Tullett sees higher profit margin than previously expected

By Esha Vaish

(Reuters) - British interdealer broker Tullett Prebon Plc (TLPR.L) said profit margin was expected to be higher than previously thought, as it saw more activity in some of its traditional interdealer products over the last two months.

Shares in Tullett, which is to buy larger peer ICAP Plc's (IAP.L) global broking business, rose more than 9 percent. Its stock was the largest percentage gainer on the FTSE midcap index (.FTMC) on the London Stock Exchange on Friday.

The company said it expected full-year underlying operating profit margin to be higher at around 13.5 percent, just two months after it warned that increased investment costs and lower revenue would weigh on margin.

Tullet had reported a margin of 14.4 percent for the year ended Dec. 31, 2014.

Interdealer brokers, which match buyers and sellers of currencies, bonds and other tradable instruments, have been hit in recent years by regulation designed to rein in the riskier trading activities of their traditional investment bank clients.

Traditional telephone broking services have also faced sweeping reforms, as regulators push more derivatives trading onto electronic platforms to make the market more transparent.

Tullett in November said it would cut fixed costs and about 5 percent of the front office jobs in traditional interdealer product areas.

A week later it agreed to buy ICAP's global hybrid voice broking and information business in a 1.11-billion-pound deal to better compete in the sector.

Revenue over the months of November and December rose 14 percent, as oil and related products markets continued to trade strongly and market volumes in equity products picked up.

Excluding gains from an acquisition and currency movements, revenue during the period rose 4 percent. This compares with a 5 percent revenue fall for the four months to October.

"The first four months of the second half were particularly weak, leading to a profit warning in November, so this is a real turnaround that activity has picked up in its traditional business," Shore Capital analyst Paul McGinnis said.

McGinnis raised his full-year operating profit forecast by 8 percent to 107.5 million pounds. This is still short of the 118 million pounds he had forecast before the warning.

Tullett is expected to report results on March 1.

($1 = 0.6948 pounds)

(Reporting by Esha Vaish in Bengaluru; Editing by Gopakumar Warrier and Sunil Nair)