REG - CMC Markets Plc - Interim Results
16/11/2022 07:00
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RNS Number : 5300G CMC Markets Plc 16 November 2022
16 November 2022
CMC MARKETS PLC
("CMC" or the "Company")
Interim results for the half year ended 30 September 2022
Net operating income 21% higher versus H1 2022.
Three year growth plan on track. CMC Invest successfully launched in the UK,
with Singapore to follow.
30 September 2022 30 September 2021 Change
For the half year ended
Net operating income (£ million) 153.5 126.7 21%
Trading net revenue (£ million) 128.4 101.0 27%
Investing net revenue (£ million) 20.8 24.2 (14%)
Other income (£ million) 4.3 1.5 173%
Profit before tax (£ million) 36.6 36.0 1%
Basic earnings per share (pence) 10.2 9.6 6%
Dividend per share (pence) 3.50 3.50 -
Trading gross client income (£ million) 154.9 127.0 22%
Trading client income retention 83% 80%
Trading active clients (numbers) 50,199 53,834 (7%)
Trading revenue per active client (£) 2,558 1,877 36%
Investing active clients (numbers) 164,632 185,847 (11%)
Notes:
- Net operating income represents total revenue net of introducing partner
commissions and levies
- Trading net revenue represents contracts for difference ("CFD") and spread
bet gross client income net of rebates, levies and risk management gains or
losses
- Investing net revenue represents stockbroking revenue net of rebates
- Trading gross client income represents spreads, financing and commissions
charged to clients (client transaction costs)
- Active clients represent those individual clients who have traded with or
held a CFD or spread bet position or who traded on the stockbroking platform
on at least one occasion during the six-month period
- Trading revenue per active client represents total trading revenue from
trading active clients after deducting rebates and levies
- A reconciliation of revenue alternative performance measures ("APMs") to
the Group's primary statements can be found on page 34
H1 2023 Financial Highlights
· Net operating income of £153.5 million (H1 2022: £126.7 million
+21% yoy).
· Trading net revenue was £128.4 million (H1 2022: £101.0 million
+27% yoy).
· Investing net revenue was £20.8 million (H1 2022: £24.2 million
-14% yoy).
· Operating costs (excluding variable remuneration) of £106.3
million (H1 2022: £83.1 million(1) +28% yoy) and £115.6 million (H1 2022:
£89.7 million(1) +29% yoy) including variable remuneration. The majority of
the cost increase reflects investment for growth across CMC's investing and
trading platforms.
· Regulatory total capital ratio of 610% (FY 2022: 489%) and net
available liquidity of £254.2 million (FY 2022: £245.9 million).
· Interim dividend of 3.50 pence per share (H1 2022: 3.50 pence)
with a total dividend for the year expected to be in line with policy at 50%
of profit after tax.
Operational Highlights
· Plans to grow Group net operating income by 30% over three years
based on the 2022 results and underlying conditions, remain on track.
· Significant development upgrades delivered across existing
trading platforms in H1 2023. These include enhanced FX liquidity
functionality, new trading analytics, new pricing functions and enhanced
onboarding initiatives. Further product upgrades on track for delivery in H2
2023.
· Expansion of CMC Invest continues. The recent launch of the UK
investment platform, CMC Invest (http://www.cmcinvest.com) UK, which will see
new product additions over the coming months, will be followed by the launch
of CMC Invest Singapore by the end of FY 2023. Further regional expansion in
New Zealand and Canada also being considered.
· Trading active client figures decreased by 7% although all
regions saw an increase in revenue per client (+36% yoy) largely due to higher
client income along with an increase in client income retention to 83% (H1
2022: 80%). CMC's marketing focus on premium customers continues to act as a
successful strategy for the Group.
· Operating cost guidance for FY 2023 remains unchanged at £215
million excluding variable remuneration. Ongoing GBP weakness and the rate of
recruitment for the delivery of strategic initiatives could result in higher
costs.
1 30 September 2021 figures restated to include social taxes on FY 2022 annual
discretionary bonus to be within variable remuneration
( )
Lord Cruddas, Chief Executive Officer, commented:
"I am pleased to report another strong performance for the first six months of
the year. We saw an acceleration in activity across FX and commodities in
addition to the normal activity across our index flow during a period of
heightened focus on monetary policy action around the globe and a pickup in
market volatility and trading volumes.
Against this backdrop, we are on track to deliver our three-year expansion
initiatives aimed at driving higher revenues and diversifying our earnings. We
remain committed to improving our offering across our core trading CFD and
spread bet businesses, allowing our clients to access a wider range of
products through our award-winning platforms. In our Institutional trading
business, we continue to grow volumes as a non-bank liquidity provider in the
FX spot market. I am also pleased to have launched our new UK investing
business, CMC Invest (http://www.cmcinvest.com/) UK. This move in the UK into
self-directed investing marks a significant milestone for us and complements
our already sector-leading stockbroking business in Australia. CMC Invest UK
will see significant new product additions in coming months, enhancing the
platform to include ISAs, multi-currency accounts, mutual funds, and SIPPs.
The UK wealth market remains an attractive environment and we are on target to
offer retail investors a market-leading solution for long-term investment and
wealth creation.
I am also excited about the ongoing geographical expansion of our offering
into new regions like Singapore. We have committed to launch CMC Invest
Singapore by the end of FY 2023. This will complement our already substantial
business in Australia, where the migration of the approximately 500,000 ANZ
Share Investing client base is set to be completed on time, by the end of this
financial year.
We are on a fast track to diversification, using our existing platform
technology to win B2B and B2C investing business. Our strategic growth plans
are on track and set to deliver significant new business expansion as we
introduce new products across our retail, institutional and stockbroking
businesses."
An analyst and investor presentation will be held on 16 November 2022 9:00am
UK time. Participants need to register using the links below to access the
webcast.
Webcast:
https://www.lsegissuerservices.com/spark/CMCMarkets/events/fd562c32-760a-4137-a993-c9ada1ca9232
(https://www.lsegissuerservices.com/spark/CMCMarkets/events/fd562c32-760a-4137-a993-c9ada1ca9232)
Conference Line:
https://cossprereg.btci.com/prereg/key.process?key=PFDJXXVAE
(https://cossprereg.btci.com/prereg/key.process?key=PFDJXXVAE)
Forthcoming announcement dates
25 January 2023 Q3 2023 trading update
14 April 2023 FY 2023 pre-close update
Forward looking statements
This trading update may include statements that are forward looking in nature.
Forward looking statements involve known and unknown risks, assumptions,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Group to be materially different from any
future results, performance or achievements expressed or implied by such
forward looking statements. Except as required by the Listing Rules and
applicable law, the Group undertakes no obligation to update, revise or change
any forward-looking statements to reflect events or developments occurring
after the date such statements are published.
MAR disclosure statement
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
("MAR"). Upon the publication of this announcement via Regulatory Information
Service ("RIS"), this inside information is considered to be in the public
domain.
Enquiries
CMC Markets Plc
James Cartwright, Investor Relations
Euan Marshall, Chief Financial
Officer
investor.relations@cmcmarkets.com
Camarco
+44 (0) 20 3757 4980
Geoffrey
Pelham-Lane
Jennifer Renwick
Notes to Editors
CMC Markets Plc ("CMC"), whose shares are listed on the London Stock Exchange
under the ticker CMCX (LEI: 213800VB75KAZBFH5U07), was established in 1989 and
is now one of the world's leading online financial trading businesses. The
Company serves retail and institutional clients through regulated offices and
branches in 12 countries, with a significant presence in the UK, Australia,
Germany and Singapore. CMC Markets offers an award-winning, online and mobile
trading platform, enabling clients to trade over 10,000 financial instruments
across shares, indices, foreign currencies, commodities and treasuries through
contracts for difference ("CFDs"), financial spread bets (in the UK and
Ireland only) and, in Australia and the UK, access stockbroking services. More
information is available at http://www.cmcmarketsplc.com
CHIEF EXECUTIVE OFFICER'S REVIEW
Our strategy to expand and diversify the business into new asset classes,
including the launch of a new investment platform in the UK and the
development of a new investment platform in Singapore, is on track. These new
business additions are complemented by continued investment in our established
CFD and spread bet trading businesses in line with our mission to constantly
offer a superior and unrivalled technology experience for our clients.
