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Edited Transcript of IGG.L earnings conference call or presentation 23-Jul-19 8:30am GMT

Full Year 2019 IG Group Holdings PLC Earnings Call

London Jul 25, 2019 (Thomson StreetEvents) -- Edited Transcript of IG Group Holdings PLC earnings conference call or presentation Tuesday, July 23, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Bridget Elizabeth Messer

IG Group Holdings plc - Chief Commercial Officer & Executive Director

* Jonathan Mark Noble Noble

IG Group Holdings plc - Chief Information Officer & Executive Director

* June Yee Felix

IG Group Holdings plc - CEO & Executive Director

* Paul Richard Mainwaring

IG Group Holdings plc - CFO & Executive Director

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Conference Call Participants

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* Anthony Da-Costa

Peel Hunt LLP, Research Division - Analyst

* Benedict Guy Williams

Liberum Capital Limited, Research Division - Research Analyst

* Ian White

Autonomous Research LLP - Research Analyst

* Joanna Elizabeth Nader

RBC Capital Markets, LLC, Research Division - Analyst

* Justin Graham Bates

Canaccord Genuity Corp., Research Division - Financial Analyst

* Paul McGinnis

Shore Capital Group Ltd., Research Division - Research Analyst

* Portia Anjuli Patel

Canaccord Genuity Corp., Research Division - Analyst

* Richard Michael Taylor

Barclays Bank PLC, Research Division - Analyst

* Vivek Raja

Shore Capital Group Ltd., Research Division - Analyst

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Presentation

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [1]

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Good morning. A very warm welcome to you all and thank you for coming to our results presentation. I'm June Felix, CEO of IG Group, and I'm joined today by Paul Mainwaring, our CFO; Jon Noble, our Chief Operating Officer; and Bridget Messer, our Chief Commercial Officer. The disclaimer is available in your handouts to read if you wish, so I'm not going to pause on it now.

I want to begin by highlighting what we'll be discussing today. There will be time for questions at the end of the presentation, so please hold your questions until then. This morning's presentation will be a little longer than normal as in addition to the results, I would like to recap on the strategy we presented in May before we give you a deeper dive into 2 areas of strength that we did not cover in May. So I will start with a summary of FY '19 before recapping on what makes IG the brilliant company that it is, how we developed our new growth strategy, the key elements of this strategy and how we have organized our business to deliver the strategy. I will then hand over to Jon, who will discuss our business model and risk management, which are key to our long-term sustainability. Then Bridget will provide insights into our sophisticated high-quality client base and our client experience. This is a major differentiator for IG Group and a key reason why clients choose to use our service. Paul will discuss our FY '19 financial results, providing regional and product breakdowns. I will then conclude the presentation with our FY '20 outlook, which is unchanged from what we described 8 weeks ago.

Let me begin by summarizing what we've achieved in FY '19, starting with the important deliverables that have positioned us well to return to growth in FY '20: First, we have successfully navigated ESMA's product intervention measures. Since the introduction of the measures, 2/3 of our revenue in the ESMA region was generated by Professional clients. Two, we have continued our recruitment and retention of high-quality clients. Three, we've invested in initiatives to ensure we return to revenue growth in FY '20, and I will expand on these further in the presentation. And fourth, we have created, announced and rolled out our new strategy and accompanying medium-term results -- targets in May, which I will discuss further in a minute. All of these have involved collaboration by teams from across the business. I believe this brings to life how capable IG is of delivering major initiatives simultaneously. We know how to execute.

As you all know, FY '19 was a transitional year. Net trading revenue of GBP 476.9 million, down 16% on the prior year. This reflects the impact of product intervention by -- in the ESMA region and subdued market conditions, providing clients with fewer opportunities to trade, especially in the second half. Total operating costs of GBP 284.3 million resulting in operating profit of GBP 192.9 million and basic EPS of 43.1p. As we previously stated, the full year dividend will be 43.2p per share. Despite the headwinds, we still achieved over GBP 190 million in operating profit and a 40% operating margin. This provides an excellent base on which to grow in FY '20.

Now I want to discuss what differentiates us and how we will deliver growth. IG is a business with a clear purpose: to empower informed, decisive, adventurous people to access opportunities in the financial markets. We have authentic values that are truly embodied by our employees and reflected in our culture: champion the client, lead the way, love what we do. As part of our strategic development, we have reviewed our vision and updated it to better reflect our strengths and what we're seeking to provide: the world's best trading experience. Our purpose, values and vision align with our key strengths and support the sustainable business model that we have successfully operated for the last 45 years. These strengths truly differentiate us and enable us to deliver long-term growth. Given the importance of our sustainable business model, our risk management, our clients and client base, Jon and Bridget will discuss these strengths in a bit more detail shortly.

In conjunction with these strengths, we have made the following strategic choices to enable us to pursue our vision to provide the world's best trading experience. These strategic choices underpin how we operate. They are: operate a sustainable business model, provide the best client experience, win with our technology, tailor client propositions, broaden our product range and extend our geographic reach. Since my appointment, I've been working with my team across the business to develop an ambitious, achievable bottoms-up strategy. This involved an extensive review of our current business and a critical assessment of potential opportunities. The resulting growth strategy was announced on the 22nd of May 2019.

To execute our growth strategy, we will deploy 4 growth levers. Three of these are new or have been underutilized previously, and the fourth, multiproduct, is a lever we'll continue to deploy. The levers are: first, expanded distribution channels. Here, we will create partnerships that accelerate and expand our reach. These partnerships will leverage IG's outstanding platform, risk management and unique product expertise, and our partners will bring distribution. Secondly, a global firm with more local focus. We will tailor products and marketing to local needs. Third, segmented target markets. We will customize our offering for our 3 client segments, which are high-value, Retail and Institutional, to ensure that we meet the needs of each of these segments. Multiproduct. We will continue to expand our innovative product range, giving current and prospective clients more choice to execute their trading strategies.

Let's look at what we achieved in FY '19. We launched a U.S. margin FX business. We introduced new options products in Europe, and we developed an MTF to allow our European businesses -- clients to trade turbo warrants on a 24/5 basis.

Now I will update you on the progress we have made in executing on our strategy in the 8 weeks since I announced it. As part of our strategic review, we categorized our business into 2 groups: core markets and significant opportunities. Our core markets are large, established markets where we already have a significant presence. They consist of the U.K., EU, EMEA non-EU, Australia and Singapore. In FY '19, these markets accounted for the vast majority of our revenue. And here, we plan to take share and expand revenue, utilizing 2 of our growth levers: localization and segmentation. We have already localized more of our marketing effort and budget to better penetrate each market. We've expanded our premium client service teams to accelerate our acquisition of high-value clients. We've begun streamlining our operational processes by combining our operational teams and increasing our application of technology. We are also prepared for Brexit, having set up IG Europe in Germany and successfully migrating our European client base.

