CMC Markets Group: Investment platform analysis

The below highlights the five insider transactions during the last six months. The two larger buy trades appear to be grants or awards. These were followed on the same day by partial sales. With the share price surging during the year, these insiders appear to be cashing in on a much higher market cap.

• David John Finebery – Deputy Chief Executive Officer
  Information Sell, Options Exercised and Fully Sold – 51,770 shares
• David John Fineberg – Deputy Chief Executive Officer
  Uninformative Buy Grant/Award/Other – 109,928 shares
• Matthew Lewis – Regional Head
  Informative Sell, Options Exercised and fully Sold 25,863 shares
• Matthew Lewis – Regional Head
  Uninformative Buy, Grant/Award/Other Acquisition 57,355 shares
• Matthew Lewis – Regional Head
  Uninformative Buy, Auto Buy 2,198 shares

Assets Under Administration (AUA) on the company’s investment platform have not followed a linear upward path over the past three years. The figure at the end of FY2024 was £40.5 billion. That’s up from £39.6 billion at the end of FY2023 and down from £45.7 billion at the end of 2022.

Number of users vs previous year and quarter.

At the end of FY2024, CMC Markets had 208,000 investing clients, down 4% year over year. This is down from around 245,000 in 2022, shortly after the takeover of ANZ’s online trading customer base. In 2023, management pointed to a tough trading environment characterised by lower levels of volatility. The company has achieved some expansion goals with the launch of new products in Singapore and the UK.

Average revenue per user (ARPU) vs previous year and quarter.

Average Revenue Per (investment platform) User (ARPU) fell in 2024, hitting to £161 per customer. ARPU came in at £173.63 in 2023. This figure is considerably lower than the ARPU generated from the company’s trading platform.

CMC Market’s Trading Business: Revenue, Users, and ARPU

CMC Markets primarily operates a trading platform, and this is the largest revenue-generating part of the business. The trading platform generated £259.1 million in 2024, up from £233.1 million in 2023. This was achieved with just 55,329 users and 58,766 users respectively. ARPU, as reported by the company, came in at £4,685 and £3,968 respectively.

Revenue vs previous year vs consensus estimates.

Revenue generation has been non–linear since 2020. As a trading platform, the company benefitted from increased volumes and volatility during the pandemic. FY2021 represented a unique year for the company. Revenue, expressed here as net operating income, has gradually increased from 2022, reaching £332.8 million in 2024.

Earnings per share (EPS) vs previous year vs consensus estimates.

Earnings per share (EPS) has also followed a non-linear path, with FY2021 representing a unique period of outperformance. With pandemic-era tailwinds long gone, the business saw EPS tick upwards to 16.7p in 2024.

Revenue breakdown

As noted above, CMC Markets generates the majority of its earnings from its trading platform. The share of revenue generated from the investment platform peaked in 2022.

Profit Before Tax margin vs previous year and quarter vs consensus estimates

The Profit Before Tax (PBT) ratio is a financial metric that measures a company’s profitability before tax expenses are deducted. CMC Markets has sustained a health PBT ratio in recent years.

Gross profit margin vs previous year and quarter vs consensus estimates

The gross profit margin is a key financial metric that indicates the percentage of revenue remaining after deducting the cost of goods sold (COGS). According to data from FactSet, the gross profit margin was 88.1% in 2024, higher than all the preceding three years.

Free cash flow vs previous year vs consensus estimates

Data from FactSet highlights non-linear free cash flows, with the figure peaking in FY2022 at £152.6 million. This has subsequently fallen to £72.5 million in 2024. FactSet data suggests that free cash flow will fall further to £65.6 million in FY2025.

Net debt/cash vs previous year vs previous quarter

According to data from FactSet, CMC Markets is in a strong financial position with a net cash position of £194.3 million. This is the strongest position this business has been in over the past decade.

Analysts’ price targets and ratings including commentary.

Based on six analysts offering 12-month price targets for Hargreaves Lansdown in the last 3 months. The average price target is 233.8p with a high forecast of 330p and a low forecast of 135p.