Ig Group Holdings Plc · LSE:IGG
Ig — H1 FY2020 Earnings Presentation
45 slides from Ig's earnings presentation, January 2020
Slide 1: Results Presentation
Results Presentation Half year ended 30th November 2019 FY20 H1 RESULTS 1
Slide 2: Introduction
Introduction June Felix Chief Executive Officer FY20 H1 RESULTS 2
Slide 3: 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", “
Slide 4: What we will discuss today
What we will discuss today 1. H1 FY20 Summary JUNE FELIX 2. Financial performance PAUL MAINWARING 3. Strategic and operational progress JUNE FELIX 4. Summary and outlook JUNE FELIX FY20 H1 RESULTS 4
Slide 5: Highlights
Highlights We are pleased with our performance in H1 FY20 • Net trading revenue £249.9m, flat against a tough comparative • Total operating expenses £136.3m in line with guidance, reflecting strategic investment • Operating profit £100.1m, operating profit margin 40.1% • Basic EPS 22.4p • Confident
Slide 6: Core Markets
Core Markets OTC leveraged business provides a strong foundation for growth • Sustainable, non-conflicted business model • Valuable, loyal client base • Continued growth in the active client base • Double digit growth in first trades FY20 H1 RESULTS 6
Slide 7: Significant Opportunities
Significant Opportunities Good progress across the portfolio • Japan revenue is up 82% on prior year • Emerging markets has grown its client base by nearly 40% • Added key leadership in Greater China • IG US received awards for value for money, customer service and education materials1 • Increased o
Slide 8: Financial results and financial position
Financial results and financial position Paul Mainwaring Chief Financial Officer FY20 H1 RESULTS 8
Slide 9: Income statement
Income statement (£m) H1 FY20 H1 FY19 % Change (£m) H1 FY20 H1 FY19 % Change Net trading revenue 249.9 251.0 - Operating profit 100.1 112.5 (11%) Net interest on client money 2.6 3.0 Net finance (cost) / income 1.1 0.5 Betting duty and FTT (1.4) (5.9) Profit before taxation 101.2 113.0 (10%) Other o
Slide 10: Revenue by product
Revenue by product Revenue (£m) H1 FY20 H1 FY19 % Change OTC leveraged 239.5 240.1 - Exchange traded derivatives 7.8 8.4 (7%) Stock trading 2.6 2.5 4% Total Group 249.9 251.0 - Active Clients (000) H1 FY20 H1 FY19 % Change Revenue per client (£) H1 FY20 H1 FY19 % Change OTC leveraged 110.1 103.9 6%
Slide 11: Revenue: OTC leveraged revenue bridge
Revenue OTC leveraged revenue bridge (£m) (32) 25 240 (8) 240 9 (13) (15) 21 5 (20) Existing New 214 clients trading Existing Returning clients Existing more / (less) clients not clients clients trading more / (less) 5 trading New Existing Returning clients clients not clients trading H1 FY19 H2 FY1
Slide 12: First trades and client tenure
First trades and client tenure First trades REVENUE BY CLIENT TENURE (OTC leveraged) H1 FY20 H2 FY19 H1 FY19 ESMA region 9,105 8,456 8,290 Non ESMA 5,175 4,115 4,193 0-6 months 10% 9% Significant Opportunities 8,469 4,313 2,143 7-12 months 12% 12% Total first trades 22,749 16,884 14,626 1-3 years 26
Slide 13: Revenue by market
Revenue by market Revenue (£m) H1 FY20 H1 FY19 % Change ESMA region – OTC leveraged 126.6 144.7 (13%) ESMA region – Stock trading 2.2 2.0 10% Total ESMA region – Core Markets 128.8 146.7 (12%) Other Core Markets – OTC leveraged 80.3 75.6 6% Other Core Markets – Stock trading 0.4 0.5 (20%) Total Othe
