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№ 084 30 filings · 2021-06-10 → 2025-11-20

CMC MARKETS PLC

CMCX
Financial Services Market cap £1.0bn Overall fit 410 /1000

Modest fit: high operating leverage on B2B/API distribution build-out and a fair-to-cheap valuation with net-cash balance sheet, but minimal direct AI-receiver exposure — the upside narrative is fintech distribution and Web3, not AI infrastructure. Not a focus name for an AI-receiver portfolio.

Fair value range 360p–460p Mid case · £1.1bn
Absolute upside +7.1% vs current market cap
Conviction 3/5 confidence in fair call
Supports the call
  • clean audited disclosure with investment-grade rating
  • multiple valuation methods converge in tight range
  • recent track record of meeting/beating guidance
Limits the call
  • trading revenue intrinsically volatile half-on-half
  • DeFi/Web3 strategic pivot introduces wide tail of outcomes
Methodology

Forward P/E on FY2026 guided NOI, cross-checked with EV/EBITDA

In one line · bull case

High-operating-leverage fintech platform with accelerating B2B/API distribution and net-cash balance sheet, available at ~14x forward earnings with a ~3.5% yield.

In one line · biggest risk

Trading revenue cyclicality could reassert (as in FY2024) and compress PBT margin sharply, while Web3/DeFi spend absorbs capital without clear return.

Drivers
AI beneficiary 28 /100
Trading platform with some proprietary tech but no demonstrable AI-driven revenue line; Web3/DeFi pivot is not AI.
Operating leverage 72 /100
High fixed-cost platform with low-marginal-cost B2B/API distribution; Westpac deal expected to lift Australian volumes ~45%.
Earnings vs expectations 68 /100
Multiple beats and a 10% in-year upgrade to FY2026 NOI guidance after FY2024 reset.
Growth momentum 70 /100
FY2026 guided ~14% NOI growth above prior consensus; B2B pipeline accelerating across geographies.
Moat 48 /100
Technology platform plus growing API distribution network creates moderate switching costs but space is competitive.
Earnings quality 70 /100
Clean reported earnings, unqualified audit, generally good cash conversion; some one-offs (remediation, impairments).
Management quality 55 /100
Founder-CEO Lord Cruddas is majority shareholder and entrenched; recent execution has been strong but governance optionality is limited.
Cyclicality 60 /100
Trading revenue is volatility-dependent; investing/stockbroking provides partial diversification.
Leverage 8 /100
Net cash position, no debt, BBB- investment grade from Fitch, OFR ratio 221%.
Value-trap signals · 3
  • Controlling-shareholder concentration (Lord Cruddas)
  • Escalating Web3/DeFi narrative risks strategic drift
  • Recurring regulatory/legal overhang in Australia (class action + ASIC remediation)

CMC Markets PLC (CMCX) — Investment Research Note

Executive summary

CMC Markets is a UK-listed online CFD/spread-bet trading and institutional ("B2B") platform technology business, with a substantial Australian stockbroking ("CMC Invest") operation now the country's #2 broker. Operating trajectory has inflected sharply since FY2024 — NOI grew from £288m (FY2023) to £332.8m (FY2024) to £340.1m (FY2025), and the H1 2026 result of £186.2m drove a 10% upgrade to FY2026 guidance against consensus of £353.9m 2025-11-20 interim. The single most important point for valuation today is whether the institutional B2B and API distribution flywheel (Westpac, Revolut, ASB, Neobank API, Currys) materially re-rates the multiple — not the company's "Web3/DeFi" rhetoric, which is unproven and capital-light enough not to derail the thesis.

Fair value estimate

  • Methodology: forward P/E cross-checked with EV/EBITDA. Reported FY2026 NOI guidance is ~£389m (10% above £353.9m consensus) 2025-11-20 interim. Applying H1 2026 PBT margin of ~26.5% gives PBT of ~£103m and PAT of ~£75m (28% effective tax rate). With ~271m weighted shares, that implies EPS of ~27.5p. Apply 13–17x forward P/E to a fintech broker with platform-economics tilt and net cash.
  • Fair value range: 360p – 460p per share, mid ~410p.
  • Implied market cap: £976m – £1,246m, mid ~£1,111m.
  • Current market cap: £1,029.7m (~380p).
  • Upside to mid: ~+8%; range from ~-5% to ~+21%.
  • View: fair-to-modestly-undervalued.

Sector context

ICB Financials / Financial Services. CMCX is a hybrid retail CFD broker + emerging B2B fintech infrastructure + Australian stockbroker. Quality is roughly in line with sector peers but with a stronger balance sheet (net cash, BBB- investment grade from Fitch, OFR ratio 221% at H1 2026 2025-11-20 interim). Growth profile is currently above sector average due to B2B partnership build-out. Listed peers: IG Group (IGG), Plus500 (PLUS), Hargreaves Lansdown (HL — pre-take-private). Leverage profile is conspicuously cleaner than typical financial peers.

