty. Such settlement ‘fails’ give rise to a funding requirement, reflecting the value of the security
which the Group has ‘failed to deliver’ until such time as the delivery leg is finally settled, or the security sold, and the business has
received the associated cash.
The Group has addressed this funding risk by arranging overdraft facilities to cover ‘failed to deliver’ trades, either with the relevant
settlement agent/depository or with a clearing bank. Under such arrangements, the facility provider will fund the value of any ‘failed
to deliver’ trades until delivery of the security is effected. Certain facility providers require collateral (such as a cash deposit or parent
company guarantee) to protect them from any adverse mark-to-market movement and some also charge a funding fee for providing
the facility.
The Group is also exposed to potential margin calls. Margin calls can be made by central counterparties under the Matched Principal
broking model when not all legs of a matched principal trade are settled at the central counterparty or when there is a residual balance
or confirmation error. Margin calls can be made by the Group’s clearers or correspondent clearers under the Executing Broker broking
model when there is a trade error or a counterparty is slow to confirm their trade. These margin calls occur mainly in the US and UK.
In the event of a liquidity issue arising, the firm has recourse to existing global cash resources, after which it could draw down on its
£270m committed revolving credit facility as additional contingency funding.
(b) Capital management
The Group’s policy is to maintain a capital base and funding structure that maintains creditor, regulator and market confidence and
provides flexibility for business development while also optimising returns to shareholders. The capital structure of the Group consists
of debt, as set out in Note 24, cash and cash equivalents, other current financial assets and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 29 and 30.
The Group has an investment firm consolidation waiver under which it is required to monitor its compliance with a Financial Holding
Company test which takes into account the Company’s shareholders’ funds and the aggregated credit risk, market risk and fixed
overhead requirements of the Company’s subsidiaries. A number of the Company’s subsidiaries are individually regulated and are
required to maintain capital that is appropriate to the risks entailed in their businesses according to definitions that vary according
to each jurisdiction.
Strategic report Governance report
Financial statements
157
157
FVTOCI
debt
instruments
£m
FVTOCI
equity
instruments
£m
Amortised
cost
£m
Mandatorily
at FVTPL
£m
Total
carrying
amount
£m
–
2
–
2
–
87
–
–
–
–
–
–
–
87
89
18
–
–
18
–
–
–
–
–
–
–
–
–
–
18
–
–
7
7
–
–
51
10
301
48,295
652
1
676
49,986
49,993
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
FVTOCI
debt
instruments
£m
FVTOCI
equity
instruments
£m
Amortised
cost
£m
Mandatorily
at FVTPL
£m
–
2
2
–
84
–
–
–
–
–
–
84
86
18
–
18
–
–
–
–
–
–
–
–
–
18
–
–
–
–
–
37
12
283
21,487
900
667
23,386
23,386
–
–
–
3
–
–
–
–
–
–
–
3
3
18
2
7
27
–
87
51
10
301
48,295
652
1
676
50,073
50,100
Total
carrying
amount
£m
18
2
20
3
84
37
12
283
21,487
900
667
23,473
23,493
(c) Categorisation of financial assets and liabilities
Financial assets
2019
Non-current financial assets measured at fair value
Equity securities
Corporate debt securities
Non-current financial assets not measure at fair value
Finance lease receivables
Current financial assets measured at fair value
Derivative instruments
Government debt securities
Current financial assets not measured at fair value¹
Term deposits
Restricted funds
Trade receivables
Settlement balances receivable
Deposits paid for securities borrowed
Finance lease receivables
Cash and cash equivalents
Total financial assets
Financial assets
2018
Non-current financial assets measured at fair value
Equity securities
Corporate debt securities
Current financial assets measured at fair value
Derivative instruments
Government debt securities
Current financial assets not measured at fair value¹
Term deposits
Restricted funds
Trade receivables
Settlement balances receivable
Deposits paid for securities borrowed
Cash and cash equivalents
Total financial assets
1
Financial assets and liabilities not measured at fair value are only measured at fair value on initial recognition.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
158
158
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
28. Financial instruments continued
Financial liabilities
2019
Financial liabilities measured at fair value
Deferred consideration
Derivative instruments
Financial liabilities not measured at fair value¹
Bank loan
Sterling Notes June 2019
Sterling Notes January 2024
Sterling Notes May 2026
Trade payables
Settlement balances payable
Deposits received for securities loaned
Total financial liabilities
Financial liabilities
2018
Financial liabilities measured at fair value
Deferred consideration
Derivative instruments
Financial liabilities not measured at fair value¹
Bank loan
Sterling Notes June 2019
Sterling Notes January 2024
Trade payables
Settlement balances payable
Deposits received for securities loaned
Total financial liabilities
Mandatorily at FVTPL
Other financial liabilities
Non-current
£m
Current
£m
Non-current
£m
Current
£m
18
–
18
–
–
–
–
–
–
–
–
18
23
–
23
–
–
–
–
–
–
–
–
23
–
–
–
–
–
430
248
–
–
–
678
678
–
–
–
–
–
10
1
25
48,275
652
48,963
48,963
Mandatorily at FVTPL
Other financial liabilities
Non-current
£m
Current
£m
Non-current
£m
Current
£m
26
–
26
–
–
–
–
–
–
–
26
15
3
18
–
–
–
–
–
–
–
18
–
–
–
–
–
498
–
–
–
498
498
–
–
–
52
80
12
19
21,451
907
22,521
22,521
Total
carrying
amount
£m
41
–
41
–
–
440
249
25
48,275
652
49,641
49,682
Total
carrying
amount
£m
41
3
44
52
80
510
19
21,451
907
23,019
23,063
1
Financial assets and liabilities not measured at fair value are only measured at fair value on initial recognition.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
158
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
159
159
continued
for the year ended 31 December 2019
28. Financial instruments continued
Financial liabilities measured at fair value
Financial liabilities
2019
Deferred consideration
Derivative instruments
Financial liabilities not measured at fair value¹
Bank loan
Sterling Notes June 2019
Sterling Notes January 2024
Sterling Notes May 2026
Trade payables
Settlement balances payable
Deposits received for securities loaned
Financial liabilities measured at fair value
Financial liabilities
2018
Deferred consideration
Derivative instruments
Financial liabilities not measured at fair value¹
Bank loan
Sterling Notes June 2019
Sterling Notes January 2024
Trade payables
Settlement balances payable
Deposits received for securities loaned
Total financial liabilities
Mandatorily at FVTPL
Other financial liabilities
Non-current
Current
Non-current
Current
£m
£m
£m
£m
Mandatorily at FVTPL
Other financial liabilities
Non-current
Current
Non-current
Current
£m
£m
£m
£m
18
–
18
–
–
–
–
–
–
–
–
26
–
26
–
–
–
–
–
–
–
26
23
–
23
–
–
–
–
–
–
–
–
15
3
18
–
–
–
–
–
–
–
18
48,275
652
48,963
48,963
–
–
–
–
–
10
1
25
–
–
–
52
80
12
19
–
–
–
–
–
–
–
–
430
248
678
678
–
–
–
–
–
–
–
–
498
498
498
Total
carrying
amount
£m
41
–
41
–
–
440
249
25
48,275
652
49,641
49,682
Total
carrying
amount
£m
41
3
44
52
80
510
19
21,451
907
22,521
22,521
21,451
907
23,019
23,063
Total financial liabilities
18
23
1
Financial assets and liabilities not measured at fair value are only measured at fair value on initial recognition.
(d) Offsetting financial assets and financial liabilities
Financial instruments at fair value through profit or loss include simultaneous back-to-back derivative transactions with counterparties
which are reported as separate financial assets and financial liabilities in the statement of financial position. These transactions are
subject to ISDA (International Swaps and Derivatives Association) Master Netting Agreements which provide a legally enforceable right
of offset on the occurrence of a specified event of default, or other events not expected to happen in the normal course of business, but
are not otherwise enforceable.
Financial instruments subject to enforceable Master Netting Agreements
and similar arrangements
2019
Derivatives at FVTPL
Related amounts not offset in the statement of financial position
Net position
2018
Derivatives at FVTPL
Related amounts not offset in the statement of financial position
Net position
Financial
assets
£m
Financial
liabilities
£m
–
–
–
3
(3)
–
–
–
–
3
(3)
–
(e) Credit risk
The Group is exposed to credit risk in the event of non-performance by counterparties in respect of its Name Passing, Matched Principal,
Executing Broker and corporate treasury operations. The Group does not bear any significant concentration risk to either counterparts
or markets.
The credit risk in respect of the Name Passing business and the information sales and risk management services is limited to the
collection of outstanding commission and transaction fees and this is managed proactively by the Group’s accounts receivable
functions. As at the year end, a substantial majority of the Group’s counterparty exposure is to investment grade counterparts (rated
BBB-/Baa3 or above) (Note 22).
The Matched Principal business involves the Group acting as a counterparty on trades which are undertaken on a delivery versus
payment basis. The Group manages its credit risk in these transactions through appropriate policies and procedures in order to mitigate
this risk including stringent on-boarding requirements, setting appropriate credit limits for all counterparts which are closely monitored
by the regional credit risk teams to restrict any potential loss through counterparty default. Settlement of these transactions takes place
according to the relevant market rules and conventions and the credit risk is considered to be minimal. As at year end, a majority of the
Group’s counterparty exposure is to investment grade counterparts. Deposits paid for securities borrowed arise on collateralised stock
lending transactions. Such trades are complete only when both the collateral and stock for each side of the transaction are returned.
As at the year end, a substantial majority of the Group’s counterparty exposure is to investment grade counterparts (Note 22).
The credit risk on cash, cash equivalents, and financial assets at amortised cost, FVTOCI or FVTPL, are subject to frequent monitoring.
All financial institutions that are transacted with are approved and internal limits are assigned to each one based on a combination
of factors including external credit ratings. As at the year end, a significant proportion of cash and cash equivalents is deposited with
investment grade rated financial institutions.
The ‘maximum exposure to credit risk’ is the maximum exposure before taking account of any securities or collateral held, or other
credit enhancements, unless such enhancements meet accounting offsetting requirements. For financial assets recognised on the
balance sheet, excluding equity instruments as they are not subject to credit risk, the maximum exposure to credit risk equals their
carrying amount.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
160
160
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
28. Financial instruments continued
(f) Maturity profile of financial and lease liabilities
The table below reflects the contractual maturities, including future interest obligations, of the Group’s financial and lease liabilities as
at 31 December:
2019
Settlement balances
Deposits received for securities loaned
Derivatives at FVTPL
Trade payables
Lease liabilities
Bank loan
Sterling Notes January 2024
Sterling Notes May 2026
Deferred consideration
2018
Settlement balances
Deposits received for securities loaned
Derivatives at FVTPL
Trade payables
Bank loan
Sterling Notes January 2024
Sterling Notes June 2019
Deferred consideration
Due
between
3 months
and
12 months
£m
Due
between
1 year and
5 years
£m
Due within
3 months
£m
Due
after
5 years
£m
48,275
652
–
22
9
–
11
–
6
48,975
21,451
907
2
19
52
13
–
10
22,454
–
–
–
3
24
–
11
7
18
63
–
–
1
–
–
13
82
5
101
–
–
–
–
81
–
533
59
13
686
–
–
–
–
–
105
–
26
131
–
–
–
–
91
–
–
270
4
365
–
–
–
–
–
513
–
–
513
Total
£m
48,275
652
–
25
205
–
555
336
41
50,089
21,451
907
3
19
52
644
82
41
23,199
(g) Foreign currency sensitivity analysis
The table below illustrates the sensitivity of the profit for the year with regard to currency movements on financial assets and liabilities
denominated in foreign currencies as at the year end. The sensitivity of the Group’s equity with regard to its net foreign currency
investments at the year end is also shown below.
Based on a 10% weakening in the US Dollar, Euro and Australian Dollar exchange rates against Sterling, the effects would be as follows:
Change in foreign currency financial assets and liabilities –
profit or loss
Change in translation of foreign operations – equity
2019
2018
USD £m
EUR £m
AUD £m
USD £m
EUR £m
AUD £m
(4)
(80)
(4)
(4)
–
(8)
(3)
(78)
(3)
(4)
–
(11)
The Group would experience equal and opposite foreign exchange movements should the US Dollar, Euro and Australian Dollar
exchange rates strengthen against Sterling.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
160
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
161
161
continued
for the year ended 31 December 2019
28. Financial instruments continued
(f) Maturity profile of financial and lease liabilities
at 31 December:
The table below reflects the contractual maturities, including future interest obligations, of the Group’s financial and lease liabilities as
Deposits received for securities loaned
2019
Settlement balances
Derivatives at FVTPL
Trade payables
Lease liabilities
Bank loan
Sterling Notes January 2024
Sterling Notes May 2026
Deferred consideration
2018
Settlement balances
Deposits received for securities loaned
Derivatives at FVTPL
Trade payables
Bank loan
Sterling Notes January 2024
Sterling Notes June 2019
Deferred consideration
Due
between
3 months
Due
between
Due within
and
1 year and
3 months
12 months
5 years
£m
£m
£m
Due
after
5 years
£m
48,275
652
–
22
9
–
11
–
6
2
19
52
13
–
10
48,975
21,451
907
–
–
–
3
24
–
11
7
18
63
–
–
1
–
–
13
82
5
101
–
–
–
–
81
–
533
59
13
686
–
–
–
–
–
–
105
26
131
Total
£m
48,275
652
–
25
205
–
555
336
41
50,089
21,451
907
3
19
52
644
82
41
–
–
–
–
–
–
91
270
4
365
–
–
–
–
–
–
–
513
22,454
513
23,199
(g) Foreign currency sensitivity analysis
The table below illustrates the sensitivity of the profit for the year with regard to currency movements on financial assets and liabilities
denominated in foreign currencies as at the year end. The sensitivity of the Group’s equity with regard to its net foreign currency
investments at the year end is also shown below.
Based on a 10% weakening in the US Dollar, Euro and Australian Dollar exchange rates against Sterling, the effects would be as follows:
Change in foreign currency financial assets and liabilities –
profit or loss
Change in translation of foreign operations – equity
2019
2018
USD £m
EUR £m
AUD £m
USD £m
EUR £m
AUD £m
(4)
(80)
(4)
(4)
–
(8)
(3)
(78)
(3)
(4)
–
(11)
The Group would experience equal and opposite foreign exchange movements should the US Dollar, Euro and Australian Dollar
exchange rates strengthen against Sterling.
(h) Interest rate sensitivity analysis
Interest on floating rate financial instruments is reset at intervals of less than one year. The Group’s exposure to interest rates arises on
cash and cash equivalents and money market instruments. The Sterling Notes are fixed rate financial instruments.
A 100 basis point change in interest rates, applied to average floating rate financial instrument assets and liabilities during the year,
would result in the following impact on profit or loss:
Income/(expense) arising on:
– floating rate assets
– floating rate liabilities
Net income/(expense) for the year
2019
+100pts
£m
2018
-100pts
£m
+100pts
£m
-100pts
£m
7
(1)
6
(7)
1
(6)
6
–
6
(6)
–
(6)
(i) Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
>
>
>
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
2019
Financial assets measured at fair value
Equity instruments
Corporate debt securities
Government debt securities
Derivative instruments
Financial liabilities measured at fair value
Deferred consideration
Derivative instruments
2018
Financial assets measured at fair value
Equity instruments
Corporate debt securities
Government debt securities
Derivative instruments
Financial liabilities measured at fair value
Deferred consideration
Derivative instruments
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
3
–
87
–
–
–
90
2
–
84
–
–
–
86
8
–
–
–
(16)
–
(8)
9
–
–
3
–
(3)
9
7
2
–
–
(25)
–
(16)
7
2
–
–
(41)
–
(32)
18
2
87
–
(41)
–
66
18
2
84
3
(41)
(3)
63
In deriving the fair value of derivative instruments valuation models were used which incorporated observable market data. There
were no significant inputs used in the models that were unobservable. There is no material sensitivity to unobservable inputs used in
the models.
