Marex Group plc

Good morning, everyone. I'm Robert Coates, Global Head of Investor Relations for Marex. Thank you for joining us today for our results conference call. Speaking today are Ian Lowett, CEO, and Rob Irvine, CFO. After the formal remarks, we will open the call up for questions. Before we begin, I would like to highlight that certain matters discussed on today's conference call are forward-looking statements relating to future events, management's plans for the business, and the future financial performance of the group. which are all subject to risk and uncertainties. Actual results could differ materially from those anticipated in the forward-looking statements. The risk factors that may affect these results are referred to in the company's press release and our previous prospectus filed with the SEC. The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update these forward-looking statements. Finally, the speakers may refer to certain adjusted non-IFRS financial measures on this call. A reconciliation of the non-IFRS financial measures to the most directly comparable IFRS measures is available in the company's press release. A copy of today's release and the investor presentation can be found on the investor page of Marex.com. With that, I'll hand over to Ian.

Good morning and welcome to our fourth quarter and full year 2024 earnings call. I'm delighted to present Marek's first set of annual results since our IPO last April, and I'm proud of all we have accomplished in our first year as a public company. Our performance demonstrates that we are successfully executing our strategy, and it is delivering value for our shareholders, clients, and other stakeholders. As of year end, our share price had risen by around 64%, putting us in the top quartile of US IPO performance in 2024. with further price appreciation since then. During the year, we have taken opportunities to grow both organically and inorganically, broadening our product offering and geographic reach. As a result, we have increased our relevance to a larger and growing client base, enabling us to gain market share. We have built a platform that is both diversified and resilient, one we believe can deliver growth across a range of market environments. As I've said before, We are grateful for the enthusiastic response we have received from the market and for the time investors and analysts have spent engaging with us to understand the Merrick story. We have learned a lot from you and your insightful questions about Merrick. Moving now to slide four and a summary of our performance highlights. Our fourth quarter performance was strong in what is typically a slowest quarter seasonally. We saw a continuation of the themes we experienced throughout the year, a supportive market backdrop continued market share gains, and momentum across all of our businesses. We continue to strengthen our position in the market with Marek's outpacing growth in overall volumes in the markets in which we operate. This was particularly the case in our securities business, where we are now benefiting from the integration of TD Cowen's Prime Services business and the extension of this capability on balance sheet. Client activity levels remained robust, as average balances grew to $15.5 billion in the fourth quarter. This resulted in Q4 net interest income of $63 million, broadly in line with Q3 2024. We delivered record full-year adjusted profit before tax of $321 million, up 40% year over year. As the acquisitions we completed in 2024 were very small bolt-on, the preponderance of the $91 million increase in profit was due to organic growth. The first shareholder sell-down post-IPO was very well received by investors, demonstrating strong levels of institutional support for Merrick and increasing liquidity in our stock as our free float increased to 52%. And we diversified our funding sources and liquidity headroom to support future growth of our platform through a $600 million issuance of senior unsecured notes. Finally, consistent with the capital allocation policy set out at IPO, we'll be paying a dividend of 14 cents per share this quarter. Slide five shows the key metrics we are focused on, namely growth, margins and returns, productivity, and quality of earnings. In 2024, revenues grew 28% to $1.6 billion, and our adjusted operating pre-tax margin increased to 20%, delivering the 40% growth in adjusted profit before tax year over year. Our reported return on equity was 25% up six percentage points year over year. When you exclude non-operating items, the majority of which are not expected to occur now that we are a public company, adjusted return on equity was 30% for 2024. In terms of productivity, profit per FTE was $99,000 up 16% year over year. And our adjusted Sharpe ratio of monthly PVT was an extraordinary 5.2, reflecting the high quality of our earnings in 2024. Looking now at exchange volumes on slide six, the aggregate markets in which we operate have grown at a double-digit rate since 2021, supported by secular growth trends. In 2024, exchange volumes grew 11.5%, with commodities growth of 20%, outpacing financials at 10%, driven by strong metals and energy market volumes during the year. Financials now make up around 40% of our revenues across our segments, helping to diversify our earnings. We believe this product diversification makes us more resilient, increasing our confidence in being able to continue to deliver profit growth through a variety of macroeconomic and market conditions. As we look at the operating environment on slide seven, Commodity prices and volatility were lower in 2024, with the exception of the elevated metals market conditions in the second quarter that we referenced on earlier calls. Rates have reduced, and although the Fed funds forward curve is higher than it was pre the U.S. election, it is predicting three rate cuts this year. Against this backdrop, our business continues to grow strongly, and we are confident that the platform we have built and the investments we have made will result in structural growth through the cycle. It is clear from the data on slide 8 that there is increasing client activity on our platform and we are gaining share. For example, in 2024, market volumes in clearing were up 12%, while marriage volumes were up 30% and revenues up 25%. Within agency and execution, energy market volumes rose 22%, while our volumes were up 27% and revenues up 30%. In securities, market volumes rose 10%, while our volumes rose 23% and our revenues were up 27%. Market banking volumes were up 20% in the market, while Marix volumes were up 44% and revenues up 34%. When you look at our various businesses on this basis, it is clear that we are consistently gaining market share, with all our business segments growing faster than the market, which itself is growing at a healthy rate. On slide 9, you can see how we have delivered another year of sequential growth and maintained a 35% CAGR in adjusted profit before tax over the last 10 years. We have demonstrated our ability to grow through a variety of market conditions and our continued momentum. We are delivering on our strategy, ensuring that we have sufficient structural growth through product and geographic diversification to offset cyclical headwinds. I'll now hand over to Rob for a more detailed review of our financials.

