IG’s Revenue And Profit Decline in FY 2019
On Monday, CFD broker and spread betting provider IG Group published its financial performance for the fiscal year 2019. The company’s revenue and earnings declined from the fiscal year 2018, though the Board decided to maintain the dividend size at the same level. Interestingly, equities continue to perform better than forex products, also because IG provides thousands of stock and index options to trade, compared to dozens of forex instruments.
Net Trading Revenue Drops 16%
According to the annual report, IG’s net trading revenue in the fiscal year 2019 was 476.9 million pounds, down 16% from 569 million pounds recorded in the previous year. The company’s operating profit tumbled 31%, from 281.1 million pounds in the fiscal year 2018 to 192.9 million pounds in 2019.
The revenue dropped by 23% in the UK, where IG has its headquarters, and by 42% in the European Union (EU). The UK and the EU account for more than half of IG’s revenue. On the other side, the net trading revenue jumped in Japan and the emerging markets, by 29% and 36%, respectively.
The decline in the European markets is also due to the European Securities and Markets Authority’s (ESMA) tighter measures on CFD trading. Besides, the low volatility level and reduced market activity put additional pressure on the broker. IG explained:
The ESMA measures have impacted the activity of Retail clients, primarily through a reduction in the size of their trades, and in the number of clients who trade. The restrictions on leverage introduced by ESMA have reduced the attractiveness of OTC trading, both in absolute terms and relative to the other forms of trading available to Retail clients. Since the introduction of the measures we have seen a reduction in the number of active Retail clients and the revenue generated per client.
The price of IG stock, traded on the London Stock Exchange (LSE), declined by more than 3% since early Monday.
IG’s Goals For The Coming Years
IG Group, which is among the largest retail brokers and by far the largest spread betting providers in the world, is currently facing major restructuring. The new CEO June Felix announced the changes three months ago.
The company intends to establish another Multilateral Trading Facility (MTF) in the European Union. IG also plans to take a significant share of the turbo market. For those unfamiliar, turbo is a financial derivative similar to contracts for differences (CFDs).
According to the strategic plan presented by Felix back in May, IG Group has set some bold targets, aiming to generate revenue growth in its key markets of up to 5% per year over the next few years.
When it comes to new markets, IG aims to increase its revenue to 160 million pounds by 2022, from the current level at 100 million pounds.
In the recent annual report, IG said that it wanted to boost its operating expenses from £259.6 million in the 2019 financial year to around £290 million in the 2020 fiscal year.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.