Tullett Falls as Revenue Drops Amid ‘Challenging’ Conditions

Tullett Prebon Plc tumbled the most in four months in London trading after the inter-dealer broker reported a drop in sales, citing a “challenging” market.

Revenue fell 9 percent to 252 million pounds ($406 million) in the four months to October and 5 percent this year as activity in the financial markets “remained subdued,” the company said in a statement today. The shares fell as much as 7.8 percent.

“It is difficult to see any good news for Tullett” in the short term, James Hamilton, a London-based analyst at Numis Corp., said in a note to clients today. “We believe the banks will continue to reduce trading activities and restrict the growth of their balance sheets. The direction of travel for regulation is also unhelpful.”

Inter-dealer brokers such as Tullett and ICAP Plc act as a go-between for banks that trade bonds, stocks, currencies, energy and derivatives and typically handle more trades during periods of greater market volatility. Profits have been squeezed as regulators push more trading onto exchanges and financial markets struggle to shake off the euro area’s debt crisis.

The stock fell 3.3 percent to 307.4 pence at the close in London, trimming its gain this year to 22 percent. Competitor ICAP has also gained 22 percent.

Tullett, which said its financial position “remains strong,” has also been hurt by mounting costs from legal action against competitor BGC Partners Inc. and former employees. The company disclosed a further 3.5 million pounds in legal fees since the end of June, taking the total cost so far this year to 13.8 million pounds, according to the statement.

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