TP ICAP Group PLC (TCAP) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today. This is our agenda for the morning. I will start with a brief introduction. Robin will take you through the financial performance. And I will then update you on the execution of our strategy before we open up for questions. Turning first to business highlights. We are making good progress executing our strategy. We are rolling out our hub strategy for global broking and energy and commodities to electronify our business and aggregate liquidity across brands. This is already producing results. For example, improved contribution margin relating to our interest rate options platform, which I will illustrate later. From our leading position in broking, we continue to diversify our revenues. Our 3 business divisions outside Global Broking represented 40% of revenues in H1 compared to 26% in 2018. Our Data and Analytics business, which continues to grow in double digits, is helping to drive this diversification. The Liquidnet acquisition completed in March. And since then, we have worked at pace to integrate it into our agency execution division. In that process, we have identified cost synergies that we are reinvesting to drive future growth. Our growth plans for Liquidnet are already well advanced in both equities and credit. You will have seen that we are announcing today the launch of our first new product in credit called Liquidnet Primary Markets, which is an electronic solution to modernize debt issuance. We also continue to focus on cost management. We told you in our trading update last November that we would make annualized cost savings of around GBP 35 million this year and we are on track to achieve this. In short, we are moving forward executing our strategy and investing to transform the business. As a result, the group will be better placed to drive sustainable earnings growth over time. So let me turn now to the financial headlines. The group delivered revenue of GBP 936 million, down 1% on the same period last year in constant currency. This includes GBP 55 million from Liquidnet. Excluding Liquidnet, revenue declined 7% to GBP 881 million against a strong comparator. Secondary markets were subdued with continuing low interest rates across the G7 and a flattened yield curve. In addition, many of our clients' traders continue to work at home with reduced risk limits, which has further dampened activity. Despite these market dynamics, our revenue is broadly in line with the equivalent period in 2019 when we saw more normalized trading conditions compared to the exceptionally high volumes in Q1 2020. On an adjusted reported basis, EBIT profit margin of 12.5% was 3 percentage points lower than 2020 as a result of 3 main drivers: First, lower activity levels due to subdued markets; second, sterling strengthening against the dollar as 60% of our revenues are dollar-denominated; and third, a larger cost base following the Liquidnet acquisition. Adjusted earnings per share were 10.2p, and we have declared an interim dividend of 4p, in line with last year when adjusted for the February rights issue. I will now hand over to Robin to provide more detail on our financial performance.

