IG Group breaches the £1bn mark

IG Group (IGG) breached the £1bn mark in total revenue generation in its 2023 financial year, although that was set against a 3 per cent fall in net trading revenue. The number of active clients was down by 6 per cent year on year, yet is still double the pre-pandemic level. And adjusted pre-tax profits were down marginally on the prior year at £491mn on an underlying margin that contracted by 310 basis points to 48 per cent, although for what it’s worth, the rate was at the upper end of management expectations.

Management believes the expansion of the group's equity trading capabilities enabled it to attract a bigger share of clients' investment portfolios. It also made the most of cash balances as interest rates rose: interest income swelled to £80.8mn from £0.8mn last time around, effectively offsetting the fall in net trading revenue. 

A mixed bag on the face of it, but the market reacted well to the trading platform’s figures, with sentiment no doubt buoyed by a new £250mn buyback programme. It is anticipated that this will be “substantially completed” by the end of the current financial year.

IG delivered its fourth consecutive year of record total revenues. And management reiterated the medium-term total revenue growth target of 5-7 per cent in its core markets+ portfolio from its 2022 financial year, along with an adjusted pre-tax margin in the mid-to-high 40s over the same timeframe. Consensus forecasts point to a substantial rise in the group’s customer base in this financial year and next and although we may be approaching the apex of the current interest cycle, the shares are trading at a 34 per cent discount to the consensus target on a 6.7 per cent forward dividend yield. Buy.

Last IC view: Buy, 792p, 26 Jan 2023