TIDMCMCX
RNS Number : 5737Q
CMC Markets Plc
07 June 2018
7 June 2018
CMC MARKETS PLC
Final results for the year ended 31 March 2018
Strong growth driven by high value and institutional clients
Year ended 31 March 31 March Variance
GBP million (unless otherwise stated) 2018 2017 %
--------------------------------------------- --------- --------- ---------
Net operating income 187.1 160.8 16%
Profit before tax 60.1 48.5 24%
Earnings per share (pence) 17.3p 13.7p 26%
Ordinary dividend per share (pence) 8.9p 8.9p -
--------------------------------------------- --------- --------- ---------
Number of trades (million) 68.4 62.7 9%
Value of trades (GBP billion) 2,587 2,016 28%
Active CFD and Spread bet clients (numbers) 59,165 60,082 (2%)
Revenue per active client (GBP) 2,964 2,517 18%
--------------------------------------------- --------- --------- ---------
Notes:
Net operating income represents total revenue after commissions
payable to introducing partners and betting levies
Dividend per share paid or proposed relating to the financial
year
Active clients represents those individual clients who have
traded with or held a CFD or spread bet positions with the Group on
at least one occasion during the financial year
Revenue per active client represents total trading revenue from
CFD and spread bet active clients after deducting partner
commissions and levies
Highlights
-- Increased client activity increasing net operating income to
GBP187.1 million up GBP26.3 million (16%)
-- Growth in premium client numbers to 10% of active clients,
overall active clients decreased 2%
-- Institutional business revenues increased by GBP8.7 million (38%) to GBP31.4 million
-- ANZ white label stockbroking transaction on track for delivery in September 2018
-- Proposed final ordinary dividend of 5.95 pence, maintaining
prior full year ordinary dividend of 8.93p
-- Financial performance at the start of 2019 is broadly in line
with prior year equivalent period
Regulatory update
-- European regulatory changes to retail CFDs to take effect
from 1 August with the prohibition on sale of binary products in
Europe from 2 July; this product generated GBP4.5 million of
revenue in UK and Europe in FY18
-- Impact partially mitigated by ANZ white label stockbroking
transaction and elective professional client opt up (on track to
represent in excess of 40% of UK and European revenue)
Progress made on strategic initiatives
-- Established markets: maintained market leading position in
Germany, grew market share in Australia and led the UK for client
satisfaction
-- Geographic expansion: China education office opened in
October, Middle East office planned for 2018
-- Digital: new framework rolled out targeting greater
efficiencies, 59% of marketing spend now through digital
channels
-- New products: FX Prime launched, CMC Pro released
-- Institutional: value of client trades up 50%
Peter Cruddas, Chief Executive Officer commented:
"The strategy of attracting and retaining experienced, high
value and institutional clients through technology and service is
delivering strong results for the Group. We have been delivering on
our strategic initiatives and these are now clearly coming through
in the financial performance, where we have delivered record
statutory profit before tax of GBP60.1 million. Now we have clarity
about the regulatory changes in Europe, and with CMC's balanced
portfolio of retail, professional and institutional clients across
a breadth of growing geographies, we are confident that our
technology and service-led strategy will continue to deliver
profitable growth."
Analyst and Investor Presentation
A presentation will be held for equity analysts and investors
today at 9.30 a.m. (BST).
A live audio webcast of the presentation will be available via
the following link:
http://webcasts.cmcmarkets.com/results/2018fullyear
Alternatively, you can dial into the presentation:
-- United Kingdom: 020 3059 5868
-- All other locations: + 44 20 3059 5868
Please quote "CMC Markets Full Year Results 2018" when
prompted.
Annual Report and Financial Statements
A copy of the CMC Markets plc (the "Company") Annual Report and
Financial Statements for the year ending 31 March 2018 (the "2018
Annual Report and Financial statements") is available within the
Investor Relations section of the Company website
http://www.cmcmarkets.com/group/results/annual-reports
Pursuant to Listing Rule 9.6.1 the "Company" has submitted the
2018 Annual Report to the National Storage Mechanism and will
shortly be available for inspection at: www.hemscott.com/nsm.do
In compliance with The Disclosure and Transparency Rules (DTR)
6.3.5, the information in the document below is extracted from the
Company's 2018 Annual Report and Financial Statements. This
material is not a substitute for reading the 2018 Annual Report and
Financial Statements in full and any page numbers and cross
references in the extracted information below refer to page numbers
and cross-references in the 2018 Annual Report and Financial
Statements.
Forthcoming announcement dates
Thursday 26 July Q1 2019 trading update
Thursday 27 September Q2 2019 pre-close trading update
Media enquiries
Camarco
Geoffrey Pelham-Lane / Ed Gascoigne-Pees / Jennifer Renwick Tel:
020 3757 4994
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 businesses. The company serves retail and
institutional clients through regulated offices and branches in 14
countries, with a significant presence in the UK, Australia,
Germany and Singapore. The Group offers an award-winning, online
and mobile trading platform, enabling clients to trade almost
10,000 financial instruments across shares, indices, foreign
currencies, commodities and treasuries through contracts for
difference ("CFDs") and financial spread bets (in the UK and
Ireland only). Clients can also place financial binary bets through
Countdowns and, in Australia, access stockbroking services. More
information is available at http://www.cmcmarkets.com/group/
Forward Looking Statements
This announcement and Appendix 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.
CHAIRMAN'S STATEMENT
In my first report as Chairman, I am pleased to report that,
against a backdrop of regulatory uncertainty in Europe, the Group
has made strong progress. The Group continues to deliver on its
strategic initiatives, including the rollout of our new mobile
platform, the opening of our Shanghai office, strong growth in our
institutional business and significant progress on the
implementation of our white label stockbroking partnership with ANZ
Bank in Australia.
Results and dividend
The Group has performed strongly throughout the financial year.
Net operating income for the year was GBP187.1 million, a 16%
improvement on the previous year. Revenue per active client at
GBP2,964 was 18% higher than the previous year, reflecting the
Group's strategic focus on generating higher quality earnings
through higher value business.
The Group continues to be highly cash generative, with a strong
balance sheet and total regulatory capital position.
The Board recommends a final dividend payment of 5.95 pence per
share, which represents a total ordinary dividend per share of 8.93
pence.
Regulation
The Group believes in strong regulation and is supportive of
regulatory change to ensure that all providers operate to the
highest standards, ensuring fair client outcomes. The European
Securities and Markets Authority ("ESMA") published temporary
product intervention measures on the provision of CFDs and binary
options to retail clients in March 2018, 15 months after the
Financial Conduct Authority ("FCA") issued consultation paper 16/40
(Enhancing conduct of business rules for firms providing contracts
for difference products to retail clients).
The Group welcomes many of the requirements, and is pleased that
we now have clarity; many of the ESMA requirements have already
been in place throughout the Group for some time. Whilst these
changes are likely to have some short-term adverse effect on the
Group as clients adjust their trading behaviour to these new
requirements, the Board believes that a stronger and better
industry will emerge. In that process the Group will be a clear
winner through its focus on high value clients, service and
technology.
Board and governance
During this financial year, we have made a number of changes to
our Board. Manjit Wolstenholme and Malcolm McCaig resigned from the
Board. Their valuable contribution to the Group in our early days
as a listed business was very much appreciated. It is also with
great sadness that we learnt of Manjit's passing away in November
2017; our thoughts are with her family.
We have welcomed Sarah Ing, Clare Salmon and Paul Wainscott to
our Board; their backgrounds and breadth of experience means they
are already proving to be strong additions.
Simon Waugh resigned from the Board at the end of December after
ten years, with five years as Chairman. I would like to thank Simon
for his significant contribution and I am delighted that Simon
continues to be part of the Group, as Chairman of our APAC &
Canada businesses at this exciting time as we integrate the ANZ
Bank stockbroking partnership.
Given the relatively new composition of the Board, a Board
evaluation has not been completed. The Board expects to complete
the appropriate evaluations during the course of the next financial
year.
People and values
Our people are core to everything that we do and, on behalf of
the Board, I would like to thank them for their efforts for once
again delivering strong financial performance against a backdrop of
regulatory uncertainty. During the year, the Group refreshed its
core values, "the CMC way", reflecting the Group's focus on
quality, clients and integrity.
Outlook
The Group has made a good start to the new financial year and
the Group's stockbroking partnership with ANZ Bank in Australia
remains on track to go live in September 2018.
We expect the new margin requirements stipulated by ESMA to have
some adverse short-term impact on the financial performance once
they are in place, which is expected during the summer. However,
the Group's strategy of attracting and retaining high value and
experienced clients will help to mitigate some of the impact. The
Group has a strong professional offering, "CMC Pro", and is in the
process of reviewing client requests to be treated as elective
professional clients where the eligibility criteria has been
satisfied. In addition, the Group's growing institutional business
and stockbroking partnership with ANZ Bank further diversifies the
Group and helps to mitigate the impact of regulatory change.
Costs remain well controlled, although will be moderately higher
in 2019 for planned investments to drive strategic initiatives as
the Board believes that it is a time to take advantage of the
opportunities that regulatory change will present, ensuring that
the Group continues to be a leader in the industry.
James Richards
Chairman
6 June 2018
CEO REPORT
Financial performance and KPIs
The Group has been delivering on its strategic initiatives and
this is now clearly coming through in the financial performance,
where we have delivered record statutory profit before tax of
GBP60.1 million, up 24% on the prior year. Profit before tax margin
has also increased from 30.1% to 32.1%, highlighting the strong
operational leverage in the business. In addition, revenue per
active client is up 18% on the prior year as we continue to focus
on our high value client proposition. All of this has been against
a backdrop of regulatory uncertainty in the UK and Europe. However,
our strategy puts us in a strong position to mitigate the impact of
the upcoming regulatory changes.
