Ig Group Holdings Plc · LSE:IGG
Ig — H1 FY21 Earnings Presentation
53 slides from Ig's earnings presentation, Jan 20, 2021
Slide 1: Results presentation Half year ended 30 November 2020
Ed THINKING BIGGER fal a wi i Ww I - Go z fa < wi a Results presentation Half year ended 30 November 2020 IS Group
Slide 2: What we will discuss today
What we will discuss today IG Group CEO reflections June Felix H1 performance Charlie Rozes Strategic update June Felix Acquisition of tastytrade June Felix and Charlie Rozes Summary and outlook June Felix
Slide 3: CEO reflections
CEO reflections June Felix Chief Executive Officer IG Group
Slide 4: CEO reflections: Stronger and better positioned than ever before
CEO reflections Stronger and better positioned than ever before 1. Delivering on our goals * Growth in the Core Markets in excess of our target range and excellent progress in our Significant Opportunities * Step change in the size of our active client base with no reduction in quality ° Advancement
Slide 5: H1 performance
H1 performance Charlie Rozes Chief Financial Officer IG Group
Slide 6: H1 financial highlights
H1 financial highlights Record revenue and profit Net trading revenue OTC LEVERAGED ACTIVE CLIENTS £416.9m 167% 164,000 —— H1 FY20 PBT 110,100 #mseyZ £231.3m 129% a Basic EPS 50.7p #126% Interim dividend per share 12.96p Q1 Q2 Q3 Q4/Q1 Q2 Q3 Q4/Q1 Q2 Q3 Q4/Q1 Q2 Q3 Q4/Q1 Q2
Slide 7: Income Statement
Income Statement Revenue growth and cost management support record earnings (£m) H1 FY21 H1FY20 %Change Net trading revenue 416.9 249.9 67% * Operating expenses increase driven by higher Betting duty, interest, and other 35 43 revenue related costs, marketing and fixed operating income : . remunerat
Slide 8: Revenue by product
Revenue by product Strong growth across all products Revenue (£m) H1 FY21 H1FY20. %Change OTC Leveraged 389.1 2377 64% * 64% increase in OTC Leveraged revenue Stock Trading & Investments 15.5 44 254% - Significant increase in our active client base Exchange Traded Derivatives tas) 78 56% —* Stock Tr
Slide 9: OTC Leveraged revenue trends
OTC Leveraged revenue trends Sustained level of client activity Quarterly revenue declined from Q4 high due to reduction in revenue per client Q4 active client levels maintained throughout H1 Consistent revenue and active clients across Q1 and Q2 New client revenue of £56m in H1 FY21 — In line with
Slide 10: Revenue by market
Revenue by market High growth rates seen across all markets Revenue (£m) H1 FY21 H1FY20 %Change Core Markets - OTC Leveraged 325.1 205.5 58% + Allmarkets benefitting from the Stock Trading & Investments 155 44 254% significant growth in active clients Total Core Markets 340.6 209.9 62% * Core Market
Slide 11: Operating expenses
Operating expenses Increased to support client activity and demand 12 18 1.2 . Regulatory IT Other fees 8.3‘ Maintenance Fixed remuneration Total = £11.3m Investment and inflationary cost increase H1 FY20 47 Revenue 7.1 related costs Marketing Total = £11.8m Additional cost linked to increased clien
Slide 12: Investment
Investment Continuing to raise the bar on performance, capacity and resilience * Additional investment in H1 FY21 to support key technology and H1 FY21 HEADCOUNT INVESTMENT operational projects * Enabled progression on number of key projects to enhance resilience of our technology and infrastructure
Slide 13: Financial position
Financial position Highly cash generative, strengthened position in FY21 £m 30-Nov-20 Own funds generated from operations' 233.4 as % of operating profit 101% Own funds 907.3 Liquid assets 1,146.3 Available liquidity 360.1 Regulatory capital headroom 273.6 Conversion of operating profit into own fun
Slide 14: FY21 guidance
