Q2 2024 Marex Group PLC Earnings Call

Speaker Change: Good day and thank you for standing by. Welcome to the Marex Group PLC First Half 2024 Results Conference Call.

Operator: have a 2024 results conference call. At this time, all participants are in a listen only mode.

Johannes Rays: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automatic message advising your hand is raised.

Speaker Change: To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Robert Coates. Please go ahead.

Robert Copes: Good morning, everyone. I'm Robert Copes, Global Head of Investigations for Marex. Thank you all for joining us today for our first half of 2024 results conference call. Speaking today are Ian Lowat, our CEO, and Rob Irvin, our CFO. After our formal remarks, we will open up the call for questions. Before we begin, I'd like to highlight that certain matters discussed in today's conference call are forward-looking statements relating to future events, management plans and objectives for the business, and the future financial performance of the group. These are subject to risks and uncertainties, and actual results may differ from those anticipated in the forward-looking statements.

Speaker Change: Good morning, everyone. I'm Robert Coates, Global Head of Investor Relations for Marex.

Robert Copes: The risk factors that may affect these results are referred to in the company's press release issued today and also in our filed prospectus with the SEC back in April. The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update these forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS measures on this call.

Speaker Change: Thank you all for joining us today for our first half of 2024 results conference call.

Speaker Change: Speaking today are Ian Lowat, our CEO , and Rob Irvine, our CFO . After our formal remarks, we will open up the call for questions.

Robert Copes: A reconciliation of the non-IFRS financial measures to the most directly comparable IFRS measures is available in the company's press release. A copy of the press release and the investor presentation can be found on the investor relations page of Marex.com with us. I will now hand over to Ian.

Speaker Change: Before we begin, I would like to highlight that certain matters discussed in today's conference call are forward-looking statements relating to future events, management plans and objectives for the business and the future financial performance of the group. These are subject to risks and uncertainties.

Speaker Change: Actual results may differ from those anticipated in the forward-looking statements. The risk factors that may affect these results are referred to in the company's press release issued today and also in our filed prospectus with the SEC back in April.

Speaker Change: The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update these forward-looking statements.

Speaker Change: Finally, the speakers may refer to certain adjusted or non-IFRS measures on this call. A reconciliation of the non-IFRS financial measures to the most directly comparable IFRS measures is available in the company's press release issued today.

Speaker Change: A copy of the press release and the investor presentation can be found on the investor relations page of Marex.com.

Ian Lowat: Welcome, everyone. Thank you for joining us today. As the CEO of a public company, one is well aware of the desirability of delivering strong results, particularly early on when one is looking to build credibility with the market. And so it is with a small dose of relief and a much larger dose of pride that Rob and I can share with you our very strong performance in our first quarter as a public company.

Speaker Change: With that, I will now hand over to Ian. Welcome, everyone. Thank you for joining us today.

Ian: As the CEO of a public company, one is well aware of the desirability of delivering strong results.

Ian: particularly early on when one is looking to build credibility with the markets.

Ian: And so it is with a small dose of relief and a much larger dose of pride that Rob and I can share with you our very strong performance in our first quarter as a public company.

Ian Lowat: And what is so pleasing to me, beyond the record numbers, is what I see driving the performance. You will see evidence that we are gaining share. I hear this anecdotally in the conversations we have with clients who report on their positive experience dealing with Marex.

Speaker Change: And what is so pleasing to me, beyond the record numbers, is what I see driving the performance.

Speaker Change: You will see evidence that we are gaining share. I hear this anecdotally in the conversations we have with clients who report on their positive experiences dealing with Marex.

Ian Lowat: I can feel the positivity and enthusiasm of our staff as they describe the progress they are making in growing their business or functioning. So we're certainly off to a robust start as a public company, and I'd like to once again thank all of those investors who have put their trust in Marex.

Speaker Change: I can feel the positivity and enthusiasm of our staff as they describe the progress they are making growing their business or function.

Speaker Change: So we're certainly off to a robust start as a public company, and I'd like to, once again, thank all of those investors who have put their trust in Marex.

Ian Lowat: I want to start out with a reminder of how and where we participate in the financial market ecosystem. Slide three illustrates how we play a critical role in connecting clients to markets and how our four services of clearing, agency, and execution, market making, and hedging and investment solutions fit together. We provide connectivity to producers and consumers of commodities, as well as asset managers and hedge funds, and act as an essential layer between our clients and the markets they need to access. At the heart of the firm is clearing, which provides the essential infrastructure to connect clients to exchanges and clearing houses.

Speaker Change: Turning to materials on slide 3.

Speaker Change: I want to start out with a reminder of how and where we participate in the financial market ecosystem.

Speaker Change: Slide three illustrates how we play a critical role in connecting clients to markets and how our four services of clearing, agency and execution, market making, and hedging and investment solutions fit together.

Speaker Change: We provide connectivity to producers and consumers of commodities, as well as asset managers and hedge funds, and act as an essential layer between our clients and the markets they need to access.

Speaker Change: At the heart of the firm is clearing, which provides the essential infrastructure to connect clients to exchanges and clearinghouses. We also provide clients with access to market liquidity either through agency and execution management.

Ian Lowat: We also provide clients with access to market liquidity, either through agency and execution or market-making, and if there is no on-exchange instrument that meets their needs, we provide bespoke hedging services through our hedging and investment solution. In combination, these four services reinforce one another, provide multiple entry points into the firm for our clients, and increase cross-selling opportunities for Marex. We are increasingly relevant in this connective layer by adding clients and growing the amount of business we do with them in the provision of these interconnected services.

Speaker Change: or market-making, and if there is no on-exchange instrument that meets their needs, we provide bespoke hedging services through our hedging and investment solutions business.

Marek's: In combination, these four services reinforce one another, produce multiple entry points into the firm for our clients, and increase cross-selling opportunities for Marek's.

Speaker Change: We are increasingly relevant in this connective layer by adding clients and growing the amount of business we do with them in the provision of these interconnected services.

Ian Lowat: Turning to slide 4, you can see our strong track record of double-digit growth and our continued momentum. We believe we are on track for a 10th consecutive year of sequential growth, having delivered a 34% CAGR in adjusted operating profit over the last 9 years. We are delivering on our strategy, which is to ensure we have sufficient structural growth to offset cyclical headwinds. By executing on this strategy, we've been able to grow through a variety of different market conditions, through a combination of organic and inorganic growth. We continue to add clients and do more business with them, with around 5,000 active clients at the end of the first half, up from around 4,100 at the end of 2023. Moving now to slide six.

Speaker Change: Turning to slide 4, you can see our strong track record of double-digit growth and our continued momentum. We believe we are on track for a 10th year of sequential growth, having delivered a 34% CAGR in adjusted operating profit over the last nine years.

Speaker Change: We are delivering on our strategy, which is to ensure we have sufficient structural growth to offset cyclical headwinds.

Speaker Change: By executing on the strategy, we've been able to grow through a variety of different market conditions through a combination of organic and inorganic growth.

Speaker Change: We continue to add clients and do more business with them, with around 5,000 active clients at the end of the first half, up from around 4,100 at the end of 2023.

Ian Lowat: We have delivered an extremely strong performance in H1, having grown our earnings and also grown our market. We have seen growth in all our business sectors. As you can see in our earnings release, the second quarter saw an exceptionally strong performance with record revenue of $422 million and operating PBT of $92 million. Our second quarter profitability is over 50% higher than the average quarter in 2023 and 35% higher than the first quarter in 2024. Reported ROE for the second quarter was 29 percent, and excluding one-time items related to the IPO, ROE was 37 percent.

Speaker Change: Moving now to slide six.

Speaker Change: We have delivered extremely strong performance in H1, having grown our earnings and also grown our market share.

Speaker Change: We are seeing growth in all our business segments.

Speaker Change: As you can see in our earnings release, the second quarter saw an exceptionally strong performance with record revenue of $422 million and operating PBT of $92 million.

Speaker Change: Our second quarter profitability is over 50% higher than the average quarter in 2023 and 35% higher than the first quarter in 2024.

Speaker Change: Reported ROE for the second quarter was 29%, and excluding one-time items related to the IPO, ROE was 37%.

Ian Lowat: During the second quarter, we were able to take advantage of the opportunities presented by the unusual conditions in the metals market. In this period of heightened market activity, we were able to provide consistent service to our clients as we continue to make markets and provide ongoing access to liquidity while keeping well within our risk parameters. Considering now our first half, we delivered strong growth with revenue up 27% year-on-year to $788 million, and adjusted operating profit also up 28% to $159 million with reported R.O.E.

Speaker Change: During the second quarter, we were able to take advantage of the opportunities presented in the unusual conditions in the metals market.

Speaker Change: In this period of heightened market activity, we are able to provide consistent service to our clients as we continue to make markets and to provide ongoing access to liquidity while keeping well within our risk parameters.

