CEO invests £1m in IG shares. Bullish signal following sound Interims, but regulatory changes key.
Companies: IG Group Holdings plc
IG Group posted a robust set of Interims this morning after a torrid few months of regulatory blows which knocked 36% or £1.1bn of its value.
In a further positive sign, just over 90 minutes after publishing the Interim Results, the CEO Peter Hetherington bought £1m in shares, a clear sign that he thinks IG shares are currently the wrong price.
Revenue, PBT and EPS are up 14%, 7% and 8% respectively. The Group continues to expand its offering into discretionary with its Blackrock partnership and suite of passive ETF-based investment portfolios, as it aims to tap into a similar market as the like of Nutmeg, and WealthFront in the US.
Marketing efforts remain effective with client payback periods still around four months.
However, regulatory risk is the primary catalyst for IG and the industry at the moment, so the regulatory update is key.
Regulators around the globe are in the process of attempting to address the perceived problems in the CFD markets, particularly regarding dangerous leverage, sharp marketing practices and high-risk binary trading.
Management confirms it agrees with the goal of regulators and strikes a more positive tone with respect to the outcome:
"...a degree of regulatory change is required and, if well structured, should be positive for client outcomes over the longer term."
"IG supports the FCA's intention to improve consumer outcomes, and the Company is very well placed to work with the FCA to assist it to achieve its goals."
In particular, IG highlights the benefits of Limited Risk accounts, as it did last year. This is the position taken by some key European regulators but not the FCA at this time.
The best point IG makes in its section on regulatory reform is the need for consistency across Europe. The FCA taking a tougher stance may well look good in the press, but it could have the opposite effect regarding customer protection:
"the rules must be applied consistently across the broader industry. Not to do so would create the risk of a regulatory arbitrage situation developing, where UK clients are effectively encouraged to choose non-compliant providers who sell into the UK from other parts of the EU, or entirely illegally from elsewhere. The nature of internet-based marketing makes this extremely difficult to prevent. If this is the case, UK consumers are likely to end up with considerably worse outcomes."
The shares opened flat in early trading but have since slipped 3%.