In addition, we have continued to build our presence in our
established and developing offices as well as grow our
institutional business. This, along with market conditions
returning to more normalised levels, resulted in the value of
client trades increasing by 28%, contributing to net operating
income increasing by 16% to GBP187.1 million against the prior
year. All asset classes contributed to the increase in net
operating income.
Operating expenses increased by 13% to GBP125.9 million mainly
due to higher discretionary remuneration and salary costs. In the
year ahead, operating costs are expected to increase as we take on
more staff and infrastructure cost to service in excess of 250,000
new active stockbroking clients as part of the ANZ Bank white label
stockbroking partnership.
It is worth noting that this performance has been achieved
without providing a cryptocurrency offering throughout the majority
of the year. The interest in cryptocurrencies has undoubtedly added
a new wave of clients to the industry. We did not offer any crypto
products until February 2018, and the offering is only currently
available to professional clients with a minimum margin requirement
of 50%.
Cash generation, given the nature of our business, remains
strong and own funds generated from operating activities was
GBP55.5 million. During the year, the Group has seen significant
fluctuations in margin requirements at our prime brokers due to
hedging growing client positions. Although this reduced towards the
end of the year, we have increased our revolving credit facility
from GBP40.0 million to GBP65.0 million; this gives us headroom to
continue growing the business and hedge growing client positions.
Our total regulatory capital ratio remained high at 31.1% at the
year-end. Active clients at 59,165 were down 2% on the previous
year and new accounts were also slightly lower than the previous
year. These decreases were primarily due to the prior year
including a number of new accounts being opened around the EU
Referendum and US presidential election, where clients opened
accounts and only traded around that event.
Whilst active and new accounts continue to be important measures
for the Group, the quality and activity of those clients are more
important, and this will become increasingly so once the regulatory
changes are implemented. During the year premium clients, our
internal measure of high quality clients, increased to 10%.
Regulation
During the year, the FCA consultation paper did not reach a
conclusion due to the impending introduction of ESMA's product
intervention powers from 3 January 2018. The ESMA announcement on
15 December 2017 resulted in a short consultation and the final
rules were published in March 2018. We expect these to be
implemented during the summer.
The main aim of these measures around improving retail client
protection can be summarised through:
-- reducing the extent of potential losses for retail investors
by the imposition of margin close-out levels, minimum margin
requirements (leverage limitations) and negative balance
protection; and
-- confronting conduct issues, such as the use of aggressive
marketing practices and marketing to an untargeted audience.
In the short term the imposition of higher minimum margin
requirements for retail clients is likely to impact the Group's
revenue, but it should be noted that the revenue impact will be
partially mitigated through our focus on high value clients and a
proportion of these clients that will opt to be treated as elective
professional clients, thus exempting them from the retail
restrictions. We expect the number of elective professional clients
to represent in excess of 40% of current UK and European revenue.
The Group has a robust process in place where clients are only
opted up once proof of meeting the required criteria are met.
Regional review
Net revenue has increased across all regions during the year,
with a globally aligned focus on acquiring and retaining high value
clients.
The UK, as the largest and most mature region as well as
servicing most of the Group's institutional business, has a higher
concentration of high value business than other regions, and as a
result saw the biggest increase in revenue per active client
("RPC") of 25% from GBP3,558 to GBP4,451. Active client numbers
reduced marginally by 6% to 16,157 from 17,142 as we focused more
on the high value and institutional segments. Overall, this
resulted in an increase in net revenue of 18% from GBP61.0 million
to GBP71.9 million.
In Europe, regulatory change in Germany, our largest office in
the region, resulted in lower growth than the UK; client numbers
decreased by 1% to 22,223 from 22,503, however, net revenue
increased by 12%, from GBP45.3 million to GBP50.6 million.
In the APAC & Canada region, an education office was opened
in Shanghai in October 2017. Client numbers in the region increased
by 2% to 20,785 from 20,437. Net revenue increased by 18% from
GBP45.0 million to GBP52.9 million.
The stockbroking business has delivered another good year of
growth, with net revenue increasing 9% to GBP8.5 million and active
client numbers growing by 17% to 38,775. This has been achieved
whilst implementing changes to the platform functionality and
building tools for the migration of ANZ Bank stockbroking retail
clients in September 2018.
Risk management
Effective risk management is essential to the continuing success
of the Group. The Group continually reviews its risk management
practices to ensure that they are proportionate and robust.
With the introduction of regulatory changes it is likely that
this will impact the trading behaviour of some clients, and as
these changes are made the Group will continually review its
trading risk management strategies to ensure that they remain
efficient and optimal, at all times operating within the
Board-approved risk appetite and Risk Management Framework.
Strategic progress
Institutional offering
The ANZ Bank white label stockbroking implementation continues
to progress on track for delivery. The retail stockbroking
migration will take place in September 2018 and a number of
intermediaries will be migrated in July 2018. This is a truly
transformational deal for the Australian business and the Group,
where CMC will become the second largest retail stockbroker in
Australia.
In addition to the ANZ Bank stockbroking implementation
providing diversification to the business, the institutional and
partners channel for our CFD offering, which provides white and
grey label and API electronic connectivity, also provides
diversification. The net revenue generated by this business has
grown by 38% from GBP22.7 million to GBP31.4 million during the
year and the ongoing rollout of additional functionality to meet
client demand continues to be a focus area.
The Group continues to grow its CFD institutional business,
launching its FX Prime offering and through its technology,
liquidity and strong balance sheet continues to attract new
institutional business.
Geographic expansion
In October 2017, the Group opened its education office in
Shanghai. Although the Chinese market remains underdeveloped at the
moment, we believe it represents a great future opportunity for the
Group as this market matures.
The Polish office continues to perform well and the Group
continues to look for new geographies in which to expand.
Product offering
We have continued to invest in and develop the Group's product
offering. This has included completing the rollout of HTML5 with
improved functionality, a new mobile platform and the launch of a
limited risk account in the UK and Germany.
In the coming year we will launch our MT4/5 offering. This is a
popular product within the trading community and will be offered in
order to meet the demands of both existing and new clients and also
take advantage of opportunities arising from regulatory change. In
April 2018, we also launched "CMC Pro", our dedicated offering to
meet the needs of professional clients.
Established markets
When putting future regulatory change in Europe to one side, I
am pleased and encouraged by the ongoing growth and revenue
contribution of all three of our established markets, the UK,
Germany and Australia. The continuing positive performance in
independent surveys in these countries also confirms our status as
a leading trading platform provider delivering strong levels of
client satisfaction. We have been shown to be leading in client
service in the UK as well as maintaining our market leading
position in Germany and number one provider for high value CFD
clients in Australia.
Digital initiatives
During the year, we have continued to invest in our digital
marketing area, where we have seen a rise in applications via the
mobile channel. A more scientific approach to our marketing spend
and improvements in search engine optimisation ("SEO") have
contributed to an improved and more focused client acquisition
process.
People and values
Our people are crucial to our success and throughout the year, I
have been consistently impressed by the quality and hard work of
our employees. During the year, we have refreshed our Group values
and are committed to retaining and developing our staff.
On behalf of myself and the Board, I would like to thank all of
our employees for their continued dedication and hard work.
Clients
Clients are central to everything we do at CMC. We continually
focus on employing and training high quality client services staff,
onboarding, education, platform features, and a focus on fair
client outcomes. During the year, the Group received many awards in
this area and ranked very highly in an independent survey of the
sector.
Dividend
The Board recommends a final dividend payment of GBP17.2
million. This is 5.95 pence per share (2017: 5.95 pence), resulting
in total dividend payment for the year of 8.93 pence per share
(2017: 8.93 pence), slightly above the Group's policy of paying 50%
of net income.
Outlook
Key areas of focus for the Group during the first half of the
year will be the successful integration of the ANZ Bank
stockbroking partnership in Australia, and in the UK and Europe on
meeting the new regulatory requirements. Alongside this, we will
continue to develop our platforms to ensure that we are well
positioned from a product perspective in the new regulatory
environment to acquire and retain experienced and valuable clients
as well as build our institutional offering.
Regulatory change is likely to impact revenue in the UK and
Europe in the short term; however, any Group revenue decrease from
retail client trading (expected to be 10% to 15% of 2018 Group CFD
and spread bet revenues) will be partially mitigated by the
increasing revenue from our stockbroking business. Regulatory
change has always helped strengthen our industry and I believe that
CMC as a strong and well-capitalised company will benefit.
We have a big year ahead, but we are well positioned to meet the
challenges to grow our business, through our own technology and 15
offices globally. Through the opportunities that our proprietary
technology provides we are diversifying the business.
Peter Cruddas
Chief Executive Officer
6 June 2018
Financial review
Summary income statement
GBPm 2018 2017 Variance Variance %
------------------------ -------- -------- --------- -----------
Net operating income 187.1 160.8 26.3 16%
Operating expenses (125.9) (111.6) (14.3) (13%)
------------------------ -------- -------- --------- -----------
Operating profit 61.2 49.2 12.0 24%
Finance costs (1.1) (0.7) (0.4) (60%)
------------------------ -------- -------- --------- -----------
Profit before taxation 60.1 48.5 11.6 24%
------------------------ -------- -------- --------- -----------
PBT margin 32.1% 30.1% 2.0%
------------------------ -------- -------- --------- -----------
Profit after tax 49.7 39.2 10.5 27%
Pence 2018 2017 Variance Variance %
------------------------ -------- -------- --------- -----------
Basic EPS 17.3 13.7 3.6 26%
------------------------ -------- -------- --------- -----------
Summary
Net operating income for the year increased by GBP26.3 million
(16%) to GBP187.1 million, primarily driven by trading conditions
returning to more normalised levels and our focus on high value
clients, which resulted in the average trade size increasing during
the year. Second half net operating income was moderately higher
than first half performance at GBP97.5 million (H1 2018: GBP89.6
million).
