CMC Markets is one of the biggest online spread betting brokers in the UK, and it posted a healthy rise in profits for its first half as work to target wealthier customers paid dividends. But its short-term outlook is more conservative as a regulatory crackdown is expected to hit the industry.
In the 6 months up to the close of December, pre-tax profits surged 58%, from £18.8m to £29.8m, on company record revenues up 19% to £89.6m.
The reported vehicle for this achievement was “high value” client business in trading, according to the London-listed group. The company has been making a concerted effort – an undertaking named ‘Project Tuna’ internally – to target a richer, more highly experienced clientele, many of whom might fall outside the scope of the changes in regulations that are expected.
The number of clients trading actively over the period in question actually fell by 2% year-on-year, but the revenue per individual client increased by 22% to £1,814. These impressive results have been achieved at a time when online trading is being reviewed by EU regulators, who could take action to restrict some derivatives instruments, perhaps as early as January 2018. This would be a direct result of fears that these instruments are too high-risk for have-a-go traders.
In a statement, CMC’s CEO Peter Cruddas said he believed the business model of CMC would “benefit from such proposed changes”. This being on the basis that CMC aims to attract the business of “high value, experienced clients”.
Despite this, the group has asserted that it remains “cautious in its short-term outlook” owing to the uncertainty surrounding the regulatory landscape. It said that trading in the second half had begun on a par with the expectations of the market.
In other news, CMC also announced the retirement of Simon Waugh, who has been chairman for around 4 years. At the end of the year, he is to be replaced by James Richards, who is a current board member whose background is in law. What changes Mr Richards might make remains to be seen, but the immediate future looks set to put CMC’s confidence in its business model to the test.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.