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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 6.50 | 2.59% | 257.00 | 258.00 | 259.50 | 261.00 | 251.00 | 252.00 | 595,066 | 16:35:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Brokers & Dealers | 321.78M | 41.44M | 0.1481 | 17.52 | 726.12M |
From Apr 2019 to Apr 2024
TIDMCMCX
RNS Number : 1237U
CMC Markets Plc
21 November 2019
21 November 2019
CMC MARKETS PLC
Interim results for the half year ended 30 September 2019
Strong net operating income, up 45%; Profit before tax GBP30 million
Technology partnerships further diversifying revenue streams
Hot Features
Premium
30 September 30 September
For the half year ended 2019 2018 Change
Net operating income (GBP million) 102.3 70.6 45%
Profit before tax (GBP million) 30.1 7.2 318%
Basic earnings per share (pence) 9.5 2.7 252%
Dividend per share (pence) 2.85 1.35 111%
======================================== ============= ============= =======
CFD net client income (GBP million) 96.0 97.6 (2%)
CFD net revenue (GBP million) 85.1 63.1 35%
CFD active clients (numbers) 41,603 44,697 (7%)
CFD revenue per active client (GBP) 2,047 1,413 45%
Stockbroking net revenue (GBP million) 14.5 5.5 164%
======================================== ============= ============= =======
Notes:
- Net operating income represents total revenue net of introducing partners commissions and betting levies
- CFD net client income represents spreads, financing and commissions charged to clients (client transaction costs) net of rebates
- CFD net revenue represents total trading revenue generated from CFD clients net of introducing partners commissions and betting levies
- CFD active clients represent those individual clients who have traded with or held a CFD or spread bet position with CMC Markets on at least one occasion during the six month period
- CFD revenue per active client represents total trading revenue from CFD and spread bet active clients after deducting rebates and levies
Financial and operating highlights
-- Strong performance with net operating income up GBP31.7 million (45%) to GBP102.3 million (H1 2019: GBP70.6 million) driven by higher CFD revenue per active client, up 45% to GBP2,047, as a result of improving retention of CFD client income, and a GBP9.0 million (164%) increase in stockbroking net revenue
-- Alongside its three strategic initiatives, the Group continues to invest in its proprietary technology platforms to diversify its offering and generate high value through institutional relationships. This has been demonstrated by the success of the ANZ Bank white label partnership which has generated GBP10.0 million net revenue in H1 2020
-- Operating expenses up 13% to GBP71.2 million (H1 2019: GBP62.7 million), due to investment in the stockbroking business (up GBP4.3 million) and higher variable remuneration (up GBP4.5 million)
-- Operating expenses excluding variable remuneration up 7% to GBP64.8 million (H1 2019: GBP60.8 million)
-- Profit before tax up 318% to GBP30.1 million (H1 2019: GBP7.2 million)
-- Decline in active clients, down 7% against H1 2019, which included four months of pre-ESMA regulations, however up 3% against H2 2019
-- Regulatory total capital ratio of 18.0% and own funds of GBP182.8 million
-- Interim dividend of 2.85 pence (H1 2019: 1.35 pence) with a total dividend for the year expected to be in line with policy at 50% of profit after tax
Good strategic progress delivered
-- Institutional offering: continuing focus on the development of existing and new relationships along with development of the product and technology offering
-- Client journey optimisation: simplification of the client onboarding journey has improved lead conversion and a focus on user experience is improving retention of existing clients
-- Established markets: the Group's core markets continue to generate a significant proportion of net operating income and we continue to focus on developing products to satisfy client requirements
Peter Cruddas, Chief Executive Officer, commented:
"I am pleased with the strong first half performance. This time last year we had the uncertainty of regulatory change overhanging the sector with the client response to the changes in minimum margin levels unclear. A year on, we are seeing clients adapt, maintaining their interest in the products and the trading platforms we offer.
It is clear that we are becoming more than a CFD business with income also being derived from technology partnerships, such as the ANZ deal. This is an exciting area of the business which will continue to grow through further planned partnerships and ongoing investment to improve the offering.
From a regulatory perspective, we welcome the consultation by the Australian Securities and Investments Commission ("ASIC") in Australia. The Group is supportive of regulatory change, which ensures that all providers operate to the highest standards, safeguarding fair client outcomes and we believe that a stronger and better industry will emerge from these changes. The exact timing of the ASIC changes is not known, however, the proposed changes are similar to those introduced by the European Securities and Markets Authority ("ESMA") in 2018. Once any changes are implemented in Australia, regulatory uncertainty will finally be lifted from all of our material regions.
I remain positive on the outlook for the remainder of the financial year and am excited about the future opportunities that will open up as we continue to focus on the development of our technology and platform offerings."
Analyst and Investor Presentation
A presentation will be held for equity analysts and investors today, 21 November 2019, at 10:30 a.m. (GMT).
A live webcast of the presentation will be available via the following link:
https://webcasts.cmcmarkets.com/results/2020halfyear
Alternatively, you can dial into the presentation:
-- United Kingdom: 020 3059 5869 -- All other locations: + 44 20 3059 5869
Please quote "CMC Markets plc H1 2020 Results conference" when prompted.
Forthcoming announcement dates
23 January 2020 Q3 2020 trading update 3 April 2020 FY 2020 pre-close update
Forward looking statements
This trading update may include statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Group undertakes no obligation to update, revise or change any forward-looking statements to reflect events or developments occurring after the date such statements are published.
Enquiries
CMC Markets Plc
Euan Marshall, Chief Financial Officer investor.relations@cmcmarkets.com
Camarco +44 (0) 20 3757 4980
Geoffrey Pelham-Lane
Ed Gascoigne-Pees
Jennifer Renwick
Notes to Editors
CMC Markets Plc ("CMC"), whose shares are listed on the London Stock Exchange under the ticker CMCX (LEI: 213800VB75KAZBFH5U07), was established in 1989 and is now one of the world's leading online financial trading businesses. The company serves retail and institutional clients through regulated offices and branches in 12 countries, with a significant presence in the UK, Australia, Germany and Singapore. CMC Markets offers an award-winning, online and mobile trading platform, enabling clients to trade up to 10,000 financial instruments across shares, indices, foreign currencies, commodities and treasuries through contracts for difference ("CFDs"), financial spread bets (in the UK and Ireland only) and, in Australia, access stockbroking services. More information is available at http://www.cmcmarkets.com/group/
CHIEF EXECUTIVE'S REVIEW
Net operating income of GBP102.3 million (H1 2019: GBP70.6 million) was strong during H1 2020, generated through higher valued clients and growing income from our technology ("B2B") business, the latter underpinned by our ANZ Bank stockbroking relationship which is now yielding material revenue for the Group.
CFD net revenue has increased by GBP22.0 million (35%) to GBP85.1 million. CFD net client income remained robust in comparison to H1 2019, down only 2% despite the prior year comparative including four months of trading pre-regulatory change in the ESMA region.
Following the regulatory changes in the ESMA region, which resulted in retail client margin requirements increasing, we have seen retail client trading activity reduce to between 30 to 40 per cent of previous levels and have naturally seen less volatile CFD trading flows from these retail clients. As previously disclosed, this change in client trading activity in combination with range bound markets led us to re-assess the way in which we manage our net client exposure as returns were deteriorating. The internal adjustments we have been able to make to our risk management approach, where we now internalise a greater proportion of our net client exposure over a longer period of time, have resulted in both improving client transaction cost capture and also reducing hedge transaction costs. Even with reduced hedging activity, a significant amount of net client exposure continues to be hedged with our prime brokers. This has allowed us to concentrate on continuing to acquire and retain higher value, sophisticated clients. In addition, we are building up diversity through technology partnerships that do not result in taking on market risk exposure. For example, our stockbroking white label business has no market risk management requirements as all trades are executed directly with exchanges around the world.
