Home Estate Planning IG Group shares down: ‘Unexciting markets’ cause 21 per cent profit drop

IG Group shares down: ‘Unexciting markets’ cause 21 per cent profit drop

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IG Group experienced a 21 per cent drop in adjusted profits before tax in the second half of 2023, which acting CEO Charlie Rozes credited to “unexciting markets” for its clients.

The group’s share price fell 9.5 per cent on open this morning, before recovering slightly.

Speaking to City A.M, Rozes said that he thought the group’s nine per cent drop in revenue from £519.1m in June to £472.6m “didn’t tell the whole story” as a low volatility year left its clients not seeing any “opportunities to trade”.

The VIX, a popular measure of the stock market’s expectation of the S&P 500’s volatility, dropped by 41 per cent over the year, leading to net trading revenue for the group to fall 19 per cent to £402.4m.

Adjusted profits after tax fell even more significantly for the group, declining 27 per cent to £154.8m, with the firms adjusted profit before tax margin dropping from 50.2 per cent to 43.5 per cent.

However, the firm’s options trading arm, tastytrade, saw a third consecutive half-year of record growth, with total revenue increasing by 29 per cent.

The acting CEO argued that this was a “good proof point of strategy” for the firm, as it has sought to diversify its revenue streams.

Rozes was also not deterred by the core numbers, arguing that IG Group was still the “home of the active trader” and said the firm would “absolutely not” be moving away from its core over-the-counter trading business.

Costs for the firm increased significantly from last half-year, with adjusted total operating costs ballooning nine per cent to £281.1m, while statutory total operating costs grew 11 per cent to £310.4m.

The firm began implementing a £50m cost-cutting programme in October, cutting 10 per cent of its staff. Rozes added that this was “on track” as the firm was “starting to see headcount reduce”, and that cost increases should fall to “low single digits” soon.

IG Group also saw its active client base diminish from the first half of the year, falling from 312,000 to 296,300, while new clients fell from 27,500 to 33,800.

Rozes said the number of customers will “naturally ebb and flow” and that “doesn’t cause us any concern”, again pointing to the low volatility of markets over the six months.

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