Results presentation. Half year ended 30 September 2017

Transcription

1 Results presentation Half year ended 30 September 2017

2 Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H Analyst presentation ǀ Pg 2

3 Key highlights Net operating income of 89.6m (2017 H1: 75.5m), a record first half RPC of 1,814 (2017 H1: 1,488) reflecting the focus on high value clients Strong operational gearing, with PBT margin increasing to 33% (2017 H1: 25%) Interim dividend of 2.98 pence (one third of FY17 total ordinary dividend) Progress continues to be made on strategic initiatives ANZ Bank Stockbroking implementation progressing to plan H Analyst presentation ǀ Pg 3

4 Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H Analyst presentation ǀ Pg 4

5 KPIs High value clients driving key metrics Active clients 1 and Revenue per active client (RPC) 2 ( ) Turnover ( bn) and Trades (m) Net operating income 3 ( m) 1,707 1,871 1,488 1,637 1, ,548 44,017 47,623 49,098 46,634 1, ,105 1, H1 clients H2 clients RPC ( ) H1 turnover H2 turnover Number of trades H1 H2 Underlying Profit Before Tax 4 ( m and margin) Profit after tax ( m) Basic EPS (pence) 40% 33% 35% 33% 25% H1 Underlying PBT H2 Underlying PBT Underlying PBT margin H1 H H1 H2 1. Active clients represent those individual clients who have traded with or held CFD or spread bet positions with CMC Markets on at least one occasion during the period. 2. Average trading revenue generated from CFD and spread bet active clients. 3. Net operating income represents total revenue after rebates payable to introducing partners and retail clients, and betting levies. 4. Underlying PBT represents PBT before exceptional items. H Analyst presentation ǀ Pg 5

6 Income statement High value client activity driving higher NOI with controlled cost increases Net operating income 19% increase in net operating income driven by high value clients trading larger volumes Value of client trades increased across all asset classes, most notably in FX (up 180bn or 58%) Group ( m) H H YoY % CFD and spread bet (incl binaries) net revenue % Stockbroking % Interest income (13%) Sundry income Net operating income % Operating expenses Controlled operating expenses. Increase driven by higher personnel costs, including: annual salary increases higher discretionary performance incentives Cost increases were partially offset by: lower but more targeted marketing spend Operating expenses (59.3) (56.4) (5%) Finance costs (0.5) (0.3) (43%) Profit before taxation % Tax (4.8) (4.1) (16%) Profit after tax % High operating leverage, with PBT margin increasing 8 ppts 1. Net operating income represents total revenue after rebates payable to introducing partners and retail clients, and betting levies. H Analyst presentation ǀ Pg 6

7 Net revenue 1 bridge ( m) Onboarding valuable new clients whilst existing client base continues to trade Existing clients: ( 9.8m) (10.3) Existing clients: ( 2.6m) 1.7 (4.3) New and returning clients: 13.9m New and returning clients: 12.2m 70.9 H net revenue Existing clients trading more Existing clients not trading Returning clients New clients H net revenue Existing clients trading more Existing clients not trading Returning clients New clients H net revenue 1. Net revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, after the impact of rebates to introducing partners and retail clients, and betting levies. H Analyst presentation ǀ Pg 7

8 Clients Long-standing clients continue to generate the majority of revenue Client churn (000 s) H Revenue¹ by client tenure % % 15% 0-6M 6-12M 1-2YR 2-3YR 19% >3YR (11) (11) (12) (11) (12) 15% H H H H H Continuous traders New traders Reactivated Stopped trading 55% of revenue was generated by clients that have been with the Group for two years or more Continuous traders remain steady half on half 1. Gross revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, before the impact of rebates to introducing partners and retail clients, and betting levies. H Analyst presentation ǀ Pg 8

9 Cumulative Ave. Client Value² Active clients (000's) RPC ( ) Revenue per active client 1 (RPC) Increased RPC driven by high value clients Active clients and RPC ,000 1,800 1,600 1,400 1,200 Increased trading from high value clients led to an increase in RPC of 22% against H Active clients decreased slightly, due to the Group s focus on high value clients and a more targeted marketing spend , RPC among the highest in the industry H H H H H UK Europe APAC and Canada RPC New client value 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Clients on boarded after the EU Referendum in FY17 are noticeably above average value, reflecting quality of new clients Payback on marketing spend remains between 2 to 3 months Months since first trade FY15 FY16 FY17 FY17 post-brexit FY18 1. Average trading revenue generated from CFD and spread bet active clients. 2. Cumulative average net trading revenue generated per new client whose first trade was placed in the associated period. H Analyst presentation ǀ Pg 9

