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IG Group Hldgs plc (IGG)

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Thursday 21 January, 2021

IG Group Hldgs plc

Interim Results

RNS Number : 3916M
IG Group Holdings plc
21 January 2021
 

 

IG Group Holdings plc

LEI No: 2138003A5Q1M7ANOUD76

 

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.

 

 

IG GROUP HOLDINGS PLC

 

21 January 2021

 

 

IG Group Holdings plc ("IG", "the Group", "the Company"), a global leader in online trading, today announces its results for the six months ended 30 November 2020 ("H1 FY21").

 

' Delivered record revenue and profit while continuing to build a diversified, global business, driven by a step change in the size of the client base and aided by continued favourable trading conditions'

 

Highlights

-  A record performance in H1 FY21:

-  Net trading revenue up 67% to £416.9 million (H1 FY20: £249.9 million)

-  Profit before tax increased 129% to £231.3 million (H1 FY20: £101.2 million)

-  Active clients rose 55% to 238,600 (H1 FY20: 154,000), 64,000 new clients onboarded (H1 FY20: 28,800)

-  New client retention rates are comparable to historical averages

-  Capital, funding, and liquidity remain very strong with regulatory capital resources of £712.3 million (31 May 2020: £675.5 million)

-  Interim cash dividend of 12.96 pence per share (H1 FY20: 12.96 pence per share)

-  Excellent progress in executing the growth strategy:

-  Revenue of £340.6 million in Core Markets (H1 FY20: £209.9 million), up 62%

-  Revenue of £76.3 million in Significant Opportunities (H1 FY20: £40.0 million), up £36.3 million

-  Successfully served a substantially larger client base and handled sharply elevated trading volumes,  brought about by the dedication of our people and resilience of our platform, made possible by the continued investment in both

Announced the landmark acquisition of tastytrade, a transaction that expands and diversifies IG's growth drivers into US options and futures, through entry into the largest listed derivatives market in the world

-  Continued support of the Company's broader communities through Group-wide environmental, social and governance (ESG) activities:  

-  Distributed £2 million of IG's Brighter Future fund to selected charities to improve the educational opportunities for disadvantaged children across the world through the Teach for All network

-  Distributed a further £1 million from the fund to selected charities in need of Covid-19 pandemic relief

 

Financial Summary  

 

 

H1 FY21

H1 FY20

Change %

 

 

 

 

 

 

Net trading revenue (£ million)

416.9

249.9

67%

 

Total operating costs (£ million)

188.2

154.1

22%

 

Profit before tax (£ million)

231.3

101.2

129%

 

Profit after taxation (£ million)

187.1

82.4

127%

 

Basic earnings per share (pence)

50.7

22.4

126%

 

Interim dividend per share (pence)

12.96

12.96

unchanged

 

 

 

 

 

 

 

 

 

June Felix, Chief Executive, commented:

"I am delighted to announce an outstanding performance over the first six months of our financial year. We delivered record revenue and profit, made excellent progress against our strategic growth objectives and continued to build a more sustainable and diversified global business.

 

Demand for our products remained high, benefitting from favourable trading conditions, although it is the quality of our technology and the dedication of our people, throughout the global pandemic, that has enabled us to convert this demand into a step change in the size of our active client base. 

 

We empower our clients as they seek opportunities to trade, providing them with a superior platform, innovative products and exceptional service to deliver an excellent trading experience. We are rewarded by their loyalty.

 

Today we also share details of our proposed acquisition of tastytrade. This is an incredibly exciting, landmark deal that is fully aligned to the growth strategy we set out in May 2019. It will see IG diversify into the high growth market of US exchange traded options and futures, a market with an estimated 1.5 million retail traders, and we are confident that this transaction will materially expand our US presence.

 

As we enter the second half of the year I believe that we are better positioned than ever before to deliver sustainable value."

 

 

Further information

 

IG Group Investor Relations  IG Group Press FTI Consulting

Liz Scorer                                                Ramon Kaur  Edward Berry

020 7573 0727                                        020 7896 0011 / 07388 440 127            07703 330 199

Fergus Witt                                              [email protected]

020 7573 0741 

 

 

Analyst presentation

 

There will be an analyst and investor presentation at 9:30am (UK Time) on Thursday 21 January.

The presentation will also be accessible live via audio webcast at https://pres.iggroup.com/ig054/ . If you wish to listen via conference call, please use the following link https://pres.iggroup.com/ig054/vip_connect .   The audio webcast of the presentation and a transcript will be archived at:  www.iggroup.com/investors .

 

 

Financial reporting calendar

 

IG regularly updates the market on financial performance and delivery against strategy. The Company believes that four updates a year is comprehensive and therefore will no longer be providing a Trading Update ahead of interim and full year results announcements. The next financial update will be the Third Quarter Revenue Update in March 2021.

 

 

Disclaimer - forward-looking statements

 

This interim statement, prepared by IG Group Holdings plc (the "Company"), may contain forward-looking statements about the Company and its subsidiaries (the "Group"). Such forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "projects", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology.  

 

Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors which are beyond the Company's control and are based on the Company's beliefs and expectations about future events as of the date the statements are made. If the assumptions on which the Group bases its forward-looking statements change, actual results may differ from those expressed in such statements. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including those set out under "Principal Risks" in the FY20 Group Annual Report for the financial year ended 31 May 2020. The Annual Report can be found on the Company's website ( www.iggroup.com ).

 

Forward-looking statements speak only as of the date they are made. Except as required by applicable law and regulation, 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 to ensure consistency with the financial statements.  This may lead to differences between subtotals and the sum of individual numbers as presented.  Acronyms used in this report are as defined in the Group's Annual Report.

 

 

About IG

 

IG empowers informed, decisive, adventurous people to access opportunities in over 17,000 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 provide the world's best trading experience. Established in 1974 as one of the world's first providers of financial derivatives to retail traders, it continued leading the way by launching the world's first online and iPhone trading services.

 

IG is an award-winning, multi-product trading company which allows retail, professional and institutional clients to trade 24 hours a day, 7 days a week[1] . IG is the world's No.1 provider of CFDs[2]  and a global leader in forex derivatives. It provides leveraged services with the option of limited-risk guarantees and offers an execution-only stock trading service in the UK and Australia. IG has a range of affordable, fully managed investment portfolios, which provide a comprehensive offering to investors and active traders.

 

IG is a member of the FTSE 250, with offices across Europe, including a Swiss bank, Africa, Asia-Pacific, the Middle East and North America. IG Group Holdings plc holds a long-term investment grade credit rating of BBB- with a stable outlook from Fitch Ratings.

 

 

CEO review

 

We are a global financial technology and trading business that enables our clients to access opportunities in the financial markets. Our prudent approach to risk management is central to our business model and ensures that our interests are aligned with those of our clients, creating a sustainable and enduring revenue stream.  Our financial performance metrics in the period have been outstanding, delivering record revenue and profits, with profit before tax 129% higher than the prior period. This performance would not have been possible without the continued commitment of our people and the resilience and flexibility of our technology. Throughout this period, the health and safety of our employees globally has been our priority, and the vast majority of our teams continue to work remotely in line with local government advice. The first six months of FY21 have been characterised by a number of headline geo-political events which have shaped the markets and driven continued levels of elevated volatility, albeit at lower levels than those seen in Q4 FY20. IG clients continued to identify increased opportunities to trade throughout the period. 

 

We have seen a sustained step change in client numbers and client trading across our leveraged and non-leveraged product sets, aided by levels of financial market volatility remaining elevated compared to historical averages. Our strong brand, long-standing commitment to client service and improvements to our marketing capability have supported a record 238,600 clients trading with us during the first half of the financial year. Of these, 69% were OTC Leveraged clients. Our new clients exhibit similar characteristics to our previous client base and encouragingly, retention rates are comparable to historical averages.  This provides us with confidence that this larger active client base, who at 30 November 2020 had £2.5 billion (31 May 2020: £2.0 billion) of funds held with us, will drive enduring revenues for the Group over the medium-term.

