TIDMCMCX
RNS Number : 2375O
CMC Markets Plc
09 June 2022
9 June 2022
CMC MARKETS PLC
("CMC" or the "Company")
Final results for the year ended 31 March 2022
2022 net operating income at top end of guidance. Embarking on
new phase of diversification. Targeting 30% net operating income
growth over three years.
31 March 31 March Change 31 March Change
For the year ended 2022 2021 % 2020 %
Net operating income (GBP
million) 281.9 409.8 (31%) 252.0 12%
Leveraged net trading revenue
(GBP million) 229.6 349.2 (34%) 214.5 7%
Non-leveraged net trading
revenue (GBP million) 48.0 54.8 (12%) 31.8 51%
Other income (GBP million) 4.3 5.8 (25%) 5.7 (24%)
Profit before tax (GBP million) 92.1 224.0 (59%) 98.7 (7%)
Basic earnings per share (pence) 24.8 61.5 (60%) 30.1 (18%)
Dividend per share (pence) 12.4 30.6 (60%) 15.0 (18%)
==================================== ========= ========= ======= ========= =======
Leveraged gross client income
(GBP million) 288.5 335.3 (14%) 240.6 20%
Leveraged client income retention 80% 104% (24%) 89% (9%)
Leveraged active clients (numbers) 64,243 76,591 (16%) 57,202 12%
Leveraged revenue per active
client (GBP) 3,575 4,560 (22%) 3,750 (5%)
------------------------------------ --------- --------- ------- --------- -------
Non-leveraged active clients
(numbers) 246,120 232,053 6% 181,630 36%
------------------------------------ --------- --------- ------- --------- -------
Notes:
- Net operating income represents total revenue net of
introducing partner commissions and levies
- Leveraged net trading revenue represents 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 12-month period
- Leveraged revenue per active client represents leveraged net
trading revenue from active clients after deducting rebates and
levies
Highlights
-- Net operating income of GBP282 million is at the top end of
guidance and a record performance outside of the pandemic
restrictions.
-- Investment in growth initiatives is expected to result in a
30% increase in net operating income over the next three years.
Benefits to be seen from 2023 and are set to deliver profit before
tax margin expansion from 2024.
-- Operating expenses have increased by 2% to GBP188 million,
primarily due to higher personnel costs to support the ongoing
strategic initiatives, partly offset by lower sales costs.
-- Profit before tax of GBP92 million (2020: GBP224 million).
-- Underlying liquidity remains strong. Regulatory OFR ratio of
489%. Net available liquidity improvement to GBP246 million (2021:
GBP211 million).
-- The GBP30 million share buyback commenced on 15(th) March. As
of 7(th) June, the Company has repurchased and cancelled 4,603,703
Ordinary Shares with nominal value of 25 pence for an aggregate
purchase amount of GBP12.7 million.
Outlook and dividend
-- Alongside our focus on delivering strong business performance
in 2023 new business expansion is expected to grow net operating
income by 30% over next three years based on the 2022 result and
underlying conditions. The targeted growth is expected to be
broadly linear over that period with benefits expected in 2023.
-- New investments will focus on seven core initiatives aiming
to enhance functionality and capture the broader wallet share as we
evolve our execution services and investment platforms. We will
continue to utilise our technology to enter new markets and expand
our non-leveraged offering. The impact will reduce revenue
volatility and grow pre-tax profit margins from 2024.
-- Our 2023 investment plans are expected to increase operating
costs to approximately GBP205 million excluding variable
remuneration, underpinning the expected 30% growth in underlying
net operating income by 2025 as well as longer-term growth from the
UK non-leveraged business. Over two thirds of the new investment
will be associated with people, product development and marketing.
The rate of spending will be dependent on the Group's ability to
make additional personnel hires.
-- CMC Invest Australia continues to expand and invest in its
market-leading offering, with reinvestment in mobile and a complete
UX redesign. Singapore expansion is on track and planned for
2023.
-- CMC's leveraged B2B offering continues to perform well,
delivering 60% client income growth in 2022 versus 2021. CMC is
expecting future 20% CAGR in B2B client income. B2B expansion
continues to be a major growth pillar.
-- CMC Invest UK: the new UK non-leveraged platform has been
successfully soft launched to staff and will be rolled out to new
clients over coming months.
-- The Board recommends a final dividend of 8.88 pence per share
(FY 2021: 21.43 pence), equating to GBP26 million, resulting in a
total dividend payment for the year of 12.38 pence per share (FY
2021: 30.63 pence).
Lord Cruddas, Chief Executive Officer commented:
"I am delighted to report another year of impressive performance
from both a strategic and financial standpoint. Excluding the
exceptional COVID-19 impacted prior year, which due to market
volatility saw unusually significant trading volumes, this is a
record net operating income result for the Group.
Over the last year we have taken steps to define the strategic
direction and diversification of the Group, building on our
existing technology to launch a new investment platform that will
unlock significant shareholder value and challenge the existing
client transaction fee cost structures.
There is significant opportunity and growth potential in the
self--directing investment platform space, especially in the UK,
not just for improved technology but also transaction costs and
fees. We believe commissions, execution spreads and custodial fees
are too high and too expensive for retail investors. We will
utilise our platform technology, including pricing and execution,
to drive down the transaction costs of investments for retail
clients, just like we did in Australia, where we are the number two
investment platform for retail investors.
The business is evolving. We continue to improve and grow our
existing leveraged business whilst at the same time utilising our
technology to enter new markets and expand our non-leveraged
offering.
I look forward to providing further updates as the strategy
expands over both the short and long-term."
Analyst and Investor Presentation
A presentation will be held for equity analysts and investors
today at 10.00 a.m. (BST), note questions will only be taken over
the conference call line.
A live audio webcast of the presentation will be available via
the following link:
https://webcasts.cmcmarkets.com/results/2022fullyear
Alternatively, you can dial into the presentation by registering
via the following link:
https://webcasts.cmcmarkets.com/results/2022fullyear/vip_connect
Annual Report and Financial Statements
A copy of the Company's Annual Report and Financial Statements
for the year ended 31 March 2022 (the "2022 Annual Report and
Financial Statements") is available within the Investor Relations
section of the Company website
http://www.cmcmarkets.com/group/results/annual-reports
Pursuant to Listing Rule 9.6.1 the Company has submitted a PDF
of the 2022 Annual Report and Financial Statements to the National
Storage Mechanism which will shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism . A
version in single electronic reporting format will be uploaded in
due course and the Company will make a further announcement when
this is available.
In compliance with The Disclosure Guidance and Transparency
Rules (DTR) 6.3.5, the information in the document below is
extracted from the Company's 2022 Annual Report and Financial
Statements. This material is not a substitute for reading the 2022
Annual Report and Financial Statements in full and any page numbers
and cross references in the extracted information below refer to
page numbers and cross-references in the 2022 Annual Report and
Financial Statements.
Forthcoming announcement dates
Friday 29 July 2022 Q1 2023 trading update
Friday 7 October 2022 H1 2023 pre-close trading update
Enquiries
CMC Markets Plc
James Cartwright, Investor Relations
Euan Marshall, Chief Financial Officer
investor.relations@cmcmarkets.com
Media enquiries
Camarco
Geoffrey Pelham-Lane / Jennifer Renwick Tel: 020 3757 4994
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. The Group 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") and financial spread bets (in the UK and Ireland only).
Clients can also place financial binary bets through Countdowns
and, in Australia, access stockbroking services. More information
is available at http://www.cmcmarkets.com/group/
Forward Looking Statements
This announcement and Appendix 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.
CHAIRMAN'S STATEMENT
Our strategic investments in technology, client service,
professional and institutional clients and income diversification
through new products, have led to a strong financial performance in
2022. This performance, along with the launch of the CMC Invest
platform in the UK, provides the Group with a strong base from
which we can continue to focus on innovation and agile and
responsive technology development.
The Board's clear vision of the Group's strategy of income
diversification through adapting and building on our superior
technology is starting to crystallise. The benefits of the Group's
strategy are becoming more apparent. Through engagement with
clients and the expertise of our staff, the Group is continuing to
develop clear opportunities for significant growth within all of
our markets.
Throughout all parts of the product development process, we
engage with clients to provide input into improvements that can be
made to our products and propositions. In addition, we have made
significant progress on initiatives to improve staff engagement.
The combination of engaged clients and employees results in a
robust and agile business focusing on medium to long-term value
generation, which supports our purpose, values and strategy.
Results and dividend
Net operating income fell 31% to GBP281.9 million; however, when
excluding the exceptional COVID-19 affected 2021, the Group
generated an increase in net operating income of 12% on 2020. This
is a strong result for the Group, as it represents a record year
outside of 2021.
The strong net operating income performance has generated
profits after tax of GBP72.0 million. The Board recommends a final
dividend of 8.88 pence per share which results in a total dividend
payment of 50% of profits after tax.
Board and governance
As discussed in the 2021 Annual Report and Financial Statements,
the Board conducted an internal governance review in 2021,
resulting in the appointment of external advisers, Independent
Audit, in January 2021. This review was concluded within 2022,
resulting in very positive changes to the information the Board
receives, improvements in the scope of the Nomination Committee
including greater involvement in people strategy, and improvements
in ownership and presentation of the Group's risk information. More
information on the changes can be found on pages 66, 74 and 76 in
the 2022 Annual Report and Financial Statements.
We are sorry to lose Clare Salmon, who is not putting herself up
for re-election this year, but also welcome Susanne Chishti, who
brings a diverse view of developments and trends in the wider
consumer technology environment. We are also seeking, via agents, a
further Non-Executive Director to cover the gap left by Clare's
departure, further details of which can be found on page 76 of the
Nomination Committee report in the 2022 Annual Report and Financial
Statements.
People and stakeholders
Our staff are our greatest asset and their work on delivering
against our strategic initiatives has driven the strong performance
across all business lines, along with delivering new products and
features to communicated timescales. On behalf of the Board, I
would like to thank them all for their considerable
contribution.
In addition, our staff have shown incredible resilience and
flexibility when faced with travel and work restrictions caused by
the COVID-19 pandemic, and have continued to do so throughout this
year. No staff were furloughed and the Group did not request any
government COVID-19 assistance. More details of what we have been
doing are presented in the Sustainability section of the 2022
Annual Report and Financial Statements.
Financial Reporting Council
During the year to 31 March 2022 the Board received
correspondence from the Financial Reporting Council ("FRC")
concerning a potential unlawful dividend payment in respect of the
payment of the 2021 interim dividend. On further investigation by
the Company it was concluded that similar questions had arisen in
some prior years. Details of this and the rectification process for
addressing these issues are set out on page 101 in the Directors'
Report in the Annual Report and Financial Statements. The Company
has made certain changes to internal processes to ensure that these
irregularities do not arise again.
