As one of London’s leading margin trading houses CMC Markets is never too far from the headlines and never more so than when it’s updating the markets on trading performance or with its results as it did this morning.
The company posted its pre-close period trading update back on the 25th of March in which it highlighted a continued strong performance from the group and in particular the acquisition and retention of CFD and stockbroking clients adding that it expected its net operating income, for the year ending 31st March 2021 to be ahead of analyst expectations.
That turned out to be the case and the net income or revenue figure jumped by +63% year over year, to come in at £410 million, some £5.0 million ahead of consensus forecasts for £405.0 million.
Net revenues from CFD trading were also up by +63% YOY at £349.0 million.
That jump in revenue reflected a +34% increase in the number of active clients in the period to 76.6k and far higher levels of client activity, which generated £28.0 million in revenue per month. Or approximately £1.40 million per day compared to just £1.0 million per day in 2020.
Pre-tax profits for the group came in at £224.0 million, a figure that was also ahead of consensus forecasts, in this case by £4.0 million.
Spread betting broker CMC Markets had of course been raising their guidance over the last year so the markets were expecting a bumper performance. Nevertheless, the figures impressed and Shore Capital analysts Vivak Raja and Paul McGinnis reiterated their buy recommendation on the stock today as a result.
Though they did not adjust their price targets, which could suggest that they think we have seen what we might think of as peek trading activity. And indeed forex broker CMC‘s stock is up by just +0.30% as I type which perhaps bears that thinking out.
However, the firm may yet have further cards to play.
One area of the business that is often overlooked is its stockbroking division which operates a JV with ANZ Bank in the antipodes.
Revenue growth in stockbroking grew by +72.0% year over year and generated £55.0 million and saw client numbers rise by +28%.
Reports surfaced last night that CMC Markets was hoping to build on and leverage its stockbroking success down-under by creating a UK wealth management platform to compete head-on with the likes of AJ Bell and Hargreaves Lansdown.
A move that could transform CMC into a multi-asset multi-product brokerage business and one that could genuinely disrupt a growing sector of the market and allow CMC to steal a march on rivals such as IG Index and Saxo Markets.
Darren is a veteran of the financial markets with almost 36 years of experience under his belt. He has worked in trading, sales, analytical, and research roles, he has been a regular guest & commentator on financial television channels and publications. During his career, Darren has been fortunate to act for and advise major hedge funds and investment banks as well as HNWI. Darren analyses the markets using a blend of technical and fundamental analysis