 

In July we announced further investment to support the next stage of development in the Significant Opportunities portfolio and to further increase scalability and resilience in our technology and operations.  Our investment in technology has driven early results with a material increase in our platform capacity compared to the start of the financial year.  This increase in capacity enabled us to absorb average daily client trading volumes that were twice the levels of the prior period and navigate days of extreme market volatility, such as the day of the Pfizer vaccine announcement, with no significant incidents.  It is absolutely critical that we stay focussed on our technology capability. We have a strategy in place that is designed to ensure we continually improve, without sacrificing agility as we continue to service the growing needs of our clients.

 

 

Delivering as a responsible corporate citizen

 

We are passionate about our responsibility as a corporate citizen in our local communities around the world. We have made strong progress towards our ESG priorities in the first half of the financial year and we will continue to use our influence for the betterment of society and our environment.

 

Following the formation of the ESG Board Committee in FY20, we established an ESG Executive Working Group tasked with driving the improvements that we are targeting in this area. This team are in the process of developing a full ESG strategy for the Group which we aim to publish later in the year.

 

One of our central considerations as a Group is our responsibility to our clients.  We work hard to ensure that we only onboard clients for whom our products are appropriate. Clients must demonstrate that they have sufficient financial resources, an appetite for risk, and knowledge of our products including the risks associated with them in order to open a leveraged trading account.  We subsequently support our clients through their trading journey with us, providing them with tailored content, educational material, risk management tools and detailed analytics to help them analyse trading opportunities.

 

In the first half, we distributed £3 million from the Brighter Future fund, with £2 million donated to the Teach for All global network to support educational charities helping young people in over a dozen countries where IG operates, and a further £1 million to selected charities in need of Covid-19 pandemic relief.

 

We are also committed to operating as a carbon neutral company, and are currently exploring a longer-term net-zero strategy and for the first time in H1 FY21, we made a submission to the Carbon Disclosure Project.

 

 

Excellent progress in executing on our growth strategy

 

Our core strengths continue to be the building blocks for success as we pursue our strategic goals. Our strength in acquiring clients would not be possible if it were not for our long history of leadership in the sector, which provides our brand with a platform which few others can match. We have also committed to pursuing our growth via partnerships, localisation of marketing and client experience, segmenting our client groups, and broadening our product set. This clearly defined, multi-faceted approach positions us well for further growth, enabling us to evaluate markets from multiple perspectives and select the entry points where we believe we can be most competitive. 

 

We are now at the halfway point of our growth strategy, and the first six months of our financial year has seen us make further excellent progress towards the delivery of our financial targets - to grow revenue in our Core Markets at around 3-5% per annum over the medium-term and to increase revenue in our portfolio of Significant Opportunities by £100 million to around £160 million in FY22.  Revenue derived from our acquisition of tastytrade  will be on top of the Significant Opportunities target and any revised guidance will be provided in due course following completion of the transaction.

 

 

Core Markets

 

The first half has seen us reinforce our strong presence in our Core Markets, which has been underpinned by exceptional levels of client acquisition, with 46,700 new clients onboarded and active clients reaching a record high of 191,400 across these markets. Revenue in the Core Markets was £340.6 million. Performance in Australia has been particularly strong, driven by the acquisition of high value clients who are attracted to IG by our depth of product range, quality of trading analytics tools and platform resilience. We are well positioned in this market to successfully navigate the changes in regulation which are scheduled to come into effect during our fourth quarter. The compliance requirements across the sector's products and services have continued to evolve and may change further over time, including areas where the Group is expanding and growing, such as Asia, and where we design and launch new products. IG has worked constructively with regulators and has adapted its products and businesses and will continue to anticipate the pace and direction of new regulation, and its adaptation to those changes is a long-term success factor.

 

Within Core Markets, our stock trading product has seen a step change in its client base in the period, growing a further 30% from the previous record in H2 FY20 through the onboarding of 22,900 new clients.  This outperformance in client acquisition built on the exceptional growth delivered in Q4 FY20.  Our stock trading clients have a high retention rate and coupled with the exceptional levels of acquisition, our active client base in this product set is now 88% higher than it was 12 months ago. Historically, around 10% of stock trading clients also choose to trade our leveraged products, providing us with an additional value creation opportunity.  We believe that we are well positioned and see further opportunity to grow this business.

 

The combination of our differentiated client offering, marketing strength and range of products provide us with confidence around our Core Markets medium-term targets.

 

 

Significant Opportunities

 

We are excited about the trajectory of growth within our Significant Opportunities portfolio. Revenue in the half was £76.3 million. At the halfway stage of our journey, with some businesses still in earlier stages of development than others, we are well on track to delivering on our strategic growth target and believe there is a positive outlook for further growth potential within the portfolio beyond FY22.

In Japan we are a challenger brand and are continuing to see good results from our local brand investment with over 12 million YouTube views and 160% growth in our Japanese Twitter followers. We have also seen an improvement in client engagement following the launch of new client experience improvements to our platform. These factors have combined to deliver another strong period of growth with revenue more than doubling on the prior period. There are further enhancements in the pipeline and we will continue to engage with clients to ensure that we are delivering the trading experience that this market demands.

 

Our Emerging Markets business is also performing strongly, with momentum in growing economies, particularly in Asia.  This business benefits from our global presence and our search engine optimisation expertise in helping clients find a provider that they can trust.  Revenue per client in this segment is consistent with our more established offices and comes at a low cost of acquisition. In Greater China, the market opportunity is at an early stage of development and will form a key part of the next phase of our strategy. There are several potential routes to access this market and we will continue to explore all our options, with IG well positioned to benefit from rising wealth in the Asia region.

 

Of our newer opportunities, Spectrum, our European multi-lateral trading facility (MTF) has passed a number of key operational milestones.  At the end of November, Spectrum was the 6th largest pan-European exchange for securitised derivatives by number of trades.  By the close of the first half it had achieved 400 million units traded since launch, and in January 2021 signed its first third-party Standard Member, Intermonte SIM. Spectrum has a strong pipeline of distribution opportunities as well as liquidity providers and product manufacturers to increase the range of securitised derivatives available. Its USP, offering clients access to the markets 24 hours a day, 5 days a week, remains a key driver of growth with 38% of client trades executed out of hours in the half year. We believe Spectrum is well positioned to grow its market share in the £1 billion European exchange traded derivatives market.

 

In our Institutional business we have been focussed on maximising the opportunity from our new brand, IG Prime.  With typical B2B event activity curtailed by the Covid-19 pandemic we have repurposed our marketing activity to focus on digital channels and have seen good acquisition, while also launching in Japan and the Netherlands.  With a revenue per client of £23,300 in the half year, we recognise the clear revenue opportunity from this segment.

 

In the US we are encouraged by the strong client growth rates in our retail foreign exchange dealer (RFED). With our award winning client service levels and market leading spreads we believe we are well positioned to capture a greater share of the switcher market in the second half of the year.  We have recently expanded our Nadex product offering to include knock-out options across all asset classes and have identified opportunities to further integrate the RFED and Nadex businesses to enhance cross-selling. DailyFX continues to grow its audience with global unique visitors up 38% on the prior period, with the site acting as an efficient acquisition channel.

 

The acquisition of tastytrade transforms the scale and breadth of IG's existing US presence and its relevance to US retail clients by adding exchange traded options and futures and stock trading to IG's US product set.  Both IG and tastytrade target a similar demographic of knowledgeable, self-directed retail traders and over time, the combined client proposition is anticipated to translate into higher retention rates and revenue per client from the combined US base.

 

 

Dividend

 

The Board intends to recommend an interim dividend of 12.96 pence per share.  The dividend will be paid on 25 February 2021 to those shareholders on the register at the close of business on 29 January 2021.   

 

Outlook

 

While the level of financial market volatility has reduced from the peaks seen in Q4 FY20, it remains elevated and the macro environment continues to be uncertain.  Should we see further normalisation in financial market volatility, or a stabilisation in the macro environment we would anticipate some reduction in the level of client acquisition and activity.  However, our active client base is now materially larger than the H1 FY20 period, with levels of new client retention comparable to historical averages. 