Thanks, Ian, and good morning, everyone. Turning to slide 11. As Ian said, we had another strong quarter. Q4 revenues grew 28% to $416 million, reflecting strong levels of plant activity and favorable market conditions. Adjusted profit before tax grew 55% to $81 million. On a full year basis, we grew revenues by $350 million to $1.6 billion. Over 70% of this growth was organic. Total costs increased 28% as we continue to invest in both our front office and our control and support functions to support future growth. Adjusted profit before tax was $321 million, ahead of the guidance range we gave at Q3 earnings of $300 to $305 million. Adjusted profit before tax margin increased 200 basis points to 20%, demonstrating our platform's ability to deliver scale benefits. As I've said before, our non-operating adjustments of $25 million were primarily related to our IPO and historic fees paid to our private equity shareholders. As a result, we would expect minimal adjustments between our adjusted and our reported profit before tax metrics going forward, as seen in the third and fourth quarters. Adjusted return on equity rose to 30%, while adjusted diluted EPS was $3.07 per share, up 33% year over year. As you can see on slide 12, All of our business segments delivered strong double-digit revenue and adjusted profit growth for the full year. I'll focus on our quarterly segmental performance on slide 13. Clearing revenue grew 48% to $125 million, driven by growth in net interest income, primarily reflecting higher average balances and commission income. Contracts cleared increased by 27%, well above the market volume growth of 7%, demonstrating again the market share gains that Ian highlighted. Adjusted profit before tax margin was 53% for the quarter in line with the full year. Agency and execution revenue grew 22% to $192 million with a strong performance in both our securities and energy businesses. Securities revenue growth of 25% reflected the impact of the TD Cowan acquisition and organic growth within our rates and FX businesses. Revenue in our energy business grew 17%, reflecting continued high activity levels in European energy markets, strong demand for our environmental offering, and the benefit of our bolt-on acquisitions. Our adjusted profit before tax margin within this segment improved to 19%, as we continue to optimize and integrate our acquisitions. Market making revenue grew 19% to $45 million with strong growth across agriculture, securities and energy, more than offsetting a week a quarter for metals. Hedging and investment solutions revenue grew 20% to $40 million as the business benefited from our investment in growing our sales team and onboarding of new clients. Turning now to slide 14. Average balances in the fourth quarter increased to $15.5 billion, up from 10.9 billion in the fourth quarter of 2023. We have grown average balances every quarter this year. As a reminder, these are daily average balances, which we think are a better reflection on what drives our net interest income. Q4 net interest income was $63 million, taking a full year net interest income to $227 million. The full year net interest income growth reflected a number of drivers. Higher average fed fund rates, which increased to 5.2% for the year. Growth in average balances from 12.9 billion to $13.5 billion, including the addition of TD Cowan's Prime Service business within agency and execution. And in 2023, we carried some fixed investments in US Treasuries, which have subsequently rolled off and been reinvested at higher rates. It is important to note that net interest income does not just impact our clearing business. Within agency and execution, Prime Services will be a growing contributor to net interest income as we continue to build out this capability. And our market making and investment solutions businesses incur interest expense as they use funding to support their activities. As before, we have given you our illustrative rate sensitivity, which indicates that 100 basis points decrease in rate across a full year would reduce adjusted profit before tax by around $20 million. This is, of course, assuming a static year-end balance sheet and ignoring any future book growth. Taking this into account, and our adjusted profit before tax increase of $91 million this year, we would see this as very manageable. Turning to our balance sheet on slide 15, total assets increased from $17.6 billion at the end of 2023 to $24.3 billion at year end 2024. This growth was primarily due to higher client activity levels, and as we continue to grow and diversify our sources of liquidity, As you can see, the majority of our balance sheet consists of high quality liquid assets, which support client activity. Looking by activity type, we can isolate buckets of assets and liabilities that net off against each other. Once netted, we're left with a corporate balance sheet, which is carrying corporate cash and other assets against group liabilities, including our structured notes portfolio and senior note issuance. It's important to emphasize that we maintain very low levels of net debt and leverage as our residual corporate balance sheet is relatively modest. As you can see on slide 16, we continue to maintain prudent levels of surplus capital and liquidity, which support our investment grade credit ratings with both S&P and Fitch. Our total capital ratio of 234%, well above the minimum required levels, and liquid headroom of over $1 billion ensure that we're well positioned for periods of market turmoil. And as you heard from Ian, we've announced a quarterly dividend of 14 cents per share to be paid on the 31st of March 2025 to shareholders on record as at close of business on the 17th of March. Turning to slide 17, as usual, I will conclude with a view on risk. We have a proactive and involved risk management approach at Marex, In market making, we are a client flow driven business and do not take a directional view on prices. However, we do carry a small level of inventory to source client demand and capture the trading spreads. Average daily VAR, or value at risk, has increased slightly to $3.2 million in 2024, reflecting growth in our market making business. However, it remains at a very low level. During 2024, we wrote off seven specific historical provisions which had previously been fully provided for. Within the P&L, we had a release of $1.7 million, reflecting our proactive credit risk management approach, which has resulted in partial recoveries of provisions we'd previously taken. Now, I'll hand you back to Ian for an operational update.