On Thursday 25 July CMC Markets Plc, the UK-based financial derivatives dealer, released its Q1 trading results, for its quarter ended 30 June 2019, through the LSE (London Stock Exchange). To date, they have shown relatively weak financial performance during the 2019 fiscal year. However, while the update does not quote specific figures, it does report that Q1 performance has improved year-on-year.
The report states that, when compared to the same quarter of the prior year, the performance of net operating income has improved. The progression has been driven by an increase in B2B sales and higher revenues per active client.
Stabilization of Spread Bet and CFD Activity
The Chief Executive Officer (CEO), Peter Cruddas, set up CMC Markets in 1989 as a forex broker with just GBP 10,000. He commented on the report stating that client trading activity concerning the spread bet and contract-for-difference (CFD) businesses is now stabilizing. He believes that this was down to clients acclimatizing to the new regulatory changes.
The firm also seems to be benefitting from growth in its institutional B2B business. The B2B activity is underpinned by not only their platform and technology but also their strategy of targeting those clients of higher value and with more experience. Cruddas further noted that this translates into a higher revenue per active client as well as an improvement in their B2B returns for the quarter.
Cruddas spoke in June 2019 on the new regulations stating he felt that the worst effects of the regulatory crackdown on the sector were finally over.
CMC Financials and the Market Climate
For the financial year ended 31 March 2019, CMC Market testified to weak results. Over the year, their net operating income decreased by 30% to GBP 56.3 million (USD 70 million), while their bottom line fell by 90% to GBP 6.3 million (USD 7.8 million).
CMC and its rivals namely, IG Group (IGG.L) and Plus500 Ltd (PLUSP.L), have all shared the experience of a fall in client numbers over the last year, as European and British regulators tightened the regulations on products that permitted anyone with a banking card to make bets on the financial markets that were too highly leveraged.
Nonetheless, they are all now signaling a steadying of this business activity in their most recent updates. Plus500 this month has stated that its revenue increased in the second quarter because it attracted new clients. IG has forecast revenue growth in the last six months of this year.
CMC Markets Future
For the financial year ended 31 March 2020, operating costs will be a little higher than 31 March 2019. However, while acknowledging this, the statement confirmed that the Board is confident in its ability to meet PBT (Profit Before Tax) expectations in its financial year ended in 2020.
They are confident that they have the perfect strategy for the business moving forward, especially as their platform technology ensures they are an attractive proposition to such a wide range of clients, as well as global institutional partners.