TP ICAP Group PLC’s shares fell on Tuesday after the company reported a sharp decline in profit for 2021 on higher costs from significant items and ‘unusually quiet secondary markets’, particularly in the first half of last year.

Shares were down 14% at 113.00 pence each on Tuesday midday in London.

The London-based financial services firm’s 2021 pretax profit fell 81% to £24 million from £129 million in 2020.

TP ICAP blamed this on higher costs from significant items. These describe costs related to restructuring, disposals, legal & regulatory matters, financing, acquisitions and investment in new business.

Total significant item costs amounted to £153 million, up 65% from £93 million the year before. The company noted that significant items for this year are expected to be around £125 million, down 22% from 2021. The costs are expected to shrink even further in 2023.

More positively, The FTSE 250 firm achieved revenue growth of 4.5% to £1.87 billion from £1.79 billion the year before. This was in line with its guidance of being broadly in line with 2020.

The company credited this to a pick-up in volumes in the second half, after ‘muted’ market activities throughout the first six months. This was partly driven by rising energy prices and the re-emergence of inflation in the final quarter, it said.

TP ICAP recommended a final dividend of 5.5 pence, bringing the total full-year dividend to 9.5p, up 58% from its total payout of 6.0p, year-on-year.

The financial services firm said that the market environment to date has driven more volume compared to the same period a year before.

‘Like other market operators, we are typically a beneficiary of volatility, and the past few weeks have been characterised by high levels of uncertainty. However, predicting future market activity is difficult. We would also note that periods of extreme volatility, such as has been witnessed in recent weeks, can have complex second-order effects on market participant behaviour and activity drivers, such as risk-taking appetite, and liquidity capacity,’ TP ICAP stated.

Looking ahead, TP ICAP expects incremental cost savings - cost savings over time - of £25 million for this year. It anticipates that these will be hurt by additional Brexit costs, realised and unrealised losses from sanctioned Russian clients of £14 million, as well as inflationary increases. TP ICAP is targeting costs savings of 38 million from this year to 2024.

‘Our performance naturally reflects the unusually quiet secondary markets that we experienced in 2021, particularly in the first half of the year. However, as market conditions started to improve in the second half, TP ICAP recovered most of the ground and grew overall market share. We continued to deliver double-digit revenue growth in Data & Analytics,’ Chief Executive Nicolas Breteau said.

‘Market volatility has continued at more elevated levels in 2022, with the return of inflation and geopolitical uncertainty driving higher volumes across many of our markets. Our revenue in the year to date until March 11 was approximately 16% higher than the corresponding period in 2021, in constant currency, or 4% higher excluding Liquidnet. While it is too early to judge whether this activity will be sustained, we believe the results of our many actions will show through in improved performance across the group in 2022 and beyond.’

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