CMC Markets Plc (CMCX) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the CMC Markets Full Year 2021 Results Call. My name is Emma, and I will be the operator for your call this morning. [Operator Instructions] I will now hand you over to Lord Cruddas, CEO. Please go ahead.

Good morning, everybody, and thank you for dialing in to our results presentation for the year ended 31st of March 2021. We continue to have to meet in a virtual fashion, but let us hope that we can all meet in person again soon. I'm Peter Cruddas, Founder and CEO of CMC Markets, and it's my pleasure to talk you through the investor presentation published to the CMC Markets website this morning. With me today is Euan Marshall, our CFO; Dave Fineberg, our Deputy CEO; and we have Matt Lewis, Head of APAC who's dialed in from Australia. As usual, I will then pass to Euan to cover the financials. David will then cover client trading and regulations, and Matt will talk about our APAC business, including stock broking. And then I'll finish on strategy before we open the lines for Q&A., and hopefully, we can get through this in the next 35, 40 minutes, but longer for questions. So if we go on to Slide 3. Is that Slide 3? Yes. So it's a pleasure to present to you today our record results and the ongoing evolution and exciting plans for the business. We were able to announce a fantastic set of results this morning, with net operating income increasing 63% to GBP 409.8 million. This strong performance across the group has seen CFD gross client income grow by 39%, and the number of active clients grow by 34%. We also report client income retention of 104% for the year driven by our strong hedging performance, which was achieved through heavy investment over a number of years in our hedging technology infrastructure. This was evident in the first half of the year, amid extreme volatility and high volumes, which we were able to fully capitalize on, and David will talk a bit about this later in the presentation. In addition, our stock broking net revenue is up 72% of GBP 55 million, with increased levels of client trading throughout the year. These factors all combined to lead the group to report a record profit before tax of GBP 224 million, up a remarkable 127%. Bloody hell. I look at that again. It looks great in print anyway. The strong performance we have reported today means I'm able to announce a final dividend of 21.43p, which will be proposed for the approval of our shareholders at the AGM in July. I reckon it's got fair chance of getting through that. This balances the need to return capital to shareholders, with the investment that is required to pursue exciting developments that will drive our future growth and has allowed us to deliver record results here today. Whilst the effects of COVID have clearly increased market volatility and enhance these results, we have also seen strong underlying growth driven both by the agility and reliability of our platforms and our investment in risk management technology. These results are a vindication of our strategy of targeting high-valued experienced clients, some of you know that as Tuna, Project Tuna, a diversification through our stockbroking and B2B partnerships and our unwavering investment in platform and technology infrastructure. Slide 4, please. I believe that our strategy of being a technology-driven business has laid the foundations for strong future growth, giving us the ability to diversify into other markets. For example, we have built a market-leading stockbroking platform in Australia where we are the #2 retail stock broker, having started from a position of 40 of 10 years ago. We have built large business-to-business, B2B platforms, so we can partner with banks and brokers around the world, offering shares, CFDs and foreign exchange. Internally, we have built a systematic risk management platform called TARDIS, which stands for Trade and Risk Data Intelligence System. TARDIS underpins and generates real-time pricing, automates trade execution and optimizes our risk management process. It brings scale and stability to our platforms, especially during volatile market conditions. It is fully integrated to our front-end trading platforms and enhances the client trading experience, whilst also lessening the risk of pricing outages. It also maximizes our income through higher client income retention and is why we were able to capture 104% of this income over the year. We can do all this because we are a technology-driven business, and we can build different platforms for different products. We have moved on from being a CFD and spread betting business managing highly leveraged retail floats. And guess what, we plan to keep on building new platforms and breaking into new markets, just like we have done since I took over as CEO in 2013. This is what these results are reflecting today, not just added market volatility due to COVID, but a diversification and an ability to build new platforms and break into new markets. They are more a reflection of our business strategy. Also when I look across at some of the financial services platforms, I see there are many that are ripe for disruption. I cannot think of one platform, but I would take instead of ours. There is so much opportunity and potential out there for us because of our platform technology, and we're going to break into those markets and be a major disruptor. I'm very excited about the future, and I will discuss this in more detail in my strategy section later. But with that, I will leave you pondering and pass over to Euan, who will take you through the numbers in detail. Ponder on, while Euan gives you the details. Euan?

