IG Group Holdings plc Thrid Quarter Revenue Update (5096T)

TIDMIGG

RNS Number : 5096T

IG Group Holdings plc

21 March 2019

21 March 2019

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 an update on its revenue for the three months to 28 February 2019, the third quarter of its FY19 financial year ("Q3 FY19").

Q3 FY19 Revenue

Q3 FY19 is the second quarter when the ESMA product intervention measures that impose restrictions relating to the offering of CFDs and which prohibit the offer of binary options to Retail clients in the UK and EU, were in effect throughout.

Net trading revenue was GBP108.0m in Q3 FY19, 12% lower than in Q2 FY19. The total number of OTC leveraged active clients in Q3 increased by 1% to 84,200. The lower revenue in Q3 compared with Q2 is due to lower revenue per client which reflects the reducing levels of volatility in financial markets throughout the quarter, culminating in persistently low levels of volatility and market activity in February.

IG's track record of sustainable revenue growth in its OTC leveraged derivatives business over the medium and long term has been delivered through growth in the size and quality of its active client base. The Group is pleased to see continued demand for its products and services, with 7,742 new OTC leverage clients placing a first trade in Q3 compared with 7,553 in Q2. During Q3 a further 1,425 ESMA region Retail clients applied to be classified as Professional, with 14% of these applications accepted.

The table below sets out revenue and active client numbers by reporting segment for Q3 FY19 compared with Q2 FY19.

 
 Reporting Segment               Revenue (GBPm)     % Change    Clients ('000s)    % Change 
-----------------------------                      ---------                      --------- 
                                Q3 FY19   Q2 FY19              Q3 FY19   Q2 FY19 
-----------------------------  --------  --------  ---------  --------  --------  --------- 
 UK                              41.8      49.7      (16%)      31.5      31.2        1% 
 EU                              15.1      17.3      (13%)      20.3      19.9        2% 
 ESMA Region                     56.9      67.0      (15%)      51.8      51.1        1% 
                               --------  --------             --------  -------- 
 EMEA ex EU                      11.3      10.7        6%        4.5       4.6       (2%) 
 APAC                            35.0      38.6       (9%)      27.9      27.6        1% 
                               --------  --------             --------  -------- 
 OTC Leveraged                   103.2     116.3     (11%)      84.2      83.3        1% 
                               --------  --------             --------  -------- 
 US                               4.0       4.5      (11%)       8.7       8.6        1% 
 Share Dealing & Investments      0.8       1.3      (38%)      37.4      37.0        1% 
 Multi product clients             -         -         -        (4.7)     (4.8)      (2%) 
 Group                           108.0     122.1     (12%)      125.6     124.1       1% 
                               --------  --------             --------  -------- 
 

ESMA Region

The table below sets out the split of revenue and active client numbers within the ESMA region between clients categorised as Professional and Retail.

 
                       Revenue (GBPm)     % Change    Clients ('000s)    % Change 
-------------------                      ---------                      --------- 
                      Q3 FY19   Q2 FY19              Q3 FY19   Q2 FY19 
-------------------  --------  --------  ---------  --------  --------  --------- 
 ESMA Professional     37.1      46.3      (20%)       5.2       5.2        - 
 ESMA Retail           19.8      20.7       (4%)      46.6      45.9        2% 
 ESMA Region           56.9      67.0      (15%)      51.8      51.1        1% 
                     --------  --------             --------  -------- 
 

The total number of OTC leveraged active clients in the ESMA region increased by 1% in Q3 compared with Q2, with the number of active Retail clients increasing by 2% to 46,600. The reduction in revenue in the ESMA region in Q3 compared with Q2 reflects lower revenue per client, consistent with the market conditions. The level of trading by Professional clients, who are not constrained by the ESMA measures, is more sensitive to volatility than Retail clients. The proportion of ESMA region revenue generated from clients categorised as Professional was 65% in Q3 FY19 compared with 69% in Q2 FY19.

Year to Date Revenue

Year to date net trading revenue of GBP359.0m is 15% lower than in the same period in the prior year, reflecting the impact of the ESMA measures and the exceptional performance in Q3 FY18 when revenue was boosted by the heightened level of interest in cryptocurrencies.

The table below sets out revenue and active client numbers by reporting segment for Q3 FY19 year to date compared with the same period in FY18. The underlying change in revenue shown in the table adjusts for the revenue generated by clients that had previously contracted with an entity in the ESMA region who elected to open an IG account in a jurisdiction which is not subject to the ESMA product intervention measures during FY19.