Moving on to our significant opportunities, which represent geographies, clients and product segments where we currently have limited or no presence. Based on our strategic review, we see very substantial opportunities, which we will capture by deploying all 4 growth levers and building on our strengths. This will allow us to serve more clients and deliver significant revenue growth.

We have completed the build of our multilateral trading facility Spectrum, allowing us to address the EU GBP 1 billion turbo warrant business. We have begun executing transactions on Spectrum and developing partnerships. We are well positioned for a full marketing rollout in the autumn. We launched our barriers product earlier in the year, and it is providing (sic) [proving] popular with our EU clients.

In the USA, we have 3 complementary businesses: IG U.S., Nadex and DailyFX. DailyFX continues to grow its unique visitors at a double-digit rate, and we have made changes to improve this as a channel for acquiring new clients. To maximize all the synergies between these businesses, we have created a new role in the U.S, a U.S. Regional Head who is now in place and will lead all 3 businesses. We also have exciting distribution partnerships underway for IG U.S.

In Japan, where we have less than 2% market share of GBP 1 billion market, we are already experiencing double-digit growth as a result of our innovative products. We plan to accelerate our growth by localizing our offering to better suit local needs. In addition, we're exploring partnerships with major financial services firms in Japan and have already several promising meetings.

Asia is a fast-growing region with a lot of potential for IG. We see the possibilities of real growth based on the meetings we've had with a number of the significant regional players in the last few weeks. In fact, we have identified tangible partnership opportunities in Hong Kong and are in active discussion today. Simultaneously, we are assessing the large-listed, leveraged securities market and we're testing our plans with relevant stakeholders in that region.

Finally, to gain share in the GBP 500 million small hedge fund and family office market, we've expanded our team in sales and marketing, begun work to enhance our Institutional brand and tailor our offering to meet the needs of this client segment.

To support the delivery of our strategy, I believed it was important to review our organization. Through this process, I and my team identified 3 key design principles: We wanted an organization that empowers local teams, facilitates quick and effective decision-making and enables a drive for scale. We have therefore amended our organization to allow our business units, arrayed across the top, greater autonomy to focus on growing revenues through the transaction fees we receive from clients. Our business units will be assisted by teams such as product and marketing, technology and trading and operations supporting our effective decision-making across the group. We have established a new business change team who ensure the delivery of key programs across our core markets and our significant opportunities.

As part of the organizational change, I've reorganized my executive team to ensure we have the right breadth and depth of talent to effectively execute our growth strategy. I am delighted that Jon Noble has agreed to take a new role as Chief Operating Officer, responsible for our trading and operations and business change teams. Jon will be overseeing delivery of our significant opportunities.

To ensure technology retains a voice at the table at the most senior levels, I have appointed Simon Myers to the Executive Committee in the role of Chief Technology Officer. Simon joined IG during the year and has a wealth of experience in managing technology at major banks, including Royal Bank of Scotland and Lloyds.

By implementing our new strategy, we expect to achieve the following: core market revenue growth of around 3% to 5% per annum over the medium term; significant opportunities, and increase in revenue of GBP 100 million to around GBP 160 million in FY '22. Achievement of these targets will result in revenue in FY '22 being around 30% higher than in FY '19.

Finally, as announced in May, the Board expects to maintain the 43.2p per share annual dividend until the group's earnings allow the Board to resume progressive dividends.

I will now hand you over to Jon who'll explain the business model and risk management.

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Jonathan Mark Noble Noble, IG Group Holdings plc - Chief Information Officer & Executive Director [2]

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Good morning. For those of you don't know me, I'm Jon Noble, IG's COO. Prior to that, I was the CIO, and prior to that, I was the Head of Trading here. And I've been at IG for fairly nearly 20 years.

The purpose of this section of the presentation is to explain our business model and how we manage risk. I will show you that our business model is designed to generate a return through collecting transaction fees charged to clients. I'll explain how we hedge our market risk in 2 different ways. We internalize market risk where we can and hedge externally automatically when we reach predetermined symmetrical risk limits. This business model generates remarkably consistent revenue regardless of client trading performance. And crucially, our interests are aligned with the interests of our clients. I will demonstrate that our business model is sustainable with low variability of daily revenue because our business model protects IG from the swings of client trading profits and losses.

Our business model is based on generating return from the transactions fees that we charge to our clients. It is not based on attempting to make money from being on the other side of clients' losing trades. On the contrary, as I'll show you, our model is designed to give our clients the best trading and execution experience available. And we always favor the clients. This is why we are the most attractive provider for sophisticated clients, who understand the quality and consistency of the trading experience that they receive at IG. Because we always favor the clients in our execution, we don't retain all of the transactions fees that clients pay to IG. Hence, our revenue will always be lower than the total client income. That's our name for the transactions fees that we charge our clients.

This chart shows you why. The blue bar on the left represents the totality of clients' income. The gray bar represents the costs that we incur in ensuring that our clients receive the best trading and execution experience. I'll explain that concept a little. We give clients instant execution of their orders, frequently in size that's not available in the underlying markets that we use to hedge. With respect to protecting clients from market risk, we offer our clients a huge range of products available with guaranteed stock losses. Additionally, we offer advantageous execution of nonguaranteed stock orders relative to market prices. This is why we call the gray bar the client execution benefit.

The small red bar represents the amounts we incur in transactions fees from hedging externally. We choose to spend a significant proportion of the transactions fees clients pay to us in operating this client-friendly business model, favoring the client's execution over our short-term P&L. It's a fundamental aspect of IG's business that we operate in the client's interests, and we believe it's crucial in making the business sustainable. It aligns our interests with those of our clients. Some other business models have an inherent conflict of interest between the provider and the clients. At IG, we want our clients to trade well and to make money from trading, as then they're more likely to keep on trading and provide us with the transactions fees which drive our revenue.

So how do we manage that market risk? Let me explain that. There are 2 steps. The first is internalization, netting clients' long and short positions off against each other, which therefore reduces our residual market exposures. We don't just do this market-by-market. We identify product [to the] markets which correlate it. The volume and breadth of our clients' trading, supported by our global footprint and wide range of markets gives us an advantage. More clients trading more products allows for more correlations, and hence more internalization.

