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The company provided a satisfactory explanation of the nature of the transactions to support the inclusion of the cashflows within operating activities. The company undertook to present separate line items for the movements in amounts due to and from subsidiaries in future annual reports and accounts. We asked for clarification of the value of dividends received in cash during the year based on an inconsistency in the notes compared to the parent company cash flow statement.
Fundamental analysts use financial statements, industry trends and market releases to see if an asset is under or overvalued. A judgement has been made to apply the recognition and measurement principles of IAS 38 Intangibles https://dreamlinetrading.com/ in accounting for these assets. The financial information set out herein does not constitute the Group’s statutory accounts for the years ended 31 March 2022 and 2021 but is derived from those financial statements.
We requested further information about the litigation and regulation provision, specifically the nature of the provision relating to Greek tax, and the nature and relevant uncertainties of other provisions included in the total for this balance. The company provided this information and, in its next accounts, agreed to enhance its disclosures over the nature of these provisions, the extent of estimation uncertainty and the likely timing of settlement. The group had significant deferred tax liabilities in respect of accelerated capital allowances. However, there was no deferred tax asset recognised for unutilised tax losses to offset the liabilities.
Shareholders
The company explained that interest income in respect of personal loans is determined using the simple interest rate method as a proxy for the EIR method given the business does not charge fees, premiums or apply discounts to their products. The company has assessed that the difference between the two methods is immaterial as the lack of fees does not cause the two methods to deviate when applying either a contractual or expected life. Going forward, we would expect this assessment to be repeated each year until such time as the company adopts an effective interest rate model. The company provided additional information about balances relating to joint operations, and agreed to include additional disclosures in relation to these interests.
It remains likely that further regulatory changes will be made in Australia, although implementation dates remain unknown. The Australian regulator, ASIC, set out its proposals in a consultation paper in August 2019. These proposals included increasing margin requirements for retail clients to a level similar to those required in the ESMA region and cover other requirements such as standardised warning notices, and cost disclosures. The heightened volatility and trading activity resulting from COVID-19 has continued into the first quarter of the financial year, and CMC continue to provide clients with market leading trading platforms and client service. I am also confident that, once the financial world returns to more normal conditions, the Group will continue to build on the underlying growth that was being displayed prior to the pandemic. This, in combination with our stable dividend policy and positive trading outlook, will enable CMC to continue to deliver considerable value to all of our stakeholders.”
As a result of our review, the company identified that it had incorrectly classified some amounts in the Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity. The company concluded that these misclassifications did not have a material impact on the financial statements and undertook to ensure that amounts were correctly classified in future financial statements. We asked for more details of the accounting policy for the recognition of revenue arising from contract modifications. The company provided the information requested and agreed to clarify the accounting policy for contract modifications in its 2022 accounts.
Stocks can be compared to market indices to provide a ‘big picture’ context, whereas, you can only compare indices to other indices. However, certain commodities such as oil tend to impact other asset classes more than any other single financial instrument. This is because demand can be dictated by a nation’s economy, politics or changing industries, while supply variables can be affected by a country’s international relations and oil production. The Group leases several assets including leasehold properties and computer hardware to meet its operational business requirements.
Accounting and Reporting Policy
Liquidity ratios form a class of metrics to measure a company’s liquidity, that is, how able a company is to pay its short-term debts without raising capital. As they do not have a cash buffer, any market turbulence could cause impose serious issues. A high P/E ratio could suggest that a stock is over-valued, whereas, a low P/E ratio could suggest a stock is undervalued or an unattractive investment. The same goes for corporate bonds, as you must take into account the company’s credit rating. This means that a company’s financial health plays a big part in the value of a corporate bond. Fundamental analysis aims to determine if you should buy or sell an asset by looking at public data.
Case Summaries, which are available for cases closed in the quarter ending March 2021 onwards, are included in the table below. As, currently, the FRC is subject to existing legal restrictions on disclosing confidential information received from a company, the Case Summaries can only be disclosed with the company’s consent. The FRC publishes, on a quarterly basis, summaries of its findings from recently closed reviews that resulted in a substantive question to a company (‘Case Summaries’).
