Business
CMC Markets : H1 2025 Results Statement
CMC Markets : H1 2025 Results
About this update from Cmc Markets Plc
CMC MARKETS PLC ("CMC" or the "Group") Interim results for the half year ended 30 September 2024 Strategy delivering enhanced profitability and margins Summary Financials 30 September 30 September Change 2024 2023 % Net operating income (£m) 177.4 122.6 45% Trading net revenue (£m) 131.3 87.4 50% Investing net revenue (£m) 19.9 16.8 19% Interest income (£m) 23.4 16.1 46% Other operating income (£m) 2.8 2.3 22% Profit / (loss) before tax (£m) 49.6 (2.0) - Profit / (loss) before tax margin (%) 28% (2%) 30ppts Basic earnings per share (pence) 12.8 (0.8) - Ordinary dividend per share (pence) 3.10 1.00 210% Note: Net operating income represents total revenue net of commissions and levies. Trading net revenue represents gross trading income net of rebates and levies. Investing net revenue represents stockbroking and related services revenue net of rebates. Profit / (loss) before tax margin % is calculated as profit before tax as a percentage of net operating income. Financial Highlights Net operating income of £177.4 million, up 45% year-on-year (H1 2024: £122.6 million), reflecting continued growth across the institutional segment and an increase in client trading activity. H1 2025 trading net revenue was £131.3 million, up 50% year-on-year (H1 2024: £87.4 million) with strong performance across both our institutional and retail segments. Investing net revenue was £19.9 million, up 19% year-on-year (H1 2024: £16.8 million), driven by a strong performance in international equities. Interest income of £23.4 million (H1 2024: £16.1 million), up 46%, driven by the continued benefit of elevated global interest rates driving income from client cash balances and a strong performance by our newly established Treasury Management and Capital Markets Division. Operating costs for H1 2025, excluding variable remuneration, were £111.4 million (H1 2024: £121.9 million), down 9%, as the Group maintains a sharp focus on costs to drive profit margin expansion. Regulatory total Own Funds Requirements (OFR) ratio of 433% 1 (31 March 2024: 312%) and net available liquidity of £246.6 million (31 March 2024: £192.2 million). Significant increase in profitability year-on-year with profit before tax of £49.6 million, up from a prior year loss of £2.0 million and reflecting the combination of robust net operating income and disciplined cost management. Interim dividend up 210% to 3.10 pence per share (H1 2024: 1.00 pence). 1. Amount includes yet to be verified half year profits, less proposed interim dividend. Operational Highlights Strengthened and established new key relationships, highlighted by securing recent partnerships with Revolut and ASB Bank in New Zealand. Client onboarding has begun with Revolut following a soft launch earlier in the year, with a steady rise in the number of clients actively trading. Recently announced partnership with ASB Bank to provide market-leading technology, customer service and execution via ASB-branded web and mobile platform, including full integration with ASB Bank's technology stack. Continued focus on diversification, expansion and innovation to drive the business forward. B2B and institutional segment continues to be a key driver of our growth with a healthy pipeline of opportunities. Further enhancement of our service offering across platforms with the expansion of cash equities and options products, and Cash ISAs to be launched imminently on CMC Invest. Additional product upgrades are on track for delivery in H2 2025. Outlook Management maintaining pragmatic approach to investment with a focus on profit margin expansion, whilst continuing to explore and invest in opportunities for incremental growth. Remain confident in delivering on guidance set out at the beginning of the year, with net operating income forecast to be in line with external market expectations. 1 Operating cost guidance for FY 2025 remains unchanged at £225 million, excluding variable remuneration and non-recurring charges. 