Ig Group Holdings Plc · LSE:IGG
Ig — H1 2018 Earnings Presentation
41 slides from Ig's earnings presentation, January 2018
Slide 1: Results Presentation: Half Year Ended 30th November 2017
RESULTS PRESENTATION Half Year Ended 30th November 2017 IG Group Holdings plc H1 FY18 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: Over 40 Years of Success
OVER 40 YEARS OF SUCCESS Empower informed, decisive, adventurous people to access opportunities in the financial markets IG CREATED THIS INDUSTRY WITH INNOVATION AT ITS CORE IG was founded First company in the Launched browser based First offered Bitcoin, now offering a contract on sector to launch
Slide 4: Agenda
AGENDA FINANCIAL PERFORMANCE FINANCIAL POSITION OUR CLIENTS OPERATIONAL DEVELOPMENTS FUTURE REGULATION FUTURE GROWTH IG Group Holdings plc H1 FY18 Results
Slide 5: Financial Performance
FINANCIAL PERFORMANCE IG Group Holdings plc H1 FY18 Results
Slide 6: FY18 H1 Summary
FY18 H1 SUMMARY Record revenue and profit before tax performance FY18 H1 RESULTS Net trading revenue £268.4m, up 10% on H1 FY17 Operating expenses excluding variable remuneration £117.6m down 7% PBT £136.2m, up 29% with margin at 50.7%, up 7.7% points Own funds generated from operations £139
Slide 7: Income Statement
INCOME STATEMENT Good revenue growth, good cost management, good margin FY17 FY18 H1 FY17 FY16 H1 Yr on Yr £m £m £m £m % Net trading revenue up 10% Net trading revenue 268.4 244.9 10% Net interest on client funds 1.8 1.8 Net operating income up 10% Betting duty & FTT (2.7) (3.7) – Interest on cl
Slide 8: Revenue and Active Clients
REVENUE AND ACTIVE CLIENTS Significant increase in OTC Leveraged revenue per client REVENUE AND CLIENT TRENDS1 OTC LEVERAGED REVENUE REVENUE (£m) H1 FY18 H1 FY17 Yr on Yr by asset class UK 116.7 115.0 1% Options EMEA 76.6 67.0 14% APAC 66.0 55.6 19% 8% Shares 16% OTC Leveraged Derivatives 259.3 237.
Slide 9: Drivers of Revenue
DRIVERS OF REVENUE Client retention is fundamental to our success REVENUE BRIDGES (£m) 22.0 (0.1) 268.4 246.2 1.9 5.8 23.0 246.2 12.9 244.9 (18.4) (20.4) 5.5 (8.7) Existing clients = (£23.6m) Existing clients = £0.3m H1 FY17 H2 FY17 H1 FY18 Existing clients not trading Existing clients trading more
Slide 10: Revenue Optimisation
REVENUE OPTIMISATION Business model results in low variability in revenue REVENUE VARIABILITY1 REVENUE PERFORMANCE2 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 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 Daily reven
Slide 11: Marketing Effectiveness
MARKETING EFFECTIVENESS Continue to attract high value clients CLIENT RECRUITMENT (excl. Nadex)1 CUMULATIVE AVERAGE CLIENT VALUE2 Client first trades Marketing cost per first trade (£) 35,000 1,600 4,000 30,000 1,400 3,500 1,200 3,000 25,000 2,500 1,000 20,000 2,000 800 15,000 1,500 600 10,000 1,000
Slide 12: Operating Expenses
OPERATING EXPENSES Good cost management in first half, no change to full year guidance H1 FY17 FY18 H1 FY17 FY16 Yr on Yr £m £m £m % Increased headcount offset by lower Fixed remuneration (46.3) (46.2) 0% average cost per head Advertising and marketing (27.7) (35.2) 21% Advertising and marketing
Slide 13: Financial Position
FINANCIAL POSITION IG Group Holdings plc H1 FY18 Results
Slide 14: Own Funds
OWN FUNDS Good cash generation OWN FUNDS FLOW MOVEMENT IN OWN FUNDS FY17 30 Nov 17 FY17 FY16 30 Nov 16 FY16 FY17 30 Nov 17 FY17 FY16 30 Nov 16 £m £m £m£m £m £m £m £m £m£m £m Operating profit 136.5 105.6 Net own funds generated Depreciation and amortisation 8.8 7.5 from operations 116.8 78.0 Share ba
Slide 15: Balance Sheet & Liquidity
