Online trading provider CMC Markets reported interim results to the end of September 2019 yesterday and the numbers didn’t disappoint. The groups net operating income rose by +45% when compared to the same period last year while revenues from CMC’s CFD operations rose by an impressive 35%. Overall profits before tax for the period hit £30.10 million pounds growing by a whopping +318% in comparison to the figures released at this stage 2018.
So just how has CMC achieved this growth?
The answer seems to be two-fold:
Firstly the spread betting broker seems to be growing their revenue per user numbers, for example, the average revenue per active CFD client rose by +45.0% to £2047 up from £1413 in 2018.
That growth was more than enough to offset a reduction in the number of active CFD trading accounts which fell by -7.0% to 41,603 from the prior period.
Secondly, the group is leveraging and benefitting from partnerships with other organisations, for example, CMC provides a stockbroking and trading solution to Australia’s ANZ Bank.
Revenues from this operation grew by +164% over the numbers from 2018 and bought in a healthy £14.50 million of income for the group
Forex broker CMC continues to invest in this type of business and has committed a further £4.30 million pounds to the partnership with ANZ, but this seems to be yielding dividends.
That investment was part of the reason that costs or operating expenses for the group rose to £64.80 million up from £60.80 million in 2018 but the CMC management believes that this has been money well spent and have raised their revenue forecasts for the full year as a result.
“It is clear that we (CMC) are becoming more than a CFD business with income also being derived from technology partnerships, such as the ANZ deal. This is an exciting area of the business which will continue to grow through further planned partnerships and ongoing investment to improve the offering.”
The importance of partnerships and white label arrangements to the larger players in the margin space was also emphasised by Saxo’s UK CEO Andrew Edwards in our recent interview with him.
Alongside strategic initiatives and partnerships, CMC is focusing on client retention and simplifying its onboarding processes making it easier for clients to open accounts and then providing them with products and services that encourage them to stay.
At the time of writing the shares were trading at 127.56p down from the 31st of October high of 130p and the 52-week high of 138.17p.
Overall though, shareholders are likely to feel pleased with the way the group has navigated an extremely tricky period for margin trading industry, to produce robust numbers which will no doubt be eyed jealously by CMC Markets’ competitors.
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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.