IG Markets Reports Minor Slump in Profit, May Open More EU Subsidiaries

The broker's financial report shows a misleading downturn in profits and tentative plans for post-Brexit Britan

IG Markets (IG) released its financial results for the year ending May 31st this Thursday. As a result of a one-off dividend payment in 2017, the retail broker saw a minor downturn in its profits despite a sizeable increase in its trading revenues.

This was due to a substantial increase in operational expenses for the broker. In 2017, the firm reported operating expenses of £154.6 million ($201.72 million). This year that figure grew to £184 million ($240.09 million), a 19 percent increase.

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Net trading revenues grew at a similar rate. At the end of the 2018 fiscal year, IG reported net trading revenue of £295 million ($384.92 million). That was a 17.8 percent increase on last year’s £250.4 million ($326.72 million).

Operating profit was also up on last year. In 2017, IG reported an operating profit of £98.5 million ($128.52 million). This year that figure grew by 15.5 percent to £113.8 million ($148.49 million).

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Why then did the firm finish the year with lower profits than last year? Well, dear reader, in 2017 IG reported £20.2 million ($26.36 million) in dividend income. That one-off income source meant the firm was able to boost its post-tax profit to £119.8 million ($156.32 million).

That meant the firm saw a misleading 4.1 percent decrease in post-tax profits. Had the dividend payment not been meted out last year, IG would have actually seen a 15.5 percent increase in its profits.

IG Markets – Heading to Europe?

More interesting for those looking at IG’s long-term efforts, the broker detailed some of its plans for a post-Brexit Britain. Earlier this year, the firm confirmed that it was establishing a German subsidiary.

With no clear Brexit deal on the horizon, IG set up its German business to ensure it will be able to continue serving clients based in the European Union (EU). In its report today, the broker noted that it might need to establish “one or more entities domiciled and regulated within the EU.”

Why IG would need to do this if they already have a German subsidiary is unclear. Nevertheless, the firm said that the costs stemming from applying for additional regulatory approval and the establishing and operating of new entities could have “a significant impact on [IG’s] future performance.”

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