Speaker Change: Considering now our first half, we delivered strong growth with revenue up 27% year-on-year to $788 million and adjusted operating profit also up 28% to $159 million with reported ROE of 25%.

Ian Lowat: of 25% Thanks to our strong performance in the first half, positive momentum in all our businesses, and the continued execution of our growth initiatives, we have a positive outlook as we anticipate full-year adjusted operating PBT of between around $280 million and $290 million, assuming more normalized market conditions and the likely impact of lower interest rates in the fourth quarter. Lastly, consistent with the capital allocation policy set out at IPO, we have announced a progressive dividend policy with a quarterly dividend of $0.14 per share, demonstrating our confidence in the outlook for the Group and commitment to shareholder returns.

Speaker Change: Thanks to our strong performance in the first half, positive momentum in all our businesses, and the continued execution of our growth initiatives, we have a positive outlook as we anticipate full-year adjusted operating PBT of between around $2.5 billion and $3.5 billion.

Speaker Change: $280 million and $290 million, assuming more normalized market conditions and the likely impact of lower interest rates in the fourth quarter.

Speaker Change: Lastly, consistent with the capital allocation policy set out at IPO, we have announced a progressive dividend policy with a quarterly dividend of $0.14 per share, demonstrating our confidence in the outlook for the group and commitment to shareholder returns.

Ian Lowat: As referenced in our previous earnings call, slide 7 shows the key metrics that we as a management team are focused on – growth, margins, and ROE, productivity, and quality of earnings. In terms of growth, what we are most focused on is increasing Adjusted Operating Profit After Tax for our common shareholders. In the first talk, we delivered strong double-digit growth in all these metrics, with revenue up 27%, Adjusted Operating PBT up 28%, and a 28% increase in Operating PAT to 116 million dollars.

Speaker Change: As referenced in our previous earnings call, slide 7 shows the key metrics that we as a management team are focused on. Growth, margins and ROE, productivity and quality of earnings.

Speaker Change: In terms of growth, what we are most focused on is increasing adjusted operating profit after tax to our common shareholders.

Speaker Change: In the first half, we delivered strong double-digit growth in all these metrics with revenue up 27%, adjusted operating PBT up 28%, and a 28% increase in operating PAT up to $116 million.

Ian Lowat: In terms of margins and ROE, our operating PBT margin remained at 20%, and our reported ROE was 25%, up two percentage points year-on-year. And the increase in return on adjusted operating PAT attributable to common equity was even stronger, up to 32% from 30%. In terms of productivity in our business, operating PAT attributable to common equity holders per FTE was up to $101,000 on an annualized basis, up 3% year-on-year. With regard to quality of earnings, our Sharpe ratio is a healthy 3.3.

Speaker Change: In terms of margins and ROE, our operating PBT margin remained at 20%, and our reported ROE was 25%, up 2 percentage points year-on-year.

Speaker Change: And the increase in return on adjusted operating PAT attributable to common equity was even stronger, up to 32% from 30%.

Speaker Change: In terms of productivity in our business, operating PAT attributable to common equity holders per FTE was up to $101,000 on an annualized basis, up 3% year on year.

Speaker Change: With regard to quality of earnings, our Sharpe Ratio is a healthy 3.3.

Ian Lowat: You may be aware that there are limitations in the Sharpe ratio metric as growth, as well as unusually profitable months, as we had in the second quarter, have the counterintuitive impact of reducing the Sharpe ratio, although investors would not see this as a negative in terms of quality of earnings. On slide eight, you can see that overall, the market in which we operate continues to grow at around eight to nine percent, which is consistent with the historic average.

Speaker Change: You may be aware that there are limitations in the Sharpe ratio metric as growth, as well as unusually profitable months, as we had in the second quarter, have the counterintuitive impact of reducing the Sharpe ratio, although investors would not see this as a negative in terms of quality of earnings.

Speaker Change: On slide eight, you can see that overall, the market in which we operate continues to grow at around eight to nine percent, which is consistent with historic averages.

Ian Lowat: Within that, though, you can see that there's been a positive skew to commodity markets, which have grown at 22% year-on-year, a much faster rate than financial securities markets. Turning to slide 9, 2022 was characterized by elevated volatility and higher commodity prices following the Ukrainian invasion. In 2023 and so far this year, volatility in commodity prices has returned to more normalized levels. The Fed Funds rate increased dramatically in 2022, and the forward curve now reflects rate cuts through 2025.

Speaker Change: Within that, though, you can see that there's been a positive skew to commodity markets, which have grown at 22% year-on-year, a much faster rate than financial securities markets.

Speaker Change: Turning to slide 9, 2022 was characterized by elevated volatility and higher commodity prices following the Ukraine invasion.

Speaker Change: In 2023, and so far this year, volatility and commodity prices have returned to more normalized levels.

Speaker Change: The Fed funds rate increased dramatically in 2022, and the forward curve now reflects rate cuts through 2025.

Ian Lowat: While St. Jude in the forward curve was reflecting a higher for longer outlook, as at the end of July, market expectations have returned to a similar level as at the start of the year. On slide 10, we show the positive market dynamics in metals during the second quarter. The quarter presented opportunities due to updated guidance on restrictions placed on the trading of Russian metal on the London Metal Exchange. We saw an increase in prices, an increase in market volume, and an increase in client activity, which was beneficial to our metal friends.

Speaker Change: Well, since June the forward curve was reflecting a higher for longer outlook

Speaker Change: As at the end of July , market expectations have returned to a similar level as at the start of the year.

Speaker Change: On slide 10, we show the positive market dynamics in metals during the second quarter.

Speaker Change: The quarter presented opportunities due to updated guidance on restrictions placed on the trading of Russian metal on the London Metal Exchange.

Speaker Change: We saw an increase in prices, an increase in market volume and an increase in client activity, which was beneficial to our metals franchise.

Ian Lowat: We were able to support increased activity while staying within our strict risk parameters without increasing VAR and maintaining our historic positive profitability distribution. These market dislocations are important not just because of the opportunity they present to increase profitability, but critically, by supporting our clients through such events, we cement our reputation as a reliable partner, which enables us to gain share over time. Moving on to slide 11.

Speaker Change: We were able to support increased activity, while staying within our strict risk parameters, without increasing VAR, and maintaining our historic positive profitability distribution.

Speaker Change: These market dislocations are important not just because of the opportunity they present to increase profitability, but critically, by supporting our clients through such events, we cement our reputation as a reliable partner, which enables us to gain share over time.

Speaker Change: Moving on to slide 11.

Speaker Change: We are committed to find ways to describe our results to investors in ways which make our progress transparent and links to metrics that are intuitive and can be tracked against publicly available information, which for our business is exchange volumes.

Ian Lowat: We are committed to finding ways to describe our results to investors in ways that make our progress transparent and links to metrics that are intuitive and can be tracked against publicly available information, which for our business is exchange volume. When you look at our various businesses on this basis, it's apparent that we are gaining share. We see increased market volumes across each service segment, while Marex's own volumes and, importantly, revenues are growing at a faster rate. Market volumes in clearing, for example, are up 9% in the first half of 2024 versus the same period last year.

Speaker Change: When you look at our various businesses on this basis, it's apparent that we are gaining share. We see increased market volumes across each service segment, while Merrick's own volumes and, importantly, revenues are growing at a faster rate.

Merrick: Market volumes in clearing, for example, are up 9% in the first half of 2024 versus the same period last year, while at merits we saw our volumes up 28% and revenues up 16%.

Ian Lowat: While at Marex, we saw our volumes up 28% and revenues up 16%, with an agency in execution in the energy markets, volumes rose 25% while our revenue was up 42% on volumes that were up 60%. In the securities markets, volumes rose 6% in the market, while our volumes rose 16% and our revenues were up 25%. Market making saw volumes up 22% in the market, while Marex saw revenues up 32% on volumes up 27%. This is a consistent picture of Marex growing faster than the market, which itself is growing at a healthy rate. Turning now to slide 12.

Merrick: Within agency and execution, in the energy markets, volumes rose 25% while our revenue was up 42% on volumes that were up 66%.

Merrick: In the securities markets, volumes rose 6% in the market, while our volumes rose 16% and our revenues were up 25%.

Merrick: Market making saw volumes up 22% in the market, while Marex saw revenues up 32% on volumes up 27%.

Mary: This is a consistent picture of Marex growing faster than the market, which itself is growing at a healthy clip.

Ian Lowat: Our growth is powered by the addition of new clients and the increase in the business we do with our existing clients. In 2024, we will have added 900 or so new clients, both through the Cowen acquisition and our ongoing onboarding efforts. The number of clients paying us more than a million dollars on an annualized basis has also increased to 259. Now, I'll pass this on to Rob to talk you through the financial... Thanks Ian and good morning everyone.

