TIDMCMCX
RNS Number : 6069S
CMC Markets Plc
17 November 2021
17 November 2021
CMC MARKETS PLC
Interim results for the half year ended 30 September 2021
Reiterating FY guidance; core underlying business trending well
above pre-pandemic levels
30 September 30 September 30 September
For the half year ended 2021 2020 Change 2019 Change
Net operating income (GBP million) 126.7 230.9 (45%) 102.3 24%
Leveraged net trading revenue
(GBP million) 101.0 200.4 (50%) 85.1 19%
Non-leveraged net trading
revenue (GBP million) 24.2 26.3 (8%) 14.5 67%
Other income (GBP million) 1.5 4.2 (63%) 2.7 (43%)
Profit before tax (GBP million) 36.0 141.1 (74%) 30.1 20%
Basic earnings per share (pence) 9.6 38.3 (75%) 9.5 1%
Dividend per share (pence) 3.50 9.20 (62%) 2.85 23%
==================================== ============= ============= ======= ============= =======
Leveraged gross client income
(GBP million) 127.0 173.6 (27%) 103.5 23%
Leveraged client income retention 80% 115% (35%) 82% (2%)
Leveraged active clients (numbers) 53,834 59,082 (9%) 41,603 29%
Leveraged revenue per active
client (GBP) 1,877 3,392 (45%) 2,047 (8%)
------------------------------------ ------------- ------------- ------- ------------- -------
Non-leveraged active clients
(numbers) 185,847 168,270 10% 118,468 57%
------------------------------------ ------------- ------------- ------- ------------- -------
Notes:
- Net operating income represents total revenue net of
introducing partner commissions and levies
- Leveraged net trading revenue represents contracts for
difference ("CFD") and spread bet gross client income net of
rebates, levies and risk management gains or losses
- Non-leveraged net trading revenue represents stockbroking
revenue net of rebates
- Leveraged gross client income represents spreads, financing
and commissions charged to clients (client transaction costs)
- Leveraged active clients represent those individual clients
who have traded with or held a CFD or spread bet position with CMC
Markets on at least one occasion during the six-month period
- Leveraged revenue per active client represents total trading
revenue from leveraged active clients after deducting rebates and
levies
Key highlights
-- H1 2022 leveraged net trading revenue at GBP101.0 million (H1
2021: GBP200.4 million) down 50% as a result of a decrease in
market volatility resulting in lower client trading activity and
client income retention reverting towards guided levels.
-- Leveraged client income retention for the period at 80% with
53,834 active clients, down 9% versus H1 2021, and up 29% versus
pre-pandemic H1 2020 levels. Total client money ("AUM") in the
leveraged business stood at GBP557 million, a new period-end record
high.
-- H1 2022 non-leveraged net trading revenue was GBP24.2 million
(H1 2021: GBP26.3 million) representing 19% of Group net operating
income versus 11% in H1 2021. Underlying client numbers increased
10% versus H1 2021, now standing at 185,847 actives.
-- H1 2022 net operating income was GBP126.7 million. FY 2022
net operating income guidance reiterated at GBP250-280 million.
-- Operating costs for H1 2022, excluding variable remuneration,
were GBP83.7 million (H1 2021: GBP79.1 million). The increase is
primarily a result of the Group's continued investment in
technology staff. Variable remuneration costs decreased to GBP6.0
million (H1 2021: GBP9.8 million).
-- Announced the acquisition of approximately 500,000 Share
Investing clients currently trading with CMC through our white
label arrangement with Australia and New Zealand Banking Group
Limited ("ANZ"). The clients bring total assets in excess of AUD$45
billion and the transaction is due to complete in the next 12-18
months.
-- Regulatory total capital ratio of 20.0% and net available liquidity of GBP182.7 million.
-- Interim dividend of 3.50 pence (H1 2021: 9.20 pence) with a
total dividend for the year expected to be in line with policy at
50% of profit after tax.
-- As announced on 15 November 2021, the Board intends to
undertake an exploratory review to consider the viability of a
managed separation of the Group's non-leveraged and leveraged
businesses in the interests of maximising shareholder value.
Lord Cruddas, Chief Executive Officer, commented:
"I'm very pleased to see the business is operating well above
pre-pandemic levels across all our business lines. This is
testament to the resilience and quality of our platform and
offering.
Encouragingly for the future, we closed our first half with
client money ("AUM") in our leveraged business being maintained
close to record highs. It was also encouraging to see active client
numbers increase by 10% in our non-leveraged business in support of
our diversification strategy. Our non-leveraged business continues
to offer the greatest growth potential and now represents
approximately 50% of our trading revenue in Australia and nearly
20% of Group net operating income. In line with our aim to
diversify and grow our non-leveraged earnings we announced the
acquisition of the ANZ Share Investing clients that, when completed
over a 12-18 month period, will boost our non-leveraged business
with approximately 500,000 clients with total assets in excess of
AUD$45bn. We are on a fast track to diversification, using our
existing platform technology to win B2B and B2C non-leveraged
business. This will be further boosted with the launch of our new
UK investment platform planned in the early part of the next
financial year, which will offer both B2C and B2B potential.
In line with this strategy, we believe it is right for us to
evaluate the viability of separating the businesses in order to
unlock the significant value within the current Group structure.
The Board is expected to start this review before year end and
complete it by June 2022. We will update on progress in due
course."
Analyst and Investor Presentation
A presentation will be held for equity analysts and investors
today, 17 November 2021, at 10:30 a.m. (GMT).
A live webcast of the presentation will be available via the
following link:
https://webcasts.cmcmarkets.com/results/2022halfyear
Should you wish to ask a question, please dial into the
presentation on +44 (0)20 3059 5869, and quote "CMC Markets plc H1
2022 Results Conference" when prompted.
Forthcoming announcement dates
20 January 2022 Q3 2022 trading update
8 April 2022 FY 2022 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
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, access stockbroking services. More information is
available at http://www.cmcmarketsplc.com
CHIEF EXECUTIVE'S REVIEW
Leveraged business
H1 2022 leveraged net trading revenue was GBP101.0 million (H1
2021: GBP200.4 million). The reduction is a result of a decrease in
market volatility resulting in lower client trading activity
throughout the period and lower client income retention. Client
income retention for the period stood at 80%, broadly in line with
target and is expected to continue to recover through the rest of
the year. H1 2022 leveraged active clients are 9% lower compared to
H1 2021, but monthly trading client numbers continue to remain
close to record highs and importantly are still up 29% versus
pre-pandemic H1 2020 levels.
