RNS Number : 7974X
CMC Markets Plc
30 June 2008
Preliminary Statement for the year ended 31 March 2008
London - 30th June 2008
CMC Markets Plc, a global leader in online financial trading, today announced its audited results for the year
ended 31 March 2008.
Financial Highlights
FY2008 FY2007 Change
Revenue £181.4m £110.5m +64%
Profit before tax - adjusted(1) £66.4m £46.8m +42%
Earnings per share - basic adjusted(1) 18.1p 12.5 p +45%
Profit after tax - statutory £39.8m £12.9m +209%
Earnings per share - basic 15.5p 5.0p +210%
Note 1 Before amortisation and impairment of intangibles arising on consolidation and exceptional items.
* Revenue up by 64% to £181.4m on the back of record trading activity
* Total value traded by customers USD1.4 trillion, up 47%
* Total number of client trades 20.1m, an increase of 49%
* Adjusted profit before tax up 42% to £66.4m
* Adjusted EPS of 18.1p, 45% higher than prior year
Operational highlights
* Strong performance across all of the Group's direct client businesses and continued expansion of global
footprint with six new
offices: Dublin, Edinburgh, Singapore, Stockholm, Tokyo and Vienna
* Geographical diversification of revenue, with 59% of Group revenue generated from non-UK offices
* Growth in the number of partner programs further extending depth of liquidity and distribution reach
* Ongoing enhancement and diversification of product offering through: further development of technology
platform, enriched content
(acquisition of Digital Look) and introduction of new products, including physical shares capability in Australia
(acquisition of Andrew
West & Co limited )
* Established strategic partnership with Goldman Sachs providing each party with access to best-in-class
technology, clients,
products and services
* Further strengthened management team and global infrastructure
Peter Cruddas, Executive Chairman, said, "It has been another busy and highly successful year for the Group with;
record profits,
acquisitions, new office openings, more awards won and an investment in CMC Markets by Goldman Sachs. There are still
tremendous
opportunities for CMC Markets around the world. We continue to look for acquisitions, will open new offices again this
year and are always
working to expand the Group's product suite and customer base. It is all very exciting but there is no time to sit back
and relax because
everybody is motivated to push the business forward. "
Jim Pettigrew, Chief Executive Officer, said, "The Group reported a very strong financial performance for the year
further highlighting
that CMC Markets is a growth business in a growth market. During the year the Group continued to further develop its
global infrastructure
and its capacity and capability to effectively access this future growth."
About CMC Markets
The CMC Markets Plc group ('CMC Markets') is a market maker in online retail financial services and both a global
leader in the
provision of contracts for difference (CFDs) and one of the largest financial spread betting service providers in the
UK.
Contacts
Jim Pettigrew Chief Executive Officer +44 (0) 203 003 8259
Doug Richards Chief Financial Officer +44 (0) 203 003 8259
Matthew Newton Finsbury +44 (0) 207 251 3801
Alex Simmons Finsbury +44 (0) 207 251 3801
Business Review
CMC Markets' principal products and services are contracts for difference (CFDs), financial spread betting and
foreign exchange trading.A key part of the Group's strategy is to focus on delivering these institutional-style trading products and services to
an increasingly
diverse range of retail investors and market professionals against the backdrop of a more global investment horizon.
CMC Markets provides a fully integrated trading platform, allowing clients to trade over 3,000 different financial
instruments, covering
equities, indices, commodities, currencies and treasuries, all within one account wrapper, in one currency, in
real-time via the internet. CMC Markets handles the front, middle and back office functionality of the trade and provides immediate clearing.
The Group has a global footprint spanning four continents and trades under the CMC Markets brand from 23 offices
around the world
supporting clients from over 85 countries. In addition, CMC Markets has an increasing number of white-label partnership
agreements in place
with financial intermediaries, banks and brokers which extends further the global penetration of the Group's products
and services.
The acquisition of Digital Look in May 2007 has enabled the Group to provide additional content based services to
clients and reinforces
the Group's ability to offer clients market research, analysis and execution, all from the one platform.
