IG Group Holdings Plc (IGG) Ord 0.005p
HL comment (20 January 2015)
"Only a few hundred" clients were affected, said IG, who hope to incorporate lessons learned from the event into their future risk management strategies. The affected clients will no doubt be reassessing the role of leveraged spread betting within their own risk management strategies.
The charge for the Swiss Franc debacle will clearly dominate the Q3 financial result, but the group has provided assurance that if it alone leads to a reduction in full year profits, they will not lower the dividend in response.
The recently adopted dividend policy of paying out 70% of earnings, with the interim set at 30% of the previous full year payment means that the group announced an interim dividend of 8.45p. This is a 47% increase, largely because of the increased payout ratio and the previous policy of paying out only 25% of the previous full year total at the interim stage. Investors should not expect the final dividend to rise by a similar percentage.
Read more share research from Hargreaves Lansdown
- Net trading revenue up 8% at £197.4 million
- Profit before tax up 2.8% to £101.4 million
- Diluted EPS up 5.4% at 21.44p
- £87.4 million of own funds generated from operations, up 10.5%
- Interim dividend of 8.45p per share, 30% of 2014 full year dividend
- Execution only stockbroking service launched in the UK; planning international roll-out
- Swiss office commenced operating in October; Dubai licence application progressing well
- Launched IG Major Markets mobile App, aimed at improving client acquisition
Tim Howkins, CEO, commented:
"IG delivered another very strong set of results, with record revenue in the half year after a subdued first quarter. We also made good progress with our ongoing investment in strategic initiatives designed to drive future growth, including the launch of stockbroking in the UK and the opening of a new office in Switzerland."
Performance was stronger in the UK (+14%) and Australia (+7%) than in Europe, which was flat, although improving 10% in the second quarter, whilst the Rest of World region fell by 25% in Q1 but grew by 25% in Q2.
IG noted that a market study of the UK retail leveraged-trading industry suggested that the numbers of active traders had fallen by 4% to 89,000 individuals and that IG's share of retail traders for both spread betting and CFD trading had fallen slightly. The group is unconcerned by this, for their strategy has been to concentrate on higher value accounts, preferring a smaller pool of more active and profitable traders. A similar survey in Australia showed a 5% decline in the number of traders, but again, IG’s focus is on the larger, more valuable players.
A record October was followed by a quiet November for IG. The second half began unusually strongly in December, with client activity rising in response to sharp swings in instruments ranging from oil prices to government bond yields. This high level of activity continued into January, but the group says the value of it has been negated by the Swiss franc movement. At this stage, the group believes it is on course to meet market revenue expectations, but that profits and earnings will be affected by the Swiss franc's impact.
Register to receive IG Group share research updates direct to your inbox for free
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
The London Stock Exchange does not disclose whether a trade is a buy or a sell so this data is estimated based on the trade price received and the LSE-quoted mid-price at the point the trade is placed. It should only be considered an indication and not a recommendation.
Trades priced above the mid-price at the time the trade is placed are labelled as a buy; those priced below the mid-price are sells; and those priced close to the mid-price or declared late are labelled 'N/A'.