IG Group the world-leading provider of contracts for difference (CFDs), financial spread betting, and the UK's largest foreign exchange provider, today reported their first half results.
On the face of it they look like a strong set of numbers with revenues up 8%, PBT up 17% and diluted eps up 22%. Against that though it was a disappointment to me to see the dividend was unchanged at 5.75p. The reason for this becomes clearer as you dig into the detail which shows that these results were produced against a set of easy comparatives from last year and H2 has a much tougher set of comparatives.
So for the full year they now only hope for modest growth due to the comparatives and on going long term investments in the business such as attempting to open an office in Switzerland, launching a stock broking offering to new and existing clients and continuing to develop their mobile app functionality. They have also been focussing more on their most active and profitable clients which has some short term effects but makes sense in the long run.
Thus the bottom line seems to be that this year seems to be a bit of a transition and there is a risk that profits for the year could even be down if H2 turns out to be weak, but equally if we get another bout of market volatility in the next few months may be they will be OK? Again it is a stock that has done well and now stands on 16 x this years expected earnings and a 3.78% yield based on their target payout ratio of 60% so not especially cheap and with a risk that they could disappoint at the final stage which might give a better entry opportunity for the long term. Thus probably not worth chasing given the valuation and current trading outlook (and some brokers may downgrade as precaution), but I'll probably give it the benefit of the doubt for now and hold it as a well managed group investing for the future.
There is a webcast of the results meeting available at their corporate website. Their trading website ig.com including their market insights, has now been made available to non clients.