IG Group @ 457.5p, -13.1 (2.78%)
Funny that when you are down everyone seems to want to stick the boot in and it seems like IG Group got it between the ribs yesterday.
Its currently beyond my understanding as to the hows and (immediate) whys but the Financial Services Compensation Scheme has issued invoices for an interim levy, some of which are calls on IG Group for the sum of £4,052,000, payable within 30 days??
Worst still is the statement (in IG's Financial Services Compensation Scheme announcement) that none of this £4m has been provided for in the accounts. Could they have known and should they have known?
The announcement, which details the failure of Keydata Investment Services Ltd. as the principle driver for the interim levy (£326m in total), goes on to suggest that it is expected to affect UK regulated Fund Managers and Investment intermediaries. An article on the Citywire website (FSCS sets levy at £326m) has a bit more detail with advisors set to pick up the tab for £93m of the total.
Unfortunately for IG, this follows closely on the back of the poorly received trading statement which declared an almost total writedown of the company's investment in Japan due to regulatory changes. These changes, relating to leverage levels, have effectively put a ceiling on IG's previous plans for growth in Japan (see earlier post:Has the Sun set on IG Index?).
However, it does have to be said that £4m appears small against the backdrop of the £143m writedown or, more positively, against consensus pre-tax profit forecasts of £166m; or last years closing cash position of £678m (2009: £520m).
The problem for IG Group is that it is a victim of its own success so, despite the 4+% dividend yield, and 45% margins, analysts still want growth. And, with Japan now being scaled back significantly as an operation, analysts are looking to the currently small US venture to provide that growth.
I have enclosed links below:
- to the IG Group's announcement published on the London Stock Exchange's Regulatory News Service;
- to a citywire article detailing a broader breakdown of the £326m; and
- to the FSCS site's Levy Information page (which still doesn't mean very much to me).
Link to London Stock Exchange: Financial Services Compensation Scheme announcement
Link to citywire: FSCS sets levy at £326m
Link to FSCS: Levy Information
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