14th Sep 2023 21:55
(Alliance News) - IG Group Holdings PLC stayed in the good graces of investors on Thursday, after posting a "resilient" trading update for its first quarter.
The London-based contracts-for-difference trading platform said total revenue for the three months ended August 31, the first quarter of the year ending May 31, 2024, increased 0.5% to GBP242.9 million from GBP241.8 million the year before.
Revenue from OTC derivatives decreased 8.2% to GBP182.7 million from GBP199.0 million, offset by revenue from exchange-traded derivatives which increased 37% to GBP49.8 million from GBP36.4 million.
Of the total revenue, net interest income on client money was GBP34.4 million, up from GBP7.1 million.
Revenue from IG's Core Markets+ portfolio fell 6% to GBP188.7 million from GBP200.3 million due to "softer market conditions," but from its High Potential Markets Portfolio increased 30% to GBP54.2 million from GBP41.5 million.
"While Core Markets+ performance was down year-on-year, it is pleasing to see an improvement in tastytrade's net trading revenue," said Shore Capital analysts on Thursday.
"Active client numbers reduced 4% year-on-year to 267,000, which in the context of lower volatility, we regard as a resilient performance and yet no cliff edge in terms of the influx of clients acquired during the pandemic."
Shore also noted some of IG's more-forward looking strategy, notably an ongoing share buyback and a more focussed search for a new chief executive officer.
As of September 12, IG said it has repurchased approximately 5.9 million shares for GBP39.6 million, under its GBP250 million buyback programme announced in July. It expects to complete the programme's first GBP100 million tranche on or before December 12.
In the "coming months", the group also expects to appoint a permanent chief executive officer to replace June Felix, who abruptly resigned in late August due to ill health. Chief Financial Officer Charlie Rozes was promoted to acting CEO after Felix commenced medical leave in early July.
Looking ahead, Shore analysts were broadly confident about the outlook for the firm, noting: "IG's regulatory capital requirement has reduce around GBP200 million, which in our view reflects the regulator's confidence in IG's business model. This also underpins IG's ability to return capital to shareholders either via the ordinary dividend and/or ongoing share buybacks, whilst increasing overall capital optionality."
Further, though Shore said it would not be changing its forecasts, analysts did say they could envisage "low single-digit earnings per share reductions" across consensus.
"IG's next scheduled update will be the interims in January, when we hope to hear more about cost efficiency plans, which are reportedly progressing. We have IG at Buy and continue to see the valuation as highly undemanding."
IG shares closed 3.6% higher at 692.00 pence each in London on Thursday.
By Holly Beveridge, Alliance News reporter
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