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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cmc Markets Plc | LSE:CMCX | London | Ordinary Share | GB00B14SKR37 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 13.00 | 4.98% | 274.00 | 270.50 | 271.50 | 273.50 | 256.50 | 256.50 | 2,974,181 | 16:35:14 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Brokers & Dealers | 321.78M | 41.44M | 0.1481 | 18.30 | 758.3M |
From Apr 2019 to Apr 2024
TIDMCMCX
RNS Number : 5737Q
CMC Markets Plc
07 June 2018
7 June 2018
CMC MARKETS PLC
Final results for the year ended 31 March 2018
Strong growth driven by high value and institutional clients
Year ended 31 March 31 March Variance GBP million (unless otherwise stated) 2018 2017 % --------------------------------------------- --------- --------- --------- Net operating income 187.1 160.8 16% Profit before tax 60.1 48.5 24% Earnings per share (pence) 17.3p 13.7p 26% Ordinary dividend per share (pence) 8.9p 8.9p - --------------------------------------------- --------- --------- --------- Number of trades (million) 68.4 62.7 9% Value of trades (GBP billion) 2,587 2,016 28% Active CFD and Spread bet clients (numbers) 59,165 60,082 (2%) Revenue per active client (GBP) 2,964 2,517 18% --------------------------------------------- --------- --------- ---------
Notes:
Net operating income represents total revenue after commissions payable to introducing partners and betting levies
Dividend per share paid or proposed relating to the financial year
Active clients represents those individual clients who have traded with or held a CFD or spread bet positions with the Group on at least one occasion during the financial year
Revenue per active client represents total trading revenue from CFD and spread bet active clients after deducting partner commissions and levies
Highlights
-- Increased client activity increasing net operating income to GBP187.1 million up GBP26.3 million (16%)
-- Growth in premium client numbers to 10% of active clients, overall active clients decreased 2%
-- Institutional business revenues increased by GBP8.7 million (38%) to GBP31.4 million -- ANZ white label stockbroking transaction on track for delivery in September 2018
-- Proposed final ordinary dividend of 5.95 pence, maintaining prior full year ordinary dividend of 8.93p
-- Financial performance at the start of 2019 is broadly in line with prior year equivalent period
Regulatory update
-- European regulatory changes to retail CFDs to take effect from 1 August with the prohibition on sale of binary products in Europe from 2 July; this product generated GBP4.5 million of revenue in UK and Europe in FY18
-- Impact partially mitigated by ANZ white label stockbroking transaction and elective professional client opt up (on track to represent in excess of 40% of UK and European revenue)
Progress made on strategic initiatives
-- Established markets: maintained market leading position in Germany, grew market share in Australia and led the UK for client satisfaction
-- Geographic expansion: China education office opened in October, Middle East office planned for 2018
-- Digital: new framework rolled out targeting greater efficiencies, 59% of marketing spend now through digital channels
-- New products: FX Prime launched, CMC Pro released -- Institutional: value of client trades up 50%
Peter Cruddas, Chief Executive Officer commented:
"The strategy of attracting and retaining experienced, high value and institutional clients through technology and service is delivering strong results for the Group. We have been delivering on our strategic initiatives and these are now clearly coming through in the financial performance, where we have delivered record statutory profit before tax of GBP60.1 million. Now we have clarity about the regulatory changes in Europe, and with CMC's balanced portfolio of retail, professional and institutional clients across a breadth of growing geographies, we are confident that our technology and service-led strategy will continue to deliver profitable growth."
Analyst and Investor Presentation
A presentation will be held for equity analysts and investors today at 9.30 a.m. (BST).
A live audio webcast of the presentation will be available via the following link:
http://webcasts.cmcmarkets.com/results/2018fullyear
Alternatively, you can dial into the presentation:
-- United Kingdom: 020 3059 5868 -- All other locations: + 44 20 3059 5868
Please quote "CMC Markets Full Year Results 2018" when prompted.
Annual Report and Financial Statements
A copy of the CMC Markets plc (the "Company") Annual Report and Financial Statements for the year ending 31 March 2018 (the "2018 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 the 2018 Annual Report to the National Storage Mechanism and will shortly be available for inspection at: www.hemscott.com/nsm.do
In compliance with The Disclosure and Transparency Rules (DTR) 6.3.5, the information in the document below is extracted from the Company's 2018 Annual Report and Financial Statements. This material is not a substitute for reading the 2018 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 2018 Annual Report and Financial Statements.
Forthcoming announcement dates
Thursday 26 July Q1 2019 trading update Thursday 27 September Q2 2019 pre-close trading update
Media enquiries
Camarco
Geoffrey Pelham-Lane / Ed Gascoigne-Pees / 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 14 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 almost 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
In my first report as Chairman, I am pleased to report that, against a backdrop of regulatory uncertainty in Europe, the Group has made strong progress. The Group continues to deliver on its strategic initiatives, including the rollout of our new mobile platform, the opening of our Shanghai office, strong growth in our institutional business and significant progress on the implementation of our white label stockbroking partnership with ANZ Bank in Australia.
Results and dividend
The Group has performed strongly throughout the financial year. Net operating income for the year was GBP187.1 million, a 16% improvement on the previous year. Revenue per active client at GBP2,964 was 18% higher than the previous year, reflecting the Group's strategic focus on generating higher quality earnings through higher value business.
The Group continues to be highly cash generative, with a strong balance sheet and total regulatory capital position.
The Board recommends a final dividend payment of 5.95 pence per share, which represents a total ordinary dividend per share of 8.93 pence.
Regulation
The Group believes in strong regulation and is supportive of regulatory change to ensure that all providers operate to the highest standards, ensuring fair client outcomes. The European Securities and Markets Authority ("ESMA") published temporary product intervention measures on the provision of CFDs and binary options to retail clients in March 2018, 15 months after the Financial Conduct Authority ("FCA") issued consultation paper 16/40 (Enhancing conduct of business rules for firms providing contracts for difference products to retail clients).
The Group welcomes many of the requirements, and is pleased that we now have clarity; many of the ESMA requirements have already been in place throughout the Group for some time. Whilst these changes are likely to have some short-term adverse effect on the Group as clients adjust their trading behaviour to these new requirements, the Board believes that a stronger and better industry will emerge. In that process the Group will be a clear winner through its focus on high value clients, service and technology.
Board and governance
During this financial year, we have made a number of changes to our Board. Manjit Wolstenholme and Malcolm McCaig resigned from the Board. Their valuable contribution to the Group in our early days as a listed business was very much appreciated. It is also with great sadness that we learnt of Manjit's passing away in November 2017; our thoughts are with her family.
We have welcomed Sarah Ing, Clare Salmon and Paul Wainscott to our Board; their backgrounds and breadth of experience means they are already proving to be strong additions.
Simon Waugh resigned from the Board at the end of December after ten years, with five years as Chairman. I would like to thank Simon for his significant contribution and I am delighted that Simon continues to be part of the Group, as Chairman of our APAC & Canada businesses at this exciting time as we integrate the ANZ Bank stockbroking partnership.
Given the relatively new composition of the Board, a Board evaluation has not been completed. The Board expects to complete the appropriate evaluations during the course of the next financial year.
People and values
Our people are core to everything that we do and, on behalf of the Board, I would like to thank them for their efforts for once again delivering strong financial performance against a backdrop of regulatory uncertainty. During the year, the Group refreshed its core values, "the CMC way", reflecting the Group's focus on quality, clients and integrity.
Outlook
The Group has made a good start to the new financial year and the Group's stockbroking partnership with ANZ Bank in Australia remains on track to go live in September 2018.
We expect the new margin requirements stipulated by ESMA to have some adverse short-term impact on the financial performance once they are in place, which is expected during the summer. However, the Group's strategy of attracting and retaining high value and experienced clients will help to mitigate some of the impact. The Group has a strong professional offering, "CMC Pro", and is in the process of reviewing client requests to be treated as elective professional clients where the eligibility criteria has been satisfied. In addition, the Group's growing institutional business and stockbroking partnership with ANZ Bank further diversifies the Group and helps to mitigate the impact of regulatory change.
Costs remain well controlled, although will be moderately higher in 2019 for planned investments to drive strategic initiatives as the Board believes that it is a time to take advantage of the opportunities that regulatory change will present, ensuring that the Group continues to be a leader in the industry.
