Icap's margins squeezed by need to pay to keep key 'rain makers'

Icap, the money broker, yesterday admitted that its margins were being squeezed because of the need to pay up to keep hold of key moneymakers.

Pre-tax profit for the half year to 30 September fell to 139m from £148m despite revenue rising 6 per cent to £809m. The interim dividend has been increased by 9 per cent to 5.11p a share.

Michael Spencer, the chief executive, said the main reason for the fall was "investment in our businesses", which amounted to about £38m. But he admitted that compensation had had to rise at a time when money brokers have been doing well from the volatility in world markets. "There has been some knock-on effect on compensation," said Mr Spencer. "But it is cyclical and hopefully the cycle will swing back."

Such is the competition for staff in the money-broking arena that it is again facing the prospect of having its dirty linen aired in public as a result of messy court cases sparked by employee poaching. Rivals BGC Partners and Tullett Prebon are locked in a High Court case in London after the latter claimed BGC had launched a raid aimed at poaching most of its City of London staff.

Mr Spencer would not comment, although Icap has not been immune from legal action over similar issues in the past. He also declined to comment on the continuing furore over banking bonuses. "Most of our trading positions are short term: we aren't the same as the banks. We haven't any need to change our bonus structure," he said.

Icap has been aggressively expanding its business in Latin America, building a business in Brazil which employs 220 staff. It is also hoping to decrease its reliance on the voice broking business, where the highest pay packages have been located.

Mr Spencer said the company had been affected by a pronounced "summer slowdown", the first that it had seen for two years. Although this hit earnings he said it was a sign of markets returning to health.

He also expects the business to benefit from the move by regulators to force more "over the counter" derivative contracts to be cleared centrally and traded electronically. Such contracts have previously been traded bank to bank but have caused problems during the financial crisis when banks have been unable to meet obligations.