There were no transfers between Level 1 and 2 during the year. £16m of deferred consideration has transferred to Level 2 from Level 3
as the performance inputs relating to this balance are now observable.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
162
162
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
28. Financial instruments continued
(i) Fair value measurements recognised in the statement of financial position continued
Reconciliation of Level 3 fair value measurements of financial assets:
Balance as at 1 January
Net change in fair value – included in ‘administrative expenses’
Acquisitions during the year
Amounts settled during the year
Transfer to level 2
Effect of movements in exchange rates
Balance as at 31 December
29. Share capital
Allotted, issued and fully paid
Ordinary shares of 25p
As at 1 January
Issue of ordinary shares
As at 31 December
30. Reconciliation of shareholders’ funds
(a) Share capital, Share premium account, Merger reserve
2019
As at 1 January 2019
Issue of ordinary shares
As at 31 December 2019
2018
As at 1 January 2018
Issue of ordinary shares
As at 31 December 2018
Equity
instruments
(at FVTOCI)
£m
7
–
–
–
–
–
7
Debt securities
(at FVTOCI)
£m
2
–
–
–
–
–
2
Deferred
consideration
(at FVTPL)
£m
(41)
(6)
(6)
12
16
–
(25)
2019
Total
£m
(32)
(6)
(6)
12
16
–
(16)
2019
No.
2018
Total
£m
(22)
(5)
(15)
11
–
(1)
(32)
2018
No.
563,336,380
–
563,336,380
554,132,671
9,203,709
563,336,380
Share
capital
£m
Share
premium
account
£m
141
–
141
139
2
141
17
–
17
17
–
17
Merger
reserve
£m
1,384
–
1,384
1,378
6
1,384
Total
£m
1,542
–
1,542
1,534
8
1,542
Share capital/Merger reserve
As at 1 January 2018 the merger reserve related to prior share-based acquisitions and represented the difference between the value of
those acquisitions and the amount required to be recorded in share capital.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
162
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
28. Financial instruments continued
(i) Fair value measurements recognised in the statement of financial position continued
Reconciliation of Level 3 fair value measurements of financial assets:
(b) Other reserves
2019
As at 1 January 2019
Equity investments at FVTOCI – net change in fair value
Exchange differences on translation of foreign operations
Taxation on components of other comprehensive income
Total comprehensive income
Gain on disposal of equity investments at FVTOCI
Share settlement of share-based payment awards
Own shares acquired for employee trusts
As at 31 December 2019
2018
As at 1 January 2018
Equity investments at FVTOCI – net change in fair value
Exchange differences on translation of foreign operations
Taxation on components of other comprehensive income
Total comprehensive income
Gain on disposal of equity investments at FVTOCI
Share settlement of share-based payment awards
Own shares acquired for employee trusts
As at 31 December 2018
Strategic report Governance report
Financial statements
163
163
Reverse
acquisition
reserve
£m
Revaluation
reserve
£m
Hedging
and
translation
£m
Own
shares
£m
(1,182)
–
–
–
–
–
–
–
(1,182)
(1,182)
–
–
–
–
–
–
–
(1,182)
4
1
–
–
1
–
–
–
5
1
7
–
–
7
(4)
–
–
4
31
–
(43)
–
(43)
–
–
–
(12)
(17)
–
48
–
48
–
–
–
31
(11)
–
–
–
–
–
2
(7)
(16)
(10)
–
–
–
–
–
4
(5)
(11)
Other
reserves
£m
(1,158)
1
(43)
–
(42)
–
2
(7)
(1,205)
(1,208)
7
48
–
55
(4)
4
(5)
(1,158)
Reverse acquisition reserve
The acquisition of Collins Stewart Tullett plc by Tullett Prebon plc in 2006 was accounted for as a reverse acquisition. Under IFRS the
consolidated accounts of Tullett Prebon plc are prepared as if they were a continuation of the consolidated accounts of Collins Stewart
Tullett plc. The reverse acquisition reserve represents the difference between the initial equity share capital of Tullett Prebon plc and
the share capital and share premium of Collins Stewart Tullett plc at the time of the acquisition. This resulted in the consolidated net
assets before and after the acquisition remaining unchanged.
Revaluation reserve
The revaluation reserve represents the remeasurement of assets in accordance with IFRS that have been recorded in other
comprehensive income.
Hedging and translation
The hedging and translation reserve records revaluation gains and losses arising on net investment hedges and the effect of changes in
exchange rates on translation of foreign operations recorded in other comprehensive income. As at 31 December 2019, £10m relates to
amounts arising on previous net investment hedges (2018: £10m).
Own shares
As at 31 December 2019, the TP ICAP plc EBT (formerly the Tullett Prebon plc Employee Benefit Trust 2007) held 4,535,504 ordinary
shares (2018: 2,609,004 ordinary shares) with a fair value of £19m (2018: £8m). During the year the Trust delivered 698,801 shares in
satisfaction of vesting share-based awards and purchased 625,301 ordinary shares in the open market at a cost of £7m. In 2018 the
Trust purchased 1,025,947 ordinary shares in the open market at a cost of £5m.
Balance as at 1 January
Net change in fair value – included in ‘administrative expenses’
Acquisitions during the year
Amounts settled during the year
Transfer to level 2
Effect of movements in exchange rates
Balance as at 31 December
29. Share capital
Allotted, issued and fully paid
Ordinary shares of 25p
As at 1 January
Issue of ordinary shares
As at 31 December
30. Reconciliation of shareholders’ funds
(a) Share capital, Share premium account, Merger reserve
2019
As at 1 January 2019
Issue of ordinary shares
As at 31 December 2019
2018
As at 1 January 2018
Issue of ordinary shares
As at 31 December 2018
Share capital/Merger reserve
Equity
Deferred
instruments
Debt securities
consideration
(at FVTOCI)
(at FVTOCI)
(at FVTPL)
£m
£m
7
–
–
–
–
–
7
2
–
–
–
–
–
2
563,336,380
554,132,671
9,203,709
–
563,336,380
563,336,380
2019
Total
£m
(32)
(6)
(6)
12
16
–
(16)
2019
No.
Merger
reserve
£m
1,384
–
1,384
1,378
6
1,384
£m
(41)
(6)
(6)
12
16
–
(25)
£m
17
–
17
17
–
17
2018
Total
£m
(22)
(5)
(15)
11
–
(1)
(32)
2018
No.
Total
£m
1,542
–
1,542
1,534
8
1,542
Share
premium
account
Share
capital
£m
141
–
141
139
2
141
As at 1 January 2018 the merger reserve related to prior share-based acquisitions and represented the difference between the value of
those acquisitions and the amount required to be recorded in share capital.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
164
164
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
30. Reconciliation of shareholders’ funds continued
(c) Total equity
Equity attributable to equity holders of the parent
2019
As at 1 January 2019
Profit for the year
Equity instruments at FVTOCI – net change in fair value
Exchange differences on translation
of foreign operations
Remeasurement of defined benefit pension schemes
Taxation on components of other comprehensive
income
Total comprehensive income
Issue of ordinary shares
Dividends paid
Gain on disposal of equity investments at FVTOCI
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Non-controlling interests arising on acquisitions
Credit arising on share-based payment awards (Note 31)
As at 31 December 2019
2018
As at 1 January 2018
Adjustment on initial application of IFRS 9
Profit for the year
Equity instruments at FVTOCI – net change in fair value
Exchange differences on translation
of foreign operations
Remeasurement of defined benefit pension schemes
Taxation on components of other comprehensive income
Total comprehensive income
Issue of ordinary shares
Dividends paid
Gain on disposal of equity investments at FVTOCI
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Credit arising on share-based payment awards (Note 31)
As at 31 December 2018
Total from
Note 30(a)
£m
Total from
Note 30(b)
£m
Retained
earnings
£m
1,542
–
–
–
–
–
–
–
–
–
–
–
–
–
1,542
1,534
–
–
–
–
–
–
–
8
–
–
–
–
–
1,542
(1,158)
–
1
(43)
–
–
(42)
–
–
–
2
(7)
–
–
(1,205)
(1,208)
–
–
7
48
–
–
55
–
–
(4)
4
(5)
–
(1,158)
1,430
67
–
–
(52)
19
34
–
(94)
–
(3)
–
3
5
1,375
1,494
(4)
32
–
–
(2)
1
31
(2)
(94)
4
(4)
–
5
1,430
Non-
controlling
interests
£m
16
1
–
(1)
–
–
–
–
(1)
–
–
–
3
–
18
13
–
3
–
1
–
–
4
–
(1)
–
–
–
–
16
Total
£m
1,814
67
1
(43)
(52)
19
(8)
–
(94)
–
(1)
(7)
3
5
1,712
1,820
(4)
32
7
48
(2)
1
86
6
(94)
–
–
(5)
5
1,814
Total
equity
£m
1,830
68
1
(44)
(52)
19
(8)
–
(95)
–
(1)
(7)
6
5
1,730
1,833
(4)
35
7
49
(2)
1
90
6
(95)
–
–
(5)
5
1,830
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
164
Notes to the Consolidated Financial Statements
Strategic report Governance report
Financial statements
165
165
continued
for the year ended 31 December 2019
30. Reconciliation of shareholders’ funds continued
(c) Total equity
2019
As at 1 January 2019
Profit for the year
Equity instruments at FVTOCI – net change in fair value
Exchange differences on translation
of foreign operations
Remeasurement of defined benefit pension schemes
Taxation on components of other comprehensive
income
Total comprehensive income
Issue of ordinary shares
Dividends paid
Gain on disposal of equity investments at FVTOCI
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Non-controlling interests arising on acquisitions
Credit arising on share-based payment awards (Note 31)
2018
As at 1 January 2018
Profit for the year
Adjustment on initial application of IFRS 9
Equity instruments at FVTOCI – net change in fair value
Exchange differences on translation
of foreign operations
Remeasurement of defined benefit pension schemes
Taxation on components of other comprehensive income
Total comprehensive income
Issue of ordinary shares
Dividends paid
Gain on disposal of equity investments at FVTOCI
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Credit arising on share-based payment awards (Note 31)
Equity attributable to equity holders of the parent
Total from
Total from
Note 30(a)
Note 30(b)
£m
£m
Retained
earnings
£m
1,542
(1,158)
1,430
67
Non-
controlling
interests
Total
£m
1,814
67
1
(43)
(52)
19
(8)
(94)
–
–
(1)
(7)
3
5
(4)
32
7
48
(2)
1
86
6
(94)
–
–
(5)
5
–
–
(52)
19
34
–
(94)
–
(3)
–
3
5
(4)
32
–
–
(2)
1
31
(2)
4
(4)
–
5
(94)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
–
–
–
–
–
(43)
(42)
(7)
–
1
–
–
–
–
–
2
–
–
–
–
7
48
55
–
–
–
–
(4)
4
(5)
–
Total
equity
£m
1,830
68
1
(44)
(52)
19
(8)
(95)
–
–
(1)
(7)
6
5
(4)
35
7
49
(2)
1
90
6
(95)
–
–
(5)
5
£m
16
1
–
(1)
–
(1)
–
–
–
–
–
–
3
–
–
3
–
1
–
–
4
–
–
–
–
–
(1)
As at 31 December 2019
1,542
(1,205)
1,375
1,712
18
1,730
1,534
(1,208)
1,494
1,820
13
1,833
As at 31 December 2018
1,542
(1,158)
1,430
1,814
16
1,830
31. Share-based awards
Senior Manager Deferred Bonus Plan
Annual awards are made under the Group’s Senior Manager Deferred Bonus Plan.
Under this Plan, employees identified as senior managers have 20% of their annual discretionary bonus awarded in deferred shares.
These awards will be settled with TP ICAP plc shares and are subject to the completion of service conditions and the fulfilment of other
conduct requirements. The number of shares in respect of a bonus year is determined after the close period for that year at the then
market price, and vest over three years from the grant. The fair value of the shares equates to the monetary value of the awards at
grant date and includes the value of expected dividends that will accrue to the beneficiaries.
Awards will be settled by the TP ICAP plc Employee Benefit Trust from shares purchased by it in the open market.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Settled during the year
Outstanding at the end of the year
2019
No.
2,888,313
1,965,358
(59,350)
(698,801)
4,095,520
2018
No.
2,520,855
1,452,545
–
(1,085,087)
2,888,313
At the year end closing share price of 408.7p the estimated total number of deferred shares for the 2019 bonus year was 1,330,927.
Executive Director Deferred Bonus Plan
Annual awards are made under the Group’s Executive Director Deferred Bonus Plan.
The Group’s Executive Directors have 50% of their annual discretionary bonus awarded in deferred shares. These awards are subject to
the completion of service conditions and the fulfilment of other conduct requirements and will be settled with TP ICAP plc shares. The
number of shares in respect of a bonus year is determined after the close period for that year at the market price, and vest three years
from the date of the grant. The fair value of the shares equates to the monetary value of the awards at grant date and includes the
value of expected dividends that will accrue to the beneficiaries.
Outstanding at the beginning of the year
Granted during the year
Expired during the year
Forfeited during the year
Settled during the year
Outstanding at the end of the year
2019
No.
82,000
138,510
–
–
–
220,510
2018
No.
–
243,191
–
(161,191)
–
82,000
Awards will be settled by the TP ICAP plc Employee Benefit Trust from shares purchased by it in the open market.
At the year end closing share price of 408.7p the estimated total number of deferred shares for the 2019 bonus year was 378,324.
Transformation Long Term Incentive Plan (‘T-LTIP’)
The Transformation Long Term Incentive Plan commenced in 2017 as a one-off long-term plan aligned to the three year integration
period for Tullett Prebon and ICAP (January 2017 – December 2019). Awards were allocated between the Executive Directors and
members of the Group’s Global Executive Committee. Awards are forfeited if a beneficiary leaves the Group, unless explicitly agreed
otherwise by the Group’s Remuneration Committee. In 2020, following the end of the performance period, the T-LTIP pool will be
determined, based on absolute total shareholder return and earnings per share performance, and converted into awards of shares. Any
shares awarded will be subject to a holding period and will be released one third in April 2021, one third in April 2022 and one third in
April 2023. During the holding period, the shares cannot be sold (other than to cover the cost of any applicable taxes).
During 2019, as a condition of granting Executive Directors awards under the Group’s new Long Term Incentive Plan (see below) their T-
LTIP awards were cancelled. The cancellation was treated as a modification resulting in an acceleration of the associated share based
expense at that time.
A net share-based credit of £1m arises in 2019 reflecting the accelerated cost from modifying of the Executive Directors awards offset by
a credit relating to the forfeiture of awards. As at 31 December 2019 the Group does not expect any awards to vest on completion of the
performance period.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
166
166
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
31. Share-based awards continued
Long Term Incentive Plan (‘LTIP’)
As part of the Directors’ Remuneration Policy, approved by shareholders at the May 2019 AGM, a new Long Term Incentive Plan (‘LTIP’)
was introduced for Executive Directors and other senior employees. Awards made to the Executive Directors are up to a maximum of
2.5x base salary. Awards made to senior employees, based on the recommendation of the Chief Executive Officer and subject to
approval by the Remuneration Committee, are up to a maximum of 2x base salary. All awards are subject to agreed performance
conditions applicable to each grant.
