Ig Group Holdings Plc · LSE:IGG
Ig — FY2017 Earnings Presentation
37 slides from Ig's earnings presentation, July 2017
Slide 1: Results Presentation: Full Year Ended 31st May 2017
RESULTS PRESENTATION Full Year Ended 31st May 2017 IG Group Holdings plc FY17 Results
Slide 2: Disclaimer
DISCLAIMER This presentation, prepared by IG Group Holdings plc (the “Company”), may contain forward-looking statements about the Company. Forward-looking statements involve known and unknown risks and uncertainties because they are beyond the Company’s control and are based on current beliefs and e
Slide 3: Financial Results and Position
FINANCIAL RESULTS AND POSITION Paul Mainwaring Chief Financial Officer IG Group Holdings plc FY17 Results
Slide 4: FY17 Summary
FY17 SUMMARY Good growth in revenue, good profit margin, good cash generation FY17 RESULTS Net trading revenue £491.1m, up 8% on FY16 PBT £213.7m, up 3% PBT margin 43.5%, down 2% points PAT £169.2m, up 3% Net own funds generated from operations of £183.9m Diluted EPS 45.9p, up 3% Full
Slide 5: Income Statement
INCOME STATEMENT PBT, Earnings and Dividend up 3% FY17 FY16 Yr on Yr Net trading revenue up 8% £m £m £m % Net operating income up 9% Net trading revenue 491.1 456.3 8% – Interest on client funds of 0.4%, on Net interest on client funds 4.0 3.4 average balances of £1bn Betting duty & FTT (7.5) (1
Slide 6: Revenue and Active Clients
REVENUE AND ACTIVE CLIENTS REVENUE AND CLIENT TRENDS1 OTC LEVERAGED REVENUE by asset class REVENUE (£m) FY17 FY16 Yr on Yr UK 223.0 222.3 - EMEA 137.5 117.3 17% Options APAC 114.1 104.7 9% 9% Shares OTC Leveraged 474.6 444.3 7% 16% 14.1 Commodities 14% US 11.2 26% 8% 15% Share Dealing & Investments
Slide 7: Drivers of Revenue
DRIVERS OF REVENUE Growth in active clients drives growth in revenue 1 1 OTC REVENUE BRIDGE (£m) OTC LEVERAGED CLIENTS FY17 FY16 125,000 86.7 474.6 (12.0) (50.6) 444.3 6.2 100,000 75,000 50,000 25,000 FY16 FY15 0 77.7 444.3 9.8 (46.4) H1 H2 H1 H2 H1 H2 394.8 8.4 FY15 FY16 FY17 UK EMEA APAC Existing
Slide 8: Operating Expenses
OPERATING EXPENSES Continued investment in advertising and marketing FY17 FY16 Yr on Yr External advertising and marketing up 30% £m £m £m % DailyFX incremental costs of £4.4m Fixed remuneration (95.5) (83.3) (15%) Advertising and marketing (64.5) (49.7) (30%) Excluding advertising and marketi
Slide 9: Own Funds
OWN FUNDS Good cash generation OWN FUNDS FLOW MOVEMENT IN OWN FUNDS FY17 31 May 17 FY17 31 FY16 May 16 FY16 FY17 31 May 17 FY17 31 FY16 May 16 £m £m £m£m £m £m £m £m £m£m £m Operating profit 213.4 207.6 Net own funds generated Depreciation and amortisation 16.4 12.7 from operations 183.9 197.3 Share
Slide 10: Balance Sheet and Liquidity
BALANCE SHEET AND LIQUIDITY Strong financial position BALANCE SHEET AVAILABLE LIQUIDITY Unaudited 31 May 17 FY17 31 May 17 FY17 31 FY16 May 16 FY16m FY17 31 May 17 FY17 31 FY16 May 16 £m £m £m£m £m £m £m £m £m£m £m Goodwill 108.1 107.1 Liquid assets 731.4 626.7 Intangible assets 48.6 18.0 Broker mar
Slide 11: Broker Margin
BROKER MARGIN Broker margin requirement driven by notional size of hedging positions NOTIONAL POSITIONS (£m) MARGIN REQUIREMENT (£m) 10,000 Client Notional 400 IG Hedge Notional 8,000 IG Residual Exposure 300 6,000 200 4,000 100 2,000 0 0 May Nov May Nov May May Nov May Nov May FY16 FY17 FY16 FY17
Slide 12: Business Review
BUSINESS REVIEW Peter Hetherington Chief Executive IG Group Holdings plc FY17 Results
Slide 13: A Good Year in Dull Markets
A GOOD YEAR IN DULL MARKETS VIX: 1990-2017 REVENUE BY REGION Yr on Yr Growth 50 S&P500 VIX 500 +26% Long term average +9% 40 400 +95% 30 300 +5% 20 200 +0.3% 19.5 10 100 0 0 1990 1995 2000 2005 2010 2015 FY15 FY16 FY17 UK EMEA-EU EMEA non-EU VIX: LAST 3 YEARS APAC US 50 S&P500 VIX Financial year ave
