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IG Group Hldgs plc - Third Quarter Revenue Update

RNS Number : 7136G
IG Group Holdings plc
19 March 2020
 

 

19 March 2020

LEI No: 2138003A5Q1M7ANOUD76

 

IG GROUP HOLDINGS PLC
Third Quarter Revenue Update

 

IG Group Holdings plc ("IG", "the Group", "the Company"), a global leader in online trading, today issues a scheduled update on its revenue for the three months to 29 February 2020 ("Q3 FY20"), the third quarter of its financial year ending 31 May 2020 ("FY20").

 

Business performance in Q3

 

The business performed strongly in the third quarter driven by a significant increase in active clients and reflecting increased client trading activity, particularly in the last week of February when financial market volatility was exceptionally high.

 

Revenue in Q3 FY20 was £139.8 million, 29% higher than in the same period in the prior year.  Q3 FY20 was IG's strongest revenue quarter since the implementation of the ESMA product intervention measures in August 2018 and is the third highest quarterly revenue in the Group's history, exceeded only by the last two quarters of FY18.

 

Revenue by product (£m)

Q3 FY20

Q3 FY19

% Change

OTC leveraged

135.2

103.2

31%

Exchange traded derivatives

3.9

4.0

(4%)

Stock trading and investments

0.7

0.8

(11%)

Group

139.8

108.0

29%

 

The Group served 101,700 OTC leveraged active clients in the quarter, 21% higher than in the same period in the prior year, with average OTC leveraged revenue per client 9% higher than in the prior year, at £1,330.

 

The Group's sustainable business model - of internalising client flows and hedging the residual risk in each market - has not changed, and the Board approved market risk limits have not changed. The Group's revenue reflects the transaction fees paid by clients ("client income"), net of the Group's external hedging costs, clients' trading profits and losses, and corresponding hedging profits and losses.  The Group's revenue does not benefit from client trading losses, nor is it exposed to client trading profits. The Group's business model is designed to give clients the best trading and execution experience available, with execution always favouring the client. 

 

This client execution benefit is generally higher in more volatile market conditions, and the conversion of client income to net trading revenue in Q3 FY20 was 70%, compared with the circa 74% conversion in H1 FY20 and in FY19 and FY18.

 

Year to date net trading revenue of £389.7 million is 9% higher than in the same period in the prior year. Revenue in the Group's Core Markets is 3% higher, with revenue from the Group's portfolio of Significant Opportunities 51% higher.

 

Revenue by product (£m)

Q3 FY20 YTD

Q3 FY19 YTD

% Change

 

OTC leveraged ("OTC")

374.7

343.3

9%

Exchange traded derivatives ("ETD")

11.7

12.4

(5%)

Stock trading and investments

3.3

3.3

-

Group

389.7

359.0

9%

 

Revenue (£m)

Q3 FY20 YTD

Q3 FY19 YTD

% Change

Core Markets

 

 

 

ESMA region OTC

198.3

201.3

(1%)

Other Core Markets OTC

123.1

111.4

10%

Stock trading and investments

3.3

3.3

-

Total Core Markets

324.7

316.0

3%

Significant Opportunities

 

 

 

OTC

53.3

30.6

74%

ETD

11.7

12.4

(5%)

Total Significant Opportunities

65.0

43.0

51%

Group

389.7

359.0

9%

 

The prior year included two months of trading prior to the implementation of the ESMA product intervention measures.  To understand the performance of the business in the ESMA region since the product intervention measures have been in effect, the most appropriate comparison is to compare the Q1-Q3 FY20 quarterly average with the Q2-Q4 FY19 quarterly average when the measures were in effect throughout.  On this analysis, ESMA region revenue in FY20 is 8% higher, driven by a 7% increase in the number of active OTC leveraged clients.

 

Year to date revenue in the Other Core Markets is 10% higher than in the prior year, driven by a 7% increase in the number of active OTC leveraged clients.

 

Year to date revenue from the Group's portfolio of Significant Opportunities of £65.0 million is £22.0 million higher than in the same period in the prior year.  Whilst the Group is still at an early stage in the implementation of its strategy and noting that each opportunity is at a different stage of development, there has been good initial progress.

