Results presentation Half year ended 30 September 2016 - PowerPoint PPT Presentation

Results presentation Half year ended 30 September 2016

Introduction Peter Cruddas - Group CEO

Introduction Key Highlights � Progress continuing to be made on strategic initiatives � NOI down 4% due to subdued markets and reduced client activity � Active clients up 8%, new clients up 15% reflecting investment in strategic initiatives � Value of client trades down 18% � Revenue per client down 13% � Client money balance up 32% compared to H1 2016 � Dividend of 2.98p (third of 2016 total ordinary dividend) � On track to deliver NOI of £220m by 2020 H1 2017 Analyst presentation � Pg 3

Financials Grant Foley - Group CFO

KPIs Active client growth offset by reduced client activity Net operating income 3 (£m) Active clients 1 and Revenue per active client (RPC) 2 (£) Turnover (£bn) and Trades (m) 1,901 1,871 33.5 33.3 1,707 30.4 26.8 1,488 1,484 17.8 90.5 47,623 1,112 84.8 46,548 78.9 75.5 960 930 911 44,017 42,681 58.8 696 37,361 2015 2016 2017 2015 2016 2017 2015 2016 2017 H1 turnover H2 turnover Number of trades H1 H2 H1 clients H2 clients RPC (£) Underlying Profit Before Tax 4 (£m and margin) Profit after tax (£m) Basic EPS (pence) 35% 34% 30% 25% 24% 22.5 8.4 8.0 21.0 7.2 20.0 38.0 36.2 5.1 26.2 14.7 4.0 18.8 13.9 11.3 2015 2016 2017 2015 2016 2017 2015 2016 2017 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 six month period. 2. 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 2017 Analyst presentation � Pg 5

Income statement Group (£m) 2017 H1 2016 H1 YoY % � Reduction in NOI due to reduced Net operating income 1 75.5 78.9 (4%) client activity from subdued markets Underlying operating expenses (53.6) (49.1) 9% � Countdowns and binaries continuing to perform well, Depreciation, amortisation and finance (3.1) (3.6) (13%) contributing £4.1m of revenue (H2 costs 2016: £3.2m) Underlying Profit before tax 2 18.8 26.2 (28%) � Operating expense increases through planned investment in Other income - 1.6 - people and marketing to support strategic initiatives Exceptional costs - (1.3) - Profit before taxation 18.8 26.5 (29%) Underlying tax (4.1) (6.1) 33% Underlying Profit after tax 3 14.7 20.1 (27%) Tax (4.1) (6.5) 36% Profit after tax 14.7 20.0 (27%) 1. Net operating income represents total revenue after rebates payable to introducing partners and retail clients, and betting levies. 2. Underlying PBT represents PBT before exceptional items. 3. Based on implied tax payable excluding exceptional items. H1 2017 Analyst presentation � Pg 6

Net operating income Lower client turnover reducing net operating income Turnover 1 and trades Breakdown by product 1,200 40 Group (£m) 2017 H1 2016 H1 YoY % CFD and spread bet (incl 35 70.9 75.1 (6%) binaries) net revenue 1,000 Stockbroking 3.7 2.7 40% Turnover (£bn) 30 Trades (m) Interest income 0.9 0.9 - 800 25 Sundry income - 0.2 (100%) 600 20 Net operating income 75.5 78.9 (4%) 15 400 10 � Reduced CFD and spread bet revenue driven by lower trading activity from clients in a quieter market environment 200 5 � Countdowns and Binary products generated £4.1m revenue during the period compared to £3.2m during H2 2016 0 0 � Stockbroking increase due to higher volumes driven by a low central bank rate and supportive market conditions in Australia � Client trading volumes strongly correlated to market volatility, which was significantly lower during H1 Turnover (£bn) Trades (m) 1. Turnover represents the notional value of client trades. H1 2017 Analyst presentation � Pg 7

