Ig Group Holdings Plc · LSE:IGG
Ig — H1 FY2019 Earnings Presentation
37 slides from Ig's earnings presentation, January 2019
Slide 1: Results Presentation
Results Presentation Half Year Ended 30 November 2018
Slide 2: 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 3: Performance highlights
Performance highlights Successfully navigating the introduction of the ESMA measures • Revenue impact from the ESMA measures was in line with the Group’s expectations – 69% of ESMA region revenue in Q2 FY19 was generated by clients categorised as Professional • Continued growth in revenue outside of
Slide 4: Financial Results and Business Performance
Financial Results and Business Performance IG Group Holdings plc • H1 FY19 Results 4
Slide 5: H1 FY19 results summary
H1 FY19 results summary vs H1 FY18 vs H1 FY17 Net trading revenue £251.0m 6% 2% Operating expenses £122.1m 4% 3% Operating profit £112.5m 18% 7% Operating profit margin 44.8% 6.1% points 1.7% points Basic EPS 24.9p 16% 10% 5 YEAR REVENUE, OPERATING PROFIT AND EPS – Underlying1 REVENUE (£m) OPERATING
Slide 6: Dividend
Dividend • The Board expects to maintain the 43.2p per share annual dividend until the Group’s earnings allow the Company to resume progressive dividends • Interim dividend of 12.96p per share – 30% of the prior year’s total dividend of 43.2p per share 5 YEAR DIVIDEND DIVIDEND PER SHARE (p) 50 Inter
Slide 7: Revenue trends
Revenue trends REVENUE BY REGION (£m) Change H1 FY19 H1 FY18 Reported Underlying UK 103.6 116.7 (11%) (9%) EU 41.8 59.2 (29%) (25%) ESMA Region 145.4 175.9 (17%) (14%) EMEA ex EU 20.6 17.4 18% 4% APAC 74.1 66.0 12% 8% Rest of World 94.7 83.4 14% 7% OTC Leveraged 240.1 259.3 (7%) (7%) Nadex 8.4 7.3 1
Slide 8: Revenue trends
Revenue trends OTC LEVERAGED REVENUE BY ASSET CLASS (£m) H1 FY19 H1 FY18 Change H2 FY18 FY18 Indices 111.6 103.1 8% 121.1 224.2 Shares 48.0 42.7 12% 52.7 95.4 FX 42.2 47.9 (12%) 46.4 94.3 Commodities 22.1 30.6 (28%) 24.4 55.0 Options 11.0 21.4 (49%) 21.7 43.1 Cryptocurrencies 5.2 13.6 (62%) 22.8 36.
Slide 9: Revenue trends
Revenue trends QUARTERLY REVENUE BY REGION (£m) Change Change Q2 FY19 Q2 FY18 Reported Underlying Q1 FY19 Q1 FY18 Reported Underlying UK 49.7 57.9 (14%) (10%) 53.9 58.8 (8%) (7%) EU 17.3 29.3 (41%) (34%) 24.5 30.0 (18%) (16%) ESMA Region 67.0 87.2 (23%) (18%) 78.4 88.7 (12%) (10%) EMEA ex EU 10.7 8.
Slide 10: ESMA region
ESMA region Update on Professional client base • As at the end of H1 FY19, we had received 22,744 ACTIVE PROFESSIONAL CLIENTS applications, of which 5,675 have been accepted 6,000 • Of those not accepted: – 60% continued to trade with IG 5,000 – 40% did not trade with IG EU 4,000 APPLICATION STATUS
Slide 11: ESMA region
ESMA region Revenue and client trends Change REVENUE (£m) H1 FY19 H1 FY18 Reported Underlying • High quality Professional client ESMA Professional 84.7 base ESMA Retail 60.7 – Around 5,500 active clients ESMA Region 145.4 175.9 (17%) (14%) in H1 FY19 ACTIVE CLIENTS (‘000) – Average revenue per clien
Slide 12: ESMA region
ESMA region Revenue and client trends Change Change REVENUE (£m) Q2 FY19 Q2 FY18 Reported Underlying Q1 FY19 Q1 FY18 Reported Underlying ESMA Professional 46.3 38.4 ESMA Retail 20.7 40.0 ESMA Region 67.0 87.2 (23%) (18%) 78.4 88.7 (12%) (10%) ACTIVE CLIENTS (‘000) ESMA Professional 5.2 4.9 ESMA Reta
Slide 13: ESMA region
ESMA region Impact of the product intervention measures ESMA REGION REVENUE (£m) Q2 FY19 ESMA REGION REVENUE (£m) Q2 FY18 Reported revenue 67.0 A Reported revenue 87.2 C Revenue from clients now outside ESMA region 4.2 If 5% moved outside ESMA region (4.4) Underlying revenue 71.2 B 82.8 D If 50% Pro
