CMC Markets Plc (CMCX) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to CMC Markets plc Full Year Results. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Lord Cruddas, Chief Executive Officer, to open the presentation.

Thank you very much, and good morning, everybody, and thank you for joining our full year 2023 results presentation. So can we turn to Slide 3, please? Lots to get through. So -- is that Slide 3? That's Slide 3, isn't it? So before we go into the financials for the year, I want to first update you on our vision for CMC and also to update you on our recent developments and plans for the future. Just to step back quickly, we're investing hard in people, products and technology. Much of this heavy investment phase is now committed. And we are firmly on track to be able to deliver a very different proposition for our clients and business partners. Our vision is to create the best-in-class one-stop financial trading and investment services platform of the future. And in my position, as founder and largest shareholder, I'm convinced this will bring benefits to all of our clients and stakeholders. Slide 4, please. So -- right, okay. So Slide 4. So this CMC evolution has reached a pivot point. Over the past year, we've added an additional 28% to staff numbers, hiring the best talent from around the globe to facilitate the significant changes we're making to the business. And we are on track to deliver a broad financial services offering spanning the globe, and we have begun the process of centralizing all products, asset classes and services through a group-wide open API ecosystem. In full year 2023, we have closed gaps in our product suite and continue to develop our offering that will include smart order routing, algorithmic access, cash equities, listed futures, options, crypto, equity and debt capital markets, corporate brokering, ISAs, SIPPs, mutual funds, interest on deposit as well as world-class content, including ETF screening and analytical tools. Well, it's a lot we've done isn't it really? Yes, and very important, our new ecosystem. This is the open API ecosystem. We'll also host third-party products, and we believe this rep and level of flexibility will form the best-in-class B2B and D2C financial services platform on the market. Slide 5, please. So this is a little bit about the technology and open API. So key to delivering this expansion and this vision comes with our investment in technology. Our in-house technology is moving quickly to develop our group-wide open API ecosystem, combined with our cloud-first approach for all core products. This, together with enhanced connectivity will provide secure API access to all products and services within the CMC's ecosystem. Delivering on this will position CMC in being able to deliver the de facto one-stop investment platform of the future. Slide 6, please. So building on our record of forging B2B partnerships in our Australian business, we see the B2B expansion of CMC's business and diversification away from pure retail as a natural development for the group. The expansion of our U.K. and Singapore Invest platforms continues. Our Invest platforms open up significant opportunity over the longer term to increase the value of our relationships with clients and partners. In the same vein, we recognized substantial prospects in our institutional trading arm, where we are steadily expanding volumes as a nonbank liquidity provider and actively creating fresh trading partnerships worldwide. Looking ahead, we will continue to examine ways to expand our geographical reach as well as deliver new initiatives such as our options offering and our recent investment in Web 3 blockchain technology. So that's just a little paced, a little forward runner to what we've been doing and where we see ourselves. And what I'll do now is I'll hand over to Euan to crunch the numbers. Thank you, Euan.

