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CMC Markets making a habit of outperforming expectations

Snapshot

  • CMC Markets operates a spread-betting and certificates for deposit trading platform
  • The company has raised market guidance several times over the last year or so
  • Founder Peter Cruddas remains a major shareholder and says he would buy more shares in the company if he were allowed to
  • While many companies suspended dividend payments during the coronavirus pandemic, CMC cranked it up by 640%
CMC Markets PLC -

Quick facts: CMC Markets PLC

Price: 380.5 GBX

LSE:CMCX
Market: LSE
Market Cap: £1.11 billion
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What CMC Markets does

CMC Markets PLC (LON:CMCX) is a trading platform operator specialising in spread betting and contracts for difference (CFDs). Its customers use the platform to trade in foreign exchange rates, stock market indices, cryptocurrencies, commodities, shares, treasury bonds and exchange-traded funds.

CMC is headquartered in London but with a global reach. As well as the core spread betting and CFD business it has a stockbroking business in Australia – the second largest in the country – plus a business-to-business (B2B) white-label technology offering, through which it can leverage the millions it has invested in its trading technology by offering the platform to partners.

A pioneer that continues to invest heavily in technology

The company has been around since 1989 when it was known as Currency Management Corporation (hence “CMC”).

In 1996, it launched a real-time foreign exchange trading platform that paved the way for online trading at a time when other spread betting firms only offered telephone accounts.

Since then, the company has continued to put a heavy emphasis on technology and remaining at the cutting edge in terms of flexibility of the platform. The investment in technology also means the trading platform is resilient even in times of extreme volatility and heavy traffic.

“Our technology not only makes us operationally resilient, it also provides our clients with a high-quality service and enables the group to access many innovative investment opportunities. This makes us an attractive choice for a wide array of clients and partners around the world,” the company says.

How it's doing

Like most spread-betting and CFD firms, CMC does well in times of market volatility so the uncertainty caused by the coronavirus (COVID-19) has certainly been good for business but even before the pandemic had the world in its grip, the company was trading well, putting out a succession of statements that increased market guidance.

In its latest results, for the six months to September 30, 2020, the group's pre-tax profit increased 369% to £141.1mln as net trading revenue from CFDs more than doubled to £200.4mln and from stockbroking rose 85% to £26.3mln.

The interim dividend was more than tripled to 9.2p.

The group did not furlough or reduce any of its permanent workforce, nor has it requested any government aid in any of its global locations as a response to the COVID-19 pandemic.

Inflexion points

  • “Project Tuna” was instigated in 2013 to increase the focus on attracting and keeping high-value clients
  • CFD revenue per active client was up 66% to £3,392 in the first half of 2020
  • CFD active client numbers increased by over 17,000 during the period
  • Guidance for the total dividend for the year was that it is expected to be in line with policy at 50% of profit after tax


Executive interview



What the boss says

“Our strengths are in our front-end and our middle-end, where we give a really good user experience, and also what we’ve seen is reliability is important – we had a 99.95% uptime during the COVID period when there was extreme volatility – but also our pricing, our execution and our internal risk management tools mean that we have scale,” Peter Cruddas, the founder and chief executive of CMC told Proactive.

The CMC chief executive revealed that the average CMC client stays with the company for three years, while the higher-value clients tend to stay for four years.

As for Cruddas himself, he cheerfully admits to being 67 in September 2020 but he plans to go on and on.

“I’m still energised,” he maintained. “We have a massive investment programme and lots of opportunities.

“I’m never gonna retire and you can quote me on that.”

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