REG - CMC Markets Plc - Interim Results
16/11/2023 07:00
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RNS Number : 6213T CMC Markets Plc 16 November 2023
16 November 2023
CMC MARKETS PLC
("CMC" or the "Company")
Interim results for the half year ended 30 September 2023
Operational Highlights
· Continue to execute diversification strategy with the successful
launch of CMC Invest Singapore in September 2023.
· Significant development and upgrades delivered across our platforms
with US cash equities launched for our B2B clients, mutual funds on CMC Invest
UK and cryptocurrencies now live on CMC Invest Australia as at the end of
October 2023. Further product upgrades on track for delivery in H2 2024.
· Regional expansion in the Middle East benefiting from a greater
presence on the ground in Dubai, where we are enhancing our service for
institutional clients.
· Operating cost guidance for FY 2024 remains unchanged at £240
million, excluding variable remuneration. Operating expenses are expected to
decline as projects are delivered and we pass the peak of the investment
cycle, with a cost review planned for H2 to enhance profitability and margins.
A further update will be provided at FY 2024.
Summary Financials and Core KPIs
30 September 2023 30 September 2022 Change
For the half year ended
Net operating income (£ million) 122.6 153.5 (20%)
Trading net revenue (£ million) 87.4 128.4 (32%)
Investing net revenue (£ million) 16.8 20.8 (20%)
Other income (£ million) 18.4 4.3 338%
(Loss)/Profit before tax (£ million) (2.0) 36.6 -
Basic earnings per share (pence) (0.8) 10.2 -
Dividend per share (pence) 1.00 3.50 (71%)
Trading gross client income (£ million) 132.6 154.9 (14%)
Trading client income retention 66% 83% -
Trading active clients (number) 46,832 50,199 (7%)
Trading revenue per active client (£) 1,867 2,558 (27%)
Investing active clients (number) 152,192 164,632 (8%)
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
Financial Highlights
· Net operating income of £122.6 million, down 20% year-on-year
(H1 2023: £153.5 million).
· H1 2024 trading net revenue was £87.4 million, down 32%
year-on-year (H1 2023: £128.4 million) and investing net revenue was £16.8
million, down 20% year-on-year (H1 2023: £20.8 million), impacted by lower
client activity and the uncertain market conditions stemming from the
inflationary and higher interest rate environment.
· Other income increased substantially in the period by 338% to
£18.4 million (H1 2023: £4.3 million) and is predominately driven by
increases in global interest rates and resulting income from client and own
cash balances.
· Operating costs for H1 2024, excluding variable remuneration,
were £121.9 million (H1 2023: £106.3 million), including a £5.3 million
impairment relating to internally developed trading platforms for the UK
Invest and cash equities offerings due to unfavourable equity market
conditions and operational delays.
· Client trading assets under management ended the period at c.
£501 million, marginally below the HY 2023 number of c. £506 million. H1
2024 active trading clients were lower compared to H1 2023 (down 7% to
46,832).
· Regulatory total Own Funds Requirements (OFR) ratio of 360% (FY
2023: 369%) and net available liquidity of £237.2 million (FY 2023: £239.2
million).
· Loss before tax of £2.0 million (H1 2023: profit before tax
£36.6 million).
· Interim dividend of 1.00 pence per share (H1 2023: 3.50 pence).
Lord Cruddas, Chief Executive Officer, commented:
"I am pleased with the resilience the business has demonstrated in the first
six months of the year in what has been a tough market environment, with low
volatility offering fewer opportunities for clients of our trading business.
Despite the subdued market conditions, we have seen continued commitment from
our existing clients and positive engagement in our institutional business.
Our diversification strategy continues to progress and is on track with major
releases in the period and several others planned for the coming months. This
was punctuated by the successful launch of CMC Invest Singapore in September
2023, which is attracting new clients to the business and expanding our
footprint in the southeast Asia region. In the UK, our Invest platform
continues to demonstrate good progress with the recent release of mutual funds
and SIPP accounts soon to follow, helping our clients achieve their long-term
financial goals.
We continue to widen our trading offering which will be bolstered by the
upcoming rollout of our options products, whilst the addition of cash equities
to our institutional offering will allow us to expand the services available
to this valuable segment and help us attract new business. Our geographical
diversification has also continued with the recent expansion of our Dubai
subsidiary in the DIFC providing us a strong foothold in one of the most
exciting financial centres in the world.
The power of our technology platform has been central to our ability to expand
our offering and provide new products and capabilities for our clients. As
these new products come online, we are well positioned to increase synergies
across our suite of businesses and drive operational efficiencies. Our
technology remains our competitive advantage and we are committed to a
disciplined level of continuous investment, however with all that has been
achieved over recent years the level of capital investment has now peaked.
I am very excited about the future of the company and the opportunities that
our diversification strategy has opened up for us in many parts of the world."
An analyst and investor presentation will be held on 16 November 2023 9:00am
UK time. Participants need to register using the links below to access the
webcast.
Webcast:
https://www.lsegissuerservices.com/spark/CMCMarkets/events/24162867-b376-44fb-b34c-985177ae8578
(https://www.lsegissuerservices.com/spark/CMCMarkets/events/24162867-b376-44fb-b34c-985177ae8578)
Forthcoming announcement dates
6 February 2024 Q3 2024 trading update
9 April 2024 FY 2024 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.
Enquiries
CMC Markets
Plc
Albert Soleiman, 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 12,000 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, Singapore and the UK, access stockbroking
services. More information is available at http://www.cmcmarketsplc.com
(http://www.cmcmarketsplc.com) .
CHIEF EXECUTIVE OFFICER'S REVIEW
Our strategy to expand and diversify the business into new asset classes,
including the expansion of our investment platform in the UK and Singapore, is
on track. These new business additions are complemented by continued
investment in our established CFD and spread bet trading businesses and widen
the capability we have to offer on our B2B business.
