The spread betting firm announced the preliminary results for the year ended 31 May 2006, showing a 44% increase in revenues over a year earlier up to £89.4 million and a 51% rise in profit before tax up to £52.6 million.
In particular, the financial spread betting business had its most successful year. Revenue was up 47% to £54.8m, accounting for 61% of group revenues. While the sport spread betting business achieved growth of 25% with revenues of £7.6m, 8.5% of group revenues.
The smaller sport fixed odds business doubled its revenues up to £1.5m, accounting for 2% of group revenues. The sport fixed odds business encompasses sports binaries, Extrabet and market making into exchanges (Betdaq and Betfair). Extrabet and market making into exchanges were both new ventures intended to capitalize on the firm\’s existing ability to make prices in order to provide incremental revenues from the existing infrastructure of the sports department.
Extrabet has received some very favourable coverage in the sporting press and client recruitment has been good: to date the sports fixed odds website has recruited almost 9,000 clients of whom about two thirds have placed a bet. Transaction sizes are significantly smaller than in the other group businesses and the clients are significantly less “sticky”, so that towards the end of the World Cup, while Extrabet recruited about 8,000 clients only about 10% of these clients were logging-on on a daily basis.
“The strong trading that we have seen in recent months continued after the year end. June was another very good month for our financial business, with revenue significantly higher than in June 2005. The World Cup is the most important event in the four-year sporting calendar and helped our sports department produce its best ever month in June. Perhaps more importantly the World Cup proved a good client recruitment opportunity, with our sport spread betting business recruiting more clients than it did during either Euro 2004 or the 2002 World Cup,” said Tim Howkins, Finance Director and Chief Executive designate, commenting on current trading and outlook.
“IG has again delivered excellent growth. This is a continuation of a long track record and we have achieved a compound annual revenue growth rate in revenue of 40% over the past eight years. We have spent the last few years expanding our product range, enhancing our technology and developing IG into a multi-national operation, and I believe we are well positioned for further growth,” added Howkins.
“2006 has been another highly successful year for the business. The significant increase in revenue and profits has resulted in further strong cash generation by the group and the board has recommended a maiden final dividend of 4p per share, making a total distribution for the year of 5.5p per share,” said Jonathan Davie, Chairman of IG Group.
UPDATE: Speaking to AFX News, Tim Howkins said IG Group may be in a position to take over one of its smaller rivals a year from now, but that for the moment all possible targets are too expensive.
“There\’s some possibility of it happening in a year, but it won\’t happen in the next month,” he said. “We have informal chats with the competition every now and then, but there isn\’t a meeting of minds at the moment. There isn\’t a deal available at the right price.”
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