IG Group Reports 6% Fall in Q4 Revenues MoM, Expects Lower Growth in FY 19 on Strict ESMA Guidelines

UK online retail trading broker, IG Group Holding Plc (LON: IGG) has reported the preliminary financial result for FY 18 (IG Group follows May-April accounting period) with a mixed bag of results and outlook for the company. 

The group continued to perform well in the last quarter of fiscal 2018 aided by the strong market volatility and surge in cryptocurrency trading. The Q4 revenues coming in at £144 million (USD $193 million) which is the second best quarter for the fiscal. The Dec 17-Feb18 quarter (the best performing quarter) witnessed revenues at £153 million. This brings a full year revenue at £565m which is 15 percent above FY-17’s £491 million.

The IG group reported operating profit before taxes for the second half of the fiscal at £175 million which is 28 percent higher than the first half year. The operating expenses for the FY18 excluding variable remuneration is expected to remain stable despite the rise in revenues at around £254 million compared to £253 million in FY 17. Variable remuneration is expected to be around at £36m in 2018, up from £24m in the previous year.

IG Group shares listed on London Stock Exchange reacted positively to the news and closed higher by 1 percent in Wednesday trading session.

IG Group while announcing the Q4 financial results has given lowered the growth guidance for next financial year on the account of the crackdown from European regulators on the sector. 

European Securities Market AuthorityESMA recently issued a new regulation by capping leverage at 30X for major currency pairs, 2X for cryptocurrency related pairs and also issued leverage capping for stock indices, commodities and other CFD instruments, which the IG Group feels that there will be a hit of 10 percent in revenues across the board. Outside the regulatory impact, IG Group believes that the macro trend will continue to support the overall business growth.

“As the ESMA rules are expected to come into force across the EU during the first half of IG’s fiscal 2019, IG stated that it expects that its revenue in FY19 will be lower than that expected for FY18, reflecting the impact of the regulatory changes in the UK and EU. However – barring any other unforeseen regulatory changes – IG expects to return to growth after FY19.” 

IG Group expects that the overall operating expenses to rise in the FY 19 due to investments and new hires across the board but the group is likely to offset this increased cost by cutting down on variable payments. The group expects the total operating cost at 2019 would be almost same the FY 18 at around £290m.

It also announced the appointment of two senior level executives at the company’s Board of Directors, Bridget Messer and Jon Noble, with effect from June 1, 2018. Bridget Messer is Chief Commercial Officer looking after the group’s business strategy and was appointed in September 2015 in the same role. Jon Noble is Chief Information Officer and was appointed in 2012. He has been responsible for setting and delivering the Group’s IT strategy and ensuring stability and security of IG’s platform.