Financial overview
The 12 months to 31 March 2008 was another record year for CMC Markets with revenues of £181.4m representing a 64%
increase on the prior
year. During the year, the Group continued to invest in technology, people, marketing and new offices as part of its
strategic growth plans. Adjusted profit before tax rose by 42% to £66.4m. The Group generated £51.1m of net cash from operations compared to
£42.2m in the previous
twelve months and utilised this to fund further technology developments and the Group's organic and acquisitive global
expansion. The
Group's balance sheet remains strong with £108.0m of cash and cash equivalents.
Operational overview
As a global financial trading business, the Group benefited from the turbulent conditions in the financial markets
during the financial
year. The breadth and depth of the Group's product offering provided clients with alternative asset classes enabling
them to take an active
approach to managing their portfolios.
UK and Ireland; 79% year on year increase in revenue
The UK recorded a strong financial performance for the year. A reorganisation and re-focus of the Group's UK retail
business has helped
drive an increase in client acquisition numbers. Targeted marketing activity, a new web-based technology release and
new products, including
limited risk accounts, have also assisted. Another successful initiative in the year, which represents a further
enhancement in the Group's
service offering, is the introduction of a sales trading desk focusing on high net worth individuals and professional
traders.
Offices in Dublin and Edinburgh were opened during the year and are operating in line with plan.
Momentum in the UK partners business continues to build with significant new business wins over the last 18 months.
Europe; 75% year on year increase in revenue
The Group opened new offices in Sweden and Austria during the year, both of which are performing ahead of
expectation. The Group
continues to have a very strong presence in the German market and its German operations reported encouraging revenue
growth in the year.
Further expansion in Europe is planned in the new financial year.
North America; 15% year on year increase in revenue
It has been a transitional year for the Group's Canadian business as it worked closely with various regulatory
bodies to achieve
regulatory approval for CFDs as a new retail product in the Canadian market. CMC Markets is the first CFD provider to
become a member of the
Investment Dealers Association of Canada (IDA) and the Group is now working with regional regulators to be in a
position to offer CFDs to
the retail market towards the end of the calendar year.
The Group's US presence is maintained by a relatively small foreign exchange trading business. Platform
enhancements are scheduled for
later in the year aimed at stimulating trading interest and activity levels.
Australia and New Zealand; 51% year on year increase in revenue
A constructive market environment assisted the Group's Australian and New Zealand operations. This year's results
include 3 months of
the Andrew West stock broking business acquired during the year, contributing £1.4m in revenue in this time. The
acquisition allows the
Group to take part in the physical share market in the country and provides the potential to capture further revenue
synergies.
Against the backdrop of a competitive landscape, the Group remains the largest CFD provider in Australia by some
degree. In Australia,
the Group operates out of five cities, and Australia is by far and away the largest contributor to the region's
revenue. The Group's New
Zealand business also had a good year.
Asia; 80% year on year increase in revenue
The Group continued to grow its platform across Asia, and Hong Kong remained the major revenue contributor in the
region. Asia also
benefited from a strong performance from Singapore in its first year of operation.
Towards the end of the financial year, the Group's Japan operations received approval from the relevant regulatory
authorities to become
the first retail CFD provider in Japan, and the Group launched its CFD product in April 2008.
In addition to Japan, there are many exciting opportunities in the Asian region which the Group are researching and
keeping under
review.
Other Activities
The Group's Partner and white-label business now has over 100 partners and has grown rapidly during the year,
increasing market share in
the process. It is now a major contributor to the Group's profits. There are multiple initiatives underway to further
increase the number of
partner arrangements, their geographical spread and the range of distribution channels and market share in this area.
New offices, targeted marketing campaigns and ongoing focus on educational programs all contributed to an increased
level of average
monthly new client numbers during the financial year. In the first two months of the new financial year, new client
numbers are
substantially higher than the comparative periods in the prior financial year.
A new Group-wide three-year technology roadmap has been agreed which will support the Group's medium to long term
revenue growth plans
and ensure that the Group continues to have state-of-the-art technology in place and is the industry leading trading
platform.
During the year, a number of governance and infrastructure initiatives have been undertaken to ensure that the
Group's global revenue
growth continues to be effectively and efficiently supported, all within an appropriate control environment.
The Group's headcount at 31 March 2008 was 1,064 (2007; 722).
Corporate activity
During the year, CMC Markets successfully completed two operational acquisitions and entered into a strategic
partnership with Goldman
Sachs.
