British electronic trading stalwart IG Group (IGG:L) has today issued its periodical Interim Management Statement for the period from June 1, 2014 to September 16, 2014, depicting a 9% decline in total commercial revenue across its entire operations compared with the previous year.
As 2014, a year in which many firms across the globe have felt the prolonged pinch resulting from ongoing low volatility in retail and institutional FX trading, revenue in the first quarter of IG Group’s fiscal year was £85.6 million, 9% behind the revenue generated in the same period in the prior year.
In March this year, the firm’s Chief Financial Officer Christopher Hill explained during IG Group’s Interim Management Statement presentation that “FX is overall down year-on-year by just over £4 million. And when you look at where that’s coming from, you have got £1 million of that coming from Australia, £1 million coming from Japan and £1 million coming from Singapore. So very clearly lower volatility, and declining volatility over the last year is impacting us on FX, particularly in Asia Pacific.”
IG Group has stated that the first three months of its fiscal year were particularly quiet in the financial markets, with volumes and volatility close to historic lows and the continuation of recent weakness in forex activity. The majority of the year-on-year difference occurred in June, which was unusually strong in the prior year.
Revenue was behind in all of the geographic regions, as the extremely quiet backdrop impacted performance. In the UK the 8% drop in active client numbers was partially offset by an increase in average revenue per client. In Australia revenue was 10% down on the prior year period, although flat against the fourth quarter of last year. In Europe, even with the relatively quiet market backdrop, active client numbers grew by 9%; however, this was more than offset by the fall in average revenue per client.
In other global regions, the continuation of weakness in the FX markets impacted Japan and Singapore, where revenue was down by around 30%; this was partially offset by strong year-on-year growth in South Africa.
In mid-September, IG launched its stockbroking offering in the UK and Ireland with a broad range of UK, US, German, Dutch and Irish equities, Exchange Traded Funds and a tax-free ISA account. Although this may take some time to build, it has a number of significant advantages against other offerings and is a major strategic development for IG.
Whilst the early stages of 2014 were punctuated by IG Group’s allocation of resources into technological development, especially with regard to retail trading platform engineering, this first quarter of the company’s fiscal year has been a period of investment in expansion to other global regions by acquiring a license from FINMA in Switzerland for IG Group’s new sales office in Geneva with the company expecting to begin trading there in the very near future.
Looking forward, the company will progress several initiatives through this year, as part of its long-term diversification strategy, with the aim being to make IG the default choice for active traders globally. The firm has stated that it will continue to develop its new stockbroking offering, including adding the ability for clients to use their equity assets as collateral against shorter-term leveraged trading, and commencing a targeted international roll-out.
IG Group will also progress its licence application in Dubai. The company is also applying significant effort to enhancing and maximising its mobile offering across the globe and to developing and refining its web presence. By successfully executing on these initiatives the company believes it can deliver the next phase of its growth.
Today there will be a conference call for analysts and investors at 8.30am (UK time). The call can be accessed by dialling +44 20 3059 8125. A replay of the conference call will be available for a week after the event by dialling +44 121 260 4861 and using passcode 4913485#
For the full release by IG Group, click here.