IG Group published a trading update this morning for the six months to November 30, 2020, which constitutes the end of H1 2021 for the company.
Forex broker IG said that following a strong first quarter the group had performed at what it called “comparable levels” in the second quarter of the financial year and had generated revenues of around £207 million well ahead of the £120.80 million of revenues seen over the same period in 2019.
The sharp increase in income was attributed to elevated trading volumes from a larger client base of 207,000 clients in Q2 this year compared to 133,800 clients in the same period last year.
Looking at the maths IG group has generated average revenues of £1000 per client during the second quarter this year compared to £902.84 last year that represents an implied revenue growth per client of 9.67% and suggests that IG is not only attracting more clients to its CFD dealing services but also providing then with ways to be more active when they are there.
The update didn’t tell us anything about the cost of acquisition of these new traders or the average longevity of the client base, which of course will directly affect the group’s profitability. Nor were we furnished with any details about the spread or distribution of the increased business. IE was the increase in trading activity uniform across the client base or did the 80/20 rule apply?
That is did 20 percent of the clients generate 80% of the revenues? We will need to wait for the interim results on January 21st 2021 for more granular details such as that.
For the half-year, IG believes its revenues will come in at £416 million compared to just under £250 million that they earned over the same period in 2019.
IG Group shares are up on the day better +2.51% at 848.76p analysts at brokers Shore Capital have retained their buy recommendation and are reviewing their 875p price target on the stock, following the update, as the numbers came well ahead of their forecasts.
The broker said that
“Even if we continue to assume normalisation in trading conditions in H2, there is room for material double-digit upgrades to current year (to May 2021) EPS, having last upgraded only as recently as September.”
Overall then it looks like the good times have continued to roll at IG Group attention now turns to whether that momentum will continue into 2021.