We internalize the market risk from the vast majority of client trades, which in turn reduces the extent to which we have to hedge externally. For example, on equity indices, our largest asset class, in May FY '19, our clients traded GBP 454 billion of notional value. We internalized 91% of the notional volume, meaning we only have to externally hedge 9%. This creates a virtuous circle. The more we can internalize, the tighter the spread we can offer our clients. And so we attract and retain more clients who trade more volume and we can internalize more. This is facilitated by IG's technology, which enables instant internalization of client trades. We monitor market risk in real time, and the vast majority of our hedging is automatic based on current market risk exposures.

So how do we decide when to hedge externally? Well, we hedge each and every time we reach our risk limits. These limits are set for each group of markets taking into account the volume of client business, the volatility of the markets concerned and the liquidity of the markets. Our limits are symmetrical, so we take the same maximum long exposure as we take short exposure. We do not take a view on market direction. The maximum limits we work within are approved by the Board, and compared with the total volumes traded by our clients these limits are tiny. Our aggregated exposure on equities and equity indices is GBP 60 million; on FX, GBP 20 million; and on commodities, GBP 15 million.

Given the number and size of our clients' trades, we need a sophisticated technology solution to execute our hedging. We do so in real time, and we hedge automatically, sending many thousands of electronic orders via our hedging brokers to the markets each month. This time-lapse video shows you our market risk exposures changing as clients trade the markets. When a bar goes yellow, we're nearing the point at which we need to hedge. When it goes red, we automatically start sending orders to the markets until we are back inside our risk limits and the bar goes yellow again.

So how does that translate into our revenue? This chart shows you the composition of our monthly revenue for the last 18 months. It is a little busy so I'll talk you through how to interpret it. The top gray line is client income, the total transaction fees that our clients pay to us each month. The green line is our actual net trading revenue. And the difference between the 2 in any given month is explained by summing the 3 bars in the relevant month. Red bars show client profits and losses in the month; dark blue bars show our hedging profits and losses; and finally, the light blue bars show our hedging costs. These 3 numbers always sum to a cost to IG: our business model cost.

As you can see in some months, clients trade profitably. And in some months, they make losses. And the converse is true for our hedging trades. Businesses in our sector that operate without hedging have an obvious incentive to worry about clients' trading profits. At IG, on the contrary, because we run a hedged model, our incentives work the other way around. Our incentive is for our clients to trade profitably and to reduce their losses. Clients who trade well rather than badly tend to continue trading, and our revenue is derived from the transactions fees that result from the volume of client trading, not from aggregate client losses.

Crucially, over the long term, this means we run a sustainable business in the interest of our clients with little variability in our monthly revenue, which you can see from this slide. This shows the daily revenue for each day since the start of FY '14. In that time, we've only had 3 loss-making days, all of which occurred in moments of significant market dislocation, such as the Swiss franc depeg or the Dow Jones flash crash. In such circumstances, we were unable to hedge as quickly as needed given our changing market exposures as we executed trades from our clients. We have subsequently put significant effort into speeding up our hedging when markets dislocate. Our highest revenue days occur when clients trade heavily. It's volume that drives our revenue, not client losses.

Now let me hand you over to Bridget to talk some more about why our clients trade.

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Bridget Elizabeth Messer, IG Group Holdings plc - Chief Commercial Officer & Executive Director [3]

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Thank you, Jon. Good morning all. For those of you who don't know me, I'm Bridget Messer, IG's Chief Commercial Officer. I've been CTO for 4 years, prior to which I was Head of Legal and Compliance at IG and Company Secretary. I've been at IG for 14 years.

June has talked to you today about our high-quality, loyal client base, and the purpose of this section of our presentation is to provide more color on this. First, we will look at the metrics we use to define quality, and then I will answer 3 questions: Why do we have such a high-quality client base? What value does our client base provide? And how do we ensure that we continue to grow our client base?

So first, let's look at the metrics we use to define quality. Let's start with client tenure. You all know, I'm sure, that the attrition rates of clients who start trading leveraged derivatives in our industry is high. At IG, we look to counter this trend by only targeting prospects who understand the product and who have the financial wherewithal to participate in trading. And then we work really hard to keep them. We provide the very best trading experience through the way we operate the business model, as explained by Jon, to our deep liquidity and client-focused execution and through our exceptional client service.

As a result, and we're really proud of this, we have industry-leading tenure statistics. In FY '19, 55% of our OTC leveraged revenue was generated from clients who've been trading with IG for longer than 3 years. And as you go up the value scale, this becomes even more marked. 2/3 of our ESMA Professional revenue comes from clients who've been trading with IG for longer than 3 years.

The other metrics we use are size of client base and revenue generated by each client. In FY '19, we had 130,000 active OTC leveraged clients who executed 86 million trades. On average, each client-generated revenue of GBP 3,500 per year. And importantly, we have a large number of ultra-valuable clients, the top 8% of clients by number. And here, we mean 10,200 clients generate 80% of our revenue in any given period. These clients have been trading with us for, on average, 4 years and 9 months.

So we've shown you we have a large and loyal client base who trade the market in huge volumes. Let's discuss why. There are 2 main drivers: firstly, clients are passionate about trading the financial markets; and secondly, we offer an unrivaled package that allows them to do what they're passionate about.

So why are clients passionate about trading? We know a lot about our clients. At a functional level, for example, they value the ability to trade the markets 24 hours a day. They value the ability to go short, and they like the hedging functionality that CFDs provide. At a deeper level though, our research tells us that clients love the intellectual challenge of using their knowledge, experience and judgment to read the markets and take a position. These clients are informed, decisive, adventurous people, and they value -- they like to engage in an activity that plays to those attributes. And finally, our clients like the potential returns that come from using leverage. Now our clients understand that this is not an investment product. We asked them what percentage of clients they think make money from trading, and the most frequent response is less than 20%.

So let's take a look at the financial outcomes of trading. This chart shows you the distribution of our clients' outcomes for the month of May. More than 1/3 of our clients achieved a positive result in the month, and overall, the median loss was GBP 64. Saying that another way, the average client spent GBP 64 in the month pursuing their passion of trading the markets. Now that is a median, not a mean. The mean is heavily skewed by some clients who trade in very significant size and who can make or lose very significant amounts, as you can see from the histogram on the slide. Summing up, our clients understand that the majority of clients lose money while trading the markets, but they still do it because they are passionate about trading.