 

As previously guided, underlying operating expenses (excluding variable remuneration) are expected to grow by 3% in FY21. We are also making a £10 million investment to support the development of our Significant Opportunities portfolio, and to further strengthen our technology and operational resilience. In addition, in H1, revenue related costs and marketing spend were higher, reflecting the excellent revenue performance and increased client demand, which we anticipate will continue while client activity remains elevated. Variable remuneration for H2 FY21 is expected to be similar to the charge reported in the first half.

 

The acquisition of tastytrade diversifies our growth drivers by providing IG with immediate scale in the US options and futures market.  Upon completion, which is anticipated to be in Q1 FY22, revenue from tastytrade will be on top of the Significant Opportunities revenue target of an additional £100 million.  At this time, there is no change to our FY21 cost guidance as a result of this proposed acquisition.

 

I would like to take this opportunity to thank our employees around the globe for their hard work, commitment and continued client focus throughout this challenging period.  Without their efforts we would not have been able to deliver such a strong set of half year results or be so well positioned as we move into the second half of our strategic growth period.

 

June Felix

CEO

 

 

 

 

Business Performance Review

 

Summary Group Income Statement

 

£m

H1 FY21

H1 FY20

Change %

Net trading revenue

416.9

249.9

67%

Betting duty and FTT

(0.7)

(1.4)

 

Net interest on client money

0.4

2.6

 

Other operating income

3.8

3.1

 

Net operating income

420.4

254.2

65%

Operating expenses

(162.8)

(138.5)

18%

Variable remuneration

(25.4)

(15.6)

63%

Total operating costs

(188.2)

(154.1)

22%

Operating profit

232.2

100.1

132%

Net finance (cost)/income

(0.9)

1.1

 

Profit before taxation

231.3

101.2

129%

 

Revenue Performance

 

Group revenue in H1 FY21 was a record £416.9 million, 67% higher than H1 FY20 and 4% higher than H2  FY20.  The increased revenue reflects growth in the Group's active client base, which is now significantly larger than in H1 FY20.  Elevated levels of client acquisition in Q4 FY20 and throughout H1 FY21 resulted in a 55% increase in the Group's number of active clients.  

 

Levels of market volatility, although lower than the extreme levels of Q4 FY20, remained elevated throughout the half.  Revenue across Q1 and Q2 was consistent (Q1 FY21:  £209.0 million, Q2 FY21: £207.9 million) and significantly higher than the quarterly average prior to Q4 FY20 (Q1-Q3 FY20 quarterly average revenue: £129.9 million).

 

 

Net Trading Revenue (£m)

 

 

H1 FY21

H1 FY20

Change %

 

OTC Leveraged

389.1

237.7

64%

 

Stock Trading and Investments

15.5

4.4

254%

 

Exchange Traded Derivatives

12.3

7.8

56%

 

Group

416.9

249.9

67%

 

 

 

 

 

 

 

  Active Clients (000)

 Revenue per Client (£)

 

H1 FY21

H1 FY20

Change %

H1 FY21

H1 FY20

Change %

OTC Leveraged

164.0

110.1

49%

2,373

2,159

10%

Stock Trading and Investments

71.2

37.9

88%

217

115

89%

Exchange Traded Derivatives

16.4

11.9

39%

750

664

13%

Group[3]

238.6

154.0

55%

 

 

 

                   

 

 

OTC Leveraged

 

In H1 FY21 OTC Leveraged revenue was £389.1 million, an increase of 64% on H1 FY20 and a 3% increase on H2 FY20.

 

There were 164,000 active OTC Leveraged clients in the half, 49% higher than H1 FY20, and 5% higher than H2 of FY20.  The level of active clients in the period benefitted from the elevated client acquisition in Q4 FY20 and throughout H1 FY21. In H1 FY21, 43,000 new OTC Leveraged clients were onboarded, compared with 22,700 in H1 FY20 and 48,500 in H2 FY20. These clients generated £56.4 million in revenue compared with £24.5 million in H1 FY20, and £58.8 million in H2 FY20.  

 

Revenue per client in H1 FY21 was £2,373, 10% higher than H1 FY20, reflecting an increase in the level of client trading, offset by some dilution in the average value, due to the significant number of new clients onboarded throughout the half. 

 

 

Stock Trading and Investments

 

Revenue from Stock Trading and Investments was £15.5 million in H1 FY21, up 254% on H1 FY20, and 67% higher than H2 FY20. 

 

In H1 FY21 the Group served 71,200 Stock Trading and Investments clients, up 88% on H1 FY20, with an 89% increase in revenue per client.  In the period, 22,900 new Stock Trading and Investments clients were onboarded, an increase of over 350% on H1 FY20.  The significant increase in client acquisition was the result of effective marketing and the quality of our offering, boosted by the favourable market conditions. 

 

At 30 November 2020 assets under administration were £2.4 billion, an increase of 103% on the same period in the prior yea r.

 

 

Exchange Traded Derivatives

 

In H1 FY21, the Group generated £12.3 million revenue from Exchange Traded Derivatives, up 56% on H1 FY20.  Of this, £10.2 million was from Nadex, the Group's US retail focused exchange, an increase of 29% on H1 FY20. This was driven by a 20% increase in the number of active clients and a 7% increase in revenue per client.

 

Spectrum, the Group's European MTF, which was launched in October 2019, delivered £2.1 million revenue in the half. 

 

 

OTC Leveraged Revenue - Core Markets

 

OTC Leveraged revenue in the Core Markets was £325.1 million in H1 FY21, 58% higher than H1 FY20, and 1% higher than H2 FY20. The performance was aided by a step change in the size of the client base and continued favourable trading conditions.

 

 

Net Trading Revenue (£m)

 

H1 FY21

H1 FY20

Change %

UK & EU

199.0

125.8

58%

Australia

61.6

36.9

67%

Singapore

36.1

21.5

68%

EMEA non-EU

28.4

21.3

33%

-Total Core Markets

325.1

205.5

58%

         

 

 

 

Active Clients (000)

Revenue per client (£)

 

H1 FY21

H1 FY20

Change %

H1 FY21

H1 FY20

Change %

UK & EU

91.2

62.5

46%

2,182

2,013

8%

Australia

22.4

15.9

41%

2,752

2,313

19%

Singapore

10.4

8.1

29%

3,473

2,665

30%

EMEA non-EU

7.4

5.6

33%

3,807

3,804

-

-Total Core Markets

131.4

92.1

43%

2,473

2,231

11%

 

UK and EU revenue in H1 FY21 was £199.0 million, 58% higher than in H1 FY20.  The significant increase in revenue was driven by the 46% increase in the number of active clients trading, the result of strong new client acquisition in Q4 FY20 and throughout H1 FY21.  In H1 FY21,19,800 new OTC Leveraged clients traded in the UK and EU, 118% higher than H1 FY20. 

 

Revenue from  Australia  increased by 67% to £61.6 million, benefitting from a 41% growth in the active client base, and a 19% increase in revenue per client.  In the half, 5,900 new clients traded, 121% higher than H1 FY20.

 

Singapore revenue in the half was £36.1 million, 68% higher than H1 FY20, reflecting a 29% increase in the number of active clients and a 30% increase in revenue per client, the result of the acquisition of several high value clients. 

 

EMEA non-EU revenue, which includes the Group's offices in Switzerland, Dubai and South Africa, was £28.4 million, 33% higher than H1 FY20.  While the number of active clients was 33% higher, revenue per client remained unchanged.

 

 

OTC Leveraged Revenue - Significant Opportunities

 

OTC Leveraged revenue in the Significant Opportunities markets was £64.0 million in H1 FY21, 99% higher than H1 FY20, and 11% higher than H2 FY20. This reflects the progress made in delivering the Significant Opportunities, combined with favourable trading conditions which were also present in H2 FY20.