Active client numbers have fallen marginally by 917 (2%) to
59,165, due to fewer event-driven trading opportunities which
encourage certain clients to open or reactivate their accounts to
trade only around these events. In the prior year, the US election
and EU Referendum drove the active client figure higher. However,
revenue per active client rose by GBP447 (18%) to GBP2,964 due to
an increase in the value of client trades by GBP571 billion (28%)
to GBP2,587 billion despite having fewer active clients.
Encouragingly this growth was seen across both of our largest asset
classes, Indices and FX. Indices was the biggest driver of this
increase with the value of client trades up GBP393 billion (35%) to
GBP1,518 billion, which equated to 59% of the value of client
trades, which is more representative of the historical share of
activity that this asset class generates for the Group.
Total costs(1) increased by GBP14.7 million (13%) to GBP127.0
million. The increase was predominantly caused by a GBP8.5 million
(17%) increase in net staff costs due to higher average headcount
as we continue to invest in the business and higher
performance-related pay.
Profit before tax increased by GBP11.6 million (24%) to GBP60.1
million, as a result of the GBP26.3 million increase in net
operating income and partly offset by a GBP14.7 million increase in
total costs explained above. As a result, our profit before tax
margin(2) increased by 2.0% to 32.1% highlighting the operational
gearing present in the business.
Net operating income overview
Year ended Year ended
GBPm 31 March 2018 31 March 2017
----------------------------------------------------- --------------- ---------------
CFD and spread bet (including binaries) net revenue 175.4 151.3
Stockbroking 8.5 7.8
Interest income 2.1 1.7
Other operating income 1.1 -
----------------------------------------------------- --------------- ---------------
Total 187.1 160.8
----------------------------------------------------- --------------- ---------------
(1) Total costs are the sum of operating expenses, depreciation,
amortisation and finance costs
(2) Statutory profit before tax as a percentage of net operating
income
Regional performance overview: CFD and spread bet
2018 2017 Variance %
-------------------------------------
Value Value Value
Net of Net of Net of
revenue trades Active RPC revenue trades Active RPC revenue trades Active RPC
(GBPm) (GBPbn) Clients (GBP) (GBPm) (GBPbn) Clients (GBP) (GBPm) (GBPbn) Clients (GBP)
-------- -------- -------- -------- -------- -------- -------- ------ -------- -------- -------- -------
UK 71.9 1,036 16,157 4,451 61.0 793 17,142 3,558 18% 31% (6%) 25%
Europe 50.6 777 22,223 2,276 45.3 632 22,503 2,012 12% 23% (1%) 13%
APAC &
Canada 52.9 774 20,785 2,544 45.0 591 20,437 2,201 18% 31% 2% 16%
-------- -------- -------- -------- ------ -------- -------- -------- ------ -------- -------- -------- -------
Total 175.4 2,587 59,165 2,964 151.3 2,016 60,082 2,517 16% 28% (2%) 18%
-------- -------- -------- -------- ------ -------- -------- -------- ------ -------- -------- -------- -------
UK
The value of client trades in the UK grew 31% against the prior
year to GBP1,036 billion (2017: GBP793 billion), driven by retail
growth of 29% to GBP733 billion (2017: GBP569 billion) as market
conditions presented clients with more trading opportunities,
whilst the institutional business also continues to grow. Although
the number of active clients fell 6% to 16,157 (2017: 17,142), much
of this churn was in low value, short-term clients trading around
known political events in the prior year such as the UK's EU
Referendum in June 2016, which in turn contributed to revenue per
active client increasing 25% to GBP4,451 (2017: GBP3,558). Our
focus on clients was clearly reflected in an independent industry
survey carried out during the year(1), with our net promoter score
further increasing and the Group continuing to lead in client
satisfaction with first place rankings in 14 out of 19 key service
areas.
Europe
Europe comprises offices in Austria, France, Germany, Italy,
Norway, Poland, Spain and Sweden. The value of client trades in
Europe was 23% higher than the prior year at GBP777 billion (2017:
GBP632 billion). Whilst active clients were marginally lower than
the prior year, the focus on high value clients has yielded strong
returns with net revenue up 12% in the region to GBP50.6 million
(2017: GBP45.3 million), and an increase in net revenue across all
offices. Our Scandinavian offices performed particularly well, with
the value of client trades in the region 67% higher than the prior
year. The largest office in the region, Germany, maintained its
market-leading position with a 8% share of primary relationships
with CFD/FX active clients(2), and the Polish office continues to
grow well with active clients up 52%.
APAC & Canada
Our APAC & Canada business services clients from our Sydney,
Auckland, Singapore, Toronto and Shanghai offices along with other
regions where we have no physical presence. The value of client
trades was 31% higher at GBP774 billion (2017: GBP591 billion). As
with other regions, net revenue growth was driven by high value
clients trading more compared to prior year, reflected in an RPC
increase of 16% to GBP2,544 (2017: 2,201), whilst active clients
were marginally higher at 20,785 (2017: 20,437).
External research highlights the Group's success in appealing to
high value traders, with the Group maintaining the position of
number one provider for high value CFD clients in Australia(3).
This report also highlighted that the Group had the highest
prompted brand awareness in the Australian CFD and FX markets, as
the brand continues to strengthen in this area. Client satisfaction
remains a key focus for the Group, and CMC was recognised as top
for overall satisfaction for Australia CFD(1) and Singapore CFD and
FX(1) clients by Investment Trends.
(1) Investment Trends May 2017 UK Leveraged Trading Report
(2) Investment Trends May 2018 Germany CFD and FX Report
(3) Investment Trends May 2017 Australia CFD Report; Investment
Trends October 2017 Singapore CFD and FX Report.
Stockbroking
The Australian stockbroking business has continued to grow, with
revenue up 9% at GBP8.5 million (2017: GBP7.8 million), and up 7%
in local currency terms. Strong client acquisition has also been
maintained during the year (47% increase in new clients(1)),
supported by a sustained reduction in client cost per acquisition
delivered through ongoing enhancements in digital marketing and
overall strong volumes seen across the local market.
The significant stockbroking partnership with ANZ Bank remains
on track for delivery. Our existing retail and intermediary client
base are also expected to be significant beneficiaries of major
platform enhancements required as part of the implementation,
encompassing mobile trading, international equities, online options
and advisor functionality.
(1) Increase in new opened accounts over the period
Interest income
The low interest rate environment remained largely the same as
the prior year and interest income increased marginally to GBP2.1
million (2017: GBP1.7 million). The majority of the Group's
interest income is earned through our segregated client deposits in
our Australia, New Zealand and stockbroking subsidiaries. However,
the Group's interest income is beginning to rise due to the FCA
granting the UK business permission to deposit a proportion of UK
client funds in term deposit accounts.
Expenses
Total operating expenses increased GBP14.3 million (13%) to
GBP125.9 million, driven by higher salary costs and
performance-related pay.
GBPm 2018 2017 Variance %
------------------------------- ------ ------ -----------
Net staff costs 57.9 49.4 17%
IT costs 16.9 15.4 10%
Marketing costs 18.3 20.3 (10%)
Sales-related costs 2.3 1.5 48%
Premises costs 6.2 5.2 19%
Legal and professional fees 4.0 3.5 14%
Regulatory fees 3.0 2.6 16%
Depreciation and amortisation 6.8 5.8 17%
Other 10.5 7.9 31%
------------------------------- ------ ------ -----------
Total operating expenses 125.9 105.8 13%
Interest 1.1 0.7 60%
------------------------------- ------ ------ -----------
Total costs 127.0 112.3 13%
------------------------------- ------ ------ -----------
Staff costs
Net staff costs increased GBP8.5 million (17%) to GBP57.9
million, largely caused by a rise in wages and salaries of GBP3.5
million (9%) due to the annualised impact of investment in
personnel in the prior year and higher performance-related pay,
which increased by GBP7.3 million. These increases were offset by
net capitalisation, mainly relating to development costs as part of
the ANZ Bank implementation and a decrease of GBP1.4 million (32%)
in share--based payments.
GBPm 2018 2017 Variance %
------------------------------------------------- ------ ----- -----------
Wages and salaries 43.4 39.9 9%
Performance related pay 10.7 3.4 213%
Share-based payments 3.0 4.4 (32%)
------------------------------------------------- ------ ----- -----------
Total employee costs 57.1 47.7 20%
Contract staff costs 3.5 1.7 104%
Capitalised internal software development costs (2.7) - -
------------------------------------------------- ------ ----- -----------
Net staff costs 57.9 49.4 17%
------------------------------------------------- ------ ----- -----------
Marketing costs
Marketing costs decreased by GBP2.0 million (10%) to GBP18.3
million during the year due to a reduction in brand and sponsorship
activity. However, digital marketing spend increased year on year
and also from the first half to the second half of the year. The
Group continues to sponsor the New South Wales Waratahs rugby team
in Australia.
Other expenses
IT costs increased by GBP1.5 million (10%) to GBP16.9 million.
We continue to see above-inflation increases in this area,
compounded by some IT contracts showing a trend of moving from
intangible software licences to software maintenance charges, and
increasing charges from market data providers.
Premises costs have increased mainly due to higher rent charges
in Australia and the opening of a new office in China.
Other costs
The increase in other costs was driven by numerous factors, but
mainly irrecoverable sales tax, a lower level of recoverable bank
charges as a result of new EU regulation and higher recruitment
costs.
Taxation
The effective tax rate for the year was 17% (2017: 19%). The
majority of the Group's profits are taxed in the UK, which had a
corporation tax rate of 19% (2017: 20%). The Group also benefited
from higher utilisation of Australian corporation tax credits in
the year due to higher forecast profitability in the Australian
entities. The effective tax rate is expected to be in the region of
12% to 14% in 2019.