Net operating income Significant fall in the value of client trades Closing VIX 1 VDAX-NEW 1 40 40 35 35 30 30 VDAX-NEW (%) Closing VIX (%) 25 25 20 20 15 15 10 10 VIX close Avg 2015 H1 Avg 2015 H2 VDAX-NEW Avg 2015 H1 Avg 2015 H2 Avg 2016 H1 Avg 2016 H2 Avg 2017 H1 Avg 2016 H1 Avg 2016 H2 Avg 2017 H1 � Value of client trades fell across all asset classes except Commodities and Treasuries � Turnover for Indices was down 27%; Indices are typically up to 50% of total client trades � Value of FX and Shares trades both fell by 6% 1. VIX and VDAX-NEW are measures of equity market volatility in their respective regions (US and Germany respectively) H1 2017 Analyst presentation � Pg 8

Net revenue 1 bridge (£m) Subdued markets leading to clients trading less 11.6 87.1 (15.8) 7.1 (8.5) 75.1 1.8 (11.1) 10.6 70.9 0.1 2016 H1 Net Existing Existing Returning New clients 2016 H2 Net Existing Existing Returning New clients 2017 H1 Net Revenue clients trading clients clients Revenue clients trading clients clients Revenue more stopped less stopped trading trading 1. Net revenue generated from CFD and spread bet active clients, including Countdowns and Binaries, after the impact of rebates and levies. H1 2017 Analyst presentation � Pg 9

Revenue per active client 1 (RPC) Growing active client base � Active client growth in all three regions, with Active clients and RPC increases in new and developing offices 50 2,000 � RPC decreased 13% compared to H1 2016, 45 1,800 reflecting subdued market environment 40 1,600 16 15 14 13 � RPC, although reduced in the period, continues to 35 1,400 Active clients (000's) reflect the Group’s high-quality client base 11 RPC (£) 30 1,200 25 1,000 Client churn (000’s) 18 18 17 17 20 800 48 47 44 15 43 1 37 3 1 15 600 10 4 9 10 2 9 7 10 400 13 13 13 13 37 34 33 11 5 200 30 28 0 - 2015 H1 2015 H2 2016 H1 2016 H2 2017 H1 (8) (10) (11) (11) (12) UK Europe APAC and Canada RPC 2015 H1 2015 H2 2016 H1 2016 H2 2017 H1 Continuous traders New traders Reactivated Stopped trading 1. Trading revenue generated from CFD and spread bet active clients. H1 2017 Analyst presentation � Pg 10

Revenue trend Continuing low number of loss days Low loss days Daily distribution 1,800 1,500 CFD and Spreadbet revenue (£k) 1,200 900 600 18 15 300 0 9 8 8 (300) (600) 2015 H1 2015 H2 2016 H1 2016 H2 2017 H1 0 5 10 15 Number of days H1 2017 Analyst presentation � Pg 11

Client assets and Prime Broker Requirements Increasing assets held by clients and higher PB requirement Client assets under management (AUM) Broker margin requirements 300 100 Max - £89m 90 Max - £78m 80 275 Max - £72m Client AUM (£m) 70 60 250 50 40 225 30 20 200 H1 2017 Analyst presentation � Pg 12

Operating costs Controlled cost growth to support strategic focus % of NOI � Total underlying operating cost¹ increase of 9% Group (£m) 2017 H1 2016 H1 YoY % 2017 H1 2016 H1 � Staff costs have increased through investment in digital Net staff costs 24.7 21.9 13% 33% 28% marketing, mobile development and client support staff as well IT costs 7.4 5.9 26% 10% 7% as share based payment charges. These have been Sales and marketing 10.6 7.5 24% 14% 10% offset by a reduction in the Premises 2.6 2.4 11% 3% 3% discretionary bonus provision � IT costs have increased Legal and Professional fees 1.8 1.6 14% 2% 2% through increased security spend and higher market data Regulatory fees 2.5 2.4 2% 3% 3% charges that are USD denominated Other 4.0 7.4 (30%) 5% 9% � Other cost decrease largely as Total operating expenses 53.6 49.1 9% 71% 62% a result of lower bad debt before exceptional costs expense through effective risk Exceptional costs - 1.3 - 0% 2% management and a one-off tax provision in the prior year Total operating expenses 53.6 50.4 6% 71% 64% Average headcount 579 518 12% 1. Operating costs excluding exceptional items. H1 2017 Analyst presentation � Pg 13