Annual Report
IG Group Holdings plc
Annual Report and Financial Statements
31 May 2009
IG Group Holdings plc is a world leader in
retail financial derivatives trading. Our dealing
platforms are founded on award-winning
technology and provide clients with easy
access to global markets and the flexibility to
trade multiple asset classes.
The Group has offices in the UK, mainland
Europe, USA, Asia and Australasia where we
serve both a retail and professional client base.
Contents
01 At a Glance
02 Global Marketing Activity
07 Technology
09 Corporate Social Responsibility
11 Partners
12 Directors’ Biographies
15 Chairman’s Statement
17 Chief Executive’s Report
20 Group Operating and Financial Review
29 Corporate Governance
35 Directors’ Remuneration Report
42 Directors’ Report
49 Statement of Directors’ Responsibilities in Respect
of the Financial Statements
50 Group and Company Financial Statements
55 Notes to the Financial Statements
94 Independent Auditor’s Report
n The largest and longest-running spread betting company in the world
n Spread betting on forex, indices, commodities, options and thousands
of global shares
n Award-winning company: voted ‘Best Spread Betting Firm’ in 2007 and
2008 by Shares Magazine
n Contracts for Difference (CFD) trading on forex, shares, commodities,
options and more
n Level 1 and 2 trading access via our PureDeal platform
n Offices in Australia, Europe, Singapore and USA
n Global network of partner companies
n A well-established Japanese forex service
n Recently launched CFDs on shares and indices, plus binary options
n Exchange based in the US offering simplified derivatives
n Trade on stock indices, commodities, forex and economic events
n Direct Access browser-based trading platform
Spread betting and CFD trading
Spread betting and CFD trading sit at the core of IG Group’s
operations. The following provides an explanation of how these
key products work:
How does spread betting work?
In the UK, financial spread betting offers a flexible tax-free* way to
profit from rising or falling markets 24 hours a day.
When placing a spread bet with IG Index, you do not physically
own the instrument (a share or commodity for example), you
bet on the direction you think the market will move. You ‘buy’
if you think the price will rise and ‘sell’ if you think it will fall; the
difference between these prices is known as the spread.
You specify an amount to bet per point of movement – the
degree to which you are correct affects how much you win
or lose.
How do CFDs work?
A CFD, or Contract for Difference, is simply an agreement to
exchange the difference in value of a particular instrument at
the time in which the contract is opened and the time at which it
is closed.
As with spread betting, the degree to which you are correct
determines your profit or loss.
With Share CFDs you trade at the cash price of the share and pay a
commission (starting from just 0.1% on major shares). IG Markets
also offers Direct Market Access (DMA) trading, which allows clients
to trade directly into the order books of major equity markets.
What does the IG Group offer?
Advanced and reliable technology
Clients can trade on our award-winning PureDeal platform – also
available on a range of mobiles, BlackBerry and iPhone devices.
Full range of markets
Instant access to global stock indices, thousands of shares, forex,
commodities, binaries, options and more.
Trading tools and ongoing education
Live streaming news from Reuters, in-depth independent
research and market-leading charting packages. We also offer a
range of online and office-based seminars designed by our team
of experts.
Spread betting and CFD trading can result in losses that exceed
your initial deposit.
* Tax law can be changed or may differ depending on your personal circumstances.
Chicago
IG Markets
311 South Wacker Drive
Suite 2650
Chicago IL 60606
Nadex
311 South Wacker Drive
Suite 2675
Chicago IL 60606
London
IG Index
Friars House
157-168 Blackfriars Road
London SE1 8EZ
IG Markets
Friars House
157-168 Blackfriars Road
London SE1 8EZ
extrabet.com
Friars House
157-168 Blackfriars Road
London SE1 8EZ
Paris
IG Markets
17 Avenue George V
75008 Paris
Milan
IG Markets
Via Cesare Correnti, 12
20123 Milano
Luxembourg
IG Markets
15, rue du fort Bourbon
L1249 Luxembourg
Düsseldorf
IG Markets
Zweigniederlassung Deutschland
Berliner Allee 10
40212 Düsseldorf
Madrid
IG Markets
Marqués de la Ensenada nº 16
1 º planta, Oficina 18
28004 Madrid
Stockholm
IG Markets
Stureplan 2
114 35 Stockholm
Tokyo
FXOnline
Halifax Onarimon Building
8F, 3-24-10 Nishi Shinbashi
Minato-ku, Tokyo 105-0003
Singapore
IG Markets
#22-04 Chevron House
30 Raffles Place
Singapore 048622
Melbourne
IG Markets
Level 7
417 St Kilda Road
Melbourne VIC 3004
IG Group Holdings plc
Annual Report and Financial Statements 2009
At a Glance 01
At a Glance
Revenue
EBITDA*
Earnings per share**
+40%
+33%
Revenue up 40% at £257.1 million
EBITDA up 33% at £131.1 million
+22%
Diluted adjusted earnings per share up 22%
at 24.74p
Total dividend
EBITDA margin
Financial accounts opened
+25%
51%
+74%
Total dividend up 25% to 15.0p per share
Strong EBITDA margin of 51%
New financial accounts up 74% at 74,331
Revenue (£million)
EBITDA* (£million)
Earnings per share**
*EBITDA represents earnings before exceptional administrative costs, depreciation, amortisation of intangible assets, amortisation and impairment of intangibles arising
on consolidation, amounts written off property, plant and equipment and intangible assets, taxation, interest payable on debt and interest receivable on corporate cash
balances and includes interest receivable on clients’ balances less interest payable to clients.
**Excludes amortisation of intangibles arising on consolidation.
02
IG Group Holdings plc
Annual Report and Financial Statements 2009
Global Marketing Activity
Global Marketing
Activity
T
and worldwide investment shows.
he IG Group deploys a global marketing strategy, across multiple media, to ensure high
brand visibility in the countries in which we operate. Our activity includes online and print
advertising, television, event and team sponsorship, plus an ongoing presence at seminars
Get Thinking campaign
To support IG’s global expansion, the Group rolled out its innovative Get Thinking campaign across
the UK, US, Europe and Asia Pacific. The campaign centred on ‘cause and effect’, depicting how events
in the real world impact upon the financial markets. The adverts asked the audience if they could
make the connections. If so, it was time to take a position with IG.
2008
2009
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Global media and
creative agencies
appointed
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Get Thinking brand
campaign launched
in UK and Asia Pacific
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Italian office opened,
Portuguese operation
launched
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Get Thinking brand
campaign launched
in Europe
IG Group Holdings plc
Annual Report and Financial Statements 2009
Global Marketing Activity 03
The Get Thinking campaign takes
“
the IG brand to a global audience
“
Television advertising
The pinnacle of the 2008/2009 Get Thinking campaign was
a television advert designed and executed by a leading
worldwide ad agency. The advert helped take the IG brand to
a global TV audience, airing on the financial strands of major
channels, including Bloomberg, BBC World and Sky News.
Ongoing focus on client needs
An important factor in client recruitment and retention is our
education programme, which includes our TradeSense course
and our in-house and online training seminars. Our series of
consumer-focussed product ads in the national press helped to
inform prospective clients that we offer a number of tools and
programmes to help them on their trading journey. g
>>
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New FXOnline site
launched in Japan
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PureDMA campaign
in the UK and Australia
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extrabet.com
site relaunched
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IG Group Holdings plc
Annual Report and Financial Statements 2009
Global Marketing Activity
A local emphasis from a global provider
UK and mainland Europe
IG Index, IG Markets and extrabet.com
The Group launched the redesigned website of its flagship
spread-betting brand IG Index in May 2009. Qualitative and
quantitative research commissioned with major market research
companies provided positive feedback on the site and showed
that the audience connected with the Get Thinking campaign.
The Get Thinking concept was also used to promote our CFD
trading brand, IG Markets, and the campaign rolled out across
all marketing channels in the UK, Italy, France, Germany, Spain
and Portugal. During the last year the success of our European
brands has seen us launch new offices and operations for clients
in Portugal, Italy and Luxembourg.
In March 2009, the Group relaunched its sports brand
extrabet.com with a light-hearted touch. Manga-style
animations were complemented by team sponsorship and
a guerrilla marketing campaign featuring a rugby ball and
magazine hand-out.
Asia Pacific
FXOnline, IG Markets Australia, IG Markets Singapore
The Group broke further into the Asia Pacific market with the
acquisition of FXOnline, a major forex provider in Japan. Our in-
house UK and Japanese marketing teams produced a new and
distinctive website, available in both languages, while existing
FXOnline clients were migrated onto the PureDeal platform.
2009
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CFDs introduced
in Japan
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TV ad screened in the
UK, Japan and Australia
IG Group Holdings plc
Annual Report and Financial Statements 2009
Global Marketing Activity 05
“
new territories, so does our marketing push
As our operations continue to expand in
“
In March 2009, FXOnline broadened its product set by becoming
the first provider to offer both CFDs and binary options in
Japan, as well as lowering spreads on key currency pairs. Both
initiatives were backed up by extensive online, print and outdoor
advertising in conjunction with the roll-out of the Get Thinking
TV ad.
North America
Nadex and IG Markets US
The IG Group continues to support the US trading arm of
IG Markets with targeted email marketing and an ongoing
online presence.
As our operations in Australia and Singapore continue to expand,
so does our marketing push within these territories. As well as
our Get Thinking brand ads, IG Markets promoted its level 2
PureDMA trading platform with a series of product-led online
banner ads in Australia.
In May 2009, the Group launched its latest venture: Nadex,
the North American Derivatives Exchange, with the tagline
‘Derivatives, simplified’. The site was promoted via online and
direct marketing, as well as advertorial copy in a number of
prominent financial magazines. n
9
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IG Index site
relaunched
9
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New treatment of
brand ads released
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Nadex launch
IG Group Holdings plc
Annual Report and Financial Statements 2009
Technology 07
We are constantly looking at ways to deliver
“
advanced technology
“
Technology
IG’s trading platforms are founded on award-winning technology.
We continue to lead the field in terms of innovation, quality of execution
and reliability.
Robust and reliable systems
During unprecedented volatility in September and October 2008, our
trading systems stood up to the rigours of extreme market conditions.
IG’s PureDeal platform was available throughout the period, handling an
unheralded 700,000 trades in one week at a time when competitors and
even the London Stock Exchange suffered outage.
Off site, we have a state-of-the-art disaster-recovery facility which hosts
our extensive network of backup servers. The venue operates as a fully
functioning office, allowing the company to continue providing a full
service should an emergency arise. Disaster Recovery is properly invoked
and tested throughout the year.
Integrating the latest technologies
IG clients can deal using the latest technology, from Apple’s
groundbreaking iPhone 3GS and iPod touch, to an increasing number of
mobile phones, BlackBerry and PDA devices. Our charting packages have
also been updated for use on the iPhone.
Another major development over the past year has been the introduction of our new Close-Out Monitor.
The system closely monitors margin levels to ensure that clients do not suffer runaway losses. n
We are constantly looking at ways to deliver advanced technology. Over the last year we have
introduced:
PureDeal
in Japan
Japanese clients can
seamlessly migrate to our
browser-based PureDeal
trading platform via the
FXOnline site.
ABC Trading
PureDMA
extrabet.com
The latest white label
offering from the Group
allows our partners to
brand the trading platform
in their colours and offer it
to clients.
Clients can trade straight
into the order book of
worldwide equity exchanges
using Direct Market Access
on our browser-based
PureDeal platform.
Our new sports platform
successfully integrates fixed-
odds, spread-betting and binary
prices, plus a casino, all on one
platform. This unique site is the
first of its kind in the world.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Social Responsibility 09
“
We believe that clients choose IG for our reputation.
In return, we have built a consumer-focussed business
with strong customer relationships
“
Corporate Social
Responsibility
Responsibility has been at the heart of our business since the Group’s inception in 1974. Over the years we
have demonstrated our belief in acting fairly, honorably and transparently with all our stakeholders, from
clients and employees to suppliers.
Educating our clients
We believe that clients choose IG for our reputation. In return, we have built a consumer-focussed business
with strong customer relationships and we commit to providing ongoing education throughout the
client’s trading life.
We also take seriously our commitment to the wider society and have taken a number of steps to reduce
our environmental footprint.
This year’s Corporate and Social Responsibility Report can be found within the Directors’ Report on
page 44.
Key initiatives in the past year
• Introduced Close-Out Monitor system to limit potential losses at no extra charge to the client;
• Increased online client education seminars with high customer satisfaction rating (over 80% rated
seminars 4/5 out of 5);
• Achieved the ISO 27001 security standard for Information Security;
• Continued our graduate recruitment programme;
• Paper statements reduced by 75%, representing more then half a million sheets of paper saved, in
addition to envelopes and printer cartridges;
• Improved recycling initiatives, including IT equipment; and
• Initiated free employee counselling service.
Engaging employees
IG is a rapidly growing company and provides a fast-moving and successful working environment. Our
employees have pride in what we have achieved and a strong sense of belonging.
This culture is reflected in a number of accolades awarded to the company last year:
• Britain’s Top Employer: named as one of the UK’s top 50 employers;
• Sunday Times’ Best Companies to Work for: listed as ‘One to Watch’ ; and
• Corporate Research Foundation: named as one of Britain’s Top Employers of 2009. n
IG Group Holdings plc
Annual Report and Financial Statements 2009
Partners
11
IG Markets and IG Index together have over
“
450 Introducing Brokers and Agents
“
Partners
With a range of partnership models, from straight referral through to full ‘white-labelling’ of our dealing
and back-office systems, our partner network creates significant ongoing revenue for the Group.
A global network
We have the power to bring our dealing technology to partners and their clients, and our scale, experience
and expertise enables us to support a vast network around the world. The year 2008/2009 has seen IG
expand its offering to partners who help to market our CFD and spread betting services.
Our white-label offering, including our generic brand, ABC Trading, has been significantly improved to give
a more flexible choice of solutions across numerous languages. We now offer partners fully or partly
branded online account opening, dealing platforms and statements. This allows partners to focus on new
revenue streams by using their contacts, sales and marketing resources, rather than investing time in expertise
and infrastructure.
IG Markets and IG Index together have over 450 Introducing Brokers and Agents, who generated revenue during
the past year. As our business expands overseas so does our network of partners, which continues to become
increasingly diverse, including advisors, online brokers, private client stockbrokers and wealth managers.
Partnering with IG
Our relationships are designed to be mutually beneficial, and we provide generous rebates to successful
partners. We offer our award-winning dealing platforms, plus our expertise in dealing, risk management
and client services. n
12
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Biographies
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Biographies
13
01 Jonathan Davie
Non-Executive Chairman, 62 years old
Jonathan qualified as a Chartered Accountant.
He joined George M. Hill and Co, a jobber on
the London Stock Exchange in 1969. The firm
was acquired by Wedd Durlacher Mordaunt and
Co where Jonathan became a partner in 1975.
Jonathan was the senior dealing partner of the
firm on its acquisition by Barclays Bank to form
BZW in 1986. Jonathan developed BZW’s Fixed
Income business prior to becoming CEO of the
Global Equities Business in 1991. In 1996 Jonathan
became Deputy Chairman of BZW and then Vice
Chairman of Credit Suisse First Boston in 1998
on their acquisition of most of BZW’s businesses.
Jonathan is presently a non-executive director of
Portland Gas plc and Chairman of First Avenue
Partners, an alternatives advisory boutique.
02 Tim Howkins
Chief Executive, 46 years old
Tim has a first class degree in Mathematics and
Computer Science from Reading. He qualified
as a Chartered Accountant with Ernst & Young
and is also a member of the Chartered Institute
of Taxation. Tim was one of a group of partners
and staff who left Ernst & Young in 1990 to form
Rees Pollock, a firm of chartered accountants
targeted at entrepreneurial, owner-managed
businesses. Tim was a partner in Rees Pollock
for seven years and was the partner responsible
for IG’s audit. He joined IG as Finance Director in
1999, and became Chief Executive in 2006.
03 Steve Clutton
Finance Director, 48 years old
Steve gained a first class degree in Chemistry
from Nottingham. After qualifying as a Chartered
Accountant with KPMG, he spent five years in
corporate finance with Barclays de Zoete Wedd.
In 1994 he joined British Telecom heading up its
internal corporate finance team before becoming
the Chief Financial Officer of BT’s international
business based in Virginia, USA. Between 2000
and 2004, Steve was Finance Director of Interoute
Communications Ltd, a private equity backed
supplier of telecoms services with operations
throughout Europe. Steve joined IG Group in
October 2006 from Barclays Bank plc, where he
was Finance Director of UK Retail Banking.
04 Peter Hetherington
Chief Operating Officer, 40 years old
Peter read Economics at Nottingham
University and has a Masters in Finance from
the London Business School. Peter was an
officer in the Royal Navy before joining
IG Index, as a graduate trainee, in February
1994. He became head of financial dealing in
1999 and was appointed a director of IG Group
in June 2002, since when he has performed
the role of Chief Operating Officer.
Directors’
Biographies
05 Andrew MacKay
Head of Asia Pacific, 43 years old
Andrew has a Masters in History from St Andrews
University and completed the Law Society Finals
examination at the College of Law in London. He
qualified as a lawyer with Linklaters and worked
there for seven years, principally in the litigation
and financial services practices. In 1998, Andrew
moved to LIFFE as market investigations manager
before joining the IG Group as Legal Counsel in
March 1999. Following the Group’s acquisition
of FXOnline in October 2008, Andrew moved to
Tokyo to assume the role of Head of Asia Pacific.
06 Sir Alan Budd
Non-Executive Director, 71 years old
Sir Alan was appointed a non-executive
director of IG Group in April 2005. He was Chief
Economic Adviser to the Treasury and head of
the government economic service between
1991 and 1997 and served as a member of
the Monetary Policy Committee of the Bank
of England between 1997 and 1999. Prior
to 1991, he was group economic adviser at
Barclays Bank and Professor of Economics at the
London Business School. He was chairman of
the Gambling Review Body and was Provost of
The Queen’s College, Oxford, until 2008. He is
Chairman of the Tax Law Review Committee.
07 Martin Jackson
Non-Executive Director, 60 years old
Martin was appointed a non-executive director of
IG Group and chairman of the Audit Committee
in April 2005. He was the group Finance Director
of Friends Provident plc between 2001 and 2003
and Friends Provident Life Office between 1999
and 2001. Prior to that, he was the group Finance
Director at London & Manchester Group plc from
1992 to 1998 up to the date of its acquisition by
Friends Provident Life Office. He is a non-executive
director and chairman of the Audit Committee of
Admiral Group plc and is a fellow of the Institute
of Chartered Accountants.
08 Robert Lucas
Non-Executive Director, 46 years old
Robert read Electrical Engineering at Imperial
College, London. He joined Marconi post
graduation until 1987, when he moved into
private equity investment with 3i plc. In 1996,
he joined CVC Capital Partners Limited and, in
2004, he became a Managing Partner. Robert
is a non-executive director of a number of
companies in which funds managed or advised
by CVC Capital Partners Limited or its affiliates
have invested, including AA/Saga. He became a
non-executive director of IG Group in 2003.
09 Nat le Roux
Non-Executive Deputy Chairman, 52 years old
Nat was Chief Executive of IG Group for four
years before becoming Non-Executive Deputy
Chairman in 2006. He initially joined the
group as Financial Dealing Director in 1992
after a varied career in futures broking and
stock broking. Nat holds an MA in Law
from Cambridge University and an MSc in
Anthropology from University College London.
He is an independent director of the London
Metal Exchange.
10 Roger Yates
Senior Independent Non-Executive Director,
52 years old
Roger joined the board as non-executive and Senior
Independent Director in February 2006. Roger read
Modern History at Worcester College Oxford, and
has 28 years’ experience in the fund management
industry as an investment professional and business
manager. Previously he was Chief Investment Officer
of Invesco Global and held senior roles for fund
management companies LGT and Morgan Grenfell.
He joined Henderson Global Investors as Chief
Executive in 1999, and in 2003 led the de-merger
of Henderson from its then parent AMP, becoming
Chief Executive of the resulting listed entity, now
Henderson Group plc, before retiring from this role in
November 2008. In June 2009, he also became a non-
executive director of F&C Asset Management PLC.
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IG Group Holdings plc
Annual Report and Financial Statements 2009
Chairman’s Statement
15
Revenue for the year was up 40% to £257m and diluted
adjusted earnings per share increased 22% to 24.7p
“
“
Chairman’s Statement
It is my pleasure to make this annual statement after another
successful year at IG. Our annual revenue has increased 40% to
£257m (2008: £184m) and diluted adjusted earnings per share
increased 22% to 24.7p (2008: 20.3p).
Whilst we have continued to grow our more established markets
in the United Kingdom and Australia, we have also taken further
steps in our strategy to diversify internationally. In October 2008 we
acquired FXOnline Japan KK and also opened our office in Milan. In
January 2009 we opened our office in Luxembourg.
IG’s continuing success reflects our investment in high quality
dealing platforms, an innovative broad range of products and
excellent customer service provided to our expanding client base.
Having made significant progress in penetrating new geographic
markets for our products, our aim for the forthcoming year is to
develop these to ultimately reach the scale that we have achieved in
the United Kingdom and Australia.
At the forthcoming AGM, your board will recommend the payment
of a final dividend of 11.0p per share. This will bring the total
dividend for the year to 15.0p, an increase of 25% on last year. This
represents a total dividend of approximately 60% of our earnings
for the year which is consistent with the policy that the board
announced two years ago. Our policy, which we will review from
time to time, is to continue to pay a similar percentage of our
earnings in future years.
Board Evaluation
This year your board decided to commission the Institute of
Chartered Secretaries and Administrators (‘ICSA’), an external
consultant, to conduct a full evaluation of the board in
accordance with the Principle 6.A of the Combined Code on
Corporate Governance.
The board has reviewed and agreed with the recommendations
made by ICSA, which I believe will lead to further improvements in
board performance in the future.
Remuneration
One matter which is understandably at the top of many investor
agendas is that of remuneration. Heretofore the Company has not
reviewed executive and non-executive basic remuneration on an
annual basis. The result is that both executive and non-executive
directors’ basic pay has fallen into the bottom quartile in most
relevant surveys.
After consultation with some of our leading shareholders, we have
agreed some increases which are set out in detail in the Annual
Report. We have also introduced an element of deferral into our
bonus structure, reflecting the FSA’s recent pronouncements on
remuneration best practice.
Henceforth it is the present intention of the Remuneration
Committee to review basic pay on an annual basis.
Non-Executive Directors
I am sorry to say that Sir Alan Budd has informed the board that
he wishes to step down as a non-executive director at a moment
which is convenient to the board.
Your board has accepted Sir Alan’s decision with understanding
and regret.
Sir Alan joined the IG board when the Company was floated on
the London Stock Exchange in April 2005. His highly distinguished
career in both Government and Business and the experience that
Sir Alan has brought to your board has been much valued. We will
miss his wise counsel.
We have commenced the process of finding a replacement for
Sir Alan. Later in our financial year, we will commence the search
for an additional independent non-executive director in order to
make progress to becoming more compliant over time with Code
Provision A3.2 of the Combined Code. We will provide a further
update in due course.
Our results for the past year could not have been achieved without
the dedication and skill of all our employees throughout the world.
I and my fellow directors would like to express our thanks to them
all for their personal contributions to these excellent results.
I and all my colleagues at IG look forward to working towards
ensuring another successful year for IG and its shareholders. n
Jonathan Davie, Chairman, 21 July 2009
IG Group Holdings plc
Annual Report and Financial Statements 2009
Chief Executive’s Report
17
Our growth has been driven by strong account
“
opening. Our financial businesses opened over
74,000 accounts during the year, up from 43,000
“
Chief Executive’s Report
Against a backdrop of chaos in financial markets worldwide,
and a severe global recession, we have achieved good levels of
growth in revenue and earnings per share. Our revenue grew by
40% this year, but that includes the impact of acquiring FXOnline
Japan KK (FXOnline) part way through the year. Organic growth,
excluding the impact of FXOnline, was 25%. Adjusted diluted
earnings per share increased by 22% (statutory diluted earnings
per share increased by 10%).
This growth was driven by strong account opening. Our financial
businesses opened over 74,000 accounts during the year,
compared to 43,000 in the previous year.
We have made good progress on our two key strategic objectives
of continuing to grow our market-leading UK business and
replicating that UK success internationally. Over the last three
years, we have progressed from operating in only two countries,
the UK and Australia, to having offices in 11 countries worldwide.
Over those three years we have grown revenue for our UK
financial business by 32% per annum compound. Three years
ago only 17% of our revenue came from outside the UK; in the
second half of this year this proportion had risen to 47% and our
non-UK businesses accounted for half of all accounts opened in
the year.
IG Index has long been recognised as the leader in the UK
spread betting market. This year IG Markets established a
market leading position in Contracts for Difference (CFDs) in
many of the countries in which we operate. Of particular note,
independent market research* has just confirmed that we are
now the most widely used primary CFD provider among active
CFD users in Australia. Our approach differs from that of some
of our competitors. We quote our CFD clients the underlying
market price and offer near-instantaneous execution, with
around 99% of client orders accepted. Unlike some of our
competitors we do not ‘re-quote’ and we are the only spread
betting or CFD provider (other than our own white label
partners) to offer Price Improvement whereby the benefit of
any significant favourable price movements in the market
between order and execution is passed on to clients. I believe
that this approach, of high quality, transparent, fair execution, is
the reason we have attained the position of market leader in so
many of the countries in which we operate.
During October we saw extreme volatility, the collapse in share
price of many banking stocks and a severe market crash. This
resulted in a high incidence of doubtful debts within our client
base. For the year as a whole our doubtful debt charge was
£18.2m, with over 80% of this charge arising in the first half. We
continue to pursue all of the outstanding debts vigorously and
we are beginning to achieve some recovery of amounts initially
fully provided for.
After October we changed our approach to managing credit
risk. The introduction of the close-out process provides a safety
net, closing out client positions before they owe us money.
