REG - IG Group Hldgs plc - Interim results for the six months to 30 November
25/01/2024 07:00
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RNS Number : 8363A IG Group Holdings plc 25 January 2024
LEI No: 2138003A5Q1M7ANOUD76
Interim results for the six months ended 30 November 2023
25 January 2024
IG Group Holdings plc ("IG", "the Group", "the Company"), a global fintech,
today announces its results for the six months ended 30 November 2023 ("H1
FY24").
"Continued execution of the strategy, with a sharp focus on clients, costs and
capital has served the Group well in soft market conditions to deliver
attractive margins and returns to shareholders."
Highlights
- Performance in H1 FY24 1 reflected softer market conditions and
against a strong comparative:
- Total revenue of £472.6 million (H1 FY23: £519.1 million),
down 9%.
- Net trading revenue of £402.4 million (H1 FY23: £494.9
million), down 19%, reflecting market volatility across a range of asset
classes materially lower than in H1 FY23.
- Net interest income of £70.2 million (H1 FY23: £24.2 million)
increased significantly, driven by higher interest rates across all markets.
- tastytrade achieved another consecutive record half of total
revenue, increasing by 29% to $117.8 million (H1 FY23: $91.4 million).
- Active clients of 296,300 (H1 FY23: 312,000) underlined IG's
sophisticated and loyal client base, while new clients acquired of 33,800 (H1
FY23: 37,500) reflected the continued demand for IG's products and services
despite soft market conditions in the period.
- Adjusted total operating costs of £281.1 million (H1 FY23:
£256.8 million), were up 9% on H1 FY23, but down 1% against H2 FY23.
Statutory total operating costs of £310.4 million (H1 FY23: £279.9 million)
increased 11%.
- Adjusted profit before tax of £205.7 million (H1 FY23: £260.7
million) was down 21%. Statutory profit before tax of £176.4 million (H1
FY23: £240.5 million). Adjusted profit before tax margin remains attractive
at 43.5% (H1 FY23: 50.2%).
- Adjusted basic EPS was 38.9p (H1 FY23: 49.7 pence). Statutory
basic EPS was 33.4 pence (H1 FY23: 45.8 pence).
- Operational highlights:
- Launched company-wide operational improvement programme in
October 2023, which will result in structural cost savings of £50 million per
year by FY26.
- High quality and strength of our risk management framework and
controls evidenced by a 40% reduction in the regulatory capital requirement,
to £290 million.
- Increased capital returns in line with the Capital Allocation
Framework:
- Repurchased £149.2 million of shares in the period, of which
£124.5 million was part of the £250 million share buyback scheme announced
in July 2023. Value of shares repurchased under the current scheme as at 22
January 2024 was £139.5 million.
- Increased the interim cash dividend to 13.56 pence per share
(H1 FY23: 13.26 pence per share).
- Approved £4 million in donations, in line with our commitment
to contribute 1% of adjusted profit after tax to charitable causes annually.
- Announced the appointment of Breon Corcoran as Chief Executive
Officer from 29 January 2024.
Financial Summary(1)
H1 FY24 H1 FY24 adjusted H1 FY23 H1 FY23 adjusted Change Adjusted change %
%
Total revenue (£m) 472.6 472.6 519.1 519.1 (9%) (9%)
Net trading revenue (£m) 402.4 402.4 494.9 494.9 (19%) (19%)
Total operating costs(2) (£m) 310.4 281.1 279.9 256.8 11% 9%
Profit before tax(3) (£m) 176.4 205.7 240.5 260.7 (27%) (21%)
Profit after tax (£m) 132.7 154.8 194.9 211.3 (32%) (27%)
Basic earnings per share (p) 33.4 38.9 45.8 49.7 (27%) (22%)
Interim dividend per share (p) 13.56 - 13.26 - 2% -
(1) From continuing operations in FY23.
(2) H1 FY24 adjusted operating costs exclude £29.3 million of one-off items
and recurring non-cash items (H1 FY23: £23.1 million).
(3) Adjusted profit before tax in H1 FY23 includes £2.9 million income for
the reimbursement of costs relating to the sale of Nadex.
Charlie Rozes, Acting Chief Executive Officer, commented:
"It's encouraging to see the benefits of our diversification strategy paying
off, despite a mixed trading backdrop for our clients, driven by persistently
low levels of market volatility in Q1 and Q2. While some of our businesses saw
revenue weakness, others achieved strong results in the period. Our exposure
to a wider range of revenue drivers will underpin further growth in the Group
as we deliver on our strategy. At the same time, we've taken action to control
growth in the cost base, significantly reducing the rate of cost growth from
FY23, yet still making selective investments in the business. As a result,
we've maintained attractive profit margins in the period.
"In addition to closely managing the cost base, our discipline around capital
allocation saw us make further progress with our ongoing share buyback
programme and also declare an increased interim dividend per share in line
with our Capital Allocation Framework. We remain confident and optimistic
about the outlook for IG and continue to be well positioned to benefit from
the structural growth of self-directed trading and investing. We are the home
of active traders worldwide, bringing exciting and innovative new products to
market, backed by the best technology and trade execution."
Further information
IG Group Investor Relations IG Group Press FTI Consulting
Martin Price / Simon Wright Angela Warburton Edward Berry / Katherine Bell
020 7573 0020 / 0099 020 7633 5382 07703 330 199 / 079 7687 0961
investors@iggroup.com (mailto:investors@iggroup.com) press@ig.com (mailto:press@ig.com) edward.berry@fticonsulting.com (mailto:edward.berry@fticonsulting.com)
/ katherine.bell@fticonsulting.com (mailto:katherine.bell@fticonsulting.com)
Analyst presentation
There will be an analyst and investor presentation at 9:30am (UK Time) on
Thursday 25 January 2024.
The presentation will also be accessible live via audio webcast at: Webcast
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. If you wish to listen via conference call, please use the following link:
Conference Call
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. The audio webcast of the presentation and a transcript will be archived at:
IG Group - Financial Results
(https://www.iggroup.com/investors/financial-results/results-reports-and-presentations/result/year/2024)
.
Financial reporting calendar
IG regularly updates the market on financial performance and delivery against
strategy. The next financial update will be the Third Quarter Revenue Update
in March 2024.
Alternative performance measures
The Group's management believe that the alternative performance measures
included in this document provide valuable information to readers of the
financial statements as they provide a more consistent basis for comparing
business performance between financial periods. They also provide more detail
on performance which the managers of the business are most directly able to
influence, or which is most relevant for an assessment of the Group's results.
Furthermore, they reflect how operating targets are defined and performance is
monitored by the Group's management. However, any alternative performance
measures in this document are not a substitute for statutory measures and
readers should consider the statutory measures as well. Refer to the appendix
for further information and calculations of alternative performance measures
included throughout this document, and the most directly comparable statutory
measures.
Forward-looking statements
This interim statement, prepared by the Company, may contain forward-looking
statements about 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 Group Annual Report for the financial year ended 31
May 2023. 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.
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.
No offer or solicitation
This announcement is not intended to, and does not constitute or form any part
of, an offer to sell, or an invitation to purchase or subscribe for any
securities, or a solicitation of any vote or approval in any jurisdiction.
No profit forecasts or estimates
No statement in this announcement is intended as a profit forecast or estimate
for any period.
About IG
IG Group (LSEG:IGG) is a global fintech company that provides online trading
platforms and educational resources to empower ambitious clients around the
globe. Established in 1974 and headquartered in the UK, IG Group is a FTSE 250
company that offers clients access to ~19,000 financial markets worldwide.
For 50 years, the Company has grown and evolved its technology, product
offering, and educational tools and content to meet the needs of its retail
and institutional clients. IG Group continues to innovate its offering for the
next generation of traders and investors through its market-leading brands:
IG, tastytrade, IG Prime, Spectrum, and DailyFX.
Acting Chief Executive Officer's Statement
The first half results highlight the success of our diversification strategy
which positioned us well to deliver attractive profit margins and return
capital to shareholders despite subdued market conditions in the period. The
business remains strongly cash generative which has allowed us to invest in
existing and new products to better serve our clients and achieve long-term
growth and sustainable distributions for shareholders. The results demonstrate
the strength and breadth of our business and I remain very confident in the
outlook.
On 8 December 2023, we announced the appointment of Breon Corcoran as Chief
Executive Officer from 29 January 2024. Breon has an exceptional track record
of delivering strong results for all stakeholders and I look forward to
welcoming him to IG.
Strategic progress in H1
In FY19, we launched a strategy to expand and diversify the Group by product
and geography, building on our strengths in trading and trading products,
technology and risk management. We continue to make great progress executing
this strategy as strong growth in our exchange traded derivatives business has
increased the proportion of total revenue from these products from 3% in FY19
to 21% in H1 FY24, while US revenue has risen from 4% to 22% over the same
period. The benefit of diversification was clear in this period, as weaker
revenues in OTC were offset by strength in exchange traded products.
tastytrade delivered another consecutive half year period of record revenue
reflecting growth in both trading revenue and interest income, despite
materially lower equity market volatility compared to the prior year. Market
share increased through H1 FY24 reflecting the success of our first national
brand campaign which launched in late FY23, and our ability to attract clients
from competitors.
Total client equity on the tastytrade platform reached record levels with
average balances in H1 up 18% on FY23, as we continued to attract large
balance accounts. We are laying the foundations for future growth with the
implementation of an industry leading CRM platform in H1 FY24 and enhancements
to the client onboarding journey this month.
In Europe, Spectrum - our pan-European exchange for securitised derivatives -
added Directa as its latest independent member. Directa is a pioneering online
broker in Italy, servicing over 61,000 active accounts representing combined
customer assets of £3bn, and as a member of Spectrum, will offer its Italian
retail customers the ability to trade securitised derivatives 24 hours a day,
five days a week.
IG has a long and proven track record of growth and innovation. Innovation
remains at the heart of our culture and we continue to develop new products
and services though our incubator programme. This includes: tastycrypto, our
self-custody digital wallet; Bad Trader a network designed for Millennial and
Gen Z traders; and The Small Exchange, an innovative new US market
infrastructure provider which is currently in development phase.
In the summer, starting in Singapore and the UK, we will be launching our next
generation stock trading platform which will provide comprehensive coverage of
ETFs, mutual funds, bonds, thousands of stocks and a cash management offering.
Our existing stock trading and investments platform has over 90,000 customers,
despite a more limited product range. Our next generation platform will be
highly differentiated by providing unique products and features, risk
management tools, flexible and competitive pricing and a highly tailored user
experience.
