CMC Markets Plc (LON:CMCX) said it had made a “profitable start” to the new financial year as it posted results showing an 89% plunge in profits last year, in line with its recent profit warning.
The spread-betting and CFD broker also promoted head of finance Euan Marshall to be its new chief financial officer after Grant Foley, who was also chief operating officer, fell on his sword.
READ: CMC Markets warns again as new trading rules hit spread bet revenue
As the group warned in April, revenues for the year from CFD and spread-betting operations had dropped and costs were higher than expected due to a combination of market conditions and regulatory changes that imposed much lower leverage levels, leading to trades falling 6% by number and 13% by value in the year ended 31 March, with revenue per active client down 30%.
Group net operating income fell 30% to £130.8mln, which resulted in a collapse in profit before tax to £6.3mln from £60.1mln the year before.
The board proposed a final dividend of 0.68p, resulting in the full year dividend being cut 30% to 2.03p.
Chief executive Peter Cruddas said: “This has been a difficult period of trading for CMC and our sector, but having now weathered the ESMA transition, we exit this year with renewed confidence in the future.”
He said the business has been adjusted “to ensure we capture revenue appropriately and manage the net risk we are exposed to from higher client margins against smaller positions being held for longer periods”, while expanding the stockbroking and institutional businesses.
New year in line
CMC had made a “profitable start to the new financial year as it continues to understand the impact of and adapt to the regulatory changes and market conditions”, he said, with the financial performance at the start of 2020 “in line with run rate consensus expectations”.
Analysts at Shore Capital said that after the detailed guidance given in April's profit warning, “there was limited scope for CMC to surprise on the numbers” and that of more interest to investors was “the extent to which CMC had also experienced the more recent uptick in spread/CFD trading” as competitor IG Group reported in mid May.
With questions having been asked about the quality of revenue at CMC, City broker Shore Capital's view was that this recent trading represents “more ’normal’ trading conditions" and, as such, they think the shares "have de-rated too far”.
CMC shares were up 0.2% to 89.6p after just over an hour of trading on Thursday.