Slide 14: OTC leveraged revenue: Core Markets ESMA region
OTC leveraged revenue Core Markets – ESMA region Average Average Q1-Q2 Q2-Q4 Achieving growth in Core Markets ESMA region FY20 FY19 % Change • In comparison with the three quarters last year when Revenue (£m) 63.3 61.2 3% the product intervention measures were in place Active clients (000) 53.6 51.5
Slide 15: OTC leveraged revenue: Other Core Markets
OTC leveraged revenue Other Core Markets Revenue (£m) H1 FY20 H1 FY19 % Change Achieving growth in Core Markets Australia 37.0 35.5 4% • Revenue up by 6% Singapore 21.9 21.2 3% EMEA ex EU 21.4 18.9 13% • Active clients up by 5% Other Core Markets 80.3 75.6 6% • Actions to mitigate the impact of regu
Slide 16: Revenue: Significant Opportunities
Revenue Significant Opportunities Revenue (£m) H1 FY20 H1 FY19 % Change Strong growth in Significant Opportunities Japan 16.2 8.9 82% • Revenue up by 43% Emerging Markets 11.3 8.1 40% US 9.6 8.4 14% • Active clients up by 37% Institutional 3.3 2.8 18% • Quality of client base maintained Total Signif
Slide 17: Operating expenses
Operating expenses BY COST ACTIVITY (£m) H1 FY20 H1 FY19 Change (£m) H1 FY20 H1 FY19 Change Prospect acquisition 39.1 35.5 3.6 Share based compensation 4.9 4.4 0.5 Sales and client management 13.1 10.8 2.3 Sales bonuses 3.0 2.7 0.3 Technology 27.2 26.2 1.0 General bonuses 7.7 8.1 (0.4) Operations (e
Slide 18: Operating expenses: FY20 guidance unchanged
Operating expenses FY20 overall guidance unchanged FY19 IFRS16 FY20 (£m) Actual Adjustment Guidance Prospect acquisition 72.5 +~20% Sales and client management 22.2 +~20% Technology 52.9 +~5% Other activities 100.3 (7) +~5% Cash operating expenses 247.9 Capitalised development (5.6) (4) Depreciation
Slide 19: Own funds
Own funds OWN FUNDS FLOW (£m) H1 FY20 H1 FY19 MOVEMENT IN OWN FUNDS (£m) H1 FY20 H1 FY19 Operating profit 100.1 112.5 Net own funds generated from operations 74.8 80.2 Depreciation and amortisation 9.1 8.8 Net financing receipts 0.7 0.1 Lease asset depreciation 3.4 - Capital expenditure (7.9) (9.6)
Slide 20: Balance sheet, Available liquidity and Regulatory capital
Balance sheet, Available liquidity and Regulatory capital BALANCE SHEET (£m) Nov 19 May 19 AVAILABLE LIQUIDITY (£m) Nov 19 May 19 Fixed assets 163.7 165.9 Liquid assets 930.6 928.1 Liquid asset buffer 84.3 84.4 Broker margin requirement (334.3) (314.0) Amounts at brokers 391.8 419.3 Non-UK cash bala
Slide 21: Strategic progress
Strategic progress June Felix Chief Executive Officer FY20 H1 RESULTS 21
Slide 22: Our purpose, vision and values underpin everything we do
Our purpose, vision and values underpin everything we do Purpose To empower informed, decisive, adventurous people to access opportunities in the financial markets Vision To provide the world’s best trading experience Values Champion the client Lead the way Love what we do FY20 H1 RESULTS 22
Slide 23: Our strategic choices
Our strategic choices Operate a sustainable business model Provide the best client experience Win with our technology Tailor client propositions Broaden our product range Extend our geographic reach FY20 H1 RESULTS 23
Slide 24: Four growth levers