The Group's strategic initiatives continue to grow and diversify the business, which are underpinned by a focus on providing superior technology to our clients and partners. This has been demonstrated during the period with 81% of stockbroking net revenue and 19% of the Group's CFD net revenue generated from our B2B business.
Operating expenses excluding variable remuneration have increased by GBP4.0 million (7%) to GBP64.8 million, which has been achieved in spite of the enlarged stockbroking business contributing GBP4.3 million to the cost base. When looking at the CFD business alone, operating expenses excluding variable remuneration were flat against H1 2019. Given the improving performance of the Group, variable remuneration increased to GBP6.4 million (H1 2019: GBP1.9 million).
Marketing spend during the period was 16% lower than H1 2019 with changes to digital spend being tested and optimised during the period. The number of client applications has decreased, but at a lower rate than the decrease in marketing spend. This has ultimately led to a small decrease in the number of new accounts.
The operational gearing in the business resulted in a statutory profit before tax of GBP30.1 million, up 318% on prior year (H1 2019: GBP7.2 million). Profit after tax was GBP27.5 million, up 253% against prior year (H1 2019: GBP7.8 million) and basic earnings per share were 9.5 pence (H1 2019: 2.7 pence).
Regulatory change
The Group is supportive of regulatory change to ensure that all providers operate to the highest standards, ensuring fair client outcomes. Having seen the impact of the regulatory changes introduced by ESMA, we believe that similar changes implemented by regulators in the major regions will result in a stronger and better industry. Our historic focus on high value clients and high regulatory standards put us in a great position to remain a leading force in the industry.
ESMA measures have now been in effect for over 12 months and we are seeing a few emerging trends, such as the ongoing reduced trading activity for retail clients, which continues to be around 30-40% of pre-ESMA levels, and the use of more cash on account to fund margin requirements while holding trades for longer periods of time. Aside from the initial drop off in the number of monthly active clients immediately after the ESMA measures were implemented, clients overwhelmingly still have an appetite to trade and we are seeing active retail client numbers slowly recover. Our professional client numbers have remained stable since the implementation of ESMA regulations.
On 7 October 2019, changes to foreign exchange margins from 2% to 5% as required by the Markets Authority of Singapore ("MAS") were implemented. Given the size of the region in comparison to the Group and that clients in this region are already familiar with higher margin requirements, the revenue impact is not going to be material, and indeed early indications are that client trading activity has not changed markedly.
The Group responded to the consultation paper released by the ASIC before the deadline of 1 October 2019 and is overall, supportive of changes within the paper. Timeframes for implementation of any resulting changes remains unclear, however, the Group's focus on higher value and sophisticated clients alongside experience gained through the ESMA implementation will help to mitigate the impact of any changes. Our Australian business generated 29% of the Group CFD net client income in H1 2020. Once any changes are implemented, regulatory uncertainty will finally be removed from all of our material regions.
Finally, regarding the UK's exit from the European Union, our German office, which will operate as our European Economic Area hub, now has a regulatory licence.
Strategic initiatives
The Group continues to deliver on strategic initiatives and maintains a healthy pipeline of projects that diversify revenue streams through product, channel and geography. These initiatives are all supported by our ongoing focus on, and investment in, technology.
Institutional ("B2B")
The institutional business continues to provide great growth potential as we develop the technology offering further. The ANZ Bank partnership is now delivering clear evidence of the value that can be generated. The Group continues to add both new CFD and stockbroking institutional clients, although any new relationships onboarded during the period have not made a material contribution to Group revenue at this stage.
Client journey optimisation
During the half year a number of improvements have been made. Firstly, there has been a focus on simplifying our onboarding journey to improve our conversion rate, making our cost of acquisition as efficient as possible. Acquisition is just one part of the client journey and we have also been improving user experience, particularly on mobile, which is leading to better retention of existing clients. Finally, as well as serving clients through providing an award-winning platform we have also been working on providing better communication to our clients, at the right time and through their preferred medium. There is always more we can do to optimise our client journey and we are exploring ways to accelerate improvements in this area so that we can increase client lifetime value.
Established markets
Given the maturity of the markets and our long presence in these regions, the UK, Australia and Germany continue to present great opportunities for growth, both from growing revenue with our existing clients as well as attracting switchers and new entrants to the market.
Dividend
With regulatory uncertainty largely behind us, the Group is confident that maintaining the dividend policy at 50% of profit after tax should provide more stable and sustainable shareholder distributions going forward. The Board has declared an interim dividend of 2.85 pence per share (2019: 1.35 pence per share), with a view to paying a final dividend in line with the Group's policy. The interim dividend will be paid on 20 December 2019 to those members on the register at the close of business on 29 November 2019.
Outlook
Following ongoing strong CFD net revenue performance at the start of H2 2020 the Board has gained further confidence in the full year performance, and it is now expected that net operating income will be in excess of GBP180 million. We continue to expect 2020 operating expenses excluding variable remuneration to be moderately higher year-on-year, with H2 2020 operating expenses excluding variable remuneration to be broadly in line with H1 2020.
The Group continues to invest in technology and people in both the CFD and stockbroking businesses which present great opportunities to deliver long-term value for shareholders.
OPERATING review
Summary
Net operating income increased by GBP31.7 million (45%) to GBP102.3 million, with strong growth in both the CFD and Stockbroking areas of the business.
CFD and spread bet net revenue increased by GBP22.0 million (35%) driven by a greater retention of client income under the revised risk management strategy. The improvements were most noticeable in our two largest asset classes, Indices and FX. Indices improvements were driven by ongoing optimisation of the risk management strategy delivering higher retention of client income, whilst in FX net revenue has increased through improvements in the quality of flow received from institutional clients.
Stockbroking net revenue was 164% higher at GBP14.5 million (H1 2019: GBP5.5 million), with the current period benefitting from the ANZ Stockbroking partnership which went live in full at the end of H1 2019.
Statutory profit before tax increased by GBP22.9 million (318%) to GBP30.1 million and the profit before tax margin(1) increased by 19.2% from 10.2% to 29.4%.
