The current stock market volatility is paying dividends for spread betting group IG, whose shares have hit a new peak after an upbeat trading statement.
The company said it expected to report a rise in profits from £125.9m to £157m for the year ending May 31, with revenues up 16% to £298m. The final quarter in particular did well, with revenues up 24%. It said:
[IG] has benefited from an increase in volatility in both forex and equity markets in the last few weeks of the year. This volatility boosted client activity and hence revenue, and also increased the rate of new account opening.
It remains difficult to predict future trends in volatility or customer reaction to changing market and economic conditions. Strong account opening and the continued development of the offering leave the group well positioned for further growth.
The company's shares have climbed 49.3p to 441.5p - up £12.5% - and analyst Robin Savage at Collins Stewart issued a buy note and said:
[The profit number] is 3% above the top end of market expectations (£53m to £126m) and 8% above our forecast. Revenues of £298m will have surprised most of the market who were expecting between £294m and £257m, despite a very clear third quarter IMS in March which showed strong growth.
We take this opportunity to increase our 2010 dividend expectation by 11% from 11.7p to 12.9p. The dividend could be even higher: dividend cover of 1.5 times would suggest a total dividend of 20p.
This pre-close statement is likely to push IG Group shares to above the all time high of 430p. The final results on 20 July should reveal very strong cash flows and dividend paying capability. We reiterate our 500p target price.
