IG Group - Britain's biggest spread-betting company - reported a 51 per cent rise in core profit to £52.6 million yesterday and said a return of cash to shareholders was becoming more likely.
The company, which allows investors to speculate on currencies, interest rates, shares and indices, had said in an earlier trading update it expected earnings before interest, tax, depreciation and amortisation (EBITDA) in the year to May 31 to come in above £50 million.
IG, which has grown revenues at a compound rate of about 40 per cent over the past eight years, said turnover rose by 44 per cent to £89.4 million and that current trading was strong. Shares in IG were up 3.7 per cent at 20912 pence in early trade, the second-best performer in the UK mid-cap index. Numis Securities described the results as "stunning", particularly with average revenue per client rising to a new high of £2,715.
"Client acquisition appears to have accelerated as the year progressed and seems to have maintained momentum. This bodes well for the coming year," Numis said in a research note.
I G said its financial spread-betting business had its most successful year. Revenue at the unit, which accounts for 61 per cent of revenue, jumped 47 per cent to £54.8 million. The company said equity market volatility was subdued for most of the year but jumped dramatically in the last two weeks of May.
However, IG said it had no loss-making days and that volatility in its own daily revenue remained low.
"The company's shares have pulled back with the rest of the betting stocks recently, despite not taking bets from the US, and we think this is unjustified given the growth prospects of the company," said Bridgewell Securities analyst Geoff Miller.
Mr Miller, who had forecast EBITDA of £50.9 million said IG's multiple of 15 times current year earnings "may not look cheap, but these results demonstrate the growth prospects and suggest that it is a price worth paying".
IG's chief executive designate, Tim Howkins, said any cash return would depend on the pace of industry consolidation, but said such a move was on the cards because otherwise the company would amass an "embarrassing pile" of cash.
"Clearly the business throws off a lot of profit and a lot of cash. At the year end we had £45 million of our own funds and a £30 million regulatory capital excess, which is actually the more relevant number. Clearly both numbers will continue to rise quite dramatically," Mr Howkins said.
The company has proposed a maiden final dividend of 4p per share, bringing the full-year payout to 5.5p. The dividend is now twice covered - as set out in the prospectus.
Mr Howkins said any move to return cash would depend partly on the level of takeover activity in the industry.
"There is still the faint possibility of some sort of industry consolidation. Some of the competitors are beginning to look a bit tired and stale," he said.