GROUP
IG GROUP HOLDINGS PLC
ANNUAL REPORT 2015
COMPANY OVERVIEW
Our Vision
At a Glance
Our Business
CHAIRMAN’S STATEMENT
STRATEGIC REPORT
Chief Executive Officer’s Review
What We Do
Our Clients
Our Strategic Objectives
Our Business Model
Our Strategy
Key Performance Indicators (KPIs)
Our People and Communities
Chief Financial Officer’s Review
Managing Our Business Risk
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CORPORATE GOVERNANCE REPORT
Chairman’s Introduction to Corporate Governance
Corporate Governance Statement
The Board
Nomination Committee
Remuneration Committee
Directors’ Remuneration Report
Audit Committee
Board Risk Committee
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
FINANCIAL STATEMENTS
Group Income Statement
Group Statement of Comprehensive Income
Statements of Financial Position
Statement of Changes in Equity
Cash Flow Statements
Notes to the Financial Statements
INVESTOR RESOURCES
Five-Year Summary
Examples
Glossary of Terms
Global Offices
Shareholder Information
Company Information
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|2 IG Group Holdings plc Annual Report 2015
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This report is fully accessible online at:
iggroup.com/ar2015
|IG Group Holdings plc Annual Report 2015|IG Group Holdings plc Annual Report 2015 COMPANY
OVERVIEW
OUR VISION,
STRATEGY AND VALUES
E
L
P
O
E
R P
U
O
VISION
To become the
default choice for
active traders globally
STRATEGY
Strengthen global presence
O
U
R
Achieve, maintain or extend market leadership
Address the needs of active retail traders
Deliver quality service to our clients
Sustain our technology leadership
VALUES
Hallmark quality
Passion for progress
Transparency in dealing
Meritocratic opportunity
OUR SHAREHOLDERS
C
L
I
E
N
T
S
33
IG Group Holdings plc Annual Report 2015|IG Group Holdings plc Annual Report 2015|
‘With strong values and
innovative people, we aim
to deliver a great trading
experience for our customers
and sustainable growth for
our shareholders.’
Andy Green
Chairman
4
|IG Group Holdings plc Annual Report 2015 AT A GLANCE
‘2015 was another year of solid
underlying financial performance,
with underlying revenue reaching
£400 million(2) for the first time. We took
an important strategic step with the
launch of execution-only stockbroking,
based upon our leading-edge
technology, and also increased our
global reach with offices in Switzerland
and Dubai.’
Tim Howkins
Chief Executive Officer
FOUR-YEAR COMPOUND
ANNUAL GROWTH RATE(5)
REVENUE(1)(2)
5.6%
PROFIT BEFORE TAX(2)(3)(4)
1.0%
OWN FUNDS GENERATED
FROM OPERATIONS(2)
0.2%
DILUTED EARNINGS PER SHARE(2)(3)(4)
2.5%
TOTAL DIVIDEND PER SHARE
8.9%
REVENUE(1)(2)
PROFIT BEFORE TAX(2)(3)(4)
OWN FUNDS GENERATED
FROM OPERATIONS(2)
m
8
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6
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FY11 FY12 FY13 FY14
FY15
FY11 FY12 FY13 FY14
FY15
FY11 FY12 FY13 FY14
FY15
DILUTED EARNINGS
PER SHARE(2)(3)(4)
TOTAL DIVIDEND
PER SHARE
p
4
5
7
3
.
p
0
8
.
8
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FY11 FY12 FY13 FY14
FY15
FY11 FY12 FY13 FY14 FY15
(1)
Throughout this report Revenue refers
to statutory net trading revenue,
which is statutory trading revenue
excluding interest on segregated
client funds and is net of introducing
partner commissions.
(2) For FY15 two metrics are disclosed.
The unadjusted statutory and also the
higher underlying performance that is
stated excluding the losses associated
with the Swiss franc event.
(3) FY14 has been restated following the
adoption of IFRIC 21. Please refer to
note 38 to the financial statements.
(4) The profit before tax and diluted
earnings per share figures for FY11
exclude both the amortisation and
impairment of goodwill and customer
relationships associated with our
Japanese business, IG Securities
(formerly FXOnline), and of the Group’s
Sport Business.
(5) Calculated with reference to the
statutory figures.
The lighter shaded area indicates the
underlying performance.
5
IG Group Holdings plc Annual Report 2015| OUR
BUSINESS
Back in 1974 we invented a new way
for people to trade gold. Since then
IG has grown to become a global
leader in online trading and the
world’s No.1 provider of CFDs.(1)
In 2002 we opened our Melbourne
office and we are now located in
20 countries.
IG is a global leader in online trading, providing active traders
with fast and flexible access to the world’s financial markets
through our award-winning dealing platforms. Since our
inception in 1974 we have opened sales offices in a further 16
countries across Europe, the Middle East and Africa, Australia,
Asia and the US, and serve clients in 164 countries. We are
the No.1 provider of CFDs and spread betting worldwide(1)
and in the last year we also launched our execution-only
stockbroking service in the UK, Ireland and the Netherlands.
For more information on our products please see the
What We Do section of this report, on page 14.
Our industry and our products are highly regulated – we
are regulated by the FCA in the UK and Europe and by the
equivalent local regulators in other jurisdictions where we
have a physical presence. We set out to develop strong and
constructive relationships with regulators and engage with
them and policymakers as much as possible – both where we
have a licence and in countries where we see the potential for
future expansion.
Two years ago we established the clear global brand of IG,
with the exception of Nadex, our binaries exchange in the US.
As part of this process we acquired the IG.com domain name
and consolidated our global web traffic through this route.
Online leadership is increasingly important in our industry,
from a perspective of acquiring, educating and providing a
high level of service to clients.
The global nature of our business, coupled with the
consistent brand, provides us with several advantages. Over
the past year this enabled us to launch a global advertising
campaign – Live Every Trade – based on the more emotional
side of trading and the factors that can influence success.
The campaign included a major television advert, and in the
past we would have had to recut such an advert to suit local
markets. Our centralised operating model has also made it
easier for us to expand into additional countries, with a well-
practised approach to launching an office and the associated
marketing that accompanies it.
Technology is key to our client acquisition and retention. More
sophisticated clients have greater expectations when it comes
to a trading platform. As a result, we invest significantly in
ensuring our dealing platforms are not just robust and secure
but also available via both web-based and downloadable
platforms as well as via a full range of tailored apps for mobile
and tablet devices. We also invest in providing a range of
advanced trading and education tools to support our clients’
trading needs.
In 2014 we celebrated our 40th anniversary. Through the last
40 years our operating model and risk management strategy
have been thoroughly tested and have proved highly resilient.
Our long history of profitability has produced the financial
strength which is visible today and provides the capital and
liquidity we need in our regulated environment as well as
supporting our future growth. Our business has continually
adapted to a changing world and the technological and
economic backdrop, and we will continue to innovate as we
look to the next phase of our growth.
47%
136,100
47% REVENUE
OUTSIDE THE UK
136,100 ACTIVE
CLIENTS
WORLDWIDE
IG RETAIL
BRANDS
(1) No.1 CFD and spread betting provider: for CFDs, based on revenue excluding
FX, published financial statements, July 2015; for spread betting, number of
active UK financial spread betting accounts (Investment Trends UK Leveraged
Trading Report, July 2014).
6
|IG Group Holdings plc Annual Report 2015 WHERE WE OPERATE
UK
EUROPE
• Introduced the first financial spread betting product in 1974
• Entered the market in Germany in 2006, with rapid
• Offices located in the City of London and Dublin (Republic
expansion across Europe from 2007
of Ireland)
• Annual revenue of £206.0 million in the 2015 financial year,
• Offices located in France, Germany, Italy, Luxembourg,
Netherlands, Norway, Spain, Sweden and Switzerland
with 60,400 active clients trading
• Annual revenue of £76.9 million in the 2015 financial year,
• Accounts for 53% of Group revenue
AUSTRALIA
• Entered the market in 2002
• Office located in Melbourne
with 29,800 active clients trading
• Accounts for 20% of Group revenue
REST OF WORLD
• Began expansion in 2006
• Annual revenue of £58.1 million in the 2015 financial year,
• Offices located in Dubai, Japan, Singapore, South Africa
with 18,700 active clients trading
• Accounts for 15% of Group revenue
and the US
• Annual revenue of £47.4 million in the 2015 financial year,
with 27,200 active clients trading
• Accounts for 12% of Group revenue
7
-DUBAIMELBOURNEDÜSSELDORFJOHANNESBURGSINGAPOREMILANAMSTERDAMLUXEMBOURGPARISMADRIDLONDONGENEVADUBLINOSLOSTOCKHOLMCHICAGOTOKYOIG Group Holdings plc Annual Report 2015| CHAIRMAN’S
STATEMENT
This is my first opportunity to
address shareholders directly
since I was elected chairman of IG
in October 2014. I am delighted
to present the results for the 2015
financial year.
It was another record year for revenue, with net trading revenue
ahead by 4.9% at £388.4 million (2014: £370.4 million). This was
after the impact of the extreme event involving the Swiss franc
in January, which I discuss in more detail below; excluding this
incident, on an underlying basis, revenue was ahead by 8.0% at
£400.2 million. Underlying profit before tax was down slightly
on the prior year as a result of ongoing investment, as set out
in the Chief Executive’s statement. Diluted earnings per share
was down by 10.5% at 35.99 pence (2014: 40.22 pence); on an
underlying basis it was ahead by 2.1% at 41.07 pence.
In January the Swiss National Bank announced, without notice,
that it was ceasing intervention in the franc exchange rate.
This caused an unprecedented appreciation in the value of
the franc, creating turmoil in the foreign exchange markets
and drastically reducing global liquidity in this G10 currency.
This was a salutary reminder, for both industry providers and
existing clients, of the potential risks and rewards of trading
in the financial markets. At IG we take very seriously our
regulatory and consumer responsibilities on appropriateness
tests for prospective clients. This incident underlines the need
for regulators to ensure that regulatory standards are applied
robustly and consistently across the industry.
The Swiss franc event provided a sudden real-world stress
test for our technology, our risk management procedures and
our balance sheet capacity. Although the resultant negative
impact of £27 million, net of recoveries, was significant and
disappointing, IG clearly demonstrated its ability to manage
through such a so-called ‘Black Swan’ event while maintaining
a robust business that delivers strong cash flows. Following
this, we have reviewed our robust risk management system and
learned lessons that we are applying to provide even greater
protection for our business and our clients.
Over the past few years IG has set out a clear vision of what
it wants to achieve. Our aim is to become the default choice
for active traders globally. We constantly engage with our
clients and carefully consider competitive and regulatory
developments. We continue to see the opportunity to innovate
and take an increasing share of a growing global market. To
achieve this, we are building on our award-winning technology
suite, broadening the range of products we offer to appeal
to sophisticated investors, expanding into further geographic
regions and fundamentally improving our mobile and online
marketing capability.
This year we achieved a major milestone in IG’s development
with the launch of an execution-only stockbroking service in
the UK. Towards the end of the year, we launched this service
in the Netherlands as the first step in the international roll-out.
Stockbroking, and its link to IG’s existing products, has the
potential to underpin the future growth of our business. We
will use technology to bring a revolution to a very traditional
market through real-time tradeable prices, direct market
access, market-leading foreign shares commission rates
and a full suite of mobile trading platforms. This will allow
IG to appeal to a much bigger global audience, providing
an attractive business opportunity in its own right as well
as broadening the understanding and take-up of our core
leveraged trading products.
8
| THE RETIREMENT OF TIM HOWKINS
After a long and extremely successful career at IG, as both CFO
and CEO, Tim Howkins has informed the Board of his intention
to retire. Tim’s career at IG has spanned 16 years and he has
been part of and led extremely dedicated teams which have
built IG from a single office in London to the global leader
it is today. Although I have only had the pleasure of working
with Tim for the last year, I would like to express my personal
gratitude and I’m sure I speak for all the employees at IG, past
and present, in wishing him every success in the future. The
Board is disappointed to lose somebody with Tim’s proven
leadership skills but fully understands his decision.
The Board has commenced a thorough search and selection
process for a successor. Tim will step down as CEO and as
a director at the AGM in October and Peter Hetherington,
currently Chief Operating Officer, will assume the role of
Interim Chief Executive, subject to regulatory approval. Peter
has been a Board member since 2002 and has been integral to
the successful development of the company. I am pleased to
report that Peter has confirmed that he would like to enter the
selection process for the permanent CEO role.
DIVIDEND
IG remains highly cash-generative and we have sought to
reflect this in the direct cash returns to shareholders. Last
year your Board raised the Ordinary dividend payout ratio to
approximately 70%. Although statutory earnings this year are
behind due to the impact of the Swiss franc incident, both our
business and the market opportunity remain strong. In line
with our progressive dividend policy, the Board made clear
at the time of the first half results in January our intention to
hold the full-year dividend flat on 2014 at 28.15 pence, and so
the Board is recommending a final dividend of 19.70 pence.
BOARD
There have been a number of changes to the Board this year.
I was delighted to be elected to lead your Board as Chairman
of IG in October 2014. My arrival was of course accompanied
by the departure of Jonathan Davie, who had been Chairman
of the Board since before the public listing of IG in 2005.
Although I didn’t work alongside Jonathan for very long, his
record speaks for itself. His guidance over the years assisted
the Executive team to grow IG into the global leadership
position it holds today. I would like to express the gratitude of
the Board and the broader IG community for his wise counsel
over the years and wish him every success in the future.
Last year’s AGM also saw the departure of Martin Jackson.
Jonathan addressed Martin’s contribution very eloquently in
his statement last year. Martin was replaced as Chairman of
the Audit Committee by Jim Newman.
During 2014 Roger Yates, our Senior Independent Non-
Executive Director and Chairman of the Remuneration
Committee, confirmed his intention to stand down from the
Board after nine years. We are currently carrying out a search
process for his successor, with the intention of conducting
a smooth handover before Roger departs at the AGM in
October. We are also seeking an additional Non-Executive
Director with digital experience.
Following these changes, your Board continues to comply
with provision B.1.2 of the 2012 UK Corporate Governance
Code (‘the Code’).
Your Board is committed to continually reviewing its
performance and effectiveness and to ensuring its governance
remains of the very highest standards. To enable a substantially
refreshed Board to take a thorough view of our performance
and any changes that may be required, we have embarked
on a multi-year external Board evaluation process. This year
we conducted a questionnaire-based analysis which will be
followed up with face-to-face interviews with Board members
next year. The results were reviewed by the Board, along with
the actions from last year’s internal review. The introduction of
the Board Risk Committee has allowed the Board to increase
the time spent on strategic and operational matters.
The intention again this year is to put every Board Director, with
the exception of Roger and Tim, up for re-election at the AGM,
in compliance with paragraph B.7.1 of the Code.
REMUNERATION
The Remuneration Committee has continued to operate well
this year. The simplified remuneration scheme introduced
in 2013 has proved effective. Salary increases for executive
directors are in line with those of our people generally.
IG’S PEOPLE
I want to express the Board’s great appreciation for the efforts
this year of our entire employee base. In my first year with IG,
I have been struck by the dedication, talent and hard work
I have witnessed from IG people. Our people remain our
greatest asset and I want to thank them for their commitment.
LOOKING FORWARD
We have broadened our horizons to bring our offering to a
much wider audience through both product and geographic
expansion. Our new offices in Switzerland and Dubai are in the
very early stages of growth but I am encouraged by the initial
signs. Importantly, they both provide clear evidence of the
ability of the IG team to deliver in challenging environments
and demonstrate our adaptability and desire to continue
growing the business. We have commenced the international
rollout of our stockbroking offering and over the next year I
expect us to expand this into more of our current markets.
We are investing significant time and effort into improving a
number of our business processes, particularly in the sales,
marketing and client-onboarding areas. This includes work on
our mobile app strategy and driving value from our investment
in generic top-level domains (gTLDs). We recognise the need
to evolve rapidly in response to the increasing importance of
the internet and mobile devices as the key client interfaces.
In summary, 2015 was a solid year, both financially and
strategically, but we are not resting on our laurels. We are
clear about our agenda and the team is energised to deliver
growth and profitability for the future.
Andy Green
Chairman
21 July 2015
9
IG Group Holdings plc Annual Report 2015| CHIEF EXECUTIVE
OFFICER’S REVIEW
‘2015 was another year
of good progress on our
strategic initiatives, coupled
with a solid underlying set of
financial results.’
Tim Howkins
Chief Executive Officer
10
Underlying revenue, before the impact of the Swiss franc
event in January – the detail of which I discuss later – was
£400.2 million, up 8.0% from £370.4 million in the prior
year. Underlying profit before tax was down by 0.9% at
£193.2 million, with operating costs increasing to support the
future growth of the business. Underlying diluted earnings
per share was up by 2.1% to 41.07 pence, benefiting from
a fall in the Group’s effective tax rate. On a statutory basis,
profit before tax was down by 13% and earnings per share
was down by 10.5%. The Group continues to invest to drive
future growth. This year, this is reflected in the £27.3 million
increase in underlying administrative expenses which
includes the infrastructure and additional marketing to
support the core business and various initiatives, including
the expansion into Switzerland and Dubai, the roll-out of
execution-only stockbroking and investments in mobile and
web-based technology.
TRADING PERFORMANCE
We achieved double-digit underlying
revenue growth in the UK, Australia
and Rest of World, which together
comprise 80% of our revenues.
This growth was driven by the combination of higher active
client numbers and higher average revenue per client in
the UK and Australia, and strong client growth in Rest of
World. However, this was partially offset by a 1.5% fall in
European revenue.
While Europe continues to see good growth in active client
numbers, which were up 14.3%, this was more than offset
by a fall in revenue per client and as a result revenue was
slightly down. A number of factors have contributed to the
fall in revenue per client: just over a third of this movement
was caused by the weakness in the exchange rate of the
euro against sterling; overnight funding revenue has fallen
as clients have held fewer positions overnight; although the
number of trades per client increased significantly, this was
more than offset by a drop in the overall average trade size,
reflecting a movement towards smaller size contracts; and
through the second half, we also saw a widening of spreads in
the underlying DAX futures contract, which increased the cost
of hedging in what is the most popular traded product across
our European business.
We saw notable growth in our US business, Nadex, which
accelerated as the year progressed. Revenue was up 68%
year-on-year and growth was strongest in the final quarter
of the year, when revenue was more than double the same
quarter of the prior year.
This growth was driven by a number of factors including the
introduction of a second market maker a little over a year
ago, on-going improvements to our marketing efficiency
and various other operational enhancements, including the
relocation of our IT infrastructure. Following this marked
| improvement in the growth rate of Nadex, in the final months
of the year we increased our US marketing expenditure to
take advantage of the improving return on investment that it
was yielding.
IMPACT OF THE SWISS FRANC EVENT
All of the above revenue figures and growth rates are stated
before the impact of the Swiss franc de-peg on 15 January,
which reduced revenue by £12 million and increased the
bad debt charge by £15 million (net of recoveries). This was
a market event of unprecedented proportions, with a major
currency moving over 30% in a matter of minutes. We have
spent considerable time reflecting on the lessons we can learn
from this, and will continue to do so. Our first change is to
introduce more extreme scenarios into our stress-testing and
scenario planning and we are considering carefully the risk/
reward ratio on all aspects of our business.
Of the 342 clients who initially owed us money as a result of
the Swiss franc move, less than 100 remain outstanding. We
recognise that the scale of the move was beyond anyone’s
expectations and we are being sympathetic to debtors’ ability
to pay, accepting less than the full amount of the debt where
this is justified by the financial circumstances of the individual.
Unfortunately a few clients, whom we believe to be financially
sophisticated, with the means to pay their debts, have used
social and more traditional media to generate adverse
publicity for IG in an attempt, we believe, to avoid taking
responsibility for their debts. We continue to encourage
any remaining affected clients to make contact so that their
individual circumstances can be taken into account in settling
their account balance. We have provided a full reconciliation
between the statutory numbers and those on an underlying
basis, adjusting for the impact of this extreme event, in note
2(a) to the financial statements.
The Swiss franc event had an immediate impact on some
providers in our industry around the globe, which either
went into insolvency or had to refinance to rebuild their
balance sheets.
At least one major hedging counterparty has withdrawn from
the market, and we believe others are re-assessing who they
want to do business with in future. I think it inevitable that the
smaller players in our industry will find hedging relationships
become harder and more expensive to secure. This may result
in some consolidation across the industry or more industry
players adopting a model that involves little or no hedging.
The latter is unlikely to result in good consumer outcomes in
the long run.
GEOGRAPHIC EXPANSION
In October we opened our office in Switzerland, having
obtained a Swiss Banking licence that was necessary for us
to do business there. This operation is performing according
to our expectations and in line with the early growth rates we
have seen in other European markets. Shortly after the year
end we received our licence from the Dubai Financial Services
Authority (DFSA) and opened for business in the Dubai
International Financial Centre. To maximise effectiveness,
the full marketing and PR launch of this business is planned
for September, once the summer is over. Our licence from
the DFSA is one of the first it has issued that enables the
licence-holder to deal with retail clients; this opens up the
market for IG to a much broader pool of potential clients than
has previously been possible in Dubai.
The challenges in obtaining the types
of licence which we have been granted
in both Switzerland and Dubai are
considerable and we were subject to
detailed and prolonged scrutiny by
both regulators. I am delighted that
we have been able to obtain these
licences. This is testament to our
ongoing investment in people, systems
and processes to ensure that we
remain fully compliant with the ever-
increasing regulatory burdens, both
within our industry and on all financial
businesses globally.
Subsequent to the year-end we obtained a representative
office licence from the China Securities Regulatory
Commission. This allows us to establish a small office in
Shanghai, which will facilitate discussions with potential
partners in China, but does not give us any right or ability
to transact business in China. As I indicated in January this
year, we continue to view China as an interesting future
market for us, but one in which we anticipate that matters will
develop slowly.
PRODUCT DIVERSIFICATION
In September we launched our stockbroking service in the
UK, and have been pleased with the progress to date. We
continue to see good recruitment of new clients – roughly
65% of all funded stockbroking accounts are clients new to
IG. Even more encouragingly, although the numbers will
take some time to settle down, around 20% of those are
going on to trade with our existing leveraged products. Early
indications are that the clients who start with stockbroking
and move on to our other products are, on average, at least
as valuable as those clients who do not start via stockbroking.
In March we began our international roll-out of this service
with the launch in the Netherlands. While this is one of our
smaller offices, we were able to complete the development
work necessary to launch here quickly because the tax regime
there made this less complex. In July 2015, we launched
stockbroking in Germany – with the offering also available to
Austrian clients. We will continue with a targeted international
roll-out and expect to launch in most of our current countries
over the coming years.
11
IG Group Holdings plc Annual Report 2015| CHIEF
EXECUTIVE
OFFICER’S
REVIEW
(CONTINUED)
As well as extending our stockbroking offering internationally,
as we continue our diversification strategy to appeal to a
broader set of clients, we will also be seeking to increase
its scope with the addition of innovative new products
and services which we believe will extend the reach of
our offering.
To this end, IG recently entered into
an agreement with BlackRock, the
largest ETF provider globally, which
will facilitate IG constructing a range
of ETF-based investment portfolios for
our clients.
The details of this new service are still being worked through
and we do not expect it to be fully operational until 2016.
However, it fits with IG’s strategy of broadening our offering
to cater for sophisticated investors as well as active traders.
At IG we believe that portfolios composed of passive
instruments such as ETFs have the potential to disrupt the
investment management industry, as passive investing and
ETFs become an integral part of investors’ portfolios. The
new service will be delivered digitally and will leverage the
capabilities of our existing stockbroking platform. We believe
that this partnership with BlackRock can significantly broaden
our reach beyond our existing client base and we consider it
to be an exciting long-term opportunity.
RISK MANAGEMENT OPTIMISATION
Over the last decade our hedging has become progressively
more cautious relative to the scale of IG, as risk limits have
remained relatively stable while client numbers, trading
volumes and Group revenue have grown significantly.
Following further development of our back-end risk
management systems, we commenced an extremely detailed
analysis of our indices risk limits market-by-market. Our
initial conclusions led to us increasing certain of our risk
limits but, more importantly, during the period we made
our main regional and global equity limits dynamic. This
involves increasing the risk limit for a market when it is open,
most liquid or when we are seeing most client activity in that
market, and reducing the limit approaching market closing,
or when liquidity or activity levels are reduced. We expect
this approach will enable us to reduce our hedging costs
and thus on average increase the revenue that we make per
unit of volume. We do not expect this approach to materially
12
impact the very high correlation that our revenue has to client
volume, which we recognise as an important element of the
IG investment case.
GROWING OUR ACTIVE CLIENT BASE
Over the long term we expect that growth in our business will
be driven primarily by increasing the number of active clients
and that this in turn will be driven mainly by the rate of client
recruitment. We have a number of initiatives in progress which
we envisage will lead to improvements in the rate of client
recruitment across all of our businesses globally.
Over the last year we have made significant improvements
to our data-driven digital marketing capability, both in terms
of personnel and technology. As we have done so, we have
been progressively optimising how and where we spend on
digital marketing. We have greater confidence in our ability
to track our marketing spend, to measure its effectiveness
and to switch the focus rapidly to respond to opportunities.
There is more work to be done to further optimise spending,
but the initial results are encouraging and this contributed
to the strong account opening we achieved throughout the
second half of the year. The payback from digital marketing
is good – on average a new trading client generates enough
revenue to cover their marketing recruitment cost within their
first three months. It therefore makes sense for us to continue
to increase our marketing spend progressively, until we reach
a point of diminishing returns from the incremental spending.
We are making ongoing incremental improvements to our
‘conversion funnel’ – the journey which a client goes through
from starting to complete our application form to funding
their account and trading for the first time. These changes
include implementing electronic ID verification in a number of
additional countries and simplifying the process of capturing
and uploading images of identity documents.
By eliminating manual steps from the
conversion funnel and making the
process as streamlined as possible,
we expect to reduce the proportion of
potential clients who drop out part-
way through the application process.
In making these changes, we will
not in any way compromise the high
regulatory standards we apply during
the account opening process.
We continue to develop multiple mobile applications to
address different stages in the client journey. We will shortly
be releasing a new educational app, IG Academy on iPhone.
|IG Group Holdings plc Annual Report 2015 The initial content of IG Academy comprises educational
materials for prospective and new clients and it will act as a
feeder into our suite of trading apps. Over time we intend to
build the content of IG Academy to address the educational
needs of clients with the full range of experience, everyone
from newcomers to sophisticated traders wanting to learn
advanced techniques.
CAPITALISING ON TOP-LEVEL DOMAINS
As I have mentioned before we were successful in our
application for seven generic top-level domains (gTLDs)
that are directly relevant to our business. We made this
investment to position our business for changes to the
structure and usage of the internet and the drivers of search
engine rankings, which we envisage will result from the recent
significant expansion in the number of top-level domains.
As a first step in exploiting these gTLDs we intend to build a
significant number of specialised websites over the coming
year. Some of these will be IG branded and be devoted to
one aspect of our product set or service; for example, IG.forex
will be devoted to our extensive forex offering. Others will
be more generic and concentrate on one segment of our
audience or one aspect of consumer need; for example,
whatis.spreadbetting will provide generic education on
financial spread betting. Each of these websites will have a
tightly defined audience, subject matter and purpose as well
as a highly relevant domain name. As a result, we expect that
they will rank highly on search engines for topics relevant to
the success of IG.
Alongside this, we will be encouraging third parties to buy
licences for domain names on our gTLDs with the view that
over time these gTLDs should become recognised as marks
of authority and relevance and become synonymous with
the products they represent. We have already made some
early sales of domain name licences for .markets, the first of
our gTLDs to go live. We do not view this as a business in its
own right, but rather as a source of income which will partially
offset the cost of developing our own websites using our
gTLDs, aimed at increasing the level of client recruitment for
our business. We currently expect the remaining gTLDs to go
live during the first half of the current financial year.
We believe that all of the above
initiatives, together with the ongoing
development of our product offering,
will help to drive the recruitment,
conversion and long-term retention of
good-quality clients.
By successfully expanding our client base globally we can
ensure the next phase of growth for IG.
MY RETIREMENT
After 16 years at IG, seven as CFO and almost nine as CEO,
I have informed the Board of my intention to retire.
Firstly and mainly, I would like to thank all of IG’s employees,
past and present, for their hard work and dedication and
for helping to make the last 16 years such an enjoyable
and rewarding experience. I would also like to express my
gratitude to the clients who have put their trust in IG over the
years. I also want to thank the loyal shareholders who put their
faith in IG and supported it with their investment.
During my time at IG I have seen our business transform, as
we have grown revenues from £12 million to an underlying
£400 million. In my time as CEO, we have grown earnings per
share from 10.88 pence to an underlying 41.07 pence, and
have gone from less than 10% of our revenue coming from
outside the UK to now almost 50%. Our group now has offices
in 20 countries and includes a US regulated exchange and
a Swiss Bank. This has been a great team effort. I have been
surrounded by an extremely talented senior management
team, a number of whom have been with me throughout my
tenure as CEO, and I have every confidence that this team will
continue to drive the business forward with the same degree
of success. I very much look forward to seeing the more
recent initiatives we have started together come to fruition
over the coming years.
Tim Howkins
Chief Executive Officer
21 July 2015
In the following sections, we will:
• Outline the products and services we provide for
our retail and institutional clients
• Show how we are set up to provide support for our
clients and meet their needs as they evolve over
time, and the critical importance of our people and
the values we live by to our success
• Summarise the rationale, the progress made in
2014, the priorities for 2015, and the link to our
business model for each of our strategic objectives
• Lastly then work through some examples of our
strategy in action and our focus for 2015
13
IG Group Holdings plc Annual Report 2015| WHAT WE DO
We offer our clients fast and
flexible trading on a range of
instruments including indices,
shares, forex and commodities on
award-winning platforms. We also
offer trading opportunities on
interest rates, government bonds,
exchange-traded funds (ETFs) and
a number of other markets.
The vast majority of our clients engage directly with us, and we aim to build a long-term relationship with them by anticipating
and responding to their changing needs through technological and service innovation. Most of our global revenue comes
from CFDs and financial spread betting (in the UK and Ireland), with an increasing proportion arising from binaries trading,
including our US retail derivatives exchange, Nadex. This year we introduced execution-only stockbroking in the UK and Ireland
and began our international roll-out of this product in the Netherlands in March. Worked examples of our major products are
shown below.
CONTRACTS FOR DIFFERENCE (CFDs)
CFDs are derivatives contracts that enable clients to take advantage of changes in an asset’s price, without owning the
asset itself.
• We are the world’s No.1 CFD provider(1)
• We offer global CFD trading, including direct market access (DMA) to shares and forex markets
The diagram below shows, in simplified form, how a CFD can be used to ‘sell’ a market when you expect it to fall. This is known
as ‘going short’. In this scenario, a subsequent fall in the market price results in a profit for the client while a rise would have
resulted in a loss. The diagram below should be viewed in conjunction with our more detailed example of a CFD trade on
page 180.
CLOSING
PRICE
MARKET
PRICE
CLOSING
PRICE
MARKET
RISE
370p
350p
320p
290p
270p
MARKET
FALL
If you expect the market
to fall, you ‘sell’ at the
MARKET PRICE
GOING SHORT
THE TRADE
You open a trade for 500 contracts
at the market price of 320p
COMMISSION
£10.00
MARKET PRICE
SIZE (SHARES)
320p
500
MARKET PRICE RISES
CLOSING PRICE
LOSS
350p
£150.00
The market moves by 30p
CLOSING PRICE
PROFIT
290p
£150.00
MARKET PRICE FALLS
(1) Based on revenue excluding FX, published financial statements, July 2015.
14
|IG Group Holdings plc Annual Report 2015 SPREAD BETTING
Financial spread betting in the UK and Ireland is a tax-free(1) way to trade by betting on the price movement of an asset. Like a
CFD, a client takes advantage of changes in an asset’s price, without owning the asset itself, and the size of a client’s win or loss
depends on the magnitude and direction of the price movement.
• We are the UK’s largest and longest-running spread betting provider(2)
• We hold 40% of the UK financial spread betting market(3)
The diagram below shows, in simplified form, how a spread bet can be used to ‘buy’ a market when you expect it to rise.
This is known as ‘going long’. In this scenario, a subsequent rise in the market price results in a profit for the client while a fall
would result in a loss. The diagram below should be viewed in conjunction with our more detailed example of a spread bet on
page 182.
IG BUY/OFFER
PRICE
THE
SPREAD
UNDERLYING
MARKET VALUE
IG SELL/BID
PRICE
MARKET
RISE
1002
1001
1000
0999
0998
MARKET
FALL
If you expect the market
to rise, you ‘buy’ at the
OFFER PRICE
GOING LONG
THE DEAL
You open a position for £10.00 per point
at the offer price of 1001
BUY/OFFER PRICE
SIZE (£ PER POINT)
1001
£10.00
MARKET PRICE RISES
SELL/BID PRICE
PROFIT
1007
£60.00
The market moves by eight points
SELL/BID PRICE
LOSS
0991
£100.00
MARKET PRICE FALLS
STOCKBROKING
Our stockbroking service, which launched in the UK in the
second quarter of the year, is powered by our existing
market-leading technology and provides clients with access
to live streaming prices and a transparent execution process,
as well as a cost-effective way to trade international equities.
At the end of November we enhanced the offering by giving
clients the ability to use their share portfolio as collateral
to support their shorter-term trading with CFDs or spread
betting. Clients can benefit from lower charges if they have
executed at least ten stockbroking transactions or placed at
least one spread bet or CFD trade in the previous month.
For a detailed stockbroking example please see page 184.
(1) Tax laws are subject to change and depend on individual circumstances.
(2) No.1 spread betting provider: based on number of active UK financial spread
betting accounts (Investment Trends UK Leveraged Trading Report, July 2014).
(3) By number of active primary accounts. All market share data presented in
this report is provided by Investment Trends Pty Limited (please refer to the
Investor Resources section on page 190 for further details).
15
IG Group Holdings plc Annual Report 2015| Our centralised operating model enables us to consolidate
the market risk associated with client trades from around
the globe, which lessens our requirement to hedge due to
the net impact of clients buying and selling the same asset,
and so reduces risk and cost. This model also enables us to
maintain lower-cost and capital-efficient processes, while
robust risk-management procedures help us monitor and
control the impact of market and credit risk on the company
and our clients.
Our exposure to market risk at any point in time depends
primarily on short-term market conditions and the levels of
client activity. We utilise market position limits for ‘operational
efficiency’ and do not take proprietary positions based on
an expectation of market movements. As a result, not all
net client exposures are hedged and we are likely to have
a residual net position in any of the financial markets in
which we offer products up to the market risk limit. The
costs associated with the hedging of market risk as well as
any gains or losses incurred on the unhedged residual net
position are reported within revenue, along with the charges
levied on our clients.
WHAT
WE DO
(CONTINUED)
BINARIES
Our pioneering binary contracts are based on a single
question: ‘Will the underlying market behave in a specific way
before the contract expires?’. Clients use their knowledge of
the financial markets to decide whether the answer will be yes
or no. We also offer ‘sprint markets’ – high-speed, fixed-risk
trades. Our binary contracts give clients the opportunity to
trade in even the flattest markets.
The main attributes of binary contracts are that they enable
clients to trade with limited risk and are unrestricted by
low volatility, therefore remaining attractive to clients when
markets are relatively stable.
NORTH AMERICAN DERIVATIVES
EXCHANGE (NADEX)
Nadex is our US derivatives exchange, enabling US and
overseas investors to trade options on global financial
markets in retail-sized contracts.
• Nadex is the first and largest US-based
retail-oriented exchange
• We provide a flexible way for our clients to trade with
limited risk
• The main product on Nadex is the binary option
HOW WE GENERATE REVENUE
Our principal revenue sources on our core leveraged products
are the dealing spreads or commission charges we apply
to each transaction, according to the asset and product
type being traded. As clients are trading on margin, we also
levy a financing charge for positions held overnight. Our
stockbroking offer charges a flat fee commission per trade in
UK shares.
We derive our earnings from the volume of our clients’
dealing transactions, which is influenced by the level
of activity in the underlying financial markets. Since our
clients can choose to ‘buy’ or ‘sell’, dealing volumes can be
maintained, and we are able to profit, irrespective of the
direction in which markets are moving.
16
|IG Group Holdings plc Annual Report 2015 OUR
CLIENTS
In the year, we had 136,100 active clients around the globe.
The majority of our customers engage directly with us and our
aim is to build a long-term mutually beneficial relationship
with them by anticipating and responding to their changing
needs throughout their time with us.
We offer them a portfolio of instruments to trade including
indices, shares, forex and commodities on award-winning
platforms. In addition, we offer trading opportunities on
interest rates, government bonds, exchange-traded funds
(ETFs) and a number of other markets. We aim to make our
platform execution consistently fast and flexible.
We also provide our products through a number of third-party
institutional providers that are chosen carefully to ensure they
maintain our strict standards of regulatory compliance as well
as fitting our risk profile. Of our active clients, approximately
10% were introduced by our partners in the financial year
ended 31 May 2015.
The basis of these partnerships varies from straight referral,
where an institution refers the client directly to IG, through to
full ‘white-labelling’ of our dealing and back-office systems,
where we provide a dealing solution in the branding of the
institution. This allows our partners to generate new revenue
streams using their marketing and sales capabilities while
relying on our award-winning dealing platforms, and our
expertise in dealing, risk management and client services.
Clients introduced to us through partner institutions are able
to trade our full product suite over the counter, or if they
prefer can trade directly on the underlying exchange via our
direct market access products.
Our platform offering encompasses our regular web and
mobile platforms, as well as a downloadable proprietary
platform specifically designed for institutional users. We also
have web and direct API (Application Programming Interface)
connectivity for those clients who wish to fully integrate their
trading strategies to the IG infrastructure via their own front
end or any number of third-party solutions.
Our partner relationships are designed to be mutually
beneficial, with generous rebates for successful partners,
which resulted in £33.7 million of payments being made to
partners in the year.
17
IG Group Holdings plc Annual Report 2015| Expanding product suite:
Stockbroking – NEW IN 2015
Spread betting
CFDs
Binaries
OUR CLIENTS AND US
We aim to be responsive to
the needs of our clients as
they evolve, with the suite
of products and services we
offer. By achieving this we will
attract and retain the most
active traders.
NO.1
GLOBAL
PROVIDER
OF CFDS AND
FINANCIAL
SPREAD BETTING
Ongoing investment in
Customer Relationship Management
BRAND STRENGTH
PRODUCT SUITE
Our unrivalled global brand
and reputation for integrity and
transparency are key reasons why
new clients choose IG as their
trading provider.
We provide clients with an
extremely broad product set,
both in terms of markets to
trade and platform functionality,
to enable them to manage
their risk.
18
|IG Group Holdings plc Annual Report 2015 Industry-leading investment in core
platform to remain at the forefront of
the industry.
Innovative
products including:
Major Markets App
Apple Watch App
API introduction
News flow provision including economic
calendar, alerts and market insight.
IG TV with more than 20 educational videos
in multiple languages launched in 2015
TECHNOLOGY ONLINE
EDUCATION
IG is recognised as a technology
leader in the industry, with
a track record of innovation.
We constantly engage with our
clients to understand what they
require of a trading platform.
Resources such as an economic
calendar, current news, market
insight and educational videos are
designed to assist clients to trade
and to deepen the relationship we
have with them.
19
IG Group Holdings plc Annual Report 2015| OUR STRATEGIC
PROGRESS IN 2015
PRIORITIES FOR 2016
OBJECTIVES
ADDRESS THE NEEDS
OF ACTIVE TRADERS
• Launched our technologically advanced
execution-only stockbroking service
We seek to attract and retain
the most active traders. Active
traders are both demanding
and valuable because they trade
frequently or place large trades.
We aim to be responsive to
their needs as they evolve over
time with the suite of products
we offer.
• Launched new IG Major Markets app for the iPad in
the UK in December
• Successful first year for IG TV in educating new and
prospective clients
• 23 new localised websites launched, focused on
onboarding new clients
• First major provider to introduce Sunday trading
ACHIEVE, MAINTAIN
OR EXTEND MARKET
LEADERSHIP
• Maintained our UK market leadership position in the
UK for CFDs and financial spread betting
• Maintained leadership position in Australia and
Market leadership is a reflection
of great customer service
combined with a strong product
and platform offering. Having
scale is important for profitability
and the long-term success of
our business.
increased lead in France
• Successful launch of IG TV and the IG video app
• Various improvements to client onboarding process
showing positive results
• Launched our first gTLD (.markets) to assist
online marketing
• Continue the successful roll-out
of stockbroking to further
regions and add the ability for
clients to participate in IPOs
• Broaden the product
set to include a wealth
management platform
• Launch further apps for new
and prospective clients,
including educational apps to
suit all levels of experience
• Continue to increase client
numbers and revenue in
stockbroking as well as the
level of cross-selling
• Further enhance the account
application to trading
process to increase new
client numbers
• Launch the remaining gTLDs
and leverage marketing and
SEO benefits
STRENGTHEN GLOBAL
PRESENCE
Opening offices in new countries
provides us with the opportunity
to recruit new clients and grow
the business. Our single global
identity and standard platform
helps us to grow the global
footprint of our business in a
cost-effective manner.
DELIVER QUALITY
SERVICE TO CLIENTS
By maintaining absolute
integrity, delivering excellent
customer service and fast
and reliable execution with
transparent pricing we strive
to make our clients feel secure
and confident in trading with
us, resulting in a longer, more
profitable relationship.
SUSTAIN TECHNOLOGY
LEADERSHIP
The strength and market-leading
functionality of our platform and
its proven resilience are essential
to maintaining client satisfaction,
and enhance client acquisition
and retention.
• Opened for business in Switzerland with a full
• Fully establish and grow the
banking licence
office in Dubai
• Received regulatory approval and opened in Dubai
• Establish relationships in
in June
• Achieved rapid growth in Nadex in the US
• Single brand of IG enabled first global brand
campaign across 13 countries in 2015
• Continued focus on delivering industry-leading
customer service
• Livechat introduced in all our sites with an average of
3,700 conversations per month
• Expanded charting technical support team
• Training introduced to move team from transactional
to relationship management
China which may enable us to
build a future business there
• Roll out stockbroking
offering to at least three
more countries
• Continue to deliver growth
in Nadex
• Introduction of new contact
centre management tool to
improve proactive contact
with clients and focus on
active traders
• Introduce peer-to-peer support
• Introduce ‘My IG’ on the
trading platform to allow
clients to self-serve
• Extended availability of full version of IG.com to all
mobile platforms
• Delivered fully dynamic versions of all IG websites
• Developed and supported new stockbroking product
• Launched the first global trading app for the
Apple Watch
• Launched web API allowing automated trading
for clients
• Co-located trading infrastructure in Nadex to reduce
pricing and execution latency
• Economic calendar rolled out to mobile apps, with
push message alerts on economic figures
• Established mobile app team to increase rate of
client sign-ups – delivered Major Markets App
• Revamp of our core online
trading platform to ensure
we remain at the forefront of
retail trading platforms
• Development of suite of
educational apps for existing
and prospective clients
• Invest in technology
to support our
onboarding processes
• Improve the users’ application
process experience
• Provide trading through
charts functionality on
mobile devices
20
|IG Group Holdings plc Annual Report 2015 OUR
BUSINESS
MODEL
We have developed a business model that
harnesses the demand from active traders
for fast, flexible and secure online trading.
KPIs
(SEE PAGE 28)
REVENUE
REVENUE PER
CLIENT
ACTIVE CLIENTS
PROFIT BEFORE TAX
DILUTED EARNINGS
PER SHARE
CASH GENERATION
DIVIDEND PER
SHARE
PLATFORM UPTIME
NET PROMOTER
SCORE
KEY RISKS
(SEE PAGE 51)
CREDIT
MARKET
LIQUIDITY
OPERATIONAL
REGULATORY
CONDUCT
TECHNOLOGY
OUR CLIENTS
We attract clients globally via a number of channels, including:
• Our international network of offices, through
local seminars and public-relations exercises
• Our optimised online and
app-store presence
• Our multi-channel brand and targeted
• Our worldwide network of
advertising campaigns
high-quality partners
S
U
C
O
F
T
N
E
I
L
C
AUTHORITY AND EXPERTISE
OUR TECHNOLOGY
OUR PRODUCTS
STRENGTH AND STABILITY
I
H
G
H
-
C
A
L
I
B
R
E
S
T
A
F
F
FINANCIAL MARKETS
Our clients can trade across a wide variety of markets, geographies and asset classes.
Indices
Shares
FX
Forex
Commodities
Other markets: Interest rates, bonds, ETFs.
21
IG Group Holdings plc Annual Report 2015|
OUR STRATEGY
In this section we outline our
strategic objectives and work
through examples of our strategy
in action and our focus in the
year ahead.
ADDRESS THE NEEDS OF ACTIVE TRADERS
The most valuable traders are those that trade most frequently or in the largest deal size. We aim to service
the needs of these traders as they evolve over time with the suite of products and platform functionality
that we offer. Our platforms, products and service levels are therefore designed with these clients in mind,
while we remain conscious of the importance of delivering an excellent trading experience for all.
ACHIEVE, MAINTAIN OR EXTEND MARKET LEADERSHIP
Market leadership is a result of an award-winning platform and product offering, combined with a service
ethos with the client at its centre; by delivering this we can ensure the long-term success of our business.
We are a global leader in online trading, with the aim to become the default choice for active traders.
We are currently the No.1(1) global provider of CFDs and financial spread betting and a recognised
authority on financial trading. We have achieved this position through a focus on what traders need:
technology, platform functionality, education and research, services, product breadth, all supported
by the excellent customer service provided by our people. We will remain focused on achieving,
maintaining, or extending market leadership in each of the markets and regions in which we operate.
STRENGTHEN GLOBAL PRESENCE
We began our expansion outside the UK in 2002, with the opening of an office in Australia. We now
have sales offices in 17 countries, serving clients in the vast majority of the countries of the world.
We have used a consistent and purposeful approach in growing our client base, both in established
and new regions. Our single global brand – IG – is helping us to develop our reach, increase our
market penetration and target additional countries, from the offices where we already operate, using
lighter versions of the IG website. These sites are fully responsive, and aim to remove the barriers
to converting clients to IG by catering for additional currencies, offering faster identity checks and
facilitating the uploading of application paperwork.
DELIVER QUALITY SERVICE TO CLIENTS
Our vision is to deliver an industry-leading and world-class service to our clients, and for the quality of
our customer service to be viewed as a competitive advantage. Through fast and reliable execution,
transparent pricing, investment in education and market insight resources and full segregation of
client funds, we aim to make our clients feel secure and confident in trading with us. Backing this up
with the best online support, helpdesk and service levels will position us very well to attract and retain
valuable active clients.
SUSTAIN TECHNOLOGY LEADERSHIP
This is a virtuous circle. Our original concentration on delivering technological excellence assisted
us in building a highly profitable business. Our financial strength now enables us to maintain a high
level of investment in IT development and infrastructure to remain at the forefront of the industry,
with a superior platform, technology, tools and resources. The strength of our platform and its proven
resilience over a long period of time are essential in acquiring and retaining clients and maximising
the length and value of a client relationship.
See page 23
See page 24
See page 25
See page 26
(1) No.1 CFD and spread betting provider: for CFDs, based on revenue excluding FX, published financial statements, July 2015; for
spread betting, number of active UK financial spread betting accounts (Investment Trends UK Leveraged Trading Report, July 2014).
See page 27
22
|IG Group Holdings plc Annual Report 2015 ADDRESS
THE NEEDS
OF ACTIVE
TRADERS
STOCKBROKING SERVICE
In September 2014 we successfully launched our execution-
only stockbroking business in the UK and Ireland – our first
significant diversification from leveraged trading and a key
milestone on our journey to become the default choice for
active traders.
Prior to developing the service, a survey of our clients
concluded that 60% of them also traded cash equities, and
65% of those said that they would consider moving their
business to IG if we offered this service. In addition, our
research indicated that the trading life of a cash equity client
was longer than that of our existing client base, that many
of them were wealthy and that there was a constituency
among them that traded very actively. This presents several
opportunities: it gives us a new and much broader sales and
marketing opportunity; it allows us to deepen the relationship
we have with our clients and to manage a greater proportion
of their trading and investment activity. Stockbroking should
extend the duration of a client relationship as their risk
appetite changes and it enables a cross-sell from more active
stockbroking customers into the leveraged product set.
We strive to deliver unparalleled service to our clients and
therefore we have undertaken a number of initiatives to
address their needs and differentiate ourselves from the
competition. We offer our customers the opportunity to
transfer their existing shareholdings to us, free from IG
charges. Once the portfolio has been transferred, the client
has access to the full range of features on IG’s platform. This
includes access to our range of over 8,000 shares, which
are offered in their local denomination, regardless of the
currency on the client’s account. This means our customers
know exactly what they are paying, with our fee to convert
to their base currency being one of the most competitive in
the market.
Unlike most traditional stockbrokers, we charge our clients
only when they trade and not for holding an active account
with us, while our superior technology supports both ‘at
quote’ and ‘on exchange’ trading, ensuring clients have
access to the best possible price. We allow traders to interact
directly with the order book and our systems search for
liquidity and price improvements across multiple venues. This
means they have more options when looking for the best
execution as well as live visibility of the market and access to
full market depth.
In addition, at the end of November we enhanced the
offering by giving clients the ability to use their share portfolio
as collateral to support their shorter-term trading with CFDs
or spread betting, with over 900 clients already signed up for
this service. In March we extended the stockbroking service to
the Netherlands and in July we rolled it out in Germany – the
largest of our continental European countries by revenue.
We anticipated that initial take up of the stockbroking
service would be slow but steady. However, we have been
encouraged by the number of early sign-ups and pleased with
the proportion of these that has come from new clients. After
nine months, we have over 4,000 clients who have opened
and funded a stockbroking account, with roughly 65% of
these being clients new to IG. Although it is very early in the
life of this product, we have seen evidence already that a
proportion of clients who start as stockbroking clients do then
move on to also trade with our other products. There isn’t
sufficient data to be clear about the size of this opportunity
but the early evidence suggests that around 20% of those
new clients who began with stockbroking go on to trade with
a leveraged product.
FOCUS ON MOBILE
With the use of mobile apps continuing to grow, an increasing
number of our clients use this as their primary method for
interacting with IG and the financial markets. As a response
to the needs of our experienced clients, our core apps
are extremely feature-rich and provide powerful tools.
However, they may not be appealing to less sophisticated
traders, discouraging them from opening an account with
us. Therefore, towards the end of our last financial year
we established an operation in Eastern Europe in order to
develop apps that better suit the needs of prospective and
new clients, with the vision to recruit, educate and support
their journey to high-value customers. In tandem with this
we are actively building the necessary marketing skills and
support to encourage app downloads and then convert the
interest shown into active clients. In December we launched
the IG Major Markets app for iPad in the UK aimed at
improving acquisition rates. The app aims to be less daunting,
offering a simpler experience, access to a smaller suite of
markets as well as being highly customisable. Since then we
have added versions for different platforms and rolled it out
to most of our geographic locations.
23
IG Group Holdings plc Annual Report 2015| OUR
STRATEGY
(CONTINUED)
ACHIEVE,
MAINTAIN
OR EXTEND
MARKET
LEADERSHIP
Market leadership is a result of delivering the products and
services that our clients require. Our strategies for achieving,
maintaining and extending market share have consistent
themes but have also been localised to suit each market. We
are currently the No.1(1) global provider of CFDs and financial
spread betting and acknowledged as a recognised authority
on financial trading.
Presented here is the background and current performance of
our three largest individual markets.
UK
IG Index was founded in 1974, becoming the UK’s first
financial spread betting company. CFDs were then introduced
in 2000 under the IG Markets brand. We now offer a full suite
of assets under the IG brand. Our UK business is based in the
City of London and accounted for just over half our Group
revenue in 2015.
Last year over 60,300 active clients traded with us in the UK
and Ireland, and in the UK market we are the market leader
in spread betting by 32 percentage points and in CFDs by
13 percentage points.(2)
AUSTRALIA
Our Australian business was established in 2002 and is
based in Melbourne. Although not first to market, we rapidly
overhauled the market leader to become the largest CFD
provider in Australia. In 2014 we had a 33% market share,
16 percentage points ahead of the second-placed provider.(2)
Australia represented 15% of Group revenue in 2015.
The total CFD market has grown strongly over the last six years
from 32,000 to 42,000 traders(3), as the product has become
better understood and displaced the retail warrants market,
a previously popular leveraged trading product in Australia.
(1) No.1 CFD and spread betting provider: for CFDs, based on revenue excluding
FX, published financial statements, July 2015; for spread betting, number of
active UK financial spread betting accounts (Investment Trends UK Leveraged
Trading Report, July 2014).
(2) By number of active primary accounts. All market share data presented in
this report is provided by Investment Trends Pty Limited (please refer to the
Investor Resources section on page 190 for further details).
(3) By number of active Australian CFD traders (Investment Trends Australia CFD
Report, 2014).
24
SINGAPORE
We opened our office in Singapore in 2006. Although quite
small, Singapore has a highly concentrated and financially
sophisticated population. IG has grown its market share
consistently to overtake most other providers. We are now
the second-largest CFD provider in Singapore, with a market
share of 17% and the second largest retail forex trading
provider with a market share of 15%. Adapting to local cultural
preferences, in 2013 we opened up our first shop front office
in the centre of Singapore and this has increased the flow
of current and new clients to the office. In 2015 Singapore
accounted for 6% of Group revenue and was the third-largest
revenue country within the Group.
|IG Group Holdings plc Annual Report 2015 STRENGTHEN
GLOBAL
PRESENCE
With the opening of our office in Dubai in June we made further progress in expanding our worldwide presence to markets
where regulation allows and where the potential financial returns to IG are attractive.
Dubai is the financial centre of the Middle East region and an obvious location for our expansion. There are a significant number
of financially sophisticated and high net worth individuals in the region and our investment in producing an Arabic language
website could ultimately prove popular to potential clients across the broader UAE. We recruited a 17-strong team, giving us
full local language customer service capabilities, and, following approval of our licence by the Dubai Financial Services Authority
(DFSA), we opened our office in June. The launch coincided with Ramadan and so we delayed our first major marketing
and media push until the end of the summer. Dubai provided some of our greatest challenges to date, due to the increased
requirement to localise the offering, but the team rose to these challenges and we are delighted to be now serving this
region locally.
Switzerland was another example of a more complex setup process, requiring a flexible but disciplined approach to the
licensing process. We were granted our licence by Swiss Financial Market Supervisory Authority (FINMA) in September 2014
and opened for business in Geneva in October 2014. The application process was extremely rigorous, requiring us to apply for
a full banking licence in order to be able to offer our full product set to clients there. In order to comply with local requirements,
we also had to clearly establish a process by which clients could opt to ring-fence their personal data within Switzerland and
be able to operate in four languages. The granting of this licence is a powerful testament to the quality of our people and
our growing credibility and reputation internationally. It will take time for us to establish ourselves in this market but the early
progress is encouraging and we are excited by its potential in the long term.
Looking forward, we continue to have dialogue with other regulators and potential partners to explore ways to further extend
our geographic reach.
It will not always be viable for us to open offices everywhere where we believe clients would benefit from our products. In light
of this in the last year we have launched slimmed-down websites for European countries without offices. These sites are fully
responsive but aim to remove the barriers to converting clients to IG by catering for additional currencies, and offering faster
identity checking and uploading of application paperwork.
Dubai is the financial centre
of the Middle East region and
an obvious location for our
expansion there. There are a
significant number of financially
sophisticated and high net worth
individuals in the region and
our investment in producing
an Arabic language website
could ultimately prove popular
to potential clients across the
broader UAE.
25
IG Group Holdings plc Annual Report 2015| OUR
STRATEGY
(CONTINUED)
DELIVER
QUALITY
SERVICE
TO CLIENTS
• We have developed and will soon offer ‘My IG’, where a
client will be able to access all products and add-ons in one
place using a single login. In addition, we plan to introduce
a major markets moves’ service that will identify significant
moves in the market which a client trades and alert them
with relevant information in a timely fashion; they will then
be able to link straight through seamlessly to place a trade.
We consistently monitor both our response times and the
quality of our answers to ensure our customer service remains
industry-leading in both aspects. This year:
• Percentage of calls dropped or missed decreased, while
call volumes increased
• Over 90% of emails were answered within 24 hours
• We developed a dedicated social media response strategy,
with our followers increasing by 46% over the year and daily
mentions increasing by approximately 75%
We were also ranked first in an IPSOS mystery-shopper
exercise involving UK spread betting providers, with the
survey also providing very useful insights into the areas
where we have further room for improvement. Meanwhile,
our service was rated as ‘good’ or ‘very good’ by 89% of
spread bettors and 81% of CFD traders who responded to an
independently conducted satisfaction survey.(1)
In order to measure our progress we have also put in place a
series of more stretching targets for next year. These include
answering all dealing calls within ten seconds, answering all
customer service calls within 15 seconds, responding to client
emails within two hours and responding to a livechat request
within 20 seconds.
Our vision is to deliver an industry-leading and world-class
service to our clients, and for the quality of our customer
service to be viewed as a competitive advantage. Through
fast and reliable execution, transparent pricing, investment in
education and market insight resources and full segregation
of client funds, we aim to make our clients feel secure and
confident in trading with us. Backing this up with the best
online support, helpdesk and service levels will position us
very well to attract and retain valuable active clients.
Our 110-strong trading services team supports our clients
across the world, 24 hours a day. They are located in 8 offices
around the world, speak 12 languages and deal with around
80,000 client communications per month.
We continually seek to improve our service to our clients;
for example in the last year:
• We introduced livechat for prospective clients in all our
sites and to date this has already been used for over 83,000
conversations. The service is now offered globally to answer
queries efficiently, to provide reassurance and to speed
up the client application process. Livechat is also very
popular with our existing clients because it provides a more
immediate and personal answer than email – especially
when speed is of the essence – and is more discreet
than using the phone. Our teams are trained to deal with
client queries as quickly and comprehensively as possible.
Looking ahead, we are working to increase the functionality
of our livechat tools to enable clients and the client service
team to share screenshots to help resolve queries; we are
also exploring the potential for video chat.
• We have commissioned a new contact centre management
tool. This tool will manage engagement with clients
across all channels, including social media and livechat,
and facilitate more regular proactive contact with higher
value clients.
• We have designed a peer-to-peer support service, which
will go live in the first half of next year, with the aim being
to build a forum where clients can engage with and support
one another on elements of trading such as charts, mobile
apps, market events and technical analysis. We envisage
this ‘IG Community’ being a closed group for the first six
to nine months to allow us to trial and perfect the offer
and the technology. In time we expect clients to be able to
move seamlessly between trading on the platform and peer
support, and to integrate the service into our mobile apps.
26
(1) Survey provided by Investment Trends Pty Limited (Investment Trends UK
Leveraged Trading Report, July 2014).
|IG Group Holdings plc Annual Report 2015 SUSTAIN
TECHNOLOGY
LEADERSHIP
Our original concentration on delivering technological
excellence assisted us in building a highly profitable business.
Our financial strength now enables us to maintain a high
level of investment in IT development and infrastructure
to keep at the forefront of the industry, with a superior
platform, technology, tools and resources. In the last year
this has resulted in 99.29% of deals being executed in under
0.1 seconds(1) and a core platform uptime of 99.95%.(2)
We appreciate the importance of technology in underpinning
the trading experience of our clients. Consequently, in the
last year we have introduced various enhancements to
improve the client experience, for example: a more flexible
layout which allows panels to be tabbed together; enabling
markets to be dragged and dropped on to charts and into
watchlists; and the ability to rebase markets on charts to
improve comparability.
We have also sought to support more valuable active
traders who want to deal in larger quantities by improving
our execution of large orders and allowing clients to submit
partial orders to us. For clients who are new to our products,
we now allow permanent demo accounts, and we are allowing
clients with live trading accounts to also have an additional
demo account where they can test automated and new
trading strategies.
We have also built our stockbroking offer to integrate
seamlessly with all our platforms and it is currently being
rolled out into selected markets around the globe. We believe
it is the most advanced offering in the market as, distinct from
other providers, it provides a straightforward choice between
a quote-based order or going directly to the exchange. As
well as providing greater price transparency in the UK, it
allows clients to trade in US shares in all sessions, thereby
enabling extended hours trading. We also permit clients to
use their shares as collateral for their leveraged trading.
Our IT team remains focused on innovating to provide our
clients with the latest in cutting-edge technology to help
them trade international markets. For example, on 10 April
2015, the day the Apple Watch was available for pre-order,
we announced that we were one of the first online trading
providers to build an Apple Watch app that automatically
installs itself on to a client’s watch if they have the IG app on
their iPhone. Via a one-tap login, clients are able to buy and
sell stocks, trade CFDs and spread bet across a number of
asset classes; monitor their existing positions; receive push
notifications and view upcoming market events. Available in
12 languages and fully localised, this is our first move into
wearable technology and offers a new, light-touch and more
instantaneous way to trade and monitor the financial markets.
In addition to this activity:
• We launched a web API for our more sophisticated traders,
allowing clients to automate their trading by building their
own software to create trading strategies
• We rolled out the economic calendar to our mobile
apps, with push message alerts on the release of
economic figures
• We also implemented changes to our mobile charts, with
improved data quality, speed and usability
Going forward, the strength of our platform and its proven
resilience across web, mobile and tablet devices is essential
to maintaining client satisfaction, retention and acquisition
and keeps us at the forefront of the industry. We will therefore
continue to invest to maintain our competitive advantage.
(1) 99.29% of trades executed in 0.1 seconds: IG globally (12 months to 31 May 2015).
(2) 99.95% core platform uptime: IG globally (12 months to 31 May 2015).
27
IG Group Holdings plc Annual Report 2015| KEY PERFORMANCE
INDICATORS (KPIs)
We use nine key financial and
operational performance metrics
to measure our performance
and our progress against the
short-term and long-term goals of
the business.
4.9%
£388.4m
£400.2m
£370.4m
2.8%
£2,854
£2,941
£2,937
7.9%
136,100
126,100
13.0%
£169.5m
£193.2m
£194.9m
10.5%
35.99p
41.07p
40.22p
REVENUE(1)
Revenue performance demonstrates business growth in terms of global
reach, range of products offered to clients, active clients and revenue per
client, and is also a driver of the staff bonus pool. Statutory revenue grew
by 4.9% in the year, impacted by the extreme event involving the Swiss
franc. Excluding this, underlying revenue was up by 8.0%, driven by strong
performance in UK and Australia, which resulted in another record year for
the Group.
REVENUE PER CLIENT(1)
Revenue per client is calculated as total revenue divided by the number of
active clients in the period, and is a measure of client activity and quality.
The Swiss franc event resulted in a drop of 2.8% in the headlined revenue
per client, however underlying revenue per client marginally increased
by 0.1%.
ACTIVE CLIENTS
Active clients are those clients who have opened at least one trade in the
period. Active clients increased by 7.9% in the year, as a result of strategic
initiatives, the launch of our stockbroking offering and strong customer
acquisition performance by Nadex.
PROFIT BEFORE TAX (PBT)(1)
Statutory PBT was down by 13.0% as a result of the Swiss franc event, with
underlying PBT marginally decreasing by 0.9%. A detailed commentary on
our PBT performance is provided in the Operating and Financial Reviews.