Net operating income overview
For the half year ended
GBP million 30 September 2019 30 September 2018 Change
CFD and Spread bet (including binaries) net revenue 85.1 63.1 35%
Stockbroking net revenue (excl. interest income) 14.5 5.5 164%
----------------------------------------------------- ------------------ ------------------ -------
Net trading revenue 99.6 68.6 45%
Interest income 1.8 1.6 17%
Other operating income 0.9 0.4 102%
===================================================== ================== ================== =======
Net operating income 102.3 70.6 45%
===================================================== ================== ================== =======
For the half year ended 30 September 2019 30 September 2018 Change
-------------------
GBP million B2C(2) B2B(3) Total B2C B2B Total B2C B2B Total
-------------------------- ------- ------- ------ ------ ------ ---- ----- ------
CFD and Spread bet
net revenue 69.0 16.1 85.1 49.1 14.0 63.1 40% 15% 35%
Stockbroking net revenue 2.7 11.8 14.5 2.4 3.1 5.5 15% 276% 164%
Net trading revenue 71.7 27.9 99.6 51.5 17.1 68.6 39% 63% 45%
========================== ======= ======= ====== ====== ====== ====== ==== ===== ======
Regional performance overview: CFD and Spread bet
For the
half
year 30 September 30 September
ended 2019 2018 Change
-------- ------------------------------------------ ------------------------------------ ---------------------------------
CFD
CFD net CFD
Net net Net client net
revenue client Active RPC revenue income Active RPC Net client Active
(GBPm) income(GBPm) Clients (GBP) (GBPm) (GBPm) Clients (GBP) revenue income Clients RPC
-------- -------- ------------- -------- ------- -------- ------- -------- ------- -------- ------- -------- ----
UK 29.7 33.3 9,259 3,205 27.6 35.4 11,083 2,496 8% (6%) (16%) 29%
Europe 15.9 16.5 13,865 1,149 16.3 22.8 16,617 978 (2%) (28%) (17%) 17%
-------- -------- ------------- -------- ------- -------- ------- -------- ------- -------- ------- -------- ----
ESMA
Region 45.6 49.8 23,124 1,972 43.9 58.2 27,700 1,582 4% (14%) (17%) 25%
APAC &
Canada 39.5 46.2 18,479 2,140 19.2 39.4 16,997 1,131 106% 17% 9% 89%
======== ======== ============= ======== ======= ======== ======= ======== ======= ======== ======= ======== ====
Total 85.1 96.0 41,603 2,047 63.1 97.6 44,697 1,413 35% (2%) (7%) 45%
======== ======== ============= ======== ======= ======== ======= ======== ======= ======== ======= ======== ====
(1) Statutory profit before tax as a percentage of net operating income
(2) Defined as individuals acquired directly by CMC, including those of both retail and professional classification
(3) Defined as institutions that trade directly with CMC or individuals that have been introduced via an institution
ESMA region performance overview, by categorisation: CFD and Spread bet
The comparative below is against H2 2019 given this was the first six month period since the implementation of ESMA intervention measures.
For the half
year ended 30 September 2019 31 March 2019 Change
-------------- ------------------------------------------ ----------------------------------- ---------------------------------
CFD
CFD client CFD
Net net Net net net
revenue client Active RPC revenue income Active RPC Net client Active
(GBPm) income(GBPm) Clients (GBP) (GBPm) (GBPm) Clients (GBP) revenue income Clients RPC
-------------- -------- ------------- -------- ------- -------- ------- -------- ------ -------- ------- -------- ----
ESMA Retail 18.0 20.2 21,122 850 10.9 19.1 21,202 514 74% 6% - 65%
ESMA
Professional 27.6 29.6 2,002 13,806 19.6 35.5 2,095 9,344 41% (17%) (4%) 48%
============== ======== ============= ======== ======= ======== ======= ======== ====== ======== ======= ======== ====
ESMA Region 45.6 49.8 23,124 1,972 30.5 54.6 23,297 1,308 50% (9%) (1%) 51%
============== ======== ============= ======== ======= ======== ======= ======== ====== ======== ======= ======== ====
UK
CFD net client income from UK clients decreased by 6%, falling to GBP33.3 million (H1 2019: GBP35.4 million). Despite the prior period containing four months of pre-regulatory change, this decrease demonstrates that clients in the region continue to trade where market conditions provide opportunities.
Revenue per active client improved significantly to GBP3,205 (H1 2019: GBP2,496) following the improved retention of client income which benefits the whole Group.
Active client numbers were down 16% to 9,259 (H1 2019: 11,083) mainly as a result of clients who stopped trading in H1 2019 as a result of ESMA regulatory change and lower client acquisition with marketing spend reduced whilst new approaches were tested and optimised.
Europe
Europe comprises results from the continental European offices. Active client numbers were 17% lower than prior year as a result of clients who stopped trading in H1 2019 as a result of ESMA regulatory change a lower marketing spend across the region. The decrease in active clients was driven by the ESMA Retail client base.
CFD net client income was 28% lower across Europe at GBP16.5 million (H1 2019: GBP22.8 million), driven by ESMA leverage restrictions that came into effect part way through the prior period.
APAC and Canada
Our APAC and Canada business services clients from our Sydney, Auckland, Singapore, Toronto and Shanghai offices along with other regions where we have no physical presence.
CFD net client income increased 17% to GBP46.2 million (H1 2019: GBP39.4 million), with the prior year containing a particularly subdued Q2, and due to clients trading a higher proportion of high spread asset classes, such as commodities, in light of market events.
Active client numbers increased by 9% to 18,479 (H1 2019: 16,997), with strong growth across the majority of offices in the region.
Stockbroking
Active clients
For the half year ended 30 September 2019 31 March 2019 30 September 2018 B2C active clients 20,417 17,929 18,544 B2B active clients 98,105 89,087 30,222 Total Stockbroking active clients 118,522 107,016 48,766 =================================== ================== ============== ==================
The benefits of the ANZ Bank white label partnership in combination with buoyant market conditions resulted net revenue in the Australian stockbroking business growing by GBP9.0 million (164%) to GBP14.5 million (H1 2019: GBP5.5 million) during the period.
The roll out of international shares and online exchange traded options during the last financial year have also assisted growth in the stockbroking business.
Operating expenses
For the half year ended GBP million 30 September 2019 30 September 2018 Change Net staff costs - fixed 26.7 23.5 14% Marketing expenses 7.8 9.3 (16%) Other expenses 30.3 28.0 8% ======================================================= ================== ================== ======= Operating expenses excluding variable remuneration 64.8 60.8 7% Variable remuneration(1) 6.4 1.9 232% ======================================================= ================== ================== ======= Operating expenses 71.2 62.7 13% ======================================================= ================== ================== ======= CFD expenses excluding variable remuneration 53.5 53.8 (1%) Stockbroking expenses excluding variable remuneration 11.3 7.0 61% ======================================================= ================== ================== =======
(1) Includes share based payments
Operating expenses excluding variable remuneration increased by GBP4.0 million (7%) to GBP64.8 million. This was driven by an increase in stockbroking fixed costs during the period required in order to support the larger business and also the variable elements related to transaction volumes. Operating costs excluding variable remuneration in the CFD business were broadly flat against H1 2019.
Variable remuneration increased to GBP6.4 million (H1 2019: GBP1.9 million), following the strong net operating income performance in the first half of the year in both the CFD and Stockbroking businesses.
Taxation
The estimated effective tax rate for H1 2020 was 9%, up from the H1 2019 effective tax rate, which was a credit of 8%. The rate remained lower than the current UK corporation tax rate due to the impact of the ongoing recognition of Australian deferred tax assets, but was higher than the prior year due to the higher tax impact of Group profit relative to the amount of deferred tax losses recognised.
Balance sheet and own funds
Property, plant and equipment increased by GBP12.6 million to GBP30.7 million due to the recognition of GBP14.7 million (31 March 2019: GBPnil) right-of-use assets under the newly-adopted accounting standard IFRS16 Leases, which was applicable to the Group from 1 April 2019. Due to the adoption of the same accounting standard, a lease liability of GBP21.4 million has also been recognised.
Trade receivables decreased by GBP17.3 million over the six month period and the main driver of this was a GBP11.8 million decrease in stockbroking trades yet to settle. A similar decrease of GBP11.1 million was seen in stockbroking payables for the same reason.