Thank you, Peter, and good morning to everyone. Moving on to Slide 6. 2021 was a record year for us, and we have seen great metrics across all fronts. We have built upon an already solid, highly profitable underlying business and delivered improvements across all of our KPIs. You'll see in the top left chart, you see the growth we have achieved in our CFD active client numbers up 34% against 2020. This has been driven by increased demand due to the pandemic-related activity. Client acquisition was particularly strong during the period, with 26,000 new trading clients onboarded, which is well in excess of prior years. Revenue per active client has risen 22% against last year driven mainly by higher client income retention. Moving on to the second graph. Gross client income, which trades commissions and financing that our clients pay, increased 39% driven mainly by the higher active client numbers. As we stated in previous announcements, we have seen encouraging signs of the longevity and quality of the FY '21 cohort, so we expect that gross client income is likely to remain above FY '20 levels, even when market conditions normalize. We are confident in this due to the high levels of active clients we experienced in 2021 being retained into the medium term. David will talk more about this later. Client income retention of 104% was predominantly driven by our 115% achieved in the first half of the year. This was well ahead of our expectations in the guidance of -- in excess of 80%. Moving on to the final graph along the top, we've now included our nonleveraged stockbroking KPIs on this slide given the growing contribution and significance of this part of our business. Stockbroking net trading revenue has grown GBP 23 million or 72% versus last year to GBP 55 million. And similar to our leverage business, the heightened interest in the financial markets has led to an increase of 50,000 or 28% in the active client base. Moving on to net operating income. As we can see from the graph on the bottom left, this has increased 63% to GBP 410 million. The operating leverage achieved results -- resulted in 127% increase in profit before tax shown in the middle graph and a PBT margin of 55%. Profit after tax was GBP 178 million, which resulted in basic earnings per share of 61.5p and the proposed final dividend of 30.6p per share. Moving on to the income statement on Slide 7. CFD and spread bets revenue was GBP 349 million, 63% higher than the prior year, driven by highest CFD client income on the larger active client base and higher client income retention, benefiting from our strong risk management performance. Our 3 regions have all seen excellent revenue and client income growth, with the U.K. and APAC and Canada regions being particularly strong. Our Stockbroking business performed strongly throughout the year and generated higher revenue in the second half than the first half due to the success of our zero brokerage international shares offering and heightened interest in shares in Q4. To the group, operating expenses, excluding variable remuneration, are up 22% to GBP 168 million, and variable remuneration increased broadly in line with our higher headcount. PBC margin increased from 39% to 55%, demonstrating that operational leverage in the business, despite the investment in our strategic projects. Now that we have -- note that we have also disclosed our PBT for both the CFD and Stockbroking businesses, which were GBP 201 million and GBP 23 million, respectively, and showing significant growth on the prior year. Moving on to Slide 8, operating expenses. In the same manner as our half year presentation, we've moved away from the usual view of operating expenses, and we focused on the fundamental drivers, so you can better understand the many line items. We have categorized these into 3 main categories. Firstly, on the left, we have marketing. This increase in spend helped us require further clients in a period where there was heightened natural interest in our products and platforms, and we therefore wanted to take the advantage of this opportunity. These costs increased GBP 9.7 million or 65% against last year and have resulted in an increase in acquisition of 102% in our CFD business and 88% in our retail Stockbroking business. We of course stood by our strategy to focus our efforts on high-value clients, rather than the number of clients acquired as seen in our revenue per client KPI. Note that this doesn't take into account increased client numbers in our B2B business, which we incurred no marketing cost to acquire. Secondly, we had higher variable costs, which led to increased client activity. These are around GBP 8 million higher and consist mainly of bank charges, market data and stockbroking transactional costs. Finally, our other cost increases, which have mainly been focused on our strategic initiatives. This includes targeted investment in staff who are driving forward our product and technology development and build-out of other functions to support it. When you also take into account the capitalization of development costs, the overall increase in costs due to investments and BAU comes in at just under GBP 15 million. You will find the P&L view of operating expenses in the appendix. Now let me talk you through the liquidity and regulatory capital position as at the 31st of March. First, you will see our regulatory capital in the top table. The group's balance sheet and overall regulatory capital remained strong with a capital ratio of 21%. Our capital resources increased by GBP 91 million as a result of our profit after tax less foreseeable dividends. Next, turning to liquidity in the bottom 2 tables. The total available liquidity has increased significantly by GBP 188 million to GBP 456 million over the 12 months due to the strong business performance. Note that March is usually a high liquidity point in our cycle due to impending large outflows in H1, such as the final dividend. This increase in total available liquidity coincided with higher liquidity usage. This was mainly as a result of the increase in margin requirements of brokers. This started the year at historical lows after the big equity market sell-off that ended the year a record -- ended the year at record highs, with heightened equity market interest in the U.S. stock market, which we're approaching record highs, demonstrating the material strings -- swings in the liquidity we have to hold for these circumstances. Our blocked cash increased in the year as we made a capital injection into our German subsidiary. This increase in -- this resulted in net available liquidity increasing by GBP 22 million to GBP 211 million at the period end. This leaves us in a continued strong position to invest in our large ongoing strategic projects, whilst maintaining a buffer for the highs and lows of the broker margin requirement. I'll now hand over to David.

