CMC Markets forecasts a 21% increase in net operating income

CMC Markets, a London-based broker, has estimated that its net operating profit (NOI) for the first half of its financial year 2023, which ended in September, will yield around £153m, a 21% year-on-year growth.

The online trading service provider, which serves retail and institutional clients in 11 countries, including the UK, Australia, Germany, France and Singapore, said in its pre-closing trading report released on Thursday.

"Improving underlying market activity during August and September supported an improvement in the group's net operating income during the period," CMC Markets says.

The broker noted that the company's expansion plan to increase its net operating income by 29% over the next three years "through the addition of additional products, and geographic expansion based on the result of 2022 and underlying conditions remain on track."

While CMC Markets expects its leveraged trading net income for the period to jump 28% year-on-year to around £129m, the group believes its net trading income without leverage will drop -13% YoY to around £20m.

In the first six months of its 2022 financial year, net trading revenue with and without leverage was £100 million and £23 million, respectively.

Additionally, CMC Markets expects its leveraged client gross revenue to improve 21% year-on-year to £156m. In the first half of 2022, this revenue reached £128 million.

The London Stock Exchange-listed company also disclosed that assets under management for its leveraged clients were around £529 million, which is "slightly below the all-time high of £559 million at the end of the period, but remains at high levels".

“H1 2023 leveraged active clients are moderately lower compared to H1 2022, offset by an overall increase in activity,” the company says.

In terms of operating cost, CMC Markets expects a 29% increase from the £85m cost in H1 2020. The broker estimates the cost to be around £110m minus variable compensation.

In June, the broker predicted that its operating costs would increase by 4% compared to its annual forecast, due to higher personnel costs and non-personnel costs.

Diversification movements

Last week, CMC Markets launched CMC Invest, its UK investment platform which offers investment opportunities in over 1,100 US and UK stocks and over 135 exchange-traded funds and investment funds.

The group noted that this unleveraged UK business is part of its "constant diversification strategy".

In 2021, the brokerage group acquired more than half a million equity investment accounts from Australia and New Zealand Banking Group, Australia's fourth-largest bank by market capitalization, for A$24 million. .

The migration of these clients is still ongoing and is expected to be completed in the second half of the current fiscal year, CMC Markets said.

"This move to self-directed investing marks an important milestone for us, representing a major opportunity for growth and diversification in the unleveraged market," says Lord Cruddas, CEO of CMC Markets.

Mr. Cruddas adds: "While still in its early stages of development, as we plan to add more features over the coming months, our goal is to provide investors with unparalleled market access through to the best technology and lower transaction costs and fees."

Additionally, CMC Markets said the Australian-based stock brokerage business ended H1 with "a modest reduction" in assets under administration, down "from all-time highs" but in line with the performance of the Australian market. They add that the company's activity "remains elevated" compared to pre-pandemic levels.

CMC Markets' fiscal 2023 half-year results will be announced on 17 November.