TIDMIGG
RNS Number : 5945C
IG Group Holdings plc
23 January 2018
LEI No: 2138003A5Q1M7ANOUD76
IG GROUP HOLDINGS PLC
Interim Results for the six months ended 30 November 2017
23 January 2018
IG Group Holdings plc ("IG", "the Group", "the Company"), a
global leader in online trading, today announces results for the
six months ended 30 November 2017.
Financial Summary
-- Net trading revenue GBP268.4 million (H1 FY17: GBP244.9m) - up 10%
-- Operating expenses excluding variable remuneration GBP117.6 million - down 7%
-- Profit before tax GBP136.2 million (H1 FY17: GBP105.2m) - up 29%
-- PBT margin 50.7% - up 7.7% points
-- Diluted EPS 29.3 pence (H1 FY17: 22.6 pence) - up 30%
-- GBP139.0 million of own funds generated from operations - up 38%
-- Interim dividend of 9.69 pence per share
All current financial results listed are for the six months
ended 30 November 2017 (H1 FY18). All general references to H1 FY17
'the prior period', 'the prior year', and 'last year' mean the six
months ended 30 November 2016, unless otherwise specified, and all
changes are calculated by reference to that period. A table setting
out the calculation of own funds generated from operations is
included as Note C in Other Information at the end of the interim
financial statements
Operating and Strategic Summary
-- Record revenue and profit before tax
-- Action taken to position the business so that it will
continue to deliver for all of its stakeholders under a more
restrictive regulatory environment
-- Continued focus on good client outcomes - implementation of
sharpened appropriateness testing and increased wealth hurdles for
all new clients
-- Significant increase in Limited Risk accounts which prevent
retail clients from losing more than their initial deposit
-- Online process that allows clients to request to be
categorised as an elective professional launched in mid-November
2017. Since then, the proportion of IG's UK and EU revenue
generated by professional clients has increased from 5% to over 25%
and is on track to be well over 50%
-- Number of institutional partners reduced, to seek to ensure
that all clients who engage with IG through a partner will be
offered the same, quality outcomes as those who maintain a direct
relationship
-- Progress on the development of a multi-lateral trading
facility (MTF) for the European market
-- Application filed to establish a subsidiary in the USA to
address the potential in the US OTC FX market
-- Application filed to establish a subsidiary in Germany as a
response to the UK's decision to leave the EU
Peter Hetherington, Chief Executive, commented:
"The Company delivered record revenue and record profit before
tax during the first half of FY18, and continued to make good
strategic and operational progress. The Group is taking action to
mitigate the potential financial impact of regulatory change, and
to position the business so that it will continue to deliver for
all of its stakeholders under a more restrictive regulatory
environment.
IG exists to empower informed, decisive, adventurous people to
access opportunities in financial markets. The company has
delivered a sustainable business by placing good client outcomes at
the heart of everything it does. Good conduct, from the way
products are designed, to how they are marketed, to whom firms
allow to use them, is essential in protecting clients.
IG supports the objective of regulators to improve retail client
outcomes in the industry. The Company's long held view is that the
most effective measure to improve client outcomes is to ensure that
the product is only marketed to the right people in the right way.
The current ESMA proposals might not achieve this. The
disproportionate focus on leverage has caused consternation amongst
our large number of retail clients, many of whom have traded for
years and wish to continue using our product as they do today.
The business is developing new products and services, and is
establishing operations in new geographies, in order to broaden its
client base, extend its competitive advantage, and to allow it to
continue to market OTC leveraged derivatives to potential new
clients for whom it is appropriate.
Demand for the products and service offered by IG is strong, and
growing. As the industry leader, the Company is well placed to
respond to regulatory change. The Company will continue to engage
fully with regulators, to seek to achieve the best possible
outcomes for current and future clients of this industry, and the
greatest long term value for shareholders."
For further information, please contact:
IG Group FTI Consulting
Liz Scorer 020 7573 0727 Neil Doyle / Ed Berry 020 3727 1141 /
1046
investors@iggroup.com
There will be a presentation today for analysts and investors at
9.30am (UK time) at IG Group, Cannon Bridge House, 25 Dowgate Hill,
London EC4R 2YA. The presentation will also be accessible via audio
webcast at www.iggroup.com and via a conference call on 020 3936
2999.
The audio webcast of the presentation and a transcript will be
archived at: www.iggroup.com/investors
The Company plans to host a Capital Markets Day on Wednesday 23
May. Further information about this event will be provided as part
of the Company's Q3 market update.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
Article 17 of the Market Abuse Regulation ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Disclaimer - forward-looking statements
This interim statement, prepared by IG Group Holdings plc (the
"Company"), may contain forward-looking statements about IG Group
Holdings plc and its subsidiaries (the "Group"). 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 Group 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 statement
should be construed as a profit forecast.
Some numbers and period on period percentages in this statement
have been rounded or adjusted in order to ensure consistency with
the financial statements.
About IG
IG empowers informed, decisive, adventurous people to access
opportunities in over 15,000 financial markets. With a strong focus
on innovation and technology, the company puts client needs at the
heart of everything it does.
IG's vision is to be a global leader in retail trading and
investments. Established in 1974 as the world's first financial
derivatives trading firm for retail clients, it continued leading
the way by launching the world's first online and iPhone trading
services.
IG is now an award-winning, multi-platform trading company, the
world's No.1 provider of CFDs* and a global leader in forex. It
provides leveraged services with the option of limited-risk
guarantees, and offers an execution-only share dealing service in
the UK, Australia, Germany, France, Ireland, Austria and the
Netherlands. IG has recently launched a range of affordable, fully
managed investment portfolios, to provide a comprehensive offering
to investors and active traders.
It is a member of the FTSE 250, with offices across Europe,
including a Swiss bank, Africa, Asia-Pacific, the Middle East and
the US, where it offers on-exchange limited risk derivatives via
the Nadex brand.
*Based on revenue excluding FX (from published financial
statements, October 2016)
Overview
The Company delivered record revenue and record profit before
tax during the first half of FY18, and continued to make good
strategic and operational progress. The Group is taking action to
mitigate the potential financial impact of regulatory change, and
to position the business so that it will continue to deliver for
all of its stakeholders under a more restrictive regulatory
environment.
Net trading revenue in the first half of the year was GBP268.4
million, 10% higher than in the same period in the prior year.
Operating costs excluding variable remuneration were GBP117.6
million, 7% lower than in the prior year. Profit before tax in the
first half of the year was GBP136.2 million, 29% higher than in the
prior year, with the PBT margin increasing to 50.7%.
The Board has declared an interim dividend of 9.69 pence per
share, calculated as 30% of the full year ordinary dividend per
share for the prior year in line with the Group's dividend
policy.
Leading the way
IG exists to empower informed, decisive, adventurous people to
access opportunities in financial markets. IG started this industry
over 40 years ago by providing clients with the opportunity to gain
exposure to the price of gold and now offers clients over 15,000
financial markets. The Company has delivered a sustainable business
by placing good client outcomes at the heart of everything it does.
Good conduct, from the way products are designed, to how they are
marketed, to whom firms allow to use them, is essential in
protecting clients.
IG differentiates itself within the industry through its good
conduct. The Company adheres to the highest regulatory standards,
and through its focus on ensuring that its marketing and
advertising targets an appropriate audience, IG seeks to only
accept clients who understand our product and the risks
involved.
Leveraged derivative instruments are not appropriate for
everyone. The Company's long held view is that robust supervision
around who the product is marketed to, and which applicants are
accepted as clients, remains the most significant measure to drive
improved client outcomes.
Regulatory developments
ESMA and the FCA issued statements on 15 December 2017 updating
their work in relation to the provision of contracts for difference
(including rolling spot forex), and binary options to retail
clients. ESMA published a "Call for evidence" paper on 18 January
2018, providing further information and inviting responses from all
stakeholders to specific questions in the paper, to be received by
5 February 2018.
The ESMA statements set out that it is considering the possible
use of its product intervention powers under Article 40 of MiFIR to
address investor protection risks. ESMA is considering measures to
prohibit the marketing, distribution or sale to retail clients of
binary options, and to restrict the marketing, distribution or sale
to retail clients of CFDs. Specifically, the restrictions on CFDs
currently under review by ESMA are:
-- Leverage limits on the opening of a position between 30:1 and
5:1; the limit will vary according to the volatility of the
underlying asset with major currency pairs at 30:1, non-major
currency pairs, major indices and gold at 20:1, other commodities
and minor equity indices at 10:1 and individual equities and any
underlying asset not mentioned above at 5:1;
-- A margin close-out rule on a position-by-position basis (that
will ensure clients' positions are automatically closed when they
fall below 50% of initial margin);
-- Negative balance protection by account to provide a guaranteed limit on client losses;
-- A restriction on benefits incentivising trading (commonly known as bonus offers);
-- A standardised risk warning.
