CMC Markets issues a profit warning

Spreadbetting company, CMC Markets, has this morning issued a profit warning. The group, which saw massive share price appreciation in 2020 during the pandemic as its customer numbers swelled, has revealed that it now expects for the FY 2022 net operating income to be between £250-280m. In July it was saying it would be £330m so today’s update is a profit warning.

In the year to March 2021 the company achieved a net operating income of almost £410m, primarily as a result of the market volatility in the first half of 2020.

The update today from CMC Markets said “overall monthly client numbers…remain up by a third from pre-pandemic levels. Likewise client AuM remains near record levels, highlighting the inherent ability of clients to trade when market opportunity arises.”

“Reduced volatility in markets has resulted in lower trading activity across both the newly acquired and existing cohort of clients. Similar trends have been seen across our non-leveraged and leveraged businesses,” CMC said.

The group blamed client income retention being below the targeted 80% and lower market volatility in July and August, which continues a trend seen in Q1 this year. Back then, the group was saying “client income retention remained in excess of 80%, but below the levels reported for FY 2021, as previously guided. Q1 2022 operating costs track moderately higher year over year as guided due to a higher headcount, specifically talent for our new non-leveraged investment platform.”

CMC Markets continues to develop its non-leveraged investment platform and stated that “Beyond the recent moderation in market activity, the group continues to have confidence in the long term growth opportunities of the business and in conjunction with further progress on its strategic initiatives, including the ongoing development of the non-leveraged investment platform, looks forward to continuing to generate long-term business growth and value,” it said.

Before today CMC Markets shares were up around 4.6% so far this year. Today the share have opened over 25% down, on the back of the profit warning and rising costs.

Competitor IG Group will be providing a Q1 FY22 revenue update on the 16th September. it would be surprising if its update is much different to that of CMC Markets.

The update from CMC Markets follows a similar tone as one from investment platform Hargreaves Lansdown. They cautioned that the pandemic surge in trading would not last, which sent the shares tumbling.

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