IG curbs costs as markets turn tame
British spread-betting company IG Group is reining in spending after a return of calm to financial markets pushed revenues 14 per cent lower in the first half of the year.
IG, one of the few beneficiaries of the volatility that hit markets at the height of the euro zone debt crisis last year, also warned today that the higher second half revenues it normally sees may not materialise if markets remained subdued.
"We are not expecting a dramatic movement unless markets get more interesting," chief executive Tim Howkins said.
Quantitative easing programmes to support economies on both sides of the Atlantic appear to be sucking volatility out of markets.
"There is a big wall of money and that absorbs market movements," Mr Howkins said.
IG, the world's largest financial spread betting company by revenues, is feeling the effect of greatly reduced activity on financial markets after the dramas of the euro zone crisis made August and September 2011 record months for revenues.
"Volatility is at a 10-year low. It's a bit quieter than a reversion to normal. Maybe it's the calm before the storm," said Mr Howkins, saying fresh problems in the euro zone or a failure to resolve the "Fiscal Cliff" in the United States could breathe fresh life into markets.
Spread betting allows small investors to speculate on the performance of financial markets by enabling them to bet on the price in the
future of either individual instruments or baskets of instruments. IG's rivals include unlisted firms City Index and CMC Markets.
Revenues at IG were £169 million in the six months ended November, in line with forecasts, and reflecting the problems of replicating last year's strong performance. IG's shares were down 3.1 per cent at 423.1 pence in a broadly flat UK midcap stock index.
IG has responded to the slowdown by cutting around 30-35 jobs from a global workforce of around 1,000 and holding down recruitment. It now aimed to keep its cost base flat with last year, rather than increasing it as previously planned, Mr Howkins said.