-- ESMA is also currently considering how CFDs on
cryptocurrencies fit within the MiFID regulatory framework as
financial instruments, whether CFDs on cryptocurrencies should be
addressed in the measures, and whether 5:1 initial leverage would
provide sufficient protection to clients.
Any product intervention measure adopted by ESMA under Article
40 of MiFIR can have an initial duration of up to three months and
is renewable.
IG supports the objective of regulators to improve retail client
outcomes in the industry, and ESMA's efforts to achieve
harmonisation of regulation across the EU. As noted in our
statement on 18 December 2017 and confirmed by the ESMA paper of 18
January 2018, all the measures that ESMA and the FCA are
considering relate to retail clients.
IG believes that enforcing consistent close-out procedures,
putting a guaranteed limit on client losses, restricting trading
incentives such as bonus offers, and issuing standardised risk
warnings would all improve client outcomes if implemented
appropriately, and enforced effectively.
IG stopped offering its Sprint binary product to new retail
clients in January 2017.
IG believes that the leverage restrictions under review are
disproportionate and go beyond what is needed to protect consumers
from poor outcomes associated with excessive leverage. The danger
of disproportionate leverage restrictions on regulated firms is the
risk that they will push retail clients to trade CFDs with
unregulated firms based outside the EU potentially resulting in
poor client outcomes.
Championing the Client
IG has sharpened its appropriateness testing and implemented
increased wealth hurdles for all new clients. The Company is
confident that these measures safeguard clients, including
directing less experienced retail clients to the Limited Risk
account, which prevents them from losing more than their initial
deposit.
The Company has three categories of clients; retail,
professional and institutional. Regulators are focussed on
protecting retail clients. Clients with a high level of
understanding, significant trading experience, large investment
portfolios, or relevant experience working in financial services,
may be categorised as professional and these clients do not require
the same level of protection as retail clients.
Whilst IG has historically categorised the vast majority of its
clients as retail as a matter of course, IG's client base is
different from most in the industry due to the Company's long term
focus on high value and sophisticated clients. The Company believes
that clients who generate the majority of its revenue in the UK and
EU could meet the MiFID defined requirements to be categorised as
professional, but prior to the potential implementation of
regulatory restrictions on retail clients there has been no reason
for them to do so.
In mid-November 2017, IG launched an online process that allows
clients to request to be categorised as an elective professional.
These requests are assessed internally, and clients who meet the
requirements are now categorised as professional. To date, more
than half of all requests by number have been rejected. Clients who
have been categorised as professional generated over 25% of the
Company's UK and EU revenue in the three months to January. The
Company believes that clients who generate well over half of its
current UK and EU revenue are both eligible and will elect to be
categorised as professional if the products they can trade and the
leverage they can utilise diverges from that available to retail
clients.
IG values its relationships with its clients. Over the past 12
months, the Company has conducted a full review of its
institutional partners and will only work with partners who share
IG's values and ethics, have transparent and appropriate fee
structures and are of sufficient size. The number of institutional
partners has been reduced, to seek to ensure that all clients who
engage with the business through a partner will be offered the
same, quality outcomes as those who maintain a direct
relationship.
On 10 January 2018 the FCA released their findings on a review
of the provision and distribution of CFD products to clients on an
advisory or discretionary basis. As stated in the Company's
announcement of the same date, IG does not offer advisory or
discretionary services for CFD products and has terminated its very
small number of relationships with distributors who offer our CFD
product on this basis to retail clients within the UK and EU. IG
believes that it complies with the applicable rules and FCA
guidance and that this review has no new financial implications for
IG's business.
IG has a very clear target market and is committed to offering
the widest possible range of trading opportunities to clients who
fit within this target market. To this end, the Company launched
its first market on a cryptocurrency more than three years ago. IG
operates its cryptocurrency products on a responsible basis, only
allowing appropriate clients to open accounts. IG offers initial
leverage of 3:1 on new cryptocurrency positions; this reduces to
1:1 as a client increases the size of their exposure. IG follows
the same risk methodology towards cryptocurrencies as it does its
other products by hedging its net exposure in the physical and
futures markets and limiting the percentage of its financial
resources allocated to hedging.
Business Development
As announced in July, the company is developing a multi-lateral
trading facility (MTF) for the European market where IG believes
there is a significant opportunity in offering its products on
exchange. The on exchange market in Europe is considerably larger
than the OTC market, providing the Company with an opportunity to
appeal to a wider client base, strengthen its brand presence and
potentially, over time, expand the adjacent OTC market. IG plans to
offer only Limited Risk products on its MTF, so that every trade
has a guaranteed stop position, making the offering suitable for
less experienced clients.
IG serves its clients through a strong online presence supported
by local offices where the size of market, or local regulatory
requirements, demand it. The company continually reviews new
geographic opportunities and has identified potential in the US OTC
FX market, where it believes the market is currently underserved.
IG filed its licence application at the end of November to
establish a new subsidiary based in Chicago, and has commenced
hiring for key roles. The Company is targeting launch in the middle
of calendar 2018.
IG has applied to BaFIN, the German regulator, to establish a
subsidiary in Dusseldorf as a response to the UK's decision to
leave the EU. This office will combine the existing German sales
office with key management and control positions and will serve as
a regional hub for the Group's well-established EU business. The
establishment of this subsidiary will not have any impact on the
Company's UK operations.
Summary
The Group is taking action to mitigate the potential financial
impact of regulatory change, and to position the business so that
it will continue to deliver for all of its stakeholders under a
more restrictive regulatory environment. Clients who are eligible
are now able to elect to be categorised as professional, so that
they can continue to trade as they do today. The business is
developing new products and services, and is establishing
operations in new geographies, in order to broaden its client base,
extend its competitive advantage, and to allow it to continue to
market OTC leveraged derivatives to potential new clients for whom
it is appropriate.
In IG's experience, when proportionate regulation has been
applied consistently and appropriately, client outcomes have
improved, and compliant providers have benefitted over the longer
term.
As demonstrated by our record financial performance, demand for
the products and services offered by IG is strong, and growing. IG
will continue to lead the way in the industry, and the Company is
better placed than most, if not all, providers in the industry to
respond to regulatory change. The Company will continue to engage
fully with regulators, to seek to achieve the best possible
outcomes for current and future clients of this industry, and the
greatest long-term value for shareholders.
Outlook
The business continues to perform strongly, and revenue in the
second half to date is running around 25% higher than in the same
period last year. It remains difficult however to predict the level
of revenue in the short term. Operating costs in the second half
are expected to be higher than in the first half, and as previously
guided, operating costs excluding variable remuneration for the
full year are expected to remain at a similar level to FY17.
IG believes that any financial impact from the implementation of
the prohibition on binary options and the restrictions on CFDs
being considered by ESMA is unlikely to be significant in the
current financial year.
It remains difficult to predict what impact regulatory change
may have on the business in subsequent financial years. The Company
believes that had the measures currently being considered by ESMA
been in place throughout the previous financial year the reduction
in revenue in that year (taking into account the actions being
taken by the business to mitigate the impact) would have been less
than 10% including the impact from lower binary revenue. If such
measures were implemented the Company would expect to flex
marketing spend and resource allocation according to
opportunity.