Thank you, Nico, and good morning, everyone. You'll note from our update in August that we are trading in line with the market and that we continue to maintain a leading market share. Against the backdrop of more normalized market conditions, we have done a great deal during the first half to put the business on a stronger footing. In February, we completed a successful rights issue to partially fund the Liquidnet acquisition. We also completed our redomiciliation to Jersey, which strengthened our capital position as we no longer have to set aside GBP 25 million a year to eliminate our CRD IV deficit. As Nico mentioned, we completed the acquisition of Liquidnet in March and, in the process of integration, have identified around GBP 20 million of synergy savings. We continue our strong cost controls in TP ICAP and are on track to meet our targeted savings this year. We are also investing in the business to deliver sustainable earnings growth over the medium term. So despite quiet market conditions, we are making steady progress. Starting now with the income statement. Revenue decreased 5% on a reported basis or 1% in constant currency to GBP 936 million. This includes 3 months of Liquidnet revenue. Excluding Liquidnet, reported revenue decreased 11% or 7% in constant currency to GBP 881 million. As Nico said earlier, this is broadly in line with the equivalent period of 2019 when we saw more normal trading conditions than last year. You will see from this slide that we are now reporting EBITDA in line with our market infrastructure peers. Adjusted EBITDA was down 17%, with EBITDA margin 2.2 percentage points lower at 16.6%. Adjusted EBIT decreased 26%, and EBIT margin was 3.6 percentage points lower at 12.5%. These movements mainly reflect the reduced contribution as a result of lower revenue. Net finance costs of GBP 29 million was GBP 6 million higher than last year for 2 reasons: First, we drew down additional debt to partially finance the Liquidnet acquisition. Second, we purchased foreign currency options to hedge the acquisition proceeds. Taken together, this resulted in adjusted earnings before significant items of GBP 75 million and adjusted earnings per share of 10.2p. Turning now to the drivers of revenue on the next slide. The charts here show transaction volumes by asset class. As you can see, volumes declined across every asset class in the first half this year, and our revenue correlates with these market dynamics. You can also see exceptional volumes in every asset class in the first quarter last year, making 2020 not just a strong comparator but an outlier. So let's turn now to our breakdown of revenue by division and asset class on a constant currency basis. Global Broking was down 7% to GBP 575 million, in line with market activity. And as I said earlier, we maintained our leading market share. Energy & Commodities decreased 9% to GBP 187 million against the first half last year that included record pandemic-driven oil volumes. Agency Execution grew 84% to GBP 103 million due to the inclusion of GBP 55 million from Liquidnet. Excluding Liquidnet, Agency Execution was 14% lower, reflecting weaker activity in the relative value business. Parameta Solutions, which includes data and analytics and post-trade solutions, grew 6% to GBP 82 million. The Data & Analytics business maintained its double-digit growth, with revenues up 11%, while post-trade solutions declined 17%, partly as a result of lower volumes due to the transition from LIBOR. Looking at Global Broking revenue by asset class on the right, the Rates business decreased 16% to GBP 226 million as a result of the lower volumes, the adverse impact of quantitative easing and low interest rates as well as continued disruption caused by Brexit and the LIBOR transition. FX & Money Markets and Emerging Markets saw declines of 9% and 6%, respectively, due to lower volatility. Equities grew 17% to GBP 117 million, mainly driven by the addition of Louis Capital Markets. And revenue in Credit was down 11% to GBP 44 million, as despite strong bond issuance in the period this did not lead to increased secondary trading. Moving on to results by business division on the next slide, where I'll focus my comments on EBIT margin. Global Broking EBIT margin decreased from 19.4% to 15.5% driven by reduced revenues and increased investment in our hub strategy. In Energy & Commodities, it reduced from 14.7% to 12.3% as a result of lower revenues. Agency Execution margin reduced significantly as a result of lower revenue in TP ICAP and the inclusion of Liquidnet, which I'll talk about on the next slide. Bear in mind, this is still a relatively small division and the impact of decreased revenue on margin is a reflection of scale. In Parameta Solutions, there was a decrease of 2 percentage points to 39% due to increased investment in new product development and additional hires in our global sales team. Looking now at the numbers by operating segment. In EMEA, revenue was 7% lower at GBP 456 million. Contribution margin decreased by 1.4 percentage points due to lower revenues and the costs associated with retaining key staff in a competitive market. Adjusted EBIT was down 25% to GBP 77 million, resulting in an EBIT margin of 16.9%. In the Americas, revenue decreased 19% to GBP 307 million. New hires and a focus on retaining key staff reduced contribution margin by 1.5 percentage points to 33.2%. There was a 2.2 percentage point decline in EBIT margin to 12.7% as a result of lower revenue despite reductions in management and support costs of GBP 10 million. In Asia Pacific, revenue was down 6% to GBP 118 million, and contribution margin increased by 2.1 percentage points to 37.3% due to a reduction in broker compensation. This resulted in stable EBIT of GBP 10 million. We are showing Liquidnet separately, in line with our regulatory governance structure. Revenue of GBP 55 million post acquisition generated a contribution of GBP 26 million at a margin of 47.3%. After support costs, the business made a loss of GBP 2 million, which contributed to the reduced EBIT margin in Agency Execution. This will improve as we deliver