LONDON (ShareCast) - Despite cutting costs, margins at inter-dealer broker (IDB) Tullett Prebon fell last year. That came as revenues dropped by six per cent which together with the above pressured operating profits eight per cent lower. The main drivers of those trends were the increased focus by some banks on cutting their exposure to derivatives and brokers´need to cope with increased regulation. Yet the firm was able to maintain its dividend pay-out at a total of 16.85p. That amounts to a dividend yield of approximately five per cent.

As well, one of the five largest IDBs is likely to soon have to make an 'exit'. It will be neither Tullett nor Icap, both of whom will in turn benefit. At some point down the road, and for whatever reason, volatility will return to markets. “But I would be in no hurry to buy into the sector at present,” wrote The Times´s Tempus.

Contrary to expectations, following the demerger of Cookson Group into Alent and Vesuvius it was shares of the latter which outperformed. The firm sold unprofitable units, helping to compensate for the slowdown in steel production Stateside and in the Euren. It also hived off its precious metals unit before a collapse in the price of gold. Those measures improved margins and allowed for a 5.3% increase in the dividend. In fact, the firm is targeting a further improvement in margins.

The company will also gain from China´s shift towards consumption. Even so, at 14 times' earnings the shares do not seem much more than a hold, as the speed of that change in China is not clear and achieving those targets hinges on achieving internal efficiencies, Tempus says.

AB

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