Investment thesis (3 bullets)

  • B2B API distribution is the underappreciated structural driver. Westpac partnership ("CMC's largest institutional deal to date") expected to lift Australian volumes ~45% within ~12 months; Neobank API live in 30+ countries with "hundreds of thousands of retail trading accounts opened over the last year", ~70% in countries with no physical CMC presence — i.e., revenue with near-zero incremental cost to acquire 2025-11-20 interim.
  • Operating leverage inflection coming through. Management explicitly flags "lower overheads and improved profit margins expected to flow through over the next 12 to 18 months" as dual-running costs from offshoring unwind 2025-11-20 interim. H1 2026 cost growth was inflated by a one-off £5.2m Australian margin-netting remediation that won't recur in FY2027.
  • Net-cash, investment-grade balance sheet at a non-stretched multiple. £222.4m cash, no debt, £683.6m total available liquidity, CET1 of £348.5m vs OFR of £157.4m, Fitch BBB- assigned post-period-end 2025-11-20 interim, 2025-06-05 final. Forward P/E ~14x with a ~3.5% dividend yield and recent earnings beats — not priced for perfection.

Key risks (3 bullets)

  • "Third vertical" DeFi/Web3 strategic spend may not be capital-light. Acquired 51% of StrikeX in May 2025; €300m Commercial Paper Programme established; tokenisation/blockchain ambitions are extensive and speculative. Could absorb capital without commensurate returns; could also reposition the multiple lower if it reads as strategic drift 2025-11-20 interim, 2025-06-05 final.
  • Australian regulatory/legal overhang. Class action ongoing in Federal Court of Australia (CFDs sold 2011–2021); margin-netting remediation provision of £9.5m is "now considered complete" but ASIC-related risk is persistent. Trading is heavily regulated and rules can change abruptly 2025-11-20 interim, 2025-06-05 final.
  • Earnings sensitivity to client trading activity and hedging outcomes. FY2024 NOI was only 2% above FY2023 and trading net revenue fell 4% as client retention dropped to 77% from 104% 2024-06-20 final. Demonstrated that PBT margin can compress 14ppts in one cycle (FY2022 PBT margin 32.5% → FY2024 19.0%).

Operating leverage

The cost base is heavily fixed: net staff costs £113.7m, IT £46.4m, sales & marketing £33.5m, depreciation/amortisation £15.6m in FY2025 — collectively ~80% of operating expenses are not directly volume-variable 2025-06-05 final. With B2B partnerships, incremental NOI carries very high contribution margin because CMC supplies platform & execution while the partner owns the customer relationship and onboarding. Management states ~70% of newly-opened API accounts come from countries where CMC has no physical presence — pure marginal economics. The investment cycle peaked in FY2024 and management is now explicitly guiding to margin expansion via offshoring of operational functions 2025-11-20 interim. A 10–20% NOI surprise above FY2026 guidance would plausibly drop ~£20–40m of incremental PBT, i.e. 20–40% to PBT vs a current run-rate of ~£100m. Operating leverage is real but not extreme (it's not a 5x-incremental-margin software business).

Value-trap signals

  • Concentrated control by founder/CEO Lord Cruddas — majority shareholder, has stated he will "never retire, or sell any of my shares" 2025-06-05 final. Limits M&A optionality and corporate governance independence.
  • Web3/DeFi narrative escalating in tone over successive results — could indicate strategic distraction; could indicate genuine optionality. The substantive results (Westpac, API growth) are core trading/investing, not crypto.
  • Trading revenue is intrinsically cyclical and volatility-dependent, with H2 typically stronger — investors should not extrapolate H1 run-rates.
  • FCA Consumer Duty + DORA + German GmbH audit remediation + Australian class action is a meaningful regulatory workload requiring ongoing compliance investment.

Earnings vs. expectations

Recent results have shown a clear positive surprise trend after a weak FY2024. Q3 FY2025 trading update (Jan 2025): "on track to achieve annual NOI in line with previous guidance" 2025-01-23 trading update. Jan 2024 trading update upgraded FY2024 NOI guidance to £290–310m from £250–280m 2024-01-08. FY2025 final result: PBT +33% YoY, ahead of progressive guidance 2025-06-05 final. H1 2026 NOI 5% YoY with FY2026 raised ~10% above consensus £353.9m 2025-11-20 interim. Pattern: after a 2024 reset, two consecutive years of in-line-to-beats, with a guidance raise within the current year.

Conviction

Conviction: 3 (moderate).

Anchors: clean and well-audited disclosure (Deloitte unqualified opinion); multiple converging valuation approaches (P/E, EV/EBITDA, dividend yield) all land in a tight range; track record of meeting/beating since the FY2024 reset.