Financial performance
The first six months of the year were categorised by a reduction in market
volatility and client trading volumes resulting in a decline in net operating
income versus the same period last year. H1 2024 trading net revenue was
£87.4 million (H1 2023: £128.4 million), down 32% year-on-year. H1 2024
investing net revenue was £16.8 million (H1 2023: £20.8 million), down 20%
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 finished the period at £501 million,
marginally below the HY 2023 number of £506 million. H1 2024 active trading
clients were lower compared to H1 2023 (down 7% to 46,832), with an associated
decrease in revenue per client. Our continued focus on positioning ourselves
and our platforms towards the premium customer segment is something that plays
to the businesses strengths and puts us in a position to capitalise on the
long-term growth opportunity.
Invest Australia net operating income decreased 2% (£0.5m) year-on-year
primarily driven by unfavourable movements in the GBP/AUD exchange rate,
partially offset by a 7% (£1.5m) growth in underlying local currency
performance. We have increased our market share against our direct
competitors, up 0.4% year-on-year to 16.4%. Assets under administration
("AuA") of A$71.5bn were also up 1% (A$0.8bn) year-on-year.
Operating costs
Operating costs for H1 2024, excluding variable remuneration, were £121.9
million (H1 2023: £106.3 million). This includes an impairment relating to
internally developed trading platforms for the UK Invest and cash equities
offerings.
We continue to review our operating model and cost structures to deliver
efficiencies across our business and drive down costs. The strong progress we
have made on our strategic initiatives with major projects coming online and
others soon to follow, means that we have reached the peak in our investment
cycle and are in a position to rationalise our products and drive operational
synergies.
We will always maintain a disciplined level of investment in our business and
technology platforms to prioritise our clients and maintain our competitive
advantage, but with positive momentum in our operational delivery and
increasing opportunities to rationalise the cost base, our ongoing focus is to
deliver sustainable cost savings.
Investing business expansion update
Following the successful integration of ANZ clients earlier in the year, we
now have direct access to over 1 million client accounts who we can educate
and engage with timely market updates and the latest investing trends. Our
customers have access to our award-winning trading and mobile platforms where
they can trade equities and options in 16 global markets. More recently, our
product offerings expanded to include trading of crypto currencies.
Our strategic expansion is progressing well with the successful launch of
Invest Singapore in September 2023, providing customers with access to 15
global equity markets initially, with more to follow. We offer radical price
transparency and a value proposition that stands out in what is an attractive
market for the business, with Singapore hosting an expanding investor base
that is growing in wealth and also importantly serving as a gateway to the
wider southeast Asia region.
In the UK our investment platform continues to develop, as we add new products
and services for our clients. Mutual funds are now live on the platform and
with SIPP accounts due to follow, this will improve our proposition for the
larger and longer-term savings market.
Critically, our investment in these areas will further expand our offering
within the institutional business by widening our product range to include
mutual funds, cash equities and other listed products.
Trading business expansion update
Our trading business continues to be a leader in key markets in which we
operate and is fundamental to our growth strategy. In addition to enabling us
to enter into new markets, our diversification strategy will further enhance
our trading offering, providing our clients with a wider product set and
building deeper relationships.
We see tremendous opportunity in our B2B business and as we expand our product
range to meet the demands of this segment for a multi-asset capability we are
excited about the opportunities this presents for CMC. Our clients have told
us that they demand a wider product offering and we are well positioned to
deliver for them and capture a wider share of this market.
Regulation
On 31 July 2023, new rules came into effect for financial services firms on
Consumer Duty in the UK. These new rules aim to set a high standard of
consumer protection when dealing with financial services. The implementation
of the Duty within the Group has been successful and CMC continues to enhance
its post-implementation processes and measure client outcomes to ensure that
clients continue to achieve their financial objectives.
Dividend
The Board has declared an interim dividend of 1.00 pence per share for the
period (H1 2023: 3.50 pence per share). This is in line with the dividend
policy of 50% of profit after tax, whilst the Group made a loss in H1 2023,
the interim dividend is being declared in line with full year earnings
expectations.
Outlook
Full year net operating income is expected to be between £250-£280 million
with operating costs at £240 million excluding variable remuneration. Whilst
market conditions in October remained subdued, I remain confident in our
ability to deliver on our communicated revenue guidance for FY 2024 and, as
delivery of new initiatives remains on track, we expect to deliver net
operating income in FY 2025 in line with current market consensus, based on
more normalised trading conditions.(1)
As we come to the end of our investment cycle, we are taking the opportunity
to increase synergies across our multiple product and business lines and drive
efficiencies throughout our global operations. A cost review is planned for
the second half and we look forward to sharing our progress on this with you
at our FY 2024 results.
(1 A company compiled analyst consensus, as at November 2023, is available
at:) (https://www.cmcmarkets.com/group/investors/analysts-coverage
(https://www.cmcmarkets.com/group/investors/analysts-coverage) )
OPERATING review
Summary
Net operating income decreased by £30.9 million (20%) to £122.6 million,
with decreases in both trading and investing net revenue being partially
offset by increased interest income.
Trading net revenue decreased by £41.0 million (32%) driven by both decreases
in client income and client income retention, which fell to 66% (H1 2023:
83%). Trading active client numbers decreased by 7% in comparison to H1 2023,
although monthly active clients remain above pre-COVID-19 levels. The
combination of these factors resulted in revenue per active client ("RPC")
decreasing by £691 (27%) to £1,867.
Investing net revenue was 20% lower at £16.8 million (H1 2023: £20.8
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 £13.2m (464%) 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 increases seen across both the trading
and investing businesses.
Statutory loss before tax of £2.0 million (H1 2023: profit before tax £36.6
million) with a decrease in net operating income accompanied by higher
operating expenses as the Group continues to invest in its strategic growth
plans. Loss before tax margin(1) was (1.6)%.
