IG Group Holdings plc

LEI No: 2138003A5Q1M7ANOUD76

Interim results for the six months ended 30 November 2021

27 January 2022

IG Group Holdings plc ("IG", "the Group", "the Company"), a purpose-led global financial technology business, today announces its results for the six months ended 30 November 2021 ("H1 FY22").

'A record first half performance across all of our businesses, building on the momentum from the past year and demonstrating the benefits of our increasingly global and diversified business model'

Highlights

-     A strong performance in H1 FY22 from continuing operations[1]:

-     Net trading revenue increased 16% to £471.9 million (H1 FY21: £408.5 million). Excluding the foreign exchange hedging gain associated with the financing of the tastytrade acquisition, adjusted net trading revenue increased 14% to £466.1 million

-     Profit before tax increased 8% to £245.2 million (H1 FY21: £227.8 million), while adjusted[2] profit before tax increased 13% to £258.0 million

-     Active clients increased 42% to 320,400 (H1 FY21: 225,200) reflecting the acquisition of tastytrade; 53,600 new clients acquired (H1 FY21: 60,800), lower than FY21, as anticipated in less volatile market conditions, but significantly higher than pre-pandemic client acquisition (H1 FY20: 26,400)

-     Client retention rates have remained consistent with historical averages, reflecting the high quality of clients onboarded in previous periods

-     Total operating costs increased 22% to £223.3 million (H1 FY21: £182.8 million). Adjusted total operating costs[3] increased 13% to £205.7 million

-     Profit before tax margin for the first half was 52.0% (H1 FY21: 55.8%). Adjusted profit before tax margin was 55.3%

-     Basic EPS was 48.1 pence (H1 FY21: 50.7 pence). Adjusted basic EPS was 50.6p

-     Interim cash dividend of 12.96 pence per share (H1 FY21: 12.96 pence per share)

-     Continuing successful execution of IG's growth strategy:

-     Revenue of £401.0 million in Core Markets+ (H1 FY21: £399.3 million) reflecting the high quality of our client base despite less volatile market conditions

-     High Potential Markets revenue of £65.1 million, up 30% on the H1 FY21 pro forma[4] revenue of £50.1 million

-     Non-OTC leveraged derivative revenue accounted for 16% of net trading revenue (H1 FY21: 5%)

-     tastytrade continuing to build momentum:

-     tastytrade showed strong growth, delivering revenue of £52.8 million in the 5 months since acquisition, increasing 29%; or 34% on a constant currency basis, on the comparable period in the prior year 4

-     Integration is well on-track with a focus on operations and marketing

-     Continuing to deliver on our ESG strategy:

-     Announced our commitment to contribute 1% of post-tax profits to charitable initiatives from 2022 to 2025, with a focus on education and improving financial literacy

-     Successful completion of a comprehensive debt refinancing and issuance, to provide greater capacity and support for future growth

-     Announced the proposed sale of Nadex and the Small Exchange, anticipated to close in Q4

Financial Summary

¹ From continuing operations

² Excludes £5.8 million of foreign exchange hedging gain associated with the financing of the tastytrade acquisition

³ Excludes £17.6 million of one-off and recurring non-cash costs related to the tastytrade transaction and the proposed sale of Nadex and Small Exchange

⁴ Excludes £1.0 million of one-off financing cost related to the debt issuance

June Felix, Chief Executive, commented:

"This has been a period of outstanding performance with record revenues and profits. Since we launched our new strategy three years ago, the group has transformed from a UK-centric, CFD focused firm, to a global financial technology company with a multi-product trading platform.

One of the key factors behind the success of this transformation is our 'global reach, local focus' which allows us to act with agility to tailor our offerings. Our outstanding growth in Japan is a strong illustration of this approach.

The tastytrade acquisition in June 2021 brought about a step-change in our reach and product offering. Through our complementary capabilities, and buttressed by tastytrade's award winning technology platform and compelling, distinctive educational content, IG is well positioned to take advantage of the global structural shifts toward self-directed trading and deliver continued sustainable growth.

Our ability to attract and retain a high-quality client base provides tangible and enduring value, and differentiates us from our competitors. As a group, we have multiple growth levers and a significant total addressable market. The 'size of the prize' is clear, and we are ready to capitalise on these opportunities as we continue to deliver on our strategic priorities and targets.