James Richards
Chairman
6 June 2018
CEO REPORT
Financial performance and KPIs
The Group has been delivering on its strategic initiatives and this is now clearly coming through in the financial performance, where we have delivered record statutory profit before tax of GBP60.1 million, up 24% on the prior year. Profit before tax margin has also increased from 30.1% to 32.1%, highlighting the strong operational leverage in the business. In addition, revenue per active client is up 18% on the prior year as we continue to focus on our high value client proposition. All of this has been against a backdrop of regulatory uncertainty in the UK and Europe. However, our strategy puts us in a strong position to mitigate the impact of the upcoming regulatory changes.
In addition, we have continued to build our presence in our established and developing offices as well as grow our institutional business. This, along with market conditions returning to more normalised levels, resulted in the value of client trades increasing by 28%, contributing to net operating income increasing by 16% to GBP187.1 million against the prior year. All asset classes contributed to the increase in net operating income.
Operating expenses increased by 13% to GBP125.9 million mainly due to higher discretionary remuneration and salary costs. In the year ahead, operating costs are expected to increase as we take on more staff and infrastructure cost to service in excess of 250,000 new active stockbroking clients as part of the ANZ Bank white label stockbroking partnership.
It is worth noting that this performance has been achieved without providing a cryptocurrency offering throughout the majority of the year. The interest in cryptocurrencies has undoubtedly added a new wave of clients to the industry. We did not offer any crypto products until February 2018, and the offering is only currently available to professional clients with a minimum margin requirement of 50%.
Cash generation, given the nature of our business, remains strong and own funds generated from operating activities was GBP55.5 million. During the year, the Group has seen significant fluctuations in margin requirements at our prime brokers due to hedging growing client positions. Although this reduced towards the end of the year, we have increased our revolving credit facility from GBP40.0 million to GBP65.0 million; this gives us headroom to continue growing the business and hedge growing client positions. Our total regulatory capital ratio remained high at 31.1% at the year-end. Active clients at 59,165 were down 2% on the previous year and new accounts were also slightly lower than the previous year. These decreases were primarily due to the prior year including a number of new accounts being opened around the EU Referendum and US presidential election, where clients opened accounts and only traded around that event.
Whilst active and new accounts continue to be important measures for the Group, the quality and activity of those clients are more important, and this will become increasingly so once the regulatory changes are implemented. During the year premium clients, our internal measure of high quality clients, increased to 10%.
Regulation
During the year, the FCA consultation paper did not reach a conclusion due to the impending introduction of ESMA's product intervention powers from 3 January 2018. The ESMA announcement on 15 December 2017 resulted in a short consultation and the final rules were published in March 2018. We expect these to be implemented during the summer.
The main aim of these measures around improving retail client protection can be summarised through:
-- reducing the extent of potential losses for retail investors by the imposition of margin close-out levels, minimum margin requirements (leverage limitations) and negative balance protection; and
-- confronting conduct issues, such as the use of aggressive marketing practices and marketing to an untargeted audience.
In the short term the imposition of higher minimum margin requirements for retail clients is likely to impact the Group's revenue, but it should be noted that the revenue impact will be partially mitigated through our focus on high value clients and a proportion of these clients that will opt to be treated as elective professional clients, thus exempting them from the retail restrictions. We expect the number of elective professional clients to represent in excess of 40% of current UK and European revenue. The Group has a robust process in place where clients are only opted up once proof of meeting the required criteria are met.
Regional review
Net revenue has increased across all regions during the year, with a globally aligned focus on acquiring and retaining high value clients.
The UK, as the largest and most mature region as well as servicing most of the Group's institutional business, has a higher concentration of high value business than other regions, and as a result saw the biggest increase in revenue per active client ("RPC") of 25% from GBP3,558 to GBP4,451. Active client numbers reduced marginally by 6% to 16,157 from 17,142 as we focused more on the high value and institutional segments. Overall, this resulted in an increase in net revenue of 18% from GBP61.0 million to GBP71.9 million.
In Europe, regulatory change in Germany, our largest office in the region, resulted in lower growth than the UK; client numbers decreased by 1% to 22,223 from 22,503, however, net revenue increased by 12%, from GBP45.3 million to GBP50.6 million.
In the APAC & Canada region, an education office was opened in Shanghai in October 2017. Client numbers in the region increased by 2% to 20,785 from 20,437. Net revenue increased by 18% from GBP45.0 million to GBP52.9 million.
The stockbroking business has delivered another good year of growth, with net revenue increasing 9% to GBP8.5 million and active client numbers growing by 17% to 38,775. This has been achieved whilst implementing changes to the platform functionality and building tools for the migration of ANZ Bank stockbroking retail clients in September 2018.
Risk management
Effective risk management is essential to the continuing success of the Group. The Group continually reviews its risk management practices to ensure that they are proportionate and robust.
With the introduction of regulatory changes it is likely that this will impact the trading behaviour of some clients, and as these changes are made the Group will continually review its trading risk management strategies to ensure that they remain efficient and optimal, at all times operating within the Board-approved risk appetite and Risk Management Framework.
Strategic progress
Institutional offering
The ANZ Bank white label stockbroking implementation continues to progress on track for delivery. The retail stockbroking migration will take place in September 2018 and a number of intermediaries will be migrated in July 2018. This is a truly transformational deal for the Australian business and the Group, where CMC will become the second largest retail stockbroker in Australia.
In addition to the ANZ Bank stockbroking implementation providing diversification to the business, the institutional and partners channel for our CFD offering, which provides white and grey label and API electronic connectivity, also provides diversification. The net revenue generated by this business has grown by 38% from GBP22.7 million to GBP31.4 million during the year and the ongoing rollout of additional functionality to meet client demand continues to be a focus area.
The Group continues to grow its CFD institutional business, launching its FX Prime offering and through its technology, liquidity and strong balance sheet continues to attract new institutional business.
Geographic expansion
In October 2017, the Group opened its education office in Shanghai. Although the Chinese market remains underdeveloped at the moment, we believe it represents a great future opportunity for the Group as this market matures.
The Polish office continues to perform well and the Group continues to look for new geographies in which to expand.
Product offering
We have continued to invest in and develop the Group's product offering. This has included completing the rollout of HTML5 with improved functionality, a new mobile platform and the launch of a limited risk account in the UK and Germany.
In the coming year we will launch our MT4/5 offering. This is a popular product within the trading community and will be offered in order to meet the demands of both existing and new clients and also take advantage of opportunities arising from regulatory change. In April 2018, we also launched "CMC Pro", our dedicated offering to meet the needs of professional clients.
Established markets
When putting future regulatory change in Europe to one side, I am pleased and encouraged by the ongoing growth and revenue contribution of all three of our established markets, the UK, Germany and Australia. The continuing positive performance in independent surveys in these countries also confirms our status as a leading trading platform provider delivering strong levels of client satisfaction. We have been shown to be leading in client service in the UK as well as maintaining our market leading position in Germany and number one provider for high value CFD clients in Australia.
Digital initiatives
During the year, we have continued to invest in our digital marketing area, where we have seen a rise in applications via the mobile channel. A more scientific approach to our marketing spend and improvements in search engine optimisation ("SEO") have contributed to an improved and more focused client acquisition process.
People and values
Our people are crucial to our success and throughout the year, I have been consistently impressed by the quality and hard work of our employees. During the year, we have refreshed our Group values and are committed to retaining and developing our staff.
On behalf of myself and the Board, I would like to thank all of our employees for their continued dedication and hard work.
Clients
Clients are central to everything we do at CMC. We continually focus on employing and training high quality client services staff, onboarding, education, platform features, and a focus on fair client outcomes. During the year, the Group received many awards in this area and ranked very highly in an independent survey of the sector.
Dividend
The Board recommends a final dividend payment of GBP17.2 million. This is 5.95 pence per share (2017: 5.95 pence), resulting in total dividend payment for the year of 8.93 pence per share (2017: 8.93 pence), slightly above the Group's policy of paying 50% of net income.
Outlook
Key areas of focus for the Group during the first half of the year will be the successful integration of the ANZ Bank stockbroking partnership in Australia, and in the UK and Europe on meeting the new regulatory requirements. Alongside this, we will continue to develop our platforms to ensure that we are well positioned from a product perspective in the new regulatory environment to acquire and retain experienced and valuable clients as well as build our institutional offering.
