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Business


Volatility and IT investment increase client revenues


A choppy economic outlook isn’t usually good news, but it is for financial spread betting companies such as IG Group.


INTERIMS S


pread betting firm IG Group Holdings has posted a 27.9 per cent increase in


profit before tax to £103.2m for the six month period ended 30 November 2011, with net trading revenue up by a similar percentage to £195.5m.


This revenue growth was driven by a 15 per cent increase in the number of clients trading in the period, coupled with an 11 per cent increase in average revenue per client. Chief executive Tim Howkins explained: “In part this improvement in revenue per client is attributable to market volatility seen in the period, but in part I believe it is thanks to the significant investment we have made, and will con- tinue to make, in IT.” The majority of the company’s financial spread betting occurs in the UK, and the product saw a 35 per cent increase in net trading revenue for the six month period to £71.0m. Binary betting increased 17 per cent to £8.4m and the firm’s contracts for differ- ence supplied the bulk of revenues, contributing £116.1m - up 24 per cent. Howkins added: “Market conditions during the period were mixed: market volatility and hence client activity were relatively subdued in June and July; August saw a period of extraordinary market volatility, which resulted in highly elevated levels of client activity; whilst after August, volatility remained elevated but as clients pro- gressively became more accustomed to these market conditions their activity reduced to more normal levels.”


The firm said it is contin- uing to ‘invest heavily’ in IT and marketing. Howkins commented: “The last six months have seen signifi- cant payback from previ- ous investment in IT. We now have a mobile app for all the main mobile plat- forms - iPhone, iPad, Android, Windows Phone 7, and Blackberry - and their international roll out is well underway. By the end of the


Arena Leisure has finally agreed terms with Reubens over its sale, but the question is


whether the OFT will feel the need to step in.


CONSOLIDATION T


TIM HOWKINS: ‘SIGNIFICANT PAYBACK FROM PREVIOUS INVESTMENT IN IT’


ANALYSIS


The impressive interim results are only for IG Group’s continuing operations and therefore excludes IG’s sport spread betting business Extrabet, which it closed on 19 July 2011. However the figures do include the £443,000 it received from its revenue share agreement with Spreadex. The deal, agreed on 8 June 2011, saw IG divest the majority of its client list relating to group’s sport spread betting and fixed odds betting business to Spreadex in exchange for six half-yearly payments based on the revenue generated from the list. So while on the surface IG is no longer involved in sports spread betting, it does in fact retain a small interest in the sector, until 2014 at least.


period these apps accounted for 16 per cent of all client-initiated deals and this percentage, which is more than double what it was a year earlier, contin- ues to grow steadily.” IG Group has also devel- oped its own charts package, reducing the cost of its previous third-party solution and allowing much closer integration between dealing and charts. “The benefit we derive from these enhancements to our client offering is readily apparent,” Howkins explained. “A significant proportion of our IT effort is devoted to other projects which, while less tangible, are at least equally impor- tant. For example, we have progressively increased the level of automation so that the vast majority of client transactions are executed with no human interven- tion, within a tenth of a second and always either


42 BettingBusinessInteractive • FEBRUARY 2012


at the requested price or at a better price for the client. This gives us the ability to cope with extreme peaks in load.


“At its peak in August our platform was handling 296 orders a second. The speed at which we are able to handle these transactions means that we are able to offer our clients an excep- tional dealing experience even in chaotic markets. It also ensures that we are increasingly efficient at converting transaction volume into revenue.” Howkins said that all of the IT developments have contributed to the company’s improved revenue per client and, over the longer term, he believes they should also help with client retention. He added: “Ongoing invest- ment in IT should produce further improvements and position us for continued profitable growth.”


he Office of Fair Trading (OFT) is con- sidering whether the purchase of racecourse operator Arena Leisure by the Reuben Brothers through their Aldersgate firm would create a situa- tion that it would need to take a look at more closely. Given that the Reubens already own Northern Racing, the OFT said it is investigating whether this deal would create ‘a rele- vant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the cre- ation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom’.


It would be a blow if the


Reubens close in on £167m Arena Leisure


DONCASTER IS ONE OF ARENA’S RACECOURSES


OFT did step in as the two firms had finally come to an arrangement after months of flirting. Aldersgate has offered shareholders 44.25 pence per share, valuing Arena at £167m, and 37 per cent higher than the closing price of 32.3 pence per Arena Share on 22 June 2011 when the whole process kicked off.


The cash consideration payable under the terms of the acquisition will be funded using Aldersgate’s existing cash resources and


the Arena directors intend unanimously to recommend the deal to shareholders. The scheme will be put to Arena Shareholders at the Court Meeting and the General Meeting which are expected to be held by 5 March 2012. Subject to the satisfaction, or where rele- vant, waiver of all relevant conditions, the scheme is expected to become effec- tive by 30 March 2012. Mark Elliott, chief execu- tive of Arena, said: “On 23 June 2011, Arena


Record revenues from 32Red


MARKET UPDATE O


nline casino 32Red has reported record rev- enues for last year, up 48 per cent to £25.0m. In a trading update ahead of full year results the company said: “This growth is partic- ularly encouraging in light of the strong 2010 compara- tive figures that were, in turn, 33 per cent ahead of 2009. Consequently, 32Red’s 2011 revenues are 96 per cent ahead of those recorded in 2009.” The firm’s performance has been dominated by the growth in the 32Red Casino which has been driven by significant new player recruitment throughout the year, particularly during the last quarter.


Excluding acquisitions, a total of 27,648 new deposit- ing players were recruited in 2011, up 42 per cent on 2010 at an average cost per acquisition of £143 (2010: £133). This accelerated new player recruitment has resulted in total active depositing players increas- ing by 39 per cent to 39,687 during the year, with average yield per depositing


tions for 2011.”


ED WARE: ‘2011 HAS BEEN ANOTHER YEAR OF PROGRESS’


active player up to £550 (2010: £519).


The firm added: “Despite the further increased levels of market- ing spend throughout the second half of the year, the continued strengthening of revenue growth will result in 32Red Plc delivering profits comfortably ahead of current market expecta-


32Red said that trading in the first month of 2012 had been strong across the product range with gross win for the first twenty-four days in January up 67 per cent on the corresponding period in 2011. Ed Ware, CEO of 32Red, said: “2011 has been another year of progress and the sustained top line growth is encouragement to continue to invest in market- ing the 32Red brand. Mean- while, we will take measures to ensure that the level of service and support we provide to our players remains our point of differ- ence and bolsters retention. “Although we recognise the potential for uncertainty in the economy at home and abroad, we look forward to further progress during 2012. We also believe Italy represents a good opportu- nity for 32Red to establish itself as a leading remote gaming operator in a new market and we maintain a watching brief on other reg- ulatory developments around the world.”


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