Slide 14: EMEA ex EU & APAC
EMEA ex EU & APAC Revenue and client trends Change EMEA ex EU H1 FY19 H1 FY18 Reported Underlying Revenue (£m) 20.6 17.4 18% 4% Active Clients (‘000) 5.4 4.9 10% Revenue per client (£) 3,806 3,540 8% APAC Revenue (£m) 74.1 66.0 12% 8% Active Clients (‘000) 32.1 30.0 7% Revenue per client (£) 2,312 2
Slide 15: Nadex, Share Dealing & Investments
Nadex, Share Dealing & Investments Revenue and client trends Nadex H1 FY19 H1 FY18 Change NADEX Revenue (£m) 8.4 7.3 15% • Reduction in active clients reflects Active Clients (‘000) 12.4 14.8 (16%) lower marketing spend Revenue per client (£) 673 492 37% • Improved quality of client base Share Deali
Slide 16: New client acquisition
New client acquisition FIRST TRADES H1 FY19 H1 FY18 Change FY14 CLIENT COHORT REVENUE ESMA region 8,300 11,666 (29%) £59m Rest of World 6,326 6,361 (1%) £52m OTC Leveraged 14,626 18,027 (19%) £39m £35m £33m Revenue generated (£m) 21.8 22.4 (3%) Revenue per new client (£) 1,492 1,245 20% Column1 YEAR
Slide 17: Our client base
Our client base Industry leading client tenure, creating sustainable business PROPORTION OF H1 FY19 REVENUE BY CLIENT TENURE 0-6 months 9% • 51% of OTC leveraged revenue 39% 0-3 years from clients trading with IG for 6-12 months 12% more than 3 years 1-3 years 28% • 61% of OTC leveraged revenue gene
Slide 18: Operating expenses and variable remuneration
Operating expenses and variable remuneration BY COST TYPE (£m) H1 FY19 H1 FY18 Change BY ACTIVITY CATEGORY (£m) H1 FY19 H1 FY18 Change Fixed remuneration 51.7 46.3 12% Prospect acquisition 36.9 39.0 (5%) Advertising and Marketing 25.6 27.7 (8%) Sales and client service 16.1 15.4 5% Other costs 36.0
Slide 19: Income statement
Income statement £m H1 FY19 H1 FY18 Change £m H1 FY19 H1 FY18 Change Net trading revenue 251.0 268.4 (6%) Operating profit 112.5 136.5 (18%) Net interest on client money 3.0 1.8 Net finance (cost) / income 0.5 (0.3) Betting duty and FTT (5.9) (2.7) Profit before taxation 113.0 136.2 (17%) Other oper
Slide 20: FY19 Outlook
FY19 Outlook • Revenue expected to be lower than in FY18 due to ESMA measures and strong H2 FY18 • Total operating costs expected to be similar to the £290m in FY18 • Net financing costs expected to be £1-2m in H2 FY19 • Effective tax rate estimated to be 19.1% IG Group Holdings plc • H1 FY19 Result
Slide 21: Key Strengths and Growth Opportunities
Key Strengths and Growth Opportunities IG Group Holdings plc • H1 FY19 Results 21
Slide 22: Key strengths
Key strengths Continuity from past success and evolution for the future TECHNOLOGY BRAND & & REPUTATION INNOVATION Champion the client PURPOSE To empower informed, PEOPLE decisive, adventurous BUSINESS people to access MODEL Lead the way opportunities in financial markets STANDING CLIENTS with REGUL
Slide 23: Professional client base
Professional client base IG - the natural home for Professional clients • Platform designed for sophisticated traders • High quality execution • Personalised client service • Utilising data science to drive decision making • Further improvements to Professional client offer – Preferred pricing schem
Slide 24: European strategy
European strategy Mitigating risk, maximising opportunities • Licence received from BaFin for IG Europe in September 2018 – Brexit mitigation, ensuring we can continue to offer our existing products in all EU member states – Provides opportunity to expand the European product set • IG Europe will of
Slide 25: European strategy
European strategy Spectrum to go live May 2019 • New trading venue for European clients • Full control of the value chain – Flexibility to innovate new products • Built using – Low cost trading – Existing, scalable technology stack – Better value for shareholders – 44 years of history pricing market
