IG Group EBITDA up 34%
January 20, 2010Andy No Comments »IG Group didn’t surprise when it reported on Tuesday strong fiscal first-half results and an upbeat financial outlook for the second half. The company reported a 34% rise in first-half pretax profit (EBITBA) which was broadly in line with expectations and emphasised that the Group is well-positioned for future growth and continues to see strong activity levels and account openings in the U.K. and overseas.
For the 6 months ended November 30, IG made £78 million in pretax profit (last month the company issued a statement that this was expected to be £77 million), up from £58.2 million in the same period of fiscal 2009. First-half trading revenue was £143.8 million, in line with guidance of £143 million given in December and up 14% from £126.5 million previously led by a 65 percent jump at the company’s Australian office and a 64 percent increase at its European unit. Net income for the 6 months ended Nov 30 amounted to £50 million ($82.1 million) compared to £37.7 million pounds in the same period a year earlier. Spread betting, CFDs, binary trades and sports betting contributed £53.50 million, £83.10 million, £5.18 million, £2.96 million respectively to trading revenues. Geographically, trading revenues from United Kingdom, Australia, Europe, Japan, Rest of the world were £82.86 million, £22.20 million, £21.73 million, £10.93 million and £6.02 million, respectively.
Even more, marketing in New Zealand started up in October and the early response has been quite encouraging. Progress in Japan remains difficult but first signs suggest that IG’s market share in Japan is growing albeit slowly. Revenue from the United States markets is still very low at £1m, but chief executive Tim Howkins stated that he remains optimistic that regulatory changes will soon allow the group to offer exchange-traded contracts there. The Group’s partner franchises (white-label partners) also grew from 14 per cent to 16 per cent of group revenue.
IG Group, which opened a trading office in Sweden during the reported period, established French and Spanish operations two years ago. The Group has also opened a representative office in Beijing earlier this month (although IG stated that it won’t be offering its services in China for the present time since gambling is not allowed) and plans to open an office in Lisbon in the second half. IG also stated that it will market its offering in South Africa more aggressively and has paid GBP2 million for the client list and business of a small South African CFD partner there, Ideal CFD Financial Services (Pty) Ltd. Finally IG stated that the next logical step would be for expansion in Netherlands which the company may consider in 2011, a company spokesman said. If the new office in Sweden is successful, IG Group may consider further expansion into neighboring Scandinavian countries in 2011 or 2012. The Group is expected to add 40 to 50 staff members over the next six months.
The earnings numbers came in a little better than the company’s estimate in December and IG stated that the stock market rally is helping clients to increase their trading. A company spokesman said that the results were mainly due to strong growth Australia, continental Europe and Singapore, with the UK producing impressive results as well. British customer numbers rose by 29% in the year to November with the company continually adding an average of more than 3,000 new UK accounts, IG Group said, rejecting some analysts’ concerns that growth in the United Kingdom has peaked and company has now expanded in Europe, Australian, the United States and the Far East although the company still generating about half of its sales in Britain.
‘IG Group has again delivered record results with strong growth in both revenue and profits,’ said CEO Tim Howkins. ‘We continue to experience strong levels of activity and account opening, both in the United Kingdom and overseas, where our expansion continues. All our markets have great potential and IG is well positioned to deliver further growth.’
IG Group, which also has foreign exchange business services, announced that it will pay an interim dividend of 5p a share, which amounts to a 25% rise on last year’s 4-pence dividend for the comparable period.
IG Index keeps growing and now has some 35,000 British active clients, compared with over 1 million personal share dealing accounts across the UK which means that there are good prospects for further growth despite some analysts stating otherwise. Also, opened office in China, no doubt in a lobbying effort for a liberalisation of China’s gambling laws but big leaps in China have to be made in baby steps. IG has no debt and about £63m in cash reserves (net of client money) and bad debts are now under strict control (they were as high as £18 million last year but the amounts are now negligible) after the introduction of tighter controls that close out client contracts if they don’t address margin calls.
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