RESULTS PRESENTATION Year ended 31 May 2014 IG FY14 RESULTS PRESENTATION P1
DISCLAIMER This presentation, prepared by IG Group Holdings plc (the Company ), may contain forward-looking statements about the Company. Forward-looking statements involve uncertainties because they relate to events, and depend on circumstances, that will, or may, occur in the future. If the assumptions on which the Company bases its forward-looking statements change, actual results may differ from those expressed in such statements. Forward-looking statements speak only as of the date they are made and the Company undertakes no obligation to update these forward-looking statements. Nothing in this presentation should be construed as a profit forecast. The financial tables contained herein may contain numbers which have been subject to rounding adjustments, and which therefore differ from the equivalent numbers contained in the Financial Statements. Unless otherwise stated, all numbers exclude the discontinued Sport business. FY14 relates to the financial year ending 31 st May 2014. Market share data has been provided by Investment Trends Pty Limited (website: www.investmenttrends.co.uk). Contact: Pawel Rokicki (email: pawel@investmenttrends.com.au). Unless stated, market share data is sourced from the following current reports: Investment Trends August 2013 Australia CFD Report Investment Trends April 2014 France CFD/FX Report Investment Trends May 2014 Germany CFD/FX Report Investment Trends November 2013 Singapore CFD/FX Report Investment Trends December 2013 UK Leveraged Trading Report Investment Trends December 2013 UK Online Broking Report IG FY14 RESULTS PRESENTATION P2
FY14 SUMMARY Record results in subdued markets FY14 RESULTS 5 YEAR REVENUE, PBT 1 AND DIVIDEND Net trading revenue 370.4m, up 2.4% PBT 194.7m, up 1.3% Diluted EPS 40.18p, up 3.6% 160.6m own funds generated from operations, up 4.1% Final dividend of 22.40p; Full year dividend of 28.15p, up 21.1% Enhanced ordinary dividend policy From 60% to 70% payout 1. Results pre FY11 include the discontinued Sport operation IG FY14 RESULTS PRESENTATION P3
INCOME STATEMENT PBT margin strong in a year of slow revenue growth YEAR ON YEAR COMPARISON FY14 FY13 H1 H2 Full Year Full Year m m m m Yr on Yr Net trading revenue 1 182.7 187.7 370.4 361.9 2.4% Total interest on client money 2.8 2.7 5.5 8.2 Betting duty & FTT (1.3) (2.6) (3.9) (5.2) Other operating income 1.1 1.1 2.2 3.0 Net operating income 185.3 188.9 374.2 367.9 1.7% Operating costs (84.9) (88.9) (169.2) (163.8) 3.3% Depreciation and amortisation (5.1) (4.6) (9.7) (12.2) Net interest (0.2) (0.3) (0.5) 0.3 PBT 95.1 95.1 194.7 192.2 1.3% Margin 2 52.1% 50.7% 52.6% 53.1% Diluted EPS 40.18p 38.80p 3.6% Dividend per share 28.15p 23.25p 21.1% Record net trading revenue, ahead by 8.5m Active clients down 7.3% Average revenue per client up 10.4% Net operating income ahead by 6.3m Lower betting duty more than offset by lower interest on client money Drop in Australian interest rates Other income mainly from revenue share on disposed Sport business Revenue share now complete Operating costs 3.3% higher ( 5.4m) Higher variable remuneration after weak 2013 1. Net trading revenue excludes interest on client funds and is presented net of introducing partner commissions 2. PBT as a percentage of net trading revenue IG FY14 RESULTS PRESENTATION P4
