Spread-betting firm IG Group Holdings plc (IGG.L) reported Tuesday a 35% increase in revenue for the third quarter ended February 28, helped primarily by inclusion of FXOnline results. However, revenues from established markets declined from the year-ago period, and the company said it is difficult to predict future trends. IG Group's stock is trading lower by over 34% on the London Stock Exchange.
Issuing an interim management statement for the three-month-period ended February 28, the company said group revenue for the quarter increased to GBP 62 million from GBP 46 million reported in the corresponding quarter of the prior year. The latest quarter includes the results of FXOnline, which were not included in the comparative period.
The six new offices in Singapore, France, Germany, Spain, Italy and the U.S. in aggregate achieved revenue of GBP 11.3 million, compared to GBP 2.8 million last year.
The group's financial businesses opened 18,700 accounts, including 4,400 from FXOnline, compared to 10,500, excluding FXOnline, in the corresponding quarter last year. Account opening in the UK remained strong.
UK financial business achieved revenue of about GBP 31.5 million, less than GBP 34.0 million generated in the corresponding period last year. For the Australian business, revenue dropped to GBP 6.4 million from GBP 6.9 million. The company attributed the declines in the established markets to higher levels of volatility in equity markets.
The Japanese business, FXOnline, achieved revenue of nearly GBP 11 million in the quarter. The company said that revenue for the final month of the quarter was disappointing due to a variety of factors, including volatility of the Yen, drop in consumer confidence and less marketing activity.
It was in September 2008 that the company agreed to acquire 87.5% of the issued share capital of FXOnline Japan KK, an online retail FX trading company, for GBP 112.2 million. The company has also signed a call option to acquire the remaining 12.5% of the shares in January 2011.
The company said it is satisfied with the initial rate of take-up of its PureDeal platform, which was introduced in the Japanese market shortly before the end of the period.
The company noted that operating costs are in line with management expectations.
The group anticipates a charge for doubtful debts of less than 3% of revenue in the third quarter, mostly stemming from legacy situations where clients had positions that were put in place prior to the introduction of the more stringent approach.
Further, the company said its measures to reduce credit risk have inevitably resulted in the loss of some revenue. The group views the risk-reward ratio in this to be unacceptable in current market and economic conditions.
Additionally, IG Group said it remains difficult to predict future trends in volatility or customer reaction to changing market and economic conditions. However, the company believes that continuing strong account openings, together with the ongoing development of the Group's offering, leave it competitively positioned for further growth.
In January, the company reported an increase in profit for the six months ended November 30, 2008, benefiting from 47% growth in revenues. Profit attributable to equity holders of the company rose to GBP 38.05 million or 11.11 pence per share from GBP 33.14 million or 9.99 pence per share in the same period of last year. Total revenue for the period rose 47% to GBP 126.5 million from GBP 85.78 million in the corresponding period of last year.
IGG.L is currently trading at 169.25 pence, down 88.50 pence or 34.27%, on 7.44 million shares.
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