Hello, everyone. So moving to Slide 11. As Euan just talked us through, FY '21 was a very strong year financially, and particularly within the CFD business, so I'll start my section by running through the CFD results in some more detail to help explain the drivers for this performance. Looking at Slide 11. The table and chart show client income and net CFD trading revenue by half year. The top line shows the gross CFD client income. As a reminder, this is the spreads, financing and commission clients pay to trade. This has seen a significant growth during the year as a result of COVID-related volatility, with both encouraging existing clients to reactivate and trade on their accounts and has also brought significant number of new clients onto the platform. It also builds on a strong underlying performance that we reported last year. These factors led to a 39% increase in gross client income compared to the same period last year, a 333 -- sorry, GBP 335.3 million. Our successful business model aims to maximize the capture of client transaction cost by balancing internalization, with a hedging at an instrument level. This allows us to minimize the cost of hedging, whilst always operating within the Board-approved risk limits. Our approach to managing market risk is optimized through TARDIS. Examples of this include the internal risk management, which continues to enhance using our high-frequency thick database where automated risk management decisions can be scrutinized afterwards for optimality and can be compared to output of new models. It improves the revenue per client where trade mark out curves are procedure and inspected systematically. This allowed CMC to apply the most appropriate internalization or hedging strategy to each type of mark out profile and also lower latency, with the pricing system continually evolving in terms of sophistication. Latency is now measured in microseconds with real-time monitoring and alerting of any exceptions. Examples of the benefits we've derived from this include: one, some data science models are already on their third or fourth iteration, where new models are only released into production risk management system if it's proven to outperform the previous via rigorous back testing; two, spread retention has improved from 88% to 93% in certain major asset classes due to the focus on minimizing the decay in the mark out curves; and three, our rich data sources allow us to help our liquidity taking better understand their flow and where CMC can add value via reduced market impact. The majority of the risk management gain seen in H1 2021 was derived from net gains from our hedge positions. CMC's exposure to our clients significant positive equity market returns in H1 was matched with largely complete hedging of the static risk during that period. The risk management gains returned towards more normalized levels in H2. Going forward, we expect to retain greater than 80% of client revenues, but not as high as the levels seen recently. Overall, these factors resulted in net CFD trading revenue increasing 63% to GBP 349.2 million. Moving to Slide 12. We have made significant investments during the period in technology and marketing, which have helped us to attract new high-value clients, which have been particularly effective during the pandemic, as more people look to trade. The chart here illustrates the monthly trends in both gross client income per client and the number of active clients since the start of the pandemic. As such, all the data is rebased to show activity compared to FY '20 monthly averages, excluding March, as this is when we first began to see the impact of the pandemic on client trading. The blue line shows a spike in client income from March to June, which coincide with periods of extreme volatility as markets reacted to the coronavirus outbreak. This led to wider spreads in the underlying market which, in turn, increased spreads paid by clients. Client income has returned to more normalized levels during the course of the year. We did see an increase in the final quarter of the year, as client interest in shares trading peaked, although we believe it will be broadly at the level seen throughout FY '20 moving forwards. The purple line shows the trend in monthly active clients. As you will see here, monthly active client levels has been consistently at least 1/3 higher than those before the pandemic, despite fluctuations in volatility during that period. As with client income, we did see an increase in the number of active clients in the final quarter of the year as a result of social media attention surrounding shares trading. This has since returned to the levels seen throughout the rest of 2021, which we believe is a sustainable client base moving forwards. This larger active client base, along with its quality, gives us confidence that the gross client income will remain strong as we move into the new financial year. Throughout the past year, we have been closely monitoring the behavior and characteristics of the clients onboarded during the pandemic. Early indications suggest that the new clients do not behave significantly different to our existing base, with attrition rates and income per client broadly in line with historical cohorts. We will continue to monitor the value of these new clients, but a similarity to the existing clients gives us confidence that we will emerge from this year with an expanded high-quality client base. Moving on to regulation on Slide 13. It's worth reiterating that we believe regulation is a good thing, as it provides protection for those who need it, and it also provides a level playing field for all providers to operate on. There are a few things to update on, but there is nothing that will materially impact the business. On the 23rd of October 2020, ASIC released an announcement detailing new regulatory measures surrounding CFDs for retail clients onboarded in Australia. The regulations came into effect on the 29th of March this year and have therefore had an immaterial effect on these results. The measures include changes to leverage ratio limits, margin closeout, negative balance protection and promotional offers. These are broadly in line with those imposed by ESMA in FY '19, and early indications that the clients in Australia have responded in a similar way to that of the ESMA region. Further ban on the sale of binary options was announced by ASIC on the 3rd of May. In the U.K., the FCA announced a ban on the sale of instruments, such as CFDs, with prices linked to cryptocurrencies to retail clients, which came into effect on the 6th of January this year. This is not expected to have any real impact, as this asset class represented less than 1% of FY '21 net CFD revenue. Finally, a brief comment on Brexit. Following the end of the transition period in December, our German subsidiary in Frankfurt now operates as our European economic area hub, with headquarters remaining in London. Thank you all for your time. I'll now hand you over to Matt Lewis.

