LONDON (ShareCast) - (Sharecast News) - IG Group Holdings reported a 16% fall in its net trading revenue to £476.9m in its preliminary results on Tuesday, which the board put down to the impact of new ESMA measures and "less favourable" market conditions throughout the 2019 financial year, particularly in the second half.
The FTSE 250 trading company said total operating costs were 2% lower in the year ended 31 May at £284.3m, while its operating profit fell 31% to £192.9m.

Basic earnings per share were said to be 30% lower at 43.1p.

On the operational front, IG Group said it "successfully" navigated the ESMA product intervention measures which came into effect during the first quarter of the financial year.

In the three quarters of the financial year during which the ESMA measures were in place throughout, 66% of ESMA region revenue was generated from professional clients, with the group serving 6,000 unique ESMA region professional clients in the 2019 financial year.

The average revenue per ESMA professional client was nearly £27,000 in the year, with the company saying it continued to recruit and retain a high quality client base.

A total of 55% of the company's global over-the-counter (OTC) leveraged revenue in the 2019 financial year was generated from clients who had been trading with IG Group for more than three years.

The average tenure of the group's highest-value clients in the year, defined as those clients generating 80% of the group's revenue, was reported to be four years and nine months.

IG Group said it continued to attract new, high quality, OTC leveraged clients, with 31,510 clients making their first trade in the period, contributing £66.8m of revenue in the year.

The firm estimated that the lifetime revenue value of the 2019 client cohort would be around £300m.

Actions had been taken to deliver a return to revenue growth in the 2020 financial year, the board reported, with IG Europe - a client-facing subsidiary in Germany - operational since January.

The board said that provided certainty that IG would be able to offer its regulated financial products in all EU member states following the UK's exit from the EU.

IG US, the group's retail foreign exchange dealer in the United States, was launched in January, and Spectrum, its EU-based multilateral trading facility (MTF), had now started operations, with the marketing launch campaign planned to start in September.

An updated strategy and new medium-term financial targets was announced in May.

As it had previously guided, the board was recommending a final dividend of 30.24p per share, taking the full year dividend for the 2019 financial year to 43.2p per share.

That was unchanged from the 43.2p per share paid for the 2018 financial period.

The board said the final dividend, if approved by shareholders, would be paid on 24 October to those members on the register at the close of business on 27 September.

Looking ahead, IG Group said it expected to return to revenue growth in the 2020 financial year.

It said the revenue growth was expected to be delivered in the second half of the year, as the first quarter of 2019 was only partly impacted by the implementation of the ESMA product intervention measures.

As it set out in the strategy update, the company's operating expenses, excluding variable remuneration, were expected to increase by around £30m in the 2020 financial year.

That was said to primarily be due to additional investment in prospect acquisition, to continue to promote the IG brand, to grow the size and quality of the client base, and to establish the new businesses in the EU and the US.

IG said it would continue to "lead the way" in the industry, explaining that it had delivered a profitable and sustainable business for more than 40 years by placing good client outcomes at the heart of everything it did.

The group had articulated its strategy to position the business so that it would continue to deliver for its clients, its shareholders and its other stakeholders, with clear medium-term financial targets.

Its board reiterated that it expected to maintain the 43.2p per share annual dividend until the group's earnings allowed it to resume progressive dividends.

"The company has made good strategic and operational progress during the 2019 financial year, taking action to ensure that the business successfully navigated the impact of regulatory change," said chief executive officer June Felix.

"We have developed our strategy to position the business so that it will continue to deliver for our clients, our shareholders and our other stakeholders under a more restrictive regulatory environment in the UK and EU.

"I am excited by the opportunities we have identified, and I am confident that the company will return to revenue growth in the 2020 financial year."

Felix said IG had experienced "significant change" over its 45-year history, and would continue to do so, driven by an evolving regulatory environment, shifting patterns of wealth, and the continued evolution of financial markets around the world.

"The company adheres to the highest regulatory standards, differentiates itself within the industry through its good conduct, and I believe that the business is well positioned to continue to adapt to regulatory change and to thrive in an evolving market.

"I am looking forward to leading the implementation of IG's strategy to deliver sustainable revenue growth and attractive shareholder returns."

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