Digital Look, acquired in May 2007, is one of the UK's leading financial information, market and company research
providers, offering
in-depth analysis of a broad section of financial markets. In addition, Digital Look has a strong technology team
offering outstanding
solutions to the Group's clients.
The Digital Look acquisition has been satisfactorily integrated and has already started to enhance the Group's
trading platform through
additional technology expertise and content. This is consistent with the Group's strategic objective of being able to
offer clients market
research, analysis and execution, all from one platform.
In Australia, the Group acquired Andrew West & Co. Limited (AWS) in December 2007. AWS was one of the last
remaining fully independent
stockbrokers in Australia, with all others being owned by major banks. This acquisition has enabled the Group's
Australian business to offer
clients a fully integrated trading service that now encompasses CFDs, physical shares, education, research and
analysis. The Australian
market is slightly different to the UK market in that there are tax and pension planning incentives that encourage
physical share ownership. Although the Group's business is strong in Australia, some clients were trading CFDs with CMC Markets and physical
shares with other
brokers. This gap has now been filled.
The Group believes that there are significant opportunities to cross sell products to the Digital Look and AWS
existing client bases and
jointly develop new products and services.
In the second half of last year, CMC Markets shareholders entered into an agreement with Goldman Sachs to sell them
10% of CMC Markets
share capital. As part of the deal, CMC Markets and Goldman Sachs have agreed to work closely together to build on the
CMC Markets platform
to help develop the business and at the same time offer CMC Markets products and its platform to their clients and
partners around the
world. A number of initiatives are currently being worked upon and which will begin to be rolled out over the coming
months.
Additions to Management Team
During the year the Group added two Directors and two non-executive Directors to its already strong Board.
Jim Pettigrew joined as CEO from Ashmore Group Plc (Jim was previously CFO at ICAP Plc) and Doug Richards became
the Group's new Global
CFO (Doug was previously with Centrica Plc).
Simon Waugh who has previously held a number of senior positions in major retail financial services companies,
including American
Express, was appointed as a non-executive Director.
In addition, Jan Boomaars of Goldman Sachs was also appointed as a non-executive Director.
Outlook
In the financial year to 31 March 2008, the Group benefited from high levels of market volatility. While it is
always difficult to
predict trends and levels of volatility and the resultant client trading activity levels; over the medium to longer
term the Directors and
senior management team at CMC Markets believe that the business is well placed to capture future market growth. During
the new financial
year, the intention is to continue to invest in technology, new offices, marketing and product innovation as the group
continues its global
growth and expansion of its products and client base.
Consolidated Income Statement
For the year ended 31 March
2008
Before amortisation and impairment of Amortisation and impairment of intangibles
Exceptional items
Total
intangibles arising on consolidation and arising on consolidation
exceptional items
Continuing operations £m £m
£m
£m
Revenue 181.4 -
-
181.4
Operating expenses (116.7) (1.3)
(7.9)
(125.9)
Operating profit 64.7 (1.3)
(7.9)
55.5
Finance income 2.3 -
-
2.3
Finance costs (0.6) -
-
(0.6)
Profit before taxation 66.4 (1.3)
(7.9)
57.2
Taxation (20.1) 0.3
2.4
(17.4)
Profit for the year 46.3 (1.0)
(5.5)
39.8
attributable to equity holders
of the parent company
Earnings per share
Basic (p)
15.5 p
Diluted (p)
15.5 p
Consolidated Income Statement
For the year ended 31 March
2007
Before amortisation and impairment of Amortisation and impairment of intangibles
Exceptional items
Total
intangibles arising on consolidation and arising on consolidation
exceptional items
Continuing operations £m £m
£m
£m
Revenue 110.5 -
-
110.5
Operating expenses (64.8) -
(25.8)
(90.6)
Operating profit 45.7 -
(25.8)
19.9
Finance income 1.1 -
-
1.1
Finance costs - -
-
-
Profit before taxation 46.8 -
(25.8)
21.0
Taxation (14.8) -
6.7
(8.1)
Profit for the year 32.0 -
(19.1)
12.9
attributable to equity holders