Outlook
Our focus on improving and building on our existing technology
underpins our strategy of exploiting our existing leveraged
technology with both new and improved products and expanding into
new geographies in our non-leveraged business.
The strengths and robustness of our technology have been
demonstrated through the white-label agreement for Australia and
New Zealand Banking Group Limited ("ANZ"), culminating in the
announcement of the acquisition of its Share Investing clients.
The strategy also forms the foundation for the launch of our new
UK non-leveraged investment platform in April 2022. The new
platform is being rolled out to the market over the coming year and
augurs well for the Group's future. Our clear focus on revenue
diversification will continue throughout the coming year as will
our assessment of how best to address the realisation of future
value for the two broadly different businesses, namely leveraged
and non-leveraged, both underpinned by our technology.
James Richards
Chairman
8 June 2022
CEO REPORT
We continue to expand and diversify the business into new asset
classes including the launch of a new investment platform in the UK
and the development of a new investment platform in Singapore.
This follows the success of our investment platform in Australia
with the migration of over 500,000 investing client accounts
through partnerships (B2B) and the acquisition of the ANZ Bank
investing business.
We have ambitious plans to continue this expansion in various
other countries and I look forward to updating investors as the
strategy expands over the short and long term.
Investing for the future
Over the last year we have taken steps to define the strategic
direction and diversification of the Group, building on our
existing technology to launch new investment platforms that will
unlock significant shareholder value and challenge the existing
client transaction fee cost structures.
There is significant opportunity and growth potential in the
self -- directed investment platform space, especially in the UK,
not just for improved technology and client experience but also
transaction costs and fees.
We believe commissions, execution spreads and custodial fees are
too high and too expensive for retail investors. We will utilise
our platform technology, including pricing and execution, to drive
down the transaction costs of investments for retail clients, just
like we did in Australia, where we are the number two investment
platform for retail investors.
CMC is a pioneer of platform technology and boasts over 25 years
of experience in providing technology-backed solutions for B2C and
B2B clients and partners. This gives us scale, leverage and the
ability to drive down transaction costs, as well as the ability to
launch new platforms and enter new markets quickly.
For example, our new UK investment platform, CMC Invest, was
launched ahead of time and on budget. It was launched to our UK
staff in April 2022 and will be available to the broader market
over the coming summer months.
It will include physical shares, multi-currency accounts, tax
wrapper products and third-party funds, cryptocurrencies and, in
due course, a full B2B offering.
In addition, we continue to look at expanding our non-leveraged
geographical diversification and we have recently announced we plan
to launch a new investment platform in Singapore within the next
year, as well as considering two other jurisdictions for launch in
2024.
As part of CMC's strategy, we announced the acquisition of
Australia and New Zealand Banking Group Limited's ("ANZ's") Share
Investing client base during the year. The transaction involved the
acquisition of approximately 500,000 ANZ Share Investing clients,
with total assets in excess of AUD$43 billion.
The CMC platform will offer ANZ clients a wide range of
additional benefits; these include access to enhanced
market-leading mobile apps and complementary education tools and
resources, as well as lower brokerage commissions across four major
international markets and the local Australian market.
The Group continues to progress the transition of clients, which
is expected to complete in the next 12 months.
Because of the growing diversification of the Group the Board
has begun an evaluation of the merits of a managed separation of
its leveraged and non-leveraged divisions to unlock further
shareholder value. This process is being led by the Chairman and
the Board and they will update investors later in the year.
Financial performance
As expected, against an extremely strong prior period, revenues
across our leveraged retail (B2C) businesses declined, compared to
the COVID-19 period.
In our non-leveraged business, revenues remained less volatile.
Client income retention remained strong, and the stockbroking
business continued to see growth in active clients and contributed
a material level of revenue and profitability for the Group.
Overall, Group net operating income decreased 31% versus the
prior period, to GBP281.9 million, but increased 12% versus 2020
(GBP252.0 million).
The Group's cost base excluding variable remuneration increased
by 3% to GBP173.1 million during the year, mainly as a result of
the significant investments in people and technology and increased
marketing spend to attract new clients.
Variable remuneration decreased by GBP1.7 million to GBP14.5
million following the record performance and associated
remuneration last year. Overall, total costs increased by 2% to
GBP189.8 million.
Against an exceptional prior year comparator, profit before tax
at GBP92.1 million was GBP131.9 million lower than the previous
year, and GBP6.6 million lower than 2020. Our dividend policy
remains unchanged, at 50% of profit after tax, therefore resulting
in a proposed final dividend per share of 8.88 pence.
The underlying fundamentals of the business remain well
supported; we continue to target and retain higher value,
sophisticated clients and we have seen levels of client money,
which are an indicator of future trading potential, remain close to
the record levels seen in the prior year. Stockbroking active
clients increased 6% to 246,120. Of this increase, stockbroking B2C
clients increased 21% to 56,205, with B2B increasing by 2% to
189,915.
The balance sheet continues to reflect the strong financial
position of the Group. At the end of the year, the Group's net
available liquidity was GBP245.9 million and the regulatory OFR
ratio was 489%.
Regulatory change
The Australian Securities and Investments Commission ("ASIC")
implemented measures relating to CFDs on 29 March 2021. 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.
As anticipated, the changes reduced the notional value of retail
client trading in Australia and, combined with lower market
volatility, resulted in less active client trading than in the
prior period. In April 2022, ASIC extended its product intervention
order, imposing conditions on the issue and distribution of CFDs
for a further five years to 23 May 2027, thereby improving
regulatory visibility.
People & sustainability
Our people are crucial to our success, and I continue to be
impressed by their hard work and dedication. We have a very strong
team across all our business units and on behalf of the Board I
would like to thank all of our people for their commitment,
especially through the COVID-19 pandemic.
How we as a business and our people interact with each other,
the environment and society is important. CMC recognises that the
Group has a duty to help improve the prospects and living
environment of the local community. Sustainability and social
awareness are part of our core values and culture. I'm proud of the
launch of our "Our Tomorrow: taking a positive position" strategy,
detailing the five core pillars of what we stand for at CMC from a
sustainability perspective.
Clients
Our clients are at the heart of everything we do as we continue
to develop our platforms, innovate and invest to ensure that our
user experience is industry leading as we drive client retention
and lifetime value. On top of our continued focus on our leveraged
clients, I am pleased to welcome approximately 500,000 new clients
to our Australian stockbroking business as they transition from ANZ
Share Invest and look forward to offering them new functionality
and an enhanced experience.
I also look forward to welcoming new clients to our UK
non-leveraged wealth platform, where we will strive to partner with
new investors over the longer term to help them achieve prosperity
at every stage of their lives.
Share buyback programme
On 15 March 2022, the Company commenced a share buyback
programme of up to GBP30 million. The Board's decision to undertake
the buyback was underpinned by the Company's robust capital
position and having considered the capital and liquidity
requirements for ongoing investment in the business. This buyback
programme forms part of a normal balanced approach to shareholder
returns alongside the current dividend policy. The share buyback
programme is progressing well and remains on track to be completed
no later than 30 June 2023.
Dividend
The Board recommends a final dividend payment of GBP25.8
million. This is 8.88 pence per share (2021: 21.43 pence),
resulting in a total dividend payment for the year of 12.38 pence
per share (2021: 30.63 pence). This represents a payment of 50% of
profit after tax, in line with policy. The Board believes that this
is an appropriate payment for the year after considering both the
Group's capital and liquidity position and forecast requirements in
the year ahead to support business growth.
Outlook
We continue to see a lot of uncertainty, not just in the
financial markets, but across all sectors and industries. If recent
years have taught us anything it is that we must be prepared for
the unexpected and the extraordinary.
Our platforms have demonstrated that in periods of extreme
volatility, they are able to continue servicing clients robustly,
enabling us to gain trust and a reputation of stability. The
investments made in our infrastructure have served us well and will
continue to do so, providing a solid foundation upon which we can
look to take advantage of future opportunities.
This year's performance reflects the ongoing success of our B2B
technology partnerships and focus across our leveraged and non --
leveraged businesses.
With a large addressable market, in terms of both client numbers
and AuA, there is a huge opportunity for us to grow with a more
predictable and stable revenue stream.
This business continues to change as we look to utilise our
technology to enter new markets and new geographies and expand our
non-leveraged offering. I look forward to updating investors as the
strategy expands over both the short and long term.
Lord Cruddas
Chief Executive Officer
8 June 2022
Financial review
2022 saw a significant decrease in market activity, particularly
during H1, from the exceptional levels seen during 2021. Whilst
this has resulted in lower net operating income for the Group, we
are in a stronger position when comparing to pre -- pandemic
performance. This has been driven primarily by the material
increase in sustained monthly active leveraged and non -- leveraged
clients when compared to 2020.
Decreased market volatility, and the resulting lower client
trading activity across both the leveraged and non-leveraged
businesses, combined with lower client income retention compared to
the exceptional levels seen in 2021, resulted in 2022 net operating
income of GBP281.9 million. This, combined with a moderate increase
in operating expenses from investment in technology and product,
resulted in a statutory profit before tax of GBP92.1 million (2021:
GBP224.0 million). Whilst net operating income and profit before
tax have reduced from 2021, the performance of the Group in 2022
was strong compared to pre-COVID-19 levels and is a record net
operating income year when excluding the COVID-19 influenced 2021
results. The overall health of the Group remains exceptionally
strong, with the step-change in active client numbers achieved in
2021 continuing in both our leveraged and non-leveraged businesses
throughout the year, combined with client AuM and AuA reaching
record highs, providing a solid base of future profitability and
growth for the Group.
The cohort of clients onboarded during the pandemic displays
similar characteristics, including quality and tenure, to those of
prior client cohorts, giving the Group confidence of retaining this
ongoing stronger and larger client base into the medium term. This,
in conjunction with the agreed acquisition of ANZ Bank Share
Investing clients in the Australian non-leveraged business, the
launch of our CMC Invest platform in the UK and the ongoing focus
on improving our institutional product offering, sees the Group
exiting the year with significant prospects for diversified
growth.
Whilst total capital resources decreased to GBP311.5 million
(2021: GBP323.1 million) as a result of the increase in intangible
assets and proposed capital distributions to shareholders, the
Group OFR ratio remains strong at 489%. Our total available
liquidity increased to GBP469.0 million (2021: GBP456.1 million)
primarily due to cash generated from operations. This healthy
capital and liquidity position is reflected in the launch of the
GBP30 million share buyback programme in March 2022. The buyback
programme should be considered as part of a normal balanced
approach to shareholder returns alongside the current dividend
policy, which is unchanged.
The ambitious digital transformation and technology investment
plan we embarked upon during 2021 has made significant progress
throughout 2022 with more frequent product enhancements along with
the new CMC Invest platform launched in the UK in April 2022. Our
non-leveraged business presents a significant growth opportunity
for the Group, and we will continue to invest in the product and
platform, both in the UK and in other geographies, over the coming
years. In addition, there are still significant areas of
opportunity for optimisation and enhancement within the leveraged
business, particularly for our institutional business, and
investment will continue in technology and product throughout
2023.