So what is it about IG that means that we attract and retain so many passionate traders? It's because we offer an unrivaled package that allows them to do what they're passionate about. We have talked with clients around the globe for many years to understand what they truly desire from a trading provider. And the answer is very simple: traders seek a platform that gives them the ability to trade what they want, when they want, how they want, where they want with a provider they can trust. And we have shaped our entire offering around this simple request.

Let me bring this to life for you with some numbers. On average, we do 7.5 million trades a month. We offer deep liquidity, sometimes deeper than is available in the underlying markets. Let's take FTSE, for example. We are good in orders up to 3.4 million of notional on a fixed 1 point spread. If a client wants to trade this size on ICE, they're looking at a spread of 1.4. We offer clients conference confidence that their resting orders will be executed impartially and fairly. And we're one of the only firms in the industry to consistently pass on price improvement for limit orders.

We offer 16,000 different markets, including a variety of markets that are tradable outside their traditional hours. We offer incredibly competitive spreads and commissions. Think back to the virtuous circle of internalization that Jon described for you. This has allowed us to reduce the charges that clients pay, which in turn improves their trading outcomes. We believe in the power of people. Our high-value clients receive a one-to-one relationship service, and we have 220 client-facing staff, over 1/2 of whom are multilingual. And we offer 14 different trading interfaces, ranging from our award-winning proprietary platforms to our API connection to third-party specialist platforms. Essentially we seek to provide clients with the world's best trading experience, an unrivaled package that allows them to do what they are passionate about.

So what does this high-quality client base provide us with? It provides us with an enduring revenue stream. You can see from the graph that each client cohort behaves in a very similar way. The average revenue generated per client who started trading in any year builds to around GBP 8,000 over 5 years. And because clients who are still trading after 5 years generally continue to trade, the average lifetime value is around GBP 10,000.

The chart on the right shows the makeup of OTC leveraged revenue by client cohort over the last 6 financial years. Those clients who started trading with us before FY '14 are still making a significant contribution to revenue. From the trends we observe, we estimate that the lifetime value of the FY '19 client cohort is around GBP 300 million.

So really importantly, how do we ensure we continue to acquire high-quality clients? It may sound obvious, but first, we're really selective. We target our promotions carefully by demographic and content, and of course, we assess each applicant as they move through the process to ensure that they have high levels of financial understanding and that they meet minimum wealth thresholds. And we decline to open accounts for clients who don't meet these hurdles.

Next, we invest carefully and significantly in marketing. As many of you know, our marketing technology gives us a real edge, and we have a sophisticated digital algorithm that allows us to acquire the right kind of client efficiently. But we don't just rely on paid-for channels for client acquisition. We also focus on search engine optimization, which leverages our heritage and our strong brand. Our investment in SEO this year has driven a 35% increase in organic traffic to IG's website, which has allowed us to rebalance away from paid-for channels.

We also invest strategically to drive our brand awareness. And this year, as we broaden our product range, our client segments and our distribution channels, we are increasing our focus on brand.

And to complement our traditional marketing channels, we are investing in relationship-led sales. In FY '19, we increased revenue [by bit] from this channel by 40% compared to FY '18. This channel is incredibly efficient at driving acquisition of high-value clients, and we have ambitious growth targets this year.

Over 45 years of innovation, care and client-centricity, we have built a large high-quality client base that is second to none. We have done this because clients are passionate about trading and because we offer an unrivaled package that allows them to do what they're passionate about. We give them the ability to trade when they want, where they want, what they want and how they want with a provider they can trust. Our large high-quality client base provides us with an equally high-quality enduring revenue stream. And we ensure we continue to build on this by being incredibly selective on who we target and who we take on and by investing carefully and significantly in marketing.

I'll now hand you over to Paul to talk you through the financials.

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [4]

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Thank you, Bridget, and good morning, everyone. I'm going to take you through the results for FY '19 and our financial position at the end of the year.

Starting with the income statement. The group's net trading revenue of GBP 476.9 million was 16% lower than in FY '18. In the pre-close statement, we estimated that our revenue would be around GBP 475 million. That little bit of extra revenue is because we have now classified GBP 1.5 million of stock trading custody fees as revenue rather than as other operating income. Our total operating costs were GBP 284.3 million, in line with the pre-close guidance. And the group's operating profit was GBP 192.9 million with the operating profit margin at 40.4%.

We earned a small amount of net finance income despite the cost of the new bank debt, and we expect that in FY '20, our net finance income will be around the same level. The group's effective tax rate is 18.5%. That's 0.6 percentage points lower than the rate we guided you to at the half year. There are lots of moving parts in the tax charge, but at this stage, we would guide you to use 18.5% as the effective tax rate for FY '20 and beyond.

Our basic EPS is 43.1p, and therefore, the full year dividend of 43.2p per share is pretty well 100% covered by earnings. And as we have said, again, the Board intends to maintain the level of dividend until the group's earnings allow for progressive dividends. This reflects the Board's confidence in our ability to deliver revenue and profit growth and the strength of the group's financial position with respect to both regulatory capital and liquidity, which I will take you through in a moment.

GBP 454 million of our revenue came from OTC leveraged derivatives. That revenue was 17% lower than in the prior year with the number of active clients down 10% and the average revenue per client down 8%. This reflects the impact of the ESMA product intervention measures and the less favorable market conditions for the business in FY '19 compared with FY '18, particularly in the second half. And although that are lower than last year, our OTC client metrics continue to be strong, both in terms of the number of active clients at 130,000 and in revenue per client at just over GBP 3,500.

Our revenue from Nadex, our exchange-traded derivatives business, was slightly higher than the prior year. We are, as planned, seeing significantly higher revenue per client, which has offset the reduction in the number of active clients as we focus on quality over quantity.

The revenue from stock trading and investments was GBP 5.9 million, up 48%. This reflects the introduction of the custody fee and a further increase in the number of clients using this service, up to nearly 38,000 at the year-end, more than 1/6 of whom were also active clients in OTC leveraged.

Our usual OTC leveraged revenue bridge analyzes the movement in revenue over the last 2 years. The key difference between the 2 years is reflected in the purple bars on the chart. In FY '19, existing clients traded less as a result of the weaker market conditions and the impact of ESMA, reducing revenue by GBP 96 million; whereas in FY '18, existing clients traded more, increasing revenue by GBP 36 million. Otherwise, the pattern of movement is the same. Each year, there are a number of clients who don't trade and a number who return to trading. The net impact from those clients in FY '19 was a reduction in revenue of GBP 65 million as 12% of the previous year's revenue. In FY '18, the impact was a reduction of GBP 45 million, as 9% of the previous year's revenue.