Net operating income overview
For the half year ended 30 September 2023 30 September 2022 Change Change %
£ million
Trading net revenue 87.4 128.4 (41.0) (32%)
Investing net revenue 16.8 20.8 (4.0) (20%)
Total net revenue(2) 104.2 149.2 (45.0) (30%)
Interest income 16.1 2.9 13.2 464%
Other operating income 2.3 1.4 0.9 70%
Net operating income 122.6 153.5 (30.9) (20%)
( )
(1) Statutory loss 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
Trading performance overview
For the half year ended 30 September 2023 30 September 2022 Change Change %
£ million
Trading gross client income 132.6 154.9 (22.3) (14%)
Client rebates, introducing partner commissions and levies (8.6) (11.5) 2.9 26%
Risk management gains / (losses) (36.6) (15.0) (21.6) (145%)
Trading net revenue 87.4 128.4 (41.0) (32%)
Client income % retention 66% 83% (17%) pts n/a
Active clients 46,832 50,199 (3,367) (7%)
Revenue per client (RPC - £) 1,867 2,558 (691) (27%)
Gross client income declined by 14%, driven by unfavourable market conditions
resulting from a decline in volatility, with trading net revenue declining 32%
driven by higher risk management losses in the period resulting in a reduction
in client income retention to 66%.
The reduction in active clients in the period, also driven by market
conditions presenting fewer opportunities for clients to trade, resulted in a
27% reduction in revenue per client from £2,558 to £1,867.
For the half year ended 30 September 2023 30 September 2022 Change (%)
Gross client income(1) (£m) Active Clients Gross client income(1) (£m) Active Clients Gross client income(1) Active Clients
B2C(2) 100.1 43,142 114.9 45,681 (13%) (6%)
B2B(3) 32.5 3,690 40.0 4,518 (19%) (18%)
Total 132.6 46,832 154.9 50,199 (14%) (7%)
(1)Spreads, financing and commissions on CFD client trades.
(2) Business to Consumer ("B2C") - revenue from retail and professional
clients
(3) Business to Business ("B2B") - revenue from institutional clients
The above presentation of B2C and B2B has been changed to more appropriately
reflect the performance of the trading business. As risk management is carried
out at Group level to maximise internalisation, revenue is best viewed at a
total level whilst client income and active clients can be viewed from the B2C
/ B2B perspective.
Investing performance overview
For the half year ended 30 September 2023 30 September 2022 Change (%)
Investing net revenue (£m) Active Clients¹ Investing net revenue (£m) Active Clients¹ Investing net revenue Active Clients
B2C 12.2 120,450 4.4 45,226 176% 166%
B2B 4.6 31,742 16.4 119,406 (72%) (73%)
Total 16.8 152,192 20.8 164,632 (20%) (8%)
(1) ANZ customers are classified as B2B prior to integration in March 2023.
Post integration, they are managed as CMC Retail customers and classified as
B2C
Investing net revenue decreased 20% driven by lower active clients and
unfavourable market conditions resulting in fewer investment opportunities for
clients.
Operating expenses
For the half year ended 30 September 2023 30 September 2022 Change %
£m
Net staff costs - fixed (excluding variable remuneration) 51.5 40.0 (29%)
IT costs 19.2 16.3 (18%)
Marketing costs 15.1 15.2 0%
Sales-related costs 1.5 2.1 29%
Premises costs 3.4 2.1 (65%)
Legal and professional fees 6.6 5.6 (17%)
Regulatory fees 2.3 7.0 67%
Depreciation, amortisation and impairment 12.9 7.3 (77%)
Other 9.4 10.7 13%
Operating expenses excluding variable remuneration 121.9 106.3 (15%)
Variable remuneration 1.7 9.3 82%
Operating expenses including variable remuneration 123.6 115.6 (7%)
Share of results of associates and joint ventures 0.1 - -
Interest 0.9 1.3 34%
Total costs 124.6 116.9 (7%)
Operating expenses excluding variable remuneration increased by £15.6 million
(15%) to £121.9 million. This was driven by an increase in staff costs
(£11.5 million) as a result of significant investment in technology, pricing
and marketing staff, an impairment charge of £5.3 million relating to
internally developed trading platforms for the UK Invest and cash equities
offerings included within depreciation and amortisation, and higher IT costs
(£2.9 million) due to higher market data charges and investments in strategic
projects.
Regulatory fees decreased by £4.7 million (67%) as a result of a lower FSCS
levy.
Premises costs increased by £1.3 million (65%), primarily driven by new
leases to drive expansion in key regions, higher utility costs as a result of
the global energy crisis and a change in accounting treatment of rates within
UK properties.
Other expenses decreased by £1.3m (13%) due to a number of factors, the main
drivers being lower bank charges, lower recruitment costs and FX gains on
balance sheet revaluation, partially offset by higher irrecoverable VAT.
Variable remuneration decreased by £7.6 million to £1.7 million (H1 2023:
£9.3 million), primarily due to a lower discretionary bonus accrual
percentage in H1 2024 as a result of weaker revenue performance in the period.
Taxation
The effective tax rate for H1 2024 was (18.5)% compared to the H1 2023
effective tax rate, which was 22.7%. The effective tax rate change in the
period is due to taxable losses in the lower tax jurisdictions of UK and
Singapore, taxable profits in the higher tax jurisdictions of Australia and
Germany, and discreet items within H1 2024.
Balance sheet and own funds
Intangible assets decreased by £1.8 million to £33.5 million (31 March 2023:
£35.3 million) primarily due to a £5.3 million write-off relating to trading
platforms built for CMC Invest UK and cash equities offerings and amortisation
within the period, partially offset by capitalisation of staff costs related
to technology projects.
Investments in associates and JVs was £2.7 million (31 March 2023: nil) as a
result of the Group's investment in StrikeX during the period.
Amounts due to or from brokers decreased by £6.2 million to £173.0 million
due to a decrease in excess cash held at brokers.
Other assets increased by £0.3 million to £2.2 million due to an increase in
client cryptocurrency exposures driving a corresponding increase in assets
held at brokers for hedging purposes.
Cash and cash equivalents increased by £30.6 million during the period due to
a £58.4m increase in the amount of professional client and eligible
counterparty funds being held under a title transfer collateral agreement
("TTCA"), partially offset by payment of the prior year final dividend (£10.9
million).
Title transfer funds increased by £58.4 million, reflecting the onboarding of
a small population of high-net-worth clients.
