presentation Half year ended 30 September 2017 Agenda 1 Key - PowerPoint PPT Presentation

Results presentation Half year ended 30 September 2017

Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H1 2018 Analyst presentation ǀ Pg 2

Key highlights Net operating income of £89.6m (2017 H1: £75.5m), a record first half RPC of £1,814 (2017 H1: £1,488) reflecting the focus on high value clients Strong operational gearing, with PBT margin increasing to 33% (2017 H1: 25%) Interim dividend of 2.98 pence (one third of FY17 total ordinary dividend) Progress continues to be made on strategic initiatives ANZ Bank Stockbroking implementation progressing to plan H1 2018 Analyst presentation ǀ Pg 3

Agenda 1 Key highlights 2 Financials 3 Regulation 4 Strategic progress 5 Q&A H1 2018 Analyst presentation ǀ Pg 4

KPIs High value clients driving key metrics Net operating income 3 (£m) Active clients 1 and Revenue per active client (RPC) 2 (£) Turnover (£bn) and Trades (m) 1,814 33.5 33.3 1,871 1,707 32.3 1,637 1,488 30.7 30.4 90.5 89.6 85.3 1,175 49,098 1,112 1,105 78.9 47,623 46,634 46,548 75.5 960 911 44,017 2016 2017 2018 2016 2017 2018 2016 2017 2018 H1 H2 H1 turnover H2 turnover Number of trades H1 clients H2 clients RPC (£) Underlying Profit Before Tax 4 (£m and margin) Basic EPS (pence) Profit after tax (£m) 40% 35% 33% 33% 25% 25.0 24.5 8.7 8.5 22.5 8.0 7.2 20.0 36.2 29.7 29.8 5.1 26.2 14.7 18.8 2016 2017 2018 2016 2017 2018 2016 2017 2018 H1 Underlying PBT H2 Underlying PBT H1 H2 H1 H2 Underlying PBT margin 1. Active clients represent those individual clients who have traded with or held CFD or spread bet positions with CMC Markets on at least one occasion during the period. 2. Average trading revenue generated from CFD and spread bet active clients. 3. Net operating income represents total revenue after rebates payable to introducing partners and retail clients, and betting levies. 4. Underlying PBT represents PBT before exceptional items. H1 2018 Analyst presentation ǀ Pg 5

Income statement High value client activity driving higher NOI with controlled cost increases Net operating income Group (£m) H1 2018 H1 2017 YoY % CFD and spread bet (incl 84.6 70.9 19%  19% increase in net operating income driven by high value binaries) net revenue clients trading larger volumes Stockbroking 4.1 3.7 11%  Value of client trades increased across all asset classes, Interest income 0.8 0.9 (13%) most notably in FX (up £180bn or 58%) Sundry income 0.1 - - Net operating income 1 89.6 75.5 19% Operating expenses (59.3) (56.4) (5%) Operating expenses Finance costs (0.5) (0.3) (43%)  Controlled operating expenses. Increase driven by higher Profit before taxation 29.8 18.8 58% personnel costs, including:  annual salary increases Tax (4.8) (4.1) (16%)  higher discretionary performance incentives Profit after tax 25.0 14.7 70%  Cost increases were partially offset by:  lower but more targeted marketing spend High operating leverage, with PBT margin increasing 8 ppts 1. Net operating income represents total revenue after rebates payable to introducing partners and retail clients, and betting levies. H1 2018 Analyst presentation ǀ Pg 6

Net revenue 1 bridge (£m) Onboarding valuable new clients whilst existing client base continues to trade Existing clients: (£9.8m) 11.9 0.5 (10.3) 10.5 Existing clients: (£2.6m) 1.7 (4.3) 2.0 1.6 84.6 New and returning clients: 80.4 £13.9m New and returning clients: £12.2m 70.9 H1 2017 net Existing clients Existing clients Returning clients New clients H2 2017 net Existing clients Existing clients Returning clients New clients H1 2018 net revenue trading more not trading revenue trading more not trading revenue 1. Net revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, after the impact of rebates to introducing partners and retail clients, and betting levies. H1 2018 Analyst presentation ǀ Pg 7

Clients Long-standing clients continue to generate the majority of revenue Client churn (000’s) H1 2018 Revenue ¹ by client tenure 1 3 1 3 3 10 9 11% 7 9 10 0-6M 40% 15% 6-12M 37 37 37 34 33 1-2YR 2-3YR >3YR 19% (11) (11) (11) (12) (12) 15% H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 Continuous traders New traders Reactivated Stopped trading  55% of revenue was generated by clients that have been with the Group for two years or more  Continuous traders remain steady half on half 1. Gross revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, before the impact of rebates to introducing partners and retail clients, and betting levies. H1 2018 Analyst presentation ǀ Pg 8

