Ig Group Holdings Plc · LSE:IGG
Ig — FY2008 Earnings Presentation
28 slides from Ig's earnings presentation, July 2008
Slide 1: IG Group Results Presentation, Year ended 31 May 2008
GROUP IG Group Results Presentation Year ended 31 May 2008 Tim Howkins, CEO Steve Clutton, Finance Director
Slide 2: Introduction
Introduction 180 Revenue up 51% 160 Revenue CAGR 41% 140 120 Earnings per share up 40% 100 (£m) 80 60 Benefits of increased IT 40 investment and international 20 0 diversification FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Proposed final dividend of 9.0p 100 per share 90 80 (total divide
Slide 3: Financial results and drivers of growth
Financial results and drivers of growth
Slide 4: Income statement
Income statement Strong revenue and profit growth continues Year on year comparison FY 07 FY 08 Growth £'m £'m % Revenue 122.0 184.0 51% 4 new businesses set up in Europe Betting duty -4.2 -10.8 and US Gross profit 117.8 173.2 47% Interest on client balances 6.5 10.2 Operating costs -53.9 -84.9 57%
Slide 5: Revenue by business line
Revenue by business line Financial business growing strongly Year on year comparison FY 07 FY08 Yr on Yr Financial: H1 H2 Total H1 H2 Total Growth Continued Financial SB £'000 £'000 £'000 £'000 £'000 £'000 % growth : IG is clear number Financial one in the UK market Spread Betting Impressive growth
Slide 6: Cost drivers
Cost drivers Building foundations for future growth Perf ormance related bonus/awards Enhanced market penetration through IT capability and innovation, new country expansion in Spain, France and US, and additional Marketing . Inf lation Volume & volatility impacts of business growth and market reach
Slide 7: Cost base
Cost base Costs tightly managed and controlled Year on year comparison FY 07 FY 08 Total H1 H2 Total £'000 £'000 £'000 £'000 Salaries 20,227 12,384 15,384 27,768 Costs added by four new Bonus 9,747 8,051 7,920 15,971 businesses ahead of revenue LTIP/SIP 1,844 2,210 2,506 4,716 generation Advertising
Slide 8: Financial: account opening is key lead indicator
Financial Account opening is key lead indicator Quarterly account opening Webinar Overall client recruitment up programme 82% year on year UK launch Mar 08 14,000 CFD PureDeal UK launch July 07 H2 account openings 25% 12,000 UK Financial SB TradeSense higher than H1 UK launch Jan 07 10,000 Strong br
Slide 9: Market volatility vs revenue
Market volatility vs revenue Continued growth through dips in market volatility Quarterly financial revenue vs average daily FTSE 100 range Quarterly financial revenue (£m) Average daily FTSE range % April 08 was FY08 60 1.8% record month despite 1.6% 50 Post 2000 range lower volatility Post 1990 ra
Slide 10: International diversification
International diversification Revenues growing strongly in current regions of focus FY08: Revenue £184m FY08 overseas revenue £49m Europe Asia Pacific Rest of world % of financial revenue Sports 27% 30% 40 30% Binaries 6% 25% 20% 21% 27.6 25% 5% 30 18% 20% 21.7 15% Fin SB 20 14.9 CFDs 52% 10 6.2 9.4
Slide 11: Client behaviour in a challenging market
Client behaviour in a challenging market
Slide 12: Client demographics
Client demographics Affluent client base which has shown resilience to economic downturn FY08 age profile of new clients Client savings (£000s) % of clients FY02 FY08 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 18-29 30-39 40-49 50-64 65+ <5 5-10 10-50 50-100 100+ Median age
Slide 13: Client balances
Client balances Client balances remain stable Median client balances (£) Established clients New clients 600 Recent market conditions have not impacted 500 client balances 400 50% of established clients have balance 300 above £488 200 50% of new clients have balance above £411 100 0 Nov-07 Dec-07 Ja
Slide 14: Client churn
Client churn After initial fall, churn rate tails off and revenue stream stabilises Client retention FY02 clients No. of clients dealing for first time (left scale) % of clients still trading in FY 08 (right scale) % of FY02 clients still trading (1) (left scale) 20,000 70% 140% 140% Subsequent reve
