CMC Markets shares plunge after recent rally despite better trading conditions

CMC Markets shares tumbled on Thursday despite the retail trading platform maintaining full-year guidance after solid growth in the first half of its financial year.

The London-based firm also said it was optimistic about meeting its cost guidance of around £225million, not counting variable remuneration and non-recurring charges.

CMC has benefited from higher market volatility and client trading activity over the last year amid geopolitical tensions in the Middle East, a contentious US presidential election and cautious monetary easing by central banks.

The business revealed its net operating income jumped by 45 per cent to £177.4million in the six months ending September.

Combined with lower operating costs, CMC rebounded to a £49.6million profit after making a £2.3million loss in the same period last year.

But shares in the company sank 14.3 per cent to 227p on Thursday morning, making them the FTSE 250 Index’s biggest faller, although they have still grown by about 72 per cent over the past year. 

Shore Capital analyst Vivek Raja said: ‘The share price has been strong over the past couple of weeks, so to the extent the market was expecting a more positive trading update today (perhaps more news on how the Revolut partnership has progressed).’

Rival trading platform IG Group also reported a stronger first-half performance on Thursday on the back of more normalised volatility levels boosting trading volumes.

Its overall turnover increased by 11 per cent to £522.5million thanks to rising trading revenue from over-the-counter and exchange-traded derivatives compensating for interest income flatlining due to lower interest rates.

While the number of active clients dipped slightly to 295,300, IG’s average revenue per customer expanded across all products and divisions.

This helped the firm’s adjusted pre-tax profits jump by 30 per cent to £266.8million in the six months to November.

Following the result, IG said it was confident of achieving full-year revenue and profit forecasts and announced a £50million extension to its share buyback scheme.

Breon Corcoran, chief executive of IG, said: ‘First-half performance reflected more supportive market conditions, but we have work to do to grow active customers, which will be necessary to deliver sustainably stronger growth.’

IG’s trading update comes a week after the company revealed it had agreed to buy share dealing app Freetrade for £160million.

The acquisition will help enhance the firm’s UK trading and investment offering while giving them access to additional customer segments and capabilities.

Freetrade currently provides over 6,000 stocks and exchange-traded funds, and had 720,000 customers and assets under management of £2.5billion as of December.

IG expects to deliver a return on invested capital between three to five years after completing the takeover, which it anticipates happening in mid-2025.

IG Group Holdings shares fell 3.3 per cent to £10.38 by the late morning, but have nonetheless risen by over a third in the past 12 months.

Shore Capital’s Raja said: ‘The share price has recovered over the past year though we do not see the valuation as stretched. 

‘The acquisition of Freetrade looks like a sensible use of ample surplus capital, leaving headroom for IG to continue buying back shares to support its historically depressed valuation, and whilst not likely to be a transformational deal, it should over time improve IG’s overall earnings quality. 

‘For IG’s core business in the current year, we assume modest recovery in net trading revenue against benign prior-year comparatives with potential for further event risk to stoke market turbulence and trading activity levels, which together with the continued cost control that we assume, should support significant earnings growth.’