IG Group FY 2014 Investor Presentation

5/22/2018 IG Group FY 2014 Investor Presentation

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IG | FY14 RESULTS PRESENTATION | P1

RESULTS PRESENTATION

Year ended 31 May 2014


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DISCLAIMER

This presentation, prepared by IG Group Holdings plc (the Company),may contain forward-looking statements about

the Company. Forward-looking statements involve uncertainties because they relate to events, and depend on

circumstances, that will, or may, occur in the future. If the assumptions on which the Company bases its forward-lookingstatements change, actual results may differ from those expressed in such statements. Forward-looking statements

speak only as of the date they are made and the Company undertakes no obligation to update these forward-looking

statements. Nothing in this presentation should be construed as a profit forecast.

The financial tables contained herein may contain numbers which have been subject to rounding adjustments, and which

therefore differ from the equivalent numbers contained in the Financial Statements. Unless otherwise stated, all numbers

exclude the discontinued Sport business.

FY14 relates to the financial year ending 31stMay 2014.

Market share data has been provided by Investment Trends Pty Limited (website: www.investmenttrends.co.uk ). Contact:

Pawel Rokicki (email: [email protected]). Unless stated, market share data is sourced from the following

current reports:

Investment Trends August 2013 Australia CFD Report

Investment Trends April 2014 France CFD/FX Report

Investment Trends May 2014 Germany CFD/FX Report

Investment Trends November 2013 Singapore CFD/FX Report Investment Trends December 2013 UK Leveraged Trading Report

Investment Trends December 2013 UK Online Broking Report
http://www.investmenttrends.co.uk/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.investmenttrends.co.uk/http://www.investmenttrends.co.uk/http://www.investmenttrends.co.uk/http://www.investmenttrends.co.uk/http://www.investmenttrends.co.uk/http://www.investmenttrends.co.uk/http://www.investmenttrends.co.uk/


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FY14 SUMMARYRecord results in subdued markets

Net trading revenue 370.4m, up 2.4%

PBT 194.7m, up 1.3%

Diluted EPS 40.18p, up 3.6%

160.6m own funds generated fromoperations, up 4.1%

Final dividend of 22.40p; Full year dividend of28.15p, up 21.1%

Enhanced ordinary dividend policy

From 60% to 70% payout

1. Results pre FY11 include the discontinued Sport

operation

FY14 RESULTS 5 YEAR REVENUE, PBT1 AND DIVIDEND


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INCOME STATEMENT

Record net trading revenue, ahead by 8.5m

Active clients down 7.3%

Average revenue per client up 10.4%

Net operating income ahead by 6.3m

Lower betting duty more than offset by

lower interest on client moneyDrop in Australian interest rates

Other income mainly from revenue share

on disposed Sport business

Revenue share now complete

Operating costs 3.3% higher (5.4m)

Higher variable remuneration after weak

2013

1. Net trading revenue excludes interest on client funds

and is presented net of introducing partner

commissions

2. PBT as a percentage of net trading revenue

PBT margin strong in a year of slow revenue growth

YEAR ON YEAR COMPARISON

FY13 Yr on Yr

H1 H2 Full Year Full Year

m m m m

Net trading revenue1 182.7 187.7 370.4 361.9 2.4%

Total interest on client money 2.8 2.7 5.5 8.2

Betting duty & FTT (1.3) (2.6) (3.9) (5.2)

Other operating income 1.1 1.1 2.2 3.0

Net operating income 185.3 188.9 374.2 367.9 1.7%

Operating costs (84.9) (88.9) (169.2) (163.8) 3.3%

Depreciation and amortisation (5.1) (4.6) (9.7) (12.2)

Net interest (0.2) (0.3) (0.5) 0.3

PBT 95.1 95.1 194.7 192.2 1.3%

Margin2 52.1% 50.7% 52.6% 53.1%

Diluted EPS 40.18p 38.80p 3.6%

Dividend per share 28.15p 23.25p 21.1%

FY14


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REVENUE BRIDGEDrivers of revenue change reflect the quiet markets

REVENUE BRIDGE1

1. Existing clients not trading are clients who traded inthe previous half year but not in the current halfyear. New clients are clients trading for the first timein the current half year.

