CMC Markets struggles to keep up with pandemic buzz as profits shrink
Online trading service CMC Markets said operating income hit £282m, a 31 per cent decline from 2021, as the firm grapples with a decline in pandemic-related market activity.
Profit before tax also fell by 59 per cent to £92m, compared to the pandemic boom in 2020 of £224m.
Active traders on CMC also dropped from 76,591 in March 2021 to around 64,243 in March this year.
As the group continues to prioritise further growth, operating expenses increased by two per cent to £188m, in part due to higher personnel costs in support of ongoing strategic priorities.
However, this investment is expected to result in a 30 per cent increase in net operating income over the next three years, with the benefits of this expected to be seen from 2023 and are set to deliver profit before tax margin expansion from 2024.
Commenting on the results, chief executive Lord Cruddas commented: “Over the last year we have taken steps to define the strategic direction and diversification of the Group, building on our existing technology to launch a new investment platform that will unlock significant shareholder value and challenge the existing client transaction fee cost structures.
“There is significant opportunity and growth potential in the self‑directing investment platform space, especially in the UK, not just for improved technology but also transaction costs and fees. We believe commissions, execution spreads and custodial fees are too high and too expensive for retail investors.
We will utilise our platform technology, including pricing and execution, to drive down the transaction costs of investments for retail clients, just like we did in Australia, where we are the number two investment platform for retail investors.”
Brokers at Peel Hunt still backed CMC’s longer term potential, giving the stock a buy recommendation, with a target price of 462p.
“We continue to believe that the range of new initiatives, which ultimately build on the group’s impressive technology and deliver a far more resilient earnings stream, are not fully reflected in the current valuation”, they said this morning.