DILUTED EARNINGS PER SHARE (DEPS)(1)
DEPS includes all components of the Group’s performance based on
profitability and capital structure. DEPS is a key measure in the award or
vesting of our Executive Director and senior staff share plans is partially with
reference to DEPS. Statutory DEPS decreased by 10.5%, while underlying
DEPS increased by 2.1% over the prior year, reflecting growth in underlying
after-tax profitability.
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
28
|IG Group Holdings plc Annual Report 2015 OWN FUNDS GENERATED FROM OPERATIONS(1)
High profit-to-cash conversion gives us strong liquidity and supports our
robust risk-management strategy and our dividend payment. Maintaining
a high level of cash generation, after the required investment, is key to
delivering strong shareholder returns. A detailed commentary is provided in
the Operating and Financial Reviews.
DIVIDEND PER SHARE
Shareholder returns are central to our strategy and reflect the strength of our
business, our capital position and our expectations of future performance.
Therefore and despite the unexpected Swiss franc event and its impact in
statutory results, we have maintained our total dividend at the same level
as in the prior year. This reflects a dividend payout policy of 78%, with our
intention always remaining to grow the dividend in absolute terms in years
when earnings are ahead.
PLATFORM UPTIME
The availability of the dealing platform is key to our clients’ confidence in
trading with IG. Reliability has remained strong in the current year, however
we narrowly missed our internal availability targets following an outage
in April. This measure is one of a suite of non-financial indicators used to
determine share-plan and bonus awards – an assessment is provided in the
Directors’ Remuneration Report.
FY15
FY14
FY15
FY14
FY15
FY14
14.8%
£136.8m
£159.2m
£160.6m
0.0%
28.15p
28.15p
0.02%
99.95%
99.97%
NET PROMOTER SCORE (NPS)(2)
To better understand how well we deliver quality service to our clients, we use NPS, as well as other measures of satisfaction, to
assess the extent of client recommendations. Over the last year we have seen improvements in Germany and France and, while
our absolute score has fallen across other markets, we have maintained our ranking and compare very favourably against the
industry average. This measure is one of a suite of non-financial indicators used to determine share-plan and bonus awards –
an assessment is provided in the Directors’ Remuneration Report.
UK SPREADBETTING
UK CFDs
SINGAPORE
IG’s
most
recent
NPS
Industry
average
-5%
17%
IG’s
most
recent
NPS
Industry
average
-7%
-9%
IG’s
most
recent
NPS
-13%
Industry
average
-19%
AUSTRALIA
GERMANY
FRANCE
IG’s
most
recent
NPS
Industry
average
-3%
16%
IG’s
most
recent
NPS
Industry
average
27%
4%
IG’s
most
recent
NPS
Industry
average
31%
1%
(1) For FY15 two metrics are disclosed. The unadjusted statutory and also the higher underlying performance that is stated excluding the losses associated with the
Swiss franc event.
(2) All NPS data presented in this report is provided by Investment Trends Pty Limited (please refer to the Investor Resources section on page 190 for further details).
NPS is calculated by asking respondents: ‘How likely are you to recommend this company to a friend or colleague?’ Respondents reply on a 0-10 scale, with the final
NPS calculated as the percentage of promoters (those answering 9 or 10) minus the percentage of detractors (those answering 0-6).
The shaded area indicates the underlying performance.
29
IG Group Holdings plc Annual Report 2015|
OUR PEOPLE
AND COMMUNITIES
After 40 years in business we
understand that sustainable
long-term returns stem from good
conduct. We seek to act with
integrity towards our staff, our
clients, our regulators and the
markets, maintaining a reputation
for quality and transparency.
As a global employer with people in 20 countries, our
commitment to our people is both an important part of
delivering our strategy and a cornerstone of our success.
We are committed to providing a rewarding career for each
one of our almost 1,400 employees. We recognise that having
a long-term strategy which develops our people is crucial to
our success, as well as being a factor that contributes strongly
to our reputation within the financial services industry.
SUSTAINABLE BUSINESS
Our conduct as a business is driven by our values of
hallmark quality, passion for progress, transparency in
dealing and meritocratic opportunity. These values have
been fundamental in the historic growth and success of IG.
However, with growth comes the challenge of maintaining
that culture and with it appropriate conduct. For that reason,
we decided to define the values set out above to support
us in realising the Group’s overall vision and strategy.
This has enabled us to embed sound corporate conduct
in the culture of the business, so it is not simply a risk or
regulatory requirement.
However, conduct undoubtedly represents a real risk to
all firms within the financial industry. Consequently we
have actively engaged in the agenda and developed a risk
management strategy, entrenching various quantitative
and qualitative measures to identify, measure, manage
and monitor Conduct Risk. Demonstrable elements to
this strategy include among others the production and
appropriate escalation of monthly conduct risk Key Risk
Indicators (KRIs) and dashboards, a rolling plan of thematic
conduct risk reviews, and formalised conduct consideration
prior to project signoff.
In this way we ensure effective communication of the
tone from the top throughout the organisation. We apply
high standards across our businesses, and specifically in
our corporate governance – as set out in the Corporate
Governance Report and the Directors’ Report in compliance
with the UK Corporate Governance Code. The following areas
demonstrate how we do this.
COMMITMENT TO OUR CUSTOMERS
We aim to put our customers at the heart of everything we
do, and we strive to ensure that we understand our clients’
needs and consistently deliver fair outcomes and positive
experiences. We have a very low tolerance for poor consumer
outcomes, and we are committed to investing in process,
training and culture to prevent unsatisfactory customer
experiences and to address root causes where any practice
falls short. We maintain this policy even when it may have a
negative impact on our own revenue or costs.
We ensure that commitment to our
customers is embedded in our culture
and strategic initiatives, and we
regularly seek and review feedback
from our clients. This enables us to
develop our products and services
specifically to meet the needs of active
traders globally.
Central to our commitment to our customers is the quality of
our order execution. We offer near-instantaneous execution,
with around 99.3% of client orders accepted automatically. We
never requote prices and, outside our set margin of tolerance,
our innovative price-improvement technology enables
customers to receive a better price if one becomes available
as a trade is executed.
CLIENT SUPPORT AND EDUCATION
We offer extensive educational resources for clients, including
an introduction programme for new clients that promotes
responsible trading, and a wide range of client seminars and
webinars. We continually look to keep this content engaging
and targeted towards our clients’ needs.
For example, in recognition of the feedback received from
clients and following the launch of our in-house TV studio in
2014, we have continued to increase the amount of original
video content we supply. This ensures our clients have instant
30
|IG Group Holdings plc Annual Report 2015 access to educational resources covering everything from
fundamental trading concepts to risk mitigation across all
their devices and in the medium they want.
We also provide an extensive range of trading tools, such as
regular free news, commentary and analysis on IG TV and via
the Market Insight section of our website. We offer charting
packages and various technical analysis tools that enable our
clients to screen markets for trading opportunities and to
receive alerts when trading signals appear.
CLIENT APPROPRIATENESS
Our products are not appropriate for everyone, and we
recognise that our conduct is particularly vital in relation to
marketing and client onboarding, in order to prevent poor
consumer outcomes arising from them. Accordingly, we
have a number of procedures that ensure our advertising
reaches the right audience, and that our clients appreciate
the risks involved with our products and understand how our
services work.
We follow strict guidelines to ensure
that we only promote our products to
a target audience within appropriate
sectors and demographic groups. We
also conduct rigorous checks to ensure
that all promotions are clear, fair and
not misleading, and that risks are not
downplayed compared to the benefits
of our products.
Before we allow a prospective client to open an account,
we undertake an assessment to determine whether our
products are appropriate for them. At account opening we
actively question and must be satisfied that clients have
the necessary knowledge or experience to understand the
risks involved. To further assess whether our products could
produce poor outcomes, we ask clients for details of their
income and savings, both at account opening and in rolling
reviews. Based on the results of these assessments, we may
choose to provide an applicant with a clear warning about the
appropriateness of the product. We may also decline to open
an account for them, or indeed close their account if it has
already been opened.
LIMITING CLIENT LOSSES
We have a number of services designed to help clients limit
their losses.
Our clients can choose to attach guaranteed stops to their
positions, so that they know their maximum possible loss at
the outset of the trade.
Our close-out monitor (COM), which automatically liquidates
clients’ positions when their margin has been significantly
eroded, also aims to restrict our clients’ potential losses. At
31 May 2015, 99.4% of all client accounts were subject to the
automatic COM procedure. Further details are set out in note
36 to the Financial Statements.
PROTECTING OUR CLIENTS’ DATA AND FUNDS
We prioritise the security of our clients’ information and
have achieved the ISO 27001:2005 certificate for information
security management.
We fully segregate funds for retail individuals, in compliance
with the regulations, and we hold segregated client money
entirely separately from our own money across a diverse
range of banks. This ensures that, in the event of our default,
client funds would be returned to the clients rather than being
treated as a recoverable asset by our general creditors.
We continue to engage PricewaterhouseCoopers LLP to
conduct ongoing independent reviews of our controls and
procedures for client money calculation and segregation
(ISAE 3000). In committing to this review process, we have
taken an additional step, over and above standard audit
checks and our regulators’ reporting requirements. This
reflects our dedication to keeping our clients’ funds secure
and delivering beneficial outcomes for customers.
31
IG Group Holdings plc Annual Report 2015| EMPLOYEE ENGAGEMENT
We believe that understanding our employees’ motivations,
concerns and feedback in general is crucial in allowing us
to decide what employee engagement initiatives we take
forward each year. It is for this reason that we have again
partnered with IBM to deliver our employee engagement
survey and were delighted to have an 85% response rate
this year.
In terms of highlights, we are pleased to report that over
90% of our employees feel that there is a strong sense of
teamwork and cooperation within IG. Similar numbers feel
a strong sense of belonging and involvement and over 90%
feel that there is a clear future vision and trust the senior
leadership of IG.
This year, 98% of employees who completed our engagement
survey agreed that IG has an outstanding future and just
over 90% have trust in senior leadership to deliver against
the vision. Both these questions scored above external
global benchmarks.
In terms of work in progress, we still have work to do in clearly
setting out career and reward structures and are working with
our management team to help them explain and develop
performance management processes.
In summary, this data continues to provide invaluable insight
to what our employees feel about working for us around the
globe. Working with a world leader like IBM means that we
continue to be able to benchmark our results against global
high-performing organisations and the finance sector.
OUR
PEOPLE AND
COMMUNITIES
(CONTINUED)
OUR PEOPLE
The Group provides a dynamic and friendly working
environment for almost 1,400 employees, located around
the world. We believe that our people should take pride in
what we achieve together, should have a powerful sense
of belonging to IG Group, and should know that we fully
recognise the crucial role that the quality of our employees
plays in our success.
In order to attract and retain the right people, we offer a
competitive reward package to recognise past performance
and encourage our key talent to be part of our future. We
believe that working together as a team is key to our global
success and so to complement our market-related salary
structure, we also include over 90% of our employees in
a group bonus scheme which is completely linked to the
financial success and ongoing stability of IG. This bonus is
then distributed on an individual performance related basis
(identified through an annual performance-appraisal system).
We also reward our high potential employees through
long-term incentive plans. The remainder of our employees
have specific sales-related bonus schemes.
Linked to our belief in our employees investing in IG, we are
happy to offer employees tax-advantaged share purchase
schemes in the UK, Australia and the US. An average of 33%
of eligible employees took part in our share plans in 2014.
To complement these direct financial rewards, we also
provide a full range of appropriate benefits, including
pension contributions. In the UK, we contribute up to 10%
of an employee’s basic salary to their pension, provided
the employee contributes 5% of their salary. If they choose
to contribute less than 5%, we will contribute double the
individual rate. We are ‘auto-enrolment’ compliant, having
met our planned staging date in November 2013, as part
of the government’s workplace pensions reform, and
continue to have over 85% participation in our UK Group
pension schemes.
32
|IG Group Holdings plc Annual Report 2015 DIVERSITY AND EQUALITY
We are committed to maintaining a diverse workforce at all
levels of the Group. We believe that diversity is a broad issue,
encompassing variations in an individual’s experience, skills,
age and background, as well as more traditional diversity
factors such as ethnic origin and gender. Our total employee
gender breakdown is shown to the right.
Commercially and for every other best practice reason, we
are an equal opportunities employer. We strongly believe
that to succeed as a global business, we need to make the
most of the potential workforce in every country that we work
within. As such, we have extensive human resource policies
in place to ensure that we attract the right people and that
once working with us, our people can expect to develop in an
environment free from discrimination and harassment.
For this reason, we continuously reinforce the need to treat
all employees fairly. We are committed to creating a work
environment free from bullying, where everyone is treated
with dignity and respect, irrespective of position or grade
within the organisation.
We give full consideration to applications for employment
from disabled persons, where the candidate’s aptitudes and
abilities are consistent with meeting the requirements of the
job. Where existing employees become disabled, whether
on a temporary or permanent basis, it is our policy to provide
continuing employment wherever practicable in the same or
an alternative position, and to provide appropriate training
and/or graduated back-to-work programmes, in conjunction
with the occupational health professionals to achieve this aim.
LEADERSHIP, MANAGEMENT AND DEVELOPMENT
With our strategic management team having been with us for
over nine years on average and therefore having developed
their careers within the Group, we recognise the strength of
having a stable and long-serving workforce. This is especially
true within the decision-making core, and as such we
continue to invest in developing our employees worldwide
while improving the quality of learning opportunities.
We have recently implemented an online learning and
policy-management system, which is accessible by all of
our employees wherever they are located in the world. We
are making every effort to enhance the system’s content
as well using this system as a means to record our policy
based training.
Our new recording studio is enhancing our internal
communications and allowing our senior team to reach out to
all of our offices with our popular ’Views from the Bridge‘ – a
series of videos featuring members of the senior management
team which aim to ensure that our key leadership messages
reach all of our people around the globe.
In terms of gender, our workforce is made up as follows:
BOARD
MALE 7
FEMALE 1
PERCENTAGE
FEMALE: 13%
STRATEGIC
MANAGEMENT TEAM(1)
MALE 10
FEMALE 3
PERCENTAGE
FEMALE: 23%
SENIOR
MANAGEMENT TEAM(2)
MALE 41
FEMALE 9
PERCENTAGE
FEMALE: 18%
TEAM MEMBERS
MALE 919
FEMALE 357
PERCENTAGE
FEMALE: 28%
TOTAL
MALE 977
FEMALE 370
PERCENTAGE
FEMALE: 28%
(1) The strategic management team is defined as the employees responsible for
planning, directing and controlling the activities of the Group.
(2) The senior management team is defined as the strategic management team
plus the Directors of the subsidiary companies included in the consolidated
Financial Statements.
33
IG Group Holdings plc Annual Report 2015| OUR
PEOPLE AND
COMMUNITIES
(CONTINUED)
We support our staff in their continuing personal and
professional training and development, and encourage
attendance at external and industry-recognised training
courses, sponsoring our people to undertake formal
education programmes and achieve professional
qualifications. We also offer internal secondments, both
in terms of pure training of newer employees and more
strategic, longer-term appointments, which allow individuals
to work in our smaller offices and provides an opportunity for
growth and expanding skill-sets.
We have made further progress this year (as measured by our
annual employee engagement survey) in terms of the senior
team articulating our vision and strategy for the future. Our
next goal is to allow our future generation of leaders to carry
on with this important leadership skill, as well as ensuring that
we are building a strong group of managers equipped with
the competences and behaviours to take IG forward.
Last year we agreed a new set of leadership behaviours for
our managers, and during the 2015/2016 appraisal cycle,
we will actively measure performance against these metrics.
There are four core principles: communicating with others,
leading by example, developing people and being passionate
about results.
We continue to support our managers in their ongoing
training with our Inspirational Development programme
which focuses on the outcomes of 360° feedback and the
behaviours associated with generating high performance.
All of our strategic and senior management team have
attended at least one structured programme over the past
18 months and our more junior managers attend a Transition
to Leadership programme, which specifically targets the
process of developing from a technical specialist to a leader
of people.
TALENT MANAGEMENT
Retention of talent can be challenging in companies with
relatively flat organisational structures, and we recognise
the importance of encouraging people to grow and stretch
themselves in roles that have limited scope for vertical
movement. We also acknowledge that it is important to
employees to understand where they are in their career and
salary progression and it is with this in mind, and in answer
to feedback from our employee engagement survey, that we
launched our salary grading communication this summer. It is
one of our core values to be transparent in dealing with our
employees in all areas, but particularly with regard to career
and salary aspirations.
We have had career pathways and associated competency
frameworks in place for key areas of the business for a
number of years now and we continue to build on these.
The frameworks describe what is needed for exceptional
performance in each role and provide space for individuals to
strengthen their performance in readiness for future horizontal
or vertical moves. We continue to expand our mentoring
programmes with the aim of not only motivating and
developing the careers of employees with high potential, but
also providing advancement opportunities for our mentors.
To attract new, high-calibre staff, we offer three graduate
schemes, in IT, operations and finance. Graduates joining the
IT and operations schemes follow a 12-month training plan
before we assign them to a permanent position. The finance
scheme is longer term, aiming to train graduates as qualified
accountants within the team. Graduates joining IG benefit
from the support of a business mentor, access to cross-
business placements, structured training plans and reviews,
which fast-track their development to first-role competence in
their chosen area.
34
|IG Group Holdings plc Annual Report 2015 HEALTH AND SAFETY
We believe that our employees are one of our most valuable
assets, and we are committed to providing each employee
with a safe and healthy working environment.
Health and safety is an integral part of our business, and by
providing key members of staff with the relevant external
training, and all other staff with appropriate in-house training,
we ensure that we comply with all statutory health and
safety requirements.
WELLBEING
We are fully committed to our employees’ health and
wellbeing, and the benefits we provide to all employees
include private medical cover, permanent health insurance and
life assurance.
To help our people enjoy healthy lifestyles, we reimburse
50% of the costs of employees’ annual gym subscriptions,
up to a specified amount, on a global basis. We also support
cycling, and we offer our staff savings on bicycles under
the government-backed cycle-to-work initiative, as well as
providing free-of-charge bicycle parking at our London office.
We support our employees’ wellbeing by providing a
confidential employee assistance programme that offers a
24/7 telephone counselling service to all our Head Office
employees and their immediate families.
Our people can use this service for impartial advice on all
matters, from housing to personal finance.
EMPLOYEE INVOLVEMENT
We take pride in being an open, non-hierarchical
organisation, with direct and open access among all teams
and at all levels. The Chief Executive Officer addresses all
employees every six months, at the half-year and full-year
points, and presents the Group’s financial results, business
updates and plans for the future. He and other members
of senior management maintain a schedule of overseas
office visits and take these opportunities to address each
local employee audience, while we also make full use of our
in-house TV studio to record interviews with key members
of the business, including the CEO, to ensure a consistent
message is sent out to all our offices.
TOP EMPLOYER
Our positive workplace culture continues to be recognised as
IG celebrates being named as one of Britain’s Top Employers
for the eighth year running in 2015.
The Top Employer certification is awarded only to
organisations that meet the highest standards in human
resource management, and we are very proud to be a long-
standing recipient. The award, by the Corporate Research
Foundation, is based on a strong performance in each
of the audited categories: pay and benefits, training and
development, corporate culture and career development.
SOCIETY AND EMPLOYEE SPONSORSHIP
We are keen to encourage our people to engage in activities
that both help their own development and support local
communities, so we are proud to support a wide variety
of different charities that are close to our employees’
hearts. We match any funds our employees have raised for
sponsored events.
To make the most of charitable donations, we continue
to work with the Charities Aid Foundation, allowing our
employees to operate a charity fund and make contributions
to selected charities from gross earnings, directly from their
monthly pay.
Not only do we support charities with gifts of money, but also
by providing time and resources. Our absence-management
policy offers the opportunity for our people to take up
voluntary work, for which we grant additional leave on a
like-for-like basis up to a maximum of five matched days per
annual leave year.
35
IG Group Holdings plc Annual Report 2015| The global nature of our business, with employees located
in 20 countries, results in the need for our people to travel
around the globe to provide local support for staff and clients.
We have taken further steps to minimise these journeys by
installing state-of-the-art video-conferencing equipment in
two more of our global locations, taking the tally of offices
offering this facility up to nine.
We provide emissions data in respect of the financial year
ending 31 May 2015 in the Mandatory Greenhouse Gas
Emissions Report and Greenhouse Gas Emissions Intensity
Ratio tables to the right. In the tables, Scope 1 emissions are
those incurred in air conditioning our offices and running
back-up generators for our servers, while Scope 2 emissions
are purchased energy such as electricity. For the most
significant sources of energy consumption discussed above,
we purchase electricity via our landlords.
BASIS OF PREPARATION
Greenhouse gas emissions are calculated on the basis of
financial control, with the emissions data included for the
companies consolidated in the Financial Statements, noting
the Statement of Exclusions given below:
• We have based our methodology on the principles of the
Greenhouse Gas Protocol.
• We have reported on all the measured emissions sources
required under The Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013, except
where stated.
• This includes emissions under Scope 1 and 2, except where
stated, but excludes any emissions from Scope 3.
Conversion factors for electricity, gas and other emissions are
those published by the Department for Environment, Food
and Rural Affairs for 2014-2015.
STATEMENT OF EXCLUSIONS
Global diesel use (for vehicles) has been excluded from
the report on the basis that it is not material to our
carbon footprint.
The scope of reporting for our fugitive emissions has been
restricted to the United Kingdom. Other regions have been
excluded due to lack of data or immateriality.
OUR
PEOPLE AND
COMMUNITIES
(CONTINUED)
OUR ENVIRONMENTAL IMPACT
As a business which conducts nearly all of its client trades
online and undertakes no industrial activities, we do not see
ourselves as a significant emitter of environmentally harmful
substances. However, we understand that we need to take
any necessary actions to ensure that we mitigate the impact
of our operations on the surrounding environment.
Running and maintaining our IT
infrastructure comprises the main
source of our environmental impact.
This supports our award-winning
platform and ensures we are able to
consistently maintain our high level of
platform uptime.
Powering and cooling our datacentres results in the majority
of our power usage – as well as our energy costs. As such,
we update our hardware and software as appropriate to save
money and energy.
This year we continued replacing a number of our rack servers
with new blade technology. This has allowed us to integrate
power and cooling technologies across the server estate
and provides a considerable saving in energy and costs.
We recycled the legacy hardware in accordance with our
internal recycling policy, ensuring that any data was securely
destroyed before recycling the remaining components.
Our global offices follow our datacentres as the second
largest consumer of energy. A number of energy-saving
processes is in place and we are committed to a far-reaching
recycling policy. This encompasses not only a proportion of
our daily office waste, but also extends to our IT equipment
when we replace hardware, while trying to ensure that we use
any desktop equipment for its maximum useful life. Our head
office building, where more than half of our employees are
based, is also ISO 14001 certified, and we complement this
environmental-management system with our own sensor-
lighting to reduce our energy use. In addition, we have
used PIR technology in both of our newly opened offices in
Dubai and Geneva and we invested in the most modern and
energy-efficient personal computers and peripherals, in line
with our commitments.
36
|IG Group Holdings plc Annual Report 2015 EMISSION CATEGORY
MANDATORY GREENHOUSE GAS
EMISSIONS REPORT
Operation of facility
Purchased energy
Combustion
Electricity
F-gas
Diesel
Gas
Vehicles*
Emission type
Scope 1: operation of facilities
Scope 1: combustion
Total Scope 1 emissions
Scope 2: purchased energy
Total Scope 2 emissions
Total emissions
Tonnes of carbon dioxide
equivalent (tCO2e)
161.77
34.93
196.7
4,007.64
4,007.64
4,204.34
GREENHOUSE GAS EMISSIONS INTENSITY RATIO
Total footprint
(Scope 1 and Scope 2) – tCO2e
Turnover (£m)
Intensity ratio (tCO2e/£m)
4,204.34
388.4
10.82
EMISSION SOURCE
* Global diesel use (for vehicles) has been excluded from the report on the
basis that it is not material to our carbon footprint.
37
IG Group Holdings plc Annual Report 2015| CHIEF FINANCIAL
OFFICER’S REVIEW
‘2015 once again highlighted the
strength of IG’s financial position
and business model that allows
it to invest in future growth while
maintaining our ordinary dividend at
approximately 70% of earnings.’
Christopher Hill
Chief Financial Officer
OPERATING AND FINANCIAL REVIEW
The Swiss franc de-pegging event in January, which has
been discussed at length in this document, means that we
address here both underlying numbers, excluding the impact
of this event, and the statutory financial results. We consider
the underlying results to give a clearer indication of the
performance of the business through the period.
IG delivered record underlying(1) revenue(2) in the period of
£400.2 million, 8.0% up on the prior year (2014: £370.4 million).
Underlying profit before tax was £193.2 million, 0.9% behind
the prior year (2014: £194.9 million) and underlying profit after
tax was up by 2.4% at £150.7 million (2014: £147.2 million),
with the prior year having been restated slightly upwards for
an industry-wide change in the accounting treatment of the
FSCS levy. Underlying diluted earnings per share was 41.07
pence, 2.1% ahead of the prior year (2014: 40.22 pence).
On a statutory basis, Group revenue was £388.4 million, 4.9%
ahead of the prior year, with profit before tax of £169.5 million
and profit after tax of £131.9 million. The Group effective tax
rate reduced to 22.2% from 24.5% in the prior year, as the fall
in the UK corporation tax rate continued to feed through.
Statutory diluted earnings per share was 35.99 pence, down
10.5% from the prior year (2014: 40.22 pence).
Overall, active client numbers for the year were ahead of
the prior period by 7.9% at just over 136,000, while average
revenue per client was flat at £2,937. Underlying revenue
in the second half of the year was slightly ahead of the first
half, with the first half marked by the difference between the
two quarters; the first quarter was very subdued, while the
second quarter was a record for the Group and contained
the record month of October, when increased newsflow
and a significant sell-off in financial markets produced more
trading opportunities for clients. Revenue from forex trading
increased through the year, returning to more normal levels,
with evidence of more volatility in this asset type after a very
quiet spell in 2014.
IG remains highly cash-generative and we have sought to
reflect this in the direct cash returns to shareholders. Last
year the Board raised the Ordinary dividend payout ratio to
approximately 70%. Although statutory earnings this year are
behind due to the impact of the Swiss franc incident, both the
business and the market opportunity remain strong. In line
with our progressive dividend policy, the Board made clear at
the time of the first half results in January its intention to hold
the full-year dividend flat on 2014 at 28.15 pence, and so the
Board is recommending a final dividend of 19.70 pence.
38
| All following references to revenue are with respect to the underlying(1) revenue(2).
Underlying(1) revenue(2)
FY15
Revenue
£m
211.9
80.9
59.2
48.2
400.2
FY15
Revenue
£m
206.0
76.9
58.1
47.4
388.4
Clients
000s
60.4
29.7
18.7
27.3
136.1
Clients
000s
60.4
29.7
18.7
27.3
136.1
FY14
Revenue
£m
192.7
82.1
52.2
43.4
370.4
FY14
Revenue
£m
192.7
82.1
52.2
43.4
370.4
Clients
000s
% change in
revenue per client
from FY14(3)
59.3
26.0
18.0
22.8
126.1
8.0%
(14%)
9.3%
(7.3%)
0.1%
Clients
000s
% change in
revenue per client
from FY14(3)
59.3
26.0
18.0
22.8
126.1
5.0%
(18%)
7.2%
(8.8%)
(2.8)%
UK
Europe
Australia
Rest of World
Total
Statutory revenue
UK
Europe
Australia
Rest of World
Total
(1) The term ‘underlying’ reflects the results before the impact of the Swiss franc event (refer to note 2 of the financial statements).
(2) All references to ‘revenue’ in this statement are made with regards to net trading revenue. Net trading revenue is trading revenue excluding interest on segregated
client funds and is presented net of introducing partner commissions.
(3) The financial tables above contain numbers which have been rounded, while all year-on-year percentages are calculated off underlying unrounded numbers.
purely on the number of primary accounts and makes no
allowance for the value of individual client value, and does
not reflect IG’s focus on active retail traders, who generate a
disproportionate percentage of the total industry revenue.
The launch of the stockbroking offering in the UK and Ireland
took place in September 2014. The proposition was then
strengthened in November with the launch of the collateral
service, which allows clients to use their equity portfolio as
margin for their leveraged trading. By the end of May there
were over 4,000 funded stockbroking accounts, 65% of which
are new to IG, and of which around 3,300 had traded. There
is also early evidence that a proportion of clients who began
as stockbroking clients are going on to use the leveraged
trading products.
UNITED KINGDOM
The UK segment comprised the offices in London and
Dublin. Revenue in the UK was 10% ahead of the prior year
at £211.9 million (2014: £192.7 million). First half revenue
(£106.8 million) was slightly ahead of the second half
(£105.1 million), with the UK benefiting from a very strong
performance in the second quarter, as clients in this region
responded more immediately to increases in market volatility.
Active client numbers were 1.9% ahead of the prior year at
just over 60,000. Active client numbers in the second half
of the year were around 2% ahead of the first half. Revenue
per client for the year was 8.0% ahead of the prior year, at
around £3,500, with particular strength in the second quarter,
driven by the very active October. The UK segment accounted
for 53% of Group revenue in the period, against 52% in the
prior year.
An annual study of the UK’s retail leveraged-trading industry,
released towards the end of 2014, showed that IG’s market
share of spread bettors had fallen slightly from 41% to 40%
and our share of CFD traders had fallen from 34% to 26%;
IG remained the clear market leader in both categories. The
study also showed a decline in the overall size of the market
for these trading instruments, from 93,000 to 89,000 retail
traders. Drawing precise quantitative conclusions from these
results is increasingly difficult. The measurement is based
39
IG Group Holdings plc Annual Report 2015| CHIEF
FINANCIAL
OFFICER’S
REVIEW
(CONTINUED)
AUSTRALIA
The Australia segment comprised the Melbourne office and
also includes revenue from New Zealand and other countries
in the Asia Pacific region. In Australia, revenue for the year
was up by 13.4% to £59.2 million (2014: £52.2 million). As
with the broader Group, Australia revenue was stronger in
the second half of the year, delivering £30.5 million against
£28.7 million for the first half. The first half was held back by
the particularly quiet first quarter. As with the UK, the second
quarter was a record for this region and was followed by a
more consistent second half. Here we experienced good
growth in active client numbers, up 3.9% against the prior
year. Active client numbers in the second half of the year
were 8% up on those in the first half. In line with the UK, as
one of the more mature regions, average revenue per client
was ahead of the prior year by 9.3%. The Australia segment
accounted for 14.8% of Group revenue in the year, against
14.1% in the prior year.
During the year, an annual market research study concluded
that IG’s market share of the retail CFD industry had fallen by
five percentage points to 33%, although it remains the clear
industry leader. As for the UK, this simple measure is based
on number of primary accounts. Internal analysis suggests
that any loss of share was concentrated towards the lower end
of client activity and value. Encouragingly, in the same time
period, the market size increased from 41,000 participants
to 42,000.
EUROPE
The Europe segment comprised the German, French,
Italian, Spanish, Dutch, Swedish, Norwegian, Luxembourg
and Swiss offices. Overall, revenue performance in Europe
in the period was disappointing. Revenue fell by 1.5% to
£80.9 million (2014: £82.1 million). Revenue was equally split
between the two halves of the year, although in line with the
UK and Australia, the second quarter was a record period
for Europe. The growth in client numbers accelerated, up by
14.3% on the prior year, with growth across all countries in the
region. However, this was more than offset by a fall in average
revenue per client, which fell to £2,720 (2014: £3,156), due
to a number of factors including currency conversion, lower
overnight funding revenue, clients trading in smaller size and
increased hedging costs in relation to German 30 contracts.
The European segment accounted for 20.2% of Group
revenue in the year, against 22.2% in the prior year.
40
During the second half of the year, annual market research
studies were published for Germany and France. They
concluded that IG’s market share of the retail CFD industry
in Germany had fallen by three percentage points to 10%,
and in France it had risen by six percentage points to 28%.
Drawing precise quantitative conclusions from these results
is increasingly difficult, given the measurement is based
purely on the number of primary accounts and makes no
allowance for the value of individual client value. In the
same time period, the market size in France stayed flat at
19,500 participants and increased in Germany from 45,000
participants to 47,000.
REST OF WORLD
The Rest of World segment comprised the offices in Singapore,
Japan and South Africa and our retail exchange, Nadex, in
the US. Revenue for the period in the Rest of World region
was ahead of the prior year by 11.1%, at £48.2 million (2014:
£43.4 million). All countries in the Rest of World segment
experienced growth, with particularly strong results in
South Africa (up 27% to £6.5 million) and the US (up 68% to
£5.3 million), but also good contributions to the growth from
Singapore (up 3.5% to £23.8 million) and Japan (up 3.3% to
£12.6 million). Overall revenue per client was down due to the
mix effect of the particularly strong growth in the US, where
average revenue per client is structurally lower due to the
nature of the product set. As a result of the US acceleration
through the year, revenue was weighted towards the second
half, which delivered 55% of the revenue. The recovery in
trading in forex over the prior year was also significant, as
Singapore and Japan are particularly heavily weighted towards
this asset class. The Rest of World segment accounted for
12.0% of Group revenue in the period, against 11.7% in the
prior year.
As reported in the half-year results, an annual market research
study concluded that IG’s market share of the retail CFD
industry in Singapore had fallen by one percentage point to
17%, with the overall market size remaining stable at 17,000,
following two years of shrinkage.
FACTORS IMPACTING REVENUE
The tight distribution of our daily revenue during the year is
illustrated in the chart to the right. The single loss-making day
highlighted by the chart is that for 15 January when the Swiss
National Bank ceased intervention in the franc exchange rate.
The absence of proprietary trading by IG and the hedged nature
of the business model – i.e. hedging with third parties to cover
the residual risk above preset limits – tends to deliver a more
stable revenue stream, irrespective of the direction of underlying
market movements. During the year we have undertaken an
extremely detailed analysis for certain of our risk limits – more
detail is provided in the Chief Executive’s Statement.
|IG Group Holdings plc Annual Report 2015 DISTRIBUTION OF DAILY REVENUE
Count of days
FINANCIAL REVIEW
Summary Group Income Statement
Year ended
31 May 2015
Underlying
£m
Year ended
31 May 2015
Statutory
£m
Restated*
Year ended
31 May 2014
£m
400.2
388.4
370.4
4.5
4.5
5.5
(5.9)
0.6
(6.3)
0.6
(3.8)
2.1
399.4
387.2
374.2
(206.1)
(217.6)
(178.8)
Net trading
revenue(1)
Net interest on
segregated client
funds
Betting duty
and financial
transaction taxes
Other operating
income
Net operating
income
Administrative
expenses
Operating profit
193.3
169.6
195.4
Net finance
expense
Profit before tax
Tax expense
Profit for the year
Diluted earnings
per share
Total dividend
per share
(0.1)
193.2
(42.5)
150.7
(0.1)
169.5
(37.6)
131.9
(0.5)
194.9
(47.7)
147.2
41.07p
35.99p
40.22p
28.15p
28.15p
28.15p
(1) Net trading revenue is trading revenue excluding interest on segregated
client funds and is net of introductory partner commissions.
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
30
27
24
21
18
15
12
9
6
3
0
-11.5
1.0
2.0
3.0
4.0
Revenue (£m)
ASSET MIX
IG has consistently benefited from the broad range of asset
classes it enables clients to trade, resulting in a more stable
revenue stream in different market conditions. This year we
derived 48% of our underlying revenue from clients trading
indices (2014: 47%) and had another strong year in shares
trading, delivering 17% of Group revenue (2014: 20%). Client
forex trading delivered 19% of Group revenue, down from
20% in the prior year, but marginally up at an absolute level.
The remaining 16% of revenue came from clients trading
binaries and commodities (2014: 13%).
Indices
Commodities
Forex Binaries
Shares
Revenue (£m)
60
50
40
30
20
10
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
FY14
FY15
41
IG Group Holdings plc Annual Report 2015| CHIEF
FINANCIAL
OFFICER’S
REVIEW
(CONTINUED)
NET OPERATING INCOME
Statutory net trading revenue, although negatively impacted
by the Swiss franc event, increased by 4.9% to £388.4 million
(2014: £370.4 million).
Underlying net trading revenue is 8.0% ahead of the prior year
at £400.2 million (2014: £370.4 million).
Net interest income on segregated client funds decreased by
£1.0 million to £4.5 million (2014: £5.5 million). This was driven
by depreciation in the Australian base interest rate and low
margins received on sterling and euro money deposits from
the banks throughout the year following their response to
Basel III changes in 2014.
Betting duties paid by the Group, in relation to losses for
spread betting clients, increased by £2.4 million to £5.8 million
(2014: £3.4 million) including a £0.4 million negative impact
due to the Swiss franc event. The Italian Financial Transaction
Tax incurred by the Group marginally increased to £0.5 million
from £0.4 million last year.
Other operating income for the year ending 31 May 2014
includes income of £1.4 million in relation to a revenue share
arrangement with Spreadex Limited, following the sale of
the Group's Sport business client list in 2012. The agreement
ended on the 23 June 2014 and therefore the income in
the current financial year is just under £0.1 million. Other
operating income also includes inactivity fees, introduced in
February 2013 and are applied to any account that has not
traded for more than two years and has a positive account
balance. As expected, the charge reduced to £0.5 million
(2014: £0.7 million).
ADMINISTRATIVE EXPENSES
Statutory administrative expenses increased by 21.7% to
£217.6 million (2014: £178.8 million), following the impact
of the Swiss franc event and the additional operating costs
associated with the Group’s strategic development.
Underlying administrative expenses increased by 15.3%
to £206.1 million (2014: £178.8 million). This includes
the infrastructure and additional marketing to support
the core business and various initiatives, including the
expansion into Switzerland and Dubai, the roll-out of
execution-only stockbroking and investments in mobile and
web-based technology.
As a result, each of employee remuneration costs, advertising
and marketing and legal and professional fees are higher than
in the prior year.
Year ended
31 May 2015
Statutory
£m
Restated*
Year ended
31 May 2014
£m
Employee remuneration costs
Advertising and marketing
Premises-related costs
IT, market data and
communications
Legal and professional
Regulatory fees
Net charge for impaired trade
receivables
Other costs
Depreciation & amortisation
Statutory administrative
expenses
Swiss franc event:
Employee remuneration costs
Bad and doubtful debt
Underlying administrative
expenses
94.3
37.8
11.1
16.4
5.9
7.1
16.2
18.1
10.7
89.3
31.7
10.0
13.8
4.3
5.4
1.6
13.0
9.7
217.6
178.8
3.6
(15.1)
–
–
206.1
178.8
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
In the year ending 31 May 2016, the Group will continue to
invest in its growth strategy. The Group anticipates a further
increase in administrative expenses at a level similar to that
seen on an underlying basis for this year.
42
|IG Group Holdings plc Annual Report 2015
EMPLOYEE REMUNERATION COSTS
Employee remuneration costs increased by 5.6% to
£94.3 million (2014: £89.3 million) in the year.
ADVERTISING AND MARKETING COSTS
Advertising and marketing costs increased by £6.1 million to
£37.8 million (2014: £31.7 million).
The average headcount increased by 20.3% year-on-year,
however, due to the change in the staff mix, which reduced
the average salary by 8.4%, total salary costs increased by
9.6%. Inclusive of national insurance and pension costs,
employee remuneration costs comprise:
Year ended
31 May 2015
Statutory
£m
Restated*
Year ended
31 May 2014
£m
Total salaries
74.0
65.0
Performance-related bonuses
and commissions
Share schemes
Statutory employee
remuneration costs
Swiss franc event:
Performance-related bonuses
and commissions
Share schemes
Underlying employee
remuneration costs
Average headcount
Year-end headcount
14.0
6.3
17.2
7.1
94.3
89.3
3.1
0.5
97.9
1,287
1,400
–
–
89.3
1,070
1,153
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
The £3.2 million reduction in statutory performance-related
bonuses and share-based payment schemes charges reflects
the Group's financial and non-financial performance measures
which were heavily impacted by the Swiss franc event. The
impact of the Swiss franc event itself on the staff bonus pool
and share scheme vesting and therefore charges, is estimated
as £3.6 million.
Headcount across most departments was higher year-on-
year. Overseas IT and marketing development teams, in
particular, have grown further to facilitate the development of
a broader range of mobile apps alongside ongoing platform
improvements projects. As at 31 May 2015, IT headcount
was 603 (2014: 497), an increase of 21.3% compared to the
previous year.
This year saw a change in focus between online and offline
advertising, with online spend increasing as we continue to
optimise and support our digital marketing approach. The
Group’s geographical expansion, with increased marketing
spends in Switzerland and later in the year in Nadex, has also
added to the increase.
The main marketing campaigns run in the year focused on
IG’s 40th birthday, ‘Live Every Trade’ TV campaign and the
new stockbroking offering launched during the year.
The Group is now in the second year of the three-year
partnership with Harlequins Rugby Club and is one of three
principal partners of the club. The partnership is consistent
with the Group’s strategic approach to increase visibility of the
IG brand and value proposition.
OTHER EXPENSES
Premises-related costs were higher at £11.1 million (2014:
£10.0 million). The increase in costs reflects the full-year effect
of the offices opened during the latter part of the last financial
year in Switzerland and Eastern Europe and also the costs
incurred in relation to the Dubai office opened in 2015.
IT, market data and communication costs include the cost
of IT maintenance and short-term licence arrangements as
well as market data fees from exchanges. The increase of
costs from £13.8 million in the prior year to £16.4 million is
due to a change in software agreements from perpetual
licences to cloud software. This has resulted in more items
being expensed, rather than capitalised, and ultimately
amortised. This change is also reflected in the reduction of
software amortisation.
Legal and professional fees, which include audit, taxation,
legal and other professional fees, increased by £1.6 million
to £5.9 million (2013: £4.3 million). The increase was primarily
driven by professional fees incurred in relation to the generic
top-level domain operation.
Regulatory fees increased by 31.5% to £7.1 million (2014:
£5.4 million). The level of FSCS levy paid by the Group
remains dependent on investment intermediary firms'
failures and the eventual compensation paid. Accordingly,
this charge is outside of Group's control and is hard to
accurately forecast.
During the year the Group changed its accounting policy
for recognising the costs of the FSCS levy to reflect
guidance provided in the IFRIC 21 ‘Levies’ standard. The
standard requires the Group to recognise in full an estimate
of the FSCS levy for the applicable year on 1 April each
year. A full explanation is provided in the Group’s interim
consolidated financial statements for the six months ended
30 November 2014.
43
IG Group Holdings plc Annual Report 2015|
CHIEF
FINANCIAL
OFFICER’S
REVIEW
(CONTINUED)
The Group also pays other regulatory fees to the FCA in the
UK, as well as regulatory bodies in other jurisdictions where
it operates.
The net charge for impaired trade receivables was significantly
higher compared to the previous year, increasing to
£16.2 million (2014: £1.6 million). The increase was largely due
to £15.1 million charge relating to the Swiss franc event which
resulted from an original debt amount of £18.4 million. Out of
this debt total, £2.8 million has been recovered to date.
Other costs include bank charges, training, travel, recruitment
and irrecoverable sales taxes. The increase is primarily
attributable to higher recruitment fees driven by the increase
in headcount, and higher irrecoverable sales taxes following
the increase in advertising and marketing spend.
Depreciation and amortisation increased by £1.0 million
to £10.7 million (2014: £9.7 million), partly due to the
amortisation of IT development costs.
OPERATING PROFIT MARGINS
The Group uses operating profit margin, which includes
an allocation of central costs, as an indicator of regional
performance (refer to note 4 of the financial statements:
Segment Information.
Statutory operating profit decreased 13.2% to £169.6 million
(2014: £195.4 million). Underlying operating profit, which
excludes the impact of the Swiss franc event, decreased by
1.1%. The Group statutory operating profit margin (operating
profit expressed as a percentage of net trading revenue)
decreased to 43.7% (2014: 52.8%).
The following table summarises operating profit margin
by region:
Operating profit
margin by region
UK
Australia
Europe
Rest of World
Year ended
31 May
2015
Underlying
Year ended
31 May
2015
Statutory
Restated*
Year ended
31 May
2014
57.2%
60.3%
27.6%
30.2%
52.1%
59.2%
18.1%
29.5%
61.1%
60.1%
38.9%
33.3%
Group
48.3%
43.7%
52.8%
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
44
Underlying operating profit margin fell to 48.3% (2014: 52.8%)
driven by lower margins in UK, Europe and Rest of World.
This reduction reflects the ongoing investment in strategic
development. For Europe the reduction in underlying profit
margin is particularly marked and driven by a combination of
a fall in underlying revenue and the direct costs associated
with the newly established operation in Switzerland. The Rest
of World region includes the new office in Dubai that did not
contribute to revenues during the year ended 31 May 2015.
PROFIT BEFORE TAXATION
Statutory profit before taxation reduced by 13.0% to
£169.5 million (2014: £194.9 million). Profit before tax margin,
calculated with reference to net trading revenue, decreased
to 43.6% (2014: 52.6%).
Underlying profit before taxation reduced by 0.9% to
£193.2 million (2014: £194.9 million).
TAXATION EXPENSE
The effective rate of taxation for the year ended 31 May 2015
decreased to 22.2% compared to a rate of 24.5% for the prior
year. The effective rate for the current year has benefited
from the reduction in the UK corporation tax rate to 20.0%.
The Group’s effective tax rate is dependent on the mix of
geographic revenue and profitability as well as the tax rates
levied in those geographies.
The calculation of the Group’s tax charge involves a degree of
estimation and judgement, in particular with respect to certain
items whose tax treatment cannot be finally determined until
agreement has been reached with the relevant tax authority
(refer to note 10 of the financial statements).
DILUTED EARNINGS PER SHARE
Statutory diluted earnings per share decreased to
35.99 pence from 40.22 pence in the year ended 31 May 2015
(refer to note 11 of the financial statements).
Underlying diluted earnings per share increased 2.1% to
41.07 pence (2014: 40.22 pence).
Diluted earnings per share is used as a primary measure
of underlying profitability and as a financial measure in
relation to the Executive Director and senior management
share plans.
DIVIDEND POLICY
IG remains highly cash-generative and we have sought to
reflect this in the direct cash returns to shareholders. Last
year the Board raised the Ordinary dividend payout ratio to
approximately 70%. Although statutory earnings this year are
behind due to the impact of the Swiss franc incident, both the
business and the market opportunity remain strong. In line
with IG’s progressive dividend policy, the Board made clear at
the time of the first half results in January its intention to hold
the full-year dividend flat on 2014 at 28.15 pence, and so the
Board is recommending a final dividend of 19.70 pence.
|IG Group Holdings plc Annual Report 2015 ‘Own funds’ increased by £18.4 million (2014: £60.5 million)
after adjustments for movements in working capital balances
and significant outflows in relation to investing and financing
activities. The outflow from investing and financing activities
includes £12.4 million in relation to capital expenditure
(2014: £11.5 million) and £112.8 million (2014: £84.8 million)
in relation to the final 2014 and interim 2015 dividend
payments. The Group made investments of £6.4 million on
a combination of IT development and software assets (2014:
£8.1 million). Cash investment in tangible fixed assets total
£6.0 million (2014: £3.4 million) and comprise £5.0 million
on IT hardware and £1.0 million on the fit out of the newly
leased offices.
LIQUIDITY
The Group’s liquid assets comprise cash balances available
to the Group for its own purposes and exclude all monies
held in segregated client money accounts. The Group’s
businesses are also entitled to use ‘title transfer funds’ in the
UK and customer deposits held by the banking subsidiary in
Switzerland in normal business operations. Therefore these
are included in the statement of financial position and the
Group’s liquid assets.
An element of the Group’s liquidity is not available for the
purposes of the centrally performed market risk management
as it is held in overseas businesses for the purposes of local
regulatory and working capital requirements or is currently
held within segregated client money bank accounts to
ensure the Group’s segregation obligations are met. At 31
May 2015 the unavailable cash increased by £37.2 million
from that unavailable in the prior year to £86.4 million (2014:
£49.2 million) primarily as a result of additional capital
requirements in each of Switzerland and Dubai.
Available liquid assets enable the funding of large broker
margin requirements when required and should be
considered in the context of the intra-year high broker
margin requirement of £293.7 million (2014: £290.3 million),
the requirement to hold a liquid assets buffer, the continued
growth of the business, the Group’s commitment to
segregation of individual clients’ money as well the final
proposed dividend for the year ended 31 May 2015, all of
which draw upon the Group’s liquidity.
Net available liquidity is disclosed in the table below and
represents the Group’s available liquidity inclusive of the
liquid assets buffer and after the payment of broker margin.
SUMMARY GROUP CASH FLOW
The following cash flow statement summarises the Group’s
cash generation during the year and excludes all cash flows
in relation to monies held on behalf of clients. In order to
provide a clear presentation of the Group’s liquid assets both
amounts due from brokers and financial investments have
been treated as ‘cash equivalents’ and included within ‘own
funds’. A more detailed version of the cash flow presented
below and the derivation of own funds are provided in note
19 to the financial statements.
Operating profit
margin by region
Year ended
31 May
2015
Underlying
Year ended
31 May
2015
Statutory
Restated*
Year ended
31 May
2014
Operating activities
Profit before tax
193.2
169.5
194.9
Depreciation &
amortisation
Other non-cash
adjustments
Income taxes
paid
Own funds
generated from
operations
Movement in
working capital
Outflow from
investing and
financing
activities
Increase in own
funds
Own funds at
start of period
Exchange profits/
(losses) on own
funds
Own funds at
end of period
10.7
3.1
10.7
(0.5)
9.7
3.8
(47.8)
(42.9)
(47.8)
159.2
136.8
160.6
n/a
7.9
(3.3)
n/a
n/a
n/a
n/a
n/a
(126.3)
(96.8)
18.4
60.5
487.3
429.3
1.4
(2.5)
507.1
487.3
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
Cash generation remains strong with statutory own
funds generated from operations of £136.8 million
(2014: £160.6 million).
Underlying own funds generation was broadly flat at
£159.2 million (2014: £160.6 million). The underlying cash
conversion rate, calculated as own funds generated from
operations divided by profit before tax, has remained strong
at 82.4% (2014: 82.4%).
45
IG Group Holdings plc Annual Report 2015| CHIEF
FINANCIAL
OFFICER’S
REVIEW
(CONTINUED)
Own funds
31 May 2015
£m
Restated*
31 May 2014
£m
507.1
487.3
Client funds held on balance
sheet
16.9
21.0
Total liquid assets
524.0
508.3
REGULATORY CAPITAL RESOURCES
Throughout the year, the Group maintained a significant
excess over the capital resources requirement, both on a
consolidated and individual regulated entity basis.
The Group considers there are significant benefits to being
well capitalised at a time of continuing global economic
uncertainty. The Group is well placed in respect of any
regulatory changes which may increase our capital or liquidity
requirements, and high levels of liquidity are important in
the event of significant market volatility. The Group’s liquidity
requirements have historically been, and remain, significantly
in excess of its regulatory capital requirements. The total
regulatory capital requirement remains significantly below the
necessary liquidity levels.
The new CRD IV requirements that came into force on
1 January 2014 require deferred tax assets relating to future
profitability to be deducted from Tier 1 Capital in the
determination of capital resources for the Group.
Less amounts required to
ensure appropriate client
money segregation – other
amounts due to the group
Less amounts required for
regulatory and working capital
of overseas businesses
Available liquid assets
Less broker margin requirement
Net available liquidity
Of which held as a liquid assets
buffer
(27.6)
(20.4)
The following table summarises the Group’s Pillar 1 capital
adequacy on a consolidated basis:
(58.8)
437.6
(204.8)
232.8
(28.8)
459.1
(285.1)
174.0
Shareholders’ equity
Investment in own shares
31 May 2015
£m
Restated*
31 May 2014
£m
591.4
1.2
565.9
1.1
Common Equity Tier 1 Capital
592.6
567.0
83.1
82.5
Less:
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
In order to mitigate liquidity risks, the Group regularly
stress tests its three-year liquidity forecast to validate the
appropriate level of committed unsecured bank facilities
held. During the year the facility was drawn on a number of
occasions during periods of high broker margin requirements
or when there was a perception of higher volatility and risk in
the financial markets. Subsequent to the year-end, the Group
undertook a review of its contingent liquidity requirements
and, upon approval from the Executive Risk Committee,
concluded to reduce its facilities to £160.0 million (refer to
note 39 of the financial statements).
A detailed analysis of the Group’s liquidity and the management
of liquidity risk are provided in note 19 to the financial statements.
Intangible assets
(124.0)
(122.7)
Investment in own shares
Deferred tax assets(1)
(1.2)
(7.1)
(1.1)
(7.1)
Total capital resources (CR) (a)
460.3
436.1
Capital resources requirement –
Pillar 1 (CRR) (b)
(a-b)
(111.3)
349.0
(115.4)
320.7
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
(1) The new CRD IV requirements which came into force on 1 January 2014
require deferred tax assets relating to future profitability to be deducted from
Tier 1 Capital to determine capital resources for the Group.
46
|IG Group Holdings plc Annual Report 2015
SUMMARY GROUP STATEMENT OF
FINANCIAL POSITION
31 May 2015
£m
Restated*
31 May 2014
£m
Property, plant and equipment
Intangible assets
Financial investments
Deferred tax assets
Non-current assets
Trade and other receivables
Cash and cash equivalents
Financial investments
Current assets
Total assets
Trade and other payables
Income tax payable
Current liabilities
Redeemable preference shares
Non-current liabilities
Total liabilities
Total equity
Total equity and liabilities
13.3
124.0
75.5
7.1
219.9
281.8
148.8
32.9
463.5
683.4
78.9
13.1
92.0
–
–
92.0
591.4
683.4
13.0
122.7
32.2
7.1
175.0
339.7
101.5
50.3
491.5
666.5
80.3
20.3
100.6
–
–
100.6
565.9
666.5
* Comparative periods have been restated to reflect the change in timing of
recognition of the FSCS levy in accordance with IFRIC 21 ‘Levies’.
NON-CURRENT ASSETS
As discussed in the Chief Executive’s Statement, the Group
continues to invest in technology both to enhance client
experience and to improve the capacity and resilience of
dealing platforms, each of which is critical to the success of
the business.
Intangible assets purchased during the year include £1.5 million
(2014: £1.8 million), for a suite of country-code and generic top-
level domains that are directly relevant to our business.
Intangible assets also include goodwill of £107.1 million
(2014: £106.7 million), primarily arising on the acquisition
of IG Group Plc and its subsidiaries in 2003, the goodwill
associated with the acquisition of Nadex of £5.0 million (2014:
£4.6 million) and the goodwill arising on the acquisition of
our South African business of £1.2 million (2014: £1.2 million)
(refer to note 16 of the financial statements).
Capitalised investment in relation to development costs
and software and licences amounted to £4.4 million (2014:
£6.0 million) largely relating to the development of the
share trading platform. During the year the Group also
invested £5.9 million in property, plant and equipment (2014:
£3.4 million). This included £4.6 million (2013: £2.5 million) in
relation to IT equipment.
CURRENT ASSETS
Trade and other receivables include amounts due from
brokers, amounts due to be received from segregated
client money accounts and prepayments. Amounts due
from brokers represent cash placed with counterparties in
order to provide initial and variation margin in relation to the
Group’s market risk management. Amounts due from brokers
have decreased to £239.2 million (2014: £303.9 million)
resulting from lower broker margins than at the prior year-
end driven by the Group's hedging of clients' futures and
shares positions.
CLIENT MONEY AND ASSETS
Total monies held on behalf of clients at year-end was
£930.5 million (2014: £879.4 million) of which £913.6 million
(2014: £858.4 million) is segregated in trust bank accounts
and treated as ‘segregated client money’ and therefore
excluded from the Group Statement of Financial Position.
Of the remaining monies, £11.6 million (2014: £21.0 million)
represents ‘title transfer funds’ where the client agrees, under
a Title Transfer Collateral Arrangement (TTCA), that full
ownership of such monies is unconditionally transferred to the
Group, while the remaining £5.3 million (2014: £nil) relates to
customer deposits with our banking operation in Switzerland.
Although the levels of client money can vary depending on
the overall mix of financial products being traded by clients,
the long-term increase in the level of client money placed by
clients with the Group is a positive indicator of future client
propensity to trade.
FINANCIAL INVESTMENTS
During the year the Group increased the holding of UK
Government Securities from £82.5 million as at 31 May 2014
to £108.4 million at 31 May 2015. The additional security is
held at broker as collateral to support the hedging of client
market exposures in accordance with the Group’s market
risk management policy. The value of securities held against
potential liquidity stress under BIPRU 12 is broadly flat on the
prior year.
LIABILITIES
Trade and other payables include amounts due to clients in
relation to both title transfer funds and customer deposits
with the Group’s Swiss banking subsidiary as well as accruals
and other payables.
Trade payables have decreased by £4.2 million from 31 May
2014 due to the decrease in the number of title transfer clients
from £21.0 million as at 31 May 2014 to £11.6 million as at 31
May 2015 partially offset by an increase in amounts due to
clients of £5.3 million in relation to the customer deposits with
the banking operation in Switzerland (2014: £nil).
Income tax payable has fallen to £13.1 million at year end
(2014: £20.3 million) reflecting the lower corporation tax
charge for the current financial year following both lower
statutory profitability and a lower overall effective tax rate.
47
IG Group Holdings plc Annual Report 2015| MANAGING OUR
BUSINESS RISK
Our strategy depends on the effective
management of our business risks. By
identifying the nature and potential
impact of these risks, we can design and
operate processes that ensure that they
are effectively controlled and mitigated.
Over time, we have developed a robust
and consistent Risk Management
Framework that we continually seek
to improve.
In this section we explain how we manage risk in accordance
with our Risk Appetite Statement (RAS) and Risk Management
Framework. We also explain in detail the key risks we face, our
governance structure for risk, and the reporting cycle that we
use to monitor and report on risk.
RISK APPETITE STATEMENT (RAS)
The RAS is at the heart of our risk management framework.
It defines the amount of risk that the Board is prepared to
accept, both on an individual risk and aggregate basis, in
pursuit of its business objectives and strategic goals. The RAS
provides parameters within which the business can operate,
and is reviewed by the Board. We have identified three main
types of risk affecting our business, and we explain these in
more detail later in this section.
1. BUSINESS MODEL RISKS
These are risks we actively manage and are able to measure,
control and assign limits and parameters to:
• Credit risk – see page 51
• Market risk – see page 51
• Liquidity risk – see page 51
2. INDUSTRY RISKS
These are risks we accept as arising from operating in
the financial services sector. For these risks we set a risk
tolerance rather than a risk appetite. They include (but are not
limited to):
• Financial institution credit risk – see page 51
• Operational risk – see page 52
• Regulatory risk – see page 52
• Conduct risk – see page 53
• Technology (IT) risk – see Operational Risk, page 52
3. ENVIRONMENTAL RISKS
These are risks over which we have minimal control.
They include (but are not limited to):
• Natural disasters such as floods, earthquakes and
disease epidemics
• Strikes and civil unrest
The RAS contains a set of statements and Key Risk Indicators
(KRIs). These balance quantitative and qualitative measures to
provide an indication of increasing or declining risk levels over
an appropriate timescale.
They are designed to alert our Board and management that a
risk is approaching, or has exceeded, an acceptable level, and
we monitor them on an ongoing basis. The Board receives
regular reports on our performance against the KRIs, and the
Board reviews the KRIs in conjunction with the RAS annually.
OUR RISK MANAGEMENT FRAMEWORK
In order to establish effective governance over risk according to
our RAS, we have developed a Risk Management Framework
to identify, measure, manage and monitor the risks faced by the
business. Our Risk Management Framework provides the Board
with assurance that we have understood and managed our risks
as far as possible, within appropriate boundaries. It comprises
our Risk Governance Framework and Risk Reporting Cycle.
OUR RISK GOVERNANCE FRAMEWORK
The diagram opposite sets out the framework for the Board
and executive committees, independent control functions
and ongoing business operations that exercise governance
over risk.
Responsibilities of the Board
The responsibilities of the Board in relation to risk
management are to:
• Set and review the RAS and the KRIs
• Review and challenge updates from the Board
Risk Committee
• Review and challenge the system of internal control and
risk management
• Review and challenge capital and liquidity stress-testing
• Approve the Corporate Governance Report in the
Annual Report
Board committees
The Board is supported in its monitoring of the Risk
Management Framework by the Board Risk, Audit and
Remuneration Committees.
Last year, we formed the Board Risk Committee in recognition
of the Board’s continued development of the Group’s focus
on risk management. The committee provides the Board with
a more in-depth level of understanding of, and governance
over, the Group’s risk framework. This is becoming
increasingly important as we expand our reach and extend
our product range, at the same time as global regulators
continue to strengthen their regimes.
48
|IG Group Holdings plc Annual Report 2015 THE BOARD
BOARD COMMITTEES
EXECUTIVE COMMITTEES
Nomination
Committee
Remuneration
Committee
Audit
Committee
Board Risk
Committee
Executive Risk
Committee
ICAAP & ILAA
Committee
Client Money
Committee
Finance
Risk
Compliance
Legal
CONTROL FUNCTIONS
BUSINESS OPERATIONS
Internal controls implemented by management
Senior
Accounting
Officer
Committee
Review by
internal
audit of risk
management
and internal
controls
The Board Risk Committee’s responsibilities in relation to risk
management are to:
• Consider, and recommend for approval by the Board, the
RAS and KRIs for the current and future strategy
• Monitor, review and challenge the Internal Capital
Adequacy Assessment Process (ICAAP) and Internal
Liquidity Adequacy Assessment (ILAA)
• Ensure rigorous stress-testing and scenario-testing of
the Group’s business and receive reports that explain the
impact of identified risks and threats
• Ensure that risk mitigation consistent with our risk appetite
is in place
• Review the Group’s major risk exposures
• Consider the adequacy and effectiveness of the technology
infrastructure and supporting documentation in the Risk
Management Framework
• Provide input to the Remuneration Committee on the risk
implications of the remuneration policy
The Audit Committee’s responsibilities in relation to
risk management are to:
• Receive an annual report from the Board Risk
Committee on the Company’s internal controls and Risk
Management Framework
• Review an assessment of the control environment, via
internal audit reports, and progress on implementing both
internal and external audit recommendations
• Monitor and review the internal audit function’s
effectiveness in the overall context of the Group’s internal
controls and risk management systems
The Remuneration Committee’s responsibility in relation
to risk management is to review the structure and level of
remuneration throughout the business and assess the impact
of remuneration on risk.
An overview of all the Board Committees’ main duties and
activity during the financial year is set out in the Corporate
Governance Report, and the Chairman of each committee has
provided a review of its activity for the year in the Corporate
Governance Report.
EXECUTIVE COMMITTEES
Executive Risk Committee
The Executive Risk Committee is an executive committee
chaired by the Chief Risk Officer. Its role is to oversee day-
to-day risk management activity across the Group. The
committee generally meets weekly to ensure that it deals
with issues as they arise, reflecting the senior management’s
commitment to playing an active role in risk management
decision-making. It also sets the tone across the Group that
risk management is central to corporate culture. The Board
receives copies of the Executive Risk Committee minutes.
