IG Group Holdings plc (LON:IGG), a global leader in online trading, today issues an update on its revenue for the three months to 28 February 2019, the third quarter of its FY19 financial year.
Q3 FY19 Revenue
Q3 FY19 is the second quarter when the ESMA product intervention measures that impose restrictions relating to the offering of CFDs and which prohibit the offer of binary options to Retail clients in the UK and EU, were in effect throughout.
Net trading revenue was £108.0m in Q3 FY19, 12% lower than in Q2 FY19. The total number of OTC leveraged active clients in Q3 increased by 1% to 84,200. The lower revenue in Q3 compared with Q2 is due to lower revenue per client which reflects the reducing levels of volatility in financial markets throughout the quarter, culminating in persistently low levels of volatility and market activity in February.
IG’s track record of sustainable revenue growth in its OTC leveraged derivatives business over the medium and long term has been delivered through growth in the size and quality of its active client base. The Group is pleased to see continued demand for its products and services, with 7,742 new OTC leverage clients placing a first trade in Q3 compared with 7,553 in Q2. During Q3 a further 1,425 ESMA region Retail clients applied to be classified as Professional, with 14% of these applications accepted.
The table below sets out revenue and active client numbers by reporting segment for Q3 FY19 compared with Q2 FY19.
|
Reporting Segment |
Revenue (£m) |
% Change |
Clients (‘000s) |
% Change |
||
|
Q3 FY19 |
Q2 FY19 |
Q3 FY19 |
Q2 FY19 |
|||
|
UK |
41.8 |
49.7 |
(16%) |
31.5 |
31.2 |
1% |
|
EU |
15.1 |
17.3 |
(13%) |
20.3 |
19.9 |
2% |
|
ESMA Region |
56.9 |
67.0 |
(15%) |
51.8 |
51.1 |
1% |
|
EMEA ex EU |
11.3 |
10.7 |
6% |
4.5 |
4.6 |
(2%) |
|
APAC |
35.0 |
38.6 |
(9%) |
27.9 |
27.6 |
1% |
|
OTC Leveraged |
103.2 |
116.3 |
(11%) |
84.2 |
83.3 |
1% |
|
US |
4.0 |
4.5 |
(11%) |
8.7 |
8.6 |
1% |
|
Share Dealing & Investments |
0.8 |
1.3 |
(38%) |
37.4 |
37.0 |
1% |
|
Multi product clients |
– |
– |
– |
(4.7) |
(4.8) |
(2%) |
|
Group |
108.0 |
122.1 |
(12%) |
125.6 |
124.1 |
1% |
ESMA Region
The table below sets out the split of revenue and active client numbers within the ESMA region between clients categorised as Professional and Retail.
|
|
Revenue (£m) |
% Change |
Clients (‘000s) |
% Change |
||
|
Q3 FY19 |
Q2 FY19 |
Q3 FY19 |
Q2 FY19 |
|||
|
ESMA Professional |
37.1 |
46.3 |
(20%) |
5.2 |
5.2 |
– |
|
ESMA Retail |
19.8 |
20.7 |
(4%) |
46.6 |
45.9 |
2% |
|
ESMA Region |
56.9 |
67.0 |
(15%) |
51.8 |
51.1 |
1% |
The total number of OTC leveraged active clients in the ESMA region increased by 1% in Q3 compared with Q2, with the number of active Retail clients increasing by 2% to 46,600. The reduction in revenue in the ESMA region in Q3 compared with Q2 reflects lower revenue per client, consistent with the market conditions. The level of trading by Professional clients, who are not constrained by the ESMA measures, is more sensitive to volatility than Retail clients. The proportion of ESMA region revenue generated from clients categorised as Professional was 65% in Q3 FY19 compared with 69% in Q2 FY19.
Year to Date Revenue
Year to date net trading revenue of £359.0m is 15% lower than in the same period in the prior year, reflecting the impact of the ESMA measures and the exceptional performance in Q3 FY18 when revenue was boosted by the heightened level of interest in cryptocurrencies.
The table below sets out revenue and active client numbers by reporting segment for Q3 FY19 year to date compared with the same period in FY18. The underlying change in revenue shown in the table adjusts for the revenue generated by clients that had previously contracted with an entity in the ESMA region who elected to open an IG account in a jurisdiction which is not subject to the ESMA product intervention measures during FY19.
|
Reporting Segment |
Revenue (£m) |
% Change |
Clients (‘000s) |
% Change |
|||
|
Q3 YTD FY19 |
Q3 YTD FY18 |
Reported |
Underlying |
Q3 YTD FY19 |
Q3 YTD FY18 |
||
|
UK |
145.5 |
185.8 |
(22%) |
(19%) |
44.7 |
55.4 |
(19%) |
|
EU |
56.9 |
92.6 |
(39%) |
(34%) |
29.4 |
36.1 |
(19%) |
|
ESMA Region |
202.4 |
278.4 |
(27%) |
(24%) |
74.1 |
91.5 |
(19%) |
|
EMEA ex EU |
31.8 |
26.0 |
22% |
6% |
6.1 |
5.9 |
3% |
|
APAC |
109.1 |
102.4 |
7% |
2% |
36.7 |
35.3 |
4% |
|
OTC Leveraged |
343.3 |
406.8 |
(16%) |
(16%) |
116.9 |
132.7 |
(12%) |
|
US |
12.4 |
11.6 |
7% |
7% |
15.1 |
18.8 |
(20%) |
|
Share Dealing & Investments |
3.3 |
2.9 |
14% |
14% |
37.4 |
33.7 |
11% |
|
Multi product clients |
|
|
|
|
(6.1) |
(6.3) |
(3%) |
|
Group |
359.0 |
421.3 |
(15%) |
(15%) |
163.3 |
178.9 |
(9%) |
Business Model
IG’s business model ensures that its interests as a business are aligned with the interests of its clients, which sets it apart from most other companies in the industry. The Company wants its clients to trade profitably, as successful clients are more likely to continue trading.
The Group accepts market risk in order to allow instant execution of client orders. The business manages the market risk it faces through internalisation and by hedging residual risk in each market at defined limits. This policy has been established for many years, and has not changed in FY19.
New Operations
The Group’s new subsidiary in the USA which is registered to operate as a Retail Foreign Exchange Dealer, IG US, and its new client facing subsidiary in Germany, IG Europe, both launched operations at the end of January. Spectrum, the Group’s MTF, is expected to launch before the end of the financial year.
Outlook
As demonstrated in Q3, the Group’s revenue in any one period is affected by market volatility and client trading opportunities, and the level of revenue in the last quarter of FY19 is difficult to predict accurately. As previously communicated, the Company continues to expect that its revenue in FY19 will be lower than in FY18. The Company’s cost guidance for FY19 remains unchanged with total operating costs expected to be at a similar level to the £290 million operating costs in FY18.
The Board reiterates that the Company expects to maintain the 43.2p per share annual dividend until the Group’s earnings allow the Company to resume progressive dividends.
There will be a conference call for analysts and investors at 8.30am (UK time) today. The call can be accessed by visiting https://pres.iggroup.com/ig046/vip_connect. The audio recording of the conference call will be archived for access at www.iggroup.com/investors.
The Company will provide a business and strategic update on the morning of 22 May 2019.
