CMC Markets Plc Interim Results (5300G)

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
	-1.50	-0.61%	246.00	245.00	246.00	246.50	243.00	244.00	49,316	12:15:08

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Security Brokers & Dealers	321.78M	41.44M	0.1481	16.61	688.35M

Cmc Markets (LSE:CMCX)
Historical Stock Chart

From Apr 2022 to Apr 2024

TIDMCMCX

RNS Number : 5300G

CMC Markets Plc

16 November 2022

CMC MARKETS PLC

("CMC" or the "Company")

Interim results for the half year ended 30 September 2022

Net operating income 21% higher versus H1 2022.

Three year growth plan on track. CMC Invest successfully launched in the UK, with Singapore to follow.

 
                                              30 September   30 September 
   For the half year ended                            2022           2021   Change 
 Net operating income (GBP million)                  153.5          126.7      21% 
  Trading net revenue (GBP million)                  128.4          101.0      27% 
   Investing net revenue (GBP million)                20.8           24.2    (14%) 
   Other income (GBP million)                          4.3            1.5     173% 
 Profit before tax (GBP million)                      36.6           36.0       1% 
 Basic earnings per share (pence)                     10.2            9.6       6% 
 Dividend per share (pence)                           3.50           3.50        - 
===========================================  =============  =============  ======= 
 Trading gross client income (GBP million)           154.9          127.0      22% 
 Trading client income retention                       83%            80% 
 Trading active clients (numbers)                   50,199         53,834     (7%) 
 Trading revenue per active client (GBP)             2,558          1,877      36% 
-------------------------------------------  -------------  -------------  ------- 
 Investing active clients (numbers)                164,632        185,847    (11%) 
-------------------------------------------  -------------  -------------  -------

Notes:

- Net operating income represents total revenue net of introducing partner commissions and levies

- Trading net revenue represents contracts for difference ("CFD") and spread bet gross client income net of rebates, levies and risk management gains or losses

- Investing net revenue represents stockbroking revenue net of rebates

- Trading gross client income represents spreads, financing and commissions charged to clients (client transaction costs)

- Active clients represent those individual clients who have traded with or held a CFD or spread bet position or who traded on the stockbroking platform on at least one occasion during the six-month period

- Trading revenue per active client represents total trading revenue from trading active clients after deducting rebates and levies

- A reconciliation of revenue alternative performance measures ("APMs") to the Group's primary statements can be found on page 34

H1 2023 Financial Highlights

   --      Net operating income of GBP153.5 million (H1 2022: GBP126.7 million +21% yoy). 
   --      Trading net revenue was GBP128.4 million (H1 2022: GBP101.0 million +27% yoy). 
   --      Investing net revenue was GBP20.8 million (H1 2022: GBP24.2 million -14% yoy).

-- Operating costs (excluding variable remuneration) of GBP106.3 million (H1 2022: GBP83.1 million(1) +28% yoy) and GBP115.6 million (H1 2022: GBP89.7 million(1) +29% yoy) including variable remuneration. The majority of the cost increase reflects investment for growth across CMC's investing and trading platforms.

-- Regulatory total capital ratio of 610% (FY 2022: 489%) and net available liquidity of GBP254.2 million (FY 2022: GBP245.9 million).

-- Interim dividend of 3.50 pence per share (H1 2022: 3.50 pence) with a total dividend for the year expected to be in line with policy at 50% of profit after tax.

Operational Highlights

-- Plans to grow Group net operating income by 30% over three years based on the 2022 results and underlying conditions, remain on track.

-- Significant development upgrades delivered across existing trading platforms in H1 2023. These include enhanced FX liquidity functionality, new trading analytics, new pricing functions and enhanced onboarding initiatives. Further product upgrades on track for delivery in H2 2023.

-- Expansion of CMC Invest continues. The recent launch of the UK investment platform, CMC Invest UK , which will see new product additions over the coming months, will be followed by the launch of CMC Invest Singapore by the end of FY 2023. Further regional expansion in New Zealand and Canada also being considered.

-- Trading active client figures decreased by 7% although all regions saw an increase in revenue per client (+36% yoy) largely due to higher client income along with an increase in client income retention to 83% (H1 2022: 80%). CMC's marketing focus on premium customers continues to act as a successful strategy for the Group.