Mary: Turning now to slide 12.

Mary: Our growth is powered by the addition of new clients and the increase in the business we do with our existing clients.

Mary: In 2024, we have added 900 or so new clients, both through the Cowin acquisition and our ongoing onboarding efforts.

Mary: The number of clients paying us more than a million dollars on an annualized basis has also increased to 259.

Mary: Now I'll pass on to Rob to talk you through the financials.

Rob Irvin: I'm really pleased to be with you today presenting our half-year update for the first time. Picking up on slide 14, you can see that we've had a strong start to 2024. We have grown our revenues by 27% to $788 million, in part reflecting the impact of the Cowen acquisition, but notably due to strong organic growth, which contributed over two-thirds of the increase in revenue. This enabled us to grow operating profits to $159 million for the first half, up 28%. The second quarter was particularly strong, and our adjusted operating profit increased by 35% compared to the first quarter to $92 million.

Rob: Thanks, Ian, and good morning, everyone. I'm really pleased to be with you today presenting for the first time our half-year update.

Rob: Picking up on slide 14, you can see that we've had a strong start to 2024.

Rob: We have grown our revenues by 27% to $788 million, in part reflecting the impact of the Cowan acquisition, but notably due to strong organic growth, which contributed over two-thirds of the increase in revenues.

Rob: This enabled us to grow operating profits to $159 million for the first half, up 28%.

Rob: The second quarter was particularly strong, and our adjusted operating profit increased by 35% compared to the first quarter, to $92 million.

Rob Irvin: We saw strong contributions from all our business segments, as well as exceptional activity in the metals market, which benefited our market-making business. Our adjusted operating margin reached 22% compared with 19% in the first quarter, demonstrating our platform's ability to deliver scale benefits. Historically, we've had minimal adjustments between our adjusted operating profit and our reported profit before tax.

Rob: We saw strong contributions from all our business segments, as well as exceptional activity in the metals market, which benefited our market-making business.

Rob: Our adjusted operating margin reached 22% compared with 19% in the first quarter, demonstrating our platform's ability to deliver scale benefits.

Rob: Historically, we've had minimal adjustments between our adjusted operating profit and our reported profit before tax.

Rob Irvin: For the first half of 2024, these non-operating items were just over $20 million, and there were four main components of this. Firstly, we incurred $8.3 million of costs associated with the IPO, predominantly legal and accounting costs, to support our U.S. listing. Secondly, we incurred $2.2 million of tax expense relating to the vesting of our gross shares, which were connected with the IPO.

Rob: For the first half of 2024, these non-operating items were just over $20 million, and there were four main components of this.

Rob Irvin: Thirdly, we incurred $2.3 million on the fair value of the cash settlement option on the gross shares. This is a technical accounting booking, and as the gross shares were all settled in equity, there was an offset in retained earnings. Fourthly, we incurred $2.4 million of owner fees that we used to pay to our private equity shareholders, which were a function of profitability; these fees ceased at the point of the IPO and will not resume.

Rob: Firstly, we incurred $8.3 million of costs associated with the IPO, predominantly legal and accounting costs, to support our U.S. listing.

Rob: Secondly, we incurred $2.2 million of tax expense relating to the vesting of our gross shares, which were connected with the IPO.

Rob: Thirdly, we incurred $2.3 million on the fair value of the cash settlement option on the gross shares. This is a technical accounting booking and as the gross shares were all settled in equity, there was an offset in retained earnings.

Rob: Fourthly, we incurred $2.4 million of owner fees that we used to pay to our private equity shareholders, which was a function of profitability.

Rob: These fees ceased at the point of the IPO and will not resume.

Rob Irvin: Going forward, now that we have completed the IPO, we would expect minimal adjustments between our adjusted operating profit and our reported profit before tax. Given this, a measure that we focus on as a management team is our return on adjusted operating profit after tax attributable to common equity holders. As a reminder, this return is calculated as follows. We tax effect our adjusted operating profit and then deduct the post-tax cost of our 81 dividends, whilst the equity is the firm's total equity, excluding our 81 capital.

Rob: Going forward, now we have completed the IPO, we would expect minimal adjustments between our adjusted operating profit and our reported profit before tax.

Rob: Given this, a measure that we focus on as a management team is our return on adjusted operating profit after tax attributable to common equity holders.

Rob: As a reminder, this return is calculated as follows.

Rob: We tax-effect our adjusted operating profit and then deduct the post-tax cost of our 81 dividend.

Rob: Whilst the equity is the firm's total equity, excluding our 81 capital.

Rob Irvin: For the first half of 2024, our return on operating profit after tax attributable to common equity holders was 32%, up from 30% in the first half of 2023. The tax rate for the first half of 2024 was 26%, reflecting the number of adjusting items which were not tax-deductible. In the medium term, we would expect our effective tax rate to be 25%.

Rob: For the first half of 2024, our return on operating profit after tax attributable to common equity holders was 32% from 30% in the first half of 2023.

Rob: The tax rate for the first half of 2024 was 26%, reflecting the number of adjusting items which were not tax-deductible. Over the medium term, we would expect our affected tax rate to be 25%.

Rob Irvin: As part of the IPO, we also reorganised our share capital. This included doing a share consolidation. As a result, at the end of June, we had 70.3 million ordinary shares. This excludes 1.9 million Treasury shares.

Rob: As part of the IPO, we also reorganised our share capital.

Rob: This included doing a share consolidation.

Rob: As a result, at the end of June , we had 70.3 million ordinary shares. This excludes 1.9 million Treasury shares.

Rob Irvin: Our adjusted basic earnings per share was $0.96 for the second quarter and $1.70 for the first half of 2024. On slide 15, you can see that we have achieved double-digit revenue and operating growth across all of our business segments. In clearing, revenues grew by 16% during the first half of 2024, reflecting growth in both commissions and net interest income. This was due in part to heightened market activity in the metals market, which increased margin requirements at exchanges and transaction volumes, but also due to the benefit of our growth initiatives in Australia, Singapore, and in our prime Services offerings.

Rob: Our adjusted basic earnings per share was 96 cents for the second quarter and $1.70 for the first half of 2024.

Rob: On slide 15, you can see that we have achieved double-digit revenue and operating growth across all of our business segments.

Rob: In clearing, revenues grew by 16% during the first half of 2024, reflecting growth in both commissions and net interest income.

Rob: This was due in part to heightened market activity in the metals market, which increased margin requirements at exchanges and transaction volumes, but also due to the benefit of our growth initiatives in Australia, Singapore and in our prime services offerings.

Rob Irvin: In agency and execution, revenues grew by 32%, reflecting market share gains, positive market sentiment in the energy market, and the benefit of recent acquisitions, primarily Cowen, which increased our capabilities in financial securities. In market making, revenues were up 23%, driven by market sentiment and metals trading, which benefited from heightened market activity across copper, aluminum, and nickel, following revised guidance related to Russian materials on the LME.

Rob: In agency and execution, revenues grew by 32% reflecting market share gains, positive market sentiment in the energy market, and the benefit of recent acquisitions, primarily Cowen, which increased our capabilities in financial securities.

Rob: In market making, revenue was up 23%, driven by market sentiment and metals trading, which benefited from heightened market activity across copper, aluminium, nickel, following revised guidance related to Russian materials on the LME.

Rob Irvin: In hedging and investment solutions, revenue growth occurred across all regions and was driven by favorable market conditions stemming from volatility in cocoa and coffee, while financial products benefited from positive investor sentiment and equity market performance. As well as the benefits of our growth initiatives, this resulted in strong client trade flows in the first half of 2024. So, in summary, a strong performance across all four of our business segments during the first half of 2024. Moving to slide 16.

Rob: And in hedging and investment solutions, revenue growth occurred across all regions and was driven by favorable market conditions stemming from volatility in cocoa and coffee, while financial products benefited from positive investor sentiment and equity market performance.

Rob: as well as the benefits of our growth initiatives, which resulted in strong client trade flows in the first half of 2024.

Rob: So, in summary, a strong performance across all 4 of our business segments during the first half of 2024. Moving to slide 16.

Rob Irvin: As you can see, average client balances in the second quarter were $13.6 billion, up from $13.2 billion for the first quarter of 2024. Please be aware that the average balances for the quarter are based upon the month end. If we'd used daily average balances, our balances would have been up around 10% versus the first quarter, which was a key driver of the increase in net interest income during the quarter. As a result... Let's interest income rose to $101 million in the first half of 2024. The growth in net interest income primarily reflected three factors, a higher average Fed fund rate.

Rob: As you can see, average client balances in the second quarter were $13.6 billion, up from $13.2 billion for the first quarter of 2024.

Rob: Please be aware that the average balances for the quarter are based upon the month end. If we'd used daily average balances, our balances would have been up around 10% versus the first quarter, which was a key driver of the increase in net interest income during the quarter.