Profit after tax for the year
The increase in profit after tax for the year of GBP10.5 million
(27%) to GBP49.7 million (2017: GBP39.2 million) was due to both
higher statutory profit before tax and a lower effective tax
rate.
Dividend
Dividends of GBP25.7 million were paid during the year (2017:
GBP23.9 million), with GBP17.1 million relating to a final dividend
for the prior year paid in August 2017, and a GBP8.6 million
interim dividend paid in December 2017 in relation to the current
year performance. The Group has proposed a final ordinary dividend
of 5.95 pence per share (2017: 5.95 pence per share).
Group statement of financial position
GBPm 2018 2017
---------------------------------- ------ ------
Intangible assets 4.4 2.1
Property, plant and equipment 20.7 18.2
Deferred tax assets 8.8 8.1
Financial investments 10.8 -
Trade and other receivables 2.2 -
---------------------------------- ------ ------
Total non-current assets 46.9 28.4
---------------------------------- ------ ------
Trade and other receivables 48.0 31.6
Derivative Financial instruments 7.3 1.9
Financial investments 10.3 20.3
Amount due from brokers 156.9 119.4
Cash and cash equivalents 60.5 53.2
---------------------------------- ------ ------
Total current assets 283.0 226.4
---------------------------------- ------ ------
Total assets 329.9 254.8
---------------------------------- ------ ------
Trade and other payables 91.8 36.3
Derivative Financial instruments 3.9 3.3
Borrowings 1.3 5.8
Current tax payable 2.3 5.5
Short term Provisions 0.1 0.4
---------------------------------- ------ ------
Total current liabilities 99.4 51.3
---------------------------------- ------ ------
Trade and other payables 5.5 3.1
Borrowings 2.3 3.0
Deferred Tax liabilities 0.7 0.0
Long term Provisions 2.0 1.6
---------------------------------- ------ ------
Total non-current liabilities 10.5 7.7
---------------------------------- ------ ------
Total liabilities 109.9 59.0
---------------------------------- ------ ------
Total equity 220.0 195.8
---------------------------------- ------ ------
Total equity and liabilities 329.9 254.8
---------------------------------- ------ ------
Non-current assets
The Group is committed to maintaining its Next Generation
trading platform and these costs are expensed as incurred. However,
GBP2.6 million of internal development costs relating to the ANZ
Bank implementation have been capitalised as intangible assets
during the year and this will continue to be the case until the
implementation is complete. The majority of the remaining
intangible assets relate to the net book value of software
licences.
There has also been significant investment in the fit-out of a
new property in Australia to accommodate more staff to support the
imminent increase in size of the stockbroking business and this has
been the main driver of the increase in property, plant and
equipment over the period along with ongoing investment in IT
infrastructure.
Deferred tax assets increased during the year due to the
recognition of a higher amount of tax losses on the balance sheet
relating to Australian tax credits. This has been driven by
increasing profitability in the stockbroking business as a result
of the ANZ Bank partnership.
Financial investments in both non-current and current assets
relate to the FCA requirement to hold eligible assets against
potential liquidity stress.
Current assets
Trade and other receivables relate mainly to client receivables
from stockbroking positions yet to settle, an escrow deposit
relating to the ANZ Bank transaction, prepayments, and other client
debtors. The year-on-year rise is a result of the escrow deposit.
Amount due from brokers relates to cash held at brokers either for
initial margin or to reduce interest payable on the Group's overall
hedge position. Cash and cash equivalents have increased during the
course of the year with a proportion being deposited with brokers
to fund growing margin requirements.
Current liabilities
Trade and other payables consist mainly of accruals and deferred
income, amounts due on stockbroking trades yet to settle, and
amounts due to clients in relation to title transfer funds.
Non-current liabilities
Trade and other payables relate mainly to the deferred unwinding
of lease incentives on our London property and the increase in
borrowings is due to a new lease agreement associated with IT
equipment purchases.
Regulatory capital resources
For the year under review, the Group was supervised on a
consolidated basis by the FCA. The Group maintained a significant
capital surplus over the regulatory requirement at all times.
The Group's total capital resources increased due to the rise in
retained earnings relating to audited 2018 profits, partly offset
by higher intangible assets and deferred tax assets on the balance
sheet.
At 31 March 2018 the Group had a total capital ratio of 31.1%
(31 March 2017: 30.2%). The following table summarises the Group's
capital adequacy position at the year-end. The Group's approach to
capital management is described in note 28 to the 2018 Annual
Report and Financial statements.
2018 2017
-------------------------------- ------ ------
Total capital resources (GBPm) 194.9 171.9
Total risk exposure (GBPm) 627.0 569.4
-------------------------------- ------ ------
Total capital ratio (%) 31.1% 30.2%
-------------------------------- ------ ------
Note: capital resources include audited reserves and any changes
to deferred tax assets resulting from the audit process and
proposed dividends.
Liquidity
The Group has access to the following sources of liquidity that
make up total available liquidity:
-- Own funds. The primary source of liquidity for the Group. It
represents the funds that the business has generated historically,
including any unrealised gains/losses on open hedging positions.
All cash held on behalf of segregated clients is excluded. Own
funds consists mainly of cash and cash equivalents and also
includes investments in UK government securities, which are held to
meet the Group's liquid asset buffer ("LAB") - as set by the FCA.
These UK government securities are BIPRU 12.7 eligible securities
and are available to meet liabilities which fall due in periods of
stress.
-- Title Transfer Funds (TTFs). This represents funds received
from professional clients and eligible counterparties (as defined
in the FCA Handbook) that are held under a title transfer
collateral agreement ("TTCA"); a means by which a professional
client or eligible counterparty may agree that full ownership of
such funds is unconditionally transferred to the Group. The Group
does not require clients to sign a TTCA in order to be treated a
professional client and as a result, their funds remain segregated.
The Group considers these funds as an ancillary source of liquidity
and places no reliance on its stability. The increase during the
year was reflective of the increase in the institutional client
base and certain other professional clients, where we require the
funds of these clients to be held under a TTCA.
-- Available committed facility (off-balance sheet liquidity).
The Group has access to a facility of up to GBP65.0 million (2017:
GBP40.0 million) in order to fund any potential fluctuations in
margins required to be posted at brokers to support the risk
management strategy. The GBP25.0 million increase during the year
was due to the syndication of the existing facility in March 2018.
The maximum amount of the facility available at any one time is
dependent upon the initial margin requirements at brokers and
margin received from clients. The facility consists of a one-year
term facility of GBP32.5 million and a three-year term facility of
GBP32.5 million, both of which were increased in March 2018 from
GBP20.0 million for each term. There was no drawdown on the
facility at 31 March 2018 (2017: GBPnil).
The Group's use of total available liquidity resources consist
of:
-- Blocked cash. Amounts held to meet the requirements of local
market regulators and amounts held at overseas subsidiaries in
excess of local segregated client requirements to meet potential
future client requirements.
-- Initial margin requirement at broker. The total GBP
equivalent initial margin required by prime brokers to cover the
Group's hedge derivative positions.
At 31 March 2018, the Group held cash balances of GBP60.5
million (2017: GBP49.0 million). In addition, GBP304.8 million
(2017: GBP310.0 million) was held in segregated client money
accounts for clients. The movement in Group cash and cash
equivalents is set out in the Consolidated Statement of Cash
Flows.
Own funds have increased to GBP193.9 million (2017: GBP183.4
million). Own funds include short-term financial investments,
amounts due from brokers and amounts receivable/payable on the
Group's derivative financial instruments. For more details refer to
note 17 of the 2018 Annual Report and Financial statements.
GBPm 2018 2017
-------------------------------------------- -------- -------
Own funds 193.9 183.4
Title transfer funds 48.0 3.8
Available committed facility 65.0 40.0
-------------------------------------------- -------- -------
Total available liquidity 306.9 227.2
Less: Blocked cash (16.6) (19.8)
Less: Initial margin requirement at broker (103.7) (93.0)
-------------------------------------------- -------- -------
Net available liquidity 186.6 114.4
-------------------------------------------- -------- -------
Of which: held as liquid assets buffer 21.2 20.0
Client money
Total segregated client money held by the Group was GBP304.8
million at 31 March 2018 (2017: GBP310.0 million).
Client funds represents the capacity for our clients to trade
and offer an underlying indication to the health of our client
base.
Client money governance
The Group segregates all money held by it on behalf of clients
excluding a small number of large clients who have entered a TTCA
with the Group. This is in accordance with or exceeding applicable
client money regulations in countries in which the Group operates.
The majority of client money requirements fall under the Client
Assets sourcebook ("CASS") rules of the FCA. All segregated client
funds are held in dedicated client money bank accounts with major
banks that meet strict internal criteria and are held separately
from the Group's own money.
The Group has comprehensive client money processes and
procedures in place to ensure client money is identified and
protected at the earliest possible point after receipt as well as
governance structures, which ensure such activities are effective
in protecting client money. The Group's governance structure is
explained further in the 2018 Annual Report and Financial
statements.
PRINCIPAL RISKS
The Group's business activities naturally expose it to
strategic, financial and operational risks inherent in the nature
of the business it undertakes and the financial, market and
regulatory environments in which it operates. The Group recognises
the importance of understanding and managing these risks and that
it cannot place a cap or limit on all of the risks to which the
Group is exposed. However, effective risk management ensures that
risks are managed to an acceptable level.
The Board, through its Group Risk Committee, is ultimately
responsible for the implementation of an appropriate risk strategy,
which has been achieved using an integrated Risk Management
Framework. The main areas covered by the Risk Management Framework
are:
-- identifying, evaluating and monitoring of the principal risks to which the Group is exposed;
-- setting the risk appetite of the Board in order to achieve its strategic objectives; and
-- establishing and maintaining governance, policies, systems
and controls to ensure the Group is operating within the stated
risk appetite.
