TIDMCMCX
RNS Number : 6213T
CMC Markets Plc
16 November 2023
16 November 2023
CMC MARKETS PLC
("CMC" or the "Company")
Interim results for the half year ended 30 September 2023
Operational Highlights
-- Continue to execute diversification strategy with the
successful launch of CMC Invest Singapore in September 2023.
-- Significant development and upgrades delivered across our
platforms with US cash equities launched for our B2B clients,
mutual funds on CMC Invest UK and cryptocurrencies now live on CMC
Invest Australia as at the end of October 2023. Further product
upgrades on track for delivery in H2 2024.
-- Regional expansion in the Middle East benefiting from a
greater presence on the ground in Dubai, where we are enhancing our
service for institutional clients.
-- Operating cost guidance for FY 2024 remains unchanged at
GBP240 million, excluding variable remuneration. Operating expenses
are expected to decline as projects are delivered and we pass the
peak of the investment cycle, with a cost review planned for H2 to
enhance profitability and margins. A further update will be
provided at FY 2024.
Summary Fin ancials and Core KPIs
30 September 30 September
For the half year ended 2023 2022 Change
Net operating income (GBP million) 122.6 153.5 (20%)
Trading net revenue (GBP million) 87.4 128.4 (32%)
Investing net revenue (GBP million) 16.8 20.8 (20%)
Other income (GBP million) 18.4 4.3 338%
(Loss)/Profit before tax (GBP million) (2.0) 36.6 -
Basic earnings per share (pence) (0.8) 10.2 -
Dividend per share (pence) 1.00 3.50 (71%)
=========================================== ============= ============= =======
Trading gross client income (GBP million) 132.6 154.9 (14%)
Trading client income retention 66% 83% -
Trading active clients (number) 46,832 50,199 (7%)
Trading revenue per active client (GBP) 1,867 2,558 (27%)
------------------------------------------- ------------- ------------- -------
Investing active clients (number) 152,192 164,632 (8%)
------------------------------------------- ------------- ------------- -------
Notes:
- Net operating income represents total revenue net of
introducing partner commissions and levies
- Trading net revenue represents contracts for difference
("CFD") and spread bet gross client income net of rebates, levies
and risk management gains or losses
- Investing net revenue represents stockbroking revenue net of
rebates
- Trading gross client income represents spreads, financing and
commissions charged to clients (client transaction costs)
- Active clients represent those individual clients who have
traded with or held a CFD or spread bet position or who traded on
the stockbroking platform on at least one occasion during the
six-month period
- Trading revenue per active client represents total trading
revenue from trading active clients after deducting rebates and
levies
Financial Highlights
-- Net operating income of GBP122.6 million, down 20%
year-on-year (H1 2023: GBP153.5 million).
-- H1 2024 trading net revenue was GBP87.4 million, down 32%
year-on-year (H1 2023: GBP128.4 million) and investing net revenue
was GBP16.8 million, down 20% year-on-year (H1 2023: GBP20.8
million), impacted by lower client activity and the uncertain
market conditions stemming from the inflationary and higher
interest rate environment.
-- Other income increased substantially in the period by 338% to
GBP18.4 million (H1 2023: GBP4.3 million) and is predominately
driven by increases in global interest rates and resulting income
from client and own cash balances.
-- Operating costs for H1 2024, excluding variable remuneration,
were GBP121.9 million (H1 2023: GBP106.3 million), including a
GBP5.3 million impairment relating to internally developed trading
platforms for the UK Invest and cash equities offerings due to
unfavourable equity market conditions and operational delays.
-- Client trading assets under management ended the period at c.
GBP501 million, marginally below the HY 2023 number of c. GBP506
million. H1 2024 active trading clients were lower compared to H1
2023 (down 7% to 46,832).
-- Regulatory total Own Funds Requirements (OFR) ratio of 360%
(FY 2023: 369%) and net available liquidity of GBP237.2 million (FY
2023: GBP239.2 million).
-- Loss before tax of GBP2.0 million (H1 2023: profit before tax GBP36.6 million).
-- Interim dividend of 1.00 pence per share (H1 2023: 3.50 pence).
Lord Cruddas, Chief Executive Officer, commented:
"I am pleased with the resilience the business has demonstrated
in the first six months of the year in what has been a tough market
environment, with low volatility offering fewer opportunities for
clients of our trading business. Despite the subdued market
conditions, we have seen continued commitment from our existing
clients and positive engagement in our institutional business.
Our diversification strategy continues to progress and is on
track with major releases in the period and several others planned
for the coming months. This was punctuated by the successful launch
of CMC Invest Singapore in September 2023, which is attracting new
clients to the business and expanding our footprint in the
southeast Asia region. In the UK, our Invest platform continues to
demonstrate good progress with the recent release of mutual funds
and SIPP accounts soon to follow, helping our clients achieve their
long-term financial goals.
We continue to widen our trading offering which will be
bolstered by the upcoming rollout of our options products, whilst
the addition of cash equities to our institutional offering will
allow us to expand the services available to this valuable segment
and help us attract new business. Our geographical diversification
has also continued with the recent expansion of our Dubai
subsidiary in the DIFC providing us a strong foothold in one of the
most exciting financial centres in the world.
The power of our technology platform has been central to our
ability to expand our offering and provide new products and
capabilities for our clients. As these new products come online, we
are well positioned to increase synergies across our suite of
businesses and drive operational efficiencies. Our technology
remains our competitive advantage and we are committed to a
disciplined level of continuous investment, however with all that
has been achieved over recent years the level of capital investment
has now peaked.
I am very excited about the future of the company and the
opportunities that our diversification strategy has opened up for
us in many parts of the world."
An analyst and investor presentation will be held on 16 November
2023 9:00am UK time. Participants need to register using the links
below to access the webcast.
Webcast:
https://www.lsegissuerservices.com/spark/CMCMarkets/events/24162867-b376-44fb-b34c-985177ae8578
Forthcoming announcement dates
6 February 2024 Q3 2024 trading update
9 April 2024 FY 2024 pre-close update
Forward looking statements
This trading update may include statements that are forward
looking in nature. Forward looking statements involve known and
unknown risks, assumptions, uncertainties and other factors which
may cause the actual results, performance or achievements of the
Group to be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements. Except as required by the Listing Rules and
applicable law, the Group undertakes no obligation to update,
revise or change any forward-looking statements to reflect events
or developments occurring after the date such statements are
published.
Enquiries
CMC Markets Plc
Albert Soleiman, Chief Financial Officer
investor.relations@cmcmarkets .com
Camarco +44 (0) 20 3757 4980
Geoffrey Pelham-Lane
Jennifer Renwick
Notes to Editors
CMC Markets Plc ("CMC"), whose shares are listed on the London
Stock Exchange under the ticker CMCX (LEI: 213800VB75KAZBFH5U07),
was established in 1989 and is now one of the world's leading
online financial trading businesses. The Company serves retail and
institutional clients through regulated offices and branches in 12
countries with a significant presence in the UK, Australia, Germany
and Singapore. CMC Markets offers an award-winning, online and
mobile trading platform, enabling clients to trade over 12,000
financial instruments across shares, indices, foreign currencies,
commodities and treasuries through contracts for difference
("CFDs"), financial spread bets (in the UK and Ireland only) and,
in Australia, Singapore and the UK, access stockbroking services.
More information is available at http://www.cmcmarketsplc.com .
CHIEF EXECUTIVE OFFICER'S REVIEW
Our strategy to expand and diversify the business into new asset
classes, including the expansion of our investment platform in the
UK and Singapore, is on track. These new business additions are
complemented by continued investment in our established CFD and
spread bet trading businesses and widen the capability we have to
offer on our B2B business.
Financial performance
The first six months of the year were categorised by a reduction
in market volatility and client trading volumes resulting in a
decline in net operating income versus the same period last year.
H1 2024 trading net revenue was GBP87.4 million (H1 2023: GBP128.4
million), down 32% year-on-year. H1 2024 investing net revenue was
GBP16.8 million (H1 2023: GBP20.8 million), down 20% year-on-year,
driven by lower activity and unfavourable market conditions
resulting from the uncertainty around the global economic outlook,
inflationary pressures and the resultant impact on interest
rates.
Client trading assets under management finished the period at
GBP501 million, marginally below the HY 2023 number of GBP506
million. H1 2024 active trading clients were lower compared to H1
2023 (down 7% to 46,832), with an associated decrease in revenue
per client. Our continued focus on positioning ourselves and our
platforms towards the premium customer segment is something that
plays to the businesses strengths and puts us in a position to
capitalise on the long-term growth opportunity.