 

The 74% growth in OTC leveraged revenue from the Group's portfolio of Significant Opportunities reflects the strong performance in Japan and Emerging Markets driven by the increase in the number of active clients in those businesses. The Group's recently launched European MTF, Spectrum, has continued to attract clients trading Turbo24s with nearly 1,300 active clients year to date, the Institutional business has increased its active client numbers by over 40%, and the Group's new US OTC FX business has served over 4,000 active clients this year.  Conditions were more challenging in the US Exchange Traded Derivatives business, Nadex, where client numbers were 8% lower. 

 

IG's track record for delivering sustainable revenue growth over the medium and long term has been driven by the growth in the size and quality of its active client base.

 

The tables setting out more detail on the breakdown of Core Markets (including further analysis of the ESMA region metrics) and total Significant Opportunities are shown in the Appendix to this document.

 

Business developments

 

During the period the Group opened a new client facing subsidiary in Bermuda, IG International. IG International is regulated by the Bermuda Monetary Authority (BMA).   IG's strong global brand has always attracted international clients from countries where the Group does not have a local presence. This investment means that the Group is better positioned to capture client demand and simplifies its arrangements with existing international clients. IG International will not offer products or services to residents of any EU country or residents of countries where IG has a regulated presence.

 

Actions to enable successful navigation of the impact of proposed changes to the regulatory environment in Australia are progressing as planned. The Group has received no further information on the nature or timing for implementation of the Australian Securities and Investments Commission measures.

 

Business continuity

 

IG has implemented a comprehensive business continuity plan in response to the COVID-19 virus, which is operating as anticipated.  All employees have the capability to work from home and IG will continue to provide the best possible service for its clients when they choose to trade the financial markets.  The Group is in regular communication with its staff members to ensure their safety, and that of their families, during this challenging time. 

 

Current Trading

 

The high level of volatility in the last week of February has continued into March.  Revenue in the first 12 trading days of the 61 in Q4 FY20 is estimated to be around £52 million.

 

These are extraordinary times.  This sustained level of volatility and revenue is unprecedented, and it is not possible to determine how long it will persist or how clients will continue to respond.  In addition, the actions of governments and regulators are not predictable, and the Group may face circumstances and events it has not previously anticipated.  It therefore remains difficult to predict accurately the level of revenue in the final quarter of this financial year. 

 

Analyst and investor call

 

There will be a conference call for analysts and investors at 8.00am (UK time) today.  The call can be accessed by visiting https://pres.iggroup.com/ig051/vip_connect. The call will also be available via audio webcast at https://pres.iggroup.com/ig051. The audio recording of the conference call will be archived for access at www.iggroup.com/investors.

 

For further information, please contact:

IG Group Investors                               IG Group Press                        FTI Consulting

Liz Scorer                                              Jon Laycock                               Neil Doyle / Ed Berry    

020 7573 0727                                       07388 440127                            020 3727 1141 / 1046

[email protected]                                 [email protected]

 

Disclaimer - forward-looking statements

 

This statement, prepared by IG Group Holdings plc (the "Company"), may contain forward-looking statements about the Company and its subsidiaries (the "Group"). Forward-looking statements involve known and unknown risks and uncertainties because they are beyond the Company's control and are based on current beliefs and expectations about future events.  No assurance can be given that such results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. 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 16,000 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 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 an award-winning, multi-product trading company which allows retail, professional and institutional clients to trade via its platforms 24 hours a day, 7 days a week*. IG is 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 stock trading service in the UK, Australia, Germany, France, Ireland, Austria and the Netherlands. 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.