Thank you, Dave, and good morning, everyone. Today, I'm going to walk you through the performance of our Stockbroking business in a bit more detail, so if I can focus your attention to Slide 15. Similar to CFDs, stockbroking has had a record year across all key metrics. Net trading revenue is up 72% or GBP 23 million versus last year, making up 14% of group net trading revenue. The growth experienced across all key metrics has been underpinned by unprecedented levels of acquisition and overall market interest that has not been seen since the early advent of online share trading in Australia. The broking business onboarded a record 117,000 new clients and grew actives by 28% during the year. In total terms, the Stockbroking business services over 230,000 active clients. And by year-end, total assets under management equated to over GBP 33 billion in shares holdings and GBP 4.1 billion in cash. Breaking down the revenue streams, net brokerage fees have increased 68% year-on-year, driven by the elevated client trading activity and record acquisition. The strength of our many white-label partnerships and intermediary relationships have also laid the foundation for the outperformance we've seen. Earlier in the year, we made a strategic decision to roll out zero brokerage to retail clients across 4 key emerging markets, and we're the first established broker in Australia to do so. This, along with growing interest in international markets, has resulted in a 361% increase in FX revenue during the period. We expect to continue to grow our international business as a key selection driver and revenue stream, with further product enhancements expected later this year. If I turn your attention to the graph on the top left-hand side, you can see Q4 FY '21 was our best-performing quarter to date, driven by record levels of market interest, enhanced further by our sheer size and the retail social trading phenomenon, which exploded toward the back end of the year. To note, all 4 quarters in FY '21 outperformed even the strongest performing quarter in FY '20. From a distribution perspective, the ongoing success of our ANZ and St. George white label partnerships drove overall performance, with net trading revenue up GBP 17 million or 75%. Our core business referenced -- referred to as CMC Retail and Partners, also performed strongly, with net trading revenue up GBP 6 million or 65% compared to the same period last year. The pie chart in the bottom left-hand corner gives a breakdown of the different client channels, which make up our stockbroking revenue. ANZ and St. George are both Tier 1 bank white label partnerships, where the counterparty is able to use our platform and technology, but retain their own branding. Both partnerships largely service retail clients. CMC Partners, which is our institutional business, services a number of Tier 2 banking relationships in Australia, plus a number of fintechs, financial planners, advisory firms, share registries and boutique investment houses. Throughout the year, the partners team have successfully onboarded a number of new intermediary clients, bringing our total active partner relationships to circa 160. Moving now on to Slide 16. In addition to the record performance, we've maintained our position as the second largest retail stock broker and the largest white label provider in Australia. For the 11th consecutive year, we've been awarded Canstar's Online Share Trading Broker of the Year. In H1, we were awarded Money magazine's best feature-packed online broker, both of which are a great testament to the team's ongoing efforts and highlights the strength in our overall proposition and global pedigree. Moving your attention to the graph on the left-hand side, we've continued to see growth in the value of our client base, with revenue per client, or RPC, increasing to record levels over the year as the existing and new client base create a wider range of products available on the platform, capturing a greater share of the investment wallet and helping to drive our best period on record. During March, we launched a new iOS mobile app, which has had over 15,000 downloads and a rating of 4.5 stars out of 5 on the App store, with the Android up going live in May. Next phase will see us roll out the app to our white label partners and add adviser functionality for our institutional partners to better support their offering. Mobile is a growing key selection driver and a channel we're expecting to help drive greater acquisition, retention, revenues and further solidify our offering as best in market. Furthermore, we launched single sign-on for tighter integration with our CFD platform, algorithmic trading and expanded our international offering to 41 exchanges in 15 countries, which is now one of the most comprehensive offerings in Australia. Core to CMC strategy and driving growth across the key metrics is our technology. Looking forward, we expect to continue our growth through improvements and additions to our product offering and platform enhancements, including app upgrades, releasing trading strategies to drive greater engagement and a revamp of our onboarding process, ensuring clients can create an account, fund and place a trade quicker than ever before. And we're also undertaking a UX review to reinvigorate the front end, make it simple and easy for clients to navigate the platform and invest. With our stockbroking offering continuously expanding an interest in investing higher than ever, alongside the size and scale we've been able to achieve, we expect client activity to continue above pre-COVID levels, and we're excited about the value we can keep adding to our clients' financial future. I'll now hand you back to Euan to cover our financial outlook.

Thank you, Matt. Let's turn to the 2022 outlook on Slide 18, firstly, looking at net operating income. We continue to remain confident in the quality of the recent clients cohorts we have onboarded, alongside the existing underlying strength and diversity in the revenue of the business. In addition, as per previous guidance, the client income retention is expected to be in excess of 80% in future periods. As David demonstrated earlier, we have moved into FY '22 with a higher monthly active client base and with gross client income per client normalizing back to pre-pandemic levels. It should be noted that the first 2 months of the year have been more subdued in comparison to FY '20 levels. Nevertheless, the group continues to have confidence in the robust underlying performance of the business, and in conjunction with further progress on its strategic initiatives, look forward to continuing to generate long-term business value and growth. As a result, the Board remains confident in achieving net operating income in excess of GBP 330 million for the year. We are investing heavily in our platform and technology, and this will also bring revenue opportunities as we look beyond FY '22. Peter is excited to talk about these to you more shortly. Operating cost, excluding variable remuneration, will rise in FY '22 as a result of the annualized effect of the increased headcount in FY '21 and the planned hires in FY '22. Marketing expenditure is also expected to rise as we replenish the larger client base. Finally, as the group continues to invest in the business and also grow its liquidity profile to service client trading activity, the dividend policy remains in place with an expected payout of 50% of profit after tax. That concludes the financial outlook. I will now hand over to Peter, who will cover our strategic update.