10 Operating costs Modest cost increase Operating cost increase of 5% Staff costs increased due to: impact of annual salary increases higher discretionary performance incentives IT costs increased as a result of higher market data charges and maintenance costs Marketing costs decreased due to more targeted spending Increase in legal and professional fees due to increased consultancy expenditure on a number of projects Regulatory fees decreased as a result of a lower FSCS levy charge for the period Other costs increased 21%, driven by higher irrecoverable VAT and bank charges Group ( m) H H YoY % Staff costs % IT costs % Sales and marketing (12%) Premises % Legal and professional fees % Regulatory fees¹ (25%) Depreciation and amortisation % Other % Total operating expenses % Average headcount (2%) 1. Includes regulatory transaction fees. H Analyst presentation ǀ Pg 10

11 Liquidity and regulatory capital Regulatory capital ratio and liquidity position remain strong Regulatory capital Group ( m) H FY 2017 Core Equity Tier 1 Capital Total available liquidity Group ( m) H FY 2017 Own funds Less: intangibles and deferred tax assets (7.2) (6.7) Capital Resources Non-segregated client and partner funds Pillar 1 requirement Total risk exposure Capital ratio % 29% 30% Available committed facility Total available liquidity Highly cash generative business with profits immediately available as liquidity Capital ratio continues to be well in excess of requirements Committed facility used at period end to maintain significant amount of excess funds with prime brokers 1. Core Equity Tier 1 capital total audited capital resources as at the end of the financial period, less dividends proposed or paid before 30 September Prior period comparative is presented using the same methodology. 2. Pillar 1 requirement the minimum capital requirement required to adhere to CRD IV. 3. Total risk exposure the Pillar 1 requirement multiplied by 12.5, as set out by the FCA. H Analyst presentation ǀ Pg 11

12 Uses of liquidity Increasing levels of client exposure driving higher hedging requirements Uses of total available liquidity Group ( m) H FY 2017 Total available liquidity Blocked cash ¹ (19.9) (19.8) Initial margin requirement at broker (119.0) (93.0) Net available liquidity Notional exposures ( m) 4,000 3,000 2,000 1,000 Predominant use of liquidity is to cover margins at broker Record levels of notional client exposure The shaded portion of the graph reflects natural aggregation of client positions High level of hedging increasing PB requirement - Apr 2015 Oct 2015 Apr 2016 Oct 2016 Apr 2017 Oct 2017 CMC carrying low level of residual risk after hedging, maintaining strong regulatory capital ratio Client Notional Hedge Notional Residual Exposure 1. Blocked cash relates to cash needed to support regulatory and overseas subsidiaries operational requirements. H Analyst presentation ǀ Pg 12

13 Financial outlook Net operating income and client activity in H2 is in line with market expectations Maintain cost control, with high operating leverage helping to deliver increased profits H2 costs expected to be higher than H1 due to increased marketing spend and ANZ implementation costs ( 3m) incurred in the second half Still too early to predict the outcome and impact from regulatory change but preparations for possible outcomes well underway Regulatory change will benefit quality providers and give us a competitive advantage H Analyst presentation ǀ Pg 13

14 Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H Analyst presentation ǀ Pg 14

15 Possible impact Regulatory change CMC welcomes strong regulation across the industry Potential change Readiness Impact Lower leverage limits imposed Flexible platform means offering easily adapted Client accounts are well funded but behavioural changes likely Negative balance protection becomes mandatory Countdowns prohibited Focus on client appropriateness Limited risk accounts developed and mandatory in Germany; technology easily adapted for other regions and UK offering to go live shortly Small proportion of total net operating income Rigorous checks already in place and further enhancements in development Margin requirement to increase but clients are typically well funded Limited: c. 8m per annum globally in FY17 (UK & Europe: 4m) Limited Public disclosure of client profit/loss ratios required Already disclosed in Poland None Bonus offers prohibited Not a significant part of business model None High pressure sales tactics prohibited Not a part of business model None Focus on high value business helps to mitigate impact H Analyst presentation ǀ Pg 15