171.3

(12.7)

6.0

18.4 (12.9)

(18.1)

5.1

15.7 (1.1) (14.0)

5.1

15.0

140

160

180

200

220

Revenue(m)

192.9192.9

187.7

12.2

169.0 182.7171.3


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REVENUE AND ACTIVE CLIENTS1BY COUNTRY

DRIVERS OF REVENUERegional performance influenced by asset mix

REVENUE AND ACTIVE CLIENTS BY MONTH

1. Unique clients trading in each year2. Year on year % calculated off underlying unrounded

numbers

FY14 FY13 Yr on Yr % FY14 FY13 Yr on Yr %

UK (inc Ireland) 192.7 186.5 3.3% 59.3 68.3 (13.2%)

Australia 52.2 56.3 (7.3%) 18.0 19.0 (5.1%)

Germany 23.0 19.2 19.8% 9.4 8.5 10.9%

France 22.2 19.3 15.0% 5.7 5.3 5.8%

Iberia 15.7 14.3 9.4% 4.4 4.8 (7.8%)

Ita ly 13.3 12.7 4.3% 3.6 3.8 (4.7%)

Sweden & Norwa y 4.6 4.1 10.6% 1.8 1.5 15.9%

Netherlands 3.4 1.4 150.1% 1.1 0.7 66.9%

Europe 82.1 71.0 15.6% 26.0 24.7 5.6%

Singa pore 23.0 25.6 (10.3%) 6.8 7.2 (6.2%)

Ja pa n 12.2 15.9 (23.4%) 7.8 10.8 (27.5%)

South Africa 5.1 4.6 12.2% 2.5 2.5 2.6%

USA 3.1 2.0 54.6% 5.7 3.7 53.6%

ROW (inc Japan) 43.4 48.1 (9.8%) 22.8 24.2 (5.6%)

Total 370.4 361.9 2.4% 126.1 136.1 (7.3%)

Revenue (m) Clients (000s)


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REVENUE COMPOSITIONSupport provided by diversity in asset class

REVENUE BY PRODUCT FY14 REVENUE COMPOSITION1

1. FY13 in brackets

Significant drop off in Forex revenue

Volatility at historic lows

Shift towards Equity indices and

Shares Year-on-year weakness in Forex


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DAILY REVENUE TREND

DAILY REVENUE VOLATILITY TREND FY14 REVENUE DISTRIBUTION

IGs risk management has delivered consistent results


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Costs continue to be well controlled


Costs excluding variable

remuneration up 2.0%

Positive impact in interim FSCS levy

Significant legacy debt recoveries

have ended

Provision in FY14


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NET OWN CASH AVAILABLEStrong cash delivery enables higher dividend and growth

NET OWN CASH AVAILABLE1 APPLICATION OF OWN CASH AVAILABLE1

1. Refer to the RNS for the calculation of Own funds

FY14 H1 FY14 H2 FY14 FY13

m m m m

Own funds generated from operations 79.1 81.5 160.6 154.3

Movement in working capital (11.3) 8.0 (3.3) (12.0)

Dividend (63.8) (21.0) (84.8) (81.6)

Other (including capex) (3.0) (9.1) (12.1) (19.1)

Increase in own funds 1.0 59.4 60.4 41.6

Own funds (opening) 429.3 426.5 429.3 388.2

Exchange losses on own funds (3.8) 1.4 (2.4) (0.5)

Own funds (closing) 426.5 487.3 487.3 429.3

Broker margin requirement (273.4) (285.1) (285.1) (245.7)

Net own cash available 153.1 202.2 202.2 183.6

FY14

m

Net own cash available 202.2

O verseas regul atory and worki ng c api ta l (28.7 )

Funds required for segregation (20.4)

Own cash available for liquidity 153.1

of which:

Held a s l iquid a ss ets buffer 82.5

Dividend due 81.8

Additional s ources of liquidity:

Title transfer funds 21.0

Committed facil ity 200.0


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REGULATIONNo significant recent developments

Europe

FTT: discussions between 11 member states continue slowly

EMIR: addressing additional trade reporting requirements

MiFID II: detail still to be clarified, but assume no significant riskmonitoring carefully

Japan New regulations for binaries in force from 1 December 2013

Singapore

Continue to anticipate FX leverage reductions

E-learning module approved by the regulator to assist new client flow

UPDATE


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SUMMARYSolid financial performance in subdued markets

Record revenue with well controlled costs

Another year of strong cash generation

Confidence in future cash flows enables increased dividend payout

Solid balance sheet

Continued investment for growth

FINANCIAL REVIEW


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THANK YOU

BUSINESS UPDATE


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THE YEAR IN FOCUSGood progress on strategic priorities

Increase in revenue, profit and cash generation

Good delivery on growth initiatives

Stockbroking launch on track for September 2014

Swiss office opened, with the licence approval anticipated

Progressing discussions with the regulator in Dubai

UPDATE


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CLIENT FOCUSContinued focus on active traders

ACTIVE NEW CLIENT VALUE BY MONTHSTEP DOWN IN CLIENT NUMBERS

One-off step down in client numbers from

management actions (Q4 FY13/Q1 FY14)

Continue to target growth in client numbers


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GEOGRAPHIC EXPANSIONOngoing targeted geographic roll-out

Switzerland licence imminent

Favourable market for IGs products

High average income

Limited competition

Office fully functional and staffed

Marketing and PR launch planned for

September

SWITZERLAND DUBAI

Regulatory application in progress

Anticipate office opening in 2015

High average income

Specific local requirements to be

addressed (e.g. language, business days)

Likely to entail acceptable restrictions on

trading leverage


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NADEXContinuing to make progress

PERFORMANCE TREND KEY DEVELOPMENTS

Full year revenue of 3.1m, up 1.1m on

prior year

One 3rdparty market maker adding liquidity

since April-14

Tightening of spreads

Full suite of mobile Apps in development


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STOCKBROKINGDelivery of key strategic initiative

UK MARKET OPPORTUNITY1 STOCKBROKING AT IG

Developed for active retail traders

Real time multi-exchange pricing

Market-leading technology

Full suite of mobile platforms

Use of share portfolio as collateral

Advantageous international shares offering

UK and Ireland planned to launch in

September 2014

First phase of international rollout in 2015

93,000 SB &CFD traders

55,000 (59%) of SB & CFD

Traders also trade shares online

Trade Daily:

6,000

Trade Weekly:

44,000

Trade Less Frequently:

700,000

750,000 online stockbrokingclients in the UK

IG potential market

1. Source: Investment Trends UK Online Broking

Report December 2013


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MOBILE DEVELOPMENTContinuing transition to mobile

CURRENT USE OF MOBILE AT IG DEVELOPMENTS

Mobile use continues to grow

Significant investment over the next 2 years

Continuing to develop existing Apps for

experienced traders

Priority to address early client journey onmobile

Developing Apps for education,

recruitment and conversion

Increasing marketing to drive downloads of

new apps


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CONCLUSIONContinuing to invest for future growth

Delivered record revenue and profit

Year of investment in growth initiatives

Stockbroking

International expansion

Switzerland Dubai

Mobile investment

Continue to develop existing apps for experienced traders

New apps for education, recruitment and conversion

Enhanced dividend payout ratio

IGs40thanniversary in November

BUSINESS UPDATE


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THANK YOU

APPENDICES


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Appendix 1:Net trading revenue per client

