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Screenshot of a breaking news alert e-mail from Q2 2017
IG Group CEO Tim Howkins and CFO Chris Hill probe specific factors relating to the company’s Q3 results, and emphasize importance of mobile trading
Following today’s announcement of corporate results for the third quarter of its financial year, IG Group CEO Tim Howkins, along with CFO Chris Hill and Head of Investor Relations Kieran McKinney engaged in a conference call to elaborate on the overall outlook for the immediate future, as well as to analyse reasons for particular results having been achieved.
LeapRate participated in the call, which was commenced by Mr. Howkins explaining that “A lot of work still going on with the long term projects that we are working on to re-position the business. There is no further update with regard to any of these and we are on track for the time table that we discussed about two months ago. As far as the last quarter is concerned, we achieved a good strong set of results, for another quarter during the fiscal year, which was well ahead of the previous year. What is pleasing is the shape of the revenue, good levels of growth from established businesses, including a strong pickup across Europe.”
Subsequent to Mr. Howkins’ opening gambit, CFO Chris Hill then addressed the audience by stating that “Given the poor record during last year, the outside world reads more into single quarter figures than usual. The patterns that we saw during the third quarter of this fiscal year were not surprising insofar as UK active client numbers were down.”
“Management actions within the company purposely de-emphasized low activity clients, and, importantly, we are beginning to see stabilization. Australia performed well in what is usually its worst quarter, and we experienced European market strength, especially in Germany and France” continued Mr. Hill.
A further synopsis by Mr. Hill was that “Asian currency volatility has been low, which has a substantial effect was a result of FX being the main asset type in the Asia Pacific region. It is always difficult to forecast the full year’s revenue consensus, however the results attained during Q3 keeps us on track”
When considering operating costs, Mr. Hill added that the company’s overheads were running below the figures of its own forecast. Some of this was attributed to a saving of £2 million as a result of the Financial Services Compensation Scheme’s recent removal of its interim levy.
He also confirmed that the company’s current operating cost forecast is now lower, weighing in at less than £175 million pre-deductions, and that IG Group will continue its current investment phase and ramp it up over next year.
Following the analysis from two of IG Group’s most senior executives, Citigroup’s Director, UK Small & Mid Cap Research Hugo Mills posed a question by asking ” Are you able to provide any more color on asset class basis, including what has been driving specific growth in certain reasons?”
With a clear answer, IG Group’s executives responded by stating that “Very clearly lower volatility and declining volatility over last year in the Asia Pacific region is impacting on FX. In other asset classes, shares are up £3.5 million, mostly from the UK, whilst futures are up 5 million. In terms of regional coverage, this has been evenly spread. Australia has provided £1.4 million and Europe £2 million plus there has also been growth within the binary options business.”
Mr. Mills asked a further question in order that IG Group may elaborate further on its investment commentary. “Is that a phasing thing or have you thought about the level of investment?” asked Mr. Mills.
Citing mobile as a priority, IG Group stated that “All of the strategic initiatives we have talked about during recent times will continue, including plans we have regard the investment in Switzerland, along with the furthering of mobile trading. Corporate investment into our share trading offering will continue as planned. The challenge that we face is the rate of hiring, with a specific area in which we are lacking resources is IT. From an infrastructure point of view we are up against the banks and they are all hiring, and given that the mobile area is a focus for everyone, that has been disappointing. We need that resource in the business and want to continue to invest, including looking forward into next year.”
IG Group owns one of the two US-based binary options exchanges, NADEX, the activities of which provoked the next question from Richard Taylor of Barclays. “Have you signed up any new partners to NADEX, or is it still reliant on organic client acquisition, plus can you give an indication on change in active clients. Im guessing the UK is more important here.”
The reply to Mr. Taylor’s question, IG Group asserted that “On NADEX, the numbers for this quarter are all organic, and we are close to signing our first broker as well as being close to getting a couple of market makers onto NADEX. With regard to client numbers, you stripped out what is going on between lower value clients and higher value clients. We are 1 or 2% growth among higher value clients and the drop off is among lower. The Impact has been felt within the UK, whilst client growth is largely from Europe.”
As the conversation drew to a close, LeapRate focused on the growth that IG Group has experienced recently in European markets, as opposed to the activity within the UK, and asked as to whether the addition of MetaTrader 4 had been a strategic decision to broaden the scope of client acquisition away from the British CFD and spread betting target market, and enable the firm to access other European markets whose traders are used to MetaTrader 4.
“We are continuing investing in platforms, particularly in mobile” was the company’s response, concluding with a statement that ” The concentration on investment in different platforms is not about a geographic shift, for example, mobile applies to all regions.”
Further to the announcement of the company’s metrics, IG Group’s stock price has risen by 3%,showing a dynamic correlation between company stock and today’s news.