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TP Icap sacks boss, issues profit warning and sees shares plunge as costs mount

Can ComScore Break Nielsen's Near-Monopoly On Ratings?

Most TV Everywhere Viewing Is Live TV In The Home

Consumer Insights Online Video User Overview

Public Companies Going Private


TP Icap sacks boss, issues profit warning and sees shares plunge as costs mount

John Phizackerley, CEO of the world's biggest interdealer broker, TP Icap PLC, was fired after promising cost cuts he could not deliver, and the company was forced to issue a profit warning leading its share price to plunge.

Created through the £1.3 billion merger of Tullett Prebon and the voice brokerage arm of Icap in 2016, TP Icap said it now thought costs would rise sharply and savings would be less than previously stated. It cut the estimated savings from its merger from £100 million to £75 million on an annualized basis by the end of 2019.

Chairman Rupert Robson said costs were rising across the industry and claimed that the merged company would be more able to withstand this because of its size. He also tried to reassure the market that the logic and potential of the merger remained "extremely compelling and this will be evidenced in the coming years."

Phizackerley in 2017 said he was confident that there was a strong future for phone trading, which matches buyers and sellers of illiquid trades by phone, allowing dealers to discuss more complex trades for clients without alerting the market, in the face of increased competition from electronic trading. However, Icap's founder, Michael Spencer, elected not to join the merged company and remained in charge of its electronic trading and post-trade services business, rebranded as NEX Group PLC. This he agreed to sell to U.S. firm CME Group Inc. in May for £3.9 billion after selling his 9% stake in TP Icap for £200 million shortly after the deal closed in 2017.

Following a hastily convened conference call the evening of July 9, TP Icap's board under Chairman Robson voted unanimously to fire Phizackerley. The broker said he would be replaced by Nicolas Breteau, who heads TP Icap's largest business, global broking.

By the end of the day July 10, its shares were down 36%, at 269.3 pence per share, and £860 million had been wiped off its value. The shares were down a further 3.5% as of shortly before 4:30 p.m. July 11, at 259.9 pence apiece.

TP Icap admitted to higher-than-expected costs during its preliminary results in March, but at its annual meeting in May it said it remained "firmly on track to deliver our target of £100 million of synergies." This target was an increase from the original promise to investors when the merger was announced that savings would be £60 million annually.

TP Icap employs 3,000 brokers who negotiate trades between buyers and sellers in fixed-income, over-the-counter swaps and commodity markets. They are understood to have been unhappy at plans to reduce broker compensation from its current 50.5% of commission charged to clients. However, in yesterday's statement, the company said "market forces" meant it would now increase that rate to at least 51%. Average revenue per broker rose from £484,000 to £579,000 in 2017.

"At the full-year results, the message from the finance director and the investor relations people was quite cautious but Phiz was quite upbeat. He said you can always sack more people to get the cost base down. Brokers are highly paid, but they generate a lot of business and if you don't treat them right they are going to leave. There are more and more instances of a handful of brokers setting up shop somewhere in London on their own and trading successfully," said an analyst who declined to be named.

TP Icap's executive incentive scheme was scaled down in 2017 after investor disquiet, and executive directors saw their potential maximum of £85 million in shares available to them reduced to £60 million. Phizackerley's own remuneration was also scaled back and he earned £2.32 million in 2017, down from £3.38 million in 2016.

TP Icap said increased regulatory capital requirements and refinancing of its revolving credit facility would increase finance costs to around £35 million. It blamed Brexit, costs associated with MiFID II, and legal and IT security spending for an additional £10 million in costs that would hit underlying profits in 2018. It said costs associated with these issues would increase from the extra £10 million to £25 million in 2019.

"Nicolas spoke last November as head of global broking and laid out the vision to be 'the largest and most respected professional intermediary in wholesale financial markets'. We would not expect a dramatic change in this vision, but there may be changes to timescale and execution," wrote Marcus Barnard, analyst and Numis Securities, in a note to clients.

TP Icap said: "It has become clear that a change of leadership is required to exercise our medium-term growth strategy and deliver the detail of the integration process."

Phizackerley, a former Lehman Bros. executive who joined Tullett Prebon in 2014 and oversaw its merger with Icap, was reported in the London Evening Standard to be "very surprised" by his ouster, "particularly in the light of a board meeting we had on June 20, that was not their position then," when they discussed half year numbers.


Technology, Media & Telecom
Can ComScore Break Nielsen's Near-Monopoly On Ratings?

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Sep. 17 2018 — Advertising agencies are becoming increasingly frustrated with the inability of Nielsen Holdings PLC's Nielsen Media Research to convince the major media companies to embrace its new cross-platform measurement system, called Total Audience Measurement. This creates a huge opportunity for comScore Inc., formerly Rentrak.

ComScore is trying to reinvent itself following its delisting in 2017 — it was relisted June 1 — following an accounting scandal. The company's stock has fallen from $65 per share intraday on Aug. 17, 2015, to close at just $18.06 per share on Sept. 6. It currently has a total enterprise value of less than $1.2 billion, paltry in comparison to Nielsen Holdings' $12.9 billion.

In April, comScore named Bryan Wiener, previously executive chairman of Dentsu's digital media agency 360i LLC, as its CEO. On Sept. 5, the company announced that it hired Sarah Hofstetter to serve as president and head up commercial strategy, including sales and marketing.

Wiener and Hofstetter have worked together for two decades, most recently at 360i, where Hofstetter was CEO and chairwoman. The two executives' deep ties to the advertising community may be just what is needed to bring a competing cross-platform measurement system to the broadcast and cable network industries.

