IG Group Holdings plc · LSE:IGG
IG — FY2023 Earnings Presentation
35 slides from IG's earnings presentation, July 2023
Slide 1: Results presentation
Results presentation Full year ended 31 May 2023
Slide 2: What we will discuss today
What we will 01 Highlights discuss today 02 Strategic progress 03 Financial performance and outlook 2
Slide 3: Highlights
Highlights IG Group °
Slide 4: Another record revenue year
Another record revenue year OPERATIONAL PERFORMANCE SHAREHOLDER DISTRIBUTIONS £1,023m £491m £363m 45.2p £250m 6% 48% 1p TOTAL PROFIT BEFORE CAPITAL FULL YEAR NEW BUYBACK 1 REVENUE TAX AND RETURNED DIVIDEND PROGRAMME MARGIN IN FY232 PER SHARE 1 Total revenue includes interest on client money 2 Capita
Slide 5: Key reflections
Key reflections Total revenue (£m) 1,023 967 846 654 • Another year of strong financial performance 483 • Delivered significant returns of capital FY19 FY20 FY21 FY22 FY23 • Achieved further progress on our strategy of diversifying the business Shareholder distributions (£m) • Leading the field in c
Slide 6: Strategic progress
Strategic progress IG Group °
Slide 7: Diversification strategy on track
Diversification strategy on track FY19 FY23 Total revenue: £483m Total revenue: £1,023m 21% 3% 2% 3% Product mix OTC 18% ETD Stock trading 95% 79% 6% Geographic mix 10% UK US 33% 42% 31% 30% EU APAC 14% Other 4% 11% 19% 7
Slide 8: Strong growth in the US
Strong growth in the US Total revenue (£m) (pro forma) FY23 FY22 Change US options market tastytrade 170.3 120.6 41% Equity and equity index volumes (contracts – bn) US FX 20.5 16.6 23% US market making1 0.5 1.8 (70%) 3.0 Total US 191.3 139.0 38% Acquisition 2.8 completes Acquisition Total US revenu
Slide 9: Progress at tastytrade
Progress at tastytrade Total client equity ($bn) 3.8 • Delivered strong total revenue growth since closing 3.7 3.7 3.6 3.6 • Strengthened US leadership team 3.4 3.4 3.4 3.3 3.3 • Launched first national brand campaign 3.2 3.1 • Significant improvement in brand recognition • Platform upgrades deliver
Slide 10: OTC business has enduring revenue streams
OTC business has enduring revenue streams OTC net trading revenue by tenure (£m) Market leader in the region – steady growth 900 800 700 600 500 400 300 Areas of higher growth potential 200 100 0 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 5+ years 1-5 years < 1 year 10
Slide 11: Interest generating another revenue stream
Interest generating another revenue stream Benefit of higher interest rates to increase, while financing costs remain fixed 20.0 7.0 6.0 15.0 5.0 10.0 4.0 £m % 3.0 5.0 2.0 - FY23 - Q1 FY23 - Q2 FY23 - Q3 FY23 - Q4 FY24 - Q1 FY24 - Q2 FY24 - Q3 FY24 - Q4 1.0 (5.0) 0.0 Interest income – US (LHS) Inter
Slide 12: Innovation is in our DNA
Innovation is in our DNA 1980-95 2006-10 2019-20 2023 First to launch Delivered pioneering Launched first European turbo Launched leveraged index, browser based trading contract available 24 hours a tastycrypto – a single stock & FX platform & DMA day, 5 days a week pioneering self- products for ret
Slide 13: Our unique client base
Our unique client base Active traders Long tenure • We cater to engaged, • Over 50% of our 0 - 6 months active traders revenue is generated 6 - 12 months 1 - 3 years • Our top 10% of clients from clients who have 3 - 5 years trade over 15 times per day been with us for 3+ 5+ years years Strict onboa
Slide 14: Growth through regulatory change
Growth through regulatory change IG has grown throughout periods of regulatory change reflecting our ability to innovate and diversify Regulation ensures that traders are Our segmentation focusses on traders We deal with regulators in an open and informed and appropriately protected with relevant ex
Slide 15: Financial performance and outlook
03 Financial performance and outlook 15
Slide 16: Balancing business growth with investment
Balancing business growth with investment Adjusted basis (£m) FY23 FY22 Change Net trading revenue 941.8 966.5 (3%) • Total revenue up 6% as significantly higher interest income offsets slightly lower net Net interest income 80.8 0.8 trading revenue Total revenue 1,022.6 967.3 6% Betting duty and ot
Slide 17: Stable core business supported by diversification
Stable core business supported by diversification Adjusted net trading revenue (£m) FY23 FY22 Change OTC derivatives 782.0 811.5 (4%) • Total net trading revenue down 3% in a year of more difficult economic conditions, particularly Exchange traded derivatives 137.1 121.2 13% in H2, which impacted cl
Slide 18: Balancing investment with good cost management
Balancing investment with good cost management Adjusted operating costs (£m) FY23 FY22 Change Fixed remuneration 188.5 150.1 26% • Cost growth in line with guidance and delivered a high profit before tax margin of 48% Advertising and marketing 93.5 87.1 7% Revenue related costs 47.9 45.3 6% • FY23 i
Slide 19: Strong capital and liquidity positions maintained
Strong capital and liquidity positions maintained Regulatory capital position Liquidity position (£m) FY23 FY22 FY21 Liquid assets 1,929.7 2,073.9 1,512.8 £1,026m £996m Broker margin requirement (678.2) (629.5) (590.9) £861m Overseas cash (383.5) (342.9) (248.0) Own funds in client money (75.1) (64.