-- Operating cost guidance for FY 2023 remains unchanged at GBP215 million excluding variable remuneration. Ongoing GBP weakness and the rate of recruitment for the delivery of strategic initiatives could result in higher costs.

1 30 September 2021 figures restated to include social taxes on FY 2022 annual discretionary bonus to be within variable remuneration

Lord Cruddas, Chief Executive Officer, commented:

"I am pleased to report another strong performance for the first six months of the year. We saw an acceleration in activity across FX and commodities in addition to the normal activity across our index flow during a period of heightened focus on monetary policy action around the globe and a pickup in market volatility and trading volumes.

Against this backdrop, we are on track to deliver our three-year expansion initiatives aimed at driving higher revenues and diversifying our earnings. We remain committed to improving our offering across our core trading CFD and spread bet businesses, allowing our clients to access a wider range of products through our award-winning platforms. In our Institutional trading business, we continue to grow volumes as a non-bank liquidity provider in the FX spot market. I am also pleased to have launched our new UK investing business, CMC Invest UK . This move in the UK into self-directed investing marks a significant milestone for us and complements our already sector-leading stockbroking business in Australia. CMC Invest UK will see significant new product additions in coming months, enhancing the platform to include ISAs, multi-currency accounts, mutual funds, and SIPPs. The UK wealth market remains an attractive environment and we are on target to offer retail investors a market-leading solution for long-term investment and wealth creation.

I am also excited about the ongoing geographical expansion of our offering into new regions like Singapore. We have committed to launch CMC Invest Singapore by the end of FY 2023. This will complement our already substantial business in Australia, where the migration of the approximately 500,000 ANZ Share Investing client base is set to be completed on time, by the end of this financial year.

We are on a fast track to diversification, using our existing platform technology to win B2B and B2C investing business. Our strategic growth plans are on track and set to deliver significant new business expansion as we introduce new products across our retail, institutional and stockbroking businesses."

An analyst and investor presentation will be held on 16 November 2022 9:00am UK time. Participants need to register using the links below to access the webcast.

Webcast:

https://www.lsegissuerservices.com/spark/CMCMarkets/events/fd562c32-760a-4137-a993-c9ada1ca9232

Conference Line:

https://cossprereg.btci.com/prereg/key.process?key=PFDJXXVAE

Forthcoming announcement dates

 
 25 January 2023   Q3 2023 trading update 
 14 April 2023     FY 2023 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.

MAR disclosure statement

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is considered to be in the public domain.

Enquiries

CMC Markets Plc

James Cartwright, Investor Relations

Euan Marshall, Chief Financial Officer investor.relations@cmcmarkets.com

Camarco +44 (0) 20 3757 4980

Geoffrey Pelham-Lane

Jennifer Renwick

Notes to Editors

CMC Markets Plc ("CMC"), whose shares are listed on the London Stock Exchange under the ticker CMCX (LEI: 213800VB75KAZBFH5U07), was established in 1989 and is now one of the world's leading online financial trading businesses. The Company serves retail and institutional clients through regulated offices and branches in 12 countries, with a significant presence in the UK, Australia, Germany and Singapore. CMC Markets offers an award-winning, online and mobile trading platform, enabling clients to trade over 10,000 financial instruments across shares, indices, foreign currencies, commodities and treasuries through contracts for difference ("CFDs"), financial spread bets (in the UK and Ireland only) and, in Australia and the UK, access stockbroking services. More information is available at http://www.cmcmarketsplc.com

CHIEF EXECUTIVE OFFICER'S REVIEW

Our strategy to expand and diversify the business into new asset classes, including the launch of a new investment platform in the UK and the development of a new investment platform in Singapore, is on track. These new business additions are complemented by continued investment in our established CFD and spread bet trading businesses in line with our mission to constantly offer a superior and unrivalled technology experience for our clients.

Financial performance

We closed the first six months with a pickup in market volatility and client trading volumes driving an improvement in net operating income versus last year. H1 2023 trading net revenue was GBP128.4 million (H1 2022: GBP101.0 million), up 27% year-on-year. H1 2023 investing net revenue, which currently relates exclusively to CMC Invest Australia, was GBP20.8 million (H1 2022: GBP24.2 million), down 14% year-on-year driven by lower activity and unfavourable market conditions resulting from the uncertainty around the global economic outlook, inflationary pressures and the resultant impact on interest rates.