Total AUM in the leveraged business stood at GBP557 million, a
new period-end record high. The Group's strategic initiatives
across the leveraged business remain unchanged. We continue to look
at ways to grow the business through an increased product offering
as well as investing in our institutional business.
Non-leveraged business
The Group's non-leveraged net trading revenue was GBP24.2
million for H1 2022 (H1 2021: GBP26.3 million). Underlying active
client numbers are up 10% versus H1 2021, now standing at 185,847.
Client non-leveraged Assets Under Administration ("AUA") reached a
new record high at AU$74.8bn, up 30% versus H1 2021 and up 67%
versus pre-pandemic H1 2020 levels. Our Australian business
recently won the Finder award for best overall Share Trading
Platform 2021 as well as winning the Canstar best platform for the
11th year running.
H1 2022 non-leveraged net trading revenue represented some 19%
of total Group net operating income. As previously highlighted,
this diversification of our earnings is core to our strategic
vision to bring enhanced growth, longer client partnerships and
reduced volatility in future earnings.
ANZ Bank client acquisition
During September 2021 CMC announced the acquisition of Australia
and New Zealand Banking Group Limited's ("ANZ") Share Investing
client base for a sum of AUD$25 m illion . The transaction involves
the acquisition of approximately 500,000 ANZ Share Investing
clients, with total assets in excess of AUD$45 billion. The AUD$25
m illion consideration will be funded from the Group's existing
cash resources.
With this acquisition, the existing white label technology
partnership, which has seen CMC's trading technology power ANZ's
share investing business since 2018, will come to an end. The
existing white label partnership generated GBP39.5 million in net
trading revenue for CMC in FY 2021 and GBP16.7 million in H1 2022.
The CMC platform will offer clients a wide range of additional
benefits currently unavailable with ANZ. These include access to
enhanced, market-leading mobile apps and complementary education
tools and resources. Following transition, the legacy ANZ Share
Investing clients will benefit from lower brokerage charges across
four major international markets and the local Australian market,
and will give CMC the opportunity to drive greater value from its
enlarged client base.
The transaction further establishes CMC as a financial
technology leader in the Australian market and removes the
uncertainty around the finite term of the existing ANZ white label
partnership. The transaction is expected to take 12 to 18 months to
fully transition clients and is another significant step in the
ongoing diversification of the Group's global business. These
clients will continue to support multi-year growth in the region
and remains core to our non-leveraged growth strategy.
Operating expenses
Operating costs for H1 2022, excluding variable remuneration,
were GBP83.7 million (H1 2021: GBP79.1 million). As previously
highlighted, this increase is primarily a result of the Group's
continued investment in technology which has resulted in higher
personnel costs. Offsetting this, marketing spend was lower over
the period although is expected to increase in H2. Given the
reduced performance of the Group, variable remuneration decreased
to GBP6.0 million (H1 2021: GBP9.8 million).
Marketing and client acquisition
Reduced market volatility in the period resulted in lower client
demand for our leveraged and non-leveraged products. This
translated into fewer opportunities to acquire high value clients
and, as a result, marketing spend during the period was 10% lower
than H1 2021 alongside a reduction in the number of client
applications.
Marketing spend for H2 2022 is expected to increase to similar levels as spent in FY 2021.
Regulatory change
The Australian Securities and Investments Commission ("ASIC")
announced new regulatory measures relating to CFDs in October 2020
that came into effect on 29 March 2021. We are supportive of the
regulatory change, as we have always operated to the highest
standards, and our experience with the European Securities and
Markets Authority ("ESMA") measures show that they are, in the
medium to long term, positive for CMC and our clients.
After the introduction of these new measures, regulatory
conditions are now more harmonised globally and we can continue to
focus on growing our business in an industry where regulatory
arbitrage is reduced. These regulatory changes reduced the notional
value of retail client trading in Australia. This, combined with
lower market volatility, resulted in less active client trading
than in the prior period, in line with our expectations and with
that seen in the ESMA region in FY 2019.
Strategic initiatives
In June we announced our intention to launch a UK non-leveraged
platform. This is an opportunity for CMC to use its industry
leading platform and brand to build a significant new business
line. It is becoming increasingly apparent that mobile digital
delivery will dominate the next generation of investment platforms.
For CMC, diversifying our business from a primarily leveraged CFD
provider to also include provision of non-leveraged wealth
management platforms is a natural evolution. Our 30-year history
has already allowed us to build a world class technology-based
trading platform. We already own the core building blocks to
facilitate this transition through our prime broking relationships
and strong relationships with regulators and other stakeholders and
are proud to already offer our clients a resilient and dependable
platform with first-class user experience. The UK has already seen
dramatic growth in direct to customer ("D2C") investment platform
AUA over recent years, with data suggesting that the UK's D2C
platform AUA currently stands at just below GBP300 billion and has
been growing at 16 % p.a. since 2008.
Institutional ("B2B")
Looking at the growth of our Australian non-leveraged business
over the past decade, i t has been built on B2B partnerships. We
now have some 160 B2B partners across the region. We ultimately see
a similar opportunity for us to utilise the same strategy in the UK
non-leveraged business. On the leveraged side, we continue to
pursue leveraged institutional and B2C opportunities and our
institutional offering continues to provide great growth potential
for both business lines.
Dividend
The Group is maintaining its dividend policy at 50% of profit
after tax. The Board has declared an interim dividend of 3.50 pence
per share (2021: 9.20 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 20 December 2021 to those members on the
register at the close of business on 26 November 2021.
Outlook
CMC reiterates its prior guidance and expects FY 2022 net
operating income to be between GBP250-280 million. We continue to
expect 2022 operating expenses excluding variable remuneration to
be moderately higher year-on-year, with H2 2022 operating expenses
excluding variable remuneration to be circa 6% higher than H1 2022
due to an expected pickup in marketing spend.
The Group continues to invest in technology and people in both
the leveraged and non-leveraged businesses that present significant
opportunities to deliver long-term value for shareholders.
OPERATING review
Summary
Net operating income decreased by GBP104.2 million (45%) to
GBP126.7 million, with a decrease in market volatility resulting in
lower client trading activity and lower client income retention
throughout the period. This lower volatility and trading activity
impacted both the leveraged and non-leveraged businesses.
Leveraged net trading revenue decreased by GBP99.4 million (50%)
driven by decreases in both gross client income and client income
retention. The decrease in gross client income was a result of the
significant volatility in the market in H1 2021 resulting in
exceptionally high client trading activity, with H1 2022 returning
to more normalised levels. Client income retention was lower during
the period at 80% (H1 2021: 115%) as a result of a change in the
mix of asset classes traded by clients and lower natural hedging of
flow within indices. This resulted in revenue per active client
("RPC") decreasing by GBP1,515 (45%) to GBP1,877.
