CMC Markets PLC

LSE:CMCX

Earnings Call Analysis

CMC Sees Profit Dip Amidst Charged Environment

CMC Markets experienced a challenging half with net operating income down by 20% year-on-year to GBP 122.6 million due to subdued market conditions causing a decline in active clients and revenue per client. Trading revenue, making up 84% of the net mix, decreased by 32%, and investing net revenue fell by 20%. Rising interest rates partially subsidized these declines by boosting other income by GBP 14 million. Operating expenses rose by 15% to GBP 121.9 million, driven by increased staff and IT costs for strategic growth and an impairment charge of GBP 5.3 million. This led to a statutory loss before tax of GBP 2 million and loss per share of 0.8p, contrasting last year's 10.2p earnings per share. Despite tough conditions, CMC maintains a strong capital position and reiterates full-year guidance with anticipated net operating income between GBP 250 million to GBP 280 million.

CMC Markets Half Year 2024: Regional Expansion and Product Diversification Amidst Market Challenges

The CMC Markets' earnings call for the first half of 2024 highlighted the company's efforts to widen its geographical footprint and expand its client product offerings. A notable milestone was the launch of the CMC Invest platform in Singapore, door to a growing wealthy investor base and entry to Southeast Asia. In the Middle East, CMC has planted roots with a subsidiary in the Dubai International Finance Center to boost their B2B operations. On the product front, the UK saw cash equities being offered to four B2B clients, mutual funds being live on the Invest platform with Self-Invested Personal Pensions (SIPPs) and cryptocurrencies being traded in Australia. The second half promises further product expansions, which the management looks forward to discussing in the next full-year results update.

Financial Review: Net Operating Income Decline and Efforts to Sustain Strategic Investments

The business has been navigating a harsher economic landscape that affected client activity, reflected in a 20% dip in net operating income at GBP 122.6 million. Most revenues remained from trading, constituting around 84% of the income. An impairment charge of GBP 5.3 million within the Invest U.K. and cash equities business has also played a role. The company experienced a statutory pre-tax loss of GBP 2 million and a decrease in loss per share to 0.8p, from an earnings per share of 10.2p in the previous term. In light of muted market conditions, active clients have reduced by 7%, with trading revenue per client down approximately 27%. Despite these reductions, Client money or Assets Under Management (AUM) stayed relatively stable at just over GBP 501 million, signifying potential resilience amidst adversity.

Operational Hurdles and Resilience: Cost Increases and Robust Regulatory Capital

Operating expenses climbed 15% to GBP 121.9 million primarily due to augmented staff costs and IT investments, crucial for delivering CMC's strategic plan. The trading business in particular saw a 32% reduction in net revenue at GBP 87.4 million. On a brighter side, the balance sheet and regulatory capital, although slightly decreased, remained strong with a Common Equity Tier 1 (CET1) and total Operational Risk Requirement (OFR) ratio at 353.4 million and 360% respectively. Total available liquidity grew, primarily driven by a substantial rise in nonsegregated funds, with the available liquidity reaching GBP 237.2 million—comparable to the previous fiscal year's results after accounting for a dividend payout and elevated regulatory buffers.

Looking Forward: Stable Outlook Reaffirmed Despite Market Volatility

Despite the challenges faced in the first half of FY 2024, management stands firm on their financial outlook, expecting a net operating income between GBP 250 million to GBP 280 million. Operating costs, barring variable remuneration, are projected to align with a pre-disclosed GBP 240 million, while anticipating a 30% effective tax rate. This forward view represents a blend of cautious optimism held by CMC's leadership, acknowledging current testing conditions but also implying confidence in the strategic path they have set forth for the company.

Earnings Call Transcript 2024-Q2

[Peter Cruddas, executive]

Good morning, everybody, and thank you for joining CMC's Half Year 2024 Results Presentation. On the call today is the Deputy Chief Executive, Dave Fineberg, and our newly appointed Chief Financial Officer, Albert Soleiman; and Head of APAC and Canada, Matt Lewis. I will begin this morning's presentation with a brief overview of some of the operational and strategic successes from the half year before handing over to David, Albert and Matt, who will cover the financial and operational highlights in more detail and who will then also take any questions that you have.