 

 

Net Trading Revenue (£m)

 

H1 FY21

H1 FY20

Change %

Japan

34.6

16.0

117%

Emerging Markets

18.4

11.2

64%

US

5.2

1.6

223%

Institutional

5.8

3.4

70%

-Total Significant Opportunities

64.0

32.2

99%

         

 

 

Active Clients (000)

Revenue per client (£)

 

H1 FY21

H1 FY20

Change %

H1 FY21

H1 FY20

Change %

Japan

16.5

10.4

58%

2,095

1,528

37%

Emerging Markets

6.6

4.5

46%

2,795

2,477

13%

US

9.2

2.8

226%

572

578

(1%)

Institutional

0.2

0.2

42%

23,303

19,443

20%

Total Significant Opportunities

32.5

17.9

81%

1,969

1,792

10%

 

H1 FY21 revenue from Japan was £34.6m, an increase of 117% on H1 FY20, driven by a 58% increase in the number of active clients and a 37% increase in the revenue per client.  Client acquisition in Japan was particularly strong benefitting from successful social and influencer marketing, in addition to the new brand campaign.  In the first half, 5,800 new clients were onboarded, 31% higher than H1 FY20 and 14% higher than H2 FY20. 

 

Emerging Markets revenue increased by 64% as we continue to see natural demand for our products from locations where we do not have an office.  Growth was driven by a 46% increase in the number of active clients and a 13% increase in revenue per client.

 

The US RFED delivered £5.2 million revenue in the half, up from £1.6 million in H1 FY20.  Client acquisition has been strong with 9,200 active clients in H1 FY21, an increase of over 226%.  Revenue per client has fallen by 1% due to the influx of new clients throughout the half, diluting the overall average.

 

Revenue from our Institutional business in H1 FY21 was £5.8 million, 70% higher than H1 FY20, driven by an increase in the number of clients, and a 20% increase in the average value per client.

 

 

Operating Costs

 

Operating costs comprise operating expenses and variable remuneration. Operating expenses in H1 FY21 were £162.8 million, £24.3 million higher than H1 FY20.  Variable remuneration in H1 FY21 increased by 63% to £25.4 million. 

 

£m

H1 FY21

H1 FY20

Change %

Fixed remuneration

64.9

56.6

15%

Advertising and marketing

34.6

27.5

26%

Revenue related costs

13.4

8.7

53%

IT maintenance and support

7.3

6.1

20%

Regulatory fees

2.5

1.3

89%

Legal and professional fees

7.6

6.8

13%

Other structural costs

32.5

31.5

3%

-Total Operating Expenses

162.8

138.5

18%

 

 

 

 

Headcount at period end

2,032

1,889

8%

 

Fixed remuneration increased by 15% in H1 FY21 to £64.9 million.  Of this increase approximately £4 million was driven by headcount growth over the previous 12 months, with the most significant increase reflecting additional investment in the technology and operations functions to support resilience and scalability projects.  The remainder of the increase in fixed remuneration cost relates to inflationary increases and additional one-off costs relating to restructuring and additional holiday pay accrual. 

 

Advertising and marketing spend increased by 26% in H1 FY20 to £34.6 million, reflecting an increase in acquisition marketing spend to capture the elevated client demand.  This additional investment, along with the Group's established brand presence, and organic marketing capability enabled the Group to onboard 43,000 new OTC Leveraged clients in the period, 4,900 new Exchange Traded Derivatives clients and 22,900 new Stock Trading and Investments clients.

 

Revenue related costs are variable costs which fluctuate with the level of client activity and include client payment charges, market data charges and provision for client and counterparty credit losses.  In H1 FY21, these costs were £13.4 million, 53% higher than H1 FY20, primarily due to higher client payment charges driven by increased client trading activity.

 

The Group is charged fees by the various regulators in the jurisdictions in which it operates, and in addition is required to make a contribution to the Financial Services Compensation Scheme (FSCS) in the UK.  The Group received an additional FSCS supplementary levy in H1 FY21, which resulted in a £1.2 million increase in costs when compared with H1 FY20.

 

IT maintenance and support costs in H1 FY21 were £7.3 million, a 20% increase on H1 FY20 reflecting additional investment in resilience and scalability projects.

 

Legal and professional fees in H1 FY21 were £7.6 million, 13% higher than H1 FY20 driven by an increase in consultancy costs to support the progression of key projects across the business.

 

Other costs were £32.5 million in H1 FY21 and were 3% higher than H1 FY20, largely reflecting inflationary increases offset by some savings due to home working and restrictions on travel.

 

 

 

 

 

 

£m

H1 FY21

H1 FY20

Change %

General bonus

14.9

7.7

92%

Share based compensation

5.8

4.9

20%

Sales bonuses

4.7

3.0

58%

Variable Remuneration

25.4

15.6

63%

               

 

The charge for the general bonus pool increased to £14.9 million, up 92% compared with H1 FY20, reflecting the higher bonus accrual driven by the outperformance in H1 FY21 against internal targets.

Share based compensation costs relate to the long-term incentive plans for senior management and reflect the size of the awards and the extent to which they are expected to vest, which is driven predominantly by earnings per share and relative total shareholder return performance.  

 

Sales bonuses increased to £4.7 million reflecting higher commission payments to sales staff for the onboarding and management of their own sourced high value clients.

 

 

Earnings Per Share

 

£m

H1 FY21

H1 FY20

Change %

Operating profit

232.2

100.1

132%

Net finance (costs)/income

(0.9)

1.1

 

Profit before tax

231.3

101.2

129%

Tax

(44.2)

(18.8)

 

Profit after tax

187.1

82.4

127%

Weighted average number of shares for the

calculation of EPS (millions)

369.0

368.0

 

Basic earnings per share (pence per share)

50.7

22.4

126%

 

Operating profit in the period was £232.2 million, 132% higher than H1 FY20. After net finance costs of £0.9 million, profit before taxation was £231.3 million.

 

The forecast full year effective tax rate (ETR) applied to the Group's H1 FY21 profit before tax is 19.1% (FY20 actual ETR: 18.8%). The ETR is dependent on a mix of factors including taxable profit by geography, tax rates levied in those geographies and the availability and use of taxable losses. The future ETR may also be impacted by changes in our business activities, client composition and regulatory status, which could affect our exemption from the UK Bank Corporation Tax surcharge.

 

Basic EPS increased by 126% from 22.4 pence per share in H1 FY20 to 50.7 pence per share in H1 FY21.

 

 

Dividend

 

An interim dividend of 12.96 pence per share is proposed to be paid on 25 February 2021 to those shareholders on the register at the close of business on 29 January 2021.

 

 

Liquidity

 

The Group seeks to maintain a strong liquidity position, ensuring that it has sufficient liquidity under both normal circumstances and stressed conditions to meet its working capital and other liquidity requirements including broker margin, the regulatory and working capital needs of its subsidiaries, and to fund adequate buffers in client money accounts. The Group's liquid assets comprise the following:

 

£m

30 Nov 2020

31 May 2020

Cash in IG bank accounts

423.2

486.2

Amounts at brokers

568.5

437.4

Own funds in client money

68.4

66.5

Liquid asset buffer 

86.2

83.8

Liquid assets

1,146.3

1,073.9

Broker margin requirement

(538.1)

(326.0)

Cash balances in non-UK subsidiaries

(179.7)

(177.4)

Own funds in client money

(68.4)

(66.5)

Available liquidity

360.1

504.0

of which:

 

 

Held as liquid asset buffer

86.2

83.8

Dividend due

47.9

111.7

 

 

       

 

Liquid assets increased by £72.4 million during H1 FY21, reflecting the strong performance and cash generative nature of the Group during the period. The Group's liquidity management strategy was effectively deployed to meet the liquidity requirements during H1 FY21, including repatriating excess cash from overseas entities regularly back to the UK. Cash generated from operations was utilised to fund the broker margin requirement, which was £212.1 million higher at 30 November 2020 than at 31 May 2020. This resulted in a cash balance at 30 November of £423.2 million, £63.0 million lower than at 31 May 2020.

 

The peak broker margin requirement in H1 FY21 was £557.2 million, higher than the previous peak broker margin amount of £456.0 million in July 2018.

 

The Group's available liquidity reflects the assets that are immediately available to meet additional liquidity requirements. Available liquidity was £360.1 million at 30 November 2020, £143.9 million lower than at 31 May 2020. This is a result of the increased broker margin requirement as at 30 November 2020.  For liquidity management and planning purposes, the Group excludes cash held by subsidiaries outside the UK from available liquidity. The amount of cash held in entities outside the UK was £179.7 million at 30 November 2020 (31 May 2020: £177.4 million).

