LONDON -- The shares of ICAP (LSE:IAP) dived 22 pence, or 7%, to 301 pence during early London trade this morning after the interdealer broker admitted current-year profits would slump 21%.
The FTSE 250 company said pre-tax profits for the 12 months to March 2013 would be around 280 million pounds, and some 74 million pounds lower than that recorded during the previous year.
Today's forecast came in at the lower end of the 280 million-to-305 million-pound profit guidance Icap suggested just last month. Icap claimed the increased activity levels it had experience during January and February had not continued at the same rate into March.
The firm added that its revenues would be 13% down on the year and that operational cutbacks were still on track to deliver annualized savings of 60 million pounds.
Michael Spencer, the chief executive of ICAP, said:
While we had a better start to the fourth quarter, we are not yet seeing a sustained upturn with market activity remaining fragile and unpredictable. This is caused, in part, by the continued lack of clarity around new regulatory requirements and the impact they may have.
Our cost savings programme has delivered as we had forecast. ICAP today is a more efficient organisation than a year ago. We also continue to invest in new platforms, products and services which I believe will drive our growth over the next two years.
Sadly Spencer did not mention anything about ICAP's dividend, which was lifted 10% at the half-year stage and currently runs at 22.6 pence per share. This morning's price dive therefore offers investors a potential 7.5% income.
Based on earlier company guidance that indicated a 28% tax rate, today's 280 million-pound profit forecast suggests earnings could be around 31 pence per share and cover the existing dividend by 1.37 times.
ICAP's dividend improved from 12.3 pence to 22 pence per share between 2007 and 2012, which indicates the business has provided some predictability to shareholder payouts and a certain operational resilience to the financial crisis.
Of course, whether the potential 7.5% income from ICAP's dividend is enough to make the shares a buy right now is something only you can decide.
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