Cable network ad revenue grew for decades before stumbling, albeit modestly, during the last recession. More recently, despite a booming economy the cable network ad industry has faltered, in part due to cord cutting and cord shaving but also because current ratings do not include all of online viewing and out-of-home viewing.

Currently, the ratings only include online viewing within a three-day period, which includes the exact same commercial load as linear. Many media companies do not believe that online viewers will tolerate the huge ad load that exists on linear TV and do not include the same commercial pods that appear on linear TV when serving up the shows online.

Although negotiations between Nielsen Media Research and the major media companies have been going on for some time, many in the industry are tired of the delays in adopting a new system and are looking at alternate ways to measure viewing.

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Technology, Media & Telecom
Most TV Everywhere Viewing Is Live TV In The Home

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence. To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Summary: subscribers to telco operators were more likely to indicate they streamed TV Everywhere content compared to cable and DBS subscribers.

Sep. 17 2018 — Streaming live TV Everywhere to a mobile device inside the home is the TV Everywhere activity most often performed at 52% of multichannel TV respondents, according to data from Kagan’s MediaCensus online consumer survey.

While 58% of respondents surveyed in multichannel homes viewed TV Everywhere in the last three months, just 46% did so out of their home. Click here for the full Kagan report.

Viewing live TV inside the home was not only the TV Everywhere activity performed by the most respondents; it was also the most frequently performed.

Subscribers to telco operators were more likely to indicate they streamed TV Everywhere content compared to cable and DBS subscribers. Subscribers to some operators are more likely to stream TV Everywhere content, with AT&T U-verse (64%) being the highest and WOW! (42%) the lowest among operator subscribers surveyed.

Younger subscribers, especially Millennials, were more likely to stream TV Everywhere content compared to older subscribers.

For more information about the terms of access to the raw data underlying this survey, please contact support@snl.com.

Data presented in this article is from the MediaCensus survey conducted in February 2018. The online survey included 20,035 U.S. internet adults matched by age and gender to the U.S. Census, with additional respondents subscribing to the top multichannel video operators in the U.S. The survey results have a margin of error of +/-0.7 ppts at the 95% confidence level. Generational segments are as follows: Gen Z: 18-20, Millennials: 21-37, Gen X: 38-52, Boomers/Seniors: 53+.

Consumer Insights is a regular feature from Kagan, a group within S&P Global Market Intelligence's TMT offering, providing exclusive research and commentary.

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Technology, Media & Telecom
Consumer Insights Online Video User Overview

Highlights

49% of survey respondents use more than one SVOD service.

Sep. 14 2018 — Data from Kagan’s U.S. online consumer surveys shows that 23% of respondents exclusively use one service, while almost half (49%) use more than one SVOD service. The service which is most commonly used exclusively is Netflix, while users of smaller services almost always use at least one other service.

Netflix is so universally used that it is both the most exclusively used service and the service most often used in conjunction with another service. In terms of demographics, Netflix users are very similar to the general population compared to smaller services that tend to have a younger user base.

With the exception of Netflix, most respondents indicated they have never subscribed to the top four services, including Netflix, Hulu, Amazon Prime Video and HBO NOW. Among those who indicated they dropped one of the top services, price was a principal reason for dropping, although content-specific reasons differed by service. Content is one of the most defining characteristics of online streaming services, which can be seen in the content viewed and most enjoyed on each service. In large part users of Netflix, Hulu and Amazon Prime Video most enjoy the content each service is known for.

A broader overview of this data was presented in a recent webcast.

Data presented in this blog is from U.S. Consumer Insights surveys conducted in September 2017 and March 2018. The online survey included 2,526 (2017) and 2,523 (2018) U.S. internet adults matched by age and gender to the U.S. Census. The survey results have a margin of error of +/-1.9 ppts at the 95% confidence level.

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Capital Markets
Public Companies Going Private

Sep. 14 2018 — The recent tweet from Elon Musk has understandably made big news, but it is worth pointing out that the appetite for taking public companies private has been a key area of activity this year. S&P Global Market Intelligence’s data shows that 2018YTD is already at 39% of 2017 numbers, standing at €17.8bn of deal value across 32 completed deals, globally. Going-private closed deal count is at a healthy 49% compared to full 2017 numbers.

In terms of most popular sectors for going-private deals, since 2013 - Information Technology has been leading the pack with €108.9bn of aggregate deal value recorded across 104 deals, while Consumer Discretionary* is trending as a distant second with €49.7bn of total deal value.

The top target location for going private deals is the US, and interestingly – China comes in at second place, with UK following. The three regions have seen total deal size of €218.8 during the period of 2013 through 2018YTD. The popularity of these locations is further supported by the fact that after going private, average target’s EBITDA values have increased compared to when those companies were public. The US-based going private targets grew their EBITDA by average of 56% since leaving the public market, while Chinese and the UK-located companies grew EBITDA by 10% and 38%, respectively. Overall, the going private moves proved to be successful for ex-public companies globally within the 2013 – 2018YTD deals’ time frame, where their average Net Income values grew by 58% while EBITDA values grew by a smaller but yet attractive 29%.

In terms of the deal pipeline, 18 going-private deals were announced globally since 1st January 2018 and would add €25.8bn of aggregate deal value to already closed €17.8bn.

The following was originally published on Angel News on August 16, 2018: Public companies going private, S&P Global comment

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