 

In addition to the cash recognised on the balance sheet, as a t 30 November 2020 the Group held £2,458.0 million (31 May 2020: £1,964.1 million) of client money in segregated bank accounts. These funds are held separately from the Group's own cash balances and are excluded from the Group's liquid assets.

 

 

£m

30 Nov 2020

31 May 2020

Liquid assets

1,146.3

1,073.9

Long-term bank borrowings

(100.0)

(100.0)

Client funds on balance sheet

(139.0)

(141.4)

Own funds

907.3

832.5

 

The Group's total liquid assets at the end of period were £1,146.3 million (31 May 2020: £1,073.9 million). The Group's liquidity is provided by shareholders' funds supplemented by a £100 million bank term loan, client deposits at IG Bank in Switzerland, and client funds which have been transferred to the Group under title transfer arrangements. The Group also has access to additional liquidity through a £100 million committed revolving credit facility which was undrawn at 30 November 2020 (31 May 2020: undrawn).

 

The Group is a highly cash generative business, and a significant amount of that cash supports hedging positions at brokers. The Group measures the strength of its balance sheet using its 'own funds' balance, a broader measure of the Group's liquidity position than cash, which takes into account the Group's liquid assets, less the Group's borrowings and client funds on its balance sheet. As at 30 November 2020, the Group had own funds of £907.3 million (31 May 2020: £832.5 million).

 

 

Own Funds Flow

 

£m

H1 FY21

H1 FY20

Operating profit

232.2

100.1

Depreciation and amortisation

12.9

12.5

Lease liability payments

(2.8)

(3.3)

Share based compensation

4.2

4.5

Change in working capital

(13.1)

(7.5)

Own funds generated from operations

233.4

106.3

as % of operating profit 

101%

106%

Taxes paid

(30.3)

(31.5)

Net own funds generated from operations

203.1

74.8

Net interest (paid)/received

(1.4)

0.7

Capitalised development costs

(1.6)

(1.7)

Capital expenditure

(6.6)

(6.2)

Purchase of own shares held in employee benefit trusts

(0.2)

(1.5)

Pre-dividend increase in own funds

193.3

66.1

Dividends paid

(111.8)

(111.4)

Increase/(decrease) in own funds

81.5

(45.3)

 

 

 

Own funds at start of the period

832.5

720.8

Increase/(decrease) in own funds

81.5

(45.3)

Impact of movement in exchange rates

(6.7)

(5.1)

Own funds at the end of period

907.3

670.4

 

 

Own funds increased by £74.8 million during H1 FY21 (H1 FY20: decrease £50.4 million). Net own funds generated from operations were £203.1 million in H1 FY21 (H1 FY20: £74.8 million) and the conversion rate of operating profit into own funds was 101% in H1 FY21 (H1 FY20: 106%). This conversion rate is lower than in H1 FY20 due to the larger working capital outflow, which arose from the payment of the FY20 bonus and other outflows arising from the exceptional performance of the business in FY20.

 

 

Regulatory Capital

 

The Group is supervised on a consolidated basis by the Financial Conduct Authority in the UK, which requires it to hold sufficient regulatory capital at both Group and individual entity levels to cover risk exposures, valued according to applicable rules, and any additional regulatory financial obligations imposed.

 

Shareholders' funds comprise share capital, share premium, retained earnings and other reserves and at 30 November 2020 totalled £1,005.0 million (31 May 2020: £935.9 million). The Group's regulatory capital resources are an adjusted measure of shareholders' funds, and as at 30 November 2020 totalled £712.3 million (31 May 2020: £675.5 million).

 

£m

30 Nov 2020

31 May 2020

Shareholders' funds

1,005.0

935.9

Less foreseeable / declared dividends

(147.7)

(111.7)

Less goodwill and intangible assets

(143.4)

(147.1)

Less value adjustment for prudent valuation

(1.6)

(1.6)

Regulatory capital resources

712.3

675.5

Total Pillar 1 Risk Exposure Amounts

2,204.3

2,018.6

Capital ratio

32.3%

33.5%

Capital ratio requirement

19.9%

19.9%

Total requirement - £m

438.7

401.7

Capital headroom - £m

273.6

273.8

 

The Group's Capital Ratio at 30 November 2020 was 32.3% (31 May 2020: 33.5%), well above the required minimum capital ratio of 19.9% (31 May 2020: 19.9%), demonstrating the Group's solid capital base. Further details about the Group's capital requirement are published in the Pillar 3 disclosure on the Group's website.

 

 

Principal risks and uncertainties

 

IG's Risk Taxonomy categorises the principal risks faced by the Group 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.

 

The principal risks and uncertainties which could impact the Group for the remainder of the current financial year remain consistent with those detailed on pages 50 to 59 of the FY20 Group Annual Report, which is available on the Group's website. There have been no significant changes in the Group's risk management framework in H1 FY21 and up to the date of this announcement.

 

Consolidated Interim Income Statement

for the six months ended 30 November 2020 (unaudited)

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

Note 

£m

£m

Trading revenue

 

421.4

254.0

Introducing partner commissions

 

(4.5)

(4.1)

Net trading revenue

  3

416.9

249.9

Betting duty and financial transaction taxes

 

(0.7)

(1.4)

Interest income on segregated client funds

 

1.2

3.0

Interest expense on segregated client funds

 

(0.8)

(0.4)

Other operating income

 

3.8

3.1

Net operating income

 

420.4

254.2

Operating costs

4

(185.8)

(153.6)

Net credit losses on financial assets

 

(2.4)

(0.5)

Operating profit

 

232.2

100.1

Finance income

 

1.9

3.7

Finance costs

 

(2.8)

(2.6)

Profit before tax

 

231.3

101.2

Tax expense

5

(44.2)

(18.8)

Profit for the period

 

187.1

82.4

Attributable to:

 

 

 

Owners of the parent

 

187.1

82.4

 

 

 

 

 

 

 

 

Earnings per ordinary share

 

 

 

Basic

6

50.7p

22.4p

Diluted

6

50.3p

22.2p

 

 

 

Consolidated Interim Statement of Comprehensive Income

for the six months ended 30 November 2020 (unaudited)

 

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

 

£m 

£m 

£m 

 m

Profit for the period

 

 

187.1

 

82.4

Other comprehensive income / (expense):

 

 

 

 

 

Items that may be subsequently reclassified to the Income Statement:

 

 

 

 

 

Changes in the fair value of financial assets held at fair value through other comprehensive income, net of tax

 

(1.1)

 

(0.1)

 

Foreign currency translation loss

 

(9.1)

 

(6.1)

 

Other comprehensive expense for the period

 

 

(10.2)

 

(6.2)

Total comprehensive income attributable to owners of the parent

 

 

176.9

 

76.2

             

 

Consolidated Interim Statement of Financial Position

at 30 November 2020 (unaudited)

 

 

Unaudited

30 November 2020

 

31 May 2020

 

Unaudited

30 November 2019

Restated1

 

Note

£m

£m

£m

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

42.7

46.4

40.5

Intangible assets

8

143.4

147.2

147.9

Financial investments

9

120.1

83.8

139.5

Deferred tax assets

 

13.3

11.5

9.0

 

 

319.5

288.9

336.9

Current assets

 

 

 

 

Trade receivables

10

406.4

347.0

270.1

Other assets

11

66.9

22.1

24.5

Prepayments

 

10.0

11.1

9.0

Other receivables

 

3.8

3.9

5.3

Income tax receivable

 

-

-

4.2

Cash and cash equivalents

 

423.2

486.2

416.4

Financial investments

9

159.3

140.5

85.1

 

 

1,069.6

1,010.8

814.6

TOTAL ASSETS

 

1,389.1

1,299.7

1,151.5

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

 

99.8

99.7

99.7

Lease liabilities

 

20.1

22.5

18.0

Deferred tax liabilities

 

0.4

0.7

0.5

 

 

