Online trading company IG Group Holdings PLC (LON:IGG) reported an increase in full year profit and new client numbers even as the industry tackled a regulatory clampdown.
Shares in IG rose 8.23% to 601p in morning trading as the group posted a 3% rise in pre-tax profit to £213.7mln in the year to 31 May.
Net trading revenue rose 8% to £491.1mln with new client numbers up 38% on the previous year.
IG raised its full year dividend by 2.9% to 32.2p per share.
Chief executive Peter Hetherington said the company delivered record revenue and profit during one of the least volatile years in financial markets for “decades”.
The low levels of volatility came despite uncertainty surrounding the UK’s vote to leave the European Union, the US Presidential election in November and elections in European countries in the second half.
Regulatory challenges for IG
IG also faced increased scrutiny from regulatory authorities in the UK and Europe. The UK’s Financial Conduct Authority has proposed stricter rules for firms selling contract for difference (CFD) products to retail customers. In June the FCA decided to delay making final rules until the European Securities and Markets Association concludes its discussions over the use of its intervention powers.
“This new level of scrutiny is overdue and IG believes that a well thought through update to regulation should be beneficial for clients - if it is proportionate, consistent and properly enforced,” IG said.
“IG has differentiated itself within the industry through its adherence to the highest regulatory standards and its focus on fair outcomes for clients. However, too many providers have been allowed to enter this industry in recent years, many of which have behaved very badly and targeted clients for whom such a product is entirely inappropriate."
IG expects to recruit fewer new clients next year due to the regulatory changes but sees higher average revenue for each of its customers.
Shore Capital repeats 'hold' rating on IG
Shore Capital reiterated a 'hold' rating and target price of 555p, citing the regulatory challenges that IG faces.
Analyst Paul McGinnis said: "We think IG is a well-managed business whose higher value, lower churning client base was not the main target of the FCA review.
"However, the proposed FCA introduction of leverage limits in the UK (50x for experienced clients and 25x for inexperienced), will impact on IG’s UK revenues once implemented."