Financial performance
We closed the first six months with a pickup in market volatility and client
trading volumes driving an improvement in net operating income versus last
year. H1 2023 trading net revenue was £128.4 million (H1 2022: £101.0
million), up 27% year-on-year. H1 2023 investing net revenue, which currently
relates exclusively to CMC Invest Australia, was £20.8 million (H1 2022:
£24.2 million), down 14% year-on-year driven by lower activity and
unfavourable market conditions resulting from the uncertainty around the
global economic outlook, inflationary pressures and the resultant impact on
interest rates.
Client trading assets under management ("AuM") finished at c. £506 million,
below the historical period-end record of c. £560 million but remaining at
elevated levels compared to pre-COVID-19. H1 2023 active trading clients were
lower compared to H1 2022 (down 7% to 50,199), nevertheless all regions saw a
significant increase in revenue per client (up 36%) largely as a result of
growth in client income as well as improved client income retention to 83% (H1
2022: 80%). Our marketing focus is set on positioning ourselves and our
platforms towards the premium customer segment. This continues to play to our
strengths.
In H1 2023 our Australian investing business, rebranded to CMC Invest
Australia, finished the period with a modest reduction in assets under
administration ("AuA") from historical record levels. Net revenue decreased
14% driven by lower active clients and unfavourable market conditions
resulting in fewer investment opportunities for clients. However, this was
partially offset by a significant increase (279% or £1.2m) in interest income
driven by higher interest rates. Overall activity remains elevated versus
pre-pandemic levels. The migration of approximately 500,0000 clients as part
of the ANZ Share Investing acquisition is on track and scheduled to finish in
H2 this financial year.
Operating costs
Operating costs for H1 2023, excluding variable remuneration, were £106.3
million (H1 2022: £83.1 million). Operating cost guidance for FY 2023 remains
unchanged at £215 million excluding variable remuneration. Currency
fluctuations, in particular any resumption in GBP weakness, would put pressure
on non-GBP denominated costs, but nevertheless would be expected to have a net
positive effect on profit due to non-GBP denominated revenue.
Investing (non-leveraged) business expansion update
CMC Invest UK was launched to the UK public on 30 September, marking the first
move for CMC into the UK's significant self-directed investing market. It is a
natural progression for the Group, complementing our already market-leading
stockbroking business in Australia. New product additions in coming months
will include ISAs, multi-currency accounts, mutual funds, ESG investment
screening and SIPPs. Once this functionality is delivered, we will continue to
enhance and invest, providing unrivalled market access to investors through
the best technology at lower transactional costs and fees compared to our
competitors. We are confident that we will be able to capture an increasing
part of the available market over time. As part of our UK growth strategy, we
will also deliver a full B2B offering, a strategy we have successfully
implemented in Australia which has resulted in CMC becoming the second largest
stockbroker in the country.
In Australia the migration of approximately 500,000 Share Investing client
accounts following the acquisition of the ANZ Bank investing business
continues and is expected to be completed by the end of FY 2023. The CMC
Invest Australia platform will offer these new clients a wide range of
additional benefits, including access to enhanced market-leading mobile apps
and complementary educational tools and resources, as well as lower brokerage
commissions across four major international markets and the local Australian
market. Our platform offering continues to receive accolades and I am proud to
say our Australian stockbroking business won the Canstar Broker of the Year
award again in 2022; the twelfth year in a row we have received this
prestigious award. At the same time, we continue to pursue growth through B2B
partnerships as well as investing and expanding our product offering across
the region, which will include physical cryptocurrencies by the end of FY
2023.
We have ambitious plans to continue this expansion in various other countries.
The expansion of CMC Invest to our Singapore office continues as planned. More
than half of the Singaporean population over the age of sixteen have
investments in stocks and equities, equating to around 1.5 million people, and
over time the platform will offer B2B and white label opportunities along with
the potential to allow further expansion into Asian markets.
Trading (leveraged) business expansion update
CMC is a pioneer of platform technology and boasts over 25 years of experience
in providing technology-backed solutions for B2C and B2B clients and partners.
This gives us scale, leverage, and the ability to drive down transaction
costs, as well as the ability to launch new platforms and enter new markets
quickly.
On our trading platforms, we continue to invest in new enterprises to drive
revenue growth. Our institutional business continues to capture the
significant growth we are seeing in global FX trading where Spot FX represents
some $2.1 trillion of average daily volume according to recent Bank for
International Settlements data. The investment in our traditional business has
intensified over the past year and we are also working towards being able to
offer new trade types, routing, and custody options on a range of asset
classes. These include cash equities, physical cryptocurrencies, and options.
This is a multi-phase programme with the first phase offering our
institutional customers the ability to trade physical equities in the US
market via the CMC Markets Connect platform and is due to be delivered early
in FY 2024. All this forms part of our focus to diversify our client mix by
both type and geography. It will also benefit the expansion across other CMC
Markets growth strategies
Managed separation update
With the launch of CMC Invest, and its growing B2B platform business, the
Group boasts two strong underlying businesses, trading and investing, each
having robust growth prospects in sizeable markets with excellent competitive
positions. In this context, on 15 November 2021 CMC Markets announced that it
had initiated a strategic review to evaluate the merits of a managed
separation of the trading and investing businesses of the Group. The review
was consistent with the Board's continuous evaluation of strategic
opportunities to maximise shareholder value.
The review has concluded that given the strong commercial and operational
synergies between the Trading and Investing businesses, shareholder's
interests would be best served by ensuring that both businesses operate within
the current Group structure for the time being rather than by pursuing a
planned separation at this stage.
Regulation
The regulatory framework remains unchanged as reported at our FY 2022 results.
The most recent significant change was the intervention by the Australian
Securities and Investments Commission ("ASIC") relating to CFDs on 29 March
2021. This change further harmonised the global regulatory environment,
allowing us to focus on growing our business in an industry where regulatory
arbitrage is reduced. In April 2022, ASIC extended its product intervention
order, imposing conditions on the issue and distribution of CFDs for a further
five years to 23 May 2027, thereby improving regulatory visibility.
People and sustainability
Our people are core to our success and we have a strong team across all our
business units. We continue to invest in attracting the best talent to our
business to support the delivery of our core strategic initiatives. Likewise,
the Group understands it has a duty to help improve the prospects and living
environment for our employees and the local community. Sustainability and
social awareness are part of our core values and culture. We continue to
develop our core KPIs associated with our sustainability strategy "Our
Tomorrow: taking a positive position". Further details of our targets and
goals will be presented within our FY 2023 Annual Report and Financial
Statements.
Share buyback programme
On 15 March 2022, the Company commenced a share buyback programme of up to
£30 million. The Board's decision to undertake the buyback was underpinned by
the Company's robust capital position and after having considered the capital
and liquidity requirements for ongoing investment in the business. This
buyback programme formed part of a normal balanced approach to shareholder
returns alongside the current dividend policy. The share buyback programme was
completed on 17 October 2022.
Dividend
The Group is maintaining its dividend policy of paying 50% of profit after
tax. The Board has declared an interim dividend of 3.50 pence per share (H1
2022: 3.50 pence per share), with a view to paying a final dividend in line
with the Group's policy. The interim dividend will be paid on 5 January 2023
to those members on the register at the close of business on 2 December 2022.
Outlook
Our three-year growth plans remain unchanged and on track. New business
expansion is expected to grow net operating income by 30% over the next three
years based on the FY 2022 result and underlying conditions, with expansion in
profit margins expected from FY 2024 onwards. The targeted growth is expected
to be broadly linear over that period. New growth investment will focus on
initiatives aiming to enhance functionality and capture a broader share of
wallet as we evolve our execution services and investment platforms. As
already discussed, we will continue to utilise our technology to enter new
markets and expand our investing offering. The impact of this growth and
diversification will reduce revenue volatility in the medium term and grow
pre-tax profit margins from FY 2024.
In respect of operating costs, guidance for FY 2023 remains unchanged at £215
million excluding variable remuneration. Currency volatility still leads to
some uncertainty over non-GBP costs although any sustained GBP weakness would
have a net positive effect on profit due to non-GBP denominated revenue. We
expect inflationary pressures to persist in H2 and we continue to monitor the
rate of recruiting success for the delivery of core strategic initiatives for
the remainder of the year. Further expansion into the institutional space and
the geographic expansion of the investment business is expected to cause some
cost increases in FY 2024 when comparing against FY 2023.