Thank you, Peter. Good morning, everyone, and thank you, Peter, for the overview of the CMC vision and how our ongoing and new initiatives fit into that vision to deliver future value for our stakeholders. . Moving on to our FY '23 performance. I'll start with our group KPIs on Slide 8. The top left chart, excluding the pandemic affected 2021, net operating income was a record GBP 288 million. This was 2% higher than 2022 and 14% higher than FY '20 which was only impacted by the pandemic in Q4. Note that for context, we have added a 4-year view, so you can more easily see in one place our comparatives against pre-pandemic metrics. Next on the top right chart, the investing share of net revenue decreased to 14% with unfavorable market conditions in this business line, the main driver. Regarding future growth, given our geographic expansion and B2B prospects, we continue to have conviction that the share will grow over time, and therefore, we'll continue to disclose this revenue split. PBT was GBP 52 million, and PBT margin has reduced to 18%. PBT margin is suppressed given the ongoing heightened investment in technology and people as we develop new products and business lines in advance have been contributing material revenue. EPS was 14.7 pence for 2023. And given our 50% of profit after-tax dividend policy for the year, the total dividend per share is 7.4 pence, and the final dividend is 3.9 pence per share. Moving on to Slide 9. Let's look at the trading business KPIs first along the top. As you can see, active clients on the top left have reduced against the highs seen in 2021 and have reduced by 9% in 2023, but again, remain above pre-pandemic levels. Importantly, revenue per active client remains strong with an indication of the quality of the clients that we continue to attract and retain. We continue to focus on quality rather than quantity of clients and we do expect the falls in active clients to tail off this year. On the second graph, you will see here that gross client income has increased GBP 15 million or 5% against 2022. But from a revenue-generating perspective, this has been offset by lower client income retention. David will talk more about the drivers of this later in the presentation. Finally, on the trading KPIs, we have client money AUM. This provides a good barometer of the health of the leveraged business. This continues to remain strong and steady despite the reduction in active clients. Moving on to the investing KPIs. Given the nascent nature of the Invest U.K. platform, we are only showing the Invest Australia figures here. We plan to disclose more regarding Invest U.K. client numbers after we have a more complete product offering later in the year and increase our marketing spend. On the bottom left graph, you will see active clients, which have dropped year-on-year with market conditions not being conducive to share trading. They do, however, continue to be well above pre-pandemic levels. Net revenue suffered as a result, down 21%. For context, market volumes in Australia were down a similar amount year-on-year, illustrating the poorer revenue performance was market related. Moving on to the second graph, you will see a big shift back into B2C. As flagged in previous presentations, this is due to the successful migration of ANZ Bank clients before the year-end to becoming CMC clients. This is a massive exercise for this Invest Australia team. CMC now has direct access to this client base who benefit from access to a wider product offering. We're confident this direct access will benefit CMC when market conditions improve. Finally, assets under administration continue to remain strong. Moving on to the income statement on Slide 10. I've explained the investing in trading revenue performance against prior year comparative previously. Given the rapid increases in global interest rates during the course of the year, we have benefited from higher interest income, which rose to just under GBP 14 million. Given the FY '23 exit rate of monthly interest income, we expect this figure to roughly double in FY '24. I'll discuss the 26% increase in operating costs in the next slide. Note that we have disclosed the profitability of our trading and investing businesses at the bottom of the table. Note that Invest U.K. costs are included within our trading business, but will be split out for greater visibility in FY '24, they were approximately GBP 6 million in the year. Moving on to the operating expenses on Slide 11. For today's presentation, we've presented an alternative view of operating expenses growth by splitting between investment items and those related to inflation and expanding our operational capabilities. As you can see, the majority of the increase in costs is due to the acceleration of investment spend that we disclosed in our results last June. During the year, certain opportunities were expedited for developments, such as options for our B2C clients and cash equities for our institutional clients both of which are now nearing delivery. This contributed to an increase in our cost guidance during the year. To provide context to the scale of this change going on in the business and described earlier by Peter, you can see that headcount has risen by around 260 heads or 28% over 12 months. We now largely have the talents and resources in place that we need to support our expanded business lines. And secondly, we are in a position to deliver more quickly than ever before, with Peter, David and Matt, all describing some big projects that have been delivered in FY '23 and some due for delivery in FY '24. Within the investment figure, it should be noted that in opening the U.K. and Singapore Invest businesses, we are incurring additional costs in order to build the operational support and marketing of these activities. Let me now talk you through the liquidity and regulatory capital position as at March 31 on the next slide. First, you'll see our regulatory capital in the top table. The group's balance sheet and overall regulatory capital remains strong with a capital ratio of 369%. Our capital resources increased due to profit for the year more than offsetting interim and proposed dividends. Next, turning to liquidity in the bottom 3 tables. On the left-hand side, you will see total available liquidity has decreased during the year to GBP 414 million. Net available liquidity has also decreased now at GBP 234 million. The lower total available liquidity has been partially offset by lower blocked cash as there is no longer committed cash to the share buyback, which was completed in October 2022. And in addition to initial margin requirements at brokers have reduced due to the lower size of client equity positions. In addition to the slide that I usually present, I wanted to demonstrate how the cash position of the group has improved since IPO in 2016 to illustrate our financial strength and the platform this has given us and will continue to give us for future growth. You can see this on Slide 13. First thing that you can readily observe is that our overall liquidity has improved significantly over time while still paying dividends to our shareholders. Looking at the top blue part of the bar, you'll see the blocked cash has increased over time. Geographical diversification and growth have caused the rise with the main contributors being growth of the Australia Invest business as a result of the ANZ Bank white label agreement and consequent acquisition of that client base, the setup of our German subsidiary post the U.K.'s decision to leave the EU and also the setup of the Invest U.K. business. Secondly, you will see variability in our IM broker, the main liquidity consumer of the group. Finally, you will see we have classed as surplus-owned funds. This provides the group with the ability to invest in diversification with recent examples being the setup of Invest U.K. and Singapore and expansion of our Dubai subsidiary without taking on debt and secondly, it provides us with enough liquidity to endure our rigorous internal stress testing scenarios. So in summary, the group continues to be in a strong position to invest in our large and growing strategic projects whilst maintaining a buffer for the highs and lows in the broker margin requirements. Moving on to shareholder value on the next slide. As well as building for the future with our diversified growth prospects, we continue to provide good income for our investors. We have returned nearly GBP 220 million to our shareholders in the last 4 years and continue to pay out 50% of profit after tax. In summary, we have a great growth story whilst continuing to pay income to our shareholder base. I'll now move on to the financial outlook on Slide 15. Firstly, we will look at the cost outlook in a similar format to how I have addressed the cost increases in FY '23, a few slides earlier. I'll run through the outlook by splitting what we are casting as investment spend versus inflationary or other spend. I have already highlighted that we recruited heavily during FY '23 and as a result, our exit rate headcount was 28% higher than the FY '22 exit rate. For context, without any further headcount rises, the annualization of this exit rate alone would lead to an increase in cost of circa GBP 12 million. The ongoing investment spend, which includes most of the headcount increase for the year, will contribute GBP 15 million of additional costs. This includes additional marketing spend, mainly for the release of our Invest Singapore platform and other investment costs of GBP 5 million. Inflation and other cost increases are likely to contribute an increase of GBP 14 million, GBP 6 million of which related to pay rises across the group. Overall, this will lead to an increase in our operating expenses of roughly GBP 10 million -- 10% to the region of GBP 240 million. We're focusing on cost efficiencies in parallel with the implementation of our strategic initiatives and expect cost growth to moderate in FY '25. Now with the anticipated cost increases explain, let me summarize what this looks like the business performance in the short and medium term on the next slide. Firstly, looking at net operating income. Regarding the start to FY '24, we have experienced quiet market conditions in the first 2.5 months of the year in both the trading and the investing businesses with client activity down by around 15% to 20% versus expectations. This will impact Q1 net operating income. As explained through today's presentation, we have a solid platform for growth in both our existing trading and investing client base. Growth in the activity of this space, combined with new products and business lines starting to generate revenue mean we continue to have confidence in meeting our 3-year 30% net operating income growth objective. We also today extend our guidance for a further year to indicate sustained NOI growth post FY '25. With cost growth moderating due to the business already having most of the people in technology required to support new business activities in place. We expect PBT margin to improve in 2025. It should be noted that the effective tax rate will rise in FY '24 due to the change in U.K. corporation tax rate from 19% last year to 25% this year. ETR will likely be in the region of 26% to 27%. I'll now hand over to David.