Own funds decreased by £36.9 million to £272.8 million (31 March 2023:
£309.7 million) during the six-month period with the decrease largely due to
the payment of the final FY 2023 dividend.
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 2023 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 2023 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 2023,
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 2023
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)
Albert Soleiman (Chief Financial Officer)
Non-Executive Directors
James Richards (Chairman)
Sarah Ing
Susanne Chishti
Paul Wainscott
Clare Francis
CONDENSED CONSOLIDATED INCOME STATEMENT
For the half year ended 30 September 2023
£ '000 Note 30 September 30 September
2023 2022
Revenue 3 119,711 171,559
Interest income 16,090 2,851
Total revenue 135,801 174,410
Introducing partner commissions and betting levies (13,239) (20,950)
Net operating income 2 122,562 153,460
Operating expenses 4 (118,315) (115,573)
Impairment of intangible assets (5,275) -
Operating (loss) / profit (1,028) 37,887
Share of results of associates and joint ventures (91) -
Finance costs (876) (1,330)
(Loss) / profit before taxation (1,995) 36,557
Taxation 5 (368) (7,605)
(Loss) / profit for the period attributable to owners of the parent (2,363) 28,952
(Loss) / Earnings per share
Basic (loss) / earnings per share (p) 6 (0.8) 10.2
Diluted (loss) / earnings per share (p) 6 (0.8) 10.1
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the half year ended 30 September 2023
£ '000 30 September 2023 30 September 2022
(Loss) / profit for the period (2,363) 28,952
Other comprehensive (expense) / income:
Items that may be subsequently reclassified to income statement
(Loss) / Gain on net investment hedges, net of tax - (86)
Gains recycled from equity to the income statement - 269
Currency translation differences (2,403) 2,696
Changes in the fair value of debt instruments at fair value through other 202 (527)
comprehensive income, net of tax
Other comprehensive (expense) / income for the period (2,201) 2,352
Total comprehensive (expense) / income for the period (4,564) 31,304
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September 2023
£'000 Note 30 September 2023 31 March 2023
ASSETS
Non-current assets
Intangible assets 8 33,471 35,342
Property, plant and equipment 9 27,380 22,771
Deferred tax assets 3,963 4,768
Financial investments 14 33 34
Trade and other receivables 10 2,601 2,666
Investments in associates and joint ventures 11 2,709 -
Total non-current assets 70,157 65,581
Current assets
Trade and other receivables 10 92,099 130,616
Derivative financial instruments 12 16,216 14,231
Current tax recoverable 10,732 9,066
Other assets 13 2,247 1,984
Financial investments 14 28,289 30,572
Amounts due from brokers 184,127 188,154
Cash and cash equivalents 15 176,836 146,218
Total current assets 510,546 520,841
TOTAL ASSETS 580,703 586,422
LIABILITIES
Current liabilities
Trade and other payables 16 185,544 182,284
Amounts due to brokers 11,120 8,927
Derivative financial instruments 12 2,384 2,033
Lease liabilities 17 5,006 5,590
Current tax payable 389 431
Provisions 18 1,025 815
Total current liabilities 205,468 200,080
Non-current liabilities
Lease liabilities 17 12,307 6,228
Deferred tax liabilities 3,393 4,012
Provisions 18 150 2,087
Total non-current liabilities 15,850 12,327
TOTAL LIABILITIES 221,318 212,407
EQUITY
Equity attributable to owners of the Company
Share capital 70,573 70,573
Share premium 46,236 46,236
Capital redemption reserve 2,901 2,901
Own shares held in trust (1,015) (1,509)
Other reserves (52,736) (50,535)
Retained earnings 293,426 306,349
Total equity 359,385 374,015
TOTAL EQUITY AND LIABILITIES 580,703 586,422
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the half year ended 30 September 2023
£'000 Share capital Share premium Capital redem-ption reserve Own shares held in trust Other reserves Retained earnings Total equity
At 31 March 2022 (Restated) 73,193 46,236 281 (1,094) (75,980) 326,242 368,878
Profit for the period - - - - - 28,952 28,952
Loss on net investment hedges, net of tax - - - - (86) - (86)
Gains recycled from equity to the income statement - - - - 269 - 269
Currency translation differences - - - - 2,696 - 2,696
Changes in the fair value of debt instruments at fair value through other - - - - (527) - (527)
comprehensive income, net of tax
Total comprehensive income for the period - - - - 2,352 28,952 31,304
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 - - - - - 164 164
Dividends - - - - - (25,250) (25,250)
At 30 September 2022 (Restated) 70,832 46,236 2,642 (599) (48,667) 305,147 375,591
At 31 March 2023 70,573 46,236 2,901 (1,509) (50,535) 306,349 374,015
Loss for the period - - - - - (2,363) (2,363)
Currency translation differences - - - - (2,403) - (2,403)
Changes in the fair value of debt instruments at fair value through other - - - - 202 - 202
comprehensive income, net of tax
Total comprehensive expense for the period - - - - (2,201) (2,363) (4,564)
Acquisition of own shares held in trust - - - (152) - - (152)
Utilisation of own shares held in trust - - - 646 - - 646
Share-based payments - - - - - 336 336
Dividends - - - - - (10,895) (10,895)
At 30 September 2023 70,573 46,236 2,901 (1,015) (52,736) 293,426 359,385
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the half year ended 30 September 2023
£ '000 Note 30 September 2023 30 September 2022
Cash flows from operating activities
Cash generated from operations 19 44,077 37,437
Interest income 14,345 3,023
Finance costs (876) (1,330)
Tax paid (2,001) (9,294)
Net cash generated from operating activities 55,545 29,836
Cash flows from investing activities
Purchase of property, plant and equipment (2,965) (2,452)
Investment in intangible assets (6,800) (10,118)
Purchase of investment in associates and joint ventures (2,800) -
Purchase of financial investments (25,219) (14,725)
Proceeds from maturity of financial investments and coupon receipts 28,121 14,414
Outflow on net investment hedges - (7)
Net cash used in investing activities (9,663) (12,888)
Cash flows from financing activities
Repayment of borrowings - (194)
Principal elements of lease payments (2,824) (2,919)
Acquisition of own shares (152) (130)
Payments for share buyback - (24,961)
Dividends paid (10,895) (25,250)
Net cash used in financing activities (13,871) (53,454)
Net increase/(decrease) in cash and cash equivalents 32,011 (36,506)
Cash and cash equivalents at the beginning of the period 146,218 176,578
Effect of foreign exchange rate changes (1,393) 807
Cash and cash equivalents at the end of the period 176,836 140,879
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the half year ended 30 September 2023
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 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 2023
have been prepared in accordance with UK-adopted international accounting
standards in conformity with the requirements of the Companies Act 2006 and
the disclosure guidance and transparency rules sourcebook of the United
Kingdom's Financial Conduct Authority. 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 2023 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 2023,
except for the new accounting policies explained below. The condensed
consolidated financial statements should be read in conjunction with the
statutory financial statements for the year ended 31 March 2023.