the cost synergies I mentioned earlier. I want to move on now to talk about movements in management and support costs on the next slide. As we planned and previously guided, group costs decreased GBP 18 million year-on-year, but this was more than offset by a GBP 48 million increase from strategic investment as well as acquisitions and foreign exchange movements. This resulted in a higher overall cost base of GBP 246 million. So let me take you through the movements. We reduced the bonus accrual, in line with trading for the period. We cut costs by GBP 4 million through headcount reductions as part of the GBP 35 million of annualized savings announced last year. And there was an additional decrease of GBP 9 million due to a reduction in COVID-19-related IT investment and lower consultancy costs. The acquisitions of Liquidnet and Louis Capital Markets account for an increase of GBP 32 million. Finally, the strengthening of sterling against the U.S. dollar resulted in an adverse foreign exchange movement of GBP 14 million. Moving now to the significant items. These are not included in the adjusted results, so that we can better measure business performance and compare with other reporting periods. Significant items amounted to GBP 74 million after tax. GBP 24 million of this was noncash. Almost all of this consists of amortization of acquired intangible assets arising on consolidation, which relates to the value of brands and customer relationships. Cash items amounted to GBP 36 million, up from GBP 17 million in the first half last year. Within this, there were GBP 11 million of reorganization and integration costs. Most of this relates to the Liquidnet integration, which we expect to generate synergy savings, but it also includes GBP 4 million to achieve the GBP 35 million of annualized cost savings. GBP 8 million of acquisition costs are associated with Liquidnet and legal and regulatory costs accounted for GBP 11 million. GBP 4 million of this relates to the recent AMF fine with the balance resulting from litigation in Germany and Australia. There was also a revaluation of our deferred tax liability in the period, resulting in a GBP 9 million charge. Moving now to the next slide. Adjusted earnings decreased to GBP 75 million, which translated into adjusted earnings per share of 10.2p. On a reported basis, earnings per share were 0.1p due to the significant items I've just mentioned. We intend to pay an interim dividend of 4p per share, which is in line with last year's interim dividend when adjusted for the February rights issue. Turning now to cash flow. Cash generated from operations amounted to GBP 55 million compared with GBP 115 million in 2020. This is largely the result of working capital outflow of GBP 55 million, which mainly reflects higher trade receivables as the number of days sales outstanding increased because COVID-19 impacted many of our clients' payment processing centers in India. Capital expenditure of GBP 30 million was up from GBP 23 million last year, reflecting investment in ongoing IT projects and in Liquidnet as well as our incremental spending on our new City of London office. The resulting adjusted free cash flow was GBP 25 million, down from GBP 92 million. You'll find the balance sheet and cash breakdown in the appendix, where there are no significant changes, except the addition of Liquidnet, so I'll move on now to talk about debt. Gross debt before lease liabilities grew by GBP 140 million to GBP 865 million. This was driven by an increased drawdown on our revolving credit facility and GBP 36 million of vendor loan notes, both associated with the Liquidnet acquisition. Our IFRS 16 lease liabilities increased to GBP 286 million due to the leases on our new office in the City of London. You'll recall that these liabilities are excluded from our banking covenant calculation. You may have seen last week's announcement from Fitch that our investment-grade credit rating has been reaffirmed with stable outlook. Before I close, I'd like to talk about the cost synergies we have identified in relation to Liquidnet. We intend to deliver annualized cost synergies of about GBP 20 million by the end of 2023 with a cost to achieve in line with the savings. These costs are treated as significant items. This represents around 10% of annualized addressable costs, and around half the savings are related to headcount reductions, the other half to non-compensation expense. We expect to achieve around 1/4 of the savings this year with the remainder delivered over the next 2 years. We also expect to deliver additional property savings, but these are being reviewed as part of a wider project across the group, and we will update you on this in due course. Moving on now to guidance for the full year. Activity in July and August has been at similar levels to 2020, and we continue to expect full year revenues, excluding Liquidnet, to be broadly in line with last year at constant currency. Liquidnet is expected to contribute revenue in the region of GBP 160 million to GBP 180 million. As 60% of group revenue is in U.S. dollars compared to just 40% of our costs, the strength of sterling against the dollar is a headwind on both our revenue and operating margin. As a result, we expect full year EBIT margin to be lower than the full year in 2020. We said at the Capital Markets Day that we will continue investing prudently in the business to generate medium-term growth. We still plan to spend around GBP 30 million in strategic IT investments this year, of which about GBP 13 million would be OpEx and the remainder CapEx. This includes expenditure on Liquidnet. Total CapEx is likely to be in the region of GBP 50 million, of which we've invested about GBP 30 million during the first half. This is in line with guidance. Finally, as we said at the Capital Markets Day, we intend to introduce a new dividend policy this year that targets cover of approximately 2x adjusted earnings. This reflects a balanced approach to capital allocation, enabling investment while allowing dividends to increase as adjusted earnings grow. Thank you very much. I'll now hand back to Nico.