Amounts due from brokers increased by GBP21.8 million to GBP109.8 million due to a GBP22.2 million increase in the excess held at brokers in comparison to initial margin requirement at period end. During the period, the Group has rarely drawn down on its GBP40.0 million revolving credit facility, which can only be used to fund broker margin requirements. The amount drawn at the end of the period was GBPnil (31 March 2019: GBPnil). Cash and cash equivalents also increased during the period by GBP13.2 million to GBP62.0 million with funds generated during the period largely held as cash or at brokers.
Own funds increased by GBP33.0 million to GBP182.8 million (31 March 2019: GBP149.8 million) during the six month period with the increase largely due to own funds generated from operating activities.
Principal risks and uncertainties
Details of the Group's approach to risk management and its principal risks and uncertainties were set out on pages 36 to 43 of the 2019 Group Annual Report and Financial Statements (available on the Group website https://www.cmcmarkets.com/group). During the six months to 30 September 2019 and up to the date of approval of the interim financial statements, there have been no significant changes to the Group's risk management framework. The Group categorises its principal risks into three areas: business and strategic risks; financial risks; and operational risks. The Group's top and emerging risks, which form either a subset of one or multiple principal risks within the three principal risk categories, and continue to be at the forefront of Group discussions, are regulatory change across the Group and the UK's exit from the European Union, although the latter is now largely mitigated through the German subsidiary receiving a regulatory license during the first half of the financial year.
RESPONSIBILITY STATEMENT
The directors listed below (being all the directors of CMC Markets plc) confirm that to the best of our knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- the interim management report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the consolidated interim financial statements, together with a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months of the financial year and any material changes in the related-party transactions described in the last annual report.
Neither the Group nor the directors accept any liability to any person in relation to the half-yearly financial report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A and Schedule 10A of the Financial Services and Markets Act 2000.
By order of the board of directors
Peter Cruddas
Chief Executive Officer
20 November 2019
CMC Markets plc Board of Directors
Executive Directors
Peter Cruddas (Chief Executive Officer)
David Fineberg (Deputy Chief Executive Officer)
Matthew Lewis (Head of Asia Pacific and Canada)
Euan Marshall (Chief Financial Officer)
Non-Executive Directors
James Richards (Chairman)
Sarah Ing
Clare Salmon
Paul Wainscott
CONSOLIDATED INTERIM INCOME STATEMENT
For the half year ended 30 September 2019 (Unaudited)
GBP '000 Note 30 September 2019 30 September 2018
===== ==================
Revenue 3 123,030 82,619
Interest income 1,843 1,575
============================================================ ===== ================== ==================
Total revenue 124,873 84,194
Introducing partner commissions and betting levies (22,554) (13,574)
============================================================ ===== ================== ==================
Net operating income 2 102,319 70,620
Operating expenses 4 (71,190) (62,728)
============================================================ ===== ================== ==================
Operating profit 31,129 7,892
Finance costs (1,034) (693)
============================================================ ===== ================== ==================
Profit before taxation 30,095 7,199
Taxation 5 (2,595) 595
============================================================ ===== ================== ==================
Profit for the period attributable to owners of the parent 27,500 7,794
============================================================ ===== ================== ==================
Earnings per share
Basic earnings per share (p) 6 9.5p 2.7p
============================================================ ===== ================== ==================
Diluted earnings per share (p) 6 9.4p 2.7p
============================================================ ===== ================== ==================
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the half year ended 30 September 2019 (Unaudited)
GBP '000 30 September 2019 30 September 2018
==================
Profit for the period 27,500 7,794
Other comprehensive income / (expense):
Items that may be subsequently reclassified to income statement
Loss on net investment hedges (411) (629)
Currency translation differences 708 779
Change in value of debt instruments at fair value through other comprehensive
income 2 31
============================================================================== ================== ==================
Other comprehensive income for the period 299 181
============================================================================== ================== ==================
Total comprehensive income for the period 27,799 7,975
============================================================================== ================== ==================
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
At 30 September 2019 (Unaudited)
GBP '000 Note 30 September 2019 30 September 2018 31 March 2019
===== ================== ==================
ASSETS
Non-current assets
Intangible assets 8 4,539 6,383 4,961
Property, plant and equipment 9 30,679 20,380 18,105
Deferred tax assets 14,732 11,228 11,649
Financial investments 11 - 10,761 11,332
Trade and other receivables 10 2,711 2,356 2,693
============================================== ===== ================== ================== ==============
Total non-current assets 52,661 51,108 48,740
============================================== ===== ================== ================== ==============
Current assets
Trade and other receivables 10 100,634 104,340 117,991
Derivative financial instruments 2,792 5,178 2,885
Financial investments 11 25,211 10,143 10,747
Current tax recoverable 4,238 369 3,384
Amounts due from brokers 109,827 136,985 88,035
Cash and cash equivalents 12 61,973 47,647 48,729
============================================== ===== ================== ================== ==============
Total current assets 304,675 304,662 271,771 ============================================== ===== ================== ================== ============== TOTAL ASSETS 357,336 355,770 320,511 ============================================== ===== ================== ================== ============== LIABILITIES Current liabilities Trade and other payables 13 91,758 95,185 100,572 Derivative financial instruments 7,224 10,227 4,303 Borrowings 14 1,095 28,691 1,088 Lease liabilities 5,158 - - Short term provisions 221 134 246 ============================================== ===== ================== ================== ============== Total current liabilities 105,456 134,237 106,209 ============================================== ===== ================== ================== ============== Non-current liabilities Trade and other payables 13 - 5,344 4,810 Borrowings 14 833 1,852 1,247 Lease liabilities 16,266 - - Deferred tax liabilities 1,153 691 1,155 Long term provisions 2,017 2,263 2,010 ============================================== ===== ================== ================== ============== Total non-current liabilities 20,269 10,150 9,222 ============================================== ===== ================== ================== ============== TOTAL LIABILITIES 125,725 144,387 115,431 ============================================== ===== ================== ================== ============== EQUITY Equity attributable to owners of the Company Share capital 72,899 72,872 72,892 Share premium 46,236 46,236 46,236 Own shares held in trust (607) (616) (604) Other reserves (49,530) (49,271) (49,829) Retained earnings 162,613 142,162 136,385 ============================================== ===== ================== ================== ============== Total equity 231,611 211,383 205,080 ============================================== ===== ================== ================== ============== TOTAL EQUITY AND LIABILITIES 357,336 355,770 320,511 ============================================== ===== ================== ================== ==============
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the half year ended 30 September 2019 (Unaudited)
Own shares
Share Share held in Other Retained
GBP '000 capital premium trust reserves earnings Total Equity
============= ============= ============= ============= =============
At 1 April 2018 72,872 46,236 (567) (49,452) 150,941 220,030
Total
comprehensive
income for the
period - - - 181 7,794 7,975
Acquisition of
own shares - - (49) - - (49)
Share-based
payments - - - - 675 675
Tax on
share-based
payments - - - - (57) (57)
Dividends - - - - (17,191) (17,191)
================ ============= ============= ============= ============= ============= =============
At 30 September
2018 72,872 46,236 (616) (49,271) 142,162 211,383
================ ============= ============= ============= ============= ============= =============
At 31 March
2019 72,892 46,236 (604) (49,829) 136,385 205,080
Change in
accounting
policy - - - - 263 263
================ ============= ============= ============= ============= ============= =============
Restated at 1
April 2019 72,892 46,236 (604) (49,829) 136,648 205,343
New shares
issued 7 - - - - 7
Total
comprehensive
income for the
period - - - 299 27,500 27,799
Acquisition of
own shares - - (32) - - (32)
Utilisation of
own shares
held in trust - - 29 - - 29
Share-based
payments - - - - 430 430
Dividends - - - - (1,965) (1,965)
================ ============= ============= ============= ============= ============= =============
At 30 September
2019 72,899 46,236 (607) (49,530) 162,613 231,611
================ ============= ============= ============= ============= ============= =============
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the half year ended 30 September 2019 (Unaudited)
GBP '000 Note 30 September 2019 30 September 2018