Regulatory change is likely to impact revenue in the UK and Europe in the short term; however, any Group revenue decrease from retail client trading (expected to be 10% to 15% of 2018 Group CFD and spread bet revenues) will be partially mitigated by the increasing revenue from our stockbroking business. Regulatory change has always helped strengthen our industry and I believe that CMC as a strong and well-capitalised company will benefit.
We have a big year ahead, but we are well positioned to meet the challenges to grow our business, through our own technology and 15 offices globally. Through the opportunities that our proprietary technology provides we are diversifying the business.
Peter Cruddas
Chief Executive Officer
6 June 2018
Financial review
Summary income statement
GBPm 2018 2017 Variance Variance % ------------------------ -------- -------- --------- ----------- Net operating income 187.1 160.8 26.3 16% Operating expenses (125.9) (111.6) (14.3) (13%) ------------------------ -------- -------- --------- ----------- Operating profit 61.2 49.2 12.0 24% Finance costs (1.1) (0.7) (0.4) (60%) ------------------------ -------- -------- --------- ----------- Profit before taxation 60.1 48.5 11.6 24% ------------------------ -------- -------- --------- ----------- PBT margin 32.1% 30.1% 2.0% ------------------------ -------- -------- --------- ----------- Profit after tax 49.7 39.2 10.5 27% Pence 2018 2017 Variance Variance % ------------------------ -------- -------- --------- ----------- Basic EPS 17.3 13.7 3.6 26% ------------------------ -------- -------- --------- -----------
Summary
Net operating income for the year increased by GBP26.3 million (16%) to GBP187.1 million, primarily driven by trading conditions returning to more normalised levels and our focus on high value clients, which resulted in the average trade size increasing during the year. Second half net operating income was moderately higher than first half performance at GBP97.5 million (H1 2018: GBP89.6 million).
Active client numbers have fallen marginally by 917 (2%) to 59,165, due to fewer event-driven trading opportunities which encourage certain clients to open or reactivate their accounts to trade only around these events. In the prior year, the US election and EU Referendum drove the active client figure higher. However, revenue per active client rose by GBP447 (18%) to GBP2,964 due to an increase in the value of client trades by GBP571 billion (28%) to GBP2,587 billion despite having fewer active clients. Encouragingly this growth was seen across both of our largest asset classes, Indices and FX. Indices was the biggest driver of this increase with the value of client trades up GBP393 billion (35%) to GBP1,518 billion, which equated to 59% of the value of client trades, which is more representative of the historical share of activity that this asset class generates for the Group.
Total costs(1) increased by GBP14.7 million (13%) to GBP127.0 million. The increase was predominantly caused by a GBP8.5 million (17%) increase in net staff costs due to higher average headcount as we continue to invest in the business and higher performance-related pay.
Profit before tax increased by GBP11.6 million (24%) to GBP60.1 million, as a result of the GBP26.3 million increase in net operating income and partly offset by a GBP14.7 million increase in total costs explained above. As a result, our profit before tax margin(2) increased by 2.0% to 32.1% highlighting the operational gearing present in the business.
Net operating income overview
Hot Features
Premium
Year ended Year ended
GBPm 31 March 2018 31 March 2017
----------------------------------------------------- --------------- ---------------
CFD and spread bet (including binaries) net revenue 175.4 151.3
Stockbroking 8.5 7.8
Interest income 2.1 1.7
Other operating income 1.1 -
----------------------------------------------------- --------------- ---------------
Total 187.1 160.8
----------------------------------------------------- --------------- ---------------
(1) Total costs are the sum of operating expenses, depreciation, amortisation and finance costs
(2) Statutory profit before tax as a percentage of net operating income
Regional performance overview: CFD and spread bet
2018 2017 Variance %
-------------------------------------
Value Value Value
Net of Net of Net of
revenue trades Active RPC revenue trades Active RPC revenue trades Active RPC
(GBPm) (GBPbn) Clients (GBP) (GBPm) (GBPbn) Clients (GBP) (GBPm) (GBPbn) Clients (GBP)
-------- -------- -------- -------- -------- -------- -------- ------ -------- -------- -------- -------
UK 71.9 1,036 16,157 4,451 61.0 793 17,142 3,558 18% 31% (6%) 25%
Europe 50.6 777 22,223 2,276 45.3 632 22,503 2,012 12% 23% (1%) 13%
APAC &
Canada 52.9 774 20,785 2,544 45.0 591 20,437 2,201 18% 31% 2% 16%
-------- -------- -------- -------- ------ -------- -------- -------- ------ -------- -------- -------- -------
Total 175.4 2,587 59,165 2,964 151.3 2,016 60,082 2,517 16% 28% (2%) 18% -------- -------- -------- -------- ------ -------- -------- -------- ------ -------- -------- -------- -------
UK
The value of client trades in the UK grew 31% against the prior year to GBP1,036 billion (2017: GBP793 billion), driven by retail growth of 29% to GBP733 billion (2017: GBP569 billion) as market conditions presented clients with more trading opportunities, whilst the institutional business also continues to grow. Although the number of active clients fell 6% to 16,157 (2017: 17,142), much of this churn was in low value, short-term clients trading around known political events in the prior year such as the UK's EU Referendum in June 2016, which in turn contributed to revenue per active client increasing 25% to GBP4,451 (2017: GBP3,558). Our focus on clients was clearly reflected in an independent industry survey carried out during the year(1), with our net promoter score further increasing and the Group continuing to lead in client satisfaction with first place rankings in 14 out of 19 key service areas.
Europe
Europe comprises offices in Austria, France, Germany, Italy, Norway, Poland, Spain and Sweden. The value of client trades in Europe was 23% higher than the prior year at GBP777 billion (2017: GBP632 billion). Whilst active clients were marginally lower than the prior year, the focus on high value clients has yielded strong returns with net revenue up 12% in the region to GBP50.6 million (2017: GBP45.3 million), and an increase in net revenue across all offices. Our Scandinavian offices performed particularly well, with the value of client trades in the region 67% higher than the prior year. The largest office in the region, Germany, maintained its market-leading position with a 8% share of primary relationships with CFD/FX active clients(2), and the Polish office continues to grow well with active clients up 52%.
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. The value of client trades was 31% higher at GBP774 billion (2017: GBP591 billion). As with other regions, net revenue growth was driven by high value clients trading more compared to prior year, reflected in an RPC increase of 16% to GBP2,544 (2017: 2,201), whilst active clients were marginally higher at 20,785 (2017: 20,437).
External research highlights the Group's success in appealing to high value traders, with the Group maintaining the position of number one provider for high value CFD clients in Australia(3). This report also highlighted that the Group had the highest prompted brand awareness in the Australian CFD and FX markets, as the brand continues to strengthen in this area. Client satisfaction remains a key focus for the Group, and CMC was recognised as top for overall satisfaction for Australia CFD(1) and Singapore CFD and FX(1) clients by Investment Trends.
(1) Investment Trends May 2017 UK Leveraged Trading Report
(2) Investment Trends May 2018 Germany CFD and FX Report
(3) Investment Trends May 2017 Australia CFD Report; Investment Trends October 2017 Singapore CFD and FX Report.
Stockbroking
The Australian stockbroking business has continued to grow, with revenue up 9% at GBP8.5 million (2017: GBP7.8 million), and up 7% in local currency terms. Strong client acquisition has also been maintained during the year (47% increase in new clients(1)), supported by a sustained reduction in client cost per acquisition delivered through ongoing enhancements in digital marketing and overall strong volumes seen across the local market.
The significant stockbroking partnership with ANZ Bank remains on track for delivery. Our existing retail and intermediary client base are also expected to be significant beneficiaries of major platform enhancements required as part of the implementation, encompassing mobile trading, international equities, online options and advisor functionality.
(1) Increase in new opened accounts over the period
Interest income
The low interest rate environment remained largely the same as the prior year and interest income increased marginally to GBP2.1 million (2017: GBP1.7 million). The majority of the Group's interest income is earned through our segregated client deposits in our Australia, New Zealand and stockbroking subsidiaries. However, the Group's interest income is beginning to rise due to the FCA granting the UK business permission to deposit a proportion of UK client funds in term deposit accounts.
Expenses
Total operating expenses increased GBP14.3 million (13%) to GBP125.9 million, driven by higher salary costs and performance-related pay.
