IG Group today issues the following Trading Update for the period from 1 June 2012 to 30 November 2012. Unless otherwise stated, trends and figures highlighted below refer to the six months ended 30 November 2012 and the corresponding period last year.
· Short term trading continues to be subdued
· Consolidating leadership position in key markets with further market share gains(1)
· Ongoing technology differentiation through mobile applications and Insight research tool
· Second half revenue likely to be in line with first half if recent activity levels persist
· Disciplined approach towards managing costs and investment
Revenue in the period was £169m, 14% lower than the prior year. Revenue in the second quarter, at £87.5m, was 7% higher than the first quarter, although still 9% behind the prior year. This performance reflects the particularly tough comparators which the group faced, as previously stated, due to the extreme levels of volatility in financial markets in 2011, and the continuing subdued markets which are impacting client activity. During the period the business did respond well to short spells of heightened market activity and continued to grow market share in its biggest markets(1).
Trading in the period
In the UK and Australia revenue per client was broadly flat, with the fall in revenue driven by fewer clients trading in the period. In Europe the number of active clients increased, but this was more than offset by the decline in average revenue per client. Across the rest of the world IG continued to see strong growth in active clients in all countries except Japan, but revenue per client also fell in these markets in line with other less mature regions.
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As previously stated, levels of account opening are affected by market conditions in the same way as client activity. In subdued markets the total level of account openings was 26% behind the same period in the prior year. There was some pick-up in this measure in the second quarter, with sequential quarter growth of 7%. The development of the IG platform and customer proposition continues to be directed towards attracting and retaining higher value clients.
In September the group carried out a significant relaunch of the IG brand, bringing the external image up to date with the company’s market positioning and delivering continuity and consistency across websites and dealing platforms. The initial roll-out of the mobile applications has now been delivered in all regions and the business continues to see an increase in the proportion of both client trades and account openings coming through mobile. IG also continued its development of the Insight research tool with a roll-out onto mobile applications.
Recent market research studies(1) in the UK, Australia and Singapore have been very encouraging, with IG continuing to increase its market share in all three countries. In the UK, market share in spread betting increased from 41% in 2011 to 44% in 2012 and in CFDs from 24% to 32%; in Australia market share increased from 34% to 37%. Recent results in Singapore show IG increased its share of the CFD market from 12% to 15% and is now the joint largest provider in the forex market, with a 13% share, up 4 percentage points on the prior year.
Historically, revenue has been weighted towards the second half of the year. However, if the levels of client activity seen in the first half persists, revenue in the second half is likely to be similar to that delivered in the first. This does not, though, factor in any increase in market activity and if markets do start to provide more attractive opportunities for clients to trade IG remains very well placed to take advantage of this.
Against this backdrop of continuing subdued activity levels, the more uncertain short term outlook and lower levels of competitor activity, IG has taken, and will continue to take, a disciplined approach to managing the cost base, whilst continuing to invest in developing the business to reinforce its market-leading positions. To date the company has made some headcount reductions, reduced some planned marketing spend and deferred some recruitment. These savings are over and above those costs which would naturally flex with revenue.
IG continues to extend its market lead in key territories and has a strong financial position. The company remains confident in its long-term growth prospects.
IG’s CEO Tim Howkins was a panelist on the New Financial Trends Panel at the Forex Magnates Summit in London.