===== ==================
Cash flows from operating activities
Cash generated from / (used in) operations 15 29,739 (14,000)
Net interest income 2,116 1,575
Tax paid (6,472) (4,524)
======================================================================= ===== ================== ==================
Net cash generated from / (used in) operating activities 25,383 (16,949)
======================================================================= ===== ================== ==================
Cash flows from investing activities
Purchase of property, plant and equipment (1,210) (2,618)
Investment in intangible assets (285) (2,502)
Purchase of financial investments (3,402) -
Proceeds from maturity of financial investments and coupon receipts - 329
Outflow on net investment hedges (581) (629)
======================================================================= ===== ================== ==================
Net cash used in investing activities (5,478) (5,420)
======================================================================= ===== ================== ==================
Cash flows from financing activities
Proceeds from borrowings 10,175 71,000
Repayment of borrowings (11,197) (43,637)
Principal elements of lease payments (30 September 2018: Principal
elements of finance lease
payments) (3,034) (440)
Acquisition of own shares (25) (49)
Dividends paid (1,965) (17,191)
Finance costs (1,034) (693)
======================================================================= ===== ================== ==================
Net cash (used in) / generated from financing activities (7,080) 8,990
======================================================================= ===== ================== ==================
Net increase / (decrease) in cash and cash equivalents 12,825 (13,379) Cash and cash equivalents at the beginning of the period 48,729 60,468 Effect of foreign exchange rate changes 419 558 ======================================================================= ===== ================== ================== Cash and cash equivalents at the end of the period 61,973 47,647 ======================================================================= ===== ================== ==================
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the half year ended 30 September 2019 (unaudited)
1. Basis of preparation
Basis of accounting and accounting policies
The condensed consolidated interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2019 and the condensed consolidated interim financial statements for the half year ended 30 September 2019 have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("IFRSs"), IFRS Interpretations Committee ("IFRS ICs") interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs.
The statutory financial statements for the year ended 31 March 2019 have been delivered to the Registrar of Companies. The auditors' opinion on those financial statements was unqualified and did not contain a statement made under Section 498 of the Companies Act 2006.
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
The accounting policies applied in these condensed consolidated interim financial statements are consistent with those applied in the Group's statutory financial statements for the year ended 31 March 2019, with the exception of the adoption of new and amended standards as set out below.
The condensed consolidated interim financial statements have been prepared under the historical cost convention, except in the case of "Financial instruments at fair value through profit or loss (FVPL)" and "Financial instruments at fair value through other comprehensive income (FVOCI)". The financial information is rounded to the nearest thousand, except where otherwise indicated.
New and amended standards adopted by the Group
The Group adopted IFRS 16 Leases from 1 April 2019. IFRS16 replaced IAS 17 Leases. Whilst lessor accounting is similar to IAS 17, lessee accounting is significantly different. Under IFRS 16, the Group recognised within the statement of financial position a right-of-use asset and a lease liability for future lease payments in respect of all leases, unless the underlying assets are of low value or the lease term is 12 months or less. Within the income statement, operating lease expense on the impacted leases was replaced with depreciation on the right-of-use asset and interest expense on the lease liability.
The Group applied IFRS 16 on a modified retrospective basis without restating prior years and electing for the following exemptions on transition at 1 April 2019. The Group:
-- applied IFRS 16 to contracts previously identified as leases by IAS 17; -- used the incremental borrowing rate as the discount rate; and
-- did not apply IFRS 16 to operating leases with a remaining lease term of less than 12 months.
The impact of the adoption of the leasing standard and the new accounting policies are disclosed in note 16 below.
Apart from IFRS 16, several other amendments and interpretations, as listed below, applied for the first time, but do not have an impact on the condensed consolidated interim financial statements of the Group.
-- IFRIC 23 Uncertainty Over Income Tax Treatments;
-- Annual Improvements to IFRS 2015 - 2017 Cycle (Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23).
Impact of standards issued but not yet adopted by the Group
The IASB has issued a number of minor amendments to IFRSs effective 1 April 2020. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. These amendments are not expected to have a significant impact on the Group.
Significant accounting judgements
The preparation of condensed consolidated interim financial statements in conformity with IFRS requires the use of certain significant accounting judgements. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The only area involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the condensed consolidated interim 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.
Going concern
The Group has considerable financial resources, a broad range of products and a geographically diversified business. Consequently, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook. Accordingly, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. They therefore continue to adopt the going concern basis in preparing these condensed consolidated interim financial statements.
Seasonality of operations
The Directors consider that, given the impact of market volatility, and the growth in overseas business and the use of mobile platforms, there is no predictable seasonality to the Group's operations.
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 bets only in UK and Ireland and the Group provides stockbroking services only in Australia. The Group's business is generally managed on a geographical basis and for management purposes, the Group is organised into four segments:
-- CFD and Spreadbet - UK and Ireland (UK & IE); -- CFD - Europe; -- CFD - Australia, New Zealand and Singapore (APAC) and Canada; and -- Stockbroking - Australia
These segments are in line with the management information received by the Chief Operating Decision Maker (CODM).
Revenues and costs are allocated to the segments that originated the transaction. Costs generated centrally are allocated to segments on an equitable basis, mainly based on revenue, headcount or active client levels, or where central costs are directly attributed to specific segments.
CFD and Spreadbet Stock-broking
==============
30 September 2019 APAC &
GBP '000 UK & IE Europe Canada Australia Central Total
================================== ========== ========== ============== ========== =========
Segment revenue net of
Introducing partner commissions
and betting levies 30,133 16,005 39,846 14,492 - 100,476
Interest income 871 - 828 144 - 1,843
================================== ========== ========== ========== ============== ========== =========
Net operating income 31,004 16,005 40,674 14,636 - 102,319
Segment operating expenses (6,460) (4,176) (7,559) (4,153) (48,842) (71,190)
================================== ========== ========== ========== ============== ========== =========
Segment contribution 24,544 11,829 33,115 10,483 (48,842) 31,129
Allocation of central
operating expenses (13,511) (13,386) (14,190) (7,755) 48,842 -
================================== ========== ========== ========== ============== ========== =========
Operating profit 11,033 (1,557) 18,925 2,728 - 31,129
Finance costs (280) (8) (168) (135) (443) (1,034)
Allocation of central
finance costs (202) (80) (161) - 443 -
================================== ========== ========== ========== ============== ========== =========
Profit before taxation 10,551 (1,645) 18,596 2,593 - 30,095
================================== ========== ========== ========== ============== ========== =========
CFD and Spreadbet Stock-broking
==============
30 September 2018 APAC &
GBP '000 UK & IE Europe Canada Australia Central Total ================================== ========= ========= ============== ========= ========= Segment revenue net of Introducing partner commissions and betting levies 27,800 16,227 19,403 5,615 - 69,045 Interest income 684 1 794 96 - 1,575 ================================== ========= ========= ========= ============== ========= ========= Net operating income 28,484 16,228 20,197 5,711 - 70,620 Segment operating expenses (8,594) (5,208) (6,857) (848) (41,221) (62,728) ================================== ========= ========= ========= ============== ========= ========= Segment contribution 19,890 11,020 13,340 4,863 (41,221) 7,892 Allocation of central operating expenses (11,974) (11,483) (11,934) (5,830) 41,221 - ================================== ========= ========= ========= ============== ========= ========= Operating profit 7,916 (463) 1,406 (967) - 7,892 Finance costs (55) - - - (638) (693) Allocation of central finance costs (272) (163) (202) (1) 638 - ================================== ========= ========= ========= ============== ========= ========= Profit before taxation 7,589 (626) 1,204 (968) - 7,199 ================================== ========= ========= ========= ============== ========= =========
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. EBITDA comprises operating profit for the period before interest expense, taxation, depreciation of property, plant and equipment and amortisation and impairment of intangibles.