The company accepted our observations and committed to provide reconciliations for all its APMs in future annual reports, and to ensure that APMs are not given more prominence than IFRS measures. We also asked the company why the ECL analysis in the receivables note did not refer to the accrued income balance of £301.5 million. It agreed to be more explicit in its future reporting that the ECL provision applied to both trade receivables and accrued income, and to demonstrate how the provision is apportioned between those two balances.
The company undertook a review of the lawfulness of dividends paid during the year to 31 March 2021 and prior financial periods. The company explained the steps that it intended to take to rectify its non-compliance with the requirements of the Act. The company also explained that balances relating to share-based payments are excluded from the determination of reserves available for distribution as it does not consider them to represent realised profits. Correct the comparative amounts in the cash flow statement to be included in the interim results for the six months ended 30 September 2022 to reflect the amount factually paid for the domain name during that period.
The company provided a satisfactory explanation and agreed to disclose information about the nature of the contractual rights in the future, along with the judgements made when recognising a liability and separate asset. The company satisfactorily explained that the smelters and roasters are the company’s customer, not its agent, and that the adjustment to revenue for ‘tolling’ or ‘treatment’ charges disclosed in the annual report is a pricing adjustment, rather than an expense of the company. The company undertook to revise the wording of its revenue accounting policy to explain in more detail the nature of the pricing of concentrate sales. We requested further information about certain items in the reconciliation of operating EBITDA to operating loss as we were unable to trace these items to figures disclosed elsewhere in the accounts. The company provided the information requested and undertook to ensure, in future annual reports, that figures reported in the finance review could be agreed to amounts in the notes to the accounts. The company’s response satisfactorily addressed the question we had raised and included a commitment to enhance its accounting policy to explain how the securitisation trust meets the requirement for consolidation under IFRS 10 in future annual reports.
- The statement of cash flows presented a cash outflow within investing activities, in relation to the acquisition of a subsidiary, which comprised the cash paid as consideration for the acquisition.
- The company provided the information requested and agreed to enhance its disclosures about the arrangement in future annual reports and accounts.
- Whereas top-down investing focuses on the greater economy and industry before analysis of a chosen company, a bottom-up approach focuses specifically on the stock and its fundamentals.
- Fundamental analysis encompasses anything from the broad economic outlook to specific valuation metrics.
I am especially pleased to see a return to growth in the UK and Germany as our clients adjust to the new regulatory environment. Strong and robust risk management is crucial to the ongoing success of the Group, and the Group’s risk management is constantly reviewed to ensure it is as effective as possible. Our continued focus on quantitative analytics and data driven decisions allowed the Group to offer very competitive spreads and liquidity versus the underlying market. Our analytics continued to evolve throughout the year, yielding higher internalisation ratios. Intelligent hedging strategies helped keep execution hedge costs low and we successfully managed arbitrage driven client trading activity by identifying trades generated through third party software programmes that exploit latency in pricing from exchanges. The Group’s cost base excluding variable remuneration increased by 14% to £137.3 million during the year, mainly as a result of the significantly enlarged Australian stockbroking business, but also due to increasing investment in our strategic initiatives.
Fundamental analysis
Marketing costs have increased by £0.8 million (6%) to £14.9 million as the Group looked to capitalise on market opportunities as they arose throughout the year, whilst ensuring that spend was targeted through the most efficient channels. The success of this targeted approach is borne out within the increases in both active clients and revenue per active client. It was impacted by regulatory changes which were implemented on 1 August 2018, placing leverage restrictions on retail clients. Encouragingly, despite the 2019 comparative including four months of pre-ESMA client activity, gross client income grew by £3.5 million (3%) and RPC increased by £1,132 (49%).
- We asked for the basis of the company’s conclusion that this excess cash met the definition of cash and cash equivalents in IAS 7 ‘Statement of Cash Flows’, which the company provided.