of the parent company
Earnings per share
Basic (p)
5.0 p
Diluted (p)
5.0 p
Consolidated Balance Sheet
As at 31 March 2008
2008 2007
ASSETS £m £m
Non-current assets
Goodwill 18.8 0.7
Intangible assets 50.4 16.6
Property, plant and equipment 19.0 14.4
Deferred tax assets 1.7 1.7
Total non-current assets 89.9 33.4
Current assets
Investments 24.2 61.5
Trade and other receivables 12.6 4.0
Cash and cash equivalents 108.0 111.1
Total current assets 144.8 176.6
TOTAL ASSETS 234.7 210.0
LIABILITIES
Current liabilities
Trade and other payables 71.3 91.6
Deferred consideration 3.5 -
Trading liabilities 2.9 18.3
Borrowings 0.5 19.1
Current tax payable 5.6 1.4
Short-term provisions 3.8 0.7
Total current liabilities 87.6 131.1
Non-current liabilities
Deferred consideration 8.4 -
Deferred tax liabilities 8.8 6.8
Borrowings 25.6 -
Total non-current liabilities 42.8 6.8
TOTAL LIABILITIES 130.4 137.9
EQUITY
Capital and reserves attributable to shareholders
of the parent company
Share capital 64.0 64.0
Own shares held in trust (3.9) -
Translation reserve 1.5 -
Merger reserve (47.8) (47.8)
Retained earnings 90.5 55.9
TOTAL EQUITY 104.3 72.1
TOTAL EQUITY AND LIABILITIES 234.7 210.0
Consolidated Cash Flow Statement
For the year ended 31 March 2008
2008 2007
£m £m
Cash movement on segregated funds 46.5 13.2
Cash generated from operations
Cash generated from operations (excluding broker 47.8 51.0
financing)
Cash utilised in broker financing 3.3 (8.8)
Net cash generated from operations 51.1 42.2
Cash flows from operating activities
Cash generated from operations 51.1 42.2
Finance income 2.3 1.1
Tax paid (13.5) (2.5)
Net cash from operating activities 39.9 40.8
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) (26.6) -
Purchase of property, plant and equipment (10.7) (9.8)
Development of software and purchase of software licences (16.5) (9.1)
Acquisition of trading and broking licences (1.4) (0.7)
Acquisition of other intangibles (0.1) (0.3)
Net cash used in investment activities (55.3) (19.9)
Cash flows from financing activities
Issuance of subordinated debt 25.0 -
Acquisition of own shares held in trust (3.9) -
Dividends paid (10.0) (20.0)
Net cash from / (used in) financing activities 11.1 (20.0)
Net (decrease) / increase in cash and cash equivalents (4.3) 0.9
Cash and cash equivalents at the beginning of the year 111.1 110.3
Effect of foreign exchange rate changes 1.2 (0.1)
Cash and cash equivalents at end of year 108.0 111.1
Notes to the financial Statements
Basis of preparation
The financial statements have been prepared in accordance with IFRS adopted by the European Union, IFRIC
interpretations and with those
parts of the Companies Act 1985 applicable to companies reporting under IFRS and therefore complies with Article 4 of
the EU IAS Regulation. The financial statements have also been prepared under the historical cost convention, as modified to include the fair
value of certain
financial instruments in accordance with IFRS. The financial statements are prepared in sterling, which is the
functional currency of the
parent company, CMC Markets Plc.
The Group maintains a columnar format for the presentation of its consolidated income statement. This enables the
Group to continue its
practice of improving the understanding of its results by presenting profit for the year before amortisation and
impairment of intangibles
arising on consolidation and exceptional items. This is the profit measure used to calculate adjusted EPS and is
considered to be the most
appropriate as it better reflects the Group's underlying cash earnings. Profit before amortisation and impairment of
intangibles arising on
consolidation and exceptional items is reconciled to profit before tax on the face of the income statement.
Items which are of a non-recurring nature and material, when considering both size and nature, have been disclosed
separately to give a
clearer presentation of the Group's results. These items are shown as 'exceptional items' on the face of the income
statement.
Intangible assets arising on consolidation represent goodwill and other separately identifiable intangible assets
on business
combinations since 1 April 2004. The amortisation of separately identifiable intangible assets and any impairment of
goodwill is included in
the income statement within the column 'amortisation and impairment of intangibles arising on consolidation.'
This information is provided by RNS
The company news service from the London Stock Exchange
END
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