analyst presentation format final - cmc markets · robust balance sheet – strong liquidity to...

Results

presentation

Half year ended

30 September 2016

Introduction

Peter Cruddas - Group CEO

Introduction

� Progress continuing to be made on strategic initiatives

� NOI down 4% due to subdued markets and reduced client activity

� Active clients up 8%, new clients up 15% reflecting investment in strategic

initiatives

� Value of client trades down 18%

� Revenue per client down 13%

� Client money balance up 32% compared to H1 2016

� Dividend of 2.98p (third of 2016 total ordinary dividend)

� On track to deliver NOI of £220m by 2020

Key Highlights

H1 2017 Analyst presentation ǀ Pg 3

Financials

Grant Foley - Group CFO

37,361

44,01747,623

42,68146,548

1,484

1,901

1,7071,871

1,488

2015 2016 2017

H1 clients H2 clients RPC (£)

13.9

26.218.8

38.0 36.2

24%

35% 34%30%

25%

2015 2016 2017

H1 Underlying PBT H2 Underlying PBTUnderlying PBT margin

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 six month period.

2. 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.

Active clients1 and Revenue per active client (RPC)2 (£)

KPIsActive client growth offset by reduced client activity

Underlying Profit Before Tax4 (£m and margin)

Net operating income3 (£m)

Basic EPS (pence)


Turnover (£bn) and Trades (m)

Profit after tax (£m)

696

1,112911930 960

17.8

26.8

33.5 33.330.4

2015 2016 2017

H1 turnover H2 turnover Number of trades

58.8

78.9 75.584.8 90.5

2015 2016 2017

H1 H2

11.3

20.0

14.7

21.022.5

2015 2016 2017

H1 H2

4.0

7.2

5.1

8.4 8.0

2015 2016 2017

H1 H2

Group (£m) 2017 H1 2016 H1 YoY %

Net operating income1 75.5 78.9 (4%)

Underlying operating expenses (53.6) (49.1) 9%

Depreciation, amortisation and finance

costs(3.1) (3.6) (13%)

Underlying Profit before tax2 18.8 26.2 (28%)

Other income - 1.6 -

Exceptional costs - (1.3) -

Profit before taxation 18.8 26.5 (29%)

Underlying tax (4.1) (6.1) 33%

Underlying Profit after tax3 14.7 20.1 (27%)

Tax (4.1) (6.5) 36%

Profit after tax 14.7 20.0 (27%)

1. Net operating income represents total revenue after rebates payable to introducing partners and retail clients, and betting levies.2. Underlying PBT represents PBT before exceptional items.3. Based on implied tax payable excluding exceptional items.

Income statement

� Reduction in NOI due to reduced client activity from subdued markets

� Countdowns and binaries continuing to perform well, contributing £4.1m of revenue (H2 2016: £3.2m)

� Operating expense increases

through planned investment in people and marketing to support strategic initiatives


Group (£m) 2017 H1 2016 H1 YoY %

CFD and spread bet (incl

binaries) net revenue70.9 75.1 (6%)

Stockbroking 3.7 2.7 40%

Interest income 0.9 0.9 -

Sundry income - 0.2 (100%)

Net operating income 75.5 78.9 (4%)

1. Turnover represents the notional value of client trades.

Breakdown by product Turnover1 and trades

Net operating incomeLower client turnover reducing net operating income

� Reduced CFD and spread bet revenue driven by lower trading activity from clients in a quieter market environment

� Countdowns and Binary products generated £4.1m revenue during the period compared to £3.2m during H2 2016

� Stockbroking increase due to higher volumes driven by a low central bank rate and supportive market conditions in Australia

� Client trading volumes strongly correlated to market volatility, which was significantly lower during H1


0

5

10

15

20

25

30

35

40

0

200

400

600

800

1,000

1,200

Tra

de

s (

m)

Tu

rno

ve

r (£

bn

)

Turnover (£bn) Trades (m)

� Value of client trades fell across all asset classes except Commodities and Treasuries

� Turnover for Indices was down 27%; Indices are typically up to 50% of total client trades