Thank you, Robin. Let me start with a brief reminder of our strategy. As you know, we are transforming our business through electronification, aggregation and diversification in order to drive sustainable earnings growth over the medium term. Electronification improves client connectivity, workflow efficiency and post-trade processing which, together, improve operating margins. Aggregating liquidity enables our clients to find the best price across all our brands and increases client stickiness. Diversifying our revenue streams by focusing on the buy side, corporates and data users drives growth and better quality earnings. We are executing our strategy to drive electronification and aggregation in Global Broking and Energy & Commodities by building hubs for rates, FX, credit and energy. These hubs will enable traders to access our screens and platforms via a single log-in instead of many. The screens look the same across instruments and brands, making it easier and more efficient for traders, who are active across multiple instruments or multiple asset classes to absorb information and transact. The hubs will benefit TP ICAP as well as clients. First, client relationships will be more sticky and brokerage rates will become more standardized. Second, with more activity conducted via platforms and common screens, there is greater opportunity for us to develop new data and analytics solutions. Third and most important, the hubs help increase broker productivity and improve profitability. I want to show what this means in practice by sharing a short film featuring our new interest rate options platform, which forms part of the Rates hub and is accessed via the TP ICAP liquidity portal Fusion. [Presentation]

The migration you saw in that film requires investment of GBP 100 million over 5 years, as we told you last year, and the hubs will be delivered incrementally over that time frame. As you can see from this slide, to achieve our target state, we have a comprehensive plan in place covering Rates, FX, Credit and Energy & Commodities. Our approach is to build out the hubs systematically across all asset classes, all regions and all brands. Turning to our progress in H1. Let's start with our Rates Hub. The key products we transact in Rates are interest rate swaps and options as well as inflation, cross-currency swaps, repo, cash gilts and European government bonds. As I said, our plan is to bring these different products together incrementally until they all sit in the Rates Hub. During the first half, we completed the delivery of the interest rate options platform, which is now live in EMEA, the U.S. and Japan. Most of our interest rate option clients are now using the platform with orders and trades flowing through it. In ICAP, where the platform is more established, approximately 50% of its interest rate options volumes are now highly electronic. Tullett Prebon was brought on the platform last September. And as the chart on the top right shows, 14% of its interest rate options revenues are now platform-driven; whereas just 1 year ago, they were pure voice. This move to electronification is a positive development when we see the impact, it has already had on contribution margin, as the chart on the bottom right shows. Moving on now to our foreign exchange hub, where the key products are G10 FX Forwards, FX options and nondeliverable forwards. Progress in the first 6 months includes the launch of ICAP SpotMatch, a fully automated matching solution for the daily Spot FX benchmark fixing. The new platform is simple, intuitive and uses state-of-the-art FIX API connectivity. We already have 12 banks using the platform, including 3 of the 5 largest globally. For the Credit Hub, we have launched an index options platform in EMEA for iTraxx indices. We also launched new execution protocols, such as all or none, and added range-trading features to the platform. In our Energy & Commodities Hub, we commenced a client pilot on Guarantees of Origin in Norway. These are trading certificates generated by European companies that produce electricity from renewable sources. So we are systematically deploying more technology across our broking business. I will now move on to our other key strategic update, Liquidnet, focusing first on its equities business. We've now owned Liquidnet for about 6 months. Over this time, we have undertaken a full qualitative assessment of the business. That assessment confirms that Liquidnet is a trusted partner for both clients and market participants. It has top-tier technology and great talents, an established network with more than 1,000 buy-side clients globally and access to 45 markets as well as third-party dark and lit venues. It's buy-side connectivity and ability to co-create customized solutions is a clear differentiator. But it has much more potential than it has delivered to date. In equities, clients choose to transact using several different channels depending on their style of trading, namely block trading, high touch, algorithms or program trading. Liquidnet has a strong advantage in block trading, and we want to leverage that in order to increase use of the other channels, which will, in turn, increase liquidity in the dark pool. We plan to do this in 4 ways. First, we are extending Liquidnet's distribution by leveraging TP ICAP's network of offices across 27 countries. We see specific near-term opportunities in Asia Pacific, where the commission wallet grew over 30% in the first quarter this year, as well as in Continental Europe. France, for example, is an underpenetrated market for Liquidnet, and we have already launched Liquidnet in Paris by leveraging TP ICAP's presence. Second, we are building out our award-winning suite of algorithms in order to help clients move more easily between execution protocols to access both dark and lit markets. Third is program trading, which is the use of algorithms to trade a basket of stocks in large volumes and, sometimes, with high frequency. Program trading represents 17% of U.S. trading volumes according to Greenwich Associates, almost all of which is pure agency. So it's a good fit with our abilities. Liquidnet is already active in program trading, especially in the U.S., but revenues have declined in recent years. It has not been a clear priority. We will now refocus, leverage our unconflicted model and undertake targeted hiring in