The Board has put in place a governance structure, which is
appropriate for the operations of an online retail financial
services group and is aligned to the delivery of the Group's
strategic objectives. The structure is regularly reviewed and
monitored and any changes are subject to Board approval.
Furthermore, management regularly considers updates to the
processes and procedures to embed good corporate governance
throughout the Group.
As part of the Group Risk Management Framework, the business is
subject to independent assurance by internal audit (third line of
defence). The use of independent compliance monitoring, risk
reviews (second line of defence) and risk and control
self-assessments (first line of defence) provides additional
support to the integrated assurance programme and ensures that the
Group is effectively identifying, managing and reporting its
risks.
The Group continues to make enhancements to its Risk Management
Framework and governance to provide a more structured approach to
identifying and managing the risks to which it is exposed.
The Board has undertaken a robust assessment of the principal
risks facing the Group. Top and emerging risks are considered those
that would threaten its business model, future performance,
solvency or liquidity and how these risks are managed or mitigated
(Code C.2.1). These are outlined below and details of financial
risks and their management are set out in note 28 to the 2018
Annual Report and Financial statements.
Top and emerging risks during the year, which form either a
subset of one or multiple principal risks and continue to be at the
forefront of the Group discussions, are:
-- Regulatory change: further to announcements and consultations
from national competent authorities ("NCAs") and ESMA, changes will
be required to be made to the marketing and distribution of CFDs to
retail clients throughout Europe in August 2018. These changes have
been regularly discussed at Board, Board Committee and Executive
Committee meetings throughout the period, including the Group's
readiness and potential impact on the Group's business model. Many
of the new requirements are already in place throughout the Group;
however, some of the measures will have an impact on client trading
behaviour that is not possible to accurately understand until
implemented. Once implemented, management will constantly monitor
any impact. The Group's strategic focus has been on high value and
experienced clients, many of whom may be entitled to become
elective professionals, which will help to mitigate the impact of
regulatory change. In addition, the Group believes that in the
medium to long term these changes present opportunities for the
Group and the Group's strong balance sheet and increasing
diversification put it in a strong position to deal with, and take
advantage of, these changes.
-- UK's exit from the European Union ("Brexit"): the impact that
Brexit has on the Group is closely monitored. Plans are underway to
establish a new subsidiary in the European Union. Once implemented
this new structure should mitigate any impact that could arise from
regulatory change resulting from Brexit.
Further information on the structure and workings of Board and
Management Committees is included in the Corporate governance
report in the 2018 Annual Report and Financial statements.
Principal Risk Description Management and mitigation
Risk
-----------------------------------------------------------------
Business and Regulatory The risk that
strategic change changes to the * Active dialogue with regulators and industry bodies.
risks regulatory
framework the
Group operates in * Monitoring of market and regulator sentiment towards
impacts the Group the product offering.
performance.
Such changes
could result in * Monitoring by and advice from compliance department
the Group's on impact of actual and possible regulatory change.
product offering
becoming less
profitable, more * A business model and proprietary technology that is
difficult responsive to changes in regulatory requirements.
to offer to
clients, or an
outright ban on
the product
offering in one
or more of the
countries
where the Group
operates.
--------------- ------------------ -----------------------------------------------------------------
Acquisitions The risk that
and disposals mergers, * Robust corporate governance structure including
acquisitions, strong challenge from independent Non-Executive
disposals or Directors.
other partnership
arrangements made
by the * Vigorous and independent due diligence process.
Group do not
achieve the
stated strategic * Align and manage the businesses to Group strategy as
objectives or soon as possible after acquisition.
that they give
rise to ongoing
or
previously
unidentified
liabilities.
--------------- ------------------ -----------------------------------------------------------------
Strategic / The risk of an
business model adverse impact * Strong governance framework established including
risk resulting from three independent Non-Executive Directors and the
the Group's Chairman sitting on the Board.
strategic
decision making
as well * Robust governance, challenge and oversight from
as failure to independent Non-Executive Directors.
exploit strengths
or take
opportunities. It * Managing the Group in line with the agreed strategy,
is a risk which policies and risk appetite.
may cause damage
or loss,
financial or * Group risk is involved in the annual budgeting
otherwise, to the process.
Group as a whole.
--------------- ------------------ -----------------------------------------------------------------
Reputational The risk of
risk damage to the * The Group is conservative in its approach to
Group's brand or reputational risk and operates robust controls to
standing with ensure significant risks to its brand and standing
shareholders, are appropriately mitigated.
regulators,
existing
and potential * Examples include:
clients, the
industry and the
public at large. * proactive engagement with the Group's regulators and
active participation with trade and industry bodies;
and
* positive development of media relations with strictly
controlled media contact.
-------------- --------------- ------------------ -----------------------------------------------------------------
Financial Credit and The risk of a Client credit risk
risks counterparty client, custodian The Group's management of client credit risk is significantly
risk or counterparty aided by automatic liquidation
failing to fulfil functionality where margin levels are continuously reviewed. If
contractual they fall below pre--agreed
obligations, levels, the positions held on the account will automatically be
including closed out.
settlement, Other platform functionality mitigates risk further:
resulting in * tiered margin requires clients to hold more
financial loss collateral against bigger or higher risk positions;
for the Group,
specifically:
Client credit * mobile phone access allowing clients to manage their
risk portfolios on the move; and
Financial losses
may be incurred
in cases where an * guaranteed stop loss orders allow clients to remove
adverse price their chance of debt from their position(s).
move exceeds the
margin that
a client holds to However, after mitigations, there is a residual risk that the
maintain their Group could incur losses relating
position, to clients moving into debit balances if there is a market gap.
followed by the Counterparty credit risk
client defaulting Risk management is carried out by a central liquidity risk
against their management ("LRM") team under the
contractual Counterparty Concentration Risk Policy, approved by the Board of
obligations to Directors.
pay the deficit. Mitigation is achieved by:
Counterparty * monitoring concentration levels to counterparties and
credit risk reporting these internally/externally on a
A financial monthly/quarterly basis; and
institution
failing to meet
or defaulting on * monitoring the credit ratings and credit default swap
their obligations ("CDS") spreads of counterparties and reporting
in accordance internally on a weekly basis.
with
agreed terms.
Further information is available in note 28 to the 2018 Annual
Report and Financial statements.
--------------- ------------------ -----------------------------------------------------------------
Financial The risk that
reporting risk financial, * Robust process of checking and oversight in place to
statutory or ensure accuracy.
regulatory
reports are
submitted late, * Knowledgeable and experienced staff undertake and
incomplete or overview the relevant processes.
are inaccurate.
--------------- ------------------ -----------------------------------------------------------------
Insurance risk The risk that an
insurance claim * Use of a reputable insurance broker who ensures cover
by the Group is is placed with financially secure insurers.
declined (in full
or in part) or
there is * Comprehensive levels of cover maintained.
insufficient
insurance
coverage. * Rigorous claim management procedures are in place
with the broker.
* The Board's appetite for uninsured risk is low and as
a result the Group has put in place established
comprehensive levels of insurance cover.
--------------- ------------------ -----------------------------------------------------------------
Liquidity risk The risk that Risk management is carried out by a central LRM team under
there is policies approved by the Board
insufficient and in line with the FCA's individual liquidity adequacy
available standards ("ILAS") regime. The Group
liquidity to meet utilises a combination of liquidity forecasting and stress
the liabilities testing to identify any potential
of the Group liquidity risk both during normal and stressed conditions. The
as they fall due. forecasting and stress testing
fully incorporates the impact of all liquidity regulations in
force in each jurisdiction and
other impediments to the free movement of liquidity around the
Group.
Risk is mitigated by:
* the provision of timely daily, weekly and monthly
liquidity reporting and real-time broker margin
requirements to enable strong management and control
of liquidity resources;
* a committed bank facility of up to GBP65 million to
meet short-term liquidity obligations to broker
counterparties in the event that the Group does not
have sufficient access to its own cash; and
* a formal Contingency Funding Plan ("CFP") is in place
that is designed to aid senior management to assess
and prioritise actions in a liquidity stress
scenario.
For more information see note 28 to the 2018 Annual Report and
Financial statements.
--------------- ------------------ -----------------------------------------------------------------
Market risk Market risk is Trading risk management monitors and manages the
defined as the exposures it inherits from clients on a real-time basis and in
risk that the accordance with Board-approved
value of our appetite.
residual The Group predominantly acts as a market maker in linear, highly
portfolio will liquid financial instruments
decrease in which it can easily reduce market risk exposure through its
due to changes in prime broker ("PB") arrangements.
market risk This significantly reduces the Group's revenue sensitivity to
factors. The individual asset classes and
three standard instruments.
market risk Financial risk management runs stress scenarios on the residual
factors are price portfolio, comprising a number
moves, of single and combined company-specific and market-wide events
interest rates in order to assess potential
and foreign financial and capital adequacy impacts to ensure the Group can
exchange rates. withstand severe moves in the
risk drivers it is exposed to.
For further information see note 28 to the 2018 Annual Report
and Financial statements.
-------------- --------------- ------------------ -----------------------------------------------------------------
Operational Business The risk that
risks change risk business change * Governance process in place for all business change
projects are programmes with Executive and Board oversight and
ineffective, fail scrutiny.
to deliver stated
objectives,
or result in * Key users engaged in development and testing of all
resources being key change programmes.
stretched to the
detriment of
business-as-usual * Significant post-implementation support, monitoring
activities. and review procedures in place for all change
Notable programmes.
business change
risks for the
Group are * Strategic benefits and delivery of change agenda
platform upgrades communicated to employees.
and the
implementation of
the ANZ
Bank stockbroking
partnership.
--------------- ------------------ -----------------------------------------------------------------
Business The risk that a
continuity & physical business * Business continuity oversight provided by operational
disaster continuity event risk function.
recovery risk or system failure
results in a
reduced * Use of external specialist premises to enhance
ability or resilience in the event of a disaster recovery or
inability to business continuity requirement.
perform core
business
activities or * Periodic testing of business continuity processes and
processes. disaster recovery.
