REG - IG Group Hldgs plc - Acquisition

IG groupAnnouncement

16/01/2025 07:00

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RNS Number : 5106T  IG Group Holdings plc  16 January 2025

16 January 2025

LEI No: 2138003A5Q1M7ANOUD76

IG GROUP HOLDINGS PLC

Acquisition of Freetrade

 

IG Group Holdings plc ("IG", "the Group") is pleased to announce the
acquisition of Freetrade, the fast-growing, commission-free, self-directed
investment platform, for £160 million. The transaction will strengthen IG's
UK trading and investments offering and provide access to new customer
segments and capabilities.

Breon Corcoran, CEO of IG commented: "This is a rare opportunity to strengthen
IG's UK trading and investments offering and broaden our target addressable
market. Freetrade is one of the most successful emerging players in the UK
direct-to-customer investment market, with a strong brand, highly scalable
technology and delivering rapid growth. I am delighted that Viktor and his
team will join IG and continue to lead Freetrade."

Viktor Nebehaj, CEO and co-founder of Freetrade said: "This is an exciting
opportunity to accelerate our growth and delivery of new products and features
on our award-winning platform. IG's vision for Freetrade is closely aligned
with our own and its backing will be of huge benefit as we continue to scale
the business."

Strategic rationale for the acquisition

Acquisition enhances IG's UK trading and investments proposition

·   Freetrade provides a wide range of products, including over 6,200
global stocks and ETFs, fractional shares, UK Treasury bills, ISAs, SIPPs,
securities lending, and proxy voting. Its simple, user-friendly platform and
transparent pricing have driven strong client acquisition, retention(1) and
AUA(2) growth.

·   The UK direct investing market has grown at 10 per cent(3) compounded
annually and is forecast to grow strongly reflecting structural drivers. These
include the growing popularity of self-directed investing, greater individual
responsibility for retirement planning, increased pension freedoms, growing
financial literacy, digitalisation of services and demand for better value
propositions.

·   Freetrade broadens IG's addressable market, adds a strong brand in the
direct-to-customer trading and investments market, brings proprietary highly
scalable technology, provides optionality on new product and market entry and
has demonstrated an ability to acquire customers at low cost.

Freetrade is one of the UK's fastest-growing subscription-based investment
platforms

·   Since its launch in 2018, Freetrade has become one of the most
successful emerging players in the UK market with 720k customers and AUA of
£2.5 billion as of the end of 2024.

·   Freetrade has strong growth momentum, with net flows in 2024 equivalent
to 22% of starting AUA. With efficient investment in marketing, AUA has risen
from £1.2 billion at the end of 2022. Customers with AUA of £10k or more are
a fast-growing segment, increasing from 27k to 41k as at 31 December 2024.

·   Freetrade has well diversified revenue, split across subscriptions,
foreign exchange transaction fees, and interest income. In 2024, revenue
increased 32% year-on-year to £27.5 million, including a record performance
in Q4(4), with operating leverage resulting in positive EBITDA(5) for the
first time as it scales through an important growth phase.

IG will accelerate delivery of Freetrade's product roadmap and invest in
growth

·   IG will operate Freetrade as a commercially standalone business with
its own brand, existing management team and operational platform to support
the successful execution of the strategy. Viktor Nebehaj, CEO and co-founder,
and the leadership team, will remain with Freetrade and continue to scale the
business.

·   Freetrade is at a key stage in its development and IG will invest in
expanding its product range, hiring talent, adding new features and increasing
marketing activity to accelerate growth. IG plans to reinvest the majority of
Freetrade's forecast profit in growing the business over the next two years.

Key transaction terms and outlook

·   IG will acquire 100% of Freetrade for an enterprise value of £160
million which will be funded in cash from existing capital resources.
Completion is subject to customary conditions including regulatory approvals
and currently expected in mid-2025.

·   The acquisition is expected to achieve a return on invested capital in
excess of the Group's weighted average cost of capital in years three to five.

·   As at 31 May 2024, IG reported surplus regulatory capital of £638
million and headroom is expected to remain strong following completion of the
acquisition. In line with IG's capital allocation framework, surplus capital
not required for other priorities will be returned to shareholders. The Group
expects to extend the existing share buyback programme(6) of £150 million
announced on 25 July 2024 in the second half of the current financial year,
subject to regulatory approval.

As previously announced, IG will report H1 FY25 results on 23 January 2025.

 

(1. ) 2024 customer retention rate of 93%

(2. ) Assets under administration

(3. ) Oliver Wyman, direct-to-customer AUA. Refers to the period from 2018 to
2023

(4. ) Unaudited Q4 2024 revenue of £8.3 million

(5. ) Unaudited adjusted EBITDA of £2.1 million in 2024 (2023: £(8.6)
million). Adjusted EBITDA excludes share based payments and includes rental
expenses

(6. ) At the close of the market on 15 January 2025, £141 million of the
£150 million share buyback programme announced on 25 July 2024 had been
completed

 

Enquiries

 IG Group Investor Relations      Media
 Martin Price                     Edward Berry / Katherine Bell
 020 7573 0020                    07703 330 199 / 079 7687 0961
 investors@ig.com                 iggroup.sc@fticonsulting.com

 

 

Disclaimer - forward-looking statements

This statement, prepared by IG may contain forward looking about IG and its
subsidiaries. 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 IG's control and are based on
the Group'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 FY24 Group Annual Report for the financial year ended
31 May 2024. The Annual Report can be found on IG'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, IG undertakes no obligation to
update these forward-looking statements.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate
for any period and should not be construed as such.

About IG

IG Group (LSEG:IGG)
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.iggroup.com%2F&data=05%7C01%7CSimon.Wright%40ig.com%7Cfa58780cb4c445598c5a08da3f12df38%7C4b4cca9cedaf42f38e219070c5d9d76b%7C0%7C0%7C637891647530086156%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=ZopP0pt%2Bpil6u7sT7JRD8OjvetOm4sSxJJ%2FDPRvXU2A%3D&reserved=0)
provides online trading platforms and educational resources to empower
ambitious clients around the globe. Headquartered in the UK, IG Group is a
FTSE 250 company that offers clients access to c.19,000 financial markets
worldwide.

 

 

APPENDIX I

ADDITIONAL UNAUDITED FINANCIAL INFORMATION ON FREETRADE

 

 

 12 months ending 31 December                         2022    2023   2024
 Revenue (£ million)                                  14.2    20.8   27.5
 Adjusted EBITDA (£ million)*                         (28.8)  (8.6)  2.1

 AUA (at period end, £ billion)                       1.2     1.6    2.5

 Customers ('000)                                     696     693    720
 Customers with AUA >£10k ('000)                      27      33     41
 Average AUA of customers with AUA >£10k (£000)       32      40     53

 

 

*Adjusted EBITDA excludes share based payments and includes rental expenses

Table based on Freetrade accounting policies

 

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