Summary income statement
GBPm 2022 2021 Change Change %
Net operating income 281.9 409.8 (127.9) (31%)
Operating expenses (187.6) (184.0) (3.6) (2%)
================================ ======== ======== ======== =========
Operating profit 94.3 225.8 (131.5) (58%)
Finance costs (2.2) (1.8) (0.4) (24%)
================================ ======== ======== ======== =========
Profit before taxation 92.1 224.0 (131.9) (59%)
================================ ======== ======== ======== =========
PBT margin (1) 32 .7% 54 .7% (22.0%) -
================================ ======== ======== ======== =========
Profit after tax 72.0 178.1 (106.1) ( 60%)
================================ ======== ======== ======== =========
Pence 2022 2021 Change Change %
Basic EPS 24.8 61.5 (36.7) (60%)
Ordinary dividend per share(2) 12.4 30.6 (18.3) (60%)
================================ ======== ======== ======== =========
(1) Statutory profit before tax as a percentage of net operating
income.
(2) Ordinary dividends paid/proposed relating to the financial
year, based on issued share capital as at 31 March of each
financial year.
Summary
Net operating income for the year decreased by GBP127.9 million
(31%) to GBP281.9 million, with a decrease in market volatility,
particularly in H1, compared to exceptional levels seen in 2021
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.
The net operating income represents a record for the Group when
excluding the COVID-19 impacted 2021.
Total operating expenses have increased by GBP3.6 million (2%)
to GBP187.6 million, with the main driver being investments in our
strategic initiatives resulting in higher personnel, professional
fees and technology costs. These increases have been partially
offset by lower sales-related costs.
Profit before tax decreased to GBP92.1 million from GBP224.0
million and PBT margin decreased to 32.7% from 54.7%, reflecting
the high level of operational gearing in the business.
Net operating income overview
GBPm 2022 2021 Change %
Leveraged net trading revenue 229.6 349.2 (34%)
Non-leveraged net trading revenue (excl. interest income) 48.0 54.8 (12%)
=========================================================== ====== ====== =========
Net trading revenue(1) 277.6 404.0 (31%)
Interest income 0.8 0.7 12%
Other operating income 3.5 5.1 (30%)
=========================================================== ====== ====== =========
Net operating income 281.9 409.8 (31%)
=========================================================== ====== ====== =========
(1) CFD and spread bet gross client income net of rebates,
levies and risk management gains or losses and stockbroking revenue
net of rebates.
Leveraged net trading revenue decreased by GBP119.6 million
(34%) driven by decreases in both gross client income and client
income retention. The reduction in gross client income was a result
of the significant volatility in the market in 2021 resulting in
exceptionally high client trading activity, with the majority of
2022 returning to more normalised levels. Client income retention
was lower during the period at 80% (2021: 104%) 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 GBP985 (22%) to
GBP3,575.
Leveraged active client numbers decreased by 16% in comparison
to 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 12% lower at GBP48.0
million (2021: GBP54.8 million), with decreased client trading
activity during the less volatile market environment offset by an
active client base which was 6% larger than 2021 and 36% higher
than 2020.
B2B and B2C net trading revenue
2022 2021 Change %
GBPm B2C B2B Total B2C B2B Total B2C B2B Total
Leveraged net
trading revenue 185.5 44.1 229.6 307.3 41.9 349.2 (40%) 5% (34%)
Non-leveraged
net trading revenue 9.6 38.4 48.0 10.4 44.4 54.8 (8%) (14%) (12%)
======================= ===== ==== ===== ===== ==== ===== ===== ===== =====
Net trading revenue 195.1 82.5 277.6 317.7 86.3 404.0 (39%) (4%) (31%)
======================= ===== ==== ===== ===== ==== ===== ===== ===== =====
The lower trading activity across the Group was reflected within
both our B2C and B2B businesses, with year-on-year decreases in net
trading revenue of 34% and 12% respectively. Whilst the leveraged
B2C business saw the largest fall in revenue of 40%, the
non-leveraged business experienced a comparatively lower fall of 8%
and the leveraged B2B business revenue grew 5%, demonstrating the
progress the Group continues to make in its strategic
direction.
Regional performance overview: leveraged
2022 2021 Change %
Net Gross Active RPC Net Gross Active RPC Net Gross Active RPCRPC
trading client Clients GBP trading client Clients GBP trading client Clients
revenue income revenue income revenue income(1)
GBPm GBPm(1) GBPm GBPm(1)
UK 78.8 107.1 16,264 4,848 122.0 123.2 20,077 6,078 (35%) (13%) (19%) (20%)
Europe 43.7 51.1 15,747 2,778 64.8 53.7 20,280 3,197 (33%) (5%) (22%) (13%)
======== ======== ======== ======== ====== ======== ======== ======== ====== ======== ========== ======== =======
UK &
Europe 122.5 158.2 32,011 3,827 186.8 176.9 40,357 4,630 (34%) (11%) (21%) (17%)
APAC
&
Canada 107.1 130.3 32,232 3,322 162.4 158.4 36,234 4,481 (34%) (18%) (11%) (26%)
======== ======== ======== ======== ====== ======== ======== ======== ====== ======== ========== ======== =======
Total 229.6 288.5 64,243 3,575 349.2 335.3 76,591 4,560 (34%) (14%) (16%) (22%)
======== ======== ======== ======== ====== ======== ======== ======== ====== ======== ========== ======== =======
(1) Spreads, financing and commissions on CFD client trades.
Leveraged
UK and Europe
Gross client income fell by GBP18.7 million (11%) and RPC
decreased by GBP803 (17%), with active clients decreasing by
21%.
UK
The number of active clients in the region decreased by 19% to
16,264 (2021: 20,077), in turn driving a gross client income
reduction of 13% against the prior year to GBP107.1 million (2021:
GBP123.2 million). The decreases were predominantly driven by the
B2C business.
Europe
Europe comprises offices in Austria, Germany, Norway, Poland and
Spain. Gross client income decreased 5% to GBP51.1 million (2021:
GBP53.7 million), driven by reduced client trading in the less
volatile market environment. RPC also fell by 13% to GBP2,778
(2021: GBP3,197). The number of active clients decreased 22% to
15,747 (2021: 20,280).
APAC & Canada
Our APAC & Canada business services clients from our Sydney,
Auckland, Singapore, Toronto and Shanghai offices along with other
regions where we have no physical presence. Gross client income
decreased by 18% to GBP130.3 million (2021: GBP158.4 million),
primarily driven by decreased active clients and lower market
activity throughout the year. Active clients were down 11% to
32,232 (2021: 36,234). Performance in the region was impacted by
the regulatory intervention by ASIC in Australia at the start of
the year, as well as the wider decrease in market volatility.
Non-leveraged
The non-leveraged Australian business delivered a very strong
top line performance, continuing the momentum from a record year in
2021. While revenue fell 12% to GBP48.0 million (2021: GBP54.8
million) due to more normalised market conditions, the underlying
key health metrics of the business continue to achieve new heights.
The business finished 2022 with record AuA, up 16% to AUD$80.2
billion (2021: AUD$69.4 billion), while active clients continued to
increase, up 6% to 246,120 (2021: 232,053).
Interest income
Global interest rates remained at historically low levels
despite moderate increases in Q4 2022, with interest income
remaining broadly flat, up 12% to GBP0.8 million (2021: GBP0.7
million). The majority of the Group's interest income is earned
through our segregated client deposits in our UK, Australia, New
Zealand and stockbroking subsidiaries.
Expenses
Total costs increased by GBP4.0 million (2%) to GBP189.8
million.
GBPm 2022 2021 Change %
---------------------------------------- ----- ----- --------
Net staff costs - fixed (excluding
variable remuneration) 70.4 62.5 (13%)
IT costs 28.7 26.2 (10%)
Marketing costs 24.5 24.6 -
Sales-related costs 2.8 5.8 51%
Premises costs 3.3 3.8 12%
Legal and professional fees 8.6 7.2 (18%)
Regulatory fees 5.6 5.0 (11%)
Depreciation and amortisation 12.9 11.2 (15%)
Irrecoverable sales tax 2.8 6.5 57%
Other 13.5 15.0 10%
======================================== ===== ===== ========
Operating expenses excluding variable
remuneration 173.1 167.8 (3%)
Variable remuneration 14.5 16.2 10%
======================================== ===== ===== ========
Operating expenses including variable
remuneration 187.6 184.0 (2%)
Interest 2.2 1.8 (24%)
======================================== ===== ===== ========
Total costs 189.8 185.8 (2%)
======================================== ===== ===== ========
Net staff costs
Net staff costs including variable remuneration increased GBP6.2
million (8%) to GBP84.9 million following significant investment
across the business, particularly within technology, marketing and
product functions, to support the delivery of strategic projects.
Variable remuneration decreased due to the Group performance
resulting in lower performance-related pay.
GBPm 2022 2021 Change %
Gross staff costs excluding variable remuneration 74.0 64.4 (15%)
Performance related pay 12.1 13.7 12%
Share-based payments 2.4 2.5 3%
=================================================== ====== ====== =========
Total employee costs 88.5 80.6 (10%)
Contract staff costs 3.9 3.2 (20%)
Net capitalisation (7.5) (5.1) 46%
=================================================== ====== ====== =========
Net staff costs 84.9 78.7 (8%)
=================================================== ====== ====== =========
Depreciation and amortisation costs
Depreciation and amortisation have increased by GBP1.7 million
(15%) to GBP12.9 million, primarily due to the depreciation of
additional office space in London and the amortisation of staff
development costs which were capitalised at the end of the previous
financial year.
Irrecoverable sales tax
Irrecoverable sales tax costs decreased GBP3.7 million (57%) to
GBP2.8 million as a result of a one-off tax recovery and ongoing
lower irrecoverable VAT in the UK.
Other expenses
Sales-related costs decreased by GBP3.0 million (51%), primarily
driven by the release of provisions made in the prior year for
client compensation.
Legal and professional fees increased GBP1.4 million (18%),
primarily driven by external consultants who have been engaged to
advise on the delivery of various strategic projects during the
year.
Premises costs decreased GBP0.5 million (12%) due to the rental
of temporary additional office space within London in 2021. This
was replaced with permanent space at the start of the financial
year to accommodate growth in headcount.
Other costs decreased due to a number of factors, with the main
drivers being lower bad debt and higher FX gains on balance sheet
revaluation, offset by higher bank charges.
Taxation
The effective tax rate for 2022 was 21.9%, up from the 2021
effective tax rate, which was 20.5%. The effective tax rate has
increased in the period due as a result of a higher proportion of
the Group's taxable profits earned outside of the UK, and so taxed
at a higher corporate tax rate than the UK's 19%, notably Australia
at 30%.