Invest Australia net operating income decreased 2% (GBP0.5m )
year-on-year primarily driven by unfavourable movements in the
GBP/AUD exchange rate, partially offset by a 7% (GBP1.5m) growth in
underlying local currency performance . We have increased our
market share against our direct competitors, up 0.4% year-on-year
to 16.4%. Assets under administration ("AuA") of A$71.5bn were also
up 1% (A$0.8bn) year-on-year.
Operating costs
Operating costs for H1 2024, excluding variable remuneration,
were GBP121.9 million (H1 2023: GBP106.3 million). This includes an
impairment relating to internally developed trading platforms for
the UK Invest and cash equities offerings.
We continue to review our operating model and cost structures to
deliver efficiencies across our business and drive down costs. The
strong progress we have made on our strategic initiatives with
major projects coming online and others soon to follow, means that
we have reached the peak in our investment cycle and are in a
position to rationalise our products and drive operational
synergies.
We will always maintain a disciplined level of investment in our
business and technology platforms to prioritise our clients and
maintain our competitive advantage, but with positive momentum in
our operational delivery and increasing opportunities to
rationalise the cost base, our ongoing focus is to deliver
sustainable cost savings.
Investing business expansion update
Following the successful integration of ANZ clients earlier in
the year, we now have direct access to over 1 million client
accounts who we can educate and engage with timely market updates
and the latest investing trends. Our customers have access to our
award-winning trading and mobile platforms where they can trade
equities and options in 16 global markets . More recently, our
product offerings expanded to include trading of crypto
currencies.
Our strategic expansion is progressing well with the successful
launch of Invest Singapore in September 2023, providing customers
with access to 15 global equity markets initially, with more to
follow. We offer radical price transparency and a value proposition
that stands out in what is an attractive market for the business,
with Singapore hosting an expanding investor base that is growing
in wealth and also importantly serving as a gateway to the wider
southeast Asia region.
In the UK our investment platform continues to develop, as we
add new products and services for our clients. Mutual funds are now
live on the platform and with SIPP accounts due to follow, this
will improve our proposition for the larger and longer-term savings
market.
Critically, our investment in these areas will further expand
our offering within the institutional business by widening our
product range to include mutual funds, cash equities and other
listed products.
Trading business expansion update
Our trading business continues to be a leader in key markets in
which we operate and is fundamental to our growth strategy. In
addition to enabling us to enter into new markets, our
diversification strategy will further enhance our trading offering,
providing our clients with a wider product set and building deeper
relationships.
We see tremendous opportunity in our B2B business and as we
expand our product range to meet the demands of this segment for a
multi-asset capability we are excited about the opportunities this
presents for CMC. Our clients have told us that they demand a wider
product offering and we are well positioned to deliver for them and
capture a wider share of this market.
Regulation
On 31 July 2023, new rules came into effect for financial
services firms on Consumer Duty in the UK. These new rules aim to
set a high standard of consumer protection when dealing with
financial services. The implementation of the Duty within the Group
has been successful and CMC continues to enhance its
post-implementation processes and measure client outcomes to ensure
that clients continue to achieve their financial objectives.
Dividend
The Board has declared an interim dividend of 1.00 pence per
share for the period (H1 2023: 3.50 pence per share). This is in
line with the dividend policy of 50% of profit after tax, whilst
the Group made a loss in H1 2023, the interim dividend is being
declared in line with full year earnings expectations.
Outlook
Full year net operating income is expected to be between
GBP250-GBP280 million with operating costs at GBP240 million
excluding variable remuneration. Whilst market conditions in
October remained subdued, I remain confident in our ability to
deliver on our communicated revenue guidance for FY 2024 and, as
delivery of new initiatives remains on track, we expect to deliver
net operating income in FY 2025 in line with current market
consensus, based on more normalised trading conditions.(1)
As we come to the end of our investment cycle, we are taking the
opportunity to increase synergies across our multiple product and
business lines and drive efficiencies throughout our global
operations. A cost review is planned for the second half and we
look forward to sharing our progress on this with you at our FY
2024 results.
(1 A company compiled analyst consensus, as at November 2023, is
available at:)
(https://www.cmcmarkets.com/group/investors/analysts-coverage)
OPERATING review
Summary
Net operating income decreased by GBP30.9 million (20%) to
GBP122.6 million, with decreases in both trading and investing net
revenue being partially offset by increased interest income.
Trading net revenue decreased by GBP41.0 million (32%) driven by
both decreases in client income and client income retention, which
fell to 66% (H1 2023: 83%). Trading active client numbers decreased
by 7% in comparison to H1 2023, although monthly active clients
remain above pre-COVID-19 levels. The combination of these factors
resulted in revenue per active client ("RPC") decreasing by GBP691
(27%) to GBP1,867.
Investing net revenue was 20% lower at GBP16.8 million (H1 2023:
GBP20.8 million) driven by lower active clients and unfavourable
market conditions resulting from the uncertainty around the global
economic outlook, inflationary pressures and the resultant impact
on interest rates.
Interest income increased by GBP13.2m (464%) as a result of the
rise in global interest rates. The majority of the Group's interest
income is earned through our segregated client deposits, with
increases seen across both the trading and investing
businesses.
Statutory loss before tax of GBP2.0 million (H1 2023: profit
before tax GBP36.6 million) with a decrease in net operating income
accompanied by higher operating expenses as the Group continues to
invest in its strategic growth plans. Loss before tax margin(1) was
(1.6)%.
Net operating income overview
For the half year ended 30 September 2023 30 September 2022 Change Change %
GBP million
Trading net revenue 87.4 128.4 (41.0) (32%)
Investing net revenue 16.8 20.8 (4.0) (20%)
------------------------- ------------------ ------------------ ------- ---------
Total net revenue(2) 104.2 149.2 (45.0) (30%)
Interest income 16.1 2.9 13.2 464%
Other operating income 2.3 1.4 0.9 70%
========================= ================== ================== ======= =========
Net operating income 122.6 153.5 (30.9) (20%)
========================= ================== ================== ======= =========
(1) Statutory loss before tax as a percentage of net operating
income
(2) CFD and spread bet gross client income net of rebates,
levies and risk management gains or losses and stockbroking revenue
net of rebates
Trading performance overview
For the half year ended 30 September 2023 30 September 2022 Change Change %
GBP million
Trading gross client income 132.6 154.9 (22.3) (14%)
Client rebates, introducing partner commissions and
levies (8.6) (11.5) 2.9 26%
Risk management gains / (losses) (36.6) (15.0) (21.6) (145%)
------------------------------------------------------- ------------------ ------------------ ---------- ---------
Trading net revenue 87.4 128.4 (41.0) (32%)
Client income % retention 66% 83% (17%) pts n/a
Active clients 46,832 50,199 (3,367) (7%)
Revenue per client (RPC - GBP) 1,867 2,558 (691) (27%)
------------------------------------------------------- ------------------ ------------------ ---------- ---------
Gross client income declined by 14%, driven by unfavourable
market conditions resulting from a decline in volatility, with
trading net revenue declining 32% driven by higher risk management
losses in the period resulting in a reduction in client income
retention to 66%.
The reduction in active clients in the period, also driven by
market conditions presenting fewer opportunities for clients to
trade, resulted in a 27% reduction in revenue per client from
GBP2,558 to GBP1,867.
For the
half year
ended 30 September 2023 30 September 2022 Change (%)
------------------------
Gross client Gross client
income(1) Active income(1) Active Gross client Active
(GBPm) Clients (GBPm) Clients income(1) Clients
------------- --------- ------------- --------- ------------- ---------
B2C(2) 100.1 43,142 114.9 45,681 (13%) (6%)
B2B(3) 32.5 3,690 40.0 4,518 (19%) (18%)
------------ ------------- --------- ------------- --------- ------------- ---------
Total 132.6 46,832 154.9 50,199 (14%) (7%)
============ ============= ========= ============= ========= ============= =========
(1) Spreads, financing and commissions on CFD client trades.
(2) Business to Consumer ("B2C") - revenue from retail and
professional clients
(3) Business to Business ("B2B") - revenue from institutional
clients
The above presentation of B2C and B2B has been changed to more
appropriately reflect the performance of the trading business. As
risk management is carried out at Group level to maximise
internalisation, revenue is best viewed at a total level whilst
client income and active clients can be viewed from the B2C / B2B
perspective.