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.
New accounting policies
Investments in associates and joint ventures
An associate is an undertaking in which the Group has a long-term equity
interest and over which it has the power to exercise significant influence. A
joint venture is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the arrangement.
The Group's interest in the net assets of associates and joint ventures is
reported in investments in the consolidated statement of financial position
and its interest in their results is included in the consolidated income
statement. Investments in associates and joint ventures are initially recorded
at cost. Investments in associates and joint ventures are reviewed for
impairment whenever events or circumstances indicate that the carrying amount
may not be recoverable. Further details are provided in note 11.
Cryptocurrency assets held as Intangible assets
The Group holds cryptocurrency assets that are not held for sale in the
ordinary course of business and therefore are measured in accordance with IAS
38 "Intangible assets". The assets are originally recognised at cost and are
subsequently remeasured at cost under the cost method. These cryptocurrency
assets, subject to periodic review, are considered to have indefinite lives
and as such are not subject to amortisation. The assets are tested for
impairment on a periodic basis with any impairment being recognised in the
consolidated income statement.
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 2023 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 23 (Contingent Liabilities), notably the
probability of any obligation or future payments arising.
Accounting for cryptocurrencies
The Group has recognised £2,247,000 (31 March 2023: £1,984,000) of
cryptocurrency assets and rights to cryptocurrency assets on its Statement of
Financial Position as at 30 September 2023. 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.
The Group has also recognised £200,000 (31 March 2023: £nil) of
cryptocurrency assets on its Statement of Financial position as at 30
September 2023. These assets are not held for sale in the ordinary course of
business. A judgement has been made to apply the measurement principles of IAS
38 "Intangible assets" in accounting for these assets. The assets are
presented within 'Intangible assets' on the Condensed Consolidated Statement
of Financial Position.
Intangible assets
The Group has recognised £13,182,500 (31 March 2023: £13,550,000) of
customer relationship intangible assets on its Statement of Financial Position
as at 30 September 2023 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 "Intangible assets" in
accounting for these assets.
Key financial estimates
The Group has recognised £9,691,000 (31 March 2023: £12,786,000) of
internally generated software in intangible assets on its Statement of
Financial Position as at 30 September 2023 relating to the development of
platforms for CMC Invest UK and cash equity offerings. In performing the
interim impairment assessment, which concluded that an impairment of
£5,275,000 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 cash equities cash-generating unit ('CGU').
We found the recoverable amount of the intangible asset to have been based on
reasonable, supportable assumptions. B2B revenue, discount rates, useful
economic life, cost per funded customer acquisition, customer retention rates,
average portfolio sizes and client trading volumes represent significant
source of estimation uncertainty. Relevant disclosures are provided in Note 8.
Going concern
The Group actively manages and assessed the capital and liquidity requirements
of operating subsidiaries within the group to ensure appropriate financial
resources. The group has 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 online trading, providing its clients with
the ability to trade a variety of financial products for short-term investment
and hedging purposes. These products include 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.
In addition to this, the Group provides online stockbroking services to cater
for its clients longer term investment needs. These services are provided in
Australia, the UK and Singapore.
At the reporting date, management considered the appropriateness of the
Group's existing operating segment disclosures and the information which is
considered by the Chief Operating Decision Maker (CODM) in allocating
resources and assessing performance. The Group's CODM has been identified as
the Board of Directors.
The Group's business is generally managed by product line, given the different
economic characteristics and the different purposes for which they are used by
clients. As a result, the Group is organised into two segments:
· Trading
· Investing
This presentation is consistent with management information regularly provided
to the CODM. Revenues and segment operating expenses are allocated to the
segments that originated the transaction, and the Group uses operating profit
to assess the financial performance of each segment.
Geographical splits of the Trading business in the prior period have been
aggregated into one segment but are not restated.
For the period ending 30 September 2023 an impairment loss of £5,275,000 is
included in the operating expenses of the Investing segment.
30 September 2023 Trading Investing Total
£ '000
Revenue 97,019 22,692 119,711
Interest income 10,599 5,491 16,090
Total revenue 107,618 28,183 135,801
Introducing partner commissions and betting levies (7,303) (5,936) (13,239)
Net operating income 100,315 22,247 122,562
Operating expenses (87,886) (30,429) (118,315)
Impairment of intangible assets - (5,275) (5,275)
Operating profit / (loss) 12,429 (13,457) (1,028)
Share of results of associates and joint ventures (90) - (90)
Finance costs (875) (1) (876)
Profit / (loss) before taxation 11,463 (13,458) (1,995)
30 September 2022 Trading Investing Total
£ '000
Revenue 139,612 31,947 171,559
Interest income 1,154 1,697 2,851
Total revenue 140,766 33,644 174,410
Introducing partner commissions and betting levies (9,832) (11,118) (20,950)
Net operating income 130,934 22,526 153,460
Operating expenses (93,389) (22,184) (115,573)
Operating profit 37,545 342 37,887
Finance costs (1,236) (94) (1,330)
Profit before taxation 36,309 248 36,557
The measurement of net operating income for segmental analysis is consistent
with that in the income statement and is broken down by geographic location
below.