Profit after tax for the year
The decrease in profit after tax for the year of GBP106.1
million (60%) was due to lower net operating income and the
operational gearing in the business.
Dividend
Dividends of GBP72.6 million were paid during the year (2021:
GBP62.1 million), with GBP62.4 million relating to a final dividend
for the prior year paid in September 2021, and a GBP10.2 million
interim dividend paid in December 2021 relating to current year
performance. The Group has proposed a final ordinary dividend of
8.88 pence per share (2021: 21.43 pence per share).
Non-Statutory Summary Group Balance Sheet
GBPm -Statutory Summary Group Balance Sheet 2022 2021
Intangible assets 30.4 10. 3
Property, plant and equipment 13.0 14. 8
Net lease liability (2.3 ) (4.0)
--------------------------------------------- ------- -------
Fixed Assets 41.1 21.1
Cash and cash equivalents 176.6 118. 9
Amount due from brokers 196.1 253. 9
Financial investments 27.9 28. 1
Other assets 13.4 -
Net derivative financial instruments - 0. 2
Title transfer funds (44.1) (30.7)
--------------------------------------------- ------- -------
Own Funds 369.9 370.4
Working Capital (43.0) 2.6
Tax (payable) / receivable (0.4) 1.7
Deferred tax net asset 2. 7 4.7
--------------------------------------------- ------- -------
Net Assets 370.3 400.5
============================================= ======= =======
The table above is a non-statutory view of the Group Balance
Sheet and line names do not necessarily have their statutory
meanings. A reconciliation to the primary statements can be found
on page 164 in the 2022 Annual Report and Financial Statements.
Fixed assets
Intangible assets increased by GBP20.1 million to GBP30.4
million (2021: GBP10.3 million) as a result of the transaction with
ANZ Bank to transition approximately 500,000 Share Investing
clients to CMC (AUD$25 million) in addition to the capitalisation
of internal resource dedicated to the development of new products
and functionality in 2022.
Net lease liability decreased by GBP1.7 million during the year
due to the net length of lease contracts being lower at the end of
2022 than the prior year.
Own funds
Amounts due from brokers relate to cash held at brokers either
for initial margin or balances in excess of this for cash
management purposes. The reduced client trading exposures
throughout the year, particularly in equities, resulted in
decreases in holdings at brokers for hedging purposes.
Cash and cash equivalents have increased during the year as a
result of the Group's operating performance, in addition to the
Group holding less cash at our brokers for margining purposes
resulting in associated increases in own cash.
Financial investments mainly relate to eligible assets held by
the Group as core liquid assets used to meet Group regulatory
liquidity requirements.
Title transfer funds increased by GBP13.4 million, reflecting
the high levels of account funding by a small population of mainly
institutional clients.
Working capital
The decrease year on year is primarily as a result of the
increased market volatility in Q4 of the prior year, which
significantly increased the value of the stockbroking receivables
yet to settle at the prior year end.
Tax payable
Tax moved to a payable position due to underpayments in
Australia.
Deferred tax net asset
Deferred net tax assets decreased as a result of accelerated
research and development tax deductions in the UK and
Australia.
Impact of climate risk
We have assessed the impact of climate risk on our balance sheet
and have concluded that there is no material impact on the
Financial Statements for the year ended 31 March 2022.
Regulatory capital resources
For the year under review, the Group was supervised on a
consolidated basis by the FCA. The Group maintained a capital
surplus over the regulatory requirement at all times.
For the period to 31 December 2021, the Group and its UK
regulated subsidiaries were subject to CRD IV, comprising the
Capital Requirements Directive ("CRD") and the Capital Requirements
Regulation ("CRR").
From 1 January 2022 the Group and its UK regulated subsidiaries
became subject to the Investment Firm Prudential Regime ("IFPR") as
transposed into the FCA's MIFIDPRU handbook. A new legislative
package, the Investment Firm Regulation and Directive ("IFR/IFD"),
was also introduced in Europe that became directly applicable to
Member States from 26 June 2021. Both regimes have been designed to
be more tailored towards investment firms and have led to changes
in the treatment of capital, remuneration requirements, governance
and transparency provisions. The UK played an instrumental role in
the introduction of IFR/IFD and the IFPR has been designed to
achieve similar outcomes, albeit tailored where necessary to
reflect the structure of the UK market and how it operates.
The Group and its UK regulated subsidiaries fall into scope of
the IFPR, with the Group's German subsidiary, CMC Markets Germany
GmbH, subject to the provisions of IFR/IFD.
On a like for like basis, the Group's total capital resources
decreased to GBP311.5 million (2021: GBP323.1 million) with
retained earnings for the year being partly offset by the interim
and proposed final dividend distribution. In accordance with the
IFPR all deferred tax assets must now be fully deducted from core
equity Tier 1 capital.
At 31 March 2022 the Group had a total OFR ratio of 489% in
comparison to a capital ratio of 20.5% in 2021 (as calculated under
the CRR). The change in capital treatment under the IFPR has
resulted in revisions to the calculation of capital requirements
and monitoring metrics. In essence, the Group has a surplus of
nearly 5 times the regulatory minimum in comparison to 2021 when it
was just over 2.5 times the regulatory minimum in accordance with
the CRR rules. This is attributable to changes in methodology but
also a decrease in market risk exposure.
The following table summarises the Group's capital adequacy
position at the year end. The Group's approach to capital
management is described in note 30 in the 2022 Annual Report and
Financial Statements.
GBPm 2022 2021
Core equity Tier 1 capital ("CET1 capital")(1) 344.5 339. 8
Less: intangibles and deferred tax assets(2) (33.0) (16.7)
=================================================== ======= =======
Total capital resources after relevant deductions 311.5 323.1
=================================================== ======= =======
Own funds requirements ("OFR")(3) 63.6 84.2
=================================================== ======= =======
Total OFR ratio (%)(4) 489% 384%
=================================================== ======= =======
(1) Total audited capital resources as at the end of the
financial year of GBP370.4 million, less proposed dividends.
(2) In accordance with the IFPR, all deferred tax assets must be
fully deducted from CET1 capital.
(3) The minimum capital requirement in accordance with MIFIDPRU
4.3.
(4) The OFR ratio represents CET1 capital as a percentage of OFR
.
Liquidity
The Group has access to the following sources of liquidity 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 consist mainly of cash and cash equivalents. They also
include investments in UK government securities, of which the
majority are held to meet the Group's regulatory liquidity
requirements.
-- 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
does not require clients to sign a TTCA in order to be treated as a
professional client and as a result their funds remain segregated.
The Group considers these funds as an ancillary source of liquidity
and places no reliance on them for its stability.
-- Available committed facility (off-balance sheet liquidity):
The Group has access to a facility of up to GBP55.0 million (2021:
GBP55.0 million) in order to fund any potential fluctuations in
margins required to be posted at brokers to support the risk
management strategy. The facility consists of a one-year term
facility of GBP27.5 million (2021: GBP27.5 million) and a
three-year term facility of GBP27.5 million (2021: GBP27.5
million). 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. There was no drawdown on the
facility at 31 March 2022 (2021: GBPnil).
The Group's use of total available liquidity resources consists
of:
-- Blocked cash: Amounts held to meet the requirements of local
regulators and exchanges, in addition to amounts held at overseas
subsidiaries in excess of local segregated client requirements to
meet potential future client requirements. Cash committed to the
purchase of shares within the current buyback programme is also
classified as blocked cash. This was GBP28.0 million at 31 March
2022 (2021: GBPnil).
-- Initial margin requirement at broker: The total GBP
equivalent initial margin required by prime brokers to cover the
Group's hedge derivative and cryptocurrency positions.
Own funds have decreased slightly to GBP369.9 million (2021:
GBP370.4 million). Own funds include short-term financial
investments, amounts due from brokers and amounts
receivable/payable on the Group's derivative financial instruments.
For more details refer to note 29 in the 2022 Annual Report and
Financial Statements.
GBPm 2022 2021
Own funds 369.9 370.4
Title transfer funds 44.1 30.7
Available committed facility 55.0 55.0
============================================ ======== ========
Total available liquidity 469.0 456.1
Less: blocked cash (103.1) (75.4)
Less: initial margin requirement at broker (120.0) (170.1)
============================================ ======== ========
Net available liquidity 245.9 210.6
============================================ ======== ========
Of which: held as liquid asset requirement 27.9 28.1
============================================ ======== ========
Client money
Total segregated client money held by the Group for leveraged
clients was GBP546.6 million at 31 March 2021 (2021: GBP549.4
million).
Client money represents the capacity for our clients to trade
and offers an underlying indication of the health of our client
base.
Client money governance
The Group segregates all money held by it on behalf of clients
excluding a small number of large clients which have entered a TTCA
with the firm. This is in accordance with or exceeding applicable
client money regulations in countries in which it operates. The
majority of client money requirements fall under the Client Assets
Sourcebook ("CASS") rules of the FCA in the UK, BaFin in Germany
and ASIC in Australia. All segregated client funds are held in
dedicated client money bank accounts with major banks that meet
strict internal criteria and are held separately from the Group's
own money.
The Group has comprehensive client money processes and
procedures in place to ensure client money is identified and
protected at the earliest possible point after receipt as well as
governance structures which ensure such activities are effective in
protecting client money. The Group's governance structure is
explained further on pages 60 to 68 of the 2022 Annual Report and
Financial Statements.
Euan Marshall
Chief Financial Officer
8 June 2022
PRINCIPAL RISKS
The Group's business activities naturally expose it to
strategic, financial and operational risks inherent in the nature
of the business it undertakes and the financial, market and
regulatory environments in which it operates. The Group recognises
the importance of understanding and managing these risks and that
it cannot place a cap or limit on all of the risks to which it is
exposed. However, effective risk management ensures that risks are
managed to an acceptable level. The Board, through its Group Risk
Committee, is ultimately responsible for the implementation of an
appropriate risk strategy, which has been achieved using an
integrated Risk Management Framework. The main areas covered by the
Risk Management Framework are:
-- identifying, evaluating and monitoring of the principal risks
to which the Group is exposed;
-- setting the risk appetite of the Board in order to achieve its strategic objectives; and
-- establishing and maintaining governance, policies, systems
and controls to ensure the Group is operating within the stated
risk appetite.
The Board has put in place a governance structure which is
appropriate for the operations of an online retail financial
services group and is aligned to the delivery of the Group's
strategic objectives including its diversification into
non-leveraged businesses. The structure is regularly reviewed and
monitored and any changes are subject to Board approval.
