CMC Markets forecasts 37% drop in CFD and spread-bet revenue in FY 2019

Maria Nikolova

Reduced client trading activity following the implementation of the ESMA intervention measures is among the factors weighing on revenues.

Online trading services provider CMC Markets Plc (LON:CMCX) has earlier today provided a trading update for the financial year to March 31, 2019 (FY 2019).

The company says that overall performance during the period has been affected by reduced client trading activity following the implementation of the ESMA restrictions on the offering of CFDs to retail clients. This was compounded by challenging market conditions during much of the final quarter.

As a result, CMC expects to report CFD and spread-bet revenue of c. £110 million for FY 2019, 37% lower than the prior year, and net operating income of c. £131 million.

The impact of the new ESMA margin rules, which has resulted in retail clients trading less, utilising more of their cash to fund their margin requirements or needing to deposit more funds with CMC to trade at previous levels, is showing signs of stabilising. Since the introduction of the new rules, client money has remained strong, and active client and new client numbers have remained stable resulting in the Group having confidence in meeting the consensus FY 2020 outlook.

CMC also noted its enlarged stockbroking business in Australia, which migrated approximately 500,000 stockbroking client accounts as part of an ANZ Bank white label transaction at the end of H1. This, and the continued strength of CMC’s institutional business also provide confidence in the Group’s outlook.

Let’s recall that, during the first half of FY19, CMC Markets registered a statutory profit before tax of £7.2 million, down 76% on prior year (H1 2018: £29.8 million). Profit after tax was £7.8 million, down 69% against the equivalent period a year earlier (H1 2018: £25 million). Basic earnings per share were 2.7 pence in H1 2019 (H1 2018: 8.7 pence).

During the six months to September 30, 2018, operating expenses rose 6% to £62.7 million (H1 2018: £59.3 million), mainly due to investment in the stockbroking business and higher fixed salary costs across the Group. Revenue per active client fell 22% year-on-year to £1,413.

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