* Prompt response to significant systems failures or
interruptions.
--------------- ------------------ -----------------------------------------------------------------
Financial Financial crime
crime risk covers a number * Adoption of the risk-based approach to financial
of unlawful crime, including undertaking formal and regular risk
activities assessments across global operations.
including fraud
(first and third
party), * Global reporting procedures and surveillance
theft, scams, processes in place using local compliance and legal
confidence expertise.
tricks, tax
evasion, bribery,
embezzlement, * Regular and ongoing training and awareness programme
identity theft, in place for staff at all levels and in all
money jurisdictions.
laundering,
forgery,
counterfeiting * Group Whistleblowing Policy provides a clear
and acts of framework for escalation of issues.
terrorism.
--------------- ------------------ -----------------------------------------------------------------
Information The risk of
and data unauthorised * Dedicated information security and data protection
security risk access to or
external
disclosure of * Resource/expertise within the Group.
client or Company
information,
including those * Technical and procedural controls implemented to
caused by "cyber minimise the occurrence of information security and
attacks". data protection breaches.
* Access to information only provided on a
"need-to-know" and "least privilege" basis consistent
with the user's role and also requires the
appropriate authorisation.
* Key data loss prevention initiatives and regular
system access reviews implemented across the
business.
--------------- ------------------ -----------------------------------------------------------------
Information The risk of loss
technology and of technology * Continuous investment in increased functionality,
infrastructure services due to capacity and responsiveness of systems and
risk loss of data, infrastructure, including investment in software that
system or data monitors and assists in the detection and prevention
centre or failure of cyber attacks.
of a third party
to restore
services in a * Rigorous software design methodologies, project
timely manner. management and testing regimes to minimise
implementation and operational risks.
* Constant monitoring of systems performance and, in
the event of any operational issues, changes to
processes are implemented to mitigate future
concerns.
* Operation of two data centres in the UK.
* Systems and data centres designed for high
availability and data integrity.
* Continuous service available to clients in the event
of individual equipment failures or major disaster
recovery events.
-------------- --------------- ------------------ -----------------------------------------------------------------
Legal The risk that
(commercial / disputes * Compliance with legal and regulatory requirements
litigation) deteriorate into including relevant codes of practice.
risks litigation.
* Early engagement with legal advisers and other risk
managers.
* Appropriately managed complaints which have a
legal/litigious aspect.
* An early assessment of the impact and implementation
of changes in the law.
-------------- --------------- ------------------ -----------------------------------------------------------------
Operations The risk that the
(processing) design or * Investment in system development and upgrades to
risks execution of improve process automation.
business
processes is
inadequate or * Enhanced staff training and oversight in key business
fails to deliver processing areas.
an expected level
of service and
protection to * Monitoring and robust analysis of errors and losses
client or Company and underlying causes.
assets.
--------------- ------------------ -----------------------------------------------------------------
Outsourcing This is the risk
and of third party * Outsourcing only employed where there is a tactical
procurement organisations gain in resource or experience.
risks inadequately
providing or
performing or * Due diligence performed on service supplier ahead of
failing outsourcing being agreed.
to provide or
perform the
outsourced * Service level agreements in place and regular
activities or monitoring of performance undertaken.
contractual
obligations to
the standards
required by the
Group.
--------------- ------------------ -----------------------------------------------------------------
People risk The risk of loss
of key staff or * The Board has directed that the Group maintains an
having active Succession and Resource Plan for all key
insufficient individuals and groups/teams, which will mitigate
skilled resources some of the risk of loss of key persons. It will
available. adopt policies and strategies commensurate with its
objectives of:
* Attracting and nurturing the best staff;
* Retaining key individuals;
* Developing personnel capabilities;
* Optimising continuous professional development; and
* Achieving a reputation as a good employer with an
equitable remuneration policy.
--------------- ------------------ -----------------------------------------------------------------
Regulatory and The risk of
compliance regulatory * Effective compliance function.
risk sanction or legal
proceedings as a
result of failure * Internal audit outsourced to an independent third
to comply with party professional services firm.
regulatory,
statutory or
fiduciary * Effective compliance oversight, planning and
requirements or implementation.
as a result of a
defective
transaction. * Comprehensive monitoring programmes by compliance and
internal audit.
* Controls for appointment and approval of staff
holding a controlled function and annual declarations
to establish ongoing fitness and propriety.
* Governance and reporting of regulatory risks through
the Risk Management Committee, Group Audit Committee
and Group Risk Committee.
* Anti-money laundering controls for client due
diligence and sanctions checking.
-------------- --------------- ------------------ -----------------------------------------------------------------
DIRECTORS' STATEMENT PURSUANT TO THE FCA'S DISCLOSURE AND
TRANSPARENCY RULES
The directors are required by the Disclosure and Transparency
Rules to include a management report containing a fair review of
the business and a description of the principal risks and
uncertainties facing the Group.
The directors listed below (being all the directors of CMC
Markets plc) confirm to the best of their knowledge that:
-- the Group Financial Statements contained in the 2018 Annual
Report and Financial Statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and results of
the Group; and
-- the Strategic Report contained in the 2018 Annual Report and
Financial Statements includes a fair review of the development and
performance of the business and the position of the Company and the
Group, together with a description of the principal risks and
uncertainties that they face; and
-- the 2018 Annual Report and Financial statements, taken as a
whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
performance, business model and strategy
The Directors' statement was approved by the Board of Directors
on 6 June 2018 and signed on its behalf by:
Peter Cruddas Grant Foley
Chief Executive Officer Chief Operating and Financial
Officer
CMC Markets plc Board of Directors
Executive Directors
Peter Cruddas (Chief Executive Officer)
David Fineberg (Group Commercial Director)
Grant Foley (Chief Operating and Financial Officer)
Non-Executive Directors
James Richards (Chairman)
Paul Wainscott (Senior Independent Director)
Sarah Ing
Clare Salmon
Consolidated income statement
For the year ended 31 March 2018
Year ended Year ended
GBP'000 Note 31 March 2018 31 March 2017
---------------------------------------------------------- ----- --------------- ---------------
Revenue 209,128 185,927
Interest income 2,114 1,739
---------------------------------------------------------- ----- --------------- ---------------
Total revenue 3 211,242 187,666
Introducing partner commissions and betting levies (24,142) (26,876)
---------------------------------------------------------- ----- --------------- ---------------
Net operating income 2 187,100 160,790
Operating expenses 4 (125,863) (111,591)
---------------------------------------------------------- ----- --------------- ---------------
Operating profit 61,237 49,199
Finance costs (1,173) (734)
---------------------------------------------------------- ----- --------------- ---------------
Profit before taxation 60,064 48,465
Taxation 5 (10,379) (9,309)
---------------------------------------------------------- ----- --------------- ---------------
Profit for the year attributable to owners of the parent 49,685 39,156
---------------------------------------------------------- ----- --------------- ---------------
Earnings per share
Basic earnings per share (p) 6 17.3p 13.7p
---------------------------------------------------------- ----- --------------- ---------------
Diluted earnings per share (p) 6 17.1p 13.6p
---------------------------------------------------------- ----- --------------- ---------------
Consolidated statement of comprehensive income
For the year ended 31 March 2018
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------------------------ --------------- ---------------
Profit for the year 49,685 39,156
Other comprehensive (expense) / income:
Items that may be subsequently reclassified to income statement
Gain / (Loss) on net investment hedges net of tax 1,755 (2,950)
Amounts recycled from equity to the income statement - 159
Currency translation differences (3,093) 4,255
Change in value of available-for-sale financial assets (58) (7)
------------------------------------------------------------------------------- --------------- ---------------
Other comprehensive (expense) / income for the year (1,396) 1,457
------------------------------------------------------------------------------- --------------- ---------------
Total comprehensive income for the year attributable to owners of the parent 48,289 40,613
------------------------------------------------------------------------------- --------------- ---------------
Consolidated statement of financial position Company
registration number: 05145017
At 31 March 2018
GBP'000 Note 31 March 2018 31 March 2017
---------------------------------- ----- -------------- --------------
ASSETS
Non-current assets
Intangible assets 8 4,365 2,115
Property, plant and equipment 9 20,685 18,197
Deferred tax assets 8,802 8,113
Financial investments 11 10,822 -
Trade and other receivables 10 2,237 -
---------------------------------- ----- -------------- --------------
Total non-current assets 46,911 28,425
---------------------------------- ----- -------------- --------------
Current assets
Trade and other receivables 10 47,940 31,542
Derivative financial instruments 7,335 1,935
Financial investments 11 10,330 20,272
Amounts due from brokers 156,887 119,390
Cash and cash equivalents 12 60,468 53,226
---------------------------------- ----- -------------- --------------
Total current assets 282,960 226,365
---------------------------------- ----- -------------- --------------
TOTAL ASSETS 329,871 254,790
---------------------------------- ----- -------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 13 91,696 36,389
Derivative financial instruments 3,922 3,340
Borrowings 1,274 5,760
Current tax payable 2,347 5,489
Short term provisions 145 368
---------------------------------- ----- -------------- --------------
Total current liabilities 99,384 51,346
---------------------------------- ----- -------------- --------------
Non-current liabilities
Trade and other payables 13 5,389 3,030
Borrowings 2,346 3,042
Deferred tax liabilities 682 24
Long term provisions 2,040 1,575
---------------------------------- ----- -------------- --------------
Total non-current liabilities 10,457 7,671
---------------------------------- ----- -------------- --------------
TOTAL LIABILITIES 109,841 59,017
---------------------------------- ----- -------------- --------------