HALF YEAR ANALYSIS1

1. Unique clients trading in a each period with revenue

stated as Net Trading Revenue

Revenue (m) H1 FY12 H2 FY12 FY12 H1 FY13 H2 FY13 FY13 H1 FY14 H2 FY14 FY14

UK (inc Ireland) 102.1 89.7 191.8 86.9 99.5 186.5 93.4 99.3 192.7

Australia 32.7 25.2 58.0 28.2 28.1 56.3 27.0 25.2 52.2

Europe 37.8 34.5 72.2 32.1 39.0 71.0 40.2 41.9 82.1

ROW 22.8 22.0 44.9 21.8 26.3 48.1 22.1 21.3 43.4

Total 195.5 171.3 366.8 169.0 192.9 361.9 182.7 187.7 370.4

Clients H1 FY12 H2 FY12 FY12 H1 FY13 H2 FY13 FY13 H1 FY14 H2 FY14 FY14

UK (inc Ireland) 59,182 53,489 74,897 50,795 52,079 68,281 46,160 45,376 59,275Australia 16,814 14,774 20,641 14,829 15,029 18,970 14,405 13,800 17,998

Europe 17,210 18,035 23,208 18,720 19,807 24,650 19,744 20,863 26,024

ROW 19,529 18,110 24,558 17,858 19,115 24,162 17,341 17,647 22,811

Total 112,735 104,408 143,304 102,202 106,030 136,063 97,650 97,686 126,108

Revenue per Client () H1 FY12 H2 FY12 FY12 H1 FY13 H2 FY13 FY13 H1 FY14 H2 FY14 FY14

UK (inc Ireland) 1,726 1,676 2,561 1,711 1,911 2,731 2,024 2,188 3,251

Australia 1,947 1,707 2,808 1,900 1,868 2,965 1,872 1,826 2,899

Europe 2,194 1,910 3,112 1,712 1,969 2,882 2,039 2,007 3,156

ROW 1,170 1,215 1,826 1,222 1,375 1,991 1,273 1,209 1,903Total 1,734 1,641 2,560 1,653 1,819 2,660 1,871 1,921 2,937


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Appendix 2:Client trading activity

CLIENT RETENTION RATE TREND

Total c lients (inc l Japan) FY12 FY13 FY14

New accounts 67,593 55,889 54,957

First trades (in period) 48,029 37,914 33,709

Implied conversion rate (%) 71% 68% 61%

Total active clients (in period) 143,304 136,063 126,108

Clients trading from prior period 95,275 98,149 92,399

Clients trading from prior period (%) 72% 68% 68%

H1 H2 H1 H2 H1 H2

New accounts 36,557 31,036 27,043 28,846 26,871 28,086

First trades (in period) 26,034 21,995 18,671 19,243 16,423 17,286

Implied conversion rate (%) 71% 71% 69% 67% 61% 62%

Total active clients (in period) 111,537 103,066 102,328 106,030 97,592 97,686

Clients trading from prior period 85,503 81,071 83,657 86,787 81,169 80,400

Clients t rading from prior period (%) 84% 73% 81% 85% 77% 82%

FY12 FY13 FY14


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Appendix 3:Broker margin requirement

BROKER REQUIREMENT (m)

FY 11 H2 FY 12 H1 FY 12 H2 FY 13 H1 FY 13 H2 FY 14 H1 FY 14 H2

217m 184m 196m 243m 246m 273m 285m

FY13 Peak 298m FY14 Peak 290m


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Appendix 4:Pillar 1 regulatory capital


(1)The new CRD IV requirements which came into force on 1 January 2014 require deferred

tax assets relating to future profitability to be deducted from Tier 1 Capital to determine capital

resources for the Group.

FY14 FY13

m m

Regulatory capital

Total Tier 1 570.8 508.4

Intangible assets (122.7) (120.5)

Investment in own shares (1.1) (1.5)

Deferred tax asset (5.7) 0.0

Total capital resources (a) 441.3 386.4

Capital resources requirement - Pillar 1 (b) 115.4 115.1

(a-b) 325.9 271.3


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Appendix 5:Market share

1. Share of primary accounts, by number, as stated by

Investment Trends reports

PRIMARY ACCOUNT MARKET SHARE COMPARISON TO BIGGEST COMPETITOR


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THANK YOU

END

IG Group FY 2014 Investor Presentation

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