CMC Markets profits plunge as regulations hit

22nd Nov 2018 10:32

(Sharecast News) - First-half profits at spreadbetting firm CMC Markets have tumbled, as low volatility and tighter regulations hit home.Pre-tax profits in the six months to 30 September slumped 76% to £7.2m, with net operating income off 21% at £70.6m. Revenues per active client also fell, by 22% to £1,413, while the number of active clients dipped 4%. The value of trades rose 4% to £1.2bn.Founder and chief executive Peter Cruddas called the second quarter "particularly difficult".He said: "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."Rules introduced by the European Securities and Market Authority have curtailed the amount of leverage retail clients can have when betting on the price movements of financial instruments. CMC warned in September that profits would be hurt by the changes.Cruddas, a former Conservative party treasurer and prominent Brexiteer, said that despite the tough first half, CMC remained focused on "future growth and diversification"."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."Marcus Barnard, analyst at Numis Securities, called the results "disappointing - even following the profit warning of September. The statement highlights a pick-up in activity as it enters the second half, positive migration of ANZ stock broking clients, future focus on institutional business and longer tenure of retail client. Other than that, we believe there is little to get excited about in these results."Shares in the FTSE 250 business were off 4% by 11am GMT, at 113.4p.CMC is increasingly focused on providing traditional brokerage services alongside spreadbetting, and earlier this year struck a stockbroking partnership with Australia's ANZ Bank.