FY21 guidance Should we see further normalisation in financial market volatility or a stabilisation in the macro environment, we would anticipate some reduction in the level of client acquisition and trading activity Operating expenses to continue to grow on an underlying basis by 3% inflation, plus
Slide 15: Strategic update
Strategic update June Felix Chief Executive Officer IG Group
Slide 16: New client cohorts
New client cohorts Improved acquisition capability, retention in line Elevated new client demand captured efficiently RETENTION OF NEW CLIENT COHORTS — 89% increase in new OTC Leveraged clients 100% Improved marketing performance — 3x volume in organic traffic as nearest competitor — 3x improvement
Slide 17: Core Markets
mites SIG OPS Core Markets Our medium-term target: Revenue growth at around 3-5% pa over the medium term + Revenue of £340.6 million — 62% increase on H1 FY20 MONTHLY ACTIVE OTC LEVERAGED CLIENTS — 3% increase on H2 FY20 100,000 * Brand strength driving exceptional levels of client 80,000 acquisitio
Slide 18: Core Markets: Continuing to benefit from heightened demand
Core Markets Continuing to benefit from heightened demand PERFORMANCE HIGHLIGHTS’ Revenue * Demand levels remained high Active clients + Record performance in Australia and Singapore * IG Singapore #1 in market penetration? Revenue Activelclients STOCK TRADING & INVESTMENTS Revenue + Revenue £15.5m
Slide 19: People, culture, conduct & standing with regulators
• PEOPLE & • CULTURE • CONDUCT & – STANDING – WITH REGULATORS –
Slide 20: Significant Opportunities
NEW CORE CLIENTS MARKETS Significant Opportunities Excellent progress £1bn FX market + Revenue +117% 2m FX traders * Growing brand and awareness MARCETS & Increasing wealth and financial + Active clients +46% in Emerging Markets GREATER CHINA sophistication driving growth * Good progress in developm
Slide 21: Acquisition of tastytrade
Acquisition of tastytrade IG Group
Slide 22: Strategically compelling and financially attractive acquisition
Strategically compelling and financially attractive acquisition * Landmark transaction that opens up new drivers of growth in the world’s largest listed derivatives market * Expands IG’s trading products into listed options and futures, increasing the contribution from agency-only revenue streams ST
Slide 23: Key transaction terms
Key transaction terms PURCHASE PRICE IG to acquire 100% of tastytrade, Inc. for $1.0 billion (£734 million)' consisting of $300 million (£220 million) cash and 61.0 million shares of IG Group” * Cash requirement funded by £150 million of new debt facilities with the balance from IG’s own cash resour
Slide 24: Founded and led by an entrepreneurial management team
Founded and led by an entrepreneurial management team who previously created thinkorswim • • • • • – • – • • • •
Slide 25: A high growth, high margin business
A high growth, high margin business ACCOUNTS 125k Mmmm Active! ——Funded REVENUE ADJUSTED EBITDA’ $116m Soa 69k 44k CAGR 64% $81m 57k s21m 2018 2019 2020 2018 2019 2020 2018 2019 2020 YoY growth % YoY growth % Adjusted EBITDA margin +78% +46% +85% +117% +56% +44% 41% 47% 47% IGG 25 1, 2 See Appendix
Slide 26: Immediate scale in the world's largest listed options and futures market
Provides IG with immediate scale in the world’s largest listed options and futures market THE US RETAIL OPTIONS & FUTURES MARKET IS TRANSFORMS SCALE AND BREADTH LARGER THAN CFDs, FX & TURBOS... OF IG’s US PRESENCE Market size by number of retail clients! Binaries Futures Options US Equities Market I
Slide 27: Existing capability
• • • • • ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Existing capability
Slide 28: Diversifies IG's geographic footprint and accelerates growth strategy
Diversifies IG’s geographic footprint and accelerates growth strategy REPRESENTS A STEP CHANGE IN IG’S US PRESENCE LTM! 30 NOVEMBER SPLIT OF IG REVENUE BY GEOGRAPHY ACCELERATES SIGNIFICANT OPPORTUNITIES STRATEGY CONTRIBUTION OF SIGNIFICANT OPPORTUNITIES TO IG REVENUE Standalone Pro forma? ili UB: Us