 

*Excluding 10pm Friday (GMT) to 4am Saturday (GMT)

**Based on revenue excluding FX (from published financial statements, June 2019)

 

 

Appendix

 

1. Q3 FY20 Group client metrics

Revenue (£m)

Q3 FY20

Q3 FY19

% Change

Core Markets

 

 

 

ESMA region OTC leveraged

71.7

56.6

27%

Other Core Markets OTC leveraged

42.8

35.8

20%

Stock trading and investments

0.7

0.8

(11%)

Total Core Markets

115.2

93.2

24%

Significant Opportunities

 

 

 

OTC

20.7

10.8

92%

ETD

3.9

4.0

(4%)

Total Significant Opportunities

24.6

14.8

65%

Group

139.8

108.0

29%

 

Active clients ('000)

Q3 FY20

Q3 FY19

% Change

Core Markets

 

 

 

ESMA region OTC leveraged

58.6

51.7

13%

Other Core Markets OTC leveraged

25.7

23.7

8%

Stock trading and investments

38.4

37.4

3%

Multi product clients

(5.0)

(4.7)

6%

Total Core Markets

117.7

108.1

9%

Significant Opportunities

 

 

 

OTC

17.4

8.8

99%

ETD

9.4

8.7

7%

Total Significant Opportunities

26.8

17.5

53%

Other multi product clients

(0.7)

-

nm

Group

143.8

125.6

14%

 

Revenue per client (£)

Q3 FY20

Q3 FY19

% Change

Core Markets

 

 

 

ESMA region OTC leveraged

1,224

1,093

12%

Other Core Markets OTC leveraged

1,669

1,511

10%

Stock trading and investments

19

22

(14%)

Significant Opportunities

 

 

 

OTC

1,189

1,232

(4%)

ETD

415

466

(11%)

 

 

 

2. Q3 FY20 YTD Group client metrics

Revenue (£m)

Q3 FY20 YTD

Q3 FY19 YTD

% Change

Core Markets

 

 

 

ESMA region OTC leveraged

198.3

201.3

(1%)

Other Core Markets OTC leveraged

123.1

111.4

10%

Stock trading and investments

3.3

3.3

-

Total Core Markets

324.7

316.0

3%

Significant Opportunities

 

 

 

OTC

53.3

30.6

74%

ETD

11.7

12.4

(5%)

Total Significant Opportunities

65.0

43.0

51%

Group

389.7

359.0

9%

 

Active clients ('000)

Q3 FY20 YTD

Q3 FY19 YTD

% Change

Core Markets

 

 

 

ESMA region OTC leveraged

73.1

74.1

(1%)

Other Core Markets OTC leveraged

34.0

31.6

7%

Stock trading and investments

38.4

37.4

3%

Multi product clients

(5.9)

(6.1)

(3%)

Total Core Markets

139.6

137.0

2%

Significant Opportunities

 

 

 

OTC

23.2

11.2

106%

ETD

15.1

15.1

-

Total Significant Opportunities

38.3

26.3

45%

Other multi product clients

(1.0)

-

nm

Group

176.9

163.3

8%

         

 

Revenue per client (£)

Q3 FY20 YTD

Q3 FY19 YTD

% Change

Core Markets

 

 

 

ESMA region OTC leveraged

2,711

2,718

-

Other Core Markets OTC leveraged

3,626

3,525

3%

Stock trading and investments

87

88

(1%)

Significant Opportunities

 

 

 

OTC

2,301

2,730

(16%)

ETD

775

818

(5%)

 

  

3. ESMA region OTC leveraged quarterly average analysis

To understand the performance of the business in the ESMA region since the product intervention measures have been in effect, the most appropriate comparison is to compare the Q1-Q3 FY20 quarterly average with the Q2-Q4 FY19 quarterly average when the measures were in effect throughout.  This analysis is provided in the tables below.

 

Quarterly average

Revenue (£m)

 

Q1-Q3 FY20

Q2-Q4 FY19

Change %

ESMA region Professional

40.0

40.5

(1%)

ESMA region Retail

26.1

20.7

26%

Total ESMA region

66.1

61.2

8%

         

 

Quarterly average

Active Clients ('000)

 

Q1-Q3 FY20

Q2-Q4 FY19

Change %

ESMA region Professional

5.0

5.1

(1%)

ESMA region Retail

50.2

46.4

8%

Total ESMA region

55.2

51.5

7%

         

 

Quarterly average

Revenue per client (£)

 

Q1-Q3 FY20

Q2-Q4 FY19

Change %

ESMA region Professional

7,918

7,915

-

ESMA region Retail

520

447

16%

Total ESMA region

1,195

1,188

1%

         

 

 

 

 

 

 

 

 


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