Operational improvement programme
In October we announced the operational improvement programme that will
simplify and streamline the business, better positioning it for further
growth. These actions will create a leaner, more agile business and further
enhance the Group's flexibility to innovate and deliver world class customer
experience.
We expect to reduce headcount by approximately 300, which represents around
10% of the total workforce at the end of FY23. Alongside other efficiency
measures, including expanding the use of our global centres of excellence, we
expect to deliver full run rate cost savings of £50 million per year. These
initiatives are expected to drive operating margin expansion over the medium
term.
We are on track to deliver structural savings of £10 million in FY24, £40
million in FY25 and £50 million in FY26. We anticipate non-recurring costs to
achieve these savings of approximately £18 million with the majority incurred
in FY24 and the remainder in FY25. £10 million of execution costs were
incurred in H1 FY24.
In addition to the structural savings, in FY24 specifically, variable costs
will be reduced by an additional £10 million reflecting the softer market
conditions in the first half of the year.
Capital allocation
On 1 January 2022, the Group transitioned to the Investment Firm Prudential
Regime ("IFPR"). As announced in September, following our first Supervisory
Review and Evaluation Process ("SREP") under the new regime, the Group's
regulatory capital requirement reduced from £497.4 million at 31 May 2023 to
£289.8 million as at 31 August 2023, evidencing the high quality and strength
of our risk management frameworks and controls, following years of steady
investment and development.
During the period we repurchased £149.2 million of shares, of which £124.5
million was part of the £250 million share buyback scheme announced in July
2023.
We have increased the interim cash dividend to 13.56 pence per share (H1 FY23:
13.26 pence per share) and approved £4 million in donations, in line with our
commitment to contribute 1% of adjusted profit after tax to charitable causes
annually.
As of 30 November 2023, headroom over the Group's minimum regulatory capital
requirements was £541.8 million. Regulatory capital resources reduced during
the period from £996.3 million reported as at 31 May 2023 to £831.6 million,
reflecting the timing of dividend payments and share buybacks amounting to
£276.4 million in the period. We expect headroom to increase in the second
half.
The Board will continue to allocate capital in a disciplined manner, in line
with our Capital Allocation Framework.
Outlook
The market conditions we experienced during H1 have continued into the
beginning of our Q3. Despite this, the business continues to perform well
reflecting our increasingly diversified revenue mix.
Higher interest rates have continued to drive growth in our interest income
and finance income. Given the geographic mix and balances of client and
corporate cash, we expect to generate a similar amount of interest income in
H2 as in H1, and higher finance income in H2 than in H1.
Given our active approach to cost management in softer market conditions and
operational improvement programme, we continue to expect an adjusted PBT
margin in the mid-to-high 40s in FY24, in line with our medium-term guidance.
In summary, we've delivered robust results in H1 FY24 despite the soft market
backdrop. Profit margins remain strong and we have a strong balance sheet
which puts us in an excellent position to invest in the business, execute our
strategy, and provide attractive returns to our shareholders.
Charlie Rozes
Acting CEO
Business Performance Review
Summary Group Income Statement
H1 FY24 H1 FY24 adjusted H1 FY23 H1 FY23 adjusted Change % Adjusted change %
£m
Net trading revenue 402.4 402.4 494.9 494.9 (19%) (19%)
Net interest income 70.2 70.2 24.2 24.2 190% 190%
Total revenue 472.6 472.6 519.1 519.1 (9%) (9%)
Betting duty and other operating income(1) 0.3 0.3 - (2.9)
Net operating income 472.9 472.9 519.1 516.2 (9%) (8%)
Total operating costs(2,3) (310.4) (281.1) (279.9) (256.8) 11% 9%
Operating profit 162.5 191.8 239.2 259.4 (32%) (26%)
Other net losses (1.5) (1.5) (1.1) (1.1)
Net finance income 15.4 15.4 2.4 2.4
Profit before tax from continuing operations 176.4 205.7 240.5 260.7 (27%) (21%)
(1) H1 FY23 adjusted betting duty and other operating income excludes £2.9
million of income for the reimbursement of costs relating to the sale of
Nadex.
(2) Operating costs include net credit losses on financial assets.
(3) H1 FY24 adjusted operating costs exclude £29.3 million of one-off items
and recurring non-cash items (H1 FY23: £23.1 million).
All results are presented on a continuing operations basis which excludes
items related to the sale of Nadex operations which completed in FY22 and was
classified as a discontinued operation. In FY23, the Group subsequently
disposed of assets related to Nadex.
Statutory and adjusted results
In addition to statutory results, we have also presented results on an
adjusted basis, which excludes certain one-off items and recurring non-cash
items. A reconciliation of alternative performance measures used in this
report is contained in the appendix.
In H1 FY24, adjusted operating costs excludes £19.3 million of one-off costs
and recurring non-cash costs associated with the tastytrade acquisition and
integration and £10.0 million of costs relating to the operational
improvement programme.
In H1 FY23, adjusted other operating income excludes £2.9 million of income
for the reimbursement of costs relating to the sale of Nadex. Adjusted
operating costs excludes £20.2 million of costs and recurring non-cash costs
associated with the tastytrade acquisition and integration and £2.9 million
of costs relating to the sale of Nadex.
The following analysis is presented on an adjusted basis to present a more
accurate view of underlying performance.
Total revenue by product
Total revenue (£m)
H1 FY24 H1 FY23 Change %
OTC derivatives 352.6 422.9 (17%)
Exchange traded derivatives 99.7 83.8 19%
Stock trading and investments 20.3 12.4 63%
Total revenue 472.6 519.1 (9%)
Total revenue consists of net trading revenue and net interest income. Total
revenue was £472.6 million in H1 FY24, down 9% on H1 FY23. OTC derivatives
total revenue was £352.6 million, down 17% reflecting softer market
conditions in the period, and lower levels of client activity. Exchange traded
derivatives total revenue was £99.7 million, up 19% on the prior period. This
includes tastytrade total revenue of £94.3 million, up 21%, benefitting from
both increased interest rates and higher cash balances, offset by a reduction
in net trading revenues, down 5%. Stock trading and investments total revenue
was £20.3 million, up 63% on H1 FY23, benefitting from increased interest
rates, while net trading revenue remained flat.
Non-OTC revenue made up 25% of total revenue in H1 FY24, up from 19% in H1
FY23 reflecting the continued focus and successful delivery of revenue
diversification.
Net trading revenue
Net trading revenue was £402.4 million, 19% lower than H1 FY23 primarily due
to lower levels of client activity as clients found fewer opportunities to
trade in subdued market conditions.
Net trading revenue performance by product
Net trading revenue (£m)
H1 FY24 H1 FY23 Change %
OTC derivatives 327.7 416.5 (21%)
Exchange traded derivatives 63.6 67.1 (5%)
Stock trading and investments 11.1 11.3 (1%)
Net trading revenue 402.4 494.9 (19%)
Net interest income 70.2 24.2 190%
Total revenue 472.6 519.1 (9%)
Active clients (000) Net trading revenue per client (£)
H1 FY24 H1 FY23 Change % H1 FY24 H1 FY23 Change%
OTC derivatives 147.3 159.1 (7%) 2,225 2,618 (15%)
Exchange traded derivatives(1) 70.1 72.2 (3%) 907 922 (2%)
Stock trading and investments 89.1 92.2 (3%) 125 122 2%
Total(2) 296.3 312.0 (5%)
(1) Exchange traded derivatives revenue per client calculation excludes
revenue generated from the Group's US market maker in H1 FY23.
(2) 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 FY24 there were 10,200 multi-product clients,
compared with 11,500 in H1 FY23.
First trades (000)
H1 FY24 H1 FY23 Change %
OTC derivatives 20.7 24.3 (15%)
Exchange traded derivatives 10.7 10.5 2%
Stock trading and investments 4.2 5.1 (17%)
Total(1) 33.8 37.5 (10%)
(1) Total Group first trades have been adjusted to remove the clients who
traded in more than one
product category to give a unique first trade count.
OTC derivatives
OTC derivatives net trading revenue of £327.7 million was down 21%,
reflecting a reduction in client activity with active clients down 7% on H1
FY23 and average revenue per client falling by 15%. Lower demand in the market
resulted in first trades reducing by 15% on H1 FY23, however H1 FY24 first
trades were in line with H2 FY23 (H2 FY23: 21,200).
UK and EU OTC derivatives net trading revenue was £162.5 million, down 22%.
Within this, active clients were down 7% year-on-year and revenue per client
was down 16%. The drop in clients was observed in Q1, with Q2 clients in line
with the previous quarter.
Australia OTC derivatives net trading revenue of £41.6 million decreased 16%,
with similar decreases in active clients and revenue per client, down 8% and
9% respectively.
Japan OTC derivatives net trading revenue was £38.9 million, down 30% on a
record H1 FY23 performance. Active clients were down 7%, while revenue per
client was down 25% as some of our higher value clients reduced their trading
having not seen opportunities in the market.
Singapore OTC derivatives net trading revenue was £35.1 million, down 4% on
H1 FY23 but up 11% on H2 FY23. Active clients were down 17% on H1 FY23 while
revenue per client was up 16% year on year. This reflects a change in client
mix, as our largest clients continued to trade in the period, while lower
value clients reduced trading.
US OTC derivatives net trading revenue decreased 32% as net trading revenue
per client decreased 32% year on year while active client numbers remained in
line with the prior year period.
Exchange traded derivatives
Net trading revenue from exchange traded derivatives was £63.6 million, down
5%.
In US Dollars, tastytrade's net trading revenue was up 2% year on year to
$72.9 million (H1 FY23: $71.8 million). In reporting currency, tastytrade's
net trading revenue in H1 FY24 was £58.2 million, decreasing 5% on the prior
year. Active clients reduced slightly in the half, down 3% on the prior
period, while revenue per client reduced by 2% driven by foreign exchange
movements. First trades in the period increased by 4% on H1 FY23.
Spectrum's net trading revenue was £5.4 million, in line with the prior year
with a 7% reduction in active clients, and a 12% reduction in first trades,
offset by a higher average revenue per client, up 6%. This half saw the
onboarding of the external broker, Directa who are trading at increasing
volumes.
Stock trading and investments
Net trading revenue from stock trading and investments was £11.1 million, in
line with H1 FY23. Active clients reduced by 3% on the prior period while the
average revenue per client increased by 2%. Despite the drop in active
clients, the assets under administration increased to £3.4 billion, an
increase against the £3.3 billion at the end of FY23 and £3.2 billion at H1
FY23. First trades in the period were down 17% on H1 FY23, and down 9% on H2
FY24.