Revenue ( m) REVENUE BRIDGE Drivers of revenue change reflect the quiet markets REVENUE BRIDGE 1 220 200 180 12.2 (12.7) 6.0 18.4 (12.9) (18.1) 15.7 (1.1) (14.0) 5.1 15.0 5.1 160 169.0 171.3 192.9 171. 182.7 3 192.9 187.7 140 1. Existing clients not trading are clients who traded in the previous half year but not in the current half year. New clients are clients trading for the first time in the current half year. IG FY14 RESULTS PRESENTATION P5
DRIVERS OF REVENUE Regional performance influenced by asset mix REVENUE AND ACTIVE CLIENTS 1 BY COUNTRY REVENUE AND ACTIVE CLIENTS BY MONTH Revenue ( m) Clients (000s) FY14 FY13 Yr on Yr % FY14 FY13 Yr on Yr % UK (inc Ireland) 192.7 186.5 3.3% 59.3 68.3 (13.2%) Australia 52.2 56.3 (7.3%) 18.0 19.0 (5.1%) Germany 23.0 19.2 19.8% 9.4 8.5 10.9% France 22.2 19.3 15.0% 5.7 5.3 5.8% Iberia 15.7 14.3 9.4% 4.4 4.8 (7.8%) Italy 13.3 12.7 4.3% 3.6 3.8 (4.7%) Sweden & Norway 4.6 4.1 10.6% 1.8 1.5 15.9% Netherlands 3.4 1.4 150.1% 1.1 0.7 66.9% Europe 82.1 71.0 15.6% 26.0 24.7 5.6% Singapore 23.0 25.6 (10.3%) 6.8 7.2 (6.2%) Japan 12.2 15.9 (23.4%) 7.8 10.8 (27.5%) South Africa 5.1 4.6 12.2% 2.5 2.5 2.6% USA 3.1 2.0 54.6% 5.7 3.7 53.6% ROW (inc Japan) 43.4 48.1 (9.8%) 22.8 24.2 (5.6%) Total 370.4 361.9 2.4% 126.1 136.1 (7.3%) 1. Unique clients trading in each year 2. Year on year % calculated off underlying unrounded numbers IG FY14 RESULTS PRESENTATION P6
REVENUE COMPOSITION Support provided by diversity in asset class REVENUE BY PRODUCT FY14 REVENUE COMPOSITION 1 Significant drop off in Forex revenue Volatility at historic lows Shift towards Equity indices and Shares Year-on-year weakness in Forex 1. FY13 in brackets IG FY14 RESULTS PRESENTATION P7
DAILY REVENUE TREND IG s risk management has delivered consistent results DAILY REVENUE VOLATILITY TREND FY14 REVENUE DISTRIBUTION IG FY14 RESULTS PRESENTATION P8
OPERATING COST DETAIL Costs continue to be well controlled YEAR ON YEAR COMPARISON FY14 FY13 Yr on Yr m m Salaries (65.0) (64.6) Advertising and Marketing (31.7) (32.6) Premises related costs (10.0) (10.2) IT, Market Data and Communications (13.8) (12.2) Legal and Professional fees (4.3) (4.8) Regulatory fees (5.5) (6.4) Bad and doubtful debt (1.6) 0.4 Other costs (13.0) (11.8) Excl variable remuneration (144.9) (142.1) 2.0% Bonus (17.2) (17.3) Share based payment schemes (7.1) (4.4) Total Operating costs (169.2) (163.8) 3.3% Costs excluding variable remuneration up 2.0% Positive impact in interim FSCS levy Significant legacy debt recoveries have ended Provision in FY14 <1.0% revenue Improved performance against weak FY13 drives variable remuneration increase As guided, increase in investment in FY15 to support growth IG FY14 RESULTS PRESENTATION P9
NET OWN CASH AVAILABLE Strong cash delivery enables higher dividend and growth NET OWN CASH AVAILABLE 1 APPLICATION OF OWN CASH AVAILABLE 1 FY14 H1 FY14 H2 FY14 FY13 m m m m Own funds generated from operations 79.1 81.5 160.6 154.3 Movement in working capital (11.3) 8.0 (3.3) (12.0) Dividend (63.8) (21.0) (84.8) (81.6) Other (including capex) (3.0) (9.1) (12.1) (19.1) Increase in own funds 1.0 59.4 60.4 41.6 Own funds (opening) 429.3 426.5 429.3 388.2 Exchange losses on own funds (3.8) 1.4 (2.4) (0.5) Own funds (closing) 426.5 487.3 487.3 429.3 Broker margin requirement (273.4) (285.1) (285.1) (245.7) Net own cash available 153.1 202.2 202.2 183.6 FY14 m Net own cash available 202.2 Overseas regulatory and working capital (28.7) Funds required for segregation (20.4) Own cash available for liquidity 153.1 of which: Held as liquid assets buffer 82.5 Dividend due 81.8 Additional sources of liquidity: Title transfer funds 21.0 Committed facility 200.0 1. Refer to the RNS for the calculation of Own funds IG FY14 RESULTS PRESENTATION P10
