The shares jumped as much as 6 percent today and traded 3.8 percent higher at 248 pence as of 11:25 a.m. local time, leaving them down 34 percent this year. The company is firing 160 front-office and 50 back-office employees from its 2,328 workforce to reduce annual fixed costs by more than 40 million pounds ($68 million), it said in a statement today.
“Tullett Prebon is clearly operating in an extremely difficult environment, but is at least focusing on what it can actually control,” Phil Dobbin, an analyst at Espirito Santo Investment Bank in London, who has a neutral rating on the stock, wrote in a note to clients.
Inter-dealer brokers such as Tullett and London-based ICAP (IAP) Plc act as a go-between for banks that trade bonds, stocks, currencies, energy and derivatives, profiting when prices fluctuate. Low swings in prices have meant limited trading for investment banks and inter-dealer brokers to profit from.
ICAP, the world’s largest broker of transactions between banks, said on July 16 that revenue declined 19 percent from April to mid-July, with Chief Executive Officer Michael Spencer forecasting the level of business would remain “dire.” ICAP’s stock has decreased 22 percent this year.
Tullett’s underlying pretax profit dropped to 43.2 million pounds in the six months to June 30 from 62.8 million pounds a year earlier, according to the statement. Revenue fell 18 percent to 360.3 million, with reported pretax profit down 83 percent to 8.9 million pounds. The company said it expects to start seeing the benefits from reduced headcount in its second-half results.
“The overall level of activity in the financial markets remained subdued” in the first half, CEO Terry Smith said in the statement. “It would be prudent to expect that market conditions will continue to be difficult.”
Tullett said revenue from trading interest-rate derivatives fell 24 percent to 70.6 million pounds from a year ago. That’s the biggest drop of six products including fixed income, energy and equities, with all reporting declines.
The company said on May 9 it agreed to buy oil broker PVM Oil Associates Ltd. for $160 million to help bolster its position in the world’s most actively traded commodity market. PVM reported revenue of $107.5 million and pretax profit of $18.2 million for the year to July 31, Tullett said.
The inter-dealer broker said revenue from trading energy products fell 14 percent to 46.6 million pounds. The interim dividend remained at 5.6 pence a share.
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