By Radhika Anilkumar
(Reuters) -Online trading platform CMC Markets expects its first-quarter net operating income to take a hit due to subdued trading activity in the first two and half months of its fiscal 2024, sending shares of the company down as much as 7% in morning trade.
Trading platforms are struggling with a slowdown in client activity as market volatility eased from highs witnessed during Russia’s invasion of Ukraine last year and the COVID-19 pandemic.
CMC Markets, which has also been battling with higher costs on the back of a weaker British pound, added that it now expects its investment plans to increase its expenses to about 240 million pounds ($301.32 million).
“We do see profit margins staying relatively low to historical achievements in full year 2024, but will see it starting to expand again in 2025 as revenues from our initiatives start to generate,” Chief Financial Officer Euan Marshall said in an interview with Reuters.
It proposed a total dividend of 7.40 pence, a fall of 40% from a year ago, after the group’s total cost base increased by 24% to 236.2 million pounds.
There is diminished interest in the UK market itself, with clients more interested in U.S.
equities, Marshall added.
This comes after its UK & Ireland region reported a 10% drop in active clients.
“Whilst predicting an improvement in market conditions is fraught with risk, it does feel like trading activity will recover at some point and CMC will then start to benefit from the work done in recent years,” analysts at Peel Hunt said in a note.
The brokerage added that in the short-term, potential for the company remained more challenging.
Shares in the company fell 5.4% to 161 pence at 0815 GMT.
The company reported a 9% fall to 58,737 in its active trading clients for the year ended on March 31, while client activity was down 15%-20% in the first two and half months.
($1 = 0.7965 pounds)
(Reporting by Radhika Anilkumar and Sinchita Mitra in Bengaluru; Editing by Rashmi Aich, Eileen Soreng and Ed Osmond)
