IG Group's first-half profits fall 18%

IG Group sales and profits fell in the first half as stringent new rules were imposed by the European securities regulator.

For the six months to 30 November, revenue of £251.0m was down 6% compared to a year ago, while operating profit fell 18% to £112.5m.

Earnings per share of 24.9p were down 16% and an interim dividend of 12.96p per share was declared, with directors pledging to maintain the 43.2p level for the full year.

Operating expenses, excluding bonuses, were up 4% to £122.1m and operating profit margin declined to 44.8% from 50.9% 12 months beforehand.

With stringent new leverage limits from the European Securities & Markets Authority coming into effect during the first quarter of the financial year, that weak first quarter was also hit by low market volatility, but this improved in the last two months of the period.

October was also when June Felix, the former Verifone, Citibank and Chase Manhattan Bank executive was appointed as boss.

She said the actions taken over the previous two years resulted in IG "successfully navigating the introduction of the ESMA measures" and she expected to provide an update on strategy before the end of the current financial year.

Felix added that she was confident that the company will, as previously guided, return to growth after the current financial year and that the board expect to maintain the dividend at its current level "until the group's earnings allow the company to resume progressive dividends".

IG shares fell more than 10% in early trading on Tuesday to 560p.

Broker Peel Hunt noted that revenue per UK and EU clients was down 2%, the number of clients down 15% to 66,400 but that 69% of IG’s ESMA region revenue in the second quarter came from professional clients.

For the full year the broker is forecasting PBT of £240.4m and EPS of 52.3p, around 2.7% ahead of consensus forecasts of £233.6m/50.9p, as performance is expected to be weighted towards the second half amid increased market volatility and positive gearing.

"Shares have fallen 23% in the last six months, with concerns around low levels of volatility and the impact of leverage limits. In our view, IG is in a good position to benefit from emerging volatility and reduced competition as regulation bites."