CMC Markets, the online derivatives trading platform, posted a 24 per cent jump in profits, as a move to target richer clients ahead of tough regulatory curbs on the sector began to pay off.
Pre-tax profits for the year to March 31 rose to £60.1m from £48.5m, with net operating income up 16 per cent to £187.1m.
CMC, which was founded and is led by former Conservative party treasurer Peter Cruddas, put this down to the group’s push to lure in bigger, more sophisticated traders. While active client numbers slipped 2 per cent to 59,165, revenue per client increased 18 per cent to £2,964.
The bid to attract wealthier customers — dubbed “Project Tuna” internally — is designed to offset some of the pain of forthcoming European rules, which include curbs on the extent to which retail punters can leverage, or pump up, their bets on financial markets using so-called “contracts for difference” products.
Some higher value clients could fall out of the scope of the new rules. CMC launched a new website targeting “professional” customers at the end of April.
The group is also implementing a new stockbroking partnership with ANZ Bank in Australia, which is “on track for delivery” in September 2018.”
The CFD regulations, designed to protect novice punters from heavy losses on complex speculative products, will come into force from August 1, the European regulators said last week. Rules that ban the sale of another type of risky product, binary options, to retail investors outright, come into force from July 2.
CMC said that any revenue hit in the short term to retail client trading — which it estimated at 10 to 15 per cent of its 2018 CFD and spread bet revenues — would be “partially” mitigated by its professional and institutional offering. It added that its binary products generated £4.5m in revenue in the UK and EU in 2018.
Mr Cruddas said:
The strategy of attracting and retaining experienced, high value and institutional clients through technology and service is delivering strong results for the group. We have been delivering on our strategic initiatives and these are now clearly coming through in the financial performance . . .
Now we have clarity about the regulatory changes in Europe, and with CMC’s balanced portfolio of retail, professional and institutional clients across a breadth of growing geographies, we are confident that our technology and service-led strategy will continue to deliver profitable growth.
The group said that costs would be “moderately higher” in 2019 due to “planned investments . . . to take advantage of opportunities that regulatory change will present”.
It announced a full year dividend of 8.9p, which was flat year on year.
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