Investing performance overview
For the
half year
ended 30 September 2023 30 September 2022 Change (%)
---------------------------
Investing Investing
net revenue Active net revenue Active Investing Active
(GBPm) Clients(1) (GBPm) Clients(1) net revenue Clients
------------- ------------ ------------- ------------ ------------- ---------
B2C 12.2 120,450 4.4 45,226 176% 166%
B2B 4.6 31,742 16.4 119,406 (72%) (73%)
------------ ------------- ------------ ------------- ------------ ------------- ---------
Total 16.8 152,192 20.8 164,632 (20%) (8%)
============ ============= ============ ============= ============ ============= =========
(1) ANZ customers are classified as B2B prior to integration in
March 2023. Post integration, they are managed as CMC Retail
customers and classified as B2C
Investing net revenue decreased 20% driven by lower active
clients and unfavourable market conditions resulting in fewer
investment opportunities for clients.
Operating expenses
For the half year ended 30 September 30 September Change
GBPm 2023 2022 %
-------------------------------------------- ------------ ------------ ------
Net staff costs - fixed (excluding
variable remuneration) 51.5 40.0 (29%)
IT costs 19.2 16.3 (18%)
Marketing costs 15.1 15.2 0%
Sales-related costs 1.5 2.1 29%
Premises costs 3.4 2.1 (65%)
Legal and professional fees 6.6 5.6 (17%)
Regulatory fees 2.3 7.0 67%
Depreciation, amortisation and impairment 12.9 7.3 (77%)
Other 9.4 10.7 13%
============================================ ============ ============ ======
Operating expenses excluding variable
remuneration 121.9 106.3 (15%)
Variable remuneration 1.7 9. 3 82%
============================================ ============ ============ ======
Operating expenses including variable
remuneration 123.6 115.6 (7%)
Share of results of associates and
joint ventures 0.1 - -
Interest 0.9 1.3 34%
============================================ ============ ============ ======
Total costs 124.6 116.9 (7%)
============================================ ============ ============ ======
Operating expenses excluding variable remuneration increased by
GBP15.6 million (15%) to GBP121.9 million. This was driven by an
increase in staff costs (GBP11.5 million) as a result of
significant investment in technology, pricing and marketing staff,
an impairment charge of GBP5.3 million relating to internally
developed trading platforms for the UK Invest and cash equities
offerings included within depreciation and amortisation, and higher
IT costs (GBP2.9 million ) due to higher market data charges and
investments in strategic projects.
Regulatory fees decreased by GBP4.7 million (67%) as a result of
a lower FSCS levy.
Premises costs increased by GBP1.3 million (65%), primarily
driven by new leases to drive expansion in key regions, higher
utility costs as a result of the global energy crisis and a change
in accounting treatment of rates within UK properties.
Other expenses decreased by GBP1.3m (13%) due to a number of
factors, the main drivers being lower bank charges, lower
recruitment costs and FX gains on balance sheet revaluation,
partially offset by higher irrecoverable VAT.
Variable remuneration decreased by GBP7.6 million to GBP1.7
million (H1 2023: GBP9.3 million), primarily due to a lower
discretionary bonus accrual percentage in H1 2024 as a result of
weaker revenue performance in the period.
Taxation
The effective tax rate for H1 2024 was (18.5)% compared to the
H1 2023 effective tax rate, which was 22.7%. The effective tax rate
change in the period is due to taxable losses in the lower tax
jurisdictions of UK and Singapore, taxable profits in the higher
tax jurisdictions of Australia and Germany, and discreet items
within H1 2024.
Balance sheet and own funds
Intangible assets decreased by GBP1.8 million to GBP33.5 million
(31 March 2023: GBP35.3 million) primarily due to a GBP5.3 million
write-off relating to trading platforms built for CMC Invest UK and
cash equities offerings and amortisation within the period,
partially offset by capitalisation of staff costs related to
technology projects.
Investments in associates and JVs was GBP2.7 million (31 March
2023: nil) as a result of the Group's investment in StrikeX during
the period.
Amounts due to or from brokers decreased by GBP6.2 million to
GBP173.0 million due to a decrease in excess cash held at
brokers.
Other assets increased by GBP0.3 million to GBP2.2 million due
to an increase in client cryptocurrency exposures driving a
corresponding increase in assets held at brokers for hedging
purposes.
Cash and cash equivalents increased by GBP30.6 million during
the period due to a GBP58.4m increase in the amount of professional
client and eligible counterparty funds being held under a title
transfer collateral agreement ("TTCA"), partially offset by payment
of the prior year final dividend (GBP10.9 million).
Title transfer funds increased by GBP58.4 million, reflecting
the onboarding of a small population of high-net-worth clients.
Own funds decreased by GBP36.9 million to GBP272.8 million (31
March 2023: GBP309.7 million) during the six-month period with the
decrease largely due to the payment of the final FY 2023
dividend.
Principal risks and uncertainties
Details of the Group's approach to risk management and its
principal risks and uncertainties were set out on pages 50 to 56 of
the 2023 Group Annual Report and Financial Statements (available on
the Group website https://www.cmcmarketsplc.com ). During the six
months to 30 September 2023 and up to the date of approval of the
condensed consolidated financial statements, there have been no
significant changes to the Group's risk management framework. The
Group categorises its principal risks into three categories:
business and strategic risks; financial risks; and operational
risks. The Group's top and emerging risks, which form either a
subset of one or multiple principal risks within the three
principal risk categories, and continue to be at the forefront of
Group discussions over the remaining six months of the financial
year and beyond, are regulatory relations across the Group, people
risk, cyber risk and project delivery risk.
RESPONSIBILITY STATEMENT
The Directors listed below (being all the Directors of CMC
Markets plc) confirm that to the best of our knowledge, these
condensed consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a
fair review of information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
-- the interim management report includes a fair review of the
important events that have occurred during the first six months of
the financial year and their impact on the condensed consolidated
financial statements, together with a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
of the financial year and any material changes in the related-party
transactions described in the last annual report.
Neither the Group nor the Directors accept any liability to any
person in relation to the interim results for the half year ended
30 September 2023, except to the extent that such liability could
arise under English law. Accordingly, any liability to a person who
has demonstrated reliance on any untrue or misleading statement or
omission shall be determined in accordance with Section 90A and
Schedule 10A of the Financial Services and Markets Act 2000.