Operating and Financial Review
Reporting Segments Revenue (GBPm) % Change Clients ('000s) % Change Revenue
per Client
% Change
----------------------- --------- --------- ------------
H1 FY18 H1 FY17 H1 FY18 H1 FY17
----------------------- -------- -------- --------- -------- -------- --------- ------------
UK 116.7 115.0 +1% 47.2 53.0 (11%) +14%
EMEA 76.6 67.0 +14% 36.0 35.8 +1% +14%
APAC 66.0 55.6 +19% 30.0 30.3 (1%) +20%
OTC Leveraged 259.3 237.6 +9% 113.3 119.1 (5%) +15%
----------------------- -------- -------- --------- -------- -------- --------- ------------
US 7.3 6.3 +16% 14.8 13.0 +13% +3%
Share Dealing &
Investments 1.8 1.0 +85% 29.1 13.3 +119% (15%)
Multi-Product Clients (5.2) (3.3) +60%
Group 268.4 244.9 +10% 151.9 142.2 +7% +3%
----------------------- -------- -------- --------- -------- -------- --------- ------------
Reporting Segments Client First Trades
----------------------- -----------------------------
H1 FY17 H2 FY17 H1 FY18
----------------------- -------- -------- ---------
UK 11,747 7,864 7,032
EMEA 7,997 7,757 5,744
APAC 5,279 5,083 5,251
----------------------- -------- -------- ---------
OTC Leveraged 25,023 20,704 18,027
----------------------- -------- -------- ---------
US 6,809 8,041 5,843
Share Dealing &
Investments 8,733 9,455 11,719
Multi-Product Clients (3,046) (2,806) (2,688)
----------------------- -------- -------- ---------
Group 37,519 35,394 32,901
----------------------- -------- -------- ---------
The financial tables above contain numbers which have been
rounded whilst all year-on-year percentages are calculated off
underlying unrounded numbers
Net trading revenue
IG delivered record revenue in the first half of GBP268.4
million, up 10% on the first half of the prior year (H1 FY17:
GBP244.9 million). Record revenue of GBP135.2 million was generated
in the first quarter, 21% ahead of the same period in the prior
year (Q1 FY17: GBP111.4 million), with revenue in the second
quarter of GBP133.2 million broadly flat compared with the same
period in the prior year (Q2 FY17: GBP133.4 million).
OTC leveraged revenue
OTC leveraged revenue of GBP259.3 million was 9% higher than in
the same period last year. The number of active clients was 5%
lower at 113,300 with revenue per client 15% higher. Revenue per
client was relatively consistent throughout the period, with
revenue per client in Q1 at GBP1,384 (Q1 FY17: GBP1,105) and in Q2
at GBP1,369 (Q2 FY17: GBP1,321). Revenue per client in the first
quarter of the prior year was dampened by the impact of management
actions to protect clients from the extreme volatility triggered by
the UK's EU referendum in June, and by the particularly strong new
client inflow in that period.
The number of active clients in the prior period was boosted by
the particularly strong new client inflow as a result of the
trading opportunities created by the EU referendum in June 2016,
and the US Presidential election in November 2016. The lower number
of active clients in the first half of this year compared with the
prior year reflects the relatively high level of attrition of the
clients recruited in the first half of FY17, and the lower level of
new client recruitment this year.
The number of new OTC leveraged clients who traded for the first
time in H1 FY18 was 18,027. This is lower than in previous periods
reflecting the introduction of a new appropriateness test for
prospective clients together with increased wealth hurdles, and a
lower level of advertising and marketing.
Revenue in the UK of GBP116.7 million was 1% higher than in the
prior period, with the lower level of active clients offset by
increased revenue per client of GBP2,470 (H1 FY17: GBP2,171).
Revenue in EMEA, which comprises our offices in France, Germany,
Ireland, Italy, Spain, Sweden Switzerland, Dubai and South Africa,
increased by 14% to GBP76.6 million. The number of active clients
in the region was up 1%, with revenue per client up by 14% to
GBP2,128 (H1 FY17: GBP1,871). The rate of revenue growth in the
non-EU offices has continued to exceed that in the more mature EU
based offices. During the period, management took the decision to
close the Ireland office with its client base now being managed
directly from London.
Revenue in APAC, which comprises our offices in Australia, Japan
and Singapore, increased by 19% to GBP66.0 million. The number of
active clients was down by 1% with revenue per client up by 20% to
GBP2,200 (H1 FY17: GBP1,834).
Around 5% of the OTC leveraged revenue in the period came from
clients trading cryptocurrencies, compared with less than 0.5% in
the prior period.
USA
Revenue from the exchange traded derivatives business in the USA
was up 16% to GBP7.3 million. Client numbers increased by 13% with
revenue per client rising by 3% to GBP492 (H1 FY17: GBP480).
Share Dealing and Investments
Revenue from the share dealing and investments products
increased by 85% to GBP1.8 million. Both products help to retain
existing OTC leveraged clients, and the share dealing product
provides an acquisition channel to attract new clients, for whom it
is appropriate, to OTC leveraged trading. Multi product clients
(who trade both OTC leveraged products and have a share dealing or
investments account) increased by 60% from the same period in the
prior year to 5,244. This is an important metric for the Group as
it shows engagement of our current client base in our whole product
set, with multi product clients having a higher value and longer
average tenure than single product clients.
Operating Expenses
Operating expenses excluding variable remuneration decreased by
7% to GBP117.6 million (H1 FY17: GBP126.0 million). Total operating
expenses including variable remuneration reduced by 4% to GBP132.5
million (H1 FY17: GBP137.9 million).
H1 FY18 H1 FY17
GBPm GBPm
Employee remuneration costs - fixed 46.3 46.2
Advertising and marketing 27.7 35.2
Depreciation and amortisation 8.8 7.5
Irrecoverable VAT and other sales taxes 6.2 7.8
Other costs 28.6 29.3
======== ========
Operating expenses excluding variable remuneration 117.6 126.0
Employee remuneration costs - variable 14.9 11.9
Operating expenses 132.5 137.9
======== ========
Operating expenses in the second half will include the charge
for the FSCS levy which is charged in full in the second half each
year (H2 FY17: GBP3.8 million). Marketing and advertising spend is
also expected to be higher than in the first half, as it is
anticipated that the second quarter run rate will be maintained.
Additionally, remuneration and other costs are expected to be
higher than in the first half as a result of the investments in
strategic initiatives including the MTF, the US OTC business and
the EU subsidiary. Overall, expenses excluding variable
remuneration for the full year are expected to be at a similar
level to the prior year.
Employee remuneration costs
Fixed employee remuneration costs of GBP46.3m were unchanged
compared with the prior year (H1 FY17: GBP46.2 million). Average
headcount has increased reflecting investment in client-service
roles and the full six months cost of the headcount associated with
Daily FX. The impact of the increase in headcount has been offset
by a lower average cost per head as roles have moved out of London;
to the Group's resource hubs in Poland, India and South Africa.
Variable employee remuneration costs increased by 25% to GBP14.9
million (H1 FY17: GBP11.9 million) reflecting a higher
discretionary bonus accrual in the six months compared to the prior
period as the Group has outperformed its internal targets.
Advertising and marketing costs
Advertising and marketing costs decreased by 21% to GBP27.7
million (H1 FY17: GBP35.2 million). Expenditure at the start of
this financial year was reduced to allow the business to assess the
impact of the revised appropriateness tests and wealth hurdles on
account applications and openings. Expenditure in the same period
in the prior year was elevated, reflecting the client recruitment
opportunity in that period due to the EU referendum.
Depreciation and amortisation
Depreciation and amortisation increased by GBP1.3 million to
GBP8.8 million (H1 FY17: GBP7.5 million). The increase reflects a
full six months' amortisation of the Daily FX website, which was
acquired in October 2016.
Irrecoverable VAT and other sales taxes
The Group does not recover all of the input VAT and other sales
taxes it incurs on its costs. The GBP6.2 million charge (H1 FY17:
GBP7.8 million) reflects the amounts not recovered. The decrease in
irrecoverable VAT and other sales taxes largely reflects the lower
marketing and advertising costs in the period.
Taxation
The effective tax rate (ETR) applied to the interim profit
before tax is 20.6%. This reflects the forecast full year effective
rate for FY18 (FY17: 20.8%).
The Group will recognise an additional tax charge of around
GBP1.3 million in the second half as a result of the recently
enacted reduction in the US corporation tax rate reducing the value
of the Group's deferred tax asset in relation to its US tax
losses.