BALANCE SHEET & LIQUIDITY Strong financial position BALANCE SHEET AVAILABLE LIQUIDITY 30 Nov 17 31 May 17 30 Nov 16 30 Nov 17 £m £m £m £m Goodwill 107.8 108.1 108.2 Liquid assets 790.6 Intangible assets 46.2 48.6 50.0 Broker margin requirement (370.7) Property, plant and equipment 15.8 17.4 13.4 Cli
Slide 16: Broker Margin
BROKER MARGIN Broker margin requirement driven by notional size of hedging positions NOTIONAL POSITIONS (£m) MARGIN REQUIREMENT (£m) 10,000 500 8,000 400 6,000 300 4,000 200 2,000 100 - Jun Nov May Nov May Nov May Nov May Nov May Nov FY16 FY17 FY18 FY16 FY17 FY18 Client Notional IG Notional IG Resid
Slide 17: Our Clients
OUR CLIENTS IG Group Holdings plc H1 FY18 Results
Slide 18: Who Are Our Clients
WHO ARE OUR CLIENTS Client base is sophisticated and high value REVENUE FROM TRADING CLIENTS H1 FY181 90% 20% 50% revenue is generated by the most valuable c.2% of clients, trading on average 3,800 times in H1 FY18 30% 80% revenue is generated by the most valuable c.10% of clients, trading on av
Slide 19: Established Client Base
ESTABLISHED CLIENT BASE Clients have typically traded with IG for over 3 years REVENUE BY CLIENT TENURE H1 FY181 CLIENT ATTRITION1 8% 10+ years 100% 18% 7 to 10 years 80% 50% 60% 12% 5 to 7 years 12% 3 to 5 years 40% 11% 2 to 3 years 20% 19% 1 to 2 years 0% 0 1 2 3 4 5 6 7 8 9 10 11 12 12% 7 to 12 m
Slide 20: Broad Product Offering
BROAD PRODUCT OFFERING Retention and extension of our client relationships MULTI-PRODUCT CLIENTS1 H1 FY18 AVERAGE CLIENT VALUE1 Complementary products that expand IG’s client offering £2,681 £2,367 – Share Dealing & Investments Aim to enhance the total value and extend the lifespan of client rel
Slide 21: Client Acquisition
CLIENT ACQUISITION Marketing is targeted and spend is discretionary TARGET MARKET ONLINE MARKETING Define a clear target client for whose needs, Bid on key terms that associate positively characteristics and objectives this financial with this target market instrument is compatible Marketing s
Slide 22: Operational Developments
OPERATIONAL DEVELOPMENTS IG Group Holdings plc H1 FY18 Results
Slide 23: Account Types in UK & EU
ACCOUNT TYPES IN UK & EU Professional accounts provide the highest value and lowest regulatory concern NOW1 FUTURE1 Accounts Accounts Standard Retail LR Account Account LR Account Pro Pro Account Account Regulatory concern Regulatory concern Historically the majority of IG’s clients and The numb
Slide 24: Professional Categorisation in UK & EU
PROFESSIONAL CATEGORISATION IN UK & EU Growing professional categorisation HIGHER VALUE, LOWER RISK1 UK & EU REVENUE1 No current regulatory advantage for a client to elect to be categorised as professional 95% <75% In November an online process was rolled out to enable clients who qualified to e
Slide 25: Limited Risk Accounts and Onboarding
LIMITED RISK ACCOUNTS AND ONBOARDING It’s the right thing to do LIMITED RISK ACCOUNTS1 APPROPRIATENESS & WEALTH HURDLES 22% 100% Implemented in June 46% 54% 12%11% Hard34%30% stop 31%25% on appropriateness 69% 100% 78% 88%89% Savings and income combination must meet pre- 54% 46% 66%70% criteri
Slide 26: MiFID and Partner Relationships
MIFID AND PARTNER RELATIONSHIPS Ensuring good client and market outcomes PREPARATION FOR MIFID II REVIEW OF PARTNERS Extensive technology programme to prepare IG requires that its partners offer the same quality for MiFID II in excess of 10 man years outcomes as IG Wide ranging changes to repo
Slide 27: Future Regulation
FUTURE REGULATION IG Group Holdings plc H1 FY18 Results
Slide 28: EU and UK Regulation
EU AND UK REGULATION We are closer to regulatory certainty OUR VIEW Following ESMA and FCA statements on December 18th and a “call for evidence” from ESMA on January 18th we have clearer proposals and timings Themes remain X Disproportionate leverage restrictions by asset class Suitability of