In 2019, shares to a maximum of 1,264,712 were awarded to the Executive Directors. These awards are subject to performance
conditions measured over the three year period 2019 to 2021 with 50% of the awards subject to EPS compound annual growth targets
and 50% subject to relative total shareholder return targets. Details of the financial targets are set out in the Report of the
Remuneration Committee on page 93. No awards were made to senior employees in 2019.
At the end of the performance period, the number of shares vesting will be determined, based on the application of the relevant
performance conditions and will be subject to a two year holding period. During the holding period, the shares cannot be sold (other
than to cover the cost of any applicable taxes) and will be eligible for dividend equivalence.
Under the Scheme Rules awards may be settled through the issue of new shares, release of treasury shares or using shares purchased in
the market.
Special Equity Award Plan
During 2019, a Special Equity Award Plan (‘SEAP’) was introduced for eligible employees. The Executive Directors are not eligible for
awards under this plan. Awards are made to eligible employees based on the recommendation of the Chief Executive Officer and
subject to approval by the Remuneration Committee. Awards are subject to the completion of service conditions and the fulfilment of
other conduct requirements and vest three years from the date of grant. The fair value of the shares equates to the monetary value of
the awards at grant date and includes the value of expected dividends that will accrue to the beneficiaries.
Awards will be settled by the TP ICAP plc Employee Benefit Trust from shares purchased by it in the open market.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Settled during the year
Outstanding at the end of the year
Charge arising from the Senior Manager Deferred Bonus Plan
Charge arising from the Executive Director Deferred Bonus Plan
Charge arising from the Transformation Long Term Incentive Plan
Charge arising from the Long Term Incentive Plan
Charge arising from the Special Equity Award Plan
2019
No.
–
731,470
–
–
731,470
2018
£m
5
–
–
–
–
5
2019
£m
5
–
(1)
–
1
5
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
166
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
31. Share-based awards continued
Long Term Incentive Plan (‘LTIP’)
As part of the Directors’ Remuneration Policy, approved by shareholders at the May 2019 AGM, a new Long Term Incentive Plan (‘LTIP’)
was introduced for Executive Directors and other senior employees. Awards made to the Executive Directors are up to a maximum of
2.5x base salary. Awards made to senior employees, based on the recommendation of the Chief Executive Officer and subject to
approval by the Remuneration Committee, are up to a maximum of 2x base salary. All awards are subject to agreed performance
conditions applicable to each grant.
In 2019, shares to a maximum of 1,264,712 were awarded to the Executive Directors. These awards are subject to performance
conditions measured over the three year period 2019 to 2021 with 50% of the awards subject to EPS compound annual growth targets
and 50% subject to relative total shareholder return targets. Details of the financial targets are set out in the Report of the
Remuneration Committee on page 93. No awards were made to senior employees in 2019.
At the end of the performance period, the number of shares vesting will be determined, based on the application of the relevant
performance conditions and will be subject to a two year holding period. During the holding period, the shares cannot be sold (other
than to cover the cost of any applicable taxes) and will be eligible for dividend equivalence.
Under the Scheme Rules awards may be settled through the issue of new shares, release of treasury shares or using shares purchased in
the market.
Special Equity Award Plan
During 2019, a Special Equity Award Plan (‘SEAP’) was introduced for eligible employees. The Executive Directors are not eligible for
awards under this plan. Awards are made to eligible employees based on the recommendation of the Chief Executive Officer and
subject to approval by the Remuneration Committee. Awards are subject to the completion of service conditions and the fulfilment of
other conduct requirements and vest three years from the date of grant. The fair value of the shares equates to the monetary value of
the awards at grant date and includes the value of expected dividends that will accrue to the beneficiaries.
Awards will be settled by the TP ICAP plc Employee Benefit Trust from shares purchased by it in the open market.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Settled during the year
Outstanding at the end of the year
Charge arising from the Senior Manager Deferred Bonus Plan
Charge arising from the Executive Director Deferred Bonus Plan
Charge arising from the Transformation Long Term Incentive Plan
Charge arising from the Long Term Incentive Plan
Charge arising from the Special Equity Award Plan
2019
No.
731,470
731,470
2018
£m
–
–
–
5
–
–
–
–
5
2019
£m
(1)
5
–
–
1
5
Strategic report Governance report
Financial statements
167
167
32. Acquisitions
(a) Acquisition of ClearCompress Limited
In September 2019,the Group acquired 100% of the issued share capital of ClearCompress a provider of algorithm-based compression
services for currency swaps. Initial cash consideration was less than £1m. Deferred contingent consideration is payable through to the
sixth anniversary of completion. The amount of deferred contingent consideration is dependent upon the performance of the business
over that period and has a fair value estimated to be £6m. The actual outcome may differ from this estimate. The initial accounting for
the acquisition is provisional due to the proximity to the year end. The estimated fair value of the net liabilities acquired were £1m.
Provisional goodwill, representing the value of the established workforce, their accumulated knowledge and ClearCompress’s
operational processes and procedures, amounted to £7m.
The Group’s underlying operating profit and earnings would not have been materially different had ClearCompress been acquired on 1
January 2019.
(b) Finalisation of the acquisition of Axiom
During 2019 the Group finalised the accounting for its acquisition of Axiom Refined Products, LLC, Atlas Commodity Markets, LLC,
Atlas Petroleum Markets, LLC, and Atlas Physical Grains, LLC (collectively ‘Axiom’), that it acquired in November 2018. The acquisition
balance sheet of Axiom was increased by US$3m (£2m) to US$5m (£3m) with a corresponding reduction to goodwill. Cash consideration
was US$17m (£13m) with deferred non-contingent consideration of US$3m (£2m) payable over three years. The amount of deferred
contingent consideration is dependent upon the performance of the business over the three year period and has a fair value estimated
to be US$12m (£10m). The actual outcome may differ from this estimate. Intangible assets, relating to customer relationships, initially
estimated to be US$2m (£1m) have been finalised at US$8m (£6m) and will be amortised over 10 years. Goodwill, representing the value
of the established workforce and the business’s reputation, amounts to US$19m (£16m).
Acquisition costs, included in administrative expenses, amounted to less than £1m in 2018.
(c) Analysis of deferred and contingent consideration in respect of acquisitions
Certain acquisitions made by the Group are satisfied in part by deferred or contingent deferred consideration. The amount of deferred
consideration payable is dependent upon the performance of each acquisition relative to the performance conditions applicable to
that acquisition. The Group has re-estimated the amounts due where necessary, with any corresponding adjustments being made to
profit or loss. The actual outcome may differ from these estimates.
At 1 January
Acquisitions during the year
Adjustments to deferred consideration charged to the Income Statement
Cash-settled
Equity-settled
Effect of movements in exchange rates
At 31 December
Amounts falling due within one year
Amounts falling due after one year
At 31 December
2019
£m
41
6
6
(12)
–
–
41
23
18
41
2018
£m
31
15
5
(3)
(8)
1
41
15
26
41
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
168
168
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
33. Reconciliation of operating result to net cash from operating activities
Operating profit
Adjustments for:
– Share-based payment charge
– Pension scheme past service and settlement costs
– Depreciation of property, plant and equipment
– Depreciation of right-of-use assets
– Amortisation of intangible assets
– Amortisation of intangible assets arising on consolidation
– Impairment of intangible assets arising on consolidation
– Loss on disposal of property, plant and equipment
– Loss on disposal of associates
– Impairment of associates
– Remeasurement of deferred consideration
– Gain on disposal of available-for-sale investments
– Non-cash movement in FVTPL balances
Operating cash flows before movement in working capital
Increase in trade and other receivables
Decrease/(increase) in net settlement and trading balances
Increase in trade and other payables
Decrease in provisions
(Decrease)/increase in non-current liabilities
Retirement benefit scheme contributions
Cash generated from operations
Income taxes paid
Interest paid
Interest paid – finance leases
Cash from operating activities
2019
£m
142
5
4
13
21
27
42
24
1
–
–
6
–
–
285
(24)
8
4
(5)
(2)
(1)
265
(64)
(41)
(12)
148
2018
£m
93
5
1
13
–
26
40
65
–
1
3
5
–
–
252
(37)
(14)
1
(1)
13
(1)
213
(30)
(34)
–
149
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
168
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
33. Reconciliation of operating result to net cash from operating activities
34. Analysis of net funds
Strategic report Governance report
Financial statements
169
169
Operating profit
Adjustments for:
– Share-based payment charge
– Pension scheme past service and settlement costs
– Depreciation of property, plant and equipment
– Depreciation of right-of-use assets
– Amortisation of intangible assets
– Amortisation of intangible assets arising on consolidation
– Impairment of intangible assets arising on consolidation
– Loss on disposal of property, plant and equipment
– Loss on disposal of associates
– Impairment of associates
– Remeasurement of deferred consideration
– Gain on disposal of available-for-sale investments
– Non-cash movement in FVTPL balances
Operating cash flows before movement in working capital
Increase in trade and other receivables
Decrease/(increase) in net settlement and trading balances
Increase in trade and other payables
Decrease in provisions
(Decrease)/increase in non-current liabilities
Retirement benefit scheme contributions
Cash generated from operations
Income taxes paid
Interest paid
Interest paid – finance leases
Cash from operating activities
2019
£m
142
2018
£m
93
5
4
13
21
27
42
24
1
–
–
6
–
–
285
(24)
8
4
(5)
(2)
(1)
265
(64)
(41)
(12)
148
5
1
13
–
26
40
65
–
1
3
5
–
–
252
(37)
(14)
1
(1)
13
(1)
213
(30)
(34)
–
149
At
1 January
£m
Cash flow
£m
Non-cash
items
£m
Adoption of
IFRS 16
£m
Exchange
rate
movements
£m
At
31 December
£m
2019
Cash
Cash equivalents
Overdrafts
Cash and cash equivalents
Financial investments
Total funds
Bank loan due within one year
Loans from related parties
Sterling Notes June 2019
Sterling Notes January 2024
Sterling Notes May 2026
Lease liabilities
Total debt
670
10
(13)
667
133
800
(52)
–
(80)
(510)
–
–
(642)
21
(2)
3
22
20
42
52
3
821
971
(241)1
331
26
–
–
–
–
–
–
–
–
(2)
(27)
(8)
(32)
(69)
–
–
–
–
–
–
–
–
–
–
–
(145)
(145)
Total net funds/(debt)
158
68
(69)
(145)
2018
Cash
Cash equivalents
Overdrafts
Cash and cash equivalents
Financial investments
Total funds
Bank loan due within one year
Sterling Notes June 2019
Sterling Notes January 2024
Total debt
Total net funds
609
13
–
622
139
761
–
(80)
(509)
(589)
172
43
(3)
(13)
27
(4)
23
(52)
41
261
(22)
1
(1)
–
–
(1)
–
(1)
–
(4)
(27)
(31)
(32)
–
–
–
–
–
–
–
–
–
–
–
(13)
–
–
(13)
(5)
(18)
–
(3)
–
–
–
4
1
(17)
19
–
–
19
(2)
17
–
–
–
–
17
678
8
(10)
676
148
824
–
–
–
(440)
(249)
(140)
(829)
(5)
670
10
(13)
667
133
800
(52)
(80)
(510)
(642)
158
1
Principal changes plus payment of interest and debt issue costs where applicable
Cash and cash equivalents comprise cash at bank and other short term highly liquid investments with an original maturity of three
months or less. As at 31 December 2019 cash and cash equivalents, net of overdrafts, amounted to £676m (2018: £667m). Cash at bank
earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one
day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term
deposit rates.
Financial investments comprise short term government securities, term deposits and restricted funds held with banks and
clearing organisations.
Non-cash items represent accrued interest, the amortisation of debt issue costs and the impact of IFRS 9’s expected credit
loss requirements.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
170
170
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
35. Contingent liabilities
Bank Bill Swap Reference Rate case
On 16 August 2016, a litigation was filed in the United States District Court for the Southern District of New York naming Tullett Prebon
plc, ICAP plc, ICAP Australia Pty LTD and Tullett Prebon (Australia) Pty. Limited as defendants together with various Bank Bill Swap
Reference Rate (‘BBSW’) setting banks. The complaint alleges collusion by the defendants to fix BBSW-based derivatives prices through
manipulative trading during the fixing window and false BBSW rate submissions. On 26 November 2018, the Court dismissed all of the
claims against the TP ICAP defendants and certain other defendants. On 28 January 2019 the Court ordered that a stipulation signed
by the Plaintiffs and the TP ICAP defendants meant that the TP ICAP defendants were not required to respond to any Proposed Second
Amended Class Action Complaint (‘PSAC’) that the Plaintiffs were seeking to file. On 3 April 2019 the Plaintiffs filed a PSAC. However
the TP ICAP defendants have no obligation to respond. The Plaintiffs have reserved the right to appeal the dismissal of the TP ICAP
defendants but have not as yet done so. It is not possible to predict the ultimate outcome of the litigation or to provide an estimate
of any potential financial impact.
Labour claims – ICAP Brazil
ICAP do Brasil Corretora De Títulos e Varoles Mobiliários Ltda (‘ICAP Brazil’) is a defendant in 13 (31 December 2018: 19) pending
lawsuits filed in the Brazilian Labour Court by persons formerly associated with ICAP Brazil seeking damages under various statutory
labour rights accorded to employees and in relation to various other claims including wrongful termination, breach of contract and
harassment (together the ‘Labour claims’). The Group estimates the maximum potential aggregate exposure in relation to the Labour
claims, including any potential social security tax liability, to be BRL 49m (£11m) (31 December 2018: BRL 67m (£14m)). The Group is the
beneficiary of an indemnity from NEX in relation to any outflow in respect of materially all of these Labour claims insofar as they relate
to periods prior to completion of the Group’s acquisition of ICAP. The Company intends to contest liability in each of these matters and
to vigorously defend itself. It is not possible to predict the ultimate outcome of these actions.
Flow case – Tullett Prebon Brazil
In December 2012, Flow Participações Ltda and Brasil Plural Corretora de Câmbio, Títulos e Valores (‘Flow’) initiated a lawsuit against
Tullett Prebon Brasil S.A. Corretora de Valores e Câmbio and Tullett Prebon Holdings do Brasil Ltda alleging that the defendants have
committed a series of unfair competition misconducts, such as the recruitment of Flow’s former employees, the illegal obtainment and
use of systems and software developed by the plaintiffs, as well as the transfer of technology and confidential information from Flow
and the collusion to do so in order to increase profits from economic activities. The amount currently claimed is BRL 243m (£44m)
(31 December 2018: BRL 222m (£45m)). The Group intends to vigorously defend itself but there is no certainty as to the outcome of
these claims. The case is currently in an early evidentiary phase.
LIBOR Class actions
The Group is currently defending two LIBOR related actions.
