IG Group PLC (LON:IGG) saw its shares push higher early on after the online trading group said it expects to report full year revenue around 7% higher than in the previous year despite a quiet fourth quarter in financial markets.
In a pre-close season trading update, the FTSE 250-listed firm also said its full year pretax profit and earnings are expected to be modestly ahead of the prior year.
IG said its revenue for the fourth quarter ending 31 May 2017 was higher than at the same stage a year ago.
READ: IG sees revenues fall during "quiet" third-quarter
It added that its total operating expenses in the second half of the year are expected to be at around the same level as reported for the first half, including a rebate from the Financial Services Compensation Scheme relating to prior years.
Back in March, IG revealed that its third quarter revenues had fallen by 3.8% during “a quiet period in global financial markets” and against an uncertain regulatory background.
In early trading, IG shares topped the FTSE 250 leader board, adding 2.5%, or 14p at 567.5p.
Regulatory issues remain a drag for the spread betting firms, which are awaiting the outcome of a Financial Conduct Authority probe in the UK, although earlier this month IG and rival CMC Markets Plc (LON:CMCX) welcomed the outcome of a consultation by German regulator BaFin into the retail contracts-for-difference industry in country, as both firms said they already comply with the upcoming changes.
"Investment case currently looks to be a fairer balance of risk and reward"
In a note to clients, Shore Capital analysts Paul McGinnis said the “in-line full year trading update represents a very respectable outcome.”
He added: “We think IG is a well-run company and don’t believe its business model and higher average client value were the prime target of the FCA (and other European regulators) seeking to crackdown on operators targeting a relatively inexperienced retail client base which may not have fully understood the risks of leverage trading.
“However, with approximately 50% of net trading revenue from the UK, the implementation of leverage limits capped at 50x (for experienced clients) will impact the on revenue and profits if introduced as proposed in the consultation published by the FCA in December.”
Repeating a ‘hold’ rating on IG Group, McGinnis pointed out: “The shares have recovered from a low of c450p in the immediate aftermath of the FCA proposals in December meaning that the investment case currently looks to be a fairer balance of risk and reward.
“However our forecasts are still potentially subject to material revision based on the final outcome meaning we would need a higher margin of safety to be more explicitly positive.”
IG will release its full-year results will be announced on Tuesday 18 July 2017.
-- Adds share price, broker comment --