GBPm 2018 2017 Variance % ------------------------------- ------ ------ ----------- Net staff costs 57.9 49.4 17% IT costs 16.9 15.4 10% Marketing costs 18.3 20.3 (10%) Sales-related costs 2.3 1.5 48% Premises costs 6.2 5.2 19% Legal and professional fees 4.0 3.5 14% Regulatory fees 3.0 2.6 16% Depreciation and amortisation 6.8 5.8 17% Other 10.5 7.9 31% ------------------------------- ------ ------ ----------- Total operating expenses 125.9 105.8 13% Interest 1.1 0.7 60% ------------------------------- ------ ------ ----------- Total costs 127.0 112.3 13% ------------------------------- ------ ------ -----------
Staff costs
Net staff costs increased GBP8.5 million (17%) to GBP57.9 million, largely caused by a rise in wages and salaries of GBP3.5 million (9%) due to the annualised impact of investment in personnel in the prior year and higher performance-related pay, which increased by GBP7.3 million. These increases were offset by net capitalisation, mainly relating to development costs as part of the ANZ Bank implementation and a decrease of GBP1.4 million (32%) in share--based payments.
GBPm 2018 2017 Variance % ------------------------------------------------- ------ ----- ----------- Wages and salaries 43.4 39.9 9% Performance related pay 10.7 3.4 213% Share-based payments 3.0 4.4 (32%) ------------------------------------------------- ------ ----- ----------- Total employee costs 57.1 47.7 20% Contract staff costs 3.5 1.7 104% Capitalised internal software development costs (2.7) - - ------------------------------------------------- ------ ----- ----------- Net staff costs 57.9 49.4 17% ------------------------------------------------- ------ ----- -----------
Marketing costs
Marketing costs decreased by GBP2.0 million (10%) to GBP18.3 million during the year due to a reduction in brand and sponsorship activity. However, digital marketing spend increased year on year and also from the first half to the second half of the year. The Group continues to sponsor the New South Wales Waratahs rugby team in Australia.
Other expenses
IT costs increased by GBP1.5 million (10%) to GBP16.9 million. We continue to see above-inflation increases in this area, compounded by some IT contracts showing a trend of moving from intangible software licences to software maintenance charges, and increasing charges from market data providers.
Premises costs have increased mainly due to higher rent charges in Australia and the opening of a new office in China.
Other costs
The increase in other costs was driven by numerous factors, but mainly irrecoverable sales tax, a lower level of recoverable bank charges as a result of new EU regulation and higher recruitment costs.
Taxation
The effective tax rate for the year was 17% (2017: 19%). The majority of the Group's profits are taxed in the UK, which had a corporation tax rate of 19% (2017: 20%). The Group also benefited from higher utilisation of Australian corporation tax credits in the year due to higher forecast profitability in the Australian entities. The effective tax rate is expected to be in the region of 12% to 14% in 2019.
Profit after tax for the year
The increase in profit after tax for the year of GBP10.5 million (27%) to GBP49.7 million (2017: GBP39.2 million) was due to both higher statutory profit before tax and a lower effective tax rate.
Dividend
Dividends of GBP25.7 million were paid during the year (2017: GBP23.9 million), with GBP17.1 million relating to a final dividend for the prior year paid in August 2017, and a GBP8.6 million interim dividend paid in December 2017 in relation to the current year performance. The Group has proposed a final ordinary dividend of 5.95 pence per share (2017: 5.95 pence per share).
Group statement of financial position
GBPm 2018 2017 ---------------------------------- ------ ------ Intangible assets 4.4 2.1 Property, plant and equipment 20.7 18.2 Deferred tax assets 8.8 8.1 Financial investments 10.8 - Trade and other receivables 2.2 - ---------------------------------- ------ ------ Total non-current assets 46.9 28.4 ---------------------------------- ------ ------ Trade and other receivables 48.0 31.6 Derivative Financial instruments 7.3 1.9 Financial investments 10.3 20.3 Amount due from brokers 156.9 119.4 Cash and cash equivalents 60.5 53.2 ---------------------------------- ------ ------ Total current assets 283.0 226.4 ---------------------------------- ------ ------ Total assets 329.9 254.8 ---------------------------------- ------ ------ Trade and other payables 91.8 36.3 Derivative Financial instruments 3.9 3.3 Borrowings 1.3 5.8 Current tax payable 2.3 5.5 Short term Provisions 0.1 0.4 ---------------------------------- ------ ------ Total current liabilities 99.4 51.3 ---------------------------------- ------ ------ Trade and other payables 5.5 3.1 Borrowings 2.3 3.0 Deferred Tax liabilities 0.7 0.0 Long term Provisions 2.0 1.6 ---------------------------------- ------ ------ Total non-current liabilities 10.5 7.7 ---------------------------------- ------ ------ Total liabilities 109.9 59.0 ---------------------------------- ------ ------ Total equity 220.0 195.8 ---------------------------------- ------ ------ Total equity and liabilities 329.9 254.8 ---------------------------------- ------ ------
Non-current assets
The Group is committed to maintaining its Next Generation trading platform and these costs are expensed as incurred. However, GBP2.6 million of internal development costs relating to the ANZ Bank implementation have been capitalised as intangible assets during the year and this will continue to be the case until the implementation is complete. The majority of the remaining intangible assets relate to the net book value of software licences.
There has also been significant investment in the fit-out of a new property in Australia to accommodate more staff to support the imminent increase in size of the stockbroking business and this has been the main driver of the increase in property, plant and equipment over the period along with ongoing investment in IT infrastructure.
Deferred tax assets increased during the year due to the recognition of a higher amount of tax losses on the balance sheet relating to Australian tax credits. This has been driven by increasing profitability in the stockbroking business as a result of the ANZ Bank partnership.
Financial investments in both non-current and current assets relate to the FCA requirement to hold eligible assets against potential liquidity stress.
Current assets
Trade and other receivables relate mainly to client receivables from stockbroking positions yet to settle, an escrow deposit relating to the ANZ Bank transaction, prepayments, and other client debtors. The year-on-year rise is a result of the escrow deposit. Amount due from brokers relates to cash held at brokers either for initial margin or to reduce interest payable on the Group's overall hedge position. Cash and cash equivalents have increased during the course of the year with a proportion being deposited with brokers to fund growing margin requirements.
Current liabilities
Trade and other payables consist mainly of accruals and deferred income, amounts due on stockbroking trades yet to settle, and amounts due to clients in relation to title transfer funds.
Non-current liabilities
Trade and other payables relate mainly to the deferred unwinding of lease incentives on our London property and the increase in borrowings is due to a new lease agreement associated with IT equipment purchases.
Regulatory capital resources
For the year under review, the Group was supervised on a consolidated basis by the FCA. The Group maintained a significant capital surplus over the regulatory requirement at all times.
The Group's total capital resources increased due to the rise in retained earnings relating to audited 2018 profits, partly offset by higher intangible assets and deferred tax assets on the balance sheet.
At 31 March 2018 the Group had a total capital ratio of 31.1% (31 March 2017: 30.2%). 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 28 to the 2018 Annual Report and Financial statements.
2018 2017
-------------------------------- ------ ------
Total capital resources (GBPm) 194.9 171.9
Total risk exposure (GBPm) 627.0 569.4
-------------------------------- ------ ------
Total capital ratio (%) 31.1% 30.2%
-------------------------------- ------ ------
Note: capital resources include audited reserves and any changes to deferred tax assets resulting from the audit process and proposed dividends.
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 consists mainly of cash and cash equivalents and also includes investments in UK government securities, which are held to meet the Group's liquid asset buffer ("LAB") - as set by the FCA. These UK government securities are BIPRU 12.7 eligible securities and are available to meet liabilities which fall due in periods of stress.
-- Title Transfer Funds (TTFs). This represents funds received from professional clients and eligible counterparties (as defined in the FCA Handbook) that are held under a title transfer collateral agreement ("TTCA"); a means by which a professional client or eligible counterparty may agree that full ownership of such funds is unconditionally transferred to the Group. The Group does not require clients to sign a TTCA in order to be treated 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 its stability. The increase during the year was reflective of the increase in the institutional client base and certain other professional clients, where we require the funds of these clients to be held under a TTCA.