- The UK played an instrumental role in the introduction of IFR/IFD and the IFPR has been designed to achieve similar outcomes, albeit tailored where necessary to reflect the structure of the UK market and how it operates.
- We asked the company for quantitative details of the significant unobservable inputs used to measure the fair value of assets held at level 3 in the fair value hierarchy.
- As it implies future earning is going downhill from this point and will not recover in a short time.
The company explained that the arrangement was suspended and modified later in the year and was now discretionary. Consequently, it was considered appropriate to derecognise the remaining financial liability. We asked the company to explain why its SECR disclosures did not include its energy consumption information. We closed our query after the company gave an undertaking to provide the information in its future reports.
Tax moved to a payable position due to underpayments in Australia.
The company provided the information requested and agreed to enhance its disclosures about the arrangement in future annual reports and accounts. We asked the company to provide further information about its disclosures in respect of current and deferred tax on share-based payments. The company acknowledged that a current tax credit posted through other comprehensive income should have been credited directly to equity and agreed to change its treatment of such amounts prospectively.
The company provided this information and agreed to enhance the IAS 1, ‘Presentation of Financial Statements’, estimation uncertainty disclosures in the next annual report and accounts. It also explained the reason why there is a difference between the reserves-based life and the useful life over which xcritical cheating the asset is being amortised, and committed to clarifying this in its future reports. As a result of our letter, the company identified one deposit that was incorrectly classified as cash and cash equivalents as the deposit had an original maturity date of 12 months and no early termination option.
In addition, we noted that the company’s disclosures stated that certain CGUs were sensitive to small to moderate changes in the discount rate or the long-term growth rate. We asked for the basis on which the company was satisfied that additional impairment losses should not have been recognised for those CGUs. The company clarified that short term deposits included an amount of £5m with a maturity date of more than three months from the date of acquisition.
Intangible assets
Kevin joined Gresham House from Oaktree Capital Management where he was a senior vice president responsible for finance and operations in the European Principal team covering private equity and debt opportunity funds. Prior to joining Oaktree, Kevin was Director – Group Reporting and Valuations at 3i Group plc. Anthony Townsend has spent over 50 years working in the City and was Chairman of the Association of Investment Companies from 2001 to 2003. This chart shows a view of problem reports submitted in the past 24 hours compared to the typical volume of reports by time of day. Downdetector only reports an incident when the number of problem reports is significantly higher than the typical volume for that time of day.
Despite market volatility, the firm has just decided to pay a £6 million interim dividend too. The company is believed to have in excess of £80m in liquid funds in the bank and presently has a record number of clients and client money – but is not thought to be completing a record number of trades . Current trading is also thought to be positive, although behind previous record years, with a profit of between £15m-£20m booked in the first six months of the year. In the 12 months to 31 March 2010, xcritical generated sales of £149.7 million and its earnings before interest, tax, depreciation and amortisation amounted to £17.1 million.
Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors. We enquired about the presentation of the redemption of other non-current liabilities in the note of changes in liabilities arising from financing activities, observing that this presentation was inconsistent with the cash flow statement. The company acknowledged that the presentation of this redemption in the note of changes in liabilities was incorrectly shown as a cash flow and committed to correct this note in the forthcoming annual report and accounts. We asked the company to provide further information about the sensitivity of the valuation of inventory to changes in assumptions, which was identified in the accounts as a source of estimation uncertainty in accordance with IAS 1 ‘Presentation of Financial Statements’. On the basis of that explanation, we closed our enquiry into the estimation uncertainty disclosures but encouraged the company to differentiate clearly any such additional disclosures from those required by IAS 1 and to explain their relevance.
New investments will focus on seven core initiatives aiming to enhance functionality and capture the broader wallet share as we evolve our execution services and investment platforms. We will continue to utilise our technology to enter new markets and expand our non-leveraged offering. View advanced insights on financial statements, including growth rates and metrics that provide an in-depth view of the company’s historical and forecasted financial performance.