In FY '19, we generated GBP 67 million of revenue from clients who traded for the first time in the year. Those new clients generated 15% of the total OTC leveraged revenue in the year, the same percentage that new clients contributed to total OTC revenue in FY '18.

So breaking the OTC leveraged revenue down by geography highlights the underlying 26% reduction in revenue in the ESMA region and the underlying 2% increase from countries not within the scope of ESMA. The underlying change adjusts for the 1,600 clients who previously contracted with a U.K. entity and who are now trading with an entity outside the ESMA region. Within the ESMA region, revenue in the EU reduced by 36% compared with the 21% reduction in the U.K. This is due to the U.K.'s client base, including a higher proportion of Professional clients, and the existence of readily available alternative trading products for retail clients in the EU, the on-exchange turbos and warrants.

Outside the ESMA region, we have seen 2% underlying revenue growth in EMEA ex-EU, that's in Switzerland and Dubai and South Africa. Each of these businesses has continued to develop their presence in their market and each of them performed well given the market conditions. The same is true in Singapore where the revenue was also up by 2%. Australia did less well. The market there is, like the ESMA region, more mature and our position in that market is already well established. The underlying 10% reduction in revenue is, we believe, reflective of the market conditions and is therefore cyclical and not structural. Our revenue in Japan was up by 29% with the growth rate in the second half of the year nearly 50%. This has been driven by the launch of the new knock-out product, which has proved to be very popular, with double-digit increases in the number of active clients and in revenue per client.

Our emerging market segment that comprises the revenue from clients who are resident in jurisdictions predominantly in Asia where we do not have a physical presence. These clients have identified IG through their own search and not in response to advertising and marketing. The increase in revenue from these markets is indicative of the strength of the demand for financial trading products and has been driven by the increase in the number of active clients we serve.

Our retail foreign exchange dealer in the USA launched in January 2019 with the full marketing push in the last quarter of the year. The rate of client acquisition has been encouraging, although the number and size of trades has been lower than we anticipated. We do, however, remain confident that we will take at least our fair market share of the OTC FX market in the USA.

And the revenue generated by institutions, the client segment of family offices and small hedge funds that were identified in the strategy as a significant opportunity, is included in the relevant country in this analysis, and so we're showing it here as a memo item. The GBP 5.5 million of revenue was generated by the 173 institutional clients we served during the year with an average revenue per client of GBP 32,000.

The pie chart on the right of the slide shows the split of OTC leveraged revenue by asset class. We have seen an increase in the proportion of our revenue from indices and single-name equities. These asset classes are popular amongst our highest value clients and client trading in these asset classes accounted for 2/3 of our OTC leveraged revenue in FY '19.

Our revenue from cryptocurrencies was GBP 10 million, down from the GBP 36 million in FY '18 and so crypto accounted for just 2% of our revenue in the year. As you will have seen [at the SAR] consulting on a potential ban on crypto derivatives for retail clients in the U.K. and our revenue from U.K. retail clients trading crypto in FY '19 was GBP 2.6 million.

One of the key actions we took to seek to mitigate the impact of the ESMA measures was the online process that we introduced to allow clients to elect to be categorized as professional. Since that process went live in November 2017, we have received approximately 25,000 applications from clients requesting to be categorized as professional and we have accepted 6,600 of these, around 24%. As we have explained before, the criteria for a client to be categorized as professional are clearly set out in MiFID and are supplemented by guidance from ESMA. We have continued to apply those criteria rigorously through a process which complies with the letter and the spirit of the regulations. This has resulted in us rejecting over 3/4 of the applicants, 30% of whom have not traded with us since. But in line with our culture and values, we will not allow clients who cannot demonstrate they meet the criteria to be categorized as professional. Since the ESMA measures have been in place, we have seen over 5,000 ESMA region professional clients trade with us each quarter. And in the year as a whole, we had 6,000 unique ESMA professional clients trade with us who on average generated revenue of GBP 27,000 each. The average professional client therefore generates nearly 20x more revenue than the average of the 75,000 unique ESMA retail clients.

The table on the top right of this slide shows the revenue in the ESMA region in the last 3/4 of the year when the ESMA measures were in place throughout. In that period, 66% of our OTC leveraged revenue in the ESMA region has been generated by professional clients. The table on the bottom right shows the revenue in client metrics for Pro and retail clients in the U.K. and EU so that you can see for your modeling the quarterly run rate of revenue in the post-ESMA period -- ESMA measures period.

So turning to operating expenses which we show here by cost type and by activity category. We have restated the latter to reflect our changed organizational design. Our operating expenses before variable remuneration were GBP 259.6 million, 2% higher than in FY '18. The major movements are the reduction in prospect acquisition, which was down by 8% compared with the prior year, which reflects the reduction in the external advertising and marketing spend. Technology expenditures increased by 15% due to higher headcount to deliver and support the growing development project portfolio. The increase in business administration costs reflect higher headcount and increased legal and professional fees supporting our investment in new initiatives and strategic planning.

As we guided in the strategy update announcement, our operating expenses excluding variable remuneration are expected to increase by around GBP 30 million in FY '20 to support the growth initiatives. The charge for variable remuneration was GBP 24.7 million, GBP 10 million lower than the charge in FY '18. At this date, I would guide you to a variable remuneration charge for FY '20 of around GBP 30 million.

The chart on the bottom right of the slide show the headcount by location and by activity category. Notably, we now have much less than half of our headcount in London, with 1/3 in our 2 main service centers in Kraków and Bangalore.

Our cash generation remains strong. The owned funds generated from operations of GBP 198.1 million is equal to a conversion rate of operating profit to cash of 103%. We receive our revenue in cash the following day. Our investment spend remains low. The GBP 14.3 million of CapEx in the year is lower than the charge from amortization and depreciation. We do not have any significant investment requirement other than those we made to the P&L.

The dividend payment in FY '19 reflect the phasing of the payments for the dividend for FY '18. In FY '20, the cash value of the dividend payment will be around GBP 159 million. As we explained at the interims, we changed the structure of our bank arrangements during the year and in June 2018, we received the funds under the GBP 100 million term loan included in that new agreement.

Our balance sheet shows that we continue to have a really strong financial position with liquid assets at the end of the year of GBP 928 million and available liquidity of GBP 375 million. We do have a volatile liquidity demand due to the variability in broker margin requirements, and we choose to operate with significant headroom and to avoid taking liquidity risk. As I said in May, we have assessed the demands on our liquidity of the strategy and we are comfortable that liquidity is not a constraint even under stressed conditions, and we are comfortable that we have and will continue to have a significantly higher level of liquidity than our liquidity requirement, including for dividends.