Client trading assets under management ("AuM") finished at c. GBP506 million, below the historical period-end record of c. GBP560 million but remaining at elevated levels compared to pre-COVID-19. H1 2023 active trading clients were lower compared to H1 2022 (down 7% to 50,199), nevertheless all regions saw a significant increase in revenue per client (up 36%) largely as a result of growth in client income as well as improved client income retention to 83% (H1 2022: 80%). Our marketing focus is set on positioning ourselves and our platforms towards the premium customer segment. This continues to play to our strengths.

In H1 2023 our Australian investing business, rebranded to CMC Invest Australia, finished the period with a modest reduction in assets under administration ("AuA") from historical record levels. Net revenue decreased 14% driven by lower active clients and unfavourable market conditions resulting in fewer investment opportunities for clients. However, this was partially offset by a significant increase (279% or GBP1.2m) in interest income driven by higher interest rates. Overall activity remains elevated versus pre-pandemic levels. The migration of approximately 500,0000 clients as part of the ANZ Share Investing acquisition is on track and scheduled to finish in H2 this financial year.

Operating costs

Operating costs for H1 2023, excluding variable remuneration, were GBP106.3 million (H1 2022: GBP83.1 million). Operating cost guidance for FY 2023 remains unchanged at GBP215 million excluding variable remuneration. Currency fluctuations, in particular any resumption in GBP weakness, would put pressure on non-GBP denominated costs, but nevertheless would be expected to have a net positive effect on profit due to non-GBP denominated revenue.

Investing (non-leveraged) business expansion update

CMC Invest UK was launched to the UK public on 30 September, marking the first move for CMC into the UK's significant self-directed investing market. It is a natural progression for the Group, complementing our already market-leading stockbroking business in Australia. New product additions in coming months will include ISAs, multi-currency accounts, mutual funds, ESG investment screening and SIPPs. Once this functionality is delivered, we will continue to enhance and invest, providing unrivalled market access to investors through the best technology at lower transactional costs and fees compared to our competitors. We are confident that we will be able to capture an increasing part of the available market over time. As part of our UK growth strategy, we will also deliver a full B2B offering, a strategy we have successfully implemented in Australia which has resulted in CMC becoming the second largest stockbroker in the country.

In Australia the migration of approximately 500,000 Share Investing client accounts following the acquisition of the ANZ Bank investing business continues and is expected to be completed by the end of FY 2023. The CMC Invest Australia platform will offer these new clients a wide range of additional benefits, including access to enhanced market-leading mobile apps and complementary educational tools and resources, as well as lower brokerage commissions across four major international markets and the local Australian market. Our platform offering continues to receive accolades and I am proud to say our Australian stockbroking business won the Canstar Broker of the Year award again in 2022; the twelfth year in a row we have received this prestigious award. At the same time, we continue to pursue growth through B2B partnerships as well as investing and expanding our product offering across the region, which will include physical cryptocurrencies by the end of FY 2023.

We have ambitious plans to continue this expansion in various other countries. The expansion of CMC Invest to our Singapore office continues as planned. More than half of the Singaporean population over the age of sixteen have investments in stocks and equities, equating to around 1.5 million people, and over time the platform will offer B2B and white label opportunities along with the potential to allow further expansion into Asian markets.

Trading (leveraged) business expansion update

CMC is a pioneer of platform technology and boasts over 25 years of experience in providing technology-backed solutions for B2C and B2B clients and partners. This gives us scale, leverage, and the ability to drive down transaction costs, as well as the ability to launch new platforms and enter new markets quickly.

On our trading platforms, we continue to invest in new enterprises to drive revenue growth. Our institutional business continues to capture the significant growth we are seeing in global FX trading where Spot FX represents some $2.1 trillion of average daily volume according to recent Bank for International Settlements data. The investment in our traditional business has intensified over the past year and we are also working towards being able to offer new trade types, routing, and custody options on a range of asset classes. These include cash equities, physical cryptocurrencies, and options.

