RESULTS PRESENTATION 6 Months ended 30 November 2012 IG NOVEMBER 2012 1
DISCLAIMER IG NOVEMBER 2012 2
OVERVIEW Benefits of IG's scale and market leadership are demonstrated in quieter markets FY13 H1 PERFORMANCE STRATEGY FY13 H1 five year volatility low in contrast with the extreme volatility in FY12 H1 Measured approach to cost management - Flat operating costs - Continue to invest for future growth - International expansion Strong cash generation COMPETITIVE POSITION FY12 PERFORMANCE Market share growth in key markets Scaling back of competitor activities Signs of reducing price pressure On-going investment in technology continues to differentiate IG Brand re-launch IG NOVEMBER 2012 3
THANK YOU FINANCIAL REVIEW IG NOVEMBER 2012 4
FY13 H1 SUMMARY FY12 H1 provides very challenging comparatives FY13 H1 RESULTS 5 YEAR REVENUE AND PBT 1 Net trading revenue 169.0m, down 14% PBT 1 81.1m, down 21% Diluted EPS 16.04p, down 22% 59.3m own funds generated from operations Interim dividend per share flat at 5.75p 1. Results exclude the discontinued Sport operation except pre-11 results, which have not been adjusted. IG NOVEMBER 2012 5
INCOME STATEMENT Operating costs held flat in a lower trading environment YEAR ON YEAR COMPARISON Net trading revenue down 14% Active clients down 9% Revenue per client down 5% Net operating income 11% lower Reduced betting duty ( 4.4m) Operating costs held flat 1. Net trading revenue excludes interest on segregated client funds and is presented net of introducing broker commissions 2. Margin based on net trading revenue IG NOVEMBER 2012 6
REVENUE BRIDGE Reduced trading activity driven by lower volatility FY12 H1 FY13 H1 REVENUE BRIDGE FY12 H2 Bridge FY13 H1 Bridge FY13 H1 dull markets impact new and existing clients FY13 H1 revenue from new clients exceeds attrition IG NOVEMBER 2012 7
ACTIVE CLIENTS Client growth most impacted by August and September comparatives REVENUE AND CLIENT TREND FY12 - FY13 YEAR ON YEAR REVENUE AND CLIENTS IG NOVEMBER 2012 8
REVENUE MIX Significant reduction in commodities and equity indices revenue YEAR ON YEAR COMPARISON % of total H1 revenue Revenue mix relatively constant year on year Except commodities revenue (6% FY13 H1 vs 12% FY12 H1) 22m of the 26m reduction in H1 year on year revenue relates to commodities and indices IG NOVEMBER 2012 9
TRADING REVENUE PER CLIENT Down on FY12 H1 but flat with FY12 H2 HALF YEARLY REVENUE BY CLIENT FY09 - FY13 H1 1 Europe UK CFD UKSB Australia Japan As expected FY13 H1 down on FY12 H1 Most regions up on FY12 H2 Europe most susceptible to the reduction in equity indices revenue Represents around twothirds of European revenue 1. Unique clients trading in each half year IG NOVEMBER 2012 10
VOLATILITY OF TRADING DAYS FY13 H1 average daily revenue decreases DAILY TRADING REVENUE VOLATILITY TREND YEAR ON YEAR TRADING REVENUE DISTRIBUTION IG NOVEMBER 2012 11
COST BASE DETAIL Flat operating costs YEAR ON YEAR COMPARISION 1. FY13 H1 Salary cost includes 1.3m redundancy programme costs 2. FY12 H2 Exceptional items relate to a property lease write back benefit IG NOVEMBER 2012 12
OPERATING COST BRIDGE Flat year on year operating costs with a lower exit run-rate FY12 H1 FY13 H1 OPERATING COSTS BRIDGE Flat year on year total operating costs including 4.6m non-recurring costs Redundancy programme ( 1.3m) Echelon legal case ( 2.3m) 1 Brand re-launch ( 1.0m) Total costs before performance related payments and non-recurring costs up 6% 1. FY13 H1Echelon costs incurred 2.3m compared to 0.3m in FY12 H1, a net movement of 2.0m year on year. Therefore total non-recurring costs of 4.6m in FY13 H1 equates to a 4.3m movement year on year. IG NOVEMBER 2012 13
