CMC Markets profits plunge as expected on lower trading volumes

CMC markets pre-tax profits were 74 per cent below levels seen during the 2020 trading boom, falling to £36million in the six months to 30 September compared to £141.1million at the same time last year.

The decline will not come as a shock to investors after the UK trading platform issued a profit warning in September, with a collapse in trading volumes driving income 45 per cent lower than last year to £126.7million.

However, performance remains well above pre-pandemic levels, with pre-tax profits and income 20 per cent and 24 per cent higher than 2019, respectively.

Revenues within CMC Market’s more profitable leveraged trading business fell 50 per cent on 2019 levels to £101million this year, while non-leveraged revenues fell 8 per cent to £24.1million. 

The former remains 19 per cent above pre-pandemic levels, while the latter is 67 per cent above.

In what would be the biggest shake-up since its founding in 1989, CMC Markets announced recently that it is considering dividing its online investment group into a retail-focused trading platform and a leveraged operation.

Its number of leveraged clients fell 9 per cent during the half, while non-leveraged clients grew by 10 per cent.

The firm highlighted aims to diversify and grow its non-leveraged earnings via the acquisition of the ANZ Share Investing, which when completed over the next 12-18 months will boost the business division with approximately 500,000 new clients and AUD$45billion (£24.4billion) of assets.

It followed CMC Markets’ September profit warning, which saw shares go into freefall after the group cut its annual earnings outlook by £80million in response to ‘subdued’ trading volumes in July and August.

However, CMC Market’s forewarning did not stop its shares falling another 3.5 per cent in early trading to 264.5p.

As basic earnings per share fell 75 per cent on the same time last year to 9.6p, CMC Market’s dividend per share fell 62 per cent to 3.5p.

Lord Cruddas, chief executive, said: ‘I’m very pleased to see the business is operating well above pre-pandemic levels across all our business lines. 

‘This is testament to the resilience and quality of our platform and offering.

‘We are on a fast track to diversification, using our existing platform technology to win B2B and B2C non-leveraged business. 

‘This will be further boosted with the launch of our new UK investment platform planned in the early part of the next financial year, which will offer both B2C and B2B potential.

‘In line with this strategy, we believe it is right for us to evaluate the viability of separating the businesses in order to unlock the significant value within the current group structure.

‘The board is expected to start this review before year end and complete it by June 2022. We will update on progress in due course.’

CMC shares are down 34.6 per cent since the start of the year and 28.8 per cent over one year.

Analysts at Peel Hunt said the stock ‘is materially undervalued’, noting investment in strategic initiatives and ‘good progress’ being made.

Maintaining a target price of 462p, they added: ‘CMC continues to invest in products and services to support future growth.’