120.3

122.9

118.2

Current liabilities

 

 

 

 

Trade payables

12

143.9

143.1

144.1

Other payables

 

87.7

81.1

50.4

Borrowings

 

-

-

20.0

Lease liabilities

 

6.8

6.8

6.7

Income tax payable

 

25.4

9.9

1.5

 

 

263.8

240.9

222.7

Total liabilities

 

384.1

363.8

340.9

Equity

 

 

 

 

Share capital and share premium

13

125.8

125.8

125.8

Other reserves

 

155.8

168.4

153.8

Retained earnings

 

723.4

641.7

531.0

Total equity

 

1,005.0

935.9

810.6

TOTAL EQUITY AND LIABILITIES

 

1,389.1

1,299.7

1,151.5

1 Refer to Note 13 for further information

 

 

These Consolidated Interim Condensed Financial Statements were approved by the Board of Directors on 21 January 2021 and signed on its behalf by:

 

 

Charles Rozes

Chief Financial Officer 

 

 

 

Consolidated Interim Statement of Changes in Equity

for the six months ended 30 November 2020 (unaudited)  

 

 

 

Share capital

Share premium

Restated1

Other reserves

Restated1

Retained earnings

Total

 

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

At 31 May 2019

 

-

125.8

161.2

554.8

841.8

IFRIC 23 transitional adjustment

 

-

-

-

0.5

0.5

IFRS 16 transitional adjustment

 

-

-

-

0.5

0.5

At 1 June 2019

 

-

125.8

161.2

555.8

842.8

Profit for the period attributable to owners of the parent

 

-

-

-

82.4

82.4

Other comprehensive expense for the period

 

-

-

(6.2)

-

(6.2)

Total comprehensive (expense) / income for the period

 

-

-

(6.2)

82.4

76.2

Equity-settled employee share-based payments

 

-

-

4.5

-

4.5

Transfer of vested awards from the share-based payment reserve

 

-

-

(4.2)

4.2

-

Employee Benefit Trust purchase of own shares

 

-

-

(1.5)

-

(1.5)

Equity dividends paid

 

-

-

-

(111.4)

(111.4)

At 30 November 2019 (unaudited)

 

-

125.8

153.8

531.0

810.6

 

 

 

 

 

 

 

At 1 June 2020

 

-

125.8

168.4

641.7

935.9

Profit for the period attributable to owners of the parent

 

-

-

-

187.1

187.1

Other comprehensive expense for the period

 

-

-

(10.2)

-

(10.2)

Total comprehensive (expense) / income for the period

 

-

-

(10.2)

187.1

176.9

Equity-settled employee share-based payments

 

-

-

4.2

-

4.2

Transfer of vested awards from the share-based payment reserve

 

-

-

(6.4)

6.4

-

Employee Benefit Trust purchase of own shares

 

-

-

(0.2)

-

(0.2)

Equity dividends paid

 

-

-

-

(111.8)

(111.8)

At 30 November 2020 (unaudited)

 

-

125.8

155.8

723.4

1,005.0

1 Refer to Note 13 for further information

Consolidated Interim Cash Flow Statement

for the six months ended 30 November 2020 (unaudited)

 

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

Note

£m

£m

Operating activities

 

 

 

Operating profit

 

232.2

100.1

Depreciation and amortisation

 

12.9

12.5

Equity settled share-based payments charge

 

4.2

4.5

(Increase) / decrease in trade receivables, other receivables

and other assets

 

(106.7)

39.9

(Decrease) / increase in trade and other payables

 

(13.0)

25.0

Cash generated from operations

 

129.6

182.0

Income taxes paid

 

(30.3)

(31.5)

Net cash flow generated from operating activities

 

99.3

150.5

 

 

 

 

Investing activities

 

 

 

Interest received

 

1.0

3.1

Purchase of property, plant and equipment

 

(4.6)

(5.0)

Payments to acquire and develop intangible assets

 

(3.6)

(2.9)

Net cash flow from financial investments

 

(34.4)

1.2

Net cash flow used in investing activities

 

(41.6)

(3.6)

 

 

 

 

Financing activities

 

 

 

Interest and fees paid

 

(2.4)

(2.4)

Interest unwinding of lease liabilities

 

(0.3)

(0.3)

Repayment of principal element of lease liabilities

 

(2.5)

(3.0)

Equity dividends paid to owners of the parent

7

(111.8)

(111.4)

Employee Benefit Trust purchase of own shares

 

(0.2)

(1.5)

Net drawdown on Revolving Credit Facility

 

-

20.0

Net cash flow used in financing activities

 

(117.2)

(98.6)

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

 

(59.5)

48.3

Cash and cash equivalents at the beginning of the period

 

486.2

373.3

Impact of movement in foreign exchange rates

 

(3.5)

(5.2)

Cash and cash equivalents at the end of the period

 

423.2

416.4

 

Notes to the Consolidated Interim Condensed Financial Statements

for the six months ended 30 November 2020 (unaudited)                                                                                                                                                                                                                                                                                                           

1.  General information

The Group provides online trading services allowing clients access to various financial markets, including indices, shares, forex, commodities, options and cryptocurrencies.

 

The Consolidated Interim Condensed Financial Statements of the Group for the six months ended 30 November 2020 were authorised for issue by the Board of Directors on 21 January 2021 and the statement of financial position was signed on the Board's behalf by Charles Rozes. IG Group Holdings plc is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in England and Wales. The address of the registered office is Cannon Bridge House, 25 Dowgate Hill, London, EC4R 2YA.


The interim financial information, together with the comparative information contained in this report for the six months ended 30 November 2019, does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The interim financial information is unaudited but has been reviewed by the Company's auditors, PricewaterhouseCoopers LLP, and their report appears at the end of these Consolidated Interim Condensed Financial Statements.  The Financial Statements for the year ended 31 May 2020 have been audited and 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 Interim Condensed Financial Statements for the six months ended 30 November 2020 have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority and in accordance with IAS 34 Interim Financial Reporting. The Consolidated Interim Condensed Financial Statements are presented in Sterling.

 

The Consolidated Interim Condensed Financial Statements do not include all of 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 2020 (FY20 Group Annual Report) which was prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

 

Throughout this report, FY21, FY20 and FY19 refer to the financial years ended 31 May 2021, 31 May 2020 and 31 May 2019 respectively. H1 FY21, H1 FY20 and H1 FY19 refer to the six months ended 30 November 2020, 30 November 2019 and 30 November 2018 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 exclude all monies held in segregated client money accounts.

 

In assessing whether it is appropriate to adopt the going concern basis in preparing the Financial Statements, the Directors have considered the resilience of the Group, taking account of its liquidity position and cash generation, the adequacy of capital resources, the availability of external credit facilities and the associated financial covenants, and stress-testing of liquidity and capital adequacy taking into account the principal risks faced by the business. Further details of these principal risks and how they are mitigated and managed is documented in the Risk Management section in the FY20 Group Annual Report on page 50.

 

The Directors' assessment has considered future performance, solvency and liquidity over a period of at least 12 months from the date of approval of the Consolidated Interim Condensed 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 confirms that they consider it appropriate to adopt the going concern basis in preparing the Consolidated Interim Condensed Financial Statements.

 

Critical accounting estimates and judgements

 

The preparation of financial statements requires the Group to make estimates and judgments that affect the amounts reported for assets and liabilities as at the reporting date, and the amounts reported for revenue and expenses during the period.

 

The nature of estimates means that actual outcomes could differ from those estimates. In the Directors' opinion, the accounting estimates or judgments that have the most significant impact on the presentation or measurement of items recorded in the Consolidated Interim Condensed Financial Statements are the following:

 

(a) Carrying value of intangible assets (excluding goodwill) (estimate) - the Group undertook an analysis as at 30 November 2020 in relation to the DailyFX intangible asset to determine whether there were any indicators of impairment. The Group considered the number of first trades generated by the asset and the average net trading revenue generated by each active client to determine whether there were any indicators that would require a full impairment assessment to be undertaken. The Group concluded that there were no indicators of impairment. Whilst the global economic outlook is uncertain due to the Covid-19 pandemic, taking into account the performance of the asset and wider Group, this was not determined to be an indicator of impairment. The Group also considered the estimated life of DailyFX and concluded that the total useful life of ten years remained appropriate.