Slide 20: Capital allocation framework in action
Capital allocation framework in action Retained comfortable headroom of £499m at 31 May 2023 1) Regulatory capital requirements (31 May 2022: £528m) 2) Organic investments Continue to balance organic investment in the business with maintaining targeted margins 3) Commitment to citizenship Proposed d
Slide 21: Guidance
Guidance • Maintain medium-term guidance of total revenue growth of 5-7% for Core Markets+ Portfolios and 25-30% for High Potential Markets per annum • For US interest income, expect c.$4m annually per 25 bps increase in the Fed Funds rate Interest • For interest income outside the US and net financ
Slide 22: High Potential Markets powering ahead
High Potential Markets powering ahead IG US and International Spectrum continue Major platform growth growth to support tastytrade is Increasing benefit upgrades and opportunities still the portfolio growing market from rising interest enhancements largely untapped share in a growing rates market Hi
Slide 23: Multiple growth drivers for the Core Markets+
Multiple growth drivers for the Core Markets+ Reduced attrition Increasing benefit from increasingly New product from rising tenured client base Scaling our Improve hedging innovation & rollout interest rates business in efficiency underweight regions We maintain medium term guidance for Core Market
Slide 24: Summary
Summary • Delivered good operational performance in challenging market conditions • Quality of our client base continues to deliver a sustainable stream of recurring revenue • Delivering on our diversification strategy • £363m of capital returned to shareholders in the period via dividends and buyba
Slide 25: Q&A
Q&A IG Group °
Slide 26: Appendix
Appendix IG Group °
Slide 27: Reconciliation of alternative performance measures
Appendix 1 Reconciliation of alternative performance measures Adjusted total revenue (£m) FY23 FY22 Adjusted profit before taxation and EPS (£m - unless stated) FY23 FY22 Net trading revenue 941.8 972.3 Earnings per share (p) 86.9 92.9 Interest income on client funds 81.8 3.5 Weighted average number
Slide 28: Adjusted operating costs walk
Appendix 2 Adjusted operating costs walk £m Inflation, technology and operational Strategic and investment Additional incubator month of investment FX tastytrade and headwinds charitable donation FY23 FY22 FY23 28
Slide 29: OTC client retention by cohort
Appendix 3 OTC client retention by cohort 100% % of clients still active in months following first trade 90% 80% 70% 60% 50% 40% 30% 20% 10% - Month 1 Month 5 Month 9 Month 13 Month 17 Month 21 Month 25 Month 29 Month 33 Month 37 Month 41 Month 45 FY19 FY20 FY21 FY22 FY23 Historic average (FY15-FY18
Slide 30: Our updated Brighter Future Framework
Appendix 4 Our updated Brighter Future Framework Framework produced in line Planet with UN Sustainable Best Development Goals People practice Two new segments of our Brighter Future Framework of ‘planet’ and ‘community’. Announced an additional £4 Products Community million donation to charita
Slide 31: Net trading revenue and drivers: Core Markets+
Appendix 5 Net trading revenue and drivers: Core Markets+ Revenue (£m) FY23 FY22 FY21 UK 297.6 328.1 317.4 EU 100.3 103.4 102.7 EMEA non-EU 49.3 50.4 56.5 Australia 95.2 88.3 119.7 Singapore 68.3 73.5 74.5 Japan 99.3 98.5 68.7 Emerging Markets 39.3 42.8 34.7 Institutional 13.3 9.9 12.3 Total OTC lev
Slide 32: Net trading revenue and drivers: High Potential Markets
Appendix 6 Net trading revenue and drivers: High Potential Markets Revenue (£m) FY23 FY22 FY21 US FX 19.5 16.6 11.6 Total OTC leveraged 19.5 16.6 11.6 ETDs – US market maker 0.5 1.8 3.5 ETDs - tastytrade 120.9 110.0 - ETDs - Europe 15.7 9.3 4.9 Total exchange traded derivatives 137.1 121.1 8.4 Total
Slide 33: Net trading revenue and drivers: Core Markets+
Appendix 7 Net trading revenue and drivers: Core Markets+ FY23 FY23 FY22 FY22 FY21 FY21 Revenue (£m) H2 H1 H2 H1 H2 H1 UK 140.2 157.3 170.9 157.2 167.4 150.0 EU 48.4 51.9 52.2 51.2 53.6 49.0 EMEA non-EU 23.6 25.6 24.5 25.9 28.2 28.4 Australia 46.0 49.3 43.1 45.2 58.1 61.6 Singapore 31.7 36.6 36.8 36
Slide 34: Net trading revenue and drivers: High Potential Markets
Appendix 8 Net trading revenue and drivers: High Potential Markets FY23 FY23 FY22 FY22 FY21 FY21 Revenue (£m) H2 H1 H2 H1 H2 H1 US FX 8.6 11.0 9.1 7.5 6.4 5.2 Total OTC leveraged 8.6 11.0 9.1 7.5 6.4 5.2 ETDs – US market maker 0.1 0.5 0.8 1.0 1.6 1.9 ETDs - tastytrade 59.7 61.2 57.3 52.8 - - ETDs -
Slide 35: Disclaimer
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",