This is a multi-phase programme with the first phase offering our institutional customers the ability to trade physical equities in the US market via the CMC Markets Connect platform and is due to be delivered early in FY 2024. All this forms part of our focus to diversify our client mix by both type and geography. It will also benefit the expansion across other CMC Markets growth strategies

Managed separation update

With the launch of CMC Invest, and its growing B2B platform business, the Group boasts two strong underlying businesses, trading and investing, each having robust growth prospects in sizeable markets with excellent competitive positions. In this context, on 15 November 2021 CMC Markets announced that it had initiated a strategic review to evaluate the merits of a managed separation of the trading and investing businesses of the Group. The review was consistent with the Board's continuous evaluation of strategic opportunities to maximise shareholder value.

The review has concluded that given the strong commercial and operational synergies between the Trading and Investing businesses, shareholder's interests would be best served by ensuring that both businesses operate within the current Group structure for the time being rather than by pursuing a planned separation at this stage.

Regulation

The regulatory framework remains unchanged as reported at our FY 2022 results. The most recent significant change was the intervention by the Australian Securities and Investments Commission ("ASIC") relating to CFDs on 29 March 2021. This change further harmonised the global regulatory environment, allowing us to focus on growing our business in an industry where regulatory arbitrage is reduced. In April 2022, ASIC extended its product intervention order, imposing conditions on the issue and distribution of CFDs for a further five years to 23 May 2027, thereby improving regulatory visibility.

People and sustainability

Our people are core to our success and we have a strong team across all our business units. We continue to invest in attracting the best talent to our business to support the delivery of our core strategic initiatives. Likewise, the Group understands it has a duty to help improve the prospects and living environment for our employees and the local community. Sustainability and social awareness are part of our core values and culture. We continue to develop our core KPIs associated with our sustainability strategy "Our Tomorrow: taking a positive position". Further details of our targets and goals will be presented within our FY 2023 Annual Report and Financial Statements.

Share buyback programme

On 15 March 2022, the Company commenced a share buyback programme of up to GBP30 million. The Board's decision to undertake the buyback was underpinned by the Company's robust capital position and after having considered the capital and liquidity requirements for ongoing investment in the business. This buyback programme formed part of a normal balanced approach to shareholder returns alongside the current dividend policy. The share buyback programme was completed on 17 October 2022.

Dividend

The Group is maintaining its dividend policy of paying 50% of profit after tax. The Board has declared an interim dividend of 3.50 pence per share (H1 2022: 3.50 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 5 January 2023 to those members on the register at the close of business on 2 December 2022.

Outlook

Our three-year growth plans remain unchanged and on track. New business expansion is expected to grow net operating income by 30% over the next three years based on the FY 2022 result and underlying conditions, with expansion in profit margins expected from FY 2024 onwards. The targeted growth is expected to be broadly linear over that period. New growth investment will focus on initiatives aiming to enhance functionality and capture a broader share of wallet as we evolve our execution services and investment platforms. As already discussed, we will continue to utilise our technology to enter new markets and expand our investing offering. The impact of this growth and diversification will reduce revenue volatility in the medium term and grow pre-tax profit margins from FY 2024.

In respect of operating costs, guidance for FY 2023 remains unchanged at GBP215 million excluding variable remuneration. Currency volatility still leads to some uncertainty over non-GBP costs although any sustained GBP weakness would have a net positive effect on profit due to non-GBP denominated revenue. We expect inflationary pressures to persist in H2 and we continue to monitor the rate of recruiting success for the delivery of core strategic initiatives for the remainder of the year. Further expansion into the institutional space and the geographic expansion of the investment business is expected to cause some cost increases in FY 2024 when comparing against FY 2023.

OPERATING review

Summary

Net operating income increased by GBP26.8 million (21%) to GBP153.5 million, with higher trading net revenue being driven by increased client income, particularly through the B2B channel, as well as increased interest income. This was partly offset by a decrease in investing net revenue.

Trading net revenue increased by GBP27.4 million (27%) mainly driven by an increase in client income. This was primarily driven by an increase in client income from B2B clients, although it was also positively impacted by heightened market volatility in H1 2023 compared to the prior year. Client income retention was also slightly higher during the period at 83% (H1 2022: 80%). This resulted in revenue per active client ("RPC") increasing by GBP681 (36%) to GBP2,558.

Trading active client numbers decreased by 7% in comparison to H1 2022, although monthly active clients remain significantly above pre-COVID-19 levels.

