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IG Index profits on back of volatile markets PDF  | Print |  E-mail
Written by Will Peters   
Tuesday, 20 July 2010 15:55


Australian spread betting market proves to be kind to IG Index.


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The owners of spread betting firm IG Index, IG Group Holdings (LON:IGG), have met forecasts with a 25 percent profit jump after volatile markets during the European sovereign debt crisis encouraged customers to bet more.

However shares have steadily moved lower on the FTSE as the day progressed. Shares closed 4.99% lower at 443.30 as investors show concerns for future growth.

Of particular concern is the Japanese unit - IG Group said new limits on trading with borrowed money in Japan could wipe out 20 percent of its revenues there, but sounded an upbeat note about its overall prospects despite a gloomy economic outlook in many of its markets.

Japan accounted for 8 percent of total revenues of 298.6 million pounds last year.

IG plans to press ahead with its international expansion by opening an office in the Netherlands or Canada in the next year, Howkins said, with Brazil a more distant contender.

The company said it was confident about the current year, with jittery market conditions which boosted betting activity at the height of the sovereign debt crisis in May spilling over into June.

IG shares were down 1.8 percent at 458 pence by 0855GMT, underperforming the FTSE 250 share index, which was 0.3 percent higher. Prior to Tuesday's results statement, the stock had risen 33 percent since the beginning of the year.

Chief executive Tim Howkins told Reuters:

"At these levels most of the positives surrounding revenue growth potential are already priced in," Execution Noble analyst Nitin Arora wrote in a research note.

"We would recommend investors take profits."

IG had a pretax profit of 157.6 million pounds ($240.9 million) in the year to May 31, up from 125.9 million pounds the previous year, and broadly in line with the 155.1 million pounds pencilled in by analysts, according to the company's calculation of consensus expectations.

The group's Australian operations posted the strongest sales growth, expanding by 63 percent, followed by mainland Europe on 57 percent. The UK, IG's biggest market with 56 percent of sales, grew by a more moderate 18 percent.

IG had said in a June trading statement that it was on course for a profit of about 157 million pounds, crediting an increase in market volatility the previous month which drove a 24 percent surge in profits during the fourth quarter.

The company takes spread bets on equity, commodity and foreign exchange markets, allowing customers to profit from falling as well as rising prices, and typically experiences a spike in betting volumes when markets fluctuate sharply.
Last Updated on Tuesday, 20 July 2010 15:59
 

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