Since we made these changes we have seen a second collapse
in the prices of banking shares in January and a significant fall
in global equity markets in late February and early March. Both
of these severe market events provided a good test for our new
approach to credit risk management and we incurred almost no
doubtful debts in either. This approach not only provides us with
protection from doubtful debts, but it also serves to protect and
preserve our client base by reducing client losses.
UK
Our UK financial business, which includes clients residing outside
the UK who choose to transact through the UK office, achieved
revenue of £150.6m, an increase of 9%. This sub-divides into
growth in spread betting of 15% and a fall of 3% in CFDs, the
latter revenue principally driven by the reduced activity of a
subset of the client base who trade long-only equity positions.
Throughout the year we saw a progressive shift in mix between
new clients for spread betting and CFDs, with an increasing
proportion of new accounts opened in the UK being for CFDs
rather than spread betting.
We have a programme of continual improvement of all of our
websites and have recently undertaken a complete redesign of
the igindex.co.uk website. g
* Investment Trends June 2009 CFD report
18
IG Group Holdings plc
Annual Report and Financial Statements 2009
Chief Executive’s Report
Europe
During the year we extended our coverage in Europe, opening
a small satellite office in Luxembourg and marketing into
Portugal from our office in Madrid. Together our European
offices produced revenue of £30.2m, an increase of over 300%.
In each of France, Spain and Italy we have established a very
clear market lead.
By the end of the year our European offices were contributing
13% of the Group’s monthly revenue.
Australia and Singapore
Our Australian business achieved revenue of £27.9m, up 12%.
The year ended strongly, with monthly revenue in April and
May higher than in any previous month of the year, despite
significantly lower volatility.
evolves. Our experience elsewhere in the world is that there is
significant price elasticity in forex, with volumes increasing as
spreads reduce. The evidence so far suggests that the same is
true in Japan.
As we have previously announced, the Japanese FSA undertook a
period of public consultation on proposals to restrict leverage for
retail forex in Japan. This consultation period has ended and the
FSA are now assessing the responses. We expect that within the
next few weeks they will announce the final form which any rules
to restrict leverage may take. Prior to the consultation period,
the FSA indicated that they intended that restrictions would not
come into force for at least a year, and not fully for two years. This
extended implementation timetable, if confirmed, will give us
considerable time to prepare.
A major objective in buying this business was to acquire a
platform from which to launch CFDs and binary options in
Our Australian business achieved
revenue of £27.9m, up 12%
Revenue for Singapore
was £9.5m, more than four
times the level achieved
in the previous year. Our
Singapore office has the
highest rate of account opening of any of the offices we have
established in the last three years, an impressive achievement
when considered relative to population.
“
Japan
We acquired FXOnline Japan KK (‘FXOnline’) in October 2008. In
its first eight months under our ownership it achieved revenue of
£28m and the acquisition was earnings enhancing.
FXOnline’s existing retail forex business faces challenges.
The competitive landscape has shifted significantly in the
last few months, with a number of competitors actively
marketing spreads of 1 pip or less on the most popular currency
pair – $/¥. To counter this competitive threat we moved to a
variable spread model at the beginning of June, so that we go
as low as 0.9 pip when underlying market spreads are tight.
This change has had some beneficial impact on volume and
revenues, but the feedback we have had indicates that Japanese
clients prefer a fixed spread model. Within the last few weeks
we began to introduce lower fixed spreads progressively across
the client base, initially targeting some larger clients who had
left us to obtain lower spreads elsewhere. The early indications
are that this has had a beneficial impact on revenues. The speed
and reliability of our dealing platform mean that we are well
equipped to compete in this low spread environment and we
will continue to adapt our offering as the competitive landscape
“
Japan, a country with a
very active speculative
trading culture. We
launched these products
progressively between
late March and early May.
Early take up has been encouraging and last month these new
products contributed more than 5% of our revenue from Japan.
The importance of these products has been recognised by
existing online brokers and we are in discussions with several
parties about establishing white label relationships. We are
currently the only provider of binary options in Japan and one
of only a handful of CFD providers. We are at a very early stage
but I believe we are well positioned to become a leading player
in these markets as they develop.
US
We achieved revenue of £2.3m in the US compared to £48k in
the previous year. The majority of the revenue came from our US
retail forex business, IG Markets Inc, which started to trade shortly
before the beginning of the financial year.
In December 2007 we acquired HedgeStreet, a US based,
CFTC-regulated, exchange. Since then we have been
progressively extending the range of contracts trading on the
exchange and have adapted our PureDeal dealing platform to
provide the front-end for members to trade on the exchange.
This development work culminated in the re-launch of the
exchange last month under the new name Nadex, the North
American Derivatives Exchange. Nadex offers two types of
contract: binary options, which have an all-or-nothing payout,
and spreads, which have a variable payout. Both types of
IG Group Holdings plc
Annual Report and Financial Statements 2009
Chief Executive’s Report
19
contracts are offered on equity index futures, forex, precious
metals and commodities; binary markets are also offered on
various economic indicators. Nadex is unique in that members
of the public in the US can, at no cost, become a member of the
exchange and then trade on it directly on its website, nadex.com.
We have made encouraging progress in each of our newer
offices and they all have scope for significant further growth.
Our main focus for the coming year will be on maximising the
recruitment, conversion and retention of clients in each of
the countries in which we operate.
We have made encouraging
progress in each of our newer offices
Our US product range now includes contracts analogous to the
most popular markets that we offer elsewhere. While we were
developing the product range and new front-end we did little
marketing for the exchange. Now that the Nadex offering is
complete we have, over the last few weeks, begun to increase
marketing and public
relations activity. Our
research indicates that
there is a gap in the
market in the US for a
simple, limited risk, easily
accessible way of trading
the financial markets. The early reaction we have had from
exchange members and the press has been encouraging.
“
Sport
Our sports business, which represents less than 4% of group
revenue, saw a 24% decline in revenue to £8.7m. This fall was
mainly attributable to the loss of a number of larger clients,
who have curtailed their sports betting activity in the current
economic environment.
Towards the end of the year we combined our two sports websites
and re-launched them with a new dealing interface under the
extrabet.com brand. The extrabet.com website is unique in offering
sports spread betting, fixed odds and binary betting from a single
platform. With all three forms of betting, the client has the ability
to close out a bet so as to lock in a profit or mitigate a loss before
the end of the event. Client and press reaction to the new site and
dealing interface have been overwhelmingly positive and the early
signs are that we are achieving greater take up of sports spread
betting by new clients as a result.
Future developments
Over the last three years our main focus has been on
extending our geographic reach and we now have
businesses in most of the major economies worldwide
where regulation permits us to operate. We will open an
office in Sweden within the next few months. We are not
currently planning further office openings, but will continue
to monitor regulatory and other developments in a number
of potential markets.
Alongside our direct offering to retail clients we continue to
develop our network of introducers and white label partners.
This network provides us with access to established pools
of clients on a revenue sharing basis, with no cost of client
acquisition. We have established white label partnerships
in a number of countries
in recent months and are
in discussions with several
more potential partners. We
expect these partnerships to
become a more significant
source of revenue in the
“
coming year. We continue to develop the tools to allow our
partners to offer our services in a variety of different ways.
Current trading and outlook
The new financial year has started well, despite subdued
market volatility. It remains difficult to predict future trends
in volatility or customer reaction to changing market and
economic conditions. We face challenging comparatives in
the first half of this year, particularly in the second quarter, as
our revenue last year was boosted by the volatility caused by
the extraordinary market events of September and October.
This has been a challenging year for most businesses,
including ours. However, I believe we emerge from it
in good health, with improved risk management and a
strong competitive lead. Our longer-term growth trajectory
continues to be underpinned by good levels of account
opening and I remain confident about the prospects for the
coming year. n
Tim Howkins, Chief Executive, 21 July 2009
20
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review
Group Operating
and Financial Review
for the year ended 31 May 2009
Introduction
The Accounting Standards Board issued Reporting Statement:
Operating and Financial Review in January 2006. This statement
does not have mandatory force and is not an accounting
or reporting standard. The directors have considered the
recommendations of this reporting statement as appropriate in
producing this operating and financial review (OFR). A discussion
of the Group’s performance and future prospects has been
included in the Chief Executive’s Report.
In applying this framework, the directors believe that they have
adequately discharged their responsibilities under Section
417(3) of the Companies Act 2006 to provide a balanced and
comprehensive review of the development and performance of
the business.
Nature, objectives and strategies
The Group’s businesses
The Group has operated in two principal areas of activity
throughout the year: financial and sport.
Financial
Contracts for Difference (CFDs), spread bets and exchange traded
futures on equities, equity indices, precious and base metals, soft
commodities, exchange rates, interest rates and other financial
markets. Exchange traded options and CFDs and spread bets on
options on certain of these markets. Financial binaries, including
exchange traded and OTC binary options and fixed odds bets on
many of these markets. The operation of a regulated futures and
options exchange.
Sport
Spread bets and fixed odds bets on sporting and other events
and the operation of an online casino.
Business objective
The Group’s objective is to maximise shareholder value by
pursuing the following strategies:
• Maintaining a leading position in the markets in which the
Group operates;
• Continuing to broaden the client base;
• Expanding the Group’s international reach; and
• Continuing to deliver product and technological innovation.
Business strategies
The Chief Executive’s Report provides an overall assessment of
the Group’s progress during the year and prospects for the future
with reference to the business strategies outlined below.
Maintaining a leading position in the markets
in which the Group operates
The Group is widely recognised as the market leader in the UK
financial spread betting market. It also has a market leading
position in a number of the countries where it offers CFDs. The
Group’s strategy is to continue to strengthen market position by
offering the broadest range of products and by offering quality
and speed of execution.
Continuing to broaden the client base
The Group continues to broaden the client base, both directly
and through introducers, from what has historically been a
relatively narrow but sophisticated group of predominantly retail
clients. This includes attracting a greater proportion of leisure-
oriented clients for the Group’s fixed odds offerings and more
market professionals and institutional clients for its CFD business.
Further developing the business of market making on betting
and financial exchanges, as well as white-labelling opportunities
(where the Group’s products are branded and distributed
in the name of third parties), will extend the reach of the
Group’s products.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review 21
Nature, objectives and strategies (continued)
Expanding the Group’s international reach
The Group continues to expand its non-UK client base and in the year ended 31 May 2009 revenue from non-UK clients grew to 43%
of total revenue (2008: 27%). It has been a significant year for international expansion with the acquisition of FXOnline Japan KK in
October and the opening of offices in Luxembourg and Milan. A Portuguese desk was launched from our Madrid office and a number
of white label arrangements were established, most notably in France with two of the country’s leading online stockbrokers, providing
access to extensive client bases. Shortly after the year end, the Group re-launched its US based CFTC-regulated exchange under the
new name North American Derivatives Exchange (Nadex) with an expanded product set. Nadex is the only regulated, retail-focussed,
online futures exchange in the US. The Group will continue to explore the feasibility of other branches or offices where local regulation
permits and market conditions are suitable. In addition, the Group continues to extend the range of third parties who introduce clients
to the Group and this is an effective way of establishing a presence for the Group’s regulated financial business in territories which do
not merit the establishment of a local office. The Group has a complete CFD offering, including website, dealing application, customer
support and telephone dealing in nine languages, in addition to offering a website and dealing application in a small number of
additional languages.
Continuing to deliver product and technological innovation
The Group recognises the benefits it has experienced as a result of the introduction of innovative products. During the year, a new
charting package was launched providing clients with the facility to monitor trends and set parameters to trade from charts.
February and March saw the launch of PureDeal (our browser-based financial dealing platform) and CFDs respectively in Japan.
The introduction of automated margin calling and the close-out monitor process has led to a significant reduction in the number of
clients going into deficit and has allowed a reduction in margin requirements on forex and index products. This culture of innovation
is one which the Group intends to maintain in order to continue to be at the forefront of the market in terms of product offering and
technology platforms.
Five year summary
Revenue
EBITDA2
EBITDA margin2
Profit before taxation (adjusted)3
Profit before taxation (statutory)
Diluted earnings per share (adjusted)3,4
Diluted earnings per share (statutory)
Normalised earnings per share2
Interim dividend paid per share
Final dividend proposed per share
Total dividend per share
Year ended 31 May
2009
IFRS
£000
257,089
131,086
51.0%
125,872
111,259
24.74p
22.31p
N/A
4.0p
11.0p
15.0p
2008
IFRS
£000
184,008
98,493
53.5%
96,990
96,990
20.28p
20.28p
N/A
3.0p
9.0p
12.0p
2007
IFRS
£000
121,990
70,351
57.7%
68,894
68,894
14.52p
14.52p
N/A
2.0p
6.5p
8.5p
2006
IFRS
£000
89,391
52,626
58.9%
51,140
51,140
10.88p
10.88p
N/A
1.5p
4.0p
5.5p
20051
IFRS
£000
62,177
34,949
56.2%
16,621
16,621
5.41p
5.41p
6.75p
–
–
–
1 Figures reported for 2005 were re-stated to reflect changes in accounting policies brought about as a result of the Group’s adoption of International Financial Reporting
Standards (IFRS).
2 EBITDA, EBITDA margin, and normalised earnings per share are defined and explained in the key performance indicators commentary.
3 Excludes amortisation and impairment of intangibles arising on consolidation.
4 A reconciliation to statutory earnings per share is provided in note 11 of the financial statements.
22
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review
Group revenue
Group revenue by business segment
The Group operates in two business segments: financial and sport.
Financial
Sport
2009
£000
Increase/
(decrease)
%
2008
£000
248,346
8,743
172,475
11,533
44.0%
(24.2%)
257,089
184,008
39.7%
Group revenue by geographical segment
The geographical analysis classifies revenue according to client location reflecting the increasing proportion of revenue derived from
outside the UK.
United Kingdom
Europe
Asia Pacific
Rest of World
2009
£000
147,471
39,530
65,500
4,588
2008
£000
Increase
%
134,713
20,396
27,371
1,528
9.5%
93.8%
139.3%
200.3%
257,089
184,008
39.7%
Proportion of revenue from non-UK clients
42.6%
26.8%
Certain clients choose to transact through an office that is outside their country of residence. Analysis of revenue by office is
reconciled to revenue by location of client as shown below:
2009
Location of client
United Kingdom
Europe
Asia Pacific
Rest of World
Total
Financial
Sport
Total
Location of office
United
Kingdom
£000
147,402
9,475
172
2,255
Europe
£000
34
30,039
8
90
Asia
Pacific
£000
35
14
65,178
97
Rest of
World
£000
–
2
142
2,146
Total
£000
147,471
39,530
65,500
4,588
159,304
30,171
65,324
2,290
257,089
150,561
8,743
30,171
–
65,324
–
2,290
–
248,346
8,743
159,304
30,171
65,324
2,290
257,089
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review 23
Group revenue (continued)
Group revenue by geographical segment (continued)
2008
Location of client
United Kingdom
Europe
Asia Pacific
Rest of World
Total
Financial
Sport
Total
Group profit
Financial
Sport
Result before unallocated items
Unallocated administrative expenses
Unallocated finance revenue
Unallocated finance costs
Profit before taxation
Location of office
United
Kingdom
£000
134,125
13,606
225
1,350
Europe
£000
538
6,739
1
22
Asia
Pacific
£000
10
51
27,145
148
149,306
7,300
27,354
137,773
11,533
7,300
–
27,354
–
149,306
7,300
27,354
Rest of
World
£000
40
–
–
8
48
48
–
48
Total
£000
134,713
20,396
27,371
1,528
184,008
172,475
11,533
184,008
2009
£000
150,476
1,893
152,577
(42,319)
2,828
(1,619)
Increase/
(decrease)
%
2008
£000
126,265
1,892
128,157
(34,584)
4,100
(683)
19.2%
0.0%
19.1%
22.4%
(31.0%)
137.0%
111,259
96,990
14.7%
24
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review
Key performance indicators
The Chief Executive’s Report provides an overall assessment of the Group’s progress during the year and prospects for the future.
The directors have assessed that the following key performance indicators, together with revenue, EBITDA, EBITDA margin, and
earnings per share, are the most effective measures of progress towards achieving the Group’s strategies and as such towards fulfilling
the Group’s business objectives.
Financial *
Number of clients dealing
Average revenue per client (£)
Number of accounts opened
Number of accounts dealing for the first time
Sport
Number of clients dealing
Number of accounts opened
Number of accounts dealing for the first time
Volatility of daily revenue
Coefficient of variability at 31 May
Average for the year
Highest in year
Lowest in year
2009
2008
Increase/
(decrease)
%
88,336
2,495
61,538
44,291
19,246
13,309
10,661
0.37
0.51
0.70
0.36
56,291
3,064
42,693
29,211
15,860
10,401
8,102
0.53
0.55
0.69
0.45
56.9%
(18.6%)
44.1%
51.6%
21.3%
28.0%
31.6%
(30.1%)
(7.3%)
1.4%
(20.0%)
*FXOnline has been excluded to aid the year on year comparison. Including FXOnline: the number of clients dealing was 112,282; the average revenue per client was £2,212;
the number of accounts opened was 74,331; the number of accounts dealing for the first time was 50,364.
Number of clients dealing
Revenue is determined to a significant extent by the number of clients dealing.
The number of financial clients dealing increased by 57% compared with the previous year. This reflects the underlying growth of the
business driven by increased penetration of new and existing markets. In addition, increased levels of market volatility seen during the
year will have encouraged clients to trade. For example, the Vix Volatility Index rose from 19.8 on 1 June 2008 to 89.5 in October 2008,
a record month for both revenue and number of clients trading.
The number of sports clients dealing directly with IG increased by 21% compared with the previous year.
Average revenue per financial client
Average revenue per financial client (total revenue divided by the number of clients dealing) varies significantly for different products
and geographies. The 19% reduction in the overall average reflects changes in the business mix during the year and the impact of
market volatility. The extraordinary levels of market volatility, in particular during the three months ended November 2008, led to
record levels of client recruitment and a spike in the number of clients dealing. The newly recruited clients trading during this period
have tended to churn at a higher rate than normally experienced, having a detrimental impact on the simple average.
Number of accounts opened and dealing for the first time
Over the long term, the growth of IG’s client base is a key driver of revenue growth. The number of accounts opened and the number
of accounts dealing for the first time in the financials business increased by 44% and 52% respectively compared with the previous
year and are leading indicators of future prospects. The increases seen in the financials business reflect international diversification and
the favourable impact of sustained high levels of market volatility which drives account opening and encourages clients to trade.
Volatility of daily revenue
The coefficient of variability of daily revenue is a statistical measure of the volatility of the Group’s revenue from day to day. The Group
calculates this as the 60-day standard deviation of daily revenues divided by the 60-day mean. Over recent years the coefficient of
variability has been consistently low reflecting the Group’s policy of maintaining low volatility of its revenues and thus maintaining
high quality of earnings. The Group has a formal risk policy which includes limits, or a methodology for setting limits for every single
financial market which the Group trades. Despite greatly increased volatility in financial markets during the year, coefficient of volatility
has continued the past trend and fallen year on year.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review 25
Key performance indicators (continued)
EBITDA and EBITDA margin
EBITDA represents earnings before exceptional administrative costs, depreciation, amortisation of intangible assets, amortisation and
impairment of intangibles arising on consolidation, amounts written off property, plant and equipment and intangible assets, taxation,
interest payable on debt and interest receivable on corporate cash balances and includes interest receivable on clients’ balances less
interest payable to clients. The net interest receivable on client balances is considered to be part of the normal activities of the Group
and is therefore included in EBITDA.
EBITDA margin represents EBITDA as a percentage of revenue.
The Group’s capital structure changed significantly in September 2003 when the Company raised significant debt and preference
shares in order to finance the purchase of IG Group plc by IG Group Holdings plc. This acquisition gave rise to significant goodwill. The
Group’s capital structure changed again in May 2005 when this debt and preference shares were repaid at the time of the Company’s
initial public offering (IPO). To facilitate comparison of business performance over time the Group uses EBITDA as a primary profit
measure. The Group seeks to achieve rapid growth in EBITDA, and bonuses for most staff other than directors of the Company are
linked to EBITDA.
Operating profit
Net interest on client balances
Depreciation
Amortisation of intangible assets
Amortisation of intangible assets arising on consolidation
Amounts written off property, plant and equipment and intangible assets
EBITDA
EBITDA margin
2009
£000
102,450
7,600
5,402
984
14,613
37
2008
£000
83,350
10,221
4,016
782
–
124
131,086
98,493
51.0%
53.5%
EBITDA for the year was £131.1m, a 33% increase on the prior year. This growth was driven by the increase in revenue, partially offset by
a substantial increase in the charge for impairment of trade receivables leading to a reduced EBITDA margin in the year under review
to 51.0% from 53.5%. EBITDA margin in the second half of the year increased to 54.2% from 47.7% in the first half, reflecting a much
reduced impairment of trade receivables charge in the second half of the year following changes made to reduce client credit risk.
Earnings per share
The Group seeks to maximise the growth in earnings per share over time in order to maximise shareholder value. The Group’s Long
Term Incentive Plans (LTIPs) and directors’ bonuses are linked to growth in diluted adjusted earnings per share and growth in the
Company’s share price. Further details of LTIPs and directors’ bonuses are set out in the directors’ remuneration report and note 25 to
the financial statements.
Diluted adjusted earnings per share were 24.74p compared with 20.28p in the previous year, an increase of 22.0%.
In order to facilitate comparison of performance between periods the Group uses diluted adjusted earnings per share (EPS) as its
primary measure of EPS. Diluted adjusted EPS represents adjusted earnings divided by the number of ordinary shares in issue and to
be issued. Adjusted earnings comprise earnings excluding amortisation and impairment of intangibles arising on consolidation net of
taxation and minority interests.
The directors consider that the basic and diluted earnings per share calculations for the years ended 31 May 2005 and prior does
not fully reflect changes in the Group’s capital structure referred to above. In order to facilitate comparison of performance over the
periods to 31 May 2005, normalised earnings per share was established. Normalised earnings per share were not calculated for the
year ended 31 May 2006 or subsequently.
Normalised earnings per share represents earnings adjusted for normalising items, divided by the number of ordinary shares in issue
and to be issued, adjusted for normalising items. Normalising adjustments to earnings comprise the impact, net of tax, of exceptional
administrative costs, interest and charges on debt finance, redeemable preference share interest payable and tax items relating to the
financing structure. Normalising adjustments to the number of shares comprise the impact of restating the weighted average number
of ordinary shares in issue prior to a subdivision and re-designation on 31 May 2005 to the equivalent weighted average number of
ordinary shares in issue in the period and treating the issue of new ordinary shares at the time of the Company’s flotation as if it had
taken place prior to 1 June 2002.
26
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review
Employees
The Group’s continued growth is highly dependent upon attracting and retaining high calibre employees.
The Group pays performance-related bonuses to all staff and has made awards under LTIPs to key personnel. In addition, the
opportunity to acquire shares under various Share Incentive Plans (SIPs) has been made available to all UK and Australian staff, with a
further plan to be introduced to USA staff in the year to 31 May 2010. These awards reward employees for past performance and help
to retain them in the future. The Group provides a range of benefits to its employees, including pension contributions, and private
health cover.
The average number of employees in the Group increased in the year from 551 to 761, in part reflecting the acquisition of FXOnline. At
the year end approximately 30% of staff were based overseas (2008: 20%).
The Group aims to provide a challenging and rewarding working environment. A significant proportion of the employment cost
consists of performance-related bonuses and commissions which vary according to revenue, profitability or earnings per share
growth. The majority of employees are in a pool scheme that is driven by the overall profitability of the Group and allocated on a
discretionary basis. Other staff are in specific schemes driven by formulae related to earnings per share growth or elements of group
revenue and profits.
Inclusive of national insurance and pension costs, employment costs comprise:
Fixed employment costs
Performance-related bonuses and commissions
Share based payment schemes
Performance-related bonuses and commissions are further split as follows:
Pool scheme
Specific schemes
2009
£000
40,165
10,661
3,256
2008
£000
27,768
15,971
4,716
54,082
48,455
2009
£000
5,136
5,525
2008
£000
10,157
5,814
10,661
15,971
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review 27
Financial position
Property, plant and equipment
The Group continues to invest heavily in technology in order to enhance its capacity and resilience which are critical to the success
of the business. During the year, the Group completed the fit out of its disaster recovery location in Hayes, Middlesex and additional
office space was taken in London, Europe and the USA all requiring fit-out expenditure. In total, additions during the year amounted to
£5.1m compared with £5.7m in the previous year. Depreciation charged in the year amounted to £5.4m (2008: £4.0m).
Intangible assets
Goodwill at the start of the year principally comprised that arising on the acquisition of IG Group plc and its subsidiaries in 2003. The
increase in goodwill during the year of £107.0m to £217.0m reflects the acquisition of FXOnline. Goodwill has been capitalised and
under the provisions of IFRS is subject to an annual impairment review. There were no impairment write-offs in the year.
Expenditure on other intangible assets amounted to £46.0m of which £43.5m related to FXOnline trade name and customer
relationships. These are being amortised using the sum of digits method over their useful lives of two and five years respectively.
Amortisation charged in the year amounted to £15.6m (2008: £0.8m).
Working capital
An explanation of the liquidity exposure faced by the Group and the management of this risk is included in note 30 to the financial
statements. The working capital position at the year end was as follows:
Amounts due from brokers
Amounts due from clients
Cash and cash equivalents
Amounts due to clients
Other current net liabilities
Net working capital
2009
£000
2008
£000
178,261
4,824
520,421
(511,656)
(58,958)
252,522
10,801
471,722
(582,689)
(37,533)
132,892
114,823
Amounts due to and from clients include unrealised profits/losses on clients’ open positions, profits/losses on closed positions as well
as the cash balance on clients’ accounts. The Group hedges the vast majority of clients’ open positions in the financials business and
amounts due from brokers represent cash or treasury bills placed with counterparties in order to provide initial and variation margin to
support these positions. Net working capital increased by £18.1m during the year. Excluding the impact of FXOnline which accounts
for £28.5m of the balance at the year end (2008: £nil), net working capital decreased by £10.5m.
