Plus500 Is Highly Efficient in Profitability, but CMC Seesaws the Most

When it comes to profitability, the three London-listed retail brokers generally perform well (with only a few exceptions). While IG Group (LON: IGG) and Plus500 (LON: PLUS) regularly lead in pre-tax profitability with three-digit gains, CMC Markets (LON: CMCX) often has lower figures.

IG Remains the Most Profitable CFDs Broker

IG, with a market cap of £3.2 billion, is the largest of the three forex and contracts for difference (CFD) brokers. It achieved a pre-tax profit of £224.4 million on revenue of £514.7 million in the six months between December 2023 and May 2024, resulting in a profit-to-revenue ratio of 43.6 percent.

During IG’s best-performing fiscal six months in the last five years, the first half of FY 2022, the broker achieved a pre-tax profit of £245.2 million, resulting in a profit-to-revenue ratio of over 51.6 percent. Although this ratio dropped to 37.3 percent in the first half of the previous fiscal year, it has since recovered over six consecutive months.

It's Hard to Beat Plus500's Efficiency

Plus500 leads the trio in terms of profit-to-revenue ratio. In its most profitable six months, the first half of 2020, the Israeli broker earned $363 million (about £280 million) in pre-tax profits, achieving a profit-to-revenue ratio of more than 64 percent, the highest among the three brokers to date.

However, Plus500’s efficiency dropped to 46.1 percent in the first half of the current year. The broker also generated $187.3 million in revenue in Q3 2024, though its profits for the quarter remain undisclosed. Public filings show its EBITDA margin for the quarter was 44 percent.

In absolute terms, Plus500’s profits are much lower than IG’s. While the Israeli broker generated only $183.7 million (around £141 million) in pre-tax profits in its latest fiscal six months, IG brought in £224.4 million. Interestingly, Plus500 also spent the most on marketing compared to its other two competitors.

CMC Markets’ figures remain low compared to its two larger competitors. In the most recent fiscal six months, from October 2023 to March 2024, the broker generated £65.3 million in pre-tax profits, recovering from a £2 million loss in the previous six months.

CMC’s latest revenue-to-profit ratio was 31 percent, which is substantially lower than its other two London-listed competitors. CMC’s best six-month period was from April to September 2020, when its revenue peaked at £230.9 million, driven by the effects of the COVID-19 pandemic. The broker achieved a pre-tax profit of £141.1 million, and a revenue-to-profit ratio of over 61.1 percent, though performance efficiency has since declined.

A key factor behind IG’s recent dominance over Plus500 and CMC has been interest income. In the second half of its last fiscal year, IG’s interest income peaked at £72.2 million. While Plus500 generated $29.1 million (around £22.3 million) over six months, CMC only brought in £18.9 million.

Finance Magnates also analyzed the different geographical markets where these three brokers operate and found that the retail traders in Singapore are the most lucrative, as proved by IG. However, CMC is moving its focus away from its UK home turf and is expanding in Asia Pacific.