£ '000 30 September 2023 30 September 2022
UK 34,410 55,627
Australia 47,112 45,889
Other countries 41,040 51,944
Total net operating income 122,562 153,460
The measurement of segment assets for segmental analysis is consistent with
that in the balance sheet. The total of non-current assets other than deferred
tax assets, broken down by location, is shown below.
£ '000 30 September 2023 31 March 2023
UK 35,532 30,996
Australia 24,336 25,348
Other countries 6,326 4,469
Total non-current assets 66,194 60,813
3. Revenue
£ '000 30 September 2023 30 September 2022
Trading 94,735 138,258
Investing 22,689 31,952
Other 2,287 1,349
Revenue 119,711 171,559
Trading revenue represents CFD and Spread bet revenue (net of hedging costs)
accounted for in accordance with IFRS 9 "Financial Instruments". Investing
revenue represents stockbroking revenue accounted for in accordance with IFRS
15 "Revenue from Contracts with Customers".
4. Operating Expenses
£ '000 30 September 2023 30 September 2022
Net staff costs 53,208 49,221
IT costs 19,191 16,324
Sales and marketing 16,664 17,325
Premises 3,414 2,061
Legal and Professional fees 6,581 5,601
Regulatory fees 2,315 7,044
Depreciation and amortisation 7,626 7,277
Bank charges 2,193 4,363
Irrecoverable sales tax 2,513 236
Other 4,623 6,271
118,328 115,723
Capitalised internal software development costs (13) (150)
Operating expenses 118,315 115,573
5. Taxation
Tax is charged at -18% for the six months ended 30 September 2023 representing
(a) the group's best estimate of the average annual effective tax rate
expected to apply for the full year, applied to the pre-tax income of the six
month period; and (b) the impact of adjustments to prior tax charges which are
recognised in full in the half-year.
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 vesting of all dilutive potential weighted average Ordinary Shares
and that vesting is satisfied by the issue of new Ordinary Shares.
£ '000 30 September 2023 30 September 2022
(Loss) / earnings attributable to ordinary shareholders (£ '000) (2,363) 28,952
Weighted average number of shares used in the calculation of basic earnings 279,199 285,048
per share ('000)
Dilutive effect of share options ('000) 5,144 1,403
Weighted average number of shares used in the calculation of diluted earnings 284,343 286,451
per share ('000)
Basic (loss) / earnings per share (p) (0.8)p 10.2p
Diluted (loss) / earnings per share (p) (0.8)p 10.1p
For the half year ended 30 September 2023, 5,144,000 (Half year ended 30
September 2022: 1,403,000) potentially dilutive weighted average ordinary
shares in respect of share awards and options in issue were included in the
calculation of diluted EPS.
7. Dividends
£ '000 30 September 2023 30 September 2022
Prior year final dividend of 3.90p per share (30 September 2022: 8.88p) 10,895 25,250
An interim dividend for 2024 of 1.00p per share, amounting to £2,800,000 has
been approved by the board but has not been included as a liability at 30
September 2023. The dividend will be paid on 11 January 2024 to those members
on the register at the close of business on 8 December 2023.
8. Intangible assets
£ '000 Goodwill Computer software Trademarks and trading licences Client relation Crypto Assets under development Total
ships
currency assets
At 31 March 2023
Cost 11,500 143,991 1,046 16,495 - 7,707 180,739
Accumulated amortisation (11,500) (129,304) (914) (3,679) - - (145,397)
Carrying amount - 14,687 132 12,816 - 7,707 35,342
Half year ended 30 September 2023
Carrying amount at the beginning of the period - 14,687 132 12,816 - 7,707 35,342
Additions - 303 - - 200 6,297 6,800
Transfers - 2,303 - - - (2,303) -
Amortisation charge - (2,142) (17) (731) - - (2,890)
Impairment - (4,135) - - - (1,140) (5,275)
Foreign currency translation - (48) (1) (350) - (107) (506)
Carrying amount at the end of the period - 10,968 114 11,735 200 10,454 33,471
At 30 September 2023
Cost 11,500 145,916 1,031 16,048 200 11,594 186,289
Accumulated amortisation and impairment (11,500) (134,948) (917) (4,313) - (1,140) (152,818)
Carrying amount - 10,968 114 11,735 200 10,454 33,471
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
Intangible assets 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, with additional
testing being carried out when impairment triggers for a CGU could adversely
impact the valuation of the CGU.
The cash equities CGU includes assets developed in the UK that provide
functionality for clients to buy and sell cash equities products. The CGU
consists of assets relating to the UK Invest platform, as well as assets
developed to offer cash equities on the Next Generation platform. Previous
impairment tests were carried out on these assets individually, however due to
the shared infrastructure used across these assets it was deemed appropriate
to assess them in aggregate as one CGU.
The assets were previously tested for impairment as at 31 March 2023. As a
result of the unfavourable equity market conditions and operational delays in
development of products, management revised forecasts downwards for the
assets, triggering an impairment review.
The recoverable amount of the CGU is measured by its value in use ("VIU"). The
key assumptions used in the projections relate to B2B revenue, cost of
acquisition of D2C clients and average portfolio sizes of the UK Invest
business, and client trading volumes in the cash equities offering through the
Next Generation platform. The most recent five-year board-approved forecast
results were used in projecting the VIU of the CGU, with a discount rate of
10.0% and a long-term growth rate (beyond the forecasting period) of 0%. The
resulting recoverable amount is £9,691,000. As this is below the carrying
value of the CGU of £14,966,000, an impairment loss of £5,275,000 was
recognised for the period ended 30 September 2023.
Given the inherent uncertainty in forecasting cashflows for new business
lines, there is a risk that the expected levels of income from the new
initiatives are not achieved, and as a result the recoverable amount of the
CGU may reduce. A 10% reduction in projected revenues would result in the full
impairment of the assets.