Client Money Committee
The Client Money Committee is chaired by the Chief Financial
Officer, who is responsible for overseeing our processes
and controls over segregating client funds and the Financial
Conduct Authority (FCA)’s client assets (CASS) operational
oversight function. The committee meets monthly and
receives reports from a number of control functions, enabling
it to monitor the effectiveness of our global processes and
controls for segregating client money.
ICAAP and ILAA Committee
In addition to managing individual risks, we stress-test
and scenario-test as part of the Internal Capital Adequacy
Assessment Process (ICAAP) and the Individual Liquidity
Adequacy Assessment (ILAA). These assessments test
the potential impact on capital and liquidity of a series
of combined risk events. The committee meets monthly
and oversees the results of the ongoing stress-testing and
scenario-testing process, ensuring that risks are continuously
identified and assessed.
Senior Accounting Officer Committee
The Senior Accounting Officer (SAO) Committee is
responsible for reviewing and challenging the processes
and controls put in place to ensure we comply with HMRC
requirements to certify that each of our UK subsidiaries ‘had
appropriate tax arrangements throughout the financial year’.
The committee reports to the Chief Financial Officer, who is
the designated SAO.
Control functions
Additional levels of assurance are provided by control
functions, which are independent of the business operations –
namely finance, risk, compliance, legal and internal audit. The
control functions provide periodic reporting to the Board and
executive committees as appropriate.
Business operations
In addition to the control functions, we have embedded risk
management into our underlying business operations. Heads of
departments are responsible for maintaining risk registers and,
where necessary, taking action to mitigate risks and enhance
the control environment. The risk and compliance control
functions use these registers in coordinating the identification,
measurement and monitoring of risk across the business.
49
IG Group Holdings plc Annual Report 2015| MANAGING
OUR BUSINESS
RISK
(CONTINUED)
OUR RISK REPORTING CYCLE
The diagram below represents the flow of information and feedback that supports the Risk Governance Framework.
OUR
KEY RISKS
BOARD REVIEW
CREDIT
BOARD AND EXECUTIVE COMMITTEES
Remuneration | Risk | Client Money | ICAAP and ILAA |
Senior Accounting Officer
MARKET
£ €
¥ $
REPORTS
• Periodic reporting
LIQUIDITY
• Monthly risk reporting (including Key
Risk Indicators)
• Internal audit
• Risk registers
• Most significant risks
• External audit control report
• ICAAP and ILAA
OPERATIONAL
REGULATORY
CONTROL FUNCTIONS
Finance | Risk | Compliance | Legal
BUSINESS OPERATIONS
IT
CONDUCT
50
ACTIONS
Control
actions
Monitored by
internal audit
AUDIT
COMMITTEE
|IG Group Holdings plc Annual Report 2015 OUR KEY RISKS
The following section describes the key risks that we face and
the steps that we take in order to manage these risks.
Credit risk
Credit risk is the risk that a counterparty fails to perform
its obligations, resulting in financial loss. Our credit risk is
managed on a Group-wide basis. The principal sources of
credit risk to our business are from financial institutions and
individual clients.
Financial institution credit risk
All financial institutions with which the Group has a
relationship are subject to a credit review. Exposure limits are
set and approved by the Executive Risk Committee.
We monitor a number of key metrics on a daily basis in
respect of financial institution credit risk. These include
balances held, change in short-term and long-term credit
rating and any change in credit default swap (CDS) price.
The Group is responsible, under various regulatory regimes,
for the stewardship of client monies. These responsibilities
include appointing and periodically reviewing institutions
where we deposit client money. Our aim is that all financial
institutions holding client money and assets should have a
minimum Standard & Poor’s short-term and long-term rating
of A-2 and A- respectively. Where this is not possible, we
set low exposure limits and seek to use the best available
counterparty – preferably one that is considered locally
systemic and therefore most likely to receive support. We also
maintain multiple brokers for each asset class.
We monitor our exposure to financial institutions with whom
the Group holds money through a daily review against
financial limits and diversification criteria.
Client credit risk
Client credit risk principally arises when a client’s total
deposited funds are insufficient to cover any trading losses
incurred. In particular, client credit risk can arise where there
are significant, sudden movements in the market, due to high
general market volatility or specific volatility relating to an
instrument in which the client has an open position.
We mitigate, but do not eliminate, client credit risk in a
number of ways. We only accept clients that pass certain
suitability criteria, and our training programme aims to
educate clients in aspects of trading and risk management, as
well as encouraging them to collateralise their accounts to an
appropriate level. We also conduct a pre-deal credit check on
every client order.
We offer a number of risk management tools that enable
clients to manage their exposures, including:
• Guaranteed and non-guaranteed stops
• Limit orders
• Extended trading hours
• Trading via mobile platforms
In addition, we manage our overall credit risk exposure
through real-time monitoring of client positions via our ‘close-
out monitor’ (COM) and through the use of tiered margining.
The COM is an automated process whereby accounts which
have fallen below the liquidation threshold are automatically
identified and closed.
For a small number of generally long-standing clients, we
grant credit against unrealised losses, with credit terms such
that any losses arising are payable immediately on the closure
of transactions.
Both the close-out monitor and client-initiated stops result
in the transfer of market risk to the Group. Market risk arises
following the closure of the underlying client position as
the Group (subject to the market risk limits, discussed in
the following section), may hold a corresponding hedging
position that will, assuming sufficient market liquidity,
be unwound.
For more information refer to note 36 to the
Financial Statements.
Market risk
Market risk is the risk that the fair value of financial assets
and financial liabilities will change due to movements in
market prices.
We manage market risk on a real-time basis, monitoring all
client positions against market risk limits set by the Executive
Risk Committee for ‘operational efficiency’. The Group
operates within these limits by hedging our residual market
risk exposure. We do not take proprietary positions based
on an expectation of market movements. As a result, not all
net client exposures are hedged and the Group may have a
residual net position in any of the financial markets in which it
offers products up to the market risk limit.
Our technology enables us to monitor our market exposure
constantly and in real time. If exposures exceed our pre-
agreed limits, our risk-management policy requires that we
hedge the positions to bring the exposure back into line with
these limits.
For more information, including our risk limits and
residual exposures at 31 May 2015, refer to note 36 to the
Financial Statements.
Liquidity risk
Liquidity risk is the risk that we will be unable to meet
payment obligations as they fall due.
We manage liquidity risk by ensuring that we have sufficient
liquidity to meet our broker margin requirements and other
financial liabilities when due, under both normal and stressed
conditions. We carried out an Individual Liquidity Adequacy
Assessment during the year and, while this applies specifically
to the Group’s FCA-regulated entities, it provides the context
within which we manage liquidity throughout the business.
Due to the very short-term nature of our financial assets and
liabilities, we do not have any material mismatches in our
liquidity maturity profiles. Short-term liquidity ‘gaps’ can arise,
51
IG Group Holdings plc Annual Report 2015| MANAGING
OUR BUSINESS
RISK
(CONTINUED)
due to our commitment to segregate all individual client
funds. If a significant market fall occurs, and assuming our
client base holds a net long position which we have hedged,
we are required to fund margin payments to brokers before
releasing funds from segregation. During periods of very high
client activity, or of significant directional movements in global
markets, we may need to fund higher margin requirements with
our brokers to hedge increased underlying client positions. We
do this from our own available liquidity.
At 31 May 2015 we had total available liquidity, including
committed unsecured facilities and after accounting for broker
margin, of £724.0 million (2014: £708.3 million). This includes
the liquid assets buffer, which consists of £83.1 million of UK
government securities. We hold this, as required by the FCA, to
provide a safeguard in times of stress.
We monitor total available liquidity on a daily basis, including
our committed unsecured facilities. We perform daily stress
tests and regularly stress-test our three-year liquidity forecast to
validate the level of committed unsecured bank facilities that we
hold. At the year-end, these amounted to £200.0 million (2014:
£200.0 million), with £120.0 million available for one year and
£80.0 million available for three years. Our Japanese business,
IG Markets Securities, has a ¥300.0 million liquidity facility as at
31 May 2015 (2014: ¥300.0 million).
For more information on how we calculate our total available
liquidity, see note 19 to the Financial Statements.
Operational risk
Operational risk is the risk of financial loss due to inadequate
or failed internal processes and systems. It can also arise from
human error or external events that we cannot influence.
Our approach to managing operational risk is governed by the
Risk Appetite Statement and Risk Management Framework. We
have designed and implemented a system of internal controls to
manage, rather than eliminate, operational risk.
The reliability of our client trading platforms is key to delivering
our strategy, and we invest significantly in the technology
infrastructure to ensure that these platforms are operationally
stable, with system access being centrally controlled. Our
investment supports the resilience and reliability of the platform,
ensuring low levels of latency, maintaining and testing system
capability under significant load and conducting penetration
testing. The Executive Risk Committee reviews our Key Risk
Indicators on a monthly basis, a process which includes
monitoring levels of core system uptime and deal latency.
In order to ensure that we provide our clients with a consistent
and uninterrupted level of service, we run a complete disaster-
recovery solution. This involves a fully functional secondary
site with real-time replication of all systems across the two
52
locations and fully independent power supplies. We support
these systems with ongoing business-continuity planning and
regular testing.
All our IT and data security systems conform to the ISO
27001:2005 Information Security Management System standards.
Cyber risk is a constant threat in the modern online environment.
We have a dedicated team which has implemented a robust,
multi-layered system, providing round-the-clock monitoring and
intruder-prevention controls.
Regulatory risk
We regard regulatory risk as one of our most significant risks. In
short, we define regulatory risk as:
• Change risk: the risk that one of our regulators introduces
new regulations or the regulatory environment itself changes,
either making our business less profitable or our products
more difficult or impossible to offer
• Expansion risk: the risk that policy and regulation in
jurisdictions where we do not currently operate remain
onerous and closed to our business model, limiting our
geographic expansion opportunities
• Breach risk: the risk that we breach a regulation that applies to
our business, leading to client or market detriment, sanctions,
fines, reputational damage and, in extreme situations, loss
of licence
We invest significant time and resources to manage and
control our regulatory risk in parallel with the development of
business strategy.
Change risk
The regulatory environment continues to evolve, and there
are a number of events, policy initiatives and proposals in
development that may impact or have already impacted our
sector, as follows:
• Change to UK membership in the European Union: the Group
business in continental Europe is offered pursuant to the
EU passporting regime for financial services. Any change to
the UK’s membership status of the European Union could
have an impact on how the Group is able to operate in the
European Union
• French marketing restrictions: there are indications that French
regulators may implement measures that would restrict the
ability for firms like ourselves to advertise complex financial
products to retail clients. The impact of these measures will
depend on whether the measures are introduced and, if so,
the form in which they are introduced. We have also seen
other European regulators in markets where we operate
introduce guidelines on the selling of complex products
this year
• Swiss franc market dislocation: extreme market events such as
was seen earlier in the year regarding the Swiss franc can result
in increased regulatory scrutiny across our industry
• Financial Transactions Tax (FTT) in the European Union: the
Enhanced Cooperation FTT effort, involving 11 of the 28
member states, has continued this year. We have expended
significant efforts throughout the year to maintain an accurate
knowledge of the status of this tax initiative, to understand
the many stakeholders’ interests and views and to ensure
IG’s voice is heard in the debate. It remains unclear what the
ultimate outcome of the Enhanced Cooperation FTT will
be, and although progress is extremely slow recent rhetoric
suggests increased political will for the introduction of an
Enhanced Cooperation FTT. The lack of detail makes the
potential impact on our revenue from Europe very difficult to
assess. We continue to monitor developments carefully
|IG Group Holdings plc Annual Report 2015 • European Markets Infrastructure Regulation (EMIR): the
The main areas of relevance include:
main impact of this legislation on our business is increased
reporting requirements to trade repositories. Potentially,
we will also be impacted in the medium-to-longer term by
the International Organization of Securities Commissions
(IOSCO), European Securities and Markets Authority (ESMA)
and European Banking Authority (EBA)’s work on margin for
over-the-counter trading, but the rules on this have not yet
been settled
• Markets in Financial Instruments (MiFID) II: the MiFID II
dossier has continued to develop this year. The MiFID II and
Markets in Financial Investments Regulation (MiFIR) Level One
texts were adopted last year and there has been significant
work on the preparation of the detailed Level Two texts. We
remain of the view that MiFID II is unlikely to pose a threat to
our UK and European businesses. We continue to monitor
MiFID II carefully and to take part in industry consultation
where appropriate
• Packaged Retail Investments Products Regulation (PRIPS): this
will impose an obligation on us from May 2016 to provide our
UK and European clients with information about our products
in a standardised form. We do not anticipate this having a
negative impact on our business
• Monetary Authority of Singapore (MAS) regulatory framework
for margined derivatives. As previously reported, in 2013 the
MAS confirmed that it would push forward with its proposal to
increase margin requirements for non-accredited investors on
a forex trade from 2% to 5%, thereby reducing leverage from
50 times to 20 times. Although these rules have not yet been
introduced, we consider that there is a good possibility that
they will be introduced in the future. If they are introduced, it
is intended that the rules will not apply to accredited investors,
defined by virtue of their wealth or income level. We believe
that the majority of IG’s revenue currently comes from clients
who would qualify for accredited investor status. In addition,
the use of guaranteed stops enables clients to further manage
leverage levels
• Common Reporting Standard (CRS): this is being
implemented in just under 100 countries (including the UK
and all countries where IG has offices) to facilitate a global
exchange of information on income and wealth of individuals
and organisations as a measure to counter tax evasion. On-
boarding processes will need to be updated to identify and
report information on clients resident in countries who have
already signed up or will sign up to CRS.
• Base Erosion and Profit Shifting (BEPS): The Organisation
for Economic Cooperation and Development (OECD) has
developed a series of action plans to address perceived
international tax avoidance by high-profile multinationals.
None of the action plans are expected to significantly impact
the Group’s tax profile
• Foreign Account Tax Compliance Act (FATCA): reporting of
accounts held outside the US by US persons, or in the Crown
Dependencies and Overseas Territories by UK residents.
Onboarding processes have been updated to identify clients
where we have a reporting obligation and the first round of
reporting is in progress
• Capital Requirements Directive IV (CRD IV) and Capital
Requirements Regulation (CRR)
The European Union (EU) began implementation of Basel
III in the European Union (EU) via the Capital Requirements
Directive IV (CRD IV) and the Capital Requirements Regulation
(CRR) on 1 January 2014. The Regulation applies directly to all
member states, while the directive required implementation
by the national regulator, the FCA in our case
These measures have introduced many different requirements
for us, both since implementation and over the coming years
– changes to capital requirements
> new capital buffers in the capital conservation and
countercyclical buffers (phased in approach to 2019)
> introduction of the leverage ratio (measure of
exposures without risk weighting)
> removal of Tier 3 capital and re-use of deferred
tax assets
– changes to liquidity requirements
> introduction of liquidity coverage ratio (LCR)
> introduction of net stable funding ratio (NSFR)
– other changes, including
> new corporate governance and
remuneration standards
> additional capital and liquidity reporting (COREP)
We have modelled the impact of the regulations as they
currently are scheduled to be implemented and expect
no significant changes to our corporate governance or
remuneration structures, as well as no significant impact
on our capital or liquidity position.
We seek to mitigate change risk by engaging with our
regulators and policymakers as much as possible, as part of
policy consultations and more generally, and also by investing
in public relations programmes and ensuring we have access
to up-to-date information on regulatory change.
Expansion risk
Like change risk, we seek to mitigate expansion risk by
engaging with regulators and policymakers in countries where
we do not yet operate, but which are desirable targets for
our future expansion. Of course, regulatory change can also
represent an opportunity for our business, and we are in talks
with certain regulators who are considering changing their
regulations in order to allow retail derivatives trading. These
discussions are still at an early stage.
Breach risk
Our compliance, legal and risk teams provide a robust
line of defence to ensure that our processes and controls
are effective in ensuring we comply with our regulatory
obligations. During the year, the Group has successfully
undergone a number of external reviews into key areas such
as client money and information security, giving us assurance
that we are managing and controlling breach risk well. As
our business becomes more complex, this risk also grows,
and we remain committed to increasing our investment in
our framework to manage risk controls.
In summary, we work closely with our regulators to ensure
that we operate to the highest regulatory standards and can
adapt quickly to regulatory change. We are committed to
engaging proactively with regulators and industry bodies,
and will continue to support changes which promote
protection for clients and greater clarity of the risks they
face. However, we cannot provide certainty that future
regulatory changes will not have an adverse impact on
our business.
Conduct risk
This is the risk that the Group’s conduct poses to the
achievement of fair outcomes for consumers or to the
sound, stable, resilient and transparent operation of the
financial markets. Put another way, conduct risk is the risk
that the manner in which we carry out our business causes
poor outcomes for our clients or the markets.
The Board has developed a conduct risk strategy that
applies across the organisation putting consumer outcomes
at the heart of the business. We have undertaken and
continue to undertake training to fully embed this strategy
into the current business practices and culture of the Group.
53
IG Group Holdings plc Annual Report 2015| CHAIRMAN’S
INTRODUCTION
TO CORPORATE
GOVERNANCE
This is my first report to you on
corporate governance at IG. I was
elected Chairman of the Board of
IG in October 2014, succeeding
Jonathan Davie, who retired at
the AGM, having served ten years
as Chairman.
The Board of Directors is responsible for the governance of the
Company. We are committed to maintaining the highest standards
in the way the Company is directed, governed and managed. We
believe that good quality governance underpins IG’s ability to
deliver sustainable future growth and long-term value creation.
After a long and extremely successful career at IG, as both CFO
and CEO, Tim Howkins has informed the Board of his intention
to retire. He will step down from the Board as a director and
CEO at the AGM in October. We have commenced a search and
selection process for his successor. Peter Hetherington, currently
Chief Operating Officer and an IG Board member since 2002, will
assume the position of Interim CEO at the end of the AGM.
In 2014 we announced that, after nine years of service, Roger Yates
will stand down from the Board as Senior Independent Director
and Chairman of the Remuneration Committee. We have begun
a search for his successor to enable a smooth handover ahead of
his departure at the AGM in October this year. More information
is set out in my Nomination Committee report that can be found
on pages 66 to 67. I would like to thank Roger, on behalf of the
Board and the whole of IG, for his commitment and exceptional
contribution and wish him well for the future.
To ensure that the Board has the appropriate balance of relevant
experience, knowledge and skills to discharge its responsibilities,
we review its membership on a regular basis. Our latest review
identified the need for greater digital experience and so we have
begun a search for a Non-Executive Director with these skills.
Last year, we strengthened our governance framework by creating
a Board Risk Committee to provide more focus on risk and risk
management issues. There is continuous interaction between the
Audit and Board Risk Committees. Stephen Hill and Jim Newman
report on the activities of the Board Risk Committee and the Audit
Committee respectively later in this report.
At the 2014 AGM, our shareholders approved our Directors’
Remuneration Policy. The Remuneration Committee has operated
in accordance with the policy and its report can be found on pages
68 to 93.
As Chairman, my primary role is to provide leadership for the
Board and to ensure we have an effective and well-functioning
Board. Each year, a formal evaluation of the effectiveness of the
Board and its committees is conducted. This year, we undertook a
questionnaire-based independent external evaluation of the Board
and its committees. Next year, we will conduct externally facilitated
face-to-face interviews. The results were reviewed by the Board
along with the actions from the 2014 internal review. In summary,
the review concluded that the Board and its committees continue
to operate effectively. More information on the evaluation process
and its findings can be found on pages 63 to 64.
The Corporate Governance Report that follows details the Group’s
governance framework and its management practices and,
together with the Directors’ remuneration report, addresses how
the Company has applied the principles of the Code for the year
ended 31 May 2015.
54
Andy Green
Chairman
21 July 2015
| CORPORATE
GOVERNANCE
STATEMENT
STATEMENT OF COMPLIANCE
The UK Corporate Governance Code (‘the Code’) sets out
the standards of good practice in relation to how a company
should be directed and governed. As we have a Premium
Listing on the London Stock Exchange, the Company reports
in accordance with the Code published in 2012. The Code
is published by the Financial Reporting Council (FRC) and
further information can be found on its website at frc.org.uk.
The Board has reviewed the Code and considers that the
Company has been compliant with its provisions for the year
ended 31 May 2015.
OVERVIEW OF CORPORATE GOVERNANCE FRAMEWORK AS AT 31 MAY 2015
INDEPENDENT
EXTERNAL
AUDITORS
Appoint the auditors
SHAREHOLDERS
Elect the Board
THE BOARD
Four independent Non-Executive Directors (NEDs), three Executive Directors and Non-Executive Chairman
CHIEF EXECUTIVE OFFICER AND EXECUTIVE DIRECTORS
BOARD COMMITTEES
EXECUTIVE COMMITTEES
Nomination
Committee
(Four independent
NEDs and Non-
Executive Chairman)
Remuneration
Committee
(Two independent
NEDs and Non-
Executive Chairman)
Audit
Committee
(Three independent
NEDs)
Board Risk
Committee
(Four independent
NEDs)
Executive Risk
Committee
Client Money
Committee
ICAAP and ILAA
Committee
Senior Accounting
Officer Committee
Senior
management
team
55
IG Group Holdings plc Annual Report 2015| THE BOARD
From left to right: Andy Green | Tim Howkins | Christopher Hill | Peter Hetherington | Roger Yates | Stephen Hill | Sam Tymms | Jim Newman
ANDY GREEN | NON-EXECUTIVE CHAIRMAN | AGE: 59
Andy joined the Board as deputy chairman in June 2014 and became chairman of the Group in October 2014. He has in-depth Board
experience and knowledge of major listed companies, having served as Group Chief Executive of Logica plc and having held board
roles in BT Group including the role of CEO of Group Strategy and Operations. Andy’s other current roles, including Non-Executive
Director of ARM Holdings plc, enable him to bring to the Board a wide perspective on technology and digital development.
Other current appointments: Andy is a Non-Executive Director of Avanti Communications Group plc. He holds a number of other roles
including chairing DockOn AG and Digital Catapult. He is a board member of the CBI, president of UK Space, co-chairman of the Space
Leadership Council and a member of the Digital Economy Council.
Committee Membership: Nomination Committee and Remuneration Committee.
TIM HOWKINS | CHIEF EXECUTIVE OFFICER | AGE: 52
Tim was appointed Chief Executive Officer of IG in 2006, having served as the Group’s Finance Director since joining the company in
1999. Tim qualified as a Chartered Accountant with Ernst & Young, and is a member of the Chartered Institute of Taxation. In 1990,
he was one of a group of partners and staff who left Ernst & Young to form Rees Pollock, a firm of Chartered Accountants targeted at
entrepreneurial, owner-managed businesses. He was a partner in Rees Pollock for seven years, and there developed a relationship with
IG, taking responsibility for the Group’s audit. With a strong finance background and a considerable number of years in the business, in
his role as our Chief Executive Tim continues to work with the Board and lead IG to develop and implement our strategy. Tim graduated
from the University of Reading with a first-class degree in Mathematics and Computer Science. Tim will be stepping down from the
Board at the AGM on 15 October 2015.
Other current appointments: Tim is a member of the Board and Executive Committee of FIA Europe, formerly known as the Futures and
Options Association.
Committee Membership: None.
CHRISTOPHER HILL | CHIEF FINANCIAL OFFICER | AGE: 44
Christopher joined the IG Board in April 2011 from Travelex, a group providing cross-border payment and foreign exchange services to
corporate and retail customers, where he served as Chief Financial Officer. A Chartered Accountant, Christopher has extensive finance
and accounting experience from a number of different business sectors. He has previously held roles at VWR International, a global
laboratory-supply company (2005-2007), General Electric (2000-2005) and Arthur Andersen (1992-2000). Christopher graduated from
Oxford University with a degree in Modern History and is an associate member of the Association of Corporate Treasurers.
Other current appointments: None.
Committee Membership: None.
PETER HETHERINGTON | CHIEF OPERATING OFFICER | AGE: 46
Peter was an officer in the Royal Navy prior to joining IG Group as a graduate trainee in 1994. In 1999, he became Head of Financial
Dealing, and in 2003 he joined the Board following his appointment as Chief Operating Officer. Peter’s considerable experience, built
over 20 years in the business, is invaluable in his role as Chief Operating Officer. Peter graduated from Nottingham University with a
degree in Economics, and from the London Business School with a Masters in Finance.
Other current appointments: None.
Committee Membership: None.
56
|IG Group Holdings plc Annual Report 2015 CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
INVESTOR
RESOURCES
ROGER YATES | SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR | AGE: 58
Roger joined the Board as Senior Independent Director in February 2006. He has over 28 years’ experience in the fund management
industry, both as an investment professional and a business manager. He brings a broad knowledge and understanding of investor
issues and the financial services sector having previously served as Chief Investment Officer of Invesco Global, and holding senior
roles at fund management firms LGT and Morgan Grenfell. He was Chief Executive of Henderson Group plc and previously served as a
Non-Executive Director for F&C Asset Management plc. Roger will step down from the Board at the AGM on 15 October 2015.
Other current appointments: Roger is a Non-Executive Director of St James’s Place plc and JPMorgan Elect plc, as well as Chairman of
Electra Private Equity plc and Pioneer Global Asset Management SpA.
Committee Membership: Audit Committee, Board Risk Committee, Remuneration Committee and Nomination Committee.
STEPHEN HILL | NON-EXECUTIVE DIRECTOR | AGE: 55
Stephen joined the Board in April 2011. He brings significant and extensive board experience having previously served as the CEO
of Betfair plc and holding managerial roles at Pearson plc, including the role of CEO of the Financial Times Group. He was Chairman
of Interactive Data Corporation in the US as well as a member of the boards of Royal Sun Alliance Insurance Group plc, Psion plc and
Channel 4.
Other current appointments: Stephen is the Chairman and CEO of D’Aval, his family’s private investment company, and Trustee and
Chairman of the Royal National Institute for Deaf People – Action on Hearing Loss. He is also a member of the Advisory Board of
the Cambridge Judge Business School and a Non-Executive Director of Applerigg Limited and Aztec Limited, a fund administration
business, and of Ofcom.
Committee Membership: Board Risk Committee, Remuneration Committee and Nomination Committee.
SAM TYMMS | NON-EXECUTIVE DIRECTOR | AGE: 51
Sam joined the Board in May 2013. She began her career at the London Stock Exchange’s Surveillance Division, which over time became
the Securities and Futures Authority and eventually the Financial Services Authority. During that time, she held a range of supervisory
roles and worked for two years in the Investigations and Enforcement Division. As a supervisor, she ran departments overseeing global
investment firms, retail and investment banks and major insurance groups. Sam’s extensive experience in the regulatory field and her
knowledge of compliance matters provide a valuable contribution to the Board.
Other current appointments: Sam is currently a Managing Director at Promontory Financial Group, a leading strategy, risk
management and regulatory compliance consulting firm, where she advises financial services businesses on a wide range of risk and
regulatory matters.
Committee Membership: Board Risk Committee, Audit Committee and Nomination Committee.
JIM NEWMAN | NON-EXECUTIVE DIRECTOR | AGE: 50
Jim joined the Board in October 2013. A qualified Chartered Accountant, he was Finance Director for Resolution plc, having joined
the company as Group Financial Controller. Jim spent ten years at Aviva, where he was Group Integration Director for the CGU/
Norwich Union merger and Finance Director of Norwich Union Life, Aviva’s UK life insurance business. He was formerly the Corporate
Development Director for Friends Life Group, where his responsibilities included overseeing the final separation and integration of
the UK life business acquired by Resolution plc, as well as the delivery of the overall group change portfolio and strategic corporate
development. His in-depth knowledge and experience of the financial services sector, as well as his considerable experience both as a
CFO and in the implementation of transformation programmes, is proving invaluable to the Board.
Other current appointments: None.
Committee Membership: Board Risk Committee, Audit Committee and Nomination Committee.
57
IG Group Holdings plc Annual Report 2015| THE BOARD
The Board is responsible
for promoting and ensuring
the long-term success of the
Group through the creation
and delivery of sustainable
shareholder value.
LEADERSHIP
ROLE OF THE BOARD
The Board’s role is to provide guidance and entrepreneurial
leadership of the Company by setting the strategic direction
of the Group and overseeing management’s implementation
of the strategy within a framework of prudent and effective
risk controls. The Board is responsible for promoting and
ensuring the long-term success of the Group through the
creation and delivery of sustainable shareholder value.
The Board seeks to ensure that, while the ultimate focus is on
long-term growth, management also delivers on short-term
objectives and achieves the right balance between immediate
and future goals. When setting the Group’s strategy and
monitoring its implementation, the Board considers the
impact its decisions may have on various stakeholders, such
as suppliers, investors, employees and the environment as a
whole. It is accountable for ensuring that, as a collective body,
it has the appropriate skills, knowledge and experience to
perform its role effectively.
The powers of the Board are set out in the Company’s articles
of association, which are available on the Group’s website,
iggroup.com. The Board may exercise all powers conferred
on it by the articles and in accordance with the Companies
Act 2006 and other applicable legislation.
The Board maintains and periodically reviews a list of matters
that are reserved to, and can only be approved by the Board.
These include setting Group strategy; approval of major
acquisitions, divestments and capital expenditure; approval
of annual budgets; approval of changes to the Group’s
capital structure including reduction of capital; approval of
expansion plans into new business or geographies; reviewing
operational and financial performance; appointment and
termination of the Directors and Company Secretary; approval
of policies related to Directors’ remuneration and severance
of Directors’ contracts; ensuring adequate succession
planning for the Board and senior management; setting the
risk appetite of the Group and approval of any changes to the
Group’s risk management policy that materially increases the
Group’s risk profile.
58
A formal schedule of matters specifically reserved for the
Board’s decision can be found on the Group’s website.
The matters that have not been specifically reserved for the
Board are delegated to the Executive Directors. These include
the development, recommendation and implementation
of the strategic plans for the Group; the development and
implementation of the risk management systems, policies and
procedure; the promotion of a good standard of corporate
governance and shareholder engagement and monitoring the
Group’s operating and financial results.
BOARD STRUCTURE
The Board is made up of the Chairman, Executive Directors,
including the Chief Executive Officer, and independent
Non-Executive Directors.
The division of responsibilities between the Chairman and
the Chief Executive Officer is set out in writing and has been
approved by the Board.
Chairman
The Chairman is responsible for leading the Board and
creating the right conditions for its effective working
and overall governance. He sets the Board’s agenda, in
consultation with the Chief Executive Officer and Company
Secretary, taking full account of Board members’ issues and
concerns and the need to allow sufficient time for items on
the agenda to be discussed. It is the Chairman’s responsibility
to encourage and facilitate active engagement by Directors,
drawing on their skills, knowledge and experience. The
Chairman is also responsible for ensuring there is effective
communication with shareholders and other stakeholders,
and that Directors are aware and maintain an understanding
of their views. The Chairman works closely with the Chief
Executive Officer, Tim Howkins, to ensure that the strategies
and actions agreed by the Board are effectively implemented.
Chief Executive Officer
The Chief Executive Officer is responsible for recommending
the Group’s strategy to the Board, implementing the agreed
strategy and managing the day-to-day business of the Group.
The Board has delegated this responsibility to him, and he is
accountable to the Board.
Executive Directors
The Executive Directors support the Chief Executive Officer
in implementing the Group’s strategy and in the operational
performance of the business.
Non-Executive Directors
The Non-Executive Directors are independent of
management and are considered by the Board to be free
from any business or other relationships, which could
compromise their independence. Their role is to effectively
advise and constructively challenge management, along
with monitoring management’s success in delivering
the agreed strategy within the risk appetite and control
framework set by the Board. They are also responsible for
determining appropriate levels of remuneration for the
Executive Directors.
|IG Group Holdings plc Annual Report 2015 Senior Independent Director
The Senior Independent Non-Executive Director’s role is
to provide a sounding board for the Chairman and support
him in the delivery of his objectives. He serves as a trusted
intermediary for the other Directors when necessary. He
maintains an understanding of the major issues and concerns
of major shareholders and informs the Board of these
issues. The Senior Independent Non-Executive Director is
also available to shareholders if they have concerns which
communication via the normal channels of Chairman, Chief
Executive Officer or other Executive Directors has failed to
resolve, or when shareholders prefer to speak directly to
him. He is responsible for evaluating the performance of the
Chairman on behalf of the other directors.
Company Secretary
The Company Secretary, Bridget Messer, supports and works
closely with the Chairman, the Chief Executive Officer and
the Board Committee Chairmen in setting agenda items for
meetings of the Board and its committees. She ensures that
accurate, timely and high-quality information flows within
the Board, the Board Committees and between Directors
and senior management. In addition, she supports the
Chairman in the designing and delivery of Director induction
programmes. The Company Secretary also advises the Board
on corporate governance issues and Board procedures.
HOW THE BOARD OPERATES
The Board meets regularly at least five times a year – and
attends an additional off-site strategy day to review strategic
options open to the Group in the context of the economic
and regulatory environment. There were seven scheduled
Board meetings this year, including the annual strategy day.
The Board also meets when necessary to discuss important
ad-hoc emerging issues that require consideration between
scheduled Board meetings. Two such meetings were held
during the year. Each Director committed an appropriate
amount of time to their duties during the financial year, and
the Non-Executive Directors met the time commitment
specified in their letters of appointment. Where Directors are
unable to attend meetings, they are encouraged to give the
Chairman their views on the matters to be discussed.
The Chairman and Non-Executive Directors meet formally in
the absence of the Executive Directors at least twice a year.
There were three such meetings during the year.
ATTENDANCE AT BOARD MEETINGS
The number of full Board meetings attended by each Director
during the year, including the Board strategy day, is set
out below:
MEETINGS
ELIGIBLE TO
ATTEND
MEETINGS
ATTENDED
Chairman
Jonathan Davie*
Andy Green**
Independent Non-Executive Directors
Martin Jackson***
Stephen Hill
Jim Newman
Sam Tymms
Roger Yates
Executive Directors
Tim Howkins
Peter Hetherington
Christopher Hill
2
9
2
9
9
9
9
9
9
9
2
9
2
8
8
9
9
9
9
9
* Jonathan Davie retired as Chairman of the Company on 16 October 2014
** Andy Green was appointed as the Deputy Chairman of the Company on
9 June 2014 and as Chairman from 16 October 2014
*** Martin Jackson retired from the Board on 16 October 2014
BOARD ACTIVITIES DURING THE YEAR
The Board meeting agendas during the year included
business across the key areas of strategy, governance, risk and
financial performance, as highlighted in the following chart.
In addition to regular reviews of performance, the Board
discussed risk appetite, capital and liquidity planning and
talent management, including succession planning.
BOARD ALLOCATION OF TIME
Quarterly forecast
and budget
Strategy
Business, operational
highlights and current
trading
Risk and governance
Financial performance
Other
59
IG Group Holdings plc Annual Report 2015|
THE BOARD
(CONTINUED)
BOARD COMMITTEES
Certain governance responsibilities have been delegated
by the Board to Board Committees to ensure that there
is independent oversight of internal control and risk
management and to assist the Board with carrying out
its responsibilities. These Board committees comprise
independent Non-Executive Directors and, in some cases,
the Chairman. Each committee has agreed terms of reference
approved by the Board, which are available on our corporate
website, iggroup.com
A brief description of the roles of each Committee is set
out below.
The Chairman of each Board committee reports to the
Board on the matters discussed at committee meetings,
and the minutes of each committee meeting are made
available to all Directors. Reports from the Chairman of each
Board committee, including information on the committee’s
composition and activities in the year, can be found in the
sections relating to each committee within this Annual Report.
AUDIT COMMITTEE
BOARD RISK COMMITTEE
Responsible for:
Responsible for:
Integrity of the financial statements of the Group,
including its annual and interim reports.
Reviews and recommends to the Board:
The effectiveness of the Group’s Internal Audit
function and risk management system, annual
internal audit plan, appointment,
re-appointment and removal of the
external auditors.
Providing oversight and advice to the Board in relation
to current and future risk exposures of the Group and
promoting a risk awareness culture within the Group.
Reviews and recommends to the Board:
The design and implementation of risk management
policy and measurement strategies
across the Group, the Group’s risk
profile, risk appetite and key risk
indicators for the current and future
strategy.
BOARD
COMMITTEES
NOMINATION
COMMITTEE
Responsible for:
Reviewing the composition of the Board and Board
Committees to ensure that they are appropriately
balanced in terms of knowledge, skills and experience.
Reviews and recommends to the Board:
Appointments to the Board and to other senior
management positions.
REMUNERATION
COMMITTEE
Responsible for:
Making recommendations to the Board on the Group’s
senior executive remuneration policy.
Reviews and recommends to the Board:
The Group’s remuneration policy which is consistent
with effective risk management, the framework for the
remuneration of the Company’s Chairman and executive
directors and all share-based awards under the Group’s
Employee Incentive Scheme.
60
|IG Group Holdings plc Annual Report 2015 EFFECTIVENESS
BOARD COMPOSITION
The Board’s size and the skills and experience of its members,
have a significant impact on its effectiveness. It aims to
maintain a balance in terms of experience and skills of
individual Board members. These factors are regularly
reviewed to ensure that the Board has the right mix of skills
and experience for constructive discussion and, ultimately,
effective Board decisions.
INDUSTRY/BACKGROUND EXPERIENCE (1)
NUMBER OF
DIRECTORS
(EXECUTIVE AND
NON-EXECUTIVE)
AND NON-EXECUTIVE
CHAIRMAN
7
3
5
4
4
4
4
4
EXPERIENCE
Financial services
Accountancy/Finance expert
Regulatory
Marketing
PR
IT
Current or recent
Chief Executive Officer or
Chairman
Prior plc experience
(1) Individual Directors may fall into one or more categories.
There is an appropriate combination of Executive
Directors and Non-Executive Directors such that no
individual or small group of individuals can dominate the
Board’s decision-making.
DIRECTOR INDEPENDENCE
The Company is fully compliant with the UK Corporate
Governance Code, which requires that at least half of the
Board, excluding the Chairman, should comprise Non-
Executive Directors who are determined by the Board to
be independent.
The independence of the Non-Executive Directors is
considered by the Board and reviewed on an annual basis, as
part of the Board effectiveness. The Board considers factors
such as length of tenure and relationships or circumstances,
which are likely to affect or appear to affect the Director’s
judgement in determining whether they remain independent.
Following this year’s review, the Board concluded that all of
the Non-Executive Directors continue to remain independent
in character and judgement and are free from any business or
other relationships, which could materially affect the exercise
of their judgement.
COMPOSITION OF EXECUTIVE AND INDEPENDENT
N0N-EXECUTIVE DIRECTORS ON THE BOARD
1
3
4
Independent
Non-Executive Chairman
Executive Directors
Independent
Non-Executive Directors
CONFLICTS OF INTEREST
Directors have a statutory duty to avoid situations in which
they may have interests that conflict with those of the
Company, unless that conflict is first authorised by the Board.
Directors are required to disclose both the nature and extent
of any potential or actual conflicts with the interests of
the Company.
In accordance with the Companies Act 2006, the Company’s
articles of association allow the Board to authorise potential
conflicts that may arise, and to impose such conditions or
limitations as it sees fit. During the year, potential conflicts
were considered and assessed by the Board and approved
where appropriate.
SUCCESSION PLANNING AND APPOINTMENTS TO
THE BOARD
The Board uses succession planning to ensure that Executives
with the necessary skills, knowledge and expertise are in
place to deliver our strategy, and that it has the right balance
of individuals to be able to discharge its responsibilities.
The Board regularly reviews its composition to keep it
constantly refreshed. Any searches for Board candidates,
and appointments made, are based on merit against
objective criteria.
The Nomination Committee has specific responsibility for
the appointment of Non-Executive and Executive Directors
and it recommends new appointments to the Board. It
regularly reviews the structure, size and composition required
of the Board and makes recommendation to the Board as
appropriate. More information on the work of the Committee
can be found in the report of the Nomination Committee
on pages 66 to 67. The Board as a whole is also involved
in overseeing the development of management resources
across the Group.
LENGTH OF TENURE OF NON-EXECUTIVE DIRECTORS
3
1
1
0-3 years
3-6 years
6-9 years
61
IG Group Holdings plc Annual Report 2015| THE BOARD
(CONTINUED)
His induction programme also included meetings with other
Directors, Company heads and visit to global offices of the
Group. He also attended meetings of all the committees of
which he is not a member to assess the framework in which
the committees operate and for a better understanding of the
work of the Committees.
ONGOING PROFESSIONAL
DEVELOPMENT
Given the rapidly changing environment in which the
Group operates, all Directors are given regular updates on
changes and developments in the business. The Company
Secretary on a regular basis updates the Board on any
relevant legislative, regulatory and governance changes. A
professional development programme is in place to enable
Directors to fulfil their roles and personal development logs
are maintained for each Non-Executive Director.
Training opportunities are provided through internal
meetings, presentations and briefings by internal advisers,
business heads as well as external advisers. During the year,
the Directors attended briefing sessions on cyber security
and risks, the Group’s mobile apps development business,
generic top-level domains (gTLDs) and the newly launched
stockbroking business.
The Chairman ensures that the Directors continually update
and refresh their skills and knowledge, and independent
professional advice is provided when required, at the
Company’s expense.
INFORMATION PROVIDED TO THE BOARD
The board has full and timely access to all relevant
information to enable it to perform its duties effectively.
INDUCTION
On appointment, each new Director receives a full and
formal bespoke induction to familiarise them with their
duties and the Company’s business operations, risk and
governance arrangements. The induction programme,
which is coordinated by the Company Secretary, includes
briefings on regulatory matters relating to the Company, as
well as meetings with senior management in key areas of the
business, such as compliance, legal, IT, human resources,
finance, risk, marketing and investor relations. These are
supplemented by induction materials such as recent Board
papers and minutes, organisation structure charts, history
of the Group, industry and regulatory reports and relevant
company policies. Newly appointed Directors also meet
the company’s external auditors and corporate brokers and
attend a presentation led by Linklaters on the roles and
responsibilities of a UK-listed company director.
Inductions are tailored to each Director’s individual
experience, background and areas of focus.
Chairman’s induction
Andy Green’s induction programme took into account his
later leadership role as Chairman and among other things,
included the following:
COMPANY STRUCTURE, HISTORY, STRATEGY AND BUSINESS
• Briefing on Group history, strategy, including opportunities and threats, strategy and business model analysis and
strength, challenges and risks to the strategy and its implementation
•
Material business lines and markets, including international markets and future plans.
GOVERNANCE, REGULATORY AND RISK
• Board and Board Committees terms of reference, Board and Committee procedure, listing obligations and market abuse
responsibilities
Regulatory framework and proposals impacting the business
Risk appetite, key risks and priorities, risk management and its effectiveness and Stress testing/Scenario planning
PRODUCTS, FINANCE, MARKETING AND SHAREHOLDER ENGAGEMENT
IG’s various products, markets in which clients can trade
Business plan, Standalone and consolidated balance sheets, budgeting process and financial projections
Meeting with top shareholders, analysts and brokers
•
•
•
•
•
62
|IG Group Holdings plc Annual Report 2015 The Company Secretary ensures appropriate and timely
information flows within and to the Board and its committees,
enabling the Board to exercise its judgement and make fully
informed decisions when discharging its duties. 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 compliance with
applicable rules and regulations is observed. The Company
Secretary supports the Chairman in setting the Board
agenda, and Board papers are distributed to all Directors in
advance of Board meetings via a secure electronic system.
The Company Secretary is also responsible for advising the
Board, through the Chairman, on all corporate governance
matters. Directors receive financial and risk information on the
company on a monthly basis, and they receive briefings from
the Chief Executive Officer in the periods between meetings.
RE-ELECTION OF DIRECTORS
The UK Corporate Governance Code requires that all
directors of FTSE 350 companies should be subject to
annual election by shareholders. Each Director and the Board
as a whole underwent a performance evaluation during
the course of the year. Following this, all Directors, with
the exception of Roger Yates and Tim Howkins who will be
stepping down at the Company’s Annual General Meeting
(AGM) on 15 October 2015, will stand for re-election at
the AGM.
BOARD EVALUATION
Each year, an evaluation of the effectiveness of the Board
is carried out to monitor and, where necessary, make
improvements to the performance of the Board. In 2014, an
internal evaluation was carried out and, in response to the
findings, the following actions have been taken:
The UK Corporate Governance Code and the Financial
Reporting Council’s guidance on Board effectiveness
recommend that the annual performance review of the Board
should be externally facilitated every three years. To this end,
in 2015, the Board engaged Lintstock Limited to assist with
the evaluation of its own performance, that of its Committees
and individual Directors. Lintstock has no other connection
with the Company.
The first stage of the review involved Lintstock engaging with
the Chairman and the Company Secretariat to set the context
for the evaluation, and to tailor the surveys used to the
specific circumstances of IG Group. All Board members were
requested to complete a web-based survey addressing the
performance of the Board and its Committees, the Chairman
and individual Director performance. The review addressed
the following core areas of Board performance:
• The composition of the Board was assessed, and the key
changes that ought to be made over the next 12 - 24
months, and over the next 3 - 5 years given the Group’s
strategic goals in particular, were considered.
• The Non-Executive involvement in the affairs of the Group
outside meetings was considered, and the relationships
between the members of the Board, and between the
Board and management, were reviewed.
• The time management at meetings was addressed, as was
the quality of the presentations made by management
to the Board. The quality of the Board packs provided in
advance of meetings was also considered.
• The role of the Board in testing and developing strategy
was assessed, as was the Board’s oversight of the strategic
plan. The Directors’ views as to the top strategic issues
facing the company were identified.
THEME
ACTION TAKEN
• The Board’s attitude towards risk was reviewed, as was the
management of the main risks to the business.
• The structure of the Group at senior levels was considered,
and the succession planning for Executive Directors,
and the Board’s visibility of potential successors for key
positions from within the business, were addressed.
Further to these core topics, the review also included a
case study on the Board’s 2015 strategy day, addressing
the management of time, the documentation provided in
advance and the quality of the sessions during the day.
THE NEED TO
INCREASE
THE LEVEL OF
FOCUS ON THE
LONG-TERM
COMPOSITION
OF THE BOARD.
THE BOARD TO
PLAY A MORE
ACTIVE ROLE
IN TALENT
MANAGEMENT
AND
SUCCESSION
PLANNING
FOR SENIOR
EXECUTIVES.
THE NEED
TO REVIEW
MANAGEMENT
INFORMATION
PRESENTED TO
THE BOARD.
Succession planning for executive
and non-executive roles on the Board
was a main focus of the Nomination
Committee in the year. The Board
skills matrix was reviewed to identify
the skills and experience required
to match the long-term strategy of
the Company.
There has been a greater focus
on succession planning with the
Board receiving presentations from
Executives on succession planning
for senior management. In addition,
further opportunities are being
created for the Board to engage
with senior management by way of
pre-Board dinner presentations.
There has been continuous
improvement on the quality and
clarity of papers presented to the
Board. Each paper is accompanied
with a summary setting out the key
issues for the Board.
63
IG Group Holdings plc Annual Report 2015| ENGAGEMENT WITH SHAREHOLDERS
The Board recognises the importance of maintaining good
communication with the Company’s shareholders, and we
have a comprehensive programme to facilitate this each year.
Our Annual Report is an important medium for
communicating with shareholders, setting out detailed
reviews of the business and its future developments in the
Chairman’s Statement, the Chief Executive Officer’s Review
and the Strategic Report.
In order to ensure that the members of the Board develop
an understanding of the views of major shareholders, there is
regular dialogue with institutional investors and shareholders,
presentations by management and Investor Roadshows
around the time of the Group’s year-end and half-year results
announcements. These are coordinated by our Investor
Relations team. We make these presentations available in
real time on the Group’s website, which also provides a wide
range of other information to shareholders and prospective
shareholders. We also respond to ad hoc requests from
shareholders on a very regular basis.
Meetings with the Company’s largest institutional
shareholders and market analysts are held to discuss
governance, business strategy and financial performance by
the Chairman and the Executive Directors. Non-Executive
Directors are also available to meet and hear the views of the
institutional shareholders when required.
THE BOARD
(CONTINUED)
Lintstock subsequently produced a report of its findings
that were discussed with the Chairman. Overall, the results
indicate that the Board is operating effectively with a number
of areas reviewed, rated positively. The top priorities for the
Board in the coming year include:
• The need to continually manage succession
planning processes;
• The need to consider the amount of time allocated to
strategy and its implementation in the annual cycle of
work; and
• Continuous improvement on the information provided to
the Board ahead of meetings.
The outcome of the performance review will be discussed at a
Board meeting with a view to developing actions to be taken
on the recommendations. We will report on actions taken and
progress made in next year’s Annual Report.
Led by Roger Yates, the Senior Independent Director, a
review of the Chairman’s performance was carried out by
the Board using a questionnaire completed by the Executive
Directors and the Non-Executive Directors. The performance
of the Chairman was discussed with the Board without the
Chairman present.
The evaluation of the performance and contribution of
each Director was conducted by the Chairman in individual
discussions referencing a self-performance review
questionnaire completed by each Director.
The reviews concluded that each Director continues to
perform effectively and demonstrate commitment to the role.
64
|IG Group Holdings plc Annual Report 2015 Following all investor presentations and meetings, feedback
is passed to the Board on any opinions or concerns expressed
by shareholders. The Directors receive regular updates on
shareholder views, roadshow feedback as well as analysts’
reports on market perception of the Group’s performance and
strategy, and are made aware of the financial expectations
of the Group from the outside market. The Board also
receives an Investor Perception study to identify shareholders’
concerns and actions undertaken for its resolution.
The Chairman and the Senior Independent Non-Executive
Director are available to meet shareholders on request,
and ensure that the Board is aware of shareholder concerns
not resolved through other communication mechanisms.
The Chairman and the Senior Independent Non-Executive
Director provide feedback to the Board on any views or
concerns expressed to them by shareholders.
AGM
The AGM provides the Board with the opportunity to
communicate with private and institutional investors and we
welcome and encourage their participation at the meeting.
The Chairman aims to ensure that all the Directors, including
the Chairmen of the Board Committees, are available at
the AGM to answer questions. We send the Annual Report
and notice of the AGM to shareholders, or make them
available on the Group’s website, at least 20 working days
before the date of the meeting. The Notice of AGM sets
out a clear explanation of each resolution to be proposed
at the meeting. Shareholders have the opportunity to ask
questions and, if they are unable to attend, can submit written
queries in advance of the meeting. At the meeting, we will
make available to shareholders full details of the proxy votes
received on each resolution, and we will publish these on the
Company’s website on the same day.
The 2014 AGM was a successful event attended by all the
Directors. Jonathan Davie and Martin Jackson did not
seek re-election and stepped down from the Board of the
Company. All the proposed resolutions were passed with the
percentage of votes in favour of each resolution ranging from
94.35% to 99.90%.
The 2015 AGM will be held on 15 October 2015. The Notice
of the Meeting sets out the resolutions to be proposed at the
meeting. A copy of the Notice is available on the Company’s
website iggroup.com.
65
IG Group Holdings plc Annual Report 2015| NOMINATION
COMMITTEE
Andy Green, Chairman of
the Nomination Committee,
gives his review of the
committee’s activities during
the financial year.
66
CHAIRMAN’S OVERVIEW
It essential that the Board is well balanced in terms of
structure, skill, experience, diversity and knowledge to enable
the Company to achieve its objectives and long-term strategy.
The Nomination Committee is responsible for identifying
and recommending suitable candidates for appointment
to the Board to ensure that its composition in this regard
meets the Company’s needs. We maintain and implement
an effective succession plan to ensure that the Board is
progressively refreshed.
COMMITTEE MEMBERSHIP AND ATTENDANCE
The committee consists of independent Non-Executive
Directors and meets as necessary to discuss appointments to
the Board. The Chairman of the Board is also the Chairman
of the committee and the Company Secretary acts as the
Secretary of the committee. The Chief Executive Officer
also attends, but is not involved in decisions relating to his
own succession.
During the year the committee met three times to consider
Board composition and succession planning.
ROLE OF THE NOMINATION COMMITTEE
The role and responsibilities of the committee include:
• Reviewing the composition of the Board and Board
Committees to ensure that they are appropriately balanced
in terms of skills, knowledge diversity and experience
• Ensuring that there is a formal, rigorous and transparent
procedure for the appointment of new Directors
• Identifying and nominating for approval by the Board,
suitable candidates to fill Board vacancies as and when
they arise
• Ensuring that plans are in place for orderly succession,
for appointments to the Board and to other senior
management positions.
The Terms of Reference of the committee are available on the
Group’s website, iggroup.com.
ACTIVITY DURING THE FINANCIAL YEAR
In October 2014, I succeeded Jonathan Davie as the
Chairman of the Board and of the Nomination Committee.
We also announced that Roger Yates will be stepping down
from the Board following the AGM in October. During the
year, the committee’s main focus has been on the search for
a candidate to replace Roger as Senior Independent Director
(SID) and as Chairman of the Remuneration Committee.
Zygos Partnership, an executive search firm which has no
other connection with the Company, was engaged following
a selection process to assist with the search for a suitable
candidate. The committee prepared a candidate specification
based on objective criteria setting out the knowledge, skill,
experience and attributes required.
| SCHEDULED
MEETINGS
ELIGIBLE TO
ATTEND
SCHEDULED
MEETINGS
ATTENDED
These include among others;
• Having served on the board of a listed company either as an
executive or a Non-Executive Director,
Chairman of the Nomination Committee
1
Jonathan Davie*
3
Andy Green**
• Having knowledge and experience of UK governance
requirements and a good understanding of the current
regulatory environment;
• Having a deep insight around how the investor community
Independent Non-Executive Directors
Martin Jackson***
Jim Newman
Roger Yates
operates; and
Stephen Hill
• Having the ability to be able to commit the time required for
Sam Tymms
1
3
3
3
3
1
3
1
2
3
3
3
the role.
From the candidate specification, a longlist of potential
candidates was drawn up from which a shortlist was compiled.
Candidates on the shortlist were interviewed by me and the
Chief Executive following which a proposal was made to
the committee on the candidates. Briefing reports on the
shortlisted candidates were reviewed by the committee and
the candidates were interviewed by Executive members of the
Board and by members of the committee. It is expected that
an appointment will be made shortly.
In addition to the search for a replacement for Roger
Yates, the committee also commenced the search for a
Non-Executive Director with digital experience following a
discussion around long-term Board composition prompted
by the 2014 Board evaluation. Russell Reynolds Associates, an
executive search firm which has no other connections with the
Company, was engaged to assist with the search. As with the
search for a replacement SID, a candidate specification was
prepared, taking into account the desired skills, knowledge
and experience required for the role. We also specified
that candidates must be able to give the necessary time
commitment. Russell Reynolds Associates prepared a longlist
of potential candidates following which a shortlist of candidates
was interviewed by me and the Chief Executive. It is expected
that an appointment will be made shortly.
Following the announcement that Tim Howkins will be retiring
from the Board as a director and Chief Executive Officer at
the 2015 AGM in October, we have commenced a search and
selection process for his successor. We will report fully on this
process in next year’s annual report.
During the year, the committee reviewed membership of the
Board Committees in light of the retirements of Jonathan
Davie and Martin Jackson. Following the committee’s
recommendation and with the Board’s approval, I joined the
Remuneration Committee in September 2014. In addition,
Sam Tymms, Stephen Hill and myself joined the Nomination
Committee in September 2014.
COMMITTEE EVALUATION
In addition to overseeing appointments to the Board, an
evaluation of the performance of the committee and its
members was undertaken in line with the committee’s
Terms of Reference. The evaluation process was externally
facilitated by Lintstock Limited as part of the overall annual
Board effectiveness review. The evaluation concluded that
the committee operates effectively and its performance
* Jonathan Davie stepped down from the committee on 16 October 2014
** Andy Green became the Chairman of the committee on 16 October 2014
*** Martin Jackson stepped down from the committee on 16 October 2014
NOMINATION COMMITTEE ALLOCATION OF TIME
Board Composition
Succession Planning
Other
was positively rated overall. The committee, however, could
improve its performance by operating with greater formality.
DIVERSITY STATEMENT
As a business, we are committed to maintaining a diverse
workforce at all levels across the Company, and more
information on how we do this can be found in the
Our People section, on page 33.
The Directors understand the significant benefits that come
with having a diverse Board. We recognise the importance
of gender diversity on the Board, however, we believe that
diversity is a wider issue and includes variations in experience,
skills, personal attributes and background. Nonetheless, we
aspire to achieve 25% female representation on the Board.
We will continue to appoint on merit, based on the skills and
experience required for membership of our Board, while
giving consideration to gender diversity when the committee
reviews the Board’s composition. For appointments to the
Board, we use executive search firms who have signed up to
the voluntary code of conduct setting out the key principles
of best practice in the recruitment process. These principles
include a recommendation that search firms should consider
gender diversity and we insist on having both male and
female candidates when drawing up longlists and shortlists
of candidates.
Andy Green
Chairman, Nomination Committee
21 July 2015
67
IG Group Holdings plc Annual Report 2015| REMUNERATION
COMMITTEE
Roger Yates,
Chairman of the
Remuneration Committee,
gives his review of the
committee’s activities
during the financial year.
68
|
CHAIRMAN’S OVERVIEW
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 May 2015.
The overall structure of the executive remuneration package
and the principles that underpin it have not changed and,
therefore, we will continue to operate with the Directors’
remuneration policy that has been in place since June 2013
and was approved in a binding vote by over 96% of our
shareholders at the AGM in 2014.
There will be a single advisory vote at this year’s AGM with
regards to this annual statement and the Annual Report on
Remuneration that details both amounts paid in respect of
the year ending 31 May 2015 and the intended operation of
the remuneration policy for the coming year. I hope you agree
that how we have rewarded our executives is commensurate
with the Company’s performance and that you will support
this year’s resolution at the forthcoming AGM.
THE BUSINESS CONTEXT IN 2015
Over the last year, IG invested significantly in longer-term
strategic projects, including the launch and roll-out of
stockbroking in the UK and, internationally, expansion into
Switzerland and Dubai and increased emphasis on mobile
technology. Against this backdrop underlying revenue for
2015 was £400.2 million, which represents an 8% increase
on 2014, and underlying diluted earnings per share (DEPS)
increased by 2% to 41.07 pence per share. Statutory diluted
earnings per share of 35.99 pence are lower than the prior
year primarily due to the impact of the unpegging of the
Swiss franc in January. The Board made clear at the time of
the first-half results in January its intention to hold the full-year
dividend flat on the prior year at 28.15 pence per share. The
Board’s recommendation of a final dividend of 19.70 pence
per share demonstrates the confidence in the underlying cash
generation of the business.
REMUNERATION OUTCOMES FOR 2015
The year to 31 May 2015 is the second year of the executive’s
variable remuneration being awarded under the Sustained
Performance Plan (SPP). In respect of performance for the
period ended 31 May 2015, the committee has awarded 41%
of the maximum potential award under the SPP compared
with 54% in the prior year. The overall SPP outcome is lower
than last year primarily as a result of the negative impact on
performance of the financial losses resulting from the Swiss
franc event in January 2015 on both the earnings per share
(EPS) and the non-financial performance measures. However,
relative total shareholder return against the benchmark has
been stronger than that for the prior year and performance
against non-financial metrics has, overall, remained strong.
We consider this award to be reflective of performance and
the business context as set out above.
| The 2015 award under the SPP is driven by three metrics:
• EPS – 45% of the maximum potential award based on 2015
annual performance. The diluted earnings per share target
range for 2015 was set by the committee at 40.18 pence
to 44.20 pence, with a linear relationship between. The
unadjusted statutory DEPS has been used for the purposes
of performance assessment for the SPP. While the Swiss
franc event was exceptional in both size and nature and
use of the underlying EPS would have resulted in a partial
award, adjustment of the statutory earnings was not
deemed to be appropriate. Accordingly, the statutory EPS
of 35.99 pence was below the threshold and none of this
element will be awarded.
• TSR – 35% of the maximum potential award based on
the two-year performance period ending 31 May 2015.
The Company’s TSR over this period of 48.2% ranked the
Company 98th out of 291 FTSE 350 companies (excluding
Investment Trusts); as a result, 74.5% of this element will
be awarded.
• Non-financial metrics – 20% of maximum potential award
based on a suite of non-financial and delivery objectives
relating to the 2015 financial year. The committee has
considered the Company’s execution and delivery of
key strategic initiatives and performance against key
quantitative and qualitative non-financial metrics. A
detailed explanation of the Company’s performance against
the non-financial metrics is discussed at page 84. Overall,
the committee has concluded that 76% of this element will
be awarded.
We remind shareholders that, as was the case last year, the
SPP is the Company’s only Executive Director incentive plan
for 2015, replacing both the annual bonus and long-term
incentive plans.
2015 also marked the end of the performance period for the
2012 awards made under the previous long-term plan, the
Value Sharing Plan. None of this award vested, despite strong
TSR over the three-year period of 88%, and as a result of the
impact of the Swiss franc event on statutory PBT.
The committee considers that shareholders deserve thorough
disclosure on remuneration. To this end, the Company has
set out extensive explanation of the judgements it has made
in granting the above awards. This disclosure is set out in the
Annual Report on Remuneration at page 84.
The committee is regularly informed of potential changes to
remuneration regulations that could impact the current policy.
In particular, we are mindful of the impact of the European
Banking Authority’s current consultation on changes to its
guidelines that would remove the proportionality exemptions
for certain companies. The proposed changes to the
proportionality principle are likely to require amendments
to the Group’s Sustained Performance Plan and overall
remuneration policy. With this in mind, the committee is
conscious of the need to consult with shareholders at an early
stage and we will do so in advance of any material change to
the remuneration policy, if required.
SCHEDULED
MEETINGS
ELIGIBLE TO
ATTEND
SCHEDULED
MEETINGS
ATTENDED
Chairman of the Remuneration Committee
Roger Yates
4
Independent Non-Executive Directors
Stephen Hill
Jonathan Davie*
Martin Jackson**
Andy Green***
4
2
2
4
4
3
2
2
4
* Jonathan Davie stepped down from the committee on 16 October 2014
** Martin Jackson stepped down from the committee on 16 October 2014
*** Andy Green attended two meetings by invitation
REMUNERATION COMMITTEE ALLOCATION OF TIME
Salary and Bonus
Scheme Arrangements
Incentive Awards
Remuneration regulation
Remuneration reporting
Remuneration policy
Other
IMPLEMENTATION OF REMUNERATION
POLICY FOR 2015
Finally, the committee has recommended a 3% base salary
increase for the Executive Directors to take effect from 1
June 2015. The general increase for employees across the
group was approximately 4%. Over the last few years our
Chief Operating Officer, Peter Hetherington, has received a
reduced salary (at 80% of the annual equivalent) to reflect his
flexible working arrangements. From this year, Peter will revert
to normal working arrangements and therefore the reduced
salary will no longer apply.
For 2016, the committee will use the same SPP metrics
described above, with the same weightings. Accordingly,
EPS will drive 45% of the maximum potential award, with
relative TSR and non-financial metrics accounting for 35% and
20% respectively.
In relation to the EPS targets, as with past years, the
committee has used a set of internal and external reference
points. The target range will be disclosed and explained in
next year’s remuneration report.
I hope that you will support the advisory vote on the
remuneration resolution at the AGM. If, in the meantime, you
have any questions regarding our remuneration report then
we will be pleased to consider them.
Roger Yates
Chairman, Remuneration Committee
21 July 2015
69
IG Group Holdings plc Annual Report 2015| DIRECTORS’
REMUNERATION REPORT
The Remuneration Committee’s
objective is to ensure remuneration
encourages, reinforces and rewards
the delivery of shareholder value.