(i) Stichting LIBOR Class Action
On 15 December 2017, the Stichting Elco Foundation, a Netherlands-based claim foundation, filed a writ initiating litigation in the
Dutch court in Amsterdam on behalf of institutional investors against ICAP Europe Limited (‘IEL’), ICAP plc, Cooperative Rabobank U.A.,
UBS AG, UBS Securities Japan Co. Ltd, Lloyds Banking Group plc, and Lloyds Bank plc. The litigation alleges manipulation by the
defendants of the JPY LIBOR, GBP LIBOR, CHF LIBOR, USD LIBOR, EURIBOR, TIBOR, SOR, BBSW and HIBOR benchmark rates, and seeks
a declaratory judgment that the defendants acted unlawfully and conspired to engage in improper manipulation of benchmarks. If the
plaintiffs succeed in the action, the defendants would be responsible for paying costs of the litigation, but each allegedly impacted
investor would need to prove its own actual damages. It is not possible at this time to determine the final outcome of this litigation, but
IEL has factual and legal defences to the claims and intends to defend the lawsuit vigorously. A hearing took place on 18 June 2019 on
Defendants motions to dismiss the proceedings. On 14 August 2019 the Dutch Court issued a ruling dismissing ICAP plc from the case
entirely but keeping certain claims against IEL relating solely to JPY LIBOR. The Group is covered by an indemnity from NEX in relation
to any outflow in respect of the ICAP entities with regard to these matters. It is not possible to estimate any potential financial impact
in respect of this matter at this time.
(ii) Swiss LIBOR Class Action
On 4 December 2017, a class of plaintiffs filed a Second Amended Class Action Complaint in the matter of Sonterra Capital Master
Fund Ltd. et al. v. Credit Suisse Group AG et al. naming as defendants, among others, TP ICAP plc, Tullett Prebon Americas Corp., Tullett
Prebon (USA) Inc., Tullett Prebon Financial Services LLC, Tullett Prebon (Europe) Limited, Cosmorex AG, ICAP Europe Limited, and ICAP
Securities USA LLC (together, the ‘Companies’). The Second Amended Complaint generally alleges that the Companies conspired with
certain bank customers to manipulate Swiss Franc LIBOR and prices of Swiss Franc LIBOR based derivatives by disseminating false
pricing information in false run-throughs and false prices published on screens viewed by customers in violation of the Sherman Act
(anti-trust) and RICO. On 16 September 2019, the Court granted the Companies’ motions to dismiss in their entirety. The plaintiffs have
appealed the dismissal to the United States Court of Appeals for the Second Circuit. The Companies intend to contest liability in the
matter and to vigorously defend themselves. It is not possible to predict the ultimate outcome of this action or to provide an estimate
of any potential financial impact.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
170
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
35. Contingent liabilities
Bank Bill Swap Reference Rate case
On 16 August 2016, a litigation was filed in the United States District Court for the Southern District of New York naming Tullett Prebon
plc, ICAP plc, ICAP Australia Pty LTD and Tullett Prebon (Australia) Pty. Limited as defendants together with various Bank Bill Swap
Reference Rate (‘BBSW’) setting banks. The complaint alleges collusion by the defendants to fix BBSW-based derivatives prices through
manipulative trading during the fixing window and false BBSW rate submissions. On 26 November 2018, the Court dismissed all of the
claims against the TP ICAP defendants and certain other defendants. On 28 January 2019 the Court ordered that a stipulation signed
by the Plaintiffs and the TP ICAP defendants meant that the TP ICAP defendants were not required to respond to any Proposed Second
Amended Class Action Complaint (‘PSAC’) that the Plaintiffs were seeking to file. On 3 April 2019 the Plaintiffs filed a PSAC. However
the TP ICAP defendants have no obligation to respond. The Plaintiffs have reserved the right to appeal the dismissal of the TP ICAP
defendants but have not as yet done so. It is not possible to predict the ultimate outcome of the litigation or to provide an estimate
of any potential financial impact.
Labour claims – ICAP Brazil
ICAP do Brasil Corretora De Títulos e Varoles Mobiliários Ltda (‘ICAP Brazil’) is a defendant in 13 (31 December 2018: 19) pending
lawsuits filed in the Brazilian Labour Court by persons formerly associated with ICAP Brazil seeking damages under various statutory
labour rights accorded to employees and in relation to various other claims including wrongful termination, breach of contract and
harassment (together the ‘Labour claims’). The Group estimates the maximum potential aggregate exposure in relation to the Labour
claims, including any potential social security tax liability, to be BRL 49m (£11m) (31 December 2018: BRL 67m (£14m)). The Group is the
beneficiary of an indemnity from NEX in relation to any outflow in respect of materially all of these Labour claims insofar as they relate
to periods prior to completion of the Group’s acquisition of ICAP. The Company intends to contest liability in each of these matters and
to vigorously defend itself. It is not possible to predict the ultimate outcome of these actions.
Flow case – Tullett Prebon Brazil
In December 2012, Flow Participações Ltda and Brasil Plural Corretora de Câmbio, Títulos e Valores (‘Flow’) initiated a lawsuit against
Tullett Prebon Brasil S.A. Corretora de Valores e Câmbio and Tullett Prebon Holdings do Brasil Ltda alleging that the defendants have
committed a series of unfair competition misconducts, such as the recruitment of Flow’s former employees, the illegal obtainment and
use of systems and software developed by the plaintiffs, as well as the transfer of technology and confidential information from Flow
and the collusion to do so in order to increase profits from economic activities. The amount currently claimed is BRL 243m (£44m)
(31 December 2018: BRL 222m (£45m)). The Group intends to vigorously defend itself but there is no certainty as to the outcome of
these claims. The case is currently in an early evidentiary phase.
LIBOR Class actions
The Group is currently defending two LIBOR related actions.
(i) Stichting LIBOR Class Action
On 15 December 2017, the Stichting Elco Foundation, a Netherlands-based claim foundation, filed a writ initiating litigation in the
Dutch court in Amsterdam on behalf of institutional investors against ICAP Europe Limited (‘IEL’), ICAP plc, Cooperative Rabobank U.A.,
UBS AG, UBS Securities Japan Co. Ltd, Lloyds Banking Group plc, and Lloyds Bank plc. The litigation alleges manipulation by the
defendants of the JPY LIBOR, GBP LIBOR, CHF LIBOR, USD LIBOR, EURIBOR, TIBOR, SOR, BBSW and HIBOR benchmark rates, and seeks
a declaratory judgment that the defendants acted unlawfully and conspired to engage in improper manipulation of benchmarks. If the
plaintiffs succeed in the action, the defendants would be responsible for paying costs of the litigation, but each allegedly impacted
investor would need to prove its own actual damages. It is not possible at this time to determine the final outcome of this litigation, but
IEL has factual and legal defences to the claims and intends to defend the lawsuit vigorously. A hearing took place on 18 June 2019 on
Defendants motions to dismiss the proceedings. On 14 August 2019 the Dutch Court issued a ruling dismissing ICAP plc from the case
entirely but keeping certain claims against IEL relating solely to JPY LIBOR. The Group is covered by an indemnity from NEX in relation
to any outflow in respect of the ICAP entities with regard to these matters. It is not possible to estimate any potential financial impact
in respect of this matter at this time.
(ii) Swiss LIBOR Class Action
On 4 December 2017, a class of plaintiffs filed a Second Amended Class Action Complaint in the matter of Sonterra Capital Master
Fund Ltd. et al. v. Credit Suisse Group AG et al. naming as defendants, among others, TP ICAP plc, Tullett Prebon Americas Corp., Tullett
Prebon (USA) Inc., Tullett Prebon Financial Services LLC, Tullett Prebon (Europe) Limited, Cosmorex AG, ICAP Europe Limited, and ICAP
Securities USA LLC (together, the ‘Companies’). The Second Amended Complaint generally alleges that the Companies conspired with
certain bank customers to manipulate Swiss Franc LIBOR and prices of Swiss Franc LIBOR based derivatives by disseminating false
pricing information in false run-throughs and false prices published on screens viewed by customers in violation of the Sherman Act
(anti-trust) and RICO. On 16 September 2019, the Court granted the Companies’ motions to dismiss in their entirety. The plaintiffs have
appealed the dismissal to the United States Court of Appeals for the Second Circuit. The Companies intend to contest liability in the
matter and to vigorously defend themselves. It is not possible to predict the ultimate outcome of this action or to provide an estimate
of any potential financial impact.
Strategic report Governance report
Financial statements
171
171
ICAP Securities Limited, Frankfurt branch - Frankfurt Attorney General administrative proceedings
On 19 December 2018, the Attorney General’s office of Frankfurt notified ICAP Securities Limited (Frankfurt Branch) (‘ISL’), that
administrative offence proceedings have been initiated against ISL in connection with criminal investigations into two former
employees and a former Director of ISL suspected of aiding and abetting tax evasion for the benefit of a third party between 2007
and 2008. The Attorney General’s office is considering imposing a corporate administrative fine against ISL or confiscating the
earnings that ISL derived from the underlying alleged criminal conduct by the former employees and former Director. Not all details
of the alleged wrongdoing or of the case against ISL are yet available. External lawyers have been instructed to represent ISL and to
seek further access to the Attorney General’s case file. As a result, it is not possible at this stage to provide a reliable estimate of any
potential financial impact on the Group.
General note
The Group operates in a wide variety of jurisdictions around the world and uncertainties therefore exist with respect to the
interpretation of complex regulatory, corporate and tax laws and practices of those territories. Accordingly, and as part of its
normal course of business, the Group is required to provide information to various authorities as part of informal and formal enquiries
or market review.
From time to time the Group’s subsidiaries are engaged in litigation in relation to a variety of matters. The Group’s reputation may also
be damaged by any involvement or the involvement of any of its employees or former employees in any regulatory investigation and by
any allegations or findings, even where the associated fine or penalty is not material.
Save as outlined above in respect of legal matters or disputes for which a provision has not been made, notwithstanding the
uncertainties that are inherent in the outcome of such matters, there are no individual matters which are considered to pose a
significant risk of material adverse financial impact on the Group’s results or net assets.
The Group establishes provisions for taxes other than current and deferred income taxes, based upon various factors which are
continually evaluated, if there is a present obligation as a result of past events, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.
In the normal course of business, certain of the Group’s subsidiaries enter into guarantees and indemnities to cover trading
arrangements and/or the use of third party services or software.
36. Short term or low value lease commitments
Minimum short term and low value lease payments recognised in the income statement
Sub-lease income received
2019
£m
2
–
2018
£m
43
(1)
At 31 December 2019 the Group had outstanding commitments for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Within one year
Within two to five years
Over five years
2019
2018
Buildings
£m
–
–
–
–
Other
£m
–
–
–
–
Buildings
£m
33
102
176
311
At 31 December 2019 the Group had contracted with tenants for the following future minimum lease payments:
Within one year
Within two to five years
Over five years
2019
2018
Buildings
£m
–
–
–
–
Other
£m
–
–
–
–
Buildings
£m
1
6
3
10
Other
£m
1
1
–
2
Other
£m
–
–
–
–
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
172
172
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
37. Retirement benefits
(a) Defined benefit schemes
The Group has a defined benefit pension scheme in the UK and a small number of schemes operated in other countries. The overseas
schemes are not significant in the context of the Group.
Defined benefit scheme surplus – UK
Defined benefit schemes deficit – Overseas
2019
£m
–
(2)
2018
£m
55
(3)
(b) UK defined benefit scheme
The Group’s UK defined benefit pension scheme is the defined benefit section of the Tullett Prebon Pension Scheme (the ‘Scheme’).
The Scheme is a final salary, funded pension scheme that is closed to new members and future accrual. For members still in service there
was a continuing link between benefits and pensionable pay, up to the date the Scheme commenced wind-up. The Principal Employer is
Tullett Prebon Group Limited.
The assets of the Scheme are held separately from those of the Group, either in separate Trustee administered funds or in contract-
based policies of insurance.
The latest funding actuarial valuation of the Scheme was carried out as at 30 April 2016 by independent qualified actuaries. The
actuarial funding surplus of the Scheme at that date was £61m and under the agreed schedule of contributions the Group will continue
not to make any payments into the Scheme.
During 2017, the Trustees of the Scheme purchased a bulk annuity policy with Rothesay Life, an insurance company, that covered all of
the Scheme’s liabilities. The policy is in the name of the Scheme and is a Scheme asset. The purchase of the policy represents a bulk
annuity ‘buy-in’ and has been accounted for in accordance with the requirements of IAS 19 ‘Employee Benefits’. Under IAS 19, the
accounting value of the purchased policy is set to be equal to the value of the liabilities covered, calculated using the current IAS 19
actuarial assumptions for the defined benefit obligation.
The Scheme is exposed to counterparty risk of Rothesay Life as the insurance policy makes up the majority of Scheme assets. However,
the Trustees of the Scheme are currently making arrangements for the transfer of the Scheme’s liabilities to the insurer to take on direct
responsibility for the provision of benefits. If implemented, this would permanently extinguish the Group’s obligation to support the
Scheme financially.
The amounts included in the balance sheet arising from the Group’s obligations in respect of the Scheme are as follows:
Fair value of Scheme assets
Present value of Scheme liabilities
Defined benefit scheme surplus - UK
Impact of asset ceiling on UK scheme surplus:
> Charged to Other Comprehensive Income (remeasurement of defined benefit pension schemes)
Recognised in the Consolidated Balance Sheet
Deferred tax liability (Note 21)
2019
£m
257
(205)
52
(52)
–
–
2018
£m
243
(188)
55
–
55
(19)
During 2019 the Trustee commenced proceedings to ‘buy-out’ the Scheme’s liabilities, a process that will enable the Trustee to exchange
the Scheme’s bulk annuity policy for individual policies issued to, and directly held, by the Scheme’s beneficiaries. To proceed with the
‘buy-out’, the Sponsor and Trustee commenced the wind-up of the Scheme. Prior to this, the Trustee had no right to unilaterally wind-up,
or otherwise augment the benefits due to members and based on those limitations the net surplus was recognised in full by the Group.
Under UK legislation, once a Scheme commences wind-up, the assets of the Scheme pass unconditionally to the Trustee to enable it to
settle the Scheme’s liabilities. As a result, the Group has applied the requirements of IFRIC 14, restricting the Group’s recognition of the
net surplus by applying an asset recognition ceiling. The asset ceiling is recorded in other comprehensive income.
During the wind-up period, the Group will continue to restrict the recognition of the net surplus. During 2019, member benefits have
been augmented resulting in a £3m past service cost which has been recorded as an exceptional costs in the Income Statement. Costs
associated with the settlement of the Scheme’s liabilities are recorded as exceptional costs in the Income Statement. Settlement costs
amounted to £1m in 2019.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
Strategic report Governance report
Financial statements
173
173
The Group has a defined benefit pension scheme in the UK and a small number of schemes operated in other countries. The overseas
schemes are not significant in the context of the Group.
Following the full settlement of the Scheme’s liabilities the Scheme will be wound up and the Sponsor expects to receive the remaining
assets. Any repayment received will also be subject to applicable taxes at that time, currently 35%.
The main financial assumptions used by the independent qualified actuaries of the Scheme to calculate the liabilities under IAS 19 were:
2019
£m
–
(2)
2018
£m
55
(3)
Key assumptions
Discount rate
Expected rate of salary increases
Rate of increase in LPI pensions in payment1
Inflation assumption
2019
%
2.00
n/a
2.70
2.30
2018
%
2.70
4.75
2.40
2.40
1 This applies to pensions accrued from 6 April 1997. The majority of current and future pensions receive fixed increases in payment of either 0% or 2.5%.
The mortality assumptions are based on standard mortality tables and allow for future mortality improvements and are the same as those
adopted for the 2016 funding valuation. Assumptions for the Scheme are that a member who retires in 15 years’ time at age 60 will live
on average for a further 31.6 years (2018: 31.4 years) after retirement if they are male and for a further 33.0 years (2018: 32.8 years) after
retirement if they are female. Current pensioners are assumed to have a generally shorter life expectancy based on their current age.