Finally, I would like to reiterate how IG is aligning its purpose with profit. Our recent pledge to contribute the equivalent of 1% of our post-tax profits to charitable causes is testament to our financial strength and demonstrates our commitment to supporting not just our clients, but the broader communities in which we operate. We believe that elevating collective financial literacy will reinforce our longevity as a business and simultaneously enhance potential outcomes for everyone in the communities in which we operate. We are here to win - for our client, for our investors, for the betterment of society."

Further information

Analyst presentation

There will be an analyst and investor presentation at 9:30am (UK Time) on Thursday 27 January 2022.

The presentation will also be accessible live via audio webcast at: https://pres.iggroup.com/ig054/. If you wish to listen via conference call, please use the following link:

https://pres.iggroup.com/ig054/vip_connect. The audio webcast of the presentation and a transcript will be archived at:  IG Group - Financial Results.

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 2022.

Non-IFRS performance measures

IG Group management believes that the non-IFRS performance measures ("adjusted measures") included in this document provide valuable information to the readers of this interim statement as they enable the reader to identify a more consistent basis for comparing business performance between financial periods and provide more detail concerning the elements of performance which are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by IG Group management. Any adjusted measures in this document are not a substitute for IFRS measures, and they may present a more favourable view of performance because they may exclude significant costs without excluding the associated revenue, and so readers should consider the IFRS measures as well.

The adjusted measures in this document relate to income and costs arising from the tastytrade acquisition, the debt issuance and the proposed sale of Nadex and Small Exchange. These costs are either one-off in nature, such as legal and professional fees, or they are non-cash items which arise from the acquisition, such as intangible amortisation and retention awards funded by the previous owners of tastytrade. These items are excluded for comparability purposes against prior performance, and where they are recurring, they may not be adjusted for in future periods. Refer to appendix 1 and 2 for further information and calculations of adjusted measures included throughout this document, and reconciliation or reference to the most directly comparable IFRS measures.

Forward-looking statements

This interim statement, prepared by IG Group Holdings plc (the "Company"), may contain forward-looking statements about the Company and its subsidiaries (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 FY21 Group Annual Report for the financial year ended 31 May 2021. 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. Nothing in this statement should be construed as a profit forecast.

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 is a purpose-led global financial technology business that has been at the forefront of trading innovation since 1974. Since then, we've evolved into a global financial technology company incorporating the IG, tastytrade, IG Prime, Spectrum, Nadex and DailyFX brands, with a presence in Europe, North America, Africa, Asia-Pacific and the Middle East. Our award-winning products and platforms empower ambitious people the world over to unlock opportunities around the clock, giving them access to over 19,000 financial markets.

IG Group Holdings plc is an established member of the FTSE 250 and holds a long-term investment grade credit rating of BBB- with a stable outlook from Fitch Ratings.

CEO review

Overview of performance

We are a purpose-led global financial technology business that provides our clients with the access, products, tools and education they need to take control of their financial future.

IG delivered another excellent set of results reflecting the size and quality of our active client base, both of our long-standing and loyal existing clients, and of the new clients onboarded during the sustained periods of increased demand last year. The total number of active clients increased to 320,400 in H1 FY22, with acquisition remaining significantly above pre-pandemic levels.

Statutory net trading revenue was £471.9 million, 16% higher than H1 FY21. Excluding the foreign exchange hedging gain related to the tastytrade transaction, adjusted net trading revenue of £466.1 million was 14% higher than the first half of FY21, another record half year revenue performance. Excluding tastytrade, which the Group acquired on 28^th June 2021, adjusted net trading revenue was up 1%.

In November we announced a successful inaugural public debt issuance and renegotiation of our Revolving Credit Facilities. This provides the Group with flexibility and provides a solid funding base to support future growth.

In December we announced the proposed sale of Nadex and Small Exchange. This strategic divestment provides significant return on investment and gives us further capacity to invest across all of our businesses.