Diluted Earnings per Share
Diluted earnings per share of 29.3 pence for the six month
period are 30% higher than the 22.6 pence for the same period last
year. Diluted earnings per share is used as a primary measure of
profitability and as a financial measure in relation to the
Executive Director and senior management share plans.
Interim Dividend
Consistent with the Group's stated interim dividend policy, the
Board has declared an interim dividend of 9.69 pence per share,
calculated as 30% of the full year ordinary dividend per share for
the prior year.
Cash generation, Investments and Dividends
The Group uses own funds generated from operations and net own
funds generated before dividends, as its key measures of cash
generation. The make-up of own funds is shown on the Balance Sheet
in Note A, and the Own Funds flow is shown in Note C of the Other
Information section in the Interim Financial Statements.
Own funds generated from operations of GBP139.0 million (H1
FY17: GBP101.0 million), compares with operating profit of GBP136.5
million (H1 FY17: GBP105.6 million), with a cash conversion rate,
calculated as own funds generated from operations divided by
operating profit, of 102% (H1 FY17: 96%).
Capital expenditure in the period of GBP8.5 million includes the
final instalment for the purchase of Daily FX of GBP3.0
million.
Net own funds generated before dividends totalled GBP103.7
million (H1 FY17: GBP40.3m).
Dividend payments to shareholders during the period comprised
the final dividend for the year to 31 May 2017 of GBP84.0
million.
The Group's own funds of GBP627.8 million at the period end are
GBP13.5 million higher than at 31 May 2017. This reflects the
GBP19.7 million of own funds generated after dividends, partly
offset by GBP6.2 million of foreign exchange translation reflecting
the reduction in GBP equivalent value of own funds in non-UK
businesses.
Liquidity
The Group's total liquid assets at the end of the period were
GBP790.6 million (31 May 2017: GBP731.4 million).
The Group's primary requirement for liquidity is the margin it
is required to deposit with its hedging brokers. The average broker
margin requirement (including the Group's holdings of
cryptocurrencies) in the six month period was GBP358 million, GBP72
million higher than the average in FY17, with a peak broker margin
requirement of GBP411 million during the period. At 30 November
2017, the actual broker margin requirement was GBP370.7 million (31
May 2017: GBP356.3 million).
The increase in the broker margin requirement reflects an
increase in the notional value of the Group's hedging trades
including an increase in the Group's holdings of cryptocurrencies
to hedge clients' trading positions.
The Group has access to a committed revolving credit facility of
GBP160 million to assist in liquidity risk management. The Group
draws down on its RCF during periods when broker margin is at
elevated levels and in advance of events that could result in an
elevated broker margin requirement, in order to reduce liquidity
risk. As at 30 November 2017 GBP50 million of the facility was
drawn down (30 November 2016: GBP50 million).
Regulatory Capital Resources
The calculation of the Group's consolidated capital resources
and capital ratio is shown in Note E of the Other Information
section in the Interim Financial Statements. The Group's capital
resources expressed as a percentage of the total requirement was
28.3% as at 30 November 2017, compared with the minimum requirement
for the Group of 19.0%.
Principal risks and uncertainties
The principal risks and uncertainties which could impact the
Group for the remainder of the current financial year remain
consistent with those detailed in the 2017 Group annual report.
There have been no significant changes in the Group's risk
management framework in the six month period ended 30 November 2017
and up to the date of approval of these financial statements.
IG's Risk Taxonomy categorises the principal risks faced by the
firm into five areas: the risks inherent in the regulatory
environment, the risks inherent in the commercial environment,
business model risk, operational risk and conduct risk.
Detail on all of the above risks and how they are managed is
included on pages 37 to 43 in the 2017 Group Annual Report, which
is available on: http://www.iggroup.com/files/AR_2017.pdf.
Consolidated interim income statement
for the six months ended 30 November 2017 (unaudited)
Unaudited Unaudited
Six months ended Six months ended
30 November 2017 30 November 2016
------------------------------------------------------------ ----- ------------------ ------------------
Note GBPm GBPm
Trading revenue 280.1 263.0
Introducing partner commissions (11.7) (18.1)
------------------------------------------------------------ ----- ------------------ ------------------
Net trading revenue 3 268.4 244.9
Betting duty and financial transaction taxes (2.7) (3.7)
Interest income on segregated client funds 2.2 2.1
Interest expense on segregated client funds (0.4) (0.3)
Other operating income 1.5 0.5
------------------------------------------------------------ ----- ------------------ ------------------
Net operating income 269.0 243.5
Operating expenses 4 (132.5) (137.9)
------------------------------------------------------------ ----- ------------------ ------------------
Operating profit 136.5 105.6
Finance income 1.3 0.9
Finance costs (1.6) (1.3)
------------------------------------------------------------ ----- ------------------ ------------------
Profit before taxation 136.2 105.2
Taxation 5 (28.1) (21.9)
Profit for the period 108.1 83.3
============================================================ ===== ================== ==================
Profit for the period attributable to owners of the parent 108.1 83.3
------------------------------------------------------------ ----- ------------------
108.1 83.3
============================================================ ===== ================== ==================
Earnings per ordinary share
- basic 6 29.5p 22.7p
- diluted 6 29.3p 22.6p
Notes 1 to 15 are an integral part of these condensed
consolidated interim financial statements.
Consolidated interim statement of comprehensive income
for the six months ended 30 November 2017 (unaudited)
Unaudited Unaudited
Six months ended Six months ended
30 November 2017 30 November 2016
---------------------------------------------------------------------- -------------------- --------------------
GBPm GBPm GBPm GBPm
Profit for the period 108.1 83.3
Other comprehensive (expense)/income:
Items that may be subsequently reclassified to the income statement:
Change in value of available-for-sale financial assets (0.6) (0.1)
Change in foreign currency translation (6.6) 15.1
---------------------------------------------------------------------- --------- --------- ---------- --------
Other comprehensive (expense)/income for the period, net of tax (7.2) 15.0
---------------------------------------------------------------------- --------- --------- ---------- --------
Total comprehensive income for the period 100.9 98.3
---------------------------------------------------------------------- --------- --------- ---------- --------
Total comprehensive income attributable to owners of the parent 100.9 98.3
====================================================================== ========= ========= ========== ========
The items of comprehensive income are stated net of related tax
effects which are negligible.
Notes 1 to 15 are an integral part of these condensed
consolidated financial statements.