order to drive performance. Fourth, we see potential to capture an increased share of cross-border trading. Cross-border or inter-region trading involves taking orders generated in one region and executing them in another. It represents about 35% of the $20 billion global equity wallet, yet it currently provides less than 20% of Liquidnet revenues. So we see an opportunity to meet more of our existing clients' inter-region trading needs. In short, we have a clear plan to deliver the full potential of the equities business and we have already started to implement that plan. I will now turn to credit. Liquidnet's existing platform is the fourth most used in credit. It has about 500 active buy-side clients, including most of the top 50 bondholders globally. It sees good order activity, but its revenues remain small as not enough of that liquidity is matched. To address this, we are leveraging the complementary capabilities of Liquidnet and TP ICAP, making targeted investments in technology and talent and developing new offerings. We are launching the first of those new offerings today, Liquidnet Primary Markets. So let me tell you more about it. Our plan in the primary market is to offer the full range of electronic agency services across the entire life cycle of a bond, from issuance to trading to redemption. Today marks the start of that journey. Liquidnet Primary Markets is a new solution that directly addresses stage 1 of the life cycle, debt issuance. So why primary? This is one of the last parts of the capital markets to electronify, so the process of issuing new bonds is largely manual, error-prone, inefficient and time consuming. As a result, buy-side traders, portfolio managers and bank sales teams spend a large part of their day on clerical tasks. So both the buy-side and sell-side, they need an electronic solution. In response, Liquidnet has worked with top European banks, asset managers and other market participants, such as data vendors and order management system providers to develop a truly market-driven solution. Liquidnet Primary Markets will enable banks to send new issue information to investors electronically via the Liquidnet app and order management system. Investors can then input new issue orders electronically to the syndicated banks with minimal manual intervention. They will then receive deal updates, allocations and final pricing electronically via Liquidnet. Clients will also be able to trade new issues electronically from their order management systems. This addresses another problem caused by the current lack of electronic trading, limited liquidity discovery and price formation in early trading. Liquidnet solution will cover nearly all new issuance in Europe, as we are working on this with more than 10 leading banks. Turning to the secondary market. Around 80% of corporate bond trading is dealer to clients and dominated by just 3 platforms. Now that Liquidnet and TP ICAP together, we have both the buy-side connectivity and strong dealer relationships to compete. And we know, from engaging with both clients and dealers, that we are welcome as a new entrant in this market. We are consulting with members and dealers to shape the new offerings that we are currently developing. First, a dealer to client request for "workflow" and second, price streaming services. We will launch both these initiatives in 2022. We will then develop a dealer to client protocol for rates and broaden our offering further. So let me now move on to progress in Parameta Solutions. We have re-branded this division from Data & Analytics to Parameta Solutions and incorporated post-trade solutions. The new brand gives the business a distinct identity, better enabling it to develop new partnerships, work with third-party data providers and diversify its offering beyond raw data to include benchmarks, indices and post-trade solutions. Parameta strategy is threefold: First, to develop new high-value information products. Second, to grow its client base with a focus on the buy-side and corporates. Third, to expand its distribution capabilities. As you can see from the chart, Parameta strategy is the right one. It has delivered double-digit compound annual growth over the last 4 years. So let's start with products. We told you in March that we had launched our first-ever information product, Bond Evaluated Pricing to help clients meet the stricter regulatory requirements for fixed income pricing. In the first half, we expanded this offer to cover foreign exchange as well. We are growing our client base by aligning our sales team to specific client segments, buy-side, sell-side, and corporates. To give you one example of how this is driving results, we added 30 new buy-side clients in H1. Turning to distribution. We have expanded our global sales team in underpenetrated markets and made new hires to work with our largest and most complex clients. We've also partnered with market-leading cloud providers to create off-premise solutions for clients. This means users can now access data on a shared basis via the public cloud with greater speed and agility in a more cost-efficient way. In post-trade solutions, despite a challenging first half, our award-winning compression service, ClearCompress has added 10 large dealers to its client list and launched 2 new products following client demand. We've now built a working group of 27 dealers to help co-create new compression products and opportunities. We will provide a more in-depth presentation on Parameta Solutions at our investor seminar on October 12. So in summary, we are making good progress executing our strategy. We have achieved notable deliveries in building out our broking hubs, and they are already starting to deliver positive results. With Liquidnet, we have a clear growth plan for both equities and credit, which we are already executing, as you can see from today's launch of Liquidnet Primary Markets. We have also moved at pace to integrate Liquidnet into the group and identified meaningful cost synergies. And Parameta Solutions continues its growth trajectory, developing higher-margin and higher-value products and creating innovative partnerships. In short, disciplined execution of our strategy is driving our transformation, which positions us well to deliver sustainable earnings growth over time. Thank you for listening. I will now open the floor to questions.

