November 6, 2015 / 7:39 AM / in 4 years

UK's Tullett Prebon sees fall in profit margins, to cut jobs

(Reuters) - Tullett Prebon Plc said it expected full-year underlying operating profit margin to be about 1.5 percentage points lower than last year, hurt by increased investment costs and revenue fall in the second half of the year.

The British interdealer broker also said that it would cut jobs and fixed costs to mitigate further reduction in market volumes since the end of June, particularly in Europe.

These actions will result in a reduction of around 5 percent front office jobs in traditional interdealer product areas, with the costs involved charged as an exceptional item in its 2015 accounts. Tullett did not say how many jobs it would cut.

Tullett employed 2,536 full-time equivalent employees and directors worldwide in 2014, according to the company’s annual report posted on its web site.

Numis analysts estimate these redundancies would cost around 17 million pounds to 18 million pounds, but will then reduce staff costs by about 15 million pounds to 16 million pounds annually.

Tullett, whose brokers match buyers and sellers of currencies, bonds and swaps, said in June it expected costs to rise less than 1 percent of its annual revenue as it planned to further expand its broking business in the energy sector.

The company said on Friday that revenue in the four months to October rose 9 percent to 255 million pounds. Excluding gains from a recent acquisition, revenue fell 5 percent on a constant currency basis.

“We continue to believe Tullett is ideally placed to benefit from a combination of rising interest rates, a normalisation of volatility and further industry consolidation, but that the return to growth is unlikely to be a smooth ride,” Numis analysts wrote in a note.

Numis cut its target price on the stock to 430 pence from 450 pence.

Tullett shares fell 5.3 percent to 311.4 pence in early trading on the London Stock Exchange. The stock was the bottom performer on the FTSE All Share Financials Index.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier

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