OPERATING review
Summary
Net operating income increased by £26.8 million (21%) to £153.5 million,
with higher trading net revenue being driven by increased client income,
particularly through the B2B channel, as well as increased interest income.
This was partly offset by a decrease in investing net revenue.
Trading net revenue increased by £27.4 million (27%) mainly driven by an
increase in client income. This was primarily driven by an increase in client
income from B2B clients, although it was also positively impacted by
heightened market volatility in H1 2023 compared to the prior year. Client
income retention was also slightly higher during the period at 83% (H1 2022:
80%). This resulted in revenue per active client ("RPC") increasing by £681
(36%) to £2,558.
Trading active client numbers decreased by 7% in comparison to H1 2022,
although monthly active clients remain significantly above pre-COVID-19
levels.
Investing net revenue is 14% lower at £20.8 million (H1 2022: £24.2 million)
driven by lower active clients and unfavourable market conditions resulting
from the uncertainty around the global economic outlook, inflationary
pressures and the resultant impact on interest rates.
Interest income increased by £2.6m (719%) as a result of the rise in global
interest rates. The majority of the Group's interest income is earned through
our segregated client deposits, with investing interest income growing by
£1.2m (279%) compared to prior year.
Statutory profit before tax was in line with the prior year at £36.6 million
(H1 2022: £36.0 million) with an increase in net operating income offset by
higher operating expenses as the Group continues to invest in its strategic
growth plans. Profit before tax margin(1) decreased by 4.6% from 28.4% to
23.8%.
Net operating income overview
For the half year ended 30 September 2022 30 September 2021 Change Change %
£ million
Trading net revenue 128.4 101.0 27.4 27%
Investing net revenue 20.8 24.2 (3.4) (14%)
Total net revenue(2) 149.2 125.2 24.0 19%
Interest income 2.9 0.3 2.6 719%
Other operating income 1.4 1.2 0.2 13%
Net operating income 153.5 126.7 26.8 21%
B2B and B2C net revenue
For the half year ended 30 September 2022 30 September 2021 Change
£ million B2C(3) B2B(4) Total B2C B2B Total B2C B2B Total
Trading net revenue 92.3 36.1 128.4 85.0 16.0 101.0 9% 125% 27%
Investing net revenue 4.4 16.4 20.8 4.9 19.3 24.2 (11%) (15%) (14%)
Total net revenue 96.7 52.5 149.2 89.9 35.3 125.2 8% 49% 19%
( )
(1) Statutory profit before tax as a percentage of net operating income
(2) CFD and spread bet gross client income net of rebates, levies and risk
management gains or losses and stockbroking revenue net of rebates
(3) Business to Consumer ("B2C") - revenue from retail and professional
clients
(4) Business to Business ("B2B") - revenue from institutional clients
Regional performance overview: Trading (Leveraged) Business
For the half year ended 30 September 30 September Change
2022
2021
Trading net revenue (£m) Gross client income(1) (£m) Active Clients RPC (£) Trading net revenue (£m) Gross client income(1) (£m) Active Clients RPC (£) Trading net revenue Gross client income(1) Active Clients RPC
UK 54.5 61.3 12,576 4,333 34.5 47.6 13,590 2,543 58% 29% (7%) 70%
Europe 24.9 31.5 12,705 1,961 18.6 20.6 13,664 1,359 34% 53% (7%) 44%
UK & Europe 79.4 92.8 25,281 3,141 53.1 68.2 27,254 1,946 50% 36% (7%) 61%
APAC & Canada 49.0 62.1 24,918 1,968 47.9 58.8 26,580 1,802 2% 6% (6%) 9%
Total 128.4 154.9 50,199 2,558 101.0 127.0 53,834 1,877 27% 22% (7%) 36%
(1)Spreads, financing and commissions on CFD client trades.
All regions saw an increase in RPC largely as a result in growth in client
income against the prior year, but also due to improved client income
retention to 83% (H1 2022: 80%). Active client figures reduced by a similar
level in all regions.
UK
Active clients decreased by 7% to 12,576 (H1 2022: 13,590), although remained
significantly above pre-COVID-19 levels (H1 2020: 9,259). Gross client income
increased by 29% to £61.3 million (H1 2022: £47.6 million) largely driven by
growth in B2B trading, whilst B2C client income also grew due to increased
high value client trading.
Revenue per active client increased by 70% to £4,333 (H1 2022: £2,543) due
to both higher gross client income and a slight increase in client income
retention leading to higher net revenue.
Europe
Europe comprises offices in Austria, Germany, Norway, Poland and Spain. Active
client numbers were 7% lower than prior year, although gross client income
increased by 53% to £31.5 million as a result of increased volume in both B2B
and B2C trading, particularly in smaller offices in the region.
As a result, revenue per active client increased by 44% to £1,961 (H1 2022:
£1,359) with higher gross client income and a slight increase in client
income retention leading to higher net revenue.
APAC & Canada
Our APAC & Canada business services clients from our Sydney, Auckland,
Singapore, Toronto and Shanghai offices along with other regions where we have
no physical presence.
Active client numbers decreased by 6% to 24,918 (H1 2022: 26,580), however,
activity remains materially above pre-COVID-19 levels (H1 2020: 18,479). Gross
client income increased by 6% to £62.1 million (H1 2022: £58.8 million),
which in turn led to a 9% increase in revenue per client to £1,968 (H1 2022:
£1,802).
Investing (non-leveraged) performance overview
Investing net revenue
For the half year ended 30 September 2022 30 September 2021 Change Change %
£ million
B2B net revenue 16.4 19.3 (2.9) (15%)
B2C net revenue 4.4 4.9 (0.5) (11%)
Total investing net revenue 20.8 24.2 (3.4) (14%)
Active clients
For the half year ended 30 September 2022 30 September 2021 Change %
B2C active clients 45,226 41,590 9%
B2B active clients 119,406 144,257 (17%)
Total investing active clients 164,632 185,847 (11%)
Investing net revenue decreased 14% driven by lower active clients and
unfavourable market conditions resulting in fewer investment opportunities for
clients. However, this was partially offset by a significant increase (279% or
£1.2m) in interest income.
Operating expenses
For the half year ended 30 September 2022 30 September 2021 Change %
£m
Net staff costs - fixed (excluding variable remuneration)(1) 40.0 33.5 (19%)
IT costs 16.3 14.2 (15%)
Marketing costs 15.2 10.8 (41%)
Sales-related costs 2.1 0.9 (143%)
Premises costs 2.1 1.8 (17%)
Legal and professional fees 5.6 4.7 (20%)
Regulatory fees 7.0 3.2 (117%)
Depreciation and amortisation 7.3 6.4 (13%)
Other 10.7 7.6 (39%)
Operating expenses excluding variable remuneration 106.3 83.1 (28%)
Variable remuneration(1) 9.3 6.6 (41%)
Operating expenses including variable remuneration 115.6 89.7 (29%)
Interest 1.3 1.0 (33%)
Total costs 116.9 90.7 (29%)
(1 30 September 2021 figures restated to include social taxes on FY 2022
annual discretionary bonus to be within variable remuneration.)
Operating expenses excluding variable remuneration increased by £23.2 million
(28%) to £106.3 million. This was driven by an increase in staff costs (£6.5
million) as a result of significant investment in technology and client
services staff over the period, and higher marketing costs (£4.4 million).
The increase in marketing was driven both by additional spend in the Australia
Invest business to replace the ANZ Bank acquisition funnel, and by higher
costs in the trading business against a prior year comparative where less
favourable market conditions meant there were fewer opportunities for targeted
marketing.
Regulatory fees increased by £3.8 million as a result of a higher FSCS levy.
IT costs increased by £2.1 million due to higher market data charges and
investments in strategic projects. Sales-related costs increased by £1.2
million (143%), primarily driven by the release of provisions in H1 2022 which
reduced the prior year comparative.
Other expenses increased by £3.1m (39%) due to a number of factors, the main
drivers being higher bank charges, recruitment costs and FX losses on balance
sheet revaluation, partly offset by lower irrecoverable sales taxes.
