Successful execution of growth strategy and proactive risk management delivers strong growth in 2022, Marex well-positioned for 2023
Marex Group today announced record full-year results for the period to 31 December 2022. Strong growth in revenue and profit demonstrates the strength of the Group’s global franchise, and ability to grow organically across all segments and geographies.
| Adjusted Results | Statutory Results | |||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||
| Revenue ($m) | 701.5 | 542.6 | 29% | 1,344.4 | 1,114.2 | 21% | ||
| Profit Before Tax ($m) | 121.7 | 79.6 | 53% | 121.6 | 69.9 | 74% | ||
| Margin | 17.3% | 14.7% | 260bps | 9.0% | 6.3% | 270bps | ||
| ROE | 17.7% | 14.2% | 16.8% | 12.4% | ||||
| Total Capital Ratio | 266% | 164% | 266% | 164% | ||||
2022 Highlights
- Diversified and resilient business model combined with proactive risk management enabled the business to successfully support clients during significant market turbulence
- Strong financial performance driven by client activity on the Marex platform
- Net revenue up 29% to $701.5 million
- Adjusted operating PBT up 53% to $121.7 million
- Successful $100m Additional Tier 1 issuance, further strengthening the balance sheet and capital position to support continued growth
- Investment grade credit ratings affirmed by S&P Global and Fitch
- Acquired ED&F Man Capital Markets division, creating a leading franchise in the US, and expanding our global footprint across APAC and the Middle East
- Delivering on our sustainability strategy, expanding our environmentals product offering, and developing an innovative carbon sequestration project
- Positive outlook for 2023; expanded global footprint, strong capital base and clear growth strategy combined with macro tailwinds have contributed to a very strong start to the year
Ian Lowitt, Marex CEO, commented:
“We are delighted with these record results. The strong revenue growth reflects the increasing demand from our clients, who recognise our deep expertise and ability to deliver quality service and solutions.
“We remain focused on our strategic growth initiatives, which are diversifying our business by adding products to our service segments and expanding geographically. A particular highlight this year has been the acquisition of the ED&F Man Capital Markets business, which materially expands our footprint, expertise and clients across the world.
“This is a very exciting time for Marex, and I’d like to thank our people for their commitment to delivering excellent service for clients through a volatile year. The outlook for Marex is very positive, we have had a strong start to 2023 and I am confident that we can continue to deliver sustainable growth and build an even more diversified, resilient and dynamic firm.”
Delivery against strategic priorities
Good progress has been achieved against the Group’s strategic initiatives during the year, further expanding the product offering and global footprint to deliver growth and diversification. The Group has further invested in its environmental products offering, which is seeing strong demand from clients as they navigate the energy transition. It has also invested in the innovative carbon sequestration venture, in partnership with OxCarbon and Global Mangrove Trust, which produced its first offsets during the year.
Marex continued to build out its Neon client portal, where the number of users increased around 25% during the year to almost 10,000, demonstrating the value of Marex’s market insight and its ability to engage clients.
Marex has successfully completed the acquisition of the ED&F Man Capital Markets business across the UK, US, the Middle East and Australia. The acquisition materially enhances Marex’s client offering, expanding the Group’s global footprint in the Middle East and across the APAC region, and creating a leading franchise in the US. The acquisition builds on Marex’s track record in identifying and integrating high-quality businesses, adding scale and capabilities that complement its organic growth trajectory.
Strong delivery in 2022
| 2022
$m |
2021
$m |
% Change | |
| Revenue | 1,333.4 | 1,114.2 | 21% |
| Cost of trade, net interest income and bad debts | (642.9) | (571.6) | 12% |
| Net revenue | 701.5 | 542.6 | 29% |
| Front office costs | (400.0) | (328.6) | 22% |
| Control and support costs | (179.8) | (134.4) | 34% |
| Adjusted operating PBT | 121.7 | 79.6 | 53% |
| Adjusted Tax | (23.4) | (15.3) | 53% |
| Adjusted operating PAT | 98.3 | 64.3 | 53% |
| Reported PAT | 98.2 | 56.5 | 74% |
| Adjusted return on equity (‘ROE’) | 18% | 14% | |
| Adjusted return on tangible equity (‘ROTE’) | 31% | 27% |
Group net revenue for the year ended 31 December 2022 is up 29% to $701.5 million and Adjusted operating PBT up 53% to $121.7 million.
