LEI No: 2138003A5Q1M7ANOUD76

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO, OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION.

FOR IMMEDIATE RELEASE

                                                                                                 20 JULY 2023

Results for the financial year ended 31 May 2023

 

"A fourth consecutive year of record revenue as IG continues to build an expanded and diversified business as the home for active traders worldwide, while delivering long-term shareholder returns."

Financial highlights (continuing operations[1])

Continued to deliver strong results in a more difficult market backdrop.           

-     Total revenue increased 5% to £1,022.6 million (FY22: £973.1 million). Adjusted[2] total revenue rose 6%.

-     Net trading revenue decreased 3% at £941.8 million (FY22: £972.3 million). Adjusted net trading revenue was down 3%.

-     Interest income rose significantly to £80.8 million (FY22: £0.8 million) reflecting higher interest rates.

-     Profit before tax of £449.9 million (FY22: £477.0 million). Adjusted profit before tax of £490.5 million down slightly by 1% (FY22: £494.3 million). Adjusted profit before tax margin was at the top end of our guidance at 48.0% (FY22: 51.1%).

-     Basic EPS of 86.9 pence (FY22: 92.9 pence). Adjusted basic EPS of 94.7 pence (FY22: 96.3 pence), down on prior year driven by a higher effective tax rate.

-     Total capital return of £363.4 million split across dividends paid and shares re-purchased in the period (FY22: £186.2 million).

-     Proposed an increased dividend of 45.2 pence (FY22: 44.2 pence) and a new, larger share buyback programme of £250 million.

 

Strategic highlights

Achieved further progress with our strategy to expand and diversify into new products and geographic markets.

-     High Potential Markets pro forma[3] total revenue increased 40% to £207.0 million (FY22: £148.3 million), with Core Markets+ broadly stable, decreasing by 1% to £815.6 million (FY22: £827.6 million).

-     US total revenue increased 47% to £191.3 million, and 38% on a pro forma basis, representing strong growth in an important strategic market.

-     tastytrade total revenue increased 52% to £170.3 million ($205.0 million) and 41% on a pro forma basis as significant growth in interest income offset softer net trading revenue.

-     Spectrum total revenue increased 68% to £15.7 million (FY22: £9.3 million). Societe Generale and UniCredit were onboarded during the year as third-party issuers.

-     Non-OTC total revenue, which includes associated interest income, increased to 21% of the Group total revenue (FY22: 16%) representing continued progress on our diversification strategy.

-     Total active clients of 358,300 (FY22: 381,500) moderated slightly but remained more than double pre-pandemic levels.

 

Capital allocation

In July 2022, the Group announced its new Capital Allocation Framework, against which disciplined capital decisions are being made.

1.   Regulatory capital requirements: regulatory capital headroom of £498.9 million at 31 May 2023 (31 May 2022: £528.2 million) provides capacity for further business growth.

2.   Organic investment: cost increases reflect investment in technology and new projects, balanced with an adjusted profit before tax margin of 48.0%.

3.   Commitment to citizenship: as part of our ESG strategy, pledged 1% of profit after tax to charitable causes, equating to £4.0 million, via our Brighter Future Fund, now totalling over £13.0 million over the past four years.

4.   Regular distributions: proposed final dividend 31.94 pence per share, representing a full year dividend of 45.2 pence per share, up 1 pence, reflecting our progressive and sustainable dividend policy and a pay-out of around 50% of adjusted profit after tax.

5.   Inorganic investment: evaluated certain potential acquisitions, applying rigorous assessment criteria, but did not identify any opportunities that met all of our requirements.

6.   Additional distributions: launching a new, and larger, share buyback programme of £250 million, to commence following the completion of the existing programme, and to be substantially completed in FY24.

 

Financial Summary (continuing operations)

£ million (unless stated)	FY23	FY23 (Adjusted)		FY22	FY22 (Adjusted)	Change %	Change (Adjusted) %
Total revenue1	1,022.6	1,022.6	973.1		967.3	5%	6%
Net trading revenue	941.8	941.8	972.3		966.5	(3%)	(3%)
Total operating costs2,3	584.9	541.0	501.9		464.9	17%	16%
Profit before tax4	449.9	490.5	477.0		494.3	(6%)	(1%)
Profit after tax	363.7	396.5	396.1		410.5	(8%)	(3%)
Basic earnings per share (p)	86.9	94.7	92.9		96.3	(6%)	(2%)
Total dividend per share (p)	45.2	-	44.2		-	2%	-

[1] FY22 adjusted total revenue excludes £5.8 million foreign exchange hedging gain associated with the financing of the tastytrade acquisition.

² Operating costs include net credit losses on financial assets.

³ FY23 adjusted operating costs excludes £39.7 million of costs and recurring non-cash costs associated with the tastytrade acquisition and integration (FY22: £33.7 million) and £4.2 million relating to the sale of Nadex (FY22: £3.3 million).

⁴ FY22 adjusted profit before tax cost excludes £1.0 million of one-time financing expense associated with the debt issuance, £9.3 million FV gain on revaluation of Zero Hash, £4.1 million of gains on sale of Small Exchange and disposal of Zero Hash.

 

Charlie Rozes, Acting Chief Executive Officer, commented:

"We've delivered a fourth consecutive year of record revenue as part of our strategy to expand and diversify the Group through great technology and innovative products, combined with outstanding client experiences.

