IG needs pick-up to hit full year expectations

18th Jan 2011 07:15

Spread betting firm IG Group fell into the red at the interim stage after taking a hit on the value of its troublesome Japanese business.Adjusted profit before tax in the six months to 30 November rose 5% to £81.6m from £78.0m the year before, but on a statutory basis the group posted a loss of £69.1m, as against a profit of £69.0m a year earlier, after taking into account a £143.1m write-down in the value of its Japanese business, FXOnline, which has been hit by regulatory changes.Earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 7% to £86.5m from £81.0m a year earlier. Net trading revenue rose 9% to £156.7m from £143.74m the year before. "After a strong start in June and the first half of July, there was a protracted period of low and falling volatility and subdued levels of underlying market volumes, which lasted until the beginning of November. Client activity levels were reduced during this period, but recovered strongly in November when there was a small increase in volatility," said chief executive, Tim Hawkins.Since the end of the reporting period the group has been working on a plan to slash its Japanese cost base with a view to ensuring the continued profitability of this business, "albeit at much lower margins than the rest of the group"."The future for the forex and CFD industry in Japan is uncertain and it is possible that the competitive landscape will shift significantly," Hawkins admitted.There was more downbeat news in other parts of the business, too, with the company warning that "if activity levels remain similar to those seen recently we expect profits to be slightly below current market expectations."On the bright side, the company said it continues to achieve strong growth in its active client base, "which we believe is the best indicator of the longer term growth trajectory of the business," Hawkins said, adding that the group had extended its market lead in its traditional heartlands of the UK and Australia.Broker Daniel Stewart commended the strong growth in active customers but remains "cautious over the short term given the downbeat trading outlook and pending legal issue with regards to Echelon Wealth Management (€25m) which we believe could knock c12% off consensus forecast earnings before interest, tax, depreciation and amortisation (£182.2m)."The interim dividend has been boosted by 5% from 5p to 5.25p.