Heavy hitters put a sheen on half-year results from spread-betting outfit CMC Markets PLC (LON:CMCX).
Pre-tax profit rose 58% to £29.8mln in the six months to the end of September from £18.8mln the year before, with revenue per active client rising 22% to £1,814 from £1,488 in the same period of last year.
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The rise in revenue per active client more than compensated for a 2% decline in the number of active clients to 46,634 from 47,623; CMC said its current focus is on attracting – and retaining – high value clients, rather than chasing a high number of here-today/gone-tomorrow low value clients.
The board has declared an interim dividend of 2.98p, which is one-third of the level of the dividend paid out in the previous financial year.
The group continues to trade in line with market expectations, but given the uncertainty around current regulatory reviews and future regulatory change, the group remains cautious in its short-term outlook.
“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,” said Peter Cruddas, CMC’s chief executive officer.
“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,” Cruddas said.
Numis a seller; Peel Hunt a buyer
Numis, which is a seller of the stock, conceded that it was a strong first half for CMC but seized on the cautious outlook for the second half of the financial year.
It expects to make modest upgrades to its current year forecasts to reflect the strong first half performance.
“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,” Numis said.
Peel Hunt, on the other hand, is a buyer of the stock.
“Although the outlook remains cautious given impending regulation, we believe that the underlying attractions of the business model will become evident as uncertainty abates,” it said, as it stuck with its 205p target price.
Shares in the company were up 6.8% at 178p in early deals.
In a separate announcement, CMC said chairman Simon Waugh would be retiring from the board at the end of the year, to be replaced by fellow board member James Richards.