Slide 14: Ongoing Success in Client Recruitment
ONGOING SUCCESS IN CLIENT RECRUITMENT Growth in first trades whilst cost per first trade stable 1 1 CLIENT RECRUITMENT CLIENT ACQUISITION Client first trades Marketing cost per first trade (£)2 Completed Applications Opens 35,000 1,600 120,000 First trades 30,000 1,400 100,000 1,200 25,000 80,000 1,
Slide 15: Client Quality Remains High
CLIENT QUALITY REMAINS HIGH CLIENT ATTRITION CUMULATIVE AVERAGE CLIENT VALUE 100% 6,000 5,000 80% 4,000 60% 3,000 40% 2,000 20% 1,000 0% 0 2 4 6 8 10 12 14 16 18 20 22 24 2 4 6 8 10 12 14 16 18 20 22 24 Months since first trade Months since first trade FY14 FY15 FY16 FY17 FY17 post Brexit Underlyi
Slide 16: High Value, Long Standing Client Base
HIGH VALUE, LONG STANDING CLIENT BASE Most valuable 2% of clients generate 50% of revenue 1 1 REVENUE BY CLIENT TENURE REVENUE FROM TRADING CLIENTS 38% 20% 91% 5+ years 30% 3-5 years 13% 1-3 years 30% 7-12 months 50% 0-6 months 14% 7% 5% < 2% FY17 Clients Revenue 51% of revenue is generated by cli
Slide 17: Share Dealing and Investments
SHARE DEALING AND INVESTMENTS Clients more heavily invested with IG SHARE DEALING IG SmartPortfolios Client numbers up 200% to c20,000 Launched in April 2017 to coincide with ISA season Strong growth in AUA to £500m Leading industry in fee transparency – Clear Total Cost of Ownership (TCO) A
Slide 18: Nadex Displaying Strong Growth
NADEX DISPLAYING STRONG GROWTH 1 GROWTH IN THE EXCHANGE CLIENT ACQUISITION Marketing cost Volume Clients Client first trades per first trade (£) 1,200,000 8,000 10,000 600 7,000 1,000,000 8,000 500 6,000 800,000 400 5,000 6,000 600,000 4,000 300 3,000 4,000 400,000 200 2,000 200,000 2,000 100 1,000
Slide 19: Focus on Client Experience & Education
FOCUS ON CLIENT EXPERIENCE & EDUCATION Continued investment in technology 19 IG Group Holdings plc FY17 Results
Slide 20: IG Vision and Values
IG VISION AND VALUES We exist to empower informed, decisive, adventurous people to access opportunities in financial markets Champion the Client Understand them. Be part of their whole experience. Think big, think long-term. Make every moment count and stick with them all the way. Do what matters mo
Slide 21: Lead the Way: Limited Risk Accounts
LEAD THE WAY Limited Risk accounts1 are becoming the standard for leverage traders 2 IT IS THE RIGHT THING TO DO FIRST TRADES H2 FY17 Rebuilt and relaunched in July 2016 after in-depth review following the Swiss franc de-peg in Jan 2015 12%11% 34%30% 31%25% 69% 100% All IG clients can place a li
Slide 22: Lead the Way: Industry Leading Appropriateness Regime
LEAD THE WAY Industry leading appropriateness regime IT IS THE RIGHT THING TO DO Applicants must qualify on experience, knowledge and wealth to open an IG Account Applicants falling below the threshold can no longer ignore risk warnings and go on to open a leverage account with IG – To open an a
Slide 23: Lead the Way: Robust Appropriateness Test
LEAD THE WAY Robust appropriateness test SAMPLE QUESTION QUESTION: ANSWER: £510 The EUR/USD has a sell price of 10499 Guaranteed stops always close your trade and a buy price of 10500. You decide to at the level you specify, regardless of open a long (buy) CFD trade of 1 contract, whether the market
Slide 24: Lead the Way: Stringent Thresholds for Client Wealth
LEAD THE WAY Stringent thresholds for client wealth and partner standards WEALTH HURDLES PARTNERS IG has had formal wealth criteria for new clients Small but valuable source of clients for many years 11% IG will 30% 25%compliant partners of69% only work with scale, These levels are periodica
Slide 25: Regulatory Landscape