So if we go to Slide 3, as a reminder, our vision for CMC is to create the best-in-class one-stop financial trading and investment services platform of the future. And you will see from today's update that we have made some great strides over the last half year, all of which we are very proud of. One area of particular focus has been diversifying our revenues across new geographies and markets. In September, Matt and I were in Singapore, where we successfully launched our CMC Invest platform. Singapore represents a great opportunity for us with an expanded investor base that is growing in wealth whilst also serving as a gateway to the wider Southeast Asia region. In addition, we also opened our Dubai subsidiary in the Dubai International Financial Center, where we are looking to expand our B2B offering. This regional hub provides us with a strong foothold in one of the most exciting financial centers in the world.

There have also been exciting developments in respect of our client product offering. U.K. cash equities have launched 4 B2B clients. Mutual funds are now live on the Invest platform with SIPPs to follow in the second half of the financial year. And crypto currencies are trading on our Invest platform in Australia. Further product upgrades are planned for the second half, and I look forward to sharing these with you at our full year results. And with that, I will hand over to Albert, who is going to run through the financials. Thank you.

[Albert Soleiman, executive]

Thank you, Peter, and good morning, everyone. I'm delighted to be here for the first set of results as CFO of CMC Markets. I've been with the business for some time and only a few weeks as CFO. And this is the most I've been excited about our prospects and the opportunities that lay ahead for the business.

I'd like to begin by turning to Slide 5, which looks at our key performance indicators for the group. It goes without saying that the external market conditions have been challenging and the first 6 months of the year being categorized by subdued market volatility and client trading volumes. This has resulted in a decline in net operating income of GBP 122.6 million, which is down 20% compared to the same period last year, with decreases in both trading and investing revenue being partially offset by an increased interest income.

Our net revenue mix has remained broadly consistent with levels seen through 2023, with trading revenue continuing to account for the majority of our income at approximately 84%. Our statutory loss before tax was GBP 2 million, which is a reflection of the decline in net operating income, higher operating expenses as the group continues to invest in strategic growth plans as well as the impairment charge of GBP 5.3 million, which has been taken within the Invest U.K. and cash equities business. Reflecting the statutory loss, our loss per share for the half year was 0.8p compared to earnings per share of 10.2p for the same period last year.

Turning now to look at our key performance indicators across our trading business and investing businesses on Slide 6. In the period, we saw a reduction in both active clients and revenue per client within the trading business largely as a result of the market conditions, which have presented fewer opportunities for clients to trade. Active clients reduced by circa 7% when compared to H1 of last year, with revenue per client decreasing by around 27%. Client money or AUM remained broadly consistent with H1 '23 number at just over GBP 501 million. With regard to the investing business, active clients demonstrated a broadly similar decrease to our trading business and were down 8%. As we outlined in the prior financial year and as visible in the middle chart, the shift in the client mix driven by the migration of the ANZ investing client base to CMC Markets. Assets under administration within the investing businesses were down marginally on the same period last year at GBP 37.7 billion.

Moving on to the income statement on Slide 7. As I already mentioned, uncertainty around the global economic outlook, inflationary pressures and the higher interest rate environment have resulted in lower client activity. These have combined to weaken our financial performance. And as a result, our trading net revenue came in at GBP 87.4 million, down 32% year-on-year, and our investing net revenue was down -- was GBP 16.7 million, down 20% year-on-year. Other income increased approximately GBP 14 million, which is attributable to the higher interest rate environment that I mentioned earlier.

In terms of costs, I will look at these in more detail in a couple of slides. However, our headline cost figure increased by approximately 15% to GBP 121.9 million, driven mainly by an increase in staff costs and IT to support the delivery of our strategic plan as well as the impairment charge I referenced earlier. Our loss before tax was GBP 2 million, reflective of the tougher external environment. and continued investment in operational delivery.