Revenue per active client 1 (RPC) Increased RPC driven by high value clients Active clients and RPC 50 2,000  Increased trading from high value clients led to an increase in 45 1,800 RPC of 22% against H1 2017 17 40 1,600 16 15 17 14  Active clients decreased slightly, due to the Group’s focus on Active clients (000's) 35 1,400 high value clients and a more targeted marketing spend 30 1,200 RPC (£) 25 1,000  RPC among the highest in the industry 18 18 19 17 18 20 800 15 600 10 400 13 13 13 13 12 5 200 0 - H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 UK Europe APAC and Canada RPC New client value £8,000  Clients on boarded after the EU Referendum in FY17 are Cumulative Ave. Client Value ² £7,000 noticeably above average value, reflecting quality of new clients £6,000  Payback on marketing spend remains between 2 to 3 months £5,000 £4,000 £3,000 £2,000 £1,000 £- 1 3 5 7 9 11 13 15 17 19 21 23 Months since first trade FY15 FY16 FY17 FY17 post-Brexit FY18 1. Average trading revenue generated from CFD and spread bet active clients . 2. Cumulative average net trading revenue generated per new client whose first trade was placed in the associated period. H1 2018 Analyst presentation ǀ Pg 9

Operating costs Modest cost increase Group (£m) H1 2018 H1 2017 YoY %  Operating cost increase of 5% Staff costs 26.2 7% 24.6  Staff costs increased due to:  impact of annual salary increases IT costs 8.2 7.4 11%  higher discretionary performance incentives Sales and marketing 9.4 10.6 (12%)  IT costs increased as a result of higher market data Premises 3.1 2.6 17% charges and maintenance costs  Marketing costs decreased due to more targeted Legal and professional fees 2.1 53% 1.4 spending Regulatory fees ¹ 2.2 2.9 (25%)  Increase in legal and professional fees due to increased consultancy expenditure on a number of projects Depreciation and amortisation 3.0 2.8 6%  Regulatory fees decreased as a result of a lower FSCS levy charge for the period Other 5.1 4.1 21%  Other costs increased 21%, driven by higher Total operating expenses 59.3 56.4 5% irrecoverable VAT and bank charges Average headcount 568 (2%) 579 1. Includes regulatory transaction fees. H1 2018 Analyst presentation ǀ Pg 10

Liquidity and regulatory capital Regulatory capital ratio and liquidity position remain strong Regulatory capital Total available liquidity Group (£m) H1 2018 FY 2017 Group (£m) H1 2018 FY 2017 Core Equity Tier 1 Capital 1 194.4 178.6 Own funds 190.3 183.4 Less: intangibles and deferred tax assets (7.2) (6.7) Non-segregated client and partner 3.3 3.8 funds Capital Resources 187.2 171.9 Pillar 1 requirement 2 51.8 45.6 Available committed facility 25.0 40.0 Total risk exposure 3 647.3 569.4 Total available liquidity 218.6 227.2 Capital ratio % 29% 30%  Highly cash generative business with profits immediately available as liquidity  Capital ratio continues to be well in excess of requirements  Committed facility used at period end to maintain significant amount of excess funds with prime brokers Core Equity Tier 1 capital – total audited capital resources as at the end of the financial period, less dividends proposed or paid before 30 September 2017. Prior period comparative is presented using the same methodology. 1. Pillar 1 requirement – the minimum capital requirement required to adhere to CRD IV. 2. Total risk exposure – the Pillar 1 requirement multiplied by 12.5, as set out by the FCA. 3. H1 2018 Analyst presentation ǀ Pg 11

Uses of liquidity Increasing levels of client exposure driving higher hedging requirements Notional exposures (£m) Uses of total available liquidity Group (£m) H1 2018 FY 2017 4,000 Total available liquidity 218.6 227.2 3,000 Blocked cash ¹ (19.9) (19.8) Initial margin requirement at broker (119.0) (93.0) 2,000 Net available liquidity 79.7 114.4 1,000 - Apr 2015 Oct 2015 Apr 2016 Oct 2016 Apr 2017 Oct 2017 Client Notional Hedge Notional Residual Exposure  Predominant use of liquidity is to cover margins at broker  Record levels of notional client exposure  The shaded portion of the graph reflects natural aggregation of client positions  High level of hedging increasing PB requirement  CMC carrying low level of residual risk after hedging, maintaining strong regulatory capital ratio 1. Blocked cash relates to cash needed to support regulatory and overseas subsidiaries operational requirements. H1 2018 Analyst presentation ǀ Pg 12