Thank you, Euan, and good morning, everyone. Moving to Slide 18. I'd like to start by running through the results in the trading business to help provide some additional color around performance in the period. Looking at Slide 18, the table and chart show client income and net revenue by half year. The top line of the table shows the gross client income. And as a reminder, this is the spreads, financing and commission clients pay to trade. The gross client income for the year was GBP 303 million, up 5% against FY '22 and a record outside of the pandemic period. As stated at half year, the increase is primarily driven by an increase in our B2B client income, although it's also led to an increase in hedging costs as this type of flow requires enhanced utilization of automated algos to minimize the market impact and reduce the spread decay. As CMC continues to diversify its flow whilst also diversifying the products offered we would expect hedging costs to remain at the current run rate of circa GBP 20 million per half. This is dependent upon market activity. In terms of client income retention, this was lower in H2, primarily through the weaker returns from the FX asset class. However, it should be noted that performance can vary by asset class between periods. As we continue to enhance our FX spot products to entity clients, we would expect the blended client income retention rate to be in the range of 75% to 80% going forward. It's important to note, we are looking to obtain greater share of wallet through our enhanced product suite to our high net worth clients, whilst in parallel building out the best-in-class institutional offering, ensuring we offer all asset classes to those direct relationships, and we compete to win flow where we're the liquidity provider. Trading net revenue was marginally higher than FY '22 at GBP 233 million, but it's important to note again, the growing diversification in the revenue as we see a growing contribution from our Institutional division. Overall, this represents a strong performance outside of pandemic-related periods and we remain confident in our ability to deliver the product suite to service the growing demand across all channels. Moving to the next slide. The growth in B2B, I just mentioned, and been seen here when looking at the contribution splits. Not only have we successfully released our FX spot product during FY '23, we're also expanding our product suite for institutional B2B clients and adjusting our infrastructure, driving down latency, enhancing execution and the liquidity offering. Whilst B2B flow is typically lower margin due to narrow pricing and less predictable flow, the market opportunity is far higher. Adapting to this change in flow is a continuous learning process but sets us apart from our competition and enables us to compete in new segments of the market. We believe that building out the offering and adding further products will continue the revenue diversification for the group. Thank you all for your time. I'll now hand you over to Matt.