Consolidated interim statement of financial position
at 30 November 2017 (unaudited)
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
Note GBPm GBPm GBPm
----------------------------------- ----- ------------- ------------ -------------
Assets
Non-current assets
Property, plant and equipment 15.8 17.4 13.4
Intangible assets 11 154.0 156.7 158.2
Financial investments 12 55.6 52.4 57.1
Deferred income tax assets 8.6 9.1 7.4
----------------------------------- ----- ------------- ------------ -------------
234.0 235.6 236.1
----------------------------------- ----- ------------- ------------ -------------
Current assets
Trade receivables 8 387.8 357.5 320.8
Prepayments and other receivables 11.1 12.2 15.4
Cash and cash equivalents 9 251.9 230.9 201.8
Financial investments 12 97.6 92.0 78.5
----------------------------------- ----- ------------- ------------ -------------
748.4 692.6 616.5
----------------------------------- ----- ------------- ------------ -------------
TOTAL ASSETS 982.4 928.2 852.6
=================================== ===== ============= ============ =============
Liabilities
Current liabilities
Trade payables 112.8 117.3 51.5
Other payables 50.3 62.5 58.2
Borrowings 10 50.0 - 50.0
Income tax payable 18.5 13.1 12.2
----------------------------------- ----- ------------- ------------ -------------
231.6 192.9 171.9
----------------------------------- ----- ------------- ------------ -------------
Non-current liabilities
Redeemable preference shares - - -
----------------------------------- ----- ------------- ------------ -------------
Total liabilities 231.6 192.9 171.9
----------------------------------- ----- ------------- ------------ -------------
Equity
Share capital - - -
Share premium 206.8 206.8 206.8
Other reserves 63.7 123.1 120.7
Retained earnings 480.3 405.4 353.2
----------------------------------- ----- ------------- ------------ -------------
Total equity 750.8 735.3 680.7
----------------------------------- ----- ------------- ------------ -------------
TOTAL EQUITY AND LIABILITIES 982.4 928.2 852.6
=================================== ===== ============= ============ =============
Notes 1 to 15 are an integral part of these condensed
consolidated interim financial statements.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 23 January 2018 and signed on
its behalf by:
P R Mainwaring, Chief Financial Officer
Consolidated interim statement of changes in equity
for the six months ended 30 November 2017 (unaudited)
Share Other reserves Retained earnings Total equity
Share capital premium
GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----------------- --------- --------------- ------------------ -------------
At 31 May 2016 - 206.8 102.2 354.0 663.0
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Profit for the period - - - 83.3 83.3
Other comprehensive income for the
period - - 15.0 - 15.0
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Total comprehensive income - - 15.0 83.3 98.3
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Equity-settled employee share-based
payments - - 4.5 - 4.5
Employee Benefit Trust purchase of
shares - - (1.0) - (1.0)
Equity dividends paid - - - (84.1) (84.1)
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Movement in equity - - 18.5 (0.8) 17.7
------------------------------------ ----------------- --------- --------------- ------------------ -------------
At 30 November 2016 - 206.8 120.7 353.2 680.7
==================================== ================= ========= =============== ================== =============
At 31 May 2017 - 206.8 123.1 405.4 735.3
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Profit for the period - - - 108.1 108.1
Other comprehensive expense for the
period - - (7.2) - (7.2)
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Total comprehensive
(expense)/income - - (7.2) 108.1 100.9
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Equity-settled employee share-based
payments - - 3.2 - 3.2
Employee Benefit Trust purchase of
shares - - (4.6) - (4.6)
Equity dividends paid - - - (84.0) (84.0)
Transfer of share based payment
reserve - - (50.8) 50.8 -
------------------------------------ ----------------- --------- --------------- ------------------ -------------
Movement in equity - - (52.2) (33.2) (85.4)
------------------------------------ ----------------- --------- --------------- ------------------ -------------
At 30 November 2017 - 206.8 63.7 480.3 750.8
==================================== ================= ========= =============== ================== =============
Notes 1 to 15 are an integral part of these condensed
consolidated interim financial statements.
Consolidated interim cash flow statement
for the six months ended 30 November 2017 (unaudited)
Unaudited Unaudited
Six months Six months
ended 30 ended
November 30 November
2017 2016
----------------------------------------------- ----- ------------ -------------
Note GBPm GBPm
Operating activities
Operating profit 136.5 105.6
Adjustments to reconcile operating profit
to cash generated from operations:
Depreciation and amortisation 8.8 7.5
Share-based payments charge 3.2 4.5
Increase in trade and other receivables (20.6) (45.7)
Increase in trade and other payables (21.8) (4.6)
----------------------------------------------- ----- ------------ -------------
Cash generated from operations 106.1 67.3
----------------------------------------------- ----- ------------ -------------
Income taxes paid (22.2) (23.0)
Net cash flow generated from operating
activities 83.9 44.3
----------------------------------------------- ----- ------------ -------------
Investing activities
Interest received 2.7 1.5
Purchase of property, plant and equipment (1.4) (4.1)
Payments to acquire and develop intangible
assets (7.1) (32.7)
Net cash flow from sale/purchase of financial
investments (10.7) (0.2)
Net cash flow used in investing activities (16.5) (35.5)
----------------------------------------------- ----- ------------ -------------
Financing activities
Interest paid (1.6) (1.3)
Equity dividends paid to owners of the
parent 7 (84.0) (84.1)
Net drawdown on revolving credit facility 50.0 50.0
Employee Benefit Trust purchase of shares (4.6) (1.0)
----------------------------------------------- ----- ------------
Net cash flow used in financing activities (40.2) (36.4)
----------------------------------------------- ----- ------------ -------------
Net increase/(decrease) in cash and cash
equivalents 27.2 (27.6)
Cash and cash equivalents at the beginning
of the period 230.9 218.8
Impact of movement in foreign exchange
rates (6.2) 10.6
Cash and cash equivalents at the end
of the period 9 251.9 201.8
=============================================== ===== ============ =============
Notes 1 to 15 are integral part of these condensed consolidated
interim financial statements.
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
1. General information
IG Group Holdings plc and its subsidiaries provide online
trading services allowing clients access to various financial
markets, including shares, indices, forex, commodities, binaries
and cryptocurrencies.
The consolidated interim condensed financial statements of IG
Group Holdings plc and its subsidiaries for the six months ended 30
November 2017 were authorised for issue by the Board of Directors
on 23 January 2018. IG Group Holdings plc is a public limited
company incorporated and domiciled in England and Wales. The
Company's ordinary shares are traded on the London Stock
Exchange.
The interim information, together with the comparative
information contained in this report for the year ended 31 May
2017, does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006. The interim information is
unaudited but has been reviewed by the Company's auditors,
PricewaterhouseCoopers LLP, and their report appears at the end of
these condensed interim financial statements. The financial
statements for the year ended 31 May 2017 have been reported on by
the Company's auditors and delivered to the Registrar of Companies.
The report of the auditors on those accounts was unqualified and
did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
2. Basis of preparation and accounting policies
Basis of preparation
The consolidated condensed interim financial statements for the
six months ended 30 November 2017 have been prepared in accordance
with the Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority and with IAS 34 "Interim Financial Reporting" as
adopted by the European Union (EU). The interim condensed
consolidated financial statements are presented in Sterling.
The consolidated interim condensed financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's Annual Report for the year ended 31 May 2017 which was
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU.
Throughout this report FY18, FY17 and FY16 refers to financial
years ended 31 May 2018, 31 May 2017 and 31 May 2016 respectively.
H1 FY18, H1 FY17 and H1 FY16 refers to the six months ended 30
November 2017, 30 November 2016 and 30 November 2015
respectively.
Going concern basis of accounting
The Group meets its day-to-day working capital requirements
through its available liquid assets and committed banking
facilities. The Group's liquid assets comprise cash balances
available to the Group for its own purposes and exclude all monies
held in segregated client money accounts. An element of the Group's
liquidity is not available for purposes of centrally performed
market risk management as it is held in overseas businesses for
purposes of local regulatory and working capital requirements or is
currently held within segregated client money bank accounts to
ensure the Group's segregation obligations are met.
In assessing whether it is appropriate to adopt the going
concern basis in preparing the condensed interim financial
statements, the Directors have considered the resilience of the
Group, taking account of its current position, the principal risks
facing the business in severe but reasonable scenarios, and the
effectiveness of any mitigating actions. Further details of these
principal risks and how they are mitigated is documented in the
2017 Group Annual Report on pages 37 to 43.
The Directors' assessment has considered the potential impacts
of these risks on the business model, future performance, solvency
and liquidity over a period of at least 12 months from the date of
approval of these condensed interim financial statements. The
Board, following the review by the Audit Committee, has a
reasonable expectation that the Group has adequate resources for
that period, and confirm that they consider it appropriate to adopt
the going concern basis in preparing these condensed interim
financial statements.
Critical accounting estimates and judgements
The preparation of these consolidated interim financial
statements requires the Group to make estimates and judgements that
impact the reported amounts of assets and liabilities as at the
interim reporting date and the amounts reported for revenues and
expenses during the period. The nature of estimates means that
actual outcomes could differ from those estimates. The significant
judgements and estimates applied by the Group in this interim
information have been applied on a consistent basis with the 2017
Group Annual Report.
In the Directors' opinion the accounting estimates or judgements
that have the most significant impact on the measurement of items
recorded in the interim financial statements are the following:
(a) The assessment of the useful economic life of the Group's
internally developed and acquired software, licenses, domain name
and generic top-level domain based intangible assets is judgmental
and can change due to obsolescence as a result of unforeseen
technological developments, and other factors. The useful life for
licenses represents management's view of the expected term over
which the Group will receive benefits from the software, and does
not exceed the licence term. For internally developed and acquired
software and domain assets the life is based on historical
experience with similar products as well as anticipation of future
events which may impact their useful economic life.
(b) The calculation of the Group's current corporation tax
charge involves a degree of estimation and judgement with respect
to certain items whose tax treatment cannot be finally determined
until resolution has been reached with the relevant tax authority.
Amounts to be paid/received may ultimately be materially different
than the amounts already accounted for and could therefore impact
the overall profitability and cash flows of the Group in future
periods.
