IG Group suffers from quiet summer markets

17th Sep 2014 08:17

A particularly quiet summer in the financial markets meant first-quarter revenues from spread-betting and CFD provider IG Group were short of analysts' expectations.Against an unusually strong period the summer before, revenue was down 9% year-on-year to £85.6m due to volumes and volatility falling close to historic lows and accompanied by a continuation of recent weakness in foreign exchange trading activity.An 8% drop in active UK client numbers, partially offset by an increase in average revenue per client, left revenue down 3%, but the eerily quiet markets were even more apparent overseas.The Australian office saw revenue fall 10% down on the prior year period, although flat against the fourth quarter of last year, as both volumes, active clients and revenue per client all declined.In Europe, even with the relatively quiet market backdrop, active client numbers grew by 9%, though this was more than counterbalanced by a 16% fall in average revenue per client.The Rest of World segment suffered the worst revenue shortfall, of 25%, due to forex softness hitting Japan and Singapore, only partially offset by strong year-on-year growth in South Africa.IG is developing an international stockbroking offering, which will allow clients to use their equity assets as collateral against spreadbetting and other shorter-term leveraged trading.Broker Liberum said the revenue figure missed its sub-consensus forecast by 7% and predicted analysts would downgrade revenue estimates by up to 5%.“To meet consensus net trading of £395m, runrate revenues would need to increase by 20% for the next three quarters versus last quarter, which looks very unlikely,” it added.Despite the miss, shares in IG climbed several pennies in the first hour on Wednesday, before falling sharply to be down 4.5% at 577p at 09:00 .