ig group fy 2014 investor presentation
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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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IG | FY14 RESULTS PRESENTATION | P2
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: pawel@investmenttrends.com.au). 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:pawel@investmenttrends.com.aumailto:pawel@investmenttrends.com.aumailto:pawel@investmenttrends.com.aumailto:pawel@investmenttrends.com.aumailto:pawel@investmenttrends.com.aumailto:pawel@investmenttrends.com.auhttp://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
YEAR ON YEAR COMPARISON
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
YEAR ON YEAR COMPARISON
(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
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