CMC Markets plc

Good morning, everybody, and thank you for joining CMC's half-year 2024 results presentation. On the call today is the Deputy Chief Executive, Dave Feinberg, and our newly appointed Chief Financial Officer, Albert Solomon, and Head of APAC and Canada, Matt Lewis. I will begin this morning's presentation with a brief overview of some of the operational and strategic successes from the half year before handing over to David, Albert and Matt, who will cover the financial and operational highlights in more detail and who will then also take any questions that you have. So if we go to slide three. As a reminder, our vision for CMC is to create the best-in-class one-stop financial trading and investment services platform of the future. And you will see from today's update that we have made some great strides over the last half year, all of which we are very proud of. One area of particular focus has been diversifying our revenues across new geographies and markets. In September, Matt and I were in Singapore, where we successfully launched our CMC Invest platform. Singapore represents a great opportunity for us with an expanding investor base that is growing in wealth, whilst also serving as a gateway to the wider Southeast Asia region. In addition, we also opened our Dubai subsidiary in the Dubai International Financial Center, where we are looking to expand our B2B offering. This regional hub provides us with a strong foothold in one of the most exciting financial centers in the world. There have also been exciting developments in respect of our client product offering. UK cash equities have launched for B2B clients. Mutual funds are now live on the Invest platform with six to follow in the second half of the financial year. And cryptocurrencies are trading on our Invest platform in Australia. Further product upgrades are planned for the second half, and I look forward to sharing these with you at our four-year result. And with that, I will hand over to Albert, who is going to run through the financials. Thank you.

Thank you, Peter, and good morning, everyone. I'm delighted to be here for the first set of results as CFO of CMC Markets. I've been with the business for some time and only a few weeks as CFO, and this is the most I've been excited about our prospects and the opportunities that lay ahead for the business. I'd like to begin by turning to slide five, which looks at our key performance indicators for the group. It goes without saying that the external market conditions have been challenging and the first six months of the year being categorised by subdued market volatility and client trading volumes. This has resulted in a decline in net operating income of £122.6 million, which is down 20% compared to the same period last year with decreases in both trading and investing revenue being partially offset by an increased interest income. Our net revenue mix has remained broadly consistent with levels seen through 2023, with trading revenue continuing to account for the majority of our income at approximately 84%. Our statutory loss before tax was £2 million, which is a reflection of the decline in net operating income, higher operating expenses as the group continues to invest in strategic growth plans, as well as the impairment charge of £5.3 million, which has been taken within the InvestUK and CashEquities business. Reflecting the statutory loss, our loss per share for the half year was 0.8 pence compared to earnings per share of 10.2 pence for the same period last year. Turning now to look at our key performance indicators across our trading business and investing businesses on slide six. In the period, we saw a reduction in both active clients and revenue per client within the trading business, largely as a result of the market conditions, which have presented fewer opportunities for clients to trade. Active clients reduced by circa 7% when compared to H1 of last year, with revenue per client decreasing by around 27%. Client money, or AUM, remained broadly consistent with H123 number at just over £501 million. With regard to the investing business, active clients demonstrated a broadly similar decrease to our trading business and were down 8%. As we outlined in the prior financial year and as visible in the middle chart, the shift in the client mix driven by the migration of the ANZ investing client base to CMC markets. Assets under administration within the investing businesses were down marginally on the same period last year at 37.7 billion pounds. Moving on to the income statement on slide seven. As I already mentioned, uncertainty around the global economic outlook, inflationary pressures, and a higher interest rate environment have resulted in lower client activity. These have combined to weaken our financial performance, and as a result, our trading net revenue came in at £87.4 million, down 32% year-on-year, and our investing net revenue was £16.7 million, down 20% year-on-year. Other income increased approximately £14 million, which is attributable to the higher interest rate environment that I mentioned earlier. In terms of costs, I will look at these in more detail in a couple of slides. However, our headline cost figure increased by approximately 15% to £121.9 million, driven mainly by an increase in staff costs and IT to support the delivery of our strategic plan, as well as the impairment charge I referenced earlier. Our loss before tax was £2 million, reflective of the tougher external environment and continued investment in operation of delivery. Turning now to our trading business on slide 8. The top line of