CMC Markets, the spread betting platform has published its interim financial results for the H1, FY 2019, reporting a dramatic fall in net profits due to regulatory woes. The results were made available through the London Stock Exchange via exchange filing.
For the period ended 30th Sept. 2018, net operating income for the company dropped 21 per cent to £70.6 million, compared to £89.6 million in H1, FY 2018. The Profit after Tax declined by over 70 per cent to £7.2m from almost £30m in the same period last year.
The drastic drop in profit was due to the regulatory changes on leverage and margin by European regulatory agency, ESMA that came into effect from 1st August 2018. According to the disclosures, performance is expected to be weighted towards the second half and will be supported by extra stockbroking revenue. In September, CMC has warned about declining profitability in the wake of new regulatory enforcement.
Chief Executive, Peter Cruddas commented on the result:
“whilst trading in the first quarter outperformed the same period last year, as previously announced, the second quarter was particularly difficult.”
“Volatility was low, and unusually the majority of asset classes traded in tight ranges. This was further compounded by the impact of European regulatory change that came into force on 1st August. As a result, overall profit after tax was significantly lower than the same period last year.”
The operating expenses during the period increased 6 per cent year-on-year to £62.7 million, from £59.3 million in the first half of 2018. The increase is largely due to investments in its stockbroking business and higher salary cost across the company.
Despite tightening regulations, CMC Markets in the first half of 2019 fiscal has recorded 14 per cent more trades increasing from 30.7 million trading in H1 of 2018, to 34.9 million in H1 of 2019. But the value of trades increased by 4 per cent year-on-year.
Cruddas added:
“As we enter the second half, which is typically stronger than the first, we have seen an improvement in market conditions and encouragingly an increase in activity across retail, professional and institutional client categories.”
