The IFX Group (formerly Zetters Group), founded in 1933, has been listed on the London Stock Exchange since 1965. Its principal subsidiary is IFX Markets Ltd, the financial trading and spread betting company. IFX Markets is regulated by the FSA,
and operates its spread betting division under the name Finspreads.
IFX loves volatility. Sharp swings in the currency and equity markets - whether upwards or downwards - encourage IFX's customers to take positions. So, while the dollar has looked to be on the precipice several times lately, the fact that it hasn't yet taken the widely expected dive has resulted in a distinct lack of business activity for the company.
But where IFX has experienced a great deal of recent turbulence is just where it wants it least - in its own boardroom. Internal squabbling resulted in the departure of several senior directors. New chief executive Edmond Warner is now trying to get things back on track, with the help of a much leaner management team. Since his appointment, Mr Warner says that about £1m of costs have been cut.
And early indications suggest that the turnaround effort is bearing fruit. Around 500 new customers have signed up for IFX's newly-improved financial spread-betting service in November, compared with an average monthly figure of 300. As well as attracting more new clients to existing operations, other options for growing the business include acquiring smaller rivals or taking on joint-ventures. And IFX's strong balance sheet means that there should be scope to do so.
House broker Panmure expects full-year adjusted EPS of 5.8p.
Having told investors only a month ago that it would fail to meet profit expectations for the year, IFX Group has said that the situation isn't as bad as it first seemed. The financial trading and spread betting firm was hit by the sharp moves in the dollar during February. Management said that this would lead to a 'substantial shortfall' on analysts' full-year pre-tax profit forecasts of £2.85m. But it appears that IFX's fortunes have since revived, and it will now slightly exceed the much lower revised expectations.
Our opinion is that IFX's latest update has done little to reverse the 17 per cent drop in its share price after February's warning. It now needs to reassure investors about its currency hedging competence. Trading on around 13 times next year's earnings, the shares are good value, albeit risky.
IFX now offers a range of contracts for difference (CFDs) on UK hedge funds. A major obstacle for many hedge fund investors is the high initial investment, which can be up to £60,000. Many funds are also illiquid, allowing one dealing day each month, and requiring notice before an investor sells. IFX will offer CFDs on hedge funds with no minimum deal size, based on daily updated prices and instant settlement (commission will be negotiable, minimum £15). It believes that any profits from hedge fund CFDs will be taxed as capital gains, not income. Gearing on the CFDs will be set at 100 per cent, so investors cannot leverage their position.
Although IFX operates in some exciting growth markets, the company's businesses have so far failed to live up to their potential. Indeed, the new management team, which took control last summer, admits that the latest financial results are "not satisfactory overall". Trading profits took a hammering after the dollar moved sharply against IFX's foreign exchange business in February. Of course, such events are an occupational hazard, but it does raise questions about the company's risk management. Still, IFX does appear to be making some progress. The volume of business conducted through IFX's foreign exchange trading platform surged by 83.9 per cent to $193bn. And equity products - which comprise financial spread betting and contracts for difference (CFDs) - are also more in demand. Active users of the spread betting service were up by around one-quarter in the second half of the year, with an accompanying increase in the amount of bets taken. The recent launch of an innovative product that gives investors exposure to hedge funds is another promising development. House stockbroker Lazard forecasts adjusted EPS of 5.89p in 2005.
7 October 2004Speciality finance stock IFX (IXF:AIM) gets a downgrade to Reduce from Buy by Numis with a target price of 80p, down from 115p. The broker has revised its assumptions, slashing the PBT and earnings figures by 37%. IFX is involved in equity products, forex and commodities and runs spread-betting business FinSpreads.
Analyst Justin Bates points to 'a lack of volatility and quieter markets'. Reducing EPS from 6.5p to 4.0p leaves IFX trading at 22.6x - still too rich, says Bates.
IFX Markets Share price: 91.5pThe recent slip in shares at financial trading and spread betting company IFX Group looks harsh when considering efforts by chief executive Edmond Warner to restructure the group. Shares were 162.5p in December 2002 but are now 80p.
3 December 2004IFX has staged the start of a recovery in the midst of dreary financial markets. There was a welcome return to profitability in the half, with profits before tax and goodwill hitting £300,000, compared with a £300,000 loss in the second half of last year. The company has its spread-betting business, Finspreads, to thank for its progress. A re-launch in November 2003 has been paying dividends, and spread-bet revenues rose 29 per cent to £5.2m, thanks to increased bet-sizes. The equity products business also reports encouraging progress.
At the foreign exchange business, new management plugged the dollar-related losses that began leaking out of the division in February. IFX reports a recovery on the second half of last year. And the company has announced the acquisition of Boston-based Commerce Foreign Exchange for £1m. The deal should be completed by 31 December and will be immediately earnings-enhancing.
IFX Markets Share price: 91.5pBooming business within foreign currency trading has helped IFX achieve much bigger profits. The foreign exchange and spread-betting firm made more money in the first six months of its current financial year than it did during the whole of the last one. And this performance would have been better still, were it not for the weakness within its equity products business.
10 February 2006Volatile, yet rising markets doing wonders for IFX's spread-betting and CFDs businesses. Profits and new client numbers rising steadily. Only real weakness is small fund management arm.
Share Price: 125PThe recovery at IFX Group, enacted by its chief executive Edmond Warner, is finally bearing fruit. Yesterday, the foreign exchange trading and spread-betting firm said its profits for the year ending 31 March would come in at £3.4m, more than the £3.1m forecast by analysts. This performance represents a near doubling on the profits achieved by IFX in 2005.
Since Mr Warner took over in 2003 he has focused it on providing equity products, through Finspreads, and on foreign exchange. More recently he has opened an office in Shanghai offering spread-betting. Given the Chinese love of gambling, the potential market is huge.
Spread betting allows investors to take positions in the stock or foreign exchange markets. It enables punters to gear up their bets - that is, cash in on movements in valuations with only a small outlay of capital - and avoid paying tax on any profits they may make. The recent boom in the UK stock market has been particularly good news for Finspreads.
The IFX boss believes his work is now done and plans to quit this year. He will leave it with £19.5m of cash on its balance sheet, up from £16.8m last year, which accounts for about half the group's market capitalisation. Strip this out and the shares trade at just nine times forecast earnings for this year. This is a significant discount to the rating enjoyed by the quoted rivals IG Group and London Capital, which is unwarranted. Buy.
1 June 2006The parent company of spread-betting house Finspreads was, perhaps unfairly, something of a dot.com casualty, seeing its shares crash from445p to 76.5p on October 2004. After hitting 173p in late April, the currentcorrection has found support from the 50-day average at 139p andcoincident key Fibonacci retracement level.
13 June 2006 |
IFX Group, the financial trading platform operator, announced record profits for last year and said that it is seeing more of the same in the current year.
"The new financial year has begun very strongly. Revenues in the first two months were approximately £7m, so that profits in this period were very substantially ahead of management's expectations," said IFX.
Trading in June has also begun strongly, said IFX adding that its strength has been underpinned by continued growth in customer numbers, and assisted by recent volatility in financial markets.
IFX Group reported a pre-tax profit from continuing operations up 152% to £4.0m from £1.6m. Meanwhile revenues rose to £25.2m from £17.4m a year ago. Basic EPS rose 195% to 7.02p per share from 2.38p.
The group added that its Boston-based retail FX business continues to exceed expectations while the spread betting business Finspreads has been aided in the second half by the launch of enhanced products.
A final dividend of 1.2p per share, has resulted in a doubling of the full year dividend to 1.7p for the year from 0.85p last time.
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