Investing net revenue is 14% lower at GBP20.8 million (H1 2022: GBP24.2 million) driven by lower active clients and unfavourable market conditions resulting from the uncertainty around the global economic outlook, inflationary pressures and the resultant impact on interest rates.

Interest income increased by GBP2.6m (719%) as a result of the rise in global interest rates. The majority of the Group's interest income is earned through our segregated client deposits, with investing interest income growing by GBP1.2m (279%) compared to prior year.

Statutory profit before tax was in line with the prior year at GBP36.6 million (H1 2022: GBP36.0 million) with an increase in net operating income offset by higher operating expenses as the Group continues to invest in its strategic growth plans. Profit before tax margin(1) decreased by 4.6% from 28.4% to 23.8%.

Net operating income overview

 
 For the half year ended    30 September 2022   30 September 2021   Change   Change % 
  GBP million 
 Trading net revenue                    128.4               101.0     27.4        27% 
 Investing net revenue                   20.8                24.2    (3.4)      (14%) 
-------------------------  ------------------  ------------------  -------  --------- 
 Total net revenue(2)                   149.2               125.2     24.0        19% 
 Interest income                          2.9                 0.3      2.6       719% 
 Other operating income                   1.4                 1.2      0.2        13% 
=========================  ==================  ==================  =======  ========= 
 Net operating income                   153.5               126.7     26.8        21% 
=========================  ==================  ==================  =======  =========

B2B and B2C net revenue

 
 For the half year             30 September            30 September 
  ended                             2022                    2021                 Change 
                                                                         ---------------------- 
 GBP million              B2C(3)   B2B(4)   Total    B2C    B2B   Total     B2C     B2B   Total 
-----------------------  -------  -------          -----  -----  ------  ------  ------  ------ 
 Trading net revenue        92.3     36.1   128.4   85.0   16.0   101.0      9%    125%     27% 
 Investing net revenue       4.4     16.4    20.8    4.9   19.3    24.2   (11%)   (15%)   (14%) 
 Total net revenue          96.7     52.5   149.2   89.9   35.3   125.2      8%     49%     19% 
=======================  =======  =======  ======  =====  =====  ======  ======  ======  ======

(1) Statutory profit before tax as a percentage of net operating income

(2) CFD and spread bet gross client income net of rebates, levies and risk management gains or losses and stockbroking revenue net of rebates

(3) Business to Consumer ("B2C") - revenue from retail and professional clients

(4) Business to Business ("B2B") - revenue from institutional clients

Regional performance overview: Trading (Leveraged) Business

 
 For the 
 half 
 year                   30 September                             30 September 
 ended                      2022                                     2021                                  Change 
--------  ---------------------------------------  ---------------------------------------  ------------------------------------ 
           Trading       Gross                      Trading       Gross 
               net      client                          net      client                      Trading       Gross 
           revenue   income(1)    Active      RPC   revenue   income(1)    Active      RPC       net      client    Active 
            (GBPm)      (GBPm)   Clients    (GBP)    (GBPm)      (GBPm)   Clients    (GBP)   revenue   income(1)   Clients   RPC 
--------  --------  ----------  --------  -------  --------  ----------  --------  -------  --------  ----------  --------  ---- 
 UK           54.5        61.3    12,576    4,333      34.5        47.6    13,590    2,543       58%         29%      (7%)   70% 
 Europe       24.9        31.5    12,705    1,961      18.6        20.6    13,664    1,359       34%         53%      (7%)   44% 
--------  --------  ----------  --------  -------  --------  ----------  --------  -------  --------  ----------  --------  ---- 
 UK & 
  Europe      79.4        92.8    25,281    3,141      53.1        68.2    27,254    1,946       50%         36%      (7%)   61% 
 APAC & 
  Canada      49.0        62.1    24,918    1,968      47.9        58.8    26,580    1,802        2%          6%      (6%)    9% 
========  ========  ==========  ========  =======  ========  ==========  ========  =======  ========  ==========  ========  ==== 
 Total       128.4       154.9    50,199    2,558     101.0       127.0    53,834    1,877       27%         22%      (7%)   36% 
========  ========  ==========  ========  =======  ========  ==========  ========  =======  ========  ==========  ========  ====

(1) Spreads, financing and commissions on CFD client trades.