The Group offers credit only to a minority of clients. A charge for impairment of trade receivables (amounts due from brokers and
clients) is established where there is objective evidence of non-collectability. Reference is made to an aged profile of debt and the
provision is subject to management review. The charge for the year was approximately 7.1% of revenue (2008: 2.2%), reflecting
the higher incidence of doubtful debts resulting from extreme market volatility in October 2008. The Group continues to pursue
outstanding debts vigorously.
At the year end, the Group had total committed bank facilities of £154.4m (2008: £200.0m), none of which were drawn. Facilities of
£120.0m (2008: £160.0m) are to provide short-term liquidity as necessary and facilities of £34.4m (2008: £40.0m) provide for paperless
settlement of share transactions (CREST).
Extraordinary movements in world markets during October 2008 coincided with large cash payments in respect of the final dividend
(£29.6m) and the acquisition of FXOnline (£40.6m net of share placing proceeds). This resulted in a short term funding requirement to
meet the Group’s payment obligations to market counterparties and profit making clients before payment was received from losing
clients. Consequently the Group utilised its committed bank facilities for a period of 18 days, which were drawn to a peak of
£88m of an available £160m.
Cash flow
Cash and cash equivalents (before the effect of exchange rates) increased by £34.4m during the year, reflecting the cash generative
nature of the business. The most significant cash outflow during the year was £121.6m in respect of the acquisition of FXOnline, part
funded by a share placing which raised £81.0m in cash net of issue costs. Other outflows included £20.3m for taxation (2008: £29.5m);
£44.0.m for dividends (2008: £31.1m) and capital expenditure of £8.0m (2008: £6.2m).
The Group holds client money on account in segregated bank accounts which at the year end amounted to £421.0m compared with
£369.0m in the previous year.
28
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Operating and Financial Review
Financial position (continued)
Capital structure
Equity share capital
Share premium
Other reserves
Retained earnings
Shareholders’ equity
Minority interests
Total equity
Redeemable preference shares
Total liabilities
2009
£000
18
206,246
45,281
141,819
393,364
2,549
2008
£000
16
125,235
11,576
107,849
244,676
40
395,913
244,716
40
40
40
40
During the year, 4,218,970 ordinary shares with an aggregate nominal value of £210 were issued following the exercise of Long Term
Incentive Plan awards for a consideration of £210. In addition, 27,864,407 ordinary shares with an aggregate nominal value of £1,393
were issued in a share placing at a price of £2.95 raising £82.2m excluding issue costs of £1.2m.
The Group remains debt free except for preference shares. Own shares held in Employee Benefit Trusts were purchased to satisfy future
obligations of the SIP awards.
Dividend policy
The Company’s dividend policy is for the dividend payout proportion to be approximately 60% of earnings (based on diluted adjusted
EPS). This policy will be kept under review, but the Company’s current intention is to pay out a similar proportion of earnings in the
future.
During the year the Company paid an interim dividend of 4.0p per share amounting to £14.4m. The final dividend for 2009 proposed
for approval by shareholders at the AGM is 11.0p per share which will amount to £39.6m taking the total dividends for the year to
£54.0m. This represents a dividend cover of 1.6, consistent with prior year.
Regulatory capital
Three of the Group’s UK operating subsidiaries are regulated by the FSA. The FSA imposes a minimum level of regulatory capital which
must be retained by each Company and also an overall level of regulatory capital which must be maintained by the Group.
At 31 May 2009 the Group had an overall consolidated FSA regulatory capital surplus as disclosed in note 30 to the financial
statements of approximately £81m (2008: £67m).
On behalf of the Board
Steve Clutton, Finance Director, 21 July 2009
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Governance 29
Corporate Governance
The Board recently commissioned the board evaluation team of
the Institute of Chartered Secretaries and Administrators (“ICSA”)
to carry out a thorough evaluation of the performance of the
Board. ICSA’s board evaluation report (the “report”) has found that
the performance of the Board is towards the upper quartile of
public company boards generally. It acknowledged that
“the Group has a Board whose members appear well qualified
and appropriate to manage the shareholders’ interests”, and
the team recognised the value of having experienced non-
executives on the Board during times of turbulent economic and
market conditions.
Nevertheless the report also recommended that the Board
take heed of institutional investors who were concerned with
the Group’s non-compliance with A3.2 of the Combined Code
by appointing an additional independent non-executive
director. Notwithstanding the Board’s stance that the three
independent non-executive directors are of sufficient calibre and
number that their views carry significant weight in the Board’s
decision making, the Board has decided to recruit an additional
independent director later in the financial year after first seeking
a replacement for Sir Alan Budd, who has indicated to the Board
his intention to retire.
Brief biographies of the directors appear on pages 12 and 13.
Statement by the directors in
compliance with the Combined Code
The Board is satisfied that the Group complied with the
provisions of the Combined Code on corporate governance,
issued by the Financial Reporting Council in June 2008, for the
whole year, with the exception that the Group was not compliant
with paragraph A3.2 throughout the year.
Paragraph A3.2 of the Combined Code requires that at least half
of the Board, excluding the Chairman, are independent non-
executive directors. The Board is currently comprised of four
executive directors and four non-executive directors excluding
the Deputy Chairman and the Chairman.
The Deputy Chairman, Nat le Roux is considered a non-
independent director as he is a former Chief Executive of the
Group. The Board considers the value he brings with
17 years’ experience in the uniquely specialised market of
spread betting and retail contracts for difference justifies his
position on the Board and is in the best interests of the Group
and the shareholders.
Robert Lucas, is considered to be a non-independent non-
executive director as he represents funds managed or advised by
CVC Capital Partners Limited and associates (“CVC”), a substantial
shareholder, holding 8.4% of the ordinary share capital of the
company at 31 May 2009 (2008: 7.7%). Robert has been involved
with the IG Group since 2003 and consequently has a detailed
knowledge of the company and its businesses. He is valued for
his challenging participation at Board meetings, and his deep
private equity experience is highly regarded by the independent
non-executive directors. On balance weighing up all the
considerations and the best interests of the shareholders the
Board considers that Robert’s presence on the Board is a positive
asset to the IG Group.
30
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Governance
The workings of the Board and
its Committees
The Board
The division of responsibilities between the Chairman and
the Chief Executive is clearly defined in writing and has been
approved by the Board.
The Board is responsible to shareholders for the proper
management of the Group. A statement of the directors’
responsibilities in respect of the financial statements is set out on
page 49 and a statement regarding the use of the going concern
basis in preparing these financial statements is given on page 47.
The Board has a formal schedule of matters specifically reserved
to it. These include:
• setting Group strategy;
• approving major acquisitions, divestments and capital
expenditure;
• approval of extension of the Group’s activities into new business
or geographic areas;
• approving annual budgets;
• reviewing operational and financial performance;
• reviewing the Group’s systems of internal control and risk
management;
• approving Board, Board Committee and Company Secretary
appointments;
• ensuring adequate succession planning for the Board and
senior management;
• defining and setting Board Committee terms of reference;
• approving policies relating to directors’ remuneration and the
severance of directors’ contracts;
• setting risk appetite and approving any changes to the Group’s
risk management policy which materially increase the risk
profile of the Group; and
• receiving reports on the views of the Company’s shareholders.
Matters not specifically reserved to the Board are delegated to
the executive directors. These include:
• the development and recommendation of strategic plans for
the Group;
• implementation of the strategies of the Group;
• day to day monitoring of the operating and financial results of
the Group;
• prioritising the allocation of capital, technical and human
resources; and
• developing and implementing risk management systems,
policies and procedures.
All directors have access to the advice and services of the
Company Secretary, who is responsible to the Board for ensuring
that board procedures are followed and that applicable rules
and regulations are complied with. Directors receive appropriate
training as necessary when they are appointed. Training on the
duties and responsibilities of directors is provided by the Group’s
legal advisers.
The Group purchases appropriate liability insurance for all
directors and staff.
The Board meets regularly; at least five times a year. In addition
the Board meets when necessary to discuss ad hoc emerging
important issues that require consideration between regular
board meetings. The non-executive directors have a particular
responsibility to ensure that the strategies proposed by the
executive directors are appropriate and fully considered. To
enable the Board to discharge its duties, all directors receive
appropriate and timely information. Briefing papers are
distributed to all directors in advance of board meetings and
financial information is distributed monthly. The Chairman
ensures that the directors take independent professional advice
as required.
The following committees deal with specific aspects of the
Group’s affairs:
Remuneration Committee
The Remuneration Committee comprises Roger Yates (Chair),
Sir Alan Budd, Jonathan Davie and Martin Jackson, who are all
independent directors. It makes recommendations to the Board,
within agreed terms of reference, on an overall remuneration
package for executive directors in order to attract, retain and
motivate high quality directors capable of achieving the Group’s
objectives. Consideration is given to pay and employment
policies elsewhere in the Group, especially when determining
annual salary increases. The Committee determines the contract
terms, remuneration and other benefits for each of the executive
directors, including performance-related bonus schemes,
pension rights, compensation payments and contingent share
awards. The Committee approves all share-based awards under
the Group’s LTIP and SIP schemes and approves the remuneration
of the Chairman. The Board itself determines the remuneration of
the other non-executive directors.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Governance 31
Summary of main activities undertaken by the Audit Committee
during the financial year:
• reviewed the annual report and interim results of the Group;
• reviewed and approved key regulatory documents produced
by the Group – Internal Capital Adequacy Assessment Process
(ICAAP) and Capital Requirements Directive (CRD), Pillar 3
(Disclosures) prior to formal approval by the Board;
• reviewed the external auditors’ audit planning and other
reports, proposed audit fees and performance of the external
auditors including their independence and objectivity;
• reviewed the policy on the use of external auditors for non-
audit services and reviewed all non-audit services provided by
the external auditors to ensure compliance with the policy as
part of the safeguards in place to ensure the independence of
the audit is not compromised;
• reviewed the effectiveness of the Group’s internal controls and
risk management systems;
• reviewed the effectiveness of the Group’s internal audit function
including a review of the three-year rolling internal audit
plan, individual internal audit reports and the report on the
implementation of internal audit recommendations;
• reviewed reports from the compliance functions;
• reviewed the effectiveness of the Group’s implementation of
the FSA’s Treating Customers Fairly (TCF) requirements;
• reviewed the Company’s procedures for detecting internal
fraud; and
• reviewed the Group’s whistle-blowing arrangements.
In addition, the members of the Audit Committee meet privately
in separate meetings with Head of Internal Audit, Head of
Compliance and external auditors to focus on respective areas
of responsibility and to discuss any potential issues where
support from the Audit Committee may be required to address
any issues arising.
The Audit Committee members also received presentations
from IT production, IT development and the Sports department
during the course of the financial year as part of an on-going
programme to provide them wit h more in-depth knowledge of
the operations of the business.
Following each meeting the Committee reports to the Board on
its activities.
The workings of the Board and
its Committees (continued)
Audit Committee
The Audit Committee members comprising Martin Jackson
(Chair, with recent and relevant financial experience), Roger Yates
and Sir Alan Budd are all independent non-executive directors.
The Finance Director, Group Financial Controller, Head of Internal
Audit, Head of Compliance, Company Secretary and the external
auditors attend the Audit Committee by invitation appropriate
to the matters under consideration. Other directors,
representatives from the finance function and other areas of the
business attend the Audit Committee as and when required.
The Audit Committee normally meets four times a year and as
and when required.
The main duties of the Audit Committee are:
• to monitor the integrity of the financial statements of the
Group including annual and interim reports, preliminary results
announcements and any other formal announcements relating
to its financial performance, reviewing significant issues and
judgements contained therein;
• to keep up to date with changes to Accounting Standards and
to review any changes to accounting polices year on year;
• to consider and make recommendations to the Board on the
appointment, re-appointment and removal of the company’s
external auditors, which is subject to shareholder approval;
• to review the effectiveness of the Group’s internal controls and
risk management systems;
• to monitor and review the effectiveness of the Group’s internal
audit function;
• to review the overall effectiveness of the Group’s
implementation of the FSA’s Treating Customers Fairly (TCF)
requirements; and
• to review the Group’s arrangements for its employees to raise
concerns, in confidence, about possible wrongdoing in financial
reporting or other matters.
The Company Secretary drafts the agenda for each Audit
Committee, ensuring that each item in the terms of reference
is covered at least once in the financial year and more frequently
if required, which is then finalised by the Chair of the
Audit Committee.
During the financial year the focus has been on keeping up to
date with changes in Accounting Standards, developments in
financial and corporate governance reporting requirements
and developments in the FSA’s Disclosure and Transparency
Rules (DTR).
32
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Governance
The workings of the Board and its Committees (continued)
Nomination Committee
The Nomination Committee considers appointments to the Board and meets as necessary. The Nomination Committee is responsible
for nominating candidates to fill board vacancies and for making recommendations on board composition and balance.
The Committee leads the process for making appointments to the Board or where the appointee is likely to become a board member.
The Committee ensures there is a formal, rigorous and transparent procedure for the appointment of new directors to the Board
through a full evaluation of the skills, knowledge and experience of candidates. The Committee also ensures plans are in place for
orderly succession for appointments to the Board, and to other senior management positions. Responsibility for making senior
management appointments is vested in the Chief Executive.
The membership of these committees was as follows:
Audit Committee
Remuneration Committee
Nomination Committee
Martin Jackson (chair)
Sir Alan Budd
Roger Yates
Roger Yates (chair)
Sir Alan Budd
Jonathan Davie
Martin Jackson
Jonathan Davie (chair)
Sir Alan Budd
Martin Jackson
Roger Yates
Copies of the terms of reference of these committees can be obtained from the Company Secretary on request and are available in the
investor relations section of the Group’s website, www.iggroup.com.
Relations with shareholders
The Board recognises the importance of communications with shareholders. The Chairman’s Statement, Chief Executive’s Report and
Operating and Financial Review include detailed reviews of the business and future developments. There is regular dialogue with
institutional shareholders including presentations by management around the time of the Company’s preliminary announcement of
the year-end results and at the half year. These presentations are made available on the Group’s website at www.iggroup.com which
also provides information to shareholders and prospective shareholders. Feedback is provided to the Board following these investor
presentations of any views or concerns expressed by shareholders.
The Board uses the annual general meeting to communicate with private and institutional investors and welcomes their participation.
The Chairman aims to ensure that all of the directors, including the chairmen of the Remuneration and Audit Committees, are
available at annual general meetings to answer questions. Details of resolutions to be proposed at the annual general meeting will be
contained in the notice of the meeting.
Roger Yates, the Senior Independent Director, is available to meet shareholders on request and to ensure that the Board is aware of
shareholder concerns not resolved through other mechanisms for shareholder communication.
The Chairman and the Senior Independent Director provide feedback to the Board of any views or concerns expressed to them
by shareholders.
Internal control and risk management
The board of directors has overall responsibility for the system of internal control and has delegated responsibility to the Audit
Committee for reviewing the effectiveness of the Group’s system of internal control at least annually. The system is designed to
manage, rather than eliminate, the risk of failure to achieve the business objectives and can only provide reasonable assurance, but not
absolute assurance against the risk of material misstatement or loss.
The Audit Committee has reviewed the effectiveness of the Group’s system of internal control, covering financial, operational and
compliance controls and risk management systems, and no significant weaknesses were identified during this review. Furthermore,
the Audit Committee regularly receives and reviews reports on internal control from internal audit and receives quarterly reports from
the compliance function.
Executive directors and senior managers are responsible for the day-to-day operation of the Group’s system of internal control which
aims to provide reasonable assurance over the:
• accomplishment of business objectives and goals;
• compliance with policies, plans, procedures, laws and regulations;
• reliability and integrity of financial and management information;
• economic and efficient use of resources; and
• safeguarding of assets.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Governance 33
Internal control and risk
management (continued)
The main features of the Group’s system of internal control are:
Organisation structure
The organisation of people within the Group is contained within
the organisation charts which document the responsibilities of
the Executive Directors and clear reporting lines through the
organisation. The organisation charts are reviewed and changed
to meet business requirements.
Risk management framework and
risk registers
The Group’s risk appetite and significant risk management
policies are set by the Board. The main risks relate to market,
credit, liquidity and operational risk. The Risk Committee,
comprising chief executive officer, chief operating officer and
finance director as well as the dealing, credit and risk directors,
meets regularly to review the risks faced by the Group, within the
parameters set by the Board. An on-going process of identifying,
evaluating and managing significant risks using risk registers is
co-ordinated by the risk function, headed by the risk director.
Heads of department are responsible for departmental risk
registers and these are updated regularly and include appropriate
action plans for improving controls to mitigate risks. The key risks
are reviewed regularly by the Board and the Audit Committee
and internal audit carries out an annual review of the risk
management process and reports to the Audit Committee. The
process has been in place for the full year under review and up to
the date of approval of the annual report and accounts.
The Group’s approach to the management of key risks arising
from financial instruments including market, credit and liquidity
risk is discussed in note 30 to the financial statements together
with other non-financial risks. The main such risk is operational
risk, in particular the risk of failure of critical business systems,
which would affect client risk positions, data feeds and trading
systems. A comprehensive business continuity and disaster
recovery plan is in place which greatly reduces the likelihood and
severity of an occurrence. Failover to IG’s alternative data centre
is tested at regular scheduled intervals and disaster recovery is
tested by closing the normal office environment. The multiple
offices which IG operates enable it to continue critical operations
within five minutes of a localised disaster in one of the key
operational sites.
Policy framework
A framework of policies covering HR, Compliance and
Information Security requirements is in place to provide guidance
to all members of staff. Policies are reviewed and changed as and
when required and a new channel for distributing policies to all
staff across the Group is currently being introduced.
Financial planning and reporting
Business managers across the Group have budget responsibility
with oversight of budgeting and reporting on performance
against budget provided by the Financial Planning and
Analysis team.
34
IG Group Holdings plc
Annual Report and Financial Statements 2009
Corporate Governance
Attendance at Board and Committee meetings
The number of full board meetings and committee meetings attended by each of the directors as members of each committee during
the year was as set out below. In each case the first figure indicates the number of meetings attended and the second figure indicates
the maximum number of meetings during the year for which each individual was a director or committee member.
Full board
meetings
Nomination
Committee
Audit
Committee
Remuneration
Committee
Jonathan Davie (Chairman)
Tim Howkins (Chief Executive)
Steve Clutton
Peter Hetherington
Andrew MacKay
Sir Alan Budd
Martin Jackson
Nat le Roux
Robert Lucas
Roger Yates
7/7
7/7
7/7
7/7
6/7
7/7
6/7
6/7
7/7
7/7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4/4
4/4
–
–
4/4
3/4
–
–
–
–
3/4
3/4
–
–
4/4
Evaluation of the Board’s performance
As mentioned on page 29, an independent evaluation of the Board’s performance was carried out by ICSA’s board evaluation team.
The evaluation took place in May and June this year and the final report was submitted to the Board in July. The evaluation consisted
of individual interviews with each director and the preparation of a final report.
Review of the Audit Committee’s performance
During the year the Audit Committee reviewed its performance. The review was carried out using the Audit Committee Institute’s
evaluation checklist and a discussion of the results by the Committee took place at a meeting in May 2009. The results were reported
to the Board in May 2009.
Review of the Remuneration Committee’s performance
During the year the Remuneration Committee reviewed its performance. The review consisted of all members completing an
evaluation questionnaire and a discussion of the results by the Committee took place at a meeting in May 2009. The results were
reported to the Board in May 2009.
Directors subject to re-election
In accordance with the Company’s articles of association, the following directors retire, and being eligible, offer themselves for re-
election at the next annual general meeting: Sir Alan Budd, Roger Yates and Martin Jackson. Sir Alan Budd has indicated his intention
to stand down from the Board once a suitable replacement independent director has been appointed to the Board. Sir Alan’s
replacement will offer him/herself for election at the AGM following his/her appointment. This is in addition to the recruitment of an
additional independent non-executive referred to on page 29.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report 35
Directors’
Remuneration Report
This report has been prepared by the Board following the
provisions in Schedules 5 and 8 to the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008 and gives details of the remuneration and service contracts
of the directors.
Information not subject to audit
The Remuneration Committee, whose composition is set out
on page 32, determines the contract terms, remuneration and
other benefits for each of the executive directors, including
performance-related bonus schemes, pension rights,
compensation payments and contingent awards.
The Committee aims to put in place a remuneration structure for
executive directors which positions total remuneration:
• competitively against the market;
• at median for target performance; and
• at upper quartile for above-target performance.
The Board itself determines the remuneration of the non-
executive directors.
Basic salary
During the year, the Remuneration Committee commissioned
external advisors to carry out a comprehensive review of the
remuneration of the Executive Directors and of the Chairman.
As regards the former, the review benchmarked the salary
and total remuneration of the Company’s Executive Directors
against a peer group of comparable FTSE 250 companies. This
benchmarking revealed that all of the Executive Directors were at
or close to the bottom of the lowest quartile in relation to salary
and generally well below median as regards total compensation.
In addition, the Chief Operating Officer, Peter Hetherington and
the Head of Asia Pacific, Andrew MacKay were given additional
responsibilities during the year.
While the Remuneration Committee was aware of heightened
investor concern about executive pay, it felt that there was a
strong case for increases in current circumstances. This was
particularly true since IG has been and remains a successful,
growing business as revealed in the results shown elsewhere
in this Annual Report. Therefore the Remuneration Committee
approved the following salary increases for the Executive
Directors effective from 1st June 2009:
Tim Howkins
Steve Clutton
Peter Hetherington
Andrew MacKay
- from £265,000 to £325,000
- from £200,000 to £215,000
- from £160,000 to £200,000 *
- from £190,000 to £235,000
Since this decision, Tim Howkins has decided that, against
the background of limited or zero salary increases for most IG
employees, his new salary should be deferred for 12 months, to
be effective from 1 June 2010.
The Remuneration Committee also decided to bring the
Chairman’s salary more into line with the median for Non-
Executive Chairmen of comparable FTSE 250 companies.
Accordingly, his salary has risen to £120,000 from £80,000, with
effect from 1 June 2009.
In the future, the Remuneration Committee has decided to
review the remuneration of the Executive Directors annually.
* Peter Hetherington’s salary changed with effect from 1 January 2009.
Performance-related bonuses
The annual cash bonus for IG’s Executive Directors is calculated
by reference to growth in diluted adjusted earnings per share
(EPS). For the year ended 31 May 2009, this required EPS growth
of 35% to achieve a maximum bonus, set at 200% of salary.
For the same period, no bonus was payable if EPS growth was
below 17%. As shown elsewhere in the Annual Report, actual
EPS growth for the year was 21.99% which resulted in a bonus of
62.4% of salary for each of the Executive Directors. In cash terms,
the total bonuses payable to the four Executive Directors was
£0.5m compared to £1.6m in the previous year.
For the year which began on 1 June 2009, the Remuneration
Committee was faced with the challenge of calibrating the bonus
scheme against a much more difficult financial background and
one in which IG is not immune. To achieve a maximum bonus,
again set at 200% of salary, the Committee has set a target of 15%
EPS growth or higher. At 7.5% EPS growth a bonus of 100% of
salary is payable and below 2.5% growth, no bonus is paid. The
Committee feels that the new targets represent an appropriate
balance between a stretching objective but one which is not
completely unachievable. In a more benign environment in the
future it is possible that the EPS growth targets will be increased
from the levels set out above.
36
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report
Information not subject to audit
Performance-related bonuses (continued)
The Remuneration Committee also decided, in the light of emerging FSA guidelines, to introduce an element of deferral into the cash
bonus scheme. The first £100,000 of any bonus to be paid in cash; one third of the resulting balance would also be paid in cash and
the remaining two thirds deferred for one year and provided in shares. The Remuneration Committee will continue to monitor FSA
guidelines on remuneration.
The Remuneration Committee retains the right to reduce the bonuses payable if it considers that the formula has not produced an
appropriate result.
Performance-related bonuses are paid in full within three months of the year end.
Long-term incentive plans
The Group operates Long Term Incentive Plans (LTIPs) for management, including the Executive Directors. Awards were made under
the LTIPs during the years ended 31 May 2005, 2007, 2008 and 2009 which vest(ed) on publication of the results for the financial years
to 31 May 2008, 2009, 2010 and 2011 respectively. The maximum participation limit of the LTIP scheme is 10% of the issued share
capital in a ten-year rolling period.
The Remuneration Committee considers delivery of high rates of growth in diluted adjusted earnings per share to be a key driver of
shareholder return. The vesting criteria below were selected to ensure that senior management has significant incentive to deliver
high rates of growth. LTIP awards are discussed further in note 25 to the financial statements.
Awards may be made to the executive directors in future on the recommendation of the Remuneration Committee. The Remuneration
Committee will determine appropriate vesting conditions for future awards with regard to prevailing conditions at the time the awards
are granted.
The Remuneration Committee intends to make awards in the year ending 31 May 2010 to senior management, including the
executive directors, with no single award exceeding four times salary.
The vesting criteria of these plans are based on compound annual growth rate in diluted adjusted earnings per share and share price
growth over the relevant three year period as shown in the table below:
Year of award
Scheme
Base period
(year ended
31 May)
Base Measurement
period
(year ended
31 May)
earnings
per share
(pence)
31 May 2009
Share price growth award
2008
N/A *
2011
31 May 2009
Earnings per share award
2008
20.28
2011
31 May 2008
Share price growth award
2007
N/A *
2010
31 May 2008
Earnings per share
growth award
2007
14.52
2010
31 May 2007
Senior management award
2006
10.88
2009
31 May 2007
Executive award
2006
10.88
2009
31 May 2005
31 May 2005
Senior management
IPO high growth award
Senior management
basic award
2005
6.75
2008
2005
6.75
2008
* share price growth is determined on a base share price of 310.9 pence (2008) and 306.8 pence (2009).
In all cases vesting is pro-rata between the lower and upper limits.