3. Revenue
GBP '000 30 September 2019 30 September 2018
==================
CFD and spread bet 95,833 72,644
Stockbroking 26,357 9,559
Other 840 416
==================== ================== ==================
Revenue 123,030 82,619
==================== ================== ==================
4. Operating Expenses
GBP '000 30 September 2019 30 September 2018
==================
Net staff costs 33,191 25,425
IT costs 10,529 9,832
Sales and marketing 7,752 9,261
Premises 1,595 3,630
Legal and Professional fees 2,491 2,458
Regulatory fees 3,124 1,649
Depreciation and amortisation 5,843 3,500
Other 6,665 6,973
=============================== ================== ==================
Operating expenses 71,190 62,728
=============================== ================== ==================
5. Taxation
GBP '000 30 September 2019 30 September 2018
==================
Analysis of charge for the period:
Current tax
Current tax on profit for the period 5,599 1,788
Adjustments in respect of previous periods 14 10
=================================================== ================== ==================
Total current tax 5,613 1,798
=================================================== ================== ==================
Deferred tax
Origination and reversal of temporary differences (3,068) (2,413)
Adjustments in respect of prior periods (10) 2
Impact of change in tax rate 60 18
=================================================== ================== ==================
Total deferred tax (3,018) (2,393)
=================================================== ================== ==================
Total tax 2,595 (595)
=================================================== ================== ==================
The standard rate of UK corporation tax was 19% with effect from 1 April 2017. Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions. The effective tax rate for the half year ended 30 September 2019 was 8.62% (Half year ended 30 September 2018: -8.27%), differs from the standard rate of UK corporation tax rate of 19% (Half year ended 30 September 2018: 19%). The differences are explained below:
GBP '000 30 September 2019 30 September 2018
==================
Profit before taxation 30,095 7,199
============================================================================== ================== ==================
Profit multiplied by the standard rate of corporation tax in the UK of 19%
(30 September 2018:
19%) 5,718 1,368
Adjustment in respect of foreign tax rates 764 (66)
Adjustments in respect of prior periods 4 12
Impact of change in tax rate 60 18
Recognition of previously unrecognised tax losses (4,218) (2,171)
Expenses not deductible for tax purposes 228 18
Income not subject to tax (10) 3
Irrecoverable foreign tax - 208
Share awards 39 26
Other differences 10 (11)
============================================================================== ================== ==================
Total tax 2,595 (595)
============================================================================== ================== ==================
GBP '000 30 September 2019 30 September 2018
===================
Tax on items recognised directly in Equity
Tax on Share based payments - (57)
============================================ =================== ==================
6. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to the equity owners of the Company by the weighted average number of ordinary shares in issue during each period excluding those held in employee share trusts which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding those held in employee share trusts, is adjusted to assume conversion of all dilutive potential weighted average ordinary shares, which consists of share options granted to employees and shares issuable to client investors at IPO.
GBP '000 30 September 2019 30 September 2018
==================
Earnings attributable to ordinary shareholders
(GBP '000) 27,500 7,794
================================================ ================== ==================
Weighted average number of shares used in the
calculation of basic earnings per share ('000) 288,582 288,322
Dilutive effect of share options ('000) 2,887 3,139
================================================ ================== ==================
Weighted average number of shares used in the
calculation of diluted earnings per share
('000) 291,469 291,461
================================================ ================== ==================
Basic earnings per share (p) 9.5p 2.7p
================================================ ================== ==================
Diluted earnings per share (p) 9.4p 2.7p
================================================ ================== ==================
For the half year ended 30 September 2019, 2,887,000 (Half year ended 30 September 2018: 3,139,000) potentially dilutive weighted average ordinary shares in respect of share options in issue were included in the calculation of diluted EPS.
7. Dividends
GBP '000 30 September 2019 30 September 2018
==================
Prior year final dividend of 0.68p per share (30 September 2018: 5.95p) 1,965 17,191
========================================================================= ================== ==================
An interim dividend for 2020 of 2.85p per share, amounting to GBP8,240,000 has been approved by the board but has not been included as a liability at 30 September 2019. The dividend will be paid on 20 December 2019 to those members on the register at the close of business on 29 November 2019.
8. Intangible assets
Trademarks and Client Assets under
GBP '000 Goodwill Computer software trading licences relationships development Total
========= ================== ================= ================= =================
At 31 March 2019
Cost 11,500 123,010 1,448 2,959 9 138,926
Accumulated
amortisation (11,500) (118,468) (1,038) (2,959) - (133,965)
================== ========= ================== ================= ================= ================= ==========
Carrying amount - 4,542 410 - 9 4,961
================== ========= ================== ================= ================= ================= ==========
Half year ended 30 September 2019
Carrying amount
at the beginning
of the period - 4,542 410 - 9 4,961
Additions - 285 - - - 285
Amortisation
charge - (721) (27) - - (748)
Foreign currency
translation - 34 7 - - 41
================== ========= ================== ================= ================= ================= ==========
Carrying amount
at the end of
the period - 4,140 390 - 9 4,539
================== ========= ================== ================= ================= ================= ==========
At 30 September
2019
Cost 11,500 123,498 1,467 2,984 9 139,458
Accumulated
amortisation (11,500) (119,358) (1,077) (2,984) - (134,919)
================== ========= ================== ================= ================= ================= ==========
Carrying amount - 4,140 390 - 9 4,539
================== ========= ================== ================= ================= ================= ==========
9. Property, plant and equipment
Leasehold Furniture, fixtures
GBP '000 improvements and equipment Computer hardware Right-of-use assets Total
==================== ==================== ================== ====================
At 31 March 2019
Cost 21,339 10,942 36,944 - 69,225
Accumulated
depreciation (11,424) (9,176) (30,520) - (51,120)
===================== ==================== ==================== ================== ==================== =========
Carrying amount 9,915 1,766 6,424 - 18,105
===================== ==================== ==================== ================== ==================== =========
Half year ended 30 September 2019
Carrying amount at
the beginning of
the period 9,915 1,766 6,424 - 18,105
Change in accounting
policy (860) - (1,763) 16,947 14,324
===================== ==================== ==================== ================== ==================== =========
Re-stated Carrying
amount at the
beginning of the
period 9,055 1,766 4,661 16,947 32,429
Additions 76 77 3,287 26 3,466
Disposals (91) (102) (3) (124) (320)
Depreciation charge (1,540) (334) (989) (2,232) (5,095)
Foreign currency
translation 51 24 18 106 199
===================== ==================== ==================== ================== ==================== =========
Carrying amount at
the end of the
period 7,551 1,431 6,974 14,723 30,679
===================== ==================== ==================== ================== ==================== =========
At 30 September 2019
Cost 19,298 10,728 30,663 16,884 77,573
Accumulated
depreciation (11,747) (9,297) (23,689) (2,161) (46,894)
===================== ==================== ==================== ================== ==================== =========
Carrying amount 7,551 1,431 6,974 14,723 30,679
===================== ==================== ==================== ================== ==================== =========
The carrying amount of property, plant and equipment held under lease includes all Right-of-use assets on 30 September 2019 (31 March 2019: Computer hardware - GBP1,763,000 held under finance leases).
