CMC Markets has just announced its full-year results for the year that ended on March 31, 2019. The company reported that its net operating income declined by 30 percent to £56.3 million, while the bottom line dropped by 90 percent to £6.3 million.
The regulatory changes across Europe driven by the ESMA have been singled out as the main factor behind the decline in revenues and profits collapse. The negative result was also exacerbated by the extraordinarily low volatility period in the first quarter of 2019.
Volatility’s impact, however, was much less pronounced: revenues for the second half of the fiscal year came in at £60.2 million, compared to £70.6 million in the first half. The results are in line with a previously issued guidance, which signaled a significant decline in revenues from CFD trading.
The number of active clients dropped 10 percent to 53,308, also impacted by fewer trading opportunities when compared to the previous year. The company also introduced a series of measures to raise the level of appropriateness of its clients throughout the year.
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The firm states that while the quantity of the clients has decreased, their quality increased. A statement confirmed by a nine percent increase in the amount of total segregated client money held by CMC Markets for its customers. The figure stood at £332.4 million as of March 31, 2019.
“Client money represents the capacity for our clients to trade and offers an underlying indication to the health of our client base,” the company elaborated in its earnings results. The management of CMC Markets is upbeat on the future of the firm as it states that the main decline in client activity occurred in August 2018 as the ESMA measures took place.
Revenues per client decried by 30 percent when compared to 2018 to £2,068. The steep decline in revenues has not been mitigated by cost savings, which only declined by two percent to £123.1 million. The savings accrued in discretionary bonus costs and reduced marketing spend but were offset by the higher costs associated with the acquisition of ANZ’s stockbroking business in Australia.
While revenues decreased by almost a third, throughout the year, trading volumes only dropped by 13 percent to £2.26 billion. The main issue again has been the impact of the ESMA’s regulations and the protracted low volatility period.
The disconnect between trading volumes and revenues signals that the company’s clients haven’t been losing as much in the aftermath of the ESMA’s measures. It is therefore warranted that the permanent measures adopted by the FCA and other national regulators across Europe are likely to remain in place for the foreseeable future.