Compound
annual
growth
% of
award
vesting
<22.5%
22.5-100%
Nil
0-100%
<12%
12-18%
18-25%
<22.5%
22.5-100%
<20%
20-25%
25-31%
<10%
10-20%
20-30%
30-40%
40-50%
<20%
20-50%
<20%
20-50%
<15%
15-25%
Nil
0-50%
50-100%
Nil
0-100%
Nil
37.5-75%
75-100%
Nil
0-40%
40-70%
70-90%
90-100%
Nil
0-100%
Nil
0-100%
Nil
0-100%
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report 37
Information not subject to audit
(continued)
Long-term incentive plans (continued)
In order to obtain tax-favoured treatment for the Group and
participants, up to 100% of the ultimate value of the LTIP awards
made in the year ended 31 May 2009 (“2009 LTIP”), which is
conditional on the performance conditions noted above, will be
delivered to the participants using HM Revenue and Customs
(“HMRC”) approved options. The HMRC approved options have
been granted to participants subject to the rules of the IG Group
Limited Executive Share Option Scheme (“Approved Plan”) which
has been updated and re-approved by HMRC. These approved
options have exactly the same vesting and exercise conditions as
the 2009 LTIP awards. In order to ultimately exercise a 2009 LTIP
award, a participant will have to first exercise the Approved Plan
option and use the IG Group Limited shares acquired as ultimate
payment for that 2009 LTIP award.
The Company operates a Share Incentive Plan (SIP) for all UK
employees except executive directors who are not able to
participate in the scheme.
Benefits
The Group provides a range of benefits to its employees,
including private health cover and health club membership. The
executive directors are entitled to participate in these non-cash
benefits on equal terms with all other staff. The Group ceased
providing health club membership to all staff from 1 June 2009.
Pensions
The Group contributes 15% of basic salary to personal pensions
for each of the executive directors. As an alternative to the
payment of part of a performance-related bonus or basic
salary, directors may elect to receive an equivalent contribution
to their pension.
Fees
The fees for non-executive directors are determined by the Board.
The non-executive directors are not involved in any discussions
or decisions by the Board about their own remuneration.
Service contracts
During the year, the executive directors’ service contracts were
novated to IG Group Limited, a wholly owned intermediate
holding company.
Each of the executive directors is employed under a service
contract for the benefit of the Company and the Group, which
can be terminated on six months notice by either the Company
or the executive director. All service contracts are continuous and
contractual termination payments are for the unexpired notice
period. The effective dates of the service contracts for each of the
executive directors as at the date of this report are:
Executive directors
Tim Howkins
Steve Clutton
Peter Hetherington
Andrew Mackay
12 April 2005
2 October 2006
12 April 2005
12 April 2005
The non-executive directors were each appointed for an initial
term of 12 months with appointment continuing indefinitely
thereafter subject to re-election, but capable of being terminated
on three months notice.
There are no special provisions for compensation in the event
of loss of office. The Remuneration Committee would consider
the circumstances of individual cases of early termination and
determine compensation payments accordingly.
38
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report
Information not subject to audit (continued)
Interests in share capital
The directors who served during the year and their beneficial interests in the share capital of the Company were as follows:
31 May
2009
31 May
2009
Ordinary Preference
Shares
Shares
31 May
2008
31 May
2008
Ordinary Preference
Shares
Shares
J R Davie
T A Howkins
S Clutton
P G Hetherington
A R MacKay
Sir Alan Budd
D M Jackson
R R Lucas
N B le Roux
R P Yates
1,000,000
4,601,291
17,169
976,620
2,010,680
27,438
–
47,312
222,100
25,000
–
10,000
–
10,000
10,000
–
–
–
10,000
–
910,000
4,081,800
3,500
909,900
1,456,225
16,667
–
42,664
222,100
25,000
–
10,000
–
10,000
10,000
–
–
–
10,000
–
There have been no changes in directors’ interests in share capital between the year end and the date of the annual report.
The market price of the Company’s ordinary shares on 31 May 2009 was 226.0p and the high and low share prices in the year were
390.0p and 166.0p respectively.
Performance graph
The following graph illustrates the performance of IG Group Holdings plc ordinary shares measured by total shareholder return (share
price growth plus dividends paid) in the period since conditional dealings commenced on the London Stock Exchange on
27 April 2005. The most appropriate benchmark is considered by the directors to be the FTSE 250 index as it represents a broad equity
market index in which the Company is a constituent member.
The figures have been rebased to 100 as at 27 April 2005 in order to aid comparison and are presented to 20 July 2009.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report 39
Information subject to audit
Directors’ remuneration
This section of the report sets out the remuneration of the directors for the year ended 31 May 2009. The remuneration of the directors
who served during the year was as follows:
Basic
salary
Other
benefits
and
and fees payments 1
£000
£000
Perfor-
mance
related
bonuses
£000
Pension
elections 2
£000
Year
ended
2009
£000
Year
ended
2008
£000
Executive directors:
T A Howkins
S Clutton
P G Hetherington 4
A R MacKay
5
Non-executive directors:
J R Davie
Sir Alan Budd
D M Jackson
R R Lucas 3
N B le Roux
R P Yates
265
200
177
190
832
80
35
40
30
35
35
1,087
1
–
–
–
1
–
–
–
–
–
–
1
165
125
110
119
519
–
–
–
–
–
–
–
–
(35)
(21)
(56)
–
–
–
–
–
–
431
325
252
288
795
420
281
358
1,296
1,854
80
35
40
30
35
35
80
35
40
30
35
35
519
(56)
1,551
2,109
1 All executive directors are entitled to receive professional subscriptions, private health cover and health club membership.
2 Executive directors can elect to receive pension contributions in lieu of performance-related bonuses and salary. These contributions are deducted in the remuneration
table and included within pension entitlements below inclusive of employers’ national insurance.
3 Fees of £30,000 (2008: £30,000) relating to the services of Robert Lucas as a director of the Company were paid to CVC Capital Partners Limited.
4 Included within pension elections is £25,000 of salary sacrificed in relation to extended paternity leave for 2008.
5 In addition, Andrew MacKay received £32,000 (2008: £nil) as a living allowance as part of his relocation to Japan.
There was no compensation for loss of office paid during the year (2008: £nil).
Pension entitlements
In addition, the Group contributed to personal pensions for each of the executive directors as follows:
T A Howkins
S Clutton
P G Hetherington
A R MacKay
There were no contributions made for the non-executive directors during the year ended 31 May 2009.
2009
£000
40
30
66
52
188
2008
£000
40
235
217
233
725
40
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report
Information subject to audit (continued)
Interests in Long Term Incentive Plans
Awards under the Group’s LTIPs have been made to each of the executive directors. The awards made and those that have lapsed or
been exercised during the year, together with the maximum numbers of shares that can vest are as follows:
Share
price at
award
date
Number
as at
31 May
2008
Number
awarded
during
the year
Number
lapsed
during
the year
Number
exercised
during
the year
Number
as at
31 May
2009
Award
date
T A Howkins
Senior management IPO basic award
16 May 2005
112.50p
141,666
Senior management IPO high
growth award
16 May 2005
112.50p
425,000
Executive award
7 Aug 2006
217.00p
122,120
Earnings per share award
23 July 2007
312.25p
169,736
Share price growth award
23 July 2007
312.25p
169,736
–
–
–
–
–
Earnings per share award
30 Sept 2008
313.75p
Share price growth award
30 Sept 2008
313.75p
–
–
174,917
174,918
–
(141,666)
–
(81,897)
(208,334)
134,769
–
–
–
–
–
–
–
–
–
–
122,120
169,736
169,736
174,917
174,918
1,028,258
349,835
(81,897)
(350,000)
946,196
S Clutton
Senior management award
4 Oct 2006
261.75p
76,409
Executive award
4 Oct 2006
261.75p
229,226
Earnings per share award
23 July 2007
312.25p
Share price growth award
23 July 2007
312.25p
96,077
96,077
–
–
–
–
Earnings per share award
30 Sept 2008
313.75p
Share price growth award
30 Sept 2008
313.75p
–
–
132,013
132,014
497,789
264,027
P G Hetherington
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76,409
229,226
96,077
96,077
132,013
132,014
761,816
Senior management IPO basic award
16 May 2005
112.50p
125,000
Senior management IPO high
growth award
16 May 2005
112.50p
375,000
Executive award
7 Aug 2006
217.00p
Earnings per share award
23 July 2007
312.25p
Share price growth award
23 July 2007
312.25p
82,949
76,861
76,861
–
–
–
–
–
Earnings per share award
30 Sept 2008
313.75p
Share price growth award
30 Sept 2008
313.75p
–
–
105,611
105,611
–
(125,000)
(72,262)
(302,738)
–
–
–
–
–
–
–
–
–
–
–
–
82,949
76,861
76,861
105,611
105,611
736,671
211,222
(72,262)
(427,738)
447,893
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Remuneration Report 41
Information subject to audit (continued)
Interests in Long Term Incentive Plans (continued)
Share
price at
award
date
Number
as at
31 May
2008
Number
awarded
during
the year
Number
lapsed
during
the year
Number
exercised
during
the year
Number
as at
31 May
2009
Award
date
A R MacKay
Senior management IPO basic award
16 May 2005
112.50p
112,500
Senior management IPO high
growth award
16 May 2005
112.50p
337,500
Executive award
7 Aug 2006
217.00p
Earnings per share award
23 July 2007
312.25p
Share price growth award
23 July 2007
312.25p
69,124
86,469
86,469
–
–
–
–
–
Earnings per share award
30 Sept 2008
313.75p
Share price growth award
30 Sept 2008
313.75p
–
–
125,413
125,413
–
(112,500)
(65,036)
(272,464)
–
–
–
–
–
–
–
–
–
–
–
–
69,124
86,469
86,469
125,413
125,413
692,062
250,826
(65,036)
(384,964)
492,888
N B le Roux
Senior management IPO basic award
16 May 2005
112.50p
61,111
Senior management IPO high
growth award
16 May 2005
112.50p
183,333
244,444
–
–
–
–
(61,111)
(35,328)
(148,005)
(35,328)
(209,116)
–
–
–
Nat le Roux was employed under a service contract with an effective date of 12 April 2005 until his resignation as Chief Executive
on 2 October 2006 when he was appointed as a non-executive director. He voluntarily relinquished two-thirds of his LTIP awards on
stepping down as Chief Executive with the agreement of the Remuneration Committee. The table above reflects the one
third retained.
Lapsed interests in Long Term Incentive Plans refer to the difference between the maximum number awarded on grant and the actual
number vesting.
The charge for the year ended 31 May 2009 relating to share-based payments in respect of the directors was £926,000
(2008: £1,467,000).
Gains made by directors on share options
The table below shows gains made by individual directors from the exercise of share options during the year. The gains are calculated
by reference to the share price as at the respective exercise date, although the shares may have been retained.
T A Howkins
S Clutton
P G Hetherington
A R MacKay
N B le Roux
On behalf of the Board
Steve Clutton, Finance Director, 21 July 2009
2009
£000
639
–
781
703
382
2,505
2008
£000
–
–
–
–
–
–
42
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report
Directors’ Report
The directors have pleasure in submitting their report together
with the Group financial statements for the year ended
31 May 2009.
The final ordinary dividend, if approved, will be paid on
13 October 2009 to those shareholders on the register at
11 September 2009.
Review of business and future
developments
A review of the Group’s progress, outlining developments during
the year and giving an indication of likely future developments, is
provided in the Chief Executive’s Report set out on pages
17 to 19.
An analysis of the position of the Group at the year end and key
performance indicators is provided in the operating and financial
review on pages 20 to 28.
Directors and their interests
Details of the directors who served and their interests in the share
capital of the Company are set out in the directors’ remuneration
report on pages 35 to 41.
Principal activities
The principal activities of the Group throughout the year have
been those of trading as principal and market maker for contracts
for difference, foreign exchange, and options, running a spread-
betting market, operating the CFTC-regulated exchange Nadex
and acting as a fixed-odds bookmaker. The Group hedges
unmatched bets and trades, as considered appropriate, to ensure
that it is not unacceptably exposed to material losses.
Results
The Group’s profit for the year, after taxation, amounted to
£78,652,000 (2008: £67,288,000), of which £77,986,000
(2008: £67,288,000) is attributable to the equity members of
the Company.
Dividends
The directors recommend a final ordinary dividend of 11.0 pence
per share, amounting to £39,554,000, making totals of 15.0 pence
per share and £53,934,000 for the year. Dividends are recognised
in the financial statements in the year in which they are paid, or in
the case of a final dividend, when approved by the shareholders.
The amount recognised in the financial statements, as described
in note 12, is made up of this year’s interim dividend and the final
dividend from the previous year, which were both paid during
the year.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report 43
Major interests in shares
Notifications have been received by the Company of the following shareholdings of three percent or more of the issued ordinary
share capital:
CVC Capital Partners Limited
Janus Capital Management, LLC
Lion Trust Investment Services Limited
Investec Asset Management Limited
Standard Life Investments Limited
JP Morgan Chase & Co
Legal & General Group plc
Reach Capital Management LLC
Prudential plc
As at 17 July 2009 As at 31 May 2009
No. percentage
No. percentage
30,190,819
27,922,770
17,907,353
17,863,943
17,564,421
15,830,307
14,287,840
11,409,480
11,066,417
8.40%
7.77%
4.98%
4.97%
4.88%
4.40%
3.97%
3.17%
3.08%
30,190,819
25,386,625
17,907,353
17,863,943
17,564,421
15,830,307
14,287,840
11,409,480
–
8.40%
7.06%
4.98%
4.97%
4.88%
4.40%
3.97%
3.17%
–
Additional information for shareholders
The following provides additional information required for shareholders as a result of the implementation of the Takeovers Directive
into UK law.
Share capital and own shares
Details of the Company’s equity and preference share capital are given in notes 22 and 21 respectively to the financial statements.
Details of the Group’s required regulatory capital are disclosed in note 30 to the financial statements.
The Group purchases its own shares in order to satisfy awards under the Group’s share schemes. Details of the shares held and the
amounts paid during the year are disclosed in note 23 to the financial statements.
Change of control
Following a change of control of the Company following a takeover bid, the Group’s banking facilities will be cancelled and any
obligations will become immediately due and payable.
Branches outside the United Kingdom
In line with the stated strategic objectives the Group has branches in a number of overseas jurisdictions including France, Spain, Italy,
Germany and Luxembourg.
Supplier payment policy and practice
The Company does not incur significant costs and the Group does not follow any stated code on payment practice. It is the Group’s
policy to agree terms of payment with suppliers when agreeing the terms for each transaction and to abide by those terms. Standard
terms provide for payment of all invoices within 30 days after the date of the invoice except where different terms have been agreed
with the supplier at the outset. There were six creditor days of suppliers’ invoices outstanding at the year end (2008: 16) for the Group.
44
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report
Risk management
The principal activities of the Group outlined above give rise to
exposure to financial risks in the ordinary course of business.
The objective of the risk department is to manage the Group’s
financial risk and to minimise the effects of fluctuations in the
financial markets on the value of the Group’s financial assets
and liabilities, on reported profitability and on the cash flows of
the Group.
The main risks associated with the Group’s financial assets and
liabilities, as well as the key operational risks faced by the Group
are set out in note 30 to the financial statements, as are the
policies agreed by the Board for the management thereof.
Donations
The Group made no political donations (2008: £nil). The Group
made charitable donations of £49,912 in the year (2008: £13,779)
as follows:
Gambling Trust
Child Line
Cancer research
Other
£16,908
£7,500
£4,440
£21,064
Employee involvement
During the year, the policy of providing employees with
information about the Group continued through quarterly
management forums where line managers are informed of
current developments and encouraged to present suggestions
and views of the Group’s performance, development and policies.
Line management communicates the points raised in the forum
across the organisation.
The Group’s intranet is used to communicate with staff.
Employees participate directly in the success of the business
through the Group’s performance-related bonus schemes and
employee share plans.
Corporate and Social
Responsibility
In this section, we describe our commitment to responsible
business conduct during the past year.
The Group is committed to ensuring that interaction with
employees, clients, suppliers, shareholders, society and the wider
environment is managed responsibly. This has been a key feature
of the IG’s values since its inception in 1974.
Business Standards
We support the high standards of corporate governance
contained in the Combined Code on Corporate Governance
issued by the Financial Reporting Council in June 2008
(Combined Code).
The Group has always recognised the need for a high quality
product and a high standard of client treatment. We apply high
standards worldwide, and these standards frequently exceed
local regulatory requirements in many of the jurisdictions in
which we operate. For example, IG defaults individual clients
to segregated client money accounts and only offers title
transfer arrangements to a small number of clients (this can be
contrasted with some of our competitors, who as a default use
title transfer arrangements to use client’s money for their own
purposes). Furthermore, margin deposited with IG is treated
as client money and is segregated from IG’s own money on a
default basis.
The Group believes that quality of order execution is key
to ensuring that clients are treated fairly. We offer near
instantaneous online execution, with 99% of client orders
being accepted. Where possible we source prices from multiple
execution venues to ensure that we offer our clients the most
advantageous price.
IG is the only spread betting and CFD firm in the industry to offer
“Price Improvement”. This feature of our online trading platform,
PureDeal, ensures that, if a price moves significantly in the client’s
favour in the fraction of a second between them clicking a trade
and it being executed, then we will give them the improved price
and will not reject the deal.
During the year IG introduced a Close-Out-Monitor system which
aims to limit potential losses at no extra cost to the client. This is
available on our Plus and Trader accounts - the default accounts
for spread betting and CFD clients. We also provide a Limited Risk
account for less-experienced clients, offering Guaranteed Stops
on all positions so that the maximum possible loss is known at
the outset.
Client services
Client service has been a key feature of our commitment to the
responsible treatment of clients. Our large team of trained and
dedicated staff delivers a professional and responsive value-
based approach to client service. Almost 10% of IG’s total global
staff is engaged in client services.
Clients of all our FSA-regulated products have the option to
exclude themselves upon request for a minimum period of six
months. This is not a regulatory requirement.
We also prioritise the security of our clients’ information and
funds and we have recently achieved the ISO 27001 certificate for
Information Security.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report 45
Corporate and Social
Responsibility (continued)
Education
IG is at the forefront of client education in the industry through
its TradeSense training programme; this six-week course is
available to all clients. For clients that we feel may not initially
have an appropriate level of knowledge and experience with
which to understand the risks associated with our products, we
require (or recommend depending on experience) that they
complete the TradeSense programme.
In 2008, we introduced online seminars which have enabled
greater numbers of clients to view seminars they might not have
been able to attend in person.
Workplace
IG is a rapidly growing company and provides a fast-moving and
successful working environment. Our employees have pride in
what we have achieved and a strong sense of belonging.
This culture is reflected in IG being listed as one of Britain’s Top
Employers 2009 by the Corporate Research Foundation, having
performed well in each of the surveyed categories: pay and
benefits, training and development, and corporate culture. IG
was also named as ‘One to Watch’ in the Sunday Times’ Best
Companies to Work for.
All of our employees are offered membership of a generous
pension scheme, permanent health insurance and death-in-
service insurance. During the year we also introduced employee
counselling on matters ranging from housing to personal finance.
We also operate schemes to encourage and reward innovation
from employees. Senior management consults with employees
to achieve objectives.
Up to 90% of our workforce comprises university graduates
and we consider our employees as a great source of talent and
ideas for generating the future growth of the business. Investing
in training and education to equip employees with the skills
and capabilities required to unlock their potential is part of the
Group’s long-term business strategy.
Our graduate recruitment programme intake was 25 in 2008 and
this is expected to be the same in 2009. The programme involves
intensive training over 12 to 18 months.
Equality and Diversity
We are an equal opportunities employer and have extensive
human resource policies in place to ensure that employees
can expect to work in an environment free from discrimination
and harassment.
The Group gives full consideration to applications for
employment from disabled persons where the candidate’s
particular aptitudes and abilities are consistent with adequately
meeting the requirements of the job.
Opportunities are available to disabled employees for training,
career development and promotion. Where existing employees
become disabled, it is the Group’s policy to provide continuing
employment wherever practicable in the same or alternative
position and to provide appropriate training to achieve this aim.
Environment
As a business which conducts over 90% of its client trades online
we do not see ourselves as a significant emitter of harmful
emissions. However, we do understand that our operations have
an impact on the environment and we are committed to taking
greater consideration of our environmental footprint.
We take steps to minimise the impact of our offices on the
environment, including the installation of both automated sensor
lighting and air conditioning which minimise usage when offices
are not in use.
Another key business change has been our move from daily
printed statements to email statements. This has reduced
paper statements by 75%, which represents more than half a
million sheets of quality paper in addition to envelopes and
printer cartridges.
With the encouragement of employees we have also improved
our recycling facilities, including IT equipment, and shifted from
providing bottled to filtered water.
46
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report
Corporate and Social Responsibility (continued)
Carbon Emissions
During the year, the Group recorded the number of kilowatt hours (kWh) of energy used and business travel by air and road.
Carbon footprint calculations from Carbon Trust:
CO2e
(tonnes)
kWh
Comment
Scope 1 – direct emissions
2.4
9,684
Employee travel by road for one company vehicle
Scope 2 – indirect emissions
1,816.6
3,382,945
Electricity for UK sites
Scope 3 – other indirect emissions
584.8
2,386,856
Employee air travel
Total
2,403.8
5,779,485
Last year air travel featured significantly as a proportion of total emissions (24%). This was due mainly to senior-management travel
related to the acquisition and integration of FXOnline in Japan, and the re-launch of the US futures exchange Nadex (formerly
HedgeStreet). New video conference facilities in all our key global offices will reduce future business travel across the group. On a
global basis, emissions equated to 3.3 tonnes per employee.
Society
We are keen to encourage employees to engage in activities that help their development and support local communities. For
example, we match any funds employees have raised for sponsored events. During the year we matched funding of almost £8,000.
Our Absence Management Policy also offers the opportunity for employees to take up voluntary work, for which IG grants additional
leave on a like-for-like basis up to a maximum of five matched days per annual leave year.
Events since the balance sheet date
There have been no significant events since the balance sheet date.
Annual general meeting
The Group’s annual general meeting will be held on 6 October 2009. A separate circular will be sent to all shareholders which details
the agenda for the AGM.
Auditors
A resolution to re-appoint Ernst & Young LLP as the Group’s auditor will be put to the forthcoming annual general meeting.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report 47
Directors’ statement as to
disclosure of information
to auditors
The directors who were members of the Board at the time of
approving the directors’ report are listed on pages 12 and 13.
Having made enquiries of fellow directors and of the Company’s
auditors, each of these directors confirms that:
• to the best of each director’s knowledge and belief, there is
no information (that is information needed by the Group’s
auditors in connection with preparing their report) of which the
Company’s auditors are unaware; and
• each director has taken all the steps a director might reasonably
be expected to have taken to be aware of relevant audit
information and to establish that the Company’s auditors are
aware of that information.
Going concern
The directors have prepared the financial statements on a going
concern basis which requires the directors to have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future.
The directors have reviewed the Group’s processes to control
those financial risks to which the Group is exposed, as disclosed
in note 30 to the financial statements, as well as reviewing the
annual budget.
As a result of this review the directors do have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
On behalf of the Board
Steve Clutton, Finance Director, 21 July 2009
48
IG Group Holdings plc
Annual Report and Financial Statements 2009
Directors’ Report
Statement of Directors’ Responsibilities in Respect of the Financial Statements 49
IG Group Holdings plc
Annual Report and Financial Statements 2009
Statement of Directors’ Responsibilities
in Respect of the Financial Statements
Directors’ Statement pursuant
to the Disclosure and
Transparency Rules
Each of the directors, whose names and functions are listed
on pages 12 and 13, confirm that, to the best of each person’s
knowledge and belief:
• the financial statements, prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the Company
and the undertakings included in the consolidation as a whole;
and
• the Chief Executive’s Statement, the Group Operating and
Financial Review and the Directors’ Report contained in the
Annual Report include a fair review of the development and
performance of the business and the position of the Company
and the undertakings included in the consolidation taken as
whole, together with a description of the principal risk and
uncertainties that they face.
By order of the Board
Steve Clutton, Finance Director, 21 July 2009
The directors are responsible for preparing the Annual Report
and the Group and Company financial statements in accordance
with applicable United Kingdom law and those International
Financial Reporting Standards (IFRS) as adopted by the
European Union.
The directors are required to prepare financial statements for
each financial year which present fairly the financial position of
the Company and of the Group and the financial performance of
the Group and cash flows of the Group and of the Company for
that period. In preparing those financial statements, the directors
are required to:
• select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and
Errors, and then apply them consistently;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements of IFRS is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the Group’s financial position and financial
performance; and
• state that the Group and the Company have complied with
IFRS, subject to any material departures disclosed and explained
in the financial statements.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time
the financial position of the Group and of the Company and
enable them to ensure that the financial statements comply
with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the company’s website, and legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
50
IG Group Holdings plc
Annual Report and Financial Statements 2009
Group Income Statement for the year ended 31 May 2009
Group Income Statement
for the year ended 31 May 2009
Note
3
8
9
10
Year ended
31 May 2009
£000
257,089
(7,223)
249,866
(18,168)
(114,635)
117,063
15,775
(6,966)
125,872
(38,744)
87,128
86,462
666
87,128
Revenue
Cost of sales
Gross profit
Impairment of trade receivables
Other administrative expenses
Operating profit
Finance revenue
Finance costs
Profit before taxation
Tax expense
Profit for the year
Profit for the period attributable to:
Equity holders of the parent
Minority Interests
Earnings per share (pence)
11
- basic
- diluted
Year ended
31 May 2009
Before amortisation
and impairment
of intangibles
arising on
consolidation
£000
Year ended
31 May 2009
Amortisation and
impairment
of intangibles
arising on
consolidation
£000
–
–
–
–
(14,613)
(14,613)
–
–
257,089
(7,223)
249,866
(18,168)
(129,248)
102,450
15,775
(6,966)
(14,613)
111,259
6,137
(8,476)
(8,476)
–
(8,476)
(32,607)
78,652
77,986
666
78,652
22.42p
22.31p
Year ended
31 May 2008 *
Total
£000
184,008
(10,842)
173,166
(4,057)
(85,759)
83,350
30,609
(16,969)
96,990
(29,702)
67,288
67,288
–
67,288
20.62p
20.28p
All of the Group’s revenue and profit for the year and prior year relate to continuing operations.
