After Charles Stanley last week we have seen a trading update from IG Group (IGG) today, which as I feared, also shows the effects of recent quiet trading trends in the market. This meant that they saw revenues in Q1 9% behind those of the same period last year. They suggest that financial market volumes and volatility were close to record lows and currency trading was also weak, although perhaps the recent wobble in Sterling will have helped there?
All regions were weaker, but the UK did benefit from higher revenues per user, in line with their strategy of targeting more profitable accounts, which offset to an extent the decline in total active clients. Otherwise they highlighted the launch of their new Stockbroking product in the UK and Ireland and the regulatory approval for a sales office in Geneva.
The Company summed up the outlook going forward as follows:
"The company will progress several initiatives through this year, as part of its long-term diversification strategy, with the aim being to make IG the default choice for active traders globally. It will continue to develop the stockbroking offering, including adding the ability for clients to use their equity assets as collateral against shorter-term leveraged trading, and commencing a targeted international roll-out. IG will also progress its licence application in Dubai. The company is also applying significant effort to enhancing and maximising its mobile offering across the globe and to developing and refining its web presence. By successfully executing on these initiatives the company believes it can deliver the next phase of its growth."
Summary & Conclusion
The trading update was weak as expected given the market background and announcements recently from similar companies. However, as the Company says it is investing in its business and looking to diversify their income stream going forward, albeit that it will still be market and activity related. The shares have fallen this morning on the back of this update and at a price close to 570 pence this leaves them on around 14x with a 5% yield which seems fair enough if not outstanding value. However, as you can see from the chart below this takes them down toward the lower end of their recent trading range and close to being oversold so there may be an opportunity to get in for the medium term if their business and financial metrics appeals to you.