Slide 15: Client activity is increasingly diversified
Client activity is increasingly diversified Clients seek out volatility FY 07: Financials revenue £110m FY 08: Financials revenue £172m Binaries Binaries 6% 6% Other Equity Other 7% 6% Indices 22% Equity Currencies Indices Currencies 16% 35% 21% Shares Shares 44% 37% Client positions in shares predo
Slide 16: Client risk management
Client risk management Clients trade across asset classes and actively manage risk Revenue % (1) % of bets with a stop (2) 76% Shares Only 8% 74% Indices Only 72% 12% 70% Mix of asset Currencies classes Only 68% 69% 10% 66% Commodities only 64% 1% 62% Aug-07 Nov-07 Feb-08 May-08 69% of revenue gener
Slide 17: Additional financial information
Additional financial information
Slide 18: Revenue per client trend – financial business
Revenue per client trend – financial business Worldwide revenue per client is trending towards the UK financial SB average Revenue per client (1) FY06 to FY08 - 18 - (1) Clients trading in a 6 month period
Slide 19: Revenue per client – financial business
Revenue per client – financial business Strong growth in financial clients trading Half-year financial revenue FY06 – FY08 Revenue (£m) H1 06 H2 06 H1 07 H2 07 H1 08 H2 08 UK 3.5 4.8 5.8 10.1 9.6 9.0 Europe 2.0 3.2 4.6 7.2 8.9 11.5 Asia Pac 3.7 5.5 5.4 7.3 12.1 15.3 Rest of World 0.5 0.7 0.3 0.4 0.7
Slide 20: Risk management and quality of earnings
Risk management and quality of earnings Daily revenue volatility remains low Daily revenue volatility FY01 – FY08 3.00 Volatility of daily revenue remains 800 Daily revenue (60 day rolling ave) within a tight range, despite revenue volatility (60 day co-efficient of variability) general market volat
Slide 21: Counterparty risk management
Counterparty risk management Balances with brokers, banks and clients are effectively managed Market Client Diversity: Account size limits / 11 hedging brokers / 27 deposit banks Concentration limits Limits regularly reviewed 61% of new UK financial spread betting accounts in Q408 were limited risk
Slide 22: Free cash, capital and dividend policy
Free cash, capital and dividend policy FY 07 FY 08 Client balances reduction: £m £m - Skewed by a small number of clients Working capital - Average balances little changed Amounts due from brokers & clients 352.6 263.3 Cash 484.6 471.7 Capital increases with retained earnings Amounts due to clients
Slide 23: Client education
Client education Driving up client recruitment and conversion TradeSense now rolled out fully across international sites Full program of - Seminars - Webinars - Webinars on demand Continuing to build breadth of educational offering internationally - 23 -
Slide 24: Innovation helps maintain IG's market lead
Innovation helps maintain IG’s market lead IG leads the way in both platform and product innovation PureDeal now rolled out fully across international sites iPhone Dealing Trailing Stops Bungee Bets DealThru Charts Each launch provides the opportunity for a fresh marketing message and another reason
Slide 25: US expansion
US expansion A two track approach to a major potential market Current status : / Operating costs are in line with expectations and revenue beginning to build / Significant opportunity but achieving profitability likely to be slow IG Markets Inc HedgeStreet Inc. Trading restarted in February 2008 Sta
Slide 26: Overseas CFD expansion
Overseas CFD expansion Early performance of new offices has improved Number of clients dealing (monthly) Newer offices outperforming early experience in Australia Minimal set up costs, modest headcount requirement Singapore, Italy and Germany accounted for 11% of FY08 CFD revenue Paris & Madrid open
Slide 27: Outlook
Outlook Business well positioned to deliver continued growth Strong client recruitment underpins growth Strong growth in the more mature markets of UK and Australia continues New Spanish and French offices have made strong starts, Singapore, Italy and Germany all making good progress US businesses e
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