The notes on pages 55 to 93 are an integral part of these financial statements.
* amortisation and impairment of intangibles arising on consolidation charge was nil for the year ended 31 May 2008.
Statement of Changes in Shareholders’ Equity for the year ended 31 May 2009 51
IG Group Holdings plc
Annual Report and Financial Statements 2009
Statements of Changes in Shareholders’ Equity
for the year ended 31 May 2009
Group
At 1 June 2007
Profit for the year
Excess of tax deduction
benefit on share-based
payments recognised directly
in equity (note 10(c))
Total recognised income
and expense for the year
Equity-settled employee
share-based payments
Purchase of treasury shares
Equity dividends paid
Movement in
shareholders’ equity
At 1 June 2008
Profit for the year
Excess of tax deduction
benefit on share-based
payments recognised directly
in equity (note 10(c))
Total recognised income
and expense for the year
Shares issued
Share issue costs
Minority interest arising
on acquisition
Foreign currency translation on
overseas subsidiaries
Equity-settled employee
share-based payments
Purchase of treasury shares
Equity dividends paid
Movement in
shareholders’ equity
At 31 May 2009
Equity
share
capital
(Note 22)
£000
Share
premium
(Note 22)
£000
Other
reserves
(Note 24)
£000
Retained
earnings
Share-
holders’
equity
Minority
interests
Total
equity
£000
£000
£000
£000
16
–
–
–
–
–
–
–
16
–
–
–
2
–
–
–
–
–
–
2
18
125,235
4,743
71,674
201,668
–
–
–
–
–
–
–
–
67,288
67,288
2,352
–
2,352
2,352
67,288
69,640
4,682
(201)
–
–
–
(31,113)
4,682
(201)
(31,113)
6,833
36,175
43,008
40
–
201,708
67,288
–
–
–
–
–
–
2,352
69,640
4,682
(201)
(31,113)
43,008
125,235
11,576
107,849
244,676
40
244,716
–
–
–
82,199
(1,188)
–
–
–
–
–
–
77,986
77,986
666
78,652
(1,730)
–
(1,730)
–
(1,730)
(1,730)
77,986
76,256
666
76,922
–
–
–
32,437
3,256
(258)
–
–
–
–
–
82,201
(1,188)
–
–
82,201
(1,188)
–
1,528
1,528
32,437
315
32,752
–
–
(44,016)
3,256
(258)
(44,016)
–
–
–
3,256
(258)
(44,016)
81,011
33,705
33,970
148,688
2,509
151,197
206,246
45,281
141,819
393,364
2,549
395,913
The notes on pages 55 to 93 are an integral part of these financial statements.
52
IG Group Holdings plc
Annual Report and Financial Statements 2009
Statement of Changes in Shareholders’ Equity for the year ended 31 May 2009
Statements of Changes in Shareholders’ Equity
for the year ended 31 May 2009
Company
At 1 June 2007
Profit for the year
Equity-settled employee
share-based payments
Equity dividends paid
Purchase of own shares
At 1 June 2008
Profit for the year
Shares issued
Share issue costs
Equity-settled employee
share-based payments
Equity dividends paid
Purchase of own shares
At 31 May 2009
Equity
share
capital
(Note 22)
£000
Share
premium
(Note 22)
£000
Other
reserves
(Note 24)
£000
Retained
earnings
Total
equity
£000
£000
16
125,235
2,921
172,278
300,450
–
–
–
–
–
–
–
–
–
35,641
35,641
4,682
–
(201)
–
(31,113)
–
4,682
(31,113)
(201)
16
125,235
7,402
176,806
309,459
–
2
–
–
–
–
–
82,199
(1,188)
–
–
–
–
–
–
3,256
–
(258)
51,600
–
–
–
(44,016)
–
51,600
82,201
(1,188)
3,256
(44,016)
(258)
18
206,246
10,400
184,390
401,054
The notes on pages 55 to 93 are an integral part of these financial statements.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Balance Sheets at 31 May 2009 53
Balance Sheets
at 31 May 2009
Group
2009
£000
Note
Company
2009
£000
2008
£000
2008
£000
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Deferred tax assets
Current assets
Trade receivables
Prepayments and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade payables
Other payables
Income tax payable
Non-current liabilities
Deferred tax liability
Redeemable preference shares
Total liabilities
NET ASSETS
Capital and reserves
Equity share capital
Share premium
Other reserves
Retained earnings
Shareholders’ equity
Minority interests
TOTAL EQUITY
13
14
15
10
17
18
19
20
10
21
22
22
24
11,632
260,607
–
7,562
9,824
112,056
–
8,053
–
–
424,071
–
–
–
309,581
–
279,801
129,933
424,071
309,581
183,085
4,928
520,421
263,323
5,690
471,722
–
96,943
122
708,434
740,735
97,065
–
1,631
46
1,677
988,235
870,668
521,136
311,258
511,656
27,326
36,560
582,689
26,715
16,508
–
120,042
–
575,542
625,912
120,042
16,740
40
16,780
–
40
40
–
40
40
–
1,759
–
1,759
–
40
40
592,322
625,952
120,082
1,799
395,913
244,716
401,054
309,459
18
206,246
45,281
141,819
393,364
2,549
16
125,235
11,576
107,849
244,676
40
18
206,246
10,400
184,390
401,054
–
16
125,235
7,402
176,806
309,459
–
395,913
244,716
401,054
309,459
Tim Howkins, Director
Steve Clutton, Director
The notes on pages 55 to 93 are an integral part of these financial statements.
54
IG Group Holdings plc
Annual Report and Financial Statements 2009
Cash Flow Statements for the year ended 31 May 2009
Cash Flow Statements
for the year ended 31 May 2009
Operating activities
Operating profit/(loss)
Adjustments to reconcile operating profit/
(loss) to net cash flow from operating activities
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of intangibles assets arising on consolidation
Share-based payments
Property, plant and equipment written off
Intangible assets written off
Impairment of trade receivables
Decrease in trade and other receivables
(Decrease) in trade and other payables
Cash generated from operations
Income taxes paid
Group
2009
£000
Note
Company
2009
£000
2008
£000
2008
£000
102,450
83,350
(2,556)
(2,020)
5,402
984
14,613
3,256
37
–
18,168
77,725
(153,138)
4,016
782
–
4,716
115
9
4,057
83,151
(145,818)
69,497
(20,274)
34,378
(29,501)
–
–
–
–
–
–
–
77,919
(795)
74,568
–
–
–
–
–
–
–
–
37,163
(3,998)
31,145
–
Net cash flow from operating activities
49,223
4,877
74,568
31,145
Investing activities
Interest received
Purchase of property, plant and equipment
Payments to acquire intangible assets
Purchase of subsidiary undertaking
Investment in subsidiary undertaking
Cash acquired on purchase of subsidiary undertaking
16,317
(5,897)
(2,142)
(121,643)
–
68,202
31,020
(4,905)
(1,282)
(3,375)
–
132
1,065
–
–
–
(111,234)
–
Net cash flow from investing activities
(45,163)
21,590
(110,169)
1
–
–
–
–
–
1
Financing activities
Interest paid
Equity dividends paid to shareholders of the parent
Proceeds from the issue of shares
Purchase of own shares
Payment of redeemable preference share dividends
(6,426)
(44,016)
81,013
(258)
(3)
(17,550)
(31,113)
–
(201)
(3)
(1,059)
(44,016)
81,013
(258)
(3)
(390)
(31,113)
–
(201)
(3)
Net cash flow from financing activities
30,310
(48,867)
35,677
(31,707)
Net increase/(decrease) in cash and cash equivalents
34,370
(22,400)
Cash and cash equivalents at the beginning of the year
471,722
484,556
Exchange gains on cash and cash equivalents
14,329
9,566
76
46
–
Net cash and cash equivalents at the end of the year
18
520,421
471,722
122
(561)
607
–
46
The notes on pages 55 to 93 are an integral part of these financial statements.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 55
Notes to the Financial Statements
at 31 May 2009
1. Authorisation of financial
statements and statement of
compliance with IFRS
The financial statements of IG Group Holdings plc (“the
Company”) and its subsidiaries (together “the Group”) for the year
ended 31 May 2009 were authorised for issue by the Board of the
directors on 21 July 2009 and the balance sheet signed on the
Board’s behalf by TA Howkins and S Clutton. IG Group Holdings
plc is a public limited company incorporated and domiciled in
England and Wales. The Company’s ordinary shares are traded on
the London Stock Exchange.
The Group and Company financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) as
they apply to the financial statements of the Group and of
the Company for the year ended 31 May 2009 and applied in
accordance with the provisions of the Companies Act 2006. The
principal accounting policies adopted by the Group and the
Company are set out in note 2.
2. Accounting policies
Basis of preparation
The accounting policies which follow have been applied
in preparing the financial statements for the year ended
31 May 2009.
The Group has presented its consolidated income statement in a
columnar format. This enables the Group to continue its practice
of improving the understanding of its results by presenting profit
for the year before amortisation and impairment of intangibles
arising on consolidation. This is the profit measure used to
calculate adjusted EPS (see note 11) and is considered to be the
most appropriate as it better reflects the Group’s underlying
cash earnings. Profit before amortisation and impairment of
intangibles arising on consolidation is reconciled to profit before
tax on the face of the income statement.
The preparation of financial statements requires management
to make estimates and assumptions that affect the amounts
reported for assets and liabilities as at the balance sheet date and
the amounts reported for revenues and expenses during the year.
The nature of estimates means that actual outcomes could differ
from those estimates.
As permitted by Section 408(1)(b), (4) of the Companies Act 2006,
the individual income statement of IG Group Holdings plc has
not been presented in these financial statements. The amount
of profit after taxation for the financial year dealt with in the
financial statements of IG Group Holdings plc is £51,600,000
(2008: £35,641,000).
The Group and Company financial statements are presented
in Sterling and all values are rounded to the nearest thousand
pounds (£000) except where otherwise indicated.
Going concern
The directors have prepared the financial statements on a going
concern basis which requires the directors have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future.
Basis of consolidation
The Group financial statements consolidate the financial
statements of IG Group Holdings plc and the entities it controls
(its subsidiaries) made up to the reporting date, as listed in
note 15.
Subsidiaries are consolidated from the date of their acquisition,
being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. Control comprises the power to govern the financial
and operating policies of the investee so as to obtain benefit
from its activities and is achieved through direct or indirect
ownership of voting rights; currently exercisable or convertible
potential voting rights; or by way of contractual agreement. The
financial statements of the subsidiaries used in the preparation
of the consolidated financial statements are prepared for the
same reporting year as the parent company and are based on
consistent accounting policies. All inter-company balances
and transactions, including unrealised profits arising from them,
are eliminated.
On acquisition, the assets, liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date
of acquisition. The cost of an acquisition is measured at the
fair value of consideration paid including an estimate of any
contingent or deferred consideration and the directly attributable
costs of the acquisition. Contingent or deferred consideration is
re-measured at each balance sheet date. Any excess of the cost
of acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. Any deficiency of the cost
of acquisition below the fair values of the identifiable net assets
acquired (discount on acquisition) is credited to the profit and
loss in the period of acquisition.
The interest of minority shareholders is stated at the minority’s
proportion of the fair values of the identifiable assets, liabilities
and contingent liabilities recognised. Losses applicable to the
minority in a consolidated subsidiary’s equity may exceed the
minority interest in the subsidiary’s equity. The excess, and any
further losses applicable to the minority, are allocated against
the majority interest except to the extent that the minority has a
binding obligation and is able to make an additional investment
to cover the losses. If the subsidiary subsequently reports profits,
such profits are allocated to the majority interests until the
minority’s share of losses previously absorbed by the majority has
been recovered.
56
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
2. Accounting policies (continued)
Basis of consolidation (continued)
Minority interests represent the portion of profit or loss and
net assets in subsidiaries that is not held by the Group and is
presented within equity in the consolidated balance sheet,
separately from parent shareholders’ equity.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from
the effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by other members of the Group. All
inter-company transactions and balances between Group entities
are eliminated on consolidation.
Foreign currencies
The functional currency of each company in the Group is that of
the country of incorporation as disclosed in note 15. The Group’s
most significant functional currency is Sterling. Transactions in
other currencies are initially recorded in the functional currency
by applying spot exchange rates prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and
liabilities denominated in foreign currencies are retranslated
at the functional currency rate of exchange prevailing on the
balance sheet date. Non-monetary assets and liabilities carried
at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value
was determined. Gains and losses arising on translation are taken
to the income statement, except for exchange differences arising
on monetary assets and liabilities that form part of the Group’s
net investment in a foreign operation. These are taken directly
to equity until the disposal of the net investment, at which time
they are recognised in profit or loss.
On consolidation, the assets and liabilities of the Group’s
overseas operations are translated into Sterling at exchange
rates prevailing on the balance sheet date. Income and expense
items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are classified as equity and
taken directly to a translation reserve. Such translation differences
are recognised as income or as expenses in the period in which
the operation is disposed of. Goodwill and fair value adjustments
arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the
closing rate.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses.
Cost comprises the aggregate amount paid and the fair value of
any other consideration given to acquire the asset and includes
costs directly attributable to making the asset capable of
operating as intended.
Depreciation is provided on all property, plant and equipment
at rates calculated to write off the cost, less estimated residual
value based upon estimated useful lives. Estimated residual value
and useful lives are reviewed on an annual basis and residual
values are based on prices prevailing at the balance sheet date.
Depreciation is charged on a straight-line basis over the expected
useful lives as follows:
Leasehold improvements
- over the lease term of
up to 15 years
Office equipment, fixtures and fittings - over 5 years
Computer and other equipment
Motor vehicles
- over 2, 3 or 5 years
- over 4 years
The carrying values of property, plant and equipment are reviewed
for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable, and are written down
immediately to their recoverable amount.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to
arise from the continued use of the asset. The gain or loss
arising on derecognition of an asset is determined as the
difference between the sale proceeds and the carrying amount
of the asset and is included in the income statement in the
period of derecognition.
Goodwill
Goodwill arising on consolidation represents the excess of
the cost of acquisition (fair value of consideration paid) over
the Group’s interest in the fair value of the identifiable assets,
liabilities and contingent liabilities of a subsidiary at the date of
acquisition. Goodwill is recognised as an asset and is allocated to
cash generating units for purposes of impairment testing. Cash
generating units represent the smallest identifiable group of
assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
Business combinations on or after 1 June 2004 are accounted
for under IFRS 3 using the purchase method. Any excess of the
cost of the business combination over the Group’s interest in the
net fair value of the identifiable assets, liabilities and contingent
liabilities is recognised in the balance sheet as goodwill and is not
amortised. To the extent that the net fair value of the acquired
entity’s identifiable assets, liabilities and contingent liabilities
is greater than the cost of the investment, a gain is recognised
immediately in the income statement. Goodwill recognised as an
asset as at 31 May 2004 is recorded at its carrying amount under
UK GAAP and is not amortised. Any goodwill asset arising on the
acquisition of equity accounted entities is included within the
cost of those entities.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses, with the carrying value being
reviewed for impairment, at least annually and whenever events
or changes in circumstances indicate that the carrying value may
be impaired.
2. Accounting policies (continued)
Goodwill (continued)
For the purpose of impairment testing, goodwill is allocated
to the related cash-generating units monitored by management,
usually at business segment level or statutory company level
as the case may be. Where the recoverable amount of the
cash-generating unit is less than its carrying amount, including
goodwill, an impairment loss is recognised in the
income statement.
The carrying amount of goodwill allocated to a cash-generating
unit is taken into account when determining the gain or loss on
disposal of the unit, or of an operation within it.
Intangible assets
Intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses.
Intangible assets acquired separately from a business are carried
initially at cost. An intangible asset acquired as part of a business
combination such as a trade name or customer relationship
is recognised at fair value outside goodwill if the asset is
separable or arises from contractual or other legal rights and its
fair value can be measured reliably. Expenditure on internally
developed intangible assets, excluding development costs, is
taken to the income statement in the year in which it is incurred.
Development expenditure is recognised as an intangible asset
only after all the following criteria are met:
• the project’s technical feasibility and commercial viability can
be demonstrated;
• the availability of adequate technical and financial resources
and an intention to complete the project have been confirmed;
and
• the correlation between development costs and future revenue
has been established.
Following initial recognition, the historic cost model is applied,
with intangible assets being carried at cost less accumulated
amortisation and accumulated impairment losses.
Intangible assets with a finite life are amortised over their
expected useful lives, as follows:
Client lists
Development costs -
Software and licences -
- straight-line basis over the expected
trading life of up to five years
straight-line basis over three years
straight-line basis over the contract
term of up to five years
sum-of-digits method over
two years
Customer relationships - sum-of-digits method over five years
Trade names -
The carrying value of intangible assets is reviewed for impairment
whenever events or changes in circumstances indicate the
carrying value may not be recoverable. In addition, the carrying
value of capitalised development expenditure is reviewed for
impairment annually before being brought into use.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 57
Impairment of assets
At least annually, or when impairment testing is required, the
directors review the carrying amounts of the Group’s tangible
and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss.
If any such indication exists (or at least annually for goodwill),
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the
cash generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less selling
costs and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present values
using a pre-tax discount rate. This rate reflects current market
assessments of the time value of money as well as the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset is estimated to be less than
its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. Impairment losses are recognised as
an expense immediately.
An assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A
previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was
recognised. If that is the case the carrying amount of the asset
is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been
determined, had no impairment loss been recognised for the
asset in prior years. A reversal of an impairment loss is recognised
as income immediately, although impairment losses relating to
goodwill may not be reversed.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less accumulated
impairment losses.
Operating leases
Leases are classified as operating leases where the lessor retains
substantially all the risks and benefits of ownership of the asset.
Lease payments under an operating lease are recognised as
an expense on a straight-line basis over the lease term unless
another systematic basis is more representative of the time
pattern of the user’s benefit.
Financial instruments
The Group determines the classification of its financial
instruments at initial recognition in accordance with the
categories outlined below and re-evaluates this designation
at each financial year end. When financial instruments are
recognised initially, they are measured at fair value, being
the transaction price plus, in the case of financial assets and
financial liabilities not at fair value through profit or loss, directly
attributable transaction costs.
58
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
2. Accounting policies (continued)
Financial assets and financial liabilities at
fair value through profit or loss
Financial assets and financial liabilities classified as held for
trading, or designated as such on inception, are included in this
category and relate to trade receivables and trade payables as
shown in the balance sheet. Financial instruments are classified
as held for trading if they are expected to settle in the short
term. The Group uses derivative financial instruments, in order to
hedge exposures resulting from derivatives with clients, which
are also classified as held for trading.
All financial instruments at fair value through the profit and loss
are carried in the balance sheet at fair value with gains or losses
recognised in the income statement.
Determination of fair value
Bets and other derivative financial instruments are stated at fair
value determined by reference to third party market values (bid
prices for long positions and offer prices for short positions).
For all other derivative financial instruments where there is no
underlying active market, the fair value is determined using an
appropriate valuation technique as determined by the Group at
the year end.
Derecognition of financial assets and
liabilities
A financial asset or liability is generally derecognised when the
contract that gives rise to it is settled, sold, cancelled or expires.
Financial assets
A financial asset is derecognised where the rights to receive cash
flows from the asset have expired; the Group retains the right to
receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under
a ‘pass-through’ arrangement; or the Group has transferred its
rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or
(b) has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
Where the Group has transferred its rights to receive cash
flows from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred
control of the asset, the asset is recognised to the extent of
the Group’s continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over the
transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration
that the Group could be required to repay.
Financial liabilities
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. Where an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability
and the recognition of a new liability, such that the difference in
the respective carrying amounts together with any costs or fees
incurred are recognised in profit or loss.
Trade receivables and trade payables
Assets or liabilities resulting from profit or losses on open
positions are carried at fair value. Amounts due from/to clients
and brokers are netted against other assets and liabilities with
the same counterparty where a legally enforceable netting
agreement is in place and where it is anticipated that assets and
liabilities will be netted on settlement.
Trade receivables represent balances with counterparties and
clients where the combination of cash held on account and
the valuation of financial derivative open positions result in
an amount due to the Group. A provision for impairment is
established where there is objective evidence of
non-collectability. Reference is made to an aged profile of debt
and the provision is subject to management review.
Trade payables represent balances with counterparties and
clients where the combination of cash held on account and
the valuation of financial derivative open positions results in an
amount payable by the Group.
Prepayments and other receivables
Prepayments and other receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted
in an active market, do not qualify as trading assets and have not
been designated as fair value through profit and loss. Such assets
are carried at amortised cost using the effective interest method
if the time value of money is significant. Gains and losses are
recognised in income when the receivables are derecognised or
impaired, as well as through the amortisation process. A provision
for impairment is established where there is objective evidence
of non-collectability.
Cash and cash equivalents
Cash comprises cash in hand and demand deposits which may
be accessed without penalty. Cash equivalents comprise
short-term highly liquid investments with a maturity of less than
three months from the date of acquisition. For the purposes
of the consolidated cash flow statement, net cash and cash
equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
The Group holds money on behalf of clients in accordance
with the client money rules of the Financial Services Authority
(FSA) and other regulatory bodies. This money is included
within cash and cash equivalents on the balance sheet and the
corresponding liability to clients is included in trade and other
payables. The return received on managing client balances is
included within finance revenue.
Other payables
Non-trading financial liabilities are recognised initially at fair value
and carried at amortised cost using the effective interest rate
method if the time value of money is significant.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 59
2. Accounting policies (continued)
Taxation
The income tax expense represents the sum of tax currently
payable and movements in deferred tax.
The tax currently payable is based on taxable profit for the period.
Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that
are taxable or deductible in other periods and it further excludes
items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is generally accounted for on all temporary
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax basis
used in the computation of taxable profit. In principle, deferred
tax liabilities are recognised for all temporary differences and
deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available, against which deductible
temporary differences may be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from
goodwill (or negative goodwill) or from the initial recognition
(other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply
when the related asset is realised or liability is settled, based
on tax rates and laws enacted or substantively enacted at the
balance sheet date. Deferred tax is charged or credited in the
income statement, except when it relates to items credited or
charged directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a
net basis.
Classification of shares as debt
or equity
When shares are issued, any component that creates a financial
liability of the Group is presented as a liability in the balance
sheet; measured initially at fair value net of transaction costs and
thereafter at amortised cost until extinguished on conversion
or redemption. The corresponding dividends relating to the
liability component are charged as interest expense in the
income statement.
Equity instruments issued by the Company are recorded as the
proceeds received, net of direct issue costs. Equity instruments
are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract
that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Own shares held in Employee
Benefit Trusts
Shares held in trust by the Company for the purposes of
employee share schemes are classified as a deduction from
shareholders’ equity and are recognised at cost. Consideration
received for the sale of such shares is also recognised in equity,
with any difference between the proceeds from the sale and the
original cost being taken to revenue reserves. No gain or loss is
recognised in the income statement on the purchase, sale, issue
or cancellation of equity shares.
Revenue recognition
Revenue is recognised when it is probable that economic
benefits associated with the transaction will flow to the Group
and the revenue can be reliably measured.
Rendering of services includes gains and losses on the running
of betting markets and trading in financial markets, net of
commissions expensed. Open positions are carried at fair
market value and gains and losses arising on this valuation are
recognised in revenue as well as gains and losses realised on
positions that have closed.
Finance revenue is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable.
The effective interest rate is the rate which exactly discounts
estimated future cash receipts over the expected life of the
financial asset to that asset’s net carrying amount.
Dividends receivable are recognised when the shareholders’ right
to receive the payment is established.
Cost of sales
Cost of sales represents duties and levies charged on betting
revenues. Betting duties are charged at a fixed rate on aggregate
net client losses.
Operating profit
Operating profit is the sum of the results of the principal activities
of the Group after charging depreciation of property, plant and
equipment, amortisation of intangible assets, operating lease
rentals on land and buildings, foreign exchange differences,
profit/loss on sale of property, plant and equipment and other
administrative expenses.
Finance costs
The interest cost recognised in the income statement is accrued
on a time basis by reference to the principal amount charged at
the effective interest rate applicable. The effective interest rate is
the rate that exactly discounts the future expected cash flows to
the carrying amount of the liability. Issue costs are included in the
determination of the effective interest rates.
60
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
2. Accounting policies (continued)
Retirement benefit costs
The Group operates defined contribution schemes. Contributions
are charged to the income statement as and when they become
payable according to the rules of the schemes.
Share-based payments
The Company operates two employee share plans: a Share
Incentive Plan (SIP) and a Long Term Incentive Plan (LTIP) both of
which are equity-settled. The cost of these awards is measured
at fair value based on the market price of the Company’s shares
at the date of the grant and are recognised as an expense in the
income statement on a straight-line basis over the vesting period
based on the Company’s estimate of the number of shares that
will eventually vest.
IFRS 8 “Operating Segments” applies to accounting periods
beginning after 1 January 2009. This standard replaces IAS
14 “Segment Reporting” and will not affect the results of the
Group but will require a change in the disclosure of segmental
information. IFRS 8 amends the current segmental reporting
requirements of IAS 14 and requires “management approach”
to be adopted so that segmental information is presented on
the same basis as that used for internal reporting purposes.
IAS 1 (Amendments) “Presentation of Financial Statements”
applies to accounting periods beginning after 1 January 2009.
The amendments prohibit the presentation of items of income
and expense (that is “non-owner changes in equity”) in the
statement of changes in equity. The amendment also sets out
the additional disclosure requirements for entities making
restatement or reclassifications, and clarifies the classification
of of items ‘held for trading’ in accordance with IAS 39.