-- Available committed facility (off-balance sheet liquidity). The Group has access to a facility of up to GBP65.0 million (2017: GBP40.0 million) in order to fund any potential fluctuations in margins required to be posted at brokers to support the risk management strategy. The GBP25.0 million increase during the year was due to the syndication of the existing facility in March 2018. 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 GBP32.5 million and a three-year term facility of GBP32.5 million, both of which were increased in March 2018 from GBP20.0 million for each term. There was no drawdown on the facility at 31 March 2018 (2017: GBPnil).
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.
At 31 March 2018, the Group held cash balances of GBP60.5 million (2017: GBP49.0 million). In addition, GBP304.8 million (2017: GBP310.0 million) was held in segregated client money accounts for clients. The movement in Group cash and cash equivalents is set out in the Consolidated Statement of Cash Flows.
Own funds have increased to GBP193.9 million (2017: GBP183.4 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 17 of the 2018 Annual Report and Financial statements.
GBPm 2018 2017 -------------------------------------------- -------- ------- Own funds 193.9 183.4 Title transfer funds 48.0 3.8 Available committed facility 65.0 40.0 -------------------------------------------- -------- ------- Total available liquidity 306.9 227.2 Less: Blocked cash (16.6) (19.8) Less: Initial margin requirement at broker (103.7) (93.0) -------------------------------------------- -------- ------- Net available liquidity 186.6 114.4 -------------------------------------------- -------- ------- Of which: held as liquid assets buffer 21.2 20.0
Client money
Total segregated client money held by the Group was GBP304.8 million at 31 March 2018 (2017: GBP310.0 million).
Client funds represents the capacity for our clients to trade and offer an underlying indication to 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 who have entered a TTCA with the Group. This is in accordance with or exceeding applicable client money regulations in countries in which the Group operates. The majority of client money requirements fall under the Client Assets sourcebook ("CASS") rules of the FCA. 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 in the 2018 Annual Report and Financial statements.
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 the Group 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. 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.
The Board has undertaken a robust assessment of the principal risks facing the Group. Top and emerging risks are considered those that would threaten its business model, future performance, solvency or liquidity and how these risks are managed or mitigated (Code C.2.1). These are outlined below and details of financial risks and their management are set out in note 28 to the 2018 Annual Report and Financial statements.
Top and emerging risks during the year, which form either a subset of one or multiple principal risks and continue to be at the forefront of the Group discussions, are:
-- Regulatory change: further to announcements and consultations from national competent authorities ("NCAs") and ESMA, changes will be required to be made to the marketing and distribution of CFDs to retail clients throughout Europe in August 2018. These changes have been regularly discussed at Board, Board Committee and Executive Committee meetings throughout the period, including the Group's readiness and potential impact on the Group's business model. Many of the new requirements are already in place throughout the Group; however, some of the measures will have an impact on client trading behaviour that is not possible to accurately understand until implemented. Once implemented, management will constantly monitor any impact. The Group's strategic focus has been on high value and experienced clients, many of whom may be entitled to become elective professionals, which will help to mitigate the impact of regulatory change. In addition, the Group believes that in the medium to long term these changes present opportunities for the Group and the Group's strong balance sheet and increasing diversification put it in a strong position to deal with, and take advantage of, these changes.
-- UK's exit from the European Union ("Brexit"): the impact that Brexit has on the Group is closely monitored. Plans are underway to establish a new subsidiary in the European Union. Once implemented this new structure should mitigate any impact that could arise from regulatory change resulting from Brexit.
Further information on the structure and workings of Board and Management Committees is included in the Corporate governance report in the 2018 Annual Report and Financial statements.
Principal Risk Description Management and mitigation
Risk
-----------------------------------------------------------------
Business and Regulatory The risk that
strategic change changes to the * Active dialogue with regulators and industry bodies.
risks regulatory
framework the
Group operates in * Monitoring of market and regulator sentiment towards
impacts the Group the product offering.
performance.
Such changes
could result in * Monitoring by and advice from compliance department
the Group's on impact of actual and possible regulatory change.
product offering
becoming less
profitable, more * A business model and proprietary technology that is
difficult responsive to changes in regulatory requirements.
to offer to
clients, or an
outright ban on
the product
offering in one
or more of the
countries
where the Group
operates.
--------------- ------------------ -----------------------------------------------------------------
Acquisitions The risk that
and disposals mergers, * Robust corporate governance structure including
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 * Align and manage the businesses to Group strategy as
objectives or 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 * Group risk is involved in the annual budgeting
otherwise, to the process.
Group as a whole.
--------------- ------------------ -----------------------------------------------------------------
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.
-------------- --------------- ------------------ -----------------------------------------------------------------
Financial Credit and The risk of a Client credit risk
risks counterparty client, custodian The Group's management of client credit risk is significantly
risk or counterparty aided by automatic liquidation
failing to fulfil functionality where margin levels are continuously reviewed. If
contractual they fall below pre--agreed
obligations, levels, the positions held on the account will automatically be
including closed out.
settlement, Other platform functionality mitigates risk further:
resulting in * tiered margin requires clients to hold more
financial loss collateral against bigger or higher risk positions;
for the Group,
specifically:
Client credit * mobile phone access allowing clients to manage their
risk portfolios on the move; and
Financial losses
may be incurred
in cases where an * guaranteed stop loss orders allow clients to remove
adverse price their chance of debt from their position(s).
move exceeds the
margin that
a client holds to However, after mitigations, there is a residual risk that the
maintain their Group could incur losses relating
position, to clients moving into debit balances if there is a market gap.
followed by the Counterparty credit risk
client defaulting Risk management is carried out by a central liquidity risk
against their management ("LRM") team under the
contractual Counterparty Concentration Risk Policy, approved by the Board of
obligations to Directors.
pay the deficit. Mitigation is achieved by:
Counterparty * monitoring concentration levels to counterparties and
credit risk reporting these internally/externally on a
A financial monthly/quarterly basis; and
institution
failing to meet
or defaulting on * monitoring the credit ratings and credit default swap
their obligations ("CDS") spreads of counterparties and reporting
in accordance internally on a weekly basis.
with
agreed terms.
Further information is available in note 28 to the 2018 Annual
Report and Financial statements.
--------------- ------------------ -----------------------------------------------------------------
Financial The risk that
reporting risk financial, * Robust process of checking and oversight in place to
statutory or ensure accuracy.
regulatory
reports are
submitted late, * Knowledgeable and experienced staff undertake and
incomplete or overview the relevant processes.
are inaccurate.
--------------- ------------------ -----------------------------------------------------------------
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.
--------------- ------------------ -----------------------------------------------------------------
Liquidity risk The risk that Risk management is carried out by a central LRM team under
there is policies approved by the Board
insufficient and in line with the FCA's individual liquidity adequacy
available standards ("ILAS") regime. The Group
liquidity to meet utilises a combination of liquidity forecasting and stress
the liabilities testing to identify any potential
of the Group liquidity risk both during normal and stressed conditions. The
as they fall due. forecasting and stress testing
fully incorporates the impact of all liquidity regulations in
force in each jurisdiction and
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;
* a committed bank facility of up to GBP65 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 more information see note 28 to the 2018 Annual Report and
Financial statements.
--------------- ------------------ -----------------------------------------------------------------
Market risk Market risk is Trading risk management monitors and manages the
defined as the exposures it inherits from clients on a real-time basis and in
risk that the accordance with Board-approved
value of our appetite.
residual The Group predominantly acts as a market maker in linear, highly
portfolio will liquid financial instruments
decrease in which it can easily reduce market risk exposure through its
due to changes in prime broker ("PB") arrangements.
market risk This significantly reduces the Group's revenue sensitivity to
factors. The individual asset classes and
three standard instruments.
market risk Financial risk management runs stress scenarios on the residual
factors are price portfolio, comprising a number
moves, of single and combined company-specific and market-wide events
interest rates in order to assess potential
and foreign financial and capital adequacy impacts to ensure the Group can
exchange rates. withstand severe moves in the
risk drivers it is exposed to.
For further information see note 28 to the 2018 Annual Report
and Financial statements.
-------------- --------------- ------------------ -----------------------------------------------------------------
Operational Business The risk that
risks change 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
Notable programmes.
business change
risks for the
Group are * Strategic benefits and delivery of change agenda
platform upgrades communicated to employees.
and the
implementation of
the ANZ
Bank stockbroking
partnership.