Leveraged active client numbers decreased by 9% in comparison to
H1 2021, however monthly active clients remain significantly above
pre-COVID-19 levels, demonstrating the structural shift in the
Group's client base.
Non-leveraged net trading revenue was 8% lower at GBP24.2
million (H1 2021: GBP26.3 million), with decreased client trading
activity during the less volatile market environment offset by an
active client base which was 10% larger than H1 2021 and 57% higher
than H1 2020.
Statutory profit before tax decreased by GBP105.1 million (74%)
to GBP36.0 million as a result of the decrease in net operating
income, combined with increased operating expenses as the Group
continues to invest in technology. Profit before tax margin(1)
decreased by 32.7% from 61.1% to 28.4%.
Net operating income overview
For the half year ended 30 September 2021 30 September 2020 Change Change %
GBP million
Leveraged net trading revenue 101.0 200.4 (99.4) (50%)
Non-leveraged net trading revenue 24.2 26.3 (2.1) (8%)
----------------------------------- ------------------ ------------------ -------- ---------
Net trading revenue(2) 125.2 226.7 (101.5) (45%)
Interest income 0.3 0.5 (0.2) (27%)
Other operating income 1.2 3.7 (2.5) (67%)
=================================== ================== ================== ======== =========
Net operating income 126.7 230.9 (104.2) (45%)
=================================== ================== ================== ======== =========
B2B and B2C net trading revenue
For the half
year ended 30 September 2021 30 September 2020 Change
-------------------------------------------------------
GBP million B2C(3) B2B(4) Total B2C B2B Total B2C B2B Total
-------------------------- ------------------ ------------------ ----------------- ---------------- ----------------- ----------------- ----------------- -----------------
Leveraged net
trading
revenue 85.0 16.0 101.0 183.0 17.4 200.4 (54%) (8%) (50%)
Non-leveraged
net trading
revenue 4.9 19.3 24.2 4.8 21.5 26.3 1% (10%) (8%)
Net trading
revenue 89.9 35.3 125.2 187.8 38.9 226.7 (52%) (9%) (45%)
========================== ================== ================== ================= ================= ================ ================= ================= ================= =================
(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: Leveraged
For the
half
year 30 September 30 September
ended 2021 2020 Change
------------------- ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------
Net Gross Net Gross
trading client trading client Net Gross
revenue income(1) Active RPC revenue income(1) Active RPC trading client Active
(GBPm) (GBPm) Clients (GBP) (GBPm) (GBPm) Clients (GBP) revenue income(1) Clients RPC
------------------- ------------------- --------------------- ------------------- ------------------ ------------------- --------------------- ------------------- ------------------ ------------------- --------------------- ------------------- -----------------
UK 34.5 47.6 13,590 2,543 66.4 63.3 14,871 4,468 (48%) (25%) (9%) (43%)
Europe 18.6 20.6 13,664 1,359 38.7 28.3 17,191 2,252 (52%) (27%) (21%) (40%)
------------------- ------------------- --------------------- ------------------- ------------------ ------------------- --------------------- ------------------- ------------------ ------------------- --------------------- ------------------- -----------------
UK &
Europe 53.1 68.2 27,254 1,946 105.1 91.6 32,062 3,280 (50%) (26%) (15%) (41%)
APAC &
Canada 47.9 58.8 26,580 1,802 95.3 82.0 27,020 3,525 (50%) (28%) (2%) (49%)
=================== =================== ===================== =================== ================== =================== ===================== =================== ================== =================== ===================== =================== =================
Total 101.0 127.0 53,834 1,877 200.4 173.6 59,082 3,392 (50%) (27%) (9%) (45%)
=================== =================== ===================== =================== ================== =================== ===================== =================== ================== =================== ===================== =================== =================
(1) Spreads, financing and commissions on CFD client trades.
Given the exceptional volatility in the prior period, all
regions saw decreases in revenue per active client, driven by lower
gross client income in all regions and reduced client income
retention across the Group. Active client figures also reduced in
all regions, primarily a result of the lower volatility presenting
fewer opportunities for clients to trade.
UK
Active clients decreased by 9% to 13,590 (H1 2021: 14,871), as a
result of a reduction in market volatility, however they remained
significantly above pre-COVID-19 levels (H1 2020: 9,259). Gross
client income decreased by 25% to GBP47.6 million (H1 2021: GBP63.3
million) driven by lower active clients in addition to a reduction
in trading activity compared to prior year.
Revenue per active client decreased by 43% to GBP2,543 (H1 2021:
GBP4,468) due to lower gross client income and a reduction in
client income retention leading to lower net trading revenue.
Europe
Europe comprises offices in Austria, Germany, Norway, Poland and
Spain. Active client numbers were 21% lower than prior year, with
gross client income decreasing by 27% to GBP20.6 million as a
result.
Revenue per active client also decreased by 40% to GBP1,359 (H1
2021: GBP2,252) due to lower gross client income and a reduction in
client income retention leading to lower net trading revenue.
APAC and Canada
Our APAC and 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 2% to 26,580 (H1 2021:
27,020), driven by the Australia office, which was impacted both by
new regulation and lower market volatility. Gross client income
decreased by 28% to GBP58.8 million (H1 2021: GBP82.0 million),
with regulatory changes implemented by the Australian Securities
and Investments Commission ("ASIC") reducing the notional value of
retail client trading, combined with lower market volatility,
resulting in less active client trading than in the prior
period.
Non-leveraged
Net trading revenue
For the half year ended 30 September 2021 30 September 2020 Change Change %
GBP million
B2B net trading revenue 19.3 21.5 (2.2) (10%)
B2C net trading revenue 4.9 4.8 0.1 1%
------------------------- ------------------ ------------------ ------- ---------
Net trading revenue 24.2 26.3 (2.1) (8%)
------------------------- ------------------ ------------------ ------- ---------
Active clients
For the half year ended 30 September 2021 30 September 2020
Change %
B2C active clients 41,590 32,225 29%
B2B active clients 144,257 136,045 6%
Total non-leveraged active clients 185,847 168,270 10%
==================================== ================== ================== ===========
The non-leveraged business continued to display growth in active
clients, with a 10% increase compared to H1 2021. Despite the
increase in active clients, net trading revenue decreased 8% to
GBP24.2 million, driven by subdued market volatility resulting in
fewer opportunities for clients to trade.