1. External market consensus for year ending 31 March 2025 is net operating income of £332.9 million. Lord Cruddas, Chief Executive Officer, commented: "I am delighted that CMC has delivered another strong performance in the first half, with pleasing results across our business driven by our commitment to technological innovation. Flagship partnerships with Revolut and ASB Bank highlight our success in the B2B space, and our diversified product offering, including the expansion of cash equities and options offerings, and the upcoming launch of cash ISAs in the UK, is deepening our relationship with our clients and supporting strong top line growth. As we announced in the previous financial year, CMC has reached the peak of the investment cycle and whilst we continue to invest in the business, we are taking a disciplined approach, and we remain laser focused on driving further efficiencies across our global operations as we continue to leverage our scale and technology. We remain confident in meeting the guidance set earlier this year, with net operating income expected to be in line with market consensus, supported by a strong pipeline of B2B partnerships and ongoing product expansion and diversification. My thanks to our dedicated team and clients for their continued trust and support, and we look forward to building on the successes of H1 in the remainder of this year." Webcast: An analyst and investor presentation will be held on 21st November 2024 at 9:00am UK time. Participants need to register using the link below. CMC Markets PLC Half Year Results | SparkLive | LSEG Forthcoming announcement dates: 23 January 2025 Q3 2025 Trading Update 5 June 2025 FY 2025 Results Enquiries CMC Markets Plc Albert Soleiman, Chief Financial Officer [email protected] Camarco Geoffrey Pelham-Lane [email protected] +44 (0) 7733 124 226 Jennifer Renwick +44 (0) 7928 471 013 Alex Campbell +44 (0) 7710 230 545 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. 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 and investing 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 platform, enabling clients to trade and in invest in over 12,000 financial instruments across shares, indices, foreign currencies, commodities and treasuries through contracts for difference ("CFDs"), financial spread bets (in the UK and Ireland only) and, in Australia, Singapore and the UK, access stockbroking services. More information is available at https://www.cmcmarkets.com/group . CEO STATEMENT It has been another half of strong financial performance and operational success for CMC Markets as our relentless focus on technological innovation continues to yield impressive results. During the period, we secured high-profile partnerships, including agreements with Revolut and ASB Bank, continuing our focus on the valuable B2B segment. In addition to this, our ongoing diversification strategy through expansion of our product offering, and consistent levels of client trading activity all put us in a strong position to deliver long-term value for shareholders. Financial performance Financial performance in the half year has been particularly strong. Net operating income of £177.4 million marks a 45% increase on the prior year (H1 2024: £122.6 million) and was underpinned by strong growth in our institutional business and increased trading activity across key asset classes. Operating costs, excluding variable remuneration, were £111.4 million (H1 2024: £121.9 million), down 9% year-on-year, testament to the hard work of the team in driving efficiencies across the business, capitalising on our scale and operating model to grow profit margins. This has led to profit before tax of £49.6 million, which compares to a loss of £2.0 million in H1 2024, and a dividend of 3.10 pence per share (H1 2024: 1.0 pence), up 210% on the prior year. Operational progress and B2B partnerships Our strategic focus on diversification and expansion continues to drive the business forward, with the B2B segment that consists of partnerships and institutional relationships remaining a major catalyst of our growth. Over the past year, I have visited all our overseas offices to engage with potential clients and our global teams. This has included my most recent visit to Auckland, my second trip to the city within the year, to sign the ASB Bank transaction. I also met with the CEO of NZX, New Zealand's stock exchange, to confirm our application to become a market participant and member of the exchange, further solidifying our footprint in New Zealand's financial landscape and highlighting our dedication to fostering high-value relationships in the region. The white- label partnership with ASB Bank will see their customers benefit from our market-leading technology, customer service, and execution capabilities via a fully ASB-branded web and mobile platform which will seamlessly integrate with ASB Bank's existing technology stack. H1 has also seen the beginning of our partnership with Revolut, where we are making steady progress in onboarding new clients following a successful soft launch. As I have said before, when major global