 

  

Critical accounting estimates and judgements (continued)

 

(b) Tax charge (estimate) - the calculation of the Group's total tax charge involves a degree of estimation. In calculating the tax charge, the Group makes assumptions about the availability of reliefs, such as the UK Patent Box, the availability of future profits to support the recognition of deferred tax assets and assessments of the outcome of tax enquiries. The tax treatment of some transactions and the application of tax legislation cannot be finally determined until formal resolution has been reached with the relevant tax authority. The Group

recognises a tax charge for open tax matters based on an assessment of the taxes that may be due. For further information please see note 8 of the FY20 Group Annual Report.

 

(c) DailyFX asset acquisition (judgement) - determining whether the purchase of DailyFX during the year ended 31 May 2017 was a business combination or an asset purchase was a matter of critical accounting judgment which remains relevant for the period ended 30 November 2020 given the carrying value of £18.0 million at 30 November 2020 (31 May 2020: £21.0 million). The purchase included the website, together with its historical content and lead list. In order to enable lead capturing and to re-establish the DailyFX Plus facility, which captures details on new subscribers, the infrastructure necessary for operating and integrating the website needed to be rebuilt. A number of the DailyFX staff were offered and subsequently accepted roles with IG. Therefore, whilst inputs had been acquired, the processes that IG would ultimately benefit from had to be recreated and rebuilt or separately acquired. Accordingly, the Group accounted for the transaction as an asset purchase as not all the requirements for a business combination were met.

 

(d) Accounting for cryptocurrencies (judgement) - the Group has recognised £66.9 million of cryptocurrency assets and rights to cryptocurrency assets on its Statement of Financial Position as at 30 November 2020 (31 May 2020: £22.1 million). These assets are used for hedging purposes and are held for sale in the ordinary course of business. A judgment has been made to apply the measurement principles of IAS 2 Inventories in accounting for these assets. The assets are presented as 'Other assets' on the Statement of Financial Position. The accounting treatment of cryptocurrency assets is considered to be a critical accounting policy judgment.

 

 

New accounting standards and interpretations

 

The accounting policies adopted in the preparation of the Consolidated Interim Condensed Financial Statements are consistent with those followed in the preparation of the FY20 Group Consolidated Financial Statements, except for the restatement disclosed in note 4. There were no new standards, amendments or interpretations issued during the period which have had a material impact on the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

 

 

Seasonality of operations

 

The Directors consider that there is no predictable seasonality to the Group's operations.

 

 

3.  Net trading revenue                                                                                                                                                                                                         

Net trading revenue represents trading revenue after deducting introducing partner commissions.

 

The segmental analysis shown below has been prepared on the same basis as FY20 and more details can be found on page 160 of the FY20 Group Annual Report. The segmental analysis does not include a measure of profitability, nor a segmented Consolidated Interim Statement of Financial Position, as this would not reflect the information which is received by the Group's Chief Operating Decision Maker.

 

 

Net trading revenue by geography:

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

 

£m

£m

UK

 

165.2

98.6

EU

 

51.4

33.3

EMEA - Non EU

 

30.1

21.8

Australia

 

65.3

37.8

Singapore

 

36.5

21.7

Japan

 

34.6

16.0

Emerging Markets

 

18.4

11.2

US

 

15.4

9.5

 

 

416.9

249.9

 

  

3.  Net trading revenue (continued)

 

Net trading revenue by product :

 

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

 

£m

£m

OTC leveraged derivatives

 

389.1

237.7

Exchange traded derivatives

 

12.3

7.8

Stock trading and investments

 

15.5

4.4

 

 

416.9

249.9

 

4.  Operating costs

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

£m

£m

 

 

 

Fixed remuneration

64.9

56.6

Variable remuneration

25.4

15.6

Employee related expenses

90.3

72.2

Advertising and marketing

34.6

 27.5

Premises related costs

3.5

 3.8

Depreciation and amortisation

12.9

 12.5

Regulatory fees

2.5

 1.3

Other costs

42.0

 36.3

 

185.8

 153.6

 

Income earned from clients for market data, such as chart fees, and income earned from charging clients for funding accounts, was previously netted off against the associated expenses within operating costs. For H1 FY21, this income has been recognised in other operating income. To provide consistency with the current period, comparative figures for other operating income and operating costs in H1 FY20 have been adjusted. H1 FY20 other operating income has been adjusted by £2.2 million from £0.9 million to £3.1 million. H1 FY20 other costs, within operating costs, has been adjusted by £2.2 million from £34.1 million to £36.3 million.

 

5. Taxation

 

The tax expense of £44.2 million (H1 FY20: £18.8 million) is recognised based on management's estimate of the effective tax rate for the full year of 19.1% (H1 FY20: 18.6%). The actual effective tax rate for FY20 was 18.8%. The factors affecting the tax charge in future periods are detailed on page 165 of the FY20 Group Annual Report.

 

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 held as own shares in the Group's 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 assuming the vesting of all outstanding share scheme awards and that vesting is satisfied by the issue of new ordinary shares. 

 

Weighted average number of ordinary shares

Unaudited

30 November 2020

Unaudited

30 November 2019

 

 

 

Basic 

368,956,420

  367,995,715

Dilutive effect of share-based payments

2,671,918

3,151,170

Diluted

371,628,338

371,146,885

 

 

6. Earnings per ordinary share (continued)

 

 

Unaudited

six months ended
30 November 2020

Unaudited

six months ended
30 November 2019

 

 

 

 

Basic earnings per ordinary share

50.7p

22.4p

 

Diluted earnings per ordinary share

50.3p

22.2p

 

 

 

7. Dividends paid and proposed

 

 

Unaudited

six months ended

30 November 2020

Unaudited

six months ended

30 November 2019

 

£m

£m

Final dividend for FY20 of 30.24 pence per share (FY19: 30.24 pence per share)

111.8

111.4

 

 

The proposed interim dividend for FY21 of 12.96 pence per share totalling £47.9 million was approved by the Board on 21 January 2021 and has not been included as a liability at 30 November 2020. This dividend will be paid on 25 February 2021 to those members on the register at the close of business on 29 January 2021.  

 

 

8. Intangible assets

 

Goodwill

Domain Names

Internally developed software

Software and Licences

Total

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

Net book value - 30 November 2020 (unaudited)

 107.7

18.9

12.5

4.3

143.4

 

 

 

 

 

 

Net book value - 31 May 2020

108.1

22.3

13.2

3.6

147.2

 

 

 

 

 

 

Net book value - 30 November 2019 (unaudited)

107.9

23.0

14.0

3.0

147.9

 

 

9. Financial investments

 

Financial investments are UK Government securities:

 

 

Unaudited

30 November 2020

31 May 2020

Unaudited

30 November 2019

 

£m

£m

£m

 

 

 

 

Held as:

 

 

 

Liquid asset buffer

86.2

83.8

84.3

Financial investments held by IG

20.8

-

-

Collateral at brokers

172.4

140.5

140.3

 

279.4

224.3

224.6

Of which:

 

 

 

Non-current portion

120.1

83.8

139.5

Current portion

159.3

140.5

85.1

 

279.4

224.3

224.6

 

On 30 November 2020 the Group purchased £20.8 million UK Government securities. These financial investments were cash settled on 1 December 2020 and were subsequently transferred on 1 December 2020 from Financial investments held by IG to Collateral at brokers.
 

10. Trade receivables

 

Unaudited

30 November 2020

31 May 2020

Unaudited

30 November 2019

 

£m

£m

£m

Amounts due from brokers

329.2

274.8

227.1

Own funds in client money

72.6

66.5

41.2

Amounts due from clients

4.6

5.7

1.8

 

406.4

347.0

270.1

 

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 Amounts due from brokers, the Group held UK Government Securities as collateral at brokers, which are classified as Financial investments in the Group's Consolidated Interim Statement of Financial Position.