� Value of FX and Shares trades both fell by 6%

10

15

20

25

30

35

40

VD

AX

-NE

W (

%)

VDAX-NEW Avg 2015 H1 Avg 2015 H2

Avg 2016 H1 Avg 2016 H2 Avg 2017 H1

10

15

20

25

30

35

40

Clo

sin

g V

IX (

%)

VIX close Avg 2015 H1 Avg 2015 H2

Avg 2016 H1 Avg 2016 H2 Avg 2017 H1

1. VIX and VDAX-NEW are measures of equity market volatility in their respective regions (US and Germany respectively)

Closing VIX1 VDAX-NEW1

Net operating incomeSignificant fall in the value of client trades


1. Net revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, after the impact of rebates and levies.

Net revenue1 bridge (£m)Subdued markets leading to clients trading less


75.1

87.1

70.9

(8.5)(15.8)

(11.1)

0.1

7.1

1.8

11.6

10.6

2016 H1 NetRevenue

Existingclients trading

more

Existingclients

stoppedtrading

Returningclients

New clients 2016 H2 NetRevenue

Existingclients trading

less

Existingclients

stoppedtrading

Returningclients

New clients 2017 H1 NetRevenue

� Active client growth in all three regions, with

increases in new and developing offices

� RPC decreased 13% compared to H1 2016,

reflecting subdued market environment

� RPC, although reduced in the period, continues to

reflect the Group’s high-quality client base

1. Trading revenue generated from CFD and spread bet active clients.

Revenue per active client1 (RPC)Growing active client base


1113 13 13 13

15

17 1718 18

11

13 14

15 16

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

5

10

15

20

25

30

35

40

45

50

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

RP

C (

£)

Ac

tive

clie

nts

(0

00

's)

UK Europe APAC and Canada RPC

Active clients and RPC

Client churn (000’s)

28 3034 33 37

79

9 1010

24

1 31

(10) (8) (11) (11) (12)

37

4344 47 48

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

Continuous traders New traders Reactivated Stopped trading

18

9

15

8 8

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

Low loss days

Revenue trendContinuing low number of loss days


Daily distribution

0 5 10 15

(600)

(300)

0

300

600

900

1,200

1,500

1,800

Number of days

CF

D a

nd

Sp

rea

db

et

reve

nu

e (

£k

)

200

225

250

275

300

Clie

nt

AU

M (

£m

)

Client assets under management (AUM) Broker margin requirements

Client assets and Prime Broker RequirementsIncreasing assets held by clients and higher PB requirement


20

30

40

50

60

70

80

90

100

Max - £72m

Max - £78m

Max -

£89m

% of NOI

Group (£m) 2017 H1 2016 H1 YoY % 2017 H1 2016 H1

Net staff costs 24.7 21.9 13% 33% 28%

IT costs 7.4 5.9 26% 10% 7%

Sales and marketing 10.6 7.5 24% 14% 10%

Premises 2.6 2.4 11% 3% 3%

Legal and Professional fees 1.8 1.6 14% 2% 2%

Regulatory fees 2.5 2.4 2% 3% 3%

Other 4.0 7.4 (30%) 5% 9%

Total operating expenses

before exceptional costs53.6 49.1 9% 71% 62%

Exceptional costs - 1.3 - 0% 2%

Total operating expenses 53.6 50.4 6% 71% 64%

Average headcount 579 518 12%

1. Operating costs excluding exceptional items.

Operating costsControlled cost growth to support strategic focus

� Total underlying operating cost¹ increase of 9%

� Staff costs have increased through investment in digital marketing, mobile development and client support staff as well as share based payment

charges. These have been offset by a reduction in the discretionary bonus provision

� IT costs have increased through increased security spend and higher market data

charges that are USD denominated

� Other cost decrease largely as a result of lower bad debt expense through effective risk

management and a one-off tax provision in the prior year


Group (£m) 2017 H1 2016 H1 YoY

Own funds 165.9 151.6 14.3

Non-segregated client and

partner funds3.7 1.2 2.5

Available committed facility 35.0 24.4 10.6

Total available liquidity 204.6 177.2 27.4

Group (£m) 2017 H1 2016 H1

Core Tier 1 Capital 1 160.9 132.4

Less: intangibles and deferred tax

assets (7.0) (4.6)

