Record H1 2022 ResultsAugust 18, 2022
Strategy execution and robust risk management delivers strong performance in supportive market conditions
$100 million AT1 Issuance further strengthens balance sheet
Marex is pleased to announce very strong results for the six months to 30 June 2022. Recent strategic investment across the global franchise has positioned the business to outperform in favourable market conditions, driving organic revenue growth, increased profit and improved margins and ROE.
|H1 2022||H1 2021||Change||H1 2020|
|Adjusted Operating PBT||59.0||34.8||70%||39.4|
|Total Capital Ratio||186%||138%*|
*Note – Total capital ratio comparator of 138% at 31 December 2021 given for consistency under the new IFPR regulations
H1 2022 Highlights:
- Net revenue up +29% YoY to $334m due to increased client activity on the platform and very strong performance in Marex’s Market Making and Execution and Clearing businesses – Client monies up 29% to $7bn at 30 June 2022
- Adjusted Operating PBT +70% YoY to $59m, reflecting successful organic growth and higher interest income
- Supportive market backdrop with increased volatility and rising energy and commodity prices supporting particularly strong performance in the first quarter with more normalised market conditions in the second quarter when we started to see the benefit of higher interest rates.
- Robust and effective risk management ensured Marex successfully navigated a period of unprecedented market volatility and allowed it to continue to provide liquidity and support its clients throughout
- Strong capital and liquidity; successful issuance of $100m AT1 capital and over $500m of liquidity headroom as at 30 June. – Investment grade credit ratings reaffirmed by S&P Global Ratings and Fitch Ratings; S&P raised outlook to stable
- Announced acquisition of ED&F Man Capital Markets, delivering on the client-focused growth strategy to expand and deepen Marex’s product offering and geographic reach
- Innovation in high-growth ESG markets; with expansion of Environmentals Group product offering and further progress made with innovative carbon sequestration project in South East Asia
- Positive outlook: proven strategy and strong capital and liquidity position create a resilient platform that is well positioned to deliver sustained growth, supported by higher interest rates
Ian Lowitt, Marex CEO, commented:
“I am extremely pleased to report another record half year result, which demonstrates the earnings power of our franchise against the strong comparative periods of 2021 and 2020, which benefited from Covid-related volatility.
I am proud of how our business has successfully navigated the recent market volatility, which at times has been extremely challenging, continuing to provide liquidity and support to our clients. This performance also underlines how our growth strategy of investing to increase the range of what we can offer our clients, whilst also diversifying the firm, is bearing fruit – and how profitable we can be when supported by macroeconomic tailwinds.
The acquisition of ED&F Man Capital Markets will represent a significant milestone for the firm, transforming our scale and Marex’s reach across products and geographies. These are exciting times for Marex as we continue to realise our ambitions and execute our strategic plan.”
H1 2022 Performance
Market Making – provides direct liquidity to our clients across a variety of products, primarily in the energy, metals and agriculture markets
- Revenues increased 84% to $101 million (2021: $55 million), as energy and commodities markets saw increased prices and elevated volatility during the period, particularly in Q1
- CSC, the energy market making business acquired in 2019, continues to perform well, benefiting from positive market conditions as well as strategic investments made to expand product coverage
Execution and Clearing – acts as principal for clients, providing direct access to 56 exchanges globally
- Growth in this business is illustrated by the growth of client assets on Marex’s balance sheet, with ’client monies’ up 29% since the start of the year to $7 billion at the end of June 2022. This reflects increased client activity and margin requirements on many exchanges
- Revenues increased 36% to $117 million (2021: $86 million) benefiting from higher volumes (+4% YoY), several notable new clients joining the platform combined with a positive market environment which allowed re-pricing of risk and higher interest income which increased $7 million YoY
Hedging and Investment Solutions – provides high quality bespoke hedging and investment solutions to clients
- Revenues for this segment were broadly stable compared to the prior year, at $44 million due to broader market volatility across most asset classes impacting investor appetite and demand for our financial investment solutions. Strong growth is anticipated for this part of the group as market conditions improve and Marex continues to invest in expanding its product offering into new areas as well as its distribution network geographically, with US and Asia offering significant growth opportunities
Price Discovery – facilitates liquidity by connecting buyers and sellers in opaque OTC energy markets
- Revenues were broadly stable at $69 million (2021: $68 million), with solid demand for Marex’s liquidity provision services during the period – despite significant volatility and disruption in the European energy markets which led to reduced activity in the second quarter.
Acquisition of ED&F Man Capital Markets
Marex announced on 1 August that it had agreed to acquire ED&F Man Capital Markets, the financial services division of ED&F Man Group. ED&F Man Capital Markets has approximately 450 employees globally and generated over $235 million of revenues in 2021.
The transaction advances Marex’s longstanding strategy to grow to meet expanding client needs and diversifying earnings by product and geography. The acquisition materially expands Marex’s client offering in Clearing, strengthens its market-leading Metal franchise and adds to the nascent businesses in Fixed Income and Equities. It will also extend the firm’s global footprint in Dubai and APAC and underpin a leading US franchise.
Marex has a proven track record of acquiring quality businesses and creating significant value through the delivery of revenue and cost synergies post-acquisition, currently delivering an average of 20% return on equity from recent acquisitions. We are therefore very excited about the growth prospects this transaction offers, and how we can better serve existing and potential clients going forwards.
The transaction is expected to complete by the end of the year, subject to regulatory approvals.
Marex has successfully navigated the recent geopolitical disruption in the commodities markets, thanks to its strong capital and liquidity, effective risk management and strategic decision-making. This helped deliver a very strong performance in the first half of the year, characterised by increased client activity on the platform.
The Group continues to execute its successful growth strategy, investing behind a series of strategic growth initiatives and selected acquisitions to broaden its product offering to clients and expand its geographic footprint. Priorities for the next six months will be to close the acquisition of ED&F Man and begin its integration onto the Marex platform, accelerate geographic expansion worldwide, and create a scalable platform in the US and APAC. Marex continues to invest in areas of high growth such as renewables, developing the proposition to meet and anticipate significant client demand through the transition towards a low carbon economy.
Whilst geopolitical risks remain elevated and market conditions volatile, Marex is continuing to work closely with clients to provide the liquidity and essential services they need to navigate this challenging period. Marex is also a beneficiary of the current fiscal tightening required to address rising inflation. It is therefore confident in the outlook for performance for the full year.