Slide 29: Shared strong culture and ethos
Shared strong culture and ethos IG Group IG Gro 1, 2,3 See Appendix 18 Y¥ Focus on knowledgeable and ambitious retail traders Y Build client knowledge and confidence Y High quality client service Y¥ Apassion for innovation Y Entrepreneurial ethos combined with a culture of regulatory compliance and
Slide 30: Delivers attractive financial benefits for shareholders
Delivers attractive financial benefits for shareholders ENHANCED GROWTH PROFILE + Enables IG to drive additional earnings growth through the acquisition of a fast-growing business operating at attractive profit margins and delivering strong cash conversion ATTRACTIVE EARNINGS * Transaction expected
Slide 31: Summary and outlook
O 5 Summary and outlook IG Group
Slide 32: Summary
Summary Stronger and better positioned than ever before Delivered strong performance against our growth strategy Significantly expanded our high quality, loyal client base Demonstrated outstanding resilience Evidenced our ability to execute while investing and delivering responsible approach to ESG
Slide 33: Outlook
Outlook * Should we see further normalisation in financial market volatility, anticipate some reduction in the level of client activity and acquisition * Materially larger client base with levels of new client retention comparable to historic averages, providing a strong base for growth * tastytrade
Slide 34: Appendices
O 6 Appendices IG Group
Slide 35: Summary financial information on tastytrade
Appendix 1 Summary financial information on tastytrade Unaudited sm FY20! FY19' FY18' Total revenues 116.2 81.0 52.1 Adjusted EBITDA 54.1 37.8 21.2 Profit before tax 49.0 46.5 18.8 Total gross assets? 200.5 157.4 118.1 Net assets? 184.1 148.4 114.2 Funded accounts (000) 125.2 69.3 44.0 Active accoun
Slide 36: Reconciliations
Appendix 2 Reconciliations tastytrade adjusted EBITDA Definition of IG Group adjusted profit Sm FY20! FY19" FY18' £ Profit after tax 35.0 34.5 13.0 Profit after tax Tax 13.9 12.0 5.8 (+) Amortisation of acquired intangibles (non-cash) Profit before tax 48.9 46.5 18.8 (+) Utilisation of transaction-r
Slide 37: OTC Leveraged revenue bridge
Appendix 3 OTC Leveraged revenue bridge (Em) 450 (29) 5 —1—_ 5 400 H 178) i mm) Ht, 350 Existing 6 81 (13) 15 clients trading | eS P New Le New Existing sepals Riana “oe Existing Returning clients eens clients clients not clients trading 250 Existing clients trading 200 more 150 H1 FY20 H2 FY20 H1FY
Slide 38: Operating costs
Appendix 4 Operating costs (£m) H1 FY21 H1 FY20 % Change Fixed remuneration 64.9 56.6 15% Advertising and marketing 34.6 27.5 26% Revenue related costs’ 13.4 8.7 53% IT maintenance and support 7.3 6.1 20% Regulatory fees 2.5 1.3 89% Legal and professional fees 76 6.8 13% Other structural costs $2.5
Slide 39: Own funds flow
Appendix 5 Own funds flow OWN FUNDS FLOW (£m) H1 FY21 H1 FY20 MOVEMENT IN OWN FUNDS (£m) H1 FY21 H1 FY20 Operating profit 232.2 100.1 Net own funds generated from operations 203.1 74.8 Depreciation and amortisation 12.9 12.5 Net financing (costs) / receipts (1.4) 0.7 Lease liability payments (2.8) (
Slide 40: Capital and Liquidity
Appendix 6 Capital and Liquidity LIQUID ASSETS (£m) 30Nov20 31 May 20 Liquid asset buffer 86.2 83.8 Amounts at brokers 568.5 437.4 Cash in IG bank accounts 423.2 486.2 Own funds in client money 68.4 66.5 Liquid assets 1,146.3 1,073.9 Bank borrowings (100.0) (100.0) Client funds on balance sheet (139
Slide 41: Broker margin
Appendix 7 Broker margin FY16 FY17 FY18 FY19 FY20 H1 FY21 FY15 AVERAGE: £410m £381m AVERAGE £316m. PEAK: £456m AVERAGE: £332m. PEAK: £453m AVERAGE £372m. PEAK: £366m AVERAGE: £286m PEAK: £258m AVERAGE: £214m. PEAK: £294m AVERAGE: £220m. PEAK: 41 IG