[Operator Instructions] Our first question comes from Kim Bergoe from Numis Securities.

Just checking, can you hear me?

Yes, we can.

Okay. I think what I'm thinking here is if you could give us a little bit of an update on sort of more risks. What are you seeing in terms of run rate within the businesses? So including what's the general market is doing? And also talk a little bit about sort of market share trends within the sort of key areas and key products. What are you seeing there? Are you keeping market share winning? Losing? And then -- so that's sort of into your medium-term or your shorter-term outlook and just -- so if you could just update us a little bit on current trends, that would be great.

Yes. Very good questions. So in terms of activity, as we said, we -- it's interesting to see that H1 -- what happened in H1 '20 versus '19 is that we went up 7%. And in H1 '21 versus H1 '20, we are down 7%. So we've seen some more kind of normalized level of activity. The relatively good news is that if we look -- and Robin will complement my answer with more numbers, but if we look at activities -- activity levels over the summer, we have a much better comparative than H1. And we've seen stronger days and a stronger level of revenue compared to last year. So we think that we see a kind of return to market, kind of clients on the buy side, but also on the dealer side coming back to the markets, identifying some trading opportunities. And we are relatively confident that Q3 and Q4 would be at high levels than last year.

Yes. Just to reiterate on that, Kim, July, August, as Nico said, slightly up on where we were last year. But obviously, they were very low levels of revenue activity. I think the view is that in the context of our guidance of the full year being broadly in line with the prior year is that we will start to see that pick up this month, and we are seeing some relatively stronger days, but we expect that to -- we anticipate that to pick up over the -- over Q4 or the rest of Q4 so that we meet that guided target.

Could you touch a little bit about what you see in terms of market share including on Liquidnet. You did touch upon in the result -- in the actual results that Liquidnet -- that type of platform has seen market share loss. Could you talk a little bit on market shares, both for Liquidnet, but also for the rest of the business?

Yes. So for the rest of the business, we -- if we look at the, I would say, the core business, the Global Broking and Energy & Commodities, we have picked up market share. We have gained market share over the last 18 months. So that's a good position to be in. It's very, as you know, consolidated markets. There is still tension and competition for brokers because in subdued markets conditions, we've witnessed that leading franchises are overperforming and second and third tier players are underperforming. So some of our competitors are really trying to catch up on revenues by poaching brokers, especially if they lack a clear technology plan. So that's really important we have maintained and in our leading franchises gained some market share. On Liquidnet, I think there is, in terms of market share, a bit of a difference between EMEA and the U.S. I think we've maintained our position, strong -- very strong position in the U.K. and EMEA in terms of market share. In the U.S., it seems that the growth of the market was mostly led by retail activity, and that retail activity is not benefiting us because it has more benefited some other players who are taking -- making markets and taking positions against retail brokers. So that explains why we have a bit of a difference between the U.S. and the U.K. situation.

[Operator Instructions] Our next question comes from Vivek Raja from Shore Capital.

Can you hear me, okay?

Yes, Vivek.