Variable remuneration increased to £9.3 million (H1 2022: £6.6 million),
primarily due to increases in headcount and a lower discretionary bonus
accrual percentage in H1 2022 due to revenue performance in the period.
Taxation
The effective tax rate for H1 2023 was 20.8%, down from the H1 2022 effective
tax rate, which was 22.7%. The effective tax rate has decreased in the period
due to a lower proportion of Group PBT being generated in Australia, where the
corporation tax rate is higher.
Balance sheet and own funds
Intangible assets increased by £3.2 million to £33.5 million (31 March 2022:
£30.3 million) due to capitalisation of staff costs related to technology
projects, partially offset by amortisation within the period.
Amounts due from brokers increased by £8.4 million to £204.5 million due to
an increase in excess cash held at brokers.
Other assets decreased by £9.4 million to £4.1 million due to a reduction in
client cryptocurrency exposures driving a corresponding drop in assets held at
brokers for hedging purposes.
Cash and cash equivalents decreased during the period, with a cash outflow for
the prior year final dividend of £25.3 million, higher amounts held at
brokers in the period and cash utilised for the Group's share buy back
purchases in the period (£25.0 million), being partially offset by cash
inflows from the Group's operating performance, resulting in a £35.7 million
decrease.
Title transfer funds increased by £8.9 million, reflecting the ongoing high
levels of account funding by a small population of mainly institutional
clients.
Own funds decreased by £44.0 million to £326.0 million (31 March 2022:
£369.9 million) during the six month period with the decrease largely due to
the payment of the final FY22 dividend and funds utilised for the Group's
share buy back programme.
Principal risks and uncertainties
Details of the Group's approach to risk management and its principal risks and
uncertainties were set out on pages 50 to 56 of the 2022 Group Annual Report
and Financial Statements (available on the Group website
https://www.cmcmarketsplc.com (https://www.cmcmarketsplc.com) ). During the
six months to 30 September 2022 and up to the date of approval of the
condensed consolidated financial statements, there have been no significant
changes to the Group's risk management framework. The Group categorises its
principal risks into three categories: business and strategic risks; financial
risks; and operational risks. The Group's top and emerging risks, which form
either a subset of one or multiple principal risks within the three principal
risk categories, and continue to be at the forefront of Group discussions over
the remaining six months of the financial year and beyond, are regulatory
relations across the Group, people risk, cyber risk and project delivery risk.
RESPONSIBILITY STATEMENT
The Directors listed below (being all the Directors of CMC Markets plc)
confirm that to the best of our knowledge, these condensed consolidated
financial statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and that the interim management report includes a
fair review of information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· the interim management report includes a fair review of the
important events that have occurred during the first six months of the
financial year and their impact on the condensed consolidated financial
statements, together with a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months of
the financial year and any material changes in the related-party transactions
described in the last annual report.
Neither the Group nor the Directors accept any liability to any person in
relation to the interim results for the half year ended 30 September 2022,
except to the extent that such liability could arise under English law.
Accordingly, any liability to a person who has demonstrated reliance on any
untrue or misleading statement or omission shall be determined in accordance
with Section 90A and Schedule 10A of the Financial Services and Markets Act
2000.
By order of the Board of Directors
Lord
Cruddas
Chief Executive
Officer
16 November 2022
CMC Markets plc Board of Directors
Executive Directors
Lord Peter Cruddas (Chief Executive Officer)
David Fineberg (Deputy Chief Executive Officer)
Matthew Lewis (Head of Asia Pacific and Canada)
Euan Marshall (Chief Financial Officer)
Non-Executive Directors
James Richards (Chairman)
Sarah Ing
Susanne Chishti
Paul Wainscott
CONDENSED CONSOLIDATED INCOME STATEMENT
For the half year ended 30 September 2022
£ '000 Note 30 September 2022 30 September 2021
Revenue 3 171,559 148,767
Interest income 2,851 348
Total revenue 174,410 149,115
Introducing partner commissions and betting levies (20,950) (22,377)
Net operating income 2 153,460 126,738
Operating expenses 4 (115,485) (89,667)
Net impairment losses on financial assets (88) (21)
Operating profit 37,887 37,050
Finance costs (1,330) (1,002)
Profit before taxation 36,557 36,048
Taxation 5 (7,605) (8,173)
Profit for the period attributable to owners of the parent 28,952 27,875
Earnings per share
Basic earnings per share (p) 6 10.2 9.6p
Diluted earnings per share (p) 6 10.1 9.6p
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the half year ended 30 September 2022
£ '000 30 September 2022 30 September 2021
Profit for the period 28,952 27,875
Other comprehensive income/(expense):
Items that may be subsequently reclassified to income statement
(Loss)/Gain on net investment hedges, net of tax (86) 1,179
Gains recycled from equity to the income statement 269 -
Currency translation differences 2,696 (1,810)
Changes in the fair value of debt instruments at fair value through other (527) (5)
comprehensive income, net of tax
Other comprehensive income/(expense) for the period 2,352 (636)
Total comprehensive income for the period 31,304 27,239
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September 2022
£'000 Note 30 September 2022 31 March 2022
ASSETS
Non-current assets
Intangible assets 8 33,512 30,328
Property, plant and equipment 9 25,075 24,941
Deferred tax assets 5,995 6,022
Financial investments 13 14,418 13,448
Trade and other receivables 10 2,260 1,797
Total non-current assets 81,260 76,536
Current assets
Trade and other receivables 10 128,544 156,917
Derivative financial instruments 11 6,142 2,359
Current tax recoverable 941 -
Other assets 12 4,065 13,443
Financial investments 13 13,127 14,497
Amounts due from brokers 204,502 196,117
Cash and cash equivalents 14 140,879 176,578
Total current assets 498,200 559,911
TOTAL ASSETS 579,460 636,447
LIABILITIES
Current liabilities
Trade and other payables 15 176,381 215,853
Derivative financial instruments 11 4,166 2,362
Share buyback liability 2,303 27,264
Borrowings - 194
Lease liabilities 16 5,778 4,916
Current tax payable - 429
Provisions 336 369
Total current liabilities 188,964 251,387
Non-current liabilities
Lease liabilities 16 8,398 9,269
Deferred tax liabilities 2,901 3,309
Provisions 2,118 2,117
Total non-current liabilities 13,417 14,695
TOTAL LIABILITIES 202,381 266,082
EQUITY
Share capital 70,832 73,193
Share premium 46,236 46,236
Capital redemption reserve 2,642 281
Own shares held in trust (599) (1,094)
Other reserves (48,667) (75,980)
Retained earnings 306,635 327,729
Total equity 377,079 370,365
TOTAL EQUITY AND LIABILITIES 579,460 636,447
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the half year ended 30 September 2022
£'000 Share capital Share premium Capital redemp-tion reserve Own shares held in trust Other reserves Retained earnings Total Equity
At 31 March 2021 73,299 46,236 - (382) (49,334) 330,698 400,517
New shares issued 175 - - - - - 175
Profit for the period - - - - - 27,875 27,875
Other comprehensive expense for the period - - - - (636) - (636)
Acquisition of own shares held in trust - - - (277) - - (277)
Utilisation of own shares held in trust - - - 218 - - 218
Share-based payments - - - - - (1,107) (1,107)
Tax on share-based payments - - - - - 779 779
Dividends - - - - - (62,414) (62,414)
At 30 September 2021 73,474 46,236 - (441) (49,970) 295,831 365,130
At 31 March 2022 73,193 46,236 281 (1,094) (75,980) 327,729 370,365
Profit for the year - - - - - 28,952 28,952
Other comprehensive income for the period - - - - 2,352 - 2,352
Acquisition of own shares held in trust - - - (130) - - (130)
Utilisation of own shares held in trust - - - 625 - - 625
Share buyback (2,361) - 2,361 - 24,961 (24,961) -
Share-based payments - - - - - 165 165
Dividends - - - - - (25,250) (25,250)
At 30 September 2022 70,832 46,236 2,642 (599) (48,667) 306,635 377,079
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the half year ended 30 September 2022
£ '000 Note 30 September 2022 30 September 2021
(Restated)
Cash flows from operating activities
Cash generated from operations 17 37,437 92,198
Interest income 3,023 875
Finance costs (1,330) (985)
Tax paid (9,294) (7,051)
Net cash generated from operating activities 29,836 85,037
Cash flows from investing activities
Purchase of property, plant and equipment (2,452) (2,340)
Investment in intangible assets (10,118) (3,593)
Purchase of financial investments (14,725) (14,805)
Proceeds from maturity of financial investments and coupon receipts 14,414 14,255
(Outflow)/inflow on net investment hedges (7) 1,361
Net cash used in investing activities (12,888) (5,122)
Cash flows from financing activities
Proceeds from borrowings - 9,999
Repayment of borrowings (194) (10,944)
Principal elements of lease payments (2,919) (3,038)
Acquisition of own shares (130) (102)
Payments for Share buyback (24,961) -
Dividends paid (25,250) (62,414)
Net cash used in financing activities (53,454) (66,499)
Net (decrease)/increase in cash and cash equivalents (36,506) 13,416
Cash and cash equivalents at the beginning of the period 176,578 118,921
Effect of foreign exchange rate changes 807 (718)
Cash and cash equivalents at the end of the period 140,879 131,619
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the half year ended 30 September 2022
1. Basis of preparation
Basis of accounting and accounting policies
The condensed consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. The condensed
consolidated financial statements do not constitute statutory accounts within
the meaning of Section 434 of the Companies Act 2006. Within the notes to the
condensed consolidated financial statements, all current and comparative data
covering periods to (or as at) 30 September is unaudited.