All regions saw an increase in RPC largely as a result in growth in client income against the prior year, but also due to improved client income retention to 83% (H1 2022: 80%). Active client figures reduced by a similar level in all regions.

Active clients decreased by 7% to 12,576 (H1 2022: 13,590), although remained significantly above pre-COVID-19 levels (H1 2020: 9,259). Gross client income increased by 29% to GBP61.3 million (H1 2022: GBP47.6 million) largely driven by growth in B2B trading, whilst B2C client income also grew due to increased high value client trading.

Revenue per active client increased by 70% to GBP4,333 (H1 2022: GBP2,543) due to both higher gross client income and a slight increase in client income retention leading to higher net revenue.

Europe

Europe comprises offices in Austria, Germany, Norway, Poland and Spain. Active client numbers were 7% lower than prior year, although gross client income increased by 53% to GBP31.5 million as a result of increased volume in both B2B and B2C trading, particularly in smaller offices in the region.

As a result, revenue per active client increased by 44% to GBP1,961 (H1 2022: GBP1,359) with higher gross client income and a slight increase in client income retention leading to higher net revenue.

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.

Active client numbers decreased by 6% to 24,918 (H1 2022: 26,580), however, activity remains materially above pre-COVID-19 levels (H1 2020: 18,479). Gross client income increased by 6% to GBP62.1 million (H1 2022: GBP58.8 million), which in turn led to a 9% increase in revenue per client to GBP1,968 (H1 2022: GBP1,802).

Investing (non-leveraged) performance overview

Investing net revenue

 
 For the half year ended        30 September 2022   30 September 2021   Change   Change % 
  GBP million 
 B2B net revenue                             16.4                19.3    (2.9)      (15%) 
 B2C net revenue                              4.4                 4.9    (0.5)      (11%) 
-----------------------------  ------------------  ------------------  -------  --------- 
 Total investing net revenue                 20.8                24.2    (3.4)      (14%) 
-----------------------------  ------------------  ------------------  -------  ---------

Active clients

 
 For the half year ended           30 September 2022   30 September 2021   Change % 
 B2C active clients                           45,226              41,590         9% 
 B2B active clients                          119,406             144,257      (17%) 
 Total investing active clients              164,632             185,847      (11%) 
================================  ==================  ==================  =========

Investing net revenue decreased 14% driven by lower active clients and unfavourable market conditions resulting in fewer investment opportunities for clients. However, this was partially offset by a significant increase (279% or GBP1.2m) in interest income.

Operating expenses

 
  For the half year ended                 30 September  30 September  Change 
   GBPm                                           2022          2021       % 
----------------------------------------  ------------  ------------  ------ 
  Net staff costs - fixed (excluding 
   variable remuneration)(1)                      40.0          33.5   (19%) 
  IT costs                                        16.3          14.2   (15%) 
  Marketing costs                                 15.2          10.8   (41%) 
  Sales-related costs                              2.1           0.9  (143%) 
  Premises costs                                   2.1           1.8   (17%) 
  Legal and professional fees                      5.6           4.7   (20%) 
  Regulatory fees                                  7.0           3.2  (117%) 
  Depreciation and amortisation                    7.3           6.4   (13%) 
  Other                                           10.7           7.6   (39%) 
========================================  ============  ============  ====== 
  Operating expenses excluding variable 
   remuneration                                  106.3          83.1   (28%) 
  Variable remuneration(1)                        9. 3           6.6   (41%) 
========================================  ============  ============  ====== 
  Operating expenses including variable 
   remuneration                                  115.6          89.7   (29%) 
  Interest                                         1.3           1.0   (33%) 
========================================  ============  ============  ====== 
  Total costs                                    116.9          90.7   (29%) 
========================================  ============  ============  ======

(1 30 September 2021 figures restated to include social taxes on FY 2022 annual discretionary bonus to be within variable remuneration.)

Operating expenses excluding variable remuneration increased by GBP23.2 million (28%) to GBP106.3 million. This was driven by an increase in staff costs (GBP6.5 million) as a result of significant investment in technology and client services staff over the period, and higher marketing costs (GBP4.4 million). The increase in marketing was driven both by additional spend in the Australia Invest business to replace the ANZ Bank acquisition funnel, and by higher costs in the trading business against a prior year comparative where less favourable market conditions meant there were fewer opportunities for targeted marketing.