Net interest income
Net interest income on client balances in H1 FY24 was £70.2 million, a
significant increase on the prior year reported interest of £24.2 million, up
190%. Interest income made up 15% of total revenue, a large increase from the
5% in H1 FY23 and 11% in H2 FY23. The increase reflects higher interest rates
and significant client balances.
In our US businesses, client cash balances at the end of the period were $1.9
billion (30 Nov 2022: $1.9 billion). This contributed £37.3 million of
interest income (H1 FY23: £16.9 million).
Outside of the US, client balances of £2.5 billion were down 12% (30 Nov
2022: £2.9 billion). This included £410.2 million of client funds on the
balance sheet (30 Nov 2022: £452.2 million) for which the interest is
recognised within the net finance income line. Interest income earned on the
remaining segregated client money balance was £32.9 million compared with
£7.3 million in H1 FY23.
Adjusted operating costs
Adjusted operating costs excludes £29.3 million of one-off items and
recurring non-cash items in order to present a more accurate view of
underlying performance. A reconciliation of alternative performance measures
used in this report is contained in the appendix.
Adjusted operating costs for H1 FY24 were £281.1 million, 9% higher than H1
FY23. The increase reflected higher average headcount, inflationary increases,
higher net credit losses, costs for ongoing litigation, and continued
investment in technology.
Adjusted operating costs from continuing operations
£m H1 FY24 H1 FY23 Change %
Fixed remuneration 100.2 93.1 8%
Advertising and marketing 43.8 43.7 0%
Revenue related costs 30.6 26.6 15%
IT, structural market data and communications 23.8 20.9 14%
Depreciation and amortisation 17.7 14.8 20%
Legal and professional 14.2 11.5 23%
Other costs 25.7 21.9 17%
Variable remuneration 25.1 24.3 3%
Total operating costs 281.1 256.8 9%
Headcount - average 2,754 2,604 6%
H1 FY24 fixed remuneration was £100.2 million, up 8%, reflecting inflationary
salary increases and headcount increase as we continued to invest in the
Group's strategic and incubator projects.
Revenue related costs include market data charges, client payment charges,
provisions for client and counterparty credit losses and brokerage trading
fees. Revenue related costs increased by 15% to £30.6 million. With the
exception of client and counterparty credit losses, all revenue related costs
decreased year on year reflecting the lower levels of client activity. Client
and counterparty credit losses increased to £10.5 million in the period (H1
FY23: £1.1 million), which included an isolated provision for bad debts
arising against a small number of professional clients.
IT maintenance, structural market data charges, and communications costs were
£23.8 million, an increase of 14% reflecting increased investments in
technology to upgrade existing systems, support future growth and deliver new
product offerings. Inflationary pressures on contract renewal for market data
further driving increases.
Depreciation and amortisation costs increased 20% to £17.7 million reflecting
investments made in new software, amortisation of assets relating to the
acquisition of Small Exchange and accelerated amortisation on internally
developed assets.
Legal and professional fees were £14.2 million, an increase of 23%,
reflecting higher costs in relation to strategic and operational projects and
costs for ongoing litigation.
Other costs which include staff related costs such as travel and
entertainment, regulatory fees and irrecoverable VAT, increased by 17% to
£25.7 million.
Variable remuneration of £25.1 million includes the general bonus accrual,
share schemes and sales bonuses. The charge for the general bonus pool was
£11.2 million, down 9%. The lower charge reflects the Group's performance
against internal targets relative to the comparative period, offset by
increases due to headcount growth and salary inflation. Share schemes costs,
which relate to long-term incentive plans for senior management, increased by
16% to £10.9 million (H1 FY23: £9.4 million) including a one-off
acceleration of charges for the outgoing CEO's share awards. Sales bonuses
increased by 17% to £3.0 million.
Net finance income
Net finance income in the period was £15.4 million, up from £2.4 million in
H1 FY23. Within this, finance income was £26.1 million (H1 FY23: £10.5
million), offset by finance costs of £10.7 million (H1 FY23: £8.1 million).
Group finance costs are fixed, however finance income, which reflects the
interest earned on corporate balances including client funds on balance sheet,
benefitted from higher interest rates.
Taxation
The forecast full year effective tax rate (ETR) applied to the Group's H1 FY24
profit was 24.8% (H1 FY23: 18.9%). The ETR is higher due to the increase in UK
corporation tax rate from 19% to 25% in April 2023. 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 tax incentives and tax
losses.
Earnings Per Share
Adjusted basic EPS was 22% lower than H1 FY23. This reduction in EPS is due to
lower profit after tax, offset by a reduction in the number of shares
following the ongoing share buyback.
£m (unless stated) H1 FY24 H1 FY24 adjusted H1 FY23 H1 FY23 adjusted Change % Adjusted change %
Profit before tax from continuing operations 176.4 205.7 240.5 260.7 (27%) (21%)
Tax expense (43.7) (50.9) (45.6) (49.4) (4%) 3%
Profit after tax from continuing operations 132.7 154.8 194.9 211.3 (32%) (27%)
Loss after tax from discontinued operations - - (0.2) (0.2) (100%) (100%)
Profit after tax for the period 132.7 154.8 194.7 211.1 (32%) (27%)
Weighted average number of shares for the 397.6 397.6 425.0 425.0 (6%) (6%)
calculation of EPS (millions)
Basic earnings per share (pence per share) 33.4 38.9 45.8 49.7 (27%) (22%)
Dividend
The proposed interim dividend for FY24 of 13.56 pence per share, totalling
approximately £52.1 million, was approved by the Board on 24 January 2024.
This dividend will be paid on 1 March 2024 to those members on the register at
the close of business on 2 February 2024.
Summary Group Balance Sheet
The balance sheet is presented on a management basis which reflects the
Group's use of alternative performance measures to monitor its financial
position, with particular focus on own funds and liquid assets which provide a
broader and more stable view of the Group's balance sheet than cash. These
alternative performance measures are reconciled to the corresponding statutory
measures in the appendix.
£m 30 Nov 2023 31 May 2023 Change %
Goodwill 603.7 611.0 (1%)
Intangible assets 252.2 276.5 (9%)
Property, plant and equipment(1) 19.7 17.6 12%
Operating lease net liabilities (2.7) (2.2) 23%
Other investments 1.2 1.2 -
Investments in associates 10.9 12.5 (13%)
Fixed assets 885.0 916.6 (3%)
Own cash 530.9 730.2 (27%)
Issued debt (299.4) (299.3) -
Client funds held on balance sheet (410.2) (420.4) (2%)
Turbo warrants (4.3) (2.7) 59%
Net amounts due from brokers 903.9 825.3 10%
Own funds in client money 45.9 75.1 (39%)
Financial investments 223.2 234.1 (5%)
Liquid asset threshold requirement 46.2 65.0 (29%)
Own funds 1,036.2 1,207.3 (14%)
Working capital (46.4) (74.4) (38%)
Net tax receivable 18.2 2.7 574%
Net deferred income tax liability (31.5) (37.6) (16%)
Net assets 1,861.5 2,014.6 (8%)
(1) Excludes right-of-use assets
The majority of the Group's fixed assets are held in US dollars, including
goodwill of £501.9 million attributed to the tastytrade business. As a
result, the Group has recognised a £31.6 million decrease in fixed assets
during the period, predominantly driven by amortisation and foreign exchange
movements.
Liquidity
The Group maintains a strong liquidity position, ensuring that it has
sufficient liquidity under both normal circumstances and stressed conditions
to meet its liquidity requirements, which include broker margin requirements,
the regulatory and working capital needs of its subsidiaries, and funding of
adequate buffers in segregated client money accounts.
The Group's available liquidity comprises assets available at short notice to
meet additional liquidity requirements, which are typically increases in
broker margin.
£m 30 Nov 2023 31 May 2023 Change %
Own cash 530.9 730.2 (27%)
Net amounts due from brokers 903.9 825.3 10%
Own funds in client money 45.9 75.1 (39%)
Financial investments 223.2 234.1 (5%)
Liquid asset threshold requirement 46.2 65.0 (29%)
Liquid assets 1,750.1 1,929.7 (9%)
Broker margin requirement (722.1) (678.2) 6%
Cash balances in non-UK subsidiaries (390.9) (383.5) 2%
Own funds in client money (45.9) (75.1) (39%)
Available liquidity 591.2 792.9 (25%)
Of which:
Held to meet regulatory liquidity requirements 46.2 65.0 (29%)
Dividend due 52.1 130.6 (60%)
The Group's liquid assets have reduced since 31 May 2023, driven by a
reduction in cash following dividends paid and the ongoing share buyback.
Dividend payments of £126.7 million and payments in relation to the share
buyback of £149.7 million, exceeded net cash flows generated from operating
activities of £72.9 million.
Net amounts due from brokers increased by £78.6 million. The balance
comprises open derivative positions, cash, UK Government securities and
cryptocurrency assets held on account by the Group's hedging and execution
counterparties. The maximum margin requirement during the period was £756.6
million in November 2023, marginally lower than the Group's peak broker margin
requirement of £757.5 million in FY23.
The Group's available liquidity reduced by £201.7 million during the period,
which is greater than the overall fall in liquid assets of £179.6 million.
This was predominantly driven by an increase in broker margin requirements and
additional funds being held in non-UK subsidiaries.
The Group regularly repatriates cash from its overseas subsidiaries, and for
liquidity management and planning purposes the Group excludes cash held by
non-UK subsidiaries from available liquidity. The amount of cash held in
entities outside the UK was £390.9 million as at 30 November 2023 (31 May
2023: £383.5 million).
The Group's available liquidity is subject to meeting regulatory liquidity
requirements. These requirements can be met with both cash and certain
financial investments. As at 30 November 2023, the requirement was £46.2
million, 29% lower than 31 May 2023.
In addition to the cash recognised on the balance sheet, as at 30 November
2023, the Group held £2,131.9 million (31 May 2023: £2,303.9 million) of
client money in segregated bank accounts, which is not recognised on the
Group's balance sheet. These client funds are held separately from the Group's
own cash balances and are excluded from the Group's liquid assets.
Own Funds
The Group measures the strength of its liquidity position using an 'own funds'
measure, as it is a broader and more stable measure than cash. Own funds
include liquid assets, less issued debt, turbo warrants and client funds on
balance sheet. As at 30 November 2023, the Group had own cash of £530.9
million (31 May 2023: £730.2 million) compared with an own funds balance of
£1,036.2 million (31 May 2023: £1,207.3 million). Own funds reduced in the
period due to the fall in liquid assets.