Marex delivered another year of exceptional performance, driven primarily by organic growth from increased client activity across the global franchise and strong commercial execution in Marex’s core energy and commodity markets. This performance reflects the agility and resilience of the business and demonstrates its ability to respond to external events whilst proactively managing risk to support clients through a period of significant market volatility.
The acquisition and consolidation of ED&F Man Capital Markets also contributed to performance in the final quarter of the year. Segregated client monies increased significantly to $12.9 billion as at the end of 2022 (2021: $5.4 billion).
Robust revenue generation and the increasing scale of the business resulted in Adjusted operating PBT margins increasing to 17.3% (2021: 14.7%), delivering improved return on equity1 of 17.7% (2021: 14.2%).
This record performance accelerates the momentum being built in Marex’s growth trajectory and represents the ninth year of consecutive growth for the Group, with an average annual Operating PBT growth of 29% since 2014.
2022 Segmental Performance
| Net Revenue | 2022
$m |
2021
$m |
% Change |
| Market Making | 161.3 | 131.3 | 23% |
| Clearing | 214.4 | 136.1 | 58% |
| Hedging and Investment Solutions | 99.8 | 87.9 | 14% |
| Agency and Execution | 226.0 | 187.3 | 21% |
| Total | 701.5 | 542.6 | 29% |
| Adjusted Operating PBT | 2022
$m |
2021
$m |
% Change |
| Market Making | 59.2 | 45.1 | 31% |
| Clearing | 93.8 | 36.8 | 155% |
| Hedging and Investment Solutions | 27.8 | 31.8 | (13%) |
| Agency and Execution | 19.2 | 21.1 | (9%) |
| Corporate residual | (78.3) | (55.2) | 42% |
| Total | 121.7 | 79.6 | 53% |
Market Making – provides direct liquidity to clients across a variety of products primarily in the energy, metals and agriculture markets.
- Revenues increased 23% to $161.3 million (2021: $131.1 million) as Metals and Agricultural franchises benefited from rising market volatility and improving market conditions, combined with strong performance particularly in our energy market making franchise.
Clearing – provides Clearing services across the full range of energy, commodity and financial markets. We act as principal for our clients and provide direct access to over 57 exchanges globally.
- Revenues increased 58% to $214.4 million (2021: $136.1 million) due to increased client activity resulting in higher number of contracts cleared during 2022, combined with the benefit of higher interest income of client balances.
- Growth in this business is illustrated by the growth of client monies, which increased 139% to $12.9 billion at the end of 2022, including $4.5 billion of client assets added with the ED&F Man Capital Markets acquisition.
- Adjusted Operating PBT increased 155% in 2022 to $93.8 million.
Hedging and Investment Solutions – provides high quality bespoke hedging and investment solutions to our clients.
- The business performed well during 2022, delivering 14% revenue growth to $99.8 million, as strong demand for our bespoke commodity hedging solutions more than offset subdued investor appetite for our investment solutions (structured notes).
- As a result of lower demand for structured financial products during the year and continued investment in distribution capabilities and control and support functions, including risk and finance, to support future growth, Adjusted operating PBT decreased by 12% in 2022 to $27.8 million from $31.8 million.
Agency and Execution – provides essential liquidity and execution services to our clients primarily in the energy and financial securities markets.
- Revenues increased 21% to $226.0 million (2021: $187.3 million). This reflected positive market conditions, particularly in the first quarter of the year, with higher volatility driving higher levels of client activity across the energy markets, and the inclusion of ED&F Man Capital Markets securities revenues in the last quarter of the year.
- We restructured our energy operations during the second half of the year as we looked to reallocate resources and invest in certain geographies to strengthen our product and client coverage. Adjusted operating PBT declined slightly year-on-year to $19.2 million from $21.1 million in 2021.
Balance Sheet
Our balance sheet continues to comprise high-quality liquid assets which underpin client activity on the Marex platform; total assets increased from $5.3 billion at December 2021 to $15.7 billion at December 2022.