Thanks, Dave, and good morning, everyone. Today, I'm going to walk you through the performance of our CMC Invest Australia business. Starting with the full year '23 results and finishing with the strategic initiatives planned for FY '24. If I can focus your attention to Slide 21. FY '23, net operating income declined 9% year-on-year, coming in at GBP 44 million. While a small decline pleasingly, this remains 39% above pre-pandemic levels. Net revenue declined 21%, principally driven by macro factors with the highest inflation seen in 32 years which resulted in steep interest rate rises over the course of the year, dampening investor appetite to cash equities off the back of reduced disposable income. For context, the reduction seen in our domestic equity turnover was in line with direct competitors and compared favorably to our large direct competitor. The decline in net trading revenue was partially offset by higher interest income earned from client cash deposits, which was materially higher than prior year, up more than 600% and circa 15% of total revenue. Looking at the graph on the bottom left, the underlying health metrics of the business remain robust, with 217,000 active clients in FY '23 while this is a modest 12% decline from the prior year's pandemic record high, it remains 19% above pre-pandemic levels. Encouragingly, we've seen an uptick in Q4 active clients, up 4% from the third quarter. Client engagement across our platforms continues to track well with log-ins up 5% year-on-year. Mobile log-ins in particular, rose 15% year-on-year. These trends demonstrate clients are engaged and ready to trade at the right market opportunity. Also pleasingly, we've seen client acquisition trend higher in Q4, with these numbers coming in strongest of the financial year, which serves as a testament to our continued investment in technology to increase client engagement and acquisition. The continued strength and resilience of the business saw it contribute circa 14% of total group net revenue. Our position as the second largest retail stock broker and the largest provider of options to retail clients in Australia, combined with the breadth of features, functionality, industry-leading pricing and products we offer we believe continues to set us apart from our competitors. Externally, we've been recognized by Canstar as the Online Broker of the Year for a record, 13 consecutive years. Moving on to Slide 22. The graph provides a breakdown of the change in client assets we manage since we last reported at half year. We saw a small increase in overall...

Slide 22, can we just move to 22?

Can we just move to 22?

Yes, there it is.

