IG Stock Drops to 2-Year Low on Disappointing Revenues
London-based IG Group, which operates a CFD trading and spread betting platform, published its financial report for the third quarter of the fiscal year 2019 that ended on February 28 of this year. According to the report, the company recorded another drop in quarterly sales amid a negative mood in the retail brokers’ industry caused by the low volatility and the new rules imposed by the European Securities and Markets Authority (ESMA).
Revenue Declines Again
Thus, during the previous quarter, IG’s revenue decreased by 12% to 108 million pounds. The drop was more evident in the homeland and the European Union, where income fell 15% to 56.9 million pounds. Revenues generated in the Asia-Pacific region fell 11% to 35 million pounds. The only region that showed growth was Europe, the Middle East, and Africa (EMEA) region outside the ESMA-regulated jurisdiction, where the CFD trading provider reported an income gain of 6% to 11.3 million pounds.
The report also touched upon the changes in the number of platform users. Thus, the total number of active customers of IG was 1% up, to about 125,600. The number of clients in the US and the EU also expanded 1% to 51,800. The company said that the number of new clients who registered during the quarter increased from 7,553 to 7,742.
The low volatility across global markets has been a severe challenge to IG. The company focused on professional clients to offset the impact, but it didn’t help that much. The revenue generated in this segment fell 20% during the third quarter. Also, only 1,425 applications or 14% of professional clients received approval from the platform operator. Despite everything, the professional client's segment accounts for the greatest revenue portion in the UK and the EU, at 37.1 million pounds, compared to retail traders, who accounted for 19.8 million pounds.
YTD Trading Revenue
Year-to-date trading revenue of IG Group fell 15% to 359 million pounds. The decline was caused by the ESMA’s new rules and the exceptional results recorded in the same period of 2018 when the investors showed increased interest in cryptocurrencies.
The revenue from the ESMA region (which includes the UK and the EU) fell massively by 27% to 202.4 million pounds. Thus, the trading revenue fell 22% in the UK and 39% in the EU. On the other hand, the EMEA region outside the EU and the Asia-Pacific region saw higher revenues, up 22% and 7% respectively. However, it seems that IG’s shift to professional clients doesn’t pay back when the volatility across global financial markets is very low.
IG Share Price Declines
The IG stock, listed on the London Stock Exchange (LSE) with the ticker IGG, has been heavily influenced by the quarterly report. The share price lost over 5% on Wednesday and another 5% on Thursday, currently trading at around 516 pence as at 3:40 PM. On Thursday, the stock fell below 500 pence to the lowest level in about two years.
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In August of 2018, IG’s share price was trading above 950 pence after moving through a long-term bullish trend. However, the pressure from ESMA’s new regulation has had a negative impact on the retail broking industry, including on IG.
As per Reuters, a Shore Capital analyst commented on the IG negative results:
We had not anticipated a particularly bullish statement from IG but this is worse than we expected.
Given the market volatility and client trading opportunities, IG said it was difficult for it to come up with an accurate forecast for the revenue figures for the fourth quarter of the fiscal year 2019. As previously stated, the company continues to expect lower revenue compared to last year.
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