banks and financial institutions trust our technology to serve their clients, it is the strongest endorsement of our business. On the product front, we have continued to expand our offering in the first half of the year. Widening our products and services is key to building longer term relationships with our clients and we have made good progress with enhancements to our cash equities and options products, as well as the imminent launch of cash ISAs in the UK. These initiatives align with our goal of delivering a comprehensive multi-asset platform, resulting in greater share of wallet from clients and further cementing CMC's reputation as a leading B2B fintech provider. Disciplined investment and driving operational efficiency Over the last 12 months the business has transitioned away from what was a period of significant investment, to a clear focus on driving operational efficiency within the business. By leveraging our scale and technology to drive top-line growth, alongside operational synergies and cost control measures, we have made significant progress. The introduction of our Treasury Management System is just one example of how we are optimising our business and generating incremental income through operational synergies and this broader realignment is reflected in our financial results, supporting the improvement seen in the half-year in diversification, profitability and margins. Looking ahead, we will maintain a disciplined and balanced approach to investment whilst continuing to drive efficiencies, always prioritising long-term value for shareholders. Dividend The Board has proposed an interim dividend payment of 3.10 pence per share. This is in line with the dividend policy of 50% of profit after tax. Outlook As outlined today, we are confident in delivering on the guidance set out at the beginning of the year, with net operating income forecast to be in line with external market expectations. 1 This is supported by a strong pipeline of B2B partnerships, as well as our continued strategic product expansion and diversification. We look forward to building on the successes of H1 in the remainder of this year. Lord Cruddas Chief Executive Officer 21 November 2024 1. External market consensus for year ending 31 March 2025 is net operating income of £332.9 million. OPERATING REVIEW Summary Year-on-year £'million H1 2025 H2 2024 H1 2024 change Net operating income 177.4 210.2 122.6 45% Operating expenses (123.7) (136.6) (118.3) 5% Impairment of intangible assets (0.2) (7.0) (5.3) Operating profit / (loss) 53.5 66.6 (1.0) - Loss on share of associate (0.2) (0.2) (0.1) Impairment of associate (2.3) - - Finance costs (1.4) (1.1) (0.9) Profit/(loss) before taxation 49.6 65.3 (2.0) - Taxation (14.3) (16.1) (0.4) Profit/(loss) after tax 35.3 49.2 (2.4) - Profit/(loss) before tax margin 28% 31% (2%) 30ppts The Group reported a statutory profit before tax of £49.6 million in H1 2025, reflecting a strong recovery from a loss of £2.0 million in H1 2024 and maintaining strong momentum following the £65.3 million profit in H2 2024.This reflects the success of the Group's ongoing diversification strategy, the continued growth of the B2B segment and sustained client trading activity. Growth was driven by strong trading volumes, particularly in the B2B client segment, and improved trading performance due to favourable market conditions. Investing net revenues were supported by higher assets under administration in Australia aided by favourable exchange rate movements. The Group's performance was further supported by disciplined cost management, with annual cost growth contained at 5% and a 9% reduction achieved on a half-year basis. Excluding variable remuneration, operating expenses were down 9% year-on-year and 13% half-on-half. We remain focused on profit margins, taking a disciplined and balanced approach to investment whilst continuing to drive efficiencies across the business. Net operating income overview Year-on-year £'million H1 2025 H2 2024 H1 2024 change Trading net revenue 131.3 171.7 87.4 50% Investing net revenue 19.9 17.2 16.8 18% Total net revenue 151.2 188.9 104.2 45% Interest income on own funds 9.5 5.3 5.9 60% Income on client funds 13.9 13.6 10.2 36% Other operating income 2.8 2.4 2.3 22% Net operating income 177.4 210.2 122.6 45% Net operating income increased by 45% to £177.4 million, led by growth in institutional business and trading volumes across core asset classes. Sequential half-on-half net operating income was down 16% due to an exceptionally strong performance in the H2 2024 comparative. Trading net revenue Trading net