NET OWN CASH AVAILABLE 59.3m own funds generated from operations FY13 H1 NET OWN CASH AVAILABLE BRIDGE FY13 H1 NET OWN CASH AVAILABLE BRIDGE Broker margin requirement increased in period by 47.0m from low May-12 position Recent high of 277.1m (see appendix 4) 180m committed bank facilities 1. FY12 inclusive of discontinued operations for cash flow purposes IG NOVEMBER 2012 14
REGULATORY CAPITAL Importance of a strong regulatory capital position YEAR ON YEAR COMPARISON 14% increase in total capital resources from prior year Flat with year end Regulatory capital surplus of 203% Buffer against market uncertainty IG NOVEMBER 2012 15
REGULATION Global regulatory activity ongoing: no material impact expected European FTT France: Tax implemented for cash equities. No impact on client or hedging transactions Italy: Precise impact of new legislation unclear: Tax on Italian equities and indices but no tax on forex, non-italian equities and equity indices or commodities. Possibly favours derivatives on Italian equities Enhanced Cooperation: Slow progress and drafting stage yet to commence Asia Pacific Singapore: No further information on precise scope of leverage reductions or timeframe. Expected exemptions should substantially mitigate impact Japan: Any changes to binary rules increasingly unlikely to have meaningful impact Australia: Lobbying for greater client money protection, which could be challenging for some operators US Encouraging enforcement action by CFTC against illegal OTC binary providers IG NOVEMBER 2012 16
THANK YOU BUSINESS UPDATE IG NOVEMBER 2012 17
MARKET SHARE Continued market share gains in our largest revenue generating countries YEAR ON YEAR MARKET SHARE 1 UK and Australia continue to grow UK spread betting up 5% Australia up 7% Significant market share growth in UK and Australia Third largest CFD provider in Singapore but with strong market share gains Now joint number 1 FX provider 1. Share of primary accounts, by number, as stated by Investment Trends reports: Investment Trends July 2012 UK Leveraged Trading Report Investment Trends May 2012 Australia CFD Report Investment Trends September 2012 Singapore FX and CFD Report IG NOVEMBER 2012 18
INVESTMENT IN TECHNOLOGY IG has the scale to invest in multiple technologies KEY INITIATIVES MOBILE USE 2010-2012 Mobile Single App for spread betting and CFDs Push Alerts seeing benefit of developing native Apps Insight research tool Now rolled out on ipad, iphone and Android On-going addition of extra tools Significant upgrade to advanced charts Many more indicators Ability to program trading strategies 47% of clients use mobile 14% of active clients only use mobile IG NOVEMBER 2012 19
CUSTOMER SERVICE Continued leading Net Promoter Scores in key markets NET PROMOTER SCORE 1 CURRENT RESULTS IG Industry average UK SB 25 6 UK CFD 20 3 Australia 21-7 France 7-8 Germany 4-8 Singapore -12-34 -40-20 0 20 40 Net Promoter Score IG Net Promoter Score (NPS) is high across all six markets surveyed by Investment Trends 2 Significantly ahead of the industry in all of these markets Customer satisfaction is driven by technology investment 1. The Net Promoter Score (NPS) is calculated by asking respondents how likely are you to recommend this company to a friend or colleague? Respondents reply on a 0-10 scale, with the final NPS calculated as the percentage of promoters (score of 9-10) less the percentage of detractors (score of 0-6). 2. Sourced from current Investment Trends reports: Investment Trends July 2012 UK Leveraged Trading Report Investment Trends February 2012 France CFD & FX Report Investment Trends May 2012 Australia CFD Report Investment Trends September 2012 Singapore FX and CFD Report Investment Trends April 2012 Germany CFD and FX Report IG NOVEMBER 2012 20
