IG Group achieves record profits
IG Group grew profits 29% to record levels in the first half of its financial year even while the online trading provider made changes to protect the business from regulatory changes and Brexit, including planning new offices in Germany and the US.
In the six months to 30 November, the FTSE 250 group generated a net trading revenue of £268.4m, an increase of 10% year-on-year. Growth was almost entirely from the first quarter, with the second three months roughly flat on the prior year.
The UK saw a 11% fall in client numbers, which IG put down to attrition of the many new clients who joined to bet on the Brexit referendum and US election the previous year. Also, the number of new over the counter (OTC) leveraged clients who traded for the first time in the period of 18,027 was lower than in previous periods due to the introduction of a new appropriateness test for prospective clients together with increased wealth hurdles, and a lower level of advertising and marketing.
Group profit before tax rose 29% to £136.2m as operating costs, excluding bonuses, were cut 7% to £117.6m and the margin expanded 7.7 percentage points to 50.7%.
Diluted earnings per share grew 30% to 29.3p and, with £139m cash generated in the period, a dividend of 9.69p was declared, as part of the policy to pay out 30% of the previous year’s full year divi.
“The group is taking action to mitigate the potential financial impact of regulatory change, and to position the business so that it will continue to deliver for all of its stakeholders under a more restrictive regulatory environment,” said chief executive Peter Hetherington.
Since the second half of IG’s financial year began, the European financial watchdog laid down new rules for the industry where retail investors will be banned from trading binary options and will face leverage limits on forex trades, among a raft of new restrictions to be placed on CFD trading. The European Securities & Markets Authority set out proposals by which it might restrict the marketing, distribution and sale of CFDs, including rolling spot forex, to retail clients.
Hetherington’s reaction is that the ESMA proposals are “disproportionate” in their focus on leverage, which he said has “caused consternation amongst our large number of retail clients, many of whom have traded for years and wish to continue using our product as they do today”.