IG Group Make Hay in Market Volatility

Volatility in equity and forex markets in the last few weeks of the financial year has pushed revenues at IG Group ahead of expectations.

Morningstar.co.uk Editors 9 June, 2010 | 9:15AM
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In a trading update, the group said it expects to report revenues of approximately £298m for 2010, up from £257.1m in 2009. Profits growth was around 25%, after £5m in exceptional items from an office relocation.

The group has seen a significant increase in revenues since volatility in financial markets increased at the end of April. This began with the prosecution of Goldman Sachs, moved through the sovereign debt crises in Europe and then the ‘flash crash’ in May. The group estimated that this volatility has added £4-5m in revenues over the period.

Account opening in the final quarter was strong, with 21,500 financial accounts opened, compared to 18,750 in the final quarter of the preceding year. The UK, Europe, Japan and Australia all contributed to this increase.

The UK financial business accounts for 54% of revenues. It saw revenue growth of 8% over the year to £162m. It had a much stronger second half with 18% growth over the previous year.

The Group's Australian office delivered strong growth on the back of resilient equity markets and a robust currency. It achieved revenues of £46m, up 65% on the previous year (43% on a constant currency basis).

Elsewhere, the Group's Singapore office achieved revenue of £11m, up 16%. The Group's European offices saw revenue of £47m, up 56% (54% on a constant currency basis). All of the Group's European offices contributed to this growth, but growth was strongest in Germany, particularly in the final quarter of the year. Revenue from the Group's Japanese office was £24m, compared to £27.9m for the 8 months of the prior year during which the business was owned by IG.

In the US, the group’s exchange, Nadex, received the necessary change of regulatory designation to enable it to accept clients via intermediary brokers. Matthew Tooth, interim finance director said that growth was likely to come through in 2012 rather than 2011, but the group was in discussions with a number of brokers with a view to their offering direct access to Nadex to their clients.

Shares were up 7.5% to 421.7p in early trading, putting them on a p/e of around 13x. The shares have seen a substantial run-up since the start of 2009 when they were trading at below half their current level. With cash on the balance sheet, the group is in a strong position to build its position and make the most of market volatility.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
IG Group Holdings PLC939.00 GBX0.32

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