Operating expenses
For the half year ended 30 September 30 September Change %
GBPm 2021 2020
---------------------------------------- ------------ ------------ --------
Net staff costs - fixed (excluding
variable remuneration) 34.1 28.8 (18%)
IT costs 14.2 12.7 (12%)
Marketing costs 10.8 12.0 10%
Sales-related costs 0.9 2.8 68%
Premises costs 1.8 1.7 (2%)
Legal and professional fees 4.7 3.3 (40%)
Regulatory fees 3.2 2.6 (23%)
Depreciation and amortisation 6.4 5.5 (17%)
Irrecoverable sales tax 1.0 3.3 71%
Other 6.6 6.4 (7%)
======================================== ============ ============ ========
Operating expenses excluding variable
remuneration 83.7 79.1 (6%)
Variable remuneration 6.0 9.8 39%
======================================== ============ ============ ========
Operating expenses including variable
remuneration 89.7 88.9 (1%)
Interest 1.0 0.9 (11%)
======================================== ============ ============ ========
Total costs 90.7 89.8 (1%)
======================================== ============ ============ ========
Operating expenses excluding variable remuneration increased by
GBP4.6 million (6%) to GBP83.7 million. This was driven by an
increase in staff costs (GBP5.3 million) driven by significant
investment in technology, trading and product staff over the period
and increased IT costs (GBP1.5 million) as a result of higher
market data charges and investments in strategic projects.
Irrecoverable sales taxes decreased by GBP2.3 million (71%) due
to a one-off recovery and ongoing lower irrecoverable VAT in the
UK. Sales-related costs decreased by GBP1.9m (68%) driven primarily
by release of provisions in H1 2022 that initially arose in H1
2021, and marketing costs decreased by GBP1.2m (10%) as there were
fewer opportunities for targeted marketing in the period due to the
lower market volatility.
Variable remuneration decreased to GBP6.0 million (H1 2021:
GBP9.8 million), due to the strong operating performance in H1
2022, with costs returning to more normalised levels in line with
company performance.
Taxation
The effective tax rate for H1 2022 was 22.7%, up from the H1
2021 effective tax rate, which was 21.5%. The effective tax rate
has increased in the period due to a higher proportion of Group PBT
being generated in Australia, where the corporation tax rate is
higher, and the prior period benefiting from the utilisation of
deferred tax credits.
Balance sheet and own funds
Intangible assets increased by GBP15.6 million to GBP25.9
million (31 March 2021: GBP10.3 million) as a result of the
transaction with Australia and New Zealand Banking Group Limited
("ANZ") to transition approximately 500,000 of ANZ's Share
Investing clients to CMC (AUD$25m) and the capitalisation of staff
costs related to technology projects.
Amounts due from brokers decreased by GBP73.0 million to
GBP180.9 million due to a decrease in initial margin at brokers.
Other assets increased due to cryptocurrency holdings being
reported under this new category. The Group held an immaterial
balance of cryptocurrencies as at FY 2021, which were reported
within amounts due from brokers.
Cash and cash equivalents increased during the period, with a
cash outflow for the prior year final dividend of GBP62.4m being
offset by lower IM at brokers in the period, along with cash
inflows from the Group's operating performance, resulting in a
GBP12.7 million increase.
Title transfer funds increased by GBP11.2m, reflecting the
ongoing high levels of account funding by a small population of
mainly institutional clients.
Own funds decreased by GBP36.2 million to GBP334.2 million (31
March 2021: GBP370.4 million) during the six month period with the
decrease largely due to the payment of the final FY21 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 37 to 45 of
the 2021 Group Annual Report and Financial Statements (available on
the Group website https://www.cmcmarketsplc.com ). During the six
months to 30 September 2021 and up to the date of approval of the
interim 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, are regulatory change across the Group, the Group's
approach to the UK's exit from the European Union and the
development and release of a UK non-leveraged platform.
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 interim 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 consolidated interim
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 2021, 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
17 November 2021
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
Clare Salmon
Paul Wainscott
CONSOLIDATED INTERIM INCOME STATEMENT
For the half year ended 30 September 2021
GBP '000 Note 30 September 2021 30 September 2020
===== ==================
Revenue 3 148,767 255,622
Interest income 348 478
============================================================ ===== ================== ==================
Total revenue 149,115 256,100
Introducing partner commissions and betting levies (22,377) (25,235)
============================================================ ===== ================== ==================
Net operating income 2 126,738 230,865
Operating expenses 4 (89,667) (88,859)
Net impairment losses on financial assets (21) -
============================================================ ===== ================== ==================
Operating profit 37,050 142,006
Finance costs (1,002) (900)
============================================================ ===== ================== ==================
Profit before taxation 36,048 141,106
Taxation 5 (8,173) (30,315)
============================================================ ===== ================== ==================
Profit for the period attributable to owners of the parent 27,875 110,791
============================================================ ===== ================== ==================
Earnings per share
Basic earnings per share (p) 6 9.6p 38.3p
============================================================ ===== ================== ==================
Diluted earnings per share (p) 6 9.6p 38.1p
============================================================ ===== ================== ==================
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the half year ended 30 September 2021
GBP '000 30 September 2021 30 September 2020
==================
Profit for the period 27,875 110,791
Other comprehensive income/(expense):
Items that may be subsequently reclassified to income statement
Gain/(loss) on net investment hedges 1,179 (2,572)
Currency translation differences (1,810) 6,777
Changes in the fair value of debt instruments at fair value through other
comprehensive income (5) (32)
============================================================================== ================== ==================
Other comprehensive (expense)/income for the period (636) 4,173
============================================================================== ================== ==================
Total comprehensive income for the period 27,239 114,964
============================================================================== ================== ==================
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
At 30 September 2021
30 September 31 March
GBP '000 Note 2021 2021
===== =============
ASSETS
Non-current assets
Intangible assets 8 25,903 10,330
Property, plant and equipment 9 26,560 26,105
Deferred tax assets 5,318 6,370
Trade and other receivables 10 1,775 1,800
====================================== ===== ============= =========
Total non-current assets 59,556 44,605
====================================== ===== ============= =========
Current assets
Trade and other receivables 10 128,567 127,119
Derivative financial instruments 2,820 3,241
Current tax recoverable 2,242 1,749
Other assets 11 35,544 -
Financial investments 12 28,103 28,104
Amounts due from brokers 180,919 253,895
Cash and cash equivalents 13 131,619 118,921
====================================== ===== ============= =========
Total current assets 509,814 533,029
====================================== ===== ============= =========
TOTAL ASSETS 569,370 577,634
====================================== ===== ============= =========
LIABILITIES
Current liabilities
Trade and other payables 14 181,647 152,253