Furthermore, management regularly considers updates to the
processes and procedures to embed good corporate governance
throughout the Group. As part of the Group Risk Management
Framework, the business is subject to independent assurance by
internal audit (third line of defence). The use of independent
compliance monitoring, risk reviews (second line of defence) and
risk and control self-assessments (first line of defence) provides
additional support to the integrated assurance programme and
ensures that the Group is effectively identifying, managing and
reporting its risks. The Group continues to make enhancements to
its Risk Management Framework and governance to provide a more
structured approach to identifying and managing the risks to which
it is exposed to ensure the Group's risk management is commensurate
to its current operations alongside its aspirations and
diversification. The Board annually undertakes a robust assessment
of the principal risks facing the Group.
The Group has always had an understanding of the importance of
the importance of ESG, evidenced by governance review conducted by
Independent Audit in respect to Governance and, in turn, the Group
is in the process of evolving its framework to a more pure adoption
of Enterprise Risk Management framework to support the
diversification of its business whilst maintaining its level of
oversight and control.
Top and emerging risks are those that would threaten the Group's
business model, future performance, solvency or liquidity. They
form either a subset of one or multiple principal risks, their
management is set out in note 30 to the Financial Statements and
they are:
-- COVID-19 : The primary risk faced was from a resilience
perspective; the Group has put significant measures in place which
have proven to be robust and continues to actively monitor the
situation.
-- Climate change risk: A summary of the process undertaken to
assess the risks of climate change on the Group is detailed within
pages 40 to 43 of the 2022 Annual Report and Financial Statements,
with the conclusion that they are not material.
-- People risk: changing expectations regarding the office
working environment and flexible working in combination with skills
shortages have given rise to heightened staff acquisition and
retention risk. Numerous measures have been put in place during the
year to continue to attract and retain talent including changes to
policies and remuneration reviews. The risk continues to be
heightened.
-- Market risk management: The Group's risk management is
constantly reviewed to ensure it is optimised and as efficient as
possible. For more information on market risk management and
mitigation see page 53 of the 2022 Annual Report and Financial
Statements.
Further information on the structure and workings of the Board
and Management Committees is included in the Corporate governance
report on pages 60 to 68 of the 2022 Annual Report and Financial
Statements.
Principal Risk Risk Description Management and mitigation
Business and Acquisitions The risk that
strategic risks and disposals mergers, * Robust corporate governance structure including
risk acquisitions, strong challenge from independent Non-Executive
disposals or Directors.
other partnership
arrangements made
by the * Vigorous and independent due diligence process.
Group do not
achieve the
stated strategic * Aligning and managing the businesses with Group
objectives or strategy as soon as possible after acquisition.
that they give
rise to ongoing
or
previously
unidentified
liabilities.
================ ================== ==============================================================
Strategic / The risk of an
business model adverse impact * Strong governance framework established including
risk resulting from three independent Non-Executive Directors and the
the Group's Chairman sitting on the Board.
strategic
decision making
as well * Robust governance, challenge and oversight from
as failure to independent Non-Executive Directors.
exploit strengths
or take
opportunities. It * Managing the Group in line with the agreed strategy,
is a risk which policies and risk appetite.
may cause damage
or loss,
financial or
otherwise, to the
Group as a whole.
================ ================== ==============================================================
Preparedness The risk that
for regulatory changes to the * Active dialogue with regulators and industry bodies.
change risk regulatory
framework the
Group operates in * Monitoring of market and regulator sentiment towards
impact the the product offering.
Group's
performance.
Such changes * Monitoring by and advice from compliance department
could result in on impact of actual and possible regulatory change.
the Group's
product offering
becoming less * A business model and proprietary technology that are
profitable, more responsive to changes in regulatory requirements.
difficult
to offer to
clients, or an
outright ban on
the product
offering in one
or more of the
countries
where the Group
operates.
================ ================== ==============================================================
Reputational The risk of
risk damage to the * The Group is conservative in its approach to
Group's brand or reputational risk and operates robust controls to
standing with ensure significant risks to its brand and standing
shareholders, are appropriately mitigated.
regulators,
existing
and potential * Examples include:
clients, the
industry and the
public at large. * proactive engagement with the Group's regulators and
active participation with trade and industry bodies;
and positive development of media relations with
strictly controlled media contact; and
* systems and controls to ensure we continue to offer a
good service to clients and quick and effective
response to address any potential issues.
================ ================ ================== ==============================================================
Financial risks Credit and The risk of Client counterparty risk
counterparty losses arising The Group's management of client counterparty risk is
risk from a significantly aided by the automated
counterparty liquidation functionality. This is where the client positions
failing to meet are reduced should the total
its obligations equity of the account fall below a pre-defined percentage of
as they fall the required margin for the portfolio
due. held.
Other platform functionality mitigates risk further:
* tiered margin requires clients to hold more
collateral against bigger or higher risk positions;
* mobile phone access allowing clients to manage their
portfolios on the move;
* guaranteed stop loss orders allow clients to remove
their chance of debt from their position(s); and
* position limits can be implemented on an instrument
and client level. The instrument level enables the
Group to control the total exposure the Group takes
on in a single instrument. At a client level this
ensures that the client can only reach a pre-defined
size in any one instrument.
In relevant jurisdictions, CMC offers negative balance
protection to retail clients limiting
the liability of a retail investor to the funds held in their
trading account.
However, after mitigations, there is a residual risk that the
Group could incur losses relating
to clients (excluding negative balance protection accounts)
moving into debit balances if
there is a market gap.
Financial institution credit risk
Risk management is carried out by a central liquidity risk
management ("LRM") team under the
Counterparty Concentration Risk Policy.
Mitigation is achieved by:
* monitoring concentration levels to counterparties and
reporting these internally/externally on a
monthly/quarterly basis; and
* monitoring the credit ratings and credit default swap
("CDS") spreads of counterparties and reporting
internally on a weekly basis.
---------------- ================ ================== ==============================================================
Insurance risk The risk that an
insurance claim * Use of a reputable insurance broker who ensures cover
by the Group is is placed with financially secure insurers.
declined (in full
or in part) or
there is * Comprehensive levels of cover maintained.
insufficient
insurance
coverage. * Rigorous claim management procedures are in place
with the broker.
The Board's appetite for uninsured risk is low and as a
result the Group has put in place
established comprehensive levels of insurance cover.
---------------- ================ ================== ==============================================================
Tax and The risk that
financial financial, * Robust process of checking and oversight in place to
reporting risk statutory or ensure accuracy.
regulatory
reports including
VAT and similar * Knowledgeable and experienced staff undertake and
taxes are overview the relevant processes.
submitted late,
incomplete or are
inaccurate.
================ ================== ==============================================================
Liquidity risk The risk that
there is * Risk management is carried out by a central LRM team
insufficient under policies approved by the Board and in line with
available the FCA's Investment Firms Prudential Regime ("IFPR")
liquidity to meet regime. The Group utilises a combination of liquidity
the liabilities forecasting and stress testing to identify any
of the Group potential liquidity risks under both normal and
as they fall due. stressed conditions. The forecasting and stress
testing fully incorporates the impact of all
liquidity regulations in force in each jurisdiction
that the Group operates in and any other impediments
to the free movement of liquidity around the Group
Risk is mitigated by:
* the provision of timely daily, weekly and monthly
liquidity reporting and real-time broker margin
requirements to enable strong management and control
of liquidity resources;
* maintaining regulatory and Board-approved buffers;
* managing liquidity to a series of Board-approved
metrics and Key Risk Indicators;
* a committed bank facility of up to GBP55 million
(2021: GBP55 million) to meet short-term liquidity
obligations to broker counterparties in the event
that the Group does not have sufficient access to its
own cash; and
* a formal Contingency Funding Plan ("CFP") is in place
that is designed to aid senior management to assess
and prioritise actions in a liquidity stress
scenario.
For further information see note 30 to the 2022 Annual Report
and Financial Statements.
---------------- ================ ================== ==============================================================
Market risk The risk that the
value of our * Trading risk management monitors and manages the
residual exposures it inherits from clients on a real-time
portfolio will basis and in accordance with Board-approved appetite.
decrease due to
changes in market
risk * The Group predominantly acts as a market maker in
factors. The linear, highly liquid financial instruments in which
three standard it can easily reduce market risk exposure through its
market risk prime broker ("PB") arrangements. This significantly
factors are price reduces the Group's revenue sensitivity to individual
moves, interest asset classes and instruments.
rates and foreign
exchange rates.
* Financial risk management runs stress scenarios on
the residual portfolio, comprising a number of single
and combined Company-specific and market-wide events
in order to assess potential financial and capital
adequacy impacts to ensure the Group can withstand
severe moves in the risk drivers it is exposed to.
For further information see note 30 to the 2022 Annual Report
and Financial Statements.
================ ================ ================== ==============================================================
Operational Business change The risk that
risks risk business change * Governance process in place for all business change
projects are programmes with Executive and Board oversight and
ineffective, fail scrutiny.
to deliver stated
objectives,
or result in * Key users engaged in development and testing of all
resources being key change programmes.
stretched to the
detriment of
business-as-usual * Significant post-implementation support, monitoring
activities. and review procedures in place for all change
programmes.
* Strategic benefits and delivery of change agenda
communicated to employees.
---------------- ================ ================== ==============================================================
Business The risk that a
continuity and business * Multiple data centres and systems to ensure core
disaster continuity event business activities and processes are resilient to
recovery risk or system failure individual failures.
results in a
reduced ability
or * Remote access systems to enable staff to work from
inability to home or other locations in the event of a disaster
perform core recovery or business continuity requirement.
business
activities or
processes. * Periodic testing of business continuity processes and
disaster recovery.
* Robust incident management processes and policies to
ensure prompt response to significant systems
failures or interruptions.
---------------- ================ ================== ==============================================================
Financial crime The risk that the Adherence with applicable laws and regulations regarding
risk Group is not anti-money laundering ("AML"), counter
committed to terrorism financing ("CTF"), sanctions and anti-bribery &
combatting corruption is mandatory and fundamental
financial crime to our AML/CTF framework. We have strict and transparent
and ensuring that standards and we continuously strengthen
our our processes to ensure compliance with applicable laws and
platform and regulations. CMC Markets reserves
products are not the right to reject any client, payment, or business that is
used for the not consistent with our risk
purpose of money appetite. This risk is further mitigated by:
laundering, * establishing and maintaining a risk-based approach
sanctions evasion towards assessing and managing the money laundering
or terrorism and terrorist financing risks to the Group;
financing.
* establishing and maintaining risk-based know your
customer ("KYC") procedures, including enhanced due
diligence ("EDD") for those customers presenting
higher risk, such as politically exposed persons
("PEPs");
* establishing and maintaining risk-based systems for
surveillance and procedures to monitor ongoing
customer activity;
* procedures for reporting suspicious activity
internally and to the relevant law enforcement
authorities or regulators as appropriate;
* maintenance of appropriate records for the minimum
prescribed record keeping periods;
* training and awareness for all employees;
* provision of appropriate MI and reporting to senior
management of the Group's compliance with the
requirements; and
* oversight of Group entities for financial crime in
line with the Group AML/CTF Oversight Framework.
