Shares of FCA regulated online brokerage group CMC Markets Plc (LON:CMCX) fell by more than 12% in Wednesday trading on the London Stock Exchange, after the company presented a brief Trading Update which contained some negative comments regarding the company’s Fiscal Q2. (CMC Markets has a March 31 year end so the quarter in question, Q2-2017, is for July 1 through September 30, 2016).
CMC shares, now at £2.43, still sit slightly above their IPO price of £2.40 from earlier this year.
CMC did lead off its Trading Update (full text provided below) with some positive data, especially pertaining to its long term growth. New clients – the lifeblood of all online brokers – are up 19% and active clients (i.e. number of clients who made trades during the period) are up 9% compared to the same period last year. Client money balances at the end of August were 21% higher than at the same point last year.
However, CMC noted that relatively low volatility throughout most of the summer has led to lower client trade values. As a result, CMC expects that Net Operating Income for the six months to September 30, 2016 will be lower than the same period last year.
The news from CMC had some contagion effects beyond the company. CMC online rival IG Group Holdings plc (LON:IGG) saw its stock fall by more than 4% on Wednesday, cooled off by the concern that this is part of an industry-wide slowdown. Before the drop IG shares had been hovering at all-time highs the past few weeks. IG Group will be providing its own Trading Update on its just closed Fiscal Q1-2017 (IG has a May 31 year end, Q1 is June through August) within the next couple of weeks, which should shed more light on that issue.
CMC Markets share price, IPO to present. Source: Google Finance.
CMC’s full Q2-2017 Trading Update reads as follows:
Trading update
CMC Markets plc (LSE: CMCX, “the Group”) is issuing a trading update ahead of its Annual General Meeting to be held at 10:00am today at 133 Houndsditch, London, EC3A 7BX.
The Group continues to make progress on each of its strategic initiatives, with improvements in a number of key indicators of future trading activity. For the five month period to 31 August 2016, new clients are up 19% and active clients are up 9% compared to the same period last year. In addition, client money balances at the end of August are 21% higher than at the same point last year.
However, low levels of volatility are providing fewer trading opportunities for clients. As a result, and in line with many competitors, the value of client trades continues to be lower than the prior year and Net Operating Income for the six months to 30 September 2016 is expected to be lower than the same period last year.
The Group is confident that Net Operating Income will improve in the second half through the Group’s larger funded client base, growing institutional offering and new product development. The Group also continues its focus on cost control.
With a strong, growing client base and clear strategy the Group remains focussed and confident of achieving the target of £220m Net Operating Income by 2020.
Peter Cruddas
Chief Executive Officer
7 September 2016