IG Profit up as Sovereign Crisis Boosts Trading
July 20, 2010Peter No Comments »City spread betting company IG Group (IGG.L) have reported a marked improvement in sales through companies IG Index and IG Markets brands, as May’s market volatility continued into June and July.
Reporting on its performance in the year ended May 31, IG Group said it made a £157.6 million pretax profit, adjusted to strip out £5 million in expenses for moving offices, up 25% from £125.9 million in fiscal 2009, and inline with its estimate last month of £157 million. Revenue was £298.6 million, up 16% from £257.1 million in fiscal 2009 and meeting its £298 million guidance.
Quick Facts
- Underlying profits rose by 25% to £157.6m in the year to May, up from £125.9m, on revenues 16% higher at £299m. Pre-tax profits rose by 26% to £140.3m.
- Best performance came from Australia, with revenue increasing by over 63% from £27.9m to £45.7m driven by its CFD business.
- In Europe, revenue also grew rapidly, up 57% from £30.2m to £47.4m with Germany showing the highest growth rate.
- In the United Kingdom, growth picked up after October and in the second half of the year, revenues rose by 18% year-on-year.
- The number of financial clients dealing grew 10% to 120,689 and year-on-year partners business revenue powered ahead by 42% to £48.7m.
- There was also a big swing in the bad debt position from a £18.2m write-off in the previous year to a net recovery of £1.1m this time.
The June estimates had far outstripped analyst expectations, and in part were the result of brisk business in May, as markets went through a bout of extreme volatility from investor worries over the euro zone’s fiscal health.
After opening offices in Sweden and Portugal and a representative office in China in the previous year, IG Group said it aims to move into at least one other country this year, while also seeing prospects for strong growth in its fledgling U.S. business.
‘We are well-placed competitively and have extended our market lead in several of our key markets over the last year. We have demonstrated continued growth from our U.K. business and strong growth from both Europe and Australia, which are now businesses of significant scale. I look forward to the coming year with confidence,’ Chief Executive Officer Tim Howkins said.
He told Dow Jones Newswires the company was particularly pleased with a roughly 43% constant-currency growth rate in its Australian businesses, where it has been gaining market share from competitors and is benefiting from a broader increase in the number of people regularly taking bets on financial markets.
Howkins said the next new office will be in either Canada or the Netherlands.
IG Group is best known in the U.K. for its IG Index spread-betting operations that let people bet on stock, currency, commodity and interest rate moves. It also has major operations in Australia, Japan and continental Europe, offering contracts for differences and foreign exchange trading.
The company benefits when volatility in financial markets is high, since it encourages more trading and use of its products.
Analysts said current market conditions are ideal for the company, but that the rally in its stock price since the June trading update could lead to some profit-taking.
‘We expect strong growth to continue in the mid-term, particularly in Europe, where the offices are earlier on in their maturity profiles,’ analysts at UBS said, keeping a buy rating and 500-pence price target.
By region, the U.K. contributed £168.5 million in revenue–including a £5.9 million contribution from its sports betting business–Australia £45.7 million, Japan £23.9 million and continental Europe £47.4 million. The rest of the world, including Singapore and the U.S., accounted for about £13 million in revenue.
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