CMC Markets expecting Bitcoin and meme investors to graduate to its platform

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CMC Markets PLC (LON:CMCX) remains confident of achieving net operating income in excess of £330mln in the current financial year.

The online trading platform operator said in its results statement for the year to the end of March 2021 that its monthly active client base has remained strong, although client trading activity has come off the boil a little.

The year just ended was a record one for the group, with net operating income soaring 63% to £409.8mln from £252.0mln the year before.

Profit before tax more than doubled to £224mln from £98.7mln the previous year.

The full-year dividend has been increased to 30.6p from 15.0p following the declaration of a final dividend of 21.43p.

Contract for difference (CFD) active clients increased by 19,389 (34%) to 76,591 by the end of March, driven by CMC’s ongoing focus on high value, sophisticated, experienced global clients, and increased levels of interest in the financial markets from a new wave of clients.

CFD revenue per client during the year rose 22% to £4,560 from £3,750 the previous year.

The number of active stockbroking active clients at the end of March stood at 252,053, up from 181,630 at the end of March 2020.

The stockbroking business’s net trading revenue rose 72% to £54.8mln from £31.8mln in the prior year.

“The performance in 2021, building on a strong performance in 2020, is a result of the group’s unwavering focus on our strategic initiatives. This has delivered increased diversification of group revenues and improved CFD client income retention,” said Peter Cruddas, the chief executive officer of CMC.

“Active client numbers have also increased substantially, primarily as a result of COVID-19 related volatility and heightened levels of interest in the financial markets, but our strategy allows us to attract and retain these new clients. The growing contribution of B2B [business-to-business] revenues is also particularly pleasing and will continue to be an important part of our strategy going forward,” Lord Cruddas added.

Speaking to Proactive, Cruddas acknowledged the company had done well out of the pandemic in terms of attracting new custom but stressed the characteristics of the new customers are not that different to its core client base of professional, long-term, sophisticated investors.

“To be honest, if you wanted to trade Bitcoin or you wanted to trade Gamestop … we probably wouldn’t be your first choice. The millennials, lower-end clients – they can probably find better platforms than ours.

“It’s good that they’re coming into the market because eventually, hopefully, they’ll move into a much bigger programme of investing, not just the topical stocks, and we’ll see more of them coming to us in the future.

“At the end of the day, clients want to trade all the new stocks, the IPOs, they want to trade Bitcoin, commodities but what they really want is stability. They want to be able to trade when they choose to,” Cruddas said.

Shore Capital said it was a strong set of results from CMC, with both the dividend and earnings per share marginally ahead of expectations.

“Guidance is unchanged so we do not expect to make material revisions to forecasts,” the broker said.

Shore rates the shares a ‘buy’ and has a fair value price target of 550p.

“CMC has continued to invest in its proprietary technology platform during the year. While this is not expected to add new revenue streams in the near-term as we had hoped, it improves the resilience of the platform and risk management systems, and should accelerate getting new products to market,” Shore Capital said.

“CMC’s investment in technology also includes the build of a non-leveraged trading platform for UK clients, which is expected to lead to a moderate increase in operating costs in 2022F. Platform resilience through the year ended March 2021 was very impressive given the varied market conditions and periods of very intense client demand,” it added.

Shares in CMC were up 0.5% at 491.5p in late morning trading.

— adds broker comment, director interview and updates share price —

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