Turning now to our trading business on Slide 8. The top line of the table shows gross trading client income, which, as a reminder, is the spreads, financing and commissions clients pay to trade. Gross client income for the half was GBP 132.6 million, which is down 14% when compared to H1 of last year and is reflective of the lower market volatility and client trading activity but also reflects a strong prior year comparative of H1 '23, including periods of much higher volatility, mainly centered around geopolitical conflicts and sterling weakness.

You will notice that client income retention has dropped to 66% with risk management losses of GBP 16.9 million following unfavorable performance of our strategic hedges on certain asset classes and significant flows seen from larger institutional clients. Overall, and as a result of the factors I've just spoken to, the trading business was down 32% on the same period last year. Whilst the financial performance has been weaker than we had expected, our strategic investment in our trading and investing platforms has continued, and Dave is going to talk through some of the operational highlights and our future growth plans a little later on.

Turning now to costs on Slide 9. Operating expenses, excluding variable remuneration, increased by around 15% to GBP 121.9 million in the first half. The bulk of this was driven by an increase in staff costs, which were up GBP 12.6 million, and roughly half of this increase is attributable to the annualization of hires made in the prior year and inflation-related salary increases. These higher staff costs are reflective of the significant investment we've made in strategic projects as we've continued to improve our technological and product offering for clients and look to position the business for future growth. As I mentioned earlier, we are taking an impairment charge of GBP 5.3 million within the Invest U.K. and cash equities business as we reduce the asset carrying value due to operational delays and a longer time horizon to profitability. Premises costs increased by GBP 1.3 million, primarily driven by new leases to drive expansion in key regions, high utility costs as a result of the global energy crisis and a change in accounting treatment of rates within U.K. properties.

Regulatory fees decreased by GBP 4.7 million, largely as a result of the lower FSCS levy in the current year. Costs remain a key focus for myself and the management team. We are today reiterating our guidance for the full year of operating costs of GBP 240 million, excluding variable remuneration, and as we continue to review our operating model and cost structures to drive efficiencies across our business.

I would like to turn now to our liquidity and regulatory capital on Slide 10. The group's balance sheet and overall regulatory capital remains strong. Our CET1 and total OFR ratio have seen small declines, but remained robust at GBP 353.4 million and 360%, respectively, and reflect the strong levels of capital resources that exist within business. Our total available liquidity increased to GBP 435.6 million However, this is mainly driven by a sizable increase in nonsegregated funds, which is offset by a decline in own funds driven by the payment of the 2023 final dividend and movements in working capital. Our block cash has increased marginally within the half year, largely as a result of the capital injections in Dubai and Invest U.K. And as a reminder, this is cash we need to maintain within the business, support regulatory and overseas subsidiary operational requirements.

Margin requirements with brokers also increased in the half year by just under GBP 17 million, reflecting our risk management position at period end. The net result is available liquidity of GBP 237.2 million which is broadly in line with our FY '23 result as cash generated by the business has been offset by increase in regulatory buffers and margin requirements.

Finally, turning to the financial outlook on Slide 11. Our financial outlook for the remainder of the year is unchanged. We continue to expect net operating income of between GBP 250 million to GBP 280 million. Operating costs, excluding variable remuneration, are expected to be in line with our guided figure of GBP 240 million, and we are forecasting an effective tax rate of 30%. On NOI, the first half has been characterized by lower client activity across both the trading and investing businesses and these subdued conditions have continued in the second half. Nevertheless, management remain confident in meeting expectations for the remainder of the year and over the medium term, the delivery of new initiatives remains on track, and we expect to deliver net operating income in full year 2025, in line with market consensus based on more normalized trading conditions.