"We've performed well in the much more difficult market conditions that persisted through most of the past year, maintaining our leadership position in OTC derivatives while building further momentum in our product and geographic expansion. Total revenue exceeded £1 billion for the first time in IG's history, more than double our revenue in FY19 when we launched the strategy, while consistently achieving strong profit margins. A notable highlight has been our progress in the US, with the strong growth of tastytrade driving total revenue of £191.3 million, also an all-time high for IG.

"This combination of our operating performance and capital strength enabled us to return £363.4 million to shareholders during FY23 and we're pleased to announce today an increased cash dividend and a new £250 million share buyback programme.

"Our clients and our people remain at the heart of our success. IG's commitment to offering a first-class trading experience has resulted in a loyal, high quality global client base, demonstrated by active client numbers remaining significantly above the levels of just a few years ago. Our unique client base is the foundation of our resilient growth profile.

"Looking ahead, we're well positioned to continue investing for growth given the strength and consistency of our cash flow and balance sheet. We keep a close watch on profit margins and in FY24 will continue to look for opportunities to achieve even greater cost efficiency. We're the home of active traders worldwide, and we are building a more sustainable, long-term business that delivers for all stakeholders."

 

IG Group Investor Relations	IG Group Press	FTI Consulting
Martin Price / Simon Wright	Angela Warburton / Alayna Francis	Edward Berry / Katherine Bell
020 7573 0020 / 0099	020 7633 5382 / 5395	07703 330 199 / 079 7687 0961
investors@iggroup.com	[email protected]	[email protected]  / [email protected]

Further information

Analyst presentation

There will be an analyst and investor presentation at 9:30am (UK Time) on Thursday 20 July.

The presentation will be accessible live via audio webcast at Webcast | IG Group. If you wish to listen via conference call, please use the following link Conference call registration | IG Group. The audio webcast of the presentation and a transcript will be archived at: Financial Results | IG Group.

 

Alternative performance measures

IG Group management believes that the alternative performance measures included in this document provide valuable information to the readers of the financial statements 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 the managers of these businesses are most directly able to influence or 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. 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 appendices for further information and calculations of alternative performance measures included throughout this document, and the most directly comparable statutory measures.

 

Forward-looking statements

This preliminary 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 FY22 Group Annual Report for the financial year ended 31 May 2022. 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.

 

No offer or solicitation

This announcement is not intended to, and does not constitute, or form part of, any 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.

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. Acronyms used in this report are as defined in the Group's Annual Report.

 

About IG

IG Group (LSEG:IGG) is an innovative, global fintech company that delivers dynamic online trading platforms and a robust educational ecosystem to power the pursuit of financial freedom for the ambitious. For nearly 50 years, the Company has evolved its technology, risk management, financial products, and education and content to meet the needs of its retail and institutional clients. IG Group continues to innovate its offering for the new generation of tomorrow's investors through its IG, tastytrade, IG Prime, Spectrum, and DailyFX brands.

 

Established in 1974, IG Group is a London-headquartered FTSE 250 company offering its clients access to ~19,000 financial markets through its offices spread across Europe, North America, Africa, Asia-Pacific and the Middle East.

 

Acting Chief Executive Officer's Statement

I am delighted to report a fourth consecutive year of record total revenue for IG Group. Total revenue exceeded £1 billion for the first time, more than double the revenue in FY19, and our cost management ensured that we continue to deliver a high profit margin.

 

Our success in balancing core growth with diversification over the last four years positioned us extremely well for the difficult market backdrop we saw during FY23, with global inflation, interest rate rises, and macro uncertainty. A fundamental strength of ours is that the amount of cash that we generate in the ordinary course of business allowed us to both invest for further growth and deliver attractive and sustainable distributions for shareholders.

 

 

Our strategic progress in FY23

In FY19, we launched our strategy to expand and diversify the Group by both product and geography, leveraging our well-established strengths in trading and trading products, technology, and risk management.

 

Since then, we've made great progress and while total revenue has more than doubled, the proportion of revenue from non-OTC products increased from 5% to 21%, and the proportion of revenue from the UK market reduced from 42% to 33%, primarily driven by our organic and inorganic growth in the US market.

 

Given its position as the world's largest financial market, our growth in total US revenues this year, up 47% to £191.3 million, is a particular highlight. The main driver of this revenue growth is tastytrade, where significantly higher levels of interest income offset some softer net trading revenue. In the year we laid stronger foundations for future growth, and some highlights of our progress at tastytrade include:

-     Improving client experience by overhauling mobile applications, creating an open API, and launching an upgraded web-based trading platform, which is now the newest in the sector. This delivers a scalable, powerful trading platform to our clients, backed by outstanding customer service.

-     Expanding our equity trading capabilities to capture a greater share of our clients' trading portfolios and attract larger client balances. This allowed us to capitalise on the rising US interest rate cycle.

-     Rebranding the brokerage firm from tastyworks to tastytrade earlier this year, setting the stage for it to become a household name for trading the US markets.

-     Leveraging Group marketing capabilities, including search engine optimisation, and building a best-in-class marketing function.

-     Launching the first-ever national brand campaign to raise the profile and awareness of the business.