Rob: As a result...

Rob: Net interest income rose to $101 million for the first half of 2024.

Rob: The growth in net interest income primarily reflected three factors.

Rob Irvin: The impact of the Cowen Prime Services transaction, which we completed in December 2023, and reinvestment of maturing assets at higher yields. These factors were partially offset by higher interest payments to clients. It is important to remember that net interest income does not just impact our clearing segments. For example, the interest earned by the Cow and Prime Services business is included within the agency and execution segment, and our market-making and hedging and investment solutions incur interest expense as they use funding to support their activity.

Rob: higher average Fed fund rates

Rob: the impact of the Cowen Prime Services transaction, which we completed in December, 2023, and reinvestment of maturing assets at higher yields.

Rob: These factors were partially offset by higher interest payments to clients.

Rob: It's important to remember the net interest income does not just impact our clearing segment. For example, the interest earned by the Cowen Prime Services business is included within the agency and execution segment.

Rob: And our market making and hedging and investment solutions incur interest expense as they use funding to support their activities.

Rob Irvin: Clearly, the fact that rates have remained elevated in the first half of 2024 is beneficial to the business. As I mentioned, we do expect rate cuts late this year and into next year. We estimate that a 100-basis point decrease in rates will reduce operating profits by around $20 million. This is based on the current book and does not take into account any future growth which would partially mitigate the impact.

Rob: Clearly, the fact that rates have remained elevated in the first half of 2024 is beneficial to the business.

Rob: As Ian mentioned, we do expect rate cuts late this year and into next year. We estimate that a 100-basis point decrease in rates will reduce operating profits by around $20 million.

Rob: This is based upon the current book and does not take into account any future growth which would partially mitigate the impact.

Rob Irvin: On slide 17, our capital allocation framework looks to balance a strong capital position supporting both organic and inorganic growth opportunities with a disciplined return. We can build this out into 4 key areas. Firstly, we will maintain a strong capital position to support our investment grade credit rating. Secondly, on organic growth, our investment will focus on targeted areas of our underlying business where we can earn an attractive return. Thirdly, on dividends, we have announced today an initial dividend of $10 million, or $0.14 per share. This will be paid to shareholders off record on the 30th of August and is expected to be paid on the 16th of September 2024.

Rob: On slide 17, our Capital Allocation Framework looks to balance a strong capital position supporting both organic and inorganic growth opportunities with disciplined returns.

Rob: We can build this out into four key areas.

Rob: Firstly, we will maintain a strong capital position to support our investment grade credit rating.

Rob: Secondly, on organic growth, our investment will focus on targeted areas of our underlying business where we can earn an attractive return. Thirdly, on dividends, we have announced today an initial dividend of $10 million, or $0.14 per share.

Rob: This will be paid to shareholders off record on the 30th of August and is expected to be paid on the 16th of September 2024.

Rob Irvin: And fourthly, with surplus capital, we will continue to take an active approach to selective M&A, focusing on complementary businesses that support our current businesses while delivering attractive returns. As you can see on slide 18, we continue to maintain prudent levels of surface capital and liquidity, which underpins our investment grade credit ratings from both S&P and FIT. These levels of surplus capital and liquidity also ensure that we are well positioned in periods of market turmoil. At the end of the first half of 2024, our total capital ratio was 276%, and we had liquidity headroom of $1.2 billion.

Rob: And fourthly, with surplus capital, we will continue to make an active approach to selective M&A, focus on complementary businesses that support our current businesses while delivering attractive returns.

Rob: [inaudible]

Rob: As you can see on slide 18, we continue to maintain prudent levels of surplus capital and liquidity, which underpins our investment grade credit ratings from both S&P and Fitch.

Rob: These levels of surplus capital and liquidity also ensure that we are well positioned in periods of market turmoil.

Rob: At the end of the first half of 2024, our total capital ratio was 276%, and we had liquidity headroom of $1.2 billion.

Rob Irvin: Turning to slide 19, I will conclude with a view on risk. We have a proactive and involved risk management approach at Marex. In market making, we are a client flow-driven business and do not take a directional view on prices. However, as the business is a market maker, we do carry some input truth. For example, the VAR value at risk has remained around $2.5 million.

Rob: Turning to slide 19, I will conclude with a view on risk. We have a proactive and involved risk management approach at Marex.

Rob: In market making, we are a client flow driven business and do not take a directional view on prices.

Rob: However, as the business is a market maker, we do carry some inventory. The VAR, value at risk, has remained at around $2.5 million.

Rob Irvin: As Ian said, we were able to support our clients during this period, providing ongoing access to liquidity while keeping well within our risk parameters, without increasing VAR and without increasing trading losses. Although we did have one week where we made a small loss, the number of positive training days has remained consistent at 87%. During the first half of 2024, we wrote off five specific historical provisions which have been fully provided for in 2020 and 2022.

Rob: As Ian said, we were able to support our clients during this period, providing ongoing access to liquidity while keeping well within our risk parameters.

Ian: without increasing VAR and without increasing trading losses.

Ian: Although we did have one week where we made a small loss, the number of positive trading days has remained consistent at 87%.

Ian: During the first half of 2024, we wrote off five specific historical provisions which have been fully provided for in 2020 and 2022.

Rob Irvin: Within our P&L, for the first half of 2024, we had a release of around $2 million, reflecting our proactive credit risk management approach which has resulted in partial recoveries of provisions with previously taken. We maintain a very prudent approach to monitoring credit risk. Now I'll hand you back to Ian for an operational update and some concluding remarks. Thanks Rob.

Ian: Within our P&L for the first half of 2024, we had a release of around $2 million, reflecting our proactive credit risk management approach, which has resulted in partial recoveries of provisions we'd previously taken.

Ian: We maintain a very prudent approach to monitoring credit risk.

Ian: Now, I'll hand you back to Ian for an operational update and some concluding remarks.

Ian Lowat: In these last few slides, we thought it would be helpful to give you another lens to understand how we're growing. Most information we provide is at a segment level, and we thought it would be helpful to show you the geographic element of our growth and the business. Turning now to slide 21.

Ian: Thanks Rob. In these last few slides we thought it'd be helpful to give you another lens to understand how we're growing. Most information we provide is at a segment level and we thought it'd be helpful to show you the geographic element of our growth and diversification.

Ian Lowat: The commodity markets, in particular, are well served out of the European time zone. In many of our franchises across this region, we have built market-leading positions in the core commodity markets. We continue to expand our offering in clearing. We became the first non-bank FCM to become an LCH swap clearing member in June 2024, going live at the end of July and clearing our first trade earlier this month.

Ian: Turning now to slide 21.

Ian: The commodity markets in particular are well served out of the European time zone. In many of our franchises across this region, we've built market-leading positions in the core commodity markets.

Ian: We continue to expand our offering in clearing. We became the first non-bank FCM to become an LCH swap clearing member in June 2024, going live at the end of July and clearing our first trade earlier this month.

Ian Lowat: And we're seeing interest from a large number of potential clients for this set. The acquisition of EDNF man capital markets and OTCEX gave us a footprint in the Middle East, where we currently have over 60 people, and we're seeing a lot of interest from people moving to Dubai and client interest in the region. We continue to be able to attract successful teams to our platform and are looking to build our teams in the Middle East.

Ian: and we're seeing interest from a large number of potential clients for this service.

Ian: The acquisition of ED&F MAN Capital Markets and OTCEX gave us a footprint in the Middle East where we currently have over 60 people and we're seeing a lot of interest from people moving to Dubai and client interest in the region.

Ian: We continue to be able to attract successful teams to our platform and are looking to build our teams in the Middle East, for example in FX, where we are making investments to expand our capabilities in the second half of the year.

Ian: On slide 22, acquisitions have been an important part of our growth in the Americas, with both RCG and EDNFMAN providing scale in a very large and growing market.

Ian: We now have over 700 people across 19 offices in the Americas providing all of our services on a cross-asset class basis.

Ian Lowat: The business is performing well, with growth in all the core commodity businesses, metals, energy, and agriculture, so far in 2020. The recently acquired Prime Services business is contributing to growth with around 70% of the revenue in the U.S. market. Integration of that acquisition is progressing well, and we have important system integration milestones over the next few months. We're also making a series of hires to fill product coverage. We continue to monitor opportunities for further consolidation within our core services.

Ian: The business is performing well, with growth in all the core commodity businesses – metals, energy and agriculture – so far in 2024.

Ian: The recently acquired Prime Services business is contributing to growth, with around 70% of the revenue in the U.S. market.

Ian: Integration of that acquisition is progressing well and we have important system integration milestones over the next few months.

Ian: We're also making a series of team hires to fill product coverage gaps.

Ian: We continue to monitor opportunities for further consolidation within our core services.