16 Regulatory focus Options for clients if margins are increased 1 Manage their account headroom Client money ( m)¹ Increase their deposit on account Amend trading activity levels Become an elected professional Clients may elect to be classified as professional if they can evidence at least two of the following criteria: 5 i. They have carried out 10 trades of a significant size per quarter in the last year ii. Financial instrument portfolio 500,000 iii. Possessing 1 year of relevant work experience in the financial sector 0 Mar-16 Sep-16 Mar-17 Sep-17 Margin requirement - Other assets Margin requirement - Equities Account value (GBP) Margin increases unlikely to affect equities Overall client money in excess of margin required On average clients hold 4x margin requirements 1. Includes all client money, including active and dormant account balances H Analyst presentation ǀ Pg 16

17 Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H Analyst presentation ǀ Pg 17

18 CMC Increasingly diversified business with a focus on high value clients $ Increasingly diversified High value clients Platform Revenue generated across UK, Europe, APAC and Canada Institutional growth ANZ Stockbroking transaction diversifies the business RPC amongst the highest in industry Appeal to high value traders through: Superior client service Value for money Rebates High touch offering Targeted marketing approach Flexible, bespoke technology, easily adapted for change Appeal to experienced clients through our feature rich, customisable platform H Analyst presentation ǀ Pg 18

19 CMC Markets continues to make strong strategic progress Delivering on strategic initiatives Growth initiative Established markets Geographic expansion Digital initiatives Maintain a competitive and compliant product offering Institutional offering Highlights Leading the UK industry in client satisfaction¹ Maintained market leading position in Germany² and increased market share in Australia³ Significant increase in value of client trades, driving up net revenue⁴ and RPC France underperformed compared to the prior year equivalent but revenue steady despite regulatory change introduced in January 2017 Continued growth in Poland office, with active clients up 96% since H New China education office ⁵ launched in October 2017 Steady increase in applications via mobile channels and as a result of digital marketing initiatives Investing in digital marketing infrastructure in order to achieve greater economies of scale and efficiency 56% of the value of Next Generation client trades completed on mobile devices in H1 FY18 (H1 FY17: 50%) FX Prime functionality launched May 2017 CFD products adapted for regulatory compliance in Germany from August 2017 Limited risk offering being finalised ANZ transaction on track for delivery in September 2018 Value of client trades up 91% compared to H Strong pipeline of prospective relationships 1. Investment Trends May 2017 UK Leveraged Trading Report. 2. Investment Trends March 2017 Germany CFD & FX Report. 3. Investment Trends May 2017 Australia CFD Report. 4. Net revenue generated from CFD and spread bet active clients, after the impact of rebates and levies. 5. China business is onboarded and serviced through Australia. H Analyst presentation ǀ Pg 19

20 High value clients High proportion of revenue generated by premium¹ clients Client base Client tenure (months) 9.2% % % % % % 8.0% H H H H H H H H Standard Premium¹ Proportion of our client base who are classified as Premium¹ clients continues to grow 7% growth from H to H Premium¹ client tenure continues to increase to almost three years Standard client tenure remains steady at 2.5 years 1. Premium clients are calculated based on internal revenue metrics. 2. Net revenue generated from CFD and spread bet active clients, after the impact of rebates. H Analyst presentation ǀ Pg 20

21 Institutional Continues to be a key strategic driver of growth and diversification Institutional net revenue and value of client trades % growth in Institutional net revenue compared to H CMC FX Prime (institutional FX GUI & API) launched Spread bet API launched 100 Institutional team expansion in Australia and Germany, extending global reach Impending launch in H2 of CMC Prime Derivatives platform H H H H H Institutional net revenue¹ ( m) Institutional value of client trades² ( bn) 1. Net revenue generated from CFD and spread bet active clients, after the impact of rebates and levies. 2. Value of client trades represents the notional value of client trades. H Analyst presentation ǀ Pg 21

