CMC – Share Price Movements – Cost Reduction & Efficiency Plans

CMC Markets came out with a trading update today, here are the summarised points:

- CMC Markets is implementing cost reduction and efficiency plans following its interim results announcement on 16 November 2023.

- The company is at the peak of its investment cycle and has completed a cost review in H2 aimed at enhancing efficiency across its global operations.

- Approximately 200 positions will be cut, which is around 17% of the current workforce, to achieve cost efficiency.

- A one-time, non-recurring cost of about £2.5 million will be incurred in FY24, with anticipated annual savings of £21 million starting in FY25, amounting to an 18% reduction in consensus staff costs.

- Cost reductions are primarily realized through the consolidation of support functions, the simplification of reporting structures, and the automation of processes.

- CMC continues to focus on structural savings and efficiency improvements while committing to growth and maintaining leading technology.

- Trading is consistent with forecasts, and the company expects to achieve a net operating income between £290 million and £310 million for FY24.

To download the full statement click here

The market has reacted positively to the news, with the share price increasing by 16.7% to date.

The extent of this positive reaction is somewhat surprising. While reducing costs is beneficial, I feel the company is scaling back its growth objectives. The anticipated net operating income of £290m to £310m is encouraging, especially considering the company's net operating income of £187.1m in 2018, which resulted in a post-tax profit of £49.69m. Should profits for 2024 fall within this range, the company's P/E ratio would be approximately 7.

I will keep an eye on their progress. However, my main interest lies in seeing an increase in overall trading volumes within the company, rather than a 17% reduction in workforce.