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CMC Markets (LON:CMCX), a UK forex and spreadbetting broker, that went public earlier this year reported a 4% decline in its net operating income for the six months that ended on September 30, on an annual basis, to £75.5 million.
At the same time, the value of client trades decreased 18% – from £1.1 trillion in H1 FY 2016 to £911 billion in H1 FY 2017. The chief executive’s review attributes the decline mostly to more limited trading opportunities, particularly in indices. The revenue per active client, consequently has also declined – from £1707 in H1 FY 2016 to £1488 in the first half of FY 2017. This represents a drop of 13%.
CMC Markets’ profit before tax declined even more significantly – by 29%, to £18.8 million. In comparison, the profit as of September 30, 2015, was £26.5 million.
In its statement, the broker notes that in H1 FY 2017, the Group experienced a lower level of market activity, despite the brief pick up immediately after the Brexit referendum results that proved to be short-lived. Hence, the company notes, the overall decline in the main metrics, despite an encouraging rise in numbers of active clients of 8% and a 32% increase in client assets, both of which are positive leading indicators of propensity to trade.
The report also shows that CMC Markets’ underlying operating costs in the period rose 9% to £53.6 million (H1 FY16: £49.1 million), reflecting an increase in the numbers of employees and in marketing to support strategic growth initiatives.
Despite the not so flattering results, CMC Markets notes that it continues to achieve its main strategic goals. For example, the number of its active clients in established markets rose 3%, even though the value of client trades dropped 15%. The France office of the broker, however, reported a 37% increase in value of client trades.
At the same time, the new products of CMC Markets fared nicely. The binary options, which were launched this spring, along with Countdowns which were released mid-way through the first half of FY16 have delivered revenue of £4.1 million, which is an increase of 26% against the second half of the prior year.
The net revenue through the channel of the institutional offering rose 41%, to £10.4 million. “During the period we have maintained strategic relationships in the traditional white and grey label market and started delivering API solutions for institutional clients to execute trades in Indices, Commodities, Treasuries and FX products,” CMC Markets said.
In conclusion the brokerage notes that following the subdued trading activity for the majority of H1 FY17 and in line with historic trends, the H2 FY17 performance will be better. However, if subdued conditions persist and client trading levels do not improve, net operating income for FY17 is likely to be moderately lower than FY16.
“Our first half net operating income reduced due to lower client trading activity, as experienced by the wider market and highlighted at our AGM trading update on 7 September 2016,” said Peter Cruddas, Chief Executive Officer and majority stakeholder in CMC Markets. “However, we continue to make significant strategic progress, delivering against our five pillars of growth. We are growing our active client base through retail and institutional channels, rolling out new products and platform enhancements and looking at opportunities to develop our international footprint.”
CMC Markets was set up back in 1989 and now it runs offices in 14 countries across the globe, focusing on the markets in the UK, Australia, Germany, and Singapore. The broker offers trading in more than 10,000 financial instruments, including forex, shares, indices, commodities and treasuries via its proprietary trading platform Next Generation.