Regulatory fees increased by GBP3.8 million as a result of a higher FSCS levy.

IT costs increased by GBP2.1 million due to higher market data charges and investments in strategic projects. Sales-related costs increased by GBP1.2 million (143%), primarily driven by the release of provisions in H1 2022 which reduced the prior year comparative.

Other expenses increased by GBP3.1m (39%) due to a number of factors, the main drivers being higher bank charges, recruitment costs and FX losses on balance sheet revaluation, partly offset by lower irrecoverable sales taxes.

Variable remuneration increased to GBP9.3 million (H1 2022: GBP6.6 million), primarily due to increases in headcount and a lower discretionary bonus accrual percentage in H1 2022 due to revenue performance in the period.

Taxation

The effective tax rate for H1 2023 was 20.8%, down from the H1 2022 effective tax rate, which was 22.7%. The effective tax rate has decreased in the period due to a lower proportion of Group PBT being generated in Australia, where the corporation tax rate is higher.

Balance sheet and own funds

Intangible assets increased by GBP3.2 million to GBP33.5 million (31 March 2022: GBP30.3 million) due to capitalisation of staff costs related to technology projects, partially offset by amortisation within the period.

Amounts due from brokers increased by GBP8.4 million to GBP204.5 million due to an increase in excess cash held at brokers.

Other assets decreased by GBP9.4 million to GBP4.1 million due to a reduction in client cryptocurrency exposures driving a corresponding drop in assets held at brokers for hedging purposes.

Cash and cash equivalents decreased during the period, with a cash outflow for the prior year final dividend of GBP25.3 million, higher amounts held at brokers in the period and cash utilised for the Group's share buy back purchases in the period (GBP25.0 million), being partially offset by cash inflows from the Group's operating performance, resulting in a GBP35.7 million decrease.

Title transfer funds increased by GBP8.9 million, reflecting the ongoing high levels of account funding by a small population of mainly institutional clients.

Own funds decreased by GBP44.0 million to GBP326.0 million (31 March 2022: GBP369.9 million) during the six month period with the decrease largely due to the payment of the final FY22 dividend and funds utilised for the Group's share buy back programme.

Principal risks and uncertainties

Details of the Group's approach to risk management and its principal risks and uncertainties were set out on pages 50 to 56 of the 2022 Group Annual Report and Financial Statements (available on the Group website https://www.cmcmarketsplc.com ). During the six months to 30 September 2022 and up to the date of approval of the condensed consolidated financial statements, there have been no significant changes to the Group's risk management framework. The Group categorises its principal risks into three categories: business and strategic risks; financial risks; and operational risks. The Group's top and emerging risks, which form either a subset of one or multiple principal risks within the three principal risk categories, and continue to be at the forefront of Group discussions over the remaining six months of the financial year and beyond, are regulatory relations across the Group, people risk, cyber risk and project delivery risk.

RESPONSIBILITY STATEMENT

The Directors listed below (being all the Directors of CMC Markets plc) confirm that to the best of our knowledge, these condensed consolidated financial statements have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and that the interim management report includes a fair review of information required by DTR 4.2.7R and DTR 4.2.8R, namely:

-- the interim management report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated financial statements, together with a description of the principal risks and uncertainties for the remaining six months of the financial year; and

-- material related party transactions in the first six months of the financial year and any material changes in the related-party transactions described in the last annual report.

Neither the Group nor the Directors accept any liability to any person in relation to the interim results for the half year ended 30 September 2022, except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A and Schedule 10A of the Financial Services and Markets Act 2000.

By order of the Board of Directors

Lord Cruddas

Chief Executive Officer

16 November 2022

CMC Markets plc Board of Directors

Executive Directors

Lord Peter Cruddas (Chief Executive Officer)

David Fineberg (Deputy Chief Executive Officer)

Matthew Lewis (Head of Asia Pacific and Canada)

Euan Marshall (Chief Financial Officer)

Non-Executive Directors

James Richards (Chairman)

Sarah Ing

Susanne Chishti

Paul Wainscott

CONDENSED CONSOLIDATED INCOME STATEMENT