Slide 29: Responses to Regulation
RESPONSES TO REGULATION Retail clients affected by changes can take action Potential Mitigating Regulation Action Potential Client Action CLIENT DEPOSITS (£m) Leverage Live process • Elect to be categorised as 1,600 limits to enable professional Client deposits and clients to 1,400 • Trade with less
Slide 30: Responses to Regulation: Clients
RESPONSES TO REGULATION: CLIENTS Our clients have significant concerns “These new measures are wholly unnecessary. I have been a trader for over a decade. Retail accounts such as those with IG … offer an effective use of capital. I am fully aware of the risks involved in speculation. That is my resp
Slide 31: Future Growth
FUTURE GROWTH IG Group Holdings plc H1 FY18 Results
Slide 32: Product and Regional Development
PRODUCT AND REGIONAL DEVELOPMENT New development in Germany EU SUBSIDIARY MTF Applying for BaFIN licence Developing Multi-lateral Trading Facility (MTF) to address the significant EU market in on exchange Utilise existing base in Dusseldorf Leveraged trading Expand local team to include key
Slide 33: Opportunity in the US
OPPORTUNITY IN THE US Application filed for US retail FX dealer licence CEO has been appointed internally and recruitment for other key roles has begun Consider the US margin FX market to be currently underserved following the exit of the largest competitor Currently 85,000 active forex trader
Slide 34: Opportunities Outside the EU
OPPORTUNITIES OUTSIDE THE EU Allocating resource to growth areas OTC LEVERAGED REVENUE OUTSIDE EVOLVING MARKETING FOCUS UK & EU (£m) 100% 100 22% 18% 20% 26% 28% 20% 80% 10% 80 9% 11% 9% 34% 29% 9% 60% 37% 32% 60 33% 40% 40 43% 38% 30% 33% 30% 20% 20 0% 0 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 H2 H1 FY16 FY1
Slide 35: Conclusion
CONCLUSION Strong platform for growth Record revenues and profit in H1 FY18 Active positioning for regulatory change – If ESMA proposals had been in place in the previous financial year, we estimate a reduction in revenue of less than 10% Strong start to second half – Operating costs to be hig
Slide 36: Appendices
APPENDICES IG Group Holdings plc H1 FY18 Results
Slide 37: Appendix 1: ESMA Leverage Proposals
APPENDIX 1: ESMA Leverage Proposals Leverage limits from ESMA Call for evidence – 18th January 2018 Leverage limits on the opening of a position by a retail client. The contemplated leverage limits would apply to any payment made to a product provider for the purpose of entering into a CFD, excludin
Slide 38: Appendix 2: Full Year and Half Year Analysis
APPENDIX 2: Full Year and Half Year analysis 1 REVENUE FY15 FY16 FY17 FY18 (£m) H1 H2 FY H1 H2 FY H1 H2 FY H1 UK 102.1 101.5 203.7 106.4 116.0 222.3 115.0 108.0 223.0 116.7 EMEA 48.1 47.5 95.6 53.1 64.2 117.3 67.0 70.5 137.5 76.6 APAC 45.3 50.3 95.6 50.3 54.4 104.7 55.6 58.5 114.1 66.0 OTC Leveraged
Slide 39: Appendix 3: Quarterly Analysis
APPENDIX 3: Quarterly analysis 1 REVENUE FY15 FY16 FY17 FY18 (£m) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 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 58.8 57.9 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 39.0 37.7 APAC 19.4 25.9 24.3 26.0 25.1 25.2 28.5 25.9
Slide 40: Appendix 4: Regulatory Capital
APPENDIX 4: Regulatory Capital FY16 FY17 30 Nov 17 FY17 FY16 30 Nov 16 £m £m £m £m £m £m Shareholders' Funds 750.8 680.7 less foreseeable declared dividends (35.6) (34.6) less acquisition intangibles (107.8) (108.2) less intangible assets (46.2) (50.0) less deferred tax assets (8.6) (7.4) Capital re
Slide 41: End
END IG Group Holdings plc H1 FY18 Results