Yes. To finish off the presentation, I've got to say some fantastic slides in here. Really enjoyed that actually. Thanks, Euan. We are now on, I think, Slide 20. Before we get further into our strategic update, I'd like to take a step back and look at what we offer and how we differentiate ourselves. You'll have noted the introduction of leverage and non-leverage that we talked through the different parts of the business. Our primary goal is to provide a superior and unrivaled trading experience for our clients, which we achieved through our platforms, which offer a wide range of products to an ever-broadening pool of clients and partners. On the leverage side, we offer CFDs and spread betting, multi-asset class liquidity, along with outsourcing our trading platform technology. We're also diversifying our revenue streams into nonleverage areas. We have our established Stockbroking business in Australia, which has seen very strong growth in recent years, and this area also offers a lot of opportunity for us going forward. I think we're on the next slide now, #21, yes. So historically, our focus has been to develop and improve our platforms, with the aim of making financial markets truly accessible. This has ranged from building award-winning mobile apps to ensure clients can trade wherever they are to investments in our award-winning next-generation platform, which we continue to enhance. In addition to this, we built our white labeling solution and launched our stockbroking platform, so that we can service a greater pool of clients and their needs. More recently, we have shifted our focus to further developing our technology and expertise to maximize the revenue from the flows that we receive from our clients. A key area of investment in the past couple of years has been in infrastructure to help drive down latency, which improves our ability to capture a higher percentage of client income and also improves the service we offer to our clients and to our B2B partners. Most importantly, we have enhanced our risk management strategy, TARDIS, as I mentioned at the start of today's call. We believe this is a key differentiator for us, as it allows us to monetize trades, and it is underpinned with intelligence gathered from years of data. We've spoken today about the extreme volatility the markets have faced over the past year, which plays significant stress on platforms industry-wide, but we believe that we can handle this volatility as a matter, of course, whilst also ensuring we monetize the increased trade in volumes. Other providers may have struggled in this period, or clients may have experienced delays, but fundamentally, when CMC clients wanted to trade and saw opportunities to trade in periods of high volatility, we provided that uninterrupted service with no delays, no downtime and no restrictions, and that is something that is invaluable to our clients. So now let's look ahead. Next slide, please, [ Louise ]. CMC is at its core a technology-driven business, and we have always put investment in technology front and center, and we will continue to do so as it underpins all of our businesses. Transactions such as the ANZ partnership have also demonstrated the scalability of the platform, with hundreds of thousands of clients onboarded to our stockbroking platform in the largest migration of client accounts in the Australian Stock Exchange history. We see TARDIS as a key driver of innovation going forward, not just on the risk management side, but also the ability to launch new products and platforms that take full advantage of the systems and data on which they are built. However, we are getting into new areas, and I want to talk about that today. Next slide, please. We have built up a large cash balance even after dividends, and we intend to use some of it to invest in the business further through the launch of a big new investment platform. Sorry, wrong side. Of course, we will continue to invest in all of our platforms, which includes stockbroking, CFDs, foreign exchange, dynamic trading, B2B and client journey to name but a few. To the team at CMC Markets, that goes without saying. But before I get on to the big new investment platform, I haven't mentioned dynamic trading in this presentation so far, but it warrants a mention as it is a new client CFD front-end trading tool, which we launched in May, and it's also a reflection of what we can achieve with technology and how we can disrupt our own industry through platform technology. And I've got to say, we love disrupting our own industry. Dynamic trading is a professional trading tool, which allows clients to build their own positions within a basket or index. They can select their own leverage and select their own individual weightings for each product within the basket or index. Also cash deposits are offset against the trade borrowing costs, which reduces their financing costs. There is even a facility to trade foreign currency baskets without having to do the foreign exchange deal. We have only just launched dynamic trading, and we believe it will effectively change the CFD industry, well, certainly for Tuna clients anyway. A bit of a digression here, but we'll get back on track. In Australia, we have a very good business, which is diverse and growing rapidly. More precisely, we have a big nonleverage business through our stockbroking platform, which has grown with assets of approximately AUD 70 billion, of which around 10% is in cash. We are the second largest retail stockbroking provider in Australia, which executes trades directly onto the primary exchanges. We are also the #2 retail options provider under primary exchange, and we are signing up twice as many stockbroking clients per month than the entire CFD business globally. Although stockbroking clients are not as valuable, in time, this business will become more valuable than the CFD business in Australia simply because of the great growth rate. It's only a matter of time. And it's clear there is a growing demand for financial and investment-type products and not just in Australia. The large and growing investment market in the U.K. is very competitive, but we believe platform technology is the weakness and where the big opportunities lie for us. Also platform technology is our sweet spot, and we will be playing to our strengths. Constant technology investment and efficient platforms allow you to be commercially more competitive, and we have seen this in Australia and in our CFD business, and we see the same opportunities in the U.K. investment platform business today. So we are going to build and launch a big new self-investment, non-leverage platform in the U.K. To do this, we are going to replicate the Australian business model and run the 2 big investment platforms side by side. This makes sense as we can leverage off the experienced people we have in Australia. But more importantly, it will keep costs low, and we will be able to launch quicker. And actually, we've already begun the process, and we'll talk a little bit about that. Cost can be kept to a minimum because we effectively already own and operate the core of the new platform in Australia. Our new platform will not be built from scratch, and it is a natural extension and progression for the technology and for the business. I'm just about to finish off now. So the new U.K. investment platform will also offer physical shares, third-party products like funds, multicurrency share trading, SIPPs, ISAs and other long-term investment products. And I am confident that we will launch the best investment platform in the U.K. Like I said, platform technology is our sweet spot. Also like Australia, in time, we will be offering white label, B2B and API partnerships to competitors or new entrants in the investment space. This will be technology-driven platform and will allow funds and asset managers to list their products. We are open to partnerships, just like the ANZ Bank and St. George deals in Australia, and the other 250 partners we have worldwide. Matt said 160, that's just Australia. This is a very exciting period for the company. Since IPO in 2016, we have grown the business, delivered on our 5 pillars of growth and paid record dividends, produced record profits and generated an absolute shareholder return of approximately 150%. Our share price was the second best performing share in the FTSE 250 last year. We see -- we saw regulatory change back in 2018, but our strategy of Project Tuna has been vindicated by those regulatory changes. You can only operate a Tuna strategy if you have great technology. Our strategy since I became CEO in 2013 has been driven by technology. It underpins everything we do and allows us to compete competitively on commercials and disrupt our own industry and other industries as well. Our new U.K. investment platform is a continuation of this strategy and our most exciting project to date. And on that note, we're done, and I'll open up to questions.

