CMC Markets hits seven month high thanks to 'premium' focus

CMC Markets reported higher revenues for the first quarter of its financial year as a 1% drop in active spread-betting and CFD client numbers was offset by a 9% increase in revenue per client.

This change was attributed to changes in marketing and the group's "continued focus on premium clients", which grew 10% and now represent around 10% of CMC’s overall client base and roughly 75% of revenues.

"CMC retains its focus on cost discipline, and operating costs are broadly unchanged compared to the same period year-on-year, as well as a cautious approach to the use of capital."

Delivery of the partnership with antipodean bank ANZ, which is expected to give CMC access to over 250,000 retail stockbroking clients, was said to remains "in-line with the projected timetable", and all key milestones to date have been met.

On the regulatory landscape, changes from Germany's BaFin need to be implemented by 10 August with the results of an FCA consultation in the UK looming some time soon.

"The group has not experienced any change in client behaviour as a result of the consultation and therefore sees no impact until any changes proposed are to be implemented by ESMA.

"CMC is confident that the strength of the platform, its people and its client proposition which focuses on premium clients means the Group will perform well and gain market share over the medium to long term in a more regulated environment," it said.

Shares were up 7% above 155 for the first time since December.

Analysts at Numis, which stuck to its 'sell' rating and 100p target price, said they believed this negative stance was "fair given the significant level of regulatory uncertainty and its notably higher level of revenue volatility".

Those at Shore Capital said that with CMC’s H1/H2 split of net operating income in the previous financial year having been £75.5m/£85.3m, the fall in active clients and rise in revenue per client could be interpreted "as an indicator that net operating income in Q1 of the current financial to Mar ’18 was up circa 8% year-on-year".

"The implied Q1 growth of 8% in net operating income is higher than our Mar ’18 full year assumption of 3% but the comparatives get tougher in H2 and tighter regulation could conceivably catch the back end of the financial year. Therefore our inclination is to leave our Mar ’18 full year numbers unchanged at his early stage."