As such, it has implemented a
remuneration policy which provides
a framework for making decisions,
including those covering the
remuneration of Executive Directors.
PREPARATION OF THE DIRECTORS’
REMUNERATION REPORT
Our Directors’ Remuneration Report covers the remuneration
of the Executive and Non-Executive Directors of IG Group
Holdings plc. In line with the regulations governing the
disclosure and approval of directors’ remuneration, the report
is split into three sections: an annual statement from the
Chairman of the Remuneration Committee, the Directors’
Remuneration Policy and an Annual Report on Remuneration.
The disclosures required under Article 450 of the Capital
Requirements Regulation are provided on the corporate
website and accordingly are not detailed within the Directors’
Remuneration Report.
Unless otherwise stated, information and disclosures within
the Directors’ Remuneration Report are unaudited. The
regulations require the Company’s auditors to report on
the audited information in the report and to state that this
section has been properly prepared in accordance with these
regulations. The audited sections, which fall within the Annual
Report on Remuneration, have been clearly identified.
This following part of the Remuneration Report sets out the
Directors’ Remuneration Policy as approved by shareholders
at the 2014 Annual General Meeting. Although not required
by the reporting regulations, the substantive terms of the
Directors’ Remuneration Policy are reproduced here for
ease of reference. Any details, however, that were specific to
2014 or earlier years (including, for example, any disclosures
relating to particular Directors and the remuneration
scenarios charts) have been updated, where applicable, to
reflect the current position. There is no vote on the Directors’
Remuneration Policy at the 2015 Annual General Meeting as it
is unchanged.
DIRECTORS’ REMUNERATION POLICY
The role of the Remuneration Committee
The committee is responsible for making recommendations
to the Board on the Group’s senior executive remuneration
policy. Operating within defined and agreed terms of
reference, it determines an overall remuneration package
for the Executive Directors in order to attract and retain
high-quality Directors capable of achieving the Group’s
objectives. The committee’s terms of reference can be found
on our corporate website at iggroup.com.
The committee sets and agrees with the Board a competitive
and transparent remuneration framework which is aligned
to the Company strategy and is in the interests of both
the Company and its shareholders. The committee
determines the contractual terms, remuneration and other
benefits for each of the Executive Directors, including
performance-related incentive arrangements, pension rights,
compensation payments and share-incentive awards.
The committee’s other responsibilities are to:
• Determine and review the Group’s remuneration policy,
ensuring it is consistent with effective risk management
across the Group, and to consider the implications of this
remuneration policy on risk
• Determine and agree the policy for the remuneration of the
Board Chairman and the Executive Directors
• Review and note pay and employment conditions and the
remuneration trends across the Group
• Approve all share-based awards under the Group’s
employee incentive schemes, to determine each year
whether awards will be made and, if awards are made, to
monitor their operation, the size of such awards and the
performance targets to be used
• Establish the selection criteria, appoint and set the terms
of reference for any remuneration consultants who advise
the committee
70
|IG Group Holdings plc Annual Report 2015 In line with new regulations governing the disclosure and
approval of directors’ remuneration, our Directors’ Remuneration
Report is split into two sections:
Directors’ Remuneration Report
Directors’ Remuneration Policy
Annual Report on Remuneration
70
82
• Monitor regulatory developments, including those affecting
UK-listed companies and financial services firms, to ensure
the Company’s remuneration policy is consistent with these
value both for the Company and the shareholders. Likewise,
failure to achieve, individually or at Company level, will not
be rewarded.
The committee is also mindful of ensuring that there is an
appropriate balance between the level of risk and reward
for the individual, the Company and for our shareholders.
When setting levels of variable remuneration, the degree
of stretch in performance conditions and the balance of
equity and cash within a package, consideration is given
to obtaining the appropriate balance of each so as not to
encourage unnecessary risk-taking. As well as financial risk,
the committee also ensures that there is an appropriate focus
on regulatory and governance matters.
The total remuneration package is structured so that a
significant proportion is linked to performance conditions,
and it is the Company’s policy to ensure that a high
proportion of the potential remuneration package is provided
via share-based instruments. This ensures that executives
have a strong ongoing alignment with shareholders through
the Company’s share price performance.
The table on pages 72-77 summarises each element of the
remuneration policy for the Executive Directors, explaining
how each element operates and how each part links to the
corporate strategy.
The Board determines the remuneration of
Non-Executive Directors.
Objectives of the remuneration policy
The Remuneration Committee’s objective is to ensure
remuneration encourages, reinforces and rewards the
growth of shareholder value. As such, it has implemented a
remuneration policy which provides a framework for making
decisions, including those covering the remuneration of
Executive Directors. The remuneration policy is set to ensure
that remuneration has the ability to attract and retain senior
executives of a high calibre, remains competitive and provides
appropriate incentive for performance.
The committee has agreed that all matters relating to
remuneration of Group employees should:
• Align with the best interests of the Company’s shareholders
and other stakeholders
• Recognise and reward good and excellent performance of
employees that helps drive sustainable growth of the Group
• Focus on retaining high-performing senior management
• Be consistent with regulatory and corporate
governance requirements
• Be designed to achieve effective risk management
• Be straightforward, easy for employees to understand and
easy for the Group to monitor
• Not be used to reward behaviour that inappropriately
increases the Group’s exposure to risks
The committee considers that a successful remuneration
policy needs to be sufficiently flexible to take account of
future changes in the Company’s business environment and
in remuneration practice. There must be transparency and
alignment to the delivery of strategic objectives at both a
Company and an individual level. There must also be scope
to reward for exceptional effort and achievement that delivers
71
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
KEY ELEMENTS OF REMUNERATION
PURPOSE AND LINK TO STRATEGY
OPERATION
OPPORTUNITY
PERFORMANCE METRICS
BASE SALARY
Provides a sound basis on which to recruit and retain
key employees of appropriate calibre to deliver the
strategic objectives of the Company.
Salaries are normally reviewed by the committee annually,
and are usually fixed for 12 months commencing 1 June.
Any salary increase may be influenced by:
Reflects the market value of the role and the post-
holder’s experience, competency and performance
within the Company.
• Scale, scope and responsibility of the role
• Experience of the individual and his or her performance
• Average change in wider workforce pay
• Business performance and prevailing market conditions
• Commercial need
• Periodic benchmarking of similar roles at comparable
companies selected on the basis of comparable size,
complexity, geographic spread and business focus
The general policy is to pay around
No performance metrics apply to base salary.
No recovery or
RECOVERY OR
WITHHOLDING
withholding applies to
base salary.
BENEFITS
Competitive, cost-effective benefits to help recruit and
retain Executive Directors and senior management.
PENSION
Market-competitive, cost-effective retirement benefits
attract and retain executives.
Benefits may include, for example, private medical
insurance, discounted health club membership and
life assurance.
Cash alternatives may be provided for any or all of these
benefits, depending on individual circumstances.
Relocation and related benefits may be offered where a
Director is required to relocate.
The aim is to provide market-competitive
No performance metrics apply to benefits.
No recovery or
withholding applies
to benefits.
The Group contributes to Executive Directors’ personal
pension plans. Executives have the option to receive part,
or all, of their pension contribution as a cash allowance in
lieu of Company pension contributions.
The company may contribute up to 15%
No performance metrics apply to
of base salary to pension, an equivalent
retirement benefits.
cash allowance in lieu, or a mixture
of both.
No recovery or
withholding applies to
retirement benefits.
72
mid-market levels, with annual increases
typically in line with the wider workforce.
Increases beyond the percentage
increases granted to the wider
workforce may be awarded in
exceptional circumstances,
such as:
• Where there is a change in the
individual’s responsibility
• Where the salary set at initial
appointment was below the level
expected once the individual gains
further experience and a track record
of performance in the role
An above-market positioning may be
appropriate, in exceptional circumstances,
to reflect the criticality of the role and the
individual’s experience and performance.
Base salary levels for the financial year
ending 31 May 2016 are:
T A Howkins – £486,400
C F Hill – £340,400
P G Hetherington – £364,900
benefits, and their value may vary from
year to year, depending on the cost to
the Company from third-party providers.
Benefits constitute a small percentage
of total remuneration.
|IG Group Holdings plc Annual Report 2015
PURPOSE AND LINK TO STRATEGY
OPERATION
OPPORTUNITY
PERFORMANCE METRICS
No performance metrics apply to base salary.
RECOVERY OR
WITHHOLDING
No recovery or
withholding applies to
base salary.
BASE SALARY
Provides a sound basis on which to recruit and retain
Salaries are normally reviewed by the committee annually,
key employees of appropriate calibre to deliver the
and are usually fixed for 12 months commencing 1 June.
strategic objectives of the Company.
Any salary increase may be influenced by:
Reflects the market value of the role and the post-
• Scale, scope and responsibility of the role
holder’s experience, competency and performance
within the Company.
• Experience of the individual and his or her performance
• Average change in wider workforce pay
• Business performance and prevailing market conditions
• Commercial need
• Periodic benchmarking of similar roles at comparable
companies selected on the basis of comparable size,
complexity, geographic spread and business focus
BENEFITS
Competitive, cost-effective benefits to help recruit and
Benefits may include, for example, private medical
retain Executive Directors and senior management.
insurance, discounted health club membership and
life assurance.
Cash alternatives may be provided for any or all of these
benefits, depending on individual circumstances.
Relocation and related benefits may be offered where a
Director is required to relocate.
The general policy is to pay around
mid-market levels, with annual increases
typically in line with the wider workforce.
Increases beyond the percentage
increases granted to the wider
workforce may be awarded in
exceptional circumstances,
such as:
• Where there is a change in the
individual’s responsibility
• Where the salary set at initial
appointment was below the level
expected once the individual gains
further experience and a track record
of performance in the role
An above-market positioning may be
appropriate, in exceptional circumstances,
to reflect the criticality of the role and the
individual’s experience and performance.
Base salary levels for the financial year
ending 31 May 2016 are:
T A Howkins – £486,400
C F Hill – £340,400
P G Hetherington – £364,900
The aim is to provide market-competitive
benefits, and their value may vary from
year to year, depending on the cost to
the Company from third-party providers.
Benefits constitute a small percentage
of total remuneration.
No performance metrics apply to benefits.
No recovery or
withholding applies
to benefits.
PENSION
attract and retain executives.
Market-competitive, cost-effective retirement benefits
The Group contributes to Executive Directors’ personal
pension plans. Executives have the option to receive part,
or all, of their pension contribution as a cash allowance in
lieu of Company pension contributions.
The company may contribute up to 15%
of base salary to pension, an equivalent
cash allowance in lieu, or a mixture
of both.
No performance metrics apply to
retirement benefits.
No recovery or
withholding applies to
retirement benefits.
73
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
KEY ELEMENTS OF REMUNERATION
PURPOSE AND LINK TO STRATEGY
OPERATION
OPPORTUNITY
PERFORMANCE METRICS
SUSTAINED PERFORMANCE PLAN (SPP)
Approved by shareholders at the 2014 AGM, the
SPP provides a single incentive plan for Executive
Directors rather than having separate annual and
long-term plans.
It provides a simple and competitive incentive
mechanism that encourages and rewards both annual
and sustained long-term performance, linked to the
Company’s strategic objectives.
The SPP encapsulates traditional annual bonus and
long-term incentive plans. It is entirely share-based,
encouraging executives to build up a substantial
stake in the Company, thereby aligning the interests
of management with shareholders.
We are initially operating the SPP by reference to five
consecutive ‘plan years’. The first plan year was the
financial year ended 31 May 2014.
Awards of shares (either in the form of par value options,
nil cost options or conditional awards), known as ‘plan
contributions’, are made after the announcement of results
relating to each plan year.
Plan contributions are granted by reference to achievement
against applicable performance targets and accumulate
within a participant’s ‘plan account’.
Each year, a percentage of the accumulated balance in
the plan account vests (ie options or awards are released
to participants).
Therefore, a participant’s plan account will comprise the
sum of the plan contribution (if any) being made in relation
to the relevant plan year plus the accumulated awards
registered in the plan account from previous plan years.
In the first five plan years, a participant’s plan account vests
as follows:
Following
Financial year
ending
% of cumulative shares in
plan account vesting
Plan year 1
31 May 2014
Plan year 2
31 May 2015
Plan year 3
31 May 2016
Plan year 4
31 May 2017
Plan year 5
31 May 2018
40.0%
40.0%
33.3%
33.3%
33.3%
After plan year 5, the committee may at such time (or at a
later date during the life of the SPP) close the operation of
the plan.
If the SPP is closed following plan year 5, unvested awards
remaining in the plan account will vest in tranches of 50%,
25% and 25% on the first, second and third anniversaries of
the SPP’s closure. The same principles will apply on a later
termination of the plan.
Participants may receive a payment at the time of delivery
of vested shares of an amount equivalent to the dividends
that would have been paid on those shares while in the
plan account (adopting a first-in, first-out basis). This
amount may assume dividend reinvestment. Dividends will
not accrue on vested but unexercised awards.
74
The maximum plan contribution in
The quantum of any awards granted is dependent
The committee
respect of a plan year is an award of
on performance against performance targets set by
shares with a market value of no more
than 500% of an executive’s annual
rate of salary.
RECOVERY OR
WITHHOLDING
may decide within
three years of a plan
contribution that the
underlying award will
be subject to clawback.
This may happen
where there has been a
material misstatement
in the Company’s
financial results or an
error in assessing any
applicable performance
condition. It may also
be triggered if there has
been substantial failure
of risk management,
or if the participant’s
employment is
terminated for
serious misconduct.
The clawback may be
satisfied by a reduction
in the amount of
any subsisting plan
account, a reduction
in the vesting of any
subsisting vested
awards or future
share awards and/or a
requirement to make
cash payment.
the committee for each relevant financial year.
Performance targets may comprise, for example,
diluted earnings per share (DEPS) targets, Total
Shareholder Return (TSR) and non-financial
measures. Performance is measured over single
plan years (financial years) except for TSR (from plan
year 2 – awards in respect of financial year ending
31 May 2015). We currently intend to apply the
following performance criteria:
DEPS – a sliding scale of targets will apply for each
plan year. The targets will be set at the start of
each plan year. Targets and performance will be
disclosed retrospectively in the Annual Report on
Remuneration for the relevant financial year-end.
Relative TSR – the Company’s share price (plus
dividends reinvested) performance is measured
against an appropriate comparator group. For
the first plan year, performance was based on
that plan year alone; for the second plan year,
performance was based on plan years 1 and 2. For
plan years thereafter performance is measured over
three plan years ending with the plan year being
reported on. The committee retains the discretion
to scale back the level of award if it feels the
Company’s underlying financial performance does
not warrant the level of award resulting from TSR
performance alone.
Non-financial – these may comprise strategic goals,
operational and client satisfaction measures for
each plan year. Targets and performance will be
disclosed retrospectively.
Where possible, a sliding scale of targets will be
set. For the DEPS and relative TSR measures, no
more than 25% is payable for achieving threshold
performance, rising to full payout for achieving a
more challenging target.
The scorecard of financial, share price and non-
financial metrics may vary from year to year in
accordance with strategic priorities and the
regulatory environment.
At the time of determining the contribution for plan
year 5, in the event that the committee feels the
Company’s underlying financial performance over
the first five plan years has not been satisfactory, the
committee may scale back the final balance of the
plan account.
|IG Group Holdings plc Annual Report 2015
PURPOSE AND LINK TO STRATEGY
OPERATION
OPPORTUNITY
PERFORMANCE METRICS
SUSTAINED PERFORMANCE PLAN (SPP)
Approved by shareholders at the 2014 AGM, the
We are initially operating the SPP by reference to five
SPP provides a single incentive plan for Executive
consecutive ‘plan years’. The first plan year was the
Directors rather than having separate annual and
financial year ended 31 May 2014.
long-term plans.
Awards of shares (either in the form of par value options,
It provides a simple and competitive incentive
nil cost options or conditional awards), known as ‘plan
mechanism that encourages and rewards both annual
contributions’, are made after the announcement of results
and sustained long-term performance, linked to the
relating to each plan year.
Company’s strategic objectives.
Plan contributions are granted by reference to achievement
The SPP encapsulates traditional annual bonus and
against applicable performance targets and accumulate
long-term incentive plans. It is entirely share-based,
within a participant’s ‘plan account’.
encouraging executives to build up a substantial
stake in the Company, thereby aligning the interests
of management with shareholders.
The maximum plan contribution in
respect of a plan year is an award of
shares with a market value of no more
than 500% of an executive’s annual
rate of salary.
Each year, a percentage of the accumulated balance in
the plan account vests (ie options or awards are released
to participants).
Therefore, a participant’s plan account will comprise the
sum of the plan contribution (if any) being made in relation
to the relevant plan year plus the accumulated awards
registered in the plan account from previous plan years.
In the first five plan years, a participant’s plan account vests
as follows:
Following
Financial year
% of cumulative shares in
ending
plan account vesting
Plan year 1
31 May 2014
Plan year 2
31 May 2015
Plan year 3
31 May 2016
Plan year 4
31 May 2017
Plan year 5
31 May 2018
40.0%
40.0%
33.3%
33.3%
33.3%
After plan year 5, the committee may at such time (or at a
later date during the life of the SPP) close the operation of
the plan.
If the SPP is closed following plan year 5, unvested awards
remaining in the plan account will vest in tranches of 50%,
25% and 25% on the first, second and third anniversaries of
the SPP’s closure. The same principles will apply on a later
termination of the plan.
Participants may receive a payment at the time of delivery
of vested shares of an amount equivalent to the dividends
that would have been paid on those shares while in the
plan account (adopting a first-in, first-out basis). This
amount may assume dividend reinvestment. Dividends will
not accrue on vested but unexercised awards.
The quantum of any awards granted is dependent
on performance against performance targets set by
the committee for each relevant financial year.
Performance targets may comprise, for example,
diluted earnings per share (DEPS) targets, Total
Shareholder Return (TSR) and non-financial
measures. Performance is measured over single
plan years (financial years) except for TSR (from plan
year 2 – awards in respect of financial year ending
31 May 2015). We currently intend to apply the
following performance criteria:
DEPS – a sliding scale of targets will apply for each
plan year. The targets will be set at the start of
each plan year. Targets and performance will be
disclosed retrospectively in the Annual Report on
Remuneration for the relevant financial year-end.
Relative TSR – the Company’s share price (plus
dividends reinvested) performance is measured
against an appropriate comparator group. For
the first plan year, performance was based on
that plan year alone; for the second plan year,
performance was based on plan years 1 and 2. For
plan years thereafter performance is measured over
three plan years ending with the plan year being
reported on. The committee retains the discretion
to scale back the level of award if it feels the
Company’s underlying financial performance does
not warrant the level of award resulting from TSR
performance alone.
Non-financial – these may comprise strategic goals,
operational and client satisfaction measures for
each plan year. Targets and performance will be
disclosed retrospectively.
Where possible, a sliding scale of targets will be
set. For the DEPS and relative TSR measures, no
more than 25% is payable for achieving threshold
performance, rising to full payout for achieving a
more challenging target.
The scorecard of financial, share price and non-
financial metrics may vary from year to year in
accordance with strategic priorities and the
regulatory environment.
At the time of determining the contribution for plan
year 5, in the event that the committee feels the
Company’s underlying financial performance over
the first five plan years has not been satisfactory, the
committee may scale back the final balance of the
plan account.
RECOVERY OR
WITHHOLDING
The committee
may decide within
three years of a plan
contribution that the
underlying award will
be subject to clawback.
This may happen
where there has been a
material misstatement
in the Company’s
financial results or an
error in assessing any
applicable performance
condition. It may also
be triggered if there has
been substantial failure
of risk management,
or if the participant’s
employment is
terminated for
serious misconduct.
The clawback may be
satisfied by a reduction
in the amount of
any subsisting plan
account, a reduction
in the vesting of any
subsisting vested
awards or future
share awards and/or a
requirement to make
cash payment.
75
IG Group Holdings plc Annual Report 2015| RECOVERY OR
WITHHOLDING
to all-employee
share schemes.
Not applicable.
Not applicable.
Not applicable.
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
KEY ELEMENTS OF REMUNERATION
PURPOSE AND LINK TO STRATEGY
OPERATION
OPPORTUNITY
PERFORMANCE METRICS
ALL-EMPLOYEE SHARE SCHEMES
All employees including Executive Directors are
encouraged to become shareholders through the
operation of an HMRC-approved share-incentive
plan (SIP) and/or such other all-employee share plans
as the Company may adopt in the future.
SHARE OWNERSHIP POLICY
Aligns the interests of management and shareholders
and promotes a long-term approach to performance
and risk management.
The SIP is a flexible, tax-efficient, all-employee plan. Partnership,
free, dividend and matching shares may be granted under the SIP.
HMRC or non-UK plan equivalent limits
No performance metrics tend to apply, although
No recovery or
will apply to any all-employee schemes
they may be introduced where applicable and
withholding applies
If other HMRC-approved all-employee plans are introduced, they
will operate in accordance with HMRC guidance and limits.
Similar non-UK plans may be operated to enable non-UK
employees and Directors to participate.
that may be introduced.
if appropriate.
This currently constitutes a small
proportion of Executive Directors’
total remuneration.
A share ownership policy was introduced from the financial year
ended 31 May 2014.
Under this policy, the Chief Executive Officer is required to
hold shares to the value of a minimum of 200% of base salary,
and for other Executive Directors a requirement of 100% of
base salary applies.
Only shares owned outright by the Executive Director are
included in the guideline, which must be achieved within five
years of the introduction of the policy or, if later, from the date
of appointment to the Board.
The committee will review progress annually, with an
expectation that Executive Directors will make progress towards
achieving the shareholding policy each year.
NOTES TO THE POLICY TABLE
Choice of performance measures:
The performance measures that are used in the share performance plan (SPP) are a subset of the Company’s Key Performance Indicators (KPIs).
Metric
Rationale and link to the strategic KPIs
Total Shareholder Return
(TSR) relative to a suitable
benchmark group
TSR measures the total return to IG Group’s shareholders, both through share price growth
and dividends paid, and as such it is aligned to shareholder interests.
TSR is influenced by how well IG Group performs on a range of other metrics, including
financial indicators such as revenue, profit, cash generation and dividends, and non-financial
indicators such as client satisfaction and operational performance.
How performance measures are set
index (excluding investment trusts).
The committee sets the requirements for each plan year. The current benchmark group comprises the constituents of the FTSE 350
Diluted earnings per share
(DEPS)
DEPS is a key indicator of the profits generated for shareholders, and a reflection of both
revenue growth and cost control.
The committee determines appropriate performance targets each year, taking account of the annual and longer-term business
plans. DEPS is calculated on such adjusted basis as the committee reasonably selects (eg adjusting for the effects of any share
buybacks).
Non-financial performance
Specific non-financial measure
Execution and delivery of key
strategic initiatives
76
Specific non-financial criteria include system reliability, customer satisfaction, effective
risk management, sustaining the Company’s excellent reputation and maintaining a good
standing with regulators. Each of these measures has a direct impact on a number of the
Group’s KPIs, for example, system reliability is a key measure of the resilience of our trading
platforms, which is an essential element of revenue generation and client satisfaction.
Customer satisfaction is also measured using the Net Promoter Score (NPS) data supplied by
Investment Trends. NPS is a measure of whether clients would recommend IG Group.
The basket of measures chosen is considered to provide a broader assessment of executive
delivery than financial metrics alone.
The delivery of the Group’s strategic initiatives is key to the delivery of the strategy and will,
over time, drive financial performance and growth.
The committee approved, in advance, a basket of non-financial measures for the year ended 31 May 2015.
Following the end of the year the committee assesses performance relative to prior years, internal targets and sector averages.
Assessment is undertaken ‘in the round’, taking account of activities and achievements during the year.
For example, for NPS, performance is assessed through comparison of the Group’s performance against other companies in the
sector, with the aim of maintaining a high NPS score relative to the sector average.
As part of the Board’s strategy planning, there is a clear plan of strategic initiatives provided to the Remuneration Committee at the
start of the year, which details the underlying projects set for delivery in the short-to-medium term. The Remuneration Committee
uses this plan to judge performance and management’s execution and delivery of key strategic initiatives.
|IG Group Holdings plc Annual Report 2015
PURPOSE AND LINK TO STRATEGY
OPERATION
OPPORTUNITY
PERFORMANCE METRICS
HMRC or non-UK plan equivalent limits
will apply to any all-employee schemes
that may be introduced.
No performance metrics tend to apply, although
they may be introduced where applicable and
if appropriate.
This currently constitutes a small
proportion of Executive Directors’
total remuneration.
RECOVERY OR
WITHHOLDING
No recovery or
withholding applies
to all-employee
share schemes.
Aligns the interests of management and shareholders
A share ownership policy was introduced from the financial year
Not applicable.
Not applicable.
Not applicable.
ALL-EMPLOYEE SHARE SCHEMES
All employees including Executive Directors are
The SIP is a flexible, tax-efficient, all-employee plan. Partnership,
encouraged to become shareholders through the
free, dividend and matching shares may be granted under the SIP.
operation of an HMRC-approved share-incentive
plan (SIP) and/or such other all-employee share plans
as the Company may adopt in the future.
If other HMRC-approved all-employee plans are introduced, they
will operate in accordance with HMRC guidance and limits.
Similar non-UK plans may be operated to enable non-UK
employees and Directors to participate.
SHARE OWNERSHIP POLICY
and promotes a long-term approach to performance
ended 31 May 2014.
and risk management.
Under this policy, the Chief Executive Officer is required to
hold shares to the value of a minimum of 200% of base salary,
and for other Executive Directors a requirement of 100% of
base salary applies.
Only shares owned outright by the Executive Director are
included in the guideline, which must be achieved within five
years of the introduction of the policy or, if later, from the date
of appointment to the Board.
The committee will review progress annually, with an
expectation that Executive Directors will make progress towards
achieving the shareholding policy each year.
NOTES TO THE POLICY TABLE
Choice of performance measures:
Total Shareholder Return
(TSR) relative to a suitable
benchmark group
Non-financial performance
The performance measures that are used in the share performance plan (SPP) are a subset of the Company’s Key Performance Indicators (KPIs).
Metric
Rationale and link to the strategic KPIs
How performance measures are set
TSR measures the total return to IG Group’s shareholders, both through share price growth
and dividends paid, and as such it is aligned to shareholder interests.
The committee sets the requirements for each plan year. The current benchmark group comprises the constituents of the FTSE 350
index (excluding investment trusts).
TSR is influenced by how well IG Group performs on a range of other metrics, including
financial indicators such as revenue, profit, cash generation and dividends, and non-financial
indicators such as client satisfaction and operational performance.
Diluted earnings per share
DEPS is a key indicator of the profits generated for shareholders, and a reflection of both
(DEPS)
revenue growth and cost control.
The committee determines appropriate performance targets each year, taking account of the annual and longer-term business
plans. DEPS is calculated on such adjusted basis as the committee reasonably selects (eg adjusting for the effects of any share
buybacks).
Specific non-financial measure
Specific non-financial criteria include system reliability, customer satisfaction, effective
The committee approved, in advance, a basket of non-financial measures for the year ended 31 May 2015.
risk management, sustaining the Company’s excellent reputation and maintaining a good
standing with regulators. Each of these measures has a direct impact on a number of the
Group’s KPIs, for example, system reliability is a key measure of the resilience of our trading
platforms, which is an essential element of revenue generation and client satisfaction.
Customer satisfaction is also measured using the Net Promoter Score (NPS) data supplied by
Investment Trends. NPS is a measure of whether clients would recommend IG Group.
The basket of measures chosen is considered to provide a broader assessment of executive
delivery than financial metrics alone.
Following the end of the year the committee assesses performance relative to prior years, internal targets and sector averages.
Assessment is undertaken ‘in the round’, taking account of activities and achievements during the year.
For example, for NPS, performance is assessed through comparison of the Group’s performance against other companies in the
sector, with the aim of maintaining a high NPS score relative to the sector average.
Execution and delivery of key
The delivery of the Group’s strategic initiatives is key to the delivery of the strategy and will,
strategic initiatives
over time, drive financial performance and growth.
As part of the Board’s strategy planning, there is a clear plan of strategic initiatives provided to the Remuneration Committee at the
start of the year, which details the underlying projects set for delivery in the short-to-medium term. The Remuneration Committee
uses this plan to judge performance and management’s execution and delivery of key strategic initiatives.
77
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
NOTES TO THE POLICY TABLE (CONTINUED)
Annual DEPS targets and non-financial performance
measures, where used, are likely to be too sensitive to
disclose in advance, for commercial reasons. We will,
however, disclose the measures and targets (where
applicable) used, and the extent to which we have achieved
them, on a retrospective basis, at the end of the relevant
performance period.
REMUNERATION SCENARIOS FOR
EXECUTIVE DIRECTORS
As a result of the Company’s remuneration policy, a significant
proportion of the remuneration received by Executive
Directors depends on Company performance. The chart
on page 79 shows how total pay for the Executive Directors
varies under three different performance scenarios: minimum,
target and maximum:
Incentive plan discretions
The committee will operate the current SPP (and other share
plans still in operation) according to their respective rules and
the policy set out above, and in accordance with the Listing
Rules and HMRC rules where relevant. Copies of the SPP
rules are available on request from the Company Secretary.
As is consistent with market practice, the committee retains
discretion over a number of areas relating to operating and
administrating these plans. These include (but are not limited
to) the following:
• Who participates in the plans
• The timing of grant of award and/or payment
• The size of an award and/or a payment within the plan
limits approved by shareholders
• The choice of (and adjustment of) performance measures
and targets in accordance with the policy set out above and
the rules of each plan (including the treatment of delisted
companies for the purpose of the TSR Comparator Group)
• Discretion relating to the measurement of performance in
the event of a change of control or reconstruction
• Determination of a good leaver (in addition to any specified
categories) for incentive-plan purposes, based on the rules
of each plan and the appropriate treatment under the
plan rules
• Adjustments required in certain circumstances (eg rights
issues, corporate restructuring, special dividends and on a
change of control)
Any use of the above discretions would, where relevant,
be explained in the Annual Report on Remuneration. As
appropriate, it might also be the subject of consultation with
the Company’s major shareholders.
Legacy arrangements
For the avoidance of doubt, in approving the Directors’
Remuneration Policy, the Company has authority to honour
any commitments entered into with current or former
Directors that have been disclosed to shareholders previously.
This includes awards made under the deferred bonus plan,
the value-sharing plan (VSP) and any other share plans
operated by the Company.
Minimum
This comprises the fixed elements of pay, being base salary,
benefits and pension. Base salary and pension are effective
as at 1 June 2015 and the benefits value is the actual value for
the year ended 31 May 2014.
Target
This comprises fixed pay and the target value of SPP
(250% of salary).
Maximum
This comprises fixed pay and the maximum value of SPP
(500% of salary).
No account has been taken of share price growth,
or of dividend shares awarded in respect of the
deferred element of bonus and SPP awards over the
deferral/performance periods.
EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
Each Executive Director is employed under a service contract
with IG Group Limited (a wholly-owned intermediate holding
company) for the benefit of the Company and the Group.
The period of notice for existing Executive Directors does
not exceed six months and, accordingly, Executive Directors’
employment contracts can be terminated on six months’
notice by either party.
In the event that the Company terminates an Executive
Director’s service contract other than in accordance with the
terms of his or her contract, the committee will act in the best
interests of the Company and ensure there is no reward for
failure. All service contracts are continuous, and contractual
termination payments relate to the unexpired notice period.
On a Director’s departure, the Company may at its sole
discretion pay base salary and the value of any benefits
(including pension) that would have been receivable in lieu
of any unexpired period of notice. In the event of termination
for gross misconduct, the Company may give neither
notice nor a payment in lieu of notice. Where the Company,
acting reasonably, believes it may have a right to terminate
employment due to gross misconduct, it may suspend the
executive from employment on full salary for up to 30 days to
investigate the circumstances prevailing.
The Company may place an executive on gardening leave
for up to the duration of the notice period. During this time,
the executive will be entitled to receive base salary and all
contractual benefits (including pension). At the end of the
78
|IG Group Holdings plc Annual Report 2015 REMUNERATION SCENARIOS FOR EXECUTIVE DIRECTORS
£000
3,000
2,500
2,000
1,500
1,000
500
81%
68%
Fixed pay
SPP
81%
81%
68%
68%
100%
32%
19%
100%
32%
19%
100%
32%
19%
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
T A Howkins
C F Hill
P G Hetherington
gardening leave period, the Company may, at its discretion,
pay the executive base salary alone, in lieu of the balance of
any period of notice given by the Company or the executive.
yielding one third immediately and thereafter the remaining
balance in equal parts on the first and second anniversary of
such determinations.
When considering payments in the event of termination,
the Remuneration Committee takes into account individual
circumstances. Relevant factors include the reasons for
termination, contractual obligations and the relevant incentive
plan rules. When determining any loss of office payment
for a departing Director the committee will always seek to
minimise the cost to the Company while complying with the
contractual terms and seeking to reflect the circumstances
in place at the time. The committee reserves the right to
make additional payments where such payments are made
in good faith in discharge of an existing legal obligation
(or by way of damages for breach of such an obligation); or
by way of settlement or compromise of any claim arising in
connection with the termination of an Executive Director’s
office or employment.
For new executive appointments, the committee has
discretion to offer a longer notice period of up to 12 months
to secure an appointment. Any payments in lieu of notice will
be at the committee’s discretion, and will be limited to base
salary and the value of benefits (including pension) as set
out above.
Sustained performance plan awards
As a general rule, if a participant ceases to hold employment
or be a Director within the Group, or gives notice of
leaving, they forfeit any entitlement to receive further plan
contributions. All awards subsisting in their plan account at
such time are forfeited in full.
However, the situation may be different if the participant
ceases to be an employee or a Director within the Group
under certain circumstances. These include injury, disability,
retirement, redundancy, the disposal of the participant’s
employing company or the business for which they work by
the Group, or other circumstances at the discretion of the
committee. In this case, participation in the plan will cease
once the plan contributions in respect of the plan year in
which the cessation arises are determined. This will take
into account the proportion of the full plan year worked.
Ordinarily, the participant’s plan account will then vest,
For the purposes of any awards permitted to vest to leavers as
described above, the committee retains discretion to reduce
the level of vesting that would otherwise result. It may refer to
such time-based adjustments as it considers appropriate.
Where awards are granted in the form of options, any vested
awards already held at the time of cessation (ie vested awards
held outside the plan account but unexercised) will remain
exercisable for a limited period. The exception is when
dismissal has been for misconduct, in which case such awards
lapse in full.
Value-sharing plan (VSP) awards – legacy plan
As a general rule, awards which have not vested will
lapse when employment ceases. This may differ in certain
circumstances when there is a good reason for leaving.
Examples include injury, disability, retirement, redundancy,
the disposal of the participant’s employing company or
the business for which they work by the Group, or other
circumstances at the discretion of the committee. The
committee has the discretion to determine that an Executive
Director is a good leaver. In this case, the award will not lapse
but will continue or, if the committee decides, will vest on
cessation to the extent the performance condition is satisfied.
A time pro-rated reduction will apply unless the committee
determines otherwise. In the event of death, awards will vest
at that time to the extent that performance, in the opinion of
the committee, has been satisfied.
Change of control
The Executive Directors’ contracts do not provide for any
enhanced payments in the event of a change of control
of the Company, nor for liquidated damages. Copies of
the Executive Directors’ service contract are available for
inspection at the Company’s registered office.
79
IG Group Holdings plc Annual Report 2015| Where an individual is appointed to the Board, different
performance measures may be set for the SPP for the year of
joining the Board, taking into account the individual’s role and
responsibilities and the point in the year when they joined.
For an internal appointment, any variable pay element
granted in respect of the prior role may be allowed to pay out
according to its terms, adjusted as appropriate to take into
account the terms of the Executive Director appointment. The
committee will carefully determine the base salary level for a
new Executive Director, taking into account the individual’s
background, skills and experience, and the business criticality
and nature of the role being offered. It will also consider the
Company’s circumstances and relevant external and internal
benchmarks. Above all, the committee must exercise its own
judgement in determining the most appropriate salary for the
new appointment.
In certain circumstances, the committee will have set a
starting base salary which is positioned below the relevant
market rate. It may then wish to adjust the Executive Director’s
base salary, at a level above the average increase in the
Company, as the individual gains experience and establishes
a strong performance track record in the role. Conversely, the
base salary may need to be positioned above the relevant
market rate in order to attract the most appropriate candidate
for the role.
We will provide benefits in accordance with the approved
policy. We may pay relocation expenses or allowances,
legal fees and other costs relating to the recruitment
as appropriate.
We will set fees for a new Non-Executive Director or Chairman
in accordance with the approved policy.
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
REMUNERATION POLICY ACROSS THE COMPANY
We have designed the remuneration policy for the Executive
Directors and senior management with regard to the
policy for employees across the Company as a whole. The
committee is kept updated through the year on general
employment conditions, basic salary-increase budgets,
the level of bonus pools and payouts and participation in
share plans. The committee is therefore aware of how total
remuneration at the Executive Director level compares to the
total remuneration of the general population of employees.
Common approaches to remuneration policy which apply
across the Company include:
• Consistency in ‘pay for performance’, with annual bonus
schemes being offered to the vast majority of employees
• Offering pension, medical and life assurance benefits for all
employees, where practical given geographical location
• Ensuring that salary increases for each category of
employee are considered, taking into account the overall
rate of increase across the Company, benchmarking, and
Company and individual performance
• Encouraging broad-based share ownership through the use
of all-employee share plans, where practical
RECRUITMENT REMUNERATION POLICY
The committee’s overriding objective is to appoint Executive
Directors with the necessary background, skills and
experience to ensure the continuing success of the Company.
We recognise that the pace of change and technology
development in our industry, as well as the global nature
of IG Group, mean that the right individuals may often be
highly sought-after.
We set the remuneration package for a new Executive
Director in accordance with the Company’s approved
remuneration policy, as detailed on page 79 of the
Directors’ Remuneration Report, subject to the additional
provisions described below. The maximum level of variable
remuneration (excluding any buyout arrangements) that we
can offer to a new executive on an annual basis will be in
accordance with the sustained performance plan limit, being
500% of salary.
In many cases, where we make an external appointment,
the individual will forfeit incentive awards connected with
their previous employment on resignation. The committee
may therefore decide to offer further cash or share-based
payments to ‘buy-out’ these existing entitlements by making
awards of a broadly equivalent value, in the committee’s
view. These awards can be made either under the Company’s
existing incentive plans or via other arrangements. In
determining the appropriate form and amount of any such
award, the committee will consider various factors. These
include the type and quantum of award, the length of the
performance period and the performance and vesting
conditions attached to each forfeited incentive award.
80
|IG Group Holdings plc Annual Report 2015 CHAIRMAN AND NON-EXECUTIVE DIRECTORS
The table below summarises each element of the remuneration policy applicable to the Non-Executive Directors.
PURPOSE AND
LINK TO STRATEGY
To attract and retain
Non-Executive
Directors of
appropriate calibre
and experience.
OPERATION
OPPORTUNITY
PERFORMANCE
RECOVERY OR
METRICS
WITHHOLDING
No performance
metrics apply.
No recovery or
withholding applies.
The Remuneration
Committee
determines the fee
for the Chairman
(without the
Chairman present).
The Board is
responsible for
setting Non-
Executive Directors’
fees. The Non-
Executive Directors
are not involved in
any discussions or
decisions by the
Board about their
own remuneration.
Fees are within
the limits set by
the articles of
association and
take account of the
commitment and
responsibilities of
the relevant role.
The Chairman
receives a single
fee to cover all their
Board duties.
Non-Executive
Directors receive
a fee for carrying
out their duties.
They may receive
additional fees
if they chair the
primary Board
Committees, and for
holding the post of
Senior Independent
Director.
Committee
membership fees
may be paid.
Details of current fee
levels are set out in
the Annual Report
on Remuneration.
Non-Executive Directors do not have service contracts; they are engaged by letters of appointment. Each Non-Executive
Director is appointed for an initial term of three years subject to re-election, but the appointment can be terminated on three
months’ notice.
CONSIDERATION OF SHAREHOLDER VIEWS
The committee engages proactively with the Company’s major shareholders. For example, when making any material changes
to the remuneration policy, the Remuneration Committee Chair will inform major shareholders of these in advance, and will offer
a meeting to discuss details as required.
CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE COMPANY
In setting the remuneration of the Executive Directors, the committee takes into account the overall approach to reward for
employees in the Company. The Group operates in a number of different environments, and has many employees who carry
out diverse roles across a number of countries. All employees, including Directors, are paid by reference to the market rate,
and base salary levels are reviewed regularly. When considering salary increases for Directors, the Company will be sensitive to
pay and employment conditions across the wider workforce, however no remuneration comparison measurements have been
utilised to date. The committee does not formally consult with employees on the executive remuneration policy. The committee
is periodically updated on pay and conditions applying to employees across the Company.
81
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
ANNUAL REPORT ON REMUNERATION
This part of the report includes a summary of how we implemented the policy in the financial year ended 31 May 2015 (including
payment and awards in respect of incentive arrangements), and how we will apply the remuneration policy for the financial year
ending 31 May 2016. We also give details of the Remuneration Committee’s operation, the Directors’ share interests and how
shareholders voted at the 2014 AGM.
IMPLEMENTATION OF REMUNERATION POLICY IN THE FINANCIAL YEAR ENDING 31 MAY 2015
Single total figure of remuneration for each Director (audited)
Contribution to SPP plan account(6)
Name of
Director
Executive Directors
T A Howkins
C F Hill
P G Hetherington(1)
Year
2015
2014
2015
2014
2015
2014
Non-Executive Directors
J R Davie (2)
A Green (3)
S G Hill
D M Jackson (2)
J A Newman
S J Tymms
R P Yates
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Fees/
basic
salary
£000
Benefits
in kind(4)
£000
Pension(5)
£000
Vested
element
£000
Deferred
element
£000
472
459
331
321
283
275
73
192
235
–
70
53
29
67
65
40
55
53
70
53
1
1
1
1
1
1
1
1
–
–
9
11
1
6
–
–
3
1
–
–
71
69
50
48
43
41
–
–
–
–
–
–
–
–
–
–
–
–
–
–
390
498
273
349
292
374
585
748
409
523
439
561
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Legacy
Plan:
VSP(7)
£000
–
195
–
117
–
117
Total
£000
975
1,246
682
872
731
935
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£000
1,519
1,970
1,064
1,359
1,058
1,369
74
193
235
–
79
64
30
73
65
40
58
54
70
53
(1) P G Hetherington was paid a reduced pro rata salary of £283,400, based upon a £354,300 full-time equivalent salary, to reflect his flexible working arrangements.
As in previous years, and consistent with the previous legacy arrangements, his SPP opportunity is based on his full-time equivalent salary. As of 1 June 2015, P G
Hetherington has ceased the flexible working arrangement and accordingly his salary from this date will revert to the full-time amount.
(2) J R Davie ceased to be Chairman at the 2014 AGM held on 16 October 2014 and D M Jackson ceased to be a director on 16 October 2014.
(3) A Green joined the Group as Deputy Chairman on 9 June 2014 and succeeded J R Davie as Chairman at the 2014 AGM.
(4) Executive Directors’ benefits can include private medical cover, discounted gym membership and life assurance cover. Following an internal review, certain
Non-Executive Directors’ expenses relating to the performance of a director’s duties such as travel to and from company meetings and related accommodation
have been classified as taxable benefits. In such cases, the Company will ensure that the director is kept whole by settling the expense and any related tax. In line
with the regulations, these taxable benefits have been disclosed and are shown in the benefits in kind column, with a consequential restatement of the prior year
comparatives. The figures shown include the cost of the taxable benefit plus the related personal tax charge.
(5) The Group contributes 15% of basic salary to personal pensions for each of the Executive Directors, who also have the option to receive part, or all, of their pension
entitlement in cash. The additional cash payment is counted in lieu of pension, and is not treated as base salary for the purposes of calculating other benefits.
T Howkins elected to restrict pension contributions to £40,000 and receive the balance of the pension contribution as an additional cash payment. C Hill elected to
restrict pension contributions to £40,000 and receive the balance of the pension contribution as an additional cash payment. P Hetherington elected to receive the
full pension contribution as an additional cash payment.
(6) Figures provided are the values of the SPP plan contributions in respect of performance for the periods ending 31 May 2015 and 31 May 2014 (ie Plan Years 2 and
1). The vested element is the proportion of the Plan Year contribution for the relevant period that vests shortly following the end of the financial year. The deferred
element is the proportion that remains deferred in the plan account. Details of SPP awards held in the Plan Account, both vested and unvested, are provided in the
Outstanding Share Awards table on page 86.
(7) The 2011 VSP awards had a performance period ending 31 May 2014. Half the awards vested on 22 July 2014 with the remaining vesting on 21 July 2015. The
value of these awards provided in last year’s remuneration report was based on an estimated share price. We have restated the amounts (now as 2014 prior year
comparatives) using the actual share price on 22 July 2014 (619.5p, for half the awards) and the average three-month share price for period ended 31 May 2015
(740.9p) for the remaining awards.
The 2012 VSP awards had a performance period ending 31 May 2015. Performance was below threshold for both the PBT and TSR metrics and therefore this
award lapsed.
82
|IG Group Holdings plc Annual Report 2015 DETERMINATION OF SPP PLAN CONTRIBUTION FOR THE FINANCIAL YEAR ENDING 31 MAY 2015
Performance targets for Plan Year 2 (financial year ending 31 May 2015) comprised Diluted Earnings per Share (DEPS) targets, Total
Shareholder Return (TSR) and non-financial measures. TSR performance was measured over the 2-year period from 1 June 2013 to
31 May 2015 and DEPS and non-financial measures over the financial year ending 31 May 2015.
Performance
measure
Weighting
Potential as a
percentage of
base salary
Threshold
(25% payout
for TSR and
0% for DEPS)
Maximum
(100% payout)
Actual
performance
Plan
contribution as
percentage of
base salary
DEPS
TSR
Non-financial
Total
45%
35%
20%
100%
225%
40.18 pence
44.20 pence
175% Median ranking
Upper-quartile
ranking
35.99 pence
(0% vesting)
98 of 291
companies
(74.5% vesting)
See commentary on page 84
100%
500%
0%
130%
76%
206%
PERFORMANCE MEASURES – HOW THESE ARE SET AND REVIEW OF PERFORMANCE FOR THE
FINANCIAL YEAR ENDING 31 MAY 2015 (AUDITED)
Diluted earnings per share (45% weighting)
At the start of the 2015 financial year, the committee established a diluted earnings per share (DEPS) range for the purposes of
performance measurement and consequentially payout under the SPP. This was demanding given the strategic investment the
business is making in new technology, products and geographies. In setting the DEPS range, the committee considered the
costs of planned investment in strategic objectives, the actual DEPS for the year ended 31 May 2014 of 40.18 pence and analyst
DEPS consensus for 2015.
Notwithstanding the strong underlying performance of the Group over the year, the negative financial impact of the Swiss franc
movement meant that actual DEPS for the year ended 31 May 2015 of 35.99 pence was below the threshold target and therefore
none of the potential award under this measure was granted.
In setting the DEPS range for the year ending 31 May 2016, the committee has taken into account a number of relevant factors
including internal and external considerations and an appropriate degree of challenge on prior year performance after taking
account of the impact of the Swiss franc event.
Total shareholder return (35% weighting)
Under the Total Shareholder Return measure, a median ranking against the FTSE 350 (excluding Investment Trusts) would
result in 25% of this element being granted with the full award being granted for upper quartile ranking or better. The award
to be granted for performance between median and upper quartile would be determined on a straight line basis between
these points.
In respect of the award to be granted in respect of Plan Year 2, TSR was measured over the two-year period from 1 June 2013
to 31 May 2015. Actual TSR performance for IG Group, as measured by New Bridge Street, for the two-year period was 48.2%.
Against the peer group this performance was sufficient to rank IG Group at 98 out of 291 companies and resulted in 74.5% of
the potential payout under this measure being awarded.
Non-financial measures
The committee approved a basket of non-financial measures comprising strategic goals as well as operational and client
satisfaction measures for the year ended 31 May 2015. These measures are also utilised for an element of the staff general
bonus pool. These measures, and the assessment of performance, for the year ended 31 May 2015 are set out in the following
table. An average of the performance under the specific non-financial measures combined with performance under the
execution and delivery measure resulted in an overall assessment of 76% of the potential payout under this element of the plan
being awarded.
83
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
METRIC
PERFORMANCE
ASSESSMENT
SPECIFIC NON-FINANCIAL MEASURES
System
reliability /
uptime
The main measures used to assess performance against this metric are core dealing
availability per month and maximum percentage downtime in any one day. The Group
strives to achieve 99.8% for the first measure and less than 4.0% for the second measure.
65%
(FY14 85%)
During the year, core dealing availability per month was breached on one occasion
(April 2015) and maximum downtime was breached on two occasions – in August 2014
and April 2015.
For the majority of the year core dealing availability was very high. The main system
outage and breach of the Group’s availability target was due to a software flaw in a new
reporting tool – measures have been taken to remedy this. Overall, system reliability
was marginally down from the prior year (99.95% versus 99.97%) as shown in the Key
Performance Indicators section of the Strategic Report. The availability of the dealing
platform is very important in terms of client confidence of trading with IG and the
Group will continue to undertake work in this area to ensure a consistently high level of
platform uptime is maintained.
Maintaining
good standing
relationships
with regulators
The Group continues to maintain constructive and open relationships with regulators
and FY15 was a good year from a regulatory perspective.
92.5%
(FY14 90%)
The Group continues to have strong relations with all regulators. During FY15, IG
successfully obtained licences in Switzerland and Dubai, both of which involved very
stringent application processes and represented significant achievements. In addition,
there were no regulatory incidents during the year.
Customer
satisfaction
The Remuneration Committee uses a number of indicators to measure performance
against this metric.
85%
(FY14 80%)
Net Promoter Score (NPS) data is tracked by the syndicated Investment Trends studies
and is a measure of how likely clients are to recommend IG to others. Over the last year
the Group has seen improvement in Australia, France and Germany while Singapore
remained unchanged. The UK on the other hand saw a drop in NPS but was ranked first
for Spread Betting. The reasons for this drop in satisfaction are considered to have been
remedied. Please refer to the Key Performance Indicators section of the Strategic Report
for more information on NPS.
During the year, the Group once again commissioned an independent study to conduct
a ‘mystery shopping’ programme among IG and a number of competitors in the UK.
The study consisted of ten cases being raised with each provider where they were
challenged with the same questions or scenarios. Each case was scored against desired
behaviours expected from the case handler. The result of the study shows that the
Group performed consistently well in most categories and ranked first in overall scoring
with a 30% lead against the Group’s main competitor.
The Group continued to run IG Think Tank, an online community and forum which
supports engagement with clients and the inclusion of their feedback into the IT
development cycle. This has led to better IG apps development, mobile charting
functionalities, and more informative news feeds.
IG brand awareness continued to improve with almost 50% of online investors naming
the Group when asked to state the different providers they have heard of. With the
launch of stockbroking, recognition of the brand grew 14%, which was a significant
achievement given the timeframe.
During the year, the Group also established a senior management forum to discuss
and address the latest client insights and feedback – a process that has already led to a
number of key client wishes having been addressed or where solutions are in progress.
Reputation
The Remuneration Committee assessed whether there have been any events resulting
in negative media coverage or reputational damage during the year.
65%
(FY14 100%)
The Group and the industry as a whole experienced adverse press coverage in the
aftermath of the Swiss National Bank decision to remove the Swiss franc’s peg to the
euro. Additionally, the industry also saw some scrutiny from the regulators following
some concerns raised regarding the operations of some competitors. The Group’s PR
team and external advisors are considered to have done well in mitigating the poor PR
and reputational impact.
84
|IG Group Holdings plc Annual Report 2015 METRIC
PERFORMANCE
SPECIFIC NON-FINANCIAL MEASURES (CONTINUED)
Risk
management
The impact of the Swiss franc event was significant and resulted in material financial
losses for the Group. However, the Group was satisfied with the response of the risk
management systems in terms of the identification of the issues, the speed of which the
losses were quantified and the subsequent communication made with stakeholders.
Furthermore, the Group made considerable progress across a number of risk
management areas during the year through the newly established Board Risk
Committee. Nevertheless, the Remuneration Committee’s assessment is that the
negative impact on our shareholders resulting from the Swiss franc event should result
in a zero score for this metric.
ASSESSMENT
0% (FY14 100%)
EXECUTION AND DELIVERY OF KEY STRATEGIC INITIATIVES
Execution and
delivery of
key strategic
initiatives
As part of the Board’s strategy planning, there is a clear plan of strategic projects
provided to the Remuneration Committee at the start of the year, which details the
underlying projects set for delivery in the short-to-medium term. The Remuneration
Committee uses this plan to judge performance and management’s execution and
delivery of key strategic initiatives.
90% (FY14 90%)
There were a number of key strategic projects delivered during the year.
Examples of the projects include:
• Stockbroking – Successfully launched in the UK in September 2014 including ISAs
and use of stock as collateral for shorter-term trading from November 2014. It was
rolled out internationally in the Netherlands in March 2015 and further launches are
expected later this calendar year.
• Switzerland – The Group received a licence from FINMA, the Swiss regulator, in
September 2014 for Switzerland and the business went live the following month.
• Dubai – Another significant milestone was the licence from the DFSA, the Dubai
Regulator, which was obtained in principle in May 2015.
• gTLD – The Group’s first gTLD was made available in May 2015 with the remainder to
go live sequentially in the first quarter of FY16.
Significant progress has been made on a number of projects which was not envisaged
at the start of the financial year – each of which has been progressed without disruption
to the key strategic projects noted above. There has also been significant progress
towards several other strategic projects which remain work in progress. The outcome
will be disclosed once they cease to be commercially sensitive.
Overall summary
Based on performance for the financial year ending 31 May 2015, we will grant awards under the SPP to the value of 206% of
base salary (41% of the maximum potential payout) as plan contributions to the Executive Directors after the announcement of
the results. The actual number of shares that will be deposited within the Directors’ plan accounts will be based on the ten-day
average share price immediately prior to grant.
LEGACY VALUE-SHARING PLAN VESTING IN RELATION TO PERFORMANCE PERIOD ENDING
31 MAY 2015
The legacy Value-Sharing Plan (VSP), which was approved by shareholders in 2010, comprises annual awards. It provides the
Executive Directors and other senior staff with a pre-defined number of shares for each £10.0 million of surplus shareholder
value created over three years above a hurdle. Surplus shareholder value was calculated under two criteria: Total Shareholder
Return (TSR) and Profit before Taxation (PBT). In relation to the final award made under the plan on 1 August 2012, statutory PBT
fell by 13% to £169.5 million, following the impact of the Swiss franc (underlying PBT grew by 4%) and a TSR of 88.4% over the
three-year period ended 31 May 2015 none of the award vested. Further detail is provided overleaf.
85
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
The calculation of surplus shareholder value in relation to this plan is explained below:
(i) TSR element (60%): This is based on the value created from the difference between the Total Shareholder Return (TSR) of
IG Group Holdings plc and that of the FTSE 350 Financial Services Index, multiplied by the IG Group Holdings plc starting
market capitalisation.
Despite a TSR of 88.4% over the three-year period ending 31 May 2015 (measured by Kepler Associates) there was no vesting
under this element of the scheme as this performance was below that of the FTSE 350 Financial Services Index of 120.6%.
(ii) Profit before taxation (40%): This is based on the growth in PBT over the three-year period, multiplied by a fixed multiple
determined by the IG Group Holdings plc starting market capitalisation, plus net equity cash flows to shareholders above a
hurdle return.
The multiple for the 2012 VSP was 8.83. This is derived by dividing the starting market capitalisation of £1,636 million by the
PBT for the year ending 31 May 2012 (£185.7 million). The required hurdle return was 12% per annum.
PBT for the final year of the three-year performance period ending 31 May 2015 of £169.5 million together with net equity
cash flows to shareholders did not result in the generation of a shareholder value when compared to the required hurdle
return at which vesting commences. That is the growth in PBT and dividend return over the three-year performance period
was below the required 12% per annum hurdle rate and accordingly there was no vesting under this element of the scheme.
AWARDS GRANTED DURING THE FINANCIAL YEAR ENDING 31 MAY 2015 (AUDITED)
The SPP awards granted during the financial year ending 31 May 2015 in respect of performance to 31 May 2014 (Plan Year 1)
are as follows.
Contribution
% of
salary
271%
271%
271%
Value of
options
awarded
Number
of options
awarded(1)
1,245,965
872,035
934,812
204,290
142,980
153,273
Number of options
in the plan account
after plan year 1
contribution
Number of options
vested and exercised
during the year
Number of options
in the plan account
at the end of the
year
204,290
142,980
153,273
81,716
57,192
61,309
122,574
85,788
91,964
T A Howkins
C F Hill
P G Hetherington
(1) The number of options contributed to the plan account was based on the 10-day average share price immediately post the announcement date of the Group results
for the year ended 31 May 2014 of 610 pence per share. Awards were granted in the form of nil cost options. Awards were based on performance achieved and are
therefore subject to continued employment and subject to the satisfaction of the underlying financial performance underpin to be tested at the end of Plan Year 5 as
set out in the remuneration policy.
Details of the outstanding SPP share awards, using an estimate of the options to be granted in respect of Plan Year 2 (i.e. performance to 31 May 2015) are set
out below.
OUTSTANDING SHARE AWARDS
Sustained performance plan
Options
awarded as
dividend
equivalents
accruing on
unvested
options
during the
year
(number of
options)
Plan
contribution
in respect of
year ending
31 May 2015
(estimated
number of
shares) (1)
Estimated
number of
options vesting
(40% following
determination
of plan year 2
contributions (2)
Estimated
cumulative
number of
unvested
options
remaining in
plan account
at the end of
plan year 2
Plan account
following
contribution
for the year
Plan account
brought
forward
(number of
shares)
Event
T A Howkins
C F Hill
P G Hetherington
Plan year 2
Plan year 2
Plan year 2
122,574
85,788
91,964
5,825
4,077
4,371
124,695
87,276
93,561
253,094
177,141
189,896
101,238
70,856
75,958
151,856
106,285
113,938
(1) Executive Directors will be granted awards in respect of Plan Year 2 following the announcement of results for the year ended 31 May 2015 on 21 July 2015. The
share price used to calculate the number of awards to be granted will be the ten-day average share price immediately following the announcement of results for the
year ended 31 May 2015 on 21 July 2015. As the actual average share price is not known at the time of signing of the Annual Report, the above number of awards
has been estimated using a share price of 781.5 pence, being the share price on 29 May 2015.
Share awards have an exercise price of 0.005 pence and are exercisable until August 2024.
(2)
In accordance with the scheme rules 40% of the cumulative awards in the Plan Account (after the contributions in respect of Plan Year 2) will vest in August 2015 with
the vesting of the remaining options deferred. The August 2015 vesting will include additional dividend shares accrued as follows in respect of Plan Year 1 awards
held in the Plan Account – TA Howkins (5,825), C F Hill (4,077) and P G Hetherington (4,371) based on reinvestment at the dividend payment date.
86
|IG Group Holdings plc Annual Report 2015 Other share awards
Share
price at
award
date
Number
as at 31
May 2014
Number
awarded
during
the year
Number
lapsed
during the
year
Number
exercised
during
the year
Number
outstand-
ing at 31
May 2015
Award
date
Number
vested
but not
exercised
at 31
May 2015
T A Howkins
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Total shareholder return
award – three year
VSP: Total shareholder return
award – four year
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Total shareholder return
award – three year
VSP: Total shareholder return
award – four year
Long-term bonus plan – 2012
Long-term bonus plan – 2013
29 Oct 10 528.50p
29 Oct 10 528.50p
20 Jul 11 450.00p
20 Jul 11 450.00p
17,057
17,057
4,314
4,314
20 Jul 11 450.00p
9,984
20 Jul 11 450.00p
01 Aug 12 449.70p
01 Aug 12 449.70p
9,985
163,636
163,636
01 Aug 12 449.70p
245,454
01 Aug 12 449.70p
01 Aug 12 450.45p
29 Jul 13 545.29p
245,453
109,938
38,000
1,028,828
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(17,057)
–
(4,314)
–
–
17,057
–
4,314
–
17,057
–
–
(9,984)
–
–
(163,636)
(163,636)
(245,454)
–
–
–
–
(245,453)
–
–
–
(109,938)
(38,000)
9,985
–
–
–
–
–
–
(818,179)
(179,293)
31,356
17,057
–
–
–
–
–
–
–
–
Share
price at
award
date
Number
as at 31
May 2014
Number
awarded
during
the year
Number
lapsed
during the
year
Number
exercised
during
the year
Number
outstand-
ing at 31
May 2015
Award
date
Number
vested
but not
exercised
at 31
May 2015
C F Hill
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Total shareholder return
award – three year
VSP: Total shareholder return
award – four year
Share Incentive Plan – 2012
partnership shares
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Total shareholder return
award – three year
VSP: Total shareholder return
award – four year
Share Incentive Plan – 2013
partnership shares
Long-term bonus plan – 2013
Share Incentive Plan – 2014
partnership shares
20 Jul 11 450.00p
20 Jul 11 450.00p
2,589
2,589
20 Jul 11 450.00p
5,990
20 Jul 11 450.00p
5,990
27 Jul 12 419.18p
01 Aug 12 449.70p
01 Aug 12 449.70p
328
130,909
130,908
01 Aug 12 449.70p
196,363
01 Aug 12 449.70p
196,363
26 Jul 13 555.19p
29 Jul 13 545.29p
259
22,783
–
–
–
–
–
–
–
–
–
–
–
25 Jul 14 556.26p
–
297
–
–
–
–
–
(130,909)
(130,908)
(196,363)
(196,363)
(2,589)
–
–
2,589
(5,990)
–
–
–
–
–
–
–
5,990
328
–
–
–
–
259
–
297
–
–
–
–
(22,783)
–
695,071
297
(654,543)
(31,362)
9,463
–
–
–
–
–
–
–
–
–
–
–
–
–
87
IG Group Holdings plc Annual Report 2015|
DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
Share
price at
award
date
Number
as at 31
May 2014
Number
awarded
during
the year
Number
lapsed
during the
year
Number
exercised
during
the year
Number
outstand-
ing at 31
May 2015
Award
date
Number
vested
but not
exercised
at 31
May 2015
29 Oct 10 528.50p
20 Jul 11 450.00p
20 Jul 11 450.00p
10,661
2,589
2,589
20 Jul 11 450.00p
5,990
20 Jul 11 450.00p
01 Aug 12 449.70p
01 Aug 12 449.70p
5,990
130,909
130,908
01 Aug 12 449.70p
196,363
01 Aug 12 449.70p
196,363
26 Jul 13 555.19p
29 Jul 13 545.29p
258
25,340
–
–
–
–
–
–
–
–
–
–
–
25 Jul 14 556.26p
–
297
–
–
–
–
(10,661)
(2,589)
–
–
–
2,589
(5,990)
–
–
(130,909)
(130,908)
(196,363)
(196,363)
–
–
–
–
–
–
–
–
–
(25,340)
–
5,990
–
–
–
–
258
–
297
707,960
297
(654,543)
(44,580)
9,134
–
–
–
–
–
–
–
–
–
–
–
–
–
P G Hetherington
VSP: Profit award – four year
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Total shareholder return
award – three year
VSP: Total shareholder return
award – four year
VSP: Profit award – three year
VSP: Profit award – four year
VSP: Total shareholder return
award – three year
VSP: Total shareholder return
award – four year
Share Incentive Plan – 2013
partnership shares
Long term bonus plan – 2013
Share Incentive Plan – 2014
partnership shares
TABLE OF DIRECTORS’ SHARE INTERESTS (AUDITED)
The share interests of each person who was a Director of the Company during the year as at 31 May 2015 (together with
interests held by his or her connected persons) were as follows:
Legally
owned shares(5)
Share
Incentive
Plan
shares(6)
31 May
2014
31 May
2015
SPP awards(2)
Vested but
unexer-
Un-vested
cised Un-vested
Executive Directors
T A Howkins
C F Hill
P G Hetherington(3)
1,621,183 1,621,183
43,928(4)
129,899
35,131
113,970
–
1,181
852
128,399
89,865
96,335
Non-Executive Directors
A Green
S G Hill
D M Jackson
J A Newman
S J Tymms
R P Yates
–
117,209
–
–
–
25,000
–
80,707
–
–
–
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
VSP share
option awards
Total
% of salary
held under
shareholding
policy(1)
Vested but
unexer-
cised
31 May
2015
31,356 1,780,938
143,553
235,665
8,579
8,579
–
–
–
–
–
–
–
80,707
–
–
–
25,000
% salary
2,638%
107%
361%
–
901%
–
–
–
279%
(1) Calculated as shares owned on 29 May 2015 at the closing mid-market share price of 781.5p.
