Home Money CMC Markets Shares Plunge After Recent Rally Despite Better Trading Conditions

CMC Markets Shares Plunge After Recent Rally Despite Better Trading Conditions

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Big result: Retail platform IG Group's adjusted pre-tax profits rise 30 per cent to £266.8m in the six months to November
  • CMC has benefited from increased market volatility and client trading activity.
  • Trading platform IG Group reported stronger performance in the first half

CMC Markets Stock fell on Thursday even though the retail trading platform maintained its full-year guidance after strong 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 £225 million, excluding variable remuneration and non-recurring charges.

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

The company revealed that its net operating income rose 45 per cent to £177.4 million in the six months to September.

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

But the company’s shares sank 14.3 per cent to 227 pence on Thursday morning, making them the biggest faller on the FTSE 250 index, although they have still risen around 72 per cent over the year. past.

Big result: Retail platform IG Group’s adjusted pre-tax profits rise 30 per cent to £266.8m in the six months to November

Shore Capital analyst Vivek Raja said: “The share price has been strong over the last few weeks, so the market was expecting a more positive trading update today (perhaps more news on how the partnership with Revolut has progressed). “.

Rival trading platform IG Group also reported stronger first-half performance on Thursday thanks to more normalized volatility levels boosting trading volumes.

Its total turnover rose 11 per cent to £522.5m as trading revenue from over-the-counter and exchange-traded derivatives offset falling interest income due to lower interest rates.

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

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

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

Breon Corcoran, chief executive of IG, said: “H1 performance reflected more favorable market conditions, but we have work to do to increase active customers, which will be necessary to achieve stronger, more sustainable growth.”

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

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

Freetrade currently offers more than 6,000 shares and exchange-traded funds, and had 720,000 customers and assets under management worth £2.5bn in December.

IG expects to generate a return on invested capital within three to five years after completing the acquisition, which it anticipates will occur in mid-2025.

IG Group Holdings Stock They fell 3.3 per cent to £10.38 late in the morning, but have still risen by more than a third in the last 12 months.

Shore Capital’s Raja said: ‘The share price has recovered over the past year, although we don’t consider the valuation to be at breaking point.

“The acquisition of Freetrade looks like a sensible use of ample excess capital, leaving room for IG to continue buying back shares to support its historically depressed valuation, and while it is not likely to be a transformative deal, it should improve overall quality over time. of IG profits. .

‘For IG’s core business in the current year, we assume a modest recovery in net trading revenues versus benign prior-year comparisons with potential for increased risk of events fueling market turbulence and trading activity levels,’ which, together with the continued cost control we undertake, should support significant profit growth.”

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