By order of the Board of Directors
Lord Cruddas
Chief Executive Officer
16 November 2023
CMC Markets plc Board of Directors
Executive Directors
Lord Peter Cruddas (Chief Executive Officer)
David Fineberg (Deputy Chief Executive Officer)
Matthew Lewis (Head of Asia Pacific and Canada)
Albert Soleiman (Chief Financial Officer)
Non-Executive Directors
James Richards (Chairman)
Sarah Ing
Susanne Chishti
Paul Wainscott
Clare Francis
CONDENSED CONSOLIDATED INCOME STATEMENT
For the half year ended 30 September 2023
30 September 30 September
GBP '000 Note 2023 2022
===== ==============
Revenue 3 119,711 171,559
Interest income 16,090 2,851
===================================================================== ===== ============== =============
Total revenue 135,801 174,410
Introducing partner commissions and betting levies (13,239) (20,950)
===================================================================== ===== ============== =============
Net operating income 2 122,562 153,460
Operating expenses 4 (118,315) (115,573)
Impairment of intangible assets (5,275) -
Operating (loss) / profit (1,028) 37,887
Share of results of associates and joint ventures (91) -
Finance costs (876) (1,330)
===================================================================== ===== ============== =============
(Loss) / profit before taxation (1,995) 36,557
Taxation 5 (368) (7,605)
===================================================================== ===== ============== =============
(Loss) / profit for the period attributable to owners of the parent (2,363) 28,952
===================================================================== ===== ============== =============
(Loss) / Earnings per share
Basic (loss) / earnings per share (p) 6 (0.8) 10.2
--------------------------------------------------------------------- ----- -------------- -------------
Diluted (loss) / earnings per share (p) 6 (0.8) 10.1
--------------------------------------------------------------------- ----- -------------- -------------
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
For the half year ended 30 September 2023
GBP '000 30 September 2023 30 September 2022
==================
(Loss) / profit for the period (2,363) 28,952
Other comprehensive (expense) / income:
Items that may be subsequently reclassified to income statement
(Loss) / Gain on net investment hedges, net of tax - (86)
Gains recycled from equity to the income statement - 269
Currency translation differences (2,403) 2,696
Changes in the fair value of debt instruments at fair value through other
comprehensive income,
net of tax 202 (527)
============================================================================== ================== ==================
Other comprehensive (expense) / income for the period (2,201) 2,352
============================================================================== ================== ==================
Total comprehensive (expense) / income for the period (4,564) 31,304
============================================================================== ================== ==================
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September 2023
GBP'000 Note 30 September 2023 31 March 2023
===== ==================
ASSETS
Non-current assets
Intangible assets 8 33,4 71 35,342
Property, plant and equipment 9 27,380 22,771
Deferred tax assets 3,963 4,768
Financial investments 14 33 34
Trade and other receivables 10 2,601 2,666
Investments in associates and joint ventures 11 2,7 09 -
=============================================== ===== ================== ==============
Total non-current assets 70,157 65,581
=============================================== ===== ================== ==============
Current assets
Trade and other receivables 10 92,099 130,616
Derivative financial instruments 12 16,216 14,231
Current tax recoverable 10,732 9 ,066
Other assets 13 2 , 247 1,984
Financial investments 14 28,289 30,572
Amounts due from brokers 184,127 188,154
Cash and cash equivalents 15 176,836 146,218
=============================================== ===== ================== ==============
Total current assets 510,546 520,841
=============================================== ===== ================== ==============
TOTAL ASSETS 580,703 586,422
=============================================== ===== ================== ==============
LIABILITIES
Current liabilities
Trade and other payables 16 185,544 182,284
Amounts due to brokers 11,120 8,927
Derivative financial instruments 12 2,384 2,033
Lease liabilities 17 5,006 5,590
Current tax payable 389 431
Provisions 18 1,025 815
=============================================== ===== ================== ==============
Total current liabilities 205,468 200,080
=============================================== ===== ================== ==============
Non-current liabilities
Lease liabilities 17 12,307 6,228
Deferred tax liabilities 3,393 4,012
Provisions 18 150 2,087
=============================================== ===== ================== ==============
Total non-current liabilities 15,850 12,327
=============================================== ===== ================== ==============
TOTAL LIABILITIES 221,318 212,407
=============================================== ===== ================== ==============
EQUITY
Equity attributable to owners of the Company
Share capital 70,573 70,573
Share premium 46,236 46,236
Capital redemption reserve 2,9 01 2,901
Own shares held in trust (1,015) (1,509)
Other reserves (52,736) (50,535)
Retained earnings 293,426 306,349
=============================================== ===== ================== ==============
Total equity 359,385 374,015
=============================================== ===== ================== ==============
TOTAL EQUITY AND LIABILITIES 580,703 586,422
=============================================== ===== ================== ==============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the half year ended 30 September 2023
Capital Own shares
Share Share redem-ption held in Other Retained
GBP'000 capital premium reserve trust reserves earnings Total equity
============= ============= ============ ============ ============= =============
At 31 March
2022
(Restated) 7 3,193 4 6,236 281 ( 1,094) ( 75,980) 326,242 368,878
Profit for the
period - - - - - 28,952 28,952
Loss on net
investment
hedges, net
of tax - - - - (8 6) - (8 6)
Gains recycled
from equity
to the income
statement - - - - 2 69 - 2 69
Currency
translation
differences - - - - 2 ,696 - 2,696
Changes in the
fair value of
debt
instruments
at fair value
through other
comprehensive
income,
net of tax - - - - (52 7) - (52 7)
--------------- ------------- ------------- ------------ ------------ ------------- ------------- -------------
Total
comprehensive
income for
the period - - - - 2 ,352 28, 952 3 1,304
--------------- ------------- ------------- ------------ ------------ ------------- ------------- -------------
Acquisition of
own shares
held in trust - - - (130) - - (130)
Utilisation of
own shares
held in trust - - - 625 - - 625
Share buyback (2,361) - 2 ,361 - 24,961 (24,961) -
Share-based
payments - - - - - 164 164
Dividends - - - - - (25,250) (25,250)
--------------- ------------- ------------- ------------ ------------ ------------- ------------- -------------
At 30
September
2022
(Restated) 70,832 46,236 2 ,642 (599) (48,667) 305,147 375,591
--------------- ------------- ------------- ------------ ------------ ------------- ------------- -------------
At 31 March 2023 7 0,573 4 6,236 2,901 ( 1,509) ( 50,535) 306,349 374,015
Loss for the period - - - - - (2 , 363) (2 , 363)
Currency translation differences - - - - (2,4 03) - (2,4 03)
Changes in the fair value of debt
instruments at fair value through other
comprehensive income,
net of tax - - - - 202 - 202
------------------------------------------ -------- -------- ------- --------- ---------- ---------- ----------
Total comprehensive expense for the
period - - - - (2,2 01) (2,363) (4,564)
------------------------------------------ -------- -------- ------- --------- ---------- ---------- ----------
Acquisition of own shares held in trust - - - (152) - - (152)
Utilisation of own shares held in trust - - - 646 - - 646
Share-based payments - - - - - 336 336
Dividends - - - - - (10,895) (10,895)
------------------------------------------ -------- -------- ------- --------- ---------- ---------- ----------
At 30 September 2023 70,573 46,236 2 ,901 (1,015) (52,736) 293,426 359,385
------------------------------------------ -------- -------- ------- --------- ---------- ---------- ----------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the half year ended 30 September 2023
30 September 30 September
GBP '000 Note 2023 2022
===== =============
Cash flows from operating activities
Cash generated from operations 19 44,077 37,437
Interest income 14,345 3,023
Finance costs (876) (1,330)
Tax paid (2,001) (9,294)
============================================ ===== ============= =============
Net cash generated from operating
activities 55,545 29,836
============================================ ===== ============= =============
Cash flows from investing activities
Purchase of property, plant and equipment (2,965) (2,452)
Investment in intangible assets (6,800) (10,118)
Purchase of investment in associates
and joint ventures (2,800) -
Purchase of financial investments (25,219) (14,725)
Proceeds from maturity of financial
investments and coupon receipts 28,121 14,414
Outflow on net investment hedges - (7)
============================================ ===== ============= =============
Net cash used in investing activities (9,663) (12,888)
============================================ ===== ============= =============
Cash flows from financing activities
Repayment of borrowings - (194)
Principal elements of lease payments (2,824) (2,919)
Acquisition of own shares (152) (130)
Payments for share buyback - (24,961)
Dividends paid (10,895) (25,250)
Net cash used in financing activities (13,871) (53,454)
============================================ ===== ============= =============
Net increase/(decrease) in cash and
cash equivalents 32,011 (36,506)
Cash and cash equivalents at the beginning
of the period 146,218 176,578
Effect of foreign exchange rate changes (1,393) 807
============================================ ===== ============= =============
Cash and cash equivalents at the end
of the period 176,836 140,879
============================================ ===== ============= =============
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the half year ended 30 September 2023
1. Basis of preparation
Basis of accounting and accounting policies
The condensed consolidated financial statements have been
prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority. The condensed consolidated financial statements
do not constitute statutory accounts within the meaning of Section
434 of the Companies Act 2006. Within the notes to the condensed
consolidated financial statements, all current and comparative data
covering periods to (or as at) 30 September is unaudited.
The Group's statutory financial statements for the year ended 31
March 2023 have been prepared in accordance with UK-adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006 and the disclosure guidance
and transparency rules sourcebook of the United Kingdom's Financial
Conduct Authority. These financial statements have been delivered
to the Registrar of Companies. The auditors' opinion on those
financial statements was unqualified and did not contain a
statement made under Section 498 of the Companies Act 2006. The 31
March 2023 balances presented in these condensed consolidated
financial statements are from those financial statements and are
audited.
The accounting policies and methods of computation applied in
these condensed consolidated financial statements are consistent
with those applied in the Group's statutory financial statements
for the year ended 31 March 2023, except for the new accounting
policies explained below. The condensed consolidated financial
statements should be read in conjunction with the statutory
financial statements for the year ended 31 March 2023.
The condensed consolidated financial statements have been
prepared under the historical cost convention, except in the case
of "Financial instruments at fair value through profit or loss
(FVPL)" and "Financial instruments at fair value through other
comprehensive income (FVOCI)". The financial information is rounded
to the nearest thousand, except where otherwise indicated.
New accounting policies
Investments in associates and joint ventures
An associate is an undertaking in which the Group has a
long-term equity interest and over which it has the power to
exercise significant influence. A joint venture is a joint
arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement. The
Group's interest in the net assets of associates and joint ventures
is reported in investments in the consolidated statement of
financial position and its interest in their results is included in
the consolidated income statement. Investments in associates and
joint ventures are initially recorded at cost. Investments in
associates and joint ventures are reviewed for impairment whenever
events or circumstances indicate that the carrying amount may not
be recoverable. Further details are provided in note 11.