In terms of costs, operating expenses are naturally expected to slow as projects are delivered and we pass the peak of the investment cycle. Whilst our strategic delivery has also opened up increasing opportunities to rationalize our cost base and deliver operational synergies across multiple product and business lines as we move through the second half. We continue to review our operating model and cost structures to drive efficiencies and a further update will be provided to the market at our full year results.

Whilst this has been a challenging start to the year for the group, I am confident that the investments we've made and the strategic milestones reached in the first half place the business on firm footing to capture the long-term growth opportunity.

And with that, I would like to hand over to Matt, who's going to talk you through some of the work he and the team are doing in the Invest business.

[Matthew Lewis, executive]

Thank you, Albert, and good morning, everyone. Today, I'm going to walk you through the performance of our CMC Invest Australia business. Starting with our results for the first half and concluding with the strategic initiatives we will be delivering in H2.

If I can focus your attention to Slide 13. First half net operating income declined 2% or GBP 500,000 year-on-year, coming in at GBP 22.1 million actual underlying performance in local currency grew 7% or GBP 1.5 million year-on-year. This was unfortunately offset by a negative GBP 2 million on group consolidation due to unfavorable currency movement during the period. The growth in underlying performance in local currency was driven by an increase in interest income rising 247% or GBP 3.8 million year-on-year, partially offset by a 12% or GBP 2.3 million reduction in net revenue.

The reduction in net revenue was due to a 24% decline in domestic turnover. This is consistent to the decline seen in total market and is reflective of interest rate adjustments made by the Australian Central Bank, which has seen 13 increases at record pace over the past 18 months. Pleasingly, despite the macro headwinds, our market share has been maintained against our direct competitors during the period with CMC remaining the #2 retail broker in Australia. Furthermore, our strategic initiative to boost our international offering has paid off with foreign exchange revenue from international trading, up 34% year-on-year.

Moving on to Slide 14. The underlying health of the business remains robust with 152,000 active clients in the first half, as shown in the chart on the left-hand side. While this does represent a modest 8% decline against the first half of the prior year, it is stable on our FY '23 closing figure. Our ability to attract new customers remains strong with over 30,000 new accounts opened in the period. The graph on the right-hand side provides a breakdown of the change in client assets we manage over the past 12 months. Positively, it has remained stable at AUD 71.5 billion despite previously mentioned market impacts. The continued strength and resilience of the Invest Australia business saw it contribute circa 18% of total group net operating income.

Moving on to Slide 15. I'll now give an update on progress of the strategic initiatives of the Invest business. Following the successful integration of ANZ clients earlier in the calendar year, we now have direct access to over 1 million client accounts who we can engage and educate with timely market updates and investing trends. Our customers have access to award -- to our award-winning trading and mobile platforms, where they can trade equities and options in 16 global markets. A pleasing trend we are seeing is an increase in proportion of trades executed over mobile, demonstrating the success of this platform in supporting our clients in making investment decisions anytime, anywhere. Recent enhancements to the platform include new research tools and the introduction of thematic investing, enabling investors to quickly identify companies that are key players in sectors such as renewable energy, automation and robotics.

Off the back of significant investor interest, our product offering recently expanded to include physical crypto currencies. Our solution is designed with a regulatory first approach providing a trusted trading environment that is well positioned for proposed licensing requirements scheduled towards the end of next year and mitigates the risks and challenges associated with offshore trading platforms. As the first mainstream broker to offer physical crypto within the 1 platform, our clients can now safely and conveniently buy, hold and sell a list of 7 leading crypto currencies including Bitcoin and Ethereum within our closed loop solution.

In H2, we look forward to introducing stock lending on international securities, which will generate a new revenue stream for our business and importantly, also for our clients. This will increase the attractiveness of our international offering given the ability to earn passive income on any holdings.

On the regional expansion front, I'm pleased to confirm the successful launch of Invest Singapore in September 2023. Customers have the ability to trade in 15 global equity markets initially with more to follow shortly. We offer radical price transparency, a value proposition that is rare in the local market. Singapore is an attractive market with an expanding investor base that is growing in wealth, which importantly will also serve as a gateway to the wider Southeast Asia region with a total addressable market size of over 10 million equity investors.