 

In Europe, Spectrum - our pan-European trading venue for securitised derivatives - is a great example of our ability to innovate at scale. Spectrum marked an important milestone this year by welcoming two top-tier banks, Societe Generale and UniCredit, as new product issuers. This means that European clients will have access to thousands of new products, and we are bringing more issuers and brokers to the exchange this year.

 

In our OTC business, we retained our leadership position. FY23 provided much more challenging conditions than we've seen in recent years. Despite this, the high quality of our OTC client base shone through, and our market-leading platform, products, and trade execution supported their trading during the period.

 

Our client focus

At IG, we're driven by one unrelenting focus: to offer our ambitious clients the opportunity to create the financial freedom they strive for now and in the future. This means a first-class trading experience on market-leading platforms and tools, access to around 19,000 markets, outstanding trade execution and amazing customer service. This passion to surpass our clients' expectations and create inspiring experiences has enabled us to deliver sustainable, resilient growth over decades by building and retaining a strong and loyal client base.

 

We are champions of client welfare, and fair client outcomes remain a foundation of our business. We conducted a thorough review of our internal processes ahead of the introduction of the FCA's new UK Consumer Duty rules that confirmed our business was already largely compliant and we have updated our processes where necessary. This again demonstrates our ability to grow the business in the ever-changing global regulatory landscape. This approach is part of our culture. It enables us to earn our clients' long-term loyalty and trust and brings to life our values to champion the client and do the right thing.

 

Understanding clients' needs and shaping our business model to align with their interests, underpins the long-term, sustainable performance of our business. An important aspect of our business model is our differentiated content, which is provided through live programming, blogs, podcasts, online courses and website content. Across all of our channels, IG content is watched globally more than 100 million times each year, showing the importance that content plays in our client focused offering.

 

Our commitment to communities and our people

We've pledged to contribute annually the equivalent of 1% of post-tax profits to charitable causes, and we're proud to deliver on this promise. We're supporting projects around the world with a particular focus on the theme 'empowerment through education'. For example, we work in partnership with Teach For All and their international network. With a shared purpose to make educational systems work for every child, these partnerships continue to make a real difference. As part of this ongoing commitment, by the end of FY26 our goal is to positively impact the lives of one million people around the world.

 

Making a positive impact in our communities is important to everyone at IG. Our people passionately support this commitment, with over a third of our employees engaging in voluntary and charitable activities this year.

 

Our people are the driving force behind our operational performance as a company. Their continued engagement and personal commitment to our goals and ambitions is of critical importance. To support them through this challenging period of high inflation rates, we've undertaken a special remuneration review focused on our most impacted colleagues, providing one-off cost of living booster payments and pay rises.

 

Strong financial performance

Total revenue of £1,022.6 million was up 5% on prior year. Our performance reflected two important factors. First, we broadly maintained our levels of trading revenue and avoided the sharp decline following the pandemic as seen by many others in the industry. Second, we capitalised on the interest rate cycle and drove significant increases in interest income.

 

As we projected last year, interest income was the principal revenue growth driver in FY23, generating £80.8 million in FY23, compared to just £0.8 million in FY22. The increase in interest rates has also meant that our net finance line was positive, as the return from our corporate cash outweighed the cost of the small level of issued debt and our revolving credit facility, which remained undrawn as at 31 May 2023.

 

Disciplined cost management remained a priority, even with the challenges of translational foreign exchange headwinds and high levels of inflation across many of our regions. While this impacted some of our supplier costs, the main impact was on our people, and we took steps to ensure that we are financially supporting our people globally. Consequently, while this drove higher rates of fixed remuneration growth, we retained our highly skilled and talented people and avoided elevated levels of attrition.

 

We've earned a reputation as an innovative business, and critical, but careful, decisions were taken throughout the year to decide on capital allocated to new organic growth initiatives. We operate a formal 'incubator' process which in recent years produced new ventures such as our OTC business in the US and our European ETD business. We are disciplined allocators of capital and we'll always prioritise allocation to foster innovation and organic growth.

 

In FY23, we balanced the levels of investment for future growth with delivering a sustainable profit margin. Our adjusted profit margin for the year was 48%, down slightly on our prior year margin of 51% but well within the mid-to-high 40's range that we're managing to. We've grown revenues at a steady rate over the past 20 years, at consistently high margins. We keep a close watch on profit margins and in FY24 will continue to look for opportunities to achieve even greater cost efficiency.

 

Our effective tax rate was 19.2%, versus 17.0% in FY22, due to some one-off adjustments in the prior year and the impact of the increased UK corporate tax rate which rose sharply from 19% to 25% in April 2023.

 

Earnings per share of 94.7p was down slightly year on year reflecting lower profit after tax, partially offset by a reduction in the number of shares in issue as a result of the on-going share buyback programme, which is now being enlarged for FY24. We expect the share count to continue to reduce, as the full impact of the buyback programmes are reflected.

 

Capital and liquidity

Our FY23 results announcement marks the one-year anniversary of the publication of our Capital Allocation Framework. The framework has been well received by all our stakeholders, and our Board has been embedding it internally as we evaluate the most effective uses of capital.

 

Our first priority is ensuring that we meet our regulatory capital requirements. In January 2022, the Group transitioned to the Investment Firms Prudential Regime, and since then has had a static, transitory minimum capital requirement. At the end of the year our regulatory capital headroom above that requirement was a very healthy £498.9 million.