================ ================== ==============================================================
Information and The risk of
data security unauthorised * Dedicated information security and data protection
risk access to, or expertise within the Group.
external
disclosure of,
client or Company * Technical and procedural controls implemented to
information, minimise the occurrence or impact of information
including those security and data protection breaches.
caused by cyber
attacks.
* Access to information and systems only provided on a
"need-to-know" and "least privilege" basis consistent
with the user's role and also requires the
appropriate authorisation.
* Regular system access reviews implemented across the
business.
---------------- ================ ================== ==============================================================
Information The risk of loss
technology and of technology * Continuous investment in increased functionality,
infrastructure services due to capacity and responsiveness of systems and
risk loss of data, infrastructure, including investment in software that
system or data monitors and assists in the detection and prevention
centre or failure of cyber attacks.
of a third party
to restore
services in a * Software design methodologies, project management and
timely manner. testing regimes to minimise implementation and
operational risks.
* Constant monitoring of systems performance and, in
the event of any operational issues, changes to
processes are implemented to mitigate future
concerns.
* Operation of resilient data centres to support each
platform (two in the UK to support Next Generation
and two in Australia to support Stockbroking).
* Systems and data centres designed for high
availability and data integrity enabling continuous
service to clients in the event of individual
component failure or larger system failures.
* Dedicated Support and Infrastructure teams to manage
key production systems. Segregation of duties between
Development and Production Support teams where
possible to limit development access to production
systems.
---------------- ================ ================== ==============================================================
Legal The risk that
(commercial / disputes * Compliance with legal and regulatory requirements
litigation) deteriorate into including relevant codes of practice.
risks litigation.
* Early engagement with legal advisers and other risk
managers.
* Appropriately managed complaints which have a
legal/litigious aspect.
* An early assessment of the impact and implementation
of changes in the law.
---------------- ================ ================== ==============================================================
Operations The risk that the
(processing) design or * Investment in system development and upgrades to
risks execution of improve process automation.
business
processes is
inadequate or * Enhanced staff training and oversight in key business
fails to deliver processing areas.
an expected level
of service and
protection to * Monitoring and robust analysis of errors and losses
client or Company and underlying causes.
assets.
================ ================== ==============================================================
Procurement and The risk that
outsourcing third-party * Responsibility for procurement, vendor management and
risks organisations general outsourcing owned by the Chief Financial
inadequately Officer under the Senior Manager and Certification
perform, or fail Regime, with the accountability to ensure compliance
to provide or to the Group procurement process and completion of
perform, key activities, based on the risk profile of the
the outsourced service required by the organisation.
activities or
contractual
obligations to * Outsourcing only employed where there is a strategic
the standards gain in resource or experience, which is not
required by the available in house.
Group.
* Due diligence performed on service supplier ahead of
outsourcing being agreed.
* Service-level agreements in place and regular
monitoring of performance undertaken.
================ ================== ==============================================================
People risk The risk of loss
of key staff, * The Board has directed that the Group maintains
having active People, Succession and Resource Plans for the
insufficient Group and all key individuals and teams, which will
skilled and mitigate some of the risk of loss of key persons. It
motivated will adopt policies and strategies commensurate with
resources its objectives of:
available
or failing to
operate * attracting and nurturing the best staff;
people-related
processes to an
appropriate * retaining and motivating key individuals;
standard.
* managing employee-related risks;
* achieving a high level of employee engagement;
* developing personnel capabilities;
* optimising continuous professional development; and
* achieving a reputation as a good employer with an
equitable remuneration policy.
================ ================== ==============================================================
Regulatory and The risk of
compliance risk regulatory * Internal audit outsourced to an independent
sanction or legal third-party professional services firm.
proceedings as a
result of failure
to comply with * Effective compliance oversight and advisory/technical
regulatory, guidance provided to the business.
statutory or
fiduciary
requirements or * Comprehensive monitoring and surveillance programmes,
as a result of a policies and procedures designed by compliance.
defective
transaction.
* Strong regulatory relations and regulatory horizon
scanning, planning and implementation.
* Controls for appointment and approval of staff
holding a senior management or certified function and
annual declarations to establish ongoing fitness and
propriety.
* Governance and reporting of regulatory risks through
the Risk Management Committee, Group Audit Committee
and Group Risk Committee.
* Robust anti-money laundering controls, client due
diligence and sanctions checking.
---------------- ================ ================== ==============================================================
Conduct risk The risk that
through our * The Treating Customers Fairly ("TCF") and Conduct
culture, Committee is comprised of senior management and
behaviours or subject matter experts; it convenes regularly to
practices we fail evaluate and challenge the TCF MI alongside any
to meet the emerging issues or incidents which could impact
reasonable client fairness. It reports to the Board via the Risk
expectations of Management Committee ("RMC") who are also charged
our customers, with approving the TCF Policy.
shareholders or
regulators.
* Also, the Conduct, Fitness and Propriety Panel is
chaired by global HR, with Deputy CEO as well as
global and regional HR and compliance membership. The
Committee discusses specific conduct-related matters,
including any serious concerns raised in the TCF
Committee, breaches of the Code of Conduct, serious
complaints specific to an employee or any concerns
with a Certification or Senior Manager Function.
* APAC has a Conduct Committee for the region,
nominated jointly by the APAC and stockbroking
Boards. It aims to ensure a customer-centric
perspective in how CMC goes about compliance
obligations and business activities to ensure we are
delivering good customer outcomes. It is chaired by
the Head of HR APAC and consists of Board
representatives across the region as well as the Head
of APAC Commercial. Accordingly, governance
structures, control mechanisms and organisational
culture should be sufficiently relevant, suitable and
sustainable to support good organisational conduct.
---------------- ================ ================== ==============================================================
Client money The risk that the
segregation Group fails to * The Client Money and Asset Protection Committee
risk implement ("CMAPC"), which reports into the RMC, is a
adequate controls fundamental part of the Group's client money
and processes to governance and oversight procedures. The CMAPC is
ensure that chaired by the Chief Financial Officer, an
client money is FCA-approved person, who is responsible for
segregated in overseeing the controls and procedures in place to
accordance with protect client money.
applicable
regulations.
The Committee is comprised of senior management from across
the Group who oversee functions
which impact client money. The CMAPC forms a key part of
the oversight of client money in
addition to compliance, and internal audit.
---------------- ================ ================== ==============================================================
DIRECTORS' STATEMENT PURSUANT TO THE FCA'S DISCLOSURE GUIDANCE
AND TRANSPARENCY RULES
The directors are required by the Disclosure Guidance and
Transparency Rules to include a management report containing a fair
review of the business and a description of the principal risks and
uncertainties facing the Group.
Each of the directors, whose names and functions are listed
below, confirm to the best of their knowledge that:
-- the Group Financial Statements contained in the 2022 Annual
Report and Financial Statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union, give a true and
fair view of the assets, liabilities, financial position and
results of the Group;
-- the Strategic Report contained in the 2022 Annual Report and
Financial Statements includes a fair review of the development and
performance of the business and the position of the Company and the
Group, together with a description of the principal risks and
uncertainties that they face; and
-- the 2022 Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
CMC Markets plc Board of Directors
James Richards (Chairman)
Lord Cruddas (Chief Executive Officer)
David Fineberg (Deputy Chief Executive Officer)
Euan Marshall (Chief Financial Officer)
Matthew Lewis (Head of Asia Pacific & Canada)
Paul Wainscott (Senior Independent Director)
Sarah Ing (Non-Executive Director)
Clare Salmon (Non-Executive Director)
Susanne Chishti (Non-Executive Director)
Consolidated income statement
For the year ended 31 March 2022
Year ended Year ended
GBP'000 Note 31 March 2022 31 March 2021
===== ===============
Revenue 325,809 461,308
Interest income 834 746
========================================================== ===== =============== ===============
Total revenue 3 326,643 462,054
Introducing partner commissions and betting levies (44,693) (52,288)
========================================================== ===== =============== ===============
Net operating income 2 281,950 409,766
Operating expenses 4 (189,131) (183,994)
Net impairment gains on financial assets 1,494 -
========================================================== ===== =============== ===============
Operating profit 94,313 225,772
Finance costs (2,177) (1,762)
========================================================== ===== =============== ===============
Profit before taxation 92,136 224,010
Taxation 5 (20,138) (45,903)
========================================================== ===== =============== ===============
Profit for the year attributable to owners of the parent 71,998 178,107
========================================================== ===== =============== ===============
Earnings per share
Basic earnings per share (p) 6 24.8p 61.5p
========================================================== ===== =============== ===============
Diluted earnings per share (p) 6 24.7p 61.2p
========================================================== ===== =============== ===============
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Profit for the year 71,998 178,107
==================================================================================== =============== ===============
Other comprehensive income / (expense):
Items that may be subsequently reclassified to income statement
Loss on net investment hedges, net of tax (1,089) (2,007)
Currency translation differences 1,761 4,563
Changes in the fair value of debt instruments at fair value through other
comprehensive income,
net of tax (54) (54)
Other comprehensive income for the year 618 2,502
==================================================================================== =============== ===============
Total comprehensive income for the year attributable to owners of the parent 72,616 180,609
==================================================================================== =============== ===============
Consolidated statement of financial position Company
registration number: 05145017
At 31 March 2022
GBP'000 Note 31 March 2022 31 March 2021
===== ==============
ASSETS
Non-current assets
Intangible assets 8 30,328 10,330
Property, plant and equipment 9 24,941 26,105
Deferred tax assets 6,022 6,370
Financial investments 13,448 -
Trade and other receivables 10 1,797 1,800
================================== ===== ============== ==============
Total non-current assets 76,536 44,605
================================== ===== ============== ==============
Current assets
Trade and other receivables 10 156,917 127,119
Derivative financial instruments 2,359 3,241
Current tax recoverable - 1,749
Other assets 13,443 -
Financial investments 11 14,497 28,104
Amounts due from brokers 196,117 253,895
Cash and cash equivalents 12 176,578 118,921
================================== ===== ============== ==============
Total current assets 559,911 533,029
================================== ===== ============== ==============
TOTAL ASSETS 636,447 577,634
================================== ===== ============== ==============
LIABILITIES
Current liabilities
Trade and other payables 13 215,853 152,253
Derivative financial instruments 2,362 3,077