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
(c) The measurement of the Group's net trading revenue
predominantly reflects transactions that have settled in cash and
accordingly involves little judgment. However, the calculation of
the segmental net trading revenue involves the use of an allocation
methodology determined by management, as the Group manages risk and
hedges on a group-wide portfolio basis. This allocation methodology
does not impact the overall Group net trading revenue
disclosed.
Significant accounting policies
The accounting policies, methods of computation and presentation
adopted in the preparation of the interim condensed financial
statements are consistent with those followed in the preparation of
the 2017 Group Annual Report except as described below:
-- Taxes on income in the interim periods are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
New accounting standards and interpretations - standards and
amendments adopted during the year
No new standards, amendments or interpretations, effective for
the first time for the financial year beginning on or after 1 June
2017 have had a material impact on the Group.
Seasonality of operations
The Directors consider that there is no predictable seasonality
to the Group's operations.
3. Segment information
The Executive Directors are the Group's chief operating
decision-maker (CODM). Management has determined the operating
segments based on the information reviewed by the Executive
Directors for the purposes of allocating resources and assessing
performance.
During the second half of the year ended 31 May 2017, the
management structure of the group evolved and the CODM now receive
information from the business on a different basis to previous
periods. Accordingly, the segmental reporting for the comparative
period has been restated.
The Executive Directors continue to consider the business
performance principally from a geographic perspective, namely the
United Kingdom (UK), Europe, Middle East and Africa (EMEA), Asia
Pacific (APAC) and the United States of America (US):
- The UK segment comprises the group's local trading activities in the United Kingdom.
- The EMEA segment comprises the group's local trading
activities in Ireland, France, Germany, Italy, Luxembourg, Spain,
Sweden, Switzerland, United Arab Emirates and South Africa.
- The APAC segment comprises the group's local trading
activities in Australia, Singapore and Japan.
- The US segment comprises the group's local trading activities in the US.
The UK segment derives its net trading revenue from OTC
leveraged derivatives, share dealing, and investments. The EMEA and
APAC segments derive their net trading revenue from OTC leveraged
derivatives and share dealing. The US segment derives its net
trading revenue from exchange traded derivatives.
Segment net trading revenue is stated after deducting
introducing partner commissions as this is consistent with the
management information received by the Executive Directors.
Net trading revenue from OTC leveraged derivatives is reported
by segment reflecting the location of the office that manages the
underlying client relationship and represents an allocation of the
net trading revenue that the Group generates from clients' trading
activity.
The Executive Directors review segment contribution as the
measure of segment profit or loss. Segment contribution is segment
net trading revenue less direct costs, which are reported by
segment reflecting the costs that are directly related to
activities within that region or controlled by management in that
region.
The Group manages market risk and a number of other activities
on a group-wide portfolio basis and accordingly a large proportion
of costs are incurred centrally. These central costs are not
allocated to individual segments for decision making purposes for
the CODM and accordingly these costs have not been allocated to
segments.
Capital expenditure is predominantly managed centrally and
depreciation and amortisation is not allocated to individual
segments for decision making and accordingly has not been allocated
to segments in these financial statements.
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
Six months ended 30 November UK EMEA APAC US Central Total
2017 (unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ------- ------- ------ -------- -------
Segment net trading revenue 118.1 76.7 66.3 7.3 268.4
Betting duty and financial
transaction taxes (2.5) (0.2) (2.7)
Interest income on segregated
client funds 2.2 2.2
Interest expense on segregated
client funds (0.4) (0.4)
Other operating income 1.5 1.5
-------------------------------- ------- ------- ------- ------ -------- -------
Net operating income 115.6 76.5 66.3 7.3 3.3 269.0
Direct costs (23.2) (26.1) (14.2) (7.1) (70.6)
-------------------------------- ------- ------- ------- ------ -------- -------
Segment contribution 92.4 50.4 52.1 0.2 3.3 198.4
Central costs (53.1) (53.1)
Depreciation and amortisation (8.8) (8.8)
-------------------------------- ------- ------- ------- ------ -------- -------
Operating profit 136.5
Net finance cost (0.3)
-------------------------------- ------- ------- ------- ------ -------- -------
Profit before taxation 136.2
================================ ======= ======= ======= ====== ======== =======
Six months ended 30 November UK EMEA APAC US Central Total
2016 (restated) (unaudited)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ------- ------- ------ -------- -------
Segment net trading revenue 115.9 67.1 55.6 6.3 244.9
Betting duty and financial
transaction taxes (3.5) (0.2) (3.7)
Interest income on segregated
client funds 2.1 2.1
Interest expense on segregated
client funds (0.3) (0.3)
Other operating income 0.5 0.5
-------------------------------- ------- ------- ------- ------ -------- -------
Net operating income 112.4 66.9 55.6 6.3 2.3 243.5
Direct costs (26.8) (27.8) (13.1) (6.2) (73.9)
-------------------------------- ------- ------- ------- ------ -------- -------
Segment contribution 85.6 39.1 42.5 0.1 2.3 169.6
Central costs (56.5) (56.5)
Depreciation and amortisation (7.5) (7.5)
-------------------------------- ------- ------- ------- ------ -------- -------
Operating profit 105.6
Net finance cost (0.4)
-------------------------------- ------- ------- ------- ------ -------- -------
Profit before taxation 105.2
================================ ======= ======= ======= ====== ======== =======
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
4. Operating expenses
Unaudited Unaudited
Six months ended Six months ended
30 November 2017 30 November 2016
GBPm GBPm
Employee remuneration including related social security costs are as follows:
Wages and salaries and other pension costs in relation to defined
contribution schemes 46.3 46.2
Equity-settled share-based payment awards 3.9 4.4
Performance related bonus 11.0 7.5
------------------ ------------------
Employee related expenses 61.2 58.1
------------------ ------------------
Advertising and marketing 27.7 35.2
Premises-related costs 6.6 6.3
Telephone and data 1.1 1.0
IT Maintenance and support 5.4 5.9
Market Data 4.5 5.0
Legal and professional costs 3.7 3.6
Regulatory fees 0.5 0.2
Net charge for impaired trade receivables (0.3) 1.7
Irrecoverable VAT and other sales taxes 6.2 7.8
Payment card charges 2.3 0.7
Depreciation and amortisation 8.8 7.5
Other costs 4.8 4.9
------------------ ------------------
132.5 137.9
================== ==================
Included in premises-related costs is operating lease rentals
for office space of GBP3.9 million (six months ended 30 November
2016: GBP3.1 million).
5. Taxation
Income tax expense is recognised based on management's estimate
of the annual income tax rate expected for the full financial year.
The estimated effective annual tax rate for the year ending 31 May
2018 is 20.6% (year ended 31 May 2017: 20.8%).
The above estimated effective annual tax rate for FY18 does not
include GBP1.3 million that will be charged in the second half as a
result of the recently enacted reduction in the US corporation tax
rate, reducing the value of deferred tax assets in the US.
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares in
issue during the period, excluding shares purchased and held as own
shares in Employee Benefit Trusts. Diluted earnings per ordinary
share is calculated using the same profit figure as that used in
basic earnings per ordinary share and by adjusting the weighted
average number of ordinary shares used in the basic earnings per
share calculation to assume conversion of all dilutive ordinary
shares arising from share schemes.
The following reflects the income and share data used in the
earnings per share computations:
Unaudited Unaudited
Six months Six months
ended ended
30 November 30 November
2017 2016
GBPm GBPm
Profit for the period:
Earnings attributable to equity
shareholders of the parent 108.1 83.3
============= =============
Number Number
Weighted average number of ordinary
shares
Basic 366,554,430 366,565,292
Dilutive effect of share-based
payments 2,177,243 2,886,268
------------ ------------
Diluted 368,731,673 369,451,560
============ ============
Unaudited Unaudited
Six months Six months
ended ended
30 November 30 November
2017 2016
Basic earnings per ordinary share 29.5p 22.7p
Diluted earnings per ordinary share 29.3p 22.6p
============= =============
7. Dividends paid and proposed
Unaudited Unaudited
Six months Six months
ended ended
30 November Year ended 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
Amounts recognised as distributions
to equity holders during the
period:
Interim dividend of 9.42p for - 34.6 -
FY17 (FY16: 8.45p)
Final dividend of 22.88p for
FY17 (FY16: 22.95p) 84.0 83.9 84.1
------------- -------------- -------------
84.0 118.5 84.1
============= ============== =============
The proposed interim dividend for FY18 of 9.69p per share
amounting to GBP35.6 million was approved by the Board on 23
January 2018 and has not been included as a liability at 30
November 2017. This dividend will be paid on 2 March 2018 to those
members on the register at the close of business on 2 February
2018.
