IG Group Holdings plc · LSE:IGG
IG — H1 FY2006 Earnings Presentation
24 slides from IG's earnings presentation, January 2006
Slide 1: Results presentation: six months ended 30 November 2005
Results presentation Six months ended 30 November 2005 Nat le Roux, CEO Tim Howkins, CFO
Slide 2: Introduction
Introduction Highlights Presentation contents Financial results Turnover up 31% – P&L – Revenue Normalised earnings per share up 40% – Cost base Business performance All parts of business contributed to growth – UK Financial – Australia Current trading strong – Binary Key performance metrics – Clien
Slide 3: Profit and loss
Profit and loss Year Six months ending ending 30 November 31 May 2005 2004 2005 Strong revenue growth continues £'m £'m £'m Turnover 38.6 29.4 +31% 62.2 Operational gearing Betting duty (1.3) (1.4) (2.5) 37.3 28.0 +33% 59.6 Transition to IFRS has no significant Interest on client money 2.1 1.6 +31%
Slide 4: Revenue by business line
Revenue by business line 2004 2005 2006 H1 H2 Total H1 H2 Total H1 Growth £'000 £'000 £'000 £'000 £'000 £'000 £'000 Financial UK 18,081 21,387 39,468 21,178 25,437 46,615 27,889 +32% Australia 492 935 1,427 1,841 1,935 3,776 3,630 +97% Binaries 897 1,256 2,153 2,541 2,409 4,950 2,701 +6% Sports Bina
Slide 5: Cost base
Cost base Year Six months ending ending 30 November 31 May Cost base is predominantly fixed, with 2005 2004 2005 periodic minor step changes £'000 £'000 £'000 Employment costs are the largest overhead Salaries 7,507 6,260 12,807 Increase in current period : Bonuses 3,121 2,307 5,255 – Pay rises LTIP
Slide 6: Financials - UK
Financials - UK Growth trend continues Number of transactions¹ Growth driven by: 300,000 Continuing strong account opening Increasing levels of introduced business 250,000 Strong growth in both spread betting and CFDs 200,000 150,000 100,000 50,000 0 Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec-
Slide 7: Financials - Australia
Ju 0 200 400 600 800 1,000 1,200 1,400 n- A u 02 g- 0 Oc 2 t -0 De 2 c- Fe 0 2 b- 0 Ap 3 r -0 Ju 3 n- A u 03 g- 0 Oc 3 t -0 De 3 c- Fe 0 3 b- 0 Ap 4 r -0 Ju 4 n- A u 04 g- 0 Oc 4 t -0 De 4 c- 0 Financials - Australia Fe 4 b- 0 Ap 5 r -0 Ju 5 n- A u 05 g- 0 Oc 5 t -0 5 Number of clients dealing - Aus
Slide 8: Binary bets
Binary bets Binary betting continues to grow Number of transactions¹ 70,000 Financial binary clients suffered heavy losses in September 60,000 and October, resulting in a temporary fall in volumes 50,000 Betting exchange provides an additional flow of business with no client recruitment cost 40,000
Slide 9: Client acquisition is the key growth driver
Client acquisition is the key growth driver Continued success of on-line account opening Clients betting or trading for the first time Number of clients dealing¹ 7000 25,000 6000 20,000 5000 igmarkets.com CAGR 25% igindex.co.uk Australia 15,000 4000 igsports.com binarybet.com Total 3000 10,000 2000
Slide 10: Revenue per client
Revenue per client H1 05 H2 05 H1 06 Revenue per Potential Ease of account opening Turnover 1 £'000 £'000 £'000 client market size UK CFD (inc. FX) 4,267 5,117 6,091 UK fin. spread betting 16,911 20,320 21,798 Australia 1,841 1,935 3,630 CFDs and FX Higher Lower Total financial 23,019 27,372 31,519
Slide 11: International expansion
International expansion Different approaches suit different territories Singapore office Multi-lingual web sites Launch planned for February Binary product can be offered internationally with no local presence Low cost operation Binary sites now available in – 4 staff initially – Sales function only
Slide 12: Sports binaries
Sports binaries New sports fixed odds offering Market making on exchanges Development of a mass-market sports fixed odds offering Market making on Betdaq has demonstrated potential near completion – Some technology issues – Income is small but growing Separate brand focusing on Sport – Binarybet.com
Slide 13: The effect of spread cuts
The effect of spread cuts Markets which appeal to day-traders show significant price elasticity Daily FTSE total volume in £ per point IG’s policy is to be fully price competitive in markets which are – Short-term 200,000 Spread cut from – Offered by all competitors 4 to 2 in Feb 05 150,000 – Commod
Slide 14: Risk management and quality of earnings
Risk management and quality of earnings 400,000 2.00 Management of exposure is a balance – Too much hedging is expensive 1.80 350,000 – Too little hedging and revenue volatility is excessive 1.60 300,000 Volatility of revenue has fallen significantly – main exposure 1.40 limits had not been increase
Slide 15: Capital, free cash, dividend policy
Capital, free cash, dividend policy Utilisation of cash for acquisition or return to shareholders is restricted by regulatory capital requirements 31-May-05 30-Nov-05 The requirement for regulatory capital limits the ability of the Capital £'m £'m group to utilise surplus cash Share capital and rese
Slide 16: Outlook
Outlook Foundations remain in place to deliver future growth Continuing strong growth from core UK business Australia growth continues New distribution channels for binaries Further international expansion - both regulated and unregulated Business debt free and highly cash generative - 16 -
Slide 17: Appendices
Appendices ! Business Lines ! What Is a Spread Bet? ! What is a CFD? ! What is a Binary Bet? ! Binary Betting Markets ! IG’s Approach to Hedging
Slide 18: Business Lines
Business Lines IG’s innovative and extensive range of products provides retail clients and market professionals with the opportunity to speculate on a wide range of underlying financial instruments or sporting and political/entertainment events Financial Binaries Sport ! Spread betting Product ! Bin
Slide 19: What is a Spread Bet?
What is a Spread Bet? A spread bet is a leveraged product that allows speculation on an underlying financial instrument or sporting event Financial Sport Example FTSE 100 England Cricket Match Market: England 1st Innings IG Quotes: 4,700 – 4,708 380 – 400 Client FTSE will rise Score below 380 Believ
Slide 20: What is a CFD?
What is a CFD? A CFD differs from a spread bet in that the client trades at the market price, rather than the firm’s price, and then pays an explicit commission and financing costs Example Market: Vodafone plc IG Quotes: Market price 139.25p / 139.5p Client Believes: Vodafone will fall Client Trade:
Slide 21: What is a Binary Bet?
What is a Binary Bet? A binary bet is a simple yes / no proposition, which allows clients to increase potential returns on short-term markets with limited risk. If the answer is yes, the bet settles at 100; if the answer is no, the bet settles at 0 FTSE to close down by between 0 and 10 points Examp
Slide 22: Binary Betting Markets
Binary Betting Markets Binary bets offer the client opportunities to speculate on a wide number of different underlying markets Financial Examples Sports Examples Offered on a wide variety of financial markets – Offered on most main sports including football, rugby, FTSE, Wall Street, Nasdaq, Dax, S
Slide 23: IG's Approach to Hedging
IG’s Approach to Hedging IG manages its market risk on a portfolio basis. Using a hierarchy of limits IG aims to achieve an optimal balance of minimising both hedging costs and revenue volatility World market Market risk is ideally hedged at the world market level Limit £13.75m in S&P futures Countr
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