Revenue fell to £128.9mln in the three months to August 31 from a record of £135.2mln a year ago, even as the number of clients rose by 3% to 129,000.
The heightened level of volatility in financial markets which fuelled spreadbetters’ profits last year had not continued, while a regulatory crack-down designed to protect retail customers from losing too much money had also impacted trading.
Those results were still good enough to beat Numis’ forecasts but the stock has fallen more than 10% since, making it good value, according to the broker.
“Following the better than forecast Q1 performance where IG reported revenues of £128.9m against our estimate of £121.0m in a quiet quarter with some of the ESMA impact we are today upgrading,” read a note to clients.
“For this year and next our revenue forecast increases by 2% to £534.4m and £579.3m respectively. Given the recent weakness our recommendation moves to ‘buy’ from ‘add’.”