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
8. Trade receivables
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
Amounts due from brokers 324.4 313.0 285.6
Own funds in client money 61.1 43.4 31.5
Amounts due from clients 2.3 1.1 3.7
------------- ------------ -------------
387.8 357.5 320.8
============= ============ =============
Amounts due from brokers represent balances with brokers where
the combination of cash held on account and the valuation of
financial derivative open positions results in an amount due to the
Group. In addition to the GBP324.4 million (31 May 2017: GBP313.0
million and 30 November 2016: GBP285.6 million) the Group had
GBP71.9 million (31 May 2017: GBP63.2 million and 30 November 2016:
GBP53.0 million) of UK Government Securities held as collateral at
brokers.
Amounts due from brokers include GBP66.8 million (31 May 2017:
GBP11.9 million and 30 November 2016: GBP6.2 million) relating to
cash and cryptocurrencies held on exchanges and in third party
vaults. Cryptocurrency assets are valued on a fair value basis
using exchange prices.
Amounts due from brokers include open derivative financial
assets positions of GBP16.4 million (at 31 May 2017: liabilities of
GBP0.6m and 30 November 2016: assets of GBP0.1 million) classified
as Level 1 under IFRS and open derivative financial liabilities
positions of GBP3.0 million (at 31 May 2017: liabilities of
GBP17.9m and 30 November 2016: assets of GBP5.7 million) classified
as Level 2 under IFRS.
Own funds in client money represents the Group's own cash held
in segregated client funds, in accordance with the UK's Financial
Conduct
Authority (FCA) 'CASS' rules and similar rules of other
regulators in whose jurisdiction the Group operates including
GBP18.1 million (31 May 2017: GBP12.7 million and 30 November 2016:
GBP2.0 million) to be transferred to the Group on the following
business day and GBP2.7 million (31 May 2017: GBP2.9 million and 30
November 2016: GBPnil) variation margin for title transfer
clients.
Amounts due from clients arise when a client's total funds
deposited with the Group are insufficient to cover any trading
losses incurred or when a client utilises a trading credit limit,
stated net of an allowance for impairment.
9. Cash and cash equivalents
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
Cash and cash equivalents 251.9 230.9 201.8
============= ============ =============
Cash and cash equivalents includes:
-- Title transfer funds of GBP69.1 million (31 May 2017: GBP60.0
million and 30 November 2016: GBP28.6 million) held by the Group
under a title transfer collateral arrangement (TTCA) under which a
client agrees that full ownership of such monies is unconditionally
transferred to the Group.
-- Client monies deposited with the Group's Swiss banking
subsidiary, IG Bank SA, of GBP43.7 million (31 May 2017: GBP57.1
million and 30 November 2016: GBP19.7 million)
10. Borrowings
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
Current
Draw down on revolving credit
facility 50.0 - 50.0
------------- ---------------- -------------
50.0 - 50.0
============= ================ =============
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
11. Intangible assets
Goodwill Domain Internally Software Total
names Development and licences
software
GBPm GBPm GBPm GBPm GBPm
Net book value - 30 November
2017 107.8 28.7 14.6 2.9 154.0
========= ======= ============= ============== ======
Net book value - 31 May
2017 108.1 32.5 12.9 3.2 156.7
========= ======= ============= ============== ======
Net book value - 30 November
2016 108.2 35.3 11.7 3.0 158.2
========= ======= ============= ============== ======
Goodwill primarily relates to the purchase of IG Group plc by IG
Group Holdings Limited.
Domain names include the cost of acquiring IG.com, a suite of
complementary domains to support the Group's global brand and
DailyFX.
In line with the Group's accounting policy for domain names and
generic top-level domains, domain names are amortised over ten
years.
Software and licenses relate to external purchases of
commercially available software for internal consumption within the
Group.
The expected useful lives of each class of intangible asset are
set out in note 34, Accounting Policies, in the 2017 Group Annual
Report.
12. Financial investments
Financial investments are UK Government securities held for the
following purposes:
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
Liquid asset buffer 81.3 81.2 82.6
Collateral at brokers 71.9 63.2 53.0
153.2 144.4 135.6
============= ============ =============
Split as:
* Non-current portion 55.6 52.4 57.1
* Current portion 97.6 92.0 78.5
153.2 144.4 135.6
============= ============ =============
Certain UK government securities are held by the Group in
satisfaction of the FCA requirements to hold a 'liquid asset
buffer' against potential liquidity stress under BIPRU 12.
During the period ended 30 November 2017 the Group purchased UK
government gilts for GBP65.7 million (year ended 31 May 2017:
GBP120.4 million and period ended 30 November 2016: GBP32.1
million) and disposed of gilts for GBP55.0 million (year ended 31
May 2017: GBP112.4 million and period ended 30 November 2016
GBP31.9 million).
The effective interest rates of securities held at period end,
during the period range from 0.07% to 0.84% (year ended 31 May
2017: from 0.03% to 0.59% and period ended 30 November 2016: from
0.5% to 1.0%).
Financial investments are shown as current assets when they have
a maturity of less than one year and are held as
'available-for-sale'. The fair value of securities held is based on
closing market prices at period end as published by the UK Debt
Management Office.
Financial investments are classified as Level 1 under IFRS (31
May 2017 and 30 November 2016: Level 1).
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
13. Related party transactions
The basis of remuneration of key management personnel remains
consistent with that disclosed in the 2017 Annual Report. There
were no other related party transactions which had a material
impact on these consolidated interim condensed financial
statements.
14. Contingent liabilities and provisions
There are currently no contingent liabilities expected to have a
material adverse financial impact on the Group's consolidated and
condensed results or net assets. The Group had no material
provisions at 30 November 2017 (31 May 2017 and 30 November 2016:
GBPnil).
15. Financial risk management
Financial risks arising from financial instruments are analysed
into market, credit, concentration and liquidity risks. These
condensed interim financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements. Details of how these risks are managed are
discussed in the financial risk management note on page 127 of the
2017 Group Annual Report.
There has not been a significant change in the Group's financial
risk management processes or policies since the year end.
Details of the financial instruments valuation hierarchy is
provided in notes 8 and 12. The definitions, details of the inputs
and the valuation techniques in determining the fair values of the
Group financial instruments are shown on page 125 of the 2017 Group
Annual Report.
There have been no changes in the valuation techniques for any
of the Group's financial instruments held at fair value in the
period (year ended 31 May 2017 and period ended 30 November 2016:
none). There were no transfers between Level 1 and Level 2 fair
value measurements, and no transfers into or out of Level 3 for the
period ended 30 November 2017 (year ended 31 May 2017 and period
ended 30 November 2016: none).
Fair value of financial assets and liabilities measured at
amortised cost
The fair value of the following financial assets and liabilities
approximate their carrying amount:
-- trade and other receivables (excluding the Group's open financial derivative positions);
-- cash and cash equivalent; and
-- trade and other payables.
Notes to the consolidated interim condensed financial
statements
for the six months ended 30 November 2017 (unaudited)
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that the
consolidated condensed interim financial statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting",
as adopted by the European Union, gives a true and fair view of the
assets, liabilities, financial position and profit and loss the
Group, and that the interim management report herein includes a
fair review of the information required by Disclosure and
Transparency Rules 4.2.7 and 4.2.8, namely:
-- an indication of important events that have occurred during
the six months ended 30 November 2017 and their impact on the
consolidated condensed interim financial statements, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- material related party transactions in the six months ended
30 November 2017 and any material changes in the related party
transactions described in the last Annual Report.