revenue increased to £131.3 million from £87.4 million in H1 2024 driven by both increased client income and higher client income retention. Performance remained strong across all geographies, including core markets of the UK and APAC. Active client numbers declined in comparison to H1 2024, although this was offset by increased revenue per active client of £2,984, up 60% on H1 2024, as we continued to attract and retain both institutional and higher net worth individuals. This in part was aided by the performance of CMC Connect which acts as a non-bank liquidity provider, offering access to a range of asset classes. During the period, we entered into a partnership with Revolut, which has been test-launched in the Czech Republic, Denmark and Greece, with plans for further expansion into additional countries in Europe later this year. Given the recent launch and limited geographical coverage, the impact on B2B revenues for the period is not significant. However, this partnership presents an exciting opportunity for future revenue growth as well as increased operational leverage given the limited incremental costs required to service these customers. Overall, B2B services now contribute 38% of trading volumes (H1 2024: 31%; H2 2024: 35%), reinforcing our focus on growing this business. Investing net revenue Investing net revenue was 18% and 16% higher than H1 2024 and H2 2024 respectively at £19.9 million (H1 2024: £16.8 million; H2 2024: £17.2 million) driven by increased client trading volumes in the Group's Australian stockbroking arm resulting in both additional foreign exchange fees and brokerage revenue. Asset inflows increased our assets under administration to £41.1 billion, solidifying our position as Australia's second-largest stockbroker. We are optimistic that the growth in clients and balances will continue to see income increase, aided by the rollout of new revenue-generating propositions including the launch of stock lending, although we are witnessing strong competition from both established providers and new entrants alike. CMC Invest operations in the UK and Singapore continue to contribute a small proportion to net revenue reflecting the infancy of these operations. During the period, the Group has continued to invest in new features and will look to launch additional products and functionality in the near-term. This includes the launch of a FSCS-protected cash ISA product in the UK, which will have the aim of attracting both newer, and wider, range of customers to the platform. The Group has also reached an agreement with ASB Bank in New Zealand to provide stockbroking services to their c1.5 million banking customers. This deal underlines the continued execution of our strategy of growing our B2B services and be the partner of choice in both our trading and investing institutional offerings. Interest income The Group has continued to benefit from the higher interest rate environment, with total interest income from both client and own funds of £23.4 million, reflecting a 46% year-on-year increase and a 24% improvement from H2 2024 (H1 2024: £16.1 million; H2 2024: £18.9 million). Throughout the first half of the year, we have focused on improving returns on our own balances to maintain performance through our Treasury Management Systems as interest rates begin to decline. As a result, interest income from client funds has decreased to 59% of total interest income, down from 63% in H1 2024 and 72% in H2 2024. However, with segregated client funds continuing to represent the majority of the Group's cash balances, we expect this trend to gradually taper as rates fall. Operating expenses Year-on-year £'million H1 2025 H2 2024 H1 2024 change Net staff costs 59.0 65.3 53.2 11% IT costs 22.4 20.5 19.2 17% Sales and marketing 15.0 18.9 16.7 (10%) Premises 2.5 3.2 3.4 (26%) Legal and professional fees 7.0 7.4 6.6 6% Regulatory fees 2.5 2.0 2.3 9% Depreciation and amortisation 6.8 7.5 7.6 (11%) Bank charges 1.9 2.9 2.2 (14%) Irrecoverable sales tax 2.7 3.0 2.5 8% Other 3.9 5.9 4.6 (15%) Operating expenses 123.7 136.6 118.3 5% Operating expenses were up 5% year-on-year to £123.7 million, impacted by inflationary increases, IT investments, additional staffing to support ongoing projects and increased variable remuneration following the improved Group performance. Sequential half-on-half operating expenses have reduced by 9% as the Group implemented tight control over staff costs and discretionary spending, particularly in sales and marketing, while continuing to invest in areas critical to long-term growth and efficiency. Staff costs