IG active clients up by 42% to 320,400 from Tastytrade aquisition

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IG Group, the UK’s largest margin trading and Spread Betting broker published interim results this week, that covered the 6 months to the 30th of November 2021.

IG Revenue up 16%

The figures showed a net revenue increase of +16.0% to £471.90 million, which compares to the £408.50 million the company earned in the corresponding period last year.

What’s more, when IG stripped out one-off hedging gains associated with the purchase of Tastytrade, revenues grew by +14.0% to £466.10 million.

The number of active clients increased by +42.0% to 320,400 though the bulk of that growth came from Tastytrade though IGs pre-existing business added 53,600 clients, however that figure was below the 60,800 new accounts signed up in the first half of the financial year 2021.

Operating costs for the CFD trading platform rose sharply in the first half of the financial year 2022 jumping by +22.0% to £223.30 million those rising costs dented pre-tax profit margins which nonetheless came in at 52%, good as that was it was lower than the pretax margin in the prior year of 55.80%.

Earnings per share came in at 48.10p vs the figure for the prior year of 50.70p and the interim dividend was maintained at 12.96p per share.

Tastytrade, which was acquired for $1.0 billion last year, delivered revenue of £52.80 in the five months after the closing of the deal, a growth rate of some 34% on a constant currency basis.

Forex broker IG said that the integration of Tastytrade was well on track with a focus on operations and marketing.

June Felix IG Group CEO said of the results that:

“This has been a period of outstanding performance with record revenues and profits. Since we launched our new strategy three years ago, the group has transformed from a UK-centric, CFD focused firm, to a global financial technology company with a multi-product trading platform.”

Adding that
“One of the key factors behind the success of this transformation is our ‘global reach, local focus’ which allows us to act with agility to tailor our offerings.”

How did the IG Group share price react to the results?

Investors warmed to the numbers and seemed happy to overlook rising costs, reduced margins and client numbers. IG shares finished Thursday’s session up by 2.86% having traded as high as 883p on the day.

1.76 million shares changed hands on Thursday, that’s almost three times IG Groups average daily volume.

However, not all investors are staying the course and on Friday morning the markets woke up to the news of an institutional placing in IG Group’s shares.

TCMI, a venture capital investor, offered a block of 15.00 million IG shares for sale, at 780.0p, which represented a discount of -7.50% to Thursday’s closing price.

That discount could be considered as being wider than we might normally expect, but given the high levels of volatility in the equity markets at present, you could understand the need for a bigger haircut.

IG Group shares sold off by just over -6.20% following the announcement of the placing, which was coordinated by two investment banks, Barclays and the US-owned Jefferies.

What did the brokers think of the IG Results?

Barclays was the first broker to put pen to paper saying that IG Group had shown:

“Resilient trading against tough comps reflecting active client growth vs pre-Covid (numbers)These are strong results, with revenue up 1% YoY ex-Tastytrade (TT), a significant achievement given (the) tough comps, and concerns that revenue would dry up in weaker market conditions”

Barclays has an overweight recommendation on IG Group and a price target of 1210p. The bank raised its earnings forecast for FY 2022 saying that it believes IG Group will trade on PE of 14 times earnings in 2023, based on Thursdays 886p closing price.

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