22 Stockbroking ANZ partnership update 250k+ active clients On target for go live in September 2018 Key milestones being met Mobile trading application released during H1, also benefitting existing client base Projected to incur operating expenses of 3m in H2 Potential for future opportunities 50k active accounts 2017 H Analyst presentation ǀ Pg 22

23 Strategic outlook Continue to focus on high value, experienced clients who may elect to become professional Regulatory change continues to present challenges but also opportunities The Group s proprietary technology can respond quickly and effectively to change ANZ Bank stockbroking transaction progressing smoothly, and on target for completion in September 2018 Continue to look for new strategic opportunities H Analyst presentation ǀ Pg 23

24 Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H Analyst presentation ǀ Pg 24

25 Appendices

26 Appendix 1 Selected KPIs by half year Net revenue 1 ( m) H1 H2 Full Year H1 H2 Full Year H1 H2 Full Year H1 UK Europe APAC & Canada Total Active clients² H1 H2 Full Year H1 H2 Full Year H1 H2 Full Year H1 UK 10,673 12,814 15,417 12,749 13,172 17,268 13,345 13,149 17,142 12,164 Europe 15,365 17,111 20,019 16,954 18,175 21,714 18,159 18,800 22,503 17,909 APAC & Canada 11,323 12,756 14,867 14,314 15,201 18,347 16,119 17,149 20,437 16,561 Total 37,361 42,681 50,303 44,017 46,548 57,329 47,623 49,098 60,082 46,634 Revenue per active client ( ) H1 H2 Full Year H1 H2 Full Year H1 H2 Full Year H1 UK 1,812 2,283 3,152 2,314 2,548 3,652 2,180 2,426 3,558 2,860 Europe 1,288 1,499 2,269 1,302 1,455 2,234 1,080 1,365 2,012 1,315 APAC & Canada 1,442 2,058 2,864 1,646 1,781 2,760 1,376 1,330 2,201 1,584 Total 1,484 1,901 2,716 1,707 1,871 2,828 1,488 1,637 2,517 1, Net revenue represents total trading revenue generated from CFD and spread bet clients after the impact of Rebates & Levies. Geographic segmentation is according to location of office which on-boards client, rather than client place of residence. 2. Active clients represent those individual clients who have traded with or held CFD or spread bet positions with CMC Markets on at least one occasion during the preceding 6 months for half year figures and 12 months for full year. H Analyst presentation ǀ Pg 26

27 Appendix 2 Revenue composition H CFD and Stockbroking revenue 1 by asset class New products 4% Stockbroking 5% Shares 12% H CFD and Stockbroking revenue 1 by asset class New products 6% Stockbroking 5% Shares 12% FX 28% FX 24% Treasury 0% Commodity 14% Index 37% Treasury 0% Commodity 13% Index 39% H Net revenue 2 by region H Net revenue 2 by region APAC & Canada 31% UK 39% APAC & Canada 31% UK 41% Europe 30% Europe 28% 1. CFD and Stockbroking revenue represents total revenue generated from CFD, Spread bet and stockbroking clients after the impact of Rebates & Levies. Geographic segmentation is according to location of office which on-boards client, rather than client place of residence. 2. Net revenue generated from CFD and spread bet active clients, including Countdowns and Binaries after the impact of rebates and levies. H Analyst presentation ǀ Pg 27

28 Appendix 3 Income statement Group ( m) H H YoY % Total revenue % Rebates & levies (12.8) (12.7) (1%) Net operating income % Operating expenses (59.3) (56.4) (5%) Finance costs (0.5) (0.3) (43%) Profit before taxation % Taxation (4.8) (4.1) (16%) Profit after tax % Dividend per share (pence) % Basic EPS (pence) % 1. Net operating income represents total revenue after the impact of rebates & levies. H Analyst presentation ǀ Pg 28

29 Appendix 4 Balance sheet Group ( m) 30 September 2017 (unaudited) 31 March 2017 Non-current assets Intangible assets Property, plant and equipment Financial investments Deferred tax assets Total non-current assets Current assets Trade and other receivables Derivative financial instruments Financial investments Amounts due from brokers Cash and cash equivalents Total current assets Current liabilities Trade and other payables Derivative financial instruments Borrowings Current tax payable Short term provisions Total current liabilities Non-current liabilities Trade and other payables Borrowings Deferred tax liabilities - - Long term provisions Total non-current liabilities Total equity H Analyst presentation ǀ Pg 29