We saw a small increase in overall assets under administration to AUD 73.2 billion, driven by marginal increases in asset prices, and partially offset by small net cash outflows, which was pleasing given the reduction in disposable income seen across the broader economy. At the half year presentation, I discussed a number of our initiatives, which I'll provide an update on now. Firstly, I'm pleased to announce that we have successfully concluded the acquisition of the ANZ share investing client base. The project completed in March with over 600,000 ANZ client accounts with an AUA value of AUD 37.6 billion migrated to the CMC retail business. Importantly, we now own the end-to-end communication with these clients and they enjoy access to the full CMC retail ecosystem, including significantly better pricing, our market-leading mobile app, creating strategies and education. During the period, we also rolled out our award-winning mobile app to more of our white label partners, including Tier 1 and Tier 2 banks. We're excited to share that we've achieved a 4.8 star rating in the app stores, the highest rated investment app in our sector. Throughout the course of the year, we've made significant progress on our strategic priorities, a number of which are set to launch in FY '24. These include a physical crypto investment offering, stock lending, which will directly add to the bottom line and the complete rewrite of our front-end web platform which will enhance usability and overall client experience and engagement, further complementing our market-leading mobile app user experience. Moving on to Slide 23. As flagged in H1, our geographical diversification has progressed with the expansion of Invest into Singapore, which was soft launched to staff in March and on track for a full retail launch in Q2. We're excited by this opportunity is it's not only limited to the Singapore market, but will serve as a launch pad into other markets across Southeast Asia which have a total addressable market of over 10 million investors. Finally, to recap on our Invest platform strategy. We've now successfully re-branded our Australian stockbroking business under the CMC Invest brand. This business already boasts AUA at AUD 73 billion and is firmly positioned as the region's second-largest stock broker and #1 retail options provider. Our launch of U.K. Invest continues to go from strength to strength. We now offer over 3,500 products, including flexible ISAs, ETFs and increased equity offering with SIPPs and mutual funds also expected to be rolled out in the coming months. We believe the U.K. is an incredibly attractive market with a total available market opportunity of nearly GBP 300 billion of assets under administration. As previously stated, we've also recently soft launched our CMC Invest Singapore venture, post getting all regulatory license last year and we'll be looking to fully launch the product over the summer. Looking forward, we're also exploring a New Zealand Invest offering in FY '25. These businesses mark a significant longer-term opportunity for us and will help drive our core diversification strategy over the coming years. I'll now hand you back to Peter.

Impressive, Matt. Thank you. Thanks, Matt. So let me now summarize. I think we're on to Slide 25 now, please. Let me now summarize some of the messages we've heard from the team today. That's it. Yes. So CMC is changing quickly. And we've been investing over the last past 2 years to reposition the group. We're now boasting a much stronger platform for growth than at any point in our history with a lot of new initiatives. One in particular, I'd like to highlight is our expansion into options. We're making significant investment in the development of our options offering. CMC is already #1 in exchange-traded options in Australia, and options have been the most requested product by our existing client base. Options trading growth represents the fastest-growing product in the marketplace. Average 2023 market volumes are 15x bigger than the volumes seen in 2010. More importantly, the vast majority of retail brokers offer institutional grade options to retail investors. We think that this is inadequate, and we see our offering as more relevant to the retail market. CMC will offer a pure OTC product that clients can fully customize to their requirements. And Phase 1 will consist of offering options products to the U.K. clients only with a targeted 20 -- September 2023 release. Phase 2 will be to expand our offering geographically building on the strong presence we already have in Australia, Singapore and Europe. Quite excited about options, I wanted to mention it today. Slide 26, please. Got a great options team, by the way. Premier League, these guys, we're going to do the price in ourselves internally and so on. Anyway, Slide 26. To summarize some of the recent achievements. So full year '23 was a record net operating income result outside of the pandemic period. We're continuing to invest, diversify and grow our business whilst maintaining a strong cash return focus to shareholders. Near GBP 220 million of cash has been returned to shareholders over the last 4 years. This equates to circa 45% of our current market capitalization. It's not bad actually if you hold the shares long enough, you'll get them for nothing. Won't you? If you think about that. Anyway, I digress. We continue to be a highly cash-generative business with overall liquidity whilst providing the platform to deliver new business expansions. Our institutional expansion is on track with a 95% growth rate in B2B volumes in '23. We've delivered the successful completion of ANZ share invest in migration and the expansion of Invest U.K. with SIPPs and mutual funds soon to follow. Can remember, a year ago, people were saying, well, why are you confident that you can launch this platform. Well there you go, we've launched it. Also, our strategic initiatives remain on track with the imminent release of investing a poll, options, cash equities onto all of our trading platforms, smart order routing, algorithmic execution, best-class thematic content and ETF analysis are also all to come. Technology upgrades, our open API infrastructure framework provides significant improvements to latency, connectivity, enhanced automation and analysis to drive the quality of execution for our clients, all aimed at driving our B2B growth. So final slide before we throw it open to questions and try to contain your excitement over what we've been doing here and what we've been achieving, 27 slide, please. As I know we struggle to contain our excitement at times, even Euan, won't you Euan. Yes, so Slide 27. As I said at the start of the presentation, CMC's evolution has reached a pivot point. And I really mean that there's been so much going on here. It is very exciting. And we're on track to create a best-in-class one-stop financial trading and investment services platform of the future. Our 3-year growth plan introduced last year to increase net operating income by 30% between '22 and '25 is on track. And additionally, the new initiatives we've spoken about today will sustain growth through to 2026 to drive net operating income up and above our current near-term goals. We've been investing heavily but we now expect operating expenditure growth to slow in coming years based on our current initiatives and investments as projects are delivered. This, combined with efficiency initiatives will enhance profitability and PBT margins in years to come. So that's it. Thank you all for your time today. And with that, I conclude today's presentation and pass this back to the operator for any questions. Thank you.