(2) This figure excludes awards under the SPP scheme for performance year ending 31 May 2015 which will be granted following the announcement of the Group’s
results on 21 July 2015. The awards held in the Plan Account include those in respect of Plan Year 1 as at 31 May 2015.
(3) P Hetherington also held 10,000 preference shares at 31 May 2015 and 31 May 2014.
(4) Of which 43,000 belong to Vanessa Hill.
(5) This figure includes partnership shares that are purchased as part of the Group’s Share Incentive Plan (SIP) which are not subject to vesting conditions and prior year
figures have been restated.
(6) This figure shows the number of matching shares held at 31 May 2015 as part of the Group’s Share Incentive Plan (SIP) which will vest after three years from the
respective award date, as long as employees remain employed by the Group.
88
|IG Group Holdings plc Annual Report 2015
A share ownership policy was introduced from the financial year ending 31 May 2014. Under this policy, the CEO is required to
hold shares to the value of a minimum of 200% of base salary, and for other Executive Directors a requirement of 100% of base
salary applies. Only shares owned outright by the Executive Director are included in the guideline, which must be achieved
within five years of the introduction of the policy or, if later, from the date of appointment to the Board.
There have been no changes to any of the Directors’ share interests in the period since 31 May 2015. The awards to be made
under the Company’s SPP in respect of the performance period ending on 31 May 2015 are set out earlier in this report and are
not included in this table.
CHANGE IN REMUNERATION OF THE CHIEF EXECUTIVE
Base salary
Taxable benefits
Performance based remuneration(1)
%
Change
(2015/
2014)
%
Change
(2014/
2013)
%
Change
(2013/
2012)
%
Change
(2015/
2014)
%
Change
(2014/
2013)
%
Change
(2013/
2012)
%
Change
(2015/
2014)
%
Change
(2014/
2013)(2)
%
Change
(2013/
2012)
Chief Executive
Group employees
2.83%
6.8%
7.49%
5.91%
3.14%
4.44%
0%
0%
0%
(32.34%)
136.23%
(64.62%)
6.44%
2.78%
19.08%
(22.94%)
13.09%
(42.40%)
(1) For the Chief Executive, the change in remuneration has been restated to include all performance-based remuneration. Remuneration is included in the financial
year in which performance is measured against.
(2) Given the move away from separate annual and long-term plans to a single variable pay plan in the 2014 financial year, the performance-based remuneration
consists of the SPP award and legacy VSP plans only. The change is calculated based on the change in the total of the SPP contribution for the plan year and the VSP
vesting in that year.
EXECUTIVE DIRECTORS’ OUTSIDE APPOINTMENTS
T Howkins is a member of the Board and Executive Committee of FIA Europe. The Executive Directors have no other
external appointments.
PAYMENT FOR LOSS OF OFFICE (AUDITED)
No Director has departed, nor has there been a payment for loss of office during the year.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table sets out the profit, dividends and overall spend on pay over the last five financial years:
Profit after tax
Dividends
Employee remuneration costs
Average number of employees
2015
£m
131.9
102.8
94.3
1,287
2014
£m
147.2
102.8
89.3
1,070
2013
£m
141.7
84.6
86.3
1,005
2012
£m
136.8
81.6
92.7
960
2011
£m
(25.3)
72.0
75.5
951
89
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
REMUNERATION COMMITTEE ACTIVITY
DURING THE YEAR
REMUNERATION COMMITTEE ALLOCATION
OF TIME
Salary and Bonus
Scheme Arrangements
Incentive Awards
Remuneration regulation
Remuneration reporting
Remuneration policy
Other
REMUNERATION
COMMITTEE EFFECTIVENESS
During the year, the committee undertook a questionnaire-
based review of its own effectiveness. The evaluation process
was externally facilitated by Lintstock as part of the overall
annual Board effectiveness review. Overall, the review
concluded that the committee is effective and its performance
was rated highly. The committee however could further
enhance its effectiveness with more training and support
on regulatory changes in the area of remuneration and the
implications for remuneration policy.
ADVICE TO THE COMMITTEE
During the financial year ended 31 May 2015 the committee
consulted T Howkins, Chief Executive, about remuneration
matters relating to individuals other than himself. The
Company Secretary also provided advice and support to
the committee.
Appropriate Company employees and external advisers may
attend committee meetings at the invitation of the Chairman.
EXTERNAL ADVISORS
The Remuneration Committee was advised during the year
by New Bridge Street (NBS), which was appointed following a
competitive tender process in early 2013.
NBS provided advice in respect of a wide range of issues,
including advice on the operation of the Sustained
Performance Plan, TSR performance monitoring, drafting the
Remuneration Report, remuneration benchmarking and share
plan implementation services.
NBS’s fee for advice provided to the Remuneration
Committee during the financial year ending 31 May 2015 was
£58,000 (excluding VAT).
NBS was appointed following a review of advisors. The
committee considers the advice obtained from NBS to
be objective and independent. NBS is a member of the
Remuneration Consultants Group and is a signatory to its
Code of Conduct, which requires its advice to be objective
and impartial.
STATEMENT OF SHAREHOLDER VOTING
AT 2014 AGM
At the October 2014 AGM, resolutions were proposed for
shareholders to approve the Directors’ Remuneration Policy,
the Directors’ Remuneration Report for the financial year
ended 31 May 2014 and the IG Group Long Term Incentive
Plan. The following votes were received:
2014 Remuneration Policy
Total number
of votes
% of votes cast
292,271,643
11,550,602
303,822,245
375,428
96.20%
3.80%
100%
–
2014 Annual Report on
Renumeration
Total number
of votes
% of votes cast
300,876,365
1,390,389
302,266,754
1,930,919
99.54%
0.46%
100%
–
IG Group Long Term
Incentive Plan
Total number
of votes
% of votes cast
298,686,270
5,045,504
303,731,774
375,902
98.34%
1.66%
100%
-
For(1)
Against
Total
Withheld
For(1)
Against
Total
Withheld
For(1)
Against
Total
Withheld
(1) For includes votes at the Chairman’s discretion.
A majority (over 50%) of the votes cast was required for
the resolutions to be passed, and all were duly approved
by shareholders.
90
|IG Group Holdings plc Annual Report 2015 TOTAL SHAREHOLDER RETURN CHART
The chart below shows the Company’s TSR performance compared with that of the FTSE 350 index. As IG Group is a member of
this index, the committee believes it is appropriate to compare the Group’s performance against it.
IG Group FTSE 250
FTSE 350 Financial Services
500
450
400
350
300
250
200
150
100
50
0
May 09
May 10
May 11
May 12
May 13
May 14
May 15
Source: Datastream (Thomson Reuters)
The graph represents the change in the value of a nominal investment of £100, made on 1 June 2009, in the Company and in
the FTSE 350 index. The closing values at 31 May 2015 represent the value of each nominal holding at that date, and reflect the
change in the share price and the value of dividend income reinvested over the period.
CHIEF EXECUTIVE – EARNINGS HISTORY
The five-year earnings history of the Chief Executive is shown in the table below:
Financial year
2010
2011
2012
2013
2014(2)
2015
Single-figure remuneration (£000)
Annual bonus outcome (% maximum)
LTIP vesting outcome (% maximum)
VSP vesting outcome (% maximum)(1)
SPP plan contribution (% maximum)(1)
1,628
100%
48%
–
–
1,141
7%
40%
–
–
2,201
99%
61%
–
–
1,103
47%
–
6%
–
1,970
–
–
3%
54%
1,519
–
–
0%
41%
(1) The SPP replaced the annual bonus and VSP schemes from the financial year ending 31 May 2014.
(2) The 2011 VSP awards had a performance period ending 31 May 2014. Half the awards vested on 22 July 2014 with the remaining vesting on 21 July 2015. The
value of these awards provided in last year’s remuneration report was based on an estimated share price. We have restated the amounts (now as 2014 prior year
comparatives) using the actual share price on 22 July 2014 (619.5 pence, for half the awards) and the average three month share price for period ending 31 May 2015
(740.9 pence) for the remaining awards.
91
IG Group Holdings plc Annual Report 2015| DIRECTORS’ REMUNERATION REPORT
(CONTINUED)
IMPLEMENTATION OF REMUNERATION POLICY FOR THE FINANCIAL YEAR ENDING 31 MAY 2016
Base salaries
Base salaries for Executive Directors are reviewed annually by the committee. The Remuneration Committee decided to
increase base salaries by 3% for the forthcoming year. Base salary is the only pensionable component.
The base salaries as at 1 June 2015 and increases from the prior year are:
T A Howkins
C F Hill
P G Hetherington(1)
2015
2016
Increase
£472,200
£486,400
£330,500
£340,400
£354,300
£364,900
3%
3%
3%
(1)
In 2015 P G Hetherington was paid a reduced pro rata salary of £283,400 calculated as 80% of his full-time equivalent salary of £354,300 to reflect his flexible working
arrangements. In 2016, there is no pro rata reduction as P G Hetherington‘s flexible working arrangements will no longer apply.
Chairman and Non-Executive Directors’ fees
The Chairman and Non-Executive Directors’ fees were last reviewed in July 2014. There are no changes to fee levels for the
forthcoming year and the fee levels for 2016 are:
• Chairman: £235,000 (unchanged from the financial year ended 31 May 2015). The fee was set by the committee after taking
into account the experience of the individual and Chairman fee levels in the market).
• Non-Executive Director base fee: £55,000
• Chairman of the Audit Committee additional fee: £15,000
• Chairman of Board Risk Committee additional fee: £15,000
• Combined role of Chairman of the Remuneration Committee and Senior Independent Director fee: £15,000.
• The Chairman of the Nomination Committee will not receive an additional fee.
Benefits and pension
We will provide benefits and pension in line with the information set out in the Policy Table on page 72 (pension to a maximum
of 15% of base salary, cash of equivalent value or a mixture of both).
92
|IG Group Holdings plc Annual Report 2015 Sustained performance plan
For the awards to be granted in respect of Plan Year 3, which will end on 31 May 2016, maximum opportunity of 500% of annual
rate of base salary will apply for Executive Directors.
The performance targets for these awards are as follows:
MEASURE
FURTHER DETAIL
MEASUREMENT
PERIOD (PLAN YEARS)
WEIGHTING
Diluted
earnings
per share
The committee has determined a sliding scale of
targets that will apply for the financial year ending
31 May 2016.
Financial year ending
31 May 2016.
Relative
Total
Shareholder
Return
Performance is measured against constituents of
the FTSE 350 excluding investment trusts. No part
of this element will be awarded if performance is
below median. 25% will be awarded for median,
increasing on a straight-line basis, with full vesting
for upper-quartile performance or better. The
committee’s discretion to scale back vesting will apply
as set out in the Policy Report.
The two financial years
ending 31 May 2016.
45%
35%
Non-
financial
measures
The measures will include:
• System reliability
• Maintaining good standing with regulators
Financial year ending
31 May 2016.
20%
• Customer satisfaction
• Reputation and PR
• Risk management
• Execution and delivery of key strategic initiatives
The committee will ensure the EPS and non-financial targets are suitably stretching. We deem the EPS and non-financial
measures themselves to be commercially sensitive, and will not disclose these prospectively. However, we will provide
retrospective disclosure of the targets and performance against them in next year’s remuneration report.
APPROVAL
This report was approved by the Board of Directors on 21 July 2015 and signed on its behalf by:
Roger Yates
Chair, Remuneration Committee
93
IG Group Holdings plc Annual Report 2015| AUDIT
COMMITTEE
Jim Newman, Chairman of
the Audit Committee, gives
his review of the committee’s
activities during the
financial year.
CHAIRMAN’S OVERVIEW
During the year, the Audit Committee has maintained its
focus on the integrity of financial reporting and supported
the Board in carrying out its responsibilities in relation to the
Group’s financial reporting requirements, through reviewing
the results and formal financial announcements. The ultimate
responsibility for reviewing and approving the Annual Report
and other externally reported financial information remains
with the Board.
The committee again considered the appropriateness of the
design and effectiveness of the Group’s system of internal
controls and governance over a wide range of regulatory and
compliance-related matters. The committee also reviewed
the quality of the external audit process, including the
identified audit risks, the audit plan and reports from the
Company’s auditor.
In the prior year, as part of its overall consideration of the
effectiveness of the Company’s internal audit function, the
committee received both an internal review against best
practice guidance and commissioned an External Quality
Assessment (EQA) performed by an independent external
firm. The External Quality Assessment concluded that the
Internal Audit Charter, policies and procedures ‘generally
conforms’ to the IIA Standards and the Code of Ethics. This
is the highest rating achievable in accordance with the IIA
Standards. The review identified potential improvements
which the committee considered – the detail of which is
discussed later in the Internal Audit section.
In relation to financial reporting the committee’s primary
responsibilities are to review the appropriateness of the
half-year and annual financial statements. Matters considered
include the impact and disclosure of the Swiss franc related
losses, the prior year restatements required following the
mandatory adoption of and consequential changes to
accounting policy required by IFRIC 21 and the primary areas
of judgement – each of which are detailed later in this report.
The year ended 31 May 2015 is the final year that the Group’s
current audit partner will provide an opinion on the Group’s
Annual Report and Financial Statements as the mandatory
rotation time limit of five years has been reached. For the
financial year ending 31 May 2016 the Group will therefore
have a new audit partner from PricewaterhouseCoopers. The
Audit Committee Chairman and the Chief Financial Officer
have worked with PricewaterhouseCoopers in order to ensure
an effective transition.
The Audit Committee’s terms of reference, which were
amended in the prior year to reflect both the revised
Corporate Governance Code and the establishment of the
Board Risk Committee, are summarised below and can be
found in full on the corporate website iggroup.com.
94
| ROLE OF THE AUDIT COMMITTEE
In summary, the Audit Committee’s terms of reference are to:
• Monitor the integrity of the Group’s financial statements,
including Annual and Interim Reports, preliminary results
announcements and any other formal announcements
relating to its financial performance, reviewing significant
reporting issues and judgements which they contain
• Provide advice to the Board on whether the Annual Report,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the company’s performance
• Review the continuing appropriateness of the Group’s
accounting policies
• Review the clarity of disclosures, ensuring the Group has
made appropriate estimates and judgements in preparing
all material information presented in the Annual Report
• Review an annual report from the Board Risk
Committee on the Company’s internal controls and Risk
Management Framework
• Ensure there are suitable whistle-blowing arrangements for
employees to raise concerns, in confidence, about possible
wrongdoing in financial reporting or other matters
• Review an assessment of the control environment, via
internal audit reports, and progress on implementing both
internal and external audit recommendations
• Monitor and review the internal audit function’s
effectiveness in the overall context of the Group’s internal
controls and risk-management systems
• Consider and approve the internal audit function’s remit,
ensure it has adequate resources and appropriate access to
information, and that it has adequate standing and is free
from management or other restrictions
• Review and assess the internal audit plan
• Consider and make recommendations to the Board on
appointing, reappointing and removing the Company’s
external auditors, which are subject to shareholder approval
• Oversee the relationship with the external auditors,
including approving the audit fee, non-audit fees and
non-audit services policy, as well as assessing annually the
external auditors’ independence and objectivity and the
effectiveness of the audit process
• Review the annual audit plan and the findings of the
external auditors, including a discussion on major areas
of audit focus, accounting and audit judgements and any
errors identified during the audit
• After each committee meeting, make a formal report to
the Board in which the Chairman of the Audit Committee
describes the proceedings
The Company Secretary drafts the agenda for each
committee meeting, ensuring that each item in the terms of
reference is covered at least once in the financial year, and
more frequently if required.
SCHEDULED
MEETINGS
ELIGIBLE TO
ATTEND
SCHEDULED
MEETINGS
ATTENDED
Chairman of the Audit Committee
Martin Jackson*
Jim Newman
Independent Non-Executive Directors
Roger Yates**
Sam Tymms
Andy Green***
1
4
4
4
4
1
4
3
4
4
* Martin Jackson stepped down as Chairman of the Audit Committee on
16 October 2014
** Roger Yates was unable to attend a rescheduled meeting
*** Andy Green attended by invitation
AUDIT COMMITTEE – MEMBERSHIP
AND ATTENDANCE
All Audit Committee members are independent Non-
Executive Directors who can draw on considerable, recent
financial services experience.
The Chief Financial Officer, Chief Risk Officer, Head of
Finance, Head of Internal Audit, Company Secretary and the
external auditors attend the Audit Committee by invitation
appropriate to the matters under consideration. Other
Directors and representatives from the finance function and
other areas of the business attend the Audit Committee
as necessary.
The committee normally meets four times a year and as
and when required. Separately, members of the committee
also meet privately with the Head of Internal Audit and the
external auditors to focus on respective areas of responsibility
and to discuss any potential requirements for support from
the committee to address any issues arising.
MAIN ACTIVITIES DURING THE
FINANCIAL YEAR
Following the establishment of the Board Risk Committee
during the prior year, responsibility for compliance, conduct
risk, client money and fraud was passed to the Board
Risk Committee.
In addition to discharging its responsibilities as described
above, the committee focused on a number of key areas. The
following summary of activities includes all areas covered by
the Audit Committee during the financial year.
95
IG Group Holdings plc Annual Report 2015| AUDIT
COMMITTEE
(CONTINUED)
FINANCIAL REPORTING
In relation to financial reporting, the primary role of the
committee is to work with management and the external
auditors in reviewing the appropriateness of the half-year and
annual financial statements. The committee discharged its
responsibilities in this area through concentrating on, among
other matters:
• Assessing the quality and acceptability of accounting
policies and practices
• Ensuring disclosures are clear and compliant with financial
reporting standards and relevant financial and governance
reporting requirements
• Considering material areas in which significant judgements
have been applied or there has been discussion with the
external auditors
• Reviewing all formal financial announcements and financial
statements prior to issuance
• Evaluating whether the Annual Report and Accounts,
taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders
to assess the Company’s performance, business model
and strategy
To aid this review, the committee has considered reports from
the Chief Financial Officer and his team. It has also received
reports from the external auditors on the outcomes of their
half-year review and annual audit.
The committee considered and addressed the following
disclosure or primary areas of judgement in relation to the
Financial Statements for the year ended 31 May 2015:
Swiss franc related losses
The committee has received a paper from management
setting out the rationale for the disclosures made in the
Annual Report and financial statements associated with
the losses incurred as a direct impact of the Swiss National
Bank actions on the 15 January 2015. The ultimate impact
on the Group’s profit before taxation is dependent on the
Group’s ability to recover the remaining outstanding debt,
the recovery of which is significantly dependent on a small
number of individually large debtors. Management’s paper
included an analysis of the gross debt, the recoveries made as
at 31 May 2015 and the provision for bad and doubtful debts
recorded in the financial statements. The Group’s auditor also
provided commentary on this matter to the committee.
96
IFRIC 21
As disclosed in note 41 to the Financial Statements IFRIC 21
is mandatory for the Group’s 31 May 2015 year-end. IFRIC
21 gives guidance as the obligating event that gives rise
to the liability to pay a levy, in the case of the Group this
is applicable to the United Kingdom’s Financial Services
Compensation Scheme levy (FSCS levy) at 1 April each year.
This interpretation is retrospective and accordingly requires
restatement of the comparative information.
The committee has received a paper from management
setting out the technical accounting analysis, the impact of
the guidance on the Group’s recognition of the FSCS levy and
the consequential restatement of the prior year information.
The Group’s auditor also provided commentary on this matter
to the committee.
Goodwill
In accordance with accounting standards the Group is
required to review any goodwill balances for impairment and
consider the underlying assumptions involved in calculating
the value-in-use of separate parts of the business known as
cash-generating units (CGUs). The committee observed that
a significant proportion of the Group’s goodwill relates to
the UK, Australian and South African CGUs, for which both
the single-year profit for the year ended 31 May 2015 and
that included in the Board-approved budget for the year
ending 31 May 2016 are greater than the carrying value of the
associated goodwill. Accordingly, the goodwill impairment
reviews of these CGUs are not considered to contain material
or significant judgements.
Therefore the key judgement in terms of goodwill
impairment reviews relates to the underlying assumptions
used in calculating the US CGU’s value-in-use. The US CGU
comprises both the Nadex exchange and the associated
market-making business (the ‘Nadex business’) as well as
the wider commercial use of the exchange technology
within the Group. The Nadex business remains in the early
stages of development and while significant progress
has been made during the year, it has continued to be
loss-making. Accordingly, the Audit Committee received a
paper from management setting out the financial forecasts
for both the Nadex exchange business and the platform
savings associated with the wider use of the exchange
technology within the Group. This paper set out the key
assumptions used in the impairment review and an associated
sensitivity analysis.
The committee also considered the development of the
Nadex business through the year ended 31 May 2015. This
included advances in the platform and product offering,
increased levels of client acquisition and volumes traded,
the additional liquidity resulting from the new market-
maker to the exchange and the continued commitment by
management to ensure the US business has the investment
it needs to reach profitability. The committee also reviewed
detailed financial forecasts and assumptions. In addition,
the Group’s auditor provided commentary on the matter to
the committee.
|IG Group Holdings plc Annual Report 2015 Useful economic life of intangible fixed assets
The Group is required to make judgements regarding the
useful economic life and carrying value of all its acquired
and internally developed software and licences and domain
names. During the year, the Group continued to invest in the
technology platform, domain names and industry-specific
generic top-level domains and to consolidate the online
presence around the IG.com website. As at 31 May 2015, the
Group had £6.1 million of domain assets in the Group balance
sheet that are amortised over a ten-year useful economic
life. As there is a risk of obsolescence for such assets, the
committee reviewed a report from management detailing the
financially significant intangible assets, the rationale for their
useful economic life, their continued use within the business
and their remaining carrying value.
Corporation tax
Calculating the Group’s current corporation tax charge
involves a degree of estimation and judgement, as the tax
treatment of certain items cannot be finally determined until
resolution has been reached with the relevant tax authority.
The Group holds tax provisions in respect of the potential tax
liability that may arise on these unresolved items. However,
the amount ultimately payable may be materially lower than
the amount accrued, and could therefore improve the Group’s
overall profitability and cash flows in future periods. The
committee reviewed a report from management that detailed
the assumptions made in calculating the Group’s current
corporation tax charge and provisions. The Group’s auditor
also provided commentary on this matter to the committee.
EXTERNAL AUDIT
The committee is responsible for making recommendations
on the appointment, reappointment and removal of external
auditors, and for assessing and agreeing the fees payable
to the Company’s auditor (both audit and non-audit fees).
The committee is also responsible for reviewing the audit
plans and reports from the external auditors. The main
activities undertaken in relation to the external audit are
summarised below.
Audit tendering and rotation
The Company’s external audit was last re-tendered
in 2010, resulting in a change of external auditors to
PricewaterhouseCoopers LLP for the financial year ended 31
May 2011. In line with the requirement to rotate the senior
statutory auditor, the Company’s current audit partner will
rotate after the audit of the year ended 31 May 2015 is
complete. Having recently conducted a full audit-firm tender
exercise, provided it remains satisfied with the external
audit process, the committee anticipates that the next
formal re-tender process will be for the audit of the year
ending 31 May 2021. This is in line with the UK Corporate
Governance Code and will comply with the transitional
requirements of both the EU and the Competition and
Markets Authority, subject to the final UK implementation of
the EU requirements.
Oversight of the external audit
The effectiveness of the external audit process depends
upon appropriately identifying risks at the start of the audit
cycle, and consequently the committee receives a detailed
audit plan from the auditor, on an annual basis, identifying
its assessment of the key audit risks. International audit
standards require that the risk of override of internal controls
is assumed to be a significant audit risk. In the auditors’
assessment, the primary audit risk identified to the Financial
Statements concerned management override of internal
controls, including both information technology as well as
manual controls. The work performed in this area by the audit
firm is detailed in its audit opinion.
The risk associated with information technology relates to
super-user access to certain legacy areas of the Group’s
trading system. The committee reviewed reports from
management and internal audit on the design, operation and
ongoing monitoring of a number of key controls designed
to mitigate the risks associated with the super-user access.
Additionally, the committee assessed whether the audit
process addressed these matters effectively through the
reporting received from the auditor during the audit cycle.
Management considers the risk in this area to have been
appropriately managed. The committee concurs with this
view. The committee has also considered the auditors’ report
on the potential override of internal controls, including the
results of additional substantive audit procedures and manual
journal testing undertaken.
The auditors’ also assessed counterparty credit risk to be
an elevated audit risk, both in terms of financial institution
credit risk and also client credit risk. This later element being
particularly highlighted by the Swiss franc related debtors
realised during the year.
With regards to financial institution credit risk the committee
has reviewed a paper from management and additionally the
risk disclosures within note 36 to the Financial Statements that
set out the control framework and policies and procedures
for the management of credit and associated concentration
risk by the Group. As a key business risk to the Group the
committee considers an appropriate control framework with
regards to financial institution credit risk, overseen by the
Board Risk Committee has been established. Additionally, the
committee assessed whether the audit process addressed
these matters effectively through the reporting received from
the auditor during the audit cycle. Both management and the
audit firm consider the financial statement risk in this area to
have been appropriately managed. The committee concurs
with this view.
With regards to client credit risk, this principally arises where
the client total funds deposited with the Group are insufficient
to cover any trading losses incurred and can arise where there
are significant and sudden movements in a market. From a
financial reporting viewpoint, material client credit risk only
arises post client losses being incurred, as is the case with the
Swiss franc related losses. As stated earlier, the committee has
97
IG Group Holdings plc Annual Report 2015| AUDIT
COMMITTEE
(CONTINUED)
received a paper from management setting out an analysis
of the gross debt, the recoveries made as at 31 May 2015
and the provision for bad and doubtful debts recorded in
the financial statements. Both management and the audit
firm consider the financial statement risk in this area to have
been appropriately managed. The committee concurs with
this view.
The committee also holds private meetings with the external
auditor through the year as an additional opportunity for
open dialogue and feedback from both the committee and
the auditor without management being present.
Effectiveness of the external auditors
Having performed a review of the external auditors during
the year, the committee is satisfied with their effectiveness.
The committee noted that the Company’s current audit
partner will rotate after the audit for the year ended
31 May 2015 is complete, and that the replacement partner
and handover process remain key to the external auditors’
continued effectiveness.
Audit and audit-related fees
Details of the Group’s audit and audit-related fees for the year
ended 31 May 2015 are disclosed in note 6 to the Financial
Statements. Audit-related fees include the statutory audit of
the Group and its subsidiaries, as well as audits required due
to the regulated nature of our business. Also included therein
are fees associated with the ISAE 3000 controls opinion
relating to the Group’s processes and controls over client
money segregation.
During the year, the committee reviewed and approved a
recommendation from management on the Company’s audit
and audit-related fees.
Non-audit fees
To safeguard the objectivity and independence of the
external auditors from becoming compromised, the
committee has a formal policy governing the engagement
of the external auditors to provide non-audit services. This
year, the committee again reviewed the Group’s policy
governing non-audit work, details of which are provided on
the corporate website.
The policy makes an important distinction between ‘audit-
related services’ and all other ‘non-audit services’.
The underlying rationale for this is because a number of
‘audit-related services’ are specifically required of the Group’s
auditors, through regulatory, legislative or contractual
obligations in addition to the statutory audit services. The
98
policy also sets out the considerations and safeguards that
are required in relation to non-audit services provided by the
auditors, and the specific services the auditors are precluded
from providing. Additionally, the policy sets out certain
permitted services for which the committee has pre-approved
management to engage the auditors.
This approval is subject to the policies set out above, and
to specified fee limits for individual engagements, as well as
the reporting requirements for all non-audit services to the
committee. There were no exceptions to this policy during
the year.
Since appointing PricewaterhouseCoopers LLP as auditors,
the Group has established and developed relationships
with a number of independent advisory and assurance
firms which provide alternatives to engaging the audit firm.
During the year, PricewaterhouseCoopers has performed
non-audit services in accordance with the non-audit policy.
The committee has monitored PricewaterhouseCoopers to
ensure that under no circumstances has work been performed
which affects its independence. This was done by carefully
assessing the nature of all non-audit work performed,
reviewing a summary of all the non-audit fees paid during
the year, evaluating the non-audit policy and ensuring that
appropriate safeguards were in place for each non-audit
engagement. The committee also requested and received an
explanation from PricewaterhouseCoopers of its own in-house
independence process.
During the year, non-audit fees of £0.9 million were paid
to PricewaterhouseCoopers as discussed in note 6 to
the financial statements. These principally related to tax
compliance and filing; corporate, structuring and sales-related
tax advice; regulatory advice and strategic advice to the
board. All contracts for non-audit services in excess of
£0.1 million require committee approval. Below this level,
the Chairman of the Audit Committee is notified of new
instructions for the delivery of non-audit services. Firms
other than the auditors have been engaged, following
a competitive tender process for the provision of a wide
range of non-audit services, including transfer pricing, tax
advisory services related to new business offerings and
changes to regulation, tax compliance services, risk and
regulatory advice.
INTERNAL AUDIT
The internal audit function provided the committee with
a summary report including internal audit reports and
recommendations in line with the internal audit plan for
the financial year. In addition, in the light of potential
improvements highlighted by the EQA, the function
provided additional updates on specific areas throughout
the year. The main areas of focus have been regulatory and
operational in nature. The committee monitored progress
on the implementation of the audit recommendations raised
by the internal audit function, and the effectiveness of the
coordination between internal and external audit.
|IG Group Holdings plc Annual Report 2015 AUDIT COMMITTEE ALLOCATION OF TIME
The following chart highlights how the committee spent its
time during the year ended 31 May 2015.
Statutory Reporting
Internal Audit Matters
Risks and Controls
External Audit Matters
Other
The committee reviewed the three-year rolling risk-based
internal audit plan including improvements as a result of the
EQA and considered the resources and skills allocated to
the internal audit function in order to execute the plan. The
plan consists of various different types of audit which require
different skills in order to provide adequate coverage across
the Group.
In the current year, internal audit resource was further
supplemented with functional specialism from external
advisory firms, and a Regulatory Internal Audit Manager
was recruited to provide more focus on regulatory risk.
This in-house specialism is in addition to the IT Internal
Audit Manager who focuses on internal audits of the IT
department and provides assurance over technology risks.
For the forthcoming year, the committee has again authorised
investment both in internal audit resource and in external
expertise. This will enable the delivery of the planned audits
with support from external specialists. The Audit Committee
considers this investment will ensure that resources remain
sufficient to provide adequate coverage of the Group’s risks,
while retaining flexibility to address new risks as they arise
over the three-year plan period.
All of the improvements from the External Quality Assessment
performed by an independent external firm have now been
introduced into the internal audit function to the satisfaction
of the Audit Committee.
INFORMATION TECHNOLOGY CONTROLS
The Group’s operations are heavily dependent on information
technology (IT), and accordingly the committee has reviewed
internal audit reports on IT controls and assessments of
external penetration tests and cyber risk. All of these have
been supported or performed by external specialists.
AUDIT COMMITTEE EFFECTIVENESS
During the year, the committee undertook a questionnaire-
based review of its own effectiveness. The evaluation
process was externally facilitated by Lintstock Limited as
part of the overall annual Board effectiveness review. The
review concluded that the committee was effective and its
performance was highly rated. For the committee to continue
to perform effectively, there was the need to ensure that the
balance of competencies on the committee is maintained
when members depart. In addition, the committee should
continue its enhancement of the quality of the internal audit
programme and its liaison with the Board Risk Committee.
Jim Newman
Chairman, Audit Committee
21 July 2015
99
IG Group Holdings plc Annual Report 2015| BOARD RISK COMMITTEE
Stephen Hill, Chairman of the
Board Risk Committee, gives
his review of the committee’s
activities during the financial year.
CHAIRMAN’S OVERVIEW
The Board Risk Committee was formed in 2014 and, in its first
full year of operation, has proven to be a useful resource in
providing the Board with further opportunity to review and
challenge the Group’s risk management framework in relation
to current and potential risk exposures. During the year,
as well as the continual review of the main risk documents,
including the Risk Appetite Statement, the ICAAP and the
ILAA, the committee considered the impacts of the Swiss
franc event and the resultant changes to our approach to
managing the risks associated with such an event.
ROLE OF THE BOARD RISK COMMITTEE
The committee’s key responsibilities are to:
• Consider and recommend for approval by the Board, the
Risk Appetite Statement (RAS) and Key Risk Indicators (KRIs)
for the current and future strategy
• Monitor, review and challenge the Internal Capital
Adequacy Assessment Process (ICAAP) and Internal
Liquidity Adequacy Assessment (ILAA). This includes stress-
testing, the liquidity and regulatory capital positions of the
Group, the size of the liquidity and capital buffers, and the
appropriateness of management mitigation actions
• Ensure rigorous stress-testing and scenario-testing of the
Group’s business and receive reports that explain the impact
of identified risks and threats
• Ensure risk mitigation consistent with our risk appetite is
in place
• Review the Group’s major risk exposures
• Consider the adequacy and effectiveness of the technology
infrastructure and supporting documentation in the Risk
Management Framework
• Provide input to the Remuneration Committee on the
risk implications of the remuneration policy
• Review the scope and nature of the work undertaken by the
control functions in connection with business model and
industry risks, and specifically regulatory, compliance, client
money, anti-money-laundering and conduct risks
• Review and approve the statements to be included in the
Annual Report concerning controls and risk management
• Review and monitor risk-related control recommendations
to ensure they are being actioned appropriately
The full Terms of Reference for the committee can be found
on the Company’s website, iggroup.com
100
100
|
| BOARD RISK COMMITTEE – MEMBERSHIP
AND ATTENDANCE
The Board Risk Committee is composed of independent
Non-Executive Directors and the table on the next page
shows the committee members during the year and their
attendance at committee meetings.
The committee is scheduled to meet four times a year
and additionally as and when required. The committee’s
recommendations are referred to the Board and matters
discussed by the committee are reported to the Board at
Board meetings.
The Chairman of the Company, the Chief Financial Officer,
Chief Operating Officer, Chief Risk Officer, Global Head of
Legal and Compliance, Head of Internal Audit and Deputy
Company Secretary all attend the Board Risk Committee by
invitation. Other Directors, representatives from the finance
function and other areas of the business attend the Board Risk
Committee appropriate to the matter under consideration.
ACTIVITY DURING THE FINANCIAL YEAR
The committee met three times during the year. To ensure
the committee discharges its responsibilities appropriately,
an annual work plan is set around the committee’s Terms
of Reference and was approved by the committee at
the start of the year. The Company Secretary assists the
Chairman of the committee in drafting the agenda for each
committee meeting.
During the year, the committee reviewed updates to
the ICAAP and the ILAA, approved the scenarios and
assumptions for internal stress testing and recommended the
documents to the Board for approval.
The Swiss franc strengthened dramatically following the
removal of the peg by the Swiss National Bank in January
and, as a result, IG incurred a market loss of £11.8 million and
booked a provision for bad debts of £15.1 million. The Risk
Committee reviewed how the business had responded to this
event and, in particular, considered how the dealing, market
and credit risk management systems and frameworks had
functioned in response to such a stress.
The committee was clear that the outcome was within IG’s
overall risk appetite, albeit at the higher end, but challenged
management in its modelling of stress scenarios. A number of
changes were made to margins on indices and currencies as
a result.
The committee also provided input to the Remuneration
Committee on the risks associated with the Group’s
remuneration policy, paying particular attention to the design
and monitoring of sales-incentive schemes.
The committee received the annual report from the Client
Money Committee, and also reviewed the risks and processes
around client money in relation to potential new business
and product developments. The internal audit function also
provided updates on the risks highlighted in its reports.
The committee received an environmental risk report focusing
on risks which are outside the Company’s control but could
have a negative impact on the business.
Such risks include political risks such as the impact of the
exit of the UK from the EU, and other associated regulatory
risks. In addition, the committee reviewed reports from
the Compliance function on the department’s activities
around compliance monitoring, conduct risk, money
laundering. The committee also received briefings on current
regulatory themes.
SCHEDULED
MEETINGS
ELIGIBLE TO
ATTEND
SCHEDULED
MEETINGS
ATTENDED
Chairman of the Board Risk Committee
Stephen Hill
Independent Non-Executive Directors
Roger Yates
Sam Tymms
Jim Newman
Andy Green*
* Andy Green attended by invitation
3
3
3
3
3
3
3
3
3
3
BOARD RISK COMMITTEE ALLOCATION OF TIME
Reporting, risks
and controls
Governance
ICAAP and ILAA
Compliance and
Conduct Risk
Operational Risk
Remuneration
Risk appetite
Client Money
Others
During the year, a review of the committee’s effectiveness and
performance was performed without significant issues.
Stephen Hill
Chairman, Board Risk Committee
21 July 2015
101
IG Group Holdings plc Annual Report 2015| DIRECTORS’
REPORT
The Directors are pleased to
submit their report, together with
the Group Financial Statements
for the year ended 31 May 2015.
The Directors’ Report comprises pages 102 to 104 of this
report, together with the sections of the Annual Report
incorporated by reference.
The Companies Act 2006 (‘the Act‘) requires the Directors to
present a Strategic Report in the Annual Report and Accounts.
This information can be found on pages 10 to 53.
The Company has chosen, in accordance with section 414 C(11)
of the Act and as noted in this Directors’ Report, to include
certain matters in its Strategic Report that it would otherwise
be necessary to disclose in the Directors’ Report.
CORPORATE GOVERNANCE STATEMENT
In compliance with the Disclosure and Transparency Rules
(DTR) 7.2.1, the disclosures required by DTR 7.2.2 to 7.2.7
are set out in this Directors’ Report and in the Corporate
Governance Report on pages 54 to 109 which, together with
the Statement of Directors’ Responsibilities, is incorporated by
reference into this Directors’ Report.
ACCOUNTABILITY AND AUDIT
A statement of the Directors’ responsibilities in respect of the
Financial Statements is set out immediately prior to that section
of the Annual Report, on page 105, and a statement regarding
the use of the going-concern basis in preparing these Financial
Statements is provided later in this report.
The Independent Auditors’ Report, which sets out the auditors’
reporting responsibilities, can be found on pages 106 to 109.
PROFIT AND DIVIDENDS
The Group’s statutory profit for the year after taxation
amounted to £131,933,000 (2014: £147,156,000), all of which
is attributable to the equity members of the Company
(2014: £147,156,000).
The Directors recommend a final ordinary dividend of
19.70 pence per share, amounting to £71,843,000, making a
total of 28.15 pence per share and £102,660,000 for the year.
Dividends are recognised in the Financial Statements for the
year in which they are paid or, in the case of a final dividend,
when approved by the shareholders. The amount recognised in
102
the Financial Statements, as described in note 12, includes this
financial year’s interim dividend and the final dividend from the
previous year, both of which were paid.
The final ordinary dividend, if approved, will be paid on
30 October 2015 to those shareholders on the register at
02 October 2015.
OPERATIONS OUTSIDE THE UNITED KINGDOM
In line with our strategic objectives, the Group has branches
in Australia, South Africa, France, Germany, Italy, Luxembourg,
the Netherlands, Norway, Ireland, Spain and Sweden. It has
operating subsidiaries in the US, Singapore, Japan, Australia,
India, Switzerland, Dubai and Belarus.
REVIEW OF BUSINESS AND LIKELY
FUTURE DEVELOPMENTS
We provide a review of the Group’s progress, outlining
developments during the year and giving an indication of likely
future developments, in the Strategic Report on pages 10 to
53. The Strategic Report also covers an analysis of the financial
position of the Group at the year-end, and information about
our Key Performance Indicators.
ARTICLES OF ASSOCIATION
The Company’s articles of association (‘the Articles’) are
available from the Group’s website, iggroup.com, or by writing
to the Company Secretary at the Group’s registered office.
The Articles can also be obtained from the UK Registrar of
Companies. Amendments to the Articles can only be made
by means of a special resolution at a general meeting of the
Company’s shareholders.
BOARD OF DIRECTORS AND THEIR INTERESTS
Details of the Directors who held office at the end of the
year are set out on pages 56 to 57 and are incorporated into
this report by reference. We provide information about the
Directors’ service contracts, and their interests in the share
capital of the Company, in the Directors’ Remuneration Report
on pages 70 to 93.
During the year, Jonathan Davie and Martin Jackson stepped
down as Chairman and Non-Executive Director respectively on
16 October 2014. On this date, Andy Green, who joined the
Board as Deputy Chairman on 9 June 2014, became Chairman
of the Group. Roger Yates and Tim Howkins will retire from the
Board at the Company’s Annual General Meeting (AGM) on
15 October 2015.
APPOINTMENT AND RETIREMENT OF DIRECTORS
The appointment and retirement of Directors is governed by
the Articles, the UK Corporate Governance Code (‘the Code’),
the Companies Act 2006 and related legislation. The Board has
the power to appoint any person as a Director to fill a casual
vacancy or as an additional Director, provided the total number
of Directors does not exceed the maximum prescribed in the
Articles. Any such Director holds office only until the next AGM,
and is then eligible to offer himself or herself for election.
The Articles also require that all those Directors who have been
in office at the time of the two previous AGMs, and who did
|IG Group Holdings plc Annual Report 2015 not retire at either of them, must retire as Directors by rotation.
Such Directors are eligible to stand for re-election. However, in
line with the Code’s recommendation that all directors of FTSE
350 companies should be subject to annual election, all our
Directors will stand for re-election at the 2015 AGM with the
exception of Roger Yates and Tim Howkins, who are retiring
from the Board.
DIRECTORS’ CONFLICTS OF INTEREST
In accordance with the Companies Act 2006, all Directors must
disclose both the nature and extent of any potential or actual
conflicts with the interests of the Company. We explain the
procedure for this in the Board section, on page 61.
INSURANCE AND INDEMNITIES
The Group has Directors’ and Officers’ liability insurance
in place, providing appropriate cover for any legal action
brought against its Directors. Qualifying third-party indemnity
provisions (as defined by section 234 of the Companies Act
2006) were in force during the year ended 31 May 2015. At the
date of approval of the financial statements these provisions
remain in force for the benefit of the Directors, in relation to
certain losses and liabilities which they may incur (or have
incurred) to third parties in the course of acting as Directors of
the Company.
RESEARCH AND DEVELOPMENT
In the ordinary course of business, the Company regularly
develops new products and services.
GREENHOUSE GAS (GHG) EMISSIONS
Information on the required disclosure of the Group’s GHG
emissions for the year ended 31 May 2015 is set out in the
Strategic Report on page 37.
POLITICAL DONATIONS
The Company made no political donations to political
organisations or independent election candidates and incurred
no political expenditure in the year (2014: £nil).
EMPLOYEE INVOLVEMENT
The Company is fully committed to involving employees in all
aspects of the business. Detailed information on employee
engagement can be found on page 35 of the Strategic Report.
EMPLOYEES WITH DISABILITIES
We give full and fair consideration to applications for
employment from people with disabilities. Information on the
Company’s policy on employing people with disabilities can be
found on page 33 of the Strategic Report.
SHARE CAPITAL
The Company has three classes of shares: ordinary shares,
B shares and preference shares. As at 31 May 2015, the
Company’s issued shares comprised 366,157,776 ordinary
shares of 0.005p each, 65,000 B shares of 0.001p and 40,000
preference shares of £1.00 each. Details of movement in the
Company’s share capital and rights attached to the issued
shares are given in notes 26 and 27 to the Financial Statements.
Information about the rights attached to the Company’s
shares can also be found in the Articles. Details of the Group’s
required regulatory capital are disclosed in note 37 to the
Financial Statements.
VARIATION OF RIGHTS
Subject to the provisions of applicable statutes, the rights
attached to any class of shares may be varied either with the
consent in writing of the holders of at least three-quarters in
nominal value of the issued shares of that class or with the
sanction of a Special Resolution passed at a separate meeting
of the holders of the shares of that class.
RESTRICTIONS ON TRANSFER OF SECURITIES
There are no specific restrictions on the transfer of securities
in the Company, other than as contained in the Articles
and certain laws or regulations, such as those related to
insider trading, which may be imposed from time to time.
The Directors and certain employees of the Company are
required to obtain the Company’s approval prior to dealing in
the Company’s securities. The Company is not aware of any
agreements between holders of securities that may result in
restrictions on the transfer of securities or on voting rights.
EXERCISE OF RIGHTS OF SHARES IN EMPLOYEE
SHARE SCHEMES
The trustees of the Employee Benefit Trust do not seek to
exercise voting rights on shares held in the employee trusts,
other than on the direction of the underlying beneficiaries. No
voting rights are exercised in relation to shares unallocated to
individual beneficiaries.
POWERS OF THE DIRECTORS TO ISSUE OR
PURCHASE THE COMPANY’S SHARES
The Articles permit the Directors to issue or repurchase the
Company’s own shares, subject to obtaining shareholders’
prior approval. The shareholders gave this approval at the
2014 AGM. The authority to issue or buy back shares will
expire at the 2015 AGM, and it will be proposed at the
meeting that the Directors be granted new authorities
to issue or buy back shares. The Directors currently have
authority to purchase up to 36,606,154 of the Company’s
ordinary shares. However, the Company did not repurchase
any of its ordinary shares during the year.
During the year, the Company instructed the trustee of the
Employee Benefit Trust to purchase shares in order to satisfy
awards under the Group’s share-incentive plan schemes.
The Company also issued shares in respect of long-term
incentive plan and value-sharing plan schemes. Details of the
shares held by the Group’s Employee Benefit Trusts and the
amounts paid during the year are disclosed in note 28 to the
Financial Statements.
MAJOR INTEREST IN SHARES
Information provided to the Company by major shareholders
pursuant to the Financial Conduct Authority (FCA)’s Disclosure
and Transparency Rules (DTRs) is published via a Regulatory
Information Service and is available on the Company’s
website. The following information has been received, in
accordance with DTR5, from holders of notifiable interests
103
IG Group Holdings plc Annual Report 2015| DIRECTORS’
REPORT
(CONTINUED)
in the Company’s issued share capital. It should be noted
that some of these holdings may have changed since the
Company received the notification. Holders are not required
to notify the Company of any change until the next applicable
threshold is reached or crossed.
Massachusetts Financial Services
Company
31 May 2015
No. of shares Percentage
36,584,986
10.00%
Artemis Investment Management LLP
18,806,983
Black Rock Inc.
Cantillon Capital Management LLC
18,313,343
18,258,919
Prudential PLC Group of Companies
11,066,471
5.15%
5.01%
4.99%
3.00%
The company was informed of the following movement of notifiable
interest between 31 May 2015 and 20 July 2015.
20 July 2015
No. of shares Percentage
Allianz Global Investors GmbH
18,303,673
4.99%
CHANGE OF CONTROL
Following any future change of control of the Company, the
Group’s banking facilities, which are currently undrawn (refer
to note 18 of the Financial Statements), will be cancelled, and
any obligations will become immediately due and payable.
There are no agreements between the Company and its
Directors or employees providing for compensation on
any loss of office or employment that occurs because of
a takeover bid. However, options and awards granted to
employees under the Company’s share schemes and plans
may vest on a takeover, under the schemes’ provisions.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Group is exposed to a number of business risks in
providing products and services to its clients. The Board is
responsible for establishing the overall appetite for these
risks, which is detailed and approved in the Risk Appetite
Statement. Our Risk Management Framework is supported
by a system of internal controls designed to embed the
management of business risk throughout the Group. We
outline the risks to which the Group is exposed and our
Risk Management Framework, including a description of its
system of internal controls, in the Managing Our Business Risk
section of the Strategic Report.
104
FINANCIAL INSTRUMENTS
Details of our use of financial instruments and financial
risk management are set out in note 35 and 36 to the
Financial Statements.
RELATED-PARTY TRANSACTIONS
Details of related-party transactions are set out in note 34 to
the Financial Statements.
ANNUAL GENERAL MEETING
The Company’s AGM will be held on 15 October 2015. We set
out details of the resolutions to be proposed at the AGM in a
separate circular sent to all shareholders.
INDEPENDENT AUDITORS
Resolutions to reappoint PricewaterhouseCoopers LLP as
the Company’s auditors and to authorise the Directors to
determine their remuneration will be put to shareholders at
the AGM on 15 October 2015.
GOING CONCERN
The Directors have prepared the Financial Statements
on a going-concern basis, which requires them 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 for
controlling the financial risks to which it is exposed, its
available liquidity, its regulatory capital position and the
annual budget. As a result of this review, the Directors are
satisfied 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.
DIRECTORS’ STATEMENT AS TO DISCLOSURE OF
INFORMATION TO AUDITORS
So far as each person who was a Director at the date of
approving this report is aware, there is no relevant audit
information, being information needed by the auditors in
connection with preparing their report, of which the auditors
are unaware. Each Director has taken all the steps that he or
she is obliged to take as a Director in order to make himself
or herself aware of any relevant audit information, and to
establish that the Company’s auditors are aware of that
information. This confirmation is given pursuant to section
418 of the Companies Act 2006 and should be interpreted in
accordance with and subject to these provisions.
SUBSEQUENT EVENTS
As a result of a review of our contingent liquidity requirements
and upon approval from the Executive Risk Committee, we
have renegotiated and reduced our liquidity facility from
£200.0 million to £160.0 million. Further details are set out in
Note 19(e) to the Financial Statements.
|IG Group Holdings plc Annual Report 2015 STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for
preparing the Annual Report, the
Directors’ Remuneration Report
and the Financial Statements in
accordance with applicable law
and regulations.
The Companies Act 2006 requires the Directors to prepare
Financial Statements for each financial year. Under this law,
the Directors have prepared the Group and parent company
Financial Statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union. In preparing these Financial Statements, the
Directors have also elected to comply with IFRSs issued by
the International Accounting Standards Board (IASB).
Under company law, the Directors must not approve the
Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company, and of the Group’s profit or loss for that financial
year. In preparing these Financial Statements, the Directors
are required to:
• Select suitable accounting policies and apply
them consistently
The Directors are responsible for safeguarding the assets of
the Company and the Group, and for taking reasonable steps
to prevent and detect fraud and other irregularities.
The maintenance and integrity of the Group’s website is also
the Directors’ responsibility.
RESPONSIBILITY STATEMENT
It is the Directors’ opinion that the Annual Report and
Accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s performance, business
model and strategy.
Each of the Directors, whose names and functions are listed in
the Corporate Governance Report, confirms that, to the best
of their knowledge:
• Make judgements and accounting estimates that are
• The Financial Statements, which have been prepared in
reasonable and prudent
• State whether applicable IFRSs as adopted by the
European Union and IFRSs issued by the IASB have been
followed, subject to any material departures disclosed and
explained in the Financial Statements
• Prepare the Financial Statements on a going-concern basis,
unless it is inappropriate to presume that the Company will
continue in business
Legislation in the United Kingdom governing the preparation
and dissemination of Financial Statements may differ from
legislation in other jurisdictions.
The Directors are responsible for ensuring that the Company
keeps adequate accounting records. These records must be
sufficient to show and explain the Company’s transactions and
disclose the financial position of the Company and the Group
with reasonable accuracy at any time. They must also enable
the Directors to ensure that the Financial Statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006 and, as regards the Group Financial Statements,
Article 4 of the IAS Regulation.
accordance with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities, financial
position and profit of the Company and the undertakings
included in the consolidation taken as a whole
• The Strategic Report and the Directors’ Report included
within this Annual Report provide a fair review of the
business’s development and performance, the Company’s
position and the undertakings included in the consolidation
taken as a whole, together with a description of the
principal risks and uncertainties that the Group faces
On behalf of the Board:
Christopher Hill
Chief Financial Officer
21 July 2015
105
IG Group Holdings plc Annual Report 2015| INDEPENDENT
AUDITORS’ REPORT
TO THE MEMBERS OF
IG GROUP HOLDINGS PLC
REPORT ON THE FINANCIAL STATEMENTS
Our opinion
In our opinion:
• IG Group Holdings plc’s Group Financial Statements
and the Company Financial Statements (the ‘Financial
Statements’) give a true and fair view of the state of the
Group’s and of the Company’s affairs as at 31 May 2015 and
of the Group’s profit and the Group’s and the Company’s
cash flows for the year then ended;
• The Group Financial Statements have been properly
prepared in accordance with International Financial
Reporting Standards (‘IFRSs’) as adopted by the
European Union;
• The Company Financial Statements have been properly
prepared in accordance with International Financial
Reporting Standards 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.
What we have audited
IG Group Holdings plc’s Financial Statements comprise:
• The Group and Company Statements of Financial Position
as at 31 May 2015;
• The Group income Statement and the Group statement of
comprehensive income for the year then ended;
• The Group and Company Cash Flow Statements for the
year then ended;
• The Group and Company Statements of Changes in Equity
for the year then ended; and
• The notes to the Financial Statements, which include
a summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied in
the preparation of the Financial Statements is applicable law
and IFRSs as adopted by the European Union and, as regards
the Company Financial Statements, as applied in accordance
with the provisions of the Companies Act 2006.
Our audit approach
Overview
We present below an overview of our audit approach, the
details of which are considered within our audit report:
Materiality
Audit scope
Areas of
focus
• Overall Group materiality:
£8.5 million which represents
5% of profit before tax.
• The majority of the audit work
was performed by the Group
audit team in London.
• Specific procedures were
carried out by overseas teams
where necessary.
• Risk of management
override of internal controls,
incorporating Information
Technology.
• Counterparty credit risk.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).
We designed our audit by determining materiality and
assessing the risks of material misstatement in the Financial
Statements. In particular, we looked at where the directors
made subjective judgements, for example in respect of
significant accounting estimates that involved making
assumptions and considering future events that are inherently
uncertain. As in all of our audits, we also addressed the
risk of management override of internal controls, including
evaluating whether there was evidence of bias by the
directors that represented a risk of material misstatement due
to fraud.
106
|IG Group Holdings plc Annual Report 2015 The risks of material misstatement that had the greatest effect
on our audit, including the allocation of our resources and
effort, are identified as ‘areas of focus’ in the table below. We
have also set out how we tailored our audit to address these
specific areas in order to provide an opinion on the Financial
Statements as a whole, and any comments we make on the
results of our procedures should be read in this context. This
is not a complete list of all risks identified by our audit.
Area of focus
How our audit addressed the area of focus
Risk of management override of internal controls, incorporating
Information Technology
International Standards on Auditing (UK & Ireland) (ISAs (UK
& Ireland)) require that we consider this as a significant risk as
management is in a unique position to perpetrate fraud because of
their ability to manipulate accounting records and prepare fraudulent
Financial Statements by overriding controls that otherwise appear to
be operating effectively.
Although management is responsible for safeguarding the assets
of the business, we planned our audit so that we had a reasonable
expectation of detecting material misstatements to the Financial
Statements and accounting records.
Specifically in relation to Information Technology, the risk relates to
super user access to the Universe, the main client ledger system, by
certain individuals in order to perform their role. Those individuals
have an opportunity to commit and conceal fraud.
Counterparty credit risk
The Group is exposed to counterparty credit risk when placing cash
with banks and brokers and individual client counterparty credit risk.
The removal of the link of the Swiss franc to the euro in January
resulted in significant provision for bad debts relating to individual
clients for the Group at the year end.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the Financial Statements as a whole, taking into account the
geographic structure of the Group, the accounting processes
and controls, and the industry in which the Group operates.
The Group consists of a UK holding Company with a number
of subsidiary entities and branches containing the operating
businesses of both the UK and overseas territories. The
accounting records for both the UK and overseas businesses
We tested the fraud risk assessment performed by management and
the prevention and detection controls in place in the Group with no
exceptions noted from our testing. We tested the appropriateness
and authorisation of journal entries that we identified as unusual and
no issues arose from this work.
We examined significant one-off transactions and considered
their accounting treatment with no significant exceptions arising.
We also incorporated an element of unpredictability into our
testing approach.
We understood and tested key controls in place over financial
information. Specifically, in relation to information technology, we
performed testing over the IT general controls in Universe, including
access rights. Additionally we tested the controls mitigating the risks
relating to super-user access including controls that would identify
unexpected changes to data which could impact the Financial
Statements and reconciliations of Universe reports to external third
party sources including broker and bank reconciliations. We noted
no significant issues arising.
We inspected the Group’s credit policy and tested the effectiveness
of the ongoing monitoring which includes ensuring balances held
with counterparties are within the levels approved by the Executive
Risk Committee and checking for changes in the short term and long
term credit worthiness of institutional counterparties. No significant
were identified through this work.
We tested on a sample basis the credit worthiness of institutional
counterparties to external rating agency reports. No exceptions were
noted from this work.
We performed controls and substantive testing over cash and
broker reconciliations. We noted no significant issues arising.
We read and understood the bad debt provisioning policies and
checked that these were consistent with prior year. Where this
was not the case, we understood the rationale for any change and
considered whether new methodologies are appropriate.
We reperformed the calculation of the provision to calculate the
expected recovery and value within the Financial Statements, and no
issues were noted in the testing.
We understood the basis and assumptions used by management
for the provisioning of the Swiss franc exposures. We considered
the adequacy of this provision and noted no significant issues from
our testing.
are primarily maintained in the UK. As a result, the majority
of the audit work was performed by the Group audit team
in London, with certain, specific procedures carried out by
overseas PwC engagement teams where necessary. This work
was limited to payroll procedures in Australia and Singapore.
107
IG Group Holdings plc Annual Report 2015| Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures and to evaluate the
effect of misstatements, both individually and on the Financial
Statements as a whole.
Based on our professional judgement, we determined
materiality for the Financial Statements as a whole as follows:
OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report
and the Directors’ Report for the financial year for which
the Financial Statements are prepared is consistent with the
Financial Statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our
opinion:
Overall Group materiality
£8.5 million (2014: £9.7 million).
How we determined it
5% of profit before tax.
Rationale for benchmark
applied
Consistent with last year, we applied
this benchmark, a generally accepted
audit practice, in the absence
of indicators that an alternative
benchmark would be appropriate.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
£420,000 (2014: £450,000) as well as misstatements below
that amount that, in our view, warranted reporting for
qualitative reasons.
Going concern
Under the Listing Rules we are required to review the
Directors’ Statement, set out on page 104, in relation to
going concern. We have nothing to report having performed
our review.
As noted in the Directors’ Statement, the directors have
concluded that it is appropriate to prepare the Financial
Statements using the going concern basis of accounting.
The going concern basis presumes that the Group and the
Company have adequate resources to remain in operation,
and that the directors intend them to do so, for at least one
year from the date the Financial Statements were signed. As
part of our audit we have concluded that the directors’ use of
the going concern basis is appropriate.
However, because not all future events or conditions can
be predicted, these statements are not a guarantee as
to the Group’s and Company’s ability to continue as a
going concern.
We have no
exceptions to
report arising from
this responsibility.
We have no
exceptions to
report arising from
this responsibility.
• Information in the Annual Report is:
− materially inconsistent with the information
in the audited Financial Statements; or
− apparently materially incorrect based
on, or materially inconsistent with, our
knowledge of the Group and Company
acquired in the course of performing our
audit; or
− otherwise misleading.
• the statement given by the directors on page
105, in accordance with provision C.1.1 of
the UK Corporate Governance Code (‘the
Code’), that they consider the Annual Report
taken as a whole to be fair, balanced and
understandable and provides the information
necessary for members to assess the Group’s
and Company’s performance, business model
and strategy is materially inconsistent with
our knowledge of the Group and Company
acquired in the course of performing
our audit.
• the section of the Annual Report on page
96, as required by provision C.3.8 of the
Code, describing the work of the Audit
Committee does not appropriately address
matters communicated by us to the Audit
Committee.
We have no
exceptions to
report arising from
this responsibility.
Adequacy of accounting records and information and
explanations received
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• We have not received all the information and explanations
we require for our audit
• Adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us
• The Company Financial Statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns
We have no exceptions to report arising from
this responsibility.
108
|IG Group Holdings plc Annual Report 2015 Directors’ remuneration
Directors’ remuneration report – Companies Act 2006
opinion
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
What an audit of Financial Statements involves
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:
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have no
exceptions to report arising from this responsibility.
• Whether the accounting policies are appropriate to the
Group’s and the Company’s circumstances and have been
consistently applied and adequately disclosed;
• The reasonableness of significant accounting estimates
made by the directors
Corporate governance statement
• The overall presentation of the Financial Statements.
Under the Listing Rules we are required to review the part
of the Corporate Governance Statement relating to the
Company’s compliance with the ten provisions of the UK
Corporate Governance Code. We have nothing to report
having performed our review.
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 105, 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 and express an opinion on the
Financial Statements in accordance with applicable law and
ISAs (UK & Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for
and only for the Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for
no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent
in writing.
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
Financial Statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited Financial Statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Darren Ketteringham (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
21 July 2015
109
IG Group Holdings plc Annual Report 2015| FINANCIAL
STATEMENTS
GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 MAY 2015
Trading revenue(1)
Interest income on segregated client funds
Revenue
Interest expense on segregated client funds
Introducing partner commissions
Betting duty and financial transaction taxes(1)
Other operating income
Net operating income
Analysed as:
Net trading revenue(1)
Other net operating income
Administrative expenses(1)
Operating profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Profit for the year attributable to owners of the parent
Note
3
3
4
3
5
8
9
10
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
422.1
4.9
427.0
(0.4)
(33.7)
(6.3)
0.6
387.2
388.4
(1.2)
(217.6)
169.6
1.8
(1.9)
169.5
(37.6)
131.9
131.9
131.9
£m
407.9
5.8
413.7
(0.3)
(37.5)
(3.8)
2.1
374.2
370.4
3.8
(178.8)
195.4
1.5
(2.0)
194.9
(47.7)
147.2
147.2
147.2
Earnings per ordinary share
Basic
Diluted
Note
11
11
36.13p
35.99p
2015
Restated*
40.35p
40.22p
The notes on pages 116 to 177 are an integral part of these Financial Statements.
(1) The Group’s trading revenue and net trading revenue have been negatively impacted by £12.2 million and £11.8 million respectively, betting duty and financial
transaction taxes by £0.4 million and administrative expenses by £11.5 million, following the Swiss National Bank’s announcement, on 15 January 2015, that it had
ceased intervention in the exchange rate between the Swiss franc and euro. Please refer to note 2 for further details.