EQUITY
Share capital 72,872 72,646
Share premium 46,236 46,236
Own shares held in trust (567) (466)
Other reserves (49,452) (48,056)
Retained earnings 150,941 125,413
---------------------------------- ----- -------------- --------------
Total equity 220,030 195,773
---------------------------------- ----- -------------- --------------
TOTAL EQUITY AND LIABILITIES 329,871 254,790
---------------------------------- ----- -------------- --------------
Consolidated statement of changes in equity
For the year ended 31 March 2018
Own shares held Retained
GBP'000 Share capital Share premium in trust Other reserves earnings Total Equity
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
At 1 April 2016 72,600 46,243 (984) (49,513) 107,981 176,327
New shares
issued 46 (7) - - - 39
Total
comprehensive
income for the
year - - - 1,457 39,156 40,613
Acquisition of
own shares held
in trust - - (504) - - (504)
Utilisation of
own shares held
in trust - - 1,022 - - 1,022
Share-based
payments - - - - 2,253 2,253
Tax on
share-based
payments - - - - (31) (31)
Dividends - - - - (23,946) (23,946)
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
At 31 March 2017 72,646 46,236 (466) (48,056) 125,413 195,773
New shares
issued 226 - - - - 226
Total
comprehensive
income /
(expense) for
the year - - - (1,396) 49,685 48,289
Acquisition of
own shares held
in trust - - (104) - - (104)
Utilisation of
own shares held
in trust - - 3 - - 3
Share-based
payments - - - - 1,505 1,505
Tax on
share-based
payments - - - - 57 57
Dividends - - - - (25,719) (25,719)
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
At 31 March 2018 72,872 46,236 (567) (49,452) 150,941 220,030
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
Consolidated statement of cash flows
For the year ended 31 March 2018
GBP'000 Note Year ended 31 March 2018 Year ended 31 March 2017
--------------------------------------------------------- ----- ------------------------- -------------------------
Cash flows from operating activities
Cash generated from operations 14 64,242 11,865
Net interest income 2,114 1,739
Tax paid (13,787) (11,372)
--------------------------------------------------------- ----- ------------------------- -------------------------
Net cash generated from operating activities 52,569 2,232
--------------------------------------------------------- ----- ------------------------- -------------------------
Cash flows from investing activities
Purchase of property, plant and equipment (8,640) (3,069)
Proceeds from disposal of property, plant and equipment 42 85
Investment in intangible assets (3,518) (811)
Proceeds from disposal of intangible assets - 33
Purchase of financial investments (21,426) (20,562)
Proceeds from maturity of financial investments and
coupon receipts 20,512 20,710
Inflow / (Outflow) on net investment hedges 2,206 (4,792)
--------------------------------------------------------- ----- ------------------------- -------------------------
Net cash used in investing activities (10,824) (8,406)
--------------------------------------------------------- ----- ------------------------- -------------------------
Cash flows from financing activities
Repayment of borrowings (171,686) (20,204)
Proceeds from borrowings 170,778 19,247
Proceeds from issue of ordinary shares 42 -
Acquisition of own shares (104) (465)
Dividends paid (25,719) (23,946)
Finance costs (1,173) (734)
--------------------------------------------------------- ----- ------------------------- -------------------------
Net cash used in financing activities (27,862) (26,102)
--------------------------------------------------------- ----- ------------------------- -------------------------
Net increase / (decrease) in cash and cash equivalents 13,883 (32,276)
--------------------------------------------------------- ----- ------------------------- -------------------------
Cash and cash equivalents at the beginning of the year 48,952 78,280
Effect of foreign exchange rate changes (2,367) 2,948
--------------------------------------------------------- ----- ------------------------- -------------------------
Cash and cash equivalents at the end of the year 60,468 48,952
--------------------------------------------------------- ----- ------------------------- -------------------------
1. Basis of preparation
Basis of accounting
The financial information set out herein does not constitute the
Group's statutory accounts for the years ended 31 March 2018 and
2017, but is derived from those financial statements. The Annual
Report and Financial Statements for the year ended 31 March 2017
have been delivered to the Registrar of Companies and those for the
year ended 31 March 2018 will be delivered following the Company's
Annual General Meeting to be held on 26 July 2018. The external
auditor has reported on those financial statements; its reports
were unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) Companies Act 2006.
While the financial information included in this announcement
have been prepared in accordance with the International Financial
Reporting Standards as adopted by the European Union ("IFRSs"),
IFRS Interpretations Committee ("IFRS IC") interpretations as
adopted by the European Union and the Companies Act 2006 applicable
to companies reporting under IFRSs, this announcement does not
itself contain sufficient information to comply with IFRSs.
The financial statements have been prepared in accordance with
the going concern basis, under the historical cost convention,
except in the case of "Financial instruments at fair value through
profit or loss" and "Available for sale financial assets". The
financial information is rounded to the nearest thousand, except
where otherwise indicated.
The Group's principal accounting policies adopted in the
preparation of these financial statements are consistent with those
of the previous financial year. There were no new or amended
standards or interpretations that resulted in a change in
accounting policy. These policies have been consistently applied to
all years presented. The financial statements presented are at and
for the years ending 31 March 2018 and 31 March 2017. Financial
annual years are referred to as 2018, and 2017 in the financial
statements.
Use of estimates
The preparation of financial statements in conformity with IFRS
requires the use of certain significant accounting judgements. It
also requires management to exercise its judgement in the process
of applying the Group's accounting policies. The only area
involving a higher degree of judgement or complexity, or where
assumptions and estimates are significant to the financial
statements is:
Deferred taxes
The carrying amounts of deferred tax assets are reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered
2. Segmental reporting
The Group's principal business is online retail financial
services and provides its clients with the ability to trade
contracts for difference (CFD) and financial spread betting on a
range of underlying shares, indices, foreign currencies,
commodities and treasuries. The Group also makes these services
available to institutional partners through white label and
introducing broker arrangements. The Group's CFDs are traded
worldwide; spread betting only in UK and Ireland and the Group
provides stockbroking services only in Australia. The Group's core
business is generally managed on a geographical basis and for
management purposes, the Group is organised into three
segments:
-- UK and Ireland (UK & IE);
-- Europe;
-- Australia, New Zealand and Singapore (APAC) and Canada;
Revenues and costs are allocated to the segments that originated
the transaction. Costs generated centrally are allocated to
segments on an equitable basis, mainly based on revenue, headcount
or active client levels.
Year ended 31 March 2018 APAC &
GBP'000 UK & IE Europe Canada Central Total
------------------------------------ --------- --------- --------- --------- ----------
Segment revenue net of introducing
partner commissions and betting
levies 73,087 50,465 61,434 - 184,986
Interest income 593 - 1,521 - 2,114
------------------------------------ --------- --------- --------- --------- ----------
Net operating income 73,680 50,465 62,955 - 187,100
Segment operating expenses (16,001) (9,840) (14,544) (85,478) (125,863)
------------------------------------ --------- --------- --------- --------- ----------
Segment contribution 57,679 40,625 48,411 (85,478) 61,237
Allocation of central operating
expenses (25,603) (26,734) (33,141) 85,478 -
------------------------------------ --------- --------- --------- --------- ----------
Operating profit 32,076 13,891 15,270 - 61,237
Finance costs (62) - (1) (1,110) (1,173)
Allocation of central finance
costs (484) (320) (306) 1,110 -
------------------------------------ --------- --------- --------- --------- ----------
Profit before taxation 31,530 13,571 14,963 - 60,064
------------------------------------ --------- --------- --------- --------- ----------
Year ended 31 March 2017 APAC &
GBP'000 UK & IE Europe Canada Central Total
------------------------------------ --------- --------- --------- --------- ----------
Segment revenue net of introducing
partner commissions and betting
levies 61,091 45,194 52,766 - 159,051
Interest income 192 - 1,547 - 1,739
------------------------------------ --------- --------- --------- --------- ----------
Net operating income 61,283 45,194 54,313 - 160,790
Segment operating expenses (13,603) (11,916) (13,217) (72,855) (111,591)
------------------------------------ --------- --------- --------- --------- ----------
Segment contribution 47,680 33,278 41,096 (72,855) 49,199
Allocation of central operating
expenses (23,050) (23,355) (26,450) 72,855 -
------------------------------------ --------- --------- --------- --------- ----------
Operating profit 24,630 9,923 14,646 - 49,199
Finance costs (71) (4) (2) (657) (734)
Allocation of central finance
costs (271) (202) (184) 657 -
------------------------------------ --------- --------- --------- --------- ----------
Profit before taxation 24,288 9,717 14,460 - 48,465
------------------------------------ --------- --------- --------- --------- ----------
The measurement of net operating income for segmental analysis
is consistent with that in the income statement.
The Group uses 'Segment contribution' to assess the financial
performance of each segment. Segment contribution comprises
operating profit for the year before finance costs and
taxation.
3. Total revenue
Revenue
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
-------------------- --------------- ---------------
CFD and spread bet 197,385 175,842
Stockbroking 10,633 10,104
Other 1,110 (19)
-------------------- --------------- ---------------
Total 209,128 185,927
-------------------- --------------- ---------------
Interest income
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
----------------------------------- --------------- ---------------
Bank and broker interest 2,087 1,622
Interest from clients 3 64
Interest on financial investments 24 53
----------------------------------- --------------- ---------------
Total 2,114 1,739
----------------------------------- --------------- ---------------
The Group earns interest income from its own corporate funds and
from segregated client funds.
4. Operating expenses
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------- --------------- ---------------
Net staff costs 57,936 49,380
IT costs 16,949 15,352
Sales and marketing 20,558 21,791
Premises 6,224 5,211
Legal and Professional fees 4,027 3,520
Regulatory fees 2,951 2,550
Depreciation and amortisation 6,810 5,835
Other 10,645 7,952
------------------------------------------------- --------------- ---------------
126,100 111,591
Capitalised internal software development costs (237) -
------------------------------------------------- --------------- ---------------
Operating expenses 125,863 111,591
------------------------------------------------- --------------- ---------------
The above presentation reflects the breakdown of Operating
expenses by nature of expense.
