20th Jan 2015 07:51
LONDON (Alliance News) - IG Group PLC Tuesday reported a 2.8% rise in first-half pretax profit, but said it expects full-year earnings and profit to be hurt by losses stemming from the Swiss National Bank's surprise decision to remove its cap on the franc against the euro, though IG said it intends to maintain its full-year dividend at last year's level.
In a statement, IG Group, which was established in 1974 as a financial spread betting firm, said it made a GBP101.4 million pretax profit in the six months ended November 30, compared with a GBP98.6 million pretax profit in the corresponding period in the prior year. Net trading revenue, which subtracts interest on segregated client funds and is presented net of introducing partner commissions, rose by 8% to GBP197.4 million.
"As is often the case, the record month in October was followed by a subdued patch in November. The second half then began with an unseasonably strong December. Client activity levels rose again as a number of news stories drove sharp movements in financial markets and presented a range of trading opportunities. These heightened activity levels continued into January," Chief Executive Tim Howkins said in a statement.
At the revenue level, Howkins warned, the upside of the improved client activity was negated by the jump in the value of the franc last week. Although IG Group remains on track to meet revenue expectations for the year, according to Howkins, profit and earnings face a hit due to client debts relating to the jump in the franc.
Nevertheless, Howkins said that IG Group intends to maintain its full-year ordinary dividend at last year's level if diluted earnings per share are lower purely due to the losses relating to the SNB's surprise move.
The group increased its interim dividend to 8.45 pence from 5.75 pence.
IG's first-half results come just days after the financial trading services provider said it was facing a loss of up to GBP30 million due to Swiss franc trading losses. Its first-half results included the breakdown of those losses, with GBP12 million from market exposure and GBP18 million relating to client credit.
"While this was due to an unprecedented and unforeseeable degree of movement in a major global currency and only a few hundred clients were affected. We will seek to learn lessons from this incident which we can incorporate into our risk management approach going forward," Howkins said.
The SNB's decision caused turmoil in the markets as the franc shot up against the euro and liquidity dried up, forcing Alpari (UK) Ltd into administration and currency broker FXCM Inc into a USD300 million financing deal with Leucadia National Corp, the holding company for investment bank Jefferies Group LLC, to continue normal operations.
By Samuel Agini; [email protected]; @samuelagini
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