CMC Markets shares fall on revenue warning
Online trading firm CMC Markets has seen shares tumble after warning over a hefty drop in spread betting revenues amid more stringent rules and “challenging” markets.
Shares in the firm fell as much as 10% as it said it is expecting a 37% plunge in full-year spread betting and “contract for difference” revenues to around £110 million, while annual net operating income is set to plummet by nearly a third.
The group cautioned it expects net operating income of around £131 million for its year to March 31, down sharply on the £187.1 million reported the previous year.
It blamed lower client trading activity since the regulatory clampdown on the sale of so-called contracts for differences (CFCs), with new rules coming into effect last August to protect investors from significant losses.
The firm said the effects of this were “compounded by challenging market conditions during much of the fourth quarter”.
But CMC stuck by its belief that the new rules would be “good for this business and for the industry” in the long-term, and said that despite the revenue hit, client money had remained strong and active client and new client numbers were stable.
CMC also separately announced the departure of chief operating and financial officer Grant Foley, who is leaving to pursue other opportunities.
He will remain with the group for six months to ensure a smooth transition.
Analyst Paul McGinnis at Shore Capital slashed his pre-tax profit forecast for CMC to £6 million-£7 million, down from £19 million previously predicted, and said investors were likely to be “sceptical” over CMC’s ability to meet 2019-20 forecasts.
He added: “We think the majority of the damage to share price has been done and would still not rule out the prospect of the company going private if the valuation reduces materially from here.”
CMC was founded in 1989 by chief executive Peter Cruddas, a former Conservative Party treasurer, and floated in February 2016.