--------------- ------------------ -----------------------------------------------------------------
Business The risk that a
continuity & physical business * Business continuity oversight provided by operational
disaster continuity event risk function.
recovery risk or system failure
results in a
reduced * Use of external specialist premises to enhance
ability or resilience in the event of a disaster recovery or
inability to business continuity requirement.
perform core
business
activities or * Periodic testing of business continuity processes and
processes. disaster recovery.
* Prompt response to significant systems failures or
interruptions.
--------------- ------------------ -----------------------------------------------------------------
Financial Financial crime
crime risk covers a number * Adoption of the risk-based approach to financial
of unlawful crime, including undertaking formal and regular risk
activities assessments across global operations.
including fraud
(first and third
party), * Global reporting procedures and surveillance
theft, scams, processes in place using local compliance and legal
confidence expertise.
tricks, tax
evasion, bribery,
embezzlement, * Regular and ongoing training and awareness programme
identity theft, in place for staff at all levels and in all
money jurisdictions.
laundering,
forgery,
counterfeiting * Group Whistleblowing Policy provides a clear
and acts of framework for escalation of issues.
terrorism.
--------------- ------------------ -----------------------------------------------------------------
Information The risk of
and data unauthorised * Dedicated information security and data protection
security risk access to or
external
disclosure of * Resource/expertise within the Group.
client or Company
information,
including those * Technical and procedural controls implemented to
caused by "cyber minimise the occurrence of information security and
attacks". data protection breaches.
* Access to information only provided on a
"need-to-know" and "least privilege" basis consistent
with the user's role and also requires the
appropriate authorisation.
* Key data loss prevention initiatives and 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 * Rigorous software design methodologies, project
timely manner. management and 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 two data centres in the UK.
* Systems and data centres designed for high
availability and data integrity.
* Continuous service available to clients in the event
of individual equipment failures or major disaster
recovery events.
-------------- --------------- ------------------ -----------------------------------------------------------------
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.
--------------- ------------------ -----------------------------------------------------------------
Outsourcing This is the risk
and of third party * Outsourcing only employed where there is a tactical
procurement organisations gain in resource or experience.
risks inadequately
providing or
performing or * Due diligence performed on service supplier ahead of
failing outsourcing being agreed.
to provide or
perform the
outsourced * Service level agreements in place and regular
activities or monitoring of performance undertaken.
contractual
obligations to
the standards
required by the
Group.
--------------- ------------------ -----------------------------------------------------------------
People risk The risk of loss
of key staff or * The Board has directed that the Group maintains an
having active Succession and Resource Plan for all key
insufficient individuals and groups/teams, which will mitigate
skilled resources some of the risk of loss of key persons. It will
available. adopt policies and strategies commensurate with its
objectives of:
* Attracting and nurturing the best staff;
* Retaining key individuals;
* 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 regulatory * Effective compliance function.
risk sanction or legal
proceedings as a
result of failure * Internal audit outsourced to an independent third
to comply with party professional services firm.
regulatory,
statutory or
fiduciary * Effective compliance oversight, planning and
requirements or implementation.
as a result of a
defective
transaction. * Comprehensive monitoring programmes by compliance and
internal audit.
* Controls for appointment and approval of staff
holding a controlled 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.
* Anti-money laundering controls for client due
diligence and sanctions checking.
-------------- --------------- ------------------ -----------------------------------------------------------------
DIRECTORS' STATEMENT PURSUANT TO THE FCA'S DISCLOSURE AND TRANSPARENCY RULES
The directors are required by the Disclosure 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.
The directors listed below (being all the directors of CMC Markets plc) confirm to the best of their knowledge that:
-- the Group Financial Statements contained in the 2018 Annual Report and Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and results of the Group; and
-- the Strategic Report contained in the 2018 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 2018 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
The Directors' statement was approved by the Board of Directors on 6 June 2018 and signed on its behalf by:
Peter Cruddas Grant Foley
Chief Executive Officer Chief Operating and Financial Officer
CMC Markets plc Board of Directors
Executive Directors
Peter Cruddas (Chief Executive Officer)
David Fineberg (Group Commercial Director)
Grant Foley (Chief Operating and Financial Officer)
Non-Executive Directors
James Richards (Chairman)
Paul Wainscott (Senior Independent Director)
Sarah Ing
Clare Salmon
Consolidated income statement
For the year ended 31 March 2018
Year ended Year ended
GBP'000 Note 31 March 2018 31 March 2017
---------------------------------------------------------- ----- --------------- ---------------
Revenue 209,128 185,927
Interest income 2,114 1,739
---------------------------------------------------------- ----- --------------- ---------------
Total revenue 3 211,242 187,666
Introducing partner commissions and betting levies (24,142) (26,876)
---------------------------------------------------------- ----- --------------- ---------------
Net operating income 2 187,100 160,790
Operating expenses 4 (125,863) (111,591)
---------------------------------------------------------- ----- --------------- ---------------
Operating profit 61,237 49,199
Finance costs (1,173) (734)
---------------------------------------------------------- ----- --------------- --------------- Profit before taxation 60,064 48,465 Taxation 5 (10,379) (9,309) ---------------------------------------------------------- ----- --------------- --------------- Profit for the year attributable to owners of the parent 49,685 39,156 ---------------------------------------------------------- ----- --------------- --------------- Earnings per share Basic earnings per share (p) 6 17.3p 13.7p ---------------------------------------------------------- ----- --------------- --------------- Diluted earnings per share (p) 6 17.1p 13.6p ---------------------------------------------------------- ----- --------------- ---------------
Consolidated statement of comprehensive income
For the year ended 31 March 2018
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------------------------ --------------- ---------------
Profit for the year 49,685 39,156
Other comprehensive (expense) / income:
Items that may be subsequently reclassified to income statement
Gain / (Loss) on net investment hedges net of tax 1,755 (2,950)
Amounts recycled from equity to the income statement - 159
Currency translation differences (3,093) 4,255
Change in value of available-for-sale financial assets (58) (7)
------------------------------------------------------------------------------- --------------- ---------------
Other comprehensive (expense) / income for the year (1,396) 1,457
------------------------------------------------------------------------------- --------------- ---------------
Total comprehensive income for the year attributable to owners of the parent 48,289 40,613
------------------------------------------------------------------------------- --------------- ---------------
Consolidated statement of financial position Company registration number: 05145017
At 31 March 2018
GBP'000 Note 31 March 2018 31 March 2017 ---------------------------------- ----- -------------- -------------- ASSETS Non-current assets Intangible assets 8 4,365 2,115 Property, plant and equipment 9 20,685 18,197 Deferred tax assets 8,802 8,113 Financial investments 11 10,822 - Trade and other receivables 10 2,237 - ---------------------------------- ----- -------------- -------------- Total non-current assets 46,911 28,425 ---------------------------------- ----- -------------- -------------- Current assets Trade and other receivables 10 47,940 31,542 Derivative financial instruments 7,335 1,935 Financial investments 11 10,330 20,272 Amounts due from brokers 156,887 119,390 Cash and cash equivalents 12 60,468 53,226 ---------------------------------- ----- -------------- -------------- Total current assets 282,960 226,365 ---------------------------------- ----- -------------- -------------- TOTAL ASSETS 329,871 254,790 ---------------------------------- ----- -------------- -------------- LIABILITIES Current liabilities Trade and other payables 13 91,696 36,389 Derivative financial instruments 3,922 3,340 Borrowings 1,274 5,760 Current tax payable 2,347 5,489 Short term provisions 145 368 ---------------------------------- ----- -------------- -------------- Total current liabilities 99,384 51,346 ---------------------------------- ----- -------------- -------------- Non-current liabilities Trade and other payables 13 5,389 3,030 Borrowings 2,346 3,042 Deferred tax liabilities 682 24 Long term provisions 2,040 1,575 ---------------------------------- ----- -------------- -------------- Total non-current liabilities 10,457 7,671 ---------------------------------- ----- -------------- -------------- TOTAL LIABILITIES 109,841 59,017 ---------------------------------- ----- -------------- -------------- EQUITY Share capital 72,872 72,646 Share premium 46,236 46,236 Own shares held in trust (567) (466) Other reserves (49,452) (48,056) Retained earnings 150,941 125,413 ---------------------------------- ----- -------------- -------------- Total equity 220,030 195,773 ---------------------------------- ----- -------------- -------------- TOTAL EQUITY AND LIABILITIES 329,871 254,790 ---------------------------------- ----- -------------- --------------
