LONDON -- The world's leading inter-broker dealer ICAP (LSE: IAP.L) saw shares drop by over 4% this morning after announcing muted operations in its half-time report.
Blaming subdued activity in the global capital markets due to the eurozone crisis and the well-recorded difficulties faced by the global economy, ICAP saw group revenue drop by 14% compared to the same stage last year. The company also recently dropped out of the FTSE 100 (UKX).
However, September did see trading volumes pick up, but the company warned that "activity levels remain difficult to predict and it is not yet clear whether signs of improved confidence are sustainable."
Group chief executive officer of ICAP Michael Spencer commented: "The macroeconomic environment remains difficult and it's too early to judge if recent actions by the Federal Reserve and the European Central Bank will result in a sustained improvement in market confidence. In any event, we will continue to take the necessary action to constrain our cost base as well as position ICAP optimally for upcoming financial regulatory reform.
To combat this downturn, ICAP undertook a structural review and is on schedule to deliver a minimum of 50 million pounds per year run-rate savings by the year-end in March. As such, management predicted that if volumes in H2 remained depressed, pre-tax profits for the full year are expected to be in line with market expectations at around 307-346 million pounds.
Spencer went on to say: "We have a strong balance sheet and continue to convert profit very efficiently into cash. Our diversified business, together with multiple initiatives in our electronic and post trade businesses, will ensure that we benefit from regulatory and market changes and build on our position as the industry leader."
ICAP paid out a dividend per share of 22 pence previously, and currently sits on a yield of over 6%. With the share price dropping this morning, it could represent a decent opportunity for high-yield investors. However, with revenues down and warnings from both management and the market, it's not a very secure option...
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Sam does not own any share mentioned in this article.