remain the biggest contributor to operating expenses and in the current period we incurred costs of £59.0 million representing a 11% increase year-on-year (H1 2024: £53.2 million) reflecting inflationary salary increases and additional headcount to support the Group's growth and operational projects over the past year. Sequential half-on-half staff costs are down 10% from £65.3 million, primarily as a result of the reduction in headcount undertaken at the end of 2024. Non-staff costs have grown at a lower rate as we have implemented a disciplined approach to cost management. IT costs remain the largest non-staff cost component and have increased 17% year-on-year to £22.4 million (H1 2024: £19.2 million), driven by higher investments in technology and increased maintenance costs as we continued to enhance our systems for future scalability. Sales and marketing expenses fell by 10% year-on-year and 21% sequential half-on-half to £15.0 million (H1 2024: £16.7 million; H2 2024: £18.9 million), reflecting a more targeted approach to marketing spend during the period. Legal and professional fees increased by 6% year-on-year to £7.0 million (H1 2024: £6.6 million; H2 2024: £7.4 million), driven by higher advisory and project-related costs. Regulatory fees also rose by 9% to £2.5 million over the same period (H1 2024: £2.3 million; H2 2024: £2.0 million). Impairment of investments in associate Due to the continued underperformance of the investment, combined with its poor financial position and ongoing losses the Group fully wrote down its investment in Strike X, a customer centric blockchain solutions business, which was acquired in June 2023. Despite the impairment, the Group continues to support Strike X and its strategic objectives. Taxation The effective tax rate for the six months ended 30 September 2024 was 28.9% compared to -18.4% and 24.6% in H1 2024 and H2 2024 respectively. The Group's effective tax rate is higher than the UK statutory tax rate of 25% due to the effect of profits being taxed in Australia and Germany where the tax rate is higher than the UK rate and adjustments for discrete items. Balance sheet £'million 30 September 2024 31 March 2024 Change Fixed assets 54.5 57.5 (5%) Trade and other receivables 182.2 164.8 11% Financial investments 109.0 50.9 114% Amounts due from brokers 202.7 228.9 (11%) Cash and cash equivalents 174.1 160.3 9% Other assets 44.6 54.5 (18%) Total assets 767.1 716.9 7% Trade and other payables 297.6 272.8 9% Obligations under repurchase agreements 28.9 - - Lease liabilities 14.3 16.9 (15%) Other liabilities 15.3 23.7 (35%) Total liabilities 356.1 313.4 14% Total equity 411.0 403.5 2% Total equity and liabilities 767.1 716.9 7% Fixed assets reduced 5% since the full year reflecting the fact the Group has passed the peak of its investment cycle with amortisation and depreciation exceeding capitalised spend, although the Group continues to invest in maintaining and enhancing its proposition. Financial investments increased 114% to £109.0 million (31 March 2024: £50.9 million) reflecting a strategic shift towards investment-grade corporate bonds and credit-linked notes. This approach, implemented by the newly established Treasury Management and Capital Markets Division, aims to achieve higher yields compared to traditional cash holdings and gilts. Additionally, the use of repurchase agreements has been introduced to further optimise returns. Whilst these investments carry an increased level of risk, they within the Group's existing market, liquidity, credit and counterparty risk appetites. Despite this heightened focus on returns, the Group also saw an increase in cash and cash equivalents during the period, driven by H1 profits, partially offset by the payment of the prior year's final dividend. Additionally, the Group's cash position benefited from a reduction in excess cash held with brokers, which declined by 11% to £202.7 million from £228.9 million at year-end. Capital resources As of 30 September 2024, the Group had total capital resources of £337.3 million 1 compared to £340.1 million as at 31 March 2024. This compares to the Own Funds Requirement (OFR) of £77.9 million (31 March 2024: £109.0 million) giving an OFR ratio of 433% 1 (31 March 2024: 312%). 