Trading Update and Capital Markets Day
23 May 2018
LEI No: 2138003A5Q1M7ANOUD76
IG GROUP HOLDINGS PLC
Trading Update and Capital Markets Day
IG Group Holdings plc ("IG", "the Group", "the Company") today issues a trading update on its financial year ending 31 May 2018 ("FY18"). The Company is also hosting a Capital Markets Day today for investors and analysts at its London head office, and sets out below the new and updated information that will be disclosed at that meeting.
Trading Update
IG has continued to perform well in the final quarter of FY18. Net trading revenue for the full year is expected to be around £565m (FY17: £491m).
The Group's operating expenses for FY18, excluding variable remuneration, are expected to be around £254m (FY17: £253m), in line with previous guidance. The Group's charge for variable remuneration is expected to be around £36m (FY17: £24m).
Outlook
The Group expects the product intervention measures announced by ESMA on 27 March 2018 to come into effect in the first half of FY19. As previously disclosed:
- the Company believes that the reduction in historic revenue from the implementation of the measures announced by ESMA, taking into account the expected proportion of revenue that will be generated from clients categorised as professional, would have been approximately 10%
- the Company expects that its revenue in FY19 will be lower than that expected for FY18, reflecting the impact of the regulatory changes in the UK and EU
- the Company expects to return to growth after FY19
Capital Markets Day Content
At the Capital Markets Day today the Group's senior management will set out how and why the Group's business is well positioned to mitigate the impact of regulatory change and to deliver sustainable growth and attractive shareholder returns. This includes setting out:
- the Group's vision and values
- its approach to risk management
- more detailed analysis of the cost base
- specific actions being taken to deliver growth from existing and new countries and from product and platform innovation
- explanation of the key areas of the business (prospect acquisition, sales and client service, technology, and internalisation and dealing) and how these activities contribute to the Group's sustainable competitive advantage
New and updated information
The Group has received around 15,000 applications since November 2017 from clients to elect to be categorised as professional, and 3,800 clients are now categorised as professional. The Group's process for assessing these applications is appropriately rigorous and over three-quarters of the applicants to date have been rejected. Clients categorised as professional contributed over 35% of UK and EU OTC leveraged revenue in the last three months, and the Group continues to expect this proportion to rise to 50% when the ESMA measures come into effect.
IG is supportive of the objectives of regulators to improve client outcomes, and the Group will continue to engage with regulators across the globe in their efforts to develop appropriate regulation of the industry. There are a number of actions that retail clients may take in response to the ESMA measures. The Group will allow appropriate retail clients to continue to trade as they choose where this is fully compliant with the regulatory rules.
The Group believes that macro trends will continue to fuel business growth. The business expects to benefit from its US subsidiary serving the OTC FX market, which is planned to go live by the end of the first half of FY19, from the MTF in Europe that is expected to be live for FY20, and from acquiring licences to operate in jurisdictions in selected emerging markets that fit our strict criteria.
The Group intends to continue to invest to broaden the business's product offering and to reinforce its competitive advantage. Operating expenses excluding variable remuneration are expected to increase in FY19 reflecting the Group's continued investment in product and platform development and additional headcount in sales and client service. Total operating costs (operating expenses plus variable remuneration) in FY19 are expected to be at a similar level to the £290m total operating costs in FY18, reflecting a lower expected charge for variable remuneration.
A number of large technology firms are taking action on inappropriate advertising and marketing, and on unlicensed operators in the industry. These actions include introducing bans on the advertising and marketing of cryptocurrencies and binary options, and the requirement that firms advertising and marketing CFDs can demonstrate that they are appropriately licensed in those jurisdictions in which the services are being promoted. The Group also expects that some of the large payment and card providers will soon introduce rules to ensure that these businesses only facilitate payments from and to clients in jurisdictions in which the firms are appropriately licensed.
IG has delivered a sustainable business by placing good client outcomes at the heart of everything it does. As a compliant provider of its services, and with a model of operating through local presence with local regulatory approvals, the Company does not expect that the actions currently being taken, if applied appropriately, will have any significant impact on its business.
Effective Tax Rate
The Group expects that it will be granted a patent, today, by the UK Patent Office for its invention in measuring latency. In addition, the Group has been notified that patents are expected to be granted by the European Patent Office in the next few months for inventions relating to automatic pricing and for the synchronisation of independent systems. As a result of the Group recognising the benefit of a 'patent box' claim in its FY18 results, the effective tax rate ("ETR") for FY18 is expected to be around 19.5% (FY17: 20.8%), including the impact of the reduction in value of its US deferred tax assets.
The presentation materials from the Capital Markets Day will be available by close of business today on the Group website http://www.iggroup.com/
For further information, please contact:
IG Group
Liz Scorer 020 7573 0727
FTI Consulting
Neil Doyle / Ed Berry 020 3727 1141 / 1046
Disclaimer - Market abuse regulation and forward-looking statements
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under 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.
This 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.
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 firm, 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 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, February 2018)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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