 

Our commitment to charitable causes, with a focus on empowerment through education, remained strong. In FY22, we pledged to allocate 1% of post-tax profits to these causes, and we're fulfilling this commitment again with an additional pledge of £4.0 million.

 

Our proposed final dividend of 31.94 pence represents a total dividend for the year of 45.2 pence, an increase of 1 pence on the prior year, representing progressive and sustainable increases.

 

During the year, we considered certain acquisitions to accelerate progress on our strategy but did not identify anything which met our range of criteria. We'll maintain a disciplined approach towards capital allocation across the Group.

 

Having assessed our regulatory capital headroom and our alternative uses of capital, we've announced an additional distribution to shareholders, in the form of a £250 million share buyback. We expect this to be substantially completed within FY24. The announcement of a new share buyback programme demonstrates our ability to invest for growth while also providing attractive returns to shareholders.

 

Liquidity management was another strong point of our financial performance. The peak broker margin requirement during the year was £757.5 million (FY22 peak margin: £774.7 million). Our robust liquidity position supports client trading across a variety of market conditions. The broker margin requirement at the period end was £678.2 million, resulting in an available liquidity balance of £792.9 million.

 

 

Guidance

The medium-term guidance that we set out in July 2021 was that we would anticipate total revenue growth of 25-30% in our High Potential Markets from FY21, and total revenue growth of 5-7% in our Core Markets+ portfolio from FY22. We reiterate this guidance, and we're confident in delivering this.

 

We anticipate that interest income will continue to be a material stream of revenue within our total revenue line. In the US, we maintain our guidance that for every 25 basis points rise in the Fed Funds rate, we would expect an additional $4 million of revenue on an annual basis. Outside of the US and for net finance, we expect higher income in FY24 than in FY23 reflecting the annualisation effect of rate increases last year and projected interest rate increases in FY24.

 

We maintain our guidance that we would expect to achieve an adjusted profit before tax margin of mid-to-high 40s over the medium term. We keep a close watch on profit margins and in FY24 will continue to look for opportunities to achieve even greater cost efficiency.

 

On effective tax rate, the recent increases in the UK corporate tax rate will cause further upwards pressure in FY24. We now expect the Group's effective tax rate to be approximately 24% for FY24, slightly below the UK corporate tax rate of 25%.

 

In summary, we've achieved another consecutive year of record total revenue, combined with good cost management and 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.

 

Business Performance Review

Summary Group Income Statement

 

£m	FY23	FY23 adjusted	FY22	FY22 adjusted	Change %	Adjusted change %
Net trading revenue1	941.8	941.8	972.3	966.5	(3%)	(3%)
Net interest income	80.8	80.8	0.8	0.8	nm	nm
Total revenue	1,022.6	1,022.6	973.1	967.3	5%	6%
Betting duty and other operating income2	0.8	(2.5)	6.1	4.6
Net operating income	1,023.4	1,020.1	979.2	971.9	5%	5%
Total operating costs3,4	(584.9)	(541.0)	(501.9)	(464.9)	17%	16%
Operating profit	438.5	479.1	477.3	507.0	(8%)	(5%)
Other net gains/(losses)5	(2.6)	(2.6)	11.1	(2.3)
Net finance income / (cost)6	14.0	14.0	(11.4)	(10.4)
Profit before tax from continuing operations	449.9	490.5	477.0	494.3	(6%)	(1%)

¹ FY22 adjusted excludes £5.8 million foreign exchange hedging gain associated with the financing of the tastytrade acquisition.

² FY23 adjusted betting duty and other operating income excludes £3.3 million income for the reimbursement of costs relating to the sale of Nadex (FY22: £1.5 million).

³ Operating costs include net credit losses on financial assets.

⁴ FY23 adjusted operating costs excludes £39.7 million of costs and recurring non-cash costs associated with the tastytrade acquisition and integration (FY22: £33.7 million) and £4.2 million relating to the sale of Nadex (FY22: £3.3 million).

⁵ FY22 excludes £9.3 million fair value (FV) gain on revaluation of Zero Hash, £4.1 million of gains on sale of Small Exchange and disposal of Zero Hash.

⁶ FY22 adjusted net finance cost excludes £1.0 million of one-time financing expense associated with the debt issuance.

 

 

Statutory results

 

On a statutory basis, net trading revenue from continuing operations was £941.8 million, down 3% on FY22, reflecting a reduction in client activity. The Group's total revenue of £1,022.6 million, increased by 5%, driven by significantly higher levels of interest income. Net operating income increased by 5% to £1,023.4 million (FY22: £979.2 million).

 

Statutory operating costs, including net credit loss on financial assets, were £584.9 million, 17% higher than FY22. The Group's statutory profit before tax for FY23 was £449.9 million, down 6% on FY22.

 

The results are presented on a continuing operations basis which excludes items related to the sale of Nadex operations which completed in FY22 and classified as a discontinued operation. In FY23, the Group subsequently disposed of assets related to Nadex.

 

Adjusted results

 

The following analysis reflects a continuing operations and adjusted basis, which excludes certain one-off items and recurring non-cash items in order to present a more accurate view of underlying performance. A reconciliation of non-GAAP measures used in this report is contained in appendix 1.

