IG Group hurt by Japanese writedown

Marion Dakers
SPREAD-BETTING company IG Group announced a half-year loss yesterday, blaming weak trading activity and a £143m write-down on its Japanese foreign exchange business FXO.

Chief executive Tom Howkins said much of the stall in sales was down to a three-year low in market volatility towards the end of 2010.

“We’ve got lots of good quality clients with lots of money in their accounts – it’s simply that for part of the period they were trading much less because the markets were just plain dull,” he told analysts.

“It was the worst sort of market for us, but we did see an improvement in November, which carried on into December. The long-term fundamentals of the business remain very strong.”

Net trading rose nine per cent to £156.7m, mostly due to strong growth at the start of the period.

The firm said its Japanese business was suffering from increasingly strict regulations, which limited investors to trade with leverage of 50 times in August and will restrict them to 25 times in the coming year.

IG Group said it has booked a £143.1m write-down thanks to impaired goodwill and customer relationships in its Japanese business, but said the charge would not alter group cash flow or capital position.

The charge wiped out IG’s profits and led to a £69.1m pre-tax loss for the six months to the end of November. The company raised its interim dividend by five per cent, however, on the back of underlying earnings per share.

Analysts at Panmure Gordon said that “while the write-down is significant, we expect it to finally draw a line under an issue which has weighed on the investment case for two years”.

IG shares lost 7.2 per cent to close at 481p yesterday.