IG Group shares trade down 11% after disappointing outlook
Shares of leading UK-based online trading house IG Group took a large hit on Thursday, after the company reported stellar results but a less-than-stellar outlook for the coming fiscal year.
IG shares dropped 11% on Thursday, from Wednesday’s close of 833.5p to close at 743p. They recovered slightly in early Friday trade, up 0.6% to 748.5p.
IG had already given investors most of the “good news” prior to the release of FY 2020 results (IG has a May 31 fiscal year end). In early June IG’s trading update indicated that revenues for its fiscal Q4 2020 – the months of March-April-May – were going to hit a record £259 million, well beyond IG’s previous best ever quarter. So the expectations for Thursday morning’s release of full revenue+profit results, in addition to the company’s outlook for 2021, were set quite high.
And, it seems, that what was said did not quite meet expectations. First, the company 2H-2020 profits of £158 million off of a record second half revenue base of £399 million were less than what investors expected. IG shareholders clearly hoped that more of its Q4 revenue windfall would hit the bottom line.
Second, outlook. The company pointed out that its targets remain unchanged, for revenue growth in Core Markets of 3-5% over the medium term.
Not really inspiring stuff.
Also, IG indicated that it anticipates a reversion to more “normalised levels of market volatility” during the course of FY21. Although IG did say that current trading into early FY21 has continued to reflect elevated levels of volatility, this has moderated since the peak seen in March.
The big question is whether the short term spike on client activity, and in new client sign-ups, will yield longer term benefits for IG and some of its key UK rivals such as Plus500 and CMC Markets. For now, investors seem skeptical.