CLS0030 Website Commitee Images Resized Trevor Suarez

Trevor Suarez
Chief Financial Officer

Chief Financial Officer’s Report

As highlighted by both Ken and Marc, as we enter 2022, CLS celebrates 20 years of delivering unprecedented levels of risk mitigation, liquidity optimization and operational efficiencies.

We have played a key role supporting the FX market, which has grown from settling average daily values of just over USD1 trillion in the early days of CLS, almost two decades ago, to over USD6 trillion in 2021. With a proven track record of delivering critical industry-wide services at scale, we have continued to adapt and evolve to meet the changing needs of our shareholders, clients and the broader FX market . It is within this broader context that I would like to explain our financial performance, as we continue to rightly invest in our infrastructure as well as develop and enhance our product suite to meet our clients’ settlement, processing and data needs. From a financial perspective this has meant maintaining financial stability while making the necessary, and significant, investments in our technology infrastructure and control functions. This ensures we remain resilient and can deliver the high levels of service you have come to expect. We seek to grow revenues from increased levels of activity processed through the CLS ecosystem to offset the cost of our investments and other cost increases such as inflation. Combined with cost savings from our investments, this will minimize as much as possible the need for future tariff increases.

“With a proven track record of delivering critical industry-wide services at scale, we have continued to adapt and evolve to meet the changing needs of our shareholders, clients and the broader FX market.”

Overall financial performance showed a lower level of post tax loss in 2021 of GBP8.3 million compared to a prior year loss of GBP15.4 million, while cash and investment balances at GBP178 million were broadly flat year-on-year. (December 2020: GBP179 million). Going forward we expect our cash investment balances to increase slightly as we complete major components of our investment program. Our current balances remain well in excess of regulatory requirements. During the year following a review of assets capitalized on the balance sheet, GBP9 million of intangible assets relating to prior years were written off, with an associated adjustment to the 2021 opening reserves. Further details are disclosed in the footnote to Consolidated statement of changes in equity table on page 48 of this report and in note 9, Intangible Assets, on page 65.

Revenue for the year was GBP237.9 million, an increase of 12%, compared to 2020, resulting from a combination of tariff adjustments to CLSSettlement and higher settled values, as well as an increasing contributing revenue from products such as CLSNet, CLSTradeMonitor, Cross Currency Swaps and CLSMarketData.

Pre-tax operating losses of GBP17.0 million in 2021 compared to GBP20.1 million reported for 2020. Results for 2021 were helped by higher revenues from CLSSettlement. However this was offset by final accelerated amortization charges, following the completion of Convergence, which migrated CLSSettlement onto the new Unified Services Platform, as well as a higher level of change costs directly expensed to the P&L rather than capitalized to the balance sheet.

This allows us greater flexibility to develop and enhance new and existing services. This has been achieved by optimizing the underlying technology platform supporting our settlement services and through the complete ownership of our application development and change delivery. However, our journey is not complete. Our ongoing investment in resilience, security and three lines of defense, alongside our focus on upgrading the hardware and data centers that support CLSSettlement will progress over the next two to three years.

Additionally, 2021 saw an increase in people costs, offset by lower third party costs, as we brought core technology capability in house, reducing our reliance on contract staff as we seek to deliver essential services and complete our long-term technology agenda. Therefore our future income statements will continue to recognize some of this investment immediately as well as related amortization charges of prior year investments. All of these factors will influence our reported profitability for the next few years. Despite this, we expect to maintain strong capital resources in excess of any minimum regulatory and working capital requirements throughout this period.

At the start of 2021, we also went live with three new legal entities: CLS Processing Solutions Ltd., CLS Assets UK Ltd. and CLS US Services Inc. These entities were incorporated in 2018, and their establishment provides a greater level of segregation and transparency between our settlement and non-settlement product lines. In closing we will continue to further consolidate our resources and modernize our technology and control environment in a measured and planned manner. We will always ensure we do not put our financial stability and capital at risk.

These efforts are fundamental to improving our business, protecting the settlement service and maintaining our reputation as the trusted FMI delivering high quality services to the FX market. I look forward to 2022 as we deliver on our long-term strategy to consolidate our resources, modernize our technology and control environment and deliver on commitments to our shareholders, clients and the broader FX ecosystem.

Trevor Suarez

Chief Financial Officer

Read related news