Margin trading giant IG Group is set to make significant job cuts to trim its cost base. IG Group has set out plans to cut as many as 300 jobs which it believes will allow it to make substantial cost savings. The proposed job losses would represent approximately 10% of the company’s workforce, as of the end of its financial year 2023.
Why is IG cutting jobs?
IG is cutting jobs because it wants to reduce its expenses, the job cuts and other so-called efficiency measures are expected to deliver savings of up to £50.00 million per annum.
The headcount reduction will be spread across IG’s global operations.
In common with many other brokers, IG has seen a downturn in client trading activity as the rising cost of living leaves customers with less disposable income and lower risk appetites.
How has trading been for IG Group recently?
In its latest trading update, for Q1 FY 2024, the CFD broker revealed that revenue in its core OTC derivatives trading businesses had declined by just under £17.0 million or -8.0% compared to a year earlier though there were revenue gains in both its on-exchange and stock trading and investment businesses.
The spread betting broker also reported a fall in the number of active traders, which slipped to 267,000 down from 279,300 at the same point in the financial year 2023.
Charles Rozes IG’s acting CEO said of the announcement:
“We want to position IG Group as a lean fintech company and today’s decisive actions ensure a strong platform for future growth”
“We will continuously evaluate and pursue cost-efficiency opportunities to create a more agile and scalable organisation. Full support will be provided to our people throughout this process, and while these decisions are not easy to take, they will ensure the business is well positioned for continued long-term success”
There is money for buybacks however
Despite weaker trading, IG Group has continued to buy back its stock as part of a £250 million mandate, which was approved in July this year.
Since August the firm has purchased just under £100 million worth of IG stock representing some 15.30 million shares.
When I joined IG in 1998 the firm comprised just 25 people.
The growth of the business in the interim 25 years has been extraordinary and the firm’s market cap now sits at just under £2.50 billion.
IG’s board must act in a way it considers to be in the best interest of the company and its shareholders.
However, two things come to my mind:
Firstly the company is without a permanent CEO, following June Felix’s recent departure on grounds of ill health, and one wonders whether this kind of decision should be taken by her replacement, rather than her stand-in.
Secondly, I am forced to ask why the firm is continuing to buy back its stock, if it’s on a cost-cutting drive.
After all surely one of the most effective ways to become more cost-effective, and efficient, is to stop spending money needlessly.