And finally for me, regulatory capital. At the end of May, we had GBP 180 million of headroom over our regulatory capital requirements. And as I said in May, we do not regard our regulatory capital position as a constraint. We have significant headroom, and the Board is comfortable that we can eat into that headroom if required.

So let me hand back to June for her concluding remarks.

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [5]

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Thank you, Paul. Before looking at FY '20, I will recap what we have covered so far. As you heard during the course of the presentation, IG is a great business with very able, agile and ambitious employees who are capable of simultaneously delivering numerous initiatives. Jon and Bridget gave you some insight into 2 of the most important differentiating strengths. First, Jon clearly outlined why our business model and risk management capability will create long-term value. We generate a return from our transaction fees charged to clients. This approach favors clients, negates conflicts of interest and results in low variability of revenue. Then second, Bridget explained how we build enduring client revenue by attracting and retaining a sophisticated high-value and loyal client base who have the longest tenure in the industry and who choose IG because we offer them an unrivaled package to trade the financial markets. These strengths, combined with our technology and spirit of innovation, brand and reputation, our conduct and standing with regulators, our people and culture, along with the strengths of our balance sheet create a uniquely strong foundation for IG's next stage of growth.

I want to finish by presenting our outlook for FY '20, which I expect to be an exciting year. We have begun executing the strategy I revealed in May and today, we are reconfirming the revenue and cost outlook we gave the market at the time. As a result of the new strategy, we expect to return to growth in FY '20 as our actions and the significant opportunities and core markets begin to deliver results. To achieve growth in FY '20, we will need to invest in our business. We expect our operating expenses, excluding variable remuneration, to increase by about GBP 30 million in this year. This strategy will continue our history of leading the way and help us realize our vision of providing the world's best trading experience. It will allow us to meet the expectations of our clients, shareholders and other stakeholders and deliver the medium-term financial targets I outlined earlier. As CEO, I am absolutely confident we will continue to grow a thriving and profitable business.

Thank you for listening. We'll take questions now.

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Questions and Answers

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Paul McGinnis, Shore Capital Group Ltd., Research Division - Research Analyst [1]

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Paul McGinnis from Shore Capital. Just interested in the client execution benefit, the 17%. I was just wondering, it looked from the chart as if it varies a little bit month-by-month. I mean, is it actually a metric that you either can or would even attempt to actually manage down given the potential benefit it could have to revenue where you sort of manage to get it down to a smaller number? Or would that just detract from the client experience to such a degree that it's not worth trying?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [2]

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Well, we have actively managed it consistently over time and we'll continue to keep a firm eye on it. And I would say that, that is foundational to how we operate, right? So lots of execution. I mean, lots of investment in technology, a great deal of expertise across the team to look at that. We look at that every single day. So we actually track our performance in terms of continuing to drive -- improve that number. Jon, do you want to add anything?

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Jonathan Mark Noble Noble, IG Group Holdings plc - Chief Information Officer & Executive Director [3]

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It's remarkably consistent, actually, on a monthly basis. It does vary from day-to-day. But over any aggregated period of time, it is remarkably consistent as a metric. And clearly, one way of improving it would be to improve the speed with which we can hedge, which we've made great strides in, I think, over the last few years. We will never change the basis on which we always take the client's order, fill the client's order first and then we deal with the hedging afterward. And when you fill a guaranteed stock, you fill it at the price that the guaranteed stock was at. The market may have shifted well beyond it, [but don't] slip it. So you always get those elements of cost and that's pretty consistent month to month.

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [4]

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But that's also why they're loyal.

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Ian White, Autonomous Research LLP - Research Analyst [5]

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Ian White from Autonomous Research. Just two questions from my side, please. First, when you said quite a bit over the last couple of months about the organic opportunities you're exploring. I wondered if you could tell us how you were thinking about the possibility for inorganic expansion and would you consider sort of trading off sustaining the dividend versus sort of deploying capital inorganically if the right opportunity arose?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [6]

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Let me take that first and then you can also add in. So the reality is we have luckily, first of all, a great base and a great foundation of core business and lots of opportunities to grow that on an organic basis, which we are prioritizing. It's really the best -- we believe, the best way to proceed. And I think clearly, we'll always keep our eyes open but that's not the way we expect to be able to deliver the best shareholder value.

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [7]

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Yes. No [comment then]. So that question is theoretical or hypothetical at this stage.

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Ian White, Autonomous Research LLP - Research Analyst [8]

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Understood. And on the FY '20 guidance, can I just confirm that you're referring to revenue growth in particular, when you're talking about a return to growth next year.

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [9]

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That's correct.

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Ian White, Autonomous Research LLP - Research Analyst [10]

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And does that guidance include the possibility that leverage restrictions were introduced in Australia over the coming months?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [11]

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Yes. It does. Both revenue growth, and it does take into account the potential of the impact, although we've had to estimate it, we don't know what the rules are yet or the timing of them in Australia.

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Joanna Elizabeth Nader, RBC Capital Markets, LLC, Research Division - Analyst [12]

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Joanna Nader from RBC. A couple of questions. First on the returning clients, which are still quite a little percentage of your revenue. Just wondering if you have any initiatives around mining that?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [13]

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Absolutely. No, as I mean, one of the things that we've gone very, very rigorously is continue to invest in technology to, first of all, develop the insights that we have, to really get to know them well. But also looking at expanding the portfolio of offers that we provide them. Some of the things we'll be announcing shortly in terms of partnerships to bring even better content, better trading tools and also to look at new products such as the ones that we're talking about here today. So we believe very strongly that being client-focused has been such an important foundation of this company to date, and having those deep and one-to-one client relationships that we've invested so much money in and really believe strongly in, especially with our valuable clients, will allow us to get the kind of insights that will make sure we tailor products. And this is a foundational piece that will help us expand that base.

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Joanna Elizabeth Nader, RBC Capital Markets, LLC, Research Division - Analyst [14]

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Maybe just another question on the U.S. and I know it's very early days and it's very hard to make precise predictions in the early days, but just wondering why you think maybe you're not getting the numbers and size of clients? Is that just simply opportunities are not that exciting in FX so...