Slide 26: US Retail Foreign Exchange Dealer
US Retail Foreign Exchange Dealer Significant opportunity in the US OTC FX market • The US regulatory landscape has stabilised • 90k US Retail traders, with only 3 competitors • Licence granted in October 2018 • We will offer Spot FX and Options • We will compete on – Best-in-class technology and cu
Slide 27: Looking forward
Looking forward Continuity from past success and evolution for the future • IG has grown successfully by expanding its core business of providing CFDs to Retail clients Number of Billionaires1 • The market is changing • To continue to grow, IG is evolving • 4 key areas of opportunity – Scalable tech
Slide 28: Outlook
Outlook Continuity from past success and evolution for the future • Confident in return to growth after FY19 Number of Billionaires1 • Interim dividend of 12.96 pence per share – 30% of total FY18 dividend, in line with policy • The Board expects to maintain the current annual dividend until the Gro
Slide 29: Q&A
Q&A For further information, please contact: IG Group FTI Consulting Liz Scorer Ed Berry 020 7573 0727 020 3727 1046 IG Group Holdings plc • H1 FY19 Results 29
Slide 30: Appendices
APPENDICES IG Group Holdings plc • H1 FY19 Results 30
Slide 31: Own funds
Appendix 1 Own funds OWN FUNDS FLOW (£m) H1 FY19 H1 FY18 MOVEMENT IN OWN FUNDS (£m) H1 FY19 H1 FY18 Operating profit 112.5 136.5 Net own funds generated from operations 80.2 116.8 Depreciation and amortisation 8.8 8.8 Net financing income 0.1 - Share based compensation 4.9 3.2 Investments Change in
Slide 32: Balance sheet
Appendix 2 Balance sheet BALANCE SHEET (£m) 30 Nov 18 31 May 18 AVAILABLE LIQUIDITY (£m) 30 Nov 18 Goodwill 108.1 108.0 Liquid assets 917.5 Intangible assets 45.5 43.4 Broker margin requirement (314.5) Property, plant and equipment 15.1 15.5 Non-UK cash balances (176.6) Fixed assets 168.7 166.9 Own
Slide 33: Revenue analysis
Appendix 3 Revenue analysis FY16 FY17 FY18 FY19 REVENUE (£m) H1 H2 FY H1 H2 FY H1 H2 FY H1 UK 106.4 116.0 222.3 115.0 108.0 223.0 116.7 132.8 249.5 103.6 EU 47.1 54.4 101.5 52.8 54.1 106.8 59.3 66.0 125.3 41.8 ESMA Region 153.4 170.4 323.9 167.8 162.1 329.9 175.9 198.9 374.8 145.4 EMEA ex EU 6.0 9.7
Slide 34: Client analysis
Appendix 4 Client analysis 1 FY16 FY17 FY18 FY19 ACTIVE CLIENTS ('000) H1 H2 FY H1 H2 FY H1 H2 FY H1 UK 46.1 48.0 59.9 53.0 48.1 64.7 47.2 47.3 59.9 39.9 EU 27.3 30.5 37.0 31.5 32.6 40.3 31.1 31.6 39.6 26.5 ESMA Region 73.4 78.4 97.0 84.4 80.6 105.1 78.3 78.9 99.4 66.4 EMEA ex EU 3.2 3.7 4.6 4.4 4.7
Slide 35: Revenue per client analysis
Appendix 5 Revenue per client analysis FY16 FY17 FY18 FY19 REVENUE PER CLIENT (£) H1 H2 FY H1 H2 FY H1 H2 FY H1 UK 2,307 2,419 3,710 2,171 2,248 3,446 2,470 2,807 4,166 2,594 EU 1,726 1,788 2,742 1,677 1,660 2,649 1,906 2,093 3,168 1,580 ESMA Region 2,091 2,173 3,340 1,987 2,011 3,140 2,246 2,521 3,
Slide 36: Regulatory capital
Appendix 6 Regulatory capital £m 30 Nov 18 30 Nov 17 Workings Shareholders’ funds 817.5 750.8 Less foreseeable declared dividends (47.7) (35.6) Less goodwill (108.1) (107.8) Less intangible assets (45.5) (46.2) Less deferred tax assets (8.4) (8.6) Capital resources 607.8 552.6 A Pillar 1 Risk Exposu
Slide 37: Revenue optimisation
Appendix 7 Revenue optimisation 1 REVENUE VARIABILITY (£m) Revenue Coefficient 3.0 2.5 2.5 2.0 2.0 1.5 Daily revenue (60 day roll avg) 1.5 1.0 1.0 Coefficient of variability (60 day roll avg) 0.5 0.5 0.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1 Excluding impact of Swiss franc eve