the table shows gross trading client income, which as a reminder is the spreads, financing and commissions clients pay to trade. Gross client income for the half was £132.6 million, which is down 14% when compared to H1 of last year, and is reflective of the lower market volatility and client trading activity, but also reflects a strong prior year comparative of H1-23, including periods of much higher volatility, mainly centred around geopolitical conflicts and sterling weakness. You will notice that client income retention has dropped to 66%, with risk management losses of £16.9 million, following unfavourable performance of our strategic hedges on certain asset classes and significant flows seen from larger institutional clients. Overall, and as a result of the factors I've just spoken to, the trading business was down 32% on the same period last year. Whilst the financial performance has been weaker than we had expected, our strategic investment in our trading and investing platforms has continued and Dave is going to talk through some of the operational highlights and our future growth plans a little later on. Turning now to costs on slide 9. Operating expenses excluding variable remuneration increased by around 15% to £121.9 million in the first half. The bulk of this was driven by an increase in staff costs, which were up £12.6 million, and roughly half of this increase is attributable to the annualisation of hires made in the prior year and inflation-related salary increases. These higher staff costs are reflective of the significant investment we've made in strategic projects as we've continued to improve our technological and product offering for clients and look to position the business for future growth. As I mentioned earlier, we are taking an impairment charge of £5.3 million within the InvestUK and CashEquities business as we reduce the assets carrying value due to operational delays and a longer time horizon to profitability. Premises costs increased by £1.3 million, primarily driven by new leases to drive expansion in key regions, high utility costs as a result of the global energy crisis and a change in accounting treatment of rates within UK properties. Regulatory fees decreased by £4.7 million, largely as a result of the lower FSCS levy in the current year. Costs remain a key focus for myself and the management team. We are today reiterating our guidance for the full year of operating costs of 240 million pounds, excluding variable remuneration, as we continue to review our operating model and cost structures to drive efficiencies across our business. I would like to turn now to our liquidity and regulatory capital on slide 10. The group's balance sheet and overall regulatory capital remain strong. Our CET1 and total OFR ratio have seen small declines, but remain robust at £353.4 million, 360% respectively, and reflect the strong levels of capital resources that exist within the business. Our total available liquidity increased to £435.6 million. However, this is mainly driven by a sizable increase in non-segregated funds, which is offset by a decline in owned funds driven by the payment of the 2023 final dividend and movements in working capital. Our block cash has increased marginally within the half year, largely as a result of the capital injections in Dubai and Invest UK. And as a reminder, this is cash we need to maintain within the business to support regulatory and overseas subsidiary operational requirements. Margin requirements with brokers also increased in the half year by just under £17 million, reflecting our risk management position at period end. The net result is available liquidity of 237.2 million pounds, which is broadly in line with our FY23 result as cash generated by the business has been offset by increase in regulatory buffers and margin requirements. Finally, turning to the financial outlook on slide 11. Our financial outlook for the remainder of the year is unchanged. We continue to expect net operating income of between 250 to 280 million pounds. Operating costs excluding variable remuneration are expected to be in line with our guided figure of 240 million pounds, and we are forecasting an effective tax rate of 30%. On NOI, the first half has been categorised by lower client activity across both the trading and investing businesses, and these subdued conditions have continued in the second half. Nevertheless, management remained confident in meeting expectations for the remainder of the year, and over the median term, the delivery of new initiatives remains on track, and we expect to deliver net operating income in full year 2025 in line with market consensus based on more normalised trading conditions. In terms of costs, operating expenses are naturally expected to slow as projects are delivered and we pass the peak of the investment cycle. whilst our strategic delivery has also opened up increasing opportunities to rationalise our cost base and deliver operational synergies across multiple product and business lines as we move through the second half. We continue to review our operating model and cost structures to drive efficiencies, and a further update will be provided to the market at our full-year results. Whilst this has been a challenging start to the year for the group, I am confident that the investments we've made and the strategic milestones reached in the first half place the business on firm footing to capture the long-term growth opportunity. And with that, I would like to hand over to Matt, who's going to talk you through some of the work he and the team are doing in the Invest business.