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
110
|IG Group Holdings plc Annual Report 2015 GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2015
Profit for the year
Other comprehensive income/(expense):
Items that may be subsequently reclassified to profit or loss:
Change in value of available-for-sale financial assets
Foreign currency translation income/(expense) on overseas subsidiaries
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to owners of the parent
Year ended 31 May 2015
Restated*
Year ended 31 May 2014
£m
0.3
0.6
£m
131.9
0.9
132.8
132.8
132.8
£m
0.1
(6.5)
£m
147.2
(6.4)
140.8
140.8
140.8
All items of other comprehensive income or expense may be subsequently reclassified to profit or loss.
The items of comprehensive income noted above are stated net of related tax effects.
The notes on pages 116 to 177 are an integral part of these Financial Statements.
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
111
IG Group Holdings plc Annual Report 2015| FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF FINANCIAL POSITION AT 31 MAY 2015
Group
Company
31 May
2015
Restated*
31 May
2014
Restated*
1 June
2013
31 May
2015
Note
£m
£m
£m
£m
2014
£m
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Financial investments
Deferred tax assets
Current assets
Trade receivables
Prepayments and other receivables
Cash and cash equivalents
Financial investments
TOTAL ASSETS
Liabilities
Current liabilities
Trade payables
Other payables
Income tax payable
Non-current liabilities
Redeemable preference shares
Total liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
Shareholders’ equity
TOTAL EQUITY AND LIABILITIES
13
14
15
21
10
17
18
21
22
23
26
27
27
29
13.3
124.0
–
75.5
7.1
13.0
122.7
–
32.2
7.1
219.9
175.0
14.5
120.5
–
–
10.9
145.9
300.6
10.3
98.3
50.5
459.7
605.6
19.0
59.1
24.3
327.5
12.2
101.5
50.3
491.5
666.5
21.9
58.4
20.3
100.6
102.4
–
–
100.6
102.4
–
206.8
85.4
273.7
565.9
666.5
–
206.8
85.1
211.3
503.2
605.6
–
–
–
1.6
479.8
471.6
–
–
–
–
479.8
473.2
–
202.8
–
–
202.8
682.6
–
126.5
–
126.5
–
126.5
–
206.8
39.3
310.0
556.1
682.6
–
135.7
–
–
135.7
608.9
–
7.7
–
7.7
–
7.7
–
206.8
34.3
360.1
601.2
608.9
269.6
12.2
148.8
32.9
463.5
683.4
17.7
61.2
13.1
92.0
–
92.0
–
206.8
91.8
292.8
591.4
683.4
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.The opening balance sheet as at 1 June 2013 reflects the Group’s restated closing balance
as at 31 May 2013.
The financial statements on pages 110 to 177 were approved by the Board of Directors on 21 July 2015
and signed on its behalf by:
Tim Howkins
Chief Executive
Christopher Hill
Chief Financial Officer
Registered Company number: 04677092
112
|IG Group Holdings plc Annual Report 2015
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2015
Other
reserves
(note 29)
Retained
earnings
Share-
holders’
equity
Group
Restated* At 1 June 2013
Profit for the year
Other comprehensive expense for the year
Total comprehensive (expense)/income for the year
Equity-settled employee share-based payments
(Note 30)
Utilisation of own shares
Equity dividends paid (Note 12)
Movement in equity
Restated* At 31 May 2014
Profit for the year
Other comprehensive income for the year
Total comprehensive (expense)/income for the year
Equity-settled employee share-based payments
(Note 30)
Excess of tax deduction benefit on share-based
payments recognised directly in equity (Note 10)
Purchase of own shares
Equity dividends paid (Note 12)
Movement in equity
At 31 May 2015
Share
capital
(note 27)
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share
premium
account
(note 27)
£m
206.8
–
–
–
–
–
–
–
£m
85.1
–
(6.4)
(6.4)
6.6
0.1
–
0.3
206.8
85.4
–
–
–
–
–
–
–
–
–
0.9
0.9
5.3
0.5
(0.3)
–
6.4
206.8
91.8
Non-
con-
trolling
interests
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
£m
503.2
147.2
(6.4)
140.8
6.6
0.1
(84.8)
62.7
565.9
131.9
0.9
132.8
5.3
0.5
(0.3)
(112.8)
25.5
591.4
£m
211.3
147.2
£m
503.2
147.2
–
(6.4)
147.2
140.8
–
–
(84.8)
62.4
273.7
131.9
–
6.6
0.1
(84.8)
62.7
565.9
131.9
0.9
131.9
132.8
–
–
–
5.3
0.5
(0.3)
(112.8)
(112.8)
19.1
292.8
25.5
591.4
The notes on pages 116 to 177 are an integral part of these Financial Statements.
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
113
IG Group Holdings plc Annual Report 2015| FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2015
Company
At 1 June 2013
Profit for the year and total comprehensive income
Equity-settled employee share-based payments (note 30)
Utilisation of own shares
Equity dividends paid (note 12)
Movement in equity
At 31 May 2014
Profit for the year and total comprehensive income
Equity-settled employee share-based payments (note 30)
Purchase of own shares
Equity dividends paid (note 12)
Movement in equity
At 31 May 2015
Share
capital
(note 27)
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
Share
premium
account
(note 27)
£m
206.8
–
–
–
–
–
£m
27.4
–
6.6
0.3
–
6.9
206.8
34.3
–
–
–
–
–
–
5.3
(0.3)
–
5.0
206.8
39.3
Other
reserves
(note 29)
Retained
earnings Total equity
£m
359.1
85.8
–
–
(84.8)
1.0
360.1
62.7
–
–
£m
593.3
85.8
6.6
0.3
(84.8)
7.9
601.2
62.7
5.3
(0.3)
(112.8)
(112.8)
(50.1)
310.0
(45.1)
556.1
The notes on pages 116 to 177 are an integral part of these Financial Statements.
114
|IG Group Holdings plc Annual Report 2015 CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 MAY 2015
Cash generated from operations
Income taxes paid
Interest received on segregated client funds
Interest paid on segregated client funds
Note
20
Group
Restated*
Year ended
31 May 2014
Year ended
31 May 2015
Company
Year ended
31 May 2015
Year ended
31 May 2014
£m
210.4
(42.9)
4.9
(0.4)
£m
176.5
(47.8)
6.0
(0.3)
£m
112.8
–
–
–
£m
85.8
–
–
–
Net cash flow from operating activities
172.0
134.4
112.8
85.8
Investing activities
Interest received
Purchase of property, plant and equipment
Payments to acquire intangible assets
Proceeds from maturity of financial investments and
coupon receipts
Purchase of financial investments
Net cash flow used in investing activities
Financing activities
Interest paid
Equity dividends paid to owners of the parent
Proceeds from drawdown of committed banking facility
Repayment of committed banking facility
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange profit/(loss) on cash and cash equivalents
12
19(c)
19(c)
Cash and cash equivalents at the end of the year
18
0.8
(6.0)
(6.4)
51.3
(51.1)
(11.4)
(1.9)
(112.8)
100.0
(100.0)
(114.7)
45.9
101.5
1.4
148.8
1.4
(3.4)
(8.1)
59.4
(91.3)
(42.0)
(2.0)
(84.8)
80.0
(80.0)
(86.8)
5.6
98.3
(2.4)
101.5
–
–
–
–
–
–
–
(112.8)
–
–
(112.8)
–
–
–
–
–
–
–
–
–
–
(1.2)
(84.8)
–
–
(86.0)
(0.2)
0.2
–
–
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
For the purposes of the cash flow statement, cash and cash equivalents is stated gross of the drawdown of the committed
banking facility (31 May 2015 and 31 May 2014: £nil). Please refer to note 19.
The notes on pages 116 to 177 are an integral part of these Financial Statements.
115
IG Group Holdings plc Annual Report 2015| INDEX TO NOTES TO THE FINANCIAL STATEMENTS
NOTE
1.
2.
3.
4.
5.
6.
7.
8.
9.
Presentation, critical accounting estimates and judgements
Underlying results
Turnover
Segment information
Administrative expenses
Auditors’ remuneration
Staff costs
Finance income
Finance costs
10. Taxation
11. Earnings per ordinary share
12. Dividends
13. Property, plant and equipment
14.
Intangible assets
15.
Investment in subsidiaries
16.
Impairment of goodwill
17. Trade receivables
18. Cash and cash equivalents
19.
Liquidity analysis and risk management
20. Cash generated from operations
21. Financial investments
22. Trade payables
23. Other payables
24. Provisions
25. Contingent liabilities
26. Redeemable preference shares
27. Share capital
28. Own shares held in Employee Benefit Trusts
29. Other reserves
30. Employee share plans
31. Capital commitments
32. Obligations under leases
33. Transactions with Directors
34. Related party transactions
35. Financial instruments
36. Financial risk management
37. Capital management and resources
38.
Impact of adopting new accounting standards
39. Subsequent events
40. Authorisation of financial statements and statement of compliance with IFRS
41. Accounting policies
116
|IG Group Holdings plc Annual Report 2015
NOTES TO THE FINANCIAL STATEMENTS
The calculation of the Group’s current corporation tax
charge involves a degree of estimation and judgement with
respect of certain items whose tax treatment cannot be
finally determined until resolution has been reached with
the relevant tax authority. The Group holds tax provisions in
respect of the potential tax liability that may arise on these
unresolved items, however, the amount ultimately payable
may be materially lower than the amount accrued and paid
and could therefore improve the overall profitability and cash
flows of the Group in future periods.
The measurement of the Group’s net trading revenue is
predominately based on quoted market prices (refer to note
35 for the financial instrument valuation hierarchy disclosures)
and accordingly involves little judgement. However, the
calculation of the segmental net trading revenue, as the
Group manages risk and hedges on a group-wide portfolio
basis, involves the use of an allocation methodology. This
allocation methodology does not impact on the overall Group
net trading revenue disclosed.
2.
UNDERLYING RESULTS
The Directors regard the adjustment of exceptional items as
detailed below necessary to provide a greater understanding
of the results of the Group for the year.
1.
PRESENTATION, CRITICAL
ACCOUNTING ESTIMATES
AND JUDGEMENTS
Critical accounting estimates and judgements
The preparation of financial statements requires the Group
to make estimates and judgements that affect the amounts
reported for assets and liabilities, as at the year-end, and the
amounts reported for revenues and expenses during the year.
The nature of estimates means that actual outcomes could
differ from those estimates.
In the Directors’ opinion, the accounting estimates or
judgements that have the most significant impact, on the
measurement of items recorded in the financial statements,
remain the impairment of goodwill (refer to note 16), the
useful economic life applied to the intangible assets, the
recoverability of amounts owed by clients and the calculation
of the Group’s current corporation tax charge (refer to
note 10(b)).
The judgements in relation to the assessment of goodwill for
impairment largely relate to the assumptions underlying the
calculation of the value-in-use of the US cash generating unit
(CGU). The US CGU comprises both the Nadex exchange
and associated market making business (the ‘Nadex
exchange business’) as well as the wider commercial use
of the exchange technology within the Group. While the
Nadex exchange business remains loss making, the wider
commercial use of the technology by the Group provides
other significant economic benefits, which taken alone
support the carrying value of the goodwill. For this reason,
the Directors consider that a reasonably possible change in a
key assumption would not cause the units' carrying amount
to exceed its recoverable amount. In the event of the Nadex
exchange business failing to generate sufficient profits, the
deferred tax asset of US$2.8 million held in relation to carry
forward tax losses might suffer impairment.
The assessment of the useful economic life of the Group’s
internally developed and acquired software, licenses, domain
name and generic top-level domain based intangible assets is
judgemental and can change due to obsolescence as a result
of unforeseen technological developments. The useful life
for licences represents management’s view of the expected
term over which the Group will receive benefits from the
software, and does not exceed the licence term. For internally
developed and acquired software and domain assets the life
is based on historical experience with similar products as well
as anticipation of future events which may impact their useful
economic life.
The recoverability of amounts owed by clients, particularly
following the impact of the actions of the Swiss National Bank
in January 2015, is dependent on the Group’s ability to collect
the remaining outstanding amounts from a small number of
individually large debtors. Provisions have been made where
the directors consider there is a risk of non-recoverability
(refer to note 36((ii)b).
117
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
2(A)
UNDERLYING PROFIT BEFORE TAX AND DILUTED EARNINGS PER SHARE
Exceptional items – Swiss franc event impact
On 15 January 2015, the Swiss National Bank announced that it had ceased intervention in the exchange rate between the Swiss
franc and euro. This caused a sudden extreme appreciation in the value of the franc, accompanied by a lack of market liquidity
which lasted several minutes and resulted in a negative financial impact to the Group to a maximum of £30.0 million. This was
from a combination of £11.8 million of market losses and £18.4 million of gross client credit exposures. The market related losses
occurred where client positions were closed in the Group’s systems at a more beneficial level than the Group was able to close
its entire corresponding hedge due to the market dislocation.
The precise level of the impact on the Group’s profit before taxation is partially dependent on the Group’s ability to recover
client debts. The recovery of the outstanding debt is dependent on the ultimate recovery from a small number of debtors. The
Group’s approach remains that for clients who are considered to be well positioned and with resources to pay their debts the
Group will continue to employ resources to recover the debts. The impact on profit before tax and diluted earnings per share at
31 May 2015 is as below:
Net operating income
Analysed as:
Net trading revenue
Other net operating (loss)/income(1)
Administrative expenses(2)
Operating profit
Finance income
Finance costs
Profit before taxation
Tax expense(3)
Profit for the year
Earnings per ordinary share
– basic
– diluted
Statutory
Year ended
31 May 2015
Swiss franc
event impact
Underlying
Year ended
31 May 2015
Restated*
Year ended
31 May 2015
Note
2(b)
2(b), 3(a)
2(b)
2(b)
8
9
10
2(c)
2(c)
£m
387.2
388.4
(1.2)
(217.6)
169.6
1.8
(1.9)
169.5
(37.6)
131.9
£m
12.2
11.8
0.4
11.5
23.7
–
–
23.7
(4.9)
18.8
£m
399.4
400.2
(0.8)
(206.1)
193.3
1.8
(1.9)
193.2
(42.5)
150.7
36.13p
35.99p
5.14p
5.08p
41.27p
41.07p
£m
374.2
370.4
3.8
(178.8)
195.4
1.5
(2.0)
194.9
(47.7)
147.2
Restated*
40.35p
40.22p
(1) £0.4 million Swiss franc event impact relates to betting duty.
(2) Included in administrative expenses are:
Swiss franc related bad debts charge(2.1)
Employee bonuses(2.2)
Share schemes - Sustained Performance Plan (SPP)(2.3)
(2.1) The movement in the Swiss franc event related debts are below:
Gross debt at 15 January 2015
Amounts recovered(2.4)
Bad debts charge (note 36)
Net debt at 31 May 2015
£m
15.1
(3.1)
(0.5)
11.5
£m
18.4
(2.8)
(15.1)
0.5
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
(2.2) The losses associated with the Swiss franc move impact upon the general staff bonus pool. The approximate reduction in the general staff bonus pool of
£3.1 million, results from impaired performance against both financial and non-financial measures.
(2.3) Performance under the Executive Director and Senior Management SPP is 35% weighted to a diluted earnings per share (DEPS) target. At headline DEPS no awards
under the element of the scheme will be made, with a resulting reduced IFRS 2 charge of £0.5 million.
(2.4) Amounts recovered are settled debtors in the period from 15 January to 31 May 2015.
(3) The Swiss franc event tax impact of £4.9 million was calculated using the UK effective corporation tax rate at 20.83%.
118
|IG Group Holdings plc Annual Report 2015
2(B)
UNDERLYING SEGMENTAL ANALYSIS
Year ended 31 May 2015
Net trading revenue
Swiss franc event impact on net trading revenue
Underlying net trading revenue
UK
£m
206.0
5.9
211.9
Australia
Europe
£m
58.1
1.1
59.2
£m
76.9
4.0
80.9
Rest of
World
£m
47.4
0.8
48.2
Central
£m
–
–
–
Total
£m
388.4
11.8
400.2
2(C)
UNDERLYING EARNINGS PER SHARE
Basic earnings per ordinary share is calculated by dividing the profit for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares in issue during the period, excluding shares purchased and held
as own shares in Employee Benefit Trusts. Diluted earnings per ordinary share is calculated using the same profit figure as that
used in basic earnings per ordinary share and by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive ordinary shares arising from share schemes.
The following reflects the income and share data used in the earnings per share computations:
Statutory
Year ended
31 May 2015
Swiss franc
event impact
Underlying
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
Note
£m
£m
£m
£m
Profit for the period:
Earnings attributable to equity shareholders of the parent
2(a)
131.9
18.8
150.7
147.2
Weighted average number of ordinary shares
Basic
Dilutive effect of share-based payments
Diluted
Basic earnings per ordinary share
Diluted earnings per ordinary share
Year ended
31 May 2015
Year ended
31 May 2014
(number)
(number)
365,199,825
364,710,756
1,383,806
1,213,527
366,583,631
365,924,283
Statutory
Year ended
31 May 2015
Swiss franc
event impact
Underlying
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
Note
11
£m
36.13p
35.99p
£m
5.14p
5.08p
£m
41.27p
41.07p
£m
40.35p
40.22p
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
119
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
2(D)
UNDERLYING FUNDS GENERATED FROM OPERATIONS
The following statement summarises the Group’s cash generation during the period and excludes all cash flows in relation to
monies held on behalf of clients. Additionally amounts due from brokers and the liquid asset buffer have been included within
‘own funds’ in order to provide a clear presentation of the Group’s available cash resources. The derivation of own funds is
explained in note 15(a), and is stated net of amounts drawn on the Group’s committed banking facility.
Operating activities
Profit before tax
Depreciation and amortisation
Other non-cash adjustments(1)
Income taxes paid
Own funds generated from operations
Statutory
Year ended
31 May 2015
Swiss franc
event impact(1)
Underlying
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
Note
£m
2(a), 19(d)
19(d)
19(d)
169.5
10.7
(0.5)
(42.9)
136.8
£m
23.7
–
3.6
(4.9)
22.4
£m
£m
193.2
10.7
3.1
(47.8)
159.2
194.9
9.7
3.8
(47.8)
160.6
(1) The £3.6 million included in the ‘Other non-cash adjustments’ line relates to remuneration expenses. The £4.9 million in the ‘Income taxes paid‘ line was calculated
using the UK effective corporation tax rate at 20.83% (refer to note 2(a)).
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
3. TURNOVER
3(A)
NET TRADING REVENUE
Net trading revenue represents trading revenue from financial instruments carried at fair value through profit or loss net of
introducing partner commission, and commission earned from providing the execution only stockbroking service. This is
consistent with the management information received by the Chief Operating Decision Maker (refer to note 4). Revenue from
external customers includes interest income on segregated client funds and is analysed as follows:
Net trading revenue
Contracts for difference
Spread betting
Binaries
Stockbroking commission(1)
Total net trading revenue
Interest income on segregated client funds
Revenue from external customers
Year ended
31 May 2015
Year ended
31 May 2014
£m
£m
205.8
146.2
36.2
0.2
388.4
4.9
393.3
210.8
132.8
26.8
-–
370.4
5.8
376.2
In addition to the above, finance income is disclosed in note 8. The Group does not derive more than 10% of external revenue
from any one single customer.
(1) During the year the Group commenced the offering of an execution-only stockbroking service in the UK, Ireland and the Netherlands.
3(B)
OTHER OPERATING INCOME
Revenue share arrangement(1)
Administrative charges to clients(2)
Year ended
31 May 2015
Year ended
31 May 2014
£m
–
0.6
0.6
£m
1.4
0.7
2.1
(1) The Group received income under a revenue share agreement with Spreadex Limited in relation to the client list of the former Sport business, calculated by
reference to the revenue that Spreadex Limited generated from clients on the list. This arrangement ended on 23 June 2014.
(2) The Group charges inactivity fees for those accounts on which clients have not traded for two years.
120
|IG Group Holdings plc Annual Report 2015 4.
SEGMENT INFORMATION
The segment information is presented as follows:
• Segment net trading revenue has been disclosed net of introducing partner commissions as this is consistent with the
management information received by the Chief Operating Decision Maker (CODM), being the Executive Directors
• Net trading revenue is reported by the location of the office that manages the underlying client relationship and aggregated
into the disclosable segments of UK, Australia, Europe and Rest of World. The Rest of World segment comprises the Group’s
operations in Japan, South Africa, Singapore, the United States and the United Arab Emirates
• The UK segment comprises the Group’s operations in the UK and Ireland
• The Europe segment comprises the Group’s operations in France, Germany, Italy, Luxembourg, the Netherlands, Norway,
Spain, Sweden and Switzerland
• Segment contribution, being segment trading revenue less directly incurred costs, as the measure of segment profit and loss
reported to the CODM
The UK segment derives its revenue from financial spread bets, contracts for difference (CFDs), binary options and execution-
only stockbroking. The Australian segment derives its revenue from CFDs and binary options. The European segment derives
its revenue from CFDs, binary options and execution-only stockbroking. The businesses reported within Rest of World derive
revenue from the operation of a regulated futures and options exchange as well as CFDs and binary options.
The Group employs a centralised operating model whereby market risk is managed principally in the UK, switching to Australia
outside of UK hours. The costs associated with these operations are included in the Central segment, together with central costs
of senior management, IT development, marketing and other support functions. As the Group manages risk and hedges on a
group-wide portfolio basis, the following segmental revenue analysis involves the use of an allocation methodology. Interest
income and expense on segregated client funds is managed and reported to the CODM centrally and thus has been reported
in the Central segment. In the following analysis, the Central segment costs have been further allocated to the other reportable
segments based on a number of cost allocation assumptions and segment net trading revenue.
Year ended 31 May 2015
Segment net trading revenue
Interest income on segregated client funds
Revenue from external customers
Interest expense on segregated client funds
Other operating income
Betting duty and financial transaction taxes
Net operating income
Segment contribution
Allocation of central income and costs
Depreciation and amortisation
Operating profit
Net finance costs
Profit before taxation
UK
Australia
Europe
Rest of
World
Central
£m
206.0
–
206.0
–
–
(5.8)
200.2
154.5
(41.6)
(5.6)
107.3
£m
58.1
–
58.1
–
–
(0.1)
58.0
48.3
(12.5)
(1.4)
34.4
£m
76.9
–
76.9
–
–
(0.4)
76.5
35.1
(19.0)
(2.2)
13.9
£m
47.4
–
47.4
–
–
–
47.4
25.6
(10.1)
(1.5)
14.0
£m
–
4.9
4.9
(0.4)
0.6
–
5.1
(83.2)
83.2
–
–
Total
£m
388.4
4.9
393.3
(0.4)
0.6
(6.3)
387.2
180.3
–
(10.7)
169.6
(0.1)
169.5
121
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
4.
SEGMENT INFORMATION (CONTINUED)
Restated* Year ended 31 May 2014
Segment net trading revenue
Interest income on segregated client funds
Revenue from external customers
Interest expense on segregated client funds
Other operating income
Betting duty and financial transaction taxes
Net operating income
Segment contribution
Allocation of central income and costs
Depreciation and amortisation
Operating profit
Net finance income
Profit before taxation
UK
Australia
Europe
Rest of
World
Central
£m
192.7
–
192.7
–
–
(3.5)
189.2
160.5
(37.9)
(4.9)
117.7
£m
52.2
–
52.2
–
–
–
52.2
43.7
(11.1)
(1.3)
31.3
£m
82.1
–
82.1
–
–
(0.3)
81.8
51.6
(17.6)
(2.1)
31.9
£m
43.4
–
43.4
–
–
–
43.4
25.2
(9.3)
(1.4)
14.5
£m
–
5.8
5.8
(0.3)
2.1
–
7.6
(75.9)
75.9
–
–
Total
£m
370.4
5.8
376.2
(0.3)
2.1
(3.8)
374.2
205.1
–
(9.7)
195.4
(0.5)
194.9
* During the year ended 31 May 2015, the Group adopted IFRIC 21 ‘Levies’. The comparative figures for the year ended 31 May 2014 have been restated to reflect the
change in timing of recognition of the UK FSCS levy.
5.
ADMINISTRATIVE EXPENSES
This is stated after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Advertising and marketing
Net charge for impaired trade receivables(1)
Operating lease rentals for land and buildings
Foreign exchange gains(2)
Group
Year ended
31 May 2015
Year ended
31 May 2014
£m
5.7
5.0
37.8
16.1
5.3
(0.6)
£m
4.7
5.0
31.7
1.6
4.4
(0.4)
(1) Net charge for impaired trade receivables includes £15.1m (2014: £nil) in relation to the Swiss franc event (refer to note 2).
(2) All of the above, except foreign exchange differences, are included in administrative expenses within the income statement. Foreign exchange gains and losses are
included in revenue.
122
|IG Group Holdings plc Annual Report 2015 6.
AUDITORS’ REMUNERATION
Audit and audit-related fees(1)
Fees payable to the Company’s auditors for the audit of the
parent company and consolidated financial statements
Fees payable to company’s auditor and its associates for other services:
– Statutory and regulatory audit of subsidiaries and branches of the Company
– Audit-related assurance services:
• Other services supplied pursuant to legislation
• Other audit-related assurance services
Total audit and audit-related fees
Non-audit fees
Other services relating to taxation
– Tax compliance services(2)
– Tax advisory services(3)
Services relating to regulatory advice(4)
Services relating to strategic advice(5)
Total other fees
Group
Year ended
31 May 2015
Year ended
31 May 2014
£m
£m
0.4
0.3
0.1
0.1
0.9
0.2
0.3
0.1
0.3
0.9
0.3
0.2
0.1
0.1
0.7
0.3
0.2
–
0.5
(1)
(2)
(3)
(4)
(5)
Includes the Group’s audit fee as well as services that are specifically required of the Group’s auditors through legislative or contractual requirements, controls
assurance engagements required of the auditors by the regulatory authorities in whose jurisdiction the Group operates and other audit-related assurance services.
Includes corporate and other tax compliance and filing services which are closely related to the audit process and are therefore efficiently provided by the auditors
due to their existing knowledge of the business.
Includes advice relating to the Group’s transfer pricing policies, sales taxes, tax structures and other general tax advice.
Includes services provided in relation to regulatory requirements and other regulatory advice.
Includes advisory work in relation to strategic advice to the Board.
An overview of the Audit Committee’s review of Auditors’ remuneration and non-audit fee policy can be found in the
Corporate Governance Statement.
123
IG Group Holdings plc Annual Report 2015| 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 (in relation to defined contribution schemes)
Group
Year ended
31 May 2015
Year ended
31 May 2014
£m
79.4
9.2
5.7
94.3
£m
75.4
8.7
5.2
89.3
Staff costs, including Directors, include the following amounts in respect of performance-related bonuses, and share-based
payments (inclusive of national insurance) charged to the income statement:
Performance-related bonuses
Equity-settled share-based payment schemes
Group
Year ended
31 May 2015
£m
14.0
Year ended
31 May 2014
£m
17.2
6.3
20.3
7.1
24.3
The Directors’ emoluments for the years ended 31 May 2015 and 31 May 2014, can be found in the Directors’
Remuneration Report.
The average monthly number of employees, including Directors, was made up as follows:
Group
Year ended
31 May 2015
£m
Year ended
31 May 2014
£m
479
81
488
38
201
395
71
397
38
169
1,287
1,070
Group
Year ended
31 May 2015
£m
Year ended
31 May 2014
£m
0.7
0.4
0.7
1.8
0.6
0.6
0.3
1.5
IT development
IT support
Sales, marketing and client support
Dealing
Management and administrative
8.
FINANCE INCOME
Bank interest receivable
Interest receivable from brokers
Interest accretion on financial investments
124
|IG Group Holdings plc Annual Report 2015 9.
FINANCE COSTS
Liquidity facility arrangement and non-utilisation fees
Interest payable to clients
Interest payable to brokers
Bank interest payable
Other charges
Group
Year ended
31 May 2015
£m
1.2
Year ended
31 May 2014
£m
1.7
0.1
0.1
0.1
0.4
1.9
–
–
0.3
–
2.0
Interest payable to clients relates to interest paid or accrued to clients in relation to title transfer funds (refer to note 18).
10.
TAXATION
10(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 income tax:
Origination and reversal of temporary differences
Adjustment in respect of prior years
Impact of change in tax rates on deferred tax
Total deferred income tax (note 10(d))
Tax expense in the income statement (note 10(b))
Group
Year ended 31
May 2015
Restated*
Year ended
31 May 2014
£m
34.3
3.8
(1.0)
37.1
(0.4)
0.9
–
0.5
37.6
£m
42.4
3.6
(1.8)
44.2
0.5
2.3
0.7
3.5
47.7
125
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
10.
TAXATION (CONTINUED)
10(B) RECONCILIATION OF THE TOTAL TAX CHARGE
The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the effective
corporation tax is calculated at 20.83% (2014: 22.67%) of the estimated assessable profit in the UK. Taxation outside the UK is
calculated at the rates prevailing in the respective jurisdictions. The tax expense in the income statement for the year can be
reconciled to the income statement as set out below:
Profit before taxation
Profit multiplied by the UK standard rate of corporation tax of 20.83% (2014: 22.67%)
Expenses not deductible for tax purposes
Impact of timing differences not recognised
Higher taxes on overseas earnings
Adjustment in respect of prior years
Impact of change in tax rates on deferred tax
Total tax expense reported in the income statement
The effective tax rate is 22.18 % (2014: 24.47%).
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
169.5
35.3
0.5
1.2
0.7
(0.1)
–
37.6
£m
194.9
44.1
0.1
1.3
1.0
0.5
0.7
47.7
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
10(C) DEFERRED INCOME TAX ASSETS
The deferred income tax assets included in the Statement of Financial Position are as follows:
Decelerated capital allowances
Tax losses available for offset against future tax
Share-based payments
Other timing differences
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
–
1.8
1.5
3.8
7.1
£m
0.4
1.7
1.0
4.0
7.1
The tax losses available for offset against future tax relate to operating losses arising in the US consolidated tax group, the
recoverability of which is dependent on sufficient future operating profits in those entities. A deferred tax asset is recognised
where it is considered probable that the US consolidated tax group will generate future operating profits which can be offset
against the tax losses carried forward. Where it is not anticipated that future operating profits will be generated against which
the losses can be offset, a deferred tax asset is not recognised.
126
|IG Group Holdings plc Annual Report 2015 Share-based payment awards have been charged to the Income Statement but are not allowable as a tax deduction until the
awards vest. The excess of tax relief in future years over the amount charged to the Income Statement is recognised as a credit
directly to equity. The movement in the deferred income tax assets included in the Statement of Financial Position is as follows:
At the beginning of the year
Income statement charge (note 10(d))
Tax credited directly to equity
Foreign currency adjustment
IFRIC 21 restatement
At the end of the year
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
7.1
(0.5)
0.5
–
–
7.1
£m
10.9
(3.5)
–
(0.3)
–
7.1
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
10(D) DEFERRED INCOME TAX – INCOME STATEMENT CREDIT
The deferred income tax charge included in the Income Statement is made up as follows:
Decelerated capital allowances
Share-based payments
Other timing differences
Income statement charge
The deferred tax credited to equity during the year is as follows:
Share-based payments
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
(0.4)
0.1
(0.2)
(0.5)
(0.5)
£m
(0.3)
(1.1)
(2.1)
(3.5)
–
Closing deferred tax on UK temporary differences has been calculated at the substantively enacted rate of 20% (2014: 20%).
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
10(E) FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS
Factors that may affect the Group’s future tax charge include the geographic location of the Group’s earnings, the tax rates
in those locations, changes in tax legislation, future planning opportunities, the use of brought-forward tax losses and the
resolution of open tax issues. The calculation of the Group’s total tax charge involves a degree of estimation and judgement
with respect to the recognition of deferred tax assets (refer to note 10(d)) and of certain items whose tax treatment cannot
be finally determined until resolution has been reached with the relevant tax authority. The Group holds tax provisions in
respect of the potential tax liability that may arise on these unresolved items, however, the amount ultimately payable may be
materially lower than the amount accrued and could therefore improve the overall profitability and cash flows of the Group in
future periods.
127
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
11.
EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the profit for the year attributable to owners of the Company 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 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. The following reflects the income and share data used in the earnings per
share computation:
Profit for the year
Earnings attributable to non-controlling interests
Earnings attributable to owners of the parent
Weighted average number of shares
Basic
Dilutive effect of share-based payments
Diluted
Basic earnings per share
Diluted earnings per share
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
131.9
–
131.9
£m
147.2
–
147.2
365,199,825
364,710,756
1,383,806
1,213,527
366,583,631
365,924,283
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
36.13p
35.99p
40.35p
40.22p
* As outlined in the Group accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
12.
DIVIDENDS
Declared and paid during the year:
Final dividend for 2014 at 22.40p per share (2013: 17.50p)
Interim dividend for 2015 at 8.45p per share (2014: 5.75p)
Proposed for approval by shareholders at the AGM:
Final dividend for 2015 at 19.70p per share (2014: 22.40p)
Group
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
81.9
30.9
112.8
71.8
£m
63.8
21.0
84.8
81.9
The final dividend for 2015 of 19.70p per share amounting to £71.8 million was proposed by the Board on 15 July 2015 and
has not been included as a liability at 31 May 2015. This dividend will be paid on 30 October 2015, following approval at the
Company’s AGM, to those members on the register at the close of business on 2 October 2015.
The dividend paid or declared in relation to the financial year are set out below:
Dividend declared per share:
Interim dividend
Final dividend
128
Year ended
31 May 2015
Year ended
31 May 2014
£m
£m
8.45p
19.70p
28.15p
5.75p
22.40p
28.15p
|IG Group Holdings plc Annual Report 2015 13.
PROPERTY, PLANT AND EQUIPMENT
Group
Cost:
At 1 June 2013
Foreign currency adjustment
Additions
Written off
At 31 May 2014
Foreign currency adjustment
Additions
Written off
At 31 May 2015
Accumulated depreciation:
At 1 June 2013
Foreign currency adjustment
Provided during the year
Written off
At 31 May 2014
Foreign currency adjustment
Provided during the year
Written off
At 31 May 2015
Net book value – 31 May 2015
Net book value – 31 May 2014
Net book value – 1 June 2013
Leasehold
improvements
Office
equipment,
fixtures
and fittings
Computer
and other
equipment
£m
17.5
(0.2)
0.7
(0.1)
17.9
(0.1)
1.0
–
18.8
7.1
(0.1)
1.9
(0.1)
8.8
(0.1)
2.0
–
10.7
8.1
9.1
10.4
£m
2.4
(0.1)
0.2
(0.1)
2.4
–
0.3
–
2.7
1.5
(0.1)
0.4
(0.1)
1.7
–
0.5
–
2.2
0.5
0.7
0.9
£m
18.0
(0.3)
2.5
(5.0)
15.2
–
4.6
(1.0)
18.8
14.8
(0.2)
2.4
(5.0)
12.0
(0.1)
3.2
(1.0)
14.1
4.7
3.2
3.2
Total
£m
37.9
(0.6)
3.4
(5.2)
35.5
(0.1)
5.9
(1.0)
40.3
23.4
(0.4)
4.7
(5.2)
22.5
(0.2)
5.7
(1.0)
27.0
13.3
13.0
14.5
129
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
14.
INTANGIBLE ASSETS
Group
Cost:
At 1 June 2013
Foreign currency adjustment
Additions
Written off(1)
At 31 May 2014
Foreign currency adjustment
Additions
Written off
At 31 May 2015
Accumulated amortisation:
At 1 June 2013
Foreign currency adjustment
Provided during the year
Written off(1)
At 31 May 2014
Foreign currency adjustment
Provided during the year
Written off
At 31 May 2015
Net book value – 31 May 2015
Net book value – 31 May 2014
Net book value – 1 June 2013
Client
lists and
customer
relationships
Domain
names
Development
costs
Software and
licences
£m
2.0
(0.3)
–
–
1.7
(0.1)
–
–
1.6
2.0
(0.3)
–
–
1.7
(0.1)
–
–
1.6
–
–
–
£m
£m
4.0
–
1.8
–
5.8
–
1.5
–
7.3
0.1
–
0.4
–
0.5
–
0.7
–
1.2
6.1
5.3
3.9
7.3
–
4.7
–
12.0
–
3.1
–
15.1
1.9
–
1.7
–
3.6
–
2.4
–
6.0
9.1
8.4
5.4
£m
15.9
(0.1)
1.3
(0.4)
16.7
0.1
1.3
(0.3)
17.8
12.0
(0.1)
2.9
(0.4)
14.4
0.1
1.9
(0.3)
16.1
1.7
2.3
3.9
Goodwill
£m
235.5
(0.6)
–
(128.2)
106.7
0.4
–
–
107.1
128.2
–
–
(128.2)
–
–
–
–
–
107.1
106.7
107.3
Total
£m
264.7
(1.0)
7.8
(128.6)
142.9
0.4
5.9
(0.3)
148.9
144.2
(0.4)
5.0
(128.6)
20.2
–
5.0
(0.3)
24.9
124.0
122.7
120.5
(1) Goodwill of £123.0 million and £5.2 million relating to the Group’s Japanese and discontinued Sport businesses was fully impaired in the year ended 31 May 2011
(refer to note 15(b) of the Group financial statements for the year ended 31 May 2011).
Goodwill primarily relates to the purchase of IG Group plc by IG Group Holdings plc; detail is provided in note 16. The client list
acquired with the business of Ideal CFDs has been amortised on a sum of digits basis over three years.
Domain names include the cost of acquiring ig.com and a suite of complementary domains to support the Group global brand.
This also includes industry-specific generic top-level domains (gTLDs).
Development costs relate to both internally generated intangible assets and third-party software acquired to further enhance
the Group own proprietary software.
Software and licences relate entirely to external purchases of off-the-shelf, commercially available software for internal
consumption within the Group.
The expected useful lives of each class of intangible asset are set out in note 41, Accounting Policies.
130
|IG Group Holdings plc Annual Report 2015 Company
Cost:
At 1 June 2013
Additions
At 31 May 2014
Additions
Transfer to Group companies (1)
At 31 May 2015
Accumulated amortisation:
At 1 June 2013
Provided during the year
At 31 May 2014
Provided during the year
Disposal
At 31 May 2015
Net book value – 31 May 2015
Net book value – 31 May 2014
Net book value – 31 June 2013
Domain names
£m
–
1.6
1.6
1.5
(3.1)
–
–
–
–
0.2
(0.2)
–
–
1.6
–
(1) During the year, the Company transferred the generic top-level domains it owned to other group companies.
Please refer to the Group intangible assets disclosure above for more details regarding domain names.
15.
INVESTMENT IN SUBSIDIARIES
PARENT COMPANY – INVESTMENT IN SUBSIDIARIES
At cost:
At the beginning of the year
Additions(1)
At the end of the year
Company
31 May 2015 31 May 2014
£m
471.6
8.2
479.8
£m
460.0
11.6
471.6
(1) Additions in the year ended 31 May 2015 comprise the investment relating to equity-settled share-based payments for subsidiary employees of £5.3 million (2014:
£6.6 million) and the purchase of shares in the Company’s immediate subsidiary, IG Group Limited, of £2.9 million (2014: £5.0 million).
131
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
15.
INVESTMENT IN SUBSIDIARIES (CONTINUED)
The following companies are all owned directly or indirectly by IG Group Holdings plc:
Country of
Incorporation Holding
Voting
Rights
Ordinary shares
Ordinary shares
100%
100%
Nature of Business
Holding company
Non-trading
Name of Company
Subsidiary undertakings held directly:
IG Group Limited
IG Jersey Cashbox Limited
Subsidiary undertakings held indirectly:
IG Index Limited
IG Markets Limited
UK
Jersey
UK
UK
UK
IG Markets South Africa Limited
Australia
IG Australia Pty Limited
Singapore
IG Asia Pte Limited
USA
North American Derivatives Exchange Inc.
IG Securities Limited(1)
Japan
Switzerland
IG Bank S.A. (previously called IG Switzerland S.A.)
UK
Market Data Limited
USA
Market Risk Management Inc.
India
IG Infotech (India) Private Limited
UK
IG Nominees Limited
UK
IG Knowhow Limited
UK
extrabet Limited
Belarus
LLC IG Dev
UK
IG Finance
UK
IG Finance Two
UK
IG Finance Three
UK
IG Finance Four
UK
IG Finance 5 Limited
IG Forex Limited (previously called IG Finance 6 Limited) UK
IG Spread Betting Limited (previously called IG Finance 7
Limited)
UK
UK
UK
UK
Gibraltar
Gibraltar
Gibraltar
USA
Japan
Japan
Dubai
Dubai
UK
IG Finance 8 Limited
IG Finance 9 Limited
ITS Market Solutions Limited
Fox Sub Limited
Fox Sub Two Limited
Fox Japan Holdings(1)
IG US Holdings Inc.
Market Data Japan Limited
FXOnline Japan Co., Limited
IG Limited
IG Services Limited
Financial Domaign Limited
Financial Domaign Registry Holdings Limited UK
Financial Domaign Registrar Limited UK
Financial Domaign (Services) Limited
DotSpreadbetting Registry Limited
DotMarkets Registry Limited
DotTrading Registry Limited
DotCFD Registry Limited
DotBroker Registry Limited
DotForex Registry Limited
IG Markets Corporation
Nadex Domains Inc.
Tower Three Capital Inc.
Hedgestreet Securities Inc.
Nadex Clearing LLC
Deal City Limited
UK
UK
UK
UK
UK
UK
UK
Canada
USA
USA
USA
USA
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
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
100%
100%
Spread betting
CFD trading, foreign exchange
and market risk management
CFD trading
100%
100%
Sales and marketing office
100% CFD trading and foreign exchange
100%
Exchange
100% CFD trading and foreign exchange
100% CFD trading and foreign exchange
Data distribution
100%
Market maker
100%
Software development
100%
Nominee company
100%
Software development
100%
Non-trading
100%
Software development
100%
Financing
100%
Financing
100%
Financing
100%
Financing
100%
Financing
100%
Financing
100%
Ordinary shares
100%
Financing
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%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Financing
100%
Financing
100%
Non-trading
100%
Financing
100%
Financing
100%
Holding company
100%
Holding company
100%
Holding company
100%
100%
Non-trading
100% CFD trading and foreign exchange
Intra-Group Corporate Services
100%
Holding company
Holding company
Domains registrar
Domains registry
Domains registry
Domains registry
Domains registry
Domains registry
Domains registry
Domains registry
Non - trading
Domains registry
Non-trading
Non-trading
Non-trading
Software development
(1)
IG Securities Limited and Fox Japan Holdings have a year end of 31 March due to local Japanese law.
132
|IG Group Holdings plc Annual Report 2015 Employee Benefit Trusts:
IG Group Holdings plc Inland Revenue Approved Share Incentive Plan (UK Trust)
IG Group Limited Employee Benefit Trust (Jersey Trust)
IG Group Employee Equity Plan Trust (Australian Trust)
The following UK entities, all of which are 100% owned by the Group, are not subject to an audit by virtue of s479A of the
Companies Act 2006 relating to subsidiary companies: IG Finance 5 Limited (06752558), IG Finance 9 Limited (07306407), and
Extrabet Limited (04560348).
The following UK entities, all of which are 100% owned by the Group, are exempt from the requirement to prepare individual
accounts by virtue of s394A of the Companies Act 2006 relating to the individual accounts of dormant subsidiaries: IG Nominees
Limited (04371444), IG Finance (05024562), IG Finance Two (05137194), IG Finance Four (05312015), IG Forex Limited (06808361),
IG Spread Betting Limited (06806588), IG Finance 8 Limited (06807656), ITS Market Solutions Limited (04768327), Financial
Domaign Limited (09233880), Financial Domaign Registry Holdings Limited (09235699), Financial Domaign Registrar Limited
(09235694), Financial Domaign (Services) Limited (09235591), DotSpreadbetting Registry Limited (09237702), DotMarkets
Registry Limited (09237708), DotCFD Registry Limited (09237733), DotBroker Registry Limited (09237714), DotForex Registry
Limited (09237740) and Deal City Limited (9635230) (incorporated 11 June 2015).
16.
IMPAIRMENT OF GOODWILL
Goodwill has been allocated for impairment testing purposes to the cash-generating units (CGUs), as follows:
UK
Australia
US
South Africa
Group
31 May 2015 31 May 2014
£m
100.0
0.9
5.0
1.2
£m
100.0
0.9
4.6
1.2
107.1
106.7
UK goodwill arose on the purchase of IG Group plc by IG Group Holdings Limited on 5 September 2003. Goodwill disclosed
for Australia arose on the acquisition of the non-controlling interest in IG Australia Pty Limited in the year ended 31 May 2006.
Goodwill arising on the acquisitions of Nadex (formerly HedgeStreet) and the associated exchange technology and licence, and
Ideal CFDs has been allocated to the separate US and South African CGUs respectively.
Impairments during the year ended 31 May 2015
There was no indication of an ‘impairment trigger’ existing on any of the CGUs (2014: £nil), nor any impairment recognised
during the year ended 31 May 2015.
Impairment testing at year end
The goodwill associated with each CGU has been subject to an impairment test at 31 May 2015 as set out in the following
disclosures. For the purposes of impairment testing of goodwill, the carrying amount of each CGU 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 for the UK CGU of £1.7 billion (2014: £1.3 billion) is based upon fair value less costs of
disposal. This is £1.6 billion (2014: £1.2 billion) in excess of the carrying amount of the CGU.
The estimated recoverable amount of the US CGU, however, is based upon a value-in-use calculation due to the difficulty in
determining a fair value for this CGU. For the US CGU this is calculated as the total of the present value of projected future cash
flows and a terminal value.
133
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
16.
IMPAIRMENT OF GOODWILL (CONTINUED)
Sensitivity to changes in assumptions
The UK, Australian and South African CGUs reported a segment operating profit, after the allocation of central costs,
of £107.3 million, £34.4 million and £2.3 million respectively for the year ended 31 May 2015 (refer to note 4, Segment
information). Furthermore, the UK CGU represents 53% of the Group’s net trading revenue for the year ended 31 May 2015.
The Board approved budget for the financial year ending 31 May 2016 and longer-term strategic plans for the Group forecast
at least a similar level of performance for these CGUs to continue. As a result both the single year operating profit and
thus the recoverable amount of the UK, Australian and South African CGUs is significantly in excess of the carrying value.
Accordingly, the outcome of the impairment review for the CGUs is not considered to be sensitive to the assumptions used.
The Directors have performed a sensitivity analysis around the assumptions used in the value-in-use calculation of the goodwill
associated with the US CGU. The US CGU comprises both the Nadex exchange and associated market making business (the
‘Nadex exchange business’) as well as the wider commercial use of the exchange technology within the Group. While the Nadex
exchange business remains loss making, the wider commercial use of the technology by the Group provides other significant
economic benefits which taken alone support the carrying value of the goodwill. For this reason, the Directors consider that a
reasonably possible change in a key assumption would not cause the units' carrying amount to exceed its recoverable amount.
In the event of the Nadex exchange business failing to generate sufficient profits, the deferred tax asset of US$2.8 million held
in relation to carry forward tax losses might suffer impairment.
Key assumptions used in fair value less costs of disposal calculations
The fair value less costs of disposal of the UK CGU has been calculated using an earnings multiple determined by reference to
the Company’s quoted market capitalisation and the Group’s segmental operating profit. As the business model of this CGU is
largely synonymous with that of the Group, this methodology is deemed to be appropriate.
Key assumptions used in value-in-use calculations
Projected future cash flows for the US CGU were based upon the Board-approved budget for the year ending 31 May 2016.
Forecasts to the year ending 31 May 2020 were then extrapolated from the budget using a range of client recruitment, client
retention rates, average trading clients’ growth month on month and revenue per client assumptions. These were based
upon actual amounts measured in prior periods which were projected forward in accordance with expected trends. This
methodology is consistent with that used for the 31 May 2014 year-end impairment review. The revenue growth rates, disclosed
in the following table, are consistent with the long-term growth rates of other of the Group’s businesses measured over a
five-year period.
The calculation of value-in-use for the US CGU is most sensitive to the following assumptions:
• Client recruitment and retention rates
• Average revenue per client
• The discount rate
• The long-term growth rate used for the terminal value calculation
Cash flows were translated into sterling using year-end exchange rates.
The cash flows were discounted using a pre-tax discount rate as disclosed in the table below. This was derived using a region
specific, market-based cost of equity and debt assumption in order to reflect both the financing cost and risk associated with
the US CGU. The long-term growth rate (g) used in the terminal value calculation of the US CGU is also disclosed below and is
equivalent to, or lower than, the respective long-term growth rate for the US economy.
Cash-generating unit
US
2015
15.81%
2014
16.8%
2015
58%
2014
44%
2015
1.9%
2014
1.9%
Discount rate
Average years 1-5
growth rate
Terminal growth rate
(g)
On the basis of the results of the above analysis there was no impairment of goodwill during the year.
134
|IG Group Holdings plc Annual Report 2015 17.
TRADE RECEIVABLES
Amounts due from brokers(1)
Other amounts due to the Group(2)
Amounts due from clients(3)
Group
31 May 2015 31 May 2014
£m
239.2
28.4
2.0
269.6
£m
303.9
21.3
2.3
327.5
(1) Amounts due from brokers represent balances with brokers where the combination of cash held on account and the valuation of financial derivative open positions
results in an amount due to the Group. At 31 May 2015 the actual broker margin requirement was £204.8 million (2014: £285.1 million) with the balance being excess
cash margin held at brokers.
(2) Other amounts due to the Group include balances that will be transferred to the Group’s own cash from segregated client funds on the following working day in
accordance with the UK’s Financial Conduct Authority (FCA) ‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates as well as
excess funds held in segregation in certain jurisdictions. This also includes amounts due from banking counterparties or held within segregated client funds in
relation to monies transferred by clients to the Group that remain unsettled at the year-end. The Group is required to segregate these client funds at the point of
client funding and not at cash settlement.
(3) Amounts due from clients arise when a client’s total funds deposited with the Group are insufficient to cover any trading losses incurred and are stated net of an
allowance for impairment (refer note 36).
18.
CASH AND CASH EQUIVALENTS
18(A) CASH AND CASH EQUIVALENTS
Gross cash and cash equivalents(1)
Less: Segregated client funds(2)
Cash and cash equivalents(3)
Group
Company
31 May 2015 31 May 2014 31 May 2015 31 May 2014
£m
1,062.4
(913.6)
148.8
£m
959.9
(858.4)
101.5
£m
–
–
–
£m
–
–
–
(1) Gross cash and cash equivalents includes each of the Group’s own cash, proceeds from the drawdown of the committed banking facility, as well as all client
monies held.
(2) Segregated client funds comprise individual client funds held in segregated client money accounts or money market facilities established under the UK’s Financial
Conduct Authority (FCA) ‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates. Such monies are not included in the Group’s
Statement of Financial Position.
(3) Cash and cash equivalents includes both title transfer funds held by the Group under a Title Transfer Collateral Arrangement (TTCA) by which a client agrees that full
ownership of such monies is unconditionally transferred to the Group, and client monies deposited with the Group’s Swiss banking subsidiary, IG Bank SA.
The Group’s Swiss banking subsidiary, IG Bank SA, is also required to protect customer deposits under the FINMA Privileged Deposit Scheme. At 31 May 2015 IG
Bank SA was required to hold £2.8 million in satisfaction of this requirement.
18(B) CLIENT FUNDS AND ASSETS
Segregated client funds(1)
Segregated client assets(2)
Total segregated client funds and assets
Group
Company
31 May 2015 31 May 2014 31 May 2015 31 May 2014
£m
913.6
77.4
991.0
£m
858.4
–
858.4
£m
–
–
–
£m
–
–
–
(1) Segregated client funds comprise individual client funds held in segregated client money accounts or money market facilities established under the UK’s Financial
Conduct Authority (FCA) ‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates. Such monies are not included in the Group’s
Statement of Financial Position.
(2) During the year the Group commenced the offering of an execution only stockbroking service in the UK, Ireland and the Netherlands. As a result the Group is
required to segregate the clients’ equity positions under the Financial Conduct Authority’s ‘CASS’ rules.
135
IG Group Holdings plc Annual Report 2015|
NOTES TO THE FINANCIAL STATEMENTS
19.
LIQUIDITY ANALYSIS AND RISK MANAGEMENT
The following section provides an analysis of the Group’s available liquidity, the liquidity requirements that result from the
Group’s business model, and sets out the key measures used to monitor and manage the level of liquidity available.
The key measures used by the Group are explained below:
Liquid assets: These are the total liquid assets that the Group can access. These include cash held at bank (both own cash and
title transfer funds) as well as at brokers, the liquid assets buffer held by the Group and other cash amounts due to the Group.
Own funds: These are liquid assets less title transfer funds. Title transfer funds are client monies held by the Group under a Title
Transfer Collateral Arrangement (TTCA).
Available liquid assets: Certain of the Group’s funds are not immediately available for the purposes of central market risk
management as they are required to provide regulatory capital balances in regulated subsidiaries. Additionally, the Group’s
overseas businesses also require working capital balances to both fund daily operations and to ensure sufficient liquidity is
available to fund the local client segregation requirements. Available liquid assets are therefore liquid assets less all amounts
held in overseas subsidiaries and amounts due from segregation – each of which are not considered immediately available for
market risk management.
Net available liquidity: This is the remaining liquidity available to the Group after the funding of the broker margin requirement
associated with market risk management.
Total available liquidity: This measure is the total of the Group’s liquid assets and the Group’s undrawn committed
banking facilities.
In order to mitigate liquidity risks, the Group regularly stress-tests its three-year liquidity forecast to validate the appropriate
level of committed unsecured bank facilities held. On 15 July 2014 the Group completed the renewal negotiations of the
liquidity facility with a syndicate of three banks. In doing so, the Group has maintained the size of the overall facility at
£200.0 million. Of the total committed banking facility, £120.0 million is available for a period of one year and £80.0 million is
available for three years respectively from the facility signing date. The drawings made under the Group’s facility in the year
ended 31 May 2014 are disclosed in note 19(c).
Additionally, the Group’s Japanese business, IG Securities Limited, has a ¥300.0 million liquidity facility as at 31 May 2015 (2014:
¥300 million).
The following notes have been provided to further explain the derivation of liquid assets, own funds, available liquid assets, net
available liquidity and total available liquidity. The generation of own funds is disclosed in note 19(d).
136
|IG Group Holdings plc Annual Report 2015 19(A) LIQUID ASSETS AND OWN FUNDS
‘Liquid assets’, stated net of borrowings, and ‘own funds’ are the key measures the Group uses to monitor the overall level of
liquidity available to the Group. The derivation of both liquid assets and own funds are shown in the following table:
Cash and cash equivalents(1)
Amounts due from brokers(2)
Financial investments – held at brokers(3.1)
Financial investments – liquid asset buffer(3.2)
Other amounts due to the Group(4)
Liquid assets
Less:
Note
18
17
21
21
17, 22
Drawdown of committed banking facility
Client funds held on balance sheet(5)
22
Own funds
31 May 2015 31 May 2014
£m
148.8
239.2
25.3
83.1
27.6
524.0
–
(16.9)
507.1
£m
101.5
303.9
–
82.5
20.4
508.3
–
(21.0)
487.3
(1) Cash and cash equivalents represent cash held on demand with financial institutions (please refer to note 18).
(2) Amounts due from brokers represent balances with brokers where the combination of cash held on account and the valuation of financial derivative open positions
results in an amount due to the Group. These positions are held to hedge client market exposures in accordance with the Group’s market risk management policy.
(3.1) During the year ended 31 May 2015 the Group purchased an additional UK Government Gilt which is held at brokers as collateral to support the hedging of client
market exposures in accordance with the Group’s market risk management policy (refer to note 21).
(3.2) The UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against potential liquidity stress under BIPRU 12.
(4) Other amounts due to the Group include balances that will be transferred to the Group’s own cash from segregated client funds on the following working day in
accordance with the FCA ‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates. This also includes amounts due from banking
counterparties or held within segregated client funds in relation to monies transferred by clients to the Group that remain unsettled at the year-end. The Group is
required to segregate these client funds at the point of client funding and not at cash settlement.
(5) Client funds held on balance sheet include both Title Transfer funds and client monies deposited with the Group’s Swiss banking subsidiary. These are recognised on
the Group’s statement of financial position with an associated payable to clients.
137
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
19.
LIQUIDITY ANALYSIS AND RISK MANAGEMENT (CONTINUED)
19(B) THE GROUP’S LIQUIDITY REQUIREMENTS
The Group requires day-to-day liquidity for each of: the full segregation of client monies; the funding of regulatory and working
capital in overseas businesses; the funding of margin requirements at brokers to hedge the underlying client positions under
both normal and stressed conditions; the funding of a liquid asset buffer; and amounts associated with general working capital.
The available liquid assets measure excludes cash amounts tied up in both the requirement to segregate client funds and in the
regulatory and working capital of overseas businesses, as they are not considered to be available for the purposes of central
market and liquidity risk management.
These requirements are analysed in the following table:
Liquid assets
Less: amounts required to ensure appropriate client money segregation
Less: amounts required for regulatory and working capital of overseas businesses(1)
Available liquid assets
Less broker margin requirement(2)
Net available liquidity
Of which is:
Held as a liquid assets buffer(3.1)
Drawdown of committed banking facility(3.2)
Note
19(a)
17, 22
17
21
31 May 2015 31 May 2014
£m
524.0
(27.6)
(58.8)
437.6
(204.8)
232.8
83.1
–
£m
508.3
(20.4)
(28.8)
459.1
(285.1)
174.0
82.5
–
(1)
In the year ended 31 May 2015 the Group made a regulatory capital injection into its United Arab Emirates and Swiss subsidiaries. The Group’s regulated
subsidiaries in Australia, Japan, Singapore, South Africa, Switzerland, United Arab Emirates and the US all have minimum cash holding requirements associated
with their respective regulatory capital requirements. Additionally, the Group’s regulated business or subsidiaries in Australia, Singapore, Japan, South Africa,
United Arab Emirates and the US are required to segregate individual client funds in segregated client money bank accounts. This daily segregation requirement
occurs prior to the release of funds from the UK (note: market risk management is performed centrally for the Group in the UK) in relation to the associated hedging
positions held at external brokers. Accordingly, cash balances are held in each of the overseas businesses in order to ensure client money segregation obligations
are met. Both the regulatory working capital amounts and customer deposits are not available to the Group for the purposes of central market risk management.
(2) Positions are held with external brokers in order to hedge client market risk exposures in accordance with the Group’s market risk management policies.
(3.1) The liquid assets buffer is not available to the Group in the ordinary course of business, however utilisation is allowed in times of liquidity stress and therefore it is
considered as available for the purposes of overall liquidity planning.
(3.2) The short term banking facility was undrawn at 31 May 2015 and 31 May 2014.
138
|IG Group Holdings plc Annual Report 2015 19(C) LIQUIDITY MANAGEMENT AND LIQUIDITY RISK
Liquidity risk is managed centrally and on a group-wide basis. The Group’s approach to managing liquidity is to ensure it will
have sufficient liquidity to meet its broker margin requirements and other financial liabilities when due, under both normal
circumstances and stressed conditions. The Group has carried out an Individual Liquidity Adequacy Assessment (‘ILAA’) during
the year, and while this applies specifically to the Group’s FCA regulated entities, it provides the context in which liquidity is
managed on a continuous basis for the whole Group.
The Group does not have any material liquidity mismatches with regard to liquidity maturity profiles due to the very short-term
nature of its financial assets and liabilities. Liquidity risk can, however, arise as individual client funds are required to be placed in
segregated client money accounts in all jurisdictions with the exception of Switzerland where the entity has a banking licence. A
result of this is that short-term (less than one week) liquidity ‘gaps’ can potentially arise in periods of very high client activity or
significant increases or falls in global financial market levels.
During periods of significant market movements the Group may be required to fund margin payments to brokers prior to the
release of funds from segregation, and in periods of significant market increases or increased client activity, the Group may
be required to fund higher margin requirements at brokers to hedge increased underlying client positions. These additional
requirements are funded from the Group’s available liquid assets while these individual client positions are open, as individual
client funds remain in segregated client money bank accounts.
In order to mitigate this and other liquidity risks, the Group regularly stress-tests its three-year liquidity forecast to validate the
appropriate level of committed unsecured bank facilities held.
These facilities were drawn to a maximum of £25.0 million for a period of 7 days in January 2015, £50.0 million for a period of
30 days in March 2015 and £25.0 million for a further 7 days in May 2015. On all three occasions, the drawdown was to fund
relatively high levels of broker margin due to changes in market conditions. In the year ended 31 May 2014 the facilities were
drawn down to a maximum of £50.0 million for a period of 30 days but partially repaid down to £25.0 million for a further 32
days in October to December 2013, and for £30.0 million for 28 days during February and March 2014 following the reduction in
available liquidity after payment of dividends and at a time of relatively high levels of broker margin.
As well as the three-year liquidity forecast, the Group also produces more detailed short-term liquidity forecasts and detailed
stress-tests such that appropriate management actions or liquidity facility drawdown can occur prior to a period of expected
liquidity requirements.
A number of measures are used by the Group for managing liquidity risk, one of which is the level of total available liquidity.
For this purpose, total liquidity is calculated as set out in the following table inclusive of the undrawn committed facility.
Liquid assets
Undrawn committed banking facility(1)
Total liquidity (including facilities)(2)
31 May 2015 31 May 2014
£m
524.0
200.0
724.0
£m
508.3
200.0
708.3
(1) Draw down of the committed banking facility is capped at 80% of the actual broker margin requirement on the draw down date. The maximum available draw down
was £163.8 million at 31 May 2015 (2014: £200.0 million) based on the broker margin requirements on those dates, of which £nil was drawn down as at 31 May 2015
(31 May 2014: £nil).
(2) Stated inclusive of the liquid assets buffer of £83.1 million (2014: £82.5 million) that is held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset
buffer’ against potential liquidity stress under BIPRU 12. Utilisation of the liquid assets buffer is allowed in times of liquidity stress and therefore it is considered as
available for the purposes of overall liquidity planning.
The Group’s total liquidity enables the funding of large broker margin requirements when required – the total available liquidity
that can be utilised for market risk management at 31 May 2015 should be considered in light of the intra-period high broker
margin requirement of £293.7 million (2014: £290.3 million), the requirement to hold a liquid assets buffer, the continued growth
of the business (both for client trading and geographic expansion), the Group’s commitment to segregation of individual clients,
money as well as the declared final dividend for the year ending 31 May 2015, all of which draw upon the Group’s liquidity.
139
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
19.
LIQUIDITY ANALYSIS AND RISK MANAGEMENT (CONTINUED)
19(D) OWN FUNDS GENERATED FROM OPERATIONS
The following cash flow statement summarises the Group’s generation of own funds during the year and excludes all cash flows
in relation to monies held on behalf of clients. Additionally, both amounts due from brokers and financial investments have been
included within ‘own funds’ in order to provide a clear presentation of the Group’s cash resources. The derivation of own funds
is explained in note 19(a), and is stated net of amounts drawn on the Group’s committed banking facility. A narrative explanation
of the key cash flows disclosed in the following cash flow statement is provided within the Operating and Financial Review.
