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UPDATE 2-IG Group sees markets bigger threat than EU tax plans
January 15, 2013 / 9:00 AM / 5 years ago

UPDATE 2-IG Group sees markets bigger threat than EU tax plans

* H1 pretax down 21 pct at 81.1 mln stg

* Revenue down 14 pct at 169 mln

* Shares down 3.5 pct, hit lowest in a month (Adds analyst quotes)

By Luke Jeffs

LONDON, Jan 15 (Reuters) - IG Group believes sustained tough market conditions rather than a European financial transaction tax represent the greatest challenge to the spread-betting firm’s prospects in the medium term.

Britain-based IG, which runs spread-betting brand IG Index, said on Tuesday low volatility linked to difficult market trends lay behind a 14 percent drop in half-year revenue to 169 million pounds ($271 million) and a 21 percent drop in pretax profit.

“There is a risk that the current market and economic conditions last for some time,” said Tim Howkins, chief executive.

“If these conditions do persist then we might reasonably expect low levels of revenue growth from our more established businesses in the UK and Australia, but higher levels of growth from our newer businesses in Europe, South Africa, Singapore and the U.S.,” Howkins added.

IG shares were down 3.5 percent at 451.6 pence by 1000 GMT, having fallen as low as 443.2p, their lowest in a month.

Financial spread betting, where IG is market leader and competes with the likes of City Index and CMC Markets, allows punters to take long or short positions against a spread quoted by the bookmaker in a range of markets such as top share indexes and currency rates.

Its appeal grows at times of market volatility, when potential returns are greatest. But some analysts see IG having a strong position in the longer term regardless of its short-term outlook, because of its strong market position and wide product range.

“While IG continues to operate in a challenging ... market, we continue to believe that the breadth of its platform is a key differentiator and should enable it to take market share and position it well for further market turbulence,” Citigroup analyst Hugo Mills said.

STRONGLY PLACED

At Investec, analyst James Hollins said: “We make the assumption that current soft market conditions (will) become more buoyant in the short-to-medium term and IG is very strongly placed, as global market leader with well-invested technology, to take advantage.”

IG said it was not worried about the impact a proposed financial transaction tax (FTT) will have on trading in Europe, seeing the tax as being hard for its proponents to agree on.

Eleven European states, including France, Germany and Italy, are working on plans to introduce a transaction tax on share and derivative deals.

“While we continue to closely monitor FTT developments at both a country and EU level, we view this subject as unlikely to have significant adverse impact on the group,” said Howkins.

The European Commission is set to meet next month to formalise an agreement between member states on the tax.

Some European member states have said the tax could take effect in those countries that opt into the plan as early as next year.

But Howkins said: “Our discussions with senior EU representatives of a number of those countries suggest agreement on anything other than a very narrow scope financial transaction tax is likely to be difficult and even that may take considerable time.”

IG also said pretax profit for the six months to the end of November fell more than a fifth to 81.1 million pounds while earnings per share fell to 16p from 20.7p.

The London-based firm, however, said its latest results were being compared with a particularly busy previous year which reflected the escalating euro zone crisis.

$1 = 0.6224 British pounds Editing by David Holmes

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