The Group's statutory financial statements for the year ended 31 March 2022
have been prepared in accordance with UK-adopted international accounting
standards, including interpretations issued by the IFRS Interpretations
Committee and with the requirements of the Companies Act 2006. These financial
statements have been delivered to the Registrar of Companies. The auditors'
opinion on those financial statements was unqualified and did not contain a
statement made under Section 498 of the Companies Act 2006. The 31 March 2022
balances presented in these condensed consolidated financial statements are
from those financial statements and are audited.
The accounting policies and methods of computation applied in these condensed
consolidated financial statements are consistent with those applied in the
Group's statutory financial statements for the year ended 31 March 2022. The
condensed consolidated financial statements should be read in conjunction with
the statutory financial statements for the year ended 31 March 2022. In the
year ending 31 March 2022 the consolidated financial statements of the Group
have been prepared in accordance with IFRS as adopted by the UK Endorsement
Board. This change in basis of preparation is required by UK company law for
the purpose of financial reporting as a result of the UK's exit from the EU on
31 January 2020 and the cessation of the transition period on 31 December
2020. This change does not constitute a change in accounting policy but rather
a change in accounting framework. There is no impact on recognition,
measurement or disclosure between the two frameworks in the period reported.
The condensed consolidated financial statements have been prepared under the
historical cost convention, except in the case of "Financial instruments at
fair value through profit or loss (FVPL)" and "Financial instruments at fair
value through other comprehensive income (FVOCI)". The financial information
is rounded to the nearest thousand, except where otherwise indicated.
Future accounting developments
The Group did not implement the requirements of any Standards or
Interpretations that were in issue but were not required to be adopted by the
Group at the half year. No other Standards or Interpretations have been issued
that are expected to have an impact on the Group's financial statements.
There is no material impact expected of reference rate reform for the half
year ended 30 September 2022 and will not lead to a remeasurement gain or
loss.
Significant accounting judgements and estimates
The preparation of condensed consolidated financial statements in conformity
with IFRS requires the use of certain significant accounting judgements. It
also requires management to exercise its judgement in the process of applying
the Group's accounting policies. The areas involving a higher degree of
judgement or complexity, or where assumptions and estimates are significant to
the condensed consolidated financial statements are:
Contingent liabilities
Judgement has been applied in evaluating the accounting treatment of the
specific matters described in Note 22 (Contingent Liabilities), notably the
probability of any obligation or future payments arising.
Accounting for cryptocurrencies
The Group has recognised £4,065,000 (31 March 2022: £13,443,000) of
cryptocurrency assets and rights to cryptocurrency assets on its Statement of
Financial Position as at 30 September 2022. These assets are used for hedging
purposes and held for sale in the ordinary course of business. A judgement has
been made to apply the measurement principles of IFRS 13 Fair value
measurement in accounting for these assets. The assets are presented as 'other
assets' on the Condensed Consolidated Statement of Financial Position.
Intangible assets
The Group has recognised £14,322,000 (31 March 2022: £14,237,000) of
customer relationship intangible assets under development on its Statement of
Financial Position as at 30 September 2022 relating to the transaction with
Australia and New Zealand Banking Group Limited ("ANZ") to transition its
portfolio of Share Investing clients to CMC for AUD$25m. A judgement has been
made to apply the recognition and measurement principles of IAS 38 Intangibles
in accounting for these assets.
Key financial estimates
Intangible assets
The Group has recognised £9,712,000 (31 March 2022: £6,054,000) of
internally generated software in intangible assets on its Statement of
Financial Position as at 30 September 2022 relating to the development of UK
CMC Invest trading platform. In performing the interim impairment assessment,
which concluded that no impairment was required, it was determined that the
recoverable amount of the asset is a source of estimation uncertainty which is
sensitive to the estimated future revenues from the UK CMC Invest business.
Relevant disclosures are provided in Note 8.
Going concern
The Group has considerable financial resources, a broad range of products and
a geographically diversified business. Consequently, the Directors believe
that the Group is well placed to manage its business risks in the context of
the current economic outlook. Accordingly, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future, a period of not less than 12 months from
the date of this report. They therefore continue to adopt the going concern
basis in preparing these condensed consolidated financial statements.
Seasonality of operations
The Directors consider that given the impact of market volatility and the
growth in overseas business there is no predictable seasonality to the Group's
operations.
2. Segmental reporting
The Group's principal business is providing leveraged online retail financial
services and providing its clients with the ability to trade contracts for
difference (CFD) and financial spread betting on a range of underlying shares,
indices, foreign currencies, commodities and treasuries. The Group also makes
these services available to institutional partners through white label and
introducing broker arrangements. The Group's CFDs are traded worldwide; spread
bets only in the UK and Ireland and the Group provides stockbroking services
only in Australia. The Group's business is generally managed on a geographical
basis and for management purposes, the Group is organised into four segments:
· Trading - CFD and Spreadbet - UK and Ireland ("UK & IE");
· Trading - CFD - Europe;
· Trading - CFD - Australia, New Zealand and Singapore ("APAC") and
Canada; and
· Investing - Stockbroking - Australia
These segments are in line with the management information received by the
Chief Operating Decision Maker (CODM).
Revenues and segment operating expenses are allocated to the segments that
originated the transaction.
Operating expenses in the Central segment relate to costs that are not
directly related to activities in one region or are not controlled by regional
management. These centrally generated costs are allocated to segments on an
equitable basis, mainly based on revenue, headcount or active client levels,
or where central costs are directly attributed to specific segments.
Trading Investing
30 September 2022 UK & IE Europe APAC & Canada Australia Total
£ '000 Central
Revenue 57,794 25,894 55,924 31,947 - 171,559
Interest income 336 - 818 1,697 - 2,851
Total revenue 58,130 25,894 56,742 33,644 - 174,410
Introducing partner commissions and betting levies (2,500) (957) (6,375) (11,118) - (20,950)
Net operating income 55,630 24,937 50,367 22,526 - 153,460
Segment operating expenses (12,994) (3,646) (12,657) (7,123) (79,153) (115,573)
Segment contribution 42,636 21,291 37,710 15,403 (79,153) 37,887
Allocation of central operating expenses (25,086) (16,125) (22,881) (15,061) 79,153 -
Operating profit 17,550 5,166 14,829 342 - 37,887
Finance costs (303) (295) (99) (94) (539) (1,330)
Allocation of central finance costs (269) (83) (187) - 539 -
Profit before taxation 16,978 4,788 14,543 248 - 36,557
Trading Investing
30 September 2021 UK & IE Europe APAC & Canada Australia Central Total
£ '000
Revenue 39,361 19,200 52,574 37,632 - 148,767
Interest income (253) (1) 156 446 - 348
Total revenue 39,108 19,199 52,730 38,078 - 149,115
Introducing partner commissions and betting levies (4,244) (578) (4,181) (13,374) - (22,377)
Net operating income 34,864 18,621 48,549 24,704 - 126,738
Segment operating expenses (8,680) (2,957) (11,939) (5,756) (60,356) (89,688)
Segment contribution 26,184 15,664 36,610 18,948 (60,356) 37,050
Allocation of central operating expenses (17,328) (14,737) (18,397) (9,894) 60,356 -
Operating profit 8,856 927 18,213 9,054 - 37,050
Finance costs (250) (14) (103) (87) (548) (1,002)
Allocation of central finance costs (237) (106) (205) - 548 -
Profit before taxation 8,369 807 17,905 8,967 - 36,048
The measurement of net operating income for segmental analysis is consistent
with that in the income statement.