Operating activities
Profit before tax
Depreciation and amortisation (note 5)
Other non-cash adjustments
Income taxes paid
Own funds generated from operations
Movement in working capital
Inflow/(outflow) from investing activities
Interest received
Purchase of property, plant and equipment and intangible assets
Outflow from financing activities
Interest paid
Equity dividends paid to owners of the parent
Total outflow from investing and financing activities
Increase in own funds
Own funds at 1 June
Exchange gains/(losses) on own funds
Own funds at 31 May
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
£m
£m
169.5
10.7
(0.5)
(42.9)
136.8
7.9
194.9
9.7
3.8
(47.8)
160.6
(3.3)
0.8
1.5
(12.4)
(11.5)
(1.9)
(112.8)
(126.3)
18.4
487.3
1.4
507.1
(2.0)
(84.8)
(96.8)
60.5
429.3
(2.5)
487.3
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
19(E) SUBSEQUENT EVENTS
As at 31 May 2015, the Group had £200.0 million in revolving credit facility from a syndicate of three UK banks. The Group has
undertaken a review of its contingent liquidity requirements and, upon approval from the Executive Risk Committee, concluded
to reduce the facility to £160.0 million and include a fourth bank in the syndicate. The inclusion of a fourth bank in the syndicate
offers the Group further bank diversification. This new facility has £100.0 million available for up to a 1-year term (with an option
to extend for a further year) and £60.0 million available for up to 3 years and was signed on 17 July 2015 (refer to note 39).
A final dividend of 19.70p per share amounting to £71.8 million was proposed by the Board on 15 July 2015.
In the Directors’ opinion the Group has sufficient liquidity available to meet operational requirements under both normal and
stressed conditions. Liquidity management is also dependent on credit risk management subsequently described in note 36(ii).
140
|IG Group Holdings plc Annual Report 2015
20.
CASH GENERATED FROM OPERATIONS
Operating activities
Operating profit/(losses)
Adjustments to reconcile operating profit to net cash
flow from operating activities:
Net interest income on segregated client funds
Depreciation of property, plant and equipment
Amortisation of intangible assets
Non-cash foreign exchange losses/(gains) in
operating profit
Share-based payments
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Group
Company
Year ended
31 May 2015
Restated*
Year ended
31 May 2014
Year ended
31 May 2015
Year ended
31 May 2014
Note
£m
£m
169.6
195.4
13
14
(4.5)
5.7
5.0
(6.2)
5.3
32.8
2.7
210.4
(5.5)
4.7
5.0
8.6
6.6
(40.9)
2.6
176.5
£m
(6.3)
–
–
0.2
–
5.3
2.9
110.7
112.8
£m
(2.3)
–
–
–
–
6.6
80.5
1.0
85.8
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
21.
FINANCIAL INVESTMENTS
UK Government securities:
At 1 June
Purchase of securities
Maturity of securities and coupon receipts
Accrued interest
Net gains transferred to equity
At 31 May(1)
Less non-current portion
Current portion
(1) The balance is made up as follows:
Liquid asset buffer(1.1)
Collateral at broker(1.2)
Group
31 May 2015
31 May 2014
£m
83.1
25.3
£m
82.5
–
Group
31 May 2015 31 May 2014
£m
£m
82.5
76.4
(51.3)
0.5
0.3
108.4
(75.5)
32.9
50.5
91.3
(59.6)
0.2
0.1
82.5
(32.2)
50.3
(1.1) The UK Government securities are held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against potential liquidity stress under
BIPRU 12.
(1.2) During the year ended 31 May 2015 the Group purchased a £25.7m (carrying value of £25.3 million at 31 May 2015) UK Government Gilt which is held at brokers as
collateral to support the hedging of client market exposures in accordance with the Group’s market risk management policy.
The effective interest rates of securities held at the year-end range from 0.41% to 1.01%.
Financial investments are shown as current assets when they have a maturity less than one year and are held as ‘available-
for-sale’. The fair value of securities held is based on closing market prices at the year end as published by the UK Debt
Management Office. Please refer to note 36(i)(c) for a maturity profile.
141
IG Group Holdings plc Annual Report 2015|
NOTES TO THE FINANCIAL STATEMENTS
22.
TRADE PAYABLES
Client funds held on balance sheet(1)
Amounts due to clients(2)
Other trade payables
Group
31 May 2015 31 May 2014
£m
16.9
0.8
–
17.7
£m
21.0
0.8
0.1
21.9
(1) Client funds held on balance sheet include both Title Transfer funds and client monies deposited with the Group’s Swiss banking subsidiary. These are recognised on
the Group’s statement of financial position with an associated payable to clients.
(2) Amounts due to clients represent a combination of balances that will be transferred from the Group’s own cash into segregated client funds on the following working
day in accordance with the UK’s Financial Conduct Authority (FCA) ‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates.
23. OTHER PAYABLES
Accruals
Other taxes and social security
Amounts due to Group companies (Note 34b)
Group
Company
31 May 2015
Restated*
31 May 2014
31 May 2015 31 May 2014
£m
55.3
5.9
–
61.2
£m
54.1
4.3
–
58.4
£m
6.9
–
119.6
126.5
£m
7.2
–
0.5
7.7
Included within accruals are amounts in relation to employee bonuses.
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
24.
PROVISIONS
The Group and Company had no material provisions at 31 May 2015. (31 May 2014: £nil).
25.
CONTIGENT LIABILITIES
From time to time the Group may be involved in disputes in the ordinary course of business. Provision is made for all claims
where costs are likely to be incurred and there are currently no contigent liabilities expected to have a material adverse financial
impact on the Group’s consolidated results or net assets.
142
|IG Group Holdings plc Annual Report 2015 26.
REDEEMABLE PREFERENCE SHARES
Allotted, called up and fully paid:
40,000 preference shares of £1 each
Company and Group
31 May 2015 31 May 2014
£m
–
£m
–
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% (2014: 8%).
27.
SHARE CAPITAL
COMPANY AND GROUP
Allotted and fully paid:
(i) Ordinary shares (0.005p)
At 1 June 2013
Issued during the year
At 31 May 2014
Issued during the year
At 31 May 2015
(ii) B shares (0.001p)
At 31 May 2015
At 31 May 2014
Number of shares
Share capital
Share premium
account
£m
£m
364,894,924
859,707
365,754,631
403,145
366,157,776
65,000
65,000
–
–
–
–
–
–
206.8
–
206.8
–
206.8
–
During the year to 31 May 2015, 403,145 (2014: 859,707) ordinary shares with an aggregate nominal value of £20 (2014: £43) were
issued following the exercise of Sustained Performance Plan and Value Share Plan awards for a consideration of £20 (2014: £43).
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.
143
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
28. 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:
1,046,727 (2014: 1,223,411) ordinary shares of 0.005p each
Purchased during the year:
48,169 (2014: 4,968) ordinary shares of 0.005p each
Exercised/re-allocated during the year:
124,561 (2014: 181,652) ordinary shares of 0.005p each
At the end of the year:
970,335 (2014: 1,046,727) ordinary shares of 0.005p each
Company and Group
31 May 2015 31 May 2014
£m
1.1
0.3
(0.2)
1.2
£m
1.5
–
(0.4)
1.1
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 2015, 320,192 ordinary shares (2014: 389,725)
were held in the trust and at the year-end have reduced shareholders’ equity by £2.5 million (2014: £2.3 million). These include
35,956 ordinary shares (2014: 151,711) which were not allocated to employees and are available for future SIP awards. The
market value of the shares held conditionally at the year-end was £0.3 million (2014: £0.9 million).
The Group has a Jersey resident Employee Benefit Trust which holds shares in the Company. At the 31 May 2015, the trust held
512,075 (2014: 512,075) ordinary shares which are available to satisfy awards under the long-term share plans and Directors’
deferred bonus award. The shares held at the year-end have reduced shareholders’ equity by £26 (2014: £26). The market value
of the shares held conditionally at the year-end was £4.0 million (2014: £3.1 million).
The Group has an Australian resident Employee Equity Plan Trust in order to hold shares in the Company in respect of awards
under a SIP. At 31 May 2015, 15,126 ordinary shares (2014: 9,790) were held in the trust and at the year-end have reduced
shareholders’ equity by £0.1 million (2014: £0.1 million).
Upon flotation of the Company on 4 May 2005, 5,861,497 ordinary shares and cash of £2.4 million 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 2015, 100 (2014: 33) B shares were sold by B shareholders to the Trust.
The Trust sold 12,195 (2014: 4,025) ordinary shares in order to realise the funds necessary to purchase these B shares. The Trust
unconditionally held 63,992 (2014: 63,892) B shares at the year-end. The Trust also held 1,008 (2014: 1,108) B shares and 122,940
(2014: 135,137) ordinary shares which it may sell in order to satisfy its obligations to B shareholders, all of whom are current or
former employees.
144
|IG Group Holdings plc Annual Report 2015 29. 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 taxation. The foreign currency translation reserve includes amounts in
relation to the translation of overseas subsidiaries. The available-for-sale reserve includes unrealised gains or losses in respect of
financial investments.
Group
Restated* at 1 June 2013
Equity-settled employee share-based payments
Excess of tax deduction benefit on share-based
payments recognised directly in equity (Note 10)
Foreign currency translation on overseas subsidiaries
Exercise of US share incentive plans
Exercise of UK share incentive plans
Utilisation of own shares
Purchase of own shares
Gain on financial investments
At 31 May 2014
Equity-settled employee share-based payments
Excess of tax deduction benefit on share-based
payments recognised directly in equity (Note 10)
Foreign currency translation on overseas
subsidiaries
Exercise of US share incentive plans
Exercise of UK share incentive plans
Utilisation of own shares
Purchase of own shares
Gain on financial investments
At 31 May 2015
Share-
based
payments
(Note 30)
Foreign
currency
translation
Own shares
held in
Employee
Benefit
Trusts
(Note 28)
£m
33.3
6.6
–
–
–
(0.2)
0.1
–
–
39.8
5.3
0.5
–
–
(0.2)
–
–
–
£m
55.4
–
–
(6.5)
–
–
(0.2)
–
–
48.7
–
–
0.6
–
–
–
–
–
45.4
49.3
£m
(1.5)
–
–
–
–
0.2
0.2
–
–
(1.1)
–
–
–
–
0.2
–
(0.3)
–
(1.2)
Transactions
with non-
controlling
interests
£m
(2.1)
–
–
–
–
–
–
–
–
(2.1)
–
–
–
–
–
–
–
–
(2.1)
Available
for sale
reserve
£m
–
–
–
–
–
–
–
–
0.1
0.1
–
–
–
–
–
–
–
0.3
0.4
Total
other
reserves
£m
85.1
6.6
–
(6.5)
–
–
0.1
–
0.1
85.4
5.3
0.5
0.6
–
–
–
(0.3)
0.3
91.8
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
Share-based
payments
(Note 30)
Own shares held
in Employee
Benefits Trusts
(Note 28)
Total other
reserves
Company
At 1 June 2013
Equity-settled employee share-based payments
Excess of tax deduction benefit on share-based payments recognised
directly in equity (Note 10)
Exercise of UK share incentive plans
Utilisation of own shares
At 31 May 2014
Equity-settled employee share-based payments
Excess of tax deduction benefit on share-based payments recognised
directly in equity (Note 10)
Exercise of UK share incentive plans
Purchase of own shares
At 31 May 2015
£m
28.9
6.6
–
(0.2)
0.1
35.4
5.3
–
(0.2)
–
40.5
£m
(1.5)
–
–
0.2
0.2
(1.1)
–
–
0.2
(0.3)
(1.2)
£m
27.4
6.6
–
–
0.3
34.3
5.3
–
–
(0.3)
39.3
145
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
30.
EMPLOYEE SHARE PLANS
The Company operates four employee share plans: a Sustained Performance Plan (SPP), a Long-Term Incentive Plan (LTIP), a
Value-Sharing Plan (VSP) and a Share Incentive Plan (SIP), all of which are equity-settled. The expense recognised in the income
statement in respect of share-based payments (including associated social security costs) was £6.3 million (2014: £7.1 million).
30(A)
CURRENT SCHEMES
Sustained Performance Plan (SPP)
The SPP award was introduced in the year ended 31 May 2014 to replace the VSP award for the Group’s executive directors and
other selected senior employees. The Remuneration Committee approves any awards made under the plan and is responsible
for setting the policy for the operation of the plan, agreeing performance targets and participation.
The legal grant of awards under the SPP occurs post the relevant performance period. At the outset of the financial year
the Remuneration Committee approves, and communicates to the participants, performance conditions and a pre-defined
maximum monetary award in terms of multiple of salary. The grant of awards, in the form of equity settled par value options, is
based upon three performance conditions: Total Shareholder Return (TSR), diluted earnings per share and operational non-
financial performance. Awards subsequently vest in tranches over the long-term (up to seven years), so the participant retains an
ongoing substantial stake in the share price performance of the Company.
The following table shows the number of options awarded in relation to performance for the year ended 31 May 2014:
Award date
Share price
at award
Expected
full vesting
date
At the start
of the year
Awarded
during the
year
Lapsed
during the
year
Exercised
during the
year
Dividend
equivalent
awarded
during the
year
At the end
of the year
4 Aug 2014
609.90p
4 Aug 2020
Total
–
–
919,119
919,119
(104,073)
(200,217)
(104,073)
(200,217)
29,220
29,220
644,049
644,049
(number)
(number)
(number)
(number)
(number)
(number)
Of the above SPP exercised during the year ending 31 May 2015, the average share price at exercise was:
Award date
4 Aug 2014
Average share price at exercise
615.56p
The weighted average exercise price of all SPP awards is 0.005p.
As a ‘shared understanding’ under IFRS2 is established between the Company and participants at the scheme outset, the costs
associated with the SPP are accounted for as share-based payments from this time.
Further information on the Company’s SPP awards is given in the Directors’ Remuneration Report.
The awards for the current year SPP will be granted post year-end following the approval of actual performance against targets
set by the Remuneration Committee. A ten-day share price averaging period that will commence after the Company’s closed
period is utilised to convert notional salary awarded into a number of options (refer to the Directors’ Remuneration Report for
performance conditions).
The table below details the number of option awards expected to be awarded for the year ended 31 May 2015:
Award date
Share price at 29 May 2015(1)
Expected full vesting date
4 Aug 2015
Total
(1) Closing share price on 29 May 2015.
781.5p
4 Aug 2020
Awards expected during the
year ending 31 May 2016
(number)
504,832
504,832
146
|IG Group Holdings plc Annual Report 2015 Long-Term Incentive Plan (LTIP)
The LTIP award has been made available to senior management who are not invited to participate in the SPP.
LTIP awards allow the award of nominal cost options, which vest when specific performance targets are achieved, conditional
upon continued employment at the vesting date. For each award a minimum performance target has to be achieved before any
shares vest and the awards vest fully once the maximum performance target is achieved.
The awarded LTIP vests after three years with a predefined number of shares allocated pro-rata based on achieving diluted
earnings per share growth of between zero and 9% for the awards made in the year ended 31 May 2014, and between zero and
13% for the the year ended 31 May 2015, with straight line vesting in between.
The maximum number of LTIP awards that can vest under the awards made are:
Award date
Share price
at award
Expected
vesting date
At the start of
the year
Awarded during
the year
Lapsed during
the year
Exercised during
the year
At the end
of the year
28 Nov 2013
584.00p
28 Nov 2016
5 Aug 2014
618.50p
5 Aug 2017
Total
(number)
437,733
–
437,733
(number)
–
454,665
454,665
(number)
(31,321)
(8,403)
(39,724)
(number)
–
(number)
406,412
–
–
446,262
852,674
The weighted average exercise price of all LTIP awards is 0.005p.
Share Incentive Plan (SIP)
SIP awards are made available to all UK, Australian and US employees. The Executive Directors have responsibility for setting
the terms of the award which are then approved by the Remuneration Committee.
The UK and Australian awards invite all employees to subscribe for up to £1,800/A$3,000 (2014: £1,500/A$3,000) of partnership
shares, with the Company typically matching on a two-for-one (2014: one-for-one) basis. All matching shares vest after three
years as long as the employee remains employed with the Group for the term of the award. Shares awarded under the scheme
are held in trust in accordance with local tax authority rules. Employees are entitled to receive dividends on the shares held in
trust for as long as they remain employees.
The US award invites employees to invest a maximum of 5% of their salary bi-annually to the award. The award runs for a
six-month period and at the end of this period, the employees are invited to purchase shares in IG Group Holdings plc at a
discount of 15% to the scheme price, being the lower of the opening share price and the closing share price for the period.
The maximum number of SIP shares that can vest based on the awards made are:
Country
of award
Award date
Share
price at
award
Expected
vesting date
At the start
of the year
Awarded
during the year
Lapsed during
the year
Exercised
during the year
At the end
of the year
(number)
(number)
(number)
(number)
(number)
UK
28 July 2011
4.4374
28 July 2014
Australia
1 August 2011
4.4477
1 August 2014
UK
27 July 2012
4.5600
27 July 2015
Australia
22 August 2012
4.3200 22 August 2015
UK
26 July 2013
5.8000
25 July 2016
Australia
15 July 2013
5.7250
15 July 2016
UK
25 July 2014
6.0580
25 July 2017
Australia
15 July 2014
5.9970
15 July 2017
Total
47,627
2,706
73,153
3,304
56,457
3,780
–
–
187,027
–
–
–
–
–
–
(563)
–
(9,257)
–
(5,720)
–
(47,064)
(2,706)
(2,628)
–
(1,034)
(324)
–
–
61,268
3,304
49,703
3,456
195,238
8,366
203,604
(19,596)
(2,376)
173,266
–
–
8,366
(35,136)
(56,132)
299,363
147
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
30.
EMPLOYEE SHARE PLANS (CONTINUED)
30(A)
CURRENT SCHEMES (CONTINUED)
Of the above SIP awards exercised during the year ending 31 May 2015, the average weighted share price at exercise was:
Country of award
UK
Australia
UK
UK
Australia
UK
Award date
Average share
price at exercise
28 Jul 2011
1 Aug 2011
27 July 2012
26 Jul 2013
15 July 2013
27 July 2014
598.00p
607.00p
639.77p
630.18p
575.50p
701.50p
The weighted average exercise price of all SIP awards during the year ending 31 May 2015 is 605.16p.
30(B) FAIR VALUE OF EQUITY-SETTLED AWARDS
The fair value of the equity-settled share-based payments to employees is determined at the date at which a shared
understanding of the terms and conditions of the arrangement is reached between the Company and the participants.
The weighted average fair value of the equity-settled awards granted or deemed as such under IFRS2 during the year was
£8.9 million (2014: £11.2 million).
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, the fair value at grant date is determined by taking the share price at grant date. An adjustment for the present
value of future dividends is not required as dividend equivalents are awarded on options granted under the LTIP.
For potential SPP awards made under the Total Shareholder Return (TSR) criteria, fair value is calculated using an option pricing
model prepared by advisers. For the SPP awards made under the earnings per share and non-financial operational measures
the fair value is determined by taking the share price at deemed grant date less the present value of future dividends for the
duration of the performance period. Dividend equivalents accrue under the SPP on awarded but unvested options post the
performance period. Post vesting (minimum holding period) dividend equivalents cease to accrue on unexercised options.
The inputs below were used to determine the fair value of the TSR element of the SPP awards granted on 12 September 2014:
Date of grant
Share price at grant date (pence)
Expected life of awards (years)
Risk-free sterling interest rate (%)(1)
IG expected volatility (%)(2)
Benchmark index correlation (%)
Interim dividend estimate(3)
12 September 2014
599.00p
1
–
19.78%
18.08%
8.45p
(1) Due to minimal exercise price the risk-free rate has no impact on the fair value calculation.
(2) Based on historical TSR volatility of IG Group Holdings plc measured daily over a period prior to the date of grant and commensurate with the remaining
performance period.
(3) The dividend paid in the period from the deemed grant date to the end of the performance period, from which date dividend equivalents accrue on awarded but
unvested options.
The weighted average fair values per award granted are as follows:
At the beginning
of the year
Awarded during
the year
Lapsed during
the year
Exercised during
the year
At the end
of the year
Year ended 31 May 2015
Year ended 31 May 2014
262.45p
266.93p
526.33p
583.42p
242.96p
287.95p
419.82p
254.55p
534.09p
262.45p
148
|IG Group Holdings plc Annual Report 2015 30(C) LEGACY SCHEMES
Value Sharing Plan (VSP)
The VSP award was an annual award introduced during the year ended 31 May 2011. In the year ended 31 May 2014, however,
the VSP awards were replaced by the SPP for executives and selected senior management and LTIP awards for other senior
management. VSP awards were conditional awards made available to Executive Directors and other senior staff. Participants do
not pay to receive awards or to exercise options. The VSP performance period is over three years with a pre-defined number
of shares allocated, for each £10 million of surplus shareholder value created over the three-year period above a hurdle. Half
of the shares vest after three years and can be exercised at that date, with the remaining half being deferred for a further
year, conditional upon continued employment at the vesting date. The VSP is based upon two performance conditions,
Total Shareholder Return (TSR) and profit before taxation.
The maximum number of VSP shares that can vest based on the awards made are:
Award date
Share
price at
award
Expected
vesting
date
At the start
of the year
Awarded during
the year
Lapsed during
the year
Exercised during
the year
At the end of
the year
29 Oct 2010
528.50p 29 Oct 2013
29 Oct 2010
528.50p 29 Oct 2014
20 Jul 2011
450.00p
31 Jul 2014
20 Jul 2011
450.00p
31 Jul 2015
(number)
17,057
121,893
100,214
98,864
1 Aug 2012
449.70p
31 Jul 2015
3,491,992
1 Aug 2012
449.70p
31 Jul 2016
3,482,189
Total
7,312,209
(number)
–
–
–
–
–
–
–
(number)
–
(705)
(9,261)
(17,227)
(3,491,992)
(3,482,189)
(7,001,374)
(number)
(17,057)
(96,213)
(89,640)
–
–
–
(number)
–
24,975
1,313
81,637
–
–
(202,910)
107,925
Of the above VSP exercised during the year ending 31 May 2015, the average share price at exercise was:
Award date
29 Oct 2010
20 Jul 2011
The weighted average exercise price of all VSP awards is 0.005p.
Average share price at exercise
602.89p
627.38p
Legacy Long-Term Incentive Plan (LTIP)
The historic LTIP awards were made available to Executive Directors and other senior staff in the years ended 31 May 2005 to
31 May 2010 and were then replaced by the VSP award.
These historic LTIP awards allowed the award of nil cost or nominal cost shares which were legally classified as options and
vested when specific performance targets were achieved, conditional upon continued employment at the vesting date. For
each award a minimum performance target had to be achieved before any options vested and the awards vested fully once the
maximum performance target was achieved.
The remaining number of LTIP awards that can be exercised is:
Award date
Share
price at
award
Expected
vesting
date
At the start
of the year
Awarded during
the year
Lapsed during
the year
Exercised during
the year
At the end of
the year
(number)
(number)
(number)
(number)
(number)
23 Jul 2007
312.25p
23 Jul 2010
Total
15,952
15,952
–
–
–
–
–
–
15,952
15,952
The weighted average exercise price of all LTIP awards is 0.005p.
149
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
31. CAPITAL COMMITMENTS
The Group and Company had £0.4 million capital expenditure contracted for at year end but not yet incurred
(2014: £0.9 million).
32. OBLIGATIONS UNDER LEASES
Operating lease agreements
The Group and Company have entered into commercial leases on certain properties. Future minimum rentals payable under
non-cancellable operating leases are as follows:
Group
Future minimum payments due:
Not later than one year
After one year but not more than five years
After more than five years
Company
Future minimum payments due:
Not later than one year
After one year but not more than five years
After more than five years
31 May 2015 31 May 2014
£m
5.3
15.9
12.1
33.3
£m
4.9
16.4
17.9
39.2
31 May 2015 31 May 2014
£m
2.3
9.5
10.5
22.3
£m
2.3
9.6
15.3
27.2
The Group’s main lease on its UK headquarters and several of its smaller offices include annual inflationary rent increase clauses.
33.
TRANSACTIONS WITH DIRECTORS
During the year ended 31 May 2015 the Group paid £13,200 (inclusive of VAT) to Promontory Financial Group (UK) Limited
(Promontory) for financial advisory services. The services provided were made in the ordinary course of business on similar terms
as those prevailing for transactions with other persons unconnected with the Group. S Tymms is a Non-Executive Director for
the Group and a managing director for Promontory. The Group had no other transactions with its Directors other than those
disclosed in the Directors’ Remuneration Report.
150
|IG Group Holdings plc Annual Report 2015 34.
RELATED PARTY TRANSACTIONS
34(A) GROUP
The Directors and other members of management classified as ‘persons discharging management responsibility’ in accordance
with the Financial Services and Markets Act are considered to be the key management personnel of the Group in accordance
with IAS 24. The Directors’ Remuneration Report 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 together with their connected parties
was as follows:
Company
Short-term employee benefits
Post-employment benefits
Share-based payments
34(B) COMPANY
The Company had the following amounts outstanding with subsidiaries at the year-end:
Loans to related parties
Loans from related parties
31 May 2015 31 May 2014
£m
2.8
0.3
3.2
6.3
£m
2.7
0.3
4.0
7.0
31 May 2015 31 May 2014
£m
201.8
119.6
£m
133.0
0.5
All amounts remain outstanding at the year-end and are repayable on demand. A number of intercompany amounts were
subject to offset arrangements during the year.
35.
FINANCIAL INSTRUMENTS
Accounting classifications and fair values – Group
The table below sets out the classification of each class of financial assets and liabilities and their fair values (excluding
accrued interest). The Group considers the carrying value of all financial assets and liabilities to be a reasonable approximation
of fair value and represents the Group’s maximum credit exposure without taking account of any collateral held or other
credit enhancements.
‘Trade receivables – due from brokers’ represent balances with brokers where the combination of cash held on account
(disclosed as loans and receivables) and the valuation of financial derivative open positions (disclosed as held for trading)
results in an amount due to the Group. These positions are held to hedge client market exposures and hence are considered
to be held for trading and are accordingly accounted for at fair value through profit and loss (FVTPL). These transactions are
conducted under terms that are usual and customary to standard margin trading activities and are reported net in the Group
Statement of Financial Position as the Group has both the legal right and intention to settle on a net basis.
‘Trade payables due to clients’ represent balances where the combination of client cash held on account and the valuation of
financial derivative open positions results in an amount payable by the Group. Trade payables – due to clients are reported net
in the Group Statement of Financial Position as the Group adjusts the gross amount payable to clients (ie monies held on behalf
of clients) for profits or losses incurred on a daily basis consistent with the legal right and intention to settle on a net basis.
151
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
35.
FINANCIAL INSTRUMENTS (CONTINUED)
The Group’s financial instruments are classified as follows:
Group
As at 31 May 2015
Financial assets
Cash and cash equivalents
Financial investments(1)
Trade receivables – due (to)/from brokers:
Non-exchange traded instruments
Exchange-traded instruments
Total trade receivables – due (to)/from brokers
Trade receivables – due from clients
Trade receivables – other amounts due from clients
Financial liabilities
Trade payables – Client funds held on balance sheet
Trade payables – Amounts due to clients
Redeemable preference shares
FVTPL –
Held for
trading
Loans and
receivables
Other
amortised
cost
Available-
for-sale
Total
carrying
amount Fair value
Note
£m
£m
£m
£m
£m
£m
18
21
17
17
22
22
26
–
–
(9.7)
0.8
(8.9)
–
–
(8.9)
–
–
–
–
148.8
–
176.2
71.9
248.1
2.0
28.4
427.3
–
0.8
–
0.8
–
–
–
–
–
–
–
–
16.9
–
–
16.9
–
108.4
–
–
–
–
–
108.4
–
–
–
–
148.8
108.4
166.5
72.7
239.2
2.0
28.4
526.8
16.9
0.8
–
17.7
148.8
108.4
166.5
72.7
239.2
2.0
28.4
526.8
16.9
0.8
–
17.7
(1) The balance is made up of £83.1 million (2014: £82.5 million) of UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid
asset buffer’ against potential liquidity stress under BIPRU 12, and a £25.3 million (2014: £nil) UK Government Gilt which is held at brokers as collateral to support the
hedging of client market exposures in accordance with the Group’s market risk management policy (refer to note 21).
Group
As at 31 May 2014
Financial assets
Cash and cash equivalents
Financial investments(1)
Trade receivables – due (to)/from brokers:
Non-exchange traded instruments
Exchange-traded instruments
Total trade receivables – due (to)/from brokers
Trade receivables – due from clients
Trade receivables – other amounts due to the Group
Financial liabilities
Trade payables – Client funds held on balance sheet
Trade payables – Amounts due to clients
Redeemable preference shares
FVTPL –
Held for
trading
Loans and
receivables
Other
amortised
cost
Available-
for-sale
Total
carrying
amount Fair value
Note
£m
£m
£m
£m
£m
£m
18
21
17
17
22
22
26
–
–
12.3
(35.7)
(23.4)
–
–
(23.4)
–
–
–
–
101.5
–
175.9
151.4
327.3
2.3
21.3
452.4
–
0.8
–
0.8
–
–
–
–
–
–
–
–
21.0
–
–
21.0
–
82.5
–
–
–
–
–
82.5
–
–
–
–
101.5
82.5
188.2
115.7
303.9
2.3
21.3
511.5
21.0
0.8
–
21.8
101.5
82.5
188.2
115.7
303.9
2.3
21.3
511.5
21.0
0.8
–
21.8
(1) £82.5 million of UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against potential liquidity stress
under BIPRU 12 (refer to note 21).
152
|IG Group Holdings plc Annual Report 2015
Financial instrument valuation hierarchy
The hierarchy of the Group’s financial instruments carried at fair value is as follows:
Group
As at 31 May 2015
Financial assets:
Trade receivables – due from/(to) brokers
Financial investments(4)
Level 1(1)
Level 2(2)
Level 3(3)
Total fair
value
£m
£m
£m
£m
0.8
108.4
(9.7)
–
–
–
(8.9)
108.4
(1) Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes the Group’s exchange-traded open
hedging positions.
(2) Valued using techniques where a price is derived based significantly on observable market data. For example, where an active market for an identical financial
instrument to the product offered by the Group to its clients or used by the Group to hedge its market risk does not exist.
(3) Valued using techniques that incorporate information other than observable market data that is significant to the overall valuation.
There have been no changes in the valuation techniques for any of the Group’s financial instruments held at fair value in the year (2014: none). During the year
ended 31 May 2015, there were no transfers (2014: none) between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value
measurements (2014: none).
(4) The balance is made up of £83.1 million (2014: £82.5 million) of UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid
asset buffer’ against potential liquidity stress under BIPRU 12, and a £25.3 million (2014: £nil) UK Government Gilt which is held at brokers as collateral to support the
hedging of client market exposures in accordance with the Group’s market risk management policy (refer to note 21).
Group
As at 31 May 2014
Financial assets:
Trade receivables – due (to)/from brokers
Financial investments(5)
Level 1
Level 2
Level 3
Total fair
value
£m
£m
£m
£m
(35.7)
82.5
12.3
–
–
–
(23.4)
82.5
(5) £82.5 million of UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against potential liquidity stress
under BIPRU 12 (refer to note 21).
153
IG Group Holdings plc Annual Report 2015|
NOTES TO THE FINANCIAL STATEMENTS
35.
FINANCIAL INSTRUMENTS (CONTINUED)
Reconciliation of the movement in Level 3 of the valuation hierarchy
At 1 June
2014
Gains or
losses in
revenue(1)
Cash
settled
positions (2)
Transfers
At 31 May
2015(3)
Group
£m
£m
£m
£m
Financial assets:
Trade receivables – due from clients (Note 3(a))
–
36.2
(36.2)
–
(1) Disclosed in trading revenue in the income statement. This represents client positions that have closed in the year as well those open at the year end.
(2) Value of client positions that have cash settled in the year.
(3) Value of open, unsettled client positions at the yearend disclosed in trading revenue in the income statement.
£m
–
Group
Financial assets:
At 1 June
2013
Gains or
losses in
revenue
Cash
settled
positions
Transfers
At 31 May
2014
£m
£m
£m
£m
£m
Trade receivables – due to clients (Note 3(a))
–
26.8
(26.8)
–
–
The impact of a reasonably possible alternative valuation assumption on the valuation of trade receivables – due from clients
reported within Level 3 of the valuation hierarchy is not significant.
Accounting classifications and fair values – Company
FVTPL –
Held for
trading
Loans and
receivables
Other
amortised
cost
Available-
for-sale
Total
carrying
amount Fair value
£m
£m
£m
£m
£m
£m
–
–
–
–
–
–
–
201.8
201.8
–
–
–
–
–
–
119.6
–
119.6
–
–
–
–
–
–
–
201.8
201.8
–
201.8
201.8
119.6
119.6
–
–
119.6
119.6
FVTPL –
Held for
trading
Loans and
receivables
Other
amortised
cost
Available-
for-sale
Total
carrying
amount Fair value
£m
£m
£m
£m
£m
£m
–
–
–
–
–
–
–
133.0
133.0
–
–
–
–
–
–
0.5
–
0.5
–
–
–
–
–
–
–
133.0
133.0
0.5
–
0.5
–
133.0
133.0
0.5
–
0.5
Company
As at 31 May 2015
Financial assets:
Cash and cash equivalents
Amounts due from Group companies (Note 34(b))
Financial liabilities:
Amounts due to Group companies (Note 34(b))
Redeemable preference shares
Company
As at 31 May 2014
Financial assets:
Cash and cash equivalents
Amounts due from Group companies (Note 34(b))
Financial liabilities:
Amounts due to Group companies (Note 34(b))
Redeemable preference shares
154
|IG Group Holdings plc Annual Report 2015
Items of income, expense, gains or losses – Group
Gains and losses arising from financial assets and liabilities classified as fair value through the profit and loss, held for trading,
amounted to net gains of £388.4 million (2014: £370.4 million).
Finance income (refer to note 8) totalled £1.8 million (2014: £1.5 million). An amount of £1.8 million (2014: £1.5 million) represents
interest income on financial assets not at fair value through profit or loss and includes interest receivable in respect of non-
segregated client balances, part of which is held with broker and interest receivable calculated using the Effective Interest Rate
methodology for financial investments.
Finance costs (refer to note 9) totalled £1.9 million (2014: £2.0 million). An amount of £1.8 million represents interest expense
on financial liabilities not at fair value through profit or loss (2014: £0.4 million). The remainder, £0.1 million (2014: £1.6 million)
represents fee expense arising from maintaining the Group’s committed bank facilities.
Financial instruments subject to offsetting, enforceable master netting agreements and similar arrangements
Within the Group’s terms and conditions with individual clients and brokers are standard netting agreement clauses. The effect
of these netting arrangements, including rights of set-off associated within the Group’s recognised financial assets and financial
liabilities is as follows:
Group
As at 31 May 2015
Financial assets
Financial investments(1)
Trade receivables – due from brokers(2)
Trade receivables – due from clients(3)
Trade receivables – other amounts due to the Group
Financial liabilities
Trade payables – due to brokers(2)
Trade payables
Gross amounts
before offsetting
Amounts set off in
the balance sheet
Net amounts presented
in the balance sheet
Note
£m
£m
£m
21
17
17
17
22
108.4
320.9
264.5
2.0
695.8
81.7
253.8
335.5
–
(81.7)
(236.1)
–
(317.8)
(81.7)
(236.1)
(317.8)
108.4
239.2
28.4
2.0
378.0
–
17.7
17.7
(1) The balance is made up of £83.1 million (2014: £82.5 million) held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against
(2)
(3)
potential liquidity stress under BIPRU 12, and a £25.3 million (2014: £nil) UK Government Gilt which is held at brokers as collateral to support the hedging of client
market exposures in accordance with the Group’s market risk management policy (refer to note 21).
‘Trade receivables - due from brokers’ and ‘Trade payables – due to brokers’ represent balances with brokers where the combination of cash held on account
(disclosed as loans and receivables) and the net valuation of financial derivative open positions (disclosed as held for trading) results in an amount due to/from
the Group. The net financial derivative open positions have been presented gross according to whether individual positions held at brokers are in a profit or
loss position.
‘Trade receivables - due from clients’ represent balances with clients where the combination of cash held on account (disclosed as loans and receivables) and the net
valuation of financial derivative open positions (disclosed as held for trading) results in an amount due to the Group. The net financial derivative open positions have
been presented gross according to whether individual positions held with clients are in a profit or loss position.
155
IG Group Holdings plc Annual Report 2015|
NOTES TO THE FINANCIAL STATEMENTS
Financial instruments subject to offsetting, enforceable master netting agreements and similar arrangements (continued)
Group
As at 31 May 2014
Financial assets
Financial investments(1)
Trade receivables – due from brokers
Trade receivables – due from clients
Trade receivables – other amounts due to the Group
Financial liabilities
Trade payables – due to brokers
Trade payables
Gross amounts
before offsetting
Amounts set off in
the balance sheet
Net amounts
presented in the
balance sheet
Note
£m
£m
£m
21
17
17
17
22
82.5
379.5
282.0
21.3
765.3
75.6
301.6
377.2
–
(75.6)
(279.7)
–
(355.3)
(75.6)
(279.7)
(355.3)
82.5
303.9
2.3
21.3
410.0
–
21.9
21.9
(1) £82.5 million of UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against potential liquidity stress
under BIPRU 12 (refer to note 21 for details).
36.
FINANCIAL RISK MANAGEMENT
Responsibility for risk management, including financial risks, resides at all levels within the Group, starting with the Board of
Directors. Our Corporate Governance structure, including details of how the Board delegates responsibility for internal control
and risk management to our Audit and Risk committees, is described in detail in the Corporate Governance section of the
Annual Report.
The Group’s Internal Capital Adequacy Assessment Process (ICAAP) and Individual Liquidity Adequacy Assessment (ILAA), while
applying specifically to the Group’s FCA entities, provide an on-going assessment of the risks the Group considers to have
the potential to have a significant detrimental impact on its financial performance and future prospects and describes how the
Group mitigates these risks subject to the Group’s risk appetite.
Financial risks arising from financial instruments are analysed into market, credit, concentration and liquidity risks, and these are
discussed below.
(i)
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. This is analysed into market price, currency and interest rate risk components.
The Group’s market risk is managed under the ‘Market Risk Policy’ on a group-wide basis and exposure to market risk at
any point in time depends primarily on short-term market conditions and the levels of client activity. The Group utilises
market position limits for ‘operational efficiency’ and does not take proprietary positions based on an expectation of market
movements. As a result not all net client exposures are hedged and the Group may have a residual net position in any of the
financial markets in which it offers products up to the market risk limit.
The Group’s Market Risk Policy incorporates a methodology for setting market position limits, consistent with the Group’s risk
appetite, for each financial market in which the Group’s clients can trade, as well as certain markets which the Board considers
to be correlated. These limits are determined with reference to the expected liquidity and volatility of the underlying financial
product or asset class and represent the maximum long and short client exposure that the Group will hold without hedging the
net client exposure.
The Group’s real-time market position monitoring system allows it to monitor its market exposure against these limits
continuously. If exposures exceed these limits, the policy requires that hedging is undertaken to bring the exposure back within
the defined limit.
There is a significant level of ‘natural’ hedging arising from the Group’s global client base pursuing varying trading strategies
which results in a significant portfolio hedging effect. This reduces the Group’s net market exposure prior to the Group hedging
any residual net client exposures.
Where the Group has residual positions in markets for which it has not been possible or cost-effective to hedge, the Executive
Risk Committee determines the appropriate action and reviews these exposures regularly, subject to the risk management
framework approved by the Board.
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|IG Group Holdings plc Annual Report 2015
Binary bets and options are typically 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 hedge specific positions if considered necessary. The Group aims 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 contracts means that risk on
these markets at any point in time is not considered to be significant.
A)
MARKET PRICE RISK
This is the risk that the fair value of a financial instrument fluctuates as a result of changes in market prices other than due to the
effect of currency or interest rate risks.
Equity market price risk:
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.
During the year, following further development of the back-end risk management systems, a detailed analysis of the risk
limits market-by-market was undertaken. This resulted in increasing certain risk limits, as well as making the main regional and
global equity limits dynamic by responding intraday when the market is open and most liquid, when client activity increases or
decreases and reducing the limit approaching market closing. Accordingly, the intraday limit will fluctuate but with a maximum
limit set at £100.0 million.
At 31 May 2015 the exposure limit was £30.0 million (2014: £20.0 million) and the Group’s equity exposure was £2.8 million
(2014: £2.7 million). The average equity exposure limit during the year was £26.4 million (2014: £18.2 million). As noted earlier in
this section, the Group’s market risk policy requires that when the exposure exceeds the exposure limit, hedging is undertaken
to bring the exposure back within that limit as soon as practical.
The Group has no significant concentration of market risk.
No sensitivity analysis is presented for equity market price risk as the impact of reasonably possible market movements on the
Group’s net trading revenue and equity are not significant, being less than the Group’s average daily net trading revenue from
financial instruments. Changes in market risk variables have no direct impact on the Group’s equity as the Group has no financial
instruments designated in hedging relationships.
Other market price risk:
The Group also has market price risk as a result of its trading activities (offering bets and Contracts for Difference (CFDs) on
interest rate derivatives and commodities) that is hedged as part of the overall market risk management. The exposure is
monitored on a Group-wide basis and is hedged using exchange-traded futures and options. Exposure limits are set by the
Executive 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.
The exposure to interest rate derivatives and commodities at the year-end are as follows:
Interest rate derivatives
Commodities
31 May 2015 31 May 2014
£m
11.0
7.4
£m
11.2
4.7
No sensitivity analysis is presented for other market price risk as the impact of reasonably possible market movements on the
Group’s net trading revenue are not significant. Changes in risk variables have no direct impact on the Group’s equity as the
Group has no financial instruments designated in hedging relationships.
157
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
36.
FINANCIAL RISK MANAGEMENT (CONTINUED)
B)
FOREIGN CURRENCY RISK
The Group is exposed to two sources of foreign currency risk.
i)
Translational foreign currency risk
Translation exposures arise from financial and non-financial items held by an entity with a functional currency different from
the Group’s presentation currency. The functional currency of each company in the Group is that denominated by the country
of incorporation as disclosed in note 15. The Group does not hedge translational exposures as they do not have a significant
impact on the Group’s capital resources.
Transactional foreign currency risk
ii)
Transactional foreign currency exposures represent financial assets or liabilities denominated in currencies other than the
functional currency of the transacting entity. Transaction 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 Executive 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 Group monitors transactional foreign currency risks including currency statement of financial position 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 year-end was as follows:
US dollar
Euro
Australian dollar
Yen
Other
31 May 2015 31 May 2014
£m
(4.9)
(9.1)
(2.3)
(2.7)
(3.9)
£m
(2.4)
(1.8)
0.9
(8.8)
3.6
No sensitivity analysis is presented for foreign exchange risk as the impact of reasonably possible market movements on the
Group’s net trading revenue are not significant. Changes in risk variables have no direct impact on the Group’s equity as the
Group has no financial instruments designated in hedging relationships.
C)
NON-TRADING INTEREST RATE RISK
The Group also has interest rate risk relating to financial instruments not held at fair value through profit or loss. These
exposures are not hedged.
The interest rate risk profile of the Group’s financial assets and liabilities as at each year-end was as follows:
Group
Fixed rate
Redeemable preference shares
Financial investments(1)
Floating rate
Cash and cash equivalents
Trade receivables – due from brokers
Trade payables – client funds held on
balance sheet
Within 1 year
Between
2 and 5 years
More than 5 years
Total
31 May
2015
31 May
2014
31 May
2015
31 May
2014
31 May
2015
31 May
2014
31 May
2015
31 May
2014
£m
£m
£m
£m
£m
£m
£m
£m
–
32.9
148.8
239.2
–
50.3
101.5
303.9
(16.9)
(21.0)
–
75.5
–
32.2
–
–
–
–
–
–
404.0
434.7
75.5
32.2
–
–
–
–
–
–
–
–
–
–
–
–
82.5
101.5
303.9
108.4
148.8
239.2
(16.9)
(21.0)
479.5
466.9
(1) Financial investments are made up of £83.1 million (2014: £82.5 million) held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’
against potential liquidity stress under BIPRU 12, and a £25.3 million (2014: £nil) UK Government Gilt which is held at brokers as collateral to support the hedging of
client market exposures in accordance with the Group’s market risk management policy (refer to note 21).
158
|IG Group Holdings plc Annual Report 2015
Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument. Please refer to note 21 for
effective interest rates received.
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.
Interest rate risk sensitivity analysis
A non-traded interest rate risk sensitivity analysis has been performed on net interest income on segregated client funds, based
on the value of client funds held at the year-end, on the basis of a 0.25% (2014: 0.25%) per annum fall and a 0.5% (2014: 0.5%)
rise in interest rates, at the beginning of the year, as these are considered ‘reasonably possible’. The impact of such a fall in
interest rates would reduce net interest income on segregated client funds by approximately £2.2 million (2014: £1.6 million)
per annum. The impact of such a rise in interest rates would increase net interest income on segregated client funds by
approximately £4.5 million (2014: £3.3 million) per annum. Changes in risk variables have no material impact on the Group’s
equity as the Group has no financial instruments designated in hedging relationships.
(ii)
Credit risk
Credit risk is the risk that a counterparty fails to perform its obligations, resulting in financial loss. The principal sources of credit
risk to our business are from financial institutions and individual clients.
The Group’s credit risk is managed on a group-wide basis.
A)
FINANCIAL INSTITUTION CREDIT RISK
Financial institution credit risk is managed in accordance with the Group’s ‘Counterparty Credit Management Policy’.
Financial institutional counterparties are subject to a credit review when a new relationship is entered into and this is updated
semi-annually (or more frequently as required eg on a change in the financial institution’s corporate structure). Proposed
maximum exposure limits for these financial institutions are then reviewed and approved by the Executive Risk Committee.
As part of its management of concentration risk, the Group is also committed to maintaining multiple brokers for each
asset class. Where possible, the Group negotiates for its funds to receive client money protection which can reduce direct
credit exposure.
In respect of financial institution credit risk, the following key metrics are monitored on a daily basis:
• Balances held with each counterparty group, against limits approved by the Executive Risk Committee; and
• Any change in short- and long-term credit rating.
The Group is responsible under various regulatory regimes for the stewardship of client monies. These responsibilities are
defined in the Group’s Counterparty Credit Management Policy and include the appointment of and periodic review of
institutions with which client money is deposited. The Group’s general policy is that all financial institutional counterparties
holding client money accounts must have minimum short- and long-term ratings of A-2 and A- respectively, although in some
operating jurisdictions where accounts are maintained to provide local banking facilities for clients it can be problematic to
find a banking counterparty satisfying these minimum ratings requirements. In such cases the Group will seek to use a locally
systemically important institution. These criteria also apply for the Group’s own bank accounts held with financial institutions.
The Group also actively manages the credit exposure to each of its broking counterparties settling or recalling balances at each
broker on a daily basis in line with the collateral requirements.
In addition, the majority of deposits are made on an overnight or breakable term basis which enables the Group to react
immediately to any deterioration in credit quality, and deposits of an unbreakable nature or requiring notice are only held with
a subset of counterparties which have been approved by the Executive Risk Committee. At 31 May 2015 there were no deposits
held on an unbreakable basis (2014: £nil).
159
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
36.
FINANCIAL RISK MANAGEMENT (CONTINUED)
B)
CLIENT CREDIT RISK
The Group operates a real-time mark-to-market trading platform, with client profits and losses being constantly updated on
each client’s account.
Client credit risk principally arises when a client’s total funds deposited with the Group are insufficient to cover any trading
losses incurred. In addition, a small number of clients are granted credit limits to cover open losses and margin requirements as
described below.
In particular, client credit risk can arise where there are significant, sudden movements in the market i.e. due to high general
market volatility or specific volatility relating to an individual financial instrument in which the client has an open position.
We mitigate, but do not eliminate, client credit risk in a number of ways, including the real time monitoring of client positions
via our ‘close-out monitor’, the ability of clients to set a level in advance at which the deal will be closed (the ‘stop’ level or
‘guaranteed stop’ level) and the use of tiered margining.
Credit risk is also mitigated in part through increased margin requirements on larger positions, our client suitability criteria, and
is supported by an extensive training programme that aims to educate clients in all aspects of trading and risk management
which encourages them to collateralise their accounts at an appropriate level in excess of the minimum requirement.
The principal types of client credit risk exposure are managed under the Group’s ‘Client Credit Management Policy’ and depend
on the type of account and any credit offered to clients as follows:
Clients subject to the Group’s ‘close-out monitor’
The ‘close-out monitor’ (COM) is an automated liquidation process whereby accounts which have broken the liquidation
threshold are automatically identified. Where client losses are such that their total equity falls below the specified liquidation
level positions will be liquidated, resulting in reduced credit risk exposure for the Group.
Both the ‘close-out monitor’ and client initiated ‘stops’ result in the transfer of market risk to the Group. Market risk arises
following the closure of the underlying client position as the Group (subject to the market risk limits, discussed in the ‘Market
risk’ section with regards to market risk), may hold a corresponding hedging position that will, assuming sufficient market
liquidity, be unwound.
In addition a subset of clients has what are known as ‘Limited Risk’ accounts. For such accounts a level is set in advance (the
‘guaranteed stop’ level) at which the deal will be closed, meaning a maximum client loss can be calculated at the opening of
the trade. Clients placing trades with guaranteed stop levels pay a small premium on each transaction. The maximum loss is
then the amount the client is required to deposit to open the trade, meaning that in most circumstances the client can never
lose more than their initial margin deposit. Although no longer offered to new clients, the Group still has a significant number of
clients with this type of account. This type of account results in the transfer of an element of market risk to the Group, which is
managed under the Group’s Market Risk Policy, and only a subset of more liquid products are available to trade. Clients with any
type of account may still choose to use guaranteed stops (where available and on payment of the premium).
The majority of client positions are monitored on the Group’s real-time COM system or are limited risk accounts with
guaranteed ‘stop-losses’. As at 31 May 2015, 99.85% (2014: 99.81%) of financial client accounts are subject to the automatic
COM procedure or are ‘limited risk’ accounts.
Credit accounts
Clients holding other types of accounts are permitted to deal in circumstances where they may be capable of suffering losses
greater than the funds they have deposited 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.
The Group may offer credit limits with the result that any ‘open loss’ can be paid subject to agreed credit terms. These accounts
typically only create a credit exposure when the client’s loss exceeds their initial margin deposit.
In addition to the waiver of payment of open losses on a trade, the Group may also offer clients credit in respect of their
initial margin. This is a permanent waiving of initial margin requirements while the limit is active on the account subject to the
credit limit.
Credit limits are only granted following provision by the client of evidence of their available financial resources and credit
accounts limits are continuously reviewed by the Group’s Credit Department. Each client with a credit limit is also assigned
a liquidation level, breach of which will result in closure of positions. Credit accounts are small in number, are not actively
promoted and in general they are not made available to new clients.
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|IG Group Holdings plc Annual Report 2015
Risk-based tiered margins
The Group applies a tiered-margin requirement for equities and other instruments with risk-adjusted margin requirements
dependent on several factors including the volatility and liquidity of the underlying instrument.
This has resulted in potential margin requirement of up to 75% of the value of the notional client position for large client
positions but a reduced margin requirement for smaller client positions.
These tiered margins, in addition to the COM discussed earlier, contribute to the further mitigation of the Group’s client
counterparty credit risk exposure.
Management of client collateral
The Group also accepts collateral from a small number of its stockbroking clients in the form of shares or other securities which
mitigate the Group’s credit risk. Clients retain title to the securities lodged while their trading account is operating normally,
but are required to sign a collateral agreement which will allow the Group to take title and sell the securities in the event of the
client defaulting on any margin obligations.
The collateral value assigned to the client account is updated in real time, and each security is assigned a ‘haircut’ value eg a
client is typically allowed to use 90% of a major FTSE 100 current market value.
The analysis of neither past due nor impaired credit exposures in the following table excludes individual client funds held in
segregated client money accounts or money market facilities established under the UK’s Financial Conduct Authority (FCA)
‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates. Under these rules, client money
funds held with trust status are protected in the event of the insolvency of the Group.
Cash and cash equivalents
Trade receivables –
due from brokers
Trade receivables –
due from clients
31 May 2015 31 May 2014 31 May 2015 31 May 2014 31 May 2015 31 May 2014
£m
£m
£m
£m
£m
£m
(note 18)
(note 17)
(note 17)
–
–
–
–
–
–
7.0
6.5
125.7
8.7
0.2
–
0.7
148.8
148.8
–
–
–
–
–
–
–
9.1
86.7
5.1
0.1
–
0.5
101.5
101.5
–
–
–
–
–
–
–
16.9
219.2
0.2
–
–
2.9
239.2
239.2
–
–
–
–
–
–
–
55.1
247.4
0.1
–
–
1.3
303.9
303.9
22.7
(21.7)
1.0
11.4
(10.6)
0.8
0.1
0.2
0.3
–
–
–
–
–
–
0.7
0.7
2.0
0.3
–
0.3
–
–
–
–
–
–
1.2
1.2
2.3
Group
Individually impaired
Gross exposure
Allowance for impairment
Past due but not impaired
Ageing profile:
0-3 months
> 6 months
Neither past due nor impaired
Credit rating:
AA+ & above
AA to AA-
A+ to A-
BBB+ to BBB-
BB+ to B
CCC
Unrated(1)
Total carrying amount
(1) Amounts due from brokers are primarily related to the Group's operations in South Africa. Unrated amounts due from clients relate to open positions. Prepayments
and other receivables are all unrated (2014: all unrated).
161
IG Group Holdings plc Annual Report 2015|
NOTES TO THE FINANCIAL STATEMENTS
36.
FINANCIAL RISK MANAGEMENT (CONTINUED)
B)
CLIENT CREDIT RISK (CONTINUED)
The Financial investments are UK Government securities held by the Group in satisfaction of the FCA requirements to hold a
‘liquid asset buffer’ against potential liquidity stress under BIPRU 12 and as such they are rated as AA+.
Impairment of trade receivables due from clients
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 year:
Group
Balance at 1 June
Impairment loss for the year
– gross charge for the year
– recoveries
Write-offs
Foreign exchange
Balance at 31 May
31 May 2015 31 May 2014
£m
10.6
18.0
(2.8)
(4.1)
–
21.7
£m
10.8
2.9
(1.3)
(1.5)
(0.3)
10.6
Included in the ‘gross charge for the year’ line is £15.1million and £2.8 million in the ‘recoveries’ line in the table above, in
relation to the Swiss franc event (see note 2, for details).
The recovery of the outstanding debts associated with the Swiss franc is dependent on the ultimate recovery from a small
number of debts. The Group’s approach remains that for clients whom are considered to be well positioned and with resources
to pay their debts the Group will continue to employ resources to recover the debts.
Credit risk – Company
Held within prepayments and other receivables in the Statement of Financial Position of the Company are amounts payable
to the Company from related parties that are unrated. Refer to note 34(b). The Company is not otherwise exposed to material
amounts of credit risk.
(iii)
Concentration risk
Concentration risk is defined as all risk exposures with a loss potential which is large enough to threaten the solvency or the
financial position of the Group. In respect of financial risk, such exposures may be caused by credit risk, market risk, liquidity risk
or a combination or interaction of those risks.
The following table analyses the Group’s credit exposures, at their carrying amounts, by geographical region and excludes
individual client funds held in segregated client money accounts established under the UK’s Financial Conduct Authority (FCA)
‘CASS’ rules and similar rules of other regulators in whose jurisdiction the Group operates.
Analysis of credit exposures at carrying amount by geographical segment:
Group
As at 31 May 2015
Financial assets
Cash and cash equivalents
Financial investments(1)
Trade receivables – due from brokers
Trade receivables – due from clients
Other amounts due to the Group
Total financial assets
UK
£m
71.8
108.4
44.9
2.0
22.2
249.3
Europe
Australia Rest of World
£m
£m
£m
0.5
–
44.9
–
–
45.4
5.7
–
29.1
–
–
70.8
–
120.3
–
6.2
34.8
197.3
Total
£m
148.8
108.4
239.2
2.0
28.4
526.8
(1) Financial investments are made up of £83.1 million (2014: £82.5 million) held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’
against potential liquidity stress under BIPRU 12, and a £25.3 million (2014: £nil) UK Government Gilt which is held at brokers as collateral to support the hedging of
client market exposures in accordance with the Group’s market risk management policy (refer to note 21).
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|IG Group Holdings plc Annual Report 2015 As at 31 May 2014
Financial assets
Cash and cash equivalents
Financial investments
Trade receivables – due from brokers
Trade receivables – due from clients
Other amounts due to the Group
Total financial assets
Group
UK
£m
74.3
82.5
92.5
2.0
14.2
265.5
Europe
Australia Rest of World
£m
£m
£m
1.2
–
51.8
0.2
–
53.2
6.5
–
52.2
0.1
1.7
60.5
19.5
–
107.4
–
5.4
132.3
Total
£m
101.5
82.5
303.9
2.3
21.3
511.5
The Group’s largest credit exposure to any one individual broker at 31 May 2015 was £91.2 million (A- rated) (2014: £79.0 million,
A- rated). Included in cash and cash equivalents, the Group’s largest credit exposure to any bank at 31 May 2015 was
£54.1 million (A rated) (2014: £61.5 million, AA+ rated). The Group has no significant exposure to any one particular client or
group of connected clients.
All of the Company’s credit exposures arise in the UK at both 31 May 2015 and 31 May 2014.
(iv)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations arising from its financial liabilities that are
settled by delivering cash or other financial assets. For further details refer to note 19.
Derivative and non-derivative cash flows by remaining contractual maturity – Group
The following tables present the undiscounted cash flows receivable and payable (excluding interest payments) by the Group
under derivative and non-derivative financial assets and liabilities allocated to the earliest period in which the Group can be
required to pay although the remaining contractual maturities may be longer.
Amounts payable on demand:
As at 31 May 2015
Financial assets
Cash and cash equivalents
Financial investments(1)
Trade receivables – due (to)/from brokers
Trade receivables – due from clients
Trade receivables – other amounts due to the Group
Financial liabilities
Trade payables – Client funds held on balance sheet
Derivative
Non-derivative
£m
–
–
(8.9)
–
–
(8.9)
–
(8.9)
£m
148.8
108.4
248.1
2.0
28.4
535.7
(16.9)
518.8
Total
£m
148.8
108.4
239.2
2.0
28.4
526.8
(16.9)
509.9
(1) Financial investments are made up of £83.1 million (2014: £82.5 million) held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’
against potential liquidity stress under BIPRU 12, and a £25.3 million (2014: nil) UK Government Gilt which is held at brokers as collateral to support the hedging of
client market exposures in accordance with the Group’s market risk management policy (refer to note 21).
Derivative trade receivables disclosed in the table above represent the Group’s open positions with brokers. Non-derivative trade
receivables and payables disclosed in the table above represent cash margin held at brokers, UK Government securities and client
debtors. Derivative and non-derivative cash flows are presented alongside each other in the table above as they result from the same
underlying trading relationship and as the Group has both the legal right and intention to settle on a net basis.
Trade receivables are disclosed as repayable on demand as when client positions are closed the 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.
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IG Group Holdings plc Annual Report 2015|
NOTES TO THE FINANCIAL STATEMENTS
36.
FINANCIAL RISK MANAGEMENT (CONTINUED)
B)
CLIENT CREDIT RISK (CONTINUED)
Derivative and non-derivative cash flows by remaining contractual maturity – Group (continued)
Amounts payable on demand:
As at 31 May 2014
Financial assets
Cash and cash equivalents
Financial investments(1)
Trade receivables – due (to)/from brokers
Trade receivables – due from clients
Trade receivables – other amounts due to the Group
Financial liabilities
Trade payables – Client funds held on balance sheet
Derivative Non-derivative
£m
–
–
(23.4)
–
–
(23.4)
–
(23.4)
£m
101.5
82.5
327.3
2.3
21.3
534.9
(21.0)
513.9
Total
£m
101.5
82.5
303.9
2.3
21.3
511.5
(21.0)
490.5
(1) £82.5 million of UK Government securities held by the Group in satisfaction of the FCA requirements to hold a ‘liquid asset buffer’ against potential liquidity stress
under BIPRU 12 (refer to note 21 for details).
Amounts payable over 5 years:
The Group has non-derivative cash flows payable over 5 years in relation to the redeemable preference shares at 31 May 2015
and 2014, as disclosed in note 26.
Derivative and non-derivative cash flows by remaining contractual maturity - Company
There were no Company derivative cash flows as at 31 May 2015 (2014: £nil).
At 31 May 2015 the Company held cash and cash equivalents of £724 (2014: £194) available on demand and redeemable
preference shares of £40,000 (2014: £40,000) the terms of which are disclosed in note 26.
37.
CAPITAL MANAGEMENT AND RESOURCES
Capital management
The Group is supervised on a consolidated basis by the UK’s Financial Conduct Authority (FCA). The Group’s operations
in Australia, Japan, Singapore, South Africa, Switzerland, United Arab Emirates and the United States, are also regulated.
Individual capital requirements in these jurisdictions are taken into account when managing the Group’s capital resources.
The Group’s regulatory capital resources management objective is to ensure that the Group complies with the regulatory capital
resources requirement set by the FCA and other global regulators in jurisdictions in which the Group’s entities operate.
The Group’s capital management policy aims to maximise returns on equity while maintaining a strong capital position to
enable the Group to take advantage of growth opportunities, whether organic or by acquisition. The Group does not seek to
generate higher returns on equity by introducing leverage through, for example, the use of long-term debt finance.
The Group’s 2014 ICAAP was approved by the Board in December 2014. There have been no capital requirement breaches
during the financial and prior year. The Group also regularly undertakes three-year stress and scenario testing of its main
financial and operational risks to project its future capital and liquidity adequacy requirements.
The disclosures required of the Group under the Capital Requirements Regulation (Pillar III) will be made on the Group’s
corporate website iggroup.com. These will provide additional information which will allow market participants to assess key
pieces of information on a firms capital, risk exposures, risk assessment process and hence the capital adequacy of the firm.
164
|IG Group Holdings plc Annual Report 2015
Return on Assets
In accordance with the Capital Requirements Directive IV (CRD IV)(1) and the IFPRU prudential regulations the Group is required
to disclose a return on assets metric. This has been calculated as ‘profit for the year’ divided by ‘shareholders equity’:
Return on assets
Capital resources
31 May 2015
Restated*
31 May 2014
£m
22.3%
£m
26.0%
The Group had significant surplus regulatory capital resources over the Pillar 1 regulatory capital resources requirement
throughout the year. An analysis of the Group’s consolidated capital resources and capital resources requirement is provided in
the Operating and Financial Review.
The following table summarises the Group’s capital adequacy on a consolidated basis.
£m
Shareholders’ equity per audited financial statements
Investment in own shares
Common Equity Tier 1 Capital
Less: Intangible assets
Less: Investment in own shares
Less: Deferred tax asset(1)
Total capital resources (CR)
31 May 2015
Restated*
31 May 2014
591.4
1.2
592.6
(124.0)
(1.2)
(7.1)
460.3
565.9
1.1
567.0
(122.7)
(1.1)
(7.1)
436.1
(1) The new CRD IV requirements which came into force on 1 January 2014 require deferred tax assets relating to future profitability to be deducted from Tier 1 Capital
in the determination of capital resources for the Group.