Derivative financial instruments 2,919 3,077
Borrowings 194 945
Lease liabilities 15 4,869 4,599
Provisions 885 1,889
====================================== ===== ============= =========
Total current liabilities 190,514 162,763
====================================== ===== ============= =========
Non-current liabilities
Borrowings - 194
Lease liabilities 15 10,653 10,727
Deferred tax liabilities 1,446 1,622
Provisions 1,627 1,811
====================================== ===== ============= =========
Total non-current liabilities 13,726 14,354
====================================== ===== ============= =========
TOTAL LIABILITIES 204,240 177,117
====================================== ===== ============= =========
EQUITY
Equity attributable to owners of the
Company
Share capital 73,474 73,299
Share premium 46,236 46,236
Own shares held in trust (441) (382)
Other reserves (49,970) (49,334)
Retained earnings 295,831 330,698
====================================== ===== ============= =========
Total equity 365,130 400,517
====================================== ===== ============= =========
TOTAL EQUITY AND LIABILITIES 569,370 577,634
====================================== ===== ============= =========
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the half year ended 30 September 2021
Own shares Retained
GBP '000 Note Share capital Share premium held in trust Other reserves earnings Total Equity
===== ============== ============== ============== =============== ==============
At 31 March
2020 72,899 46,236 (433) (51,836) 216,013 282,879
New shares
issued 400 - - - - 400
Profit for the
period - - - - 110,791 110,791
Other
comprehensive
income for
the period - - - 4,173 - 4,173
Acquisition of
own shares
held in
trusts - - (319) - - (319)
Utilisation of
own shares
held in trust - - 370 - - 370
Share-based
payments - - - - (3,114) (3,114)
Tax on
share-based
payments 5 - - - - 790 790
Dividends 7 - - - - (35,393) (35,393)
=============== ===== ============== ============== ============== =============== ============== =============
At 30
September
2020 73,299 46,236 (382) (47,663) 289,087 360,577
=============== ===== ============== ============== ============== =============== ============== =============
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
trusts - - (277) - - (277)
Utilisation of
own shares
held in trust - - 218 - - 218
Share-based
payments - - - - (1,107) (1,107)
Tax on
share-based
payments 5 - - - - 779 779
Dividends 7 - - - - (62,414) (62,414)
=============== ===== ============== ============== ============== =============== ============== =============
At 30
September
2021 73,474 46,236 (441) (49,970) 295,831 365,130
=============== ===== ============== ============== ============== =============== ============== =============
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the half year ended 30 September 2021
30 September 30 September
GBP '000 Note 2021 2020
===== =============
Cash flows from operating activities
Cash generated from operations 16 105,515 123,236
Interest income 875 921
Tax paid (7,051) (13,640)
============================================== ===== ============= =============
Net cash generated from operating activities 99,339 110,517
============================================== ===== ============= =============
Cash flows from investing activities
Purchase of property, plant and equipment (2,340) (2,041)
Investment in intangible assets (16,910) (4,389)
Purchase of financial investments (14,805) (14,873)
Proceeds from maturity of financial
investments 14,255 14,345
Inflow/(Outflow) on net investment
hedges 1,361 (1,817)
============================================== ===== ============= =============
Net cash used in investing activities (18,439) (8,775)
============================================== ===== ============= =============
Cash flows from financing activities
Proceeds from borrowings 9,999 -
Repayment of borrowings (10,944) (1,108)
Principal elements of lease payments (3,038) (3,093)
Proceeds from issue of Ordinary Shares - 81
Acquisition of own shares (102) -
Dividends paid (62,414) (35,393)
Finance costs (985) (898)
============================================== ===== ============= =============
Net cash used in financing activities (67,484) (40,411)
============================================== ===== ============= =============
Net increase in cash and cash equivalents 13,416 61,331
Cash and cash equivalents at the beginning
of the period 118,921 84,307
Effect of foreign exchange rate changes (718) 4,454
============================================== ===== ============= =============
Cash and cash equivalents at the end
of the period 131,619 150,092
============================================== ===== ============= =============
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the half year ended 30 September 2021
1. Basis of preparation
Basis of accounting and accounting policies
The condensed consolidated interim 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
interim 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 interim 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 2021 have been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 ('IFRS') and the applicable legal requirements
of the Companies Act 2006. In addition to complying with
international accounting standards in conformity with the
requirements of the Companies Act 2006, the consolidated financial
statements also comply with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. 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 2021 balances presented in these condensed consolidated
interim financial statements are from those financial statements
and are audited.
The accounting policies applied in these condensed consolidated
interim financial statements are consistent with those applied in
the Group's statutory financial statements for the year ended 31
March 2021, except for the change in accounting policy related to
cryptocurrency assets explained below. The condensed consolidated
interim financial statements should be read in conjunction with the
statutory financial statements for the year ended 31 March 2021. In
the year ending 31 March 2022 the consolidated financial statements
of the Group will be 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 interim 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.
Accounting policy - Other assets
Other assets represent cryptocurrencies controlled by the Group.
The Group offers various cryptocurrency-related products that can
be traded on its platform. The Group purchases and sells
cryptocurrencies as part of its hedging activity.
The Group holds cryptocurrency assets for trading in the
ordinary course of its business, effectively acting as a commodity
broker-dealer in respect of the underlying cryptocurrency assets.
In the prior period cryptocurrency assets were disclosed within
Amount due from brokers (31 March 2021: GBP1,520,000). The assets
will continue to be measured at fair value less cost to sell with
changes in valuation being recorded within revenue in the income
statement in the period in which they arise. Cryptocurrency assets
are not financial instruments, and they are categorised as
non-financial assets.
Cryptocurrency assets continue to be held at fair value through
profit and loss therefore this accounting policy impacts
classification only. Other assets amount to GBP35,544,000 and are
presented as a separate line in the consolidated statement of
financial position.
There is no further impact for the half year ended 30 September
2021 and for the year ended 31 March 2021.
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 2021 and will not lead to a
remeasurement gain or loss.
Significant accounting judgements and estimates
The preparation of condensed consolidated interim 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 interim financial
statements are:
Deferred taxes
The carrying amounts of deferred tax assets are reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Contingent liabilities
Judgement has been applied in evaluating the accounting
treatment of the specific matters described in Note 20 (Contingent
Liabilities), notably the probability of any obligation or future
payments arising.
