Rise in revenue offsets drop in client numbers for CMC Markets

CMC Markets posted record operating income in the third quarter, with a jump in revenue helping to offset a drop in active client numbers, as the spreadbetter cautioned over the impact of regulatory uncertainty.

In a trading update for 1 October to 31 December 2017, the company said net operating income was “the highest for the year to date”, reflecting its continuing focus on high value clients and growing institutional business.

Although the number of active clients for the quarter fell 6% from the same period a year ago to 38,859 and was down 4% for the year to date, the proportion of high value clients grew, pushing revenue per client up by 33% from the same period last year and 26% year-to-date.

CMC Markets said operating costs before variable remuneration continue to be well controlled and the implementation of its stockbroking partnership with ANZ Bank in Australia remains on track for delivery in September.

“CMC remains confident that its strategy and focus on high value clients will continue to drive growth over time. However, the regulatory uncertainty continues and the group remains cautious around the impact any potential changes could have on group performance in the short-term.

“CMC's longer-term outlook remains positive and the group believes that its strategy of targeting high value, experienced clients, many of whom could be 'elected professional', together with its proprietary technology puts the group in a strong position to manage regulatory change.”

RBC Capital Markets, which rates the stock at ‘outperform’, said it expects FY18 consensus upgrades as a result of this statement.

“While the final form of ESMA's proposed measures remains uncertain, we believe that CMC's focus on high value clients, its growing institutional business and the implementation of the ANZ partnership will help limit the impact,” it said.

Numis said: “We do not expect to make any material changes to our estimates as the worse than expected active client numbers is partially offset by the stronger RPC. We remain comfortable with our sell recommendation which reflects our concerns about the rapidly changing regulatory environment and its notably higher revenue volatility.”

At 1100 GMT, the shares were up 2.3% to 161.60p.