 

Adjusted total revenue by product

 

	Adjusted total revenue (£m)
	FY23	FY22	Change %
OTC derivatives	806.3	810.2	-
Exchange traded derivatives	186.5	123.1	51%
Stock trading and investments	29.8	34.0	(12%)
Group	1,022.6	967.3	6%

 

Adjusted total revenue consists of adjusted net trading revenue and net interest income. Adjusted total revenue was £1,022.6 million in FY23, up 6% on FY22. OTC derivatives total revenue was £806.3 million, slightly below that of the FY22 record year for OTC. Exchange traded derivatives total revenue was £186.5 million, up 51% on the prior period. Within exchange traded derivatives, tastytrade total revenue was £170.3 million (£120.9 million trading revenue and £49.4 million interest income), up 52% on FY22 and 41% on a pro forma basis which includes a full 12 months of tastytrade revenue in the comparative period, benefitting from both increasing Fed Funds rates and favourable translational foreign exchange, offset by a reduction in net trading revenues. Stock trading and investments total revenue was £29.8 million, down 12% due to a reduction in client trading activity.

 

Non-OTC revenue made up 21% of total revenue in FY23, considerably up from 16% in FY22 reflecting the continued diversification of our revenue.

 

 

Adjusted net trading revenue

 

Adjusted net trading revenue was £941.8 million, 3% lower than FY22 as the challenging macroeconomic environment impacted trading activity.

 

Net trading revenue performance by product

 

	Adjusted net trading revenue (£m)
	FY23	FY22	Change %
OTC derivatives	782.0	811.5	(4%)
Exchange traded derivatives	137.1	121.2	13%
Stock trading and investments	22.7	33.8	(33%)
Net trading revenue	941.8	966.5	(3%)
Net interest income	80.8	0.8	nm
Group total revenue	1,022.6	967.3	6%

 

	Active clients (000)			Net trading revenue per client (£)
	FY23	FY22	Change %	FY23	FY22	Change %
OTC derivatives	189.5	199.8	(5%)	4,126	4,063	2%
Exchange traded derivatives1	91.6	104.5	(12%)	1,490	1,142	31%
Stock trading and investments	90.8	93.2	(3%)	250	363	(31%)
Group2	358.3	381.5	(6%)

¹ Exchange traded derivatives revenue per client calculation excludes revenue generated from the Group's US market maker.

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 FY23 there were 13,700 multi-product clients, compared with 16,000 in FY22.

OTC derivatives

 

OTC derivatives net trading revenue of £782.0 million, was down 4%, reflecting a 5% reduction in active clients (FY23: 189,500) as client activity moderated against a more difficult macroeconomic backdrop year over year, particularly in Q3. Net trading revenue per client increased 2% on the FY22 average, reflecting the high quality of our client base.

 

UK and EU OTC derivatives revenue was £397.9 million, down 8%, with almost all of the year-on-year difference driven by a difficult comparison to an exceptionally strong Q3 in FY22. Q4 revenue however increased 16% on Q3, as client trading activity increased. Active clients in the year declined 6%, with a 2% lower average net trading revenue per client.

 

Japan OTC derivatives revenue was £99.3 million, up 1% on the record FY22 performance, with active clients increasing 10%, and average net trading revenue per client decreasing by 8%. We continue to see exciting opportunities to grow this business further through the launch of new products and effective marketing programs.

 

Australia OTC derivatives revenue of £95.2 million increased 8%, with average revenue per client up 29%, more than offsetting a 16% decline in the active client base.

 

Institutional OTC derivatives revenue was up 35% at £13.3 million with a significantly higher net trading revenue per client and active client numbers remaining level.

 

US OTC derivatives revenue increased 17% as net trading revenue per client increased 31% year on year benefitting from the increasing quality of the client base and some translational foreign exchange benefit.

 

Exchange traded derivatives

Net trading revenue from exchange traded derivatives was £137.1 million, up 13%, and 6% higher than FY22 on a pro forma basis, which includes a full 12 months of tastytrade revenue in the comparative period.

 

tastytrade's net trading revenue in the period increased 10% to £120.9 million, and 2% on a pro forma basis. Active clients reduced by 16% on a pro forma basis, reflecting normalisation against the higher levels of activity in FY22 and lower levels of new client acquisition in the period. The decline in active clients was more than offset by increased revenue per client, up 22%, due to improvements in the client mix and favourable translational foreign exchange rates.

 

Spectrum's revenue was £15.7 million, up 68%, as revenue per client increased significantly to £2,286, up 67%, as the exchange onboarded Societe Generale and UniCredit as new issuers.

Stock trading and investments

 

Net trading revenue from stock trading and investments was £22.7 million, down 33%, reflecting a 31% reduction in average net trading revenue per client as trade frequency per client reduced. The number of active clients reduced slightly and assets under management at the end of the period remained in line with FY22 at £3.3 billion.

 

Net interest income

 

Net interest income on client balances was £80.8 million increasing significantly from £0.8 million reported in FY22. Interest on client balances made up 8% of total revenue in FY23, increasing from 5% in H1 to 11% in H2. This increase reflected the rising interest rate cycle and the significant client money balances held throughout the year.

 

In our US businesses, client balances at the end of the year were $1.9 billion (31 May 2022: $2.0 billion). This contributed £50.4 million of interest (FY22 £1.9 million).