Share buyback liability 27,264 -
Borrowings 194 945
Lease liabilities 14 4,916 4,599
Current tax payable 429 -
Provisions 369 1,889
================================== ===== ============== ==============
Total current liabilities 251,387 162,763
================================== ===== ============== ==============
Non-current liabilities
Borrowings - 194
Lease liabilities 14 9,269 10,727
Deferred tax liabilities 3,309 1,622
Provisions 2,117 1,811
================================== ===== ============== ==============
Total non-current liabilities 14,695 14,354
================================== ===== ============== ==============
TOTAL LIABILITIES 266,082 177,117
================================== ===== ============== ==============
EQUITY
Share capital 73,193 73,299
Share premium 46,236 46,236
Capital redemption reserve 281 -
Own shares held in trust (1,094) (382)
Other reserves (75,980) (49,334)
Retained earnings 327,729 330,698
================================== ===== ============== ==============
Total equity 370,365 400,517
================================== ===== ============== ==============
TOTAL EQUITY AND LIABILITIES 636,447 577,634
================================== ===== ============== ==============
Consolidated statement of changes in equity
For the year ended 31 March 2022
Capital Own shares
Share Share redemption held in Other Retained
GBP'000 capital premium reserve trust reserves earnings Total Equity
============= ============= ============ ============ ============= =============
At 1 April
2020 72,899 46,236 - (433) (51,836) 216,013 282,879
New shares
issued 400 - - - - - 400
Profit for the
year - - - - - 178,107 178,107
Other
comprehensive
income for
the year - - - - 2,502 - 2,502
Acquisition of
own shares
held in trust - - - (364) - - (364)
Utilisation of
own shares
held in trust - - - 415 - - 415
Share-based
payments - - - - - (2,458) (2,458)
Tax on
share-based
payments - - - - - 1,164 1,164
Dividends - - - - - (62,128) (62,128)
=============== ============= ============= ============ ============ ============= ============= =============
At 31 March
2021 73,299 46,236 - (382) (49,334) 330,698 400,517
New shares
issued 175 - - - - - 175
Profit for the
year - - - - - 71,998 71,998
Other
comprehensive
income for
the year - - - - 618 - 618
Acquisition of
own shares
held in trust - - - (1,006) - - (1,006)
Utilisation of
own shares
held in trust - - - 294 - - 294
Share buyback (281) - 281 - (27,264) (2,975) (30,239)
Share-based
payments - - - - - 59 59
Tax on
share-based
payments - - - - - 553 553
Dividends - - - - - (72,604) (72,604)
=============== ============= ============= ============ ============ ============= ============= =============
At 31 March
2022 73,193 46,236 281 (1,094) (75,980) 327,729 370,365
=============== ============= ============= ============ ============ ============= ============= =============
Consolidated statement of cash flows
For the year ended 31 March 2022
Year ended Year ended
GBP'000 Note 31 March 2022 31 March 2021
===== ===============
Cash flows from operating activities
Cash generated from operations 15 181,795 151,300
Interest income 1,742 1,784
Tax paid (14,651) (33,620)
======================================================== ===== =============== ===============
Net cash generated from operating activities 168,886 119,464
======================================================== ===== =============== ===============
Cash flows from investing activities
Purchase of property, plant and equipment (3,500) (4,162)
Investment in intangible assets (21,813) (8,028)
Purchase of financial investments (28,337) (28,933)
Proceeds from maturity of financial investments
and coupon receipts 27,511 25,176
Outflow on net investment hedges (998) (1,761)
======================================================== ===== =============== ===============
Net cash used in investing activities (27,137) (17,708)
======================================================== ===== =============== ===============
Cash flows from financing activities
Repayment of borrowings (10,945) (51,190)
Proceeds from borrowings 10,000 50,000
Principal elements of lease payments (5,962) (6,057)
Proceeds from issue of Ordinary Shares - 80
Acquisition of own shares (831) (44)
Share buyback (2,975) -
Dividends paid (72,604) (62,128)
Finance costs (2,151) (1,749)
======================================================== ===== =============== ===============
Net cash used in financing activities (85,468) (71,088)
======================================================== ===== =============== ===============
Net increase in cash and cash equivalents 56,281 30,668
======================================================== ===== =============== ===============
Cash and cash equivalents at the beginning of the year 118,921 84,307
Effect of foreign exchange rate changes 1,376 3,946
======================================================== ===== =============== ===============
Cash and cash equivalents at the end of the year 176,578 118,921
======================================================== ===== =============== ===============
1. Basis of preparation
Basis of accounting
The financial information set out herein does not constitute the
Group's statutory accounts for the years ended 31 March 2022 and
2021 but is derived from those financial statements. The Annual
Report and Financial Statements for the year ended 31 March 2021
have been delivered to the Registrar of Companies and those for the
year ended 31 March 2022 will be delivered following the Company's
Annual General Meeting to be held on 28 July 2022. The external
auditor has reported on those financial statements; its reports
were unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) Companies Act 2006.
While the financial information included in this announcement
has been prepared in accordance with the UK-adopted international
accounting standards, including interpretations issued by the IFRS
Interpretations Committee and with the requirements of the
Companies Act 2006 for the periods presented, this announcement
does not itself contain sufficient information to comply with
IFRSs.
The Financial Statements have been prepared in accordance with
the going concern basis, 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.
The Group's principal accounting policies adopted in the
preparation of these financial statements are consistent with those
of the previous financial year. The financial statements presented
are at and for the years ending 31 March 2022 and 31 March 2021.
Financial annual years are referred to as 2022, and 2021 in the
financial statements.
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 for 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 the adoption of this accounting policy
impacts classification only. Other assets amount to GBP13,443,000
and are presented as a separate line in the consolidated statement
of financial position. The Statement of Financial Position has not
been restated to reclassify the comparative, on grounds of
materiality.
There is no further impact for the year ended 31 March 2022 and
for the year ended 31 March 2021.
Significant accounting judgements
The preparation of Financial Statements in conformity with IFRSs
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 only area
involving a higher degree of judgement or complexity, or where
assumptions and estimates are significant to the Financial
Statements, is:
Deferred taxes
The recognition and measurement of deferred tax assets involve
significant judgment. 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 35 (Contingent
Liabilities), notably the probability of any obligation or future
payments arising.
Accounting for cryptocurrencies
The Group has recognised GBP13,443,000 (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 31 March 2022. These assets are used for
hedging purposes and held for sale in the ordinary course of
business. A judgement has been made to apply the measurement
principles of IFRS 13 Fair value measurement in accounting for
these assets. The assets are presented as 'other assets' on the
Consolidated Statement of Financial Position.
Intangible assets
The Group has recognised GBP14,237,000 of intangible assets
under development on its Statement of Financial Position as at 31
March 2022 relating to the transaction with Australia and New
Zealand Banking Group Limited ("ANZ") to transition its portfolio
of Share investing clients to CMC for AUD$25m. A judgement has been
made to apply the recognition and measurement principles of IAS 38
Intangibles in accounting for these assets.
The Group has recognised GBP6,054,000 of intangible assets under
development on its Statement of Financial Position as at 31 March
2022 relation to the development of UK CMC Invest trading platform.
In performing the annual impairment assessment, which concluded
that no impairment was required, it was determined that the
recoverable amount of the asset is a source of estimation
uncertainty which is sensitive to the estimated future revenues
from the UK CMC Invest business.
2. Segmental reporting
The Group's principal business is online retail financial
services including stockbroking 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, whereas the financial spread betting products are only
available to trade 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 Spread bet - 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.
Year ended 31 March
2022 Leveraged Non-leveraged
UK & APAC
GBP'000 IE Europe & Canada Australia Central Total
========= ========= ============== ========== ==========
Segment revenue net of
introducing partner commissions
and betting levies 80,891 43,795 108,384 48,046 - 281,116
Interest income (413) - 335 912 - 834
================================== ========= ========= ========== ============== ========== ==========
Net operating income 80,478 43,795 108,719 48,958 - 281,950
Segment operating expenses (18,767) (6,480) (22,755) (10,422) (129,213) (187,637)
================================== ========= ========= ========== ============== ========== ==========
Segment contribution 61,711 37,315 85,964 38,536 (129,213) 94,313
Allocation of central
operating expenses (35,527) (30,597) (40,689) (22,400) 129,213 -
================================== ========= ========= ========== ============== ========== ==========
Operating profit 26,184 6,718 45,275 16,136 - 94,313
Finance costs (432) (290) (195) (168) (1,092) (2,177)
Allocation of central
finance costs (474) (207) (411) - 1,092 -
================================== ========= ========= ========== ============== ========== ==========
Profit before taxation 25,278 6,221 44,669 15,968 - 92,136
================================== ========= ========= ========== ============== ========== ==========
Year ended 31 March
2021 Leveraged Non-leveraged
UK & APAC
GBP'000 IE Europe & Canada Australia Central Total
========= ========= ============== ========== ==========
Segment revenue net of
introducing partner commissions
and betting levies 125,947 65,035 163,236 54,802 - 409,020
Interest income (26) - 533 239 - 746
================================== ========= ========= ========== ============== ========== ==========
Net operating income 125,921 65,035 163,769 55,041 - 409,766
Segment operating expenses (19,909) (6,574) (21,950) (10,039) (125,522) (183,994)
================================== ========= ========= ========== ============== ========== ==========
Segment contribution 106,012 58,461 141,819 45,002 (125,522) 225,772
Allocation of central
operating expenses (36,336) (30,393) (37,320) (21,473) 125,522 -
================================== ========= ========= ========== ============== ========== ==========
Operating profit 69,676 28,068 104,499 23,529 - 225,772
Finance costs (484) (36) (242) (213) (787) (1,762)
Allocation of central
finance costs (331) (134) (322) - 787 -
================================== ========= ========= ========== ============== ========== ==========
Profit before taxation 68,861 27,898 103,935 23,316 - 224,010
================================== ========= ========= ========== ============== ========== ==========
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 year before finance costs and
taxation.
3. Total revenue
Revenue
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Leveraged 247,987 373,006
Non-leveraged 74,326 83,310
Other revenue 3,496 4,992
=============== =============== ===============
Total 325,809 461,308
=============== =============== ===============
Interest income
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Bank and broker interest 8 25 681
Interest on financial investments 9 43
Other interest income - 22
=================================== =============== ===============
Total 834 746
=================================== =============== ===============
The Group earns interest income from its own corporate funds and
from segregated client funds.
4. Operating expenses
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Net staff costs 84,862 78,653
IT costs 28,721 26,162
Sales and marketing 27,363 30,399
Premises 3,343 3,794
Legal and Professional fees 8,568 7,234
Regulatory fees 5,576 5,002
Depreciation and amortisation 12,901 11,239
Irrecoverable sales tax 2,789 6,536
Other 15,480 15,017
================================================= =============== ===============
189,603 184,036
Capitalised internal software development costs (472) (42)
================================================= =============== ===============
Operating expenses 189,131 183,994
================================================= =============== ===============
The above presentation reflects the breakdown of Operating
expenses by nature of expense.