Progress executing our growth strategy

tastytrade

Our strategic acquisition of tastytrade significantly expands the Group's presence in the US and diversifies our revenue through entry into US options and futures, the world's largest listed derivatives market.

tastytrade has performed very well in the first 5 months since acquisition, delivering 34% revenue growth in H1 FY22 against the comparable period in the prior year, and again delivered another consecutive quarter of record revenue.

We have made good progress on the integration of tastytrade. We are leveraging IG's sophisticated marketing expertise, especially in search engine optimisation, combining that with tastytrade's strong social media presence.

Spectrum

Spectrum, our pan-European listed retail derivatives exchange, continued its high levels of growth with revenue up 79%. Spectrum's unique customer proposition of market access 24 hours a day, 5 days a week is proving increasingly popular amongst clients.

We are very excited about the growth that Spectrum has shown recently, and we continue to develop a strong pipeline of distribution opportunities, liquidity providers and product manufacturers, which will empower Spectrum to take full advantage of the £1 billion European exchange traded derivatives market.

Core Markets+

Performance in the UK and EU has been strong, against a backdrop of softer market conditions. In the UK, revenue was up 5% on H1 FY21, and 69% up on H1 FY20, showing the maintained step change in the client base. There was a similar story in the EU, where revenue was up 4% on H1 FY21, and 55% up on H1 FY20. The high quality of the clients we have onboarded recently is reflected in the levels of retention, which remain comparable to historic averages.

Japan is another success story. Not only did we see record revenue in the half, we are attracting clients at a faster rate than we have ever done previously. This positions us well for continued growth in future years. Our success in Japan highlights the capabilities of the Group to localise our marketing and products to different markets worldwide while relying on our fundamental strength in risk management, an ideal combination for future sustainable growth.

Australia saw the implementation of new Australian Securities and Investments Commission (ASIC) regulations in March 2021, therefore H1 FY22 represents the first full half of trading in that environment. As anticipated, this has led to a reduction in revenue from H1 FY21. However, comparing this to pre-pandemic in H1 FY20, revenue was up 23%, and second quarter revenue was up 17% on the first quarter, as clients adapted to the new regulations.

Dividend

The Board has approved an interim cash dividend of 12.96 pence per share. The dividend will be paid on 4 March 2022 to those shareholders on the register at the close of business on 3 February 2022. 

Outlook

Our results have shown that we have sustained the step change in active clients onboarded over the past several quarters, a testament to our well-developed marketing capabilities, the power of our platforms, and our trade execution.

We've seen a strong outturn in the half, as all of our businesses continue to sustain a high level of operating performance. We continue to target revenue growth in Core Markets+ in the range of 5-7% per year over the medium term. We anticipate that our High Potential Markets portfolio will continue to grow revenue at a rate of 25-30% per year in the medium term, with tastytrade at the higher end of that range; for FY22 we now anticipate that tastytrade will be within this range.

The excellent performance we have seen so far this year means that our variable remuneration charge will be higher than originally anticipated.  All other costs are being managed in line with the previous guidance.  We expect the FY22 full year variable remuneration charge to be above the FY21 charge, reflecting the increase in the number of Group employees.  As a result, we now expect our total adjusted operating costs to increase by around 7% on the combined FY21 IG and tastytrade cost base. 

We have a very exciting future ahead of us, with multiple product and geographic growth levers and a significant total addressable market. Our strengths in technology innovation and robust risk management along with our global footprint and significant financial flexibility position us perfectly for the future.

Finally, I would like to take this opportunity to thank all of our employees around the world for their continued dedication and determination through what remains a challenging period. Our successes as a business would not be possible without their collective efforts.

June Felix

CEO

Business Performance Review

Summary Group Income Statement

[1] Adjusted excludes £5.8 million foreign exchange hedging gain associated with the financing of the tastytrade acquisition

² Operating expenses include net credit losses on financial assets

³ Adjusted excludes £16.0 million of costs and recurring non-cash costs associated with the tastytrade acquisition and integration and £1.6 million relating to the proposed sale of Nadex and the Small Exchange

⁴ Adjusted excludes £1.0 million of one-time financing expense associated with the debt issuance

Statutory results

On a statutory basis, net trading revenue was £471.9 million, reflecting the continued size and strength of the active client base and the inclusion of tasty revenue from 28 June 2021 following completion.

