Interim results for the half year ended 30 September 2018

Increased diversification positions CMC for growth despite short-term market challenges

For the six months ended
£ million (unless otherwise stated)
30 September 201830 September 2017Change
Net operating income70.689.6(21%)
Profit before tax7.229.8(76%)
Earnings per share (pence)2.78.7(69%)
Number of trades (million)34.930.714%
Value of trades (£ billion)1,2261,1754%
Active clients (numbers)44,69746,634(4%)
Client assets341.8322.56%
Revenue per active client (£)1,4131,814(22%)

Notes:
Net operating income represents total revenue after rebates payable to clients and introducing partners, and betting levies
Active clients represent those individual clients who have traded with or held a CFD or spread bet position with CMC Markets on at least one occasion during the six month period
Client assets represent total amounts due to segregated clients at the period end
Revenue per active client represents total trading revenue from CFD and spread bet active clients after deducting rebates and levies

Financial and operating highlights

  • Net operating income down 21% to £70.6 million (H1 2018: £89.6 million). As previously announced, the second quarter was impacted by a sustained period of low market volatility and range bound markets, as well as two months of ESMA regulatory changes affecting retail trading activity
  • Operating expenses up 6% to £62.7 million (H1 2018: £59.3 million), mainly due to investment in the stockbroking business and higher fixed salary costs across the Group
  • Profit before tax down 76% to £7.2 million (H1 2018: £29.8 million). Performance expected to be weighted towards H2 and assisted by additional stockbroking revenue
  • Revenue per active client down 22% to £1,413; slight decline in active clients, down 4%
  • Regulatory total capital ratio of 26.8% and own funds of £192.0 million
  • Interim dividend of 1.35 pence (H1 2018: 2.98 pence), 50% of H1 2019 profit after tax

Strategic progress

  • ANZ Bank white label stockbroking partnership: 103 intermediaries migrated to CMC's stockbroking platform in July and ANZ Bank's retail stockbroking clients were successfully migrated in September. On an annualised basis, the partnership is expected to deliver c. £7 million statutory profit before tax
  • Product offering: Equities DMA launched during H1 2019 and MT4, the foreign exchange platform, launched early in Q3 2019
  • Diversification: In addition to the growing contribution from the stockbroking business, the Group continues to pursue diversification through growing its institutional business and geographic expansion; an application to open a new office in Dubai is currently being reviewed by the local regulator
  • Brexit: An application to open a regulated subsidiary in Germany is being progressed with the German regulator

Regulatory change

  • ESMA intervention measures effective from 1 August 2018
  • Over 40% of UK and European revenue is now generated by elective professional clients, in line with previous guidance
  • Institutional business increases this percentage to 50%
  • UK and Europe retail trading volumes have been improving since August relative to growth in professional trading activity
  • Client deposits have not changed materially implying ongoing appetite to trade

Peter Cruddas, Chief Executive Officer, commented:
"Whilst trading in the first quarter outperformed the same period last year, as previously announced, the second quarter was particularly difficult. Volatility was low, and unusually the majority of asset classes traded in tight ranges. This was further compounded by the impact of European regulatory change that came into force on 1 August. As a result, overall profit after tax was significantly lower than the same period last year.

The Group remains focused on future growth and diversification. In the second quarter we successfully migrated 103 intermediaries, and over 500,000 clients to our stockbroking platform following the migration from ANZ Bank; this makes the stockbroking business a much more meaningful part of the overall Group. This will also provide a springboard for further growth in the APAC region.

Our institutional business continues to improve and enhance its product offering with MT4 and Direct Market Access for Equities added in the period. This business line continues to have a strong pipeline of new client opportunities. In addition, our core retail business continues to focus on attracting quality clients and seeking new growth areas. Our Dubai office application is awaiting regulatory approval and we are also in the early stages of applying for a licence to operate in South Africa.

I continue to believe that in the medium-term CMC will benefit from the changes made by the European Regulators, as clients move to quality well-regulated providers, and we are beginning to see evidence that average retail client tenure is extending following the implementation. As we enter the second half, which is typically stronger than the first, we have seen an improvement in market conditions and encouragingly an increase in activity across retail, professional and institutional client categories."

Analyst and investor presentation

A presentation will be held for equity analysts and investors today at 09.30am (UK time)

A live webcast of the presentation will be available via the following link:

http://www.cmcmarkets.com/results/2019/h1

Alternatively, you can dial into the presentation:

United Kingdom: 020 3059 8125
All other locations: + 44 20 3059 8125
Please quote “CMC Markets plc H1 2019 Results conference” when prompted.

Forthcoming announcement dates

24 January 2019Q3 2019 trading update
3 April 2019FY 2019 pre-close update

Media enquiries

Camarco

Geoffrey Pelham-Lane/Ed Gascoigne-Pees/Jennifer Renwick Tel: 020 3757 4994

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