5. Taxation
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Analysis of charge for the year:
Current tax:
Current tax on profit for the year 18,642 35,124
Adjustments in respect of previous years (465) (815)
=================================================== =============== ===============
Total current tax 18,177 34,309
=================================================== =============== ===============
Deferred tax:
Origination and reversal of temporary differences 1,699 11,508
Adjustments in respect of previous years 409 86
Impact of change in tax rate (147) -
=================================================== =============== ===============
Total deferred tax 1,961 11,594
=================================================== =============== ===============
Total tax 20,138 45,903
=================================================== =============== ===============
The standard rate of UK corporation tax charged was 19% with
effect from 1 April 2017. Taxation outside the UK is calculated at
the rates prevailing in the respective jurisdictions. The effective
tax rate of 21.86% (year ended 31 March 2021: 20.49%) differs from
the standard rate of UK corporation tax of 19% (year ended 31 March
2021: 19%). The differences are explained below:
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Profit before taxation 92,136 224,010
==================================================================================== =============== ===============
Profit multiplied by the standard rate of corp. tax in the UK of 19% (31 March
2021: 19%) 17,506 42,562
Adjustment in respect of foreign tax rates 2,500 3,918
Adjustments in respect of previous years (56) (729)
Impact of change in tax rate (147) 1
Expenses not deductible for tax purposes 291 415
Recognition of previously unrecognised tax losses - (678)
Other differences 44 414
==================================================================================== =============== ===============
Total tax 20,138 45,903
==================================================================================== =============== ===============
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Tax on items recognised directly in Equity
Tax credit on Share based payments 553 1,164
============================================ =============== ===============
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 year 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 vesting of all dilutive potential
weighted average Ordinary Shares and that vesting is satisfied by
the issue of new Ordinary shares.
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Earnings attributable to ordinary shareholders (GBP '000) 71,998 178,107
================================================================================= =============== ===============
Weighted average number of shares used in the calculation of basic EPS ('000) 290,815 289,677
Dilutive effect of share options ('000) 1,022 1,485
================================================================================= =============== ===============
Weighted average number of shares used in the calculation of diluted EPS ('000) 291,837 291,162
================================================================================= =============== ===============
Basic EPS (p) 24.8p 61.5p
================================================================================= =============== ===============
Diluted EPS (p) 24.7p 61.2p
================================================================================= =============== ===============
For the year ended 31 March 2022, 1,022,000 (year ended 31 March
2021: 1,485,000) potentially dilutive weighted average Ordinary
Shares in respect of share options in issue were included in the
calculation of diluted EPS.
7. Dividends
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Declared and paid in each year
Final dividend for 2021 at 21.43p per share (2020: 12.18p) 62,410 35,393
Interim dividend for 2022 at 3.50p per share (2021: 9.20p) 10,194 26,735
============================================================ =============== ===============
Total 72,604 62,128
============================================================ =============== ===============
The final dividend for 2022 of 8.88 pence per share, amounting
to GBP25,778,000 was proposed by the Board on 8 June 2022 and has
not been included as a liability at 31 March 2022. The dividend
will be paid on 11 August 2022, following approval at the Company's
AGM, to those members on the register at the close of business on
14 July 2022.
The dividends paid or declared in relation to the financial year
are set out below:
Year ended Year ended
pence 31 March 2022 31 March 2021
===============
Declared per share
Interim dividend 3.50 9.20
Final dividend 8.88 21.43
==================== =============== ===============
Total dividend 12.38 30.63
==================== =============== ===============
8. Intangible assets
Trademarks and Client Assets under
GBP '000 Goodwill Computer software trading licences 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
at
31 March 2021 - 3,920 262 - 6,148 10,330
------------------ --------- ------------------ ----------------- ----------------- ----------------- ----------
Additions - 7 7 - - 2 1,736 2 1,813
Transfers - 5 ,246 - - (5 ,246 ) -
Disposals - - (6 9 ) - - (6 9 )
Amortisation
charge - (2 ,773 ) (4 7 ) - - (2 ,820 )
Foreign currency
translation - 1 05 (1 ) - 9 70 1 ,074
------------------ --------- ------------------ ----------------- ----------------- ----------------- ----------
Carrying amount
at
31 March 2022 - 6,575 145 - 23,608 30,328
------------------ --------- ------------------ ----------------- ----------------- ----------------- ----------
At 31 March 2022
Cost 11,500 132,187 1,052 3,095 23,608 171,442
Accumulated
amortisation (11,500) (125,612) (907) (3,095) - (141,114)
------------------ --------- ------------------ ----------------- ----------------- ----------------- ----------
Carrying amount - 6,575 145 - 23,608 30,328
------------------ --------- ------------------ ----------------- ----------------- ----------------- ----------
9. Property, plant and equipment
Furniture,
Leasehold fixtures and RIght-of-use
GBP '000 improvements equipment Computer hardware assets Total
================== ================= ================== ==================
At 31 March 2021
Cost 19,273 9,656 36,249 19,146 84,324
Accumulated
amortisation (14,393) (8,795) (27,235) (7,796) (58,219)
------------------ ------------------ ----------------- ------------------ ------------------ ---------
Carrying amount
at
31 March 2021 4,880 861 9,014 11,350 26,105
------------------ ------------------ ----------------- ------------------ ------------------ ---------
Additions 106 198 3,196 5,362 8,862
Disposals - (6) (14) (94) (114)
Depreciation
charge (1,642) (414) (3,225) (4,800) (10,081)
Foreign currency
translation 18 3 45 103 169
------------------ ------------------ ----------------- ------------------ ------------------ ---------
Carrying amount
at
31 March 2022 3,362 642 9,016 11,921 24,941
------------------ ------------------ ----------------- ------------------ ------------------ ---------
At 31 March 2022
Cost 16,883 8,922 37,375 24,557 87,737
Accumulated
amortisation (13,521) (8,280) (28,359) (12,636) (62,796)
------------------ ------------------ ----------------- ------------------ ------------------ ---------
Carrying amount 3,362 642 9,016 11,921 24,941
------------------ ------------------ ----------------- ------------------ ------------------ ---------
10. Trade and other receivables
GBP'000 31 March 2022 31 March 2021
==============
Current
Gross trade receivables 15,256 9,103
Less: provision for impairment of trade receivables (6,219) (7,762)
===================================================== ============== ==============
Trade receivables 9,037 1,341
Prepayments and accrued income 11,143 9,799
Stockbroking debtors 134,324 99,035
Other debtors 2,413 16,944
===================================================== ============== ==============
156,917 127,119
===================================================== ============== ==============
Non-current
Other debtors 1,797 1,800
===================================================== ============== ==============
Total 158,714 128,919
===================================================== ============== ==============
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 13).
As at 31 March 2021, the other debtors balance included a
deposit of AUD 25,000,000 (GBP13,781,000) which was repaid as part
of the transaction with ANZ as described in Note 1.
11. Financial investments
GBP'000 31 March 2022 31 March 2021
==============
UK Government securities:
At 1 April 28,037 25,385
Purchase of securities 28,337 28,933
Maturity of securities and coupon receipts (28,428) (26,256)
Accrued interest (17) 29
Changes in the fair value of debt instruments at fair value through other
comprehensive income (54) (54)
====================================================================================== ============== ==============
At 31 March 27,875 28,037
====================================================================================== ============== ==============
Equity securities
At 1 April 67 60
Foreign currency translation 3 7
====================================================================================== ============== ==============
At 31 March 70 67
====================================================================================== ============== ==============
Total 27,945 28,104
====================================================================================== ============== ==============
Split as:
Non-current 13,448 -
Current 14,497 28,104
====================================================================================== ============== ==============
Total 27,945 28,104
====================================================================================== ============== ==============
12. Cash and cash equivalents
GBP'000 31 March 2022 31 March 2021
==============
Gross cash and cash equivalents 723,213 668,304
Less: Client monies (546,635) (549,383)
================================= ============== ==============
Cash and cash equivalents 176,578 118,921
================================= ============== ==============
Analysed as:
Cash at bank 176,578 118,921
--------------------------------- -------------- --------------
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.
13. Trade and other payables
GBP'000 31 March 2022 31 March 2021
==============
Current
Gross trade payables 593,995 580,062
Less: Client monies (546,635) (549,383)
============================== ============== ==============
Trade payables 47,360 30,679
Tax and social security 2,242 236
Stockbroking creditors 123,875 89,091
Accruals and other creditors 42,376 32,247
============================== ============== ==============
T otal 215,853 152,253
============================== ============== ==============
Stockbroking creditors represent the amount payable in respect
of equity security transactions executed on behalf of clients with
a corresponding balance included within trade and other receivables
(note 10).
14. Leases
The Group leases several assets including leasehold properties
and computer hardware to meet its operational business
requirements. The average lease term is 2.1 years.
The movements in lease liabilities during the year were as
follows:
GBP'000 31 March 2022 31 March 2021
==============
At 1 April 15,326 19,273
Additions / modifications of new leases during the year 4,658 1,181
Interest expense 700 818
Lease payments made during the year (6,662) (6,875)
Foreign currency translation 163 929
--------------------------------------------------------- -------------- --------------
At 31 March 1 4,185 15,326
--------------------------------------------------------- -------------- --------------
GBP'000 31 March 2022 31 March 2021
==============
Analysis of lease liabilities
Non-current 9,269 10,727
Current 4,916 4,599
------------------------------- -------------- --------------
Total 14,185 15,326
------------------------------- -------------- --------------
The lease payments for the year ended 31 March 2022 relating to
short-term leases amounted to GBP207,000 (year ended 31 March 2020:
GBP748,000).
15. Cash generated from operations
Year ended Year ended
GBP'000 31 March 2022 31 March 2021
===============
Cash flows from operating activities
Profit before taxation 92,136 224,010
Adjustments for:
Interest income (834) (746)
Finance costs 2,177 1,762
Depreciation 10,081 9,254
Amortisation of intangible assets 2,820 1,985
Research and development tax credit (743) (728)
Loss / (profit) on disposal of property, plant and equipment 86 (109)
Other non-cash movements including exchange rate movements (681) (908)
Share-based payment 356 (2,045)
Changes in working capital
(Increase)/Decrease in trade and other receivables (29,800) 59,616
Decrease/(Increase) in amounts due from brokers 57,778 (119,619)
Increase in other assets (13,443) -
Increase/(Decrease) in trade and other payables 63,600 (24,932)
Decrease in net derivative financial instruments 76 2,574
(Decrease)/Increase in provisions (1,814) 1,186
============================================================== =============== ===============
Cash generated from operations 181,795 151,300
============================================================== =============== ===============
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR UWURRUWUNRUR
(END) Dow Jones Newswires
June 09, 2022 02:02 ET (06:02 GMT)
Cmc Markets (LSE:CMCX)
Historical Stock Chart
From Jun 2024 to Jul 2024
Cmc Markets (LSE:CMCX)
Historical Stock Chart
From Jul 2023 to Jul 2024