Revenue performance benefitted from the size and quality of the active client base, which has been maintained following the significant increase in Q4 FY20. Group active clients were 320,400 in H1 FY22, an increase of 42% on H1 FY21, reflecting the addition of 78,000 tastytrade clients. Excluding tastytrade, active clients were 242,300, 8% higher than H1 FY21, and 70% up on pre-pandemic period of H1 FY20.

The Group onboarded 53,600 new clients in H1 FY22. Excluding tastytrade, there were 39,400 new clients, a reduction of 35% on H1 FY21. New client acquisition remains materially above the pre-pandemic levels despite softer market conditions during H1 FY22.   

Statutory operating costs were £223.3 million, 22% higher than H1 FY21 as a result of one-off tastytrade acquisition and integration costs, and costs relating to the proposed sale of Nadex and the Small Exchange.

The Groups' statutory profit before tax for H1 FY22 was £245.2 million, 8% higher than H1 FY21.

As a result of the tastytrade acquisition, the Group acquired an investment in Small Exchange and Zero Hash, which are recognised as associates with a loss of £1.0 million included in the Groups profit before tax.

On 1 December we announced the proposed sale of Nadex and Small Exchange to Crypto.com, therefore Nadex is presented as a discontinued operation. Small Exchange will continue to be presented within continuing operations. Statutory profit after tax was £202.6 million, taking into account profit from both continuing and discontinued operations.

Adjusted results

The following analysis is of results from continuing operations on an adjusted basis, excluding a £5.8 million foreign exchange gain related to the tastytrade acquisition, £16.0 million of costs relating to the tastytrade acquisition, which includes £12.6 million amortisation of acquisition related intangibles, £1.6 million relating to the proposed sale of Nadex and Small Exchange and £1.0 million of financing cost relating to the new debt issuance.

Adjusted net trading revenue in H1 FY22 was £466.1 million, 14% higher than H1 FY21. Excluding tastytrade, which the Group acquired on 28 June 2021, the adjusted net trading revenue was £413.3 million, 1% higher than H1 FY21.

Adjusted H1 FY22 operating costs from continuing operations were £205.7 million, 13% higher than H1 FY21 reflecting the addition of tastytrade. Excluding tastytrade, operating costs were down 1% on H1 FY21.

Adjusted operating profit from continuing operations of £262.8 million was 15% higher than H1 FY21.  

The Group's adjusted profit before tax from continuing operations was £258.0 million, 13% higher than H1 FY21. 

Revenue performance by product

OTC leveraged derivatives

OTC leveraged revenue in H1 FY22 was £392.6 million, 1% higher than H1 FY21. OTC leveraged revenue represents 84% of Group revenue, down from 95% in H1 FY21, reflecting the growing proportion of the Group's revenue from exchange traded derivatives, following the acquisition of tastytrade.

As anticipated, the levels of client activity and new client acquisition moderated in the half as markets became less volatile following heightened activity throughout FY21, although both the active client base and new client acquisition remain at levels materially higher than the pre-pandemic period. OTC leveraged active clients were down 3% on H1 FY21 and were up 44% on H1 FY20. New clients onboarded were down 32% on H1 FY21 and 28% higher than H1 FY20.  Revenue per client was 4% higher, reflecting a change in client mix.

Exchange traded derivatives

Revenue from exchange traded derivatives, excluding Nadex as a discontinued operation, was £57.6 million, and represented 12% of Group revenue (H1 FY21: 1%). tastytrade revenue was £52.8 million, while revenue from Spectrum, the Group's multi-lateral trading facility, was £3.8 million, an increase of 79% on H1 FY21.

With the addition of tastytrade, the number of clients trading exchange traded derivatives increased to  82,600 (H1 FY21: 3,000), 26% of the total active client base.  

New client acquisition increased significantly, reflecting the inclusion of tastytrade.  Comparing H1 FY22 to pro forma H1 FY21, which included new clients acquired from 28 June 2020 to 30 November 2020, new client acquisition was down 33%, reflecting the softer market conditions.  New client acquisition remained significantly higher than pre-pandemic levels, with H1 FY22 69% higher than the pro forma H1 FY20 comparison.

