CFO Series: Euan Marshall – CMC Markets

2020 has been a tempestuous year for the world economy. I spoke to Euan Marshall, CFO of CMC Markets, to hear how the business have navigated the COVID landscape and their plans for the future.

Hi Euan, what is your role with CMC Markets and what does the company do?

“I’m the Chief Financial Officer at CMC Markets. I’ve been in this role for just over a year now and I’ve been at the company for around nine years.

“We’re a listed FTSE 250 company, offering an online global technology platform to retail and institutional clients which allows them to trade on the financial markets. The main products we offer are derivative products called ‘Contracts for Difference’ and we also have a stockbroking business in Australia. We operate in 13 offices across the world. In the last financial year, we had over 50,000 clients, and we have over 800 employees globally. Our main hubs are in London and Sydney, where the majority of those 800 staff sit.”

How did you manage the immediate impact of the UK lockdown in March?

“On seeing similar lockdowns being imposed in Europe and further afield, we were slowly testing our large-scale remote working capabilities. As lockdown commenced, we were able to move 100% of our staff into remote working, which was brilliant news. Thanks to our infrastructure capability, we were able to move absolutely everything, including our dealing function which doesn’t naturally lend itself to remote working.

“Our clients are really important to us, so we had to make sure that we were able to service them and, given that we offer a remote platform, ensure that their experience remained seamless no matter where our support functions were housed.

“I’m also happy to report that despite the increased amount of market volatility and activity, client interest in our product actually increased, and although there was a strain on client onboarding, this didn’t impact our clients. We had a resilient platform with the same uptime as in normal times, despite the very high spike in trading volumes (particularly between March-April).”

What were the financial steps you took to mitigate the risks of COVID and a prolonged lockdown?

“The company has always had a very strong balance sheet and liquidity position, so we had a good foundation when it came to financial safeguarding around the COVID period. We were actually seeing increases in revenue, profitability and cash flow as a result of the pandemic, so there was no need for us to access government schemes like the furlough scheme – all our staff were able to remain on the payroll, be paid in full, and work effectively.

“So, rather than focussing on safeguarding the company, our main focus shifted to ensuring that we maintained our control and oversight, because remote working changes interactions between teams and how we ensure we’re doing everything we need to do from a governance perspective. Another big focus was how we could remain (or become more) productive and collaborative in this new environment. We discussed investment in all sorts of productivity factors, like expediting the rollout of better kit and how that impacts our financials, and we’ve also been engaging with our staff around what tools we could be implementing to improve our collaboration.

“We pride ourselves on our client service – even though we are an online provider, we absolutely appreciate that people occasionally want to have that human interaction as well, so we have been continually making sure that as the business grows, we have the right level of human interaction as and when they require it.”

How close were you to the original 2020 budget?

“We’ve had to give regular updates to the market around our performance, more from the upside risk perspective – our financial year ends at the end of March, so we reported our full year results in June and we’ve just released our half year results. In our Q1 trading update in July, we reported having already exceeded more than double the revenue that we’d been seeing in the same period in the prior year, so all positive from that perspective.”

“Increased market activity was also a big call to action for our existing clients. We’ve seen a lot of dormant clients who have seen the opportunity to trade again, and also a big wave of new clients who previously were not active in the financial markets. We’ve seen a big uptick in trading activity that’s fed through to revenue. Given that we’re an online platform, a lot of that additional revenue has fed straight into the bottom line.

How have you handled being as busy as you have been?

“We’ve really upped our investment in technology. A lot of the time, people see this investment as focusing on front end client experience and product development, but it also covers the resilience of our trading platforms; the infrastructure, pricing and execution that’s available to our clients across our products. That’s always been a big foundation for us, and we’ve subsequently seen that the resilience has been excellent during this period. Whether existing or new, all our clients have been able to trade throughout, which is great for all parties.”

With increasing investment in technology, how have you found hiring this year?

“We’ve always had a lot of ambition to continue to invest in technology, particularly from a product perspective and our client offering. As such, we’ve been seizing the opportunity of our increased revenue and cash flow to invest more in hiring personnel, allowing us to expedite the delivery of our technology initatives.

“Our ability to hire in the currrent market has varied depending on roles, however there is a lot of talent out there. The challenge comes with onboarding people from home, especially around training, collaboration and meeting the right people – that’s added an additional dimension to the complications during this period. But we’ve done well and we’re still trying to maintain a good culture, even though not everyone’s in the office.”

With your strong uptick in trading volumes over lockdown, how are you approaching budgeting and forecasting for 2021? Are you forecasting a gradual reduction in trading volumes when people return to the office?

“The big question for both us and our analysts is around whether the new ‘COVID cohort’ of clients will be transient or permanent. Are we seeing in a few months growth that would normally take a few years? Given the lifespan of a client, which on average is four years at CMC, even the last six months is still quite a short amount of time to understand how their trading activity will evolve and how long they’ll stay with us for, but when this emerges, it will feed into our outlook for future years.

“From a finance perspective, we also need to make sure we stay on top of the expected delivery times of the new products we’re investing in and what their revenue opportunity is. A lot of this comes down to client behaviour at the end of the day, which is inherently difficult to predict.”

What do you think the long-term impact of this year will be on CMC as you look towards 2021-22?

“From a company growth perspective, we’re very positive, because the profitability has enabled us to expedite a lot of our projects. From the COVID side, and more leading into ‘what does the office of the future look like?’, I think what I’ve personally come to appreciate is that although remote working works very well in the short term, across the organisation it has a big impact on people. Especially with junior or new staff, you cannot really replace onboarding, training and introductions with virtual sessions – face-to-face interactions are so important. In addition, within senior management and project teams, co-located collaboration is really important for both moving projects forward and for ideas generation.

“There are definitely benefits for people being in the office in the future, but I don’t see a reversion back to staff being in the office close to 100% of the time; it’s somewhere in the middle – I see some kind of home/office mix emerging.”

What are the biggest lessons you’ve learnt in 2020, both from a personal and professional perspective?

“Personally, probably two things really: firstly, from a remote working perspective, it makes you realise that you need to have ways of being able to switch off from work, which can be really difficult. The second thing is appreciating things you take for granted in life, whether it be family life or the really small things like enjoying your local neighbourhood.

“From a business perspective, I think as we’ve slowly crept back towards being back in the office, it’s made me appreciate the benefits of face-to-face interaction even more. You do also genuinely miss your workmates during these periods as well – virtual faces on a computer screen don’t replace real interaction!”

Reflecting on the last year, what would you change given the opportunity?

“I’d try to cut down video meetings and understand which ones are important and which are less important. Contrary to that though, I’d make sure that I’m spending more time with my direct team, checking that they’re in the right place personally and mentally and ensuring that we’re doing everything we can for them.”

What do you expect to see in 2021?

“I’m hoping for a more positive global outlook next year – fingers crossed! We’ve now seen positive news about a vaccine so I’m hoping that in the coming months things will start to improve and governments can start focusing on rebuilding the economy and addressing the inequalities in society that have become exacerbated this year.

“From a Brexit perspective, I’m personally hoping there will be some kind of deal in the next few weeks, or at least a bit more certainty about what happens with our future relationship with the EU.

“Finally, from a company perspective, we have a lot to look forward to next year by way of technology delivery, so there is a lot of excitement in the organisation – we’ll be looking forward to 2021, regardless of what happens around COVID and Brexit.”

Thank you to Euan for sparing his time to speak with me. It’s great to hear how CMC Markets have approached the challenges of 2020 and are investing to maintain their impressive growth for the future.