This growth is largely due to increased cash and liquid assets and trade receivables, which are balances due from clients or other counterparties such as exchanges or clearing houses, as well as the addition of reverse repurchase agreements and stock lending balances – a result of the ED&F Man Capital Markets acquisition which has increased the Group’s presence in financial securities.
| 2022 | 2021 | Change
% |
|
| $m | $m | ||
| Cash and cash equivalents | 910.1 | 712.0 | 28% |
| Treasury instruments and financial institution notes | 2,719.7 | 1,524.4 | 78% |
| Liquid assets | 3,629.8 | 2,236.4 | 62% |
| Trade receivables | 4,685.2 | 2,018.8 | 132% |
| Trade payables | (6,647.6) | (3,291.2) | 102% |
| Net trade payables | (1,962.4) | (1,272.4) | 54% |
| Derivative instruments – assets | 480.8 | 496.5 | -3% |
| Derivative instruments – liabilities | (294.3) | (199.4) | 48% |
| Net derivative instruments | 186.5 | 297.1 | -37% |
| Reverse repurchase agreements | 4,346.0 | 144.3 | n.m. |
| Repurchase agreements | (4,381.4) | (140.4) | n.m. |
| Net repurchase agreements | (35.4) | 3.9 | n.m. |
| Stock borrowing and securities | 2,304.6 | 8.1 | n.m. |
| Stock lending and securities | (2,383.7) | 0.0 | n.m. |
| Net securities | (79.1) | 8.1 | n.m. |
| Debt securities in issue | (1,160.0) | (1,126.7) | 3% |
| Short-term borrowings | (148.7) | 0.0 | n.m. |
| Debt securities and borrowings | (1,308.7) | (1,126.7) | 16% |
| Other assets | 120.4 | 134.1 | -10% |
| Other liabilities | (50.5) | (29.2) | 73% |
| Other net receivables | 69.9 | 104.9 | -33% |
| Tangible equity | 500.6 | 251.3 | 99% |
| Goodwill and Intangible assets | 177.1 | 226.4 | -22% |
| Total Equity | 677.7 | 477.7 | 42% |
Capital and Liquidity
A prudent approach to capital and liquidity and commitment to maintaining an investment grade credit rating are core principles which underpin the successful delivery of the growth strategy.
| 2022
$m |
2021
$m |
|
| Total available liquid resources | 797.6 | 818.6 |
| Liquidity headroom | 530.3 | 544.9 |
Group liquidity resources consist of cash and high-quality liquid assets that can be quickly converted to meet immediate and short-term obligations. The resources include non-segregated cash, unencumbered US Treasuries, and balances at exchanges in excess of house margin requirements. The Group also includes any undrawn portion of its committed Revolving Credit Facility (‘RCF’) in its liquidity resources.
Marex maintains a robust capital position, with regulatory capital increasing significantly to almost $500m as at 31 December 2022 as a result of the strong profitability of the Group during the year and the successful issuance of $100m AT1 capital in June 2022.
The total capital ratio4 as at 31 December 2022 is 266% whilst also maintaining liquidity headroom of $530.3m at year end.
| 2022
$m |
2021
$m |
|
| Core equity Tier 1 capital2 | 383.3 | 240.0 |
| Additional Tier 1 Capital | 97.6 | — |
| Tier 2 Capital | 4.1 | 55.9 |
| Total Capital resources | 485.0 | 295.9 |
| K-factor requirement | 165.3 | 92.5 |
| Own Funds Requirement3 | 182.6 | 180.8 |
| Total capital ratio4 | 266% | 164% |
As a result of the robust capital and liquidity position and strong performance, Marex Group plc’s investment grade credit rating was reaffirmed by S&P and Fitch during the year ended 31 December 2022.
Well positioned for 2023
Following another year of strong growth and with an expanded global operating footprint and larger revenue and capital bases, the Group is very well positioned going into 2023. There are clear opportunities to further develop the Group’s environmentals offering to become a leading participant in carbon markets – where there is significant potential demand from clients as society and the financial markets transition towards a low-carbon economy.
We have had a very strong start to 2023, the integration of the ED&F Man Capital Markets acquisition is progressing well and the external environment remains supportive with continued market volatility and rising interest rates.
Management is confident that it can continue to deliver on its growth strategy of broadening its product offering and expanding its geographic footprint to drive sustainable growth.
Notes:
1 – Calculated as Operating PAT, less AT1 coupon paid in the period, divided by average shareholder equity
2 – Total capital resources include unaudited results for the period as at the end of the financial year
3 – Own Funds Requirement presented as Own Funds Threshold Requirement based on the latest ICARA process
4 – Calculated as total capital resources divided by the transitional capital requirement under IFPR