CMC Markets published its interim results today and they contained few positive surprises
What did the CMC Markets results contain?
The figures covered trading up until the end of September this year and were broadly in line with the details released in the company’s pre-close trading update on October 7th.
Net operating income came in at £126.70 million, down sharply from the £230.00 million recorded for the same period in 2020.
£101.00 million of that revenue was attributed to margin trading and spread betting, whilst non-leveraged activities generated a further £24.20 million though that was also below the 2020 figures.
Profit before tax fell to £36.00 million, just a fraction of the £141.10 million that CMC Markets made in the first half of 2020. The sharp reduction in profits has led to the interim dividend being slashed from 9.20p in 2020 to just 3.50p this time round.
In fact, there are negative growth rates across nearly all metrics compared to the 2020 interim figures. The one exception is the uptick in non-leveraged active clients, whose numbers have grown by +10%, to stand at 185,847.
What was in the CMC interim numbers came as no real surprise to the market, however, what was missing from them seems to have done.
Company broker Shore Capital expressed its surprise that there were no further details about the planned launch of the UK investment platform.
Something that CMC Markets should surely be keen to put in motion, given the potential for a demerger of this business from the leveraged trading arm, which was announced earlier this week.
Neither Shore Capital nor rival brokers Peel Hunt made any adjustments to their earnings forecasts or price targets for CMC Markets, based on this morning interim figures.
Shore Capital retains a 440p fair value price on the company.
CMC Markets stock traded lower by -6.08% this morning, a fall which takes losses over the last 6 months to -45.66%. That compares to a drop of just -10.29% in the stock price of larger rivals IG Group over the same period and gains of +5.98% for the wider FTSE 250 index over that time.
What’s next for CMC Markets?
CMC Markets could do with a winner as far as its shareholders and the wider market are concerned. However, it appears that the company has once again managed to snatch a defeat from the jaws of a potential victory this morning and the lack of further information about the progress re the launch of the UK investment platform seems to be the main culprit.
Credibility in the markets is hard-won and easily lost, and we hope that CMC Markets gets back on the right track sooner rather than later.
This was the third piece of CMC Markets share price news and trading update from the forex platform (whose share price stands at 271.16p this morning) since the 29th of July.
In the last one, which was published just over a month ago, the group warned on trading and profitability, saying that it now expected FY 2022 net operating income to settle in a range between £250-280 million.
The group reiterated that view in this morning’s release, adding that it expected net operating income from the first half of the year to come in at £126.0 million.
And that net trading revenues, from leveraged products, for the first 6 months of the year were likely to come in at £100.0 million. Exactly half of the £200.0 million figure seen in the first half of the last financial year.
CMC Markets also noted a drop in the number of active clients compared to the first half of the financial year 2021, though it also pointed to an improvement in client trading activity and volumes, during September this year.
CMC Markets shares stand at 271.16p, down -2.11% on the day, indicating that the market had already priced in the bad news.
The -41.48% fall in the CMC Markets stock price, over the last three months, confirms that theory.
From a technical standpoint, the share price is moving sideways or consolidating, after the early September sell-off. That saw the price gap down to 360p, from 420p, and then trade as low as 295p.
Standing more than 20p below that level this morning, the stock will need to overcome near term resistance at 290p if it is to make any upside headway and break out of its recent range.
The 20-period moving average at 275p could potentially offer support to the price as could the modest uptick in the stocks RSI 14 reading which has moved back above the oversold boundary of 30.0 to stand at 32.0.
Fundamentally the stock looks cheap in comparison to listed peers IG Group and Plus 500.
And with a market cap of just £801.0 million and a PE ratio of 4.50 times, CMC Markets might be thought vulnerable to takeover approaches.
However, there is now a question mark over its future growth prospects. The 11% dividend yield the stock currently offers probably can’t be considered secure either, though it may be enough to attract some adventurous income investors.
The company’s stockbroker Peel Hunt wrote on CMC Markets last week, pushing the fintech credentials of the stock, with a share price forecast of 462p.
Though it also expressed the belief that over an unspecified time frame, the stock price could reach 730p or more to value the business at £2.0 billion.
Shore Capital is the latest broker to comment on the company, writing today, they reiterated their 440p price target and rate the stock a buy. Though they note that CMC Markets marketing spend is likely to increase in the second half of this financial year.
The consensus forecast for the CMC Markets share price, among analysts that cover the stock is 436.50p, and all of them currently rate the stock as a buy.