[Operator Instructions] First question today is from the line of Ben Bathurst with RBC.

I've got, I think, 3 questions, if I may, starting with a couple on the new investment platform. Given the sort of expected ongoing cost associated with that proposition, have you got any idea yet what sort of AUM that platform will need to reach with to become a profitable scale? Because I think I'm right in sort of understanding this as being a proposition that you do think will be profitable on a standalone basis rather than seeing it as a funnel for potential clients into the CFD business. I was also wondering on the new investment platform if you will be considering looking into acquire back books from other institutions to potentially accelerate the client growth there to complement that sort of the white label service you're going to offer to. And then third question was just really on clarifying comment around the quantification in moderation of client activity so far in FY '22. I think you mentioned that the client activity was subdued so far this year. Obviously, we're expecting that, but I just wondered how -- if you could quantify that at all. Is it subdued relative to FY '21? Or was it FY '20? I think I might have heard you said. So any extra color there that you can offer would be helpful, too.

Ben, thank you for those questions. So I'll take the last one first and then hand over to Peter on the investment platform question. So if you refer back to Slide 12 of the presentation, we've kind of shown you there what the client trading activity has been like in April and May, so just below the FY '20 averages. So have a look at that later, and that should give you what you need.

Okay. Great.

One thing -- I mean, it's a good question, Ben, about the funnel. We are not building an investment platform to try and divert clients onto the CFD platform. We do not have that culture. We have not built -- our Stockbroking business in Australia, the migration rate is not that much. I mean, I don't know the numbers, Matt might know that, but it's probably less than 10%. And we do -- we are building this as a standalone business. All options are on the table. We could break it out as a separate brand, but this will be a standalone business that will operate in the investment space. It may or may not have a white label from CMC if clients want CFDs. I'm not sure we will do that at the moment. But be clear, we are entering this space focused on the investment side of the business, self-invest in pensions. And then we can also -- if it was a funnel for other products, we wouldn't list other people's funds on there. This is a standalone investment platform. Assets under management, what do we need? I mean, we can build this thing -- we're building it already in-house. We've got tremendous intellectual property from Matt and the guys in Australia. They're part of building this platform out, and we can talk about assets under management. I know that's quite important to people in that space because they look at what's -- they value companies by assets under management. Well, we've already got $40 billion for our Aussie business. So I think the scale is that we can build it. We're building it. We have it already, to be honest, in Australia. There's a lot of work still to be done. And we expect it not to be material in this financial year, but the next financial year, hopefully, we'll be able to put a bit more flavor around the numbers for you. But honestly, we're really excited about this project. We have a history of disruption because back in 2000 and 2001, when I launched the CFD and Spreadbet platform, we completely disrupted the space in terms of spread. I mean, we had deal for free on our CFD platform. We had compared a spread on our Spreadbet platform. We completely transformed the way that industry operates now. We did the same in Australia through technology, through lower commissions, through partnership arrangements, clearing trades very cheaply using technology. And now Matt's launched a commission-free foreign share trading. You can just imagine that clients love to trade Facebook and Tesla in Australia. And we're going to do the same in the investment community, and we know, if we've got the mindset of being a Spreadbet company, which we haven't, then it wouldn't be successful. It's -- so the empirical evidence is there. When we go into something, we go into it properly, and we do it properly. But I tell you one thing, we'll have the best platform in this space. So if I was a competitor, I'd be spending money on technology as we speak.

The next question comes from the line of Vivek Raja with Shore Capital.

I had a few questions, if I may. The first one is about market share. So obviously, it was one hell of a year looking back. Overall, the universe of opportunity given number of clients you've added has increased. But I just wondered, obviously, given you've maintained platform integrity, while some of your peers haven't, what do you think that's done to your market share in overall expanded marketplace? The next thing -- so just going back to Euan's points about gross client income, let me put that question in a different way. But the GBP 330 million of revenue you've guided for '22, what have you assumed in terms of sort of monthly gross current income? Because obviously, it averaged, I think, 28% last year. It was, I think, GBP 25 million, GBP 26 million per month in H2. What is sort of assumed in your GBP 330 million for that? And then I just wondered, in terms of the sort of the investments piece you've lined out, particularly in the investment platform, which I agree does sound very interesting, how much are you looking to spend on that in total this year? How much of the cash that can absorb?