The Group uses 'Segment contribution' to assess the financial performance of
each segment. Segment contribution comprises operating profit for the period
before finance costs, taxation and an allocation of central operating
expenses.
The measurement of segment assets for segmental analysis is consistent with
that in the balance sheet. The total non-current assets other than deferred
tax assets, broken down by location of the assets, is shown below.
£ '000 30 September 2022 31 March 2022
UK 44,731 41,168
Australia 27,153 26,254
Other countries 3,380 3,092
Total non-current assets 75,264 70,514
3. Revenue
£ '000 30 September 2022 30 September 2021
Trading 138,258 110,035
Investing 31,952 37,540
Other 1,349 1,192
Revenue 171,559 148,767
Trading revenue (previously presented as leveraged revenue) represents CFD and
Spread bet revenue (net of hedging costs) accounted for in accordance with
IFRS 9 "Financial Instruments". Investing revenue (previously presented as
non-leveraged revenue) represents stockbroking revenue accounted for in
accordance with IFRS 15 "Revenue from Contracts with Customers".
4. Operating Expenses
£ '000 30 September 2022 30 September 2021
Net staff costs 49,221 40,081
IT costs 16,324 14,156
Sales and marketing 17,325 11,653
Premises 2,061 1,754
Legal and Professional fees 5,601 4,654
Regulatory fees 7,044 3,240
Depreciation and amortisation 7,277 6,429
Bank charges 4,363 3,176
Irrecoverable sales tax 236 970
Other 6,183 3,554
115,635 89,667
Capitalised internal software development costs (150) -
Operating expenses 115,485 89,667
5. Taxation
£ '000 30 September 2022 30 September 2021
Analysis of charge for the period:
Current tax
Current tax on profit for the period 7,954 7,462
Adjustments in respect of previous periods 29 -
Total current tax 7,983 7,462
Deferred tax
Origination and reversal of temporary differences (394) 1,049
Adjustments in respect of prior periods - (338)
Impact of change in tax rate 16 -
Total deferred tax (378) 711
Total tax 7,605 8,173
The standard rate of UK corporation tax charged was 19% with effect from 1
April 2017. Taxation outside the UK is calculated at the rates prevailing in
the respective jurisdictions. The effective tax rate for the half year ended
30 September 2022 was 20.80% (Half year ended 30 September 2021: 22.67%)
differs from the standard rate of corporation tax of 19% (half year ended 30
September 2021: 19%). The differences are explained below:
£ '000 30 September 2022 30 September 2021
Profit before taxation 36,557 36,048
Profit multiplied by the standard rate of corporation tax in the UK of 19% (30 6,946 6,849
September 2021: 19%)
Adjustment in respect of foreign tax rates 506 1,334
Adjustments in respect of prior periods 29 (338)
Impact of change in tax rate 16 126
Expenses not deductible for tax purposes 30 142
Income not subject to tax - (42)
Share awards 52 87
Tax losses for which no deferred tax asset recognised 16 -
Other differences 10 15
Total tax 7,605 8,173
£ '000 30 September 2022 30 September 2021
Tax on items recognised directly in Equity
Tax on share-based payments - (779)
6. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to the equity
owners of the Company by the weighted average number of ordinary shares in
issue during each period excluding those held in employee share trusts which
are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue, excluding those held in employee share trusts, is adjusted to assume
conversion of all dilutive potential weighted average ordinary shares, which
consists of share options granted to employees and shares issuable to client
investors at IPO.
£ '000 30 September 2022 30 September 2021
Earnings attributable to ordinary shareholders (£ '000) 28,952 27,875
Weighted average number of shares used in the calculation of basic earnings 285,048 290,669
per share ('000)
Dilutive effect of share options ('000) 1,403 1,016
Weighted average number of shares used in the calculation of diluted earnings 286,451 291,685
per share ('000)
Basic earnings per share (p) 10.2p 9.6p
Diluted earnings per share (p) 10.1p 9.6p
For the half year ended 30 September 2022, 1,403,000 (Half year ended 30
September 2021: 1,016,000) potentially dilutive weighted average ordinary
shares in respect of share options in issue were included in the calculation
of diluted EPS.
7. Dividends
£ '000 30 September 2022 30 September 2021
Prior year final dividend of 8.88p per share (30 September 2021: 21.43p) 25,250 62,414
An interim dividend for 2023 of 3.50p per share, amounting to £9,830,000 has
been approved by the board but has not been included as a liability at 30
September 2022. The dividend will be paid on 5 January 2023 to those members
on the register at the close of business on 2 December 2022.
8. Intangible assets
£ '000 Goodwill Computer software Trademarks and trading licences Client relationships Assets under development Total
At 31 March 2022
Cost 11,500 132,187 1,052 3,095 23,608 171,442
Accumulated amortisation (11,500) (125,612) (907) (3,095) - (141,114)
Carrying amount - 6,575 145 - 23,608 30,328
Half year ended 30 September 2022
Carrying amount at the beginning of the period - 6,575 145 - 23,608 30,328
Additions - 288 - - 4,911 5,199
Transfers - 10,375 - - (10,375) -
Amortisation charge - (2,086) (15) - - (2,101)
Foreign currency translation - 9 - - 77 86
Carrying amount at the end of the period - 15,161 130 - 18,221 33,512
At 30 September 2022
Cost 11,500 143,001 1,056 3,113 18,221 176,891
Accumulated amortisation (11,500) (127,840) (926) (3,113) - (143,379)
Carrying amount - 15,161 130 - 18,221 33,512
Computer software includes capital development costs of £26,487,000 relating
to the Group's Next Generation trading platform which has been fully
amortised.
Impairment
Intangibles are tested for impairment if events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. Assets
under development are tested annually. There was no impairment identified in
the period ended 30 September 2022 (year ended 31 March 2022: £nil).
Impairment sensitivity analysis
The recoverable amount of the asset under development relating to the UK CMC
Invest platform has been determined using value-in-use discounted cashflow
calculation. This uses the most recent board-approved forecast results, a
discount rate of 9.0% and long-term growth rate (beyond the forecasting
period) of 0%. The carrying value of the net assets was £9,712,000 (31 March
2022: £6,054,000).
The recoverable amount is sensitive to changes in forecast revenues. A 2%
reduction in projected revenues would determine a recoverable amount equal to
the carrying value of £9,712,000. A 12% reduction in projection would result
in the full impairment of the asset.
9. Property, Plant and Equipment
£ '000 Leasehold improvements Furniture, fixtures and equipment Computer hardware Right-of-use assets Construction in progress Total
At 31 March 2022
Cost 16,883 8,922 37,375 24,557 - 87,737
Accumulated depreciation (13,521) (8,280) (28,359) (12,636) - (62,796)
Carrying amount 3,362 642 9,016 11,921 - 24,941
Half year ended 30 September 2022
Carrying amount at the beginning of the period 3,362 642 9,016 11,921 - 24,941
Additions 8 309 1,967 2,749 168 5,201
Transfers 23 - - - (23) -
Disposals (44) (9) (1) - - (54)
Depreciation charge (753) (206) (1,765) (2,452) - (5,176)
Foreign currency translation 8 7 18 126 4 163
Carrying amount at the end of the period 2,604 743 9,235 12,344 149 25,075
At 30 September 2022
Cost 16,201 9,225 39,425 27,027 149 92,027
Accumulated depreciation (13,597) (8,482) (30,190) (14,683) - (66,952)
Carrying amount 2,604 743 9,235 12,344 149 25,075
10. Trade and other receivables
£ '000 30 September 2022 31 March 2022
Current
Gross trade receivables 27,553 15,256
Less: Loss allowance (6,293) (6,219)
Trade receivables 21,260 9,037
Prepayments 12,693 10,622
Accrued income 1,117 521
Stockbroking debtors 89,569 134,324
Other debtors 3,905 2,413
128,544 156,917
Non-current
Other debtors 2,260 1,797
Total 130,804 158,714
Stockbroking debtors represent the amount receivable in respect of equity
security transactions executed on behalf of clients with a corresponding
balance included within trade and other payables (note 15).
