CMC Markets interim profit jumps 58% but short-term outlook cautious

In the six months to the end of September, pre-tax profit rose to £29.8m from £18.8m in the same period a year ago, as net operating income grew 19% to £89.6m and the value of trades was up 29% to £1.2bn. Meanwhile, revenue per active client increased to £1,814 from £1,488, helping to offset a 2% decline in the number of active clients to 46,634.

Net revenue in the UK & Ireland and Europe was up 20%, while Asia Pacific and Canada saw revenue grow 18% in the period.

Chief executive officer Peter Cruddas said: "Net operating income was a record for the first half and a reflection of our continuing focus on high value clients. We are continually developing and improving our offering, growing our institutional business as well as making progress in new geographies. I am delighted to confirm that, having recently visited Australia to see ANZ's senior team, our stockbroking partnership is on track for launch in September 2018.

"We continue to await the outcome of the industry review by the European regulators, and have had meetings with the various regulators as part of the consultation period. What is clear from the consultation process is that the regulators are concerned with the level of client losses, and inadequate appropriateness and on-boarding checks.

"We fully support increased regulatory oversight of the industry and believe that CMC's business model will benefit from such proposed changes. Our business model is to attract and retain high value, experienced clients that understand the product. I believe this puts us in a stronger position than many of our competitors."

The company added that it remains cautious in its short-term outlook due to uncertainty around current regulatory reviews and future regulatory change.

Numis said: "Despite the better than expected interim results, we remain cognisant of the looming threat of significant regulatory change next year (namely from ESMA and the FCA), which, in our view, could have a material impact on both the growth and profitability of the group."

RBC Capital Markets said: "While we await the potential impact from European regulation (with an update expected in January 2018), we continue to believe that our forecasts take a conservative view. For FY18, we forecast net operating income of £174.2m, EBITDA of £57.7m and earnings per share of 14p, which we believe is achievable and may even be conservative following today’s results."

CMC also announced that chairman Simon Waugh will retire from the board with effect from 31 December. He will be succeeded by fellow board member James Richards.

At 1255 GMT, the shares were up 5.5% to 176p.