To achieve our strategy we will use four growth levers NEW CONTINUING Expanded A global firm with Segmented Multi distribution channels more local focus target markets product Accelerated and Localised marketing and Customised offerings OTC, ETD and non- expanded distribution customer experience for
Slide 25: Core Markets: strong foundation for growth
Core Markets Strong foundation for growth ESMA region EMEA ex EU Active clients up 4% Active clients up 4% Share of premium traders: Leading provider in these markets • UK 42%1 • EU 17% Australia Active clients up 4% Share of premium traders 17%1 Singapore Active clients up 7% Market penetration 26%
Slide 26: Core Markets: plans on track to navigate regulatory change
Core Markets Plans on track to navigate regulatory change In response to anticipated regulatory change • Applied learnings from ESMA • Implemented systems, processes and client outreach to ensure smooth transition Australia - requirements expected to be confirmed in early 2020 • Actions underway to
Slide 27: Significant Opportunities: good progress across the portfolio
Significant Opportunities Good progress across the portfolio US OTC FX Spectrum Greater China Delivering steady growth Now live, over 900 clients New leadership in place Award winning customer service1 33% of H1 trading out of hours Encouraging partnership discussions Japan 82% revenue growth 75% gr
Slide 28: Japan is growing fast
Significant Opportunity Japan is growing fast REVENUE (£m) MARKET CHARACTERISTICS +82% 16.2 £1bn 2m Revenue Traders 8.9 PROGRESS • Strong performance in H1 H1 FY19 H1 FY20 • New leadership ACTIVE CLIENTS (000) • Continued success with product differentiation +75% 10.4 • Multi-channel marketing and o
Slide 29: Japan is growing fast
Significant Opportunity Japan is growing fast FY20 H1 RESULTS 29
Slide 30: Emerging Markets is growing well
Significant Opportunity Emerging Markets is growing well REVENUE (£m) SIGNIFICANT TAILWINDS DRIVING GROWTH +40% 11.3 Increasing Increasing sophistication Increasing 8.1 wealth in the access and use of confidence with financial services digital technology H1 FY19 H1 FY20 Serves clients who discover I
Slide 31: Plans progressing well in Greater China
Significant Opportunity Plans progressing well in Greater China CHINA WEALTH PER ADULT OVER TIME (USD)1 MARKET CHARACTERISTICS Professional investors 4m in China £1.5bn 230k CBBC and warrants leveraged traders 500k in Hong Kong market in Hong Kong in Hong Kong2 In order to access the Greater China m
Slide 32: Plans progressing across our US businesses
Significant Opportunity Plans progressing across our US businesses DAILYFX AVERAGE MONTHLY VISITORS (000) North America MARKET CHARACTERISTICS +35% 705k 4 retail margin FX 110k (+10% YoY) 488 futures & options providers margin FX traders1 traders1 361 • US OTC FX offers compelling market proposition
Slide 33: Institutional segment is benefiting from focus
Significant Opportunity Institutional segment is benefiting from focus REVENUE (£m) MARKET CHARACTERISTICS +18% 2.8 3.3 8,000 funds Tier 1 prime brokers ~£500m with <$200m AUM concentrating on Institutional client larger funds >$200m segment opportunity PROGRESS H1 FY19 H1 FY20 • Benefitting from ne
Slide 34: Spectrum momentum is encouraging
