By Clare Hutchison
LONDON (Reuters) - Shares in online trading provider IG Group (L:IGG) fell more than 4 percent on Wednesday after it reported a drop in first-quarter revenue which it blamed on quiet financial markets.
The British company saw particularly low trading volumes in foreign exchange, where activity has been subdued over the past year by a combination of low interest rates across the developed world and an uncertain regulatory.
"The first three months of the company's year were particularly quiet in the financial markets, with volumes and volatility close to historic lows and the continuation of recent weakness in foreign exchange activity," said IG, which also provides trading in shares and financial spread-betting.
Revenue in the three months to Aug. 31 fell 9 percent to 85.6 million pounds ($139.3 million) compared with a year earlier, the company said.
It added that much of the year-on-year difference occurred in June, as the same month last year saw unusually strong trading volumes in response to heavy falls in equity markets on the back of U.S. monetary stimulus tapering fears and concerns over the Chinese economy.
IG's shares were down 4.6 percent at 575.5 pence at 1028 GMT (11:28 a.m. BST), making the company one of the biggest fallers on the FTSE index of small and mid-cap firms.
The company did not disclose its profit for the first quarter in the update. It will next publish profit figures in January when it reports its half-year results.
IG shares have fallen 3 percent so far this year, reflecting the market's caution over the short-term trading outlook, Citi analyst Hugo Mills said.
Mills, along with a number of other analysts, is expecting downgrades to consensus forecasts. The current estimate for full-year revenue is 391.4 million pounds, Thomson Reuters data shows, ahead of the 370.4 million pounds reported last year.
EXPANSION
IG Chief Executive Tim Howkins told Reuters the company had no plans to revise its full-year guidance. The company has not yet published that figure.
"I don't think it (first-quarter results) really changes our view of the year, but clearly things need to accelerate a bit to get to some of the original forecasts we had," he said.
Howkins declined to say when performance might improve, but said the first two weeks of September had been busier, with another interest rate cut in Europe and Thursday's Scottish independence referendum providing opportunities to trade.
First-quarter revenue was down across all of IG's markets, with Australia seeing the biggest decline at 10 percent. In its home market Britain, a 3 percent drop in sales was partially offset by a 5 percent rise in average revenue per client.
IG has been trying to boost that measure by appealing to clients who produce a greater share of revenue. It has extended trading hours for U.S. stocks and raised minimum deposits.
It has also been diversifying, in attempt to provide a cushion against lower trading volumes, by expanding overseas and adding new services.
This month it received a licence for a new office in Switzerland and Howkins said it could start trading there within the next week or two. It has also launched a stock-broking service in Britain and Ireland.
(Editing by Jason Neely and Pravin Char)