IG Group has unveiled another set of record results for the year to May with profits and net revenues rising to record levels year-on-year, the spread betting and CFD provider which powers IG Markets revealed yesterday. The results are the first since the group wrote off its Extrabet sports spreadbetting business last month, and both net revenues of £320.4m (up 7.3%) and profits before tax of £163m (up 3.4%) are in line with expectations, it said.
CEO Tim Howkins believes there are better times ahead still: ‘It was a relatively tough year. We faced falling volatility and worse consumer sentiment. That a pattern we’ve seen since October.’
Howkins added that the troubled Japanese IG division has resulted into a £143 million one-off non-cash write down, as a direct consequence of tighter leverage regulations in Japan which have severely impacted IG’s business in the country. FXOnline Japan was originally bought less than three years ago in an all-cash acquisition worth £118m, funded partially by money raised from investors. The Group has now reduced the headcount in the Japanese division to 33 from 60, while sharply cutting marketing expenses, which should help to restore the division back to profit-making.
The company was however keen to highlight a 3.4% rise in adjusted profits to £163m once the £143m costs for Japan and other charges relating to the closure of its sports division, extrabet, were removed. The sports division was closed at a cost of £7.75m so as to allow the company to focus on financials. The company also had to absorb a £4.1m Financial Services Compensation Scheme levy.
The UK business now represents 52% of IG’s business and has achieved revenue growth of 3%. This constituted 8% growth in active clients, offset by a 5% fall in revenue per client. The Australian business now represents 15% of revenue and achieved revenue growth of 4%. This was made up of 11% growth in active clients offset by a 6% fall in revenue per client. Revenue per client recovered well in the final quarter of the year and was at its highest level for the year in May. Recent market research indicates that IG has extended its market lead in Australia over the last year and it is thought that IG Group now has 34% share of primary accounts, while IG’s nearest competitor has 20%.
Revenue was boosted by a 21% increase in Europe, with Germany delivering a growth rate of 54% during the period, in a country where IG is number 2 but gaining market share. European business now makes up 18% to the group total. The overall number of traders and investors taking positions within the group rose by 11%, but in a sign of the difficult market conditions, the average amount traded by each client fell. Excluding Japan, the number of active clients, increased 13% to 117,252.
In the USA, IG has decide to close the IG Forex division, IG’s retail forex operation in the USA, so as to concentrate on Nadex, IG’s exchange business.
As suggested when the group issued its Q3 results, IG Group’s new Amsterdam offices in the Netherlands have now been opened and IG also acquired a business in South Africa during the past year, with chairman Jonathan Davie commenting: ‘We remain focused on evaluating opportunities to enter new markets while ensuring that we continue to develop our established businesses.’
IG also continues to invest heavily in technology, which it considers as a key competitive differentiator and driver of long term profitable growth. During the year, in conjunction with the relocation of IG’s head office, IG has reported to have also built and equipped a new data centre spending almost £5.0m on hardware and a further £5.0m on software licenses. IG now has 350 staff just in its IT department, representing a third of its global workforce. The total employment costs for this IT team exceeded £23.5 million in the year, compared to £18.7 million the year before.
IG is targeting international growth as it has 39% market share in the United Kingdom but less in its other major markets and it believes it can raise that. Howkins also noted that future business growth is likely to be organic and not via acquisitions with smartphones helping to drive extra growth at the spread betting and CFDs firm.