 

Outside of the US, client balances of £2.7 billion were down 12% (31 May 2022: £3.1 billion). This included £420.4 million of client funds on the balance sheet (31 May 2022: £519.4 million) for which the interest is recognised within the net finance income line. Interest income recognised on the remaining segregated client money balance was £30.4 million compared with a net interest cost of £1.1 million in FY22.

 

 

Operating Costs

 

Total adjusted operating costs for FY23 were £541.0 million, 16% higher than FY22. The increase reflected approximately £16.2 million of translational foreign exchange headwinds, inflationary increases, the £4.0 million pledge to charitable causes, and higher technology related costs as we continue to invest in innovation and resiliency.

 

Adjusted operating costs from continuing operations

 

£m	FY23	FY22	Change %
Fixed remuneration	188.5	150.1	26%
Advertising and marketing	93.5	87.1	7%
Revenue related costs	47.9	45.3	6%
IT, structural market data and comms	42.5	35.0	21%
Depreciation and amortisation	29.6	28.5	4%
Legal and professional	25.9	16.8	54%
Other costs	63.1	44.2	42%
Variable remuneration	50.0	57.9	(14%)
Total operating costs	541.0	464.9	16%
Headcount - average	2,616	2,408	9%

 

FY23 fixed remuneration was £188.5 million, up 26%, reflecting increased headcount, translational foreign exchange on non-GBP salaries, salary increases driven partly by inflation, and a one-off cost of living payment to more than 60% of our people. Headcount growth was primarily in technology areas and reflected continued investments in new development projects and the running of our global trading platforms and infrastructure.

 

Advertising and marketing spend increased by 7% to £93.5 million. This reflected marketing investments in Germany and tastytrade to support our strategic goal of growing our exchange traded derivatives business and diversifying the Group's revenue base.

 

Revenue related costs include market data charges, client payment charges, provisions for client and counterparty credit losses and brokerage trading fees. Although net trading revenue was lower in FY23, revenue related costs increased by 6% to £47.9 million reflecting a change in revenue mix, in particular higher brokerage trading fees due to a larger volume of US index options traded by clients.

 

IT maintenance, structural market data charges, and communications costs were £42.5 million, an increase of 21% reflecting increased investments in technology to expand infrastructure capacity to support future growth and periodic spikes in client trading.

 

Depreciation and amortisation costs increased 4% to £29.6 million. Legal and professional fees were £25.9 million, an increase of 54%, reflecting higher costs in relation to strategic and operational projects.

 

Other costs, which include staff related costs (such as travel and entertainment), regulatory fees and irrecoverable VAT, increased by 42%. Also included was the £4.0 million pledge to charitable causes, representing 1% of FY22 adjusted profit after tax, which was approved by the Board in September 2022.  Additionally, other costs increased due to higher travel and entertainment as staff returned to the office and travel frequency increased.

 

Within variable remuneration was the general bonus accrual, share schemes and sales bonuses. The charge for the general bonus pool was £27.6 million, down 15%, reflecting a lower level of outperformance to internal targets relative to the comparative period, offset by increases due to headcount growth and salary inflation.  Share schemes costs relating to the long-term incentive plans for senior management reduced by 6% to £16.8 million (FY22: £17.8 million) reflecting the lower share price, and lower levels of performance against internal targets in comparison to prior year. Sales bonuses decreased by 25% to £5.6 million reflecting lower commission payments to sales staff.

 

Net finance income

 

Net finance income in the period was £14.0 million, up from a £10.4 million adjusted cost in FY22. Within this, finance income was £30.2 million (FY22: £3.4 million), offset by finance costs of £16.2 million (FY22: £13.8 million). Group finance costs are fixed, however the finance income, which reflected the interest earned on corporate balances including client funds on balance sheet, benefitted from the rising interest rate cycle.

Earnings Per Share

£m (unless stated)	FY23	FY23 adjusted	FY22	FY22 adjusted	Change %	Adjusted change %
Profit before tax from continuing operations	449.9	490.5	477.0	494.3	(6%)	(1%)
Tax	(86.2)	(94.0)	(80.9)	(83.8)
Profit after tax from continuing operations	363.7	396.5	396.1	410.5	(8%)	(3%)
Weighted average number of shares for the calculation of EPS (millions)	418.7	418.7	426.3	426.3	(2%)	(2%)
Basic earnings per share (pence per share)	86.9	94.7	92.9	96.3	(6%)	(2%)

 

Profit before tax was £449.9 million in FY23, and £490.5 million on an adjusted basis, 1% lower than FY22.

The effective tax rate (ETR) was 19.2% based on profit before tax from continuing operations (FY22: 17.0%). The ETR was lower than the average main rate of UK corporate tax in the period of 20%, where the majority of the Group's profits were taxed, primarily as a result of standard UK tax incentives and adjustments to prior year estimates. The ETR for FY24 is anticipated to be around 24% on an adjusted basis, due to the sharp increase in UK corporate tax rate from 19% to 25% from 1 April 2023. The ETR is dependent on several factors including taxable profit by geography, tax rates levied in those geographies and the availability and use of taxable losses. The future ETR may also be impacted by changes in our business activities, client composition and regulatory status, which could affect our exemption from the UK Bank Corporation Tax surcharge.

 

Profit after tax was £363.7 million, down 8% on FY22, and 3% lower on an adjusted basis. Basic EPS was 86.9 pence, down 6% on FY22 and 2% lower on an adjusted basis due to the reduction in profits, partly offset by a lower share count reflecting our share buyback programme.