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [15]

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Well we believe -- first of all, it's very early days. As we said, we just started in January. We just turned on the marketing machine in the last quarter or so. And what we find in the U.S. market, we haven't been a known entity, unlike the U.K. where we've been here for a very long time. However, we have some very interesting and exciting, as I said, distribution partnerships to expand our brand and also our reach in that market. The DailyFX as we said, is a really good tool. We've made changes to help ensure that the audience of that which is very targeted comes onboard but watch this space. And we do believe that it will take a little time for them to get used to the tool. We're clearly offering a much better product in terms of both the spreads we offer as well as the customer service. And those are 2 things that our market research showed were really lacking in the current competitive environment. So once they discover us, they get to use our platform, we are very confident it'll turn into the kind of business we expect.

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Portia Anjuli Patel, Canaccord Genuity Corp., Research Division - Analyst [16]

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Portia Patel from Canaccord. Just picking up on another of your growth initiatives, the turbos. I was wondering if you could give us an idea of how the ARPU for turbos compares to the European OTC leveraged product?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [17]

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Well we haven't launched it yet, so it's rather hard. But we have done a thorough analysis of the other competitors, what that looks like. We've done a lot of client research and we're pretty -- we're quite confident that it's going to be comparable. And we actually see that, fundamentally, the people that like the turbo warrants are similar to the ones that we have today in our CFD business because they like leveraged trading. So I think we're going to be giving them some opportunities that are quite unique, both in the 24/5 service as well as the range that we're offering. So our estimation -- we've taken that into account as we've modeled this.

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Portia Anjuli Patel, Canaccord Genuity Corp., Research Division - Analyst [18]

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Just to pick up on your comment, when you say comparable, do you mean to the average or the professional or the retail?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [19]

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To the retail.

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [20]

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Retail. Retail.

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Richard Michael Taylor, Barclays Bank PLC, Research Division - Analyst [21]

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Richard Taylor from Barclays. 2 questions, please, Firstly I'm putting one for Jon, Slide 18. Why are those limits set as they are, please? And how have they moved around over time? And if you have moved them over time, what's that done to the sort of the variability of daily revenue or even the absolute revenue opportunity?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [22]

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Let me just say one word and then Jon why don't you finish off. These are set by the Board. We go thorough a very thorough analysis in terms of looking at what our risk appetite is. This is a very structured process. We've tested those limits against a whole range of scenarios as you would expect as a regulated entity. But Jon, why don't you add anything else you'd like?

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Jonathan Mark Noble Noble, IG Group Holdings plc - Chief Information Officer & Executive Director [23]

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So we have models that helps understand what would happen to the revenue in the event we change the limits and we have changed them in small ways over the years, but they remain absolutely tiny relative to the client notional traded volume and there's no plans to change them currently.

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Richard Michael Taylor, Barclays Bank PLC, Research Division - Analyst [24]

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Okay. And then the second question is on Page 34. The purple bars that you show. Paul, I know that you said that a lot of the reduction of the 96 would have been ESMA related. But I was just trying to understand if you could give us some indications as to what that would, that 96 negative would have been ex-ESMA?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [25]

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Richard, it's a good question but very difficult to isolate out, not that we haven't tried. I mean, one way you could do it is to simply take the 36 with the revenue up in FY '18 and take that off. I mean, I would suggest that, that GBP 60 million is not just the impact of ESMA but it also includes some market condition factor, there's more than the GBP 36 million. So net if you're starting at GBP 60 million, you might take another GBP 10 million, say, a bit more off perhaps due to marketing conditions, perhaps you're at GBP 40 million, GBP 50 million. And then there is some impact of ESMA that will be in the clients not trading as well but that is only 3% higher impact on revenue than it was in the prior year. So look, I mean, the overall impact of ESMA being around 10% of the revenue we still think holds, but yes, to go to -- you are having to make some significant assumptions without being able to know. But we don't think -- our view on that hasn't changed.

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Richard Michael Taylor, Barclays Bank PLC, Research Division - Analyst [26]

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Understood. So just to be clear, your guess will be if ESMA was -- if ESMA didn't happen last year, the purple bar would be negative?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [27]

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Yes, oh yes. Market conditions in this -- I mean, I could just -- you could use Australia down 10% as a control group, unaffected by [so that's] underlying, so that's not taking into account the people who have -- we've contracted with Australia. They're down 10%. I mean, it's a comparable client base, comparable market maturity. So you could use that as a sort of read on how much the revenue would have gone down by ex-ESMA.

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Anthony Da-Costa, Peel Hunt LLP, Research Division - Analyst [28]

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It's Anthony Da-Costa, Peel Hunt. Just 2 questions, if I may. The first on revenue composition on Page 20. Now I found it very interesting that the client P&L wasn't exactly offset by the hedging P&L. And more interesting than that, you actually sort of obviously sort of took a loss in both years. So if you look at the client execution benefit, does that remain, has that remained negative over the course...

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [29]

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Always. Every day, every month, every year, always.

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Anthony Da-Costa, Peel Hunt LLP, Research Division - Analyst [30]

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So the client will never be completely offset?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [31]

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Never. No. No. No. It can't be, because we'll always favor the client execution first over our own. So we will never be in a position where we're able to make more money than the client transaction fees.

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Anthony Da-Costa, Peel Hunt LLP, Research Division - Analyst [32]

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Because this is the first time you've ever disclosed something like this.

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [33]

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It's the first time we disclosed the numbers. I mean, for years we've shown that chart in a way that there's a difference between client income and net trading revenue and then we usually show the bit if we [tendered every] trade. But that's what we've shown the first time we've shown the numbers.

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Anthony Da-Costa, Peel Hunt LLP, Research Division - Analyst [34]

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And then the second question is on, what is your revenue -- I mean, your retail strategy for retail customers?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [35]

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No. Well, our retail strategy is as it has been in terms of ensuring that we continue to attract retail. We talk a lot about the high-value absolutely, because they're incredibly valuable to us. But we still work very, very hard to ensure that the retail clients, which we have quite a lot of, still have an outstanding trading experience. And we continue to look at ways to create the appropriate types of service as well as the content. We have the whole trading academy that ensures that they get the right information and they have, they get to practice and have demo accounts. So retail clients are still very important to us.