 

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, and includes £8.8 million (31 May 20: £16.5 million and 30 November 2019: £3.5 million) to be transferred to the Group on the following business day.

 

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.

 

 

11. Other assets

 

Other assets are cryptocurrencies and rights to cryptocurrencies, which are owned and controlled by the Group for the purpose of hedging the Group's exposure to clients' cryptocurrency trading positions. The Group holds cryptocurrencies on exchange and in vaults as follows:

 

 

Unaudited

30 November 2020

31 May 2020

Unaudited

30 November 2019

 

£m

£m

£m

Exchange

10.9

6.0

9.4

Vaults

56.0

16.1

15.1

 

66.9

22.1

24.5

 

 

12. Trade payables

 

 

Unaudited

30 November 2020

31 May 2020

Unaudited

30 November 2019

 

£m

£m

£m

Client funds

139.0

141.4

140.1

Amounts due to clients

4.9

1.7

4.0

 

143.9

143.1

144.1

 

Client funds comprise title transfer funds and client monies deposited with the Group's Swiss banking subsidiary, IG Bank SA. These amounts are included within cash and cash equivalents in the Group's Consolidated Interim Statement of Financial Position. Client funds also include financial liabilities relating to issued turbo warrants. Amounts due to clients represent balances that will be transferred from the Group's own cash into segregated client funds on the following business day in accordance with the UK's Financial Conduct Authority 'CASS' rules and similar rules of other regulators in whose jurisdiction the Group operates.

 

13.  Share capital and share premium

 

 

 

Number of shares

Share capital

Share premium account

Restated

 

 

 

 

£m

£m

Allotted and fully paid:

 

 

 

 

(i) Ordinary shares (0.005p)

 

 

 

 

 

 

 

 

 

At 31 May 2019

 

  368,844,455

-

  125.8

Issued during the period

 

595,000

-

-

At 30 November 2019 (unaudited)

 

369,439,455

-

125.8

 

 

 

 

 

At 31 May 2020

 

  369,439,455

-

  125.8

Issued during the period

 

860,000

-

  -

At 30 November 2020 (unaudited)

 

370,299,455

  125.8

 

In the year ended 31 May 2009, the Group undertook a share placement that the Group has now determined qualified for Merger Relief under section 612 Companies Act 2006. As a result, £81.0 million has been reclassified to 'other reserves' from 'share premium', reflecting the Merger Relief treatment. For further information please refer to note 23 of FY20 Group Annual Report.

 

During H1 FY21, IG Group Holdings plc issued 860,000 ordinary shares (H1 FY20: 595,000 ordinary shares) with an aggregate nominal value of £43.00 (H1 FY20: £29.75) to the Employee Benefit Trust in order to satisfy the exercise of Sustained Performance Plan and Long Term Incentive Plan awards, for consideration of £43.00 (H1 FY20: £29.75).

 

During H1 FY21, there have been no changes to the Group's deferred redeemable shares and redeemable preference shares (six months ended 30 November 2019: none)

 

 

14.  Related party transactions

 

The basis of remuneration of key management personnel remains consistent with that disclosed in the FY20 Group Annual Report.

 

At a General Meeting of the Company's shareholders held on 17 September 2020, a resolution was passed which authorised the appropriation of distributable profits to the payment of the interim FY18, final FY17, and interim FY10 distributions and removed any right for the Company to pursue shareholders or directors for repayment. The overall effect of the resolution being passed was to return all parties to the position they would have been in had the dividends been made in full compliance with the Companies Act 2006.

 

There were no other related party transactions which had a material impact on the Consolidated Interim Condensed Financial Statements.

 

 

15.  Contingent liabilities and provisions

 

In the ordinary course of business, the Group is subject to legal and regulatory risks in a number of jurisdictions. There are no contingent liabilities that are expected to have a material adverse financial impact on the Group's Consolidated Interim Condensed Financial Statements. The Group had no material provisions at 30 November 2020 (31 May 2020 and 30 November 2019: £nil). 

 

 

16.  Financial risk management

 

Financial risks arising from financial instruments are analysed into market, credit and liquidity risks. Details of how these risks are managed are in note 27 of the FY20 Group Annual Report. There has not been a significant change in the Group's financial risk management policies during the period.

 

Details of the financial instruments valuation hierarchy is provided in note 30, Significant Accounting Policies, in the FY20 Group Annual Report. The definitions, details of the inputs and the valuation techniques in determining the fair values of the Group's financial instruments are shown in note 26 of the FY20 Group Annual Report.

 

 

16.  Financial risk management (continued)

 

Financial instrument valuation hierarchy

 

The hierarchy of the Group's financial instruments carried at fair value is as follows:

 

 

 

Level 1

Level 2

Level 3

Total fair value

At 30 November 2020 (unaudited)

 

£m

£m

£m

£m

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

Trade receivables - amounts due (to)/ from brokers

 

3.6

14.5

-

18.1

Financial investments

 

279.4

-

-

279.4

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

Trade payables - client funds

 

-

12.3

-

12.3

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total fair value

At 31 May 2020

 

£m

£m

£m

£m

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

Trade receivables - amounts due (to)/ from brokers

 

(3.0)

1.2

-

(1.8)

Financial investments

 

224.3

-

-

224.3

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

Trade payables - client funds

 

-

12.6

-

12.6

 

 

 

 

Level 1

Level 2

Level 3

Total fair value

At 30 November 2019 (unaudited)

 

£m

£m

£m

£m

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

Trade receivables - amounts due (to)/ from brokers

 

(20.9)

(3.8)

-

(24.7)

Financial investments

 

224.6

-

-

224.6

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

Trade payables - client funds

 

-

35.1

-

35.1

 

 

 

Fair value financial assets and liabilities measured at amortised cost

 

The carrying value of the following financial assets and liabilities measured at amortised cost approximate their fair value:

· Cash and cash equivalent

· Trade and other receivables (excluding the Group's open financial derivative hedging positions with brokers)

· Trade and other payables

· Borrowings

 

The Group's financial instruments carried at amortised cost as at 30 November 2020 are measured at Level 2 (30 November 2019 and 31 May 2020: Level 2).

 

There have been no changes to the fair value hierarchy, the valuation techniques and accounting estimates for any of the Group's financial instruments in the period. There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.

 

 

17.  Subsequent events

 

On 21 January 2021, the Group announced that it had agreed definitive terms to acquire tastytrade, Inc.  Total consideration of approximately $1 billion will be paid to tastytrade, Inc's shareholders, and satisfied through $300 million in cash and the issuance of 61.0 million IG shares, valued at $700 million. The acquisition is subject to a number of conditions including regulatory approvals that are expected to be obtained shortly prior to completion. It is currently anticipated that completion will occur in the first quarter of the year ended 31 May 2022.

 

The Group intends to part fund the acquisition through an additional £150 million loan. This loan is in addition to the Groups existing £100 million drawn down term loan and £100m revolving credit facility.

Statement of Directors' Responsibilities

 

The Directors confirm to the best of their knowledge that the Consolidated Interim Condensed Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", give a true and fair view of the assets, liabilities, financial position and profit and loss of 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 2020 and their impact on the Consolidated Interim Condensed 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 2020 and any material changes in the related party transactions described in the last Annual Report.

 

A list of current directors is maintained on the IG Group Holdings plc website: www.iggroup.com

 

On behalf of the Board

 

 

 

 

Charles Rozes 

Chief Financial Officer

21 January 2021

 

Independent review report to IG Group Holdings plc

Report on the Consolidated Interim Condensed 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 2020 (the "period").

 

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 2020;

· the consolidated interim income statement and consolidated interim statement of comprehensive income for the period then ended;

· the consolidated interim cash flow statement 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 of IG Group Holdings plc 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 statements 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 interim 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, 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

21 January 2021

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

 

[1] Excluding 10pm Friday (GMT) to 8am Saturday (GMT)

[2] Based on revenue excluding FX (from published financial statements, June 2020)

[3]Total Group active clients have been adjusted to remove the clients who are active in more than one product category (multi-product clients) to give a unique client count.  In H1 FY21 there were 13,000 multi-product clients, compared with 5,800 in H1 FY20. 

 

 

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