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 2023
Cost 16,565 9,321 42,420 22,634 152 91,092
Accumulated depreciation (14,092) (8,606) (31,661) (13,962) - (68,321)
Carrying amount 2,473 715 10,759 8,672 152 22,771
Half year ended 30 September 2023
Carrying amount at the beginning of the period 2,473 715 10,759 8,672 152 22,771
Additions 316 229 2,364 6,614 3 9,526
Transfers 482 82 (450) - (114) -
Depreciation charge (490) (137) (2,054) (2,055) - (4,736)
Foreign currency translation (9) (9) (37) (122) (4) (181)
Carrying amount at the end of the period 2,772 880 10,582 13,109 37 27,380
At 30 September 2023
Cost 16,997 9,568 44,206 28,681 37 99,489
Accumulated depreciation (14,225) (8,688) (33,624) (15,572) - (72,109)
Carrying amount 2,772 880 10,582 13,109 37 27,380
10. Trade and other receivables
£ '000 30 September 2023 31 March 2023
Current
Gross trade receivables 7,236 8,721
Less: Loss allowance (4,658) (4,247)
Trade receivables 2,578 4,474
Prepayments 15,976 14,985
Accrued income 3,682 2,335
Stockbroking debtors 64,313 105,103
Other debtors 5,550 3,719
92,099 130,616
Non-current
Other debtors 2,601 2,666
Total 94,700 133,282
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 16).
11. Investments in associates and joint ventures
On 6 June 2023, the Group acquired a 33% stake in Strike X Technologies
("Strike X"), a customer centric blockchain solutions business for a cost of
£2,800,000. This investment presents the Group with further opportunity for
growth. The partnership will allow the Group access to the latest blockchain
related products and services with the opportunity to leverage these for our
customers over the longer term.
The Group's share of loss in Strike X for the period ended 30 September 2023
was £91,000 (period ended 30 September 2022: £nil). The investment was
adjusted accordingly to £2,709,000 as at 30 September 2023 (31 March 2023:
£nil).
Such investments are reviewed for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable. There was no
indication of impairment for the period ended 30 September 2023 (Period ended
30 September 2022: £nil).
12. Derivative financial instruments
Assets 30 September 30 September 2023 31 March 31 March
2023 Carrying 2023 2023
Notional amount Amount Notional amount Carrying amount
£m £ '000 £m £'000
Held for trading
Client trading positions 94.1 16,057 120.9 13,125
Held for hedging
Forward foreign exchange contracts - economic hedges 60.6 159 73.6 1,106
Total 154.7 16,216 194.5 14,231
Liabilities 30 September 30 September 2023 31 March 31 March
2023 Carrying 2023 2023
Notional amount Amount Notional amount Carrying amount
£m £ '000 £m £'000
Held for trading
Client trading positions 53.9 (2,384) 35.7 (2,033)
Total 53.9 (2,384) 35.7 (2,033)
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.
13. 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. As presented below, the Group holds cryptocurrencies on
exchange and in vault. Cryptocurrencies held in vaults are held in wallets
that have additional security features. The fair value of cryptocurrencies are
based on the market price of these instruments as at the balance sheet date.
Other assets are measured at fair value less costs to sell.
£ '000 30 September 2023 31 March 2023
Exchange 910 1,178
Vaults 1,337 806
Total 2,247 1,984
14. Financial investments
£ '000 30 September 2023 31 March 2023
Investment in debt instruments classified at FVOCI
UK Government securities 27,881 30,572
Financial assets mandatorily measured at FVTPL
Equity securities 441 34
Total 28,322 30,606
£ '000 30 September 2023 31 March 2023
Analysis of financial investments
Non-current 33 34
Current 28,289 30,572
Total 28,322 30,606
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.
15. Cash and cash equivalents
£ '000 30 September 2023 31 March 2023
Cash and cash equivalents 176,836 146,218
Analysed as:
Cash at bank 176,836 146,218
Cash and cash equivalents comprise of cash on hand and short-term deposits.
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.
16. Trade and other payables
£ '000 30 September 2023 31 March 2023
Client payables 107,772 49,409
Tax and social security 737 1,272
Stockbroking creditors 55,058 98,428
Accruals and other creditors 21,977 33,175
Total 185,544 182,284
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).
17. Lease liabilities
£ '000 30 September 2023 31 March 2023
At the beginning of the period / year 11,818 14,251
Additions / modifications of new leases during the period / year 8,495 3,223
Interest expense 266 658
Lease payments made during the year (3,090) (6,112)
Foreign currency translation (176) (202)
At the end of the period / year 17,313 11,818
£ '000 30 September 2023 31 March 2023
Analysis of lease liabilities
Non-current 12,307 6,228
Current 5,006 5,590
Total 17,313 11,818
18. Provisions
£ '000 Restructuring costs Property related Other Total
At 1 April 2023 - 2,348 553 2,901
Additional provision 715 - 79 794
Utilisation of provision - - (398) (398)
Unutilised provision reversed - (1,955) (144) (2,099)
Translation - (13) (10) (23)
At 30 September 2023 715 380 80 1,175
The restructuring provision is for costs relating to redundancies announced
within the period ended 30 September 2023.
The property related provision includes dilapidation provisions. During the
period ended 30 September 2023, the Group entered into reversionary leases for
some of its leased properties. The Group was relieved of its obligation to
restore the properties to its original condition as part of this agreement.
Provisions amounting to £1,955,000 were released with the corresponding
impact recorded to the right of use asset.
19. Cash generated from operations
£ '000 30 September 2023 30 September 2022
Cash flows from operating activities
Profit before taxation (1,995) 36,557
Adjustments for:
Interest income (16,090) (2,851)
Finance costs 876 1,330
Depreciation 4,736 5,176
Amortisation of intangible assets 2,890 2,101
Impairment of intangible assets 5,275 -
Profit on disposal of property, plant and equipment - 54
Share of after tax results of associates and joint ventures 91 -
Share-based payment 975 790
Other non-cash movements including exchange rate movements (409) 2,014
Changes in working capital:
Decrease in trade and other receivables and other assets 39,956 27,980
Decrease/(increase) in amounts due from brokers 4,027 (8,385)
(Increase)/decrease in other assets (263) 9,378
Increase/(decrease) in trade and other payables 3,198 (34,553)
Increase in amounts due to brokers 2,193 -
Decrease in net derivative financial instruments liabilities (1,634) (2,058)
Increase/(decrease) in provisions 251 (96)
Cash generated from operations 44,077 37,437
20. 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
2023 were £272,800,000 (31 March 2023: £309,732,000).