With the continued evolution of our product and technology and targeted expansion in the region, we are excited for the future of the business. And for the unrivaled client experience, we continue to deliver.

I will now hand you over to David to cover our strategic and operational updates.

[David Fineberg, executive]

Thanks, Matt. I'm now going to take you through some of the strategic and operational success from the half year in a bit more detail as well as look forward to what is to come in H2 and beyond. Turning to the next slide. Whilst the external market environment has presented its challenges, our targeted investment in geographic expansion continues to diversify our revenue streams and advance our B2B and B2C capabilities to take greater share of wallet. We remain convinced this is the right strategy for the group but recognize this has been a difficult first half. Matt has already talked you through the successful launch of our CMC Invest Singapore platform, and as Peter mentioned at the top of the presentation, we have also enhanced our presence in the Middle East with the expansion of our Dubai office. We're enhancing our service for institutional clients with new product offerings.

In terms of products, mutual funds are being launched on our Invest U.K. platform and cash equities will be available for trading for our B2B clients. Looking forward to the second half of the year. On the product side, OTC options are due for rollout in H2 in the U.K. and SIPPs are due to launch in the Invest U.K. Whilst finally, we are continuing to boost our B2B offering to capture what we see as a big opportunity for the business within the FX market. And this is something I'll speak to in a bit more detail in a couple of slides' time. As you can see, it has clearly been a busy 6 months for the business in terms of strategic and operational delivery and the second half looks set to be the same.

I'd now like to take you to the next slide, where I'll look at some of the technological functionality and how we are leveraging our capabilities and learnings throughout the business. Our core competitive advantage is our technology. Over recent years, we have been making significant investments in our technological and open API infrastructure, all of which will help provide us with the platform for future growth and business expansion. However, while some of these benefits of the investments are easily observable, there are less obvious benefits in being able to leverage our technology capabilities across different areas of the business. This is particularly the case when it comes to our B2B expansion where our own Invest platform technology is being leveraged in support of our institutional proposition and drive future growth diversification. Our technological investments are designed to deliver a unified and publicly accessible API across all of our next-gen supportive products, accounts and customer types used both by CMC's internal platforms, but also our B2B platform integrations.

It is our intention over time that our API infrastructure will cover the full end-to-end customer life cycle from onboarding and funding to account management and customer reporting. This will result in a much improved B2C customer journey. However, the B2B business will also benefit from improved understanding of the build process and our adaptability of internal technology improving our velocity of development on the B2B side. In addition, cash equity and option products internally at CMC are already benefiting from the API layer as a single source of calculations and the removal of the complexity of integrating various premises services and individual requirements. Our technological capabilities and the integration of this technology across the business are both constantly improving, and I speak for all of the management team when I'm saying I'm really excited by some of the opportunities our investment in this space has opened up.

Indeed, one of those areas that we see as a big opportunity is within FX, and I would like to look at that in more detail on the next slide. B2B continues to be an important area of focus for CMC and one where we see great opportunity. Our client base of mid-market firms who are underserved by Tier 1 banks provides greater diversification of revenues as we leverage our strong tech capabilities, the developer business line offers a key differential when compared to peers.

As a nonbank liquidity provider and a sizable FX spot market, we continue to advance our capabilities with the LumeFX connectivity platform going live in H1 driving scalability of pricing and execution. Further optimization of our FX product, connecting more execution venues, ECNs and client types are planned for the second half. More broadly, within the B2B business, we have launched our institutional grade cash equity platform and API for U.K. clients. And in H2, we will be launching further global exchanges for cash equities as well as developing a Futures & Options platform for both exchange and OTC-based execution. We look forward to updating you more on these exciting developments as we go into 2024.

