Overview: betting game

They think it’s all over, but it is only just starting for the finance
director at spread-betting team IG Group. Tim Howkins is set to be elevated into
the chief executive’s slot following the announcement that the current holder of
the title, Nat Le Roux, will be stepping down.

What’s happened?

Spread-betting has taken off big time, with companies such as IG Group
benefiting from an apparently insatiable appetite for what is, essentially, a
sophisticated form of online gambling.

The original founder was Stuart Wheeler, famed for making a rather hefty
donation to the Tories, proof that the man was a born gambler. IG floated in
2000, then was taken private in a management buyout in 2003. It re-floated in
2005, and is due to announce its second full-year results on Monday 24 July.

What’s going to happen?

Le Roux led the buyout, but has now handed over the reins to Howkins, who
joined the group in 1999 and was part of the MBO team. And he takes over at a
very interesting time. Punters were expected to have placed £1bn in bets on the
World Cup, and IG Group will have hoped to grab a slice of the action – as well
as betting on share prices, foreign exchange and commodities, IG will take
positions in sporting and political events.

So Howkins should have good news to report. Analysts are putting money on a
profit spread of between £45m and £50m, which would be up around 40% on the
previous year. Its sports business is expected to have grown by 30%, while its
‘contracts for difference’ business should turn in a growth rate of 60%.

Howkins will also report on the progress of several new initiatives including
extrabet.com, an innovative sports fixed-odds service that allows bets to be
placed right up to the final whistle. And then there is its binary betting
service, which allows you to close out a bet before the sporting action has
finished.

But Howkins will need to keep on his toes – recent stock market falls, while
benefiting his business through added volatility, have also, ironically, made IG
Group vulnerable to a takeover bid. Australian bank Macquaire is rumoured to be
considering a punt on the spread-better, though a healthy set of results could
push IG’s price up and out of its reach.

How it works

Spread-betters gamble on whether a share, index or currency will rise or fall
over a certain period.For instance,a punter bets £2 that BP at 540p will rise by
August.He collects £2 for every penny it is higher by then or loses £2 for every
penny it falls.He can close the bet and realise a profit or loss before the end
of the contract.The more right they are,the more they make.The more wrong they
are,the more they lose.