|Shares in spread betting firm IG Group fell sharply from £2.98 ($4.35) to £2.03 ($2.96) on Monday after the company announced a fall in profits. Shares in IG, which have performed well after floating in mid-2000, have now lost 70% of their value this year. |
IG profits fell from £15.7 million ($22.9 million) last year to a projected £12.7-13.7 million. ($18.5 – 20 million) this financial year. Analysts had predicted an average of £16.9 million ($24.6 million) pre-tax profits for this year.
IG said that a decision in March to lay off a lower proportion of financial bets had backfired, and the decision coincided with customers winning a greater proportion of bets than usual.
Spokesman Paul Austin said that no particular financial instrument had been the single cause of the lost profits, although the company lost £500,000-600,000 ($730,000 – 876,000) as its traditional method of hedging the Dow Jones Industrial Average unravelled.
”`We’ve been hedging the Dow against futures on the S&P 500 for 20 years but the indices have diverged in recent months and that’s gone against us,’ he said…”
Nat Le Roux, who took over as chief executive from the company’s poker-playing founder Stuart Wheeler, said IG had 'just happened to have a bad run'.
Charles Hall, analyst at WestLB Panmure, said it 'was slightly sod's law' that the hedging cut had occurred at the same time as clients winning above the norm. He said the share price fall reflected concerns about earnings volatility.