Vivek, so it's David here. So one thing, I'll pick up the market share question. And obviously, I'll hand over to Euan and then obviously Peter. So market share is often something that does get discussed. I know a lot of providers try to use it to promote excellence through market share, but it's not really something we are wholly focused on. We look at the quality of the base that we inherit through the actions that we do. So a good example of that is that you would have known that we were probably the last to offer cryptos to retail clients because we waited upon clarity from ESMA. So we weren't using the likes of cryptos with huge acquisition or with the marketing spend. Whilst it is higher year-on-year, we're not spending the levels that you see elsewhere. So whilst market share is important, it's not a sole focus for us. As you said before about the platform, integrity and stability, that's absolutely paramount. It's -- it got a lot of focus, not just in the CFD space, but wider. You saw a lot of investment platforms struggling. And throughout, we've often spoken to you and others about the resilience is that we look back at historical highs and make sure that the platform can cater for even more load. So when we're tracking the volatility, client acquisition, client trading levels throughout the year, we are comfortable that our systems could cope with that. And yes, we were the beneficiary of some clients moving across, but you've got to remember when clients switch providers, they return money back to source, then fund it through. So you don't have a direct correlation as to where they've come from. But when the sales traders speak to clients, we are aware of winning some business due to other's instability.

And just to add to David's point as well, it's not just about the acquisition of this new wave of clients. Of utmost importance to us is the longevity of clients and retaining those that we acquire because we want our clients to be with us for the long term as well. Moving on to the forecast as well around assumes client income monthly, I think we're all aware, obviously, that -- from the graph that David showed earlier, FY '21 is a bit more of an anomaly rather than the norm. So I think you'd be looking at FY '20 as more of an average. But at the same time -- and that's from a per client basis, but the other thing to keep in mind as well is we are excited about the future. Peter has been talking about initiatives that have just been released and new products that have just been released, and we do anticipate growth from those products that we're releasing as well. On the investment into the investment platform, that's all within people's forecast. Already, we've talked about growth in our technology, staff, into our product staff and into the wider support functions. Those costs are already in forecast that you guys have.

Yes. And just, Vivek, thank you for picking up on the integrity of the platform because we have spent a lot of time and a lot of money in ensuring that our technology is the first point of investment for this company. We haven't spent a lot of -- we haven't sort of created lots of sales and marketing and onboarding people that are paid commissions and so on. David said, and it applies throughout the whole group. It's about quality. And if you've got quality clients, you have to have a robust, reliable platform. And the one thing that -- if you really want to know sort of the 3 components of last year was platform reliability, incredibly automated risk management and volatility and the platform and the risk management. You've got to remember, this is basically -- there's no human intervention on this other than the modeling that they keep doing. But those 2 components allowed us to capitalize and outperform when the volatility came, when others were struggling to get their platforms working. And some companies were not even allowing clients to open accounts. We're preparing along, and that's the platform for our investment, a new platform going forward. That underpins -- everything we do is underpinned by technology. We're really good at technology. We've been doing this for 25 years. We've made plenty of mistakes. But when we were talking to ANZ about migrating 1 million clients across their platform to ours, and bear in mind, they don't operate nominee accounts in Australia, it's across individual bank accounts, 1 million bank accounts, we never saw anybody at the top table with us. We were the only ones there. There was actually a small local broker, but they didn't have the balance sheet and couldn't cope. So we're all about technology here, and you should be fearful. If we talk about going into a market with our technology, then we will disrupt. We like disrupting. Well, I do. Dave doesn't. He likes it nice and quieter. No. I'm joking, I'm joking. Matt is the same. He saw this. You've got to find them up a bit.

The next question comes from the line of James Lockyer with Peel Hunt.

Two for me, please. So first, I mean, we've covered the nonleverage platform in detail, which is great to hear about. But I was wondering if you could talk a bit maybe about the potential go-to-market strategy that you might have once it's launches. Presumably, platform strength and stability will be a key message, but how much may you need to invest in traditional marketing in the near term to compete with those who have already got a foothold in the space? That's the first question. And on the second question, just on staffing. You increased your tech team by 36% last year, which was the fastest growth across the piece. Where are those new heads focusing their time? Is it new innovation? Is it cloud migration? Or is it the nonlevered platform? And how should we think about this year in terms of further growth?

Yes you want me to kick off? James, look, there's a lot of excitement around here about this next phase of the business. And for now, we're building the platform, and some of the people cover the increase in IT staff, but some of those people have been brought in to support the building of the new platform. But the core of it, we already own. And the core of it, we've already got. These people are there to sort of keep up with demand, really. So the starting point for us is to build -- make sure we build the best platform in the market. That's the most important thing for us. When you've got great technology, what we proved last year and what I was saying earlier, is although -- when you've got great technology, it means you can be very, very competitive on pricing, commissions, execution, service so that's the starting point, and we'll see where it takes us. But we know where to advertise. We know what competitors do. We look at their platforms. We look at their charges. We look at their commissions. We know where they go. And that's -- so it's not rocket science. The other thing as well is that we're open to partnership arrangements. There's plenty of investment-type businesses out there that don't have technology that would want technology, so I would invite them to give us a call because this has been very successful in Australia. I mean, they've done a brilliant job down there and the fact that we got Tier 1 banks using our technology to allow their clients to trade, and we're going to leverage off that here. So it won't just be going after mom-and-dad traditional marketing. It will be going after partnerships as well. Euan, do you want to add?