Capital Resources 153.9 127.8

Pillar 1 requirement 2 41.6 33.5

Total risk exposure 3 520.0 418.3

Capital ratio % 30% 31%

1. Core Tier 1 capital – total audited capital resources as at the end of the financial period, less dividends proposed or paid before 30 September. Prior year 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.4. Blocked cash relates to cash needed to support regulatory and overseas subsidiaries operational requirements.5. Internal Liquidity Buffer consistent at £30m.6. Surplus total available liquidity is defined as the liquidity in excess of the Group’s liquidity risk appetite and is the Group’s key liquidity measure.

Liquidity and regulatory capitalGood cash generation and strong regulatory capital ratio


Available liquidity

Group (£m) 2017 H1 2016 H1 YoY

Total available liquidity 204.6 177.2 27.4

Blocked cash4 (19.5) (14.4) (5.1)

Internal Liquidity Buffer 5 (30.0) (30.0) -

Initial margin requirement at

broker(89.0) (44.0) (45.0)

Surplus total available

liquidity6 66.1 88.8 (22.7)

Uses of Available liquidity

Regulatory capital

Key regulatory topics

� Brexit

� ESMA Task Force

� European regulators

� MiFID II

� Australia – client money segregation


Financial summary

� NOI down

– Subdued market environment

– Increasing number of active clients

– Lower RPC

� Contribution from new products

– Countdowns and Binaries generated £4.1 million

� Costs remain under control

– Targeted investment in the business to drive future growth

� Interim dividend of £8.6 million – 2.98 pence per share, third of prior year total ordinary dividend

� Robust balance sheet

– Strong liquidity to facilitate future growth

– Capital ratio of 30%


Outlook


Net Operating Income

� Client activity has not decreased further

� Believe that H2 will be an improvement on H1

� If market conditions persist, full year net operating income likely to be moderately lower than FY16

� Strategic initiatives on course to deliver NOI of £220m by 2020

Costs

� H2 costs to be in line with H1

Strategic Progress

Peter Cruddas - Group CEO

� Increasing primary market share in UK1

and Australia2

� #1 position in Germany3 maintained

Established marketsSeen as the choice provider by both new clients and switchers

Digital marketingImprove effectiveness of digital

marketing to drive client

acquisition

Geographic expansionGrow developing regions, open

new offices and explore potential

opportunities elsewhere

New products / developmentsContinue to drive new binaries proposition and evaluate other

opportunities

InstitutionalNext Gen platform to offer full

white and grey label proposition

Strategic objectivesSolid progress on strategic priorities

1. Investment Trends July 2016 UK Leveraged Trading Report.2. Investment Trends May 2016 Australia CFD Report.3. Investment Trends May 2016 Germany CFD & FX Report.

A

B

C

D

E

Initiative Objective FY17 progress

� Improved offline activity driving online demand

� Strong growth in ‘app’ downloads

� Poland office on track with expectations� France performance continues to

improve� Looking at new opportunities

� Binaries released in April� Knockouts released in October

� 36 institutions signed up on a YTD basis� Turnover from institutions up 34%

against H1 2016


� UK

– #1 client satisfaction rating and superior net

promoter score relative to the sector

average²

– Growing primary market share²

– Retail active clients up 9% against H1 2016

� Australia

– Growing primary market share

– Retained number one ranking for high

value CFD clients and grew primary market

share3

� Germany

– Maintained market leading position4, with

gap widening to the second largest

competitor

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 six month period. Geographic segmentation is according to location of office which on-boards client, rather than client place of residence.

