Darwinex reports higher revenues for 2021, but net profit halved
Darwinex, a UK-based social trading broker and asset manager, has reported its financials for the fiscal year ending June 30, 2021. Although the group failed to match some of last year’s performance metrics, having suffered from lower net income, it turned the best revenue since it was founded in 2012.
Over the previous fiscal year, the broker saw its operating revenue increase to £5.27 million in FY 2021, up from £4.69 million a year ago, or 12.4 percent higher year-over-year.
In terms of its bottom line, the firm reported its net profit at a figure of £224,547 for 2021, down by more than 50 percent compared to £469,926 in the previous year.
Darwinex’s revenues consisted mainly of commission earned on foreign exchange trading by clients. The latest results highlight a downturn for the Darwinex, with the London-based firm failing to grow their organic profit the first time in many years.
The primary culprit for the downbeat performance might have been its higher administrative expenses which increased by 26 percent, coming in at £4.09 million relative to £3.27 million a year earlier. However, the broker attributed this rise to higher investments into marketing. Although this had resulted in short-term losses, Darwinex hopes higher expense to be offset by future growth.
Within this context, the company said it invested over the last 18 months to add exchange traded instruments (cash equities, futures, ETFs). It is working to support all asset classes by Q2 2022, it said in a filing with the UK Companies House.
Darwinex, which offers a hybrid of social-related copy trading solutions, saw its revenues grow from just €146,500 in 2015 to over €1.0 million in 2016, then doubled the figure to €2.15 million for 2017 until it peaked in the prior fiscal 2021.
Prior to the current Covid-spurred volatility, the firm suffered from reduced trading volumes, which it described in previous reports as a market-wide phenomenon due to changes in regulations and market conditions. ESMA’s restrictions have already had a more severe impact than most CFDs brokers anticipated.
For instance, the European regulator has banned any welcome bonuses or other incentives that encourage clients, prospective or existing, to trade CFDs or to trade larger contracts.
This was problematic for many firms who often rely on such bonuses as a means of attracting clients, including Darwinex, which previously offered traders rebates on commission fees.
The UK broker also acknowledged that it faces two primary risks and uncertainties, the Brexit and the trend towards zero-commission brokerage in the industry. In anticipation of Britain’s divorce from the European Union, Darwinex has secured a regulatory license in Spain as a back-up to a potential no-deal Brexit.
The broker’s parent company, Tradeslide Ventures Ltd, has recently restructured its capital structure to include a new anchor investor, converting all outstanding convertible debt into equity and injecting €1M of fresh capital.