OTHER INITIATIVES Delivering further improvements to drive client activity Brand re-launch A consistent look and experience across all client touch-points Brings image in line with expectations of service and delivery excellence Tracking of payback from online advertising Track revenue generated rather than accounts opened Enables better optimisation of online marketing Email marketing capability Account opening processes Currently only optimised for applicants based in countries where we have an office New offices Ireland Norway Existing binary option offering Product works well in a low volatility environment Additional market access strategies targeting professional / most active traders IG NOVEMBER 2012 21
SUMMARY Managing through a period of dull markets Challenging comparatives Competitive position is strong Strong cash generation Prudent approach to investment Other initiatives to drive client activity FY13 H2 revenue is likely to be flat on H1 if activity levels similar IG remains well positioned to benefit from more favourable trading conditions - - IG NOVEMBER 2012 22
THANK YOU APPENDICES IG NOVEMBER 2012 23
Appendix 1: Financial net trading revenue per client HALF-YEAR ANALYSIS FY06 - FY13 H1 1 1. Clients trading in a six month period IG NOVEMBER 2012 24
Appendix 2: European client and revenue summary FY13 H1 CLIENT AND REVENUE BY OFFICE Clients Yr on Yr Revenue Yr on Yr 000s Change m Change France 4.2 (1%) 9.1 (19%) Germany 6.3 7% 8.1 (23%) Italy 3.0 6% 5.8 (18%) Iberia 3.7 15% 6.5 (9%) Sweden 1.1 23% 2.0 53% Netherlands 0.4 106% 0.6 13% Total 18.7 9% 32.1 (15%) IG NOVEMBER 2012 25
Appendix 3: Client trading activity CLIENT RETENTION RATES BY YEAR AND HALF YEAR TREND FY07 - FY13 H1 1 FY07 FY08 FY09 FY10 FY11 FY12 FY13 IG clients excluding Japan H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 New accounts 10,648 13,137 19,012 23,681 31,916 29,622 31,655 32,102 30,338 30,293 32,213 28,755 25,545 First trades (in period) 7,063 8,746 13,378 15,833 22,194 22,097 23,064 23,548 22,686 22,117 24,330 20,962 17,961 Implied conversion rate (%) 66% 67% 70% 67% 70% 75% 73% 73% 75% 73% 76% 73% 70% Total active clients (in period) 21,204 25,780 35,921 41,341 57,517 63,954 73,365 81,738 86,024 90,954 101,489 95,121 94,250 Clients trading from prior period 14,141 17,034 22,543 25,508 35,323 41,857 50,301 58,190 63,338 68,837 77,159 74,159 76,289 Clients trading from prior period (%) 73% 80% 87% 71% 85% 73% 79% 79% 77% 80% 85% 73% 80% Prior annual figures: Total IG Financial clients excl Japan FY07 FY08 FY09 FY10 FY11 FY12 New accounts 23,785 42,693 61,538 63,757 60,631 60,968 First trades (in period) 15,809 29,211 44,291 46,612 44,803 45,292 Implied conversion rate (%) 66% 68% 72% 73% 74% 74% Total active clients (in period) 34,483 56,291 88,336 103,338 117,252 130,006 Clients trading from prior period 18,674 27,080 44,045 56,726 72,449 84,714 Clients trading from prior period (%) 76% 79% 78% 64% 70% 72% 1. Percentage of those clients (excluding Japan) who traded as a percentage of clients trading in previous period IG NOVEMBER 2012 26
Appendix 4: Broker margin requirement trend BROKER REQUIREMENT ( m) TREND FY11- FY13 H1 IG NOVEMBER 2012 27