2. Investment Trends July 2016 UK Leveraged Trading Report.3. Investment Trends May 2016 Australia CFD Report4. Investment Trends May 2016 Germany CFD & FX Report

Active clients1 and number of trades Highlights

Established marketsStrong organic growth in established markets


0

5

10

15

20

25

30

35

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

Ac

tive

clie

nts

(0

00

's)

UK GERMANY AUSTRALIA

0

2

4

6

8

10

12

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

Clie

nt

tra

de

s (

millio

ns

)

UK GERMANY AUSTRALIA


Product driven communication in the UK/AUS/SGP Events led communication in the UK/AUS/SGP

Tailored communication for European markets TV campaign raising awareness across all offices

Increased investment in offline activityEssential for driving demand into the online funnel


Mobile focus driving increased app downloadsContinued progress on SEO keyword visibility

New online application form improving conversion rates New look website V1 rollout nearing completion, V2 starting

Digital progressEncouraging results on demand driving and conversion initiatives

V1 website V2 website

34%

40%

Pre new form conversion rate Post new form conversion rate

UK Weekly Application Form Conversion rates

28,946

55,129

79,038

H1 FY16 H2 FY16 H1 FY17

0

5,000

10,000

15,000

20,000

25,000

30,000 UK - SEO Visibility1

Old UK site New UK site released

1. Estimated traffic to the site based on search rankings. Source: SEMrush

1. Cost per new approved account, presented net of Land Rover BAR sponsorship cost

Investment in offline driving short term higher CPA’s1 Mobile trading turnover continues to increase

Digital benefits

� Trades and turnover via mobile devices continue to increase

� Award winning Apps, smartphone penetration and 4G

driving this trend

� Increase in offline spend to drive demand into the online funnel

� Continued focus on digital and mobile spend

� Conversion improvements - online application form and websites

733

614

530

775

667

575

-

100

200

300

400

500

600

700

800

900

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1 Mediumterm target

60% 58%52% 53% 50%

40% 42%48% 47% 50%

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

Next Gen Online turnover Next Gen Mobile turnover


� 26% higher active clients than H1 2016

� 30% higher RPC than prior year comparative

� Resulting net revenue1 is 64% higher than H1 2016

� 37% growth in value of client trades

� Regulatory headwinds around advertising resulting in a change of focus towards more traditional marketing

1. Net revenue generated from CFD and spread bet active clients, including Countdowns and Binaries after the impact of rebates and levies.

� Office opened during Q3 2016

� Net revenue up 244% compared to H2 2016

� Active clients up 123%

� Significant increases to number and value of client trades

of 252% and 292% respectively

France

Geographic expansion/developing regionsFrance and Poland

Poland


0

100

200

300

400

500

600

700

800

900

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2015 H1 2016 H1 2017 H1

Ac

tive

clie

nts

Re

ve

nu

e (

£m

)

Revenue (£m) Active clients

0

100

200

300

400

500

600

700

2016 Q3 2016 Q4 2017 Q1 2017 Q2

Cumulative new accounts Quarterly active clients

Stage 1 - Countdowns

� Launched 20th July 2015 in UK, Australia and New Zealand, and all remaining offices (except Canada and Singapore) on 16th November 2015

� Continuing growth in active clients, with average daily clients during H1 2017 17% higher than H2 2016

� Revenue generated by product was 26% in H1 2017 than during H2 2016

Stage 2 - Binaries

� Binaries released 25th April with slower uptake than Countdowns, as expected

Stage 3 - Knockouts

� Release during October 2016 in Germany

Other developments

� Development of new product and platform enhancements ongoing

1. Gross Countdowns revenue before the impact of rebates and levies.

Countdowns and Binaries revenue1 (£m)

New productsBinaries launched April 2016, Knockouts launched in Germany October 2016


1.1

3.2

4.1

H1 2016 H2 2016 H1 2017

• Value of trades increased by 34% against H1 2016

• Net institutional revenue growth of 41% to £10.4 million against prior year

• Active clients in line with H1 2016 and grew 9% compared to H2 2016

• Growth has been aided by first full period following release of API functionality

• Strong pipeline of potential partnerships present opportunities for further growth

Institutional trades and volume

Institutional clients

InstitutionalSignificant growth driven by higher quality clients


0

200

400

600

800

1,000

1,200

0

20

40

60

80

100

120

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1

Nu

mb

er

of

tra

de

s (

00

0s

)

Tu

rno

ve

r (£

bn

)