At each balance sheet date before vesting, the cumulative
expense is calculated representing the extent to which
the vesting period has expired and management’s best
estimate of the achievement or otherwise of non-market
conditions determining the number of equity instruments
that will ultimately vest. The movement in cumulative expense
since the previous balance sheet date is recognised in the
income statement as part of administrative expenses, with a
corresponding entry in equity.
The Company also operates a Shadow SIP scheme for overseas
staff, which is cash settled. The fair value of these awards is
measured at the grant date using the Black-Scholes option
pricing model taking into account the terms and conditions of
the award. A liability is recognised over the expected vesting
period and until the liability is settled it is re-measured at each
reporting date with changes in fair value recognised in the
income statement.
Recent accounting developments
IFRIC interpretations which are effective for the year ended
31 May 2009 but are not relevant to the Group:
IFRIC 12 “Service concession arrangements”
IFRIC 14 “The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction”
Standards and interpretations that have been issued with an effective
date after the date of these financial statements:
The Group has not applied these standards and interpretations
in the preparation of these financial statements. The impact on
the Group’s financial statements of the future adoption of the
standards and interpretations is still under review, but the Group
does not expect any of these changes to have a material effect
on the results or net assets of the Group in the period of initial
application. The Group expects to apply the following standards
from their respective effective dates.
IFRS 2 (Amendment) “Share-based payment” applies to
accounting periods beginning after 1 January 2009. This
amendment clarifies that vesting conditions are service
and performance conditions only. It also specifies that all
cancellations should receive the same accounting treatment
whether cancelled by the entity or by other parties.
IAS 32 (Amendment) “Financial Instruments: Presentation” and
IAS 1(Amendment) “Presentation of Financial Statements
– Puttable Instruments and Instruments with obligations
arising on Liquidation” applies to accounting periods
beginning after 1 January 2009.
IAS 27 (Revised) “Consolidated and separate financial
statements” applies to accounting periods beginning after
1 July 2009. The revised standard requires the effects of all
transactions with non-controlling interests to be recorded in
equity if there is no change in control. An amendment to the
standard that applies to accounting periods beginning after
1 January 2009 clarifies the interaction of IFRS 5 and IAS 30
with regards to investments in subsidiary operations.
IFRS 3 (Revised) “Business Combinations” applies to accounting
periods beginning after 1 July 2009. The revised standard
includes significant changes to how the acquisition method is
applied to business combinations.
IFRS 5 (Amendment) “Non-current assets held-for-sale and
discontinued operations” applies to accounting periods
beginning after 1 July 2009. The amendment clarifies the
disclosure requirements where the partial sale of a subsidiary
results in a loss of control.
IAS 36 (Amendment) “Impairment of assets” applies to
accounting periods beginning after 1 January 2009.
The amendment requires that, where fair value less costs
to sell is calculated based on discounted cash flows,
disclosures equivalent to those for a value in use calculation
should be made.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 61
2. Accounting policies (continued)
Recent accounting developments
(continued)
IAS 38 (Amendment) “Intangible Assets” applies to accounting
periods beginning after 1 January 2009. The amendment
allows the recognition of a prepayment only in the event that
payment has been made in advance of obtaining right of
access to goods or receipt of services.
IAS 19 (Amendment) “Employee benefits” applies to accounting
periods beginning after 1 January 2009. The amendment
clarifies certain accounting and valuation of defined benefit
plans and alters the distinction of short term and long term
employee benefits.
IAS 39 (Amendment) “Financial Instruments: Recognition and
Measurement” applies to accounting periods beginning after
1 January 2009. The amendment clarifies certain definitions
and aligns the example of a segment (for inter-segment
hedging) with IFRS 8.
IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”
applies to accounting periods beginning after 1 October 2008.
Standards and interpretations that are not yet effective and are not
relevant to the Group’s operations:
IAS 23 (Amendments) “Borrowing Costs” applies to accounting
periods beginning after 1 January 2009. The amendments
to the standard require an entity to capitalise borrowing
costs directly attributable to the acquisition, construction or
production of a qualifying asset (one that takes a substantial
period of time to get ready for use or sale) as part of the cost
of that asset. The option of immediately expensing borrowing
costs is removed. The amendments also align the definition of
borrowing costs with that in IAS39.
IAS 16 (Amendment) “Property plant and equipment” and
consequential amendment to IAS 7 “Statement of cash flows”
applies to accounting periods beginning after 1 January 2009.
The amendment relates to entities whose ordinary activities
are renting and subsequently selling assets.
IAS 28 (Amendment) “Investments in Associates” applies to
accounting periods beginning after 1 January 2009.
The amendment requires that the investment in an
associate is treated as a single asset for the purposes of
impairment testing.
IAS 29 (Amendment) “Financial reporting in hyperinflationary
economies” applies to accounting periods beginning after
1 January 2009.
IAS 31 (Amendment) “Interests in joint ventures” applies to
accounting periods beginning after 1 January 2009.
IAS 38 (Amendment) “Intangible Assets” applies to accounting
periods beginning after 1 January 2009. The amendment
deletes wording that states that there is ‘rarely, if ever’ support
for use of a method of amortisation that results in a lower rate
than the straight-line method.
IAS 40 (Amendment) “Investment Property” applies to
accounting periods beginning after 1 January 2009. The
amendment brings property that is under construction or
development for future use as an investment property within
the scope of IAS 40.
IAS 41 (Amendment) “Agriculture” applies to accounting periods
beginning after 1 January 2009. The amendment relates to
the valuation methodologies for biological assets.
IAS 20 (Amendment) “Accounting for government grants and
disclosure of government assistance” applies to accounting
periods beginning after 1 January 2009. The amendment
relates to accounting for the benefit of a below market rate
government loan.
IFRIC 13 “Customer loyalty programmes” applies to accounting
periods beginning after 1 July 2008.
IFRIC 15 “Agreements for the Construction of Real Estate”
applies to accounting periods beginning after 1 January 2009.
IFRIC 17 “Distributions of Non-cash Assets to Owners” applies to
accounting periods beginning after 1 January 2009.
IFRIC 18 “Transfer of Assets from Customers” applies to asset
transfers after 1 July 2009.
Critical accounting estimates
and judgements
In the directors’ opinion there are no critical accounting estimates
or judgements that have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities
within the next financial year.
The accounting estimates or judgements that have the most
significant impact on the financial statements are the estimation
of share-based payment costs (see note 25), the measurement
and impairment of goodwill (see note 16), the impairment of
trade receivables (see note 5) and the assessment of net market
risk and associated disclosures (see note 30).
62
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
3. Revenue
Revenue represents the net trading income from financial instruments carried at fair value through profit and loss. Revenue disclosed
in the income statement is analysed as follows:
Rendering of services
Finance revenue is disclosed in note 8.
2009
£000
2008
£000
257,089
184,008
4. Segment information
The operating businesses are organised and managed separately according to the nature of the products provided, with each
segment representing a strategic business unit that offers different products and serves different markets.
Primary reporting format – business segments
The primary segment reporting format is by business segment as the Group’s risks and rates of return are affected predominantly by
differences in the products provided.
The Group operates in two principal areas of activity: financial and sport. The types of financial instrument included within each of the
above categories are described in the Group Operating and Financial Review.
Year ended 31 May 2009
Revenue
Segment result
Segment result before amortisation and impairment arising on consolidation
Amortisation and impairment of intangibles arising on consolidation
Segment result
Unallocated administrative expenses
Unallocated finance revenue
Unallocated finance costs
Profit before taxation
Tax expense
Profit for the year
Assets and liabilities
Segment assets
Segment liabilities
Other segment information
Capital expenditure
Property, plant and equipment
Intangible assets
Depreciation
Amortisation of intangible assets
Amortisation and impairment of intangibles arising on consolidation
Impairment of trade receivables
Financial
£000
Sport Unallocated
£000
£000
248,346
8,743
165,089
(14,613)
150,476
1,893
–
1,893
–
–
–
–
Total
£000
257,089
166,982
(14,613)
152,369
(42,319)
2,828
(1,619)
111,259
(32,607)
78,652
960,775
10,220
17,240
988,235
521,857
3,405
67,060
592,322
2,870
1,171
3,066
521
14,613
18,129
559
238
577
106
–
39
1,691
731
1,759
357
–
–
5,120
2,140
5,402
984
14,613
18,168
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 63
4. Segment information (continued)
Primary reporting format – business segments (continued)
Year ended 31 May 2008
Revenue
Segment result
Unallocated administrative expenses
Unallocated finance revenue
Unallocated finance costs
Profit before taxation
Tax expense
Profit for the year
Assets and liabilities
Segment assets
Segment liabilities
Other segment information
Capital expenditure
Property, plant and equipment
Intangible assets
Depreciation
Amortisation of intangible assets
Impairment of trade receivables
Financial
£000
Sport Unallocated
£000
£000
172,475
11,533
126,265
1,892
–
–
Total
£000
184,008
128,157
(34,584)
4,100
(683)
96,990
(29,702)
67,288
745,613
8,285
116,770
870,668
591,275
145
34,532
625,952
2,417
680
1,482
407
3,426
736
137
590
84
631
2,522
465
1,944
291
–
5,675
1,282
4,016
782
4,057
Unallocated administrative expenses comprise overheads, including information technology costs, which are not specifically
attributable to business segments.
Unallocated assets and liabilities comprise property, plant and equipment, intangible assets, deferred tax assets, prepayments and
other debtors, cash and cash equivalents, accruals, tax liabilities and financial liabilities which are not specifically attributable to
business segments.
Unallocated assets include cash and cash equivalents amounting to £2,218,000 (2008: £99,411,000).
64
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
4. Segment information (continued)
Secondary reporting format – geographical segments
Geographical segment information for revenue and profit is based upon client location. The UK segment includes all clients located in
the UK; Europe includes all clients located in Ireland and continental Europe; Asia Pacific includes all clients located in Australasia, Asia
and the Far East; all other clients are classified as Rest of World. Geographical segment information for assets and capital expenditure is
based upon asset location.
The Group has offices in the United Kingdom, France, Germany, Italy, Luxembourg, Spain, Australia, Japan, Singapore, and the United
States of America.
Year ended 31 May 2009
Revenue
Segment assets
Other segment information:
Capital expenditure
Property, plant and equipment
Intangible assets
Year ended 31 May 2008
Revenue
Segment assets
Other segment information:
Capital expenditure
Property, plant and equipment
Intangible assets
Unallocated assets comprise deferred tax assets.
UK
£000
Europe
£000
Asia
Pacific
£000
Rest of
World
£000
Unallo-
cated
£000
Total
£000
147,471
39,530
65,500
4,588
–
257,089
661,929
28,487
255,705
34,552
7,562
988,235
4,191
1,803
185
1
401
–
343
336
–
–
5,120
2,140
UK
£000
Europe
£000
Asia
Pacific
£000
Rest of
World
£000
Unallo-
cated
£000
Total
£000
134,713
20,396
27,371
1,528
–
184,008
757,217
54,694
35,246
15,458
8,053
870,668
4,377
923
392
6
103
1
803
352
–
–
5,675
1,282
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 65
5. Operating profit
This is stated after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of intangible assets arising on consolidation
Operating lease rentals for land and buildings
Impairment of trade receivables
Foreign exchange differences
Advertising and marketing
Property, plant and equipment written off
Intangible assets written off
Group
2009
£000
2008
£000
5,402
984
14,613
3,385
18,168
735
23,682
37
–
4,016
782
–
1,793
4,057
(127)
11,922
115
9
All of the above except foreign exchange differences are included in the administrative expenses within the income statement.
Foreign exchange differences are included in revenue.
6. Auditors’ remuneration
Audit fees:
Group audit
Additional costs in relation to the prior year
Other fees to auditors:
Statutory and regulatory audit of subsidiaries of the Company pursuant to legislation
Additional costs in relation to the prior year statutory and regulatory audit of subsidiaries of the Company
Other services supplied pursuant to legislation
All other services
Group
2009
£000
2008
£000
352
–
173
21
17
61
272
273
45
85
–
30
–
115
66
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
7. Staff costs
The staff costs for the year including directors were as follows:
Wages and salaries
Social security costs
Other pension costs
Group
2009
£000
2008
£000
46,015
5,008
3,059
41,871
4,284
2,300
54,082
48,455
Staff costs include the following amounts in respect of performance-related bonuses, inclusive of national insurance and share-based
payments charged to the income statement:
Performance-related bonuses
Equity-settled share-based payment schemes
Cash settled share-based payment schemes
Group
2009
£000
2008
£000
10,661
3,256
–
15,971
4,682
34
13,917
20,687
The directors’ emoluments for the year ended 31 May 2009 and the comparative year can be found in the directors’ remuneration
report on page 39.
The average monthly number of employees was made up as follows:
Dealing, sales and client support
Management and administration including IT
8. Finance revenue
Interest receivable from brokers
Interest receivable from clients
Bank interest receivable
Group
2009
2008
464
297
761
329
222
551
Group
2009
£000
3,812
1,285
10,678
2008
£000
7,725
885
21,999
15,775
30,609
Finance revenue includes £12,888,000 (2008: £26,562,000) of interest receivable in respect of segregated and non-segregated client
balances, part of which is held with brokers.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 67
Group
2009
£000
2008
£000
5,288
598
150
3
927
16,341
329
–
3
296
6,966
16,969
Group
2009
£000
2008
£000
30,895
4,578
2,391
30,857
1,046
(440)
37,864
31,463
(5,257)
(1,761)
32,607
29,702
9. Finance costs
Interest payable to clients
Interest payable to brokers
Bank interest payable
Dividend on redeemable preference shares
Other charges
10. Taxation
(a) Tax on profit on ordinary activities
Tax charged in the income statement
Current income tax:
UK Corporation tax
Foreign tax
Adjustment in respect of prior years
Total current income tax
Deferred tax:
Origination and reversal of temporary differences
Tax expense in the income statement (note 10(b))
(b) Reconciliation of the total tax charge
The rate of corporation tax in the UK was reduced from 30% to 28% from 1 April 2008. The tax expense in the income statement for
the year is marginally higher than the standard rate of corporation tax in the UK of 28% (2008: 29.67%). The differences are reconciled
below:
Accounting profit before income tax
2009
£000
2008
£000
111,259
96,990
Accounting profit multiplied by the UK standard rate of corporation tax of 28% (2008: 29.67%)
31,153
28,777
Expenses not deductible for tax purposes
Lower taxes on overseas earnings
Foreign tax losses previously not recognised
Adjustment in respect of prior years
Total tax expense reported in the income statement
The effective tax rate is 29.3% (2008: 30.6%).
309
(1,246)
–
2,391
1,638
(120)
(153)
(440)
32,607
29,702
68
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
10. Taxation (continued)
(c) Deferred income tax assets
The deferred income tax assets included in the balance sheet are as follows:
Decelerated capital allowances
Tax losses available for offset against future tax
Doubtful debt provision
Share-based payments
Other
Group
2009
£000
1,345
2,699
675
2,388
455
7,562
2008
£000
817
759
–
6,477
–
8,053
The tax losses available for offset against future tax relate to operating losses arising in overseas subsidiary companies, the
recoverability of which is dependent on future operating profits in those entities. A deferred tax asset is recognised where it is
anticipated that future operating profits, consistent with the Board-approved three-year plan, will exceed the losses that have arisen
to date. Where it is not anticipated that future operating profits will exceed the losses that have arisen to date, a deferred tax asset is
not recognised.
Share-based payment awards have been charged to the income statement but are not allowable as a tax expense until the awards
vest. The excess of tax relief in future periods over the amount charged to the income statement is recognised as a credit directly
to equity.
The gross movement in the deferred income tax assets included in the balance sheet is as follows:
Group
At the beginning of the year
Income statement (charge)/credit
Tax credited directly to equity
Acquired on acquisition
Foreign currency adjustment
At the end of the year
(d) Deferred income tax liabilities
The deferred income tax liabilities included in the balance sheet are as follows:
At the beginning of the year
Acquisition of a subsidiary
Foreign currency adjustment
Income statement charge
At 31 May 2009
2009
£000
8,053
(880)
(1,730)
1,719
400
7,562
2008
£000
3,940
1,761
2,352
–
–
8,053
Group
2009
£000
–
18,257
4,620
(6,137)
16,740
A deferred tax liability of £18.3m was recognised in respect of separately identifiable intangible assets arising on the acquisition of
FXOnline (see note 15).
The deferred tax liability of £18.3 million decreased from the date of acquisition to the end of the period by £1.5m (£6.1m reduction as
a result of the amortisation of the underlying intangibles less £4.6m foreign currency translation gain).
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 69
10. Taxation (continued)
(e) Deferred income tax – income statement charge
The deferred income tax credit included in the income statement is made up as follows:
Decelerated capital allowances
Tax losses available for offset against future tax
Share-based payments
Doubtful debt provision
Other
Amortisation of intangibles arising on acquisition
The deferred tax (debited)/credited to equity during the year is as follows:
Share-based payments
Group
2009
£000
2008
£000
528
1,940
(2,359)
675
(1,664)
6,137
(119)
560
1,320
–
–
–
5,257
1,761
(1,730)
2,352
The deferred tax asset recognised in equity relates to a deductible temporary excess of the estimated future taxation benefit and the
amounts charged to date in the income statement.
11. Earnings per ordinary share
The income statement may only disclose basic and diluted EPS. The Group has also calculated an adjusted EPS measurement ratio as
the directors consider it is the most appropriate measurement since it better reflects the business’s underlying cash earnings.
Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held
as own shares held in Employee Benefit Trusts. Diluted earnings per share is calculated using the same profit figure as that used in
basic earnings per share and by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all
dilutive ordinary shares arising from share schemes. Adjusted earnings is based on earnings before amortisation and impairment of
intangibles arising on consolidation.
The following reflects the income and share data used in the earnings per share computations:
Earnings attributable to equity shareholders of parent
Amortisation and impairment of intangibles arising on consolidation net of tax and minority interests
Adjusted earnings
Weighted average number of shares:
Basic and adjusted
Dilutive effect of share-based payments
Diluted
Earnings per share
Basic
Diluted
Basic adjusted
Diluted adjusted
Group
2009
£000
2008
£000
77,986
8,476
67,288
–
86,462
67,288
347,904,665 326,243,567
5,515,661
1,627,469
349,532,134 331,759,228
22.42p
22.31p
24.85p
24.74p
20.62p
20.28p
20.62p
20.28p
70
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
12. Dividends
Declared and paid during the year:
Final dividend for 2008 at 9.00p per share (2007: 6.50p)
Interim dividend for 2009 at 4.00p per share (2008: 3.00p)
Proposed for approval by shareholders at the AGM:
Final dividend for 2009 at 11.00p per share (2008: 9.00p)
13. Property, plant and equipment
Group
Cost:
At 1 June 2007
Foreign currency adjustment
Additions
Acquisition of subsidiary
Written off
At 31 May 2008
Foreign currency adjustment
Additions
Acquisition of subsidiary
Written off
At 31 May 2009
Depreciation:
At 1 June 2007
Foreign currency adjustment
Provided during the year
Written off
At 31 May 2008
Foreign currency adjustment
Provided during the year
Written off
At 31 May 2009
Net book value at 31 May 2009
Net book value at 31 May 2008
Net book value at 1 June 2007
Company and Group
2008
£000
2009
£000
29,636
14,380
21,288
9,825
44,016
31,113
39,554
29,475
Office
Leasehold fixtures and
equipment, Computer
and other
fittings equipment
£000
£000
improvements
£000
4,734
15
2,078
–
(922)
5,905
166
2,102
204
(2)
237
6
505
5
(47)
706
53
469
127
(3)
11,590
(158)
3,092
115
(1,712)
12,927
565
2,549
1,158
(3,104)
Total
£000
16,561
(137)
5,675
120
(2,681)
19,538
784
5,120
1,489
(3,109)
8,375
1,352
14,095
23,822
1,440
–
1,132
(830)
1,742
24
1,390
–
3,156
5,219
4,163
3,294
91
2
61
(47)
107
7
233
(3)
344
6,872
(141)
2,823
(1,689)
7,865
116
3,779
(3,070)
8,403
(139)
4,016
(2,566)
9,714
147
5,402
(3,073)
8,690
12,190
1,008
5,405
11,632
599
146
5,062
4,718
9,824
8,158
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 71
14. Intangible assets
Cost:
At 1 June 2007
Foreign currency adjustment
External purchases
Acquisition of subsidiary
Written off
At 31 May 2008
Foreign currency adjustment
External purchases
Acquisition of subsidiary
Written off
Client lists
and
customer
Goodwill relationships
£000
£000
Trade
name
£000
Develop-
Software
ment
costs and licences
£000
£000
106,218
5
–
3,802
–
110,025
19,819
–
87,121
–
826
24
–
–
–
850
9,666
–
42,691
–
Total
£000
112,841
39
1,282
3,851
(301)
117,712
29,832
2,140
131,019
(2,793)
3,119
–
50
–
(9)
3,160
(5)
99
–
(2,357)
2,678
10
1,232
49
(292)
3,677
176
2,041
429
(436)
897
5,887
277,910
3,034
89
(9)
3,114
(1)
38
(2,357)
794
103
46
85
1,433
542
(283)
1,692
5
946
(436)
5,166
782
(292)
5,656
(1,157)
15,597
(2,793)
2,207
17,303
3,680
260,607
1,985
112,056
1,245
107,675
–
–
–
–
–
–
176
–
778
–
954
–
–
–
–
(47)
567
–
520
434
–
–
At 31 May 2009
216,965
53,207
Amortisation:
At 1 June 2007
Provided during the year
Written off
At 31 May 2008
Foreign currency adjustment
Provided during the year
Written off
At 31 May 2009
–
–
–
–
–
–
–
–
699
151
–
850
(1,114)
14,046
–
13,782
Net book value at 31 May 2009
216,965
39,425
Net book value at 31 May 2008
Net book value at 1 June 2007
110,025
106,218
–
127
72
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
15. Investment in subsidiaries
At cost:
At the beginning of the year
Investment relating to equity-settled share-based payments for subsidiary employees
Increase in investment in IG Group Ltd
At the end of the year
The following companies are all owned directly or indirectly by IG Group Holdings plc:
Company
2009
£000
2008
£000
309,581
3,256
111,234
304,899
4,682
–
424,071
309,581
Holding
Voting rights
Nature of business
Name of Company
Country of
incorporation
Subsidiary undertakings held directly:
IG Finance
IG Group Limited
UK
UK
Subsidiary undertakings held indirectly:
IG Index plc
IG Markets Limited
extrabet Limited
UK
UK
UK
Ordinary shares
Ordinary shares*
Ordinary shares
Ordinary shares
100%
100%
100%
100%
Ordinary shares
100%
extrabet Financial Limited
IG Australia Pty Limited
UK
Australia
Ordinary shares
Ordinary shares
100%
100%
IG Asia Pte Limited
Singapore
Ordinary shares
100%
IG Markets Inc.
USA
Ordinary shares
100%
North American Derivatives
Exchange, Inc. (formerly
HedgeStreet Inc.)
FXOnline Japan KK
USA
Japan
Market Data Limited
Market Risk Management Inc. USA
India
UK
IG Infotech (India) Private Ltd
IG Nominees Limited
UK
IG Finance Two
IG Finance Three
IG Finance Four
IG Finance Five Limited
IG Finance Six Limited
IG Finance Seven Limited
IG Finance Eight Limited
UK
UK
UK
UK
UK
UK
UK
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares*
Ordinary shares
Ordinary shares
Ordinary shares
100%
87.5%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Financing
Holding company
Spread betting
Margin trading and
foreign exchange
Spread betting and
fixed odds bookmaker
Fixed odds bookmaker
Australia sales and
marketing office
Margin trading and
foreign exchange
Foreign exchange
and USA sales office
Exchange
Margin trading and
foreign exchange
Data distribution
Market maker
Software development
Nominee company
Financing
Financing
Financing
Financing
Financing
Financing
Financing
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 73
15. Investment in subsidiaries (continued)
Name of Company
Country of
incorporation
Holding
Voting rights
Nature of business
Subsidiary undertakings held indirectly (continued):
Gibraltar
Fox Sub Limited
Fox Sub Two Limited
Gibraltar
Fox Japan Holdings Limited Gibraltar
IG US Holdings Inc.
Market Data Japan KK
USA
Japan
Ordinary shares
Ordinary shares
Ordinary shares*
Ordinary shares
Ordinary shares
100%
100%
100%
100%
100%
Financing
Financing
Holding company
Holding company
Holding company
* Each of IG Group Limited, Fox Japan Holdings Limited and IG Finance 5 Limited has preference shares in issue. These are 100% held within the IG group of companies.
Employee Benefit Trusts:
IG Group Holdings plc Inland Revenue Approved Share Incentive Plan (UK trust)
IG Group Limited Employee Benefit Trust (Jersey trust)
15a) Acquisition of HedgeStreet Inc.
On 6 December 2007, the Group acquired 100% of the ordinary shares of HedgeStreet Inc. (“HedgeStreet”) for a consideration of
£3,024,000 ($6,000,000) satisfied in cash.
Goodwill of £3,829,000 arose on the acquisition of HedgeStreet relating to certain intangible assets that cannot be individually
separated and reliably measured and includes the future growth potential of the business. There has not been an amendment to the
fair value of the acquired assets or consideration paid in the year ended 31 May 2009 in relation to this acquisition.
On 21 June 2009, HedgeStreet Inc. changed its name to North American Derivatives Exchange, Inc.
15b) Acquisition of FXOnline Japan KK
On 2 October 2008, the Group acquired 87.5% of the issued share capital of FXOnline Japan KK (“FXOnline”), a leading privately-owned
Japanese online retail FX trading company, for a total consideration of ¥22.2 billion (£117.6 million). The Group also has a call option to
acquire the remaining 12.5% of the issued share capital exercisable from January 2011 according to a pre-agreed formula that is linked
to the future performance of FXOnline. The entire consideration was satisfied in cash, which was in part financed by a share placing of
27,864,407 shares at a placing price of £2.95 raising £82.2 million.