£m 30 Nov 2023 31 May 2023 Change %
Liquid assets 1,750.1 1,929.7 (9%)
Client funds on balance sheet (410.2) (420.4) (2%)
Turbo warrants (4.3) (2.7) 59%
Issued debt (299.4) (299.3) -
Own funds 1,036.2 1,207.3 (14%)
Client funds on balance sheet are funds on deposit with the Group's Swiss
banking subsidiary, IG Bank SA, and client funds held by other subsidiaries
which are not subject to the same legal or regulatory protections as client
money held off balance sheet, including funds under title transfer
arrangements.
The Group has a £375.0 million revolving credit facility, which increased
following an accordion to the existing revolving credit facility signed during
H1 FY24. The credit facility matures in October 2026. The Group has the option
to request an increase in the revolving credit facility size to £400.0
million, subject to borrower request and lender consent.
Own Funds Flow
£m H1 FY24 H1 FY23
Own funds generated from operations 183.8 232.2
As a percentage of operating profit 113% 97%
Income taxes paid (66.4) (65.6)
Net own funds generated from operations 117.4 166.6
Net interest and fees received/(paid) 13.1 (3.6)
Capital expenditure and capitalised development costs (10.8) (10.5)
Purchase of own shares held in employee benefit trust (13.3) (14.6)
Net cash flow on acquisition of subsidiaries - 3.2
Net proceeds from disposal of subsidiaries - 1.0
Pre-dividend and share buyback increase in own funds 106.4 142.1
Payments made for share buyback (149.7) (113.9)
Equity dividends paid to owners of the parent (126.7) (133.2)
Decrease in own funds (170.0) (105.0)
Own funds at the start of the period 1,207.3 1,253.8
Decrease in own funds (170.0) (105.0)
Impact of movement in foreign exchange rates (1.1) 1.5
Own funds at the end of the period 1,036.2 1,150.3
Own funds in the period decreased by £171.1 million. This was predominantly a
result of shares bought back during H1 FY24 of £149.7 million and dividends
paid of £126.7 million exceeding net own funds generated from operations of
£117.4 million.
The Group's own funds generated from operations of £183.8 million was £48.4
million lower than own funds generated from operations in H1 FY23. The primary
driver of this decrease is operating profit falling by £76.5 million, which
is offset by changes in fair value movement of UK Government securities of
£16.5 million, a higher share-based payment charge by £4.0 million, and
differences in adjustments for working capital movements of £3.5 million.
Net own funds generated from operations in H1 FY24 was further reduced by
£66.4 million of income taxes paid, of which £1.4 million related to FY23
profits and the remaining £65.0 million was advance tax payments for FY24.
Regulatory Capital
The Group is supervised on a consolidated basis by the UK's Financial Conduct
Authority (FCA), 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 our internal assessment of risks.
The Group's regulatory capital resources, which totalled £831.6 million at 30
November 2023 (31 May 2023: £996.3 million) are an adjusted measure of
shareholders' funds. Shareholders' funds comprise share capital, share
premium, retained earnings and other reserves.
The Group's regulatory capital requirement as at 30 November 2023 was £289.8
million (31 May 2023: £497.4 million). The Group's capital headroom, once
interim profits have been approved for use by the FCA, will be £541.8 million
(31 May 2023: £498.9 million), demonstrating the Group's solid capital base.
The drop in regulatory capital requirement from May 2023 was due to the
completion of the Supervisory Review and Evaluation Process.
£m 30 Nov 2023 31 May 2023
Shareholders' funds 1,861.5 2,014.6
Less foreseeable / declared dividends (66.4) (127.6)
Less remaining share buyback (122.4) (22.5)
Less goodwill and intangible assets (805.2) (829.9)
Less deferred tax assets (22.4) (23.2)
Less significant investments in financial sector entities (12.1) (13.7)
Less value adjustment for prudent valuation (1.4) (1.4)
Regulatory capital resources 831.6 996.3
Total requirement 289.8 497.4
Capital headroom 541.8 498.9
Principal risks and uncertainties
IG's Risk Taxonomy categorises the principal risks faced by the Group into
four areas: the risks inherent in the regulatory environment, commercial risk,
business model risk, and conduct and operational 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 48 to 53 of the
FY23 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 FY24 and up to the date
of this announcement.
Consolidated Interim Income Statement
for the six months ended 30 November 2023 (unaudited)
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
Note £m £m
Continuing operations
Trading revenue 406.4 498.9
Introducing partner commissions (4.0) (4.0)
Net trading revenue 3 402.4 494.9
Betting duty and financial transaction taxes (3.2) (6.7)
Interest income on client funds 71.2 24.9
Interest expense on client funds (1.0) (0.7)
Other operating income 3.5 6.7
Net operating income 472.9 519.1
Operating costs 4 (299.9) (278.8)
Net credit losses on financial assets 20 (10.5) (1.1)
Operating profit 162.5 239.2
Finance income 26.1 10.5
Finance costs (10.7) (8.1)
Share of loss after tax from associates (1.5) (1.1)
Profit before tax 176.4 240.5
Tax expense 5 (43.7) (45.6)
Profit for the period from continuing operations 132.7 194.9
Loss for the period from discontinued operations - (0.2)
Profit for the period attributable to owners of the parent 132.7 194.7
Earnings per ordinary share
Basic 6 33.4p 45.8p
Diluted 6 33.1p 45.5p
Consolidated Interim Statement of Comprehensive Income
for the six months ended 30 November 2023 (unaudited)
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
£m £m £m £m
Profit for the period 132.7 194.7
Other comprehensive income:
Items that may be subsequently reclassified to the Consolidated Interim Income
Statement:
Changes in the fair value of financial assets held at fair value through other 5.3 (5.5)
comprehensive income, net of tax
Foreign currency translation (loss)/gain (10.9) 30.1
Other comprehensive (loss)/income for the period, net of tax (5.6) 24.6
Total comprehensive income for the period 127.1 219.3
Total comprehensive income/(loss) attributable to owners of the parent arising
from:
Continuing operations 127.1 219.5
Discontinued operations - (0.2)
127.1 219.3
Consolidated Interim Statement of Financial Position
at 30 November 2023 (unaudited)
Unaudited Unaudited
30 November 2023 31 May 2023 30 November 2022
Note £m £m £m
Assets
Non-current assets
Goodwill 8 603.7 611.0 627.2
Intangible assets 9 252.2 276.5 288.0
Property, plant and equipment 38.9 36.1 34.0
Financial investments 10 477.1 379.6 474.6
Investment in associates 10.9 12.5 14.4
Other investments 1.2 1.2 1.2
Prepayments - 0.3 0.7
Deferred income tax assets 22.4 23.2 19.7
1,406.4 1,340.4 1,459.8
Current assets
Cash and cash equivalents 11 586.7 798.5 858.9
Trade receivables 12 556.6 570.4 448.5
Financial investments 10 138.4 226.8 145.4
Other assets 13 24.9 15.0 11.3
Prepayments 24.8 25.3 19.8
Other receivables 11.6 10.0 8.3
Income tax receivable 27.6 8.8 -
1,370.6 1,654.8 1,492.2
TOTAL ASSETS 2,777.0 2,995.2 2,952.0
Liabilities
Non-current liabilities
Debt securities in issue 14 297.9 297.6 297.4
Other payables 1.2 1.2 1.2
Lease liabilities 13.9 13.3 10.9
Deferred income tax liabilities 53.9 60.8 66.4
366.9 372.9 375.9
Current liabilities
Trade payables 15 431.2 478.0 487.2
Other payables 100.0 116.2 91.0
Lease liabilities 8.0 7.4 7.4
Income tax payable 9.4 6.1 3.1
548.6 607.7 588.7
TOTAL LIABILITIES 915.5 980.6 964.6
Equity
Share capital and share premium 16 125.8 125.8 125.8
Translation reserve 109.9 120.8 147.7
Merger reserve 590.0 590.0 590.0
Other reserves (26.6) (16.9) (16.4)
Retained earnings 1,062.4 1,194.9 1,140.3
TOTAL EQUITY 1,861.5 2,014.6 1,987.4
TOTAL EQUITY AND LIABILITIES 2,777.0 2,995.2 2,952.0
The Consolidated Interim Condensed Financial Statements were approved by the
Board of Directors on 24 January 2024 and signed on its behalf by:
Charles A. Rozes
Chief Financial Officer
Registered Company number:
04677092
Consolidated Interim Statement of Changes in Equity
for the six months ended 30 November 2023
(unaudited)
Share capital Share premium Translation reserve Merger reserve Other reserves Retained earnings Total
£m £m £m £m £m £m £m
At 1 June 2022 - 125.8 117.6 590.0 8.4 1,186.0 2,027.8
Profit for the period and attributable to owners of the parent - - - - - 194.7 194.7
Other comprehensive income/(loss) for the period - - 30.1 - (5.5) - 24.6
Total comprehensive income/(loss) for the period - - 30.1 - (5.5) 194.7 219.3
Equity dividends paid to owners of the parent - - - - - (133.2) (133.2)
Share buyback - - - - (1.6) (114.6) (116.2)
Purchase of own shares held in employee benefit trusts - - - - (14.6) - (14.6)
Transfer of vested awards from the share-based payment reserve - - - - (7.4) 7.4 -
Equity-settled employee share-based payments - - - - 6.7 - 6.7
Share-based payments converted to cash settled liabilities - - - - (2.4) - (2.4)
At 30 November 2022 (unaudited) - 125.8 147.7 590.0 (16.4) 1,140.3 1,987.4
At 1 June 2023 - 125.8 120.8 590.0 (16.9) 1,194.9 2,014.6
Profit for the period and attributable to owners of the parent - - - - - 132.7 132.7
Other comprehensive income/(loss) for the period - - (10.9) - 5.3 - (5.6)
Total comprehensive income/(loss) for the period - - (10.9) - 5.3 132.7 127.1
Equity dividends paid to owners of the parent - - - - - (126.7) (126.7)
Share buyback - - - - (1.0) (149.9) (150.9)
Purchase of own shares held in employee benefit trusts - - - - (13.3) - (13.3)
Transfer of vested awards from the share-based payment reserve - - - - (11.4) 11.4 -
Equity-settled employee share-based payments - - - - 10.7 - 10.7
At 30 November 2023 (unaudited) - 125.8 109.9 590.0 (26.6) 1,062.4 1,861.5
( )
(
)
Consolidated Interim Statement of Cash Flows
for the six months ended 30 November 2023 (unaudited)
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
Note £m £m
Operating activities
Operating profit / (loss):
From continuing operations 162.5 239.2
From discontinued operations - (0.2)
Depreciation and amortisation 32.9 30.2
Loss on disposal of assets 1.0 0.2
Interest income on client funds (71.2) (24.9)
Interest expense on client funds 1.0 0.7
Equity settled share-based payments charge 10.7 6.7
Decrease in trade receivables, other receivables and other assets 5.1 29.6
(Decrease) in trade and other payables (71.1) (124.6)
Cash generated from operations 70.9 156.9
Interest received on client funds 69.2 24.9
Interest paid on client funds (0.8) (0.7)
Income taxes paid (66.4) (65.6)
Net cash flows generated from operating activities 72.9 115.5
Investing activities
Interest received 23.0 4.7
Purchase of property, plant and equipment (7.4) (6.3)
Payments to acquire and develop intangible assets (3.4) (4.2)
Net cash flow from financial investments 1.0 (230.3)
Net cash flow on acquisition of subsidiaries - 3.2
Net proceeds from disposal of subsidiaries - 1.0
Net cash flows generated from/(used in) investing activities 13.2 (231.9)
Financing activities
Interest paid (8.0) (6.3)
Financing fees paid (1.9) (2.0)
Interest paid on lease liabilities (0.4) (0.3)
Repayment of principal element of lease liabilities (3.3) (3.8)
Payments made for share buyback (149.7) (113.9)
Equity dividends paid to owners of the parent 7 (126.7) (133.2)
Purchase of own shares held in employee benefit trust (13.3) (14.6)
Net cash flows (used in) financing activities (303.3) (274.1)
