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How will UK trading hold up at IG Group?

The spread betting specialist will deliver its first-half results next week
January 25, 2017

Shares in IG Group (IGG) fell off a cliff after the Financial Conduct Authority (FCA) announced its proposals for tougher restrictions on spread betting and contracts-for-difference providers in December. However, the regulator is not expected to publish its findings until the spring, meaning that management is likely to remain tight-lipped about any impact when IG announces its first-half results next week.

IC TIP: Hold at 531p

What we do know is that the spread-betting specialist's UK business suffered a reduction in sales during July and August after it increased client margin requirements: as a result, UK revenue per client fell by a fifth over the quarter. However, the group was more successful in attracting new customers, increasing new client trades by 70 per cent on the same period in the previous year, and at the end of November management said trading was in line with expectations.

While the UK accounted for around half of group sales at the end of May 2016, management is trying to diversify the business via geography and product line. In a sign of progress, the rest-of-the-world division delivered its best sales growth during the 12 months to May. Investors should also watch out for the performance of the UK execution-only stockbroking platform, Share Dealing, which expanded into Australia last year.