IG Group Bucks Mkt Collapse With Higher 1H Profit

LONDON (Dow Jones)–U.K.-based financial derivatives and sports betting company IG Group Holdings PLC (IGG.LN) Tuesday revealed a jump in first-half revenue and profit as the market collapse prompted customers to switch to short-term trading of indices and currencies from trading in individual shares.

“Revenue from both these areas has grown very strongly, more than making up for the weakness in sares and, together with the impressive performance of our newer international operations, has enabled us to achieve continued strong organic growth,” the company said.

Chief Executive Tim Howkins said he is confident in the company’s outlook despite uncertain market conditions. He said lower interest rates will hit the return on its cash balances in the second half of the fiscal year, but the pound’s recent fall will boost income from its growing overseas operations.

During the first six months of the fiscal year, the company reported net profit of £37.7 million, up 14% from £33.1 million a year earlier. Pretax profit was up 13% to £54.6 million from £48.2 million, underperforming a 47% rise in revenue to £126.5 million, mainly due to higher administration costs and a charge of £14.7 million for bad customer debts. The half ended Nov. 30.

IG Group said most of the bad debts arose in October as markets swung wildly and hit customers. However, it said it is still at an early stage of chasing the debt and it expects to achieve a good level of recovery. It has also become more risk adverse, and clients on margin call are now closed out before they get into deficit.

Showing its confidence, the company raised its interim dividend to 4 pence from 3 pence a year earlier.

Most of the revenue growth was organic, though the company was also boosted by the acquisition in October of FXOnline Japan KK, which increased its presence in Asia-Pacific.

“Our main focus in the second half will be on continuing to grow our existing businesses worldwide. However, we continue to evaluate a number of new markets,” the company said.

It will also re-launch its sports betting business in the second half of the year. The unit accounted for only 3% of revenue in the first half.

Thoughts: A relatively positive update in a sea of red – will this be sufficient to shore a declining share price? The UK business has continued to grow reflecting IG’s dominant position in the market. Quoting a broker’s statement ‘The brand, technology and strong management team places IG well to take advantage of continued volatility in the UK markets and expansion opportunities abroad’

Tags: financial derivatives, FXOnline Japan, IG Group, sports betting, Tim Howkins

This entry was posted on Tuesday, January 20th, 2009 at 11:07 pm and is filed under Financial Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.