Cryptocurrency assets held as Intangible assets
The Group holds cryptocurrency assets that are not held for sale
in the ordinary course of business and therefore are measured in
accordance with IAS 38 "Intangible assets". The assets are
originally recognised at cost and are subsequently remeasured at
cost under the cost method. These cryptocurrency assets, subject to
periodic review, are considered to have indefinite lives and as
such are not subject to amortisation. The assets are tested for
impairment on a periodic basis with any impairment being recognised
in the consolidated income statement.
Future accounting developments
The Group did not implement the requirements of any Standards or
Interpretations that were in issue but were not required to be
adopted by the Group at the half year. No other Standards or
Interpretations have been issued that are expected to have an
impact on the Group's financial statements.
There is no material impact expected of reference rate reform
for the half year ended 30 September 2023 and will not lead to a
remeasurement gain or loss.
Significant accounting judgements and estimates
The preparation of condensed consolidated financial statements
in conformity with IFRS requires the use of certain significant
accounting judgements. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or
complexity, or where assumptions and estimates are significant to
the condensed consolidated financial statements are:
Contingent liabilities
Judgement has been applied in evaluating the accounting
treatment of the specific matters described in Note 23 (Contingent
Liabilities), notably the probability of any obligation or future
payments arising.
Accounting for cryptocurrencies
The Group has recognised GBP2,247,000 (31 March 2023:
GBP1,984,000) of cryptocurrency assets and rights to cryptocurrency
assets on its Statement of Financial Position as at 30 September
2023. These assets are used for hedging purposes and held for sale
in the ordinary course of business. A judgement has been made to
apply the measurement principles of IFRS 13 "Fair value
measurement" in accounting for these assets. The assets are
presented as 'other assets' on the Condensed Consolidated Statement
of Financial Position.
The Group has also recognised GBP200,000 (31 March 2023: GBPnil)
of cryptocurrency assets on its Statement of Financial position as
at 30 September 2023. These assets are not held for sale in the
ordinary course of business. A judgement has been made to apply the
measurement principles of IAS 38 "Intangible assets" in accounting
for these assets. The assets are presented within 'Intangible
assets' on the Condensed Consolidated Statement of Financial
Position.
Intangible assets
The Group has recognised GBP13,182,500 (31 March 2023:
GBP13,550,000) of customer relationship intangible assets on its
Statement of Financial Position as at 30 September 2023 relating to
the transaction with Australia and New Zealand Banking Group
Limited ("ANZ") to transition its portfolio of Share Investing
clients to CMC for AUD$25m. A judgement has been made to apply the
recognition and measurement principles of IAS 38 "Intangible
assets" in accounting for these assets.
Key financial estimates
The Group has recognised GBP9,691,000 (31 March 2023:
GBP12,786,000) of internally generated software in intangible
assets on its Statement of Financial Position as at 30 September
2023 relating to the development of platforms for CMC Invest UK and
cash equity offerings. In performing the interim impairment
assessment, which concluded that an impairment of GBP5,275,000 was
required, it was determined that the recoverable amount of the
asset is a source of estimation uncertainty which is sensitive to
the estimated future revenues from the cash equities
cash-generating unit ('CGU'). We found the recoverable amount of
the intangible asset to have been based on reasonable, supportable
assumptions. B2B revenue, discount rates, useful economic life,
cost per funded customer acquisition, customer retention rates,
average portfolio sizes and client trading volumes represent
significant source of estimation uncertainty. Relevant disclosures
are provided in Note 8.
Going concern
The Group actively manages and assessed the capital and
liquidity requirements of operating subsidiaries within the group
to ensure appropriate financial resources. The group has a broad
range of products and a geographically diversified business.
Consequently, the Directors believe that the Group is well placed
to manage its business risks in the context of the current economic
outlook. Accordingly, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future, a period of not less than 12
months from the date of this report. They therefore continue to
adopt the going concern basis in preparing these condensed
consolidated financial statements.
Seasonality of operations
The Directors consider that given the impact of market
volatility and the growth in overseas business there is no
predictable seasonality to the Group's operations.
2. Segmental reporting
The Group's principal business is online trading, providing its
clients with the ability to trade a variety of financial products
for short-term investment and hedging purposes. These products
include contracts for difference (CFD) and financial spread betting
on a range of underlying shares, indices, foreign currencies,
commodities and treasuries. The Group also makes these services
available to institutional partners through white label and
introducing broker arrangements. The Group's CFDs are traded
worldwide; spread bets only in the UK and Ireland.
In addition to this, the Group provides online stockbroking
services to cater for its clients longer term investment needs.
These services are provided in Australia, the UK and Singapore.
At the reporting date, management considered the appropriateness
of the Group's existing operating segment disclosures and the
information which is considered by the Chief Operating Decision
Maker (CODM) in allocating resources and assessing performance. The
Group's CODM has been identified as the Board of Directors.
The Group's business is generally managed by product line, given
the different economic characteristics and the different purposes
for which they are used by clients. As a result, the Group is
organised into two segments:
-- Trading
-- Investing
This presentation is consistent with management information
regularly provided to the CODM. Revenues and segment operating
expenses are allocated to the segments that originated the
transaction, and the Group uses operating profit to assess the
financial performance of each segment.
Geographical splits of the Trading business in the prior period
have been aggregated into one segment but are not restated.
For the period ending 30 September 2023 an impairment loss of
GBP5,275,000 is included in the operating expenses of the Investing
segment.
30 September 2023
GBP '000 Trading Investing Total
========= ==========
Revenue 97,019 22,692 119,711
Interest income 10,599 5,491 16,090
================================= ========= ========== ==========
Total revenue 107,618 28,183 135,801
Introducing partner commissions
and betting levies (7,303) (5,936) (13,239)
================================= ========= ========== ==========
Net operating income 100,315 22,247 122,562
Operating expenses (87,886) (30,429) (118,315)
Impairment of intangible assets - (5,275) ( 5,275)
Operating profit / (loss) 12,429 (13,457) (1,028)
Share of results of associates
and joint ventures (90) - (90)
Finance costs (875) (1) (876)
Profit / (loss) before taxation 11,463 (13,458) (1,995)
================================= ========= ========== ==========
30 September 2022
GBP '000 Trading Investing Total
========= ==========
Revenue 139,612 31,947 171,559
Interest income 1,154 1,697 2,851
================================= ========= ========== ==========
Total revenue 140,766 33,644 174,410
Introducing partner commissions
and betting levies (9,832) (11,118) (20,950)
================================= ========= ========== ==========
Net operating income 130,934 22,526 153,460
Operating expenses (93,389) (22,184) (115,573)
================================= ========= ========== ==========
Operating profit 37,545 342 37,887
Finance costs (1,236) (94) (1,330)
Profit before taxation 36,309 248 36,557
================================= ========= ========== ==========
The measurement of net operating income for segmental analysis
is consistent with that in the income statement and is broken down
by geographic location below.
GBP '000 30 September 2023 30 September 2022
==================
UK 34,410 55,627
Australia 47,112 45,889
Other countries 41,040 51,944
============================ ================== ==================
Total net operating income 122,562 153,460
============================ ================== ==================
The measurement of segment assets for segmental analysis is
consistent with that in the balance sheet. The total of non-current
assets other than deferred tax assets, broken down by location, is
shown below.
GBP '000 30 September 2023 31 March 2023
==================
UK 35,532 30,996
Australia 24,336 25,348
Other countries 6,326 4,469
========================== ================== ==============
Total non-current assets 66,194 60,813
========================== ================== ==============
3. Revenue
GBP '000 30 September 2023 30 September 2022
==================
Trading 94,735 138,258
Investing 22,689 31,952
Other 2,287 1,349
=========== ================== ==================
Revenue 119,711 171,559
=========== ================== ==================
Trading revenue represents CFD and Spread bet revenue (net of
hedging costs) accounted for in accordance with IFRS 9 "Financial
Instruments". Investing revenue represents stockbroking revenue
accounted for in accordance with IFRS 15 "Revenue from Contracts
with Customers".
4. Operating Expenses
GBP '000 30 September 2023 30 September 2022
==================
Net staff costs 53,208 49,221
IT costs 19,191 16,324
Sales and marketing 16,664 17,325
Premises 3,414 2,061
Legal and Professional fees 6,581 5,601
Regulatory fees 2,315 7,044
Depreciation and amortisation 7,626 7,277
Bank charges 2,193 4,363
Irrecoverable sales tax 2,513 236
Other 4,623 6,271
================================================= ================== ==================
118,328 115,723
Capitalised internal software development costs (13) (150)
================================================= ================== ==================
Operating expenses 118,315 115,573
================================================= ================== ==================
5. Taxation
Tax is charged at -18% for the six months ended 30 September
2023 representing (a) the group's best estimate of the average
annual effective tax rate expected to apply for the full year,
applied to the pre-tax income of the six month period; and (b) the
impact of adjustments to prior tax charges which are recognised in
full in the half-year.