The valuation of the Scheme liabilities is sensitive to changes in the assumptions used. The effect of changes in the discount rate,
inflation and mortality assumptions, assuming an independent change in one assumption with all others held constant, on the liabilities
is shown below:
The amounts included in the balance sheet arising from the Group’s obligations in respect of the Scheme are as follows:
Life expectancy increases by 3 years
As at 31 December 2019
Following a 0.25% decrease in the discount rate
Following a 0.25% increase in the inflation assumption
Scheme
assets
£m
257
Scheme
liabilities
£m
(205)
Surplus
£m
52
Change
New value
Change
New value
Change
New value
4.3%
268
1.9%
262
8.2%
278
5.4%
(216)
2.4%
(210)
10.2%
(226)
–
52
–
52
–
52
The above analysis does not reflect any inter-relationship between the assumptions.
The above changes have been derived by adjusting the actuarial calculation of the Scheme’s liabilities at 31 December 2019 to allow
for the assumption change. Changes to the risks inherent in the Scheme would result in changes to the Scheme’s carrying value.
However, as a result of the bulk annuity purchase, the value of the Scheme’s insurance asset matches changes in the insured liabilities.
The value of Scheme’s surplus assets will change as the market value of those investments change.
The amounts recognised in the income statement in respect of the Scheme were as follows:
Deemed interest arising on the defined benefit pension scheme surplus
Impact of asset ceiling on UK scheme surplus
Recognised in the Consolidated Income Statement
Past service costs
Scheme’s administrative and settlement costs
2019
£m
1
(1)
–
(3)
(1)
(4)
2018
£m
1
–
1
–
(1)
–
Deemed interest arising on the defined benefit pension scheme surplus has been included within finance income (Note 8).
172
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
37. Retirement benefits
(a) Defined benefit schemes
Defined benefit scheme surplus – UK
Defined benefit schemes deficit – Overseas
(b) UK defined benefit scheme
Tullett Prebon Group Limited.
based policies of insurance.
The Group’s UK defined benefit pension scheme is the defined benefit section of the Tullett Prebon Pension Scheme (the ‘Scheme’).
The Scheme is a final salary, funded pension scheme that is closed to new members and future accrual. For members still in service there
was a continuing link between benefits and pensionable pay, up to the date the Scheme commenced wind-up. The Principal Employer is
The assets of the Scheme are held separately from those of the Group, either in separate Trustee administered funds or in contract-
The latest funding actuarial valuation of the Scheme was carried out as at 30 April 2016 by independent qualified actuaries. The
actuarial funding surplus of the Scheme at that date was £61m and under the agreed schedule of contributions the Group will continue
not to make any payments into the Scheme.
During 2017, the Trustees of the Scheme purchased a bulk annuity policy with Rothesay Life, an insurance company, that covered all of
the Scheme’s liabilities. The policy is in the name of the Scheme and is a Scheme asset. The purchase of the policy represents a bulk
annuity ‘buy-in’ and has been accounted for in accordance with the requirements of IAS 19 ‘Employee Benefits’. Under IAS 19, the
accounting value of the purchased policy is set to be equal to the value of the liabilities covered, calculated using the current IAS 19
actuarial assumptions for the defined benefit obligation.
The Scheme is exposed to counterparty risk of Rothesay Life as the insurance policy makes up the majority of Scheme assets. However,
the Trustees of the Scheme are currently making arrangements for the transfer of the Scheme’s liabilities to the insurer to take on direct
responsibility for the provision of benefits. If implemented, this would permanently extinguish the Group’s obligation to support the
Scheme financially.
Fair value of Scheme assets
Present value of Scheme liabilities
Defined benefit scheme surplus - UK
Impact of asset ceiling on UK scheme surplus:
Deferred tax liability (Note 21)
> Charged to Other Comprehensive Income (remeasurement of defined benefit pension schemes)
Recognised in the Consolidated Balance Sheet
2019
£m
257
(205)
52
(52)
–
–
2018
£m
243
(188)
55
–
55
(19)
During 2019 the Trustee commenced proceedings to ‘buy-out’ the Scheme’s liabilities, a process that will enable the Trustee to exchange
the Scheme’s bulk annuity policy for individual policies issued to, and directly held, by the Scheme’s beneficiaries. To proceed with the
‘buy-out’, the Sponsor and Trustee commenced the wind-up of the Scheme. Prior to this, the Trustee had no right to unilaterally wind-up,
or otherwise augment the benefits due to members and based on those limitations the net surplus was recognised in full by the Group.
Under UK legislation, once a Scheme commences wind-up, the assets of the Scheme pass unconditionally to the Trustee to enable it to
settle the Scheme’s liabilities. As a result, the Group has applied the requirements of IFRIC 14, restricting the Group’s recognition of the
net surplus by applying an asset recognition ceiling. The asset ceiling is recorded in other comprehensive income.
During the wind-up period, the Group will continue to restrict the recognition of the net surplus. During 2019, member benefits have
been augmented resulting in a £3m past service cost which has been recorded as an exceptional costs in the Income Statement. Costs
associated with the settlement of the Scheme’s liabilities are recorded as exceptional costs in the Income Statement. Settlement costs
amounted to £1m in 2019.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
174
174
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
37. Retirement benefits continued
The amounts recognised in other comprehensive income in respect of the Scheme were as follows:
Return on Scheme assets (excluding deemed interest income) – Trustee administered funds
Return on Scheme assets (excluding deemed interest income) – revaluation of insurance policies
Actuarial (losses)/gains arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Actuarial gains/(losses) arising from experience adjustments
Remeasurement of the defined benefit pension scheme
Movements in the present value of the Scheme liabilities were as follows:
At 1 January
Deemed interest cost
Past service cost
Actuarial (losses)/gains arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Actuarial gains/(losses) arising from experience adjustments
Benefits paid/transfers out
At 31 December
Movements in the fair value of the Scheme assets were as follows:
At 1 January
Deemed interest income
Return on Scheme assets (excluding deemed interest income) – Trustee administered funds
Return on Scheme assets (excluding deemed interest income) – revaluation of insurance policies
Benefits paid/transfers out
Administrative and settlement costs
At 31 December
The major categories and fair values of the Scheme assets as at 31 December were as follows:
Cash and cash equivalents
Government bonds
Insurance policies
Other receivables
At 31 December
2019
£m
(1)
23
(23)
–
1
–
2019
£m
(188)
(5)
(3)
(23)
–
1
13
205
2019
£m
243
6
(1)
23
(13)
(1)
257
2019
£m
2
52
202
1
257
2018
£m
(2)
(9)
11
(1)
(1)
(2)
2018
£m
(203)
(5)
–
11
(1)
(1)
11
(188)
2018
£m
260
6
(2)
(9)
(11)
(1)
243
2018
£m
3
51
188
1
243
During 2017, as part of the arrangements for insuring the Scheme’s liabilities, the Trustees transferred all of the Scheme’s equity
investments into fixed income securities and bonds. The Scheme does not hedge against foreign currency exposures or interest rate risk.
The Scheme duration is an indicator of the weighted average time until benefit payments are made. For the Scheme as a whole, the
duration is around 20 years reflecting the approximate split of the defined benefit liability between current employees (duration of 25
years), deferred members (duration of 23 years) and current pensioners (duration of 13 years).
The estimated amounts of contributions expected to be paid into the Scheme during 2019 is £nil.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
174
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
37. Retirement benefits continued
The amounts recognised in other comprehensive income in respect of the Scheme were as follows:
Return on Scheme assets (excluding deemed interest income) – Trustee administered funds
Return on Scheme assets (excluding deemed interest income) – revaluation of insurance policies
Actuarial (losses)/gains arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Actuarial gains/(losses) arising from experience adjustments
Remeasurement of the defined benefit pension scheme
Movements in the present value of the Scheme liabilities were as follows:
At 1 January
Deemed interest cost
Past service cost
Actuarial (losses)/gains arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Actuarial gains/(losses) arising from experience adjustments
Benefits paid/transfers out
At 31 December
Movements in the fair value of the Scheme assets were as follows:
Return on Scheme assets (excluding deemed interest income) – Trustee administered funds
Return on Scheme assets (excluding deemed interest income) – revaluation of insurance policies
At 1 January
Deemed interest income
Benefits paid/transfers out
Administrative and settlement costs
At 31 December
The major categories and fair values of the Scheme assets as at 31 December were as follows:
Cash and cash equivalents
Government bonds
Insurance policies
Other receivables
At 31 December
2019
£m
(1)
23
(23)
–
1
–
2019
£m
(188)
(5)
(3)
(23)
–
1
13
205
2019
£m
243
6
(1)
23
(13)
(1)
257
2019
£m
2
52
202
1
257
2018
£m
(2)
(9)
11
(1)
(1)
(2)
2018
£m
(203)
(5)
–
11
(1)
(1)
11
(188)
2018
£m
260
6
(2)
(9)
(11)
(1)
243
2018
£m
3
51
188
1
243
During 2017, as part of the arrangements for insuring the Scheme’s liabilities, the Trustees transferred all of the Scheme’s equity
investments into fixed income securities and bonds. The Scheme does not hedge against foreign currency exposures or interest rate risk.
The Scheme duration is an indicator of the weighted average time until benefit payments are made. For the Scheme as a whole, the
duration is around 20 years reflecting the approximate split of the defined benefit liability between current employees (duration of 25
years), deferred members (duration of 23 years) and current pensioners (duration of 13 years).
The estimated amounts of contributions expected to be paid into the Scheme during 2019 is £nil.
Strategic report Governance report
Financial statements
175
175
(c) Defined contribution pensions
The Group operates a number of defined contribution schemes for qualifying employees. The assets of these schemes are held
separately from those of the Group.
The defined contribution pension cost for the Group charged to administrative expenses was £17m (2018: £15m), of which £8m (2018:
£8m) related to overseas schemes.
As at 31 December 2019, there was £1m outstanding in respect of the current reporting year that had not been paid over to the schemes
(2018: £1m).
38. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this Note.
The total amounts owed to and from associates and joint ventures at 31 December 2019, which also represent the value of transactions
during the year, are set out below:
Associates
Joint ventures
Amounts owed by
related parties
2018
£m
3
1
2019
£m
3
–
Amounts owed to
related parties
2018
£m
–
(2)
2019
£m
–
(3)
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have
been made for doubtful debts in respect of the amounts owed by related parties.
During the year, less than £1m of interest was paid on loans from related parties.
Directors
Costs in respect of the Directors who were the key management personnel of the Group during the year are set out below in aggregate
for each of the categories specified in IAS 24 ‘Related Party Disclosures’. Further information about the individual Directors is provided
in the audited part of the Report on Directors’ Remuneration on pages 87 to 93.
Short term benefits
Social security costs
2019
£m
6
1
7
2018
£m
3
–
3
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
176
176
Financial Statements
Notes to the Consolidated Financial Statements
continued
for the year ended 31 December 2019
39. Principal subsidiaries
At 31 December 2019, the following companies were the Group’s principal subsidiary undertakings. A full list of the Group’s
undertakings, the country of incorporation and the Group’s effective percentage of equity owned is set out in the listing on pages 184 to
191. All subsidiaries are involved in broking or information sales activities and have either a 31 December or 31 March year end as
identified below.
Country of
incorporation
and operation
Australia
Bermuda (operating in England)
Brazil
England
France
Guernsey (operating in England)
Hong Kong
Indonesia
Japan
Singapore
UAE
United States
Principal subsidiary undertakings
ICAP Brokers Pty Limited
PVM Oil Associates Limited
ICAP do Brasil Corretora de Títulos e Valores Mobiliários Ltda
Tullett Prebon Brasil Corretora de Valores e Cambio Ltda
ICAP Energy Limited
ICAP Europe Limited
ICAP Global Derivatives Limited
ICAP Information Services Limited
ICAP Management Services Limited
ICAP Securities Limited
ICAP WCLK Limited
iSwap Limited
The Link Asset and Securities Company Limited
Tullett Prebon (Europe) Limited
Tullett Prebon (Securities) Limited
PVM Oil Futures Limited
Coex Partners Limited
TP ICAP (Europe) S.A.
Tullett Prebon Information Limited
ICAP (Hong Kong) Limited
ICAP Securities Hong Kong Limited
Tullett Prebon (Hong Kong) Limited
PT. Inti Tullett Prebon Indonesia
Tullett Prebon (Japan) Limited
ICAP (Singapore) Pte Limited (formerly ICAP AP (Singapore) Pte. Limited)
TP ICAP Management Services (Singapore) Pte. Ltd.
Tullett Prebon Energy (Singapore) Pte. Ltd.
Tullett Prebon (Singapore) Limited
PVM Oil Associates Pte. Ltd.
TP ICAP (Dubai) Limited
ICAP Corporates LLC
ICAP Energy LLC
ICAP Information Services Inc.
ICAP Securities USA LLC
ICAP SEF (US) LLC1
Tullett Prebon Americas Corp.
Tullett Prebon Financial Services LLC
PVM Futures Inc
Coex Partners Inc
Tullett Prebon Information Inc
Issued ordinary
shares, all voting
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50.1%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
57.52%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1
31 March year end due to operational reasons.
As at 31 December 2019, £18m (2018: £16m) is due to non-controlling interests relating to those subsidiaries that are not wholly owned.
Movements in non-controlling interests are set out in Note 30(c). No individual non-controlling interest is material to the Group. There
are no significant restrictions on the ability of the Group to access or use assets and settle liabilities relating to these subsidiaries.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
176
Notes to the Consolidated Financial Statements
Company Balance sheet
as at 31 December 2019
Strategic report Governance report
Financial statements
177
177
Non-current assets
Investment in subsidiary undertakings
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Other long term payables
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium
Merger reserve
Own shares
Profit and loss account
Total equity
Notes
4
5
5
6
8
8
7
9
2019
£m
2,935
23
2,958
35
23
58
3,016
(106)
(11)
(117)
(59)
2,899
(678)
(6)
(684)
(801)
2,215
141
17
1,262
(16)
811
2,215
2018
£m
2,681
343
3,024
23
3
26
3,050
(74)
(144)
(218)
(192)
2,832
(498)
(13)
(511)
(729)
2,321
141
17
1,262
(11)
912
2,321
ICAP (Singapore) Pte Limited (formerly ICAP AP (Singapore) Pte. Limited)
TP ICAP Management Services (Singapore) Pte. Ltd.
Tullett Prebon Energy (Singapore) Pte. Ltd.
The Company reported a loss for the financial year ended 31 December 2019 of £9m (2018: profit of £66m).
The Financial Statements of TP ICAP plc (registered number 5807599) were approved by the Board of Directors and authorised for issue
on 10 March 2020 and are signed on its behalf by
Nicolas Breteau
Chief Executive Officer
continued
for the year ended 31 December 2019
39. Principal subsidiaries
At 31 December 2019, the following companies were the Group’s principal subsidiary undertakings. A full list of the Group’s
undertakings, the country of incorporation and the Group’s effective percentage of equity owned is set out in the listing on pages 184 to
191. All subsidiaries are involved in broking or information sales activities and have either a 31 December or 31 March year end as
Bermuda (operating in England)
PVM Oil Associates Limited
Principal subsidiary undertakings
ICAP Brokers Pty Limited
ICAP do Brasil Corretora de Títulos e Valores Mobiliários Ltda
Tullett Prebon Brasil Corretora de Valores e Cambio Ltda
Issued ordinary
shares, all voting
identified below.
