CMC Markets' high-value client focus boosts H2 income

(Reuters) - Spreadbetting group CMC Markets Plc <CMCX.L> said net operating income for the second half of the year would be 'moderately' above the first half and 'significantly' ahead of the prior year, stemming from its increased focus on high-value clients.

CMC, which was hit by a sector-wide regulatory clampdown, said a rise in the proportion of high-value clients had led to improved revenue per client in the final quarter of the year.

Active client numbers at CMC -- founded by Chief Executive Peter Cruddas as a foreign exchange broker with a 10,000-pound investment in 1989 -- rose year-on-year in the final quarter.

CMC shares rose as much as 8.9 percent in early trading on the London Stock Exchange after at least one analyst nudged up 2018 forecasts following the trading update.

However, full-year client numbers were still behind last year, CMC said on Thursday.

The European Union's securities watchdog on Tuesday said it will ban 'binary' options sales to retail clients and restrict the sales of Contract for Differences (CFDs) to protect investors from significant losses, knocking down shares in Britain's spreadbetters.

(GRAPHIC - UK spreadbetters battle regulation: https://reut.rs/2J2izPW)

Binary options and CFDs are financial products that give an investor exposure to price movements in securities without actually owning the underlying asset such as a currency, commodity or stock.

Binary products generated 2.1 million pounds in revenue from the UK and Europe in the first half of 2018, CMC had said, adding that a drop in revenue from such products would be immaterial for the group.

However, an analyst at RBC Capital said the shift towards high-value clients should mean that CMC is well positioned for the upcoming ESMA measures that apply to retail clients. The brokerage has an "outperform" rating on the stock with a target price of 170 pence.

Analysts at Peel Hunt, who raised their 2018 forecasts by 10 percent, said CMC's latest statement emphasises the strength of its platform. They expect to see a re-rating in CMC shares as the current regulatory overhang dissipates.

(This version of the story corrects graphics link)

(Reporting by Noor Zainab Hussain and Rahul B in Bengaluru; Editing by Sunil Nair)