6. Earnings per share ( EPS )
Basic EPS is calculated by dividing the earnings attributable to
the equity owners of the Company by the weighted average number of
Ordinary Shares in issue during each period, excluding those held
in employee share trusts, which are treated as cancelled.
For diluted earnings per share, the weighted average number of
Ordinary Shares in issue, excluding those held in employee share
trusts, is adjusted to assume conversion vesting of all dilutive
potential weighted average Ordinary Shares and that vesting is
satisfied by the issue of new Ordinary Shares.
GBP '000 30 September 2023 30 September 2022
==================
(Loss) / earnings attributable to ordinary
shareholders (GBP '000) (2,363) 28,952
================================================ ================== ==================
Weighted average number of shares used in the
calculation of basic earnings per share ('000) 279,199 285,048
Dilutive effect of share options ('000) 5,144 1,403
================================================ ================== ==================
Weighted average number of shares used in the
calculation of diluted earnings per share
('000) 284,343 286,451
================================================ ================== ==================
Basic (loss) / earnings per share (p) (0.8)p 10.2p
================================================ ================== ==================
Diluted (loss) / earnings per share (p) (0.8)p 10.1p
================================================ ================== ==================
For the half year ended 30 September 2023, 5,144,000 (H alf year
ended 30 September 2022: 1,403,000) potentially dilutive weighted
average ordinary shares in respect of share awards and options in
issue were included in the calculation of diluted EPS.
7. Dividends
GBP '000 30 September 2023 30 September 2022
==================
Prior year final dividend of 3.90p per share (30 September 2022: 8.88p) 10,895 25,250
========================================================================= ================== ==================
An interim dividend for 2024 of 1.00p per share, amounting to
GBP2,800,000 has been approved by the board but has not been
included as a liability at 30 September 2023. The dividend will be
paid on 11 January 2024 to those members on the register at the
close of business on 8 December 2023.
8. Intangible assets
Trademarks Client Crypto Assets
Computer and trading relation currency under
GBP '000 Goodwill software licences ships assets development Total
========= ========== ============= ========== ========== =============
At 31 March
2023
Cost 11,500 143,991 1,046 16,495 - 7,707 180,739
Accumulated amortisation (11,500) (129,304) (914) (3,679) - - (145,397)
========================== ========= ========== ============= ========== ========== ============= ==========
Carrying amount - 14,687 132 12,816 - 7,707 35,342
========================== ========= ========== ============= ========== ========== ============= ==========
Half year ended
30 September
2023
Carrying amount
at the beginning
of the period - 14,687 132 12,816 - 7,707 35,342
Additions - 303 - - 200 6,297 6,800
Transfers - 2,303 - - - (2,303) -
Amortisation
charge - (2,142) (17) (731) - - (2,890)
Impairment - (4,135) - - - (1,140) (5,275)
Foreign currency
translation - (48) (1) (350) - (107) (506)
========================== ========= ========== ============= ========== ========== ============= ==========
Carrying amount
at the end of
the period - 10,968 114 11,735 200 10,454 33,471
========================== ========= ========== ============= ========== ========== ============= ==========
At 30 September
2023
Cost 11,500 145,916 1,031 16,048 200 11,594 186,289
Accumulated amortisation
and impairment (11,500) (134,948) (917) (4,313) - (1,140) (152,818)
========================== ========= ========== ============= ========== ========== ============= ==========
Carrying amount - 10,968 114 11,735 200 10,454 33,471
========================== ========= ========== ============= ========== ========== ============= ==========
Computer software includes capital development costs of
GBP26,487,000 relating to the Group's Next Generation trading
platform which has been fully amortised.
Impairment
Intangible assets are tested for impairment if events or changes
in circumstances indicate that the carrying amount of the asset may
not be recoverable. Assets under development are tested annually,
with additional testing being carried out when impairment triggers
for a CGU could adversely impact the valuation of the CGU.
The cash equities CGU includes assets developed in the UK that
provide functionality for clients to buy and sell cash equities
products. The CGU consists of assets relating to the UK Invest
platform, as well as assets developed to offer cash equities on the
Next Generation platform. Previous impairment tests were carried
out on these assets individually, however due to the shared
infrastructure used across these assets it was deemed appropriate
to assess them in aggregate as one CGU.
The assets were previously tested for impairment as at 31 March
2023. As a result of the unfavourable equity market conditions and
operational delays in development of products, management revised
forecasts downwards for the assets, triggering an impairment
review.
The recoverable amount of the CGU is measured by its value in
use ("VIU"). The key assumptions used in the projections relate to
B2B revenue, cost of acquisition of D2C clients and average
portfolio sizes of the UK Invest business, and client trading
volumes in the cash equities offering through the Next Generation
platform. The most recent five-year board-approved forecast results
were used in projecting the VIU of the CGU, with a discount rate of
10.0% and a long-term growth rate (beyond the forecasting period)
of 0%. The resulting recoverable amount is GBP9,691,000. As this is
below the carrying value of the CGU of GBP14,966,000, an impairment
loss of GBP5,275,000 was recognised for the period ended 30
September 2023.
Given the inherent uncertainty in forecasting cashflows for new
business lines, there is a risk that the expected levels of income
from the new initiatives are not achieved, and as a result the
recoverable amount of the CGU may reduce. A 10% reduction in
projected revenues would result in the full impairment of the
assets.
9. Property, Plant and Equipment
Furniture,
Leasehold fixtures Computer Right-of-use Construction
GBP '000 improvements and equipment hardware assets in progress Total
============== =============== ========== ============= =============
At 31 March 2023
Cost 16,565 9,321 42,420 22,634 152 91,092
Accumulated depreciation (14,092) (8,606) (31,661) (13,962) - (68,321)
========================== ============== =============== ========== ============= ============= =========
Carrying amount 2,473 715 10,759 8,672 152 22,771
========================== ============== =============== ========== ============= ============= =========
Half year ended 30 September 2023
Carrying amount
at the beginning
of the period 2,473 715 10,759 8,672 152 22,771
Additions 316 229 2,364 6,614 3 9,526
Transfers 482 82 (450) - (114) -
Depreciation charge (490) (137) (2,054) (2,055) - (4,736)
Foreign currency
translation (9) (9) (37) (122) (4) (181)
========================== ============== =============== ========== ============= ============= =========
Carrying amount
at the end of the
period 2,772 880 10,582 13,109 37 27,380
========================== ============== =============== ========== ============= ============= =========
At 30 September
2023
Cost 16,997 9,568 44,206 28,681 37 99,489
Accumulated depreciation (14,225) (8,688) (33,624) (15,572) - (72,109)
========================== ============== =============== ========== ============= ============= =========
Carrying amount 2,772 880 10,582 13,109 37 27,380
========================== ============== =============== ========== ============= ============= =========
10. Trade and other receivables
GBP '000 30 September 2023 31 March 2023
==================
Current
Gross trade receivables 7,236 8,721
Less: Loss allowance (4,658) (4,247)
========================== ================== ==============
Trade receivables 2,578 4,474
Prepayments 15,976 14,985
Accrued income 3,682 2,335
Stockbroking debtors 64,313 105,103
Other debtors 5,550 3,719
========================== ================== ==============
92,099 130,616
========================= ================== ==============
Non-current
Other debtors 2,601 2,666
========================== ================== ==============
Total 94,700 133,282
========================== ================== ==============
Stockbroking debtors represent the amount receivable in respect
of equity security transactions executed on behalf of clients with
a corresponding balance included within trade and other payables
(note 16).
11. Investments in associates and joint ventures
On 6 June 2023, the Group acquired a 33% stake in Strike X
Technologies ("Strike X"), a customer centric blockchain solutions
business for a cost of GBP2,800,000. This investment presents the
Group with further opportunity for growth. The partnership will
allow the Group access to the latest blockchain related products
and services with the opportunity to leverage these for our
customers over the longer term.
The Group's share of loss in Strike X for the period ended 30
September 2023 was GBP91,000 (period ended 30 September 2022:
GBPnil). The investment was adjusted accordingly to GBP2,709,000 as
at 30 September 2023 (31 March 2023: GBPnil).
Such investments are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. There was no indication of impairment for the period
ended 30 September 2023 (Period ended 30 September 2022:
GBPnil).