11. Derivative financial instruments
Assets 30 September 30 September 2022 31 March 31 March
2022 Carrying 2022 2022
Notional amount Amount Notional amount Carrying amount
£m £ '000 £m £'000
Held for trading
Index, commodity, foreign, cryptocurrency and treasury futures 165.1 1,794 97.5 1,774
Forward foreign exchange contracts 221.6 3,704 90.2 417
Held for hedging
Forward foreign exchange contracts - economic hedges 21.2 644 14.0 78
Forward foreign exchange contracts - net investment hedges - - 40.0 90
Total 407.9 6,142 241.7 2,359
Liabilities 30 September 30 September 2022 31 March 31 March
2022 Carrying 2022 2022
Notional amount Amount Notional amount Carrying amount
£m £ '000 £m £'000
Held for trading
Index, commodity, foreign, cryptocurrency and treasury futures 133.1 (1,833) 107.6 (1,690)
Forward foreign exchange contracts 159.4 (1,122) 79.4 (131)
Held for hedging
Forward foreign exchange contracts - economic hedges 35.8 (1,211) 36.0 (530)
Forward foreign exchange contracts - net investment hedges - - 4.7 (11)
Total 328.3 (4,166) 227.7 (2,362)
The fair value of derivative contracts are based on the market price of
comparable instruments at the balance sheet date. All derivative financial
instruments have a maturity of less than one year.
12. Other assets
Other assets are cryptocurrencies, which are owned and controlled by the Group
for the purpose of hedging the Group's exposure to clients' cryptocurrency
trading positions. The Group holds cryptocurrencies on exchange and in vault
as follows:
£ '000 30 September 2022 31 March 2022
Exchange 3,115 953
Vaults 950 12,490
4,065 13,443
13. Financial investments
£ '000 30 September 2022 31 March 2022
UK Government securities:
At the beginning of the period / year 27,875 28,037
Purchase of securities 14,725 28,337
Maturity of securities and Coupon receipts (14,689) (28,428)
Accrued interest 103 (17)
Changes in the fair value of debt instruments at fair value through other (527) (54)
comprehensive income
At the end of the period / year 27,487 27,875
Equity securities:
At the beginning of the period / year 70 67
Changes in the fair value of equity instruments at fair value through profit (12) -
and loss
Foreign currency translation - 3
At the end of the period / year 58 70
Total 27,545 27,945
£ '000 30 September 2022 31 March 2022
Analysis of financial investments
Non-current 14,418 13,448
Current 13,127 14,497
Total 27,545 27,945
Financial investments are shown as current assets when they have a maturity of
less than one year and as non-current when they have a maturity of more than
one year.
14. Cash and cash equivalents
£ '000 30 September 2022 31 March 2022
Cash and cash equivalents 140,879 176,578
Analysed as:
Cash at bank 140,879 176,578
Cash and cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
15. Trade and other payables
£ '000 30 September 2022 31 March 2022
Client payables 56,798 47,360
Tax and social security 958 2,242
Stockbroking creditors 81,345 123,875
Accruals and other creditors 37,280 42,376
176,381 215,853
Stockbroking creditors represent the amount payable in respect of equity and
securities transactions executed on behalf of clients with a corresponding
balance included within trade and other receivables (note 10).
16. Lease liabilities
£ '000 30 September 2022 31 March 2022
At the beginning of the period / year 14,185 15,326
Additions / Modifications of new leases during the period / year 2,767 4,658
Interest expense 344 700
Lease payments made during the year (3,263) (6,662)
Foreign currency translation 143 163
At the end of the period / year 14,176 14,185
£ '000 30 September 2022 31 March 2022
Analysis of lease liabilities
Non-current 8,398 9,269
Current 5,778 4,916
Total 14,176 14,185
17. Cash generated from operations
£ '000 30 September 2022 30 September 2021
(Restated)
Cash flows from operating activities
Profit before taxation 36,557 36,048
Adjustments for:
Interest income (2,851) (348)
Finance costs 1,330 1,002
Depreciation 5,176 5,083
Amortisation of intangible assets 2,101 1,346
Profit on disposal of property, plant and equipment 54 -
Share-based payment 790 (886)
Other non-cash movements including exchange rate movements 2,014 (1,101)
Changes in working capital:
Decrease/(increase) in trade and other receivables and other assets 27,980 (1,391)
(Increase)/decrease in amounts due from brokers (8,385) 71,456
Decrease/(increase) in other assets 9,378 (34,024)
(Decrease)/increase in trade and other payables (34,553) 16,077
(Decrease)/increase in net derivative financial instruments liabilities (2,058) 81
Decrease in provisions (96) (1,145)
Cash generated from operations 37,437 92,198
18. Share buyback
On 14 March 2022, the Board approved a share buyback programme with up to
£30.0 million to be returned to shareholders. On this date, a financial
liability of £30,239,000 was established representing the financial liability
for the full value of the share buyback programme plus directly attributable
costs.
In H1 2023, the Group repurchased and cancelled 9,444,362 (H1 2022: nil)
Ordinary Shares with nominal value 25 pence. The amount by which the Company's
share capital is diminished on the cancellation of the purchased shares is
transferred to the capital redemption reserve. This amounted to £2,361,000
(H1 2022: £nil).
The share buyback reserve amount, presented within Other reserves is reduced
by the consideration paid for the repurchased shares with a corresponding
transaction recorded within Retained earnings to reflect the consumption of
distributable profits. For H1 2023, this amounted to £24,961,000 (H1 2022:
£nil).
19. Liquidity
The Group has access to the following liquidity resources that make up total
available liquidity:
· Own funds. Own funds are calculated in order to provide a clear
presentation of the Group's potential cash resources. Own funds consist of
cash and cash equivalents, amounts due from brokers, other assets and also
includes investments in UK government securities, of which the majority are
held to meet the Group's regulatory liquidity requirements. Own funds also
include any unrealised gains / losses on open hedging positions and all cash
in the form of title transfer funds is excluded. Own funds on 30 September
2022 were £325,978,000 (31 March 2022: £369,947,000).
· Title Transfer Funds (TTFs). This represents funds received from
professional clients and eligible counterparties (as defined in the FCA
Handbook) that are held under a Title Transfer Collateral Agreement (TTCA); a
means by which a professional client or eligible counterparty may agree that
full ownership of such funds is unconditionally transferred to the Group. The
Group considers these funds as an ancillary source of liquidity and places no
reliance on its stability.
· Available committed facility (off-balance sheet liquidity). The
Group has access to a syndicated revolving credit facility of up to £55.0
million (31 March 2022: £55.0 million) in order to fund any potential
fluctuations in margins required to be posted at brokers to support our risk
management strategy. The maximum amount of the facility available at any one
time is dependent upon the initial margin requirements at brokers and margin
received from clients. The facility consists of a one year term facility of
£27.5 million and a three year term facility of £27.5 million, both of which
were renewed in March 2022. Under the terms of the syndicated revolving credit
facility agreement, the Group is required to comply with financial covenants
covering minimum Tangible net worth and a minimum EBITDA: Interest expense
ratio for the Group at a consolidated level. The Group has complied with all
covenants throughout the reporting period.
The Group's use of total available liquidity resources consist of:
· Blocked cash. Amounts held to meet the requirements of local
market regulators and amounts held at overseas subsidiaries in excess of local
segregated client requirements to meet potential future client requirements.
· Initial margin requirement at broker. The total GBP equivalent
initial margin required by prime brokers to cover the Group's hedge derivative
positions.
Net available liquidity
£ '000 30 September 2022 31 March 2022
Cash and cash equivalents 140,879 176,578
Amount due from brokers 204,502 196,117
Other assets 4,065 13,443
Financial investments 27,545 27,945
Derivative financial instruments (Current Assets) 6,142 2,359
383,133 416,442
Less: Title transfer funds (52,989) (44,133)
Less: Derivative financial instruments (Current Liabilities) (4,166) (2,362)
Own Funds 325,978 369,947
Title transfer funds 52,989 44,133
Available committed facility 55,000 55,000
Total Available liquidity 433,967 469,080
Less: Blocked cash (81,422) (103,089)
Less: Initial margin requirement at broker (98,367) (120,078)
Net available liquidity 254,178 245,913
The following Own Funds Flow Statement summarises the Group's generation of
own funds during each period and excludes all cash flows in relation to monies
held on behalf of clients.