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Anthony Da-Costa, Peel Hunt LLP, Research Division - Analyst [36]

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And then just to follow up on that. The retail customers that didn't make it into professional, what has changed in terms of those that are still trading, have they increased [really] their balances?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [37]

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No. They haven't. I mean, they've decided that there's a certain budget in the budget for trading, and they work within their budget. And I think that's what we've seen in terms of the adjustment for retail clients in ESMA. In other markets, we, for example Japan, there's 2 million retail traders and they love our products and we -- they don't seem to be able to get enough of them. So the good news is that is growing rapidly. Let's remember that fundamentally, the growth in leveraged trading continues to increase over -- we receive 1 million people that try -- come to our website and look to open applications every year. We turn down those that are not appropriate. So pent-up demand for leveraged trading, real interest in terms of increasing sophistication of financial markets all over the world, higher wealth across the world as we discussed last time, and all of those things really see toward a rising wave as it relates to this particular category and we're incredibly well positioned. As you also -- as we said before, when you have regulation, which we do believe in, the people that are compliant win because we know how to operate in that and we're actually now operating in a much better environment in ESMA so we expect to take share and to grow revenue.

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Benedict Guy Williams, Liberum Capital Limited, Research Division - Research Analyst [38]

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Ben from Liberum. So 74% of retail customers lose money. It's standard across the industry pretty much. What percent of your -- either your professional clients or of your -- the top 8% of your [80% of your revenues] lose money?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [39]

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It's not dissimilar. I mean, if you remember, what clients are losing is their transaction fees. And the more you trade, the more transaction fees you spend, the more likely you are to lose. So those average statistics of how many client accounts there lose money are -- they need to be read with some caution.

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [40]

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Yes. But they also, remember, they're very loyal. We have, the very high-value clients have been with us for a very long time. They know what they're doing, they actually love the pursuit of competing in the financial markets and actually enjoy the intellectual exercise. We talk to a lot of them, and it is something that they get a lot of utility from, both in terms of enjoyment, also in terms of their hedging strategies. So it has a role in their life. And you would not be doing it for over 3 years if you didn't feel that it was something you wanted to -- added value in terms of enjoyment as well as in terms of utility.

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Benedict Guy Williams, Liberum Capital Limited, Research Division - Research Analyst [41]

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So if I can just follow on from that. So I think we all understand that it was in your initial submission that, as you say, it's trading cost that cause the loss. I understand what you mean, this is grownups choosing to trade and the majority of them lose money and we understand the median/mean arguments. And I totally understand that part of your pitch is -- well it's not pitch, that the reality of IG is that you are championing the client in the sense that you're providing the best possible trading opportunity and the fact that you hedge so tightly does mean that we have this really low volatility of revenue, but you just disclosed to us that if you hadn't hedged for the last 2 years your revenue would have been GBP 380 million higher, it's amazing. And it's staggering. So -- and there's obviously a big in between, right? I mean, you hedge really tightly, other people don't, have massive volatility. So have you -- is there any tension, obviously you want to internalize more, but in terms of the risk you take, do you not think that you could go slightly in the other direction?

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [42]

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No. No. It's been looked at over the period of time so much. And the key thing is that it aligns our interest with the interest of the client. When you're looking at months in which clients -- and our clients are trading in huge size, and there would've been months in which our revenue would have been negative to the tune of a staggering amount. So that's one reason. But most importantly, when you're in a situation in which clients are making profits and you're not hedging, you are pretty much compelled as a business, as a company, using other people's money, to do something about it. You have to do something about it. We do not. We want our clients to trade profitably, we encourage them to trade well. We give them tools and techniques to do so, that is very different to how providers who don't hedge have to deal with when clients make profits. And we don't think that, that is in any way in the interest of the client and it certainly is not in the interest of creating a sustainable revenue stream.

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Vivek Raja, Shore Capital Group Ltd., Research Division - Analyst [43]

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It's Vivek Raja from Shore Capital. Questions about, outside the core markets [execution markets] just wondering if you could talk about the [last year] how long does the process take, how far you are through that process, what the pitfalls are, when you expect that [course to reverse and to realize some changes] ?

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [44]

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Well, it's going to be widely variable depending on complexity of the partnerships that we create. But I can say that what is exciting is when I've been to Asia twice in the last couple of months to meet with some prospective partners, there is a real appetite, so. But as you all know, deals take time. Some of them are easy in terms of -- because they're so simple to do, the relative commitment on both sides is quite simple. We're looking at things that will span the whole range in terms of partnerships. So I think when in the next couple of months, the next -- over time, we will be able to come back to you. But the great thing is the partners we're talking to have very big established bases of customers that are hungry for our products. They don't need to talk to us, right? We are a medium-sized company. There are some other bigger companies. But we have unique product expertise. We have -- that has been developed over 45 years that they can see and are very excited about. So I would say we still need some time, but the structure of them, as I said, will be focused on, we bring products, expertise, risk management across a whole suite of capability and they have the established client base, they already know who their clients are and they're going to be part of our marketing engine to those clients. That's the fundamental structure. In other markets, for example, in Europe with the MTF, we're also developing partnerships with brokers there to also connect to a spectrum. In the U.S., we're looking at a range of partnerships as well. So partnerships are a capital P and also with a small p. So the small ps can happen quite quickly but still have a good impact because they're going to be referring flow to us, referring interested clients. But the great news is that we are seeing a tremendous interest.

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Justin Graham Bates, Canaccord Genuity Corp., Research Division - Financial Analyst [45]

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It's Justin Bates at Canaccord. Could you just provide us with the information, the number of new clients that you've signed up and who are dealing for the first time? And then secondly, just to clarify your point about returning to growth. On the revenue growth, is that for the full year year-on-year or is it when you get to quarter 2 to quarter 4 year-on-year you'll be delivering growth? So I'm just thinking about June and July and is it a fair assumption to assume a 20% [ed]

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [46]

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Yes. So in terms of first trades, new clients, first trades, over 31,000 in this past year. So that's what Bridget had discussed. And in terms of growth over the full year versus last year, we expect that to be over the course of the full year.

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Justin Graham Bates, Canaccord Genuity Corp., Research Division - Financial Analyst [47]

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And just to follow up, June and July year-on-year, would it be fair to assume that U.K. and Europe were roughly down 20%, 30% similar to what we saw last year [because]...

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Paul Richard Mainwaring, IG Group Holdings plc - CFO & Executive Director [48]

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We're not going to comment on the 2 months until we get to the quarter. But obviously as the ESMA and the CFD didn't come into effect until the beginning of August you've got 2 months of the 3 where the [f movers] weren't in place and they were decent months.

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June Yee Felix, IG Group Holdings plc - CEO & Executive Director [49]

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Any further questions? Any other questions? Thank you very much. Really appreciate you coming today and please have a cup of coffee or tea or water, and we look forward to seeing you at the next presentation. Thank you.

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Operator [50]

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Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day.