Turning now to the outlook. As we look at the year ahead, the business is well positioned with diversified revenue streams from our 3 core business divisions. Our strategic investment in our technology, geographic expansion and client capabilities has been significant, and this enhanced and diverse offering will be critical in generating value for the business over time. As Albert mentioned, with the strong progress we've made on our strategic initiatives and with major projects coming online and others soon to follow, this means that we've reached a peak in our investment cycle and are now in a position to rationalize our products and drive operational synergies. I'm very excited about the future of the company and the opportunities our diversification strategy has opened upwards in many parts of the world. Thank you for your time today. We will now open the lines for Q&A.

[Operator]

[Operator Instructions] We have our first question from Vivek Raja at Shore Capital.

[Vivek Raja, analyst]

Can you hear me?

[Peter Cruddas, executive]

Yes.

[Vivek Raja, analyst]

Okay. All right. Great. I had a couple of questions, please. The first one is on costs. So your GBP 250 million guidance, excluding variable for the current year. Can you just give us a sense of, if you can, how much of that is project cost, which could fall away once you reach the peak of your investment cycle, as you have highlighted in the update today?

The next thing I wanted to know, please, could you just remind us what you've said at the full year stage on interest income guidance? And then the last thing I wanted to ask you was you previously guided on client income retention, which I appreciate is not appropriate in light of the sort of institutional flow that you're seeing. But can you just help us think about what you could get to in terms of client income retention for the trading business once you've kind of optimized your risk management framework because I can see from your disclosure that hedging costs have gone up but also, so has the client P&L. So just what is this a sustainable conversion of gross client income with institutional flow in your trading business over time?

[Peter Cruddas, executive]

Yes, no problem. So on the cost side, Vivek, I mean, we don't directly split costs that way. But what I would say is obviously, as you invest, not all your investments are capitalized. So as that tails off, the OpEx side of it begins to tail off at the same rate. So by reaching that peak investment cycle, and again, I stress that the peak investment is not the end of investment. It's just the amount that -- the proportion that we will be investing going forward would be scaled back, and that's where we see that begin to really have a positive impact on the cost line.

The other aspect to that is the synergies that we can achieve across the different businesses and products that we bring online in terms of, as a specific example, the operating cost of each of those businesses, we see opportunity there to get synergies and achieve that across the operational framework. Some work has already begun on that.

And as I say, as we go into the second half, we'll be looking for more specific plans and targets for the cost line. On interest guidance, the current environment of higher interest rates has really given us a tailwind in terms of the optimization of our cash position and our ability to generate meaningful returns on that, and we expect that to continue in the second half.

[David Fineberg, executive]

Vivek, it's David here. So on your client income question, regarding the 60%, yes, obviously, it's lower than what we previously alluded to as we diversify the flows of the business. But obviously, that in respect of the market conditions we are seeing through the first half, particularly Q2, as we look forward, we would probably expect that to be in the range of sort of 70% to 75%. That's obviously when -- in like more normalized conditions. So that's probably the range you're looking at.

[Vivek Raja, analyst]

That's really helpful. Albert, just to follow up on the interest income. I was just asking what you said because I think you alluded to your guidance that you provided in the previous full year results. So just wondered if you could just repeat that, please, for me.

[Albert Soleiman, executive]

Yes. I mean not awful lot on what I was saying earlier, Vivek, to be honest. I think the higher interest environment and our focus on optimization of our cash balances gives us confidence that we'll be able to sustain that rate of income into the second half. I mean, we're quite proactive, especially with our own cash management in terms of optimizing that flow. And again, that's reflected in the level of income we've generated to date.

[Operator]

Our next question is from Kim Bergoe at Deutsche Numis.

[Kim Bergoe, analyst]

Two questions -- a couple of questions, actually, if I may. One is on the cost, I mean, you said that you reached sort of peak investment. And I'm thinking -- so you said GBP 240 million sort of excluding revenue or variable remuneration for the full year, GBP 229.9 million, including GBP 5.3 million impairment. Well, what should we sort of expect for the second half of the year? That's, I guess, is my question, if you said that the investments have peaked.