Accounting for cryptocurrencies
The Group has recognised GBP35,544,000 (31 March 2021:
GBP1,520,000 in "Amounts due from brokers") of cryptocurrency
assets and rights to cryptocurrency assets on its Statement of
Financial Position as at 30 September 2021. 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
Consolidated Statement of Financial Position. The measurement and
disclosure of cryptocurrency assets is considered to be a
significant accounting judgement.
Intangible assets
The Group has recognised GBP13,317,000 of intangible assets
under development on its Statement of Financial Position as at 30
September 2021. These assets relate 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 measurement
principles of IAS 38 Intangibles in accounting for these
assets.
No significant estimates were used in the preparation of the
condensed consolidated interim financial statements.
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
interim 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:
-- Leveraged - CFD and Spreadbet - UK and Ireland ("UK & IE");
-- Leveraged - CFD - Europe;
-- Leveraged - CFD - Australia, New Zealand and Singapore ("APAC") and Canada; and
-- Non-leveraged - Stockbroking - Australia
These segments are in line with the management information
received by the Chief Operating Decision Maker (CODM).
Revenues and costs are allocated to the segments that originated
the transaction. Costs generated centrally 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.
Leveraged Non-leveraged
==============
30 September 2021 APAC &
GBP '000 UK & IE Europe Canada Australia Central Total
================================== ========= ========= ============== ========== =========
Segment revenue net of
Introducing partner commissions
and betting levies 35,117 18,622 48,393 24,258 - 126,390
Interest income/(expense) (253) (1) 156 446 - 348
================================== ========= ========= ========= ============== ========== =========
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
================================== ========= ========= ========= ============== ========== =========
Leveraged Non-leveraged
=========================
30 September
2020 APAC &
GBP '000 UK & IE Europe Canada Australia Central Total
========================= ==================== ==================== ========================= ==================== ====================
Segment
revenue net
of
Introducing
partner
commissions
and betting
levies 69,506 38,796 95,733 26,352 - 230,387
Interest
income 89 - 320 69 - 478
========================= ==================== ==================== ==================== ========================= ==================== ====================
Net operating
income 69,595 38,796 96,053 26,421 - 230,865
Segment
operating
expenses (9,970) (2,924) (9,565) (5,253) (61,147) (88,859)
========================= ==================== ==================== ==================== ========================= ==================== ====================
Segment
contribution 59,625 35,872 86,488 21,168 (61,147) 142,006
Allocation of
central
operating
expenses (17,907) (15,732) (17,483) (10,025) 61,147 -
========================= ==================== ==================== ==================== ========================= ==================== ====================
Operating
profit 41,718 20,140 69,005 11,143 - 142,006
Finance costs (261) (17) (119) (111) (392) (900)
Allocation of
central
finance
costs (153) (67) (172) - 392 -
========================= ==================== ==================== ==================== ========================= ==================== ====================
Profit before
taxation 41,304 20,056 68,714 11,032 - 141,106
========================= ==================== ==================== ==================== ========================= ==================== ====================
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.
31 March
GBP '000 30 September 2021 2021
==================
UK 26,638 22,662
Australia 24,953 12,693
Other countries 2,647 2,880
========================== ================== =========
Total non-current assets 54,238 38,235
========================== ================== =========
3. Revenue
GBP '000 30 September 2021 30 September 2020
==================
Leveraged 110,035 211,791
Non-leveraged 37,540 40,195
Other 1,192 3,636
=============== ================== ==================
Revenue 148,767 255,622
=============== ================== ==================
Leveraged revenue represents CFD and Spread bet revenue. Non
leveraged revenue represents Stockbroking revenue.
4. Operating Expenses
GBP '000 30 September 2021 30 September 2020
==================
Net staff costs 40,081 38,559
IT costs 14,156 12,676
Sales and marketing 11,653 14,799
Premises 1,754 1,727
Legal and Professional fees 4,654 3,325
Regulatory fees 3,240 2,645
Depreciation and amortisation 6,429 5,493
Irrecoverable sales tax 970 3,337
Other 6,730 6,298
=============================== ================== ==================
Operating expenses 89,667 88,859
=============================== ================== ==================
5. Taxation
30 September 30 September
GBP '000 2021 2020
=============
Analysis of charge for the period:
Current tax
Current tax on profit for the period 7,462 21,122
Adjustments in respect of previous periods - (116)
=================================================== ============= =============
Total current tax 7,462 21,006
=================================================== ============= =============
Deferred tax
Origination and reversal of temporary differences 1,049 9,311
Adjustments in respect of prior periods (338) (2)
Impact of change in tax rate - -
=================================================== ============= =============
Total deferred tax 711 9,309
=================================================== ============= =============
Total tax 8,173 30,315
=================================================== ============= =============
The standard rate of UK corporation tax 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 2021 was 22.67% (H alf year
ended 30 September 2020: 21.48%), differs from the standard rate of
UK corporation tax rate of 19% (H alf year ended 30 September 2020:
19%). The differences are explained below:
GBP '000 30 September 2021 30 September 2020
==================
Profit before taxation 36,048 141,106
============================================================================== ================== ==================
Profit multiplied by the standard rate of corporation tax in the UK of 19%
(30 September 2020:
19%) 6,849 26,810
Adjustment in respect of foreign tax rates 1,334 3,266
Adjustments in respect of prior periods (338) (118)
Impact of change in tax rate 126 -
Expenses not deductible for tax purposes 142 116
Income not subject to tax (42) 11
Share awards 87 -
Other differences 15 230
============================================================================== ================== ==================
Total tax 8,173 30,315
============================================================================== ================== ==================
GBP '000 30 September 2021 30 September 2020
==================
Tax on items recognised directly in Equity
Tax on share-based payments (779) (790)
============================================ ================== ==================
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.
GBP '000 30 September 2021 30 September 2020
==================
Earnings attributable to ordinary shareholders
(GBP '000) 27,875 110,791
================================================ ================== ==================
Weighted average number of shares used in the
calculation of basic earnings per share ('000) 290,669 288,985
Dilutive effect of share options ('000) 1,016 1,833
================================================ ================== ==================
Weighted average number of shares used in the
calculation of diluted earnings per share
('000) 291,685 290,818
================================================ ================== ==================
Basic earnings per share (p) 9.6p 38.3p
================================================ ================== ==================
Diluted earnings per share (p) 9.6p 38.1p
================================================ ================== ==================
For the half year ended 30 September 2021, 1,016,000 (H alf year
ended 30 September 2020: 1,833,000) potentially dilutive weighted
average ordinary shares in respect of share options in issue were
included in the calculation of diluted EPS.
