Net profit down at IG Group despite record revenue in FY23

Total revenue during the 12 months to 31 May was £1.02bn (€1.18bn/$1.32bn), up 5% on the previous year. This was also the fourth consecutive financial year of record revenue – and the first time IG Group exceeded £1.00bn in revenue.

The increase was due to a sharp rise in interest income, which rocketed from £800,000 in FY22 to €80.8m. IG Group said this was the result of higher interest rates in the market.

Putting this into perspective, net trading revenue was down by 4% year-on-year to £941.8m. The group attributed this to reduced client activity over the course of the year.

“We’ve delivered a fourth consecutive year of record revenue as part of our strategy to expand and diversify the group through great technology and innovative products, combined with outstanding client experiences,” IG Group’s chief financial officer and acting CEO, Charlie Rozes, said.

“We’ve performed well in the much more difficult market conditions that persisted through most of the past year, maintaining our leadership position in over-the-counter (OTC) derivatives while building further momentum in our product and geographic expansion.”

Analysing IG Group’s performance 

Breaking down revenue further, OTC derivatives accounted for £806.3m of all revenue. This was down marginally from the record £810.2m posted in the previous year. 

Exchange traded derivatives jumped 51% to $186.5m, driven by its acquisition of brokerage and investor education platform Tastytrade in June 2021. Revenue from Tastytrade alone was up 52% to £170.3m.

However, stock trading and investments revenue slipped 12% to £29.8m. Again, IG Group put this down to lower client activity.

UK remains core market

Most trading revenue came from activities in the UK, with revenue in the region reaching £322.0m. Australia’s share was £99.8m, Japan £99.3m and Singapore £68.8m. A further £55.2m came from non-European Union markets across EMEA and £39.5m non-disclosed emerging markets.

In total, the UK, Asia Pacific and emerging markets accounted for £684.7m in revenue. US operations generated £140.9m in trading revenue and the European Union £116.2m. 

As for interest, some £50.4m came from US operations and £30.4m activities across other markets.

Rising expenses

Looking at outgoings, IG Group noted £10.4m in betting duty and financial transactions tax, as well as £1.0m in client fund interest. Operating costs were up 17% to £583.8m.

Based on net trading revenue alone, this left operating profit down 8.1% at £438.5m. After also including £11.4m in net financial income, profit before tax was still 5.7% lower at £449.9m.

IG Group paid £86.2m in tax, leaving £363.7m in net profit from continuing operations, a drop of 8.2%. After accounting for £1.3m in net profit from discontinued operations, total net profit was 27.6% lower at £503.9m. This larger decline was due to the sale of Nadex during FY22.

“Our clients and our people remain at the heart of our success,” Rozes said. “IG’s commitment to offering a first-class trading experience has resulted in a loyal, high quality global client base, demonstrated by active client numbers remaining significantly above the levels of just a few years ago. Our unique client base is the foundation of our resilient growth profile.”

IG Group is well positioned to continue investing for growth, given the strength and consistency of its cash flow and balance sheet, Rozes added.

“We keep a close watch on profit margins and in FY24 will continue to look for opportunities to achieve even greater cost efficiency. 

“We’re the home of active traders worldwide and we are building a more sustainable, long-term business that delivers for all stakeholders.”

CEO Felix takes medical leave 

Rozes is temporarily at the helm of IG Group while CEO June Felix takes medical leave. This was confirmed earlier in the month, with IG Group not disclosing when Felix would return.

Per the arrangement, CFO Rozes is assuming Felix’s day-to-day responsibilities as acting CEO. Rozes is combining this with his current role.

IG Group said this helps provide “continuity” as it executes its strategy.