Turnover (£bn) Number of trades (000s)

0

5

10

15

20

25

30

0

1,000

2,000

3,000

4,000

5,000

2015 H1 2015 H2 2016 H1 2016 H2 2017 H1 Tu

rno

ve

r p

er

clie

nt

(£m

)

Ac

tive

clie

nts

Active clients Turnover per active (£m)

Summary

� Clear strategy that is being delivered

� Good growth in active client numbers

� Launch of Binaries and Knockouts

� Institutional offering delivered and growing

� Continuing to invest for growth, despite lower NOI

� Strong liquidity to support growth

� Continue to be confident in £220m NOI target by 2020


Questions

Appendices

Appendix 1

Net revenue1 (£m)

2014 2015 2016 2017

H1 H2 Full Year H1 H2 Full Year H1 H2 Full Year H1

UK 15.7 17.7 33.4 19.3 29.3 48.6 29.5 33.6 63.1 29.1

Europe 21.0 24.8 45.8 19.8 25.6 45.4 22.1 26.4 48.5 19.6

APAC & Canada 18.8 16.0 34.8 16.4 26.2 42.6 23.5 27.1 50.6 22.2

Total 55.5 58.5 114.0 55.5 81.1 136.6 75.1 87.1 162.2 70.9

Selected KPIs by half year

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.

Active clients²

2014 2015 2016 2017


UK 10,901 10,894 14,054 10,673 12,814 15,417 12,749 13,172 17,268 13,345

Europe 15,435 15,751 19,572 15,365 17,111 20,019 16,954 18,175 21,714 18,159

APAC & Canada 12,021 11,380 14,380 11,323 12,756 14,867 14,314 15,201 18,347 16,119

Total 38,357 38,025 48,006 37,361 42,681 50,303 44,017 46,548 57,329 47,623

Revenue per active client (£)

2014 2015 2016 2017


UK 1,437 1,624 2,373 1,812 2,283 3,152 2,314 2,548 3,652 2,180

Europe 1,361 1,572 2,338 1,288 1,499 2,269 1,302 1,455 2,234 1,080

APAC & Canada 1,564 1,411 2,424 1,442 2,058 2,864 1,646 1,781 2,760 1,376

Total 1,446 1,539 2,374 1,484 1,901 2,716 1,707 1,871 2,828 1,488


Group (£m) 2017 H1 2016 H1 YoY %

Total revenue 88.2 89.1 (1%)

Rebates & levies (12.7) (10.2) (24%)

Net operating income1 75.5 78.9 (4%)

Other income - 1.6 -

Operating expenses (53.6) (49.1) (9%)

Exceptional costs - (1.3) -

Depreciation and amortisation (2.8) (3.2) 12%

Finance costs (0.3) (0.4) 22%

Profit before taxation 18.8 26.5 (29%)

Underlying Profit before tax2 18.8 26.2 (28%)

Taxation (4.1) (6.5) 36%

Profit after tax 14.7 20.0 (27%)

Underlying Profit after tax3 14.7 20.1 (27%)

Dividend per share (pence) 2.98 3.57 (17%)

Basic EPS (pence) 5.1 7.2 (29%)

1. Net operating income represents total revenue after the impact of Rebates & Levies.

2. Underlying PBT represents PBT before exceptionals.

3. Based on implied tax payable excluding exceptional items

Appendix 2Income statement


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.

2017 H1 CFD and Stockbroking revenue1 by asset class 2016 H1 CFD and Stockbroking revenue1 by asset class

2017 H1 Net revenue2 by region 2016 H1 Net revenue2 by region

Appendix 3Revenue composition


Shares12%

Index39%

Commodity13%

Treasury0%

FX24%

New products6%

Stockbroking5%

Shares12%

Index49%

Commodity8%

Treasury0%

FX27%

New products1%

Stockbroking3%

UK39%

Europe30%

APAC & Canada

31%

UK41%

Europe28%

APAC & Canada

31%

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 2001. 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 2000.

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.


analyst presentation format final - cmc markets · robust balance sheet – strong liquidity to...

Documents