 

Dividend

The final dividend for FY23 of 31.94 pence per share was proposed by the Board. This will be paid on 19 October 2023, following approval at the Company's Annual General Meeting, to those shareholders on the register at the close of business on 22 September 2023. This represents a total FY23 dividend paid of 45.2 pence per share (FY22: 44.2 pence per share).

 

 

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 statutory balances in the appendix.

£m	31 May 2023	31 May 2022	Change %
Goodwill	611.0	604.7	1%
Intangible assets	276.5	292.1	(5%)
Property, plant and equipment1	17.6	16.7	5%
Operating lease net liabilities	(2.2)	(2.0)	10%
Other investments	1.2	-	nm
Investments in associates	12.5	14.8	(16%)
Fixed assets	916.6	926.3	(1%)
Own cash	730.2	1,245.9	(41%)
Issued debt	(299.3)	(299.2)	-
Client funds held on balance sheet	(420.4)	(519.4)	(19%)
Turbo warrants2	(2.7)	(1.5)	80%
Net amounts due from brokers	825.3	657.1	26%
Own funds in client money	75.1	64.2	17%
Financial investments	234.1	-	nm
Liquid assets threshold requirement	65.0	106.7	(39%)
Own funds	1,207.3	1,253.8	(4%)
Working capital	(74.4)	(82.5)	(10%)
Net current assets held for sale	-	0.4	(100%)
Tax receivable/(payable)	2.7	(20.5)	(113%)
Net deferred tax liability	(37.6)	(49.7)	(24%)
Net assets	2,014.6	2,027.8	(1%)

¹ Excludes right-of-use assets.

² Recognised in client funds held on balance sheet in the prior year.

During FY23, Group's fixed assets decreased by £9.7 million. The decrease in fixed assets was driven by annual depreciation and amortisation of £61.8 million offset by additions of £26.2 million in intangibles and property, plant and equipment, £8.7 million on the Small Exchange acquisition, £7.6 million lease payment and a £10.8 million increase from foreign exchange. The Group's working capital increased by £8.1 million, which was primarily driven by a lower general bonus accrual compared to prior year.

The Group recognised a £13.2 million decrease in net assets during the period driven by a £46.5 million decrease in own funds offset by a reduction of £35.3 million in tax and deferred tax liabilities.

 

Liquidity

The Group maintained a strong liquidity position, ensuring that it had sufficient resources under both normal circumstances and stressed conditions to meet its working capital and other liquidity requirements, which included broker margin requirements, regulatory and working capital needs of its subsidiaries, and funding of adequate buffers in client money accounts.

The Group's available liquidity comprised assets available at short notice to meet additional liquidity requirements, which were typically increases in broker margin.

 

£m	31 May 2023	31 May 2022	Change %
Own cash	730.2	1,245.9	(41%)
Net amounts due from brokers	825.3	657.1	26%
Own funds in client money	75.1	64.2	17%
Financial investments	234.1	-	-
Liquid assets threshold requirement	65.0	106.7	(39%)
Liquid assets	1,929.7	2,073.9	(7%)
Broker margin requirement	(678.2)	(629.5)	8%
Cash balances in non-UK subsidiaries	(383.5)	(342.9)	12%
Own funds in client money	(75.1)	(64.2)	17%
Available liquidity	792.9	1,037.3	(24%)
of which:
Held to meet regulatory liquidity requirements	65.0	106.7	(39%)
Dividend due	130.6	134.8	(3%)

 

The composition of the Group's liquid assets changed during the period, with more liquid assets held as financial investments (UK government securities) rather than cash. This was a result of changes in regulations that require the Group to post securities into segregated accounts instead of cash to meet initial margin requirements at certain brokers. The impact on the Group's liquid assets was that the UK government securities held by the Group increased by £210.3 million, with a corresponding reduction in the cash balance at 31 May 2023. The Group held £372.3 million of UK government securities to satisfy margin requirements. The Group's cash balance also reduced as a result of dividends paid during FY23 of £188.1 million, share buyback of £175.2 million and tax paid of £116.6 million, offset by cash generated from total operations of £296.2 million.

Net amounts due from brokers increased by £168.2 million. The balance comprised open derivative positions, cryptocurrency assets, cash and UK government securities held on account by the Group's hedging and execution counterparties. The broker margin requirement at 31 May 2023 was £48.7 million higher than the requirement at 31 May 2022. The maximum margin requirement during the period was £757.5 million in August 2022, lower than the Group's highest broker margin requirement of £774.7 million which occurred in H1 FY22.

The Group's available liquidity reduced by £244.4 million during the period, which was more than the overall fall in liquid assets of £144.2 million. This was driven by an increase in broker margin requirements and the Group holding higher cash balances in non-UK subsidiaries to meet local cash requirements at the end of the year. 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 £383.5 million as at 31 May 2023 (31 May 2022: £342.9 million).

The Group's available liquidity is subject to meeting other requirements including regulatory liquidity requirement within the Investment Firms Prudential Regime (IFPR). IFPR has a basic liquid assets requirement and a liquid assets threshold requirement, which can be met with both cash and certain financial investments. As at 31 May 2023, £65.0 million was held as liquid asset threshold requirement, 39% lower than 31 May 2022 due to removal of the transitional IFPR arrangement.