Ian Lowat: This is in line with the capital allocation priorities discussed by Rob, which include an active approach to selective M&A. On slide 23, we see significant opportunities in Asia Pacific. We've had a presence in Asia for over a decade now.

Ian: This has been in line with the capital allocation priorities discussed by Rob, which include an active approach to selective M&A.

Ian: On slide 23, we see significant opportunities in Asia-Pacific.

Ian Lowat: Initially focused on the energy markets out of Singapore, which is our regional head office. The clearing memberships we obtained at the end of 2023 with ASX and SGX support the growth and scalability of our platform and mean we can offer more services to more clients. We have made good progress onboarding new clearing clients with strong uptake in energy clearing on ASX, given this is a concentrated market with good opportunities in other asset classes in the future.

Ian: We've had a presence in Asia for over a decade now, initially focused on the energy markets out of Singapore, which is our regional head office.

Ian: The caring memberships we obtained at the end of 2023 with ASX and SGX support the growth and scalability of our platform and mean we can offer more services

Ian: to more clients. We have made good progress on boarding new clearing clients with strong uptake in energy clearing on ASX given this is a concentrated market with good opportunities in other asset classes in future.

Ian Lowat: We have also been growing our footprint in the broader APAC region. The EDNF acquisition gave us capabilities in Australia, and the recent addition of clearing capabilities in the country is supporting growth, providing margin expansion opportunities, as our investments bring increased scale benefits to the country. A great example of the scalability of our platform is with our recently announced new offers in New Zealand. We opened this offer earlier this year, which brings new clients in carbon, energy, and dairy.

Ian: We've also been growing our footprint in the broader APAC region.

Ian: The EDNF acquisition gave us capabilities on Australia, and the recent addition of clearing capabilities in the country is supporting growth, providing margin expansion opportunity as our investments bring increased scale benefits in the country.

Ian: A great example of scalability of our platform is with our recently announced new office in New Zealand.

Ian: We opened this office earlier this year, which brings new clients in carbon, energy, and dairy.

Ian: Our clearing memberships with ASX and SGX mean that these new clients can also clear directly with us something they couldn't do previously, enhancing our relevance to them from day one and demonstrating the value of our platform.

Ian: Our hedging and investment solutions business in APAC is also performing well, with additional hires expanding our distribution capabilities and supporting growth.

Ian Lowat: I hope that we have provided you with a good sense of the strong performance in the first half, including a very strong second quarter and the good progress we are making with our growth. Thanks to the combination of these things, we have a positive outlook for the full year. We anticipate fully adjusted operating PVT to be between $280 million and $290 million.

Ian: Moving to slide 25. I hope that we've provided you with a good sense of the strong performance in the first half, including a very strong second quarter and the good progress we're making with our growth initiatives.

Ian: Thanks to the combination of these things, we have a positive outlook for the full year. We anticipate full year adjusted operating PPT to be between $280 million and $290 million.

Ian Lowat: We continue to be very proud of the scalable platform we have built at Marex and of the consecutive growth that we have delivered year after year and our ability to deliver strong performance across a variety of markets. We have a client-driven business model with a prudent approach to risk and maintain surface capital and liquidity, which positions us well to take advantage of market opportunities, as you can see from our performance in the second quarter. Against that backdrop, we are pleased to announce a dividend for the third quarter.

Ian: We continue to be very proud of the scalable platform we have built at Marex and of the consecutive growth that we have delivered year after year and our ability to deliver a strong performance across a variety of market conditions.

Ian: We have a client-driven business model with prudent approach to risk and maintain surplus capital and liquidity, which positions us well to take advantage of market opportunities, as you can see from our performance in the second quarter.

Ian: Against that backdrop, we are pleased to announce a dividend from the third quarter. Our progressive dividend policy signals the Board's commitment to balance a healthy financial position, growth, and returns to our shareholders.

Speaker Change: And with that, I'd now like to open for questions.

Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 and 1 again.

Operator: Please stand by while we compile the Q&A roster. Thank you very much. We will now take the first question. Thank you. On the line from Patrick Mollett from Piper Sandler, please go ahead.

Speaker Change: Please stand by while we compile the Q&A roster.

Speaker Change: From the line of Patrick Mollet from Piper Sandler, please go ahead.

Patrick Mollet: Yes, good morning. Thanks for taking the question. I just had one on the adjusted pre-tax income guidance. And could you maybe just elaborate on some of the assumptions you're baking in there around maybe margins, where you expect interest rates to go for the rest of the year, and then any contribution that you're baking in from some of these growth initiatives?

Patrick Moly: Yes, good morning. Thanks for taking the question. I just had one on the adjusted pre-tax.

Patrick Moly: income guidance. Ian, could you maybe just elaborate on some of the assumptions you're baking in there?

Speaker Change: around, you know, maybe margins.

Speaker Change: where you expect interest rates to go for the rest of the year and then any contribution that you're banking in from some of these growth initiatives. Thanks.

Ian Lowat: Thanks, Patrick. So just a few things. I mean, obviously, in terms of sort of interest rates, you know, we're using sort of the forward curve as the basis for sort of the forecast. And I think, as we sort of showed in the materials, the forward curve is now sort of anticipating something very similar to what I think existed, you know, sort of at the beginning of the year. But that's sort of the basis that we would have, you know, with regard to interest rates. So, you know, some series of. It up sort of cuts in the latter part of the year.

Patrick Moly: Thanks, Patrick.

Ian: So, a few things.

Ian: I mean, obviously, in terms of sort of interest rates, you know, we're using sort of the forward curve as the basis for sort of the forecast, and I think as we sort of showed in the materials,

Ian: You know, the forward curve is now sort of anticipating something very similar to what I think existed, you know, sort of at the beginning of the year. But that's sort of the basis that we would have, you know, with regard to interest rates. So, you know, some series of.

Ian Lowat: You know, I think that, as we think about, sort of the second half, we want to ensure that we're not making sort of heroic assumptions about the kind of environment that we're going to be operating in. So we broadly have in mind a much more normalized environment. But we're also aware that there's some limited seasonality in our sort of earnings. If you looked at last year, I think 54% of our earnings were in the first half and 46% in the second. And so in the second half, you just typically have two slower summer months in December.

Ian: It sort of cuts in the latter part of the year.

Ian: You know, I think that, you know, as we think about

Ian: Yeah, that's sort of the second half, you know, we want to

Ian: ensure that you know we're not making sort of heroic assumptions about the kind of environment that we're going to be operating in so we

Ian: you know, broadly have in mind a much more normalised environment. You know, we're also aware that there's some limited seasonality in our...

Ian: You know, sort of earnings, if you looked at last year, I think it was 54% of our earnings were in the first half and 46% in the second, and so in the second half you just typically have, you know, two slower summer months in December, and so.

Ian Lowat: And so you just want to reflect that seasonality. But I think that broadly, what animates this is a view that we're obviously very pleased with how we did in the second quarter and how strong our first half was. We feel very positive about the franchise and the business we've built. And we're also sort of cognizant that we're still building credibility with the market. And so we want to ensure that what we're sort of indicating are numbers that we have sort of very high confidence that we can deliver again. Thank you. I'm sorry. Did I address all your points, Patrick? I want to make sure I did. Sorry, one moment please.

Ian: You know, you just want to reflect, you know, that seasonality. But I think that, you know, broadly what animates this is a view that, you know, we're obviously very pleased with how we did in the second quarter and, you know, how strong our first half was. We feel very positive about

Ian: you know, the franchise and the business we've built. And we're also sort of cognizant that, you know, we're still building credibility with the market. And so, you know, we want to ensure that, you know, what we're sort of indicating are numbers that we have sort of very high confidence that we can deliver against.

Ian: Thank you.

Ian: I'm sorry, did I address all your points Patrick? I want to make sure I did.

Speaker Change: Sorry, one moment please.

Speaker Change: We will now take the next question. Patrick, if you need a follow-up please press star 11 again.

Operator: We will now take the next question. Patrick, if you need a follow-up, please press the start button one more time. The next question comes from the line of Dan Fanon. Please go ahead from Jefferies. Hey, thanks. Good morning.

Speaker Change: The next question comes from the line of Dan Fanon. Please go ahead from Jefferies.

Dan Fanon: I wanted to follow up just on the second quarter environment. And you talked about what happened with the LME in Russia. So curious, you know, if we could size maybe the contribution of that and or maybe how the market is operating today and or the period of time for which you may be earned, you know, outsized. Rebex.

Dan Fanon: Hey, thanks. Good morning. I wanted to follow up just on the second quarter environment and you talked about what happened with the LME.

Dan Fanon: and Russia. So curious, you know, if we could size maybe the contribution of that and or maybe how the market is operating today and or the period of time for which you may be earned, you know, outsized revenues.

