FT Alphaville has lost count (almost) of the spread betting companies which have told us business is booming in spite, or in some cases because of, the credit crunch. It’s all about the volatility you see. The punters love it.
Well, no more. It looks like Le Crunch is finally starting to catch up with the industry and its customers.
Witness, IG Group, the granddady of the sector. It shares lost almost a third of their value on Tuesday. This follows news of slowing revenues in its two biggest markets – UK and Australia – and also in Japan, where IG recently acquired an online foreign exchange trading company called FXOnline.
From Tuesday’s statement. (emphasis ours).
The Group’s clients have become increasingly accustomed to the higher levels of volatility that have been a feature of equity markets since the summer of 2007. As a consequence the uplift of revenue that the Group typically experiences on a higher volatility day is becoming progressively less marked and this made growth against very strong comparatives challenging in the Group’s two most established businesses in the UK and Australia. The Group’s UK financial business achieved revenue of approximately £31.5m, compared to £34.0m in the corresponding period in the previous financial year. The Group’s Australian business achieved revenue of £6.4m, compared to £6.9m in the corresponding quarter of the previous year.
The Group’s Japanese business, FXOnline, achieved revenue of approximately £11m in the quarter. Revenue for the final month of the quarter was disappointing and there appear to be a number of contributory factors. The business is sensitive to the level of volatility of the Yen and this was lower in February than it had been in previous months. In the run up to the launch of its PureDeal platform marketing activity was reduced. Consumer confidence has deteriorated rapidly in Japan in the face of challenging economic conditions and this appears to have had a greater impact on the Japanese client base than is the case elsewhere in the Group.
But for how much longer, we wonder. Will the UK and Australia go the same way as Japan?
IG will no doubt point to the fact that it is still managing to sign up lots of new customers, – almost 19,000 in the past quarter alone. But as a sector, it could be that spread-betting has finally gone ex-supergrowth.
Related link:
IG interim management statement – RNS