Changes are continuing at London based online FX, CFDs and spreadbetting broker CMC Markets Plc (LON:CMCX), although the changes do seem to be bearing fruit.
CMC Markets reported this morning its results for the first six months of fiscal 2018 (CMC has a March 31 year end, so the results are for April-September 2017), with the company seeing near-record revenues and record pre-tax profit for a six month period.
CMC also surprised the markets with word that its Chairman for the past four years, Simon Waugh, would be stepping down effective December 31, and will be replaced by board member James Richards, a lawyer who was previously a partner at law firms Dillon Eustace and at Travers Smith LLP.
Mr. Waugh will remain Chairman of CMC’s ASIC-licensed Australia arm CMC Markets Group Australia Pty Ltd until the end of 2018, reflecting the growing importance of the region to the company.
Back to CMC’s 1H-2018 results…
Financial and operating highlights
- Revenues up 19% to £89.6 million (H1 FY17: £75.5 million).
- Operating costs up 5% to £59.3 million (H1 FY17: £56.4 million), mainly due to higher discretionary performance incentives and core staff costs.
- Profit before tax up 58% to £29.8 million (H1 FY17: £18.8 million) reflecting strong operational gearing.
- Revenue per active client up 22% to £1,814; however as we noted earlier there was a slight decline in active clients, down 2%.
- Continuing growth in client assets up 14% to £322.5 million (H1 FY17: £283.3 million).
- Established markets: Value of client trades up 25%, through the Group’s focus on high value clients.
- Geographic expansion: Poland office continuing to perform well, with the value of trades up 107% and client numbers up 96%. Shanghai office officially opened in October 2017. Product offering quickly adapted for regulatory change in Germany.
- Digital initiatives: 56% of the value of Next Generation client trades completed on mobile devices in H1 FY18 (H1 FY17: 50%).
- Maintain a competitive and compliant product offering: FX DMA launched and HTML5 roll out nearing completion.
- Institutional offering: Institutional business continues to grow, value of client trades up 91% compared to H1 FY17.
- Stockbroking partnership with ANZ Bank remains on track for delivery in September 2018.
Peter Cruddas, Chief Executive Officer, commented:
I am pleased with the Group’s excellent performance and progress for the first six months of this financial year. 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.
We also have diversity with 15 offices around the world and a growing stockbroking business in Australia, which will continue to grow its contribution to the Group following the implementation of the ANZ Bank stockbroking business.
Whilst we await the outcome from the European regulators, the teams around the world are focused on delivering our strategic initiatives and ensuring that whatever the outcome we will be ready to respond and adapt.
As far as outlook goes, CMC management stated that at the start of H2 the Group continues to trade in line with market expectations, however, given the uncertainty around current regulatory reviews and future regulatory change, the Group remains cautious in its short-term outlook. Notwithstanding this, the Group considers a greater level of regulation could give it a competitive advantage as some smaller, less established players may find it more challenging to meet the new requirements.
CMC Markets’ full release on 1H-2018 results can be seen here.