REGULATION No significant recent developments UPDATE Europe FTT: discussions between 11 member states continue slowly EMIR: addressing additional trade reporting requirements MiFID II: detail still to be clarified, but assume no significant risk monitoring carefully Japan New regulations for binaries in force from 1 December 2013 Singapore Continue to anticipate FX leverage reductions E-learning module approved by the regulator to assist new client flow IG FY14 RESULTS PRESENTATION P11
SUMMARY Solid financial performance in subdued markets FINANCIAL REVIEW Record revenue with well controlled costs Another year of strong cash generation Confidence in future cash flows enables increased dividend payout Solid balance sheet Continued investment for growth IG FY14 RESULTS PRESENTATION P12
THANK YOU BUSINESS UPDATE IG FY14 RESULTS PRESENTATION P13
THE YEAR IN FOCUS Good progress on strategic priorities UPDATE Increase in revenue, profit and cash generation Good delivery on growth initiatives Stockbroking launch on track for September 2014 Swiss office opened, with the licence approval anticipated Progressing discussions with the regulator in Dubai IG FY14 RESULTS PRESENTATION P14
CLIENT FOCUS Continued focus on active traders STEP DOWN IN CLIENT NUMBERS ACTIVE NEW CLIENT VALUE BY MONTH One-off step down in client numbers from management actions (Q4 FY13/Q1 FY14) Continue to target growth in client numbers IG FY14 RESULTS PRESENTATION P15
GEOGRAPHIC EXPANSION Ongoing targeted geographic roll-out SWITZERLAND DUBAI Switzerland licence imminent Favourable market for IG s products High average income Limited competition Office fully functional and staffed Marketing and PR launch planned for September Regulatory application in progress Anticipate office opening in 2015 High average income Specific local requirements to be addressed (e.g. language, business days) Likely to entail acceptable restrictions on trading leverage IG FY14 RESULTS PRESENTATION P16
NADEX Continuing to make progress PERFORMANCE TREND KEY DEVELOPMENTS Full year revenue of 3.1m, up 1.1m on prior year One 3 rd party market maker adding liquidity since April-14 Tightening of spreads Full suite of mobile Apps in development IG FY14 RESULTS PRESENTATION P17
STOCKBROKING Delivery of key strategic initiative UK MARKET OPPORTUNITY 1 STOCKBROKING AT IG IG potential market Developed for active retail traders Real time multi-exchange pricing 750,000 online stockbroking clients in the UK 55,000 (59%) of SB & CFD Traders also trade shares online 93,000 SB & CFD traders Market-leading technology Full suite of mobile platforms Use of share portfolio as collateral Advantageous international shares offering Trade Daily: 6,000 Trade Weekly: 44,000 Trade Less Frequently: 700,000 UK and Ireland planned to launch in September 2014 First phase of international rollout in 2015 1. Source: Investment Trends UK Online Broking Report December 2013 IG FY14 RESULTS PRESENTATION P18
MOBILE DEVELOPMENT Continuing transition to mobile CURRENT USE OF MOBILE AT IG DEVELOPMENTS Mobile use continues to grow Significant investment over the next 2 years Continuing to develop existing Apps for experienced traders Priority to address early client journey on mobile Developing Apps for education, recruitment and conversion Increasing marketing to drive downloads of new apps IG FY14 RESULTS PRESENTATION P19