FXOnline contributed £22.6 million to revenue and £9.2 million to profit before tax excluding £5.4 million of synergies generated post
acquisition. If the combination had been completed on the first day of the financial period, the estimated revenue would have been
£33.4 million with profit before tax of £9.6 million for the year, excluding £5.4 million of synergies generated post acquisition. A number
of exceptional costs were incurred pre acquisition reducing profit for the year.
74
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
15. Investment in subsidiaries (continued)
15b) Acquisition of FXOnline Japan KK (continued)
The book and fair value of the assets acquired is given below.
Net assets acquired
Intangible assets arising on acquisition – trade name
Intangible assets arising on acquisition – customer relationships
Property, plant and equipment
Intangible assets – software and licences
Deferred tax assets
Trade receivables
Other receivables
Cash and cash equivalents
Trade payables
Other payables
Corporate tax liabilities
Deferred tax liability
Goodwill
Consideration and minority interests
Represented by:
Cash
Deferred contingent consideration
Acquisition costs capitalised, settled in cash
Minority interests
Book value
£000
Fair value
£000
–
–
1,489
429
1,719
14,251
485
68,202
(65,341)
(6,456)
(2,555)
–
12,223
778
42,691
1,489
429
1,719
14,251
485
68,202
(65,341)
(6,456)
(2,555)
(18,257)
37,435
87,121
124,556
117,612
1,385
4,031
1,528
124,556
The fair value adjustments include the recognition of separately identifiable intangible assets arising on acquisition that meet the
identification and measurement requirements of IAS 38. These comprise the FXOnline trade name and customer relationships and are
amortised using the sum of digits method over two and five years respectively. The fair value of these assets was determined by an
external, professional valuer through an estimate of the present value of earnings or of costs avoided that are attributable to the asset
(the relief from royalties and the multi period excess earnings methods respectively).
A deferred tax liability of £18.3 million was recognised in respect of separately identifiable intangible assets arising on the acquisition
of FXOnline. A deferred tax liability is recognised in a business combination in respect of any identified intangible asset representing
the difference between the fair value of the acquired asset and its tax base. Recognition of a deferred tax liability in respect of such a
difference gives rise to a corresponding increase in goodwill accounted for in the consolidated balance sheet.
The deferred tax liability of £18.3 million decreased from the date of acquisition to the end of the period by £1.5 million (£6.1 million
reduction as a result of the amortisation of the underlying intangibles less £4.6 million foreign currency translation gain).
Deferred contingent consideration represents the management’s estimate of the deferred payments expected to be made to the
former FXOnline share option holders at 31 January 2011 and 31 January 2012 as a result of the cancellation of their options on
acquisition by the Group.
The directors consider that the fair value of the goodwill of £87.1 million that arose on the acquisition of FXOnline is reasonable and
related to certain intangible assets that cannot be individually separated and reliably measured. The goodwill includes the future
growth potential of the business, the assembled workforce as well as revenue and cost synergies expected to accrue to the Group.
These assets are not separately identifiable.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 75
16. Impairment of goodwill
Goodwill has been allocated for impairment testing purposes to the cash generating units (CGUs), as follows:
Financial
Sport
US business
Japanese business
Group
2009
£000
2008
£000
100,946
5,250
4,690
106,079
100,946
5,250
3,829
–
216,965
110,025
Goodwill arising on the purchase of IG Group plc by IG Group Holdings plc on 5 September 2003 has been allocated according to the
profitability of the Financial and Sport CGUs at that date.
The identification of the Group’s CGUs was reviewed subsequent to the acquisition of FXOnline. As a result, goodwill arising on the
acquisitions of each of HedgeStreet and FXOnline has been allocated to the separate US business and Japanese business CGUs
respectively as these businesses generate largely independent cash flows.
For the purposes of impairment testing of goodwill the carrying amount of each CGU (including goodwill) is compared to the
recoverable amount of each CGU and any deficits are provided. The carrying amount of a CGU includes only those assets that can be
attributed directly, or allocated on a reasonable and consistent basis.
The estimated recoverable amount of each CGU is based on value-in-use calculated as the total of the present value of projected
five-year future cash flows and a terminal value.
Key assumptions used in value-in-use calculations
The calculation of value-in-use for the CGUs is most sensitive to the following assumptions:
• Growth rates used to extrapolate cash flows beyond the three-year plan period (2008: two year period);
• The long-term growth rate used for the terminal value calculation;
• Discount rate being the weighted average cost of capital (“WACC”);
• Client recruitment rates; and
• Average revenue per client.
Projected future cash flows for each CGU were based on the Board-approved three-year plan (2008: two-year period) comprising a
one-year budget and two-year forecast (2008: one-year) which reflect past experience as well as future expected trends. Cash flows
beyond the relevant plan period (for example years four and five in the cash flow model for 2009) were estimated using a range of
subsequent growth rates in order to allow for differing growth scenarios. These ranges are disclosed in the following table and are
consistent with the long-term growth rates of the Financial and Sport businesses, being 39% and 3.5% respectively, measured over a
five-year period.
The cash flows for the US and Japanese businesses were translated into Sterling using period end market rates.
The cash flows were discounted using pre-tax discount rates (WACC) as disclosed in the table below. These were derived using
region-specific, market-based cost of equity and debt assumptions in order to reflect both the financing cost and risk associated with
each CGU. The long-term growth rates (“g”) used in the terminal value calculations are disclosed below and are equivalent to or lower
than the respective long-term growth rate for the economy in which the CGU operates.
Cash Generating Unit
Financial
Sport
US business
Japanese business
2009
WACC
15.0%
15.0%
19.8%
17.5%
2008
WACC
2009
Years 4-5
2008
Years 3-5
growth rate growth rate
14.1%
14.1%
N/A
N/A
4-8%
0-5%
15-30%
5-10%
5%
5%
N/A
N/A
2009
g
2.0%
2.0%
3.0%
1.5%
2008
g
2.0%
2.0%
N/A
N/A
76
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
16. Impairment of goodwill (continued)
Client recruitment rates and average revenue per client were based upon actual amounts measured in prior periods which were
projected forward in accordance with expected trends.
The directors have performed a sensitivity analysis around the cash flow assumptions and have concluded that no reasonably possible
change in key assumptions would cause the carrying amount of any CGU to exceed its recoverable amount.
On the basis of the results of the above analysis there was no impairment of goodwill during the year.
17. Trade receivables
Amounts due from brokers
Amounts due from clients
18. Cash and cash equivalents
Group
2009
£000
2008
£000
178,261
4,824
252,522
10,801
183,085
263,323
Group
2009
£000
Company
2009
£000
2008
£000
2008
£000
Cash at bank and in hand
Short-term deposits
Client money held
95,560
3,847
421,014
99,411
3,348
368,963
520,421
471,722
122
–
–
122
46
–
–
46
Cash and cash equivalents are deposited for varying periods of between one day and three months depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is
not materially different from the book value.
Net interest receivable on client balances amounted to £7,600,000 (2008: £10,221,000).
Undrawn committed borrowing facilities amounted to £120m (2008: £160m) at the balance sheet date.
19. Trade payables
Amounts due to clients
Group
2009
£000
2008
£000
511,656
582,689
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 77
20. Other payables
Accruals
Other taxes and social security
Amounts due to group companies (note 29)
Dividends on redeemable preference shares
21. Redeemable preference shares
Authorised:
Preference shares of £1 each
Allotted, called up and fully paid:
Preference shares of £1 each
Group
2009
£000
Company
2009
£000
2008
£000
2008
£000
26,131
1,192
–
3
25,501
1,211
–
3
962
–
119,077
3
27,326
26,715
120,042
1,756
–
–
3
1,759
Company and Group
2008
£000
2009
£000
40
40
40
40
The preference shares are entitled to a fixed non-cumulative dividend of 8% paid in preference to any other dividend. Redemption is
only permissible in accordance with capital distribution rules or on the winding up of the Company where the holders are entitled to
£1 per share plus, if the Company has sufficient distributable reserves, any accrued or unpaid dividends. The preference shares have no
voting rights, except that they are entitled to vote should the Company fail to pay any amount due on redemption of the shares. The
effective interest rate on these shares is 8% (2008: 8%).
22. Equity share capital
Authorised:
500,000,000 ordinary shares of 0.005p each
65,000 B shares of 0.001p each
Allotted, called up and fully paid:
(i) ordinary shares (0.005p)
At 1 June 2007 and 1 June 2008
Issued during year (net of issue costs)
At 31 May 2009
(ii) B shares (0.001p)
At 31 May 2008 and 31 May 2009
Company and Group
2008
£000
2009
£000
25
–
25
25
–
25
Number
of
shares
Ordinary
share
Capital
£000
Share
premium
£000
327,500,959
32,083,377
359,584,336
65,000
16
2
18
–
125,235
81,011
206,246
–
78
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
22. Equity share capital (continued)
During the year to 31 May 2009, 4,218,970 ordinary shares with an aggregate nominal value of £210 were issued following the exercise
of Long Term Incentive Plan awards for a consideration of £210. In addition, 27,864,407 ordinary shares with an aggregate nominal
value of £1,393 were issued in a share placing on 29 September 2008, at a price of £2.95 in order to finance the acquisition of FXOnline
(see note 15). This share placing raised £82.2 million before issue costs of £1.2 million.
Except as the ordinary shareholders have agreed or may otherwise agree, on a winding up of the Company, the balance of assets
available for distribution after the payment of all of the Company’s creditors and subject to any special rights attaching to other classes
of shares are distributed among the shareholders according to the amounts paid up on shares by them.
B shares
The B shares carry no entitlement to dividends and no voting rights. To the extent not already received by them the B shareholders
shall, on a winding up of the Company, be entitled to receive, from the trustee, a consideration equal to the amount realised by the
sale by the trustee of approximately 122 ordinary shares for every B share held.
23. Own shares held in Employee Benefit Trusts
The movements in own shares held in Employee Benefit Trusts in respect of employee share plans during the year were as follows:
At the beginning of the year:
1,172,840 (2008: 1,206,445) ordinary shares of 0.005p each
Purchased during the year:
79,345 (2008: 59,764) ordinary shares of 0.005p each
Exercised during the year:
34,611 (2008: 93,369) ordinary shares of 0.005p each
At the end of the year:
1,217,574 (2008: 1,172,840) ordinary shares of 0.005p each
Company and Group
2008
£000
2009
£000
704
258
503
201
–
–
962
704
The Group has a UK resident Employee Benefit Trust in order to hold shares in the Company in respect of awards under the Group’s HM
Revenue and Customs approved share incentive plan (SIP). At 31 May 2009 702,333 ordinary shares (2008: 660,765) were held in the
trust and at the balance sheet date have reduced shareholders’ equity by £952,699 (2008: £704,149). These include 201,219 ordinary
shares (2008: 185,509) which were not allocated to employees and are available for future SIP awards. The market value of the shares
held conditionally at the balance sheet date was £1,587,273 (2008; £2,525,774).
The Group has a Jersey resident Employee Benefit Trust which holds shares in the Company. At the balance sheet date the trust held
512,075 (2008: 512,075) ordinary shares which are available to satisfy awards under the SIP and LTIP schemes. The shares held at the
balance sheet date have reduced shareholders’ equity by £26 (2008: £26). The market value of the shares held conditionally at the
balance sheet date was £1,157,290 (2008: £1,957,407).
The Group has an Australian resident Employee Equity Plan Trust in order to hold shares in the Company in respect of awards under
a share incentive plan (SIP). At 31 May 2009 3,166 ordinary shares (2008: nil) were held in the trust and at the balance sheet date have
reduced shareholders’ equity by £9,004 (2008: £nil). These include nil ordinary shares (2008: nil) which were not allocated to employees
and are available for future SIP awards. The market value of the shares held conditionally at the balance sheet date was
£7,155 (2008: £nil).
Upon flotation of the Company on 4 May 2005 5,861,497 ordinary shares and cash of £2.4m were transferred to the Jersey Employee
Benefit Trust by institutional shareholders in order to satisfy their obligations to holders of 48,059 B shares and 16,941 B shares
respectively. During the year ended 31 May 2009 777 (2008: 3,653) B shares were sold by B shareholders to the trust. The trust sold
94,767 (2008: 445,537) ordinary shares in order to realise the funds necessary to purchase these B shares. The trust unconditionally held
59,611 (2008: 58,834) B shares at the balance sheet date. The Trust also held 5,389 (2008: 6,166) B shares and 657,267 (2008: 752,034)
ordinary shares which it may sell in order to satisfy its obligations to B shareholders, all of whom are current or former employees.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 79
24. Other reserves
The share-based payment reserve relates to the estimated cost of equity-settled employee share plans based on a straight-line basis
over the vesting period and the associated credit for the excess of the tax deduction for employee share-based payments over the
amounts charged to the income statement. The foreign currency translation reserve includes amounts in relation to the translation of
overseas subsidiaries.
Group
At 1 June 2007
Equity-settled employee share-based payments
Excess of tax deduction benefit on share-based
payments recognised directly in equity (note 10(c))
Purchase of treasury shares
At 1 June 2008
Equity-settled employee share-based payments
Excess of tax deduction benefit on share-based
payments recognised directly in equity (note 10(c))
Foreign currency translation on overseas subsidiaries
Purchase of treasury shares
Share
based
payments
(Note 25)
£000
5,246
4,682
2,352
–
12,280
3,256
(1,730)
–
–
Own shares
held in
Employee
Benefit
Trusts
(Note 23)
£000
Foreign
currency
translation
£000
Total
other
reserves
£000
–
–
–
–
–
–
(503)
4,743
–
4,682
–
(201)
2,352
(201)
(704)
11,576
–
3,256
–
32,437
–
–
–
(258)
(1,730)
32,437
(258)
At 31 May 2009
13,806
32,437
(962)
45,281
Company
At 1 June 2007
Equity-settled employee share-based payments
Purchase of treasury shares
At 1 June 2008
Equity-settled employee share-based payments
Purchase of treasury shares
Own shares
held in
Employee
Benefit
Trusts
(Note 23)
£000
Share
based
payments
(Note 25)
£000
Total
other
reserves
£000
3,424
4,682
–
8,106
3,256
–
(503)
–
(201)
(704)
–
(258)
2,921
4,682
(201)
7,402
3,256
(258)
At 31 May 2009
11,362
(962)
10,400
80
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
25. Employee share plans
The Company operates two employee share plans; a Share Incentive Plan (SIP) and a Long Term Incentive Plan (LTIP) both of which are
equity-settled. In addition the Company operated in the year 31 May 2008, a Shadow SIP scheme for Australian employees which was
cash settled. The expense recognised in the income statement in respect of share-based payments was as follows:
Equity-settled share-based payment schemes
Cash-settled share-based payment schemes
Group
2009
£000
3,256
–
3,256
2008
£000
4,682
34
4,716
SIP awards made to UK staff
SIP awards are made available to all UK staff, except executive directors and are equity-settled. There are no further performance
conditions other than remaining in employment with IG for the term of each award. Shares awarded under the scheme are held in a
UK trust in accordance with HM Revenue and Customs rules. Employees are entitled to receive dividends on the shares held in trust for
as long as they remain employees.
On 3 May 2005, the SIP awarded all UK employees, except executive directors, a total of 94,267 free shares which vested immediately
and 470,758 additional free shares which vest after three years. The price of ordinary shares on the award date was £1.20.
On 24 August 2006, the Company invited all UK employees to subscribe for up to £1,500 of partnership shares when the share price
was £2.38. IG offered to match every partnership share with 2 matching shares up to a maximum of £3,000. The matching shares vest
after three years.
On 24 July 2007, the Company invited all UK employees to subscribe for up to £1,500 of partnership shares when the share price was
£3.36. IG offered to match every partnership share with 1 matching share up to a maximum of £1,500. The matching shares vest after
three years.
On 22 July 2008, the Company invited all UK employees to subscribe for up to £1,500 of partnership shares when the share price was
£3.28. IG offered to match every partnership share with 1 matching share up to a maximum of £1,500. The matching shares vest after
three years.
Shadow SIP and SIP awards made to non-UK staff
Shadow SIP awards are made to overseas staff and are cash settled. The fair value of these awards is estimated at the grant date using
the Black-Scholes option pricing model taking into account the terms and conditions of the award. A liability is recognised over the
expected vesting period and until the liability is settled it is re-measured at each reporting date with changes in fair value recognised
in the income statement.
On 9 December 2005, Australian employees were awarded a total of 45,000 shares which settled on a cash basis on 31 May 2008. There
were no further performance conditions other than remaining in employment with IG for the term of the award. At the vesting date a
bonus was payable to each participant equivalent to the value of 2,500 IG shares at 31 May 2008. The number of awards vesting was
the equivalent of 37,500 shares.
On 27 January 2009, the Company invited all Australian employees to subscribe for up to A$3,000 of partnership shares when the
share price was £2.84. IG offered to match every partnership share with 1 matching share up to a maximum of A$3,000. The matching
shares vest after three years.
LTIP awards
LTIPs allow the award of nil cost or nominal cost shares. UK employees’ awards for the years ended 31 May 2005 and 31 May 2007
automatically crystallised on the vesting date. During the year ended 31 May 2008, these awards were modified at the Company’s
discretion, to offer employees the opportunity to convert all or a proportion of their shares entitlement under the initial share award
plans to share options. The modification had no impact on the income statement. LTIP awards made in the year ended 31 May 2009
and to Australian employees are legally categorised as options. The fair value of awards made to UK staff (for the years ended
31 May 2005 and 2007) is the price of ordinary shares at the grant date adjusted for the present value of future dividends to which the
holder is not entitled. The fair values of awards made in the year ended 31 May 2009 and to Australian employees for earlier years are
calculated using the Black-Scholes option pricing model.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 81
25. Employee share plans (continued)
LTIP awards (continued)
LTIPs vest if specific performance targets are achieved and are conditional upon continued employment at the vesting date.
Performance is measured as the compound annual growth rate in diluted adjusted earnings per share over the three-year vesting
period and also share price growth over the same period for awards made in the year ended 31 May 2009. For each award a minimum
performance target must be achieved before any shares vest and the awards vest fully once the maximum performance target is
achieved. Further information on the Company’s LTIPs is given in the Directors’ Remuneration Report on pages 35 to 41.
On 16 May 2005, when the share price was 112.25p awards were made to staff, conditional upon growth in normalised earnings per
share in the three years to 31 May 2008. The vesting date of these awards was upon publication of the Group’s results for the year
ended 31 May 2009 which was on 21 July 2009.
On 7 August 2006, when the share price was 217.0p awards were made to staff, conditional upon growth in diluted adjusted earnings
per share in the three years to 31 May 2009. Further awards were made on 4 October 2006, when the share price was 261.75p. The
vesting date of these awards is upon publication of the Group’s results for the year ended 31 May 2009 which was on 21 July 2009.
On 23 July 2007, when the share price was 312.25p awards were made to staff, conditional upon growth in diluted adjusted earnings
per share in the three years to 31 May 2010 and upon growth in the IG Group Holdings plc share price between the average over the
six weeks ending 31 May 2007 and the average over the six weeks ending 31 May 2010. Further awards were made on
14 August 2007, 21 August 2007, 22 October 2007 and 31 January 2008, when the share prices were 311.00p, 304.00p, 398.00p and
364.00p respectively. The vesting date of these awards is three years from the date of grant.
On 30 September 2008, when the share price was 313.75p awards were made to staff, conditional upon growth in diluted adjusted
earnings per share in the three years to 31 May 2011 and upon growth in the IG Group Holdings plc share price between the average
over the six weeks ending 21 October 2008 and the average over the six weeks ending 31 May 2011. The vesting date of these awards
is three years from the date of grant.
The maximum numbers of shares that vest based on the awards made are as follows:
Type of
award
SIP
LTIP
Shadow SIP
LTIP
SIP
LTIP
SIP
LTIP
LTIP
LTIP
LTIP
LTIP
SIP
LTIP
SIP
Award date
4 May 2005
16 May 2005
9 Dec 2005
7 Aug 2006
24 Aug 2006
4 Oct 2006
23 Jul 2007
23 Jul 2007
14 Aug 2007
21 Aug 2007
22 Oct 2007
31 Jan 2008
22 Jul 2008
30 Sept 2008
27 Jan 2009
Share
price at
award
120.0p
112.25p
183.0p
217.0p
237.61p
261.75p
336.09p
312.25p
311.0p
304.0p
398.0p
364.0p
328.0p
313.75p
284.0p
Awarded
Lapsed
Exercised
Expected At the start during the during the during the At the end
year of the year
No.
No.
vesting date of the year
No.
year
No.
year
No.
3 May 2008
21 Jul 2008
31 May 2008
7 Aug 2009
23 Aug 2009
4 Oct 2009
22 Jul 2010
26 Jul 2010
14 Aug 2010
21 Aug 2010
22 Oct 2010
31 Jan 2011
21 Jul 2011
30 Sept 2011
27 Jan 2012
233,662
5,645,205
37,500
1,104,530
185,452
427,143
56,642
2,366,165
30,547
100,428
12,563
45,610
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76,179
3,132,290
3,166
–
(662,818)
–
(67,800)
(12,620)
–
(2,676)
(28,823)
–
–
(12,563)
–
(914)
–
–
(34,611)
(4,218,969)
(37,500)
–
–
–
–
–
–
–
–
–
–
–
–
199,051
763,418
–
1,036,730
172,832
427,143
53,966
2,337,342
30,547
100,428
–
45,610
75,265
3,132,290
3,166
Year ended 31 May 2009
Year ended 31 May 2008
10,245,447
3,211,635
(788,214)
(4,291,080)
8,377,788
7,898,832
2,615,077
(175,093)
(93,369)
10,245,447
The weighted average fair values of the awards made were as follows:
At the
Awarded
Exercised
beginning during the during the during the
year
Lapsed
year
year
of the year
At the
end of the
year
Year ended 31 May 2009
Year ended 31 May 2008
167.94p
182.36p
123.14p
100.47p
212.24p
126.66p
288.64p
134.49p
120.00p
167.94p
82
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
25. Employee share plans (continued)
Liability for cash-settled awards
The carrying amount of the liability for the cash-settled Shadow SIP scheme at 31 May 2009 is £nil (2008: £143,344). The amount of
cash-settled awards which were exercised in the year to 31 May 2009 was £143,344 (2008: £nil). No awards were granted in the year
(2008: nil). The following table lists the inputs to a Black-Scholes option pricing model used in calculating the liability:
Balance sheet date
Underlying share price (pence)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of awards (years)
31 May 2008
382.25
48
5.00
0.00
The expected life of the awards is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other
features of the awards were incorporated into the measurement of fair value.
Fair value of equity-settled awards
The fair value of equity-settled share-based payments to employees is determined at the grant date. The weighted average fair value
of the equity-settled awards granted during the year was £5,856,709 (2008: £7,548,086) at the grant date. For SIP awards, the fair
value is determined to be the share price at the grant date without making an adjustment for expected dividends as awardees are
entitled to dividends over the vesting period. For LTIP awards made to UK staff in the years ended 31 May 2005 and 31 May 2007, the
fair value is determined to be the share price at the grant date after a deduction for the expected present value of future dividends
over the vesting period. LTIP awards made to Australian staff for these periods, and awards made in the year ended 31 May 2008 and
subsequent periods, are legally categorised as options and the fair value was calculated using a Black-Scholes option pricing model
(Monte Carlo for year ended 31 May 2009), using the following inputs:
Grant date
Share price at grant date (pence)
Expected life of awards (years)
Risk-free interest rate (%)
Expected volatility (%)
Expected dividend yield (%)
26. Net funds/(debt)
Group
Cash at bank and in hand
Short-term deposits
Client money held
Redeemable preference shares
16 May
2005
112.25p
3.18
5.00
34
3.73
7 Aug
2006
217.00p
2.97
5.00
32
3.04
23 July
2007
312.25p
3.00
5.75
32
3.42
30 Sept
2008
313.75p
3.00
4.06
40
5.50
At
1 June
2007
£000
92,116
1,167
391,273
(40)
Cash
flow
£000
7,295
2,181
(22,310)
–
At
1 June
2008
£000
99,411
3,348
368,963
(40)
Cash
flow
£000
(3,851)
499
52,051
–
At
31 May
2009
£000
95,560
3,847
421,014
(40)
484,516
(12,834)
471,682
48,699
520,381
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 83
27. Obligations under leases
Operating lease agreements where the Group is lessee
The Group has entered into commercial leases on certain properties. The lessee has options of renewal on each of these leases with
a notice period of three months. There were no restrictions placed upon the lessee by entering into these leases. Future minimum
rentals payable under non-cancellable operating leases are as follows:
Future minimum payments due:
Not later than one year
After one year but not more than five years
After more than five years
2009
£000
2008
£000
2,739
8,168
5,653
1,855
8,147
7,144
16,560
17,146
28. Transactions with directors
The Group had no transactions with its directors other than those disclosed in the directors’ remuneration report on pages 39 to 41.
29. Related party transactions
29a) Group
During the year, fees amounting to £30,000 (2008: £30,000) were paid to CVC Capital Partners Limited relating to the services of Robert
Lucas as a director of IG Group Holdings plc. Funds managed or advised by CVC Capital Partners Limited or its affiliates held 8.4% of the
ordinary share capital of the Company at 31 May 2009 (2008: 7.7% of the ordinary share capital).
The directors are considered to be the key management personnel of the Group in accordance with IAS 24. The directors’
remuneration report on pages 39 to 41 discloses all benefits and share-based payments made during the year and the preceding year
to the directors. The total compensation for key management personnel was as follows:
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments
There were no further related party transactions during the year or the preceding year.
