CMC Markets shares up 8% after rosy July-August trading update
Shares of UK online broker CMC Markets (LON:CMCX) traded up by 8% early Thursday, after the company dropped a surprise Trading Update (see full text below) covering July and August. CMC had been scheduled to release a trading update on October 8, but seemed to want to share some good news with the markets a little early.
In early July CMC shares popped to hit an all-time high after the company’s last Trading Update, released just after the company closed its fiscal Q1-2021 quarter (CMC has a March 31 fiscal year end). At the time, without giving exact figures, CMC indicated that its Revenues (or what it terms “net operating income”) for Q1-2021 (i.e. April-May-June 2020) were greater than its Revenue for the full first half of last year, which were £102.3 million.
CMC Markets share price, past six months. Source: Google Finance.
Now, CMC has indicated that in the first two months of fiscal Q2-2021 (i.e. July and August 2020) its Revenue run rate is only slightly below Q1 2021. Management noted that increased Revenue has been from a combination of existing clients trading more, as well as the platform continuing to attract new clients. This however has led to an increase in variable operating costs, predominantly driven by higher client onboarding costs.
CMC’s share price had drifted down somewhat from its aforementioned July all-time highs by about 15%, as investors became somewhat concerned that its January-to-June 2020 results and activity levels might not continue into the second half of the calendar year. But it seems as though the latest Trading Update has put some of those fears to bed, and CMC shares have responded this morning accordingly.
CMC reported a record £149.7 million of Revenue in the second half of fiscal 2020 (i.e. the six months ended March 31, 2020). If the company keeps up its current pace, it looks like CMC might have its first £200 million half-year in 1H-2021.
The full text of CMC Markets’ Trading Update from this morning follows:
3 September 2020
CMC Markets Plc
Trading Update – Continuing strong trading performance
CMC Markets Plc (“CMC” or the “Group”), a leading global provider of online trading and institutional (“B2B”) platform technology solutions, today issues a trading update for the period from 1 July 2020 to 31 August 2020 (the “period”).
The Group’s consistently strong trading performance across the business has continued, with net operating income run rate for the two month period only slightly below Q1 2021, and client income has continued to be in excess of the same period in the prior year. In addition, client income retention has remained particularly strong and well in excess of the guidance of above 80%. The stockbroking business also continues to perform strongly.
As a result, the Board is confident that with the strong underlying performance and diversity of the business, FY 2021 net operating income will exceed the upper end of current market consensus.
The higher revenue performance since the start of the financial year has been driven by existing clients trading more as well as the platform continuing to attract new clients. This has led to an increase in variable operating costs, predominantly driven by higher client onboarding costs and the more efficient acquisition of new clients.
The Group is also continuing its focus on investment in its technology to attract and retain clients and drive future growth.