IG falls on lack of market action

By its own admission, the six months to 30 November were quiet for trading platform IG Group (IGG). An unusual lack of market volatility meant the company’s operational performance was becalmed, which was reflected on results day by a 7 per cent fall in the share price.

To be fair, the prior year’s excellent trading performance was always going to make direct comparisons difficult. Net trading revenue was down 19 per cent to £402mn as a direct result of lower levels of volatility, matched in general terms by the number of active clients falling by 5 per cent. This was offset somewhat by the company earning significantly higher levels of interest on its considerable cash holdings. This amounted to £70.2mn, compared with £24.2mn in the same period in 2023.

At the same time, inflation had a negative impact on the group’s operating costs, and these were 11 per cent higher at £310mn.

Acting chief executive Charles Rozes noted the strange times in the market: “The amount currently held in money market accounts in the US is enormous, in the trillions. Investors seem to be waiting for an inflection point before taking a position; around 45 per cent of the global population is having key elections this year, for instance”, he said.

Analysts at Peel Hunt said that current market conditions implied that a cut of 5 per cent in forecasts for EPS was likely. The broker currently forecasts a price/earnings ratio for 2024 of 8, falling to 7 in 2025. Fundamentally, it does not take much to turn things around for IG Group, while the cash rich balance sheet will underpin the payout. Speculative buy.  

Last IC view:  Buy, 725p, 20 Jul 2023