My second question is a bit, I guess, wider in terms of with the investments that you've made in the platform and additional functionality in the platform and the products, I'm trying to sort of get a sense of what kind of, obviously, market conditions -- depending, but what kind of sort of revenue and what kind of cost will it take to run the CMC business just to get an idea of where when everything sort of settles down a bit, where are we in terms of what can this platform generate.

And that brings me to my third and final question is, trying to sort of get an idea of the cash position that you've got. Obviously, some of that is for regulatory purposes, some of it for margin calls and these kind of things. But how much sort of broadly speaking, how much cash -- sort of excess cash have you got sitting there that could be distributed without impairing the actual underlying business?

[Albert Soleiman, executive]

Okay. I'll have a go at addressing all those. So in terms of the cost, so by maintaining the cost guidance of GBP 240 million for the full year, that reflects our confidence and focus on being able to achieve some of those synergies I mentioned earlier. You will notice that we took an impairment charge. That impairment charge didn't directly result in a higher guidance on costs. And that's really twofold. One is to say we're focused on cost as of now. So where we see opportunities to make savings, to achieve synergies, we're taking them as we speak. A more thorough review is planned for the second half, and that's when we have specifics around that, what that looks like, we'll share those, but we are taking a very proactive approach to costs.

In terms of the additional functionality, if I can try to remember your question, the products that we're releasing have really 2 aspects to them. One is that they're available for our retail clients. And again, it seems the investments is a really good example where we're focused on delivering the D2C platform. But the architecture that we build these products upon enables our B2B and institutional solution. So it's a 2-tiered approach. It leverages off our scale, it leverages off our customer base, and we think we can deliver an excellent retail solution and that really educates and informs our B2B offering that we can then build and target that market.

On the cash position, so we reported own cash of circa GBP 270-odd million and again, that's -- that includes some of those regulatory amount blocked for regulatory and capital requirements. And as I mentioned earlier, we have a healthy surplus on that and that gives us the confidence to be able to operate and expand the business.

[Operator]

[Operator Instructions] Our next question is from Ben Bathurst at RBC.

[Benjamin Bathurst, analyst]

I've got questions in 3 areas, if I may. Starting with the impairments. Could you just confirm what the level of remaining intangible assets are in the investing business? And how often will you review that for impairment? So is there any potential for more charges in the second half? That's the first area.

Then secondly, on CMC Invest, when exactly do you expect to have SIPPs available online in the U.K.? And how would you be treating client cash on the platform? Would you be returning that mostly back to clients or retaining any elements of it seems to be an area of interest at the moment across the sector?

And then the final area is on the dividend. Obviously, the interim EPS of 1p, do you plan to stay strictly to the 50% payout of EPS on the full year basis once profit comes back? Or could it be that we end up with a slightly higher payout for FY '24, if you were to say, repeat the interim dividend for the final?

[Peter Cruddas, executive]

Well, let me start with the dividends. Obviously, reporting the first half loss and paying a dividend reflects our confidence in the underlying business and the strength of the balance sheet. The dividend policy hasn't changed. That dividend -- the interim dividend is based on our full year profitability forecast, and we are sticking to that 50% dividend payout.

In terms of SIPPS, SIPPS are very close. We're expecting release to the wider market before the end of this calendar year. So that's on track.

The question on impairment. Obviously, impairment is an accounting process where we look at the timing of the expected cash flows. That's what's resulted in that GBP 5.3 million charge and in terms of the carrying value of the asset going forward for invest and cash equities, the remaining amount is GBP 9.7 million.

You asked the question also on client cash. So our -- on the trading platform, our AUA of just over GBP 501 million is still very much at elevated levels. We see that as a sign of client commitment to the product and to their trading activities. And we expect that once there's more trading opportunities for clients, clients will then put that money to work. So we haven't seen a significant drawdown of that cash. We are sharing some of the interest income we're earning with clients. So there's a little incentive there for their cash to stay while they wait for those trading opportunities. And I hope with that, I've answered all your questions.

