Spreadbetter IG’s share price drops as profit and revenue fall following new regulations
Online trading company IG reported an 18 per cent drop in profits today following a European-wide crackdown on spreadbetting last year.
The figures
Operating profit fell to £112.5m in the six months to the end of November last year, the spreadbetter said today, down from £136.5m for the same period of 2017.
Read more: Trading platform IG's boss steps down amid regulatory uncertainty
Revenue also dropped by six per cent to £251m, the firm reveal, though the company said the impact of the European Securities and Markets Authority (ESMA) regulations was in line with expectations.
Shares were down more than seven per cent this afternoon as the company reported that its full-year revenue in 2019 will be lower than 2018 reflecting the impact of regulatory measures and a cryptocurrency boost in the second-half of last year.
Operating expenses, excluding variable remuneration, was up four per cent to £122.1m and earnings per share was down 16 per cent to 24.9p.
The company said that 69 per cent of the group's ESMA region revenue came from professional clients in the second quarter of the 2019 financial year.
The group announced an interim dividend of 12.96p per share to be paid at the end of February.
Why it matters
The measures introduced by ESMA aim to prevent inexperienced retail investors suffering huge losses on high-risk trades, such as contracts for difference (CFDs).
Former chief executive Peter Hetherington announced his shock departure in September last year as the regulations hit the group’s share price and revenues.
What the company said:
Chief executive June Felix, who joined the group in October, said she was confident the company would return to growth after 2019.
“The actions that have been taken over the last two years have resulted in the company successfully navigating the introduction of ESMA measures…IG has experienced significant change and will continue to do so in the future,” Felix said.
Read more: Spreadbetter IG says revenue has fallen since new European regulations introduced
“Change will be driven by regulation, by shifting patterns of wealth, and by the continued development of financial markets around the world.”
What analysts said:
Analysts at Numis said it was a "respectable first half under the circumstances".
In a note this morning Numis said: "As the CFD industry matures and regulation is introduced to restrict the activities of the less scrupulous providers, we believe IG's market position should improve.
"We see this enhancing the quality of the group's income and believe its best in class practice will ensure that it is less negatively impacted from regulatory change.
"We expect the number of providers to shrink, as many of IG's smaller competitors are already struggling to break even."