Interdealer broker ICAP ticked up in early morning deals after FTSE 100-listed company reported a solid set of results for the first half of fiscal 2010 that largely topped market expectations and further reassured investors by raising its interim dividend.
ICAP reported a 6% year-on-year increase in revenues before the impact of foreign exchange movements to £809 million, leading to 2% growth in earnings per shares to 17.5p and pretax profits down 5% to £166 million. The group increased its dividend by 9%, which was ahead of many analysts’ forecasts, to 5.11p per share and revealed itself to be remain highly cash generative, with free cash flow up 43% to £107 million.
Panmure Gordon analyst Vivek Raja described the results as “strong” this morning and noted that the company’s outlook is positive, with both Electronic broking and Post trade services expected to be beneficiaries of likely market reforms. ICAP management today indicated that full-year numbers are on track to meet current market forecasts. Raja is looking for pretax profit over the year of £334 million and following this morning’s announcement Panmure Gordon repeated its Buy recommendation.
“Having recently upgraded to Buy, we believe recent share price weakness presents an attractive entry point and take no meaningful negative readacross from Tullett’s [Prebon] recent trading statement,” Raja wrote in a research note to clients.
At Daniel Stewart, analysts Justin Bates and Tom Mills were also pleased with the group’s “solid performance” but said they needed to see further strength if they are to consider raising forecast. “We maintain our forecasts and [430p] target price for the time being, requiring proof of increased trading activity, particularly in electronic markets, before we entertain increasing expectations,” they said.
Daniel Stewart has a Hold stance on the ICAP stock, as does Shore Capital, though the latter’s price target is a tad lower at 424p per share.
Shore’s analyst Eamonn Flanagan commented that the company has succeeded in sustaining its core business during turbulent market conditions. “With a diversified revenue base and strong electronic infrastructure, it is well positioned to benefit as more normal trading conditions return,” Flanagan wrote.
