LONDON (ShareCast) - (Sharecast News) - A bruising 2018 saw CMC Markets post a sharp drop in both net operating income and profits, leading the firm to slash its dividend payout, but some analysts chose to point out he "robust" rise in client money.
Separately, the financial derivatives dealer also announced the exit of its finance director and Chief Operating Officer, Grant Foley, who would be replaced by the current Group Head of Finance, Euan Marshall, as of the next day, on 7 June.

For the year ending on 31 March, CMC Markets reported a 30% drop in net operating income to £130.8m and a 89% drop in profits before tax to £6.3m (Peel Hunt: £6.0m).

CMC attributed those results to "market conditions" and the changing regulatory landscape, with the latter referring to the new ESMA regulations which kicked-in in August 2018, together with the company's gearing.

The number of trades slipped by 6% to 64.5m, alongside a 13% drop in the value of trades to £2,259m, while the number of active CFD and spreadbetting clients shrank by 10% to 53,308.

However, the company also said that its financial performance at the beginning of 2020 was in-line with the run rate of consensus expectations.

Analysts at Peel Hunt meanwhile pointed out that client money remained "robust", rising by 9% to £332.4m, while operating expenses reduced by 2% versus 2017 even as the company invested in ANZ implementation.

Chief Executive Officer, Peter Cruddas, sounded a positive note on the outlook, saying: "regulatory change continues to be a key positive driver in our markets, we believe that our strong product offering, client service, technology platform and balance sheet will ensure our ongoing success."

Related to Brexit, management expected its new German subsidiary to be up and running in 2019, subject to regulatory approval, adding that going forwards their focus would be on institutional business, established markets and refining the client experience.

The company declared a final payout of 0.68p per share, for a full-year dividend of 2.03p, which was down by 77% versus a year ago.

Further commenting on the firm's results, analysts at Peel Hunt said that for profit forecasts to rebound from their 2019 level would require a more normalised level of trading activity.

Their estimate for CMC's financial year 2020 profits before tax and earnings per share were £25.1m and 7.4p, respectively, versus the consensus on £27.2m and 8.0p.

"There would always be a degree of earnings volatility around the introduction of new regulations and the high operational gearing of this business, but the longer-term argument is that CMC benefits from a consolidating market and its technology that can be monetised by deals such as ANZ."

Peel Hunt had a 'buy' recommendation and 105.0p target price on the shares.

After a weaker start, as of 0930 BST shares of CMC Markets were trading 1.01% higher to 90.30p.

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