CMC Markets shares dive 5.8% as full-year profits drop

CMC Markets (LSE: CMCX), the London-based online spread betting platform, experienced a significant decline in its share price on Tuesday as the company reported a drop in full-year profits. The shares fell by 5.8% to 159.80 pence, making it the worst-performing stock in early morning trade.

The FTSE 250 listed company disclosed that its total revenue for the year ending March 31 increased to £288.4 million, up from £281.9 million in the previous year. While trading revenue saw a slight increase from £229.6 million to £233.1 million, investing revenue experienced a notable decline, dropping by 21% to £37.9 million from £48.0 million.

CMC Markets’ pretax profit took a significant hit, plummeting by 43% to £52.2 million from £91.5 million in the prior year. The main factor contributing to this decline was a substantial 24% increase in operating expenses, which rose to £233.9 million. The company attributed this rise to significant investments made in technology, personnel, and product development throughout the year. Additionally, the impact of the elevated inflationary environment witnessed across all regions further contributed to the increased expenses.

As a result of the challenging financial performance, CMC Markets announced a final dividend of 3.90p, representing more than a 50% reduction compared to the previous year’s final dividend of 8.88p. Consequently, the full-year dividend for 2023 amounted to 7.4p, down 40% from the 12.4p paid out the year before.

Looking ahead, CMC Markets expressed concerns about the current market conditions, describing them as “quiet” in the first two and a half months of the 2024 financial year. This subdued market activity has led to a decline in client trading, estimated to be between 15% and 20%. As a result, the company expects a negative impact on net operating income for the first quarter.

CMC Markets says it remains optimistic about its long-term prospects. The company maintained its expectations of achieving a 30% net operating income growth between 2022 and 2025. Recognising the prevailing uncertainty in financial markets and various sectors, CMC highlighted the importance of being prepared for unexpected and extraordinary events based on their experience in recent years.

The company’s board recommended a final dividend of 3.9p per share, resulting in a total dividend payment for the year of 7.4p per share, down from 12.38p in 2022.

Over the past year, the stock has seen a 38% decline.