2009
£000
1,551
188
940
2,679
2008
£000
2,109
725
1,467
4,301
84
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
29. Related party transactions (continued)
29b) Company
The Company entered into the following related party transactions during the year as part of the funding mechanism for the
acquisition of FXOnline and the management of the resulting entity exchange rate exposures:
• The £82.2 million share placement undertaken to part fund the acquisition of FXOnline was facilitated via IG Jersey Cashbox
Limited. All amounts payable were settled as at the balance sheet date.
• A ¥12.2 billion (£79.3 million) loan from IG Finance 5 Ltd and an equivalent loan to Fox Japan Holdings, both of which remain
outstanding at the year end.
• A swap contract with IG Finance 5 Ltd (pay ¥12.2 billion, receive £84.1 million) and a forward contract with Fox Japan Holdings Ltd
(pay £85.3 million, receive ¥12.2 billion). Both these contracts were cash settled on 29 May 2009 resulting in a net gain of £154,000
for the Company.
The Company also pays for certain expenses incurred by subsidiaries and received dividends from IG Group Limited of £54 million
(2008: £38 million).
The company had the following amounts outstanding with subsidiaries at the year end:
Loans to related parties
Loans from related parties
All amounts remain outstanding at the balance sheet date and are repayable on demand.
2009
£000
96,569
119,077
2008
£000
–
–
30. Financial instruments
Accounting classifications and fair values
The table below sets out the classification of each class of financial assets and liabilities and their fair values, valued using direct market
quotes where applicable (excluding accrued interest):
Group
As at 31 May 2009
Financial assets
Cash and cash equivalents
Trade receivables – due from brokers
Trade receivables – due from clients
Financial liabilities
Trade payables – due to clients
Redeemable preference shares
Held for
trading
£000
Loans and
receivables
£000
Other
amortised
cost
£000
Total
carrying
amount
£000
Fair
value
£000
–
178,261
4,824
520,421
–
–
183,085
520,421
511,656
–
511,656
–
–
–
–
–
–
–
–
40
40
520,421
178,261
4,824
520,421
178,261
4,824
703,506
703,506
511,656
40
511,656
40
511,696
511,696
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 85
30. Financial instruments (continued)
Accounting classifications and fair values (continued)
Group
As at 31 May 2008
Financial assets
Cash and cash equivalents
Trade receivables – due from brokers
Trade receivables – due from clients
Financial liabilities
Trade payables – due to clients
Redeemable preference shares
Company
As at 31 May 2009
Financial assets
Cash and cash equivalents
Financial liabilities
Redeemable preference shares
As at 31 May 2008
Financial assets
Cash and cash equivalents
Financial liabilities
Redeemable preference shares
Held for
trading
£000
Loans and
receivables
£000
Other
amortised
cost
£000
Total
carrying
amount
£000
Fair
value
£000
–
252,522
10,801
471,722
–
–
263,323
471,722
582,689
–
582,689
–
–
–
–
–
–
–
–
40
40
471,722
252,522
10,801
471,722
252,522
10,801
735,045
735,045
582,689
40
582,689
40
582,729
582,729
Held for
trading
£000
Loans and
receivables
£000
Other
amortised
cost
£000
Total
carrying
amount
£000
Fair
value
£000
–
–
–
–
122
–
46
–
–
40
–
40
122
122
40
40
46
40
46
40
Broker margin
Amounts due from brokers, included in trade receivables, represent balances with counterparties where the combination of cash held
on account and the valuation of financial derivative open positions results in an amount due to the Group. The cash held on account
with counterparties comprises margin and surplus funds which mitigate each counterparty’s credit risk exposure to the Group, and
amounted to £178,261,000 at 31 May 2009 (2008: £252,522,000). These transactions are conducted under terms that are usual and
customary to standard margin trading activities.
86
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
30. Financial instruments (continued)
Items of income, expense, gains or
losses
Gains and losses arising from financial assets and liabilities
classified as held for trading amounted to net gains of
£257,089,000 (2008: £184,008,000).
Finance revenue (see note 8) totalled £15,775,000 (2008:
£30,609,000). The entire amount represents interest income
on financial assets not at fair value through profit or loss and
includes interest receivable in respect of segregated and
non-segregated client balances of £12,888,000 (2008:
£26,562,000), part of which is held with brokers.
Finance costs (see note 9) totalled £6,966,000 (2008: £16,969,000)
which includes interest payable on client balances of £5,288,000
(2008: £16,341,000). An amount of £6,039,000 represents interest
expense on financial liabilities not at fair value through profit or
loss (2008: £16,673,000). The remainder, £927,000 (2008: £296,000)
represents fee expense arising from maintaining the Group’s
committed bank facilities.
Nature and extent of risks arising
from financial instruments
The principal activities of the Group outlined in the Directors’
Report give rise to exposure to financial risks in the ordinary
course of business.
The Board is responsible for reviewing the Group’s system
of internal control and risk management and approving any
changes to the Group’s risk management policy which materially
increases the risk profile of the Group. Limits as to the acceptable
level of risk are established and regularly reviewed by the Board.
Under authority delegated by the Board, the Executive Directors
develop and implement risk management systems, policies
and procedures.
The Group’s finance and risk departments report to the Finance
Director and Chief Operating Officer respectively, who are
responsible to the Board. These departments comprise risk
management, financial planning, financial control and credit
control. The risk management department reports daily to the
Group’s senior management. The objective of the risk department
is to manage the Group’s financial risk and to minimise the effects
of fluctuations in financial markets on the value of the Group’s
financial assets and liabilities, on reported profitability and on the
cash flows of the Group.
The Group has exposure to the following risks from its use of
financial instruments:
• Market risk;
• Credit risk;
• Liquidity risk; and
• Operational risk.
Market risk
Market risk is the risk that changes in market prices will
affect the Group’s income or the value of its holdings of
financial instruments.
Management of market risk
Market risk is managed on a Group-wide basis. The Group’s
products can be divided into two groups: those which relate to a
liquid financial market in which it is normally easy for the Group
to hedge and those for which there is not an easily accessible
and cost-effective hedge. The Group’s revenue model for each of
these product groups is set out below.
The Group does not take proprietary positions based on an
expectation of market movements. However, not all client
transactions are hedged and as a result the Group may have a net
position in any of the markets on which it offers products.
The Group has a formal risk policy which includes limits, or
a methodology for setting limits, for every single financial
market which the Group trades, as well as certain groups of
markets which the directors consider to be correlated. These
limits determine the net exposure arising from client activity
and hedging which the Group is prepared to carry. The Group’s
exposure monitor allows it to continually monitor its exposure
against these limits. If the Group’s exposure exceeds these limits,
the policy requires that sufficient hedging is carried out to bring
the exposure back within the defined limit or, if the market is
closed, as soon as it re-opens.
Changes to the market risk policy require approval by the Group’s
Risk Committee, which comprises the Chief Executive Officer,
Chief Operating Officer and the Finance Director, as well as the
dealing, credit and risk directors. Changes to the market risk
policy which may result in a significant increase in market risk
require approval of the Board.
Where the Group has positions in markets for which it has
not been possible or cost-effective to hedge, the Group’s Risk
Committee determines the appropriate action and reviews these
exposures regularly.
Sports spread bets and binary bets are difficult or not cost-
effective to hedge and there is often no direct underlying market
which can be utilised in setting the price which the Group
quotes. The Group normally undertakes no hedging for these
markets but can lay off large positions if considered necessary.
The directors aim to reduce the volatility of revenue from
these markets by offering a large number of different betting
opportunities, the results of which should, to some extent, offset
each other irrespective of the underlying market outcome.
The overwhelmingly short-term nature of these bets means that
risk on these markets at any point in time is not considered to
be significant.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 87
30. Financial instruments (continued)
Market risk (continued)
Exposure to market risk
The Group has exposure to market risk to the extent that it has a residual un-hedged position.
The Group’s exposure to market risk at any point in time depends primarily on short-term market conditions and client activities
during the trading day. The exposure at each balance sheet date is therefore not considered representative of the market risk exposure
faced by the Group over the year. The Group’s exposure to market risk is determined by the exposure limits described above which
change from time to time.
The most significant market risk faced by the Group is on equity positions including shares and indices which are highly correlated
and managed on a portfolio basis. Other exposures, including foreign exchange, commodities and interest rates, do not give rise to
significant market risk. The equity exposure at the balance sheet date and details of the exposure limit at the year end and for the year
then ended is as follows:
Equity exposure at year end
Equity exposure limit at year end
Average equity exposure limit for the year
The Group has no significant concentration of market risk.
2009
£000
8,868
15,000
15,000
2008
£000
12,920
15,000
15,000
Sensitivity analysis
The following sensitivity analysis shows the potential impact of large moves in equity markets on revenue. The percentage applied
is based upon the Group’s assessment of movements in equity markets and is considered to represent a single day market fall that is
reasonably possible.
Equity
Market
exposures movement
applied
%
2009
£000
Potential
revenue
impact
£000
Equities
8,868
10%
887
The Group’s average daily gain from financial instruments classified as held for trading was £989,000 (2008: £708,000) and therefore the
potential revenue impact shown above represents 0.9 days trading (2008: 0.9).
Reasonably possible movements in other markets have no significant impact on the Group’s revenue.
Changes in risk variables have no direct impact on the Group’s equity as the Group has no financial instruments classified as available
for sale, or designated in hedging relationships.
88
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
30. Financial instruments (continued)
Market risk (continued)
Foreign currency risk
Foreign currency exposures arise in the normal course of business and the management of this risk forms part of the risk policies
outlined above. Limits on the exposures which the Group will accept in each currency are set by the Risk Committee and the Group
hedges its exposures as necessary with market counterparties. Foreign currency risk is managed on a Group-wide basis, while the
Company’s exposure to foreign currency risk is not considered by the directors to be significant.
The functional currency of each company in the Group is that denominated by the country of incorporation as disclosed in note 15.
The Group’s currency exposures are measured and managed in Sterling.
The Group’s exposure monitor measures foreign currency risks including currency balance sheet exposures, equity, commodity,
interest and other positions denominated in foreign currencies and bets and trades on foreign currencies. The Group’s net exposure to
foreign exchange risk based on notional amounts at each balance sheet date was as follows:
US Dollar
Euro
Australian Dollar
Yen
Other
2009
£000
(2,095)
(98)
237
(209)
1,068
2008
£000
12,548
8,074
(313)
(1,497)
(6,009)
No sensitivity analysis is presented for foreign exchange risk as the impact of reasonably possible market movements on the Group’s
revenue and equity are not significant.
Interest rate risk
The Group has interest rate risk arising from its trading activities which is hedged as part of the overall market risk management.
The Group offers bets and contracts for difference (CFDs) on interest rate derivatives and hedges its exposure using
exchange-traded futures and options. Exposure limits are set by the Risk Committee for each product, and also for groups of products
where it is considered that their price movements are likely to be positively correlated. Interest rate risk arising from trading activities is
not considered by the directors to be significant and is measured by the Group’s exposure monitor on a Group-wide basis.
The Group also has interest rate risk relating to financial instruments not at fair value through profit and loss such as cash held with
banks which are not included in the Group’s exposure monitor. These exposures are not significant and are not hedged.
The interest rate risk profile of the Group’s financial assets and liabilities as at the balance sheet date was as follows:
Group
Fixed rate
Redeemable preference shares (8%)
Floating rate
Trade receivables
Trade payables
Cash and cash equivalents
Within 1 year More than 5 years Total
2009
£000
2009
£000
2008
£000
2009
£000
2008
£000
2008
£000
–
–
(40)
(40)
(40)
(40)
183,085
(511,656)
520,421
263,323
(582,689)
471,722
–
–
–
–
–
–
183,085
(511,656)
520,421
263,323
(582,689)
471,722
191,850
152,356
(40)
(40)
191,810
152,316
Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 89
30. Financial instruments (continued)
Interest on financial instruments classified as floating rate is re-priced at intervals of less than one year. Trade receivables and payables
include client and broker balances upon which interest is paid or received based upon market rates. Cash and cash equivalents
includes client money equivalent to the amount included with trade payables. Other financial instruments of the Group that are not
included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.
No sensitivity analysis is presented for interest rate risk as the impact of reasonably possible market movements on the Group’s
revenue and equity are not significant.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge
an obligation.
Management of credit risk
Credit risk is managed on a Group-wide basis. The Group has credit exposure to the banks with which it deposits funds and the market
counterparties with which it hedges. The Group sets limits for its maximum exposure to each market counterparty and bank to which
it has credit exposure. Certain balances with brokers are held in segregated accounts with banks. The pricing of credit default swaps
and / or credit ratings of both the banks and market counterparties are monitored on a monthly basis, or more frequently if required.
The principal credit risk in respect of clients arises from a client’s trading position going into deficit through incurring a loss in excess of
the required margin deposit. The Group has no credit risk exposure to clients with Limited Risk accounts, which require each position
to have a guaranteed stop such that the client’s maximum loss is covered by the required deposit. Other types of accounts are
permitted to deal in circumstances where they may be capable of suffering losses greater than the funds they have on their account,
or in limited circumstances are allowed credit. The Group has a formal credit policy which determines the financial and experience
criteria which a client must satisfy before being given an account which exposes the Group to credit risk, including trading limits for
each client and strict margining rules.
In order to mitigate credit risk the Group continually monitors credit exposures and the margin situation on all client accounts. Since
October 2008, the Group has made changes to credit risk management and monitoring processes which have significantly reduced
the level of bad debt experienced by the Group. For the majority of clients this is achieved via an automated margin calling and
close-out process whereby a client’s trading positions are trimmed to prevent the account going into deficit. The remaining minority
of clients are not subject to automatic close-out, however these clients have a maximum period of 24 hours to provide additional
margin once their account has moved into deficit.
The Group also accepts collateral from clients in the form of shares or other securities which mitigate credit risk and all such assets are
individually assessed and discounted for expected market risk.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure without taking account of any collateral held or
other credit enhancements such as personal guarantees. The maximum exposure to credit risk at the reporting date was:
Group
2009
£000
Company
2009
£000
2008
£000
2008
£000
Cash and cash equivalents
Trade receivables – due from brokers
Trade receivables - due from clients
520,421
178,261
4,824
471,722
252,522
10,801
703,506
735,045
122
–
–
122
46
–
–
46
The fair value of collateral held at 31 May 2009 against amounts due from clients was £595,000 (2008: £4,521,000).
The Group’s largest credit exposure to any one individual broker at 31 May 2009 was £49,529,000 or 27% of the exposure to all brokers
(2008: £71,614,000, 28%). Included in cash and cash equivalents, the Group’s largest credit exposure to any bank at 31 May 2009
was £126,920,000 or 24% of the exposure to all banks (2008: £125,189,000, 27%). The Group has no significant exposure to any one
particular client.
90
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
30. Financial instruments (continued)
Credit risk (continued)
The balance of cash and cash equivalents and trade receivables – due from brokers, will fluctuate over the course of the
reporting period.
The tables below present further detail on the Group’s and the Company’s exposure to credit risk. External credit ratings (Standard and
Poor’s long term ratings or equivalent) are available for exposures to brokers and banks, and these are shown below. No external credit
rating of clients is available and therefore the balances are unrated.
Amounts due from clients are considered past due from the date that positions are closed and are aged from that date. If debtors arise
on open positions the amounts due from clients are considered neither past due nor impaired unless impairment is provided.
Group
Trade
receivables – due
from brokers
Trade
receivables – due
from clients
Cash and cash
equivalents
Collateral held at
fair value
2009
£000
2008
£000
2009
£000
2008
£000
2009
£000
2008
£000
2009
£000
2008
£000
Individually impaired
Gross exposure
Allowance for impairment
Past due but not impaired
Ageing profile:
0-3 months
4-6 months
7-9 months
10-12 months
More than 12 months
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Neither past due nor impaired
Credit rating:
AA+
AA to AA-
A+ to A-
BBB+ to BBB-
Unrated
–
87,264
88,054
1,078
1,865
–
164,256
71,547
12,253
4,466
178,261
252,522
26,458
(23,897)
7,036
(5,864)
2,561
1,172
4,993
14
–
17
–
5,024
–
–
–
–
4,605
695
7
65
–
30
797
–
–
–
–
1,466
1,466
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
212,423
307,367
182
449
5,838
351,920
113,790
26
148
4,605
520,421
471,722
Total carrying amount
178,261
252,522
4,824
10,801
520,421
471,722
12
–
12
–
–
–
–
–
–
–
–
–
–
583
583
595
15
–
15
3,118
–
–
–
–
3,118
–
–
–
–
1,388
1,388
4,521
Company
Neither past due nor impaired
Credit rating:
AA- to A+
Cash and cash
equivalents
2009
£000
2008
£000
122
122
46
46
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 91
30. Financial instruments (continued)
Credit risk (continued)
The Group records specific impairments of trade receivables due from clients in a separate allowance account. Impairments are
recorded where the Group determines that it is probable that it will be unable to collect all amounts owing according to the
contractual terms of the agreement. There are no collective impairments taken, and no other assets are considered impaired. Below is
a reconciliation of changes in the separate allowance account during the period:
Balance at 1 June
Impairment loss for the year
- gross charge for the year
- recoveries
Write-offs
Foreign exchange
Balance at 31 May
2009
£000
5,864
22,544
(4,376)
(438)
303
2008
£000
2,849
4,510
(453)
(1,010)
(32)
23,897
5,864
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations arising from its financial liabilities.
Management of liquidity risk
Liquidity risk is managed centrally for the whole Group by the Risk department. The Group’s approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to meet its broker margin requirements and liabilities when due,
under both normal circumstances and stressed conditions.
In order to monitor and manage this risk, the Group’s Risk department records the available funds daily and undertakes monthly
liquidity stress testing. The liquidity testing simulates what would happen to the Group’s cash resources should there be a large single
market fall and a sequential three-day market fall. This testing requires a number of assumptions regarding the impact of large market
moves on client and broker positions and balances and the resulting behaviour of clients and brokers in terms of maintaining or
closing positions and settling margin requirements.
There were no changes in the management of liquidity risk during the year.
Exposure to liquidity risk
Positions can be closed at any time by clients and can also be closed by the Group, in accordance with the Group’s margining rules. If
after closing a position a client is in surplus, then the amount owing is repayable on demand by the Group. When client positions are
closed, corresponding positions relating to the hedged position are closed with brokers. Accordingly the Group releases cash margin,
which is repaid by brokers to the Group on demand.
In the event of a significant movement in world markets, IG could have a short-term funding requirement to meet its payment
obligations to market counterparties and/or winning clients before payment would be received from losing clients and/or from
market counterparties. Any failure by IG to meet its payment obligations could result in market counterparties closing IG’s hedge
positions which would have materially adverse consequences for the Group’s business.
The key measure used by the Group for managing liquidity risk is the level of working capital. For this purpose working capital is the
net of all trade receivables, cash and cash equivalents and trade payables.
92
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements
30. Financial instruments (continued)
Liquidity risk (continued)
Working capital at the balance sheet date was as follows:
Amounts due from brokers
Amounts due from clients
Cash and cash equivalents
Trade payables
2009
£000
2008
£000
178,261
4,824
520,421
(511,656)
252,522
10,801
471,722
(582,689)
191,850
152,356
The Group’s liquidity risk under stressed conditions is mitigated by its committed bank facilities which amounted to £120.0m
(2008: £160.0m) at the year end.
Extraordinary movements in world markets during October 2008 resulted in a short-term funding requirement coinciding with large
cash payments in respect of the interim dividend and acquisition of FXOnline and consequently the Group utilised its committed bank
facilities for a period of 18 days, which were drawn to a peak of £88 million of an available £160 million.
In the directors’ opinion the Group has sufficient funds available to meet all operational requirements in the event of a large market
movement. Liquidity management is also dependent on credit risk management described above.
Residual contractual maturities of financial liabilities
The following are the contractual maturities of financial liabilities, excluding estimated interest payments. Given the nature of
trade payables (representing liabilities to clients in respect of trading margin deposited, unrealised profits on open positions and
surpluses held on account) and the fact that open positions can be closed immediately, trade payables are presented in the table
below as on demand.
On demand Over 5 years Total
2009
£000
2009
£000
2009
£000
2008
£000
2008
£000
2008
£000
Group
Trade payables – due to clients
Redeemable preference shares
Company
Redeemable preference shares
511,656
–
582,689
–
511,656
582,689
–
–
–
–
–
40
40
40
40
–
40
40
40
40
511,656
40
582,689
40
511,696
582,729
40
40
40
40
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes,
personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks outlined above.
The directors are responsible for managing operational risk and have identified the following risks which are considered significant
to the Group.
IG Group Holdings plc
Annual Report and Financial Statements 2009
Notes to the Financial Statements 93
30. Financial instruments (continued)
Technology
The Group’s operations are highly dependent on technology and advanced information systems. Its ability to provide its clients with
reliable, real-time access to its systems is fundamental to the success of the business. Such dependency upon technology exposes
the Group to significant risk in the event that such technology or systems experience any form of damage, interruption or failure. The
Group has business continuity procedures and policies in place which are designed to allow the Group to continue trading in its core
markets and its systems are designed to mitigate the risk of failure of any component.
Where the Group is dependent upon providers of data, market information, telephone and internet connectivity, the Group mitigates
against the risk of failure of any of these suppliers by ensuring that where possible multiple providers and data routes are utilised.
To remain competitive, the Group must continue to enhance and improve the responsiveness, functionality, accessibility and other
features of its software, network distribution systems and technologies.
Regulation
The Group’s spread betting, CFD and foreign exchange businesses are regulated in a number of jurisdictions. In addition, three of the
Group’s subsidiaries are subject to regulation as licensed bookmakers by the Gambling Commission. The Group is also subject
to various regulation and legislation relating to technology, the provision of internet services and the use of the internet. These
regulatory frameworks impose restrictions on certain of the Group’s activities and resources which place constraints on the Group
operations and development.
The regulatory environment is regularly changing and imposes significant demands on the resources of the Group. As the Group’s
activities expand, offering new products and penetrating new markets, these regulatory demands will inevitably increase. The
increasing complexity of the Group’s operations require training and recruitment be tailored to meet these regulatory demands and
the costs of compliance are expected to increase.
Capital management
Regulatory capital
The Group’s lead regulator is the Financial Services Authority (FSA). Three of the Group’s UK operating subsidiaries are regulated by
the FSA which imposes a minimum level of regulatory capital which must be retained by each company and also an overall level of
regulatory capital which must be maintained by the Group.
Given the Group’s recent strong growth, profits have been and continue to be the primary source of new capital. The Group is highly
cash generative and plans to maintain a dividend payout ratio of approximately 60% of earnings.
Capital resources are largely comprised of share capital and reserves, net of intangible assets and treasury shares. Capital requirements
are derived from credit risk, operational risk, counterparty risk and market risk considerations. Capital resources, capital requirements
and surplus capital at the balance sheet dates were as follows:
Group
Capital resources
Capital requirements
Surplus capital resources
2009
£000
2008
£000
147,263
65,992
127,480
60,893
81,271
66,587
The Group undertakes an annual Internal Capital Adequacy Assessment Process (ICAAP) which is an internal assessment of its capital
needs. The outcome of the ICAAP is reviewed by the Audit Committee and subsequently approved by the Board. The FSA periodically
reviews the adequacy of the ICAAP and may set individual capital guidance resulting in additional capital requirements for the Group.
The regulatory capital requirements for credit risk and market risk are also calculated daily (or intra-daily if required) and monitored
against expected ranges and available resources. The regulatory capital resources and net surplus are recalculated monthly and
reported to the board of directors.
The Group’s subsidiaries in the United States, Singapore, Australia and Japan are also regulated by applicable regulators in the overseas
jurisdiction. Individual capital requirements in these jurisdictions are taken into account when managing the Group’s capital resources.
There have been no material changes in the Group’s management of capital during the year.
94
IG Group Holdings plc
Annual Report and Financial Statements 2009
Independent auditor’s report
Independent auditor’s report
to the members of IG Group Holdings plc
company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at
31 May 2009 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the group financial statements, Article 4 of the
IAS Regulation.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the
Companies Act 2006; and
• the information given in the Directors’ Report for the financial
year for which the financial statements are prepared is
consistent with the financial statements.
We have audited the financial statements of IG Group Holdings
plc for the year ended 31 May 2009 which comprise the Group
Income Statement, the Group and Company Statements of
Changes in Equity, the Group and Company Balance Sheet, the
Group and Company Cash Flow Statement and the related notes
1 to 30. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the parent company financial statements,
as applied in accordance with the provisions of the Companies
Act 2006.
This report is made solely to the company’s members, as a body,
in accordance with Sections 495, 496 and 497 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of directors and
auditors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 49, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility is
to audit the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial
statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting
policies are appropriate to the group’s and the parent
IG Group Holdings plc
Annual Report and Financial Statements 2009
Independent auditor’s report 95
Matters on which we are required to report
by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company’s financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 47, in relation to
going concern; and
• the part of the Corporate Governance Statement relating to
the company’s compliance with the nine provisions of the
2006 Combined Code specified for our review.
Ernst & Young LLP, Statutory Auditor
London
21 July 2009
Company
Information
Executive Directors
T A Howkins (Chief Executive)
S Clutton
P G Hetherington
A R MacKay
Non-executive Directors
J R Davie (Chairman)
Sir Alan Budd
D M Jackson
R R Lucas
N B le Roux (Deputy Chairman)
R P Yates (Senior Independent Director)
Secretary
G Abbi
Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF
Bankers
Lloyds TSB Bank plc
10 Gresham Street
London EC2V 7AE
Royal Bank of Scotland plc
280 Bishopsgate
London EC2M 4RB
Solicitors
Linklaters
One Silk Street
London EC2Y 8HQ
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Brokers
UBS Limited
1 Finsbury Avenue
London EC2M 2PP
Registered Office
Friars House
157 _168 Blackfriars Road
London SE1 8EZ
Registered Number
04677092
IG Group Holdings plc
Friars House
157_168 Blackfriars Road
London SE1 8EZ
Tel: +44 (0)20 7896 001 1
Fax: +44 (0)20 7896 0010
www.iggroup.com