Net (decrease) in cash and cash equivalents (217.2) (390.5)
Cash and cash equivalents at the beginning of the period 11 795.2 1,246.4
Impact of movement in foreign exchange rates (0.9) 3.0
Cash and cash equivalents at the end of the period 11 577.1 858.9
Notes to the Consolidated Interim Condensed Financial Statements
for the six months ended 30 November 2023 (unaudited)
1. General Information and basis of preparation
General Information
The Consolidated Interim Condensed Financial Statements of IG Group Holdings
plc and its subsidiaries (together 'the Group') for the six months ended 30
November 2023 were authorised for issue by the Board on 24 January 2024. IG
Group Holdings plc is a public company limited by shares, 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 for the six months ended 30 November 2023,
together with the comparative information contained in this report, 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 Group's auditors, PricewaterhouseCoopers LLP, and their
report is included at the end of these Consolidated Interim Condensed
Financial Statements. The Financial Statements for the year ended 31 May 2023
(FY23 Financial Statements) have been audited and reported on by the Group's
auditors and delivered to the Registrar of Companies. The auditors' report on
the FY23 Financial Statements was unqualified, did not include a reference to
any matters to which they drew attention by way of emphasis without qualifying
its report and did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
Basis of preparation
The Consolidated Interim Condensed Financial Statements for the six months
ended 30 November 2023 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules (DTR) sourcebook of the UK's Financial Conduct
Authority and in accordance with UK-adopted International Accounting Standard
34 - Interim Financial Reporting. The Consolidated Interim Condensed Financial
Statements are presented in Sterling.
The Consolidated Interim Condensed Financial Statements do not include all the
information and disclosures required in the FY23 Financial Statements and
should be read in conjunction with the Group's Annual Report for the year
ended 31 May 2023 (FY23 Annual Report) which has been prepared in accordance
with the UK-adopted International Accounting Standards in conformity with
applicable legal requirements of the Companies Act 2006.
Throughout this report, FY24, FY23 and FY22 refer to the financial years
ending 31 May 2024, 31 May 2023, and 31 May 2022 respectively. H1 FY24, H1
FY23 and H1 FY22 refer to the six months ended 30 November 2023, 30 November
2022, and 30 November 2021 respectively.
Reclassification of comparatives
Interest income on client funds of £71.2 million (H1 FY23: £24.9 million)
and interest expense on client funds of £1.0 million (H1 FY23: £0.7 million)
have been presented as separate line items in the Consolidated Interim
Statement of Cash Flows.
2. Material accounting policies
The accounting policies adopted in the preparation of the Consolidated Interim
Condensed Financial Statements are consistent with those followed in the
preparation of the FY23 Financial Statements.
New accounting standards and interpretations
There were no new standards, amendments or interpretations issued during the
period which have had a material impact on the Group, other than those
outlined in the paragraph below. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet effective.
The IASB has published a number of minor amendments to IFRSs that are
effective for periods beginning on or after 1 January 2024. These include
amendments published to IAS 7 - Statement of Cash Flows, IFRS 7 - Financial
Instrument Disclosures, IFRS 16 - Leases and IAS 1 - Presentation of Financial
Statements. The Group has assessed the impact of these amendments and has
determined there to be insignificant impact on the Consolidated Interim
Condensed Financial Statements of the Group.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation
implements a domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. The Group has
applied the exemption, under the amendment to IAS 12, to recognising and
disclosing information about deferred tax assets and liabilities related to
top-up income taxes.
Critical accounting estimates and judgements
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and 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 judgements and estimates means that actual outcomes
could differ from those estimates.
In the Directors' opinion, there are no accounting estimates or judgments that
have a material impact on the presentation or measurement of items recorded in
the Consolidated Interim Condensed Financial Statements, except for the
judgement below.
Assessment of impairment indicators of the US Cash Generating Unit (CGU) - A
review has been performed to consider whether indicators of impairment are
present as at 30 November 2023 for the US CGU, taking into account both
internal and external factors which are outlined in note 8. The Group
disclosed a critical accounting estimate relating to the recoverable amount of
the US CGU and concluded that the recoverable amount is sensitive to
reasonably possible change to assumptions in the FY23 Financial Statements.
The judgement that there were no impairment indicators present means that no
formal impairment test has been performed.
2. Material accounting policies (continued)
Going concern basis of accounting
The Directors have prepared the Consolidated Interim Condensed Financial
Statements on a going concern basis which requires the Directors to have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for a period of at least 12 months from the date of
approval of the Consolidated Interim Condensed Financial Statements.
The Group meets its day-to-day working capital requirements through its
available liquid assets and debt 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 Consolidated
Interim Condensed 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 that considers the principal risks faced by
the business. The principal risks and uncertainties which may affect the Group
in the second half of the financial year remain consistent with those
disclosed in the FY23 Annual Report.
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.
Seasonality of operations
The Directors consider that there is no predictable seasonality to the Group's
operations.
Other matters
Sponsorship agreement
In H1 FY24, the Group entered into a sponsorship agreement which awards it
with the naming rights of a public events space. A portion of the costs
related to this agreement meets the criteria for recognition as a lease under
IFRS 16 - Leases. The right of use asset and the corresponding lease liability
will be recognised on commencement of the lease, which is expected in 2025.
3. Segmental analysis
The Executive Directors are the Group's Chief Operating Decision Maker (CODM).
Management has determined the reportable segments based on the information
reviewed by the CODM for the purposes of allocating resources and assessing
performance.
The Group manages market risk and a number of other activities on a Group-wide
portfolio basis and accordingly a large proportion of costs are incurred
centrally. These central costs are not allocated to individual segments for
decision-making purposes for the CODM, and, accordingly, these costs have not
been allocated to segments. Additionally, the Group's assets and liabilities
are not allocated to individual segments and are not reported as such for
decision making purposes to the CODM. Therefore, the segmental analysis does
not include a measure of profitability, nor a complete segmented balance
sheet, as this would not reflect the information which is received by the CODM
on a regular basis.
The CODM are presented a view of total revenue split by product. Total revenue
is an alternative performance measure which comprises net trading revenue and
net interest on client funds. In the prior period, the CODM were presented
with a view of net trading revenue split by product. This change is due to net
interest on client funds being a more material source of revenue for the
period ended 30 November 2023. The presentation for prior period comparatives
has been updated to reflect this.
Net trading revenue represents trading revenue that the Group generates from
client trading activity after deducting introducing partner commissions. Net
interest on client funds represents interest earned on segregated client money
balances after deducting interest paid in relation to the same balances. These
two balances collectively make up total revenue earned for the Group. The CODM
uses total revenue as the primary measure of performance of the various
segments of the Group. The CODM considers business performance from a product
perspective, split into OTC derivatives, exchange traded derivatives, stock
trading and investments and net interest on client funds. The products shown
in the segmental analysis are aggregated where these products are economically
similar in nature.
3. Segmental analysis (continued)
The segmental breakdown of total revenue is as follows:
Total revenue by product:
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
£m £m
OTC derivatives 327.7 416.5
Exchange traded derivatives 63.6 67.1
Stock trading and investments 11.1 11.3
Net trading revenue 402.4 494.9
Net interest on client funds 70.2 24.2
Total revenue 472.6 519.1
The CODM also considers business performance from a geographical location.
This geographical split reflects the location of the office that manages the
underlying client relationship.
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
£m £m
Segmental revenue by geography
UK 132.7 169.3
Japan 38.9 55.8
Australia 43.6 51.9
Singapore 35.1 37.0
EMEA Non-EU 21.3 28.9
Emerging markets 17.9 21.9
UK, APAC & Emerging markets 289.5 364.8
US 65.7 72.6
EU 47.2 57.5
Net trading revenue 402.4 494.9
Net interest on client funds - US 37.3 16.9
Net interest on client funds - Other 32.9 7.3
Total revenue 472.6 519.1
The Group does not derive more than 10% of revenue from any one single client.
The segmental breakdown of non-current assets excluding financial investments,
other investments and deferred income tax assets, based on geographical
location is as follows:
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
£m £m
US 740.6 815.5
UK 147.7 133.8
EU 6.8 5.5
EMEA Non-EU 5.6 6.5
Australia 2.5 0.6
Japan 1.3 2.9
Singapore 1.1 0.6
Emerging markets 0.1 0.1
Total non-current assets 905.7 965.5
4. Operating costs
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
£m £m
Fixed remuneration 109.1 96.3
Variable remuneration 27.7 27.3
Employee related expenses 136.8 123.6
Advertising and marketing 43.8 43.6
Premises-related costs 6.0 5.2
IT, market data and communications 27.2 26.2
Trading related costs 17.0 20.3
Legal and professional costs 15.4 11.6
Regulatory fees (0.7) 0.4
Depreciation and amortisation 32.9 30.2
Other costs 21.5 17.7
Total operating costs from continuing operations 299.9 278.8
Total operating costs from discontinued operations - 0.2
The Group announced measures to simplify and streamline operations on 31
October 2023, which included operational improvements and a reduction in
headcount. At 30 November 2023, the Group has recognised a provision for
redundancy compensation of £6.8 million on the balance sheet, with £7.9
million recognised as part of fixed remuneration costs.