[Benjamin Bathurst, analyst]

Yes. The only one follow-up I had was around the treatment of client cash on the CMC Invest platform actually.

[Peter Cruddas, executive]

When you say treatment, can you be more specific?

[Benjamin Bathurst, analyst]

Just whether or not you will be retaining any element of the interest generated on client cash on CMC Invest or whether or not you'd be returning...

[Peter Cruddas, executive]

Yes. Sorry, I now understood that. So similar thought I said on the trading business. So on the Invest platform, we share the interest income with clients, and we've taken a very simplified approach where we pay the same level of interest for cash holdings across the platform across all 3 account types.

[Operator]

[Operator Instructions] At the moment, we have no more live questions, so I will hand back to the management team to read out any written questions. Thank you.

[Peter Cruddas, executive]

Yes. We have a couple of questions that have come through the chat. So the first one comes from Stuart Duncan at Peel Hunt, and he asks, you mentioned Dubai. I wondered if you could give us a sense of how big the opportunity is there. And then he follows that up with the outlook and asks regarding the outlook, you said H2 has started in a very similar vein to H1. Has there been any sign of improvement in the last week or 2 around the inflation renews and equity market recovery?

[David Fineberg, executive]

Sure. So I'll take these. Regarding Dubai, obviously, we're not specific regarding the target itself because we're going in there of the B2B opportunity. But when you look across the regions, I think Dubai is showing the most accelerated growth geographically, excited opportunity, very mature, akin to the products we offer. So that's why we're excited about the opportunity.

Regarding the conditions, obviously, early days. In the last couple of weeks, yes, we have seen increased data ranges in particular, to things like indices, et cetera. But that's only, as you said in the last week or so. So that's why it's still early days in terms of the market conditions changing.

[Peter Cruddas, executive]

We have another question that has come through the chat. So this has come from Adrian Wright, and he asks, will the business expand the number of U.K. shares offered on the U.K. investment platform? And will this include AUM stocks?

[David Fineberg, executive]

Okay. Great. Thank you for the question. So we're always looking to expand the offering on Invest and our newer cash equities businesses. Specifically on U.K. stocks, yes -- the direct answer is, yes, we are looking to expand that. We're pushing -- we do have some in stocks on there. At the moment, we're hoping to increase that offering in the near future and pushing down to less liquid assets as well as other markets that will come online in the second half.

[Peter Cruddas, executive]

We have no more questions on the chat, so I can hand it back to the operator.

[Operator]

Yes, we have one further question from Portia Patel at Canaccord.

[Portia Patel, analyst]

Can you hear me? Oh, great...

[Peter Cruddas, executive]

Yes, go ahead, Portia, we can hear you.

[Portia Patel, analyst]

Yes, sorry just one quick -- just one quick question. With respect to the GBP 16.9 million of risk management gains and losses, can you just help us understand how that's split between client P&L and hedging P&L, please?

[David Fineberg, executive]

We don't actually provide that split. So we haven't got that -- we're not disclosing that one at the moment. But I don't think when you look at the trend historically, there's -- obviously, there's been some degree of risk management losses, but it's not out of line of expectation.

[Portia Patel, analyst]

Okay. And any kind of color on what that has been historically? I can't remember what you did use to disclose. Just an indication would be useful.

[Peter Cruddas, executive]

Yes, I think in the prior half, I think it's GBP 11 million. If you look back at sort of H2 last year, that was around GBP 11 million. And in prior years, it's been around sort of the GBP 9 million, GBP 10 million mark.

[Operator]

There are no further questions on the conference line. I will now hand back to the management team for closing remarks.

[Peter Cruddas, executive]

Thank you very much. I just wanted to -- yes. So I just wanted to say thank you for everyone for attending today's call, and hope you enjoy the rest of your day.

[David Fineberg, executive]

Thank you all.

[Peter Cruddas, executive]

Thank you.