The Directors of IG Group Holdings plc are as listed in the IG
Group Holdings plc 2017 Annual Report. A list of current directors
is maintained on the IG Group Holdings plc website:
www.iggroup.com
On behalf of the Board
P R Mainwaring
Chief Financial Officer
Independent review report to IG Group Holdings Plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed IG Group Holdings plc's consolidated interim
condensed financial statements (the "interim financial statements")
in the interim results of IG Group Holdings plc for the 6 month
period ended 30 November 2017. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
the consolidated interim statement of financial position as at
30 November 2017;
the consolidated interim income statement and consolidated
interim statement of comprehensive income for the period ended 30
November 2017;
the consolidated interim statement of cash flows for the period
then ended;
the consolidated interim statement of changes in equity for the
period then ended; and
the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial information and the
review
Our responsibilities and those of the Directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of condensed consolidated financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
23 January 2018
London
(a)The maintenance and integrity of the IG Group website is the
responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b)Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions
Other information:
The following supplemental notes provide additional analysis to
aid the readers of the unaudited interim financial statements, and
are outside the scope of the interim review report:
A. Balance sheet
Unaudited 31 May 2017 Unaudited
30 November 2017 GBPm 30 November
GBPm 2016
GBPm
---------------------------------- ------------------ ------------ -------------
Intangible assets arising on
acquisition 107.8 108.1 108.2
Intangible assets 46.2 48.6 50.0
Property plant and equipment 15.8 17.4 13.4
---------------------------------- ------------------ ------------ -------------
Fixed assets 169.8 174.1 171.6
---------------------------------- ------------------ ------------ -------------
Liquid assets buffer 81.3 81.2 82.6
Amounts held at/due from brokers 396.3 376.1 338.6
Cash in IG bank accounts 251.9 230.9 201.8
Own funds in client money 61.1 43.2 28.3
---------------------------------- ------------------ ------------ -------------
Liquid assets 790.6 731.4 651.3
Short term bank borrowings (50.0) - (50.0)
Client funds on balance sheet
- title transfer clients (69.1) (60.0) (28.6)
Client funds on balance sheet
- Swiss banking subsidiary (43.7) (57.1) (19.7)
Own funds 627.8 614.3 553.0
---------------------------------- ------------------ ------------ -------------
Working capital (36.9) (49.1) (39.1)
Tax payable (18.5) (13.1) (12.2)
Deferred tax assets 8.6 9.1 7.4
Net assets/shareholders' funds 750.8 735.3 680.7
================================== ================== ============ =============
B. Client funds and assets
Segregated client funds comprise individual client funds held in
segregated client money accounts or money market facilities
established under the UK's Financial Conduct Authority (FCA) CASS
rules and similar rules of regulators in other jurisdictions where
the Group operates. Client funds and client assets are not included
in the Group's Statement of Financial Position.
Unaudited
Unaudited 30 November
30 November 2017 31 May 2017 2016
GBPm GBPm GBPm
Segregated client funds 1,270.4 1,215.3 1,132.3
Segregated client assets 726.8 499.8 308.0
------------------ ------------ -------------
Total segregated client funds and
assets 1,997.2 1,715.1 1,440.3
================== ============ =============
In addition, the Group's Swiss banking subsidiary, IG Bank SA,
is required to protect customer deposits under the FINMA Privileged
Deposit Scheme. At 30 November 2017, IG Bank SA was required to
hold GBP16.1 million (31 May 2017: GBP16.5 million and 30 November
2016: GBP12.3 million) in satisfaction of this requirement. This
amount is included in cash in IG bank accounts on the Balance
Sheet.
C. Own funds flow
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
--------------------------------------- ------------- ------------ ---------------
Own Funds Cash Flow:
Operating profit 136.5 213.4 105.6
Depreciation and amortisation 8.8 16.4 7.5
Share based payments 3.2 7.7 4.5
Movement in working capital (9.5) (8.3) (16.6)
---------------------------------------- ------------- ------------ -------------
Own funds generated from operations 139.0 229.2 101.0
Income tax paid (22.2) (45.3) (23.0)
---------------------------------------- ------------- ------------ -------------
Net own funds generated from
operating activities 116.8 183.9 78.0
Interest received 1.6 2.0 1.5
Interest paid (1.6) (1.4) (1.3)
Purchase of Daily FX (3.0) (29.8) (29.8)
Purchase of other capital expenditure (5.5) (17.1) (7.1)
Employee Benefit Trust purchase
of shares (4.6) (1.1) (1.0)
---------------------------------------- ------------- ------------ -------------
Net own funds generated before
dividends 103.7 136.5 40.3
Dividends (84.0) (118.7) (84.1)
Increase in own funds 19.7 17.8 (43.8)
======================================== ============= ============ =============
Own funds at start of the period 614.3 587.7 587.7
Impact of movement in foreign
exchange rates (6.2) 8.8 9.1
Own funds at end of the period 627.8 614.3 553.0
======================================== ============= ============ =============
D. Liquidity
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
--------------------------------------------------------- ------------- ------------ -------------
Liquid assets 790.6 731.4 651.3
Broker margin requirement (370.7) (356.3) (277.6)
Non-UK liquid assets (149.5) (134.6) (96.6)
Own funds in client money (61.1) (43.2) (28.3)
---------------------------------------------------------- ------------- ------------ -------------
Total available liquidity at
the end of the period 209.3 197.3 248.8
---------------------------------------------------------- ------------- ------------ -------------
Of which is:
Held as liquid asset buffer 81.3 81.2 82.6
Dividend due 35.6 83.9 34.6
RCF drawings 50.0 - 50.0
Additional sources of liquidity
* Undrawn committed Revolving Credit Facility 110.0 160.0 110.0
---------------------------------------------------------- ------------- ------------ -------------
E. Regulatory capital
Group consolidated capital resources and requirements
Unaudited Unaudited
30 November 30 November
2017 31 May 2017 2016
GBPm GBPm GBPm
---------------------------------- ------- ------------- ------------ -------------
Shareholders' funds 750.8 735.3 680.7
------------------------------------------- ------------- ------------ -------------
Less foreseeable declared
dividends (35.6) (83.9) (34.6)
Less acquisition intangibles (107.8) (108.1) (108.2)
Less other intangible assets (46.2) (48.6) (50.0)
Less deferred tax assets (8.6) (9.1) (7.4)
------------------------------------------- ------------- ------------ -------------
Capital resources A 552.6 485.6 480.5
---------------------------------- ------- ------------- ------------ -------------
Group consolidated capital
requirement (unaudited)
Pillar 1 Risk Exposure Amounts
(REA)
---------------------------------- ------- ------------- ------------ -------------
Total Pillar 1 REA B 1,951.8 1,817.3 1,647.6
---------------------------------- ------- ------------- ------------ -------------
Capital ratio A/B=C 28.3% 26.7% 29.2%
Required capital ratio
---------------------------------- ------- ------------- ------------ -------------
Pillar 1 minimum D 8.0% 8.0% 8.0%
Individual Capital Guidance
(ICG) E 9.4% 9.4% 9.4%
---------------------------------- ------- ------------- ------------ -------------
D +
E =
ICG requirement F 17.4% 17.4% 17.4%
plus combined buffer requirement G 1.6% 1.3% 0.6%
---------------------------------- ------- ------------- ------------ -------------
F+G
Total requirement % =H 19.0% 18.7% 18.0%
================================== ======= ============= ============ =============
H x
B =
Total requirement - GBPm I 370.8 339.8 296.6
A -
Capital headroom - GBPm I 181.8 145.7 183.9
================================== ======= ============= ============ =============
The Group is required under FCA rules to hold a minimum amount
of capital in accordance with the Individual Capital Guidance
('ICG') periodically determined by the FCA. This requirement is
based on the FCA's supervisory review and evaluation process
('SREP') of the Group.
The FCA determine the ICG following review of the Group's
Internal Capital Adequacy Assessment Process ('ICAAP') through
which the Group calculates the amount of capital that should be
held against specific firm risks, in addition to the Pillar 1
requirements.
The most recent SREP resulted in an ICG of 9.4% with effect from
August 2016, of Pillar 1 Risk Exposure Amounts.
Additionally, the Group must hold capital to meet the higher of
the internally calculated Capital Planning Buffer and the
combination of the Conservation and Countercyclical buffers.
As at 30 November 2017, the Group's minimum capital ratio was
19.0%, and its actual capital ratio was 28.3%.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UURARWRAAUUR
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