* As outlined in the Group Accounting policies on page 168, comparative periods have been restated to reflect the change in timing of recognition of the FSCS levy in
accordance with IFRIC 21 ‘Levies’. See note 38 for additional information.
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IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
38.
IMPACT OF ADOPTING NEW ACCOUNTING STANDARDS
Restatement of comparatives – IFRIC 21 ‘Levies’
As outlined in the Group’s accounting policies on page 168, during the year ended 31 May 2015, the Group adopted IFRIC 21
‘Levies’ and has accordingly restated the prior periods.
The following tables reflect the impact on the Group’s financial statements at 31 May 2015 of IFRIC 21 ‘Levies’ at 1 June 2014.
Income statement – year ended 31 May 2015
Administrative expenses
Profit before tax
Taxation credit(1)
Profit for the year
IFRIC 21 Levies
£m
5.3
5.3
(1.4)
3.9
Basic and diluted loss per share (cent)
1.53p and 1.52p
Consolidated statement of financial position 31 May 2015 (lines impacted by IFRIC 21)
Deferred tax
Other payables(1)
Retained earnings – current year
1.4
(7.0)
3.9
(1) Tax impact was calculated at the substantively enacted rate of 20% (2014: 20%) on the FSCS levy charge for the year ending 31 March 2016 before adjustments made
to prior year charges.
The following tables set out the impact of IFRIC 21 ‘Levies’ on the comparative amounts for the year ended 31 May 2014.
Consolidated income statement (lines impacted by IFRIC 21)
Year ended 31 May 2014
Administrative expenses
Operating profit
Profit before taxation
Tax expense
Profit for the period
As originally
published
IFRIC 21
Levies
Restated
£m
(179.0)
195.2
194.7
(47.7)
147.0
£m
0.2
0.2
0.2
–
0.2
£m
(178.8)
195.4
194.9
(47.7)
147.2
Consolidated statement of financial position (lines impacted by IFRIC 21)
31 May 2014
Assets
Deferred tax assets
Current liabilities
Other payables
Equity
Retained earnings
1 June 2013
Assets
Deferred tax assets
Current liabilities
Other payables
Equity
Retained earnings
166
As originally
published
IFRIC 21
Levies
Restated
£m
5.7
53.3
277.4
£m
1.4
5.1
(3.7)
£m
7.1
58.4
273.7
As originally
published
IFRIC 21
Levies
Restated
£m
9.5
53.8
£m
1.4
5.3
£m
10.9
59.1
215.2
(3.9)
211.3
|IG Group Holdings plc Annual Report 2015 Consolidated statement of changes in shareholders’ equity (lines impacted by IFRIC 21)
31 May 2014
Retained earnings
Balance at the beginning of the period/year
Profit for the year
Balance at the end of the period/year
Consolidated cash flow statement (lines impacted by IFRIC 21)
Year ended 31 May 2014
Cash flow from operating activities
Profit before tax
Other non-cash items
Cash generated from operations
39.
SUBSEQUENT EVENTS
As originally
published
IFRIC 21
Levies
Restated
£m
215.2
147.0
277.4
£m
(3.9)
0.2
(3.7)
£m
211.3
147.2
273.7
As originally
published
IFRIC 21
Levies
Restated
£m
194.7
3.9
176.5
£m
0.2
(0.2)
–
£m
194.9
3.7
176.5
As at 31 May 2015, The Group had £200.0 million in revolving credit facility from a syndicate of three UK banks. The Group has
undertaken a review of its contingent liquidity requirements and upon approval from the Executive Risk Committee, concluded
to reduce the facility to £160.0 million and include a fourth bank in the syndicate. The inclusion of a fourth bank in the syndicate
offers the Group further bank diversification. This new facility has £100.0 million available for up to a 1 year term (with an option
to extend for a further year) and £60.0 million available for up to 3 years and was signed on 17 July 2015.
40.
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 2015 were authorised for issue by the Board of the Directors on 21 July 2015 and the statements of financial
position signed on the Board’s behalf by Tim Howkins and Christopher Hill. 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 Company’s registered address is 25 Dowgate Hill, London, United Kingdom, EC4R 2YA.
The Group and Company financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) and IFRIC interpretations as they apply to the financial statements
of the Group and of the Company for the year ended 31 May 2015 and applied in accordance with the provisions of the
Companies Act 2006. The Group and Company financial statements have been prepared under the historical cost convention,
as modified by the revaluation of available-for-sale financial assets and financial assets and liabilities (including derivatives) at fair
value through profit or loss.
The principal accounting policies adopted by the Group and the Company are set out in note 41.
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IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
41.
ACCOUNTING POLICIES
41.1
Basis of preparation
The accounting policies which follow have been applied in preparing the financial statements for the year ended 31 May 2015.
As permitted by Section 408(1)(b), (4) of the Companies Act 2006, the individual income statement of IG Group Holdings plc
(the Company) has not been presented in these financial statements. The amount of profit for the year dealt with in the financial
statements of IG Group Holdings plc is £62.7 million (2014: £85.8 million). A statement of comprehensive income for IG Group
Holdings plc has also not been presented in these financial statements. No items of other comprehensive income arose in the
year (2014: £nil).
Comparatives restatement
IFRIC 21 ‘Levies’
Comparative periods have been restated to reflect the impact of the adoption of IFRIC Interpretation 21: Levies.
The adoption of IFRIC 21 impacts the accounting for the Financial Services Compensation Scheme (FSCS) levy for the year
commencing 1 June 2014. FSCS levies are raised in respect of the financial year of the FSCS that runs from 1 April to the
following 31 March. The levy is payable in its entirety if the Group is in operation under its Financial Conduct Authority (FCA)
licence on 1 April, being the obligating event, and is levied relating to revenues of the Group’s prior year. IFRIC 21 requires
the levy to be recognised in full in the income statement on 1 April each year. The existence of relevant activity in the previous
period is necessary, but not sufficient, to create a present obligation, neither does the future operation of the business after 1
April result in the charge being spread over the FSCS financial year, this being the previous accounting treatment adopted by
the Group. Therefore, for each financial year presented the levy has been expensed to the income statement in full on 1 April.
Prior year comparatives have been restated under the IFRIC with an equity reserves adjustment recognised for the FSCS levy as
at 1 April 2013. Full detail of the restatement is provided in note 38.
Before the adoption of IFRIC 21, the Financial Services Compensation Scheme (FSCS) levy was recognised on an accrual basis in
accordance with the IAS 37, ‘Provisions, contigent liabilities and contingent assets’.
Presentation in £’m
In presenting the amounts used in these financial statements the level of rounding has been changed from thousands, which
were used in the comparative periods, to millions. In accordance with the requirements of IAS 8, this level of rounding does not
omit material information.
41.1.1 Going concern
The Directors have prepared the financial statements on a going concern basis that requires the Directors to have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
41.2
(a)
Basis of consolidation
Subsidiaries
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 results,
cash flows and final positions 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 between Group entities, including unrealised profits arising from them, are eliminated on consolidation.
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. Contingent or deferred consideration is re-measured at each statement of financial
position date with periodic changes to the estimated liability recognised in the consolidated income statement. Acquisition
related costs are expensed as incurred. 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 income statement in the period of acquisition.
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.
168
|IG Group Holdings plc Annual Report 2015 (b)
Non-controlling interests
Where the Group and a non-controlling shareholder enter into a forward contract (symmetrical put and call options) under which
the Group is required to purchase the non-controlling interest for its fair value (formulae-based valuation), at the forward date,
the Group continues to recognise the non-controlling interest at the proportionate share of the acquiree’s identifiable net assets,
until expiry of the arrangement. The forward liability is also recognised for management’s best estimate of the present value of the
redemption amount with a corresponding entry in equity. The accretion of the discount on the liability is recognised as a finance
charge in the consolidated income statement. The liability is re-measured to the final redemption amount with any periodic
changes to the estimated liability recognised in the consolidated income statement. On expiry of the forward, the liability is
eliminated as paid and any difference in the value of the non-controlling interest to the exercise price deducted from equity.
On an acquisition-by-acquisition basis non-controlling interests are measured either at fair value or at the non-controlling
interest proportionate share of the acquiree’s net assets.
The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from
non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of
the non-controlling interest is recorded in equity.
Losses applicable to the non-controlling shareholder in a consolidated subsidiary’s equity may exceed the non-controlling
interest in the subsidiary’s equity. The excess and any further losses applicable to the non-controlling shareholder, are allocated
against the majority interest, except to the extent that the non-controlling shareholder 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 non-controlling shareholder‘s share of losses previously absorbed by the majority has
been recovered.
Non-controlling 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 statement of financial position, separately from parent shareholders’ equity.
41.3
Foreign currencies
The functional currency of each company in the Group is that of the country of incorporation (as disclosed in note 15) as this
is consistent with the primary economic environment in which the entity operates. 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 statement of financial position date, monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency rate of exchange prevailing on the same 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 statement of financial position 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 are 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.
41.4
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 statement of financial position date. Depreciation is charged on a straight-line basis
over the expected useful lives as follows:
Leasehold improvements
Office equipment, fixtures and fittings
Computer and other equipment
–
–
–
over the lease term of up to 15 years
over 5 years
over 2, 3 or 5 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.
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NOTES TO THE FINANCIAL STATEMENTS
41.
ACCOUNTING POLICIES (CONTINUED)
41.4
Property, plant and equipment (continued)
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.
41.5
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 business 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 are accounted for 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 statement of financial position 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. 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.
For the purpose of impairment testing, goodwill is allocated to the related cash-generating units monitored by management.
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.
41.6
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:
Development costs
Software and licences
Trade names
Client lists and customer relationships
Domain names and generic top-level domains
–
–
–
–
–
straight-line basis over 3 years
straight-line basis over the contract term of up to 5 years
sum of digits method over 2 years
sum of digits method over 3 years
straight-line basis over 10 years
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.
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|IG Group Holdings plc Annual Report 2015 41.7
Impairment of non-financial assets
At least annually, or when impairment testing is required, the Directors review the carrying amounts of the Group’s property,
plant and equipment 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.
41.8
Investments in subsidiaries
Investments in subsidiaries are stated at cost less accumulated impairment losses.
Financial instruments
41.9
41.9.1 Classification, Recognition and Measurement
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. Financial instruments are disclosed in note 35 to the
financial statements.
(a)
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 the financial derivative open positions included in trade receivables – due from brokers and trade
payables – due to clients as shown in the statement of financial position and related notes. 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 derivative exposures arising from open client positions, which are also classified as held for trading.
All financial instruments at fair value through profit or loss are carried in the statement of financial position at fair value with
gains or losses recognised in revenue in the consolidated income statement.
Determination of fair value
Financial instruments arising from open client positions and the Group’s hedging positions are stated at fair value and disclosed
according to the valuation hierarchy required by IFRS 7. Fair values are predominantly determined by reference to third-party
market values (bid prices for long positions and offer prices for short positions) as detailed below:
Level 1: Valued using unadjusted quoted prices in active markets for identical financial instruments.
Level 2: Valued using techniques where a price is derived based significantly on observable market data. For example, where
an active market for an identical financial instrument to the product offered by the Group to its clients or used by the Group to
hedge its market risk does not exist.
Level 3: Valued using techniques that incorporate information other than observable market data that is significant to the
overall valuation.
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IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
41.
ACCOUNTING POLICIES (CONTINUED)
41.9.1 Classification, Recognition and Measurement (continued)
(b)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period.
These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade receivables’, ‘cash and cash
equivalents’ and ‘trade payable ‘amounts due to title transfer clients.
(c)
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any other
categories. They are included in non-current assets unless the investment matures or management intend to dispose of it within
12 months of the end of the reporting period. The Group’s available-for-sale assets comprise ‘financial investments’.
41.9.2 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 expired.
(a)
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.
(b)
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.
41.10 Trade receivables and trade payables
Assets or liabilities resulting from profit or losses on open positions are carried at fair value. Amounts due from or 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.
41.11 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 or 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, and when economic benefit is consumed. A
provision for impairment is established where there is objective evidence of non-collectability.
41.12 Cash and cash equivalents
Cash comprises cash on hand and demand deposits which may be accessed without penalty. Cash equivalents comprise short-
term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value. 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.
172
|IG Group Holdings plc Annual Report 2015 The Group holds money on behalf of clients in accordance with the client money rules of the UK Financial Conduct Authority
(FCA) and other regulatory bodies. Such monies are classified as either ‘cash and cash equivalents’ or ‘segregated client funds’
in accordance with the relevant regulatory requirements. Segregated client funds comprise individual client funds held in
segregated client money accounts or money market facilities. Segregated client money accounts hold statutory trust status
restricting the Group’s ability to control the monies and accordingly such amounts and are not held on the Group’s statement of
financial position.
The amount of segregated client funds held at year-end is disclosed in note 18 to the financial statements. The return received
on managing segregated client funds is included within net operating income.
Title transfer funds are held by the Group under a Title Transfer Collateral Arrangement (TTCA) by which a client agrees that full
ownership of such monies is unconditionally transferred to the Group. Title transfers funds are accordingly held on the Group’s
statement of financial position with a corresponding liability to clients within trade payables.
Cash and cash equivalents also includes client monies deposited with the Group’s Swiss banking subsidiary (refer to note 18).
41.13 Financial investments
Financial investments are held as available-for-sale and are non-derivative financial assets that are not classified as held for
trading, designated at fair value through profit or loss, or loans and receivables. Financial investments are recognised on a trade
date basis. They are initially recognised at fair value plus directly related transactions costs. They are subsequently carried at fair
value. Fair value is the quoted market price of the specific investments held.
Financial investments available-for-sale are carried at fair value. Unrealised gains or losses are reported in equity (in the available
for sale reserve) and in other comprehensive income, until such investments are sold, collected or otherwise disposed of, or
until any such investment is determined to be impaired. On disposal of an investment, the accumulated unrealised gain or
loss included in equity is recycled to the income statement for the period and reported in other income. Gains and losses on
disposal are determined using the average cost method.
Interest on financial investments is included in interest using the Effective Interest Rate (EIR) method.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial instrument or, when appropriate, a shorter period to the net-carrying amount of the financial asset or
financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms
of the financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. The
calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective
interest rate (see IAS 18 Revenue), transaction costs and all other premiums or discounts.
At the year-end date the Group considers whether there is objective evidence that a financial investment is impaired. In case
of such evidence, it is considered impaired if its cost exceeds the recoverable amount. The recoverable amount for a quoted
financial investment is determined by reference to the market price. A quoted financial investment is considered impaired if
objective evidence indicates that the decline in market price has reached such a level that recovery of the cost value cannot be
reasonably expected within the foreseeable future.
If a financial investment is determined to be impaired, the cumulative unrealised loss previously recognised in equity is recycled
to profit for the period.
41.14 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.
41.15 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable
that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.
41.16 Borrowings
Borrowings are recognised initially at their issue proceeds less transaction costs incurred. Subsequently, taking into
consideration the term of the borrowings, an assessment is made whether to state at amortised cost, with any difference
between net proceeds and the redemption value being recognised in the income statement over the period of the borrowings
using the effective interest rate method.
All borrowing costs are expensed as they are incurred.
173
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
41.
ACCOUNTING POLICIES (CONTINUED)
41.17 Employee Benefits
Pension obligations
(a)
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. Once the contributions have been paid the group has no legal or
constructive obligations to pay further contributions.
(b)
Bonus schemes
The Group recognises a liability and an expense for bonuses based on formulae that take into consideration the
revenue or earnings attributable to the Group’s shareholders after certain adjustments and also based on operational
non-financial measures.
(c)
Termination benefits
Termination benefits are payable when an employment contract is terminated by the Group. The Group recognises termination
benefits when the Group can no longer withdraw the offer of those benefits.
41.18 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 year. 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 years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates in the respective
jurisdictions that have been enacted or substantively enacted by the statement of financial position date.
Deferred tax is 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 statement of financial position 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 statement of
financial position 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.
41.19 Share capital
(a)
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 statement
of financial position; 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.
(b)
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.
174
|IG Group Holdings plc Annual Report 2015 (c)
Share-based payments
The Company operates three employee share plans: a Share Incentive Plan and a Sustained Performance Plan and a Long Term
Incentive Plan. Previously the company operated a Value-sharing Plan, that was all equity settled.
For market-based vesting conditions, the cost of these awards is measured at fair value calculated using option pricing models
(refer to the share based payment note for additional detail of the models and assumptions used for the various award schemes)
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.
For non-market-based vesting conditions, at each statement of financial position 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 statement of financial position date is recognised in the income statement as part of
administrative expenses, with a corresponding entry in equity.
The grant by the Company of options over its equity instruments to employees of the subsidiary undertakings in the Group is
treated as a capital contribution. The fair value of the employee services received is recognised over the vesting period as an
increase in the investment in subsidiary undertakings, with a corresponding credit to equity.
41.20 Revenue recognition
Trading revenue represents gains and losses arising on client trading activity, primarily in financial spread betting, contracts for
difference or binary options as well as the transactions undertaken to hedge the risk associated with client trading activity. Open
client and hedging 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. The policies and methodologies associated with the
determination of fair value have been discussed previously under Financial Instruments.
Trading revenue also includes:
- spread, commission and funding charges made to clients in respect of the opening, holding and closing of financial spread
bets, contracts for difference or binary options;
- commission earned from the execution-only stockbroking service after deducting contracting and trade settlement fees
payable to third-party brokers. Revenue is stated net of sales taxes and is recognised in full on the date of trade being placed;
and
- member fees charged by the Group’s regulated futures and options exchange.
The Group acts in a non-advisory capacity to match buyers and sellers under the execution-only stockbroking service, does not
act as principal when providing this service and only receives and transmits orders between counterparties.
Trading revenue is reported gross of introducing partner commission as these amounts are directly linked to trading revenue.
Introducing partner commission, along with betting duties and financial transaction taxes paid, is disclosed as an expense in
arriving at net operating income.
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.
Finance revenue or interest income on segregated client funds 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. Interest income on
segregated client funds is disclosed within revenue and therefore operating profit, as this is consistent with the nature of the
Group’s operations.
Net trading revenue, disclosed on the face of the Consolidated Income Statement and in the Notes to the Financial Statements,
represents trading revenue from financial instruments carried at fair value through profit or loss and has been disclosed net
of introducing partner commission as this is consistent with the management information received by the Chief Operating
Decision Maker.
Dividends receivable are recognised when the shareholder’s right to receive the payment is established.
41.21 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 or loss on sale of property, plant and equipment and other administrative expenses.
175
IG Group Holdings plc Annual Report 2015| NOTES TO THE FINANCIAL STATEMENTS
41.
ACCOUNTING POLICIES (CONTINUED)
41.22 Use of non-GAAP measures
The Group believes that the presentation of underlying results provides additional useful information to shareholders on the
underlying trends and comparable performance of the Group over time. These terms are not defined under IFRS and may
therefore not be comparable with similarly titled profit measures reported by other companies. They are not intended to be
a substitute for, or superior to, GAAP measures. The term ‘underlying’ refers to the relevant profit, earnings or taxation being
reported excluding exceptional items.
Exceptional items are those items of income and expense that the Group considers are material one-off in nature and of
such significance that they merit separate presentation in order to aid the reader’s understanding of the Group’s financial
performance. Such items would include profits or losses on disposal of businesses and costs associated with acquisitions and
disposals; major restructuring programmes; significant goodwill or other asset impairments; other particularly significant or
unusual items.
Other non-GAAP measures used in these financial statements are return on assets (refer to note 37), capital resources (refer to
note 37) and own funds generated from operations (refer to note 19(d)).
41.23 Finance costs and interest expense on segregated client funds
Finance costs and interest expense on segregated client funds are 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.
Interest expense on segregated client funds is disclosed within operating profit as this is consistent with the nature of the
Group’s operations.
41.24 Dividends
Dividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial statements in the period
in which the dividends are approved by the Company’s shareholders.
41.25 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.
41.26 Segment information
The Group’s segmental information is disclosed in a manner consistent with the basis of internal reports regarding components
of the Group that are regularly reviewed by the Chief Operating Decision Maker (CODM), who for the Group are the Executive
Directors, in order to assess the performance and to allocate resources to those ‘operating segments’. The Group has therefore
determined its operating segments based on the management information received on a regular basis by the Executive
Directors of the IG Group Holdings plc Board as they are considered to be the CODM. Operating segments that do not meet
the quantitative thresholds required by IFRS 8 are aggregated.
The Group envisages that the reportable segments may change as overseas businesses move towards operational maturity,
breaking through the quantitative thresholds of IFRS 8. The segments are therefore subject to annual review and the
comparatives restated to reflect any reclassifications within the segmental reporting.
41.27 Changes in accounting policies
With the exception of the adoption of IFRIC 21, the accounting policies adopted in the preparation of financial statements are
consistent with those followed in the preparation of the Group’s Annual Report for the year ended 31 May 2014.
41.27.1 New accounting standards and interpretations
Effective from 1 June 2014, the Group adopted the following interpretation and amendments to standards:
(a)
New standards, amendments and interpretations adopted by the Group
In addition to IFRIC 21 (described in Note 41.1), the following amendments to standards have also been implemented but have
not had a material effect on the Group’s results:
• IFRS 10, ‘Consolidated financial statements’ (effective 1 January 2013) (EU endorsed from 1 January 2014)
• IFRS 11,’Joint arrangements’ (effective 1 January 2013) (EU endorsed from 1 January 2014)
• IFRS 12, ‘Disclosures of interests in other entities’ (effective 1 January 2013) (EU endorsed from 1 January 2014)
• IAS 27 (revised 2011), ‘Separate financial statements’ (effective 1 January 2013) (EU endorsed from 1 January 2014)
• IAS 28 (revised 2011), ‘Associates and joint ventures’ (effective 1 January 2013) (EU endorsed from 1 January 2014)
176
|IG Group Holdings plc Annual Report 2015 • Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities (effective 1 January 2014)
• Amendment to IAS 32, ‘Financial instruments: Presentation’, on asset and liability offsetting (effective 1 January 2014)
• Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures (effective 1 January 2014)
• Amendment to IAS 39, ‘Financial instruments’: recognition and measurement’ on novation of derivatives (effective 1
January 2014)
• Annual improvements 2012 (effective 1 July 2014)
• Annual improvements 2013 (effective 1 July 2014)
• Amendment to IAS 19, ‘Employee benefits’ regarding employee or third-party contributions to defined benefit plans
(effective 1 July 2014)
Amendment to IAS 32, ‘Financial instruments:Presentation’ on offsetting financial assets and financial liabilities. This
amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all
counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment
also considers settlement mechanisms. The amendment did not have a significant effect on the Group financial statements.
(b)
New standards, amendments and interpretations adopted by the Group
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning
after 1 June 2014, and have not been applied in preparing these consolidated financial statements. With the exception of the
following new standards and amendments to standards and interpretations below, there are no others which are expected to
have a material impact:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial
liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the
classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and
establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value
through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics
of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with
the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit
losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes
to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for
liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing
the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging
instrument and for the ‘hedged ratio’ to be the same as the one management actually uses for risk management purposes.
Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is
effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted subject to EU endorsement.
The Group is yet to assess IFRS 9’s full impact.
IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising
from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus
has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and
IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after
1 January 2017 and earlier application is permitted subject to EU endorsement. The Group is yet to assess the full impact of
IFRS 15.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on
the Group. The list below includes those which will have an immaterial impact on the Group:
• Amendment to IFRS 11, ‘Joint arrangements’ regarding acquisition of an interest in a joint operation (effective 1 January 2016)
• Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ regarding depreciation and
amortisation (effective 1 January 2016)
• Amendments to IAS 16, ‘Property, plant and equipment’ and IAS 41, ‘Agriculture’ regarding bearer plants (effective 1 January
2016) (not EU endorsed at the time of going to print)
• Amendments to IFRS 10 and IAS 28 regarding the sale or contribution of assets between an investor and its associate or joint
venture (effective 1 January 2016)
• Amendment to IAS 27, ‘Separate financial statements’ regarding the equity method (effective 1 January 2016)
• IFRS 14, ‘Regulatory deferral accounts’ (effective 1 January 2016)
• Annual improvements 2014 (effective 1 January 2016)
177
IG Group Holdings plc Annual Report 2015| FIVE-YEAR
SUMMARY
GROUP INCOME STATEMENT
For the year ended 31 May
Net trading revenue
Other net operating income
Net operating income
Administrative expense
Depreciation, amortisation and amounts written off PPE
Operating profit
Finance income
Finance costs
Profit before tax
2015
2014(2)
2013(3)
2012 (3)
2011(1) (3)
£m
£m
£m
£m
£m
388.4
370.4
361.9
366.8
312.7
(1.2)
387.2
3.8
374.2
6.1
367.9
2.4
369.2
5.9
318.6
(206.9)
(169.1)
(163.8)
(172.9)
(145.1)
(10.7)
169.6
1.8
(1.9)
(9.7)
195.4
1.5
(2.0)
(12.2)
191.9
2.0
(1.8)
(10.8)
185.5
2.5
(2.3)
169.5
194.9
192.2
185.7
(10.3)
163.2
2.4
(2.4)
163.2
(150.7)
12.5
(32.8)
(5.0)
(25.3)
Amortisation and impairment of intangibles arising on consolidation
Profit before taxation from continuing operations
Tax expense
Loss from discontinued operations
–
169.5
(37.6)
–
–
194.9
(47.7)
–
–
192.2
(50.5)
–
Profit/loss for the year 131.9
147.2
141.7
–
185.7
(48.6)
(0.4)
136.8
OTHER METRICS
Own funds generated from operations
£136.8m
£160.6m
£154.3m
£140.7m
£137.7m
2015
2014(2)
2013(3)
2012 (3)
2011(1) (3)
Earnings per share (EPS)
Basic earnings per share
Diluted earnings per share
Dividend per share
Interim dividend per share
Final dividend per share
Total dividend per share
36.13p
35.99p
8.45p
19.70p
28.15p
40.35p
40.22p
5.75p
22.40p
28.15p
39.02p
38.80p
5.75p
17.50p
23.25p
37.90p
37.54p
5.75p
16.75p
22.50p
32.86p
32.57p
5.25p
14.75p
20.00p
Dividend payout ratio (against diluted EPS)
78.22%
69.99%
59.92%
59.94%
61.41%
Profit margin
Profit before taxation margin
43.64%
52.61%
53.10%
50.60%
52.20%
178
|IG Group Holdings plc Annual Report 2015 CLIENT METRICS
Average revenue per client
Number of active clients
Number of clients opened
2015
2014(2)
2013(3)
2012 (3)
2011(1) (3)
£2,854
£2,937
£2,659
£2,560
£2,341
136,111
126,108
136,063
143,304
133,580
70,967
54,957
55,889
67,593
71,344
Number of clients trading for the first time
40,932
33,709
37,914
48,029
12,958
GROUP STATEMENT OF FINANCIAL POSITION
2015
2014(2)
2013(3)
2012 (3)
2011(1) (3)
As at 31 May
£m
£m
£m
£m
£m
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Financial investments
Deferred tax assets
Current assets
Trade receivables
Prepayment and other receivables
Cash and cash equivalent
Financial investment
Total assets
Liabilities
Current liabilities
Trade payables
Other payables
Provisions
Income tax payable
Non current liabilities
Deferred tax liabilities
Provisions
Redeemable preference shares
Total liabilities
Capital and reserves
Total shareholders' equity
Non-controlling interest
Total equity
Total equity and liabilities
13.3
13.0
14.5
15.6
16.8
124.0
75.5
7.1
122.7
120.5
115.4
117.2
32.2
7.1
–
9.5
–
–
11.9
11.3
219.9
175.0
144.4
142.8
145.2
269.6
327.5
300.6
222.3
270.1
12.2
12.2
148.8
101.5
32.9
50.3
10.3
98.3
50.5
9.7
8.2
228.2
124.5
–
–
463.5
491.5
459.7
460.2
402.8
683.4
666.5
604.1
603.1
548.1
17.7
61.2
–
13.1
92.0
–
–
–
–
21.9
58.5
–
20.3
100.6
–
–
–
–
19.0
53.8
–
24.3
97.1
–
–
–
–
61.1
64.8
1.4
28.7
83.5
45.1
1.4
37.1
155.9
167.1
–
–
–
–
–
2.0
–
2.0
92.0
100.6
97.2
155.9
169.2
591.4
565.9
507.0
447.0
378.7
–
–
–
0.1
0.2
591.4
565.9
507.0
447.1
378.9
683.4
666.5
604.1
603.1
548.1
(1)
The profit before tax and diluted earnings per share figures FY11 exclude both the amortisation and impairment of goodwill and customer relationships associated
with our Japanese business, IG Securities (formerly FXOnline), and of the Group’s Sport Business.
(2) FY14 has been restated following the adoption of IFRIC 21. Please refer to note 38 of the financial statements.
(3) FY11, FY12 and FY13 have not been restated following the adoption of IFRIC 21 on a materiality basis.
179
IG Group Holdings plc Annual Report 2015| EXAMPLES
In the following pages we have
illustrated detailed examples
for Contracts for difference,
Spread Betting and Stockbroking.
SELLING A CFD
In this example, on day one you decide to sell a CFD for 20,000 shares in B plc (assumed to be a FTSE 100 company) as you
expect B plc’s share price to fall. This is known as ‘going short’. On day two the share price has indeed fallen, and you decide to
close your position.
As long as your contract is open, your account will show any ‘running’ profit or loss on your open CFD position (not illustrated
below). You must have deposited sufficient funds to cover any running losses.
You cannot place a trade without having any money in your account. In this example, we assume you have £1,000. It is important
to note that you can make losses in excess of your initial deposit requirement (referred to as ‘margin requirement’ in CFD
trading), if the market moves against you.
STEP 1 – DAY ONE – OPENING THE POSITION
The quoted bid/offer price for B plc is 80.25p/80.35p.
OFFER
PRICE
MID
PRICE
BID
PRICE
80.35p
B plc
80.30p
80.25p
Expecting the market will
fall, you sell at the
BID PRICE
GOING SHORT
TRADE
DETAILS
BID PRICE
SIZE (SHARES)
80.25p
20,000
INITIAL MARGIN REQUIREMENT (1)
£803.00
20,000 (number of shares) x 80.30p (the mid-price)
x 5% (the margin percentage)
COMMISSION(2)
£16.05
20,000 (number of shares) x 80.25p (the bid price)
x 0.10% (commission)
STEP 2
When you open the position, you are required to have enough funds in your account to cover the initial margin plus commission
on the trade. In this example the margin requirement is £803.00 and the commission is £16.05, so the available funds in your
account will fall from £1,000.00 to £180.95 (ie £1,000.00-£803.00-£16.05). It is important to note that the £803.00 is held as a
margin requirement against the risk of the open position and will be released on the closing of the position: it is still your money
but is not available for withdrawal from the account while the position is open.
(1)
The margin percentage (and therefore margin requirement) depends on the size of your CFD position and other factors such as the volatility and liquidity of the
underlying share. In this example we have used a margin requirement of 5%.
(2) Commissions are variable, but for UK FTSE 100 CFDs (as assumed for B plc), this was 0.10% on 31 May 2015.
180
|IG Group Holdings plc Annual Report 2015 STEP 3
Traditionally, clients who held long positions overnight would need to pay a funding
charge, while clients with short positions would receive interest if held overnight.
This charge or interest is calculated as the one-month sterling LIBOR rate +/- a
spread. However, with current market interest rates lower than the spread, clients
with short positions also incur a charge. As at 31 May 2015, the current LIBOR rate
was 0.49%, while the spread was 2.50%, resulting in a net financing charge of 2.01%
for short CFD positions held overnight (which for UK CFDs means those open at
10pm UK time). A corresponding long CFD position would incur a charge of 2.99%.
This is re-calculated daily.
END-OF-DAY
PRICE
(DAY ONE)
80.75p
DAILY INTEREST CHARGED
£0.89
20,000 x 80.75p x 2.01%/365 days
STEP 4
In this example we have kept things simple and assumed no corporate actions occur. However, we will also reflect the impact of
any corporate action on the underlying share, such as a dividend or a rights issue, on your positions. For more details, please
see our website, IG.com.
STEP 5 – DAY TWO – CLOSING THE POSITION
On day two, the share price has fallen and you decide to close the position.
OFFER
PRICE
MID
PRICE
BID
PRICE
78.35p
B plc
78.30p
78.25p
The market has fallen – you
buy at the IG OFFER PRICE
CLOSING POSITION
Of course, had the market moved in the opposite direction, you
would have made a loss of £100 for every penny the share price
gained, which may have exceeded your initial margin outlay.
TRADE
DETAILS
OFFER PRICE
SIZE (SHARES)
78.35p
20,000
COMMISSION(1)
£15.67
20,000 x 78.35p x 0.10%
PROFIT PER SHARE
1.9p
Difference between opening bid and closing offer prices
(80.25p-78.35p)
GROSS PROFIT ON TRADE
£380.00
20,000 x 1.9p
STEP 6 – CALCULATING THE PROFIT OR LOSS
ITEM
Selling commission (Step 1)
Financing charge (Step 3)
Buying commission (Step 5)
Gross profit (Step 5)
IG hedging gain(2)
Net gain
CLIENT
(£16.05)
(£0.89)
(£15.67)
IG(2)
£16.05
£0.89
£15.67
£380.00
(£380.00)
N/A
£347.39
£380.00
£32.61
When you open your position you may
choose to add a stop. If you choose
a guaranteed stop (only available for
certain products), we guarantee that
your position will be closed at this level
and your maximum loss is therefore
fixed. There is a small charge for a
guaranteed stop, which will be added
to the transaction cost. You may also
choose to add a non-guaranteed stop,
which will trigger a closing order when
this level is breached. Non-guaranteed
stops are free, but you may not be
closed at this level, particularly if the
market gaps.
(1) Commissions are variable, but for UK FTSE 100 CFDs (as assumed for B plc), this was 0.10% on 31 May 2015.
(2)
This simple example assumes IG is 100% hedged on the client trade and makes an equal and opposite gain on our broker position to the amount paid to the
client. The cost of our hedging with the broker has been ignored for simplicity. Thus our net profit is £32.61, which is recorded in trading revenue and consists of the
commission and financing charges levied on the client.
181
IG Group Holdings plc Annual Report 2015| EXAMPLES
(CONTINUED)
BUYING A SPREAD BET
In this example, you decide to buy A plc (assumed to be a FTSE 100 company)
at £100 per point, as you expect that A plc’s share price will rise. This is known as
‘going long’. Later in the day the share price has indeed risen and you decide to
close your position by selling A plc at our then current bid price.
Your profit is the difference between the buying and selling prices, plus or minus
any funding charges or other costs (discussed in Steps 3 and 5).
As long as your bet is open, your account will show any ‘running’ profit or loss on
your open position (not illustrated below). You must have deposited sufficient funds
to cover any running losses.
You cannot place a bet without having any money in your account. In this example,
we assume you have £1,000. It is important to note that you can make losses in
excess of your initial deposit, if the market moves against you.
STEP 1 – OPENING THE POSITION
A plc is trading in the market at 144.5p/144.7p and our quote for A plc on a daily funded bet is 144.3p/144.9p. You decide
to buy £100 per point at 144.9p, our offer price. In this example one point represents a 1p movement in the underlying share
price, so your £100 per point bet is equivalent to buying 10,000 shares in A plc.
IG OFFER
PRICE
144.9p
UNDERLYING
SHARE PRICE
A plc
144.5p/144.7p
IG BID
PRICE
144.3p
Expecting the market will
rise, you open the bet at the
OFFER PRICE
GOING LONG
BET
DETAILS
OFFER PRICE
SIZE (£ PER POINT)
144.9p
£100.00
INITIAL DEPOSIT REQUIREMENT (1)
£723.00
£100.00 (bet size) x 144.6p (the mid-price) x 5% (the deposit factor)
SPREAD(2)
£20.00
Difference between the market price and our quote
(144.9p-144.7p) x £100.00 per point
STEP 2
When you open the position, you are required to have the initial £723 deposit requirement in your account. The available funds
in your account will therefore fall from £1,000 to £277 (ie £1,000-£723). The available funds remaining in your account need to be
enough to cover any running losses you may incur, or you run the risk of being closed out of the bet. It is important to note that
the £723 is held as a deposit against the risk of the open position and will be released on the closing of the position: it is still
your money but is not available for withdrawal from the account while the position is open.
At this stage you may choose to add a stop to your position. If you choose a guaranteed stop (only available for certain products),
we guarantee that your position will be closed at this level and your maximum loss is therefore fixed. There is a small charge
for a guaranteed stop, which will be added to the transaction cost. You may also choose to add a non-guaranteed stop, which
will trigger a closing order when this level is breached. Non-guaranteed stops are free, but you may not be closed at this level,
particularly if the market gaps.
(1)
(2)
The deposit factor (and therefore deposit requirement) depends on your account type and other factors such as the volatility and liquidity of the underlying share.
Our dealing spread varies depending on the market and asset class traded and can be variable, especially in volatile market conditions. For examples please see
our website, IG.com.
182
|IG Group Holdings plc Annual Report 2015 STEP 3
In this example we have kept things simple and assumed no corporate actions occur. However, we will also reflect the impact of
any corporate action on the underlying share, such as a dividend or a rights issue, on your positions. For more details, please
see our website, IG.com.
STEP 4 – CLOSING THE POSITION
Later that day, the A plc share price has indeed risen and you decide to close the position, realising your profit on the bet.
At this point A plc is trading in the market at 148.6p/148.8p and our daily quote is 148.4p/149.0p.
IG OFFER
PRICE
149.0p
UNDERLYING
SHARE PRICE
A plc
148.6p/148.8p
IG BID
PRICE
148.4p
The market has risen –
you sell at the IG BID PRICE
CLOSING POSITION
BET
DETAILS
BID PRICE
SIZE (£ PER POINT)
148.4p
£100.00
GROSS PROFIT
£390.00
Calculated as the market price movement of the share
(148.6p-144.7p) x £100.00 per point)
SPREAD
£20.00
Calculated at 148.6p-148.4p x £100.00 per point
Of course, had the market moved in the opposite direction, you would have made a loss of £100 for every penny the share price fell,
which may have exceeded your initial deposit.
STEP 5 – CALCULATING THE PROFIT OR LOSS
For many markets (eg index futures), we build funding charges into the quote price. For share daily funded bets we make funding
adjustments each day at 10pm. We apply funding at the rate of one-month LIBOR +/- a spread (generally 2.5%).
ITEM
Buying spread (Step 1)
Selling spread (Step 4)
Gross profit (Step 4)
IG hedging gain(1)
Net gain
In the example above, if the bet had
remained open at 10pm, and assuming
one-month LIBOR of 0.49%, a funding
charge of £1.23 would have been applied
against the client account and recorded
as revenue for IG (calculated as (£100
x 150.0p assumed end-of-day price x
2.99%) / 365 = £1.23).
CLIENT
(£20.00)
(£20.00)
IG(1)
£20.00
£20.00
£390.00
(£390.00)
N/A
£350.00
£390.00
£40.00
(1)
This simple example assumes IG is 100% hedged on the client trade and makes an equal and opposite gain on our broker position to the amount paid to the client.
The cost of our hedging with the broker has been ignored for simplicity. Therefore our net profit is £40.00, which is recorded in trading revenue and is equivalent to
the spread included in our quoted prices.
183
IG Group Holdings plc Annual Report 2015|
EXAMPLES
(CONTINUED)
STOCKBROKING WITH IG
In this example, you decide to buy A plc (assumed to be a FTSE 100 company) at the
offer price on your stockbroking account, as you wish to own shares in the company.
You have linked your stockbroking account to your CFD account so you have access
to IG’s collateral feature. After a few months, the share price has risen and you
decide to close your position by selling A plc at the current bid price.
Your profit is the difference between the buying and selling prices, plus any
dividends and minus any commission or other costs (discussed in Steps 2 and 5).
You cannot place a trade without having any money in your account. In this example,
we assume you have £1,000. It is important to note that the value of shares, ETFs
and ETCs bought through any stockbroking or stocks and shares ISA account can
fall as well as rise, which could mean getting back less than you originally deposited.
STEP 1 - PRICE DISCOVERY
Most traditional stockbrokers only provide a ‘request for quote’ or ‘at quote’ service that delivers a fixed price, which is only
valid for a short period of time. With us, you can trade ‘at quote’ or ‘on exchange’, allowing you to interact directly with the
order book in the underlying market. Dealing ‘on exchange’ offers you live visibility of prices and full market depth allowing you
to make an informed decision. Choose between ‘at quote’ or ‘on exchange’ to execute your order at the best available price.
If you place an ‘on exchange’ order we use our Smart Order Router (SOR) to seek out the best price and size available. Our SOR
searches for liquidity across multiple venues, starting with ‘dark pools’ that offer mid-point matching – the best possible chance
of getting price improvements. If there is no improvement available on ‘dark’ venues the SOR goes to a market maker, again
looking for size or price improvements. Finally, if neither of the above sources provides price or size improvements, SOR sends
orders to ‘lit’ venues, where they will be visible on an exchange.
At quote
Interact with market makers
A PLC
1,000 shares
On exchange
Interact directly with order book
Get fixed price by RSP
Fixed price: 777p
Place order in the book
Order to buy
SOR looks for the best available price at execution
Potential price improvement
SOR looks for the best
available price - venue 1
SOR looks for the best
available price - venue 2
775p
778p
STEP 2 – EXECUTING YOUR TRADE
Once you have decided whether you would like to deal ‘at quote’ or ‘on exchange’, you can place your trade directly from your
platform. Once the appropriate price has been identified, your trade is executed.
When you buy your shares you are required to have sufficient funds on your account to make the purchase and cover the cost
of commission, as well as currency conversion fees (if the share is priced in a foreign currency). In this example, we assume you
have also been active on your CFD account, which means you automatically qualify for our lowest commission rate(1), which is
£6. The available funds in your account will therefore fall by the value of the shares you have bought plus the commission. In
this example, you purchase 100 shares priced at 775GBp (the best available price), which will reduce your cash balance to £219
(i.e. £1000 – £775 – £6). Unlike our margined products, you own your shares outright, meaning that you do not need to make any
additional payments to maintain your stockbroking position.
TRADITIONAL
STOCKBROKER
OFFER PRICE
IG OFFER
PRICE
IG BID
PRICE
TRADITIONAL
STOCKBROKER
BID PRICE
777p
775p
771p
768p
If you expect the market
to rise, you ‘buy’ at the
OFFER PRICE
GOING LONG
TRADE
DETAILS
OFFER PRICE
SIZE (SHARES)
775p
COST
100
£775.00
100 (number of shares) x 775p (the IG offer price)
COMMISSION
£6.00
184
|IG Group Holdings plc Annual Report 2015 STEP 3 – USING YOUR SHARES AS COLLATERAL
You can make the most of your shareholdings with IG using our collateral service. The collateral service allows you to use up to
95% of the value of your shareholdings as initial margin against your spread bets or CFD positions.(2)
In this example, we assume that you have a position on your CFD account in B plc, another FTSE 100 listed company, which
has a margin requirement of £300. The fact that you are holding the physical shares in A plc, and have linked your accounts
for collateral means that you can use up to 95%(2) of the value of this position (that is, £775 x 95% = £736) to cover your margin
requirement on B plc. This will free up any additional funds on your CFD account, which you can then use to open further CFD
positions or as a buffer against adverse market movements.
It is important to note that the collateral value is real-time. This means the collateral value of your assets will fluctuate according
to movements in the price of the stock(s) you hold on your stockbroking account.
Your shareholdings remain intact and retain their full value;(3) you simply use a percentage of their value as collateral to fund
shorter-term trades. Importantly, you can only use your shareholdings to cover the initial margin on your spread bets or CFDs.
Any running losses will need to be covered by the available cash in your CFD account. For more details, please see our
website, IG.com.
STEP 4 – CORPORATE ACTIONS
In this example we have kept things simple and assumed no corporate actions occur. However, as the owner of the equity we
will also reflect the impact of any other corporate actions on your shares, such as a rights issue, on your positions. For more
details, please see our website, IG.com.
STEP 5 – SELLING YOUR SHARES
As the objectives of your portfolio change, you can divest all or parts of your shareholding using our superior execution
technology. Once your sale is confirmed, your account will be credited with the equivalent cash. As before, we assume that you
qualify for our lowest commission rate as a holder of active stockbroking and margined accounts, so the commission is £6. If the
price of your shares in A plc has risen from 775p to 846p, your account balance will rise to £1,059 (i.e. £219 + £846 - £6).
TRADITIONAL
STOCKBROKER
OFFER PRICE
IG OFFER
PRICE
IG BID
PRICE
TRADITIONAL
STOCKBROKER
BID PRICE
852p
850p
846p
844p
TRADE
DETAILS
BID PRICE
SIZE (SHARES)
846p
100
The market has risen –
you sell at the IG BID PRICE
CLOSING POSITION
COMMISSION
£6.00
PROFIT PER SHARE
71p
Difference between opening offer price and closing bid price
(846p - 775p)
GROSS PROFIT ON TRADE
£71.00
STEP 6 – TRANSPARENT TRADING
As well as buying new shares you can conveniently keep your shares portfolio in one place, by transferring in your existing
shareholdings to us, free from IG charges. Once your shares are transferred you will have access to the full range of features on
IG’s platform including our collateral service and our superior execution.
You will also have access to our range of over 6,000 international shares, which are offered in their local denomination,
regardless of the currency on your account. This means you’ll know exactly what you’re paying, with our fee of just 0.3% to
convert to your base currency.
Obtaining live prices for international stocks from an exchange can incur a monthly fee, but we will refund this charge in full
if you place a minimum number of trades in the previous month. However, unlike some other stockbrokers, this is the only
other fee – besides commission – we will charge you, meaning you are only charged when you trade and not just for holding
your portfolio.
(1) Commissions are variable, but if your stockbroking account is accessible under the same login as your active spread betting or CFD account, you automatically
(2)
(3)
qualify for our lowest commission rate by placing at least one spread bet or CFD trade in the previous calendar month. This was £6 on 31 May 2015.
Generally you can use 75% - 95% of the value of your portfolio as collateral, depending on the liquidity of shareholdings. For more details, please see our
website, IG.com.
We do all we can to make sure you have the opportunity to cover any realised spread betting or CFD losses with cash. If you do not deposit additional funds to
cover a losing leveraged trade, we will follow our normal process of closing the trade and informing you that your account is in debit. We will only take control of
your shares if your account remains in debit. For more details, please see our website, IG.com.
185
IG Group Holdings plc Annual Report 2015| GLOSSARY OF TERMS
TERM
ABI
AGM
Basel III
Binary bet
CFTC
CGU
NOTES
Association of British Insurers
Annual General Meeting
The comprehensive set of reform measures designed to strengthen regulation, supervision and risk
management in the banking sector
A special form of spread bet with only two outcomes at expiry: if a specified result is achieved, the
bet is closed at a level of 100. If the result is not achieved, the bet closes at 0
The US Commodities Futures Trading Commission
Cash Generating Unit
Close-out monitor
(COM)
Contract for
difference (CFD)
COREP
The Group’s automatic real-time position-closing system (see the Managing Our Business Risk
section in the Strategic Report and note 36 to the Financial Statements)
A CFD is a contract to exchange the difference in the price of an asset between the time the contract
is opened and the time it is closed. An example is shown on page 180
Capital and Liquidity Reporting
CSR
DEPS
DFSA
Corporate social responsibility
Diluted Earnings Per Share
Dubai Financial Services Authority
Direct market access
(DMA)
DMA enables clients to interact directly with the market, including participating in the order book of
a stock exchange
DTRs
EBA
EPS
EQA
ESMA
ETF
The FCA’s Disclosure and Transparency Rules
European Banking Authority
Earnings per share
External Quality Assessment
European Securities and Markets Authority
Exchange-traded fund
Exposure monitor
Our real-time technology solution which constantly measures our financial exposure to all
traded instruments
FCA
FINMA
FRC
FSB
FSCS
FTT
Financial Conduct Authority (UK regulator)
The Swiss Financial Market Supervisory Authority
Financial Reporting Council
Financial Services Board (South Africa)
Financial Services Compensation Scheme
Financial Transaction Tax
Fugitive emissions
Greenhouse gas emissions caused by intentional or unintentional releases, eg equipment leaks or
hydrofluorocarbon emissions from the use of refrigeration and air-conditioning equipment
GHG emissions
Greenhouse gas emissions
Goodwill
An intangible asset representing the additional value that arises as a result of the acquisition of the
acquired company by another at a value greater than that of the target company’s assets
186
|IG Group Holdings plc Annual Report 2015 TERM
GTLDs
IAS
ICAAP
IFRIC
IFRS
IIA
ILAA
NOTES
Generic top-level domains – represented by the characters following the dot at the end of an
internet domain name, eg .com, .net
International Accounting Standard
Internal Capital Adequacy Assessment Process. The ICAAP is an internal document which identifies
the controls we use to mitigate risks to the Group’s capital and assesses and quantifies our capital
requirements
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
Institute of Internal Auditors
Individual Liquidity Adequacy Assessment. The ILAA is an internal document which identifies the
controls we use to mitigate liquidity risks and assesses and quantifies our liquidity requirements
IOSCO
International Organization of Securities Commissions
ISA
ISS
JFSA
KPIs
KRIs
LCR
LIBOR
LTIP
MAS
MiFID
Multilateral trading
facility (MTF)
International Standards on Auditing
Institutional Shareholder Services Inc
Japanese Financial Services Agency
Key Performance Indicators
Key Risk Indicators
Liquidity Coverage Ratio
London inter-bank offered rate – a benchmark interest rate published by leading London banks
Long-term incentive plan
The Monetary Authority of Singapore
Markets in Financial Instruments Directive – EU law covering financial regulation in all
member states
A non-exchange financial-trading venue providing an alternative to traditional stock exchanges
Nadex
The North American Derivatives Exchange, our US-based retail derivatives exchange business
Net Promoter Score
(NPS)
NSFR
OTC
PRIPs
NPS is calculated by asking respondents how likely they are to recommend a company to a friend
or colleague. Respondents reply on a 0-10 scale, with the final NPS calculated as the percentage of
promoters (those answering 9 or 10) minus the percentage of detractors (those answering 0-6)
Net Stable Funding Ratio
‘Over the counter’ refers to non-exchange-traded financial instruments
Packaged Retail Investment Products
Regulatory capital
resources
Rest of World
The total capital available to the Group, as calculated under the EU Capital Requirements Regulation
and the Financial Conduct Authority’s IFPRU 3 rules
One of our four reporting segments, consisting of our operations in Japan, Singapore,
South Africa and the US
RREV
Scope 1/2/3
emissions
SIP
SPP
Spread bet
Tiered margins
Title Transfer
Collateral
Arrangement (TTCA)
Research Recommendations Electronic Voting
The three classifications of emissions required to be considered under the mandatory
GHG reporting
Share-incentive plan
Sustained performance plan
A bet on whether a financial market (the underlying market) will rise or fall. We offer two prices on
every market, and the difference is known as the bid/offer spread. If you think a market is set to
rise you ‘buy’ at the higher (offer) price, and if you think it will fall you ‘sell’ at the lower (bid) price.
Your subsequent gain or loss on the bet will be determined by the direction and degree of any
movement in the underlying market. An example is shown on page 182
We use a system of margin tiers that reflect the degree of risk involved in client trades. Generally,
the riskier the traded instrument or the larger the trade size, the higher the level of margin required,
up to 100%
A financial agreement to transfer money to cover obligations, such that that money will not be
regarded as client money, which must be segregated, although IG retains the liability to repay the
client
TSR
Total Shareholder Return
UK Corporate
Governance Code
(the Code)
Up/down binary bet
Volatility-based
binary bet
The Code sets out standards of good practice in board leadership and effectiveness, remuneration,
accountability and relations with shareholders. Provision B7.1 states that all directors of FTSE 350
companies should be subject to annual election by shareholders
A specific type of binary bet where the outcome is expressed as being above or below the current
market value (ie the market has moved up or the market has moved down)
A category of binary bet where the achievement of a specific outcome is directly related to the
volatility of the underlying market
VSP
Value-sharing plan
187
IG Group Holdings plc Annual Report 2015| GLOBAL OFFICES
LONDON
(HEADQUARTERS)
IG (IG Index Limited and
IG Markets Limited)
Cannon Bridge House
25 Dowgate Hill
London
EC4R 2YA
UNITED KINGDOM
+44 (0)20 7896 0011
helpdesk.uk@ig.com
IG.com
EUROPE (EXCLUDING UK)
AMSTERDAM
IG Markets Limited
World Trade Center Amsterdam
Strawinskylaan 387
1077 XX Amsterdam
NETHERLANDS
+31 (0)20 794 6610
info.nl@ig.com
IG.com/nl
DUBLIN
IG (IG Index Limited and
IG Markets Limited)
72 Charlemont Street
Dublin 2
REPUBLIC OF IRELAND
+353 1 526 6061
dublinoffice@ig.com
IG.com/ie
DÜSSELDORF
IG Markets Limited
Berliner Allee 10
40212 Düsseldorf
GERMANY
+49 (0)211 882 370 00
info.de@ig.com
IG.com/de
LUXEMBOURG
IG Markets Limited
15 rue du fort Bourbon
L1249
LUXEMBOURG
+352 24 87 11 17
info.lu@ig.com
IG.com/lu
MADRID
IG Markets Limited
Paseo de la Castellana 13
Planta 1a Derecha
28046 Madrid
SPAIN
+34 91 787 61 61
info.es@ig.com
IG.com/es
MILAN
IG Markets Limited
Via Paolo da Cannobio, 33
7° Piano
20122 Milano
ITALY
+39 02 0069 5595
italiandesk@ig.com
IG.com/it
188
OSLO
IG Markets Limited
Akersgata 20
0158 Oslo
NORWAY
+47 22 400 200
info.no@ig.com
IG.com/no
PARIS
IG Markets Limited
17 Avenue George V
75008 Paris
FRANCE
+33 (0)1 70 98 18 18
info.fr@ig.com
IG.com/fr
STOCKHOLM
IG Markets Limited
Stureplan 2
114 35 Stockholm
SWEDEN
+46 (0)8 505 15 000
info.se@ig.com
IG.com/se
SWITZERLAND
IG Bank S.A
42 Rue du Rhone
Geneve
1204
SWITZERLAND
+41 22 888 10 12
support@igbank.ch
IG.com/en-ch
|IG Group Holdings plc Annual Report 2015
NORTH AMERICA
MIDDLE EAST
DUBAI
IG Limited
Office 2 &3
level 27
Currency House – Tower 2
Dubai International Financial Centre
P O Box – 506968
DUBAI, UAE
+971 45 59 2000
helpdesk.ae@ig.com
IG.com/ae
CHICAGO
North American
Derivatives Exchange, Inc
311 South Wacker Drive
Suite 2675
Chicago, IL 60606
US
+1 312 884 0100
customerservice@nadex.com
nadex.com
SOUTH AFRICA
JOHANNESBURG
IG Markets South Africa Limited
The Place
1 Sandton Drive
Sandton, Gauteng
2196 Johannesburg
SOUTH AFRICA
+27 (0)10 344 0051
helpdesk.za@ig.com
IG.com/za
ASIA PACIFIC
MELBOURNE
IG Australia Pty Limited
Level 15
55 Collins Street
Melbourne VIC 3000
AUSTRALIA
+61 (0)3 9860 1799
helpdesk.au@ig.com
IG.com/au
SINGAPORE
IG Asia Pte Limited
9 Battery Road
#01-02 Straits Trading Building
SINGAPORE 049910
+(65) 6390 5133
helpdesk@ig.com.sg
IG.com.sg
TOKYO
IG Securities Limited
Shiodome City Center 10F
1-5-2 Higashi-shinbashi
Minato-ku, Tokyo 105-7110
JAPAN
+81 (0)3 6704 8500
info.jp@ig.com
IG.com/jp
189
IG Group Holdings plc Annual Report 2015| SHAREHOLDER
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BY EMAIL
You can opt to receive shareholder information from us by
email rather than by post. We will then email you whenever we
add shareholder communications to the Company website.
To set this up, please visit investorcentre.co.uk/ecomms and
register for electronic communications (e-comms).
If you subsequently wish to change this instruction or revert
to receiving documents or information by post, you can do so
by contacting the Company’s registrars at the address shown
in the Company Information opposite. You can also change
your communication method back to post by logging in to
your Investor Centre account and go to ‘update my details’
followed by ‘communication options’.
The Registrar can also be contacted by telephone on
0371 495 2032. Calls to this number cost no more than a
national rate from any type of phone or provider. These prices
are for indication purposes only; if in doubt, please check the
cost of calling this number with your phone line provider. Lines
are open 8.30am – 5.30pm, Mon-Fri excluding bank holidays.
SHAREHOLDER ENQUIRIES
If you have any queries relating to your shareholding,
dividend payments or lost share certificates, or if any of your
details change, please contact Computershare by visiting
investorcentre.co.uk or by using the contact details above.
AMERICAN DEPOSITARY RECEIPTS (ADRs)
The company has a sponsored Level 1 American Depositary
Receipt (ADR) programme, with Citibank N.A. acting as the
depositary bank, which enables US investors to invest in IG
shares though an ADR, denominated in US dollars. IG’s ADR
programme trades in the US over-the-counter (OTC) market,
under the symbol IGGHY. Each ADR currently represents one
ordinary share.
E: citiadr@citi.com W: citi.com/dr
T: UK +44 (20) 7508 2708 US +1 (212) 723 5435
DIVIDEND DATES(1)
Ex-dividend date
Record date
Last day to elect for
dividend reinvestment plan
Annual General Meeting
01 October 2015
02 October 2015
09 October 2015
15 October 2015
Final dividend payment date
30 October 2015
2016 interim dividend
February 2016
ANNUAL SHAREHOLDER CALENDAR(1)
Company reporting
Final results announced
21 July 2015
Annual Report published
15 September 2015
Annual General Meeting
15 October 2015
INTERIM REPORT
As part of our e-comms programme, we have decided not to
produce a printed copy of our Interim Report. We will instead
publish the report on our website, where it will be available
around mid-January each year.
190
(1) Please note that these dates are provisional and subject to change.
|IG Group Holdings plc Annual Report 2015 CAUTIONARY STATEMENT
Certain statements included in our 2015 Annual Report, or
incorporated by reference to it, may constitute ‘forward-
looking statements’ in respect of the Group’s operations,
performance, prospects and/or financial condition.
By their very nature, forward-looking statements involve
uncertainties because they relate to events, and depend
on circumstances, that will or may occur in the future. If
the assumptions on which the Group bases its forward-
looking statements change, actual results may differ from
those expressed in such statements. The forward-looking
statements contained herein reflect knowledge and
information available at the date of this Annual Report
and the Group undertakes no obligation to update these
forward-looking statements except as required by law.
This report does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase
any shares or other securities in the Company and nothing in
this report should be construed as a profit forecast.
MARKET SHARE
Market share data has been provided by Investment Trends
Pty Limited (website: investmenttrends.co.uk).
Contact: Pawel Rokicki (email: pawel@investmenttrends.co.uk).
Unless stated, market share data is sourced from the following
current reports:
• Investment Trends UK Leveraged Trading Report
(released October 2014)
• Investment Trends Australia CFD Report
(released September 2014)
• Investment Trends Singapore CFD and FX Report
(released November 2014)
• Investment Trends Germany CFD and FX Report
(released June 2015)
• Investment Trends France CFD and FX Report
(released July 2015)
191
IG Group Holdings plc Annual Report 2015| COMPANY
INFORMATION
DIRECTORS
Executive Directors
T A Howkins (Chief Executive)
P G Hetherington
C F Hill
Non-Executive Directors
A J Green (Chairman)
S G Hill
J A Newman
S J Tymms
R P Yates (Senior Independent Director)
COMPANY SECRETARY
B E Messer
192
INDEPENDENT AUDITORS
SOLICITORS
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
7 More London Riverside
London
SE1 2RT
BANKERS
Lloyds Banking Group plc
10 Gresham Street
London
EC2V 7AE
Royal Bank of Scotland Group plc
280 Bishopsgate
London
EC2M 4RB
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Linklaters
1 Silk Street
London
EC2Y 8HQ
REGISTRARS
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
BROKERS
Barclays Bank Plc
5 The North Colonnade
Canary Wharf
London
E14 4BB
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT
REGISTERED OFFICE
Cannon Bridge House
25 Dowgate Hill
London
EC4R 2YA
REGISTERED NUMBER
04677092
|IG Group Holdings plc Annual Report 2015 NOTES
193
IG Group Holdings plc Annual Report 2015| INDEX
Accounting policies
Active clients
Amortisation
Assets and liabilities
Audit Committee
Auditors’ remuneration
Auditors’ report
Binaries
Board of Directors
Broker margin
Capital expenditure
Cash flow
Charitable donations
Client money
Contracts for difference (CFDs)
Depreciation
Diluted earnings per share
Dividend
Dividend – key dates
Employees
Financial calendar
Five-year summary
Generic top-level domains (gTLDs)
Key Performance Indicators
Liquidity
Nadex
Net Promoter Score (NPS)
Nomination Committee
Offices
Operating costs
Political donations
Regulatory risk
Remuneration
Revenue per client
Risk
Shareholder information
Shareholders – major interests
Spread betting
Strategic objectives
Stockbroking
Subsequent events
Total Shareholder Return (TSR)
Trading revenue
168
6, 17
130
112
94
98, 123
106
16
56
138
129, 130
115
35
31, 47, 135, 136
14, 180
129
28, 128
9, 29, 128
190
31, 32
191
178
13
28
136
16, 40
29
66
188
42
103
52
68
28, 38
48, 156
190
104
15, 182
20, 22
15, 184
104, 140
91
28, 120
194
|IG Group Holdings plc Annual Report 2015 THANK YOU!
Special thanks to everyone for their valuable contribution
to producing this report:
Maria Abidi
Vinaykumar Ahir
Harry Lewis
Lesley Lorraine
Dionysis Alexopoulos
Paul Lucas
Chris Alfred
Ryan Arnold
Sruti Bajoria
Carrie-Jo Baker
Hui Shan Beh
Dan Boneham
Jackie Bornor
Burger Botes
Paul Brooking
Harold Burr
Natalia Maslicov
Joe McCaughran
Kieran McKinney
Phillip Moon
Jake Mulaikal
Tony Nicol
Helen Nolan
Elisa Ormaechea
Lucy Parry
Lucy Read
Mark Chesterman
Shingai Rupanga
Fabian Chui
Lizzie Counihan
Sean Dwyer
Michelle Eardley
Huw Ellis
Fabrizio Ferraro
Johnathan Fung
Ivan Gowan
Paul Gyles
Ali Hine
Robert Hollamby
Harriet Keilthy
Himanshu Kher
Gary Sanders
Carmel Sargent
Paula Smith
Josh Springthorpe
Paul Stevens
Ellen Taylor
Anne Vasey
Anthony von den Driesch
Sara Walker
Dewi Walters
Andrew Weddell
Johan Wiese
Bunmi Williams-Likinyo
The wider Finance team and all our employees across our offices
Designed by
www.ab-uk.com
195
IG Group Holdings plc Annual Report 2015| INVESTOR
RESOURCES
IG Group Holdings plc
Cannon Bridge House
25 Dowgate Hill
London
EC4R 2YA
T: +44 (0)20 7896 0011
F: +44 (0)20 7896 0010
W: iggroup.com