- Revenue forecasts upgraded in both core and ‘high-potential’ markets
- Growth at tastytrade expected to exceed 30 per cent this year
Full-year results for IG Group (IGG) were filled with knock-out figures, as market volatility powered trading platform activity to record levels and pushed the adjusted pre-tax margin to 55.5 per cent.
As ever, IG likes to paint itself as a story of canny business growth, rather than the occasional beneficiary of wild events. “We know we’ve been helped by volatility, but I’m confident we would have seen growth without it,” says chief executive June Felix.
It’s a bold claim, but a rising client base and few signs of trader fatigue suggests good underlying demand.
Confidence is also reflected in upgraded growth guidance. Revenue from the group’s core markets, which includes the UK, is now expected to grow 5 to 7 per cent a year, up from 3 to 5 per cent, while medium-term sales growth in IG’s high-potential markets is pegged at 25 to 30 per cent.
The latter segment includes the newly-acquired US options and futures brokerage tastytrade, which on a pro-forma basis would have contributed £101m to IG’s top-line in the 12 months to May. Its growth is forecast to exceed 30 per cent this year, in a partial riposte to investor concerns about the $1bn deal.
Those investors should still keep tabs on fees earned from payment for order flow, a practice banned here but common among US retail platforms who route investor orders to wholesale brokerages. Felix did not disclose how much the group earns from these fees, though it is less than half of tastytrade’s top line; unlike popular trading app Robinhood, most cash comes from client commissions.
Analysts at Peel Hunt expect adjusted earnings of 67.3p per share for the year to May 2022. Executive confidence in growth makes the stock a speculative hedge against volatility. Buy.
Last IC View: Buy, 859p, 23 Mar 2021
|IG GROUP (IGG)|
|ORD PRICE:||865p||MARKET VALUE:||£3.73bn|
|TOUCH:||863-865p||12-MONTH HIGH:||960p||LOW: 726p|
|DIVIDEND YIELD:||5.0%||PE RATIO:||9|
|NET ASSET VALUE:||263p||NET CASH:||£533m|
|Year to 31 May||Net operating income (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|