10. Trade and other receivables
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Current
Gross trade receivables 8,874 7,376 8,185
Less: provision for impairment of trade receivables (3,759) (3,426) (3,528)
===================================================== ================== ================== ==============
Trade receivables 5,115 3,950 4,657
Prepayments and accrued income 7,431 15,708 12,391
Stockbroking debtors 70,711 69,155 82,510
Other debtors 17,377 15,527 18,433
===================================================== ================== ================== ==============
100,634 104,340 117,991
===================================================== ================== ================== ==============
Non-current
Other debtors 2,711 2,356 2,693
===================================================== ================== ================== ==============
Total 103,345 106,696 120,684
===================================================== ================== ================== ==============
Stockbroking debtors represent the amount receivable in respect of equity security transactions executed on behalf of clients with a broadly corresponding balance included within trade and other payables (note 13).
11. Financial investments
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
UK Government securities:
At the beginning of the period / year 22,013 21,152 21,152
Purchase of securities 3,402 - 11,287
Maturity of securities and Coupon receipts (355) (329) (10,613)
Accrued interest 82 50 103
Net gains transferred to equity 2 31 84
============================================ ================== ================== ==============
At the end of the period / year 25,144 20,904 22,013
============================================ ================== ================== ==============
Equity securities:
At the beginning of the period / year 66 - -
Purchase of securities - - 66
Foreign currency translation 1 - -
============================================ ================== ================== ==============
At the end of the period / year 67 - 66
============================================ ================== ================== ==============
Total 25,211 20,904 22,079
============================================ ================== ================== ==============
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Analysis of financial investments
Non-current - 10,761 11,332
Current 25,211 10,143 10,747
=================================== ================== ================== ==============
Total 25,211 20,904 22,079
=================================== ================== ================== ==============
Financial investments are shown as current assets when they have a maturity of less than one year.
12. Cash and cash equivalents
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Gross cash and cash equivalents 400,491 389,485 381,139
Less: Client monies (338,518) (341,838) (332,410)
================================= ================== ================== ==============
Own cash and cash equivalents 61,973 47,647 48,729
================================= ================== ================== ==============
Analysed as:
Cash at bank 61,973 47,647 48,729
Short-term deposits - - -
================================= ================== ================== ==============
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.
13. Trade and other payables
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Current
Gross trade payables 348,256 350,288 340,042
Less: Client monies (338,518) (341,838) (332,410)
============================== ================== ================== ==============
Trade payables 9,738 8,450 7,632
Tax and social security 79 63 27
Stockbroking creditors 64,651 63,233 75,752
Accruals and deferred income 17,290 23,439 17,161
============================== ================== ================== ==============
91,758 95,185 100,572
============================== ================== ================== ==============
Non-current
Accruals and deferred income - 5,344 4,810
============================== ================== ================== ==============
Total 91,758 100,529 105,382
============================== ================== ================== ==============
14. Borrowings
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Current
Finance lease liabilities - 754 663
Bank loans - 27,500 -
Other liabilities 1,095 437 425
=========================== ================== ================== ==============
1,095 28,691 1,088
=========================== ================== ================== ==============
Non-current
Finance lease liabilities - 1,260 952
Other liabilities 833 592 295
=========================== ================== ================== ==============
833 1,852 1,247
=========================== ================== ================== ==============
Total 1,928 30,543 2,335
=========================== ================== ================== ==============
15. Cash generated from operations
GBP '000 30 September 2019 30 September 2018
==================
Cash flows from operating activities
Profit before taxation 30,095 7,199
Adjustments for:
Net interest income (1,843) (1,575)
Finance costs 1,034 693
Depreciation 5,095 3,028
Amortisation of intangible assets 748 472
Loss on disposal of property, plant and equipment 150 -
Share-based payment 459 675
Other non-cash movements including exchange rate movements 142 62
Changes in working capital:
Decrease / (increase) in trade and other receivables 18,070 (56,569)
(Increase) / decrease in amounts due from brokers (21,792) 19,902
(Decrease) / increase / in trade and other payables (5,578) 3,444
Increase in net derivative financial instruments liabilities 3,184 8,462
(Decrease) / Increase in provisions (25) 207
============================================================== ================== ==================
Cash generated from / (used in) operations 29,739 (14,000)
============================================================== ================== ==================
The movement in trade and other receivables for the half year ended 30 September 2019 includes GBP150,000 (Half year ended 30 September 2018: GBP150,000) of exceptional litigation income relating to year ended 31 March 2016, received during the period.
16. Changes in accounting policies
This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements and discloses the new accounting policies that have been applied from 1 April 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 April 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 April 2019 was 4.65%.
Adjustments recognised on adoption of IFRS 16
The change in accounting policy affected the following items in the statement of financial position on 1 April 2019:
-- Computer hardware - decrease of GBP1,763,000 -- Leasehold improvements - decrease of GBP860,000 -- Right-of-use assets - increase of GBP16,947,000 -- Lease liabilities - increase of GBP24,453,000 -- Finance lease liabilities (Current and non-current portion) - decrease of GBP1,615,000 -- Accruals and deferred income - decrease of GBP8,046,000 -- Prepayments and accrued income - decrease of GBP608,000 -- Other debtors - increase of GBP1,339,000.
The net impact on retained earnings on 1 April 2019 was an increase of GBP263,000.
The table below provides a reconciliation between 'operating lease commitments disclosed applying IAS 17 at 31 March 2019 and lease liabilities recognised on 1 April 2019:
GBP '000 1 April 2019 Operating lease commitments disclosed as at 31 March 2019 25,145 Further lease commitments identified(1) 912 Impact of short-term recognition exemption (145) Discounted using the incremental borrowing rate at the date of initial application (3,074) Finance lease liabilities recognised as at 31 March 2019 1,615 Lease liability recognised as at 1 April 2019 24,453 ==================================================================================== =============
(1) Following a review of lease data validation during the IFRS 16 transition process, additional lease payments were identified which were previously not part of operating lease commitments.
For leases previously classified as finance leases the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.
Other right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position as at 31 March 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
GBP '000 30 September 2019 1 April 2019
==================
Computer hardware 1,218 1,763
Leasehold properties 13,505 15,184
====================== ================== =============
Right-of-use assets 14,723 16,947
====================== ================== =============
Accounting policies applied since 1 April 2019
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of- use assets are presented within Property, plant and equipment in the statement of financial position and are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in- substance fixed payments) less any lease incentives receivable and variable lease payments that depend on an index or a rate.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments.
Short-term leases
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date). Lease payments on short-term leases are recognised as expense on a straight-line basis over the lease term
17. Liquidity
The Group has access to the following liquidity resources that make up total available liquidity:
-- Own funds. The primary source of liquidity for the Group. It represents the funds that the business has generated historically, including any unrealised gains / losses on open hedging positions. All cash held on behalf of segregated clients is excluded. Own funds consists mainly of cash and cash equivalents and also includes investments in UK government securities which are held to meet the Group's liquid asset buffer (LAB - as agreed with FCA). These UK government securities are BIPRU 12.7 eligible securities and are available to meet liabilities which fall due in periods of stress.