Great. I've got a couple of questions. The first one is about D2C flows. So you sort of outlined the situation of Liquidnet into credit. It sounds like 2022, before you start having the solutions to drive D2C flows, it looks like at the moment it's still sort of bifurcated between D2D and C2C. I wondered if that is a correct understanding. And secondly, within rates, when do you expect to start penetrating D2C flows in that area? And have you started talking to clients on both the buy-side and the sell-side? What are the sort of -- what are your senses of getting those D2C flows up and running? What are the sort of real barriers that you're potentially meeting there? So that's the sort of first rather long question with a few points. And the second one, simpler. Just wondered, you stopped printing consensus on your website, I noticed. I wondered if you could confirm where consensus is and how comfortable you are with that in terms of, let's say, operating profit, EPS, DPS, whichever metrics you choose to focus on.

Well, thank you for your questions. The first question regarding D2C flows, we are building on credits and referring to the secondary market. I propose to ask Mark Russell, who is our Global Head of Fixed Income for Liquidnet, to give you his views in terms of, I mean, the milestones in building the offering. And he will tell you and give you more color about the intense dialogue that we're having with the dealers on one side and the members of clients Liquidnet. So Mark, can you give us some color on the D2C flow?

Yes. Happy to, Nico. Vivek, yes, so on the Liquidnet credit side, I think you picked up on the fact that we are moving into the dealer to client workflow kind of solutions, right, so where you have a bunch of kind of market makers, right, people that can provide liquidity and other people that want to tap into that liquidity and the protocols around that. So those protocols,-- actually, some of those protocols already exist. It's a question of how you build the connectivity and the flows to integrate to all of those clients. We're spending a lot of time at the moment consulting with our buy-side members as well as the TP ICAP traditional client base on the dealer side to figure out exactly how we build that connectivity and how it works for both those sides going forward. So filling some of the gaps, right, that they currently see out there as we launch in that space. So we're on track with the technology and with the communication that we're having with both sides of the equation to build those things. I would say, on top of that, right, what you're really building here, in addition to the technology and the connectivity to both of them, as you're building that relationship and that kind of hub, if you like, of clients. So as we're having these conversations, we're also introducing both sides to new protocols that we're launching as well. So for instance, today, we launched the Liquidnet Primary Market business, which talks about or which offers automation of new issue announcements, but it also has new issue trading. That new issue trading is an all-to-all order book protocol. And we are actively engaged with banks and with buy-side to participate in that. So in addition to building the specific technology for the D2C flow, workflow kind of protocols and working out exactly how that goes, alongside that, we are actually rolling out offerings that are taking advantage of the TP ICAP group network across dealers and partnering with the traditional Liquidnet member base, which is typically buy-side firms and bringing them together with our new issue trading protocol, right. So a lot of the building blocks that we need to successfully enter that space next year, we're actually already putting them in place right now this year. That's on the credit side. The rate side is a little bit further out. I mean I think we'll probably come back with more information around that as we get it, but those plans are still being finalized. The focus is more on the credit side at the moment.

Thank you, Mark. Moving on to the second question regarding consensus.

On consensus, Vivek, yes, and apologies that's not on the website. But at the moment, we've got a consensus of 6 analysts, which we'll put out very shortly. And we'll update that post any changes that we've seen after these results. Revenues would be 1,911 if we posted an EBIT of 268 and a DPS of 11.47p, if that was on the website today.

Could you repeat the DPS number, please?

11.47p.

How do you feel about that right now, all those numbers?

I think we would probably anticipate that the EBIT and DPS might come off a bit after today's announcements.

We have no further questions. I'll hand back over to the team for closing.

If I may, I've just got a couple of questions in the room that have come in online. So the first question is from Gurjit Kambo. Gurjit, I think Nicolas actually responded to that question earlier with regard to why we're seeing a competitive environment for staff and staff costs given the subdued revenue environment. If you have a follow-up, then please do submit. The second question is from Stuart Duncan. So Stuart asks, in the IRO hub example you gave, can you give us a little bit more detail on how the contribution margin improved? Was this a function of reduced compensation rates, fewer brokers or something else? And a follow-up to that, what determines the pace of rollout of Fusion?