Ian Lowat: Yeah. So I think that you have a sense of, you know, that market making was sort of strong in the first half of 24 versus the first half of 23. And I think, you know, metals is a component of that. But I think it's also important to, you know, recognize that market making is a, you know, quite diversified activity for us. And while it's true that the metals market was, you know, very strong in the first half of this year, actually, some of the energy market making was, you know, lower.

Dan Fanon: Yeah, so I think that, I mean, you have a sense of, you know, that market-making was sort of strong in the...

Dan Fanon: First half of 24 versus the first half of 23 and I think you know medals is a component of that

Speaker Change: But I think it's also important to recognize that market making is a quite diversified activity.

Speaker Change: you know, for us and while, you know, it's true that the...

Speaker Change: Metals was, you know, very strong in the first half of this year. Actually, some of the energy market making was, you know, was lower. So all of that sort of is reflected in the fact that on a go-forward basis one would

Ian Lowat: So all of that sort of is reflected in the fact that, on a go forward basis, one would sort of expect market making to continue to be quite strong. You know, not withstanding that, as I'm sure you're aware, there was, you know, levels of open interest, price movement, interest from clients, that was sort of unusual in the sort of second quarter. And that clearly created opportunities for us.

Speaker Change: sort of expect market-making to continue to be quite strong. You know, notwithstanding that, as I'm sure you're aware, you know, there was, you know, levels of open interest.

Speaker Change: you know, price movement, interest from clients that was...

Speaker Change: Sort of unusual, you know in the sort of second quarter and that clearly created opportunities for us

Ian Lowat: You know, it created opportunities in a couple of senses. One is obviously just sort of the profit opportunity of servicing the flow of clients. But also, really importantly, it gives us an opportunity to just show, you know, how Marex can be a reliable partner for clients. And so, you know, just by way of example, there was one, you know, sort of large client that was looking to adjust their position, went to their normal provider, and because of the volatility in the marketplace, was only quoted on 20% of their position. And then they came to Marex, and we knew where all the sort of pools of liquidity were, and we were able to quote them on the full position that they had.

Speaker Change: You know, it created opportunities in a couple of senses. One is obviously just sort of the profit opportunity of servicing the flow of clients.

Speaker Change: But also really importantly, it gives us opportunity to just show, you know, how Marriott can be a reliable partner for clients. And so, you know, just by way of example, there was one, you know, sort of large client that

Speaker Change: was looking to adjust their position, you know, went to their normal provider and was only because of the volatility in the marketplace was only quoted, you know, on 20 percent of their position and then they came to Marex and we knew where all the sort of pools of liquidity were and we were able to quote them on, you know, the full position that they had and as a consequence.

Ian Lowat: And as a consequence, I think we've been able to reinforce our position with a big client in the marketplace, and on a go forward basis, that's gonna help. So when we think about these sort of more difficult markets where there's a lot of volatility, there are opportunities not just for profit but actually to establish your credibility in the marketplace, and I think we have done that. Now in terms of the metal markets going forward, I mean, I think that we're certainly coming off the sort of very positive circumstances that we saw in the second quarter, but I think, You know, our sense at the moment is it's sort of settling at a higher level than it had been previously.

Speaker Change: I think we've been able to reinforce our position with a big client in the marketplace and on a go forward basis, that's gonna help. So when we think about.

Speaker Change: these sort of more difficult markets where there's a lot of volatility, there are opportunities not just for profit, but actually to establish your credibility in the marketplace, and I think we did that.

Ian Lowat: Although, obviously, you know, there's no sort of certainty in that process, but it does feel as though there's sort of more interest in metals. We certainly saw many clients who had not traded metals, expressing sort of genuine interest in the metals product, and we were able to sort of cross-sell those clients very successfully. So I think that this is a general matter. It's more positive for us than it was, but not as positive as it was in the second quarter. Great, that's very helpful.

Speaker Change: Now, in terms of the metal markets going forward, I mean, I think that it will certainly come off the sort of very positive circumstances that we saw in the second quarter, but I think

Speaker Change: You know, our sense at the moment is it's sort of settling at a higher level than it had been at sort of previously.

Speaker Change: Although obviously, you know, there's no sort of certainty that that persists. But it does feel as though the sort of more interesting metals we certainly saw.

Speaker Change: You know, many clients who had not traded metals, you know, expressing sort of genuine interest in the metals product and were able to sort of cross sell, you know, those clients very successfully. So, I think that as a general matter, it's more positive for us.

Speaker Change: than it was, but not as positive as it was in the second quarter.

Ian Lowat: And I guess just as a follow-up separately, just around inorganics and M&A, you guys obviously have been acquisitive in the past. And you talked about being acquisitive, you know, going forward. Can you talk about the current dialogue, the backdrop, and ultimately the scope of that, meaning small versus large, and where your focus really is today? Yeah, I think that we have a very active pipeline. I think that... You know there's a couple of dimensions to that.

Speaker Change: Great, that's helpful. And I guess this is a follow-up separately just around...

Speaker Change: inorganic and M&A.

Speaker Change: You guys obviously have been inquisitive in the past. You talked about being inquisitive, you know, going forward. Can you talk about the current dialogue, the backdrop, and ultimately the scope of that, meaning small versus large and where your focus really is today? Yeah, I think that...

Ian Lowat: I mean, partly, you know, we were, you know, very engaged, obviously, with the IPO in the sort of first part of this year. So to some extent, you know, we've been able to sort of shift a lot of resources that were focused on there. You know, for M&A, and as a result, there's a lot of activity with regard to the pipeline in that regard. You know, we're certainly finding, as a public company, we have more inbound.

Speaker Change: I mean, we have a very active pipeline. I think that there's a couple of dimensions to that. I mean, partly, you know, we were...

Speaker Change: You know very engaged obviously with the IPO in the sort of first part of this year so to some extent you know we've been able to sort of shift a lot of resources that were focused on there.

Speaker Change: you know, to M&A and as a result there's a lot of activity.

Speaker Change: with regard to the pipeline in that regard. You know, we're certainly finding as a public company we have more inbound. And I think that, you know, our credibility with clients or potential acquisitions is actually higher as a sort of public company. So those are sort of positives.

Speaker Change: You know, it's really important for us to maintain discipline in pricing and, you know, our returns. And that obviously...

Ian Lowat: You know, we are sort of applying this, and we sort of recognize how critically important it is, you know, as a public company to show that the discipline that we exhibited previously, you know, continues to be exhibited, you know, in terms of, you know, what are we seeing? We're certainly seeing opportunities to expand regionally, you know, now the focus, as I think we've shared with you on these calls, is, you know, the Middle East, APAC, and particularly Australia, and then also the United States.

Speaker Change: you know, we are sort of applying and we sort of recognize how critically important that is.

Speaker Change: as a public company to show up with the discipline that we exhibited previously, you know, continues to be exhibited. And in terms of, you know, what are we seeing? We're certainly seeing opportunities to expand regionally. You know, now focuss us, as I think we've shared with the...

Speaker Change: on these calls is the Middle East, APAC and particularly Australia and then also the United States. And so we're seeing opportunities there. We're always looking to increase diversification and resilience of our business by adding.

Ian Lowat: And so we're seeing opportunities there. We're always looking to increase the diversification and resilience of our business by adding, you know, either products or geographies that we're not sort of currently involved with or adding clients and capabilities that we don't currently have. And we certainly are seeing opportunities of that kind. And then, in terms of scale, it really does, range.

Speaker Change: either products or into geographies that we're not currently involved with or adding clients and capabilities that we don't currently have. And we certainly are seeing opportunities of those kinds. And then in terms of scale, it really does...

Ian Lowat: So there are, you know, sort of some small, both arms type acquisitions that sort of fill sort of some very niche product holes, which we're looking at. You know, we're looking at some things, but they would generate, you know, $10 to $20 million of sort of additional earnings. And then we're thinking of, you know, some things potentially, you know, in between those things. So, you know, a wide range of things.

Speaker Change: So there are, you know, sort of some small bolt-on type acquisitions that sort of fill sort of some very niche product holes, which we're looking at. You know, we're looking at some things that, you know, would generate

Speaker Change: 10 to 20 million dollars of you know sort of additional earnings and then we're thinking of you know some things potentially.

Ian Lowat: And, you know, hopefully, we'll be able to close on something in the second half of the year. But, you know, the most important thing for us is not to do anything that breaks with the historical financial.

Speaker Change: you know, in between those things. So, you know, a wide range of things and, you know, hopefully we'll be able to close on something in, you know, second half of the year. But, you know, most important for us is, you know, not not to do anything that breaks with the historical financial discipline.

Speaker Change: Great. Thanks for taking my questions.

Speaker Change: Thank you. We will now take the next question.

Operator: Thanks for taking my question. Thank you. We will now take the next question, from the line of Ben Prudish from Barclays. Please go ahead. Hi, good morning, and thanks for taking the question.