Revenue per client was 3% lower reflecting the lower average revenue per client in tastytrade's large US options and futures client base compared to the European MTF client base.

Stock trading and investments

Revenue from stock trading and investments was £15.9 million in H1 FY22, up 3% on H1 FY21 and 265% higher than H1 FY20. Active clients were 30% higher than H1 FY21, and 144% higher than H1 FY20, demonstrating the significant growth in this business over the pandemic period.   

Similar to the OTC leveraged business, new client acquisition moderated in H1 FY22, down 45% on H1 FY21, but remained significantly higher than the pre-pandemic period, up 151% on H1 FY20.

Revenue per client was down 21% on H1 FY21, reflecting a reduction in trade frequency.

The growth in stock trading and investments has driven a 50% increase in client assets under administration, which at the end of the period were £3.6 billion (H1 FY21:  £2.4 billion).

Revenue performance by segment

1 Total Core Markets+ active clients have been adjusted to remove the clients who are active in more than one product category to give a unique Core Markets+ client count.   In H1 FY22 there were 11,200 Core Markets+ multi-product clients, compared with 11,200 in H1 FY21

² Exchange traded derivatives revenue per client calculation excludes revenue generated from the Group's market maker on Nadex

³ 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 FY22 there were 13,500 multi-product clients, compared with 12,900 in H1 FY21

Core Markets+

Total Core Markets+ revenue was £401.0 million, in line with H1 FY21. Within total Core Markets+,  OTC leveraged revenue was £385.1 million, in line with H1 FY21 and stock trading and investments revenue was £15.9 million, up 3% on H1 FY21.  

As anticipated there has been some moderation in the levels of client activity and new client onboarding in the Core Markets+ portfolio, particularly in the more established markets which benefitted the most from the elevated levels of volatility and client demand in Q4 FY20 and throughout FY21, however the size of the active client base, and levels of new client acquisition remain significantly higher than pre-pandemic.

OTC leveraged Core Markets+ active clients were down 3% on H1 FY21 and 39% higher than H1 FY20. Revenue per client increased 4% on H1 FY21 and 17% on H1 FY20.

UK and EU revenue in H1 FY22 was £208.3 million, 5% higher than in H1 FY21.  The impact of a 9% reduction in active clients was offset by a 15% increase in the average revenue per client.  The revenue per client increase was due to a change in the client mix resulting from the reduction in new clients in the period.

Japan revenue of £44.6 million was 29% higher than H1 FY21 driven by a 59% increase in active clients. New client acquisition was very strong in the period benefitting from the continued focus on localisation, brand building, and successful marketing relationships. New clients onboarded increased 69% compared to H1 FY21. Average revenue per client was down 19% on H1 FY21 due to dilution from the large volume of new clients onboarded throughout the period.

Australia revenue of £45.2 million was 27% lower than H1 FY21 reflecting a full 6 month impact of the ASIC leverage restrictions, which were introduced on 29 March 2021. The leverage restrictions impacted active client numbers, new client acquisition and revenue per client all of which were lower thanH1 FY21.  However revenue in the half remained higher than pre-pandemic, up 23% on H1 FY20.

High Potential Markets  

Total High Potential Markets revenue was £65.1 million (H1 FY21: £9.2 million) which includes £52.8 million revenue from tastytrade for the 5 months since acquisition (28 June 2021 to 30 November 2021).  Excluding tastytrade, the High Potential Markets portfolio revenue was £12.3 million, 33% higher than H1 FY21, with a 79% increase in Spectrum revenue, and a 43% increase in US OTC leveraged revenue.

Comparing H1 FY22 High Potential Markets revenue to pro forma H1 FY21 revenue, which includes revenue from tastytrade for the period 28 June 2020 to 30 November 2020, revenue for the portfolio was up 30%. For tastytrade, on the same basis revenue increased by 29% in Sterling, and 34% on a constant currency basis. tastytrade active clients increased by 21% on H1 FY21, with revenue per client 7% higher.   

In the US OTC leveraged business revenue was £7.5 million, 43% higher than H1 FY21, driven by a 41% increase in revenue per client as the client base established. Active clients increased 1% on H1 FY21.