CONCLUSION Continuing to invest for future growth BUSINESS UPDATE Delivered record revenue and profit Year of investment in growth initiatives Stockbroking International expansion Switzerland Dubai Mobile investment Continue to develop existing apps for experienced traders New apps for education, recruitment and conversion Enhanced dividend payout ratio IG s 40 th anniversary in November IG FY14 RESULTS PRESENTATION P20
THANK YOU APPENDICES IG FY14 RESULTS PRESENTATION P21
Appendix 1: Net trading revenue per client HALF YEAR ANALYSIS 1 Revenue ( m) H1 FY12 H2 FY12 FY12 H1 FY13 H2 FY13 FY13 H1 FY14 H2 FY14 FY14 UK (inc Ireland) 102.1 89.7 191.8 86.9 99.5 186.5 93.4 99.3 192.7 Australia 32.7 25.2 58.0 28.2 28.1 56.3 27.0 25.2 52.2 Europe 37.8 34.5 72.2 32.1 39.0 71.0 40.2 41.9 82.1 ROW 22.8 22.0 44.9 21.8 26.3 48.1 22.1 21.3 43.4 Total 195.5 171.3 366.8 169.0 192.9 361.9 182.7 187.7 370.4 Clients H1 FY12 H2 FY12 FY12 H1 FY13 H2 FY13 FY13 H1 FY14 H2 FY14 FY14 UK (inc Ireland) 59,182 53,489 74,897 50,795 52,079 68,281 46,160 45,376 59,275 Australia 16,814 14,774 20,641 14,829 15,029 18,970 14,405 13,800 17,998 Europe 17,210 18,035 23,208 18,720 19,807 24,650 19,744 20,863 26,024 ROW 19,529 18,110 24,558 17,858 19,115 24,162 17,341 17,647 22,811 Total 112,735 104,408 143,304 102,202 106,030 136,063 97,650 97,686 126,108 Revenue per Client ( ) H1 FY12 H2 FY12 FY12 H1 FY13 H2 FY13 FY13 H1 FY14 H2 FY14 FY14 UK (inc Ireland) 1,726 1,676 2,561 1,711 1,911 2,731 2,024 2,188 3,251 Australia 1,947 1,707 2,808 1,900 1,868 2,965 1,872 1,826 2,899 Europe 2,194 1,910 3,112 1,712 1,969 2,882 2,039 2,007 3,156 ROW 1,170 1,215 1,826 1,222 1,375 1,991 1,273 1,209 1,903 Total 1,734 1,641 2,560 1,653 1,819 2,660 1,871 1,921 2,937 1. Unique clients trading in a each period with revenue stated as Net Trading Revenue IG FY14 RESULTS PRESENTATION P22
Appendix 2: Client trading activity CLIENT RETENTION RATE TREND Total clients (incl Japan) FY12 FY13 FY14 New accounts 67,593 55,889 54,957 First trades (in period) 48,029 37,914 33,709 Implied conversion rate (%) 71% 68% 61% Total active clients (in period) 143,304 136,063 126,108 Clients trading from prior period 95,275 98,149 92,399 Clients trading from prior period (%) 72% 68% 68% FY12 FY13 FY14 H1 H2 H1 H2 H1 H2 New accounts 36,557 31,036 27,043 28,846 26,871 28,086 First trades (in period) 26,034 21,995 18,671 19,243 16,423 17,286 Implied conversion rate (%) 71% 71% 69% 67% 61% 62% Total active clients (in period) 111,537 103,066 102,328 106,030 97,592 97,686 Clients trading from prior period 85,503 81,071 83,657 86,787 81,169 80,400 Clients trading from prior period (%) 84% 73% 81% 85% 77% 82% IG FY14 RESULTS PRESENTATION P23
Appendix 3: Broker margin requirement BROKER REQUIREMENT ( m) FY 11 H2 FY 12 H1 FY 12 H2 FY 13 H1 FY 13 H2 FY 14 H1 FY 14 H2 217m 184m 196m 243m 246m 273m 285m FY13 Peak 298m FY14 Peak 290m IG FY14 RESULTS PRESENTATION P24
Appendix 4: Pillar 1 regulatory capital YEAR ON YEAR COMPARISON FY14 FY13 m m Regulatory capital Total Tier 1 570.8 508.4 Intangible assets (122.7) (120.5) Investment in own shares (1.1) (1.5) Deferred tax asset (5.7) 0.0 Total capital resources (a) 441.3 386.4 Capital resources requirement - Pillar 1 (b) 115.4 115.1 (a-b) 325.9 271.3 (1) The new CRD IV requirements which came into force on 1 January 2014 require deferred tax assets relating to future profitability to be deducted from Tier 1 Capital to determine capital resources for the Group. IG FY14 RESULTS PRESENTATION P25
Appendix 5: Market share PRIMARY ACCOUNT MARKET SHARE COMPARISON TO BIGGEST COMPETITOR 1. Share of primary accounts, by number, as stated by Investment Trends reports IG FY14 RESULTS PRESENTATION P26
THANK YOU END IG FY14 RESULTS PRESENTATION P27