Yes. On the staffing, James, just to address that question. We -- the leverage part of the business is obviously the most significant part of our business still, and a lot of the investment in IT staff over the last year has been through that. But it does also include a good portion of the staff that we've onboarded in order to develop the nonleverage solution. Another thing, as Peter has alluded to in his presentation earlier, is that we're using a lot of the infrastructure and capability in our existing technology for the nonleverage platform as well. So it's not as easy as saying who's working on leveraged and who's working on nonleveraged because they can work on both together. So that's something to keep in mind as well.

You're leveraging their talent across the business, excellent.

And even the way they're leveraged, yes.

I guess, just as a follow-up. If we were to look out into sort of 3, 5 years, what would be the sort of ideal split do you think of your staff across the business in terms the tech support and client facing? Just to give us a good idea of where you might end up.

I don't see it being radically different to what it is today because in essence, if we get the nonleverage platform up and running, and we're doing both direct-to-customer as well as the partnerships, you're going to be more technology-driven than you are through sales because the technology will sell itself. There will be obviously the operational cost to serve, but I don't see it being the makeup being materially different to what it is now.

Yes. And I think from a nonleverage perspective, there is a bit more on the client-facing stuff perspective. But what we're seeing is that, as Peter has said as well and what Matt's been saying, we continue to invest in our nonleverage business in Australia. And a lot of that is around kind of automation of client service as well and ensuring that we keep that cost to serve as low as possible.

The next question comes line of Martin Price with Jefferies.

I've got 2 hopefully quick ones. First is just another follow-up on the investment platform. I was wondering if you could clarify roughly when you intend to launch. I think I heard current calendar year. And secondly, I think you touched on this, Peter, but just be interested in a little more detail on how you're thinking about the pricing strategy. Clearly, it's still a market where pricing and margins are quite high. So I guess, you could afford to go on the offensive there. And finally, appreciate this is a little off topic, but I'd also be interested in your thoughts on social trading or copy trading offerings, which appears to be driving the valuations of some of your peers like eToro. Just be interested in your thoughts on that service. Is it something you think your clients are interested in? Or does it cater for a very different audience?

Well, David will answer the piece about social trading because I don't like to swear to my analyst, so I'll let David do that. Do you want to do that or shall I...

[indiscernible].

So the launch, I'd invite you around here to go and speak to my IT people and say when can we launch. I think you'll get the same answer as I get. But look, by the time we're talking to you this time next year, we'll have a platform. It will be fantastic. It won't be the end product. But then again, we haven't got the end product with our Stockbroking business. I mean, Matt keeps investing, spending money on new apps. I mean, it's just an ongoing development program. But there's no reason why we will not be up and running within a year from now, but we're optimistic that it will be a lot, lot sooner. Now with regards to pricing, we agree with you. It's very, very expensive for Mom and Dad to invest their wealth, to invest in pensions, to do currency transactions, to buy foreign shares. It's that simple for us to look at that and actually undercut it. And we don't bother -- we're not going to replicate a service that's already out there. It's good for clients that we're bringing in this competition. We're aggressive. We've got cash. We're hard working. We believe in technology. We're going to disrupt, we're going to disrupt big time. And a big, big winner out of all of this will be the clients. Clients are investing money. Clients are investing for their children's future, investing in their pensions. We are going to drive down the cost of the investment community cost to invest. Dave will talk to you about social trading.

Yes. Martin, so as you obviously go through the year, there's various hypes, which draw both eyeballs and acquisition, be it cryptocurrencies or the main stocks or social trading. So you're always going to get these hypes. But like we've said before, we're a 30-year-old business with clean regulatory backgrounds. And so for us, we're not going to do something. We'll just start detrimenting our brand and put our clients at risk. There is a duty of care as a provider, and so what we choose to do is invest in technology, education and service. And so with that, obviously, you start to narrow your target market. And then the clients that we are onboarding, they're with us for circa 4 years on the leverage side. And then if you start going into a social trading element, you're going to start changing the characteristics of your client base. So not one for us at the moment.

I mean Tuna clients, generally -- and Dave is 100% right. Tuna clients basically don't want to trade cryptos, per se. They actually don't mind buying cryptos, but they're going to buy some cryptos and put it in their portfolio. It's a different mindset. It's a different target market. If our clients want to buy some of these stocks and stuff, they will, but they don't leverage up 50x and look to make their fortune out of trading cryptos. And there's no demand from Tuna clients to do copy trading. If they want to do copy trading, they can go somewhere else, but they won't do it with us. And it's not what they're demanding. If they seriously wanted it, we'd look at it. But it's not the mindset. It's not the same. If you want a McDonald's, you don't go into Harrods, do you?

This concludes our question-and-answer session. I will now hand back to Lord Cruddas for any closing remarks.

Well, just to say thank you, everybody, for tuning in today. It's been a stunning year. We've operated remotely. Our staff have all been paid in for. Salaries have been reviewed. We're looking forward to getting back into the office. We've got a lot on ground here. I am 100% committed to the business, looking to do another 10 years, health permitting. I'm not selling any shares. I haven't sold any shares since IPO, and I don't intend to. And the House of Lords is a great honor for me, but it won't interrupt or interfere with what we're doing here. It's -- that's a sort of I can read papers and stuff at weekend for the Lords and contribute just in the areas that I've got expertise. Very excited about this investment platform. We've been involved in this planning for a long time now. So hopefully, we'll be able to come back to you with a launch date at time we speak. But thanks for your interest, and have a nice day, and stay safe.

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect. Goodbye.