5. Tax expense
The tax expense of £43.7 million (H1 FY23: £45.6 million) is recognised
based on management's estimate of the effective tax rate for the full year of
24.8% (H1 FY23: 18.9%), applied to profits generated from continuing
operations. The actual effective tax rate for FY23 was 20.0%. The factors
affecting the tax charge in future periods are detailed on page 152 of the
FY23 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.
Weighted average number of ordinary shares Unaudited Unaudited
30 November 2023 30 November 2022
Basic 397,611,659 425,002,160
Dilutive effect of share-based payments 3,740,573 3,109,996
Diluted 401,352,232 428,112,156
Unaudited Unaudited
six months ended six months ended
30 November 2023
30 November 2022
Basic earnings per ordinary share
Attributable to continuing operations 33.4p 45.8p
Attributable to discontinued operations 0.0p 0.0p
6. Earnings per ordinary share (continued)
Unaudited Unaudited
six months ended six months ended
30 November 2023
30 November 2022
Diluted earnings per ordinary share
Attributable to continuing operations 33.1p 45.5p
Attributable to discontinued operations 0.0p 0.0p
7. Dividends paid and proposed
Unaudited Unaudited
six months ended six months ended
30 November 2023 30 November 2022
£m £m
Final dividend for FY23 of 31.94 pence per share (FY22: 31.24 pence per share) 126.7 133.2
The proposed interim dividend for FY24 of 13.56 pence per share, totalling
approximately £52.1 million, was approved by the Board on 24 January 2024 and
has not been included as a liability as at 30 November 2023. This dividend
will be paid on 1 March 2024 to those members on the register at the close of
business on 2 February 2024.
8. Goodwill
Goodwill has been allocated to CGUs as follows:
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
US 501.9 509.2 525.4
UK 100.9 100.9 100.9
South Africa 0.8 0.8 0.8
Australia 0.1 0.1 0.1
603.7 611.0 627.2
The movement in the goodwill balance is attributable to foreign exchange
movements. For the allocated goodwill, there are no accumulated impairment
losses recognised as at 30 November 2023.
Goodwill arose as follows:
· US - from the acquisition of tastytrade on 28 June 2021.
· UK - from the reorganisation of the UK business on 5 September
2003.
· South Africa - from the acquisition of Ideal CFDs on 1 September
2010.
· Australia - from the acquisition of the non-controlling interest
in IG Australia Pty Limited in the year ended 31 May 2006.
The Group performs a full goodwill impairment assessment for its annual
financial statements and when circumstances indicate that the carrying values
may be impaired. The Group's full impairment assessment carried out for the
FY23 Financial Statements was based on value-in-use calculations. The key
assumptions used to determine the value-in-use for the different cash
generating units (CGUs) are disclosed in the FY23 Financial Statements.
An assessment of both qualitative and quantitative factors has been performed
to identify whether any indicators of impairment are present as at 30 November
2023. Having performed this assessment, management has concluded that there is
no indication that the goodwill may be impaired for any of the Group's CGUs,
as the factors considered do not currently indicate a long-term deterioration
of the businesses and profitability. Management will perform an annual
impairment test, incorporating cash flow projections based on the annual
budgets approved by the Board, for the FY24 Financial Statements.
US CGU:
The Group's largest goodwill balance is associated with the US CGU. Given the
judgement involved (refer to note 2) in determining whether there are any
indicators of impairment, further details on the assessment of qualitative and
quantitative factors are provided below.
Performance of the US CGU:
During the period, the US CGU demonstrated continued growth with H1 FY24
performance in relation to new client acquisition, net trading revenue and
client interest income being higher than H1 FY23. The CGU also increased
market share in the period from 1 June 2023 to 30 November 2023. CGU
performance was behind budget, although not by a significant amount. This was
due to reduced market volatility, which impacted client acquisition and net
trading revenue. Management do not consider the performance against budget to
be an indicator of impairment considering the growth in performance against
the prior comparative period and the increase in market share during the
period.
8. Goodwill (continued)
Interest rate movement:
Interest rate movements impact both the discount rate and future cash flows.
The discount rate used to calculate the recoverable amount of the US CGU in
FY23 is a post-tax weighted average cost of capital (WACC) which is specific
to the US geographical region. The discount rate depends on the current market
assessment of the time value of money, determined by external market
information such as interest rates. Future cashflows include interest from
client funds, which can increase as a result of higher interest rates.
Management have determined that the higher interest rate as at 30 November
2023 does not represent an indicator of impairment, having considered the
impact of increased interest rates on both the future cash flows and the
discount rate.
Other factors:
Management have considered other factors including changes to the regulatory
environment and observable decline in assets such as technology as part of the
assessment. No indicator of impairment has been identified.
9. Intangible assets
Customer relationships Trade names Non-compete arrangements Internally developed software Domain names Software and licences Total
£m £m £m £m £m £m £m
Net book values
30 November 2022 - (unaudited) 161.0 59.2 23.7 27.6 13.2 3.3 288.0
31 May 2023 147.1 55.2 19.7 34.8 11.0 8.7 276.5
30 November 2023 - (unaudited) 135.8 52.3 16.3 31.1 9.4 7.3 252.2
The Group has performed a review of intangible assets as at 30 November 2023
and concluded that there are no indicators of impairment. The movements in
the carrying values of customer relationships, trade names, non-compete
arrangements and domain names in the period are attributable to accumulated
amortisation and foreign exchange movements. The movements in carrying value
of the remaining assets in the period are attributable to additions,
disposals, accumulated amortisation and foreign exchange movements.
10. Financial investments
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
Split as:
Non-current portion 477.1 379.6 474.6
Current portion 138.4 226.8 145.4
615.5 606.4 620.0
The Group's financial investments are UK Government securities. The Group held
£392.3 million UK Government securities as at 30 November 2023 (31 May 2023:
£372.3 million and 30 November 2022: £361.9 million) to satisfy margin
requirements.
As at 30 November 2023, the Group held £36.3 million (31 May 2023: £35.0
million and 30 November 2022: £32.7 million) of financial assets as
collateral to meet the initial margin requirements of certain brokers. These
assets are held to satisfy the requirements of Uncleared Margin Rules ("UMR")
and they are not recognised on balance sheet.
11. Cash and cash equivalents
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
Cash at bank 472.0 627.4 631.8
Money market funds 114.7 171.1 227.1
586.7 798.5 858.9
Segregated client funds are held in segregated client money accounts which
restrict the Group's ability to control the monies and are therefore held
off-balance sheet. The amount of segregated client funds held at 30 November
2023 was £2,131.9 million (31 May 2023: £2,303.9 million; 30 November 2022:
£2,449.9 million). The return received on managing segregated client funds is
included within net operating income.
The above balances reconcile to the amount of cash and cash equivalents shown
in the Consolidated Interim Statement of Cash Flows as at the end of the
period as follows:
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
Cash and cash equivalents as per Consolidated Interim Statement of Financial 586.7 798.5 858.9
Position
Amounts due to pooling arrangement (9.6) (3.3) -
Balance as per Consolidated Interim Statement of Cash Flows 577.1 795.2 858.9
12. Trade receivables
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
Amounts due from brokers 500.1 486.6 390.4
Own funds in client money 48.1 79.4 55.1
Amounts due from clients 8.4 4.4 3.0
556.6 570.4 448.5
Amounts due from brokers represent balances with brokers and execution
partners where the combination of cash held on account and the valuation of
financial derivative open positions, or unsettled trade receivables, results
in an amount due to the Group.
Own funds in client money represent the Group's own cash held in segregated
client funds, in accordance with the FCA CASS rules and similar rules of other
regulators in whose jurisdiction the Group operates and includes £11.3
million (31 May 2023: £24.7 million and 30 November 2022: £5.6 million) to
be transferred to the Group on the following business day.
Amounts due from clients arise when a client's total funds held with the Group
are insufficient to cover any trading losses incurred by the client or when a
client utilises a trading credit limit. Amounts due from clients are stated
net of an allowance for impairment.
13. Other assets
Other assets are cryptocurrency assets and rights to cryptocurrency assets,
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
rights to cryptocurrency assets on exchange and in vaults as follows:
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
Exchange 1.2 1.5 0.8
Vaults 23.7 13.5 10.5
24.9 15.0 11.3
Other assets are measured at fair value less costs to sell. Other assets are
level 2 assets in accordance with the fair value hierarchy set out in note 28
of the FY23 Annual report.
14. Debt securities in issue
The Group has issued £300.0 million 3.125% senior unsecured bonds due in
2028. The issued debt has been initially recognised at fair value less
transaction fees. As at 30 November 2023, £1.5 million unamortised
arrangement fees are recognised on the balance sheet (31 May 2023: £1.7
million and 30 November 2022: £1.8 million).
The Group also has access to a £375.0 million revolving credit facility,
which has increased by £25.0 million as a result of an accordion to the
existing revolving credit facility being signed in H1 FY24. The Group has the
option to request an increase in the revolving credit facility size to £400.0
million, subject to borrower request and lender consent. The revolving credit
facility will now mature in October 2026, after the Group exercised its option
in H1 FY24 to extend the maturity for a further year.
Under the terms of the revolving credit facility agreement, the Group is
required to comply with financial covenants covering maximum levels of
leverage and debt to equity. The Group has complied with all covenants
throughout the reporting period.
15. Trade payables
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
UK 262.1 253.9 305.5
US 44.9 56.1 36.9
EU 48.7 55.4 50.3
EMEA Non-EU 44.0 49.0 53.1
Singapore 0.6 1.1 0.8
Japan 9.9 4.9 5.6
Total client funds 410.2 420.4 452.2
Issued turbo warrants 4.3 2.7 1.8
Amounts due to brokers 13.4 48.6 14.3
Amounts due to clients 3.3 6.3 18.9
431.2 478.0 487.2
Client funds reflects the Group's liability for client monies which are
recognised on balance sheet in cash and cash equivalents.
Amounts due to brokers represents balances where the value of unsettled
positions, or the value of open derivatives positions held in accounts which
are not covered by an enforceable netting agreement, results in an amount
payable by the Group.
Amounts due to clients represent balances that will be transferred from cash
and cash equivalents 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.
