CMC Markets operating income jumps, outlook cloudier

Online trading and investment provider CMC Markets reported a new record high in net operating income outside of the Covid-19 pandemic period in its full-year results on Tuesday, in line with the guidance provided.

The FTSE 250 company reported a 2% increase in net operating income, reaching £288.4m.

Trading net revenue also saw a modest 1% rise to £233.1m for the 12 months ended 31 March, although investing net revenue experienced a decline of 21% to £37.9m, primarily due to subdued market conditions.

Notably, interest income soared by a staggering 1,569% to £13.9m, while other operating income remained steady at £3.5m.

Profit before tax showed a decline of 43% to £52.2m, reflecting challenging market conditions, while basic earnings per share also dropped by 40% to 14.7p.

The company's operating expenses, excluding variable remuneration, increased 26% to £217m.

Looking ahead, CMC Markets said it expected quiet market conditions in the first two and a half months of 2024 to result in a 15% to 20% decline in client trading activity, thereby impacting first quarter net operating income negatively.

However, the company maintains its outlook of achieving a 30% net operating income growth from 2022 to 2025, with expectations of a return to normal market conditions.

CMC Markets said it was planning to focus on product diversification, multi-asset interface development, and expansion through B2B partnerships and investing and institutional businesses.

In terms of costs, the company said it expected operating expenses, excluding variable remuneration, to reach approximately £240m in 2024.

Employee numbers were expected to peak in 2024 following successful hiring over the past year.

However, operating cost expansion is expected to slow in 2025 after two years of significant investment, coupled with ongoing cost efficiency initiatives.

The company's board recommended a final dividend of 3.9p per share, resulting in a total dividend payment for the year of 7.4p per share, down from 12.38p in 2022.

“During the past year, we have made progress to refine and deliver our diversification strategy,” said chief executive officer Lord Cruddas.

“We have improved our product range across our core trading CFD and spread bet businesses, offering our clients access to a wider range of financial instruments through our award-winning platforms.

“We have leveraged our existing technology to launch a new investment platform in the UK, with a Singapore platform launching imminently, as well as opening a new office in Dubai to support the rapid growth we are seeing in our institutional business.”

Lord Cruddas said CMC was changing rapidly.

“Investment in our trading platforms continues and over the coming six months we're positioned to launch cash equities, options and listed futures across our various platforms to allow our clients better opportunities to trade or hedge existing portfolio positions.

“Invest UK will be launching SIPPs and mutual funds, whilst Invest Singapore will initially offer equities, ETFs, options and futures.

“Additionally, over the course of the next 12 months, we plan to introduce a new multi-asset platform capable of trading a much wider range of instruments. I look forward to updating you later this year on further progress.”

Reporting by Josh White for Sharecast.com.