Revenue from Spectrum was £3.8 million, 79% higher than H1 FY21 driven by continued growth in the active client base, which increased by 50%, with a 19% increase in revenue per client.

Operating costs

Total adjusted operating costs for H1 FY22 were £205.7 million, 13% higher than H1 FY21 reflecting the acquisition of tastytrade. Excluding tastytrade, operating costs were 1% lower than H1 FY21.

Operating costs comprise operating expenses and variable remuneration. H1 FY22 adjusted operating expenses were £181.0 million, 15% higher than H1 FY21. Variable remuneration in H1 FY22 was £24.7 million, 2% lower than H1 FY21.

Adjusted operating costs from continuing operations

H1 FY22 fixed remuneration was £69.0 million, an increase of 10% on H1 FY21 reflecting the addition of over 180 tastytrade employees. Excluding tastytrade, fixed remuneration in H1 FY22 was down 1%, as H1 FY21 included a number of one-off costs (including holiday pay accrual and restructuring costs) and H1 FY22 benefitted from more favourable FX rates reducing overseas salary costs. 

Advertising and marketing spend increased by 14% in H1 FY22 to £38.0 million. Excluding tastytrade, marketing spend increased by 1%.

Revenue related costs are variable items which fluctuate with the level of client activity and include client payment charges, variable market data charges, and provisions for client and counterparty credit losses. In H1 FY22 these costs were £19.0 million, 44% higher than H1 FY21. Excluding tastytrade, revenue related costs reduced by 17%, reflecting a lower charge for client and counterparty credit losses, and lower credit card charges, due to the lower levels of client trading in the period.

IT maintenance, structural market data charges and communications costs were £15.7 million in H1 FY22, an increase of 32% on H1 FY21. Excluding tastytrade, the increase was 16%, reflecting additional investment in technology to support the larger active client base and build capacity for future growth.

The Group is charged fees by the various regulators in the jurisdictions in which it operates, and in addition is required to make a contribution to the Financial Services Compensation Scheme (FSCS) in the UK. Regulatory fees were £2.3 million in H1 FY22, 8% lower than H1 FY21.

Depreciation and amortisation costs increased 11% to £13.9 million. Excluding tastytrade the increase was 3%, reflecting the increased investment in technology.

Within variable remuneration, the charge for the general bonus pool was £13.9 million, down 5% on H1 FY21. Excluding tastytrade the general bonus charge was down 13%, reflecting a smaller outperformance to internal targets compared to the prior period.

Share-based compensation costs relate to the long-term incentive plans for senior management and reflect the size of the awards and the extent to which they are expected to vest, which is driven predominantly by earnings per share (EPS) and relative Total Shareholder Return performance. These costs increased by 26% largely reflecting an increased number of participants.

Sales bonuses decreased by 26% to £3.5 million reflecting lower commission payments to sales staff for the onboarding and management of their own-sourced high-value clients.

Adjusted Profit Before Tax, Profit After Tax and Earnings Per Share

Adjusted operating profit from continuing operations in the period was £262.8 million, 15% higher than H1 FY21, reflecting the acquisition of tastytrade. After net finance costs of £3.8 million, and a £1.0 million share of loss from associates, adjusted profit before tax was £258.0 million.

The forecast full year effective tax rate (ETR) applied to the Group's H1 FY22 profit before tax is 17.4% (FY21 actual ETR: 17.4%). 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 taxable losses.

Adjusted basic EPS of 50.6p per share was flat on prior year as the increase in the number of ordinary shares following the issuance of 61 million shares to acquire tastytrade, was offset by the increase in adjusted profit after tax.

Dividend

An interim dividend of 12.96 pence per share will be paid on 4 March 2022 to those shareholders on the register at the close of business on 3 February 2022.

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 are deployed to meet the Group's liquidity requirements. These alternative performance measures are reconciled to the corresponding IFRS balances in the appendix.

¹ Excludes goodwill

² Excludes right-of-use assets

On June 28, 2021 the Group completed the acquisition of tastytrade, and the results of tastytrade have been consolidated from that date. The Group has completed a provisional exercise to estimate the fair value of assets and liabilities acquired. Goodwill of £476.5 million, and identified intangible assets have been recognised, with a net book value of £254.7 million at 30 November 2021.  