7. Dividends
GBP '000 30 September 2021 30 September 2020
==================
Prior year final dividend of 21.43p per share (30 September 2020: 12.18p) 62,414 35,393
=========================================================================== ================== ==================
An interim dividend for 2022 of 3.50p per share, amounting to
GBP10,200,000 has been approved by the board but has not been
included as a liability at 30 September 2021. The dividend will be
paid on 20 December 2021 to those members on the register at the
close of business on 26 November 2021.
8. Intangible assets
Trademarks
Computer and trading Assets under
GBP '000 Goodwill software licences Client relationships development Total
========= ========== ============= ===================== =============
At 31 March 2021
Cost 11,500 125,995 1,397 2,995 6,148 148,035
Accumulated amortisation (11,500) (122,075) (1,135) (2,995) - (137,705)
========================== ========= ========== ============= ===================== ============= ==========
Carrying amount - 3,920 262 - 6,148 10,330
========================== ========= ========== ============= ===================== ============= ==========
Half year ended 30 September 2021
Carrying amount
at the beginning
of the period - 3,920 262 - 6,148 10,330
Additions - 44 - - 16,866 16,910
Transfers - 5,210 - - (5,210) -
Amortisation charge - (1,322) (24) - - (1,346)
Foreign currency
translation - (41) (1) - 51 9
========================== ========= ========== ============= ===================== ============= ==========
Carrying amount
at the end of the
period - 7,811 237 - 17,855 25,903
========================== ========= ========== ============= ===================== ============= ==========
At 30 September
2021
Cost 11,500 130,611 1,385 2,915 17,855 164,266
Accumulated amortisation (11,500) (122,800) (1,148) (2,915) - (138,363)
========================== ========= ========== ============= ===================== ============= ==========
Carrying amount - 7,811 237 - 17,855 25,903
========================== ========= ========== ============= ===================== ============= ==========
Additions of GBP16,866,000 in Assets under development are
primarily due to the transaction with Australia and New Zealand
Banking Group Limited ("ANZ") to transition ANZ's portfolio of
Share Investing clients to CMC for AUD$25m.
9. Property, plant and equipment
Furniture,
Leasehold fixtures Computer Right-of-use
GBP '000 improvements and equipment hardware assets Total
============== =============== ========== =============
At 31 March 2021
Cost 19,273 9,656 36,249 19,146 84,324
Accumulated depreciation (14,393) (8,795) (27,235) (7,796) (58,219)
============================== ============== =============== ========== ============= =========
Carrying amount 4,880 861 9,014 11,350 26,105
============================== ============== =============== ========== ============= =========
Half year ended 30 September 2021
Carrying amount at
the beginning of the
period 4,880 861 9,014 11,350 26,105
Additions 106 44 2,190 3,381 5,721
Disposals - - (14) - (14)
Depreciation charge (849) (215) (1,546) (2,473) (5,083)
Foreign currency translation (33) (9) (35) (92) (169)
============================== ============== =============== ========== ============= =========
Carrying amount at
the end of the period 4,104 681 9,609 12,166 26,560
============================== ============== =============== ========== ============= =========
At 30 September 2021
Cost 19,205 9,657 38,289 22,344 89,495
Accumulated depreciation (15,101) (8,976) (28,680) (10,178) (62,935)
============================== ============== =============== ========== ============= =========
Carrying amount 4,104 681 9,609 12,166 26,560
============================== ============== =============== ========== ============= =========
10. Trade and other receivables
GBP '000 30 September 2021 31 March 2021
==================
Current
Gross trade receivables 8,799 9,103
Less: provision for impairment of trade receivables (7,626) (7,762)
====================================================== ================== ==============
Trade receivables 1,173 1,341
Prepayments and accrued income 11,407 9,799
Stockbroking debtors 114,105 99,035
Other debtors 1,882 16,944
====================================================== ================== ==============
128,567 127,119
===================================================== ================== ==============
Non-current
Other debtors 1,775 1,800
====================================================== ================== ==============
Total 130,342 128,919
====================================================== ================== ==============
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 14).
11. 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:
GBP '000 30 September 2021 31 March 2021
==================
Exchange 21,087 -
Vaults 14,457 -
========= ================== ==============
35,544 -
========= ================== ==============
12. Financial investments
GBP '000 30 September 2021 31 March 2021
==================
UK Government securities:
At the beginning of the period / year 28,037 25,385
Purchase of securities 14,805 28,933
Maturity of securities and Coupon receipts (14,782) (26,256)
Accrued interest (17) 29
Changes in the fair value of debt instruments at fair value through other
comprehensive income (5) (54)
================================================================================ ================== ==============
At the end of the period / year 28,038 28,037
================================================================================ ================== ==============
Equity securities:
At the beginning of the period / year 67 60
Foreign currency translation (2) 7
================================================================================ ================== ==============
At the end of the period / year 65 67
================================================================================ ================== ==============
Total 28,103 28,104
================================================================================ ================== ==============
GBP '000 30 September 2021 31 March 2021
==================
Analysis of financial investments
Non-current - -
Current 28,103 28,104
==================================== ================== ==============
Total 28,103 28,104
==================================== ================== ==============
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.
13. Cash and cash equivalents
GBP '000 30 September 2021 31 March 2021
==================
Gross cash and cash equivalents 688,685 668,304
Less: Client monies (557,066) (549,383)
================================== ================== ==============
Cash and cash equivalents 131,619 118,921
================================== ================== ==============
Analysed as:
Cash at bank 131,619 118,921
---------------------------------- ------------------ --------------
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.
14. Trade and other payables
GBP '000 30 September 2021 31 March 2021
==================
Current
Gross trade payables 598,971 580,062
Less: Client monies (557,066) (549,383)
================================================ ================== ==============
Trade payables 41,905 30,679
Tax and social security 904 236
Stockbroking creditors 102,177 89,091
Other creditors, accruals and deferred income 36,661 32,247
================================================ ================== ==============
181,647 152,253
=============================================== ================== ==============
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).