Speaker Change: From the line of Ben Prudish from Barclays, please go ahead.

Ben Prudish: I wanted to just ask a few more details on Q2, the quarter-over-quarter performance, both in net interest income and metals. So on the interest income side, you indicated that average client balances were up, I think, on a daily basis, around 10%, but your net interest income was up quite a bit more than that quarter-over-quarter, so I was just wondering what else was the driver there. And then similarly on the metals side, your revenues outpaced the volumes, and it looks like the average revenue per trade picked up. Ian, in your comments, you indicated an opportunity to take advantage of basically more opportunities to serve your clients given the liquidity constraints in the market. How should we think about what normal looks like?

Speaker Change: [inaudible]

Ben Pudich: Basically more opportunities to serve your clients, you know, given the liquidity constraints in the market. How should we think about what normal looks like? You know, you indicated the back half of the year, you know, is based on a more kind of normalized outlook. So how should that trend and how should we maybe be thinking about, you know, future upside in times of market volatility?

Ben Pudich: Why don't you take the Net I.I. question, Rob, and then I'll talk to the metals question. Okay, perfect. Morning, Ben. Obviously, there are many factors that drive our net interest income, but there were two key drivers of the increase in the second quarter.

Ben Prudish: You indicated that the back half of the year is based on a more normalized outlook, so how should that trend and how should we maybe be thinking about future upside in times of market volatility? Why don't you take the NetII question, Rob, and then I'll talk to the metals question. Okay, perfect. Morning, Ben.

Rob Irvin: Obviously, there are many factors that drive our net interest income, but there were two key drivers of the increase in the second quarter. First, just to be clear, within the materials that we released today, average balances for the quarter are calculated off a four-point average using month end. What actually drives our net interest income is the average daily balance, which can fluctuate significantly due to various factors, including client flow and margin requirements at exchanges.

Speaker Change: Firstly, just to be clear, within the materials that we released today, average balances for the quarter are calculated off a four-point average.

Speaker Change: using month end. What actually drives our net interest income is the average daily balance which can fluctuate significantly for various factors including client flow and margin requirements at exchanges.

Rob Irvin: This was particularly the case in the second quarter as we supported our metal clients. So if I look at the average daily balances for the quarter, these were approximately 10% higher than the first quarter. And this added just under $20 million of additional income in the quarter.

Speaker Change: This was particularly the case in the second quarter as we supported our metal clients. So if I look at the average daily balances for the quarter, these were approximately 10% higher than the first quarter, and this added just under $20 million of additional income in the quarter.

Rob Irvin: As we build out our reporting capability over the coming months, we will look over time to disclose our average daily balances rather than the four-point average. Secondly, we have reinvested a number of maturing assets into higher yielding investments. And I think the other point that I would make is that although the average proportion of clients where we pay interest out is consistent at 60% quarter on quarter, we do get some fluctuations on a daily basis, which does give some rise to sort of gains in the quarter, particularly on metals clients where we tend to pay out slightly less. Thanks, Rob.

Speaker Change: As we build out our reporting capability over the coming months, we will look over time to disclose our average daily balances rather than the four-point average.

Speaker Change: Secondly, we have reinvested a number of maturing assets into higher yielding investment.

Speaker Change: And I think the other point that I would make is that although the average proportion of clients where we pay interest out is consistent at 60% of the course you're on quarter, we do get some fluctuations on a daily basis which does get some rise to sort of gains in the quarter.

Ian Lowat: And then just with regard to, you know, your sort of question about, you know, metals and their increase in, or the market making an increase in, you know, revenues versus increases in volumes. I mean, I think that, as I think about, you know, what we're sort of sharing with regard to volumes, you know, and pricing, I think those relationships are quite robust for clearing. They're quite robust for, so the agency and execution businesses.

Speaker Change: particularly on metals clients where we tend to pay out slightly less.

Speaker Change: Thanks Rob. And then just with regard to, you know, your sort of question about, you know, metals and they increase in...

Speaker Change: or market making an increase in revenues versus increases in volumes. I mean, I think that, you know, as I think about, you know, what we're sort of sharing with regard to volumes, you know, and pricing, and I think those relationships are quite robust.

Speaker Change: for clearing, they're quite robust for the agency and execution businesses, and I think they're broadly indicative.

Ian Lowat: And I think they are broadly indicative, you know, within the market making world. So I think that, you know, what we saw, you know, in the quarter, and it's reflected in those numbers, is that, you know, at times of higher volatility, and at times where there are, you know, sort of fewer people willing to, you know, be a market maker in size for clients. You know, those are opportunities where you would expect your revenue per transaction to be higher. And that's what's been borne out.

Speaker Change: you know, within the market-making world. So I think that...

Speaker Change: What we saw in the quarter, and it's reflected in those numbers, is that at times of higher volatility and at times where there's...

Speaker Change: You know sort of fewer people willing to you know be a market maker in size for clients You know those are opportunities where you would expect your revenue per transaction to be larger

Ian Lowat: I don't think, to the point of your question, that that's a level that I would maintain. But I do think that there will be ongoing opportunities, you know, in market making when there are, you know, dislocations or changes or just movements that require people to adjust hedges, and hopefully, you know, what everybody will recognize here is when those opportunities arise, Marex, through the combination of its sort of capabilities and client relationships, is in a position to take advantage of, you know, those opportunities.

Speaker Change: that's what's borne out. I don't think to the point of your question that that's a level that would maintain but I do think that

Ian Lowat: So, you know, in a period where there aren't those kinds of dislocations or opportunities, we wouldn't expect to see the same kind of revenues per transaction, but we do believe that there will be other periods where, you know, we can replicate this kind of performance. You obviously just know when those are going to be, which is very helpful.

Speaker Change: There will be ongoing opportunities in market making when there are dislocations or changes or just movements that require people to adjust hedges.

Speaker Change: Hopefully, you know, what everybody will recognize here is when those opportunities arise.

Speaker Change: through a combination of its sort of capabilities and client relationships is in a position to take advantage of those opportunities. So in a period where there aren't those kinds of dislocations or opportunities, we wouldn't expect to see the same kind of revenues per.

Speaker Change: transaction but we do believe that there will be other periods where you know we can replicate this kind of performance. You obviously just can't know when those are going to be.

Ben Prudish: Maybe just one follow-up, a separate question on the structured notes offering. You talked about equity markets and other factors sort of being positive drivers in the quarter. How are you thinking about the next day, 12 to 18 months? What are the key drivers, to the extent that they're in your control?

Speaker Change: Got it. Very helpful. Maybe just one follow-up, a separate question on the structured notes offering.

Speaker Change: You talked about equity markets and other factors sort of being positive drivers in the quarter. Just how are you thinking about the next say 12 to 18 months? What are the key drivers to the extent that they're in your control? You know, geographic expansion, new distribution partnerships, and things like that. How should we think about the trajectory there? Thank you.

Speaker Change: Just for clarity, you're asking for, just for structured notes, what sort of our view is? Yeah. Yeah. Yeah, look, I mean, I think that...

Ian Lowat: We continue to see a lot of demand for Marex and structured notes. I do think that we're keen to diversify our funding sources away from just structured notes, and I think that that's something that, in the fullness of time, we will achieve. But we're certainly seeing a bit of genuine interest, and so I would anticipate that we will be able to continue to grow, broadly speaking, at the rates that we've grown historically for that particular product.

Speaker Change: You know, we continue to see, you know, a lot of demand for, you know, sort of Marex and Structured Notes.

Speaker Change: I do think that, you know, we're.

Speaker Change: Keen to diversify our funding sources, you know away from just structured notes And I think that that's something that you know in the fullness of time we will you know, we will realize But we're certainly seeing

Speaker Change: sort of genuine interest, and so I would anticipate that, you know, we will be able to continue to grow, broadly speaking, at the rates that we've grown historically for that particular product.

Speaker Change: I've got it, but thank you very much.

Speaker Change: Thank you.

Operator: Thank you. Thank you. We will now take the next question. From the line of Carlos Gomez Lopez from HSBC, please go ahead. Hello, and congratulations on the strong results. Two questions.

Speaker Change: We will now take the next question.

Speaker Change: From the line of Carlos Gómez-López from HSBC, please go ahead.

Carlos Gomez Lopez: The first one about M&A, as you say, you are receiving more inbound offers as a public company. But have you also felt that perhaps the market has become more pricey because now, you know, it is possible to, you know, you have listed, you have proven that it is possible to be a listed company, and therefore people can be, perhaps, a bit more ready when it comes to selling the business to you. And second, in terms of your capitalization, which is getting stronger, have you revisited with the rating agencies what you would need to achieve a higher investment grade? I would imagine that being a public company, having more financial flexibility also puts you in a better stance in front of the rating agencies.