The Group drew down on a £150 million term loan in June 2021 to finance the tastytrade acquisition, taking its total committed term loan facilities to £250 million. In November 2021, the Group completed a comprehensive debt refinancing exercise and implementation of a long term funding structure, through the issue of £300 million of 7 year senior unsecured bonds, and renegotiation of revolving credit facilities to increase capacity to £300 million. As at 30 November 2021, the Group had £300 million debt in issue (31 May 2021: £100 million bank borrowings), and the Group has access to a £300 million revolving credit facility which was undrawn at 30 November 2021 (31 May 2021: undrawn).

The Group's net current assets held for sale relate to the net assets allocated to the Nadex disposal group, primarily comprising goodwill, fixed assets and cash, investment and goodwill associated with Small Exchange, which had initially been recognised on the statutory balance sheet as an investment in associate. 

Own Funds Flow

The Group is a highly cash generative business, and a significant amount of that cash supports hedging positions at brokers. The Group measures the strength of its balance sheet using its 'own funds' balance, a broader measure of the Group's liquidity position than cash, which takes into account liquid assets, including amounts at brokers, less borrowings and client funds on its balance sheet. As at 30 November 2021, the Group had a cash balance of £664.0 million (31 May 2021: £655.2 million) and own funds of £921.5 million (31 May 2021: £1,058.5 million).

The Group's cash balance increased by £8.8 million during H1 FY22, as a result of cash generated from operations of £258.1 million, additional debt funding of £299.2 million, and an increase of client funds on balance sheet of £125.1 million. These increases were reduced by the £216.1 million cash consideration paid to acquire tastytrade, the payment of the FY21 final dividend totalling £130.3 million, repayment of existing debt of £250.0 million of the existing term loan and a £16.7 million classification of cash held by Nadex to net current assets held for sale.

Whilst the cash balance increased during H1 FY22, the own funds balance reduced. This is the result of debt securities issued and client funds on balance sheet being deducted when calculating own funds. The movement of own funds during the period is as follows:

¹ Includes £3.5 million operating profit from discontinued operations

Own funds, including the impact of movement in exchange rates, decreased by £118.6 million during H1 FY22 (H1 FY21: increase £74.8 million), as the payment of the FY21 final dividend of £130.3m and the payment of £216.1 million cash consideration to acquire tastytrade more than offset own funds generated from operations of £213.7 million.

The conversion rate of operating profit into own funds was 99% in H1 FY22 (H1 FY21: 101%). This conversion rate is lower than in H1 FY21 due, in part, to the additional £13.5 million of depreciation and amortisation relating to the acquired tastytrade intangible assets and increased working capital. Of the working capital increase, £17.3 million relates to balances arising from the tastytrade acquisition and ongoing tastytrade balances.

Net interest and fees are higher in H1 FY22 from the drawdown of the term loan to part-finance the acquisition of tastytrade and debt refinancing. In addition to this, the Group purchased an additional £6.5 million of shares to settle the employee share-based awards during H1 FY22, further reducing own funds.

Own funds from discontinued operations relates to the Nadex disposal group, of which £16.7 million is cash.

Liquidity

The Group seeks to maintain a strong liquidity position, ensuring that it has sufficient liquidity, under both normal circumstances and stressed conditions, to meet its working capital and other liquidity requirements including broker margin, the regulatory and working capital needs of its subsidiaries, and to fund adequate buffers in segregated client money accounts.

Liquid assets increased by £186.3 million during H1 FY22, and comprises the following:

Amounts at brokers have increased by £137.6 million during H1 FY22 due to increased broker margin requirements. The balance comprises cash and UK Government Securities held on account by the Group's hedging counterparties, the valuation of open derivative positions and the valuation of physical cryptocurrency assets. The Group's broker margin requirement at 30 November 2021 was £729.3 million, £138.4 million higher than at 31 May 2021. The maximum broker margin requirement in H1 FY22 was £774.7 million, higher than the previous peak broker margin amount of £683.3 million in February 2021, reflecting the mix of client trading during periods of heightened market volatility.