1. Amount includes yet to be verified half year profits, less proposed interim dividend. Liquidity £'million 30 September 2024 31 March 2024 Change Group funds 332.1 325.8 2% Title transfer funds 110.9 119.6 (7%) Total available liquidity 443.0 445.4 (1%) Less: blocked cash (62.9) (68.5) (8%) Less: initial margin requirement at brokers (133.5) (184.7) (28%) Net available liquidity 246.6 192.2 28% The Group's liquidity remains robust with net available liquidity as at 30 September 2024 of £246.6 million (31 March 2024: £192.2 million). The increase in the first half of the year is due to an increase in Group funds and a reduction in initial margin requirements held at brokers, offset by a reduction in title transfer funds held. The Group's available liquidity consists of assets that can be accessed on short notice to meet additional liquidity needs, typically arising from increases in broker margin requirements. Furthermore, the Group maintains access to a committed facility of up to £55.0 million (31 March 2024: £55.0 million) to support margin needs with brokers. Principal risks and uncertainties Details of the Group's approach to risk management and its principal risks and uncertainties were set out on pages 59 - 68 of the 2024 Group Annual Report and Financial Statements (available on the Group website https://www.cmcmarketsplc.com) . During the six months to 30 September 2024, there have been no changes to the overall principal risk listing. The Group continues to categorise its principal risks into three categories: business and strategic risks; financial risks; and operational risks. People risk, Regulatory and compliance risk, Business change risk, and Information and data security risk were the top principal risks considered in the 2024 Group Annual Report and Financial Statements, and we continue to be exposed to those areas. The management of these risks is set out in note 30 to the Financial Statements. The Group, through its global presence, faces a variety of regulations and legislative requirements, which we are committed to meeting to a high standard. Consumer Duty remains a key focus as we continue to embed these requirements within the Group's processes. As we pursue strategic product and geographical diversification, business change and project delivery risks remain naturally elevated. To address these challenges, the Group actively incorporates capital and liquidity risk management into its strategic planning, ensuring financial resilience is maintained through this diversification. in parallel, we continually review our project portfolio to ensure alignment with strategic objectives. The Treasury Management and Capital Markets Division continues to evolve the Group's liquidity and cash flow optimisation capabilities, which includes the development of the Trading Management System and the expansion of the scope of products in which it invests. Risk management practices associated with these activities are continuously refined as the business expands and matures. Given the online nature of the Group, we also maintain heightened vigilance against cyber intrusions across our operations. Our people are essential to delivering our purpose and strategy, and our ability to attract and retain key talent is critical to our strategic goals and business resilience. During this period, the Group completed the merger of support functions across multiple business lines, streamlining reporting and automating processes, which led to a planned reduction in global headcount. The Group continues to monitor a range of people-related metrics. 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 2024, 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 21 November 2024 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) Albert Soleiman (Chief Financial Officer) Non-Executive Directors James Richards (Chair) Sarah Ing Paul Wainscott Clare Francis CONDENSED CONSOLIDATED INCOME STATEMENT For the half year ended 30 September 2024 Half year ended 30 September 31 March 30 September £ '000 Note 2024 2024 2023 Revenue 3 164,799 204,991 119,711 Interest income on own funds 9,536 5,304 5,942 Income on client funds 13,900 13,649 10,148 Total revenue 188,235 223,944 135,801 Introducing partner commissions and betting levies (10,883) (13,723) (13,239) Net operating income 177,352 210,221 122,562 Operating expenses 4 (123,659) (136,579) (118,315) Impairment of intangible assets 8 (233) (7,047) (5,275) Operating profit / (loss) 53,460 66,595 (1,028) Share of results of associate 11 (189) (192) (91) Impairment of investments in associate 11 (2,328) - - Finance costs (1,374) (1,075) (876) Profit / (loss) before taxation 49,569 65,328 (1,995) Taxation (14,308) (16,079) (368) Profit / (loss) for the period attributable to owners of 35,261 49,249 (2,363) the parent Earnings / (loss) per share Basic earnings / (loss) per share (p) 6 12.8 17.6 (0.8) Diluted earnings / (loss) per share (p) 6 12.8 17.6 (0.8)