12. Derivative financial instruments
30 September 30 September 2023 31 March 31 March
2023 Carrying 2023 2023
Notional amount Amount Notional amount Carrying amount
Assets GBPm GBP '000 GBPm GBP'000
================= ================== =================
Held for trading
Client trading positions 94.1 16,057 120.9 13,125
Held for hedging
Forward foreign exchange contracts -
economic hedges 60.6 159 73.6 1,106
Total 154.7 16,216 194.5 14,231
======================================= ================= ================== ================= =================
30 September 30 September 2023 31 March 31 March
2023 Carrying 2023 2023
Notional amount Amount Notional amount Carrying amount
Liabilities GBPm GBP '000 GBPm GBP'000
================= ================== =================
Held for trading
Client trading positions 53.9 (2,384) 35.7 (2,033)
Total 53.9 (2,384) 35.7 (2,033)
=========================== ================= ================== ================= =================
The fair value of derivative contracts are based on the market
price of comparable instruments at the balance sheet date. All
derivative financial instruments have a maturity of less than one
year.
13. Other assets
Other assets are cryptocurrencies, which are owned and
controlled by the Group for the purpose of hedging the Group's
exposure to clients' cryptocurrency trading positions. As presented
below, the Group holds cryptocurrencies on exchange and in vault.
Cryptocurrencies held in vaults are held in wallets that have
additional security features. The fair value of cryptocurrencies
are based on the market price of these instruments as at the
balance sheet date. Other assets are measured at fair value less
costs to sell.
GBP '000 30 September 2023 31 March 2023
==================
Exchange 910 1,178
Vaults 1,337 806
=========== ================== ==============
Total 2,247 1,984
=========== ================== ==============
14. Financial investments
GBP '000 30 September 2023 31 March 2023
==================
Investment in debt instruments classified at FVOCI
UK Government securities 27,881 30,572
Financial assets mandatorily measured at FVTPL
Equity securities 441 34
Total 28,322 30,606
===================================================== ================== ==============
GBP '000 30 September 2023 31 March 2023
==================
Analysis of financial investments
Non-current 33 34
Current 28,289 30,572
==================================== ================== ==============
Total 28,322 30,606
==================================== ================== ==============
Financial investments are shown as current assets when they have
a maturity of less than one year and as non-current when they have
a maturity of more than one year.
15. Cash and cash equivalents
GBP '000 30 September 2023 31 March 2023
==================
Cash and cash equivalents 176,836 146,218
============================ ================== ==============
Analysed as:
Cash at bank 176,836 146,218
---------------------------- ------------------ --------------
Cash and cash equivalents comprise of cash on hand and
short-term deposits. Cash and cash equivalents are short-term,
highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of
changes in value.
16. Trade and other payables
GBP '000 30 September 2023 31 March 2023
==================
Client payables 107,772 49,409
Tax and social security 737 1,272
Stockbroking creditors 55,058 98,428
Accruals and other creditors 21,977 33,175
=============================== ================== ==============
Total 185,544 182,284
=============================== ================== ==============
Stockbroking creditors represent the amount payable in respect
of equity and securities transactions executed on behalf of clients
with a corresponding balance included within trade and other
receivables (note 10).
17. Lease liabilities
GBP '000 30 September 2023 31 March 2023
==================
At the beginning of the period / year 11,818 14,251
Additions / modifications of new leases during the period / year 8,495 3,223
Interest expense 266 658
Lease payments made during the year (3,090) (6,112)
Foreign currency translation (176) (202)
=================================================================== ================== ==============
At the end of the period / year 17,313 11,818
=================================================================== ================== ==============
GBP '000 30 September 2023 31 March 2023
==================
Analysis of lease liabilities
Non-current 12,307 6,228
Current 5,006 5,590
================================ ================== ==============
Total 17,313 11,818
================================ ================== ==============
18. Provisions
GBP '000 Restructuring costs Property related Other Total
==================== ================= ======
At 1 April 2023 - 2,348 553 2,901
Additional provision 715 - 79 794
Utilisation of provision - - (398) (398)
Unutilised provision reversed - (1,955) (144) (2,099)
Translation - (13) (10) (23)
================================ ==================== ================= ====== ========
At 30 September 2023 715 380 80 1,175
================================ ==================== ================= ====== ========
The restructuring provision is for costs relating to
redundancies announced within the period ended 30 September
2023.
The property related provision includes dilapidation provisions.
During the period ended 30 September 2023, the Group entered into
reversionary leases for some of its leased properties. The Group
was relieved of its obligation to restore the properties to its
original condition as part of this agreement. Provisions amounting
to GBP1,955,000 were released with the corresponding impact
recorded to the right of use asset.
19. Cash generated from operations
GBP '000 30 September 2023 30 September 2022
==================
Cash flows from operating activities
Profit before taxation (1,995) 36,557
Adjustments for:
Interest income (16,090) (2,851)
Finance costs 876 1,330
Depreciation 4,736 5,176
Amortisation of intangible assets 2,890 2,101
Impairment of intangible assets 5,275 -
Profit on disposal of property, plant and equipment - 54
Share of after tax results of associates and joint ventures 91 -
Share-based payment 975 790
Other non-cash movements including exchange rate movements (409) 2,014
Changes in working capital:
Decrease in trade and other receivables and other assets 39,956 27,980
Decrease/(increase) in amounts due from brokers 4,027 (8,385)
(Increase)/decrease in other assets (263) 9,378
Increase/(decrease) in trade and other payables 3,198 (34,553)
Increase in amounts due to brokers 2,193 -
Decrease in net derivative financial instruments liabilities (1,634) (2,058)
Increase/(decrease) in provisions 251 (96)
============================================================== ================== ==================
Cash generated from operations 44,077 37,437
============================================================== ================== ==================
20. Liquidity
The Group has access to the following liquidity resources that
make up total available liquidity:
-- Own funds . Own funds are calculated in order to provide a
clear presentation of the Group's potential cash resources. Own
funds consist of cash and cash equivalents, amounts due from
brokers, other assets and also includes investments in UK
government securities, of which the majority are held to meet the
Group's regulatory liquidity requirements. Own funds also include
any unrealised gains / losses on open hedging positions and all
cash in the form of title transfer funds is excluded. Own funds on
30 September 2023 were GBP272,800,000 (31 March 2023:
GBP309,732,000).
-- Title Transfer Funds (TTFs) . This represents funds received
from professional clients and eligible counterparties (as defined
in the FCA Handbook) that are held under a Title Transfer
Collateral Agreement (TTCA); a means by which a professional client
or eligible counterparty may agree that full ownership of such
funds is unconditionally transferred to the Group. The Group
considers these funds as an ancillary source of liquidity and
places no reliance on its stability.
-- Available committed facility (off-balance sheet liquidity).
The Group has access to a syndicated revolving credit facility of
up to GBP55.0 million (31 March 2023: GBP55.0 million) in order to
fund any potential fluctuations in margins required to be posted at
brokers to support our risk management strategy. The maximum amount
of the facility available at any one time is dependent upon the
initial margin requirements at brokers and margin received from
clients. The facility consists of a one year term facility of
GBP27.5 million and a three year term facility of GBP27.5 million,
both of which were renewed in March 2023. Under the terms of the
syndicated revolving credit facility agreement, the Group is
required to comply with financial covenants covering minimum
Tangible net worth and a minimum EBITDA: Interest expense ratio for
the Group at a consolidated level. The Group has complied with all
covenants throughout the reporting period.
The Group's use of total available liquidity resources consist
of:
-- Blocked cash. Amounts held to meet the requirements of local
market regulators and amounts held at overseas subsidiaries in
excess of local segregated client requirements to meet potential
future client requirements.
-- Initial margin requirement at broker. The total GBP
equivalent initial margin required by prime brokers to cover the
Group's hedge derivative positions.
Net available liquidity
30 September 31 March
GBP '000 2023 2023
=============
Cash and cash equivalents (net
of bank overdraft) 176,836 146,218
Amount due from brokers 184,127 188,154
Other assets 2,247 1,984
Financial investments 28,322 30,606
Derivative financial instruments
(excluding Client CFD positions)
(current assets) 159 1,106
==================================== ============= ==========
391,691 368,068
Less : Title transfer funds (107,771) (49,409)
Less: Amount due to brokers (11,120) (8,927)
Own Funds 272,800 309,732
Title transfer funds 107,771 49,409
Available committed facility 55,000 55,000
==================================== ============= ==========
Total Available liquidity 435,571 414,141
Less: Blocked cash (75,699) (68,857)
Less: Initial margin requirement
at broker (122,658) (106,127)
==================================== ============= ==========
Net available liquidity 237,214 239,157
==================================== ============= ==========
The following Own Funds Flow Statement summarises the Group's
generation of own funds during each period and excludes all cash
flows in relation to monies held on behalf of clients.