· 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 2023: £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 2023. 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 2023 31 March 2023
Cash and cash equivalents (net of bank overdraft) 176,836 146,218
Amount due from brokers 184,127 188,154
Other assets 2,247 1,984
Financial investments 28,322 30,606
Derivative financial instruments (excluding Client CFD positions) (current 159 1,106
assets)
391,691 368,068
Less: Title transfer funds (107,771) (49,409)
Less: Amount due to brokers (11,120) (8,927)
Own Funds 272,800 309,732
Title transfer funds 107,771 49,409
Available committed facility 55,000 55,000
Total Available liquidity 435,571 414,141
Less: Blocked cash (75,699) (68,857)
Less: Initial margin requirement at broker (122,658) (106,127)
Net available liquidity 237,214 239,157
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 2023 31 March 2023
Operating activities
Profit before tax (1,995) 52,163
Adjustments for:
Depreciation, amortisation and impairment 12,901 15,637
Other non-cash adjustments (532) 1,629
Tax paid (2,001) (17,060)
Own funds generated from operating activities 8,373 52,369
Movement in working capital (17,476) (13,995)
Outflow from investing activities
Net purchase of property, plant and equipment and intangible assets (9,765) (28,221)
Other outflow from investing activities (2,800) (8)
Outflow from financing activities
Dividends paid (10,895) (35,040)
Share buyback - (27,264)
Other outflow from financing activities (2,976) (6,754)
Total outflow from investing and financing activities (26,436) (97,287)
Decrease in own funds (35,539) (58,913)
Own funds at the beginning of the period / year 309,732 369,947
Effect of foreign exchange rate changes (1,393) (1,302)
Own funds at the end of the period / year 272,800 309,732
21. Fair value measurement disclosures
IFRS 13 "Fair Value Measurement" requires the Group to classify its financial
assets and liabilities according to a hierarchy that reflects the
observability of significant market inputs. The three levels of the fair value
hierarchy are defined below:
· Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· 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 2023 Level 1 Level 2 Level 3 Total
£ '000
Financial investments 28,289 - 33 28,322
Derivative financial instruments (current assets) - 16,216 - 16,216
Derivative financial instruments (current liabilities) - (2,384) - (2,384)
28,289 13,832 33 42,154
31 March 2023 Level 1 Level 2 Level 3 Total
£ '000
Financial investments 30,572 - 34 30,606
Derivative financial instruments (current assets) - 14,231 - 14,231
Derivative financial instruments (current liabilities) - (2,033) - (2,033)
30,572 12,198 34 42,804
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;
· for foreign currency forwards - forward exchange rates at the
balance sheet date.
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/to brokers
· Trade and other receivables
· Trade and other payables
22. 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 2023. 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 2023.
Directors' transactions
There were no director transactions during the half year ended 30 September
2023 and 30 September 2022.
23. 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 13 June 2023, 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.
Notice of class action lawsuit
The Group received notice of a class action lawsuit being brought against one
of its operating entities on 31 May 2022. The scope of the claim is still
being defined, and there has been no material progress. As a result, an
assessment regarding the probability and size of financial outflow cannot be
determined.
Tax authority investigations
The Group, from time to time, in the normal course of business, is subject to
information requests from taxing authorities. The Group complies with those
information requests and is not aware of any outcome from such a request that
would impact the 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 profits over £25 million prior to 1 April 2023, and 3% on
profits over £100 million from 1 April 2023 onwards. The Group has concluded
that the relevant entities meet the exemption requirements and therefore the
treated tax charge, would amount to £24.5 million, (31 March 2023 £23.4
million) in respect of all relevant periods, and has not been provided for.
The Group's position is supported by external advice although it is possible
that it could be challenged. The Group expect for this matter to be resolved
by 31 March 2024.
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 now 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, they are in early stages and such an
outcome is not currently considered probable.
24. Alternative performance measures
A reconciliation of revenue alternative performance measures ("APMs) to the
Group's primary statements can be found on page 31. APMs monitor the delivery
of long-term value through a focus on client quality and operating
effectiveness. APMs are not a substitute for statutory measures. They are
largely reported in the Group's annual report.
25. 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.
26. Subsequent events
There are no events after the interim period that have not been reflected in
the condensed consolidated financial statements.
INDEPENDENT REVIEW REPORT TO CMC MARKETS PLC
Conclusion
We have been engaged by CMC Markets plc (the "Group") to review the condensed
set of financial statements in the half-yearly financial report for the six
months ended 30 September 2023 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 26.
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 2023 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 Group
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 and 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 group in accordance with ISRE (UK) 2410. Our
work has been undertaken so that we might state to the group 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 group, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
16 November 2023
Appendix: Alternative performance measures
a. Reconciliation of trading gross client income to trading net
revenue
£m 30 September 2023 30 September 2022
Trading gross client income 132.6 154.9
Client rebates introducing partner commissions and levies (8.6) (11.5)
Risk management gains / (losses) (36.6) (15.0)
Trading net revenue 87.4 128.4
b. Reconciliation of investing net revenue
£m Note 30 September 2023 30 September 2022
Investing gross revenue 3 22.7 31.9
Introducing partner commissions 2 (5.9) (11.1)
Investing net revenue 16.8 20.8
c. Reconciliation of trading net revenue, investing net revenue to net
operating income
£m Note 30 September 2023 30 September 2022
Trading net revenue (a) 87.4 128.4
Investing net revenue (b) 16.8 20.8
Other revenue 3 2.3 1.4
Interest income 2 16.1 2.9
Net operating income 122.6 153.5
d. Reconciliation of operating expenses including variable
remuneration
£m Note 30 September 2023 30 September 2022
Operating expenses 4 (118.3) (115.6)
Impairment of intangible assets (5.3) -
Operating expenses including variable remuneration (123.6) (115.6)
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