£ '000 30 September 2022 31 March 2022
(Restated)
Operating activities
Profit before tax 36,557 92,136
Adjustments for:
Finance costs 1,330 2,177
Depreciation and amortisation 7,277 12,901
Other non-cash adjustments 2,240 (1,124)
Tax paid (9,294) (14,651)
Own funds generated from operating activities 38,110 91,439
Movement in working capital (15,525) 9,887
Outflow from investing activities
Net Purchase of property, plant and equipment and intangible assets (12,570) (16,668)
Other outflow from investing activities (7) (998)
Outflow from financing activities
Interest paid (1,330) (2,177)
Dividends paid (25,250) (72,604)
Payments for Share buyback (24,961) (2,975)
Other outflow from financing activities (3,243) (7,738)
Total outflow from investing and financing activities (67,361) (103,160)
Decrease in own funds (44,776) (1,834)
Own funds at the beginning of the period / year 369,947 370,405
Effect of foreign exchange rate changes 807 1,376
Own funds at the end of the period / year 325,978 369,947
20. Fair value measurement disclosures
The Group's assets and liabilities that are measured at fair value are
derivative financial instruments and financial investments. The table below
categorises those financial instruments measured at fair value based on the
following fair value measurement hierarchy:
· Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities; or
· Level 2 - inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices); or
· Level 3 - inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
30 September 2022 Level 1 Level 2 Level 3 Total
£ '000
Financial investments 27,487 - 58 27,545
Derivative financial instruments (Current Assets) - 6,142 - 6,142
Derivative financial instruments (Current Liabilities) - (4,166) - (4,166)
27,487 1,976 58 29,521
31 March 2022 Level 1 Level 2 Level 3 Total
£ '000
Financial investments 27,875 - 70 27,945
Derivative financial instruments (Current Assets) - 2,359 - 2,359
Derivative financial instruments (Current Liabilities) - (2,362) - (2,362)
27,875 (3) 70 27,942
Valuation techniques used to determine fair values of Derivative Financial
instruments
Specific valuation techniques used to value financial instruments include:
· the use of quoted market prices or dealer quotes for similar
instruments; and
· for foreign currency forwards - present value of future cash
flows based on the forward exchange rates at the balance sheet date.
All of the resulting fair value estimates are included in level 2.
Fair value of financial assets and liabilities measured at amortised cost
The fair value of the following financial assets and liabilities not held at
fair value approximates to their carrying value:
· Cash and cash equivalents
· Amounts due from brokers
· Trade and other receivables
· Trade and other payables
· Share buyback liability
21. Related party transactions
There have been no significant changes to the nature of related parties
disclosed in the statutory financial statements for the Group as at and for
the year ended 31 March 2022. The basis of remuneration of key management
personnel remains consistent with that disclosed in the statutory financial
statements for the Group as at and for the year ended 31 March 2022.
Directors' transactions
There were no director transactions during the half year ended 30 September
2022 and 30 September 2021.
22. Contingent liabilities
The Group operates in a number of jurisdictions around the world and as a
result uncertainties exist regarding the interpretation of regulatory, tax and
legal matters in these territories. In addition, the Group engages in
partnership contracts that could result in non-performance claims and from
time-to-time is involved in disputes during the ordinary course of business.
Sometimes legal disputes can have a financially significant face value, but
the Group's experience is that such claims are usually resolved without any
material loss. The Group provides for claims where costs are likely to be
incurred.
Where there are uncertainties regarding regulatory, tax and legal matters and
a provision has not been made, there are no contingent liabilities where the
Group considers any material adverse financial impact to be probable.
Since the publication of the annual report on 8 June 2022, there have been no
significant updates or developments, including to the matter listed within the
events after the reporting period note, which would require additional
disclosure within the interim financial statements.
UK banking surcharge
In the absence of them qualifying for a specific exemption, the Group's
regulated companies in the UK would be subject to the Bank Corporation Tax
surcharge of 8% on taxable profits over £25.0 million. The group has
concluded that the relevant entities meet the exemption requirements and
therefore the related tax charge, which would amount to £22.7 million (31
March 2022: £21.8 million) in respect of all relevant periods, has not been
provided for. The Group's position is supported by external advice although it
is possible that it could be challenged.
Brexit approach
There is regulatory uncertainty regarding the Group's historical approach to
the use of reverse solicitation provisions allowing EEA clients to trade with
UK subsidiaries after 31 December 2020. The risk to the approach has been
mitigated given the majority of EEA clients' activities with the UK subsidiary
ceased prior to 31 March 2021. The Group continues to engage with the
regulatory authorities in the EEA markets where the UK subsidiary continued to
service clients after 31 December 2020. Whilst it is possible that regulatory
censure may result from these matters, such an outcome is not currently
considered probable.
23. Forward looking statements
This announcement may include statements that are forward looking in nature.
Forward looking statements involve known and unknown risks, assumptions,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Group to be materially different from any
future results, performance or achievements expressed or implied by such
forward looking statements. Except as required by the Listing Rules and
applicable law, the Group undertakes no obligation to update, revise or change
any forward looking statements to reflect events or developments occurring
after the date such statements are published.
24. Subsequent events
There are no events after the interim period that have not been reflected in
the condensed consolidated financial statements.
25. Correction of error
The Group acquired a portfolio of Share Investing clients from Australia and
New Zealand Banking Group Limited ("ANZ") in a transaction amounting to
AUD$25.0 million (£13,317,000) during September 2021. This investment in
intangible assets was presented in the condensed consolidated statement of
cash flows as having been settled in cash during the period ended 30 September
2021. This transaction was presented incorrectly in the condensed consolidated
statement of cash flows as no cash was paid as at 30 September 2021 to settle
the associated liability. Comparative periods have been restated to reflect
this correction in the tables below. Total settlements up to 30 September 2022
amounted to AUD$16.7 million (£9,591,000).
a. Condensed consolidated statement of cash flows
£ '000 Note 30 September 2021 Correction of error 30 September 2021
(Reported) (Restated)
Cash flows from operating activities
Cash generated from operations 17 105,515 (13,317) 92,198
Net cash generated from operating activities 98,354 (13,317) 85,037
Cash flows from investing activities
Investment in intangible assets (16,910) 13,317 (3,593)
Net cash used in investing activities (18,439) 13,317 (5,122)
b. Cash generated from operations
£ '000 30 September 2021 Correction of error 30 September 2021
(Reported) (Restated)
Changes in working capital:
(Decrease)/increase in trade and other payables 29,394 (13,317) 16,077
Cash generated from operations 105,515 (13,317) 92,198
INDEPENDENT REVIEW REPORT TO CMC MARKETS PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2022 which comprises the Consolidated Interim Income Statement and
the Consolidated Interim Statement of Comprehensive Income, the Consolidated
Interim Statement of Financial Position, the Consolidated Interim Statement of
Changes in Equity, the Consolidated Interim Statement of Cash Flows and
related notes 1 to 25.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2022 is not prepared,
in all material respects, in accordance with United Kingdom adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
15 November 2022
Appendix: Alternative performance measures
a. Reconciliation of trading gross client income to trading net
revenue
£m 30 September 2022 30 September 2021
Trading gross client income 154.9 127.0
Client rebates introducing partner commissions and levies (11.5) (8.3)
Risk management gains / (losses) (15.0) (17.7)
Trading net revenue 128.4 101.0
b. Reconciliation of investing net revenue
£m Note 30 September 2022 30 September 2021
Investing gross revenue 31.9 37.5
Introducing partner commissions 2 (11.1) (13.3)
Investing net revenue 20.8 24.2
c. Reconciliation of trading net revenue, investing net revenue to net
operating income
£m Note 30 September 2022 30 September 2021
Trading net revenue (a) 128.4 101.0
Investing net revenue (b) 20.8 24.2
Other revenue 3 1.4 1.2
Interest income 2 2.9 0.3
Net operating income 153.5 126.7
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