IG Group @ 439.6p, +12.4p (+2.9%)
OK so I crossed my fingers and waited for the trading statement.....and IG Group duly reported yesterday........and the statement disappointed.....and the shares fell, but not to what, with hindsight, now appears to have been a recent (but very brief), low of 414p seen on the 27 November 2012 (Is it time to bet on IG Group shares?).
Yesterday's trading update triggered falls ended with a close of 427p, but the shares have steadily improved today to finish up a healthy 12.4p by the close.
At 439.6p today's close is some 6.2% higher than the aforementioned 414p.
I don't believe that the trading statement (www.iggroup.com: First-half trading update), came up with anything new or unexpected though, other than the unwanted, and previously unmentioned caveat that if activity levels don't increase then the full year might be missed.
In the current economic climate with little sight of a light at the end of an ever extending tunnel how many companies are in a position to forecast growth with any level of certainty.
And whilst the second quarter was 7% higher than the first quarter it was going to have to be exceptional for the company to beat what was flagged up as an exceptional 1st/2nd quarter last year based upon record months in August and September 2011.
With no further momentum beyond these 2 months IG has quite conservatively encircled Q1/Q2 2011 as exceptions rather than the new rule.
But the £169m IG has achieved in the first half is very similar to the £169.28m and £167.61m achieved by H1 2010 and H1 2009. Hence, I assume the basis of the company's statement regarding a "traditional" pattern for full year revenues.
Having done a rough check it looks like, with the exception of 2011, IG's first half revenues have been outweighed by the second half by 1 or 2 percent e.g 49%: 51%.
2011: £213m / £411m = 51.8%,
2010: £169 / £354 = 47.7%,
2009: £168 / £344 = 48.8%,
2008: £126 / £257 = 49%,
2007: £86 / £184 = 46.7%.
But the company has made that veiled caveat that if current activity levels persist then the traditional pattern might not hold true this year.
On the plus side IG has tried to cut/contain some costs and with its policy of investment in its own IT systems appears to be increasing market share.
Economic conditions must be a factor but, much like Sky giving away its boxes, surely an increasing market share will yield a benefit if/when economic conditions start to show a little more stability. At which point it seems likely that the all important revenue per client number will increase.
I would have liked to have had a view of the cashflow and the cash on the balance sheet figures for comparison and effectiveness of the cost cutting activity but am happy to hold for the present as I maintain that the shares seem to have found a reasonable affordable level v. an ex. growth expectation, which must leave an opportunity should conditions start to improve.
Meanwhile the company still seems to be well managed with a strong commitment to shareholder returns.
Related article links:
- www.iggroup.com: First-half trading update
Earlier related posts:
- Is it time to bet on IG Group shares?
- Portfolio top up of IG Group.
- IG Group beats forecasts. What storm clouds?
- Has the sun set on IG Index?
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