16. Share capital and share premium
Number of shares Share capital Share premium account
£m £m
Allotted and fully paid:
(i) Ordinary shares (0.005p)
At 31 May 2022 431,574,455 - 125.8
Shares bought back and immediately cancelled (14,455,050) - -
At 30 November 2022 (unaudited) 417,119,405 - 125.8
At 31 May 2023 408,947,842 - 125.8
Shares bought back and immediately cancelled (22,547,134) - -
At 30 November 2023 (unaudited) 386,400,708 - 125.8
On 25 January 2023, the Board approved a buyback of up to £50.0 million. This
commenced on 1 April 2023 and completed on 26 July 2023, with the purchase and
cancellation of 3,644,714 shares made during H1 FY24.
16. Share capital and share premium (continued)
On 19 July 2023, the Board approved a £250.0 million buyback programme. This
commenced on 2 August 2023 with a £100.0 million tranche which was completed
on 30 October 2023, with the purchase and cancellation of 15,307,818 shares. A
second £150.0 million tranche began on 7 November 2023 and as at 30 November
2023, 3,656,015 shares had been bought back under this tranche for a total
consideration of £24.5 million.
As at 30 November 2023, for the period of H1 FY24, the Group has repurchased
22,608,547 shares, with an aggregate nominal value of £1,130, for total
consideration of £150.0 million (including related costs of £0.8 million).
As at 30 November 2023 the Group had 254,506 shares repurchased but not
cancelled.
No shares were issued to satisfy the exercise of share awards in H1 FY24.
During H1 FY24, there have been no changes to the Group's deferred redeemable
shares and redeemable preference shares (H1 FY23: none).
17. Related party transactions
The basis of remuneration of key management personnel remains consistent with
that disclosed in the FY23 Annual Report. During the period there has been a
change in the composition of key management personnel. As a result, the group
has incurred one-off costs amounting to £3.4 million in the period which are
recognised as part of operating costs in note 4.
The Group has a 9.81% shareholding and 33% voting rights in Zero Hash Holdings
Limited which is accounted for as an investment in associate on the Group's
balance sheet. Zero Hash facilitates cryptocurrency trading for clients of
tastytrade, Inc. (tastytrade). tastytrade recognised £0.1 million revenue
from Zero Hash during the period (H1 FY23: £0.1 million). In addition to
this, the Group has subleased part of its US office to Zero Hash. The rental
income generated in H1 FY24 from this sublease is £0.1 million (H1 FY23:
£0.1 million).
There were no other related party transactions which had a material impact on
the Consolidated Interim Condensed Financial Statements.
18. Contingent liabilities and provisions
The Group is subject to legal and regulatory risks in a number of
jurisdictions which may result in legal claims or regulatory action against
the Group. Through the Group's ordinary course of business there are ongoing
legal proceedings and engagements with regulatory authorities. Where possible,
an estimate of the potential financial impact of these legal proceedings is
made using management's best estimate, but where the most likely outcome
cannot be determined no provision is recognised.
The largest group of related claims that the Group is subject to could have a
financial impact of approximately £19.9 million as at H1 FY24 (H1 FY23:
£21.1 million). There have been no significant developments during the period
and it is still not possible to determine whether any amounts will be payable
to the clients. As a result, no provision has been recognised.
The Group received notice of a class action served against one of its
operating entities during the financial year ended 31 May 2023. There has been
no significant development since the claim was served and it is not possible
to determine amounts that could be payable to the clients. As a result, no
provision has been recognised.
Under the terms of the agreement with the Group's clearing broker for its
operations in the US, Apex Clearing Corporation, the Group guarantees the
performance of its customers in meeting contracted obligations. In conjunction
with the clearing broker, the Group seeks to control the risks associated with
its customer activities by requiring customers to maintain collateral in
compliance with various regulatory and internal guidelines. Compliance with
the various guidelines is monitored daily and, pursuant to such guidelines,
the customers may be required to deposit additional collateral, or reduce
positions where necessary.
Other than the matters outlined above, the Group does not expect there to be
other contingent liabilities that would have material adverse impact on the
Group Consolidated Interim Condensed Financial Statements. The Group had no
material provisions as at H1 FY24 and H1 FY23.
19. 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
29 of the FY23 Annual Report. There has not been a material change in the
Group's financial risk management policies during the period.
20. Net credit losses on financial assets
The Group recognised net credit losses of £10.5 million during the period (H1
FY23: £1.1 million). The principal sources of credit risk to the Group's
business are from financial institutions and individual clients.
Amounts due from financial institutions, which are stated net of an expected
credit loss of £1.2 million (31 May 2023: £1.0 million and 30 November 2022:
£1.3 million), are all less than 30 days due. Amounts due from clients, which
are stated net of an expected credit loss of £26.3 million (31 May 2023:
£17.1 million and 30 November 2022: £17.6 million), include both amounts
less than and greater than 30 days past due.
20. Net credit losses on financial assets (continued)
Below is the reconciliation of the Group's loss allowance:
Unaudited 31 May 2023 Unaudited
30 November 2023 30 November 2022
£m £m £m
At the beginning of the period 18.1 18.6 18.6
Loss allowance for the period:
- gross charge for the period 12.7 5.7 3.8
- recoveries (2.2) (4.6) (2.7)
- debts written off (1.1) (1.4) (1.0)
Foreign exchange - (0.2) 0.2
At the end of the period 27.5 18.1 18.9
21. Financial instruments
Fair value hierarchy
Details of the financial instruments valuation hierarchy is provided in note
28 and the Significant Accounting Policies section in the FY23 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 28 of the FY23 Annual Report.
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.
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 2023 (unaudited) £m £m £m £m
Financial assets:
Cash and cash equivalents 114.7 - - 114.7
Trade receivables - amounts due from brokers (23.5) (1.9) - (25.4)
Financial investments 615.5 - - 615.5
Other investments - - 1.2 1.2
Financial liabilities:
Trade payables - amounts due to brokers - (17.9) - (17.9)
Trade payables - client funds 17.4 79.6 - 97.0
Trade payables - issued turbo warrants - (4.3) - (4.3)
Level 1 Level 2 Level 3 Total fair value
At 31 May 2023 £m £m £m £m
Financial assets:
Cash and cash equivalents 171.1 - - 171.1
Trade receivables - amounts due from brokers (3.2) (92.4) - (95.6)
Financial investments 606.4 - - 606.4
Other investments - - 1.2 1.2
Financial liabilities:
Trade payables - amounts due to brokers (10.4) (29.1) - (39.5)
Trade payables - client funds 17.3 99.4 - 116.7
Trade payables - issued turbo warrants - (2.7) - (2.7)
21. Financial instruments (continued)
Amounts due to clients of £22.2 million (31 May 2023: £28.0 million) have
been reclassified from amortised cost to fair value through profit and loss,
and the fair value levelling of these assets has been disclosed in the table
above. Accordingly, the prior period comparative balances for 31 May 2023 only
have been restated to reflect this classification.
Level 1 Level 2 Level 3 Total fair value
At 30 November 2022 (unaudited) £m £m £m £m
Financial assets:
Cash and cash equivalents 227.1 - - 227.1
Trade receivables - amounts due from brokers (20.5) (101.4) - (121.9)
Financial investments 620.0 - - 620.0
Other investments - - 1.2 1.2
Financial liabilities:
Trade payables - amounts due to brokers 0.5 1.1 - 1.6
Trade payables - client funds 26.2 99.2 - 125.4
Trade payables - issued turbo warrants - (1.8) - (1.8)
Fair value of financial assets and liabilities measured at amortised cost
The fair value of the Group's financial assets and liabilities measured at
amortised cost approximates their carrying amount, with the exception of debt
securities in issue.
The carrying value of the Group's debt securities in issue as at 30 November
2023 was £297.9 million and the fair value of the debt securities in issue
was £250.2 million (31 May 2023: £228.8 million; 30 November 2022: £230.3
million).
22. Subsequent events
During the period from 1 December 2023 to 22 January 2024, the Group
repurchased 2,012,752 Ordinary Shares with a nominal value of 0.005p for an
aggregate purchase amount of £16.3 million (including related costs of £1.3
million).
In December 2023 the Group disposed of £161.0 million UK Government
securities and the proceeds were immediately invested in Money Market Funds.
This sale does not impact the Group's business model for the classification of
these UK Government Securities under IFRS 9 - Financial Instruments.
There have been no other subsequent events that have a material impact on the
Consolidated Interim Condensed Financial Statements.
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that these Consolidated
Interim Condensed Financial Statements have been prepared in accordance with
UK-adopted International Accounting Standard IAS 34, Interim Financial
Reporting, and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and that the interim
management report 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 2023 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
· related-party transactions that have taken place
during the six months ended 30 November 2023 that have had a material effect
on financial position/performance; and changes in the related-party
transactions described in the last annual report that could have a material
effect on the financial position/performance in the six months ended 30
November 2023.
A list of current Directors is maintained on the IG Group Holdings plc
website: www.iggroup.com
On behalf of the Board
Charles A.
Rozes
Chief Financial Officer
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 2023
(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 UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Consolidated Interim Statement of Financial Position as at 30
November 2023;
· the Consolidated Interim Income Statement and Consolidated
Interim Statement of Comprehensive Income for the period then ended;
· the Consolidated Interim Statement of Cash Flows 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 UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
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. In preparing the interim results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the interim results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
24 January 2024
Appendix
Property, plant and equipment excluding right-of-use asset
£m 30 Nov 2023 31 May 2023
Property, plant and equipment 38.9 36.1
Right-of-use assets(2) (19.2) (18.5)
Property, plant and equipment(1) 19.7 17.6
(1) Excludes right-of-use assets.
(2) Amounts identified as right-of-use assets from property, plant and
equipment.
Operating lease net liabilities
£m 30 Nov 2023 31 May 2023
Right-of-use assets(1) 19.2 18.5
Lease liabilities (current) (8.0) (7.4)
Lease liabilities (non-current) (13.9) (13.3)
Operating lease net liabilities (2.7) (2.2)
(1)Amounts identified as right-of-use assets from property, plant and
equipment.