[Operator Instructions] We'll take our first question from Kim Bergoe of Numis.

I thought I'd get in earlier and just to ask a question slightly more longer term and about your investments. Clearly, you're making a lot of investments. But I'm sort of getting a little bit confused. So if you could talk a little bit about what the focus is. If I'm looking 3, 5 years ahead at CMC, what am I looking at? Is this a gambling revenue? Is it market access? What is it you talk about? New geographies, new products, new clients, B2C, C2C, or D2C. So I know it's a slightly open question, but how should I be thinking about CMC going forward? What sort of -- when you think about investments, what are the return hurdles? What -- how -- what's the narrative that ties it all together?

Kim, thanks for your question. It's Pete Cruddas to answer this one. So good question. Thank you. If you look at the journey of CMC and where we started, and our development of technology, which really transformed CMC from a boutique business into a worldwide player because of Internet, we're one of the first, if not the first, to have an Internet platform for buying and selling. And we had a 20-year period where we were really focusing on retail clients, they were trading, the markets were expanding, more people had access to the financial markets. But what we've seen in our Australian business, and have done a really great job there was we bought a stock broker and we found that there's a much bigger market, a much deeper pool to go into to expand our business. But the problem with investment type products is that they're quite slow to develop. You can build up a good reputation and you can make good money from B2C. But you need scale in these products like shares, for example, and the way you get scale is to expand your B2B offering. So where we want to end up in the next 3 years and just thinking of the U.K., and this would apply to most regions subject to sort of regulations is that we want to build the de facto financial portal that you go on to every morning and you can see everything that you need to see. For example, open banking, you can have your bank accounts on there. You can see your investments, you can see your tax returns, you can see your portfolios, you could be able to drag and drop portfolios from other people, we've developed something really exciting on our Invest platform where you can transfer your positions over quickly. You'll have multicurrency accounts, you can move currencies around. We don't want you to go on to any -- you can see your credit cards, debit cards, we don't want you to go anywhere else other than our financial portal, and we're going to keep investing in that. And we've got the infrastructure, we've proven that we can handle 1 million clients in our Australia business, and we're going to keep expanding. We primarily see our future in the investment space. It's a much bigger market, but we'll never neglect our roots, which was CFD. So -- and technology, providing technology to partners. We're already speaking in the U.K. to half a dozen potential white label partners. I hope that in a year's time, we would have made an announcement and have other parts on our platform. So roughly, that's it. I think anybody to add anything to that?

Yes. It's David here. The only other thing I would add is that when we're speaking to our institutional clients, our high net worth clients across the group, there's a couple of things that are sort of crying out in terms of the feedback. One was consolidation. Our clients are demanding consolidation of positions, accounts, et cetera, rather than funding numerous parties. So they're crying out for consolidation with CMC. You've got the breadth of products. Again, they don't want to be having shares on one platform, FX on another. So they want the full breadth of product with one provider, but also what's crying out is the robust technology. I think a lot of them have been counted in the past dealing with various firms, whereby technology has -- there's obviously been a lack of investments. So they're crying out for that robust technology that Pete has continued to echo through today.