Country of
incorporation
and operation
Australia
Brazil
England
France
Hong Kong
Indonesia
Japan
Singapore
UAE
United States
Guernsey (operating in England)
Tullett Prebon Information Limited
The Link Asset and Securities Company Limited
ICAP Energy Limited
ICAP Europe Limited
ICAP Global Derivatives Limited
ICAP Information Services Limited
ICAP Management Services Limited
ICAP Securities Limited
ICAP WCLK Limited
iSwap Limited
Tullett Prebon (Europe) Limited
Tullett Prebon (Securities) Limited
PVM Oil Futures Limited
Coex Partners Limited
TP ICAP (Europe) S.A.
ICAP (Hong Kong) Limited
ICAP Securities Hong Kong Limited
Tullett Prebon (Hong Kong) Limited
PT. Inti Tullett Prebon Indonesia
Tullett Prebon (Japan) Limited
Tullett Prebon (Singapore) Limited
PVM Oil Associates Pte. Ltd.
TP ICAP (Dubai) Limited
ICAP Corporates LLC
ICAP Energy LLC
ICAP Information Services Inc.
ICAP Securities USA LLC
ICAP SEF (US) LLC1
Tullett Prebon Americas Corp.
Tullett Prebon Financial Services LLC
PVM Futures Inc
Coex Partners Inc
Tullett Prebon Information Inc
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50.1%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
57.52%
1
31 March year end due to operational reasons.
As at 31 December 2019, £18m (2018: £16m) is due to non-controlling interests relating to those subsidiaries that are not wholly owned.
Movements in non-controlling interests are set out in Note 30(c). No individual non-controlling interest is material to the Group. There
are no significant restrictions on the ability of the Group to access or use assets and settle liabilities relating to these subsidiaries.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
178
178
Financial Statements
Statement of Changes in Equity
for the year ended 31 December 2019
2019
Balance at 1 January 2019
Loss and total comprehensive income for the year
Dividends paid
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Credit arising on share-based awards
Balance at 31 December 2019
2018
Balance at 1 January 2018
Profit and total comprehensive income for the year
Issue of ordinary shares
Dividends paid
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Credit arising on share-based awards
Balance at 31 December 2018
Share
capital
£m
Share
premium
account
£m
141
–
–
–
–
–
141
139
–
2
–
–
–
–
141
17
–
–
–
–
–
17
17
–
–
–
–
–
–
17
Note 9
Merger
reserve
£m
1,262
–
–
–
–
–
1,262
1,256
–
6
–
–
–
–
1,262
Own
shares
£m
Profit and
loss account
£m
(11)
–
–
2
(7)
–
(16)
(10)
–
–
–
4
(5)
–
(11)
912
(9)
(94)
(3)
–
5
811
941
66
(2)
(94)
(4)
–
5
912
Total
equity
£m
2,321
(9)
(94)
(1)
(7)
5
2,215
2,343
66
6
(94)
–
(5)
5
2,321
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
178
Statement of Changes in Equity
for the year ended 31 December 2019
Notes to the Financial Statements
for the year ended 31 December 2019
Strategic report Governance report
Financial statements
179
179
Share
capital
£m
141
Share
premium
account
£m
17
Note 9
Merger
reserve
£m
1,262
Own
Profit and
shares
loss account
2019
Balance at 1 January 2019
Loss and total comprehensive income for the year
Dividends paid
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Credit arising on share-based awards
Balance at 31 December 2019
Profit and total comprehensive income for the year
2018
Balance at 1 January 2018
Issue of ordinary shares
Dividends paid
Share settlement of share-based payment awards
Own shares acquired for employee trusts
Credit arising on share-based awards
Balance at 31 December 2018
141
17
1,262
139
17
1,256
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
141
17
1,262
Total
equity
£m
2,321
(9)
(94)
(1)
(7)
5
2,215
2,343
66
6
(94)
–
(5)
5
2,321
£m
912
(9)
(94)
(3)
–
5
811
941
66
(2)
(94)
(4)
–
5
912
£m
(11)
–
–
2
(7)
–
(16)
(10)
–
–
–
4
(5)
–
(11)
1. Basis of preparation
The Company is a public company limited by shares and prepares its accounts in accordance with the requirements of FRS 101 ‘Reduced
Disclosure Framework’.
The separate Financial Statements of the Company are presented as required by the Companies Act. They have been prepared under
the historical cost convention, except for the revaluation of certain financial instruments held at fair values at the end of each reporting
period, as explained in the accounting policies and in accordance with applicable United Kingdom law and United Kingdom Generally
Accepted Accounting Practice. As discussed on page 33 of the Strategic report, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the going concern basis
continues to be used in preparing these Financial Statements.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation
to share-based payments, financial instruments, capital management, presentation of comparative information in respect of certain
assets, presentation of a cash flow statement, fair value measurements, reserve and certain related party transactions.
2. Significant accounting policies
The principal accounting policies adopted are the same as those set out in Note 3 to the Consolidated Financial Statements except as
noted below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. Estimation is required when
determining the realisable value of investment.
The Company has share-based payment arrangements involving employees of its subsidiaries. The cost of these arrangements is
measured by reference to the fair value of equity instruments on the date they are granted. Cost is recognised in ‘investment in
subsidiary undertakings’ and credited to the ‘profit and loss account’ reserve on a straight-line basis over the vesting period. Where
the cost is subsequently recharged to the subsidiary, it is recognised as a reduction in ‘investment in subsidiary undertakings’.
The Company is the sponsor of the TP ICAP plc Employee Benefit Trust and applies the ’look-through’ approach to the Trust’s assets,
liabilities and results which are included as part of the Company.
3. Profit for the year
As permitted in section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for
the year.
The auditor’s remuneration for audit and other services is disclosed in Note 5 to the Consolidated Financial Statements. The Company
has no employees (2018: nil). Information about individual Directors is provided in the audited part of the Report on Directors’
Remuneration on pages 87 to 93.
4. Investment in subsidiary undertakings
Cost
At 1 January
Capital contribution arising on share-based awards
Increase in investment in subsidiary undertaking
Transfer from immediate subsidiary undertaking
Transfer to immediate subsidiary undertaking
Impairment in subsidiary undertaking
At 31 December
2019
£m
2,681
5
419
384
(384)
(170)
2,935
2018
£m
2,595
5
81
595
(595)
–
2,681
Further information about subsidiaries, including disclosures about non-controlling interests, is provided in the ‘Group Undertakings’
section of this Annual Report on pages 184 to 191.
The investments in subsidiary undertakings are stated at cost less impairment.
Determining whether the carrying value of investments in subsidiaries is impaired requires an estimation of the recoverable amount
of each subsidiary. The recoverable amount is the higher of value in use (‘VIU’) or its net realisable value (‘NRV’). Value in use requires
estimation of future cash flows expected to arise, the selection of suitable discount rates and the estimation of future growth rates.
Future projections are based on the most recent projections considered by the Board which are used to project future pre-tax cash flows
for the next five years. After this period a steady state cash flow is used to derive a terminal value for each subsidiary. Net tangible
assets is used as a proxy for NRV.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
180
180
Financial Statements
Notes to the Financial Statements continued
for the year ended 31 December 2019
4. Investment in subsidiary undertakings continued
As at 31 December 2019, effective growth rate was 1.8% over a five year projected period, with effective pre tax discount rates of 12%.
During the year the carrying value of investments has been impaired by £170m. Further impairment would be required if there are
changes to applicable assumptions. A 1% increase in the discount rate would result in a further impairment of £130m and a reduction
of 0.5% in effective growth rates would increase the charge by £64m.
No deferred tax has been recognised on temporary differences associated with unremitted earnings as these are exempt from UK tax.
5. Trade and other receivables
Non-current receivables
Amounts owed by Group undertakings1
Current receivables
Amounts owed by Group undertakings2
Corporation tax
Prepayments and accrued income
1 Amounts receivable under loan notes.
2 Amounts receivable on demand.
6. Trade and other payables
Accruals and deferred income
Amounts due to Group undertakings1
Deferred consideration
1
Repayable on demand
7. Other long term payables
Deferred consideration
Amounts owed to Group undertakings
8. Interest bearing loans and borrowings
2019
Sterling Notes January 2024
Sterling Notes May 2026
2018
Bank loan
Sterling Notes June 2019
Sterling Notes January 2024
2019
£m
23
20
13
2
35
2019
£m
1
89
16
106
2019
£m
–
6
6
Less than
one year
£m
Greater than
one year
£m
10
1
11
52
80
12
144
430
248
678
–
–
498
498
2018
£m
343
5
16
2
23
2018
£m
2
62
10
74
2018
£m
13
–
13
Total
£m
440
249
689
52
80
510
642
Bank credit facilities and bank loans
In December 2019 the Company extended its £270m committed revolving facility, that would have matured in December 2021. The new
maturity of the facility is December 2022. Facility commitment fees of 0.8% on the undrawn balance are payable on the new facility,
reduced from 1.0% that were payable on the cancelled facility. Arrangement fees of £3m were incurred in 2018 and will be amortised
over the maturity of the new facility.
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
Annual Report and Accounts 2019
180
Notes to the Financial Statements continued
for the year ended 31 December 2019
4. Investment in subsidiary undertakings continued
As at 31 December 2019, effective growth rate was 1.8% over a five year projected period, with effective pre tax discount rates of 12%.
During the year the carrying value of investments has been impaired by £170m. Further impairment would be required if there are
changes to applicable assumptions. A 1% increase in the discount rate would result in a further impairment of £130m and a reduction
of 0.5% in effective growth rates would increase the charge by £64m.
No deferred tax has been recognised on temporary differences associated with unremitted earnings as these are exempt from UK tax.
5. Trade and other receivables
Non-current receivables
Amounts owed by Group undertakings1
Current receivables
Amounts owed by Group undertakings2
Corporation tax
Prepayments and accrued income
1 Amounts receivable under loan notes.
2 Amounts receivable on demand.
6. Trade and other payables
Accruals and deferred income
Amounts due to Group undertakings1
Deferred consideration
1
Repayable on demand
7. Other long term payables
Deferred consideration
Amounts owed to Group undertakings
8. Interest bearing loans and borrowings
2019
Sterling Notes January 2024
Sterling Notes May 2026
2018
Bank loan
Sterling Notes June 2019
Sterling Notes January 2024
2019
£m
23
20
13
2
35
2019
£m
1
89
16
106
2019
£m
–
6
6
£m
430
248
678
–
–
498
498
2018
£m
343
5
16
2
23
2018
£m
2
62
10
74
2018
£m
13
–
13
Total
£m
440
249
689
52
80
510
642
£m
10
1
11
52
80
12
144
Strategic report Governance report
Financial statements
181
181
As at 31 December 2019, the £270m revolving credit facility was undrawn. Amounts drawn down are reported as bank loans in the
above table. Bank loans are denominated in Sterling and their carrying amount approximated to their fair value.
Interest and facility fees of £3m were incurred in 2019.
Loans from related parties
In April 2019 the Group borrowed Yen 5bn (£35m) due 30 September 2019 from a related party. The loan had a coupon of 6 month
TIBOR + 2.25%. The loan was repaid in September 2019 resulting in a payment of £38m plus interest of less than £1m. The Group held
an associated foreign exchange derivative at FVTPL which resulted in a £3m inflow.
Sterling Notes: Due June 2019
In December 2012 £80m Sterling Notes, due June 2019, were issued. The Notes have a coupon of 5.25% paid semi-annually.
Sterling Notes: Due January 2024
In January 2017 the Group issued £500m unsecured Sterling Notes due January 2024. The Notes have a fixed coupon of 5.25% paid
semi-annually, subject to compliance with the terms of the Notes. In 2019 the Group repurchased Notes with a par value £69m for £72m
including accrued interest. At 31 December 2019 the fair value of the Notes (Level 1) was £475m.Accrued interest at 31 December 2019
amounted to £10m (2018: £10m). Issue costs of £3m were incurred in 2017.
Sterling Notes: Due May 2026
In May 2019 the Group issued £250m unsecured Sterling Notes due May 2026. The Notes have a fixed coupon of 5.25% paid semi-
annually, subject to compliance with the terms of the Notes. At 31 December 2019 the fair value of the Notes (Level 1) was £270m.
Accrued interest at 31 December 2019 amounted to £1m. Issue costs of £1m were incurred in 2019.
9. Share capital and reserves
Allotted, issued and fully paid
Ordinary shares of 25p
2019
No.
2018
No.
563,336,380
563,336,380
563,336,380
563,336,380
The movement in the number of shares during the year is shown in Note 29 to the Consolidated Financial Statements.
Allotted, issued and fully paid
Ordinary shares of 25p
2019
£m
141
2018
£m
141
Less than
Greater than
one year
one year
Descriptions of the merger reserve and own shares, together with the movements in those reserves, are disclosed in Note 30 to the
Consolidated Financial Statements.
On 26 March 2018 the Group issued 9,203,709 ordinary shares in settlement of deferred consideration and acquisition related share-
based payment obligations relating to the Group’s 2014 purchase of PVM Oil Associates Limited and its subsidiaries.
The distributable reserves of the Company at 31 December 2019 were £743m (2018: £849m), representing the balance on the Profit and
loss account, less cumulative unrealised credits in respect of share-based payment awards.
10. Contingent liabilities
In the normal course of business the Company enters into arrangements with certain of its undertakings to enable those entities to meet
their liabilities as and when they fall due. Such arrangements are for a period of no more than two years.
Bank credit facilities and bank loans
In December 2019 the Company extended its £270m committed revolving facility, that would have matured in December 2021. The new
maturity of the facility is December 2022. Facility commitment fees of 0.8% on the undrawn balance are payable on the new facility,
reduced from 1.0% that were payable on the cancelled facility. Arrangement fees of £3m were incurred in 2018 and will be amortised
over the maturity of the new facility.
TP ICAP Classification: Confidential
TP ICAP Classification: Confidential
TP ICAP Annual Report and Accounts 2019
www.tpicap.com
www.tpicap.com
182
Shareholder Information
Financial calendar
Preliminary Results – 10 March 2020
Ex-dividend date for final dividend – 2 April 2020
Record date for final dividend – 3 April 2020
Final date for Dividend Reinvestment Plan election – 27 April 2020
Annual General Meeting – Wednesday 13 May 2020 at 2.15pm
Final dividend payment date (if dividend approved at AGM) – 19 May 2020
Dividends
See page 1 for details on the dividend amount per share.
Dividend mandate
Shareholders who wish their dividends to be paid directly into a bank or building society account should register their mandate via the
shareholder portal at www.signalshares.com. You will need your investor code which can be found on your share certificate or dividend
confirmation. Alternatively, contact Link Asset Services for a dividend mandate form. This method of payment removes the risk of delay or
loss of dividend cheques in the post and ensures that shareholders’ accounts are credited on the dividend payment date. For future dividends,
the Company has in place a facility for payments to be made via CREST.
Dividend Reinvestment Plan (‘DRIP’)
The Company offers a DRIP, where your dividend can be reinvested in further TP ICAP plc shares through a specially arranged share dealing
service. For further information contact Link Asset Services, whose contact details are set out below.
Shareholder information on the internet
The Company maintains an investor relations page on its website, www.tpicap.com, which allows access to both current and historic share
price information, Directors’ biographies, copies of Company reports, selected press releases and other useful investor information.