Consolidated statement of changes in equity
For the year ended 31 March 2018
Own shares held Retained
GBP'000 Share capital Share premium in trust Other reserves earnings Total Equity
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
At 1 April 2016 72,600 46,243 (984) (49,513) 107,981 176,327
New shares
issued 46 (7) - - - 39
Total
comprehensive
income for the
year - - - 1,457 39,156 40,613
Acquisition of
own shares held
in trust - - (504) - - (504)
Utilisation of
own shares held
in trust - - 1,022 - - 1,022
Share-based
payments - - - - 2,253 2,253
Tax on
share-based
payments - - - - (31) (31)
Dividends - - - - (23,946) (23,946)
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
At 31 March 2017 72,646 46,236 (466) (48,056) 125,413 195,773
New shares
issued 226 - - - - 226
Total
comprehensive
income /
(expense) for
the year - - - (1,396) 49,685 48,289
Acquisition of
own shares held
in trust - - (104) - - (104)
Utilisation of
own shares held
in trust - - 3 - - 3
Share-based
payments - - - - 1,505 1,505
Tax on
share-based
payments - - - - 57 57
Dividends - - - - (25,719) (25,719)
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
At 31 March 2018 72,872 46,236 (567) (49,452) 150,941 220,030
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
Consolidated statement of cash flows
For the year ended 31 March 2018
GBP'000 Note Year ended 31 March 2018 Year ended 31 March 2017 --------------------------------------------------------- ----- ------------------------- ------------------------- Cash flows from operating activities Cash generated from operations 14 64,242 11,865 Net interest income 2,114 1,739 Tax paid (13,787) (11,372) --------------------------------------------------------- ----- ------------------------- ------------------------- Net cash generated from operating activities 52,569 2,232 --------------------------------------------------------- ----- ------------------------- ------------------------- Cash flows from investing activities Purchase of property, plant and equipment (8,640) (3,069) Proceeds from disposal of property, plant and equipment 42 85 Investment in intangible assets (3,518) (811) Proceeds from disposal of intangible assets - 33 Purchase of financial investments (21,426) (20,562) Proceeds from maturity of financial investments and coupon receipts 20,512 20,710 Inflow / (Outflow) on net investment hedges 2,206 (4,792) --------------------------------------------------------- ----- ------------------------- ------------------------- Net cash used in investing activities (10,824) (8,406) --------------------------------------------------------- ----- ------------------------- ------------------------- Cash flows from financing activities Repayment of borrowings (171,686) (20,204) Proceeds from borrowings 170,778 19,247 Proceeds from issue of ordinary shares 42 - Acquisition of own shares (104) (465) Dividends paid (25,719) (23,946) Finance costs (1,173) (734) --------------------------------------------------------- ----- ------------------------- ------------------------- Net cash used in financing activities (27,862) (26,102) --------------------------------------------------------- ----- ------------------------- ------------------------- Net increase / (decrease) in cash and cash equivalents 13,883 (32,276) --------------------------------------------------------- ----- ------------------------- ------------------------- Cash and cash equivalents at the beginning of the year 48,952 78,280 Effect of foreign exchange rate changes (2,367) 2,948 --------------------------------------------------------- ----- ------------------------- ------------------------- Cash and cash equivalents at the end of the year 60,468 48,952 --------------------------------------------------------- ----- ------------------------- ------------------------- 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 2018 and 2017, but is derived from those financial statements. The Annual Report and Financial Statements for the year ended 31 March 2017 have been delivered to the Registrar of Companies and those for the year ended 31 March 2018 will be delivered following the Company's Annual General Meeting to be held on 26 July 2018. 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 have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("IFRSs"), IFRS Interpretations Committee ("IFRS IC") interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRSs, 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" and "Available for sale financial assets". 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. There were no new or amended standards or interpretations that resulted in a change in accounting policy. These policies have been consistently applied to all years presented. The financial statements presented are at and for the years ending 31 March 2018 and 31 March 2017. Financial annual years are referred to as 2018, and 2017 in the financial statements.
Use of estimates
The preparation of 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 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 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
2. Segmental reporting
The Group's principal business is online retail financial services and provides its clients with the ability to trade contracts for difference (CFD) and financial spread betting on a range of underlying shares, indices, foreign currencies, commodities and treasuries. The Group also makes these services available to institutional partners through white label and introducing broker arrangements. The Group's CFDs are traded worldwide; spread betting only in UK and Ireland and the Group provides stockbroking services only in Australia. The Group's core business is generally managed on a geographical basis and for management purposes, the Group is organised into three segments:
-- UK and Ireland (UK & IE); -- Europe; -- Australia, New Zealand and Singapore (APAC) and Canada;
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.
Year ended 31 March 2018 APAC & GBP'000 UK & IE Europe Canada Central Total ------------------------------------ --------- --------- --------- --------- ---------- Segment revenue net of introducing partner commissions and betting levies 73,087 50,465 61,434 - 184,986 Interest income 593 - 1,521 - 2,114 ------------------------------------ --------- --------- --------- --------- ---------- Net operating income 73,680 50,465 62,955 - 187,100 Segment operating expenses (16,001) (9,840) (14,544) (85,478) (125,863) ------------------------------------ --------- --------- --------- --------- ---------- Segment contribution 57,679 40,625 48,411 (85,478) 61,237 Allocation of central operating expenses (25,603) (26,734) (33,141) 85,478 - ------------------------------------ --------- --------- --------- --------- ---------- Operating profit 32,076 13,891 15,270 - 61,237 Finance costs (62) - (1) (1,110) (1,173) Allocation of central finance costs (484) (320) (306) 1,110 - ------------------------------------ --------- --------- --------- --------- ---------- Profit before taxation 31,530 13,571 14,963 - 60,064 ------------------------------------ --------- --------- --------- --------- ---------- Year ended 31 March 2017 APAC & GBP'000 UK & IE Europe Canada Central Total ------------------------------------ --------- --------- --------- --------- ----------
Segment revenue net of introducing partner commissions and betting levies 61,091 45,194 52,766 - 159,051 Interest income 192 - 1,547 - 1,739 ------------------------------------ --------- --------- --------- --------- ---------- Net operating income 61,283 45,194 54,313 - 160,790 Segment operating expenses (13,603) (11,916) (13,217) (72,855) (111,591) ------------------------------------ --------- --------- --------- --------- ---------- Segment contribution 47,680 33,278 41,096 (72,855) 49,199 Allocation of central operating expenses (23,050) (23,355) (26,450) 72,855 - ------------------------------------ --------- --------- --------- --------- ---------- Operating profit 24,630 9,923 14,646 - 49,199 Finance costs (71) (4) (2) (657) (734) Allocation of central finance costs (271) (202) (184) 657 - ------------------------------------ --------- --------- --------- --------- ---------- Profit before taxation 24,288 9,717 14,460 - 48,465 ------------------------------------ --------- --------- --------- --------- ----------
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 2018 31 March 2017
-------------------- --------------- ---------------
CFD and spread bet 197,385 175,842
Stockbroking 10,633 10,104
Other 1,110 (19)
-------------------- --------------- ---------------
Total 209,128 185,927
-------------------- --------------- ---------------
Interest income
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
----------------------------------- --------------- ---------------
Bank and broker interest 2,087 1,622
Interest from clients 3 64
Interest on financial investments 24 53
----------------------------------- --------------- ---------------
Total 2,114 1,739
----------------------------------- --------------- ---------------
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 2018 31 March 2017
------------------------------------------------- --------------- ---------------
Net staff costs 57,936 49,380
IT costs 16,949 15,352
Sales and marketing 20,558 21,791
Premises 6,224 5,211
Legal and Professional fees 4,027 3,520
Regulatory fees 2,951 2,550
Depreciation and amortisation 6,810 5,835
Other 10,645 7,952
------------------------------------------------- --------------- ---------------
126,100 111,591
Capitalised internal software development costs (237) -
------------------------------------------------- --------------- ---------------
Operating expenses 125,863 111,591
------------------------------------------------- --------------- ---------------
The above presentation reflects the breakdown of Operating expenses by nature of expense.