I mean businesses die. Just to add to that, I mean, made great points, David. Businesses die if you do not invest. So whilst some of the market watchers will look at our numbers and say, "Oh, they're spending a lot of money." We often get asked, what are you going to do with your cash surplus? Well, there it is. We haven't made a big acquisition. We bought a stake in StrikeX which is Web 3. If you look at what we're doing, we're launching new products, getting new licenses, getting into new markets. We're paying a dividend. We're adding cash to our balance sheet. We're not incurring debt, and we're making profits. Profits are reduced because we're investing and you're seeing some tangible results of those investments with the way that Australia has now got 1 million clients, AUD 73 billion. Yes, we know we want to see an uptick in results in there. You've seen the launch of our U.K. Invest platform. We're building a B2B infrastructure. We hope to sign at least 1 B2B big -- B2B ANZ type client on that. Options is going to be absolutely phenomenal for us. And what we'll do with options? Now we've got the infrastructure, and we've got a Premier League team paying from Morgan Stanley. Is that we would then start to build structured products around our investment platform. So mom and dad can buy and sell products with capital guarantees. This is all high-level stuff for now. But you'll see a radical change in this business beginning to the investment space and the investment community because we don't think it's done very well. We're not going into this because we've got good technology. We're going into it because we think that the business models are too expensive. Just think about if you deal with some of the people in the investment space, the costs of foreign exchange, the cost of commission, the cost of managing your portfolios with them, the constant switching in and out of different currencies. We're going to give you currency -- multicurrency accounts, so you can hold U.S. dollars. So we think there's a massive opportunity, commercial opportunity, business opportunity and with our technology and our new API open ecosystem. What does that mean? It means we can launch things fast. Well, just think about it. In the last year, we've launched Invest U.K. We're launching Invest in Singapore. We're going to launch options in September. We're still paying a dividend. We're going to put physical shares on all of our platforms, our CFD platforms. I mean, it's just stuff off the top of my head.

Thanks, Peter. Thanks very much for your question, Kim. We've got some questions coming in from the web. Now I'll start with Stuart Duncan from Peel Hunt. We've got 3 questions. The first is for Dave. The second is for Matt and the third is for you and so for you, Dave, on hedging income retention. Can you give us a feel for which assets have higher and lower retention rates. For Matt, for you, on Invest Aus, can you give us a sense of the revenue model? Is this all transactional revenue? Or is there a base platform fee? And lastly, for Euan, Euan mentioned cost efficiencies. Could we take this as being a more moderate rate of growth? Or are there areas where you would still be able to reduce costs going forward? Start with Dave.

Yes, sure. Thank you. So when you look across the various asset classes, you've got things like equities, which have a more stable. Income retention given the margins that we see in the financing revenue and commissions. Then when you step across to other asset classes like indices, that's where we see most of our turnover. So that typically can have a higher income retention percentage as well as commodities. But like I was saying throughout is that it can change our asset class throughout the period based on the sort of market conditions, but that's probably where we're seeing it at the moment.

Thanks, Dave.

Matt, over to you.

I'll take the second question. Thanks, James. So I'll speak a bit broader than just the Invest AU business. I'll talk to the APAC business. Where we stand today, predominantly the revenue model for Invest AU is a transactional model. All the work that we've been doing this year and the year ahead is to move away from purely transactional to, I guess, a more annuity-style business with products and launches such as the stock lending, which will give that consistency in revenues moving forward. We're also exploring for our launch in Singapore, a subscription-based piece, which again will show those smooth revenues outside of purely transactional revenues. In terms of a platform fee, no, at this stage, we don't charge that and there's no immediate plans. Transparency in pricing is a big differentiator for CMC Invest. We think many of our competitors across the APAC region and beyond across Europe, are not transparent in their pricing model by having those hidden fees such as that. So at this stage, no plans for a platform fee per se. Over to you, Euan.