15. Lease liabilities
GBP '000 30 September 2021 31 March 2021
==================
At the beginning of the period / year 15,326 19,273
Additions / Modifications of new leases during the period / year 3,399 1,181
Interest expense 372 818
Lease payments made during the year (3,410) (6,875)
Foreign currency translation (165) 929
=================================================================== ================== ==============
At the end of the period / year 15,522 15,326
=================================================================== ================== ==============
GBP '000 30 September 2021 31 March 2021
==================
Analysis of lease liabilities
Non-current 10,653 10,727
Current 4,869 4,599
================================ ================== ==============
Total 15,522 15,326
================================ ================== ==============
16. Cash generated from operations
GBP '000 30 September 2021 30 September 2020
==================
Cash flows from operating activities
Profit before taxation 36,048 141,106
Adjustments for:
Interest income (348) (478)
Finance costs 1,002 900
Depreciation 5,083 4,583
Amortisation of intangible assets 1,346 910
Research and development tax credit - (97)
Profit on disposal of property, plant and equipment - (109)
Share-based payment (886) (2,746)
Other non-cash movements including exchange rate movements (1,101) 800
Changes in working capital:
(Increase)/decrease in trade and other receivables and other assets (1,391) 41,740
Decrease/(increase) in amounts due from brokers 71,456 (26,688)
Increase in other assets (34,024) (1,024)
Increase/(decrease) in trade and other payables 29,394 (37,721)
Increase in net derivative financial instruments liabilities 81 1,846
(Decrease)/increase in provisions (1,145) 214
===================================================================== ================== ==================
Cash generated from operations 105,515 123,236
===================================================================== ================== ==================
17. Liquidity
The Group has access to the following liquidity resources that
make up total available liquidity:
-- Own funds. The primary source of liquidity for the Group. It
represents the funds that the business has generated historically,
including any unrealised gains / losses on open hedging positions.
All cash held on behalf of segregated clients is excluded. Own
funds consists mainly of cash and cash equivalents and also
includes investments in UK government securities which are held to
meet the Group's liquid asset buffer (LAB - as agreed with FCA).
These UK government securities are BIPRU 12.7 eligible securities
and are available to meet liabilities which fall due in periods of
stress.
-- 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 GBP55.0 million (31 March 2021: GBP55.0 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
GBP27.5 million and a three year term facility of GBP27.5 million,
both of which were renewed in March 2021.
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.
Own funds on 30 September 2021 were GBP334,181,000 (31 March
2021: GBP370,405,000). Short-term financial investments, amounts
due from brokers, other assets and amounts receivable / (payable)
on the derivative financial instruments have been included within
'own funds' in order to provide a clear presentation of the Group's
potential cash resources.
30 September
GBP '000 2021 31 March 2021
=============
Cash and cash equivalents 131,619 118,921
Amount due from brokers 180,919 253,895
Other assets 35,544 -
Financial investments 28,103 28,104
Derivative financial instruments
(Current Assets) 2,820 3,241
========================================= ============= ==============
379,005 404,161
Less : Title transfer funds (41,905) (30,679)
Less: Derivative financial instruments
(Current Liabilities) (2,919) (3,077)
========================================= ============= ==============
Own Funds 334,181 370,405
Title transfer funds 41,905 30,679
Available committed facility 55,000 55,000
========================================= ============= ==============
Total Available liquidity 431,086 456,084
Less: Blocked cash (67,198) (75,371)
Less: Initial margin requirement
at broker (181,148) (170,093)
========================================= ============= ==============
Net available liquidity 182,740 210,620
========================================= ============= ==============
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.
GBP '000 30 September 2021 31 March 2021
==================
Operating activities
Profit before tax 36,048 224,010
Adjustments for:
Finance costs 1,002 1,762
Depreciation and amortisation 6,429 11,239
Other non-cash adjustments (2,176) (4,083)
Tax paid (7,051) (33,620)
====================================================================== ================== ==============
Own funds generated from operating activities 34,252 199,308
====================================================================== ================== ==============
Movement in working capital 15,632 13,863
====================================================================== ================== ==============
Outflow from investing activities
Net Purchase of property, plant and equipment and intangible assets (19,250) (12,190)
Other outflow from investing activities 1,361 (1,761)
Outflow from financing activities
Proceeds from issue of Ordinary Shares - 80
Interest paid (1,002) (1,762)
Dividends paid (62,414) (62,128)
Other outflow from financing activities (4,085) (7,291)
====================================================================== ================== ==============
Total outflow from investing and financing activities (85,390) (85,052)
====================================================================== ================== ==============
(Decrease)/increase in own funds (35,506) 128,119
Own funds at the beginning of the period / year 370,405 238,340
Effect of foreign exchange rate changes (718) 3,946
====================================================================== ================== ==============
Own funds at the end of the period / year 334,181 370,405
====================================================================== ================== ==============
18. 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;
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 2021
GBP '000 Level 1 Level 2 Level 3 Total
======== ======== ========
Financial investments 28,038 - 65 28,103
Derivative financial instruments (Current Assets) - 2,820 - 2,820
Derivative financial instruments (Current Liabilities) - (2,919) - (2,919)
28,038 (99) 65 28,004
======================================================== ======== ======== ======== ========
31 March 2021
GBP '000 Level 1 Level 2 Level 3 Total
======== ======== ========
Financial investments 28,037 - 67 28,104
Derivative financial instruments (Current Assets) - 3,241 - 3,241
Derivative financial instruments (Current Liabilities) - (3,077) - (3,077)
28,037 164 67 28,268
======================================================== ======== ======== ======== ========
Valuation techniques used to determine fair values
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
T he 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
Borrowings
19. 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 2021.
Directors' transactions
There were no director transactions during the half year ended
30 September 2021 and 30 September 2020.
20. Contingent liabilities
The Group engages in retail client relationships and partnership
contracts that could result in non-performance claims and from time
to time is involved in disputes during the ordinary course of
business. The Group provides for claims where costs are likely to
be incurred, and there are no contingent liabilities which are
expected to have a material adverse financial impact on the
Group.
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 GBP25m. The
group has concluded that the relevant entities meet the exemption
requirements and therefore the related tax charge, which would
amount to GBP16m 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 is proactively engaging 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 their
very early stages and such an outcome is not currently considered
probable.
21. 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.
22. Subsequent events
There are no events after the interim period that have not been
reflected in the condensed consolidated interim financial
statements.
Independent review report to CMC Markets plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed CMC Markets plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Interim Results of CMC Markets plc for the 6 month period
ended 30 September 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, 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.
What we have reviewed
The interim financial statements comprise:
-- the consolidated interim statement of financial position as at 30 September 2021;
-- the consolidated interim income statement and the
consolidated interim statement of comprehensive income for the
period then ended;
-- the consolidated interim statement of cash flows for the period then ended;
-- the consolidated interim statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
of CMC Markets plc 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.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, 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.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 November 2021
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END
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