5. Taxation
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
--------------------------------------------------- --------------- ---------------
Analysis of charge for the year:
Current tax
Current tax on profit for the year 10,769 9,034
Adjustments in respect of previous years 201 (41)
--------------------------------------------------- --------------- ---------------
Total current tax 10,970 8,993
--------------------------------------------------- --------------- ---------------
Deferred tax
Origination and reversal of temporary differences (656) 414
Adjustments in respect of previous years (29) (187)
Impact of change in tax rate 94 89
--------------------------------------------------- --------------- ---------------
Total deferred tax (591) 316
--------------------------------------------------- --------------- ---------------
Total tax 10,379 9,309
--------------------------------------------------- --------------- ---------------
The standard rate of UK corporation tax charged was 19% with
effect from 1 April 2017. Taxation outside the UK is calculated at
the rates prevailing in the respective jurisdictions. The effective
tax rate of 17.28% (Year ended 31 March 2017: 19.21%) differs from
the standard rate of UK corporation tax rate of 19% (Year ended 31
March 2017: 20%). The differences are explained below:
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------------------------------ --------------- ---------------
Profit before taxation 60,064 48,465
Profit multiplied by the standard rate of corp. tax in the UK of 19% (31 March
2017: 20%) 11,412 9,693
Adjustment in respect of foreign tax rates 591 465
Adjustments in respect of previous years 172 (228)
Impact of change in tax rate 94 89
Expenses not deductible for tax purposes 180 366
Income not subject to tax 34 (115)
Irrecoverable foreign tax 357 292
Recognition of previously unrecognised tax losses (2,262) (1,380)
Other differences (199) 127
------------------------------------------------------------------------------------ --------------- ---------------
Total tax 10,379 9,309
------------------------------------------------------------------------------------ --------------- ---------------
For the year ended 31 March 2018, the tax effect of exceptional
costs that were not recognised for tax purposes was GBPnil (Year
ended 31 March 2017: GBPnil)
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
----------------------------------------------- --------------- ---------------
Tax on items recognised directly in Equity
Tax credit / (charge) on Share based payments 57 (31)
----------------------------------------------- --------------- ---------------
6. Earnings per share (EPS)
Basic EPS is calculated by dividing the earnings attributable to
the equity owners of the Company by the weighted average number of
ordinary shares in issue during each year excluding those held in
employee share trusts which are treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue, excluding those held in employee share
trusts, is adjusted to assume conversion of all dilutive potential
weighted average ordinary shares, which consists of share options
granted to employees during the year ended 31 March 2018.
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------------------------------ --------------- ---------------
Earnings attributable to ordinary shareholders (GBP '000) 49,685 39,156
------------------------------------------------------------------------------------ --------------- ---------------
Weighted average number of shares used in the calculation of basic earnings per
share ('000) 287,556 286,693
Dilutive effect of share options ('000) 2,629 2,072
------------------------------------------------------------------------------------ --------------- ---------------
Weighted average number of shares used in the calculation of diluted earnings per
share ('000) 290,185 288,765
------------------------------------------------------------------------------------ --------------- ---------------
Basic earnings per share (p) 17.3p 13.7p
------------------------------------------------------------------------------------ --------------- ---------------
Diluted earnings per share (p) 17.1p 13.6p
------------------------------------------------------------------------------------ --------------- ---------------
For the year ended 31 March 2018, 2,629,000 (Year ended 31 March
2017: 2,072,000) potentially dilutive weighted average ordinary
shares in respect of share options in issue were included in the
calculation of diluted EPS.
7. Dividends
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------ --------------- ---------------
Declared and paid in each year
Final dividend for 2017 at 5.95p per share (2016: 5.36p) 17,137 15,392
Interim dividend for 2018 at 2.98p per share (2017: 2.98p) 8,582 8,554
------------------------------------------------------------ --------------- ---------------
Total 25,719 23,946
------------------------------------------------------------ --------------- ---------------
The final dividend for 2018 of 5.95p per share, amounting to
GBP17,196,000 was proposed by the board on 6 June 2018 and has not
been included as a liability at 31 March 2018. The dividend will be
paid on 24 August 2018, following approval at the Company's AGM, to
those members on the register at the close of business on 3 August
2018.
The dividends paid or declared in relation to the financial year
are set out below:
Year ended Year ended
pence 31 March 2018 31 March 2017
-------------------- --------------- ---------------
Declared per share
Interim dividend 2.98p 2.98p
Final dividend 5.95p 5.95p
-------------------- --------------- ---------------
Total dividend 8.93p 8.93p
-------------------- --------------- ---------------
8. Intangible assets
During the year ended 31 March 2018, additions to intangible
assets amounted to GBP3,518,000 (Year ended 31 March 2017:
GBP811,000). As at 31 March 2018, the net book value of intangible
assets was GBP4,365,000 (31 March 2017: GBP2,115,000).
9. Property, plant and equipment
During the year ended 31 March 2018, additions to property,
plant and equipment amounted to GBP8,640,000 (Year ended 31 March
2017: GBP6,114,000). As at 31 March 2018, the net book value of
property, plant and equipment was GBP20,685,000 (31 March 2017:
GBP18,197,000).
10. Trade and other receivables
GBP'000 31 March 2018 31 March 2017
----------------------------------------------------- -------------- --------------
Current
Gross trade receivables 7,455 5,089
Less: provision for impairment of trade receivables (2,964) (3,491)
----------------------------------------------------- -------------- --------------
Trade receivables 4,491 1,598
Prepayments and accrued income 8,065 7,494
Stock broking debtors 19,386 19,292
Other debtors 15,998 3,158
----------------------------------------------------- -------------- --------------
47,940 31,542
----------------------------------------------------- -------------- --------------
Non-current
Other debtors 2,237 -
----------------------------------------------------- -------------- --------------
Total 50,177 31,542
----------------------------------------------------- -------------- --------------
Stock broking debtors represent the amount receivable in respect
of equity security transactions executed on behalf of clients with
a corresponding balance included within trade and other payables
(note 13).
As part of the transaction with ANZ bank, the Group has AUD
25,000,000 (GBP13,703,000) deposited in escrow, which is included
in other debtors above.
11. Financial investments
GBP'000 31 March 2018 31 March 2017
-------------------------------------------- -------------- --------------
UK Government securities:
At 1 April 20,272 20,374
Purchase of securities 21,426 20,562
Maturity of securities and coupon receipts (20,512) (20,710)
Accrued interest 24 53
Net losses transferred to equity (58) (7)
-------------------------------------------- -------------- --------------
At 31 March 21,152 20,272
Less: Non-current portion (10,822) -
-------------------------------------------- -------------- --------------
Current portion 10,330 20,272
-------------------------------------------- -------------- --------------
12. Cash and cash equivalents
GBP'000 31 March 2018 31 March 2017
--------------------------------- -------------- --------------
Gross cash and cash equivalents 365,271 363,258
Less: Client monies (304,803) (310,032)
--------------------------------- -------------- --------------
Cash and cash equivalents 60,468 53,226
--------------------------------- -------------- --------------
Analysed as:
Cash at bank 60,468 50,218
Short-term deposits - 3,008
--------------------------------- -------------- --------------
Cash and cash equivalents comprise cash at bank and other
short-term highly liquid investments, with maturities of three
months or less. Cash at bank earns interest at floating rates,
based on daily bank deposit rates.
Cash and cash equivalents comprise of the following for the
purpose of the statement of cash flows:
GBP'000 31 March 2018 31 March 2017
---------------------------------------------------- -------------- --------------
Cash and cash equivalents 60,468 53,226
Less: Bank overdrafts - (4,274)
---------------------------------------------------- -------------- --------------
Cash and cash equivalents (Net of Bank overdrafts) 60,468 48,952
---------------------------------------------------- -------------- --------------
13. Trade and other payables
GBP'000 31 March 2018 31 March 2017
------------------------------ -------------- --------------
Current
Gross trade payables 352,826 313,871
Less: Client monies (304,803) (310,032)
------------------------------ -------------- --------------
Trade payables 48,023 3,839
Tax and social security 272 25
Stock broking creditors 16,992 17,079
Accruals and deferred income 26,409 15,446
------------------------------ -------------- --------------
91,696 36,389
------------------------------ -------------- --------------
Non-current
Accruals and deferred income 5,389 3,030
------------------------------ -------------- --------------
Total 97,085 39,419
------------------------------ -------------- --------------
Stockbroking creditors represent the amount payable in respect
of equity security transactions executed on behalf of clients with
a corresponding balance included within trade and other receivables
(note 10).
14. Cash generated from operations
Year ended Year ended
GBP'000 31 March 2018 31 March 2017
------------------------------------------------------------ --------------- ---------------
Cash flows from operating activities
Profit before taxation 60,064 48,465
Adjustments for:
Net interest income (2,114) (1,739)
Finance costs 1,173 734
Depreciation 5,628 4,498
Amortisation of intangible assets 1,182 1,337
Research and development tax credit (333) -
Other non-cash movements including exchange rate movements 357 719
Share-based payment 1,773 3,107
Changes in working capital:
Increase in trade and other receivables (18,659) (10,664)
Increase in amounts due from brokers (37,497) (35,160)
Increase in trade and other payables 57,666 1,180
Increase in net derivative financial instruments (5,269) (954)
Increase in provisions 271 342
------------------------------------------------------------ --------------- ---------------
Cash generated from operations 64,242 11,865
------------------------------------------------------------ --------------- ---------------
The movement in trade and other receivables for the year ended
31 March 2018 also includes GBP310,000 (31 March 2017: GBP490,000)
of exceptional litigation income received during the year. This
exceptional income was recognised in the year ended 31 March
2016.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UGURWQUPRGBQ
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