Thanks, Matt. And on the efficiencies point, I think there were kind of 2 things. When we were talking about cost increases moderating in the future, a lot of that is because of the great foundation that we now have in place around the number of staff that we've recruited in order to support that -- the operations of the new business lines going forward. So there's going to be a slower growth of headcount in this year ahead, where we're looking to reach more of a peak. When it comes to efficiencies as well, as we grow the business, we're looking constantly in areas of the operational parts of the business that we can automate and also utilize any technology usually from third-party suppliers to help us work more efficiently as well. So that's -- all of those initiatives are ongoing concurrently with all of the great strategic initiatives that Peter, David and Matt have been talking about.

Thanks very much, Euan, and thank you for your questions, Stuart. Let's move over to Ben Bathurst at RBC. 3 questions from Ben. The first for Dave, I think, first is in the trading business, is the stronger gross client income in Europe that's up 20% year-over-year, reflects on the fact you have a higher proportion of institutional revenue there. And should we expect that region to continue to see outsized growth looking forward as investment in institutional delivers returns? Dave, do you want to start with that one?

Yes, sure. So the growth that we're seeing in Europe. So this was institutional business that formerly contracted with the U.K. then post Brexit is now contracting with our GMBH entity. So it's been long-term relationships. It's not just one, it's a number of them. But this also goes back to my point about growing relationships and then through breadth of product and service. So we're seeing a good uptick there. Yes, I would like to continue to see growth in Europe. But like we keep saying throughout, you can have a plug what you've got today or you go out there with a full suite of products. So it's an area of focus, but that's the reason for the growth we've seen to date.

Thanks, Dave. I'll take the second question from Ben, you've noticed, we've made significant investment in the CMC Invest brand around the U.K. tax year. What sort of traction did you get in terms of that spend? And how did the number of users increase over March and April? You're absolutely right, Ben, we did pick up marketing to focus on the ISA season through that period. We did have some very good traction from the team. We haven't disclosed numbers yet on either client numbers or AUA, but the team has delivered some very good traction, obviously, with the rollout of SIPPs and mutual funds to come in the next few months, we expect that traction to continue. It rolls into your first question -- third question quite nicely, actually, I'll pass this over to Peter. Your last question is, are there any more developments with respect to B2B plans for U.K. Invest? Are you in discussions with any institutions at the moment? Or is it still too soon to be building a pipeline? Peter, over to you.

So the simple answer is, yes. As I said earlier, we are in discussions with some very large institutions and they're very early. I don't want to get people excited, but I'm excited by them because what we're seeing -- I mean I often sit and think about what's the best opportunity that CMC Markets has? There -- I don't know exactly because there's so many exciting things going on. But if I had to name 3 of them, one of those would be the U.K. Investment B2B space. It's very hard to get a white label for these major institutions that -- I mean, we had -- 1 company came to us and you will know them. And they said, we get clients come to us, they start saving with us for a pension when they're 25, 30. They save with us for 25 years, 30 years, they then take the cash lump sum out, buy an annuity. And then with the cash lump sum, they send it over to [ Hagerty's lands ] down for investing. Well, and then we lose the client after that because they bought their annuity and then they're investing with somewhere else. We would like to offer clients a platform so they can continue working with us. Now I don't know many companies in the U.K. that can offer what we offer, though I don't know any because generally, if you want to build a B2C or D2C client, direct-to-client client, you have to own your own technology. But we're offering major institutions a white label solution. And not only would we add the products that clients want, we can even add on to the platform, the white label partner's products as well clients can continue to buy and sell the partner products and also shares, cut we do the foreign exchange for them. We can add cryptos. We can add capital market products and so on. So I think a big opportunity -- and we saw this in Australia. We -- the B2C business where you go directly to clients, retail clients was really the sort of bait to bring in large institutions on the white label. And when you look at the $70-odd million under assets -- under administration, they're primarily through partnerships. Australia has the biggest partnership, white label partnerships in Australia. We are beginning to see the early signs of that. We love to do that business. We do it really well. We're not precious about owning our own technology, we'll license it or we will white label it to potential clients. And if we just sign 1 big client in the next year, that will move to dial a bit time. Very exciting.

Thanks very much, Peter. And Ben, thank you for your questions as well. I think that concludes our bank of questions today. I'd like to thank everybody for joining the CMC call. If you have any further questions, please don't hesitate to get in touch with myself or any other member of the team here. With that, I'll pass it back to the operator to close. Thank you.