Limits: client trading revenue is volatile half-on-half (compare FY2024 vs FY2025); the third-vertical (DeFi/Web3) introduces a wide tail of outcomes that the filings cannot quantify; controlling-shareholder concentration limits external check on capital allocation.

Filings consulted · 40

Every document the LLM read for this note. Click any row to open the source.

  1. 2025-11-20Interim Results2025-11-20_9245451_interim-results.md0.77
  2. 2025-11-20Dividend Declaration2025-11-20_9245790_dividend-declaration.md0.26
  3. 2025-07-24Result OF Agm2025-07-24_8998391_result-of-agm.md0.26
  4. 2025-06-20Notice OF Agm2025-06-20_8941184_notice-of-agm.md0.26
  5. 2025-06-05Final Results2025-06-05_8913547_final-results.md0.85
  6. 2025-06-05Dividend Declaration2025-06-05_8914437_dividend-declaration.md0.26
  7. 2025-01-23Trading Update2025-01-23_8701752_trading-update.md0.55
  8. 2024-11-21Interim Results2024-11-21_8563146_interim-results.md0.58
  9. 2024-11-21Dividend Declaration2024-11-21_8563403_dividend-declaration.md0.20
  10. 2024-10-09Trading Statement2024-10-09_8474231_trading-statement.md0.55
  11. 2024-07-25Result OF Agm2024-07-25_8331545_result-of-agm.md0.20
  12. 2024-07-25Q1 2025 Trading Update2024-07-25_8329617_q1-2025-trading-update.md0.55
  13. 2024-06-24Notice OF Agm2024-06-24_8275530_notice-of-agm.md0.20
  14. 2024-06-20Final Results For The Year Ended 31 March 20242024-06-20_8268839_final-results-for-the-year-ended-31-march-2024.md0.65
  15. 2024-06-20Dividend Declaration2024-06-20_8268966_dividend-declaration.md0.20
  16. 2024-03-27FY 2024 Pre Close Trading Update2024-03-27_8108572_fy-2024-pre-close-trading-update.md0.38
  17. 2024-01-08Trading Statement2024-01-08_7977975_trading-statement.md0.38
  18. 2023-11-16Interim Results2023-11-16_7884404_interim-results.md0.41
  19. 2023-08-25Trading Statement2023-08-25_7716627_trading-statement.md0.38
  20. 2023-07-27Trading Statement2023-07-27_7657735_trading-statement.md0.38
  21. 2023-07-27Result OF Agm2023-07-27_7659706_result-of-agm.md0.14
  22. 2023-06-23Notice OF Agm2023-06-23_7592215_notice-of-agm.md0.14
  23. 2023-06-13Final Results2023-06-13_7571413_final-results.md0.45
  24. 2023-03-27Trading Statement2023-03-27_7335040_trading-statement.md0.21
  25. 2023-01-25Trading Statement2023-01-25_7227256_trading-statement.md0.21
  26. 2022-11-16Interim Results2022-11-16_7374247_interim-results.md0.23
  27. 2022-10-06Trading Update2022-10-06_7248541_trading-update.md0.21
  28. 2022-07-28Trading Update2022-07-28_7181746_trading-update.md0.21
  29. 2022-07-28Result OF Agm2022-07-28_6915992_result-of-agm.md0.07
  30. 2022-06-24Notice OF Agm2022-06-24_7071177_notice-of-agm.md0.07
  31. 2022-06-09Final Results For The Year Ended 31 March 20222022-06-09_6871499_final-results-for-the-year-ended-31-march-2022.md0.25
  32. 2022-04-08FY 2022 Pre Close Trading Update2022-04-08_6901941_fy-2022-pre-close-trading-update.md0.21
  33. 2022-01-26Q3 2022 Trading Update2022-01-26_6953044_q3-2022-trading-update.md0.21
  34. 2021-11-17Interim Results2021-11-17_6788820_interim-results.md0.23
  35. 2021-10-07H1 2022 Pre Close Trading Update2021-10-07_6713094_h1-2022-pre-close-trading-update.md0.21
  36. 2021-09-02Trading Update2021-09-02_6716329_trading-update.md0.21
  37. 2021-07-29Result OF Agm2021-07-29_6784993_result-of-agm.md0.07
  38. 2021-07-29Q1 2022 Trading Update2021-07-29_6783591_q1-2022-trading-update.md0.21
  39. 2021-06-25Notice OF Agm2021-06-25_6842868_notice-of-agm.md0.07
  40. 2021-06-10Final Results2021-06-10_6665345_final-results.md0.25

This research note was authored by a large language model after reading 30 regulatory filings published between 2021-06-10 and 2025-11-20. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.