Registrar
Link Asset Services act as the Company’s registrars. As such administrative queries regarding your shareholding (including notifying a change
of name or address, queries regarding dividend payments and the DRIP scheme, etc) are best directed to Link Asset Services who can be
contacted at:
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Email: enquiries@linkgroup.co.uk
Telephone: 0871 664 0300¹
From overseas¹: +44 (0) 371 64 0300
1 Calls cost 12p per minute plus your phone company’s access charge. From overseas +44 (0) 371 664 0300 calls outside the United Kingdom will be charged at the applicable
International rate. We are open 9.00am – 5.30pm, Monday to Friday excluding public holidays in England and Wales.
Many of our shareholders find that the easiest way to manage their shareholdings is online, using the free, simple and secure service provided
by the Company’s registrar, Link Asset Services. To access and maintain your shareholding online, please register at www.signalshares.com
Shareholder security
TP ICAP encourages all shareholders to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free company annual
reports. If you receive any unsolicited investment advice, whether over the telephone, through the post or by email, you should;
> Make sure you note the name of the organisation and, if possible, the name of the individual contacting you.
> Check they are properly authorised by the FCA by visiting https://register.fca.org.uk/ and www.fca.org.uk/consumers/report-scam-
unauthorised-firm.
Any details of share dealing facilities that TP ICAP endorses will be included in the Company’s mailings.
Annual Report and Accounts 2019 183
Auditor
Deloitte LLP
Chartered Accountants and Statutory Auditor
1 New Street Square
London EC4A 3HQ
United Kingdom
www.deloitte.com
Registered office
TP ICAP plc
Floor 2, 155 Bishopsgate
London EC2M 3TQ
United Kingdom
Telephone: +44 (0)20 7200 7000
Website: www.tpicap.com
TP ICAP plc is a company incorporated and registered in England and Wales with number 5807599.
www.tpicap.com 184
Group undertakings
In accordance with section 409 of the Companies Act 2006, a full list of related undertakings, the country of incorporation, and the effective
percentage of equity owned as at 31 December 2019 are listed below. Unless otherwise stated, the undertakings below are wholly owned
and the share capital disclosed comprises ordinary shares or common stock (or the local equivalent thereof) which are indirectly held by
TP ICAP plc.
Interest
Footnote Registered office address
Company name
ICAP Australia Pty Ltd
Country of incorporation
Australia
ICAP Brokers Pty Limited
Australia
ICAP Futures (Australia) Pty Ltd
Australia
Tullett Prebon (Australia) Pty Limited
Australia
PVM Data Services GmbH
ICAP (Middle East) W.L.L.
Marshalls (Bahrain) W.L.L.
Austria
Bahrain
Bahrain
Tullett Liberty (Bahrain) Co. W.L.L.
Bahrain
PVM Oil Associates Ltd
ICAP do Brasil Corretora de Títulos
e Valores Mobiliários Ltda
Bermuda
Brazil
ICAP do Brasil Participações Ltda
Brazil
49%
70%
85%
Tullett Prebon Brasil Corretora de
Valores e Câmbio Ltda.
Tullett Prebon Holdings Do Brasil Ltda.
Brazil
Brazil
Catrex Limited
British Virgin Islands
Vantage Capital Holdings Limited
British Virgin Islands
PVM Oil Associates Canada Ltd
Canada
Tullett Prebon Americas Corp.,
Toronto Branch
Tullett Prebon Canada Limited
SIF ICAP Chile Holdings Ltda
SIF ICAP Chile SpA
Enmore Commodity Brokers
(Shanghai) Co. Ltd.
ICAP Shipping (Shanghai) Co,. Ltd.
Canada
Canada
Chile
Chile
China
China
2
50%
40%
49%
Prebon Yamane International Limited,
Shanghai Representative Office
Tullett Prebon SITICO (China) Limited
ICAP Colombia Holdings S.A.S.
SET-ICAP FX S.A.
Operating in China
China
Colombia
Colombia
33%
16
94.2%
47.9%
Level 27, 9 Castlereagh Street, Sydney, New South
Wales, 2000, Australia
Level 27, 9 Castlereagh Street, Sydney, New South
Wales, 2000, Australia
Level 27, 9 Castlereagh Street, Sydney, New South
Wales, 2000, Australia
Level 29, 9 Castlereagh Street, Sydney NSW 2000,
Australia
Euro Plaza–Building G, Am Euro Platz 2, 1120
Vienna, Austria
PO Box 5488, 43rd Floor, 4301, West Tower, Bahrain
Financial Harbour, Bahrain
P.O. Box 5482, Manama Centre, 104/105
Government Road, Manama 316, Bahrain
PO Box 20526, Flat No.31, Building 104, Manama
Centre, Entrance 4, 3rd Floor, Govt Avenue 383,
Manama 316, Bahrain
Cumberland House, 9th Floor, 1 Victoria Street,
Hamilton, HM11, Bermuda
Avenida das Américas, 3.500, Ed. Londres, 2º andar,
Barra da Tijuca, Rio de Janeiro-RJ, CEP 22640-102–
Brasil
Avenida das Américas, 3.500, Ed. Londres, 2º andar,
Barra da Tijuca, Rio de Janeiro-RJ, CEP 22640-102–
Brasil
Rua São Tomé, 86, 21º andar, Vila Olímpia, São
Paulo-SP, CEP 04551-030–Brasil
Rua São Tomé, 86, 21º andar, Vila Olímpia, São
Paulo-SP, CEP 04551-030–Brasil
Vistra Corporate Services Centre, Wickhams Cay II,
Road Town, Tortola, VG1110, British Virgin Islands
Portcullis Chambers, 4th Floor, Ellen Skelton
Building, 3076 Sir Francis Drake Highway, Road
Town, Tortola, British Virgin Islands
400 3rd Avenue SW, Suite 3700, Calgary, AB T2P
4H2, Canada
1 Toronto Street, Suite 301, PO Box 20, Toronto,
Ontario, M5C 2V6, Canada
1 Toronto Street, Suite 301, PO Box 20, Toronto,
Ontario, M5C 2V6, Canada
Avenida Andres Bello 2711, Piso 8, Santiago, Chile
Avenida Andres Bello 2711, Piso 8, Santiago, Chile
Room 720, Building 3, No. 999 Jinzhong Road,
Changning District, Shanghai, China
Unit 2547, 25/F One Prime, 1361 North Sichuan
Road, Hongkou District, Shanghai, China
Room 1002, DBS Tower, No.1318, Lujiazui Ring Road,
Shanghai, 200120, China
Room 1002, DBS Tower, No.1318, Lujiazui Ring Road,
Shanghai, 200120, China
Carrera 13 No. 97-76–Office 501, Bogota, Colombia
Carrera 11 No. 93-46–Oficina 403, Bogotá,
Colombia
Annual Report and Accounts 2019 185
Footnote Registered office address
Company name
SET-ICAP Securities S.A.
Country of incorporation
Colombia
Interest
47.4%
TP ICAP (Europe) S.A., Danish Branch
Operating in Denmark
ICAP del Ecuador S.A.
TP ICAP (Europe) SA
Ecuador
France
Tullett Prebon (Europe) Limited,
Paris Branch
Astley & Pearce Deutschland GmbH
ICAP Ltd. & Co. oHG
Operating in France
Germany
Germany
ICAP Securities Limited, Frankfurt
Branch
Intermoney AP & Co. Geld-und
Eurodepotmakler OHG
TP ICAP (Europe) S.A., Frankfurt Branch Operating in Germany
Operating in Germany
Germany
Tullett Prebon (Securities) Limited,
Frankfurt Branch
ICAP US Holdings No 1 Limited
ICAP US Holdings No 2 Limited
Tullett Prebon Information Limited
ICAP (Hong Kong) Limited
Operating in Germany
Gibraltar
Gibraltar
Guernsey, Operating in
UK
Hong Kong
ICAP Securities Hong Kong Limited
Hong Kong
TP ICAP Management Services (Hong
Kong) Limited
Tullett Prebon (Hong Kong) Limited
Hong Kong
Hong Kong
Tullett Prebon Asia Group Limited
Hong Kong
75%
2
15
ICAP IL India Private Limited
India
40%
11
P.T. Inti Tullett Prebon Indonesia
Indonesia
57.52%
PT ICAP Indonesia
Indonesia
99%
1
Central Totan Securities Co. Ltd
ICAP Totan Securities Co., Ltd.
Totan ICAP Co., Ltd.
Japan
Japan
Japan
tpSEF Inc., Tokyo Branch
Operating in Japan
Tullett Prebon (Japan) Limited
Tullett Prebon ETP (Japan) Ltd
Japan
Japan
M.W. Marshall (Overseas) Limited
Prebon Marshall Yamane (C.I.) Limited
Jersey
Jersey
20%
60%
40%
80%
80%
Carrera 11 No. 93-46–Oficina 403, Bogotá,
Colombia
Rentemestervej 14, Copenhagen NV, DK-2400,
Denmark
Eloy Alfaro 2515 y Catalina Aldáz, Quito, Ecuador
89/91 rue de faubourg, Saint Honore, 75008 Paris,
France
89/91 rue de faubourg, Saint Honore, 75008 Paris,
France
Stephanstrasse 14-16, 60313 Frankfurt am Main,
Germany
Stephanstrasse 14-16, 60313 Frankfurt am Main,
Germany
Stephanstrasse 14-16, 60313 Frankfurt am Main,
Germany
Stephanstrasse 3, 60313 Frankfurt am Main,
Germany
Stephanstrasse 14-16, 60313 Frankfurt am Main,
Germany
Bleidenstraße 6-10, 60311 Frankfurt am Main,
Germany
Suite 1, Burns House, 19 Town Range, Gibraltar
Suite 1, Burns House, 19 Town Range, Gibraltar
Third floor, Cambridge House, Le Truchot,
St Peter Port, GY1 1WD, Guernsey
21/F, One Hennessy, No. 1 Hennessy Road, Wan
Chai, Hong Kong
21/F, One Hennessy, No. 1 Hennessy Road, Wan
Chai, Hong Kong
21/F, One Hennessy, No. 1 Hennessy Road, Wan
Chai, Hong Kong
21/F, One Hennessy, No. 1 Hennessy Road, Wan
Chai, Hong Kong
21/F, One Hennessy, No. 1 Hennessy Road, Wan
Chai, Hong Kong
Office No. 6, 3rd Floor, C Wing, Laxmi Towers,
Bandra Kurla Complex, Bandra (E), Mumbai,
400051, Maharashtra, India
Menara Dea, Tower 2, 12th floor–Suite 1202, Mega
Kuningan area, Jalan Mega Kuningan Barat Kav.
E4.3 No. 1-2, Jakarta 12950
Menara Dea Tower II 12th Floor, Kawasan Mega
Kuningan, Jl. Mega Kuningan Barat Kav. E4.3,
Jakarta 12950, Indonesia
4-4-10, Nihonbashi Muromachi, Chuo-ku, Tokyo
103-0022 Japan
4-4-10, Nihonbashi Muromachi, Chuo-ku, Tokyo
103-0022 Japan
7th Floor, Totan Muromachi Building, 4-4-10 Nihonbashi
Muromachi, Chuo-ku, Tokyo, 103-0022, Japan
Akasaka Tameike Tower 4th Floor, 2-17-7 Akasaka
Minato-ku, Tokyo 107-0052, Japan
Akasaka Tameike Tower 4th Floor, 2-17-7 Akasaka
Minato-ku, Tokyo 107-0052, Japan
Akasaka Tameike Tower 4th Floor, 2-17-7 Akasaka
Minato-ku, Tokyo 107-0052, Japan
Level 1, IFC 1 Esplanade, St Helier, JE2 3BX, Jersey
Level 1, IFC 1 Esplanade, St Helier, JE2 3BX, Jersey
www.tpicap.com Interest
Footnote Registered office address
186
Group undertakings continued
32.1%
50%
50%
50%
50%
50%
50%
2
2
12
13
14
Company name
Tullett Prebon Money Brokerage
(Korea) Limited
ICAP Luxembourg Holdings (No. 1)
S.A.R.L
ICAP Luxembourg Holdings (No. 2)
S.A.R.L
ICAP US Holdings No 2 Limited,
Luxembourg Branch
Amanah Butler Malaysia Sdn Bhd
Country of incorporation
Korea, Republic of
Luxembourg
Luxembourg
Operating in
Luxembourg
Malaysia
ICAP Bio Organic S. de RL de CV
Mexico
Plataforma Mexicana de Carbono S. de
R.L. de C.V.
SIF Agro S.A. De C.V.
Mexico
Mexico
SIF ICAP Derivados, S.A. DE C.V.
Mexico
SIF ICAP Servicios, S.A. de C.V.
SIF ICAP, S.A. de C.V.
Mexico
Mexico
Tullett Prebon Mexico SA de CV
Mexico
Astley & Pearce (International) B.V.
Netherlands
Astley & Pearce B.V.
Netherlands
ICAP Energy AS, Netherlands Branch
ICAP Energy Limited, Netherlands
Branch
ICAP Holdings (Nederland) B.V.
Operating in The
Netherlands
Operating in The
Netherlands
Netherlands
ICAP Investments (Nederland) B.V.
Netherlands
ICAP Latin American Holdings B.V.
Netherlands
ICAP Securities (No. 1) B.V.
Netherlands
ICAP Securities (No. 2) B.V.
Netherlands
iSwap Euro B.V.
Netherlands
50.1%
Prebon Holdings B.V.
Netherlands
TP ICAP (Europe) S.A., Netherlands
Branch
Tullett Liberty B.V.
Operating in The
Netherlands
Netherlands
ICAP New Zealand Limited
New Zealand
ICAP African Brokers Limited
Nigeria
66.3%
ICAP Energy AS
Norway
6th Floor, Booyoung Eulji Building, 29 Eulji-ro, Joong-
gu, Seoul, Korea
17 Boulevard du Prince Henri, L-1724 Luxembourg,
Luxembourg
17 Boulevard du Prince Henri, L-1724 Luxembourg,
Luxembourg
17 Boulevard du Prince Henri, L-1724 Luxembourg,
Luxembourg
802, 8th Floor, Block C, Kelana Square, 17 Jalan
SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan,
Malaysia
Paseo de la Reforma No 255, Piso 7, Colonia
Cuauhtemoc, 06500 D F Mexico, Mexico
Paseo de la Reforma No 255, Piso 7, Colonia
Cuauhtemoc, 06500 D F Mexico, Mexico
Paseo de la Reforma No 255, Piso 7, Colonia
Cuauhtemoc, 06500 D F Mexico, Mexico
Paseo de la Reforma No 255, Piso 7, Colonia
Cuauhtemoc, 06500 D F Mexico, Mexico
Paseo de la Reforma No 255, Piso 7, Colonia
Cuauhtemoc, 06500 D F Mexico, Mexico
Paseo de la Reforma No 255, Piso 7, Colonia
Cuauhtemoc, 06500 D F Mexico, Mexico
Av. de Vasco de Quiroga 1900, Piso 4, Oficina 403,
Colonia Centro Ciudad Santa Fe, Delegación Álvaro
Obregón, C.P. 01210, México
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Vijzelstraat 68, office 109, 1017HL Amsterdam, the
Netherlands
Vijzelstraat 68, office 109, 1017HL Amsterdam, the
Netherlands
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Coengebouw–Suite 8.02, Kabelweg 37, Amsterdam,
1014 BA, Netherlands
Vijzelstraat 68, office 109, 1017HL Amsterdam, the
Netherlands
Telestone 8–Teleport, Naritaweg 165, 1043 BW,
Amsterdam, Netherlands
Vijzelstraat 68, office 109, 1017HL Amsterdam, the
Netherlands
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Level 12, 36 Customhouse Quay, Wellington, 6000,
New Zealand
Plot 1679, 4th Floor, African Re-Insurance Building,
Karimu Kotun Street, Victoria Island, Lagos State,
Nigeria
Storetveitvegen 96, 5072 Bergen, Norway
Annual Report and Accounts 2019 187
Interest
Footnote Registered office address
Company name
ICAP Energy Limited, Norway Branch
TP ICAP (Europe) S.A., Norway Branch
Datos Técnicos, S.A.