 
 Reporting Segment         Revenue (GBPm)          % Change           Clients ('000s)    % Change 
-----------------------                                                                 --------- 
                          Q3 YTD    Q3 YTD   Reported   Underlying   Q3 YTD    Q3 YTD 
                            FY19     FY18                              FY19      FY18 
-----------------------  --------  -------  ---------  -----------  --------  --------  --------- 
 UK                        145.5    185.8     (22%)       (19%)       44.7      55.4      (19%) 
 EU                        56.9      92.6     (39%)       (34%)       29.4      36.1      (19%) 
 ESMA Region               202.4    278.4     (27%)       (24%)       74.1      91.5      (19%) 
                         --------  -------                          --------  -------- 
 EMEA ex EU                31.8      26.0      22%          6%         6.1       5.9        3% 
 APAC                      109.1    102.4       7%          2%        36.7      35.3        4% 
                         --------  -------  ---------  -----------  --------  -------- 
 OTC Leveraged             343.3    406.8     (16%)       (16%)       116.9     132.7     (12%) 
                         --------  -------  ---------  -----------  --------  -------- 
 US                        12.4      11.6       7%          7%        15.1      18.8      (20%) 
 Share Dealing & 
  Investments               3.3      2.9       14%         14%        37.4      33.7       11% 
 Multi product clients                                                (6.1)     (6.3)      (3%) 
 Group                     359.0    421.3     (15%)       (15%)       163.3     178.9      (9%) 
                         --------  -------                          --------  -------- 
 

Business Model

IG's business model ensures that its interests as a business are aligned with the interests of its clients, which sets it apart from most other companies in the industry. The Company wants its clients to trade profitably, as successful clients are more likely to continue trading.

The Group accepts market risk in order to allow instant execution of client orders. The business manages the market risk it faces through internalisation and by hedging residual risk in each market at defined limits. This policy has been established for many years, and has not changed in FY19.

New Operations

The Group's new subsidiary in the USA which is registered to operate as a Retail Foreign Exchange Dealer, IG US, and its new client facing subsidiary in Germany, IG Europe, both launched operations at the end of January. Spectrum, the Group's MTF, is expected to launch before the end of the financial year.

Outlook

As demonstrated in Q3, the Group's revenue in any one period is affected by market volatility and client trading opportunities, and the level of revenue in the last quarter of FY19 is difficult to predict accurately. As previously communicated, the Company continues to expect that its revenue in FY19 will be lower than in FY18. The Company's cost guidance for FY19 remains unchanged with total operating costs expected to be at a similar level to the GBP290 million operating costs in FY18.

The Board reiterates that the Company expects to maintain the 43.2p per share annual dividend until the Group's earnings allow the Company to resume progressive dividends.

There will be a conference call for analysts and investors at 8.30am (UK time) today. The call can be accessed by visiting https://pres.iggroup.com/ig046/vip_connect. The audio recording of the conference call will be archived for access at www.iggroup.com/investors.

The Company will provide a business and strategic update on the morning of 22 May 2019.

For further information, please contact:

IG Group FTI Consulting

Liz Scorer Neil Doyle / Ed Berry

020 7573 0727 020 3727 1141 / 1046

[e-mail]

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.

About IG

IG empowers informed, decisive, adventurous people to access opportunities in over 15,000 financial markets. With a strong focus on innovation and technology, the company puts client needs at the heart of everything it does.

IG's vision is to be a global leader in retail trading and investments. Established in 1974 as the world's first financial spread betting firm, it continued leading the way by launching the world's first online and iPhone trading services.

IG is an award-winning, multi-platform trading company, the world's No.1 provider of CFDs* and a global leader in forex. It provides leveraged services with the option of limited-risk guarantees, and offers an execution-only share dealing service in the UK, Australia and Continental Europe. IG has a range of affordable, fully managed investment portfolios, which provide a comprehensive offering to investors and active traders.

It is a member of the FTSE 250, with offices across Europe, including a Swiss bank, Africa, Asia-Pacific, the Middle East and the US, where it offers on-exchange limited risk derivatives via the Nadex brand.

* Based on revenue excluding FX (from published financial statements, February 2018)

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March 21, 2019 03:00 ET (07:00 GMT)