Own cash
£m 30 Nov 2023 31 May 2023
Cash and cash equivalents 586.7 798.5
Less: Cash held to meet regulatory liquidity requirements (46.2) (65.0)
Less: Amounts due to pooling arrangement (note 11) (9.6) (3.3)
Own cash 530.9 730.2
Issued debt
£m 30 Nov 2023 31 May 2023
Debt securities in issue (297.9) (297.6)
Unamortised fees capitalised (note 14) (1.5) (1.7)
Issued debt (299.4) (299.3)
Net amounts due from brokers
£m 30 Nov 2023 31 May 2023
Financial investments - UK Government securities held at brokers (note 10) 392.3 372.3
Trade receivables - amounts due from brokers (note 12) 500.1 486.6
Trade payables - amounts due to brokers (note 15) (13.4) (48.6)
Other assets (note 13) 24.9 15.0
Net amounts due from brokers 903.9 825.3
Financial investments
£m 30 Nov 2023 31 May 2023
Financial investments (note 10) 615.5 606.4
Less: Financial investments - UK Government securities held at brokers (note (392.3) (372.3)
10)
Financial investments 223.2 234.1
Net deferred tax liability
£m 30 Nov 2023 31 May 2023
Deferred income tax assets 22.4 23.2
Deferred income tax liabilities (53.9) (60.8)
Net deferred income tax liability (31.5) (37.6)
Net tax receivable
£m 30 Nov 2023 31 May 2023
Income tax receivable 27.6 8.8
Income tax payable (9.4) (6.1)
Net tax receivable 18.2 2.7
Own funds in client money
£m 30 Nov 2023 31 May 2023
Trade receivables - own funds in client money (note 12) 48.1 79.4
Less: Trade payables - amounts due to clients(1) (2.2) (4.3)
Own funds in client money 45.9 75.1
(1)Amounts considered as part of own funds.
Working capital
£m 30 Nov 2023 31 May 2023
Prepayments (non-current) - 0.3
Prepayments (current) 24.8 25.3
Amounts due from clients (note 12) 8.4 4.4
Unamortised fees capitalised (note 14) 1.5 1.7
Other receivables 11.6 10.0
Other payables (current) (100.0) (116.2)
Other payables (non-current) (1.2) (1.2)
Trade payables - amounts due to clients(1) (1.1) (2.0)
Less: Amount due to pooling arrangement (note 11) 9.6 3.3
Working capital (46.4) (74.4)
(1)Amounts considered part of working capital.
Net own funds generated from operations
£m H1 FY24 H1 FY23
Cash generated from operations 70.9 156.9
Interest received on client funds 69.2 24.9
Interest paid on client funds (0.8) (0.7)
Cash generated from operations net of client interest 139.3 181.1
- (Increase) in other assets (9.9) (2.9)
- Decrease in trade payables 45.9 90.6
- Decrease/(increase) in trade receivables 5.2 (23.0)
- Repayment of principal element of lease liabilities (3.3) (3.8)
- Interest paid on lease liabilities (0.4) (0.3)
- Fair value movement in financial investments 7.0 (9.5)
Own funds generated from operations (A) 183.8 232.2
Profit before tax (B) 176.4 240.5
Conversion rate from profit to cash (A/B) % 104% 97%
Adjusted operating costs
£m H1 FY24 H1 FY23
Operating costs (note 4) 299.9 278.8
- Net credit losses on financial assets 10.5 1.1
Operating costs inc. net credit losses on financial assets 310.4 279.9
- Operating costs relating to operational improvement programme (10.0) -
- Operating costs relating to the tastytrade acquisition and (0.5) (1.7)
integration
- Amortisation on tastytrade acquisition intangibles and recurring (18.8) (18.5)
non-cash costs
- Operating costs relating to the Nadex sale - (2.9)
Adjusted operating costs 281.1 256.8
Adjusted profit before tax and earnings per share
£m (unless stated) H1 FY24 H1 FY23
Earnings per share (p) 33.4 45.8
Weighted average number of shares for the 397.6 425.0
calculation of EPS (millions) (note 6)
Profit after tax 132.7 194.7
Loss for the period from discontinued operations - 0.2
Tax expense 43.7 45.6
Profit before tax 176.4 240.5
- Operating costs related to operational improvement programme 10.0 -
- Operating costs relating to the tastytrade acquisition and 0.5 1.7
integration
- Amortisation on tastytrade acquisition intangibles and recurring 18.8 18.5
non-cash costs
- Operating income relating to the Nadex sale - (2.9)
- Operating costs relating to the Nadex sale - 2.9
Adjusted profit before tax (A) 205.7 260.7
Adjusted tax expense (50.9) (49.4)
Adjusted profit after tax 154.8 211.3
Adjusted earnings per share (pence per share) 38.9 49.7
Adjusted revenue (B) 472.6 519.1
Adjusted profit before tax margin (A/B) % 44% 50%
Total revenue - Portfolios and tastytrade
£m H1 FY24 H1 FY23 Change %
Core Markets+ 364.2 424.3 (14%)
High Potential Markets 108.4 94.8 14%
tastytrade (GBP) 94.3 77.9 21%
tastytrade (USD) 117.8 91.4 29%
Core Markets+
Net trading revenue (£m) H1 FY24 H2 FY23 H1 FY23 H2 FY22 H1 FY22 H2 H1 FY21 H2 FY20 H1 FY20
FY21
UK 120.7 140.2 157.3 170.9 157.2 167.4 150.0 148.0 92.7
EU 41.8 48.4 51.9 52.2 51.2 53.6 49.0 54.7 33.1
EMEA non-EU 20.3 23.6 25.6 24.5 25.9 28.2 28.4 32.5 21.3
Australia 41.6 46.0 49.3 43.1 45.2 58.1 61.6 51.4 36.9
Singapore 35.1 31.7 36.6 36.8 36.7 38.4 36.1 35.2 21.5
Japan 38.9 43.4 55.8 54.0 44.6 34.1 34.6 30.6 15.9
Emerging Markets 17.8 17.5 21.7 22.6 20.2 16.3 18.4 17.2 11.2
Institutional 4.0 6.1 7.3 5.7 4.2 6.5 5.8 5.8 3.4
Total OTC derivatives 320.2 356.9 405.6 409.8 385.1 402.6 383.9 375.4 236.0
Stock trading and investments 11.1 11.5 11.3 17.8 15.9 23.2 15.4 9.3 4.4
Total Core Markets+ 331.3 368.4 416.8 427.6 401.0 425.8 399.3 384.7 240.4
Clients (000) H1 FY24 H2 FY23 H1 FY23 H2 FY22 H1 FY22 H2 H1 FY21 H2 FY20 H1 FY20
FY21
UK 44.8 46.8 49.6 52.1 51.8 61.2 57.5 57.4 38.9
EU 30.2 30.7 31.3 32.7 31.3 35.4 33.8 32.5 23.6
EMEA non-EU 5.5 5.7 6.0 6.3 6.4 7.3 7.4 7.3 5.6
Australia 13.5 13.7 14.6 16.0 16.6 21.5 22.4 21.8 15.9
Singapore 7.9 8.5 9.6 10.8 10.0 10.7 10.4 10.2 8.1
Japan 31.3 30.0 33.6 31.3 26.3 19.8 16.5 14.3 10.4
Emerging Markets 6.2 6.2 6.5 6.7 6.8 7.5 6.6 5.9 4.5
Institutional 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2
Total OTC derivatives 139.6 141.8 151.5 156.2 149.5 163.7 154.8 149.6 107.3
Stock trading and investments 89.1 90.8 92.2 93.2 92.5 89.5 71.2 54.9 37.9
Total Core Markets+ 220.0 223.3 234.0 238.6 230.9 239.4 214.7 195.3 139.9
Revenue per client (£) H1 FY24 H2 FY23 H1 FY23 H2 FY22 H1 FY22 H2 H1 FY21 H2 FY20 H1 FY20
FY21
UK 2,695 2,995 3,170 3,278 3,031 2,733 2,611 2,577 2,381
EU 1,384 1,578 1,659 1,598 1,634 1,517 1,452 1,684 1,403
EMEA non-EU 3,705 4,127 4,287 3,881 4,060 3,847 3,807 4,433 3,804
Australia 3,075 3,358 3,368 2,698 2,713 2,701 2,752 2,355 2,313
Singapore 4,429 3,724 3,824 3,393 3,687 3,597 3,473 3,453 2,665
Japan 1,242 1,449 1,662 1,726 1,695 1,724 2,095 2,140 1,528
Emerging Markets 2,895 2,840 3,337 3,364 2,961 2,179 2,795 2,946 2,477
Institutional 15,395 23,403 27,752 22,279 16,362 24,229 23,303 26,297 19,443
Total OTC derivatives 2,293 2,517 2,678 2,624 2,575 2,460 2,480 2,509 2,200
Stock trading and investments 125 126 122 191 172 260 217 169 115
High Potential Markets
Net trading revenue (£m) H1 FY24 H2 FY23 H1 FY23 H2 FY22 H1 FY22 H2 H1 FY21 H2 FY20 H1 FY20
FY21
US options and futures 58.2 59.7 61.2 57.3 52.8 - - - -
US FX 7.5 8.6 11.0 9.1 7.5 6.4 5.2 4.2 1.6
US market making - 0.1 0.5 0.8 1.0 1.6 1.9 1.8 1.3
Total US 65.7 68.3 72.7 67.2 61.3 8.0 7.1 6.0 2.9
European ETDs 5.4 10.2 5.4 5.5 3.8 2.8 2.1 0.7 -
Total High Potential Markets 71.1 78.6 78.1 72.7 65.1 10.8 9.2 6.7 2.9
Clients (000) H1 FY24 H2 FY23 H1 FY23 H2 FY22 H1 FY22 H2 H1 FY21 H2 FY20 H1 FY20
FY21
US options and futures 65.6 66.9 67.4 79.2 78.1 - - - -
US FX 7.7 7.8 7.6 7.8 9.3 10.6 9.2 6.4 2.8
Total US 73.2 74.7 75.0 87.0 87.4 10.6 9.2 6.4 2.8
European ETDs 4.5 4.9 4.9 5.1 4.5 4.3 3.0 2.4 0.7
Total High Potential Markets 73.2 79.6 79.9 92.1 91.9 14.9 12.2 8.8 3.5
Revenue per client (£) H1 FY24 H2 FY23 H1 FY23 H2 FY22 H1 FY22 H2 H1 FY21 H2 FY20 H1 FY20
FY21
US options and futures 888 892 908 723 676 - - - -
US FX 980 1,103 1,437 1,168 808 600 572 651 578
Total US 897 914 962 763 690 600 572 651 578
European ETDs 1,183 2,086 1,117 1,082 845 652 709 285 -
Total High Potential Markets 914 986 972 780 698 614 606 552 457
1 Performance from continuing operations. Discontinued operations in FY23
consist of operations relating to Nadex
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