Interim results for the half year ended 30 September 2019

Strong net operating income, up 45%; Profit before tax £30 million Technology partnerships further diversifying revenue streams

  For the half year ended    
£ million (unless otherwise stated) 30 September 2019 30 September 2018 Change
Net operating income 102.3 70.6 45%
Profit before tax (£ million) 30.1 7.2 318%
Basic earnings per share (pence) 9.5 2.7 252%
Dividend per share (pence) 2.85 1.35 111%
CFD net client income (£ million) 96.0 97.6 (2%)
CFD net revenue (£ million) 85.1 63.1 35%
CFD active clients (numbers) 41,603 44,697 (7%)
CFD revenue per active client (£) 2,047 1,413 45%
Stockbroking net revenue (£ million) 14.5 5.5 164%

Notes:
Net operating income represents total revenue net of introducing partners commissions and betting levies
CFD net client income represents spreads, financing and commissions charged to clients (client transaction costs) net of rebates
CFD net revenue represents total trading revenue generated from CFD clients net of introducing partners commissions and betting levies
CFD active clients represent those individual clients who have traded with or held a CFD or spread bet position with CMC Markets on at least one occasion during the six month period
CFD revenue per active client represents total trading revenue from CFD and spread bet active clients after deducting rebates and levies

Financial and operating highlights

  • Strong performance with net operating income up £31.7 million (45%) to £102.3 million (H1 2019: £70.6 million) driven by higher CFD revenue per active client, up 45% to £2,047, as a result of improving retention of CFD client income, and a £9.0 million (164%) increase in stockbroking net revenue
  • Alongside its three strategic initiatives, the Group continues to invest in its proprietary technology platforms to diversify its offering and generate high value through institutional relationships. This has been demonstrated by the success of the ANZ Bank white label partnership which has generated £10.0 million net revenue in H1 2020
  • Operating expenses up 13% to £71.2 million (H1 2019: £62.7 million), due to investment in the stockbroking business (up £4.3 million) and higher variable remuneration (up £4.5 million)
  • Operating expenses excluding variable remuneration up 7% to £64.8 million (H1 2019: £60.8 million)
  • Profit before tax up 318% to £30.1 million (H1 2019: £7.2 million)
  • Decline in active clients, down 7% against H1 2019, which included four months of pre-ESMA regulations, however up 3% against H2 2019
  • Regulatory total capital ratio of 18.0% and own funds of £182.8 million
  • Interim dividend of 2.85 pence (H1 2019: 1.35 pence) with a total dividend for the year expected to be in line with policy at 50% of profit after tax

Regulatory update

  • ESMA retail clients trading at in the region of 35% of pre-August 2018 volumes, continue to maintain account balances and are using more of their account balance to cover margin and holding positions for longer
  • ESMA professional client numbers remain stable
  • Brexit: German subsidiary on track to be operational by October 2019, pending final regulatory approval

Good strategic progress delivered

  • Institutional offering: continuing focus on the development of existing and new relationships along with development of the product and technology offering
  • Client journey optimisation: simplification of the client onboarding journey has improved lead conversion and a focus on user experience is improving retention of existing clients
  • Established markets: the Group’s core markets continue to generate a significant proportion of net operating income and we continue to focus on developing products to satisfy client requirements

Peter Cruddas, Chief Executive Officer commented:

“I am pleased with the strong first half performance. This time last year we had the uncertainty of regulatory change overhanging the sector with the client response to the changes in minimum margin levels unclear. A year on, we are seeing clients adapt, maintaining their interest in the products and the trading platforms we offer.

It is clear that we are becoming more than a CFD business with income also being derived from technology partnerships, such as the ANZ deal. This is an exciting area of the business which will continue to grow through further planned partnerships and ongoing investment to improve the offering.

From a regulatory perspective, we welcome the consultation by the Australian Securities and Investments Commission (“ASIC”) in Australia. The Group is supportive of regulatory change, which ensures that all providers operate to the highest standards, safeguarding fair client outcomes and we believe that a stronger and better industry will emerge from these changes. The exact timing of the ASIC changes is not known, however, the proposed changes are similar to those introduced by the European Securities and Markets Authority (“ESMA”) in 2018. Once any changes are implemented in Australia, regulatory uncertainty will finally be lifted from all of our material regions.

I remain positive on the outlook for the remainder of the financial year and am excited about the future opportunities that will open up as we continue to focus on the development of our technology and platform offerings.”

Analyst and Investor Presentation

A presentation will be held for equity analysts and investors today at 9.30 a.m. (BST).

A live audio webcast of the presentation will be available via the following link:
https://webcasts.cmcmarkets.com/results/2020halfyear

Alternatively, you can dial into the presentation:

United Kingdom: 020 3059 5869
All other locations: + 44 20 3059 5869
Please quote “CMC Markets plc H1 2020 Results conference” when prompted.

Forthcoming announcement dates

23 January 2020 Q3 2020 trading update
3 April 2020 FY 2020 pre-close update

Forward looking statements

This trading update may include statements that are forward looking in nature. Forward looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Except as required by the Listing Rules and applicable law, the Group undertakes no obligation to update, revise or change any forward-looking statements to reflect events or developments occurring after the date such statements are published.

Enquiries
CMC Markets Plc [email protected]
Euan Marshall, Chief Financial Officer

Camarco
Geoffrey Pelham-Lane/Ed Gascoigne-Pees/Jennifer Renwick Tel: 020 3757 4980