ICAP Management Services Limited,
Philippine Branch
Country of incorporation
Operating in Norway
Operating in Norway
Peru
Operating in
Philippines
25%
ICAP Philippines Inc.
Philippines
99.90% 3
Tullett Prebon (Philippines) Inc.
Philippines
51%
Tullett Prebon (Polska) S.A.
ICAP (Singapore) Pte. Ltd.
Poland
Singapore
1
ICAP Energy (Singapore) Pte Ltd
Singapore
Noranda Investments Pte Ltd
Singapore
PVM Oil Associates Pte. Ltd
Singapore
PVM Oil Futures Pte. Ltd
Singapore
TP ICAP Holdings (Singapore) Pte. Ltd
Singapore
TP ICAP Management Services
(Singapore) Pte. Ltd
Tullett Prebon (Singapore) Limited
Tullett Prebon Energy (Singapore) Pte.
Ltd.
Garban South Africa (Pty) Limited
Singapore
Singapore
Singapore
South Africa
South Africa
ICAP Broking Services South Africa (Pty)
Ltd
ICAP Holdings South Africa (Pty)
Limited
ICAP Securities South Africa
(Proprietary) Limited
Tullett Prebon South Africa (Pty) Limited South Africa
South Africa
South Africa
66.3%
66.3%
66.3%
66.3%
Corretaje e Informacion Monetaria y de
Divisas SA
ICAP Energy AS, Spain Branch
Spain
21.5% 4
Operating in Spain
ICAP Energy Limited, Spain Branch
Operating in Spain
TP ICAP (Europe) S.A., Madrid Branch
Operating in Spain
Tullett Prebon (Europe) Limited, Spanish
Branch
Cosmorex AG
ICAP Energy Suisse S.A.
Tullett Prebon (Securities) Limited,
Geneva Branch
ICAP Securities Co., Ltd.
Operating in Spain
Switzerland
Switzerland
Operating in
Switzerland
Thailand
1
Storetveitvegen 96, 5072 Bergen, Norway
Storetveitvegen 96, 5072 Bergen, Norway
Pasaje Acuña 106–Lima, Peru
14th Floor, RCBC Savings Bank Corporate Centre,
26th and 25th Streets, Bonifacio South, Bonifacio
Global City, Taguig City, 1634, Philippines
14th Floor, RCBC Savings Bank Corporate Centre,
26th and 25th Streets, Bonifacio South, Bonifacio
Global City, Taguig City, 1634, Philippines
14th Floor, RCBC Savings Bank Corporate Centre,
26th and 25th Streets, Bonifacio South, Bonifacio
Global City, Taguig City, 1634, Philippines
00-684 Warszawa, ul. Wspólna 47/49, Poland
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #39-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #39-00, Singapore Land Tower,
048623, Singapore
50 Raffles Place, #41-00, Singapore Land Tower,
048623, Singapore
19 Impala Road, Block A GF, Chislehurston, Sandton,
2196, South Africa
19 Impala Road, Block A GF, Chislehurston, Sandton,
2196, South Africa
19 Impala Road, Block A GF, Chislehurston, Sandton,
2196, South Africa
19 Impala Road, Block A GF, Chislehurston, Sandton,
2196, South Africa
3rd Floor, Fredman Towers, 13 Fredman Drive,
Sandton 2196, Gauteng, South Africa
Torre Picasso, Pza Pablo Ruiz Picasso, s/n-Plantas 22
y 23, 28020 Madrid, Spain
Avenida de la Vega 1, Edificio, Planta 3, Office 15,
Madrid, 28108 Alcobendas, Spain
Avenida de la Vega 1, Edificio, Planta 3, Office 15,
Madrid, 28108 Alcobendas, Spain
Paseo de la Castellana, edificio Torre Europa Pl 10B,
28046 Madrid, Spain
Torre Europa, Paseo de la Castellana 95, planta 10,
28046 Madrid, Spain
Zürcherstrasse 66, 8800 Thalwil, Switzerland
Lavaterstrasse 40, C/o Pannell Ker Forster AG, 8002
Zurich, Switzerland
route de Pré-Bois 29, World Trade Center II, 1215
Genève 15 cases, Switzerland
No. 55 Wave Place Building, 13th Floor, Wireless
Road, Khwaeng Lumpini, Khet Patumwan, Bangkok,
10330, Thailand
www.tpicap.com 188
Group undertakings continued
Company name
ICAP-AP (Thailand) Co., Ltd.
Country of incorporation
Thailand
Interest
Footnote Registered office address
Nextgen Holding Co., Ltd.
Thailand
99.96% 8
Altex-ATS Limited
Automated Confirmation Service
Limited
ClearCompress Limited
Cleverpride Limited
Coex Partners Limited
Emsurge Limited
Exco Bierbaum AP Limited
Exco International Limited
Exco Nominees Limited
Exco Overseas Limited
Garban Group Holdings Limited
Garban International
Garban-Intercapital (2001) Limited
Garban-Intercapital US Investments
(Holdings) Limited
Garban-Intercapital US Investments (No
1) Limited
Glia Ecosystems Limited
Harlow (London) Limited
ICAP America Investments Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
75.75%
5
20%
20%
ICAP Corporates LLC, UK Branch
Operating in UK
ICAP Energy Limited
ICAP Europe Limited
UK
UK
ICAP Global Broking Finance Limited
UK
ICAP Global Broking Holdings Limited
UK
5
ICAP Global Broking Investments
ICAP Global Derivatives Limited
ICAP Holdings (Asia Pacific) Limited
UK
UK
UK
No. 55 Wave Place Building, 13th Floor, Wireless
Road, Khwaeng Lumpini, Khet Patumwan, Bangkok,
10330, Thailand
No. 55 Wave Place Building, 13th Floor, Wireless
Road, Khwaeng Lumpini, Khet Patumwan, Bangkok,
10330, Thailand
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
ISIS Building, Marsh Wall, London, E14 9SG, England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
1 Garrick Close, Hersham, Walton-On-Thames,
United Kingdom, KT12 5NY
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
4 Claridge Court, Lower Kings Road, Berkhamsted,
Hertfordshire, England, HP4 2AF
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Annual Report and Accounts 2019 189
Interest
Footnote Registered office address
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
1 The Lockers, Bury Hill, Hemel Hempstead,
England, HP1 1SR
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
50.1%
50.1%
50.1% 9
85%
3, 4
50%
3
50%
17
Company name
ICAP Holdings (EMEA) Limited
Country of incorporation
UK
ICAP Holdings (Latin America) Limited UK
ICAP Holdings (UK) Limited
ICAP Holdings Limited
ICAP Information Services Limited
ICAP Management Services Limited
ICAP Securities Limited
UK
UK
UK
UK
UK
ICAP Securities USA LLC, UK Branch
Operating in UK
ICAP UK Investments No. 1
ICAP UK Investments No. 2
UK
UK
ICAP US Holdings No 1 Limited, UK
Branch
ICAP US Holdings No 2 Limited, UK
Branch
ICAP WCLK Limited
iSwap Euro Limited
Operating in UK
Operating in UK
UK
UK
iSwap Euro B.V., UK Branch
Operating in UK
iSwap Limited
LiquidityChain Limited
Patshare Limited
Prebon Group Limited
Prebon Limited
UK
UK
UK
UK
UK
Prebon Yamane International Limited
UK
PVM Oil Futures Limited
PVM Smart Learning Limited
The Link Asset and Securities Company
Limited
TP Holdings Limited
UK
UK
UK
UK
TP ICAP (Europe) S.A., UK Branch
Operating in UK
TP ICAP Group Services Limited
Tullett Liberty (European Holdings)
Limited
Tullett Liberty (Futures Holdings)
Limited
UK
UK
UK
www.tpicap.com 190
Group undertakings continued
Interest
Footnote Registered office address
Company name
Tullett Prebon (Equities) Limited
Country of incorporation
UK
Tullett Prebon (Europe) Limited
Tullett Prebon (No. 3) Limited
Tullett Prebon (Securities) Limited
Tullett Prebon (UK) Limited.
UK
UK
UK
UK
Tullett Prebon Administration Limited
UK
Tullett Prebon Group Holdings plc
Tullett Prebon Information Limited
Tullett Prebon Investment Holdings
Limited
Tullett Prebon Latin America Holdings
Limited
Tullett Prebon Pension Trustee Limited
UK
UK
UK
UK
UK
PVM Oil Associates Ltd, UK Branch
Operating in UK
Zodiac Seven Limited
UK
41.3%
TP ICAP (Dubai) Limited
United Arab Emirates
Atlas Commodity Markets, LLC
Atlas Physical Grains, LLC
Axiom Refined Products LLC
Coex Partners Inc.
Exco Noonan Pension LLC
First Brokers Securities LLC
ICAP Broking Holdings North America
LLC
ICAP Corporates LLC
ICAP Energy LLC
ICAP Futures Holdings Inc.
ICAP Global Broking Inc.
ICAP Information Services Inc.
ICAP Media LLC
ICAP Merger Company LLC
ICAP North America Inc.
US
US
US
US
US
US
US
US
US
US
US
US
US
US
US
40%
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
Floor 2, 155 Bishopsgate, London, EC2M 3TQ,
England
71-75 Shelton Street, Covent Garden, London,
WC2H 9JQ
Unit 107 & 108, Level 1, Gate Village Building 1,
DIFC, PO Box 506787, Dubai, UAE
Two Greenway Plaza, Suite 600, Houston, TX
77046, United States
Two Greenway Plaza, Suite 600, Houston, TX
77046, United States
Two Greenway Plaza, Suite 600, Houston, TX
77046, United States
1209 Orange Street, Wilmington, Delaware, 19801,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
1209 Orange Street, Wilmington, Delaware, 19801,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
9931 Corporate Campus Drive, Suite 2400,
Louisville, Kentucky, 40223, United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
80 State Street, Albany NY 12207, United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
5
6
6
6
6
10
6
6
6
6
Annual Report and Accounts 2019 191
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
80 State Street, Albany, NY 12207, United States
Princeton South Corporate Center, Suite 160, 100
Charles Ewing Blvd, Ewing, New Jersey, 08628,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
Two Greenway Plaza, Suite 600, Houston, TX
77046, United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
80 State Street, Albany, NY 12207, United States
80 State Street, Albany, NY 12207, United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
251 Little Falls Drive, Wilmington, Delaware, 19808,
United States
Company name
ICAP Securities USA LLC
Country of incorporation
US
Interest
Footnote Registered office address
6
ICAP SEF (US) LLC
ICAP Services North America LLC
ICAP Spot USA LLC
ICAP United Inc.
ICAP US Financial Services LLC
iSwap US Inc.
M.W. Marshall Inc.
PVM Futures Inc.
PVM Oil Associates Inc.
PVM Petroleum Markets LLC
Revelation Holdings, Inc.
SCS Energy Corp.
SCS OTC Corp.
TP ICAP Americas Holdings Inc.
tpSEF Inc.
Tullett Prebon Americas Corp.
Tullett Prebon Financial Services LLC
Tullett Prebon Information Inc.
Wrightson ICAP LLC
US
US
US
US
US
US
US
US
US
US
US
US
US
US
US
US
US
US
US
50.1%
6
6
6
7
6
18
6
6
In liquidation/dissolution
Footnotes
1
2 Partnership interest
3 A ordinary shares
4 B ordinary shares
5 Directly held
6 Membership interest
7 Class A common shares, class B common shares and series B preferred shares
8 Class B ordinary
9 Voting, CM, DM and Deferred shares
10 Class B units
11 Non-cumulative non-convertible redeemable preference shares (100%) and ordinary shares (40%)
12 Series I ordinary shares and series II ordinary shares
13 Series IB shares
14 Class I Shares and Class II Shares
15 Ordinary shares & Redeemable Preference shares
16 Group B ordinary shares
17 Dissolved after 31 December 2019
18 Class A, Class B and Class C common shares
www.tpicap.com 192
Glossary
Act
The Companies Act 2006
AGM
Annual General Meeting
API
Applications Programme Interface
Board
The Board of Directors of TP ICAP plc
BRC
Board Risk Committee
ERMF
Enterprise Risk Management Framework
NEX
Nex Group plc
EU
European Union
FCA
Financial Conduct Authority
FRC
Financial Reporting Council
FX
Foreign Exchange Currency
OTC
Over the Counter
OTF
Organised Trading Facility
PBT
Profit before Tax
Pillar 1
Minimum capital requirements under CRD IV
CAGR
Compound Annual Growth Rate
Governance Manual
TP ICAP plc Group Governance Manual
Pillar 3
Disclosure requirements under CRD IV
CAPM
Capital Asset Pricing Model
GEC
Group Executive Committee of TP ICAP plc
PVM
PVM Oil Associates Ltd and its subsidiaries
CCP
Central counterparty house clearing
GRCCC
Group Risk Culture and Conduct Committee
RCF
Revolving Credit Facility
CGU
Cash-Generating Unit
CLOB
Central Limit Order Books
Group
TP ICAP plc and all of its subsidiaries
RCSA
Risk Control Self Assessment
HMRC
Her Majesty’s Revenue & Customs
Code
The UK Corporate Governance Code 2018
HR
Human Resources
COEX
Coex Partners Limited and its subsidiaries
IAS
International Accounting Standards
s/172
Section 172 of the Companies Act 2006
Company
TP ICAP plc
COO
Chief Operating Officer
CRD IV
Capital Requirements Directive
CREST
Certificateless Registry for Electronic
Share Transfer
Deloitte
Deloitte LLP
DRIP
Dividend Reinvestment Plan
EBITDA
Earnings before interest, tax, depreciation
and amortisation
EDC
Executive Director Committee
EMEA
Europe, Middle East and Africa
EPS
Earnings per Share
ICAP
ICAP Global Broking and Information
Business, acquired by TP ICAP plc on
30 December 2016
IFRS
International Financial Reporting Standard
ISDA
International Swaps and
Derivatives Association
KPI
Key Performance Indicator
LTIP
Long Term Incentive Plan
LTIS
Long Term Incentive Scheme
SEF
Swap Execution Facility
TP
Tullett Prebon PLC
Changed its name to TP ICAP plc on
28 December 2016
TPI
Tullett Prebon Information
TP ICAP plc
Changed its name from Tullett Prebon plc
on 28 December 2016
TSR
Total Shareholder Return
UK
United Kingdom
MiFID II
Markets in Financial Instruments Directive
US/USA
United States of America
MOAB
Moab Oil Inc.
MTF
Multilateral Trading Facility
NDF
Non-Deliverable Forwards
USD/US$
US Dollars
VAT
Value Added Tax
VIU
Value in use
RFQ
Request for Quotes
RoE
Return on Equity
Annual Report and Accounts 2019 Consultancy, design and production
www.luminous.co.uk
Design and production
www.luminous.co.uk
TP ICAP plc
Floor 2
155 Bishopsgate
London
EC2M 3TQ
United Kingdom
www.tpicap.com
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