Although half-year figures from spread-betting specialist IG (IGG) benefited from increased levels of market volatility, it was the impact of the Swiss National Bank's (SNB) surprise decision to abandon its cap on the Swiss franc that grabbed attention. IG's shares tumbled sharply after management flagged a maximum £30m one-off hit - though they've largely recovered since.
That hit partly reflects losses on clients' bad debts, but management also attributes it to losses incurred when IG voluntarily closed customer positions at a time when the liquidity wasn't available. Analysts expect the final loss to be less than £30m, but it will still hit second-half earnings, and could have implications for the final dividend. Management has already said that the full-year payout will be maintained at last year's level if full-year earnings are reduced because of losses on the Swiss franc trade.
Still, analysts think the strong first half and third-quarter trading trends should offset most of the loss. UBS is forecasting full-year adjusted EPS of 38.8p - down just 3 per cent - and 48.6p for 2015-16.
Increased volatility - which is driving more trading activity - helped IG's revenues grow particularly strongly in its more mature markets. They rose over 14 per cent in the UK, for instance, and nearly 7 per cent in Australia. Analysts are consequently bullish about future prospects: Numis Securities reckons "the volatility seen since the end of US quantitative easing is more representative of normal market conditions". IG also boasts a commanding 40 per cent slice of the UK’s spread-betting market, and the launch of a UK stockbroking business last September also offers promise.
IG GROUP (IGG) | ||||
---|---|---|---|---|
ORD PRICE: | 749p | MARKET VALUE: | £2.74bn | |
TOUCH: | 748-749p | 12-MONTH HIGH: | 769p | LOW: 563p |
DIVIDEND YIELD: | 4.1% | PE RATIO: | 18 | |
NET ASSET VALUE: | 155p* | NET CASH: | £150m |
Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2013 | 201 | 99 | 20.4 | 5.75 |
2014 | 214 | 101 | 21.5 | 8.45 |
% change | +6 | +2 | +5 | +47 |
Ex-div: 29 Jan Payment: 27 Feb *Includes intangible assets of £124m, or 34p a share |