30 Appendix 5 Own funds flow statement Group ( m) H H YoY % Operating activities Profit before tax % Adjustments for: Finance costs % Depreciation and amortisation % Other non-cash adjustments (0.2) 3.3 (103%) Tax paid (6.7) (5.6) (20%) Own funds generated from operating activities % Movement in working capital (14.2) (9.5) (50%) Inflow/(Outflow) from investing activities Net Purchase of property, plant and equipment and intangible assets (2.0) (3.0) 35% Other inflow/(outflow) from investing activities 0.9 (3.3) 129% (Outflow)/Inflow from financing activities Interest paid (0.4) (0.3) (43%) Dividends paid (17.1) (15.4) (11%) Other inflow/(outflow) from financing activities 14.3 (1.2) 1,335% Total outflow from investing and financing activities (4.3) (23.2) 81% Increase/(Decrease) in own funds 7.9 (13.1) - Own funds at the beginning of the year % Effect of foreign exchange rate changes (1.0) 2.6 (138%) Own funds at the end of the year % H Analyst presentation ǀ Pg 30

31 Number of days Appendix 6 Revenue trends Loss days Daily revenue¹ distribution ( 000s) % % 3.1% 10 H H H CFD and spread bet loss days % 0-1, ,000 1,500 2,000 2,500 H H Gross revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, before the impact of rebates to introducing partners and retail clients, and betting levies. H Analyst presentation ǀ Pg 31

32 Client AUM ( m) Appendix 7 Client assets and prime broker requirements Client assets under management (AUM) Broker margin requirements Max - 114m Max - 119m Max - 78m H Analyst presentation ǀ Pg 32

33 VIX closing VDAX-NEW Appendix 8 Major Indices volatility Closing VIX 1 VDAX-NEW Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 VIX Close H average H average H average H average 10 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 VDAX-NEW H average H average H average H average Value of client trades in Indices, our biggest asset class, increased 15% against prior YTD despite ongoing reduced volatility in markets 1. VIX and VDAX-NEW are measures of equity market volatility in their respective regions (US and Germany respectively). H Analyst presentation ǀ Pg 33

34 Disclaimer Certain statements in this presentation constitute or may constitute forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding the Company s future expectations, operations, financial performance, financial condition and business is or may be a forward-looking statement. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied in any forward-looking statement. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this presentation. As a result, you are cautioned not to place any reliance on such forward-looking statements. The forward-looking statements reflect knowledge and information available at the date of this presentation and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this presentation should be construed as a profit forecast or profit estimate and no statement in this presentation should be interpreted to mean that the future earnings per share of the Company for current or future financial years will necessarily match or exceed the historical or published earnings per share of the Company. This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of investment professionals in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order Persons within the United Kingdom who receive this communication (other than those falling within (i) and (ii) above) should not rely on or act upon the contents of this communication. Nothing in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion contained in the Financial Services and Markets Act This presentation has been furnished to you solely for information and may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any other purpose. This presentation does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of CMC Markets PLC ( CMC, or the Company") in any jurisdiction nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not constitute a recommendation regarding the securities of CMC. Without limitation to the foregoing, these materials do not constitute an offer of securities for sale in the United States. Securities may not be offered or sold into the United States absent registration under the US Securities Act of 1933 or an exemption there from. CMC has not verified any of the information set out in this presentation. Without prejudice to the foregoing, neither CMC nor its associates nor any officer, director, employee or representative of any of them accepts any liability whatsoever for any loss however arising, directly or indirectly, from any reliance on this presentation or its contents. This presentation is not being issued, and is not for distribution in, the United States (with certain limited exceptions in accordance with the US Securities Act of 1933) or in any jurisdiction where such distribution is unlawful and is not for distribution to publications with a general circulation in the United States. Certain figures contained in this presentation, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this presentation may not conform exactly to the total figure given as percentage movements have been calculated from the underlying data before rounding. By attending or reading this presentation you agree to be bound by the foregoing limitations. H Analyst presentation ǀ Pg 34