-- Title Transfer Funds (TTFs). This represents funds received from professional clients and eligible counterparties (as defined in the FCA Handbook) that are held under a Title Transfer Collateral Agreement (TTCA); a means by which a professional client or eligible counterparty may agree that full ownership of such funds is unconditionally transferred to the Group. The Group considers these funds as an ancillary source of liquidity and places no reliance on its stability.
-- Available committed facility (off-balance sheet liquidity). The Group has access to a syndicated revolving credit facility of up to GBP40.0 million (30 September 2018: GBP65.0 million; 31 March 2019: GBP40.0 million) in order to fund any potential fluctuations in margins required to be posted at brokers to support our risk management strategy. The maximum amount of the facility available at any one time is dependent upon the initial margin requirements at brokers and margin received from clients. The facility consists of a one year term facility of GBP20.0 million and a three year term facility of GBP20.0 million, both of which were renewed in March 2019.
The Group's use of total available liquidity resources consist of:
-- Blocked cash. Amounts held to meet the requirements of local market regulators and amounts held at overseas subsidiaries in excess of local segregated client requirements to meet potential future client requirements.
-- Initial margin requirement at broker. The total GBP equivalent initial margin required by prime brokers to cover the Group's hedge derivative positions.
Own funds on 30 September 2019 were GBP182,841,000 (30 September 2018: GBP192,037,000; 31 March 2019: GBP149,793,000). Short-term financial investments, amounts due from brokers and amounts receivable / (payable) on the derivative financial instruments have been included within 'own funds' in order to provide a clear presentation of the Group's potential cash resources.
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Cash and cash equivalents 61,973 47,647 48,729
Amount due from brokers 109,827 136,985 88,035
Financial investments 25,211 20,904 22,079
Derivative financial instruments (Current Assets) 2,792 5,178 2,885
============================================================== ================== ================== ==============
199,803 210,714 161,728
Less: Title transfer funds (9,738) (8,450) (7,632)
Less: Derivative financial instruments (Current Liabilities) (7,224) (10,227) (4,303)
============================================================== ================== ================== ==============
Own Funds 182,841 192,037 149,793
Title transfer funds 9,738 8,450 7,632
Available committed facility 40,000 36,039 40,000
============================================================== ================== ================== ==============
Total Available liquidity 232,579 236,526 197,425
Less: Blocked cash (26,929) (24,378) (25,904)
Less: Initial margin requirement at broker (67,564) (111,098) (68,269)
============================================================== ================== ================== ==============
Net available liquidity 138,086 101,050 103,252
============================================================== ================== ================== ==============
The following Own Funds Flow Statement summarises the Group's generation of own funds during each period and excludes all cash flows in relation to monies held on behalf of clients.
GBP '000 30 September 2019 30 September 2018 31 March 2019
================== ==================
Operating activities
Profit before tax 30,095 7,199 6,329
Adjustments for:
Finance costs 1,034 693 1,442
Depreciation and amortisation 5,843 3,500 7,325
Other non-cash adjustments 924 768 672
Tax paid (6,472) (4,524) (7,590)
============================================================== ================== ================== ==============
Own funds generated from operating activities 31,424 7,636 8,178
============================================================== ================== ================== ==============
Movement in working capital 10,361 (13,295) (21,393)
============================================================== ================== ================== ==============
Outflow from investing activities
Net Purchase of property, plant and equipment and intangible
assets (1,495) (5,120) (6,711)
Other outflow from investing activities (581) (629) (341)
Outflow from financing activities
Interest paid (1,034) (693) (1,442)
Dividends paid (1,965) (17,191) (21,092)
Other (outflow) / inflow from financing activities (4,081) 26,874 (1,395)
============================================================== ================== ================== ==============
Total (outflow) / inflow from investing and financing
activities (9,156) 3,241 (30,981)
============================================================== ================== ================== ==============
Increase / (Decrease) in own funds 32,629 (2,418) (44,196)
Own funds at the beginning of the period / year 149,793 193,897 193,897
Effect of foreign exchange rate changes 419 558 92
============================================================== ================== ================== ==============
Own funds at the end of the period / year 182,841 192,037 149,793
============================================================== ================== ================== ==============
As part of the transaction with ANZ Bank, the Group deposited AUD 25,000,000 in escrow in April 2017.
18. Fair value measurement disclosures
The Group's assets and liabilities that are measured at fair value are derivative financial instruments and financial investments. The table below categorises those financial instruments measured at fair value based on the following fair value measurement hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); or
-- Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
30 September 2019
GBP '000 Level 1 Level 2 Level 3 Total
======== ======== ========
Financial investments 25,144 - 67 25,211
Derivative financial instruments (Current Assets) - 2,792 - 2,792
Derivative financial instruments (Current Liabilities) - (7,224) - (7,224)
======================================================== ======== ======== ======== ========
25,144 (4,432) 67 20,779
======================================================== ======== ======== ======== ========
30 September 2018
GBP '000 Level 1 Level 2 Level 3 Total
======== ========= ========
Financial investments 20,904 - - 20,904
Derivative financial instruments (Current Assets) - 5,178 - 5,178
Derivative financial instruments (Current Liabilities) - (10,227) - (10,227)
======================================================== ======== ========= ======== =========
20,904 (5,049) - 15,855
======================================================== ======== ========= ======== =========
31 March 2019
GBP '000 Level 1 Level 2 Level 3 Total
======== ======== ========
Financial investments 22,013 - 66 22,079
Derivative financial instruments (Current Assets) - 2,885 - 2,885
Derivative financial instruments (Current Liabilities) - (4,303) - (4,303)
======================================================== ======== ======== ======== ========
22,013 (1,418) 66 20,661
======================================================== ======== ======== ======== ========
Fair value of financial assets and liabilities measured at amortised cost
The fair value of the following financial assets and liabilities not held at fair value approximates to their carrying value:
-- Cash and cash equivalents -- Amounts due from brokers -- Trade and other receivables -- Trade and other payables -- Borrowings 19. Related party transactions
There have been no significant changes to the nature of related parties disclosed in the statutory financial statements for the Group as at and for the year ended 31 March 2019.
Directors' transactions
There were no director transactions during the half year ended 30 September 2019 and 30 September 2018.
20. Contingent liabilities
The Group engages in partnership contracts that could result in non-performance claims and from time to time is involved in disputes during the ordinary course of business. The Group provides for claims where costs are likely to be incurred, and there are no contingent liabilities, which are expected to have a material adverse financial impact on the Group.
21. Forward looking statements
This announcement may include statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Group undertakes no obligation to update, revise or change any forward looking statements to reflect events or developments occurring after the date such statements are published.
INDEPENT REVIEW REPORT TO CMC MARKETS PLC
Report on the consolidated interim financial statements
Our conclusion
We have reviewed CMC Markets plc's consolidated interim financial statements (the "interim financial statements") in the interim results of CMC Markets plc for the half year period ended 30 September 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated interim statement of financial position as at 30 September 2019;
-- the consolidated interim income statement and consolidated interim statement of comprehensive income for the period then ended;
-- the consolidated interim statement of cash flows for the period then ended; -- the consolidated interim statement of changes in equity for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of CMC Markets plc is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
20 November 2019
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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