Thank you, Albert, and good morning, everyone. Today, I'm going to walk you through the performance of our CMC Invest Australia business, starting with our results for the first half and concluding with the strategic initiatives we'll be delivering in H2. If I can focus your attention to slide 13. First half net operating income declined 2% or £500,000 year on year, coming in at £22.1 million. Actual underlying performance in local currency grew 7% or £1.5 million year on year. This was unfortunately offset by a negative £2 million on group consolidation due to unfavourable currency movement during the period. The growth in underlying performance in local currency was driven by an increase in interest income rising 247% or £3.8 million year on year. partially offset by a 12% or £2.3 million reduction in net revenue. The reduction in net revenue was due to a 24% decline in domestic turnover. This is consistent to the decline seen in total market and is reflective of interest rate adjustments made by the Australian Central Bank, which has seen 13 increases at record pace over the past 18 months. Pleasingly, despite the macro headwinds, our market share has been maintained against our direct competitors during the period, with CMC remaining the number two retail broker in Australia. Furthermore, our strategic initiative to boost our international offering has paid off with foreign exchange revenue from international trading up 34% year on year. Moving on to slide 14. The underlying health of the business remains robust, with 152,000 active clients in the first half, as shown in the chart on the left hand side. While this does represent a modest 8% decline against the first half of the prior year, it is stable on our FY23 closing figure. Our ability to attract new customers remains strong, with over 30,000 new accounts opened in the period. The graph on the right hand side provides a breakdown of the change in client assets we manage over the past 12 months. Positively, it has remained stable at 71.5 billion Aussie dollars despite previously mentioned market impacts. The continued strength and resilience of the Invest Australia business saw it contribute circa 18% of total group net operating income. Moving on to slide 15, I'll now give an update on progress of the strategic initiatives of the Invest business. Following the successful integration of ANZ clients earlier in the calendar year, we now have direct access to over 1 million client accounts, who we can engage and educate with timely market updates and investing trends. Our customers have access to our award-winning trading and mobile platforms where they can trade equities and options in 16 global markets. A pleasing trend we are seeing is an increase in proportion of trades executed over mobile, demonstrating the success of this platform in supporting our clients in making investment decisions anytime, anywhere. Recent enhancements to the platform include new research tools and the introduction of thematic investing, enabling investors to quickly identify companies that are key players in sectors such as renewable energy, automation, and robotics. Off the back of significant investor interest, our product offering recently expanded to include physical cryptocurrencies. Our solution is designed with a regulatory first approach, providing a trusted trading environment that is well positioned for proposed licensing requirements scheduled towards the end of next year and mitigates the risks and challenges associated with offshore trading platforms. As the first mainstream broker to offer physical crypto within the one platform, our clients can now safely and conveniently buy, hold and sell a list of seven leading cryptocurrencies. including Bitcoin and Ethereum within our closed-loop solution. In H2, we look forward to introducing stock lending on international securities, which will generate a new revenue stream for our business, and importantly, also for our clients. This will increase the attractiveness of our international offering, given the ability to earn passive income on any holdings. On the regional expansion front, I am pleased to confirm the successful launch of Invest Singapore in September 2023. Customers have the ability to trade in 15 global equity markets initially, with more to follow shortly. We offer radical price transparency, a value proposition that is rare in the local market. Singapore is an attractive market with an expanding investor base that is growing in wealth, which importantly will also serve as a gateway to the wider Southeast Asia region with a total addressable market size of over 10 million equity investors. With the continued evolution of our product and technology and targeted expansion in the region, we are excited for the future of the business and for the unrivaled client experience we continue to deliver. I will now hand you over to David to cover our strategic and operational updates.