Own funds in client money represents the Group's own cash held in segregated client funds in accordance with regulatory requirements, including the UK's Financial Conduct Authority (FCA) Client Asset Sourcebook (CASS) rules. This increased by £43.8 million to £104.7 million, as a result of trading conditions on the last day of the month.

The liquid asset buffer is held as UK Government Securities. From 1 January 2022 the liquid asset buffer requirement has been replaced by a new regime within the Investment Firm Prudential Regime rules. The Group will be subject to a basic liquid assets requirement and a liquid assets threshold requirement, which can be met with a broader range of assets than under the current rules. The Group does not expect the new rules to have a detrimental impact on its liquidity requirements, or the composition of its liquid assets.

The Group's available liquidity comprises assets that are available at short notice to meet additional liquidity requirements. Available liquidity was £561.7 million at 30 November 2021, £51.3 million lower than at 31 May 2021. This lower available liquidity reflects that the Group's liquid assets had already been deployed to support a broker margin requirement which was significantly higher than at 31 May 2021, and also reflects increased cash balances in non-UK subsidiaries. The Group regularly repatriates cash from its overseas subsidiaries and for liquidity management and planning purposes, the Group conservatively excludes cash held by subsidiaries outside the UK from available liquidity. The amount of cash held in entities outside the UK was £303.4 million at 30 November 2021 (31 May 2021: £248.0 million), £55.4 million higher than at 31 May 2021 due to increased overseas cash requirements arising from the acquisition of tastytrade and increased client funds recognised on balance sheet in overseas entities.

In addition to the cash recognised on the balance sheet, as at 30 November 2021, the Group held £2,701.7 million (31 May 2021: £2,710.3 million) of client money in segregated bank accounts. These funds are held separately from the Group's own cash balances and are excluded from the Group's liquid assets.

The Group's own funds at the end of period were £921.5 million (31 May 2021: £1,058.5 million). This comprises liquid assets, less client funds on balance sheet and issued debt. Client funds on balance sheet are funds which are deposited 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 held by the Group under title transfer arrangements.. In June 2021 the Group drew down on a £150 million term loan to finance the tastytrade acquisition. In November 2021, the Group issued £300 million of 7 year senior unsecured bonds, and the majority of the proceeds were used to repay the outstanding term loans. The reduction in own funds during the period is driven by the net cash outflow  arising from the cash consideration paid to acquire tastytrade.

Following the refinancing exercise performed in November 2021, total available credit facilities have risen from £375 million as at 31 May 2021, to £600 million as at 30 November 2021, with the potential to rise to £700 million if the new revolving credit facility is increased in size. The £300 million committed revolving credit facility was undrawn at 30 November 2021 (31 May 2021: undrawn).

Regulatory Capital

The Group is supervised on a consolidated basis by the FCA in the UK, 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 any additional regulatory financial obligations imposed.

Shareholders' funds comprise share capital, share premium, retained earnings and other reserves and at 30 November 2021 totalled £1,742.5 million (31 May 2021: £1,133.3 million). The Group's regulatory capital resources are an adjusted measure of shareholders' funds, and as at 30 November 2021 totalled £717.2 million (31 May 2021: £860.7 million), taking into account H1 FY22 profits which are included in the regulatory capital calculation following approval from the FCA.

The Group's Capital Ratio at 30 November 2021 was 25.9% (31 May 2021: 34.9%), above the required minimum capital ratio of 19.9% (31 May 2021: 19.9%), demonstrating the Group's solid capital base. The Capital Ratio has decreased in the period as a result of the goodwill and intangible assets arising on the acquisition of tastytrade. Further details about the Group's capital requirement are published in the Pillar 3 disclosure on the Group's website.

From 1 January 2022 the Group is subject to the Investment Firm Prudential Regime, which changes the basis of calculation of the Group's regulatory capital. These changes do not have any detrimental impact on the regulatory capital position of the Group.

Principal risks and uncertainties

IG's Risk Taxonomy categorises the principal risks faced by the Group into five areas: the risks inherent in the regulatory environment, the risks inherent in the commercial environment, business model risk, operational risk and conduct 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 47 to 53 of the FY21 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 FY22 and up to the date of this announcement.

Consolidated Interim Income Statement

for the six months ended 30 November 2021 (unaudited)