Slide 42: Japan
Appendix 8 Japan H1 H1 Change FY21 FY20 1 | Revenue (£m) 34.6 16.0 117% | 2 | Active clients (000) 16.5 10.4 58% HHa: 3 | First trades (000) 5.8 44 31% * Strong growth in active client base and client acquisition * Improved client retention and engagement * Delivery of look and feel changes BRAND CA
Slide 43: Emerging Markets & Greater China
Appendix 9 Emerging Markets & Greater China PERFORMANCE H1 H1 Change FY21 FY20 % 1 | Revenue (£m) 18.4 11.2 | 2 | Active clients (000) 6.6 45 3 | First trades (000) 2.5 1.7 * Revenue per client consistent with established offices * Low cost of acquisition + Strong momentum in growing economies + Max
Slide 44: US
2522% 70m growth 60m 50m 40m 30m 20m 10m 0m • • • – • • • – – –
Slide 45: Institutional
Appendix 11 Institutional PERFORMANCE H1 H1 Change FY21 FY20 % 1 | Revenue (£m) 5.8 3.4 | 2 | Active clients 247 174 3 | First trades 58 27 * IG Prime brand launched in March — Event activity limited due to Covid-19 restrictions — Repurposed activity to digital and social * IG Prime launched in Japa
Slide 46: Exchange traded derivatives: RFED and Nadex
Appendix 12 H1 H1 Change FY21 FY20 1 | Revenue (£m) 15.4 9.5 62% | 2 | Active clients (000) 22.5 14.0 61% HBb: 3 | First trades (000) 8.4 47 78% * Strong performance in RFED client acquisition * Expansion of Nadex product offering with Knock-outs on all asset classes + Further integration of RFED an
Slide 47: Responsible corporate citizenship
Appendix 13 Responsible corporate citizenship ‘quaury sBucaTon + First year of CDP disclosure LT | | aN WAT Ye) N11 ue-\ am ° On-going commitment to carbon neutrality * Exploring longer-term net-zero strategy AFOROABLEAND * £2m donation to Teach for All global network from the Brighter Future fund S
Slide 48: Half year analysis - Core Markets
Appendix 14 Half year analysis - Core Markets FY21 FY20.—FY20 Revenue (Em) H1 H2 H1 UK 150.0 1480 927 EU 490 547 33.1 EMEA non-EU 284 3251S Australia 616 51.3 369 Singapore 36.1 352 21.5 Total OTC Leveraged 325.1 321.7 205.5 Stock Trading & Investments 15.5 93 44 Total Core Markets 340.6 331.0 209.9
Slide 49: Half year analysis - Significant Opportunities
Appendix 15 Half year analysis — Significant Opportunities Fy21 FY20.—-FY20 Revenue (Em) H1 H2 H1 Japan 346 306 «16.0 Emerging Markets 184 172 «112 us 5.2 42 16 Institutional 58 58 34 Total OTC Leveraged 640 578 322 ETDs - Nadex 10.2 99 78 ETDs- Spectrum 24 o7 - Total Significant Opportunities 76.3
Slide 50: Quarterly analysis - Core Markets
Appendix 16 Quarterly analysis - Core Markets Fy21FY21.—-FY20.—s FY20.—=—s FY20.—sFY20 Revenue(Em) Q2 a a4 Qs @2 qi UK 76.1 739 93.6 54.4 45.8 47.0 EU 259 23.1 378 169 15.4 177 EMEA non-EU 139 14.4 20.2 12.3 10.3 11.0 Australia 29.2 32.4 32.2 19.2 174 198 Singapore 168 19.3 24.3 109 98 17 Total OTC
Slide 51: Quarterly analysis - Significant Opportunities
Appendix 17 Quarterly analysis — Significant Opportunities FY21 FY21 FY20 FY20 FY20 FY20 Revenue(£m) Q2 Qi Q4 Q3 Q2 Qi Japan 18.1 16.5 19.9 10.7 84 76 Emerging Markets 8.5 9.9 10.9 6.3 5.3 59 US 24 28 28 1.3 1.0 06 Institutional 3.1 27 38 2.0 16 1.8 Total OTC Leveraged 32.2 31.9 37.6 20.3 16.3 15.9
Slide 52: End notes
Appendix 18 End notes Page 23 (1) Currencies converted from USD to GBP at a rate of 1.3617 as of 19th January 2021; (2) Based on the 40 day Volume Weighted Average Price up to and including the 19th January 20211 of 842.7 pence. Currencies converted from USD to GBP at a rate of 1.3617 as of 19th Jan
Slide 53: Forward-looking statements disclaimer
This presentation, prepared by IG Group Holdings plc (the “Company’), may contain forward-looking statements about the Company and its subsidiaries (the “Group”). Such forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", “projects”,