5. Taxation
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
--------------------------------------------------- --------------- ---------------
Analysis of charge for the year:
Current tax
Current tax on profit for the year 10,769 9,034
Adjustments in respect of previous years 201 (41)
--------------------------------------------------- --------------- ---------------
Total current tax 10,970 8,993
--------------------------------------------------- --------------- ---------------
Deferred tax
Origination and reversal of temporary differences (656) 414
Adjustments in respect of previous years (29) (187)
Impact of change in tax rate 94 89
--------------------------------------------------- --------------- ---------------
Total deferred tax (591) 316
--------------------------------------------------- --------------- ---------------
Total tax 10,379 9,309
--------------------------------------------------- --------------- ---------------
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 17.28% (Year ended 31 March 2017: 19.21%) differs from the standard rate of UK corporation tax rate of 19% (Year ended 31 March 2017: 20%). The differences are explained below:
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------------------------------ --------------- ---------------
Profit before taxation 60,064 48,465
Profit multiplied by the standard rate of corp. tax in the UK of 19% (31 March
2017: 20%) 11,412 9,693
Adjustment in respect of foreign tax rates 591 465
Adjustments in respect of previous years 172 (228)
Impact of change in tax rate 94 89
Expenses not deductible for tax purposes 180 366
Income not subject to tax 34 (115)
Irrecoverable foreign tax 357 292
Recognition of previously unrecognised tax losses (2,262) (1,380)
Other differences (199) 127
------------------------------------------------------------------------------------ --------------- ---------------
Total tax 10,379 9,309
------------------------------------------------------------------------------------ --------------- ---------------
For the year ended 31 March 2018, the tax effect of exceptional costs that were not recognised for tax purposes was GBPnil (Year ended 31 March 2017: GBPnil)
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
----------------------------------------------- --------------- ---------------
Tax on items recognised directly in Equity
Tax credit / (charge) on Share based payments 57 (31)
----------------------------------------------- --------------- ---------------
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 conversion of all dilutive potential weighted average ordinary shares, which consists of share options granted to employees during the year ended 31 March 2018.
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------------------------------ --------------- ---------------
Earnings attributable to ordinary shareholders (GBP '000) 49,685 39,156
------------------------------------------------------------------------------------ --------------- ---------------
Weighted average number of shares used in the calculation of basic earnings per
share ('000) 287,556 286,693
Dilutive effect of share options ('000) 2,629 2,072
------------------------------------------------------------------------------------ --------------- ---------------
Weighted average number of shares used in the calculation of diluted earnings per
share ('000) 290,185 288,765
------------------------------------------------------------------------------------ --------------- ---------------
Basic earnings per share (p) 17.3p 13.7p
------------------------------------------------------------------------------------ --------------- ---------------
Diluted earnings per share (p) 17.1p 13.6p
------------------------------------------------------------------------------------ --------------- ---------------
For the year ended 31 March 2018, 2,629,000 (Year ended 31 March 2017: 2,072,000) 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 2018 31 March 2017
------------------------------------------------------------ --------------- ---------------
Declared and paid in each year
Final dividend for 2017 at 5.95p per share (2016: 5.36p) 17,137 15,392
Interim dividend for 2018 at 2.98p per share (2017: 2.98p) 8,582 8,554
------------------------------------------------------------ --------------- ---------------
Total 25,719 23,946
------------------------------------------------------------ --------------- ---------------
The final dividend for 2018 of 5.95p per share, amounting to GBP17,196,000 was proposed by the board on 6 June 2018 and has not been included as a liability at 31 March 2018. The dividend will be paid on 24 August 2018, following approval at the Company's AGM, to those members on the register at the close of business on 3 August 2018.
The dividends paid or declared in relation to the financial year are set out below:
Year ended Year ended
pence 31 March 2018 31 March 2017
-------------------- --------------- ---------------
Declared per share
Interim dividend 2.98p 2.98p
Final dividend 5.95p 5.95p
-------------------- --------------- ---------------
Total dividend 8.93p 8.93p
-------------------- --------------- ---------------
8. Intangible assets
During the year ended 31 March 2018, additions to intangible assets amounted to GBP3,518,000 (Year ended 31 March 2017: GBP811,000). As at 31 March 2018, the net book value of intangible assets was GBP4,365,000 (31 March 2017: GBP2,115,000).
9. Property, plant and equipment
During the year ended 31 March 2018, additions to property, plant and equipment amounted to GBP8,640,000 (Year ended 31 March 2017: GBP6,114,000). As at 31 March 2018, the net book value of property, plant and equipment was GBP20,685,000 (31 March 2017: GBP18,197,000).
10. Trade and other receivables
GBP'000 31 March 2018 31 March 2017
----------------------------------------------------- -------------- --------------
Current
Gross trade receivables 7,455 5,089
Less: provision for impairment of trade receivables (2,964) (3,491)
----------------------------------------------------- -------------- --------------
Trade receivables 4,491 1,598
Prepayments and accrued income 8,065 7,494
Stock broking debtors 19,386 19,292
Other debtors 15,998 3,158
----------------------------------------------------- -------------- --------------
47,940 31,542
----------------------------------------------------- -------------- --------------
Non-current
Other debtors 2,237 -
----------------------------------------------------- -------------- --------------
Total 50,177 31,542
----------------------------------------------------- -------------- --------------
Stock broking 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 part of the transaction with ANZ bank, the Group has AUD 25,000,000 (GBP13,703,000) deposited in escrow, which is included in other debtors above.
11. Financial investments GBP'000 31 March 2018 31 March 2017 -------------------------------------------- -------------- -------------- UK Government securities: At 1 April 20,272 20,374 Purchase of securities 21,426 20,562 Maturity of securities and coupon receipts (20,512) (20,710) Accrued interest 24 53 Net losses transferred to equity (58) (7) -------------------------------------------- -------------- -------------- At 31 March 21,152 20,272 Less: Non-current portion (10,822) - -------------------------------------------- -------------- -------------- Current portion 10,330 20,272 -------------------------------------------- -------------- -------------- 12. Cash and cash equivalents GBP'000 31 March 2018 31 March 2017 --------------------------------- -------------- -------------- Gross cash and cash equivalents 365,271 363,258 Less: Client monies (304,803) (310,032) --------------------------------- -------------- -------------- Cash and cash equivalents 60,468 53,226 --------------------------------- -------------- -------------- Analysed as: Cash at bank 60,468 50,218 Short-term deposits - 3,008 --------------------------------- -------------- --------------
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments, with maturities of three months or less. Cash at bank earns interest at floating rates, based on daily bank deposit rates.
Cash and cash equivalents comprise of the following for the purpose of the statement of cash flows:
GBP'000 31 March 2018 31 March 2017
---------------------------------------------------- -------------- --------------
Cash and cash equivalents 60,468 53,226
Less: Bank overdrafts - (4,274)
---------------------------------------------------- -------------- --------------
Cash and cash equivalents (Net of Bank overdrafts) 60,468 48,952
---------------------------------------------------- -------------- --------------
13. Trade and other payables
GBP'000 31 March 2018 31 March 2017
------------------------------ -------------- --------------
Current
Gross trade payables 352,826 313,871
Less: Client monies (304,803) (310,032)
------------------------------ -------------- --------------
Trade payables 48,023 3,839
Tax and social security 272 25
Stock broking creditors 16,992 17,079
Accruals and deferred income 26,409 15,446
------------------------------ -------------- --------------
91,696 36,389
------------------------------ -------------- --------------
Non-current
Accruals and deferred income 5,389 3,030
------------------------------ -------------- -------------- Total 97,085 39,419 ------------------------------ -------------- --------------
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. Cash generated from operations
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------ --------------- ---------------
Cash flows from operating activities
Profit before taxation 60,064 48,465
Adjustments for:
Net interest income (2,114) (1,739)
Finance costs 1,173 734
Depreciation 5,628 4,498
Amortisation of intangible assets 1,182 1,337
Research and development tax credit (333) -
Other non-cash movements including exchange rate movements 357 719
Share-based payment 1,773 3,107
Changes in working capital:
Increase in trade and other receivables (18,659) (10,664)
Increase in amounts due from brokers (37,497) (35,160)
Increase in trade and other payables 57,666 1,180
Increase in net derivative financial instruments (5,269) (954)
Increase in provisions 271 342
------------------------------------------------------------ --------------- ---------------
Cash generated from operations 64,242 11,865
------------------------------------------------------------ --------------- ---------------
The movement in trade and other receivables for the year ended 31 March 2018 also includes GBP310,000 (31 March 2017: GBP490,000) of exceptional litigation income received during the year. This exceptional income was recognised in the year ended 31 March 2016.
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.
END
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