IG Group releases lower FY19 revenues reflecting the impact of the ESMA measures


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UK online trading leader IG Group Holdings plc (LON:IGG) has today released its results for the twelve months ended 31 May 2019 (FY19).

Even though IG’s expectations were that its revenue in FY19 will be lower than in FY18, reflecting the impact of the ESMA measures, the broker announced that it has successfully navigated the regulator’s measures which came into effect during Q1 of the financial year.

Highlights include:

  • In the three quarters of the financial year during which the ESMA measures were in place throughout, 66% of ESMA region revenue was generated from Professional clients.
  • The Group served 6,000 unique ESMA region Professional clients in FY19. The average revenue per ESMA Professional client was nearly £27,000 in the year.
  • 55% of the Group’s global OTC leveraged revenue in FY19 was generated from clients who have been trading with the Company for more than 3 years.
  • The average tenure of the Group’s highest value clients in FY19, defined as those clients generating 80% of the Group’s revenue, was 4 years and 9 months.
  • The Group has continued to attract new, high quality, OTC leveraged clients with 31,510 clients making their first trade in FY19, contributing £66.8m of revenue in the year.
  • The Group estimates that the lifetime revenue value of the FY19 client cohort will be around £300m.

Actions taken to deliver a return to revenue growth in FY20.

  • IG Europe, the Group’s client facing subsidiary in Germany, has been operational since January 2019 and provides certainty that IG will be able to offer its regulated financial products in all EU member states following the UK’s exit from the EU.
  • IG US, the Group’s Retail Foreign Exchange Dealer in the USA, launched in January 2019.
  • Spectrum, the Group’s EU based MTF, has started operations, with the marketing launch campaign planned to start in September 2019.
  • Updated strategy and new medium-term financial targets announced on 22 May 2019.

Financial Summary

  • Net trading revenue £476.9 million (FY18: £569.0 million) – down 16% reflecting the impact of the ESMA measures and the less favourable market conditions throughout FY19, particularly in the second half of the financial year.
  • Total operating costs £284.3 million (FY18: £290.1 million) – down 2%.
  • Operating profit £192.9 million (FY18: £281.1 million) – down 31%.
  • Basic EPS 43.1 pence (FY18: 61.7 pence) – down 30%.

Outlook

IG expects to return to revenue growth in FY20. The revenue growth is expected to be delivered in the second half of the year as the first quarter of FY19 was only partly impacted by the implementation of the ESMA product intervention measures.

As set out in the strategy update, the Group’s operating expenses, excluding variable remuneration, are expected to increase by around £30 million in FY20. This is primarily due to additional investment in prospect acquisition, to continue to promote the IG brand, to grow the size and quality of the client base, and to establish the new businesses in the EU and the USA.

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

IG Group hires Verifone exec June Felix as CEO
June Felix, IG Group

June Felix, Chief Executive, commented:

The Company has made good strategic and operational progress during FY19, taking action to ensure that the business successfully navigated the impact of regulatory change.

We have developed our strategy to position the business so that it will continue to deliver for our clients, our shareholders and our other stakeholders under a more restrictive regulatory environment in the UK and EU. I am excited by the opportunities we have identified, and I am confident that the Company will return to revenue growth in FY20.

IG has experienced significant change over its 45-year history and will continue to do so – driven by an evolving regulatory environment, shifting patterns of wealth, and the continued evolution of financial markets around the world. The Company adheres to the highest regulatory standards, differentiates itself within the industry through its good conduct, and I believe that the business is well positioned to continue to adapt to regulatory change and to thrive in an evolving market.

I am looking forward to leading the implementation of IG’s strategy to deliver sustainable revenue growth and attractive shareholder returns.

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IG Group releases lower FY19 revenues reflecting the impact of the ESMA measures

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