REGULATORY LANDSCAPE Operating in a complex regulatory environment IG is regulated in 15 jurisdictions – We seek to work constructively with all regulators Outside Europe, IOSCO monitoring industry – Expect Singapore FX leverage reductions – Support Australian client money controls ESMA seekin
Slide 26: Regulation Is Changing
REGULATION IS CHANGING UK and EU regulation in a period of transition for OTC leveraged products IG supports ESMA movement towards supervisory convergence and regulatory harmonisation 5 key themes – Appropriateness – No negative protection – Bonus offers – Marketing ?– Leverage 26 IG Group Holdings
Slide 27: How Leverage Impacts Client Outcomes
HOW LEVERAGE IMPACTS CLIENT OUTCOMES Leverage is the main reason clients trade with CFDs1 EXTREME LEVERAGE IS DAMAGING 100% Probability of S&P GBP/EUR FTSE GBP/EUR GBP/USD FTSE loss on a trade 80% 500:1 500:1 200:1 100:1 50:1 20:1 60% 40% 20% Poor outcomes Poor outcomes FCA likely unlikely 0% 10 13
Slide 28: Clients May Elect to Become Professional
CLIENTS MAY ELECT TO BECOME PROFESSIONAL 9% of clients generate 80% of revenue 2 REVENUE UNDER SCRUTINY SIZE OF TOTAL INVESTMENT PORTFOLIO Not all UK and EU revenue will be impacted 11% 12% Rather not say PROFESSIONAL UPGRADE If clients can evidence two of: 15% 10% Over £500k 1. Sufficient trading e
Slide 29: Client Responses to Leverage Constraints
CLIENT RESPONSES TO LEVERAGE CONSTRAINTS Options for remaining retail client base CLIENT BEHAVIOUR CLIENT DEPOSITS AND MARGIN (£m)1 Remaining clients may: 1. Manage account with less headroom 1,400 Client deposits IG clients currently have excess cash on their 1,200 account vs the margin required
Slide 30: IG Responses to Leverage Constraints
IG RESPONSES TO LEVERAGE CONSTRAINTS Future proofing the business Committed to developing an MTF to serve the European market – Improves product transparency and differentiates IG – Aligns with regulatory preference – Several challenges to be overcome Further developing our non leveraged offerin
Slide 31: Conclusion
CONCLUSION IG will continue to lead the way Business continues to perform well This reflects the quality of our employees, our compliant culture and our strong acquisition capabilities – We will continue to do the right thing – We will continue to develop opportunities for geographic and product
Slide 32: Appendices
APPENDICES IG Group Holdings plc FY17 Results
Slide 33: Appendix 1: Full Year and Half Year Analysis
APPENDIX 1: Full Year and Half Year analysis 1 FY15 FY16 FY17 REVENUE (£m) H1 H2 FY H1 H2 FY H1 H2 FY UK 102.1 101.5 203.7 106.4 116.0 222.3 115.0 108.0 223.0 EMEA 48.1 47.5 95.6 53.1 64.2 117.3 67.0 70.5 137.5 APAC 45.3 50.3 95.6 50.3 54.4 104.7 55.6 58.5 114.1 OTC Leveraged 195.5 199.3 394.8 209.8
Slide 34: Appendix 2: Quarterly Analysis
APPENDIX 2: Quarterly analysis 1 FY15 FY16 FY17 REVENUE (£m) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 UK 43.7 58.4 53.6 47.9 54.5 51.9 60.3 55.7 53.0 62.0 51.1 56.9 EMEA 21.7 26.4 24.3 23.1 24.1 29.0 30.4 33.8 29.8 37.2 33.5 37.0 APAC 19.4 25.9 24.3 26.0 25.1 25.2 28.5 25.9 25.2 30.4 28.2 30.3 OTC Levera
Slide 35: Appendix 3: Regulatory Capital
APPENDIX 3: Regulatory Capital FY16 FY17 31 May 17 FY17 FY16 31 May 16 £m £m £m £m £m £m Shareholders' Funds 735.3 663 less declared dividends (83.9) (84) less acquisition intangibles (108.1) (107.1) less intangible assets (48.6) (18.0) less deferred tax assets (9.1) (7.2) Capital resources A 485.6
Slide 36: Appendix 4: Revenue Optimisation
APPENDIX 4: Revenue optimisation Balance between revenue quantum and variability 1 2 REVENUE VARIABILITY REVENUE PERFORMANCE REVENUE (£m) COEFFICIENT REVENUE (£m) 2.5 2.5 80 70 2.0 2.0 60 1.5 1.5 50 40 1.0 1.0 30 20 0.5 0.5 10 0.0 0.0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2014 2015 201
Slide 37: End
END IG Group Holdings plc FY17 Results