Significant Opportunity Spectrum momentum is encouraging MARKET CHARACTERISTICS ~400k £1.6bn ~£0.5bn on exchange traders Total EU leveraged market Total CFD market PROGRESS Full marketing launch in October 2019 to target European on-venue market • Turbo24s live on equity indices, currencies and comm
Slide 35: Summary and FY20 Outlook
Summary and FY20 Outlook June Felix Chief Executive Officer FY20 H1 RESULTS 35
Slide 36: Summary
Summary Our strategy will result in a stronger core and a broader base for further growth Segments Products High Distribution Stock Core Markets Retail OTC ETD value partners trading Targeting 3-5% per annum revenue Core growth over the medium term UK & Australia ✓ - ✓ EU ✓ - ✓ Significant Opportuni
Slide 37: FY20 outlook and dividend
FY20 outlook and dividend • The Company expects to return to revenue growth in FY20 • As guided, operating expenses excluding variable remuneration are expected to increase by around £30m reflecting strategic investment • The Board intends to maintain the 43.2 pence per share annual dividend until t
Slide 38: Q&A
Q&A FY20 H1 RESULTS 38
Slide 39: Half year analysis – Core Markets
Appendix 1 Half year analysis – Core Markets Revenue (£m) FY20 H1 FY19 H2 FY19 H1 UK 93.4 87.7 106.3 EU 33.2 29.4 38.4 EMEA ex EU 21.4 22.0 18.9 Australia 37.0 33.1 35.5 Singapore 21.9 19.5 21.2 Total OTC Core 206.9 191.7 220.3 Stock trading 2.6 3.4 2.5 Total Core 209.5 195.1 222.8 Clients (000) FY2
Slide 40: Half year analysis – Significant Opportunities
Appendix 2 Half year analysis – Significant Opportunities Revenue (£m) FY20 H1 FY19 H2 FY19 H1 Japan 16.2 10.5 8.9 Emerging Markets 11.3 9.5 8.1 US 1.8 0.2 - Institutional 3.3 2.3 2.8 Total OTC Significant Opportunities 32.6 22.5 19.8 Exchange traded derivatives – US 7.8 8.4 8.4 Total Significant Op
Slide 41: Quarterly analysis – Core Markets
Appendix 3 Quarterly analysis – Core Markets FY20 FY20 FY19 FY19 FY19 FY19 Revenue (£m) Q2 Q1 Q4 Q3 Q2 Q1 UK 46.1 47.3 44.8 42.8 51.1 55.2 EU 15.4 17.8 15.6 13.7 15.6 22.8 EMEA ex EU 10.4 11.0 11.3 10.7 10.1 8.9 Australia 17.1 19.9 17.1 15.9 17.9 17.4 Singapore 10.0 11.9 10.4 9.2 10.4 10.9 Total OTC
Slide 42: Quarterly analysis – Significant Opportunities
Appendix 4 Quarterly analysis – Significant Opportunities FY20 FY20 FY19 FY19 FY19 FY19 Revenue (£m) Q2 Q1 Q4 Q3 Q2 Q1 Japan 8.5 7.7 4.9 5.5 5.0 3.9 Emerging Markets 5.4 5.9 5.3 4.2 4.9 3.2 US 1.0 0.7 0.2 - - - Institutional 1.5 1.8 1.2 1.0 1.3 1.5 Total OTC Significant Opportunities 16.4 16.1 11.6
Slide 43: Broker margin
Appendix 5 Broker margin FY15 FY16 FY17 FY18 FY19 FY20 H1 PEAK: £294m PEAK: £258m PEAK: £366m PEAK: £453m PEAK: £456m PEAK: £381m AVERAGE: £220m AVERAGE: £214m AVERAGE: £286m AVERAGE: £372m AVERAGE: £332m AVERAGE: £329m FY20 H1 RESULTS 43
Slide 44: OTC leveraged revenue by asset class
Appendix 6 OTC leveraged revenue by asset class Commodities 12% FY20 H1 9% FY19 FX H1 46% 21% 44% Indices 18% 2% 5% 4% Cryptocurrencies 4% 20% Options 15% Shares FY20 H1 RESULTS 44
Slide 45: Revenue by year onboarded
Appendix 7 Revenue by year onboarded CUMULATIVE AVERAGE OTC LEVERAGED CLIENT VALUE (£) OTC LEVERAGED REVENUE BY YEAR ONBOARDED (£m) 8000 FY15 7000 FY16 FY14 Cohort: 6000 FY17 FY19 5000 FY18 FY18 FY17 4000 FY19 FY16 Average client value 3000 over a 5 year period is FY15 ~£8,000 FY14 2000 FY20 Pre 100