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IG's figures were pretty much in line with estimates, following a trading update from the financial spread betting group in June. However, the change to the dividend policy - the payout ratio has been raised from 50 per cent of post-tax earnings to 60 per cent due to the accumulation of surplus capital - came as a nice surprise for investors. And the board says the increase is sustainable.
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Although costs rose in the first half of the year, this reflected a doubling of IT staff - which has allowed the group to develop and improve its software and trading platforms - and offshore expansion. Indeed, last year IG added Germany and Italy to the list of countries it operates in and there are plans to open shop in France and Spain when new European regulations governing financial instruments come into effect in November. In the UK, the business has grown client numbers strongly, recruiting 1,000 new spread betting customers a month, up from 800 a month at the end of 2006.
Tim Howkins, who took over as chief executive in October, says the new year has started well, with an increase in equity market volatility pushing monthly revenue to record levels in June and new accounts continuing to open at high levels. Numis Securities expects adjusted EPS of 17.5p for 2008 (14.7p in 2007), rising to 20.1p in 2009.
IG GROUP (IGG) |
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|---|---|---|---|---|
| ORD PRICE: | 315p | MARKET VALUE: | £1.02bn | |
| TOUCH: | 314-315p | 12-MONTH HIGH: | 335p | 203p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 62p* | Net Cash | £485m** | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 39.0 | 3.7 | 1.55 | nil |
| 2005 | 62.2 | 16.6 | 5.83 | nil |
| 2006 | 89.4 | 51.1 | 10.92 | 5.5 |
| 2007 | 122.0 | 68.9 | 14.67 | 8.5 |
| % change | +36 | +35 | +34 | |
Ex-div: 07 Sep Payment: 12 Oct * Includes intangible assets of £108m, or 33p a share ** includes client funds of £391m |
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IG is in an attractive area of the market as a 50 per cent share price jump in the past year suggests. But spending is likely to remain high as the group looks for more growth opportunities in Europe. Trading on a forward PE ratio of 18 the shares are fairly priced for now.
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-IC-1.6.1b-prod - 17/12/2008 12:46:12 - jonathan.furseftb
