Wednesday 22 August 2018

CMC Markets notches up record profits thanks to high-value client push

The group reported a 24% rise in pre-tax profits to a record £60.1 million for the year to March 31.

Spread-betting firm CMC Markets has cheered record annual profits after focusing on high-value clients, but warned over a short-term hit from an incoming regulatory crackdown.
Spread-betting firm CMC Markets has cheered record annual profits after focusing on high-value clients, but warned over a short-term hit from an incoming regulatory crackdown.

By Holly Williams, Press Association Deputy City Editor

Spread-betting firm CMC Markets has cheered record annual profits, but warned over a short-term hit from an incoming regulatory crackdown.

The group reported a 24% rise in pre-tax profits to a record £60.1 million for the year to March 31.

Its move to focus on high-value clients – which accounted for 10% of the total active customer base over the year – helped drive the earnings leap, with an 18% surge in revenues per client.

This helped offset a 2% fall in overall client numbers.

Founder and chief executive Peter Cruddas, a former Conservative Party treasurer, said there would be some revenue hit from the regulatory clampdown on the sale of so-called contracts for differences, but stressed this would be short term and would see the group benefit in the long run.

There's going to be consolidation... the churn and burn type of outfits won't survive Peter Cruddas

CMC is expecting the changes to prompt a 10% to 15% fall in group contracts for difference and spread bet revenues in 2018, although some of this will be offset by rising turnover in its stockbroking business.

Mr Cruddas told the Press Association he welcomed the changes, which will reduce risks for inexperienced investors.

He added it will probably see the group benefit as smaller spread betting firms pull out due to the restrictions.

“There’s going to be consolidation… the churn and burn type of outfits won’t survive,” he added.

The group is hoping to have more than 40% of UK and European revenues derived from professional clients over the long term.

Shares in CMC rose 4% after its results.

But the group’s shares were hit in March, along with others in the sector, when the European Securities and Markets Authority (ESMA), said it would ban “binary” options sales to retail clients and restrict the sales of contracts for differences to protect investors from significant losses.

Binary products generated £4.5 million of revenues in the UK and Europe over the year to March 31, CMC said.

Its results showed that in the UK, the value of client trades grew 31% to £1.04 trillion in 2017-18.

The number of UK and active clients fell 6% to 16,157 as it focused on high-value business, while it added that 2016-17 figures were boosted by trading around the UK’s EU referendum.

Press Association

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