GBP '000 30 September 2023 31 March 2023
==================
Operating activities
Profit before tax (1,995) 52,163
Adjustments for:
Depreciation, amortisation and impairment 12,901 15,637
Other non-cash adjustments (532) 1,629
Tax paid (2,001) (17,060)
====================================================================== ================== ==============
Own funds generated from operating activities 8,373 52,369
====================================================================== ================== ==============
Movement in working capital (17,476) (13,995)
====================================================================== ================== ==============
Outflow from investing activities
Net purchase of property, plant and equipment and intangible assets (9,765) (28,221)
Other outflow from investing activities (2,800) (8)
Outflow from financing activities
Dividends paid (10,895) (35,040)
Share buyback - (27,264)
Other outflow from financing activities (2,976) (6,754)
====================================================================== ================== ==============
Total outflow from investing and financing activities (26,436) (97,287)
====================================================================== ================== ==============
Decrease in own funds (35,539) (58,913)
Own funds at the beginning of the period / year 309,732 369,947
Effect of foreign exchange rate changes (1,393) (1,302)
====================================================================== ================== ==============
Own funds at the end of the period / year 272,800 309,732
====================================================================== ================== ==============
21. Fair value measurement disclosures
IFRS 13 "Fair Value Measurement" requires the Group to classify
its financial assets and liabilities according to a hierarchy that
reflects the observability of significant market inputs. The three
levels of the fair value hierarchy are defined below:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices); or
-- Level 3 - inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs)
30 September 2023
GBP '000 Level 1 Level 2 Level 3 Total
======== ======== ========
Financial investments 28,289 - 33 28,322
Derivative financial instruments (current assets) - 16,216 - 16,216
Derivative financial instruments (current liabilities) - (2,384) - (2,384)
28,289 13,832 33 42,154
======================================================== ======== ======== ======== ========
31 March 2023
GBP '000 Level 1 Level 2 Level 3 Total
======== ======== ========
Financial investments 30,572 - 34 30,606
Derivative financial instruments (current assets) - 14,231 - 14,231
Derivative financial instruments (current liabilities) - (2,033) - (2,033)
30,572 12,198 34 42,804
======================================================== ======== ======== ======== ========
Valuation techniques used to determine fair values of Derivative
Financial instruments
Specific valuation techniques used to value financial
instruments include:
-- the use of quoted market prices or dealer quotes for similar instruments;
-- for foreign currency forwards - forward exchange rates at the balance sheet date.
Fair value of financial assets and liabilities measured at
amortised cost
T he fair value of the following financial assets and
liabilities not held at fair value approximates to their carrying
value:
-- Cash and cash equivalents
-- Amounts due from/to brokers
-- Trade and other receivables
-- Trade and other payables
22. Related party transactions
There have been no significant changes to the nature of related
parties disclosed in the statutory financial statements for the
Group as at and for the year ended 31 March 2023. The basis of
remuneration of key management personnel remains consistent with
that disclosed in the statutory financial statements for the Group
as at and for the year ended 31 March 2023.
Directors' transactions
There were no director transactions during the half year ended
30 September 2023 and 30 September 2022.
23. Contingent liabilities
The Group operates in a number of jurisdictions around the world
and as a result uncertainties exist regarding the interpretation of
regulatory, tax and legal matters in these territories. In
addition, the Group engages in partnership contracts that could
result in non-performance claims and from time-to-time is involved
in disputes during the ordinary course of business.
Sometimes legal disputes can have a financially significant face
value, but the Group's experience is that such claims are usually
resolved without any material loss. The Group provides for claims
where costs are likely to be incurred.
Where there are uncertainties regarding regulatory, tax and
legal matters and a provision has not been made, there are no
contingent liabilities where the Group considers any material
adverse financial impact to be probable.
Since the publication of the annual report on 13 June 2023,
there have been no significant updates or developments, including
to the matter listed within the events after the reporting period
note, which would require additional disclosure within the interim
financial statements.
Notice of class action lawsuit
The Group received notice of a class action lawsuit being
brought against one of its operating entities on 31 May 2022. The
scope of the claim is still being defined, and there has been no
material progress. As a result, an assessment regarding the
probability and size of financial outflow cannot be determined.
Tax authority investigations
The Group, from time to time, in the normal course of business,
is subject to information requests from taxing authorities. The
Group complies with those information requests and is not aware of
any outcome from such a request that would impact the financial
statements.
UK banking surcharge
In the absence of them qualifying for a specific exemption, the
Group's regulated companies in the UK would be subject to the Bank
Corporation Tax surcharge of 8% on profits over GBP25 million prior
to 1 April 2023, and 3% on profits over GBP100 million from 1 April
2023 onwards. The Group has concluded that the relevant entities
meet the exemption requirements and therefore the treated tax
charge, would amount to GBP24.5 million, (31 March 2023 GBP23.4
million) in respect of all relevant periods, and has not been
provided for. The Group's position is supported by external advice
although it is possible that it could be challenged. The Group
expect for this matter to be resolved by 31 March 2024.
Brexit approach
There is regulatory uncertainty regarding the Group's historical
approach to the use of reverse solicitation provisions allowing EEA
clients to trade with UK subsidiaries after 31 December 2020. The
risk to the approach has now been mitigated given the majority of
EEA clients' activities with the UK subsidiary ceased prior to 31
March 2021. The Group continues to engage with the regulatory
authorities in the EEA markets where the UK subsidiary continued to
service clients after 31 December 2020. Whilst it is possible that
regulatory censure may result from these matters, they are in early
stages and such an outcome is not currently considered
probable.
24. Alternative performance measures
A reconciliation of revenue alternative performance measures
("APMs) to the Group's primary statements can be found on page 31.
APMs monitor the delivery of long-term value through a focus on
client quality and operating effectiveness. APMs are not a
substitute for statutory measures. They are largely reported in the
Group's annual report.
25. Forward looking statements
This announcement may include statements that are forward
looking in nature. Forward looking statements involve known and
unknown risks, assumptions, uncertainties and other factors which
may cause the actual results, performance or achievements of the
Group to be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements. Except as required by the Listing Rules and
applicable law, the Group undertakes no obligation to update,
revise or change any forward looking statements to reflect events
or developments occurring after the date such statements are
published.
26. Subsequent events
There are no events after the interim period that have not been
reflected in the condensed consolidated financial statements.
INDEPENT REVIEW REPORT TO CMC MARKETS PLC
Conclusion
We have been engaged by CMC Markets plc (the "Group") to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2023 which
comprises the Consolidated Interim Income Statement and the
Consolidated Interim Statement of Comprehensive Income, the
Consolidated Interim Statement of Financial Position, the
Consolidated Interim Statement of Changes in Equity, the
Consolidated Interim Statement of Cash Flows and related notes 1 to
26.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with United Kingdom adopted
International Accounting Standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the Group a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion and our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the group in accordance with ISRE
(UK) 2410. Our work has been undertaken so that we might state to
the group those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the group, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
16 November 2023
Appendix: Alternative performance measures
a. Reconciliation of trading gross client income to trading net revenue
GBPm 30 September 2023 30 September 2022
==================
Trading gross client income 132.6 154.9
Client rebates introducing partner commissions and levies (8.6) (11.5)
Risk management gains / (losses) (36.6) (15.0)
------------------------------------------------------------ ------------------ ------------------
Trading net revenue 87.4 128.4
------------------------------------------------------------ ------------------ ------------------
b. Reconciliation of investing net revenue
GBPm Note 30 September 2023 30 September 2022
===== ==================
Investing gross revenue 3 22.7 31.9
Introducing partner commissions 2 (5.9) (11.1)
--------------------------------- ----- ------------------ ------------------
Investing net revenue 16.8 20.8
--------------------------------- ----- ------------------ ------------------
c. Reconciliation of trading net revenue, investing net revenue to net operating income
GBPm Note 30 September 2023 30 September 2022
===== ==================
Trading net revenue (a) 87.4 128.4
Investing net revenue (b) 16.8 20.8
Other revenue 3 2.3 1.4
Interest income 2 16.1 2.9
--------------------------- ----- ------------------ ------------------
Net operating income 122.6 153.5
--------------------------- ----- ------------------ ------------------
d. Reconciliation of operating expenses including variable remuneration
GBPm Note 30 September 2023 30 September 2022
===== ==================
Operating expenses 4 (118.3) (115.6)
Impairment of intangible assets (5.3) -
Operating expenses including variable remuneration (123.6) (115.6)
---------------------------------------------------- ----- ------------------ ------------------
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