Carlos Gomez-Lopez: Hello, and congratulations on the strong results. Two questions. The first one about M&A, as you say, you are receiving more inbound.

Speaker Change: offers as a public company. Have you also felt that perhaps the market has become more pricey? Because now, you know, it is possible to

Speaker Change: You have listed, you have told that this possibility to be a listed company and then for people can be perhaps a bit more really when it comes to selling the business to you. In terms of your capitalization, which is as you are getting stronger, have you revisited with the right devices? What you would need to achieve higher?

Speaker Change: investment grade. I would imagine that being a public company, having more financial flexibility also, you know, puts you in a better stance in front of the rate and HSS. Thank you.

Ian Lowat: Thank you. So, I think that... You know, sort of to your question of, you know, are we sort of under more pressure to pay more for acquisitions because we're a public company? I mean, I think that they... I've been at such pains to emphasize that. You know, we have very strict financial hurdles.

Speaker Change: You know, sort of to your question of, you know, do, are we sort of under sort of more pressure to pay more for acquisitions because we're a public company?

Speaker Change: I mean, I think that they...

Speaker Change: There's sort of a general sense that many of the companies that we're talking to, you know, have had successful sort of first half of the year, and so I think that

Speaker Change: There's sort of generally, and I don't think it's because we're a public company, but generally there's sort of a sense that that sort of impacts pricing, and I think that that's really the reason that I've been at such pains to emphasize that.

Ian Lowat: You know, we recognize how important M&A is to grow, but we also recognize how important our credibility as a.., sort of savvy acquirer of properties and being able to sort of attract.., sort of good businesses and then be able to grow them as part of our platform is to do ongoing valuation. And so what is important for us is to show that whatever it is that we're going to acquire fits well within our financial targets, which are quite demanding.

Speaker Change: You know, we have very strict

Speaker Change: sort of financial hurdle.

Speaker Change: You know, we recognize how important M&A is to growth, but we also recognize how important, you know, our credibility as a...

Speaker Change: sort of savvy acquirer of properties and being able to sort of attract

Speaker Change: sort of good businesses and then be able to grow them as part of our platform is you know sort of do ongoing valuation and so you know what is important for us is to show that you know whatever it is that we're going to acquire

Speaker Change: You know fits well within Sort of our financial targets, which are you know quite sort of demanding So I think there's there's something to your point that we're public. There's something to your point that

Ian Lowat: So I think there's something to your point that we're public, and there's something to your point that the businesses that are selling have shown fairly robust performance. But on the other hand, we recognize how important it is for us to continue to be very disciplined, and I think we are. What's the second?

Speaker Change: The businesses that are selling, you know, sort of come off, you know, fairly robust sort of performance. But on the other hand, you know, we recognize how important it is for us to continue to be very disciplined and I think we are.

Ian Lowat: The thing about ratings, I mean, as a general matter, I think that... you know, we're not actively looking to get upgraded. I mean only because I think that that's a real challenge and sort of being solidly investment-grade is sort of sufficient. You know, if, as a result of all the things that we're doing to strengthen the firm in terms of earnings, in terms of reliability of earnings, in terms of liquidity in our capital, actually leads to, you know, the rating agencies upgrading us, I think I would be obviously very pleased and grateful, but I don't think we're actively looking to change that.

Speaker Change: What was the second?

Speaker Change: The thing about ratings, I mean, as a general matter, I think that...

Speaker Change: you know we're not actively looking to

Speaker Change: to get upgraded. I mean, only because I think that that's a real challenge and sort of being solidly investment grade is sort of sufficient.

Speaker Change: You know, if as a result of all the things that we're doing to strengthen the firm in terms of earnings, in terms of reliability of earnings, in terms of our liquidity and our capital actually leads to.

Speaker Change: the rating agencies upgrading us, I think we'd obviously be very pleased and grateful, but I don't think we're actively looking to.

Paulo: To change that what would you say Paulo? Yeah, I'm you know, we We have an active

Paulo: dialogue, as you'd expect, with S&P and Fitch, both of whom rate us, you know, we think that we are performing, you know, in line with their expectations, but they've got a very high bar for upgrades, and so I think, you know, we'll have...

Paulo: to have a longer period of demonstrating the type of performance that you'll see in this half.

Speaker Change: In the past you have said that you would need perhaps as much as 40% more capital. Have you revisited that calculation?

Rob Irvin: I think the sort of guideline that we've been given for capital as a component of the upgrade, which I think is, you know, it's only one element of the rating calculation, is that the ratio would need to be about, for us, about 25%, maybe a little bit less than that, 20% higher. And that hasn't changed; we haven't had any sort of discussion with them that suggests that it could be narrower than that. But it is only one component, and there are other factors which I think, you know, play positively to sort of a ratings improvement.

Speaker Change: So I think the sort of guideline that we've been given

Speaker Change: for capital as a component of the upgrade, which I think is, you know, it's only one element of the rate in calculation is that the ratio is need to be about.

Speaker Change: For us about 25%

Speaker Change: maybe a little bit less than that, 20% higher. And that hasn't changed. We haven't had any sort of discussion with them that suggests that it could be narrower than that. But it is only one component, and there are other factors which I think play positively to sort of a ratings improvement.

Carlos Gomez Lopez: Very clear. Thank you so much. Thank you. There are no further questions at this time. I would now like to turn the conference back to Ian Lovidge for closing remarks.

Speaker Change: Very clear. Thank you so much.

Speaker Change: Thank you.

Speaker Change: There are no further questions at this time. I would now like to turn the conference back to Ian Lovidge for closing remarks.

Ian Lowat: Well, thank you all for joining us. It's obviously an exciting moment for us to have our first earnings call as a public company. And it's great to be able to share the very strong results with all of you and also our sense of enthusiasm and optimism for the future. You know, we're really all building an extremely competitive and effective firm here, and all of the sort of long-term drivers of success that we have talked about seem to be playing out in exactly the way that we had anticipated and hoped.

Ian Lowat: So it's obviously been a good quarter, and we recognize that it's just one, and we have to keep doing this, and we're obviously moving forward with the third quarter and thinking about all the things we need to do for 2025 and beyond. So thanks for joining us and I look forward to having follow-up conversations with some of you sort of post this meeting and you having an opportunity to sort of reflect on the earnings. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Good, well thank you all for joining us. It's obviously an exciting sort of moment for us to have our...

Ian Lovidge: sort of first earnings call as a sort of public company and it's great you know to be able to share the very you know sort of strong results with all of you and you know also our sort of sense of enthusiasm and optimism for the future.

Speaker Change: You know, we're, you know, we're really all building a.

Speaker Change: You know an extremely competitive and effective firm here and all of the sort of long-term drivers of success that we have talked about You know seem to be playing out in exactly the way that we had anticipated and hoped so

Speaker Change: It's obviously been a good quarter and we recognise that it's just one and we have to keep doing this.

Speaker Change: moving forward with the third quarter and thinking about all the things we need to do for 2025 and beyond. So thanks for joining us and look forward to having follow-up conversations with some of you post this meeting.

Speaker Change: you're having an opportunity to sort of reflect on the earnings.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

Ian Lowat: Our progressive dividend policy signals the board's commitment to balance a healthy financial position, growth, and returns on our shares. And with that, I'd now like to open the floor to questions. Thank you. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To restore your question, please press star 1 on 1 again.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised.

Ian Lowat: For example, NFX, where we are making investments to expand our capabilities in the second half of the year. On slide 22, acquisitions have been an important part of our growth in the Americas, with both RCTG and EDNF man providing scale in a very large and growing market. We now have over 700 people across 19 offices in the Americas, providing all of our services on a cross-asset cloud platform.

Ian Lowat: Our clearing memberships with ASX and SGX mean that these new clients can also clear directly with us, something they couldn't do previously, enhancing our relevance to them from day one and demonstrating the value of our platform. Our hedging and investment solutions business in APAC is also performing well, with additional highest tiers expanding our distribution capabilities and supporting growth. Moving to slide 25.

Ian Lowat: And I think that in our credibility with clients, or not, the potential acquisitions are actually higher as a sort of public company. So those are sort of positives. You know, it's really important for us to maintain discipline in pricing and our returns. And that, obviously.

Ian Lowat: Geographic expansion, new distribution partnerships, and things like that. How should we think about the trajectory there? Thank you. Subject, just for clarity, you're asking for... Just for structured notes, what our view is. Yeah, look, I mean, I think that.

Operator: To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Robert Cotes. Please go ahead.

Ian Lowat: What would you say, Paolo? Yeah, we have an active dialogue, as you'd expect, with S&P and Fitch deciding to rate us. We think that we are performing, you know, in line with their expectations, but they've got a very high bar for upgrades, and so I think we will have to have longer periods of demonstrating the type of performance that you'll see in. In the past, you have said you would need perhaps as much as 40% more capital. Have you revisited that calculation?