UPDATE 2-IG Group shares jump as it increases investor payout

Tue Jul 22, 2014 4:43am EDT

Related Topics

* Lifts dividend payout ratio from 60 percent to 70 percent

* Shares rise 6.9 percent to 614.5 pence at 0842 GMT

* Full year revenue rises 2.4 percent (Recasts, adds share price, CEO comments, analyst comment)

LONDON, July 22 (Reuters) - Shares in IG Group, a provider of financial spread betting and contracts for difference, rose almost 7 percent on Tuesday after the company said it would pay out more of its earnings to shareholders.

IG, which offers online trading in shares, indexes and foreign exchange, said it would lift its dividend payout ratio - the percentage of earnings paid to shareholders in dividends - from 60 percent to around 70 percent.

The company said it planned to pay a final dividend of 22.40 pence per share, taking the full-year dividend to 28.15 pence per share, a 21 percent increase on the previous year.

Chief Executive Tim Howkins, speaking after the firm reported a 2.4 percent rise in full-year revenue, said the move reflected confidence in the cash-generating nature of the business.

Shares in the group were up 6.9 percent at 614.5 pence at 0842 GMT and were the highest gainers on the FTSE index of small and mid-cap companies.

The company earlier reported full-year revenue of 370.4 million pounds ($632.6 million), slightly below the 373.8 million pounds analysts had expected, according to Thomson Reuters data, but 2.4 percent ahead of a year earlier.

Profit before tax was 1.3 percent higher at 194.7 million pounds.

Citi analyst Hugo Mills said growth was driven by an increase in the revenue it earned per client, which rose by 19 percent in Britain and Ireland and 10 percent in Europe.

IG has been making efforts to appeal to more active clients who produce a greater share of revenue. It extended trading hours for U.S. stocks, raised minimum deposits and created a more personalised service for its most valuable clients.

The company said that despite relatively low volatility throughout most of the year and a particularly subdued year-end, when foreign exchange volatility fell to 25-year lows, it had taken in record levels of client money in the final quarter.

Chief Executive Tim Howkins said the same conditions have continued into the early part of IG's new financial year, but the firm expected to benefit from any future movement of monetary policy.

"Firstly we should see an increase in market volatility, which would drive greater levels of client activity; secondly, as we hold almost 1.4 billion pounds of cash and other interest-earning assets, interest income will rise. And thirdly, a greater level of consumer confidence tends to increase trading activity among current clients," he said.

The end of quantitative easing in the UK and United States could trigger some activity in the autumn, he added.

Howkins said in the coming year the company would be focused on longer term initiatives, including international expansion. Its application to operate in Switzerland is close to being approved and he expects to be up running in the country by September. IG is also in the process of applying to expand into Dubai, where it hopes to take advantage of the wealth in the region and build a foundation for a broad Arab-speaking customer base.

It said the stock broking service it has been piloting will launch in September in Britain and Ireland and be rolled out to some other markets in 2015.

Further plans include revamping and adding to its mobile platform, which brings in roughly 30 percent of its revenue, to better serve newcomers to trading by offering educational tools. ($1 = 0.5855 British Pounds) (Reporting by Clare Hutchison; editing by Louise Heavens and Jason Neely)

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