In addition to cash recognised on the balance sheet, as at 31 May 2023, the Group held £2,303.9 million (31 May 2022: £2,577.9 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, instead of just cash, 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 the balance sheet. As at 31 May 2023, the Group had a cash balance of £730.2 million (31 May 2022: £1,245.9 million) compared with an own funds balance of £1,207.3 million (31 May 2022: £1,253.8 million).

£m	31 May 2023	31 May 2022	Change %
Liquid assets	1,929.7	2,073.9	(7%)
Client funds on balance sheet	(420.4)	(519.4)	(19%)
Turbo warrants	(2.7)	(1.5)	80%
Issued debt	(299.3)	(299.2)	0%
Own funds	1,207.3	1,253.8	(4%)

 

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 held by the Group under title transfer arrangements.

The Group has £300 million, 3.125% senior unsecured bonds due in 2028. The Group also has access to a £350 million revolving credit facility which was undrawn at 31 May 2023 (31 May 2022: undrawn). The Group has the option to request an increase in the revolving credit facility size to £400.0 million. The total available credit facilities have risen from £600 million at 31 May 2022, to £650 million as at 31 May 2023, with the potential to rise to £700 million if the new revolving credit facility is increased in size.

Own Funds Flow

£m	FY23	FY22
Own funds generated from operations	467.5	536.5
as % of operating profit	107%	112%
Taxes paid	(116.6)	(99.2)
Net own funds generated from operations	350.9	437.3
Net interest and fees received	10.2	(13.2)
Capital expenditure and capitalised development costs	(26.2)	(17.5)
Net own funds movement from acquisitions and disposals of subsidiaries and investments in associates	(2.8)	(14.7)
Purchase of own shares held in employee benefit trusts	(14.6)	(6.7)
Pre-dividend increase in own funds	317.5	385.2
Cash paid for share buyback	(175.2)	-
Dividends paid	(188.1)	(186.2)
(Decrease)/Increase in own funds	(45.8)	199.0
Own funds at start of the period	1,253.8	1,058.5
(Decrease)/Increase in own funds	(45.8)	199.0
Impact of movement in exchange rates	(0.7)	(3.7)
Own funds at the end of period	1,207.3	1,253.8

 

Own funds decreased by £45.8 million, excluding the impact of foreign exchange rates. This was driven by share buybacks completed in FY23 of £175.2 million, dividends paid of £188.1 million, purchase of own shares held in the Employee Benefit Trust of £14.6 million and capital expenditure of £26.2 million, offset by net own funds generated from operations of £350.9 million.

 

Regulatory Capital

The Group is supervised on a consolidated basis by the Financial Conduct Authority in the UK, which requires 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.

The Group's regulatory capital resources, which totalled £996.3 million as at 31 May 2023 (31 May 2022: £1,025.6 million), are an adjusted measure of shareholders' funds taking into account FY23 profits which are included in the regulatory capital calculation once signed off by the auditors. Shareholders' funds comprise share capital, share premium, retained earnings and other reserves, and as at 31 May 2023 totalled £2,014.6 million (31 May 2022: £2,027.8 million).

The Group's regulatory capital requirement as at 31 May 2023 was £497.4 million (31 May 2022: £497.4 million). The Group's capital headroom was £498.9 million (31 May 2022: £528.2 million), demonstrating the solid capital base.

£m	31 May 2023	31 May 2022
Shareholders' funds	2,014.6	2,027.8
Less foreseeable / declared dividends	(127.6)	(134.8)
Less remaining share buyback	(22.5)	-
Less goodwill and intangible assets	(829.9)	(833.7)
Less deferred tax assets	(23.2)	(17.5)
Less significant investment in financial sector entities	(13.7)	(14.8)
Less value adjustment for prudent valuation	(1.4)	(1.4)
Regulatory capital resources	996.3	1,025.6
Total requirement	497.4	497.4
Regulatory capital headroom	498.9	528.2

 

 

Consolidated Income Statement

for the year ended 31 May 2023

 

		Year ended 31 May 2023	Year ended 31 May 2022
	Note	£m	£m
Continuing operations
Trading revenue		949.7	982.0
Introducing partner commissions		(7.9)	(9.7)
Net trading revenue	2	941.8	972.3
Betting duty and financial transaction taxes		(10.4)	(2.5)
Interest income on client funds		81.8	3.5
Interest expense on client funds		(1.0)	(2.7)
Other operating income		11.2	8.6
Net operating income		1,023.4	979.2
Operating costs		(583.8)	(499.2)
Net credit losses on financial assets		(1.1)	(2.7)
Operating profit		438.5	477.3
Finance income		30.2	3.4
Finance costs		(16.2)	(14.8)
Gain on disposal of associates		-	4.1
Share of loss after tax from associates		(2.6)	(2.3)
Fair value gain on convertible loan note		-	9.3
Profit before tax		449.9	477.0
Tax expense	3	(86.2)	(80.9)
Profit for the year from continuing operations		363.7	396.1
Profit for the year from discontinued operations		1.3	107.8
Profit for the year attributable to owners of the parent		365.0	503.9
Earnings per ordinary share for profit from continuing operations:
Basic	4	86.9p	92.9p
Diluted	4	86.1p	92.1p
Earnings per ordinary share for profit attributable to owners of the parent:
Basic	4	87.2p	118.2p
Diluted	4	86.4p	117.2p