So on the second question, so typically, the improvement of contribution, it's a combination of different things. So the first is that there is an element of higher productivity. So we've seen that because we could compare and benchmark our -- the implementation of technology when we launch it for one brand before the second, we had some days where with the technology we were able to do in 1 hour in one brand, what the other brand was doing in a full day. So there's definitely a higher revenue for the desk. So it means that you don't need the same number of brokers. Example, on the cash gilts where we are now making probably around 97% of our revenue around volume matching. We have less brokers generating higher revenues. So that's an important element. The second that will benefit contribution is that you have a more automatized straight-through processing so the flow is easier. You've got better invoicing and follow-up on the rate cards with your clients. And the other element is the stickiness and the fact that you could standardize your rate cards like any exchange will do. So that's why I firmly believe that that's the right strategy for that business to improve contribution over time.

And just with regards to the follow-up that the Stuart asks, what determines the pace of rollout of the Fusion platform?

So we have a very detailed plan to deploy technology. You've seen across brands, across products. So we have really pushed and actually accelerated recently our efforts on rates because this is our #1 franchise. We are really the market leaders. We are -- we have a very, very strong franchise around euro swaps, for example, where we are the benchmark of the market. So this is where we are concentrating our efforts, but we have a step-by-step deployment of technology across the brands. It's important also, depending on products, to see if we could go to what you've seen in the film, level 1, level 2 or level 3. And in some areas, market -- the market allows you to go quicker and go to level 2 or level 3 immediately. Sometimes, it's more difficult because if you've got 2 brands displaying different meat prices at a given time, you don't want necessarily to cannibalize your own business. So that will also be an element to define the cadence of the deployment of technology.

Many thanks, Nicolas. I have no more questions that are coming online, but I believe there's one more that's coming on the phone. So if I could hand back to the moderator.

Yes, we have a question here from Piers Brown from HSBC.

Just a quick one on the new expense reduction or synergy -- cost synergy target for Liquidnet, GBP 20 million. Just interested in whether you can give us any more color on where you've identified those savings. I think you mentioned about half is coming from headcount. So what sort of functions are we looking at here? Just it seems to -- you've identified the cost savings at the same time that you're obviously building out the platform quite rapidly. So just how you sort of balance the risks between focusing on expenses, whilst, I guess, simultaneously trying to position the business for growth, particularly the electronic fixed income rollout. And then just an add-on to that, you mentioned also on the Liquidnet's guidance slide, there could be additional property savings. I don't know whether you can give any sort of quantification at this stage just how material or not those might be.

Okay. Thanks, Piers. Yes, just to reiterate, as you said, the GBP 20 million we've identified is around half and half what we call headcount and noncompensation expenses. From a headcount perspective, it's certainly not in areas where we're developing and pushing our strategic goals on improving the revenue. A lot of those, as you can imagine, may have already -- are in train or have happened, they're at the senior end where we've got duplication at the very high end of the organization. But it doesn't -- it certainly doesn't affect the pace at which we want to drive those revenue synergies. On the noncompensation side, as you'd expect, you've got an organization coming in -- a smaller organization coming into a larger one, we do anticipate that we can achieve savings in the context of our larger buying power across a lot of areas, like contractual arrangements that we have with third-party providers, both in technology, also in settlement and clearing. Those sorts of areas are clearly ones that we can take advantage of our increased overall scale. The second question you had was on real estate. Absolutely. Okay. In that synergies, we've kind of got -- we've acquired additional real estate with Liquidnet. Ordinarily, we might be looking at talking about what we think is a possible saving in the context of the Liquidnet stand-alone. I think as we emerge out of COVID and we, like many organizations, are reviewing and analyzing our agile working policies and how we operate going forward, the Liquidnet facilities portfolio falls into line with the group's global facilities portfolio, and we are currently reviewing that in aggregate in the context of what we think are the best working practices going forward for the group. And as that develops, we will be able to give the market a better guidance on what savings we think are achievable across the whole estate.

I still don't have any further questions in the room. Assuming there are no further questions on the phone, Nicolas, I'll turn it over to you to close.

Well, thank you. Thank you very much for your time and listening to our presentation. So I would just conclude by saying that difficult market conditions is actually confirming and reinforcing our conviction that it's really important for the company to continue to deploy technology and diversify its sources of revenues. And I will remind you that we will hold an investment seminar on the 12th of October for Parameta Solutions to give you more practical details on the success of that division. Thank you. Thank you very much for your time. Goodbye.