Overview
IG Group is a fast growing, profitable and cash generative provider of speculative investment and leisure products.
The Group's core business is spread betting, both on financial markets, where the Directors believe that IG is the UK market leader (based on turnover), and on sporting, entertainment and political events. The Group's other principal products and services are contracts for differences, binary bets and foreign exchange trading. These products are provided to retail clients and market professionals. More than 85 per cent of the Group's client transactions are executed online.
IG was founded in the United Kingdom in 1974 and commenced trading in Australia in 2002. The Group's business has grown rapidly since the late 1990s, with turnover having increased by 41.7 per cent compound to £49.8 million during the period between financial years 1998 and 2004. EBITDA has increased by 63.8 per cent compound to £25.1 million during the same period.
This strong growth has been achieved during a period in which equity market volatility has fallen at times and is partly attributable to the increased diversity of IG's product range. The Directors believe that reduced volatility of revenue is a significant additional benefit of this increased product diversification and that, coupled with IG's approach to hedging, the Group's earnings stream has become more stable.
Financial spread betting
The Group's financial spread betting business offers clients the opportunity to speculate on a wide range of financial instruments, including stock indices, individual equities, market sectors, precious and non-precious metals, soft commodities, interest and exchange rates and options. Financial spread betting has a number of potential attractions compared to conventional trading in the world's financial markets, in particular gearing (clients can trade on margin in individual shares without having to deposit the full value of the underlying equity), as well as the opportunity to take short positions and no current requirement to pay UK capital gains tax.
Contracts for differences (CFDs)
CFDs are offered on a similar range of underlying markets to financial spread betting but the majority of business is on individual shares. CFDs provide retail investors with the benefits of share trading without having to buy or own the underlying stock, as the CFD mirrors the price movement of a particular stock. CFDs also offer clients certain advantages over traditional forms of trading in the world's financial markets, in particular gearing, as well as the opportunity to take a short position and the benefits of share trading without currently having to pay UK stamp duty.
Sports spread betting
In addition to spread betting on financial markets, the Group provides clients with the opportunity to spread bet on many sporting, entertainment and political events. One of the attractions of sports spread betting over traditional fixed odds betting is that it can ensure clients' interest is sustained in an event where there is a high degree of certainty over the result, as often the more 'right' or 'wrong' a client is, the more he can continue to win or lose until the conclusion of an event or until the client closes his bet.
Binary betting
Binary betting is an innovative new product offered on both financial markets and sports events which is a hybrid of spread betting and fixed odds betting, offering some of the features of both. A binary bet is a bet about whether or not a specific event will occur. For example, will FTSE close down on the day? If the answer is yes, the bet settles at 100; if the answer is no, the bet settles at 0. IG quotes a continuous two-way price between 0 and 100 until just before the market closes and the client can close his bet at any time.
Foreign exchange trading
The Group launched a foreign exchange desk in 1996 to provide cost effective access to the world's foreign exchange markets for the smaller currency speculator. IG also offers its clients the opportunity to spread bet and trade CFDs on a range of currency pairs.
The Group's client base is dominated by retail clients, particularly in its spread betting businesses and in binary betting. IG's client base for CFDs and trading on foreign exchange also includes market professionals and some corporate entities. During the six months ended 30 November 2004, 18,015 clients traded with the Group, a 22 per cent increase compared to 14,767 in the corresponding period in the previous financial year.
Two of the Group's principal operating subsidiaries, IG Index (which offers spread betting and binary bets to its clients) and IG Markets (which offers CFDs and foreign exchange trading to its clients) are regulated by the Financial Services Authority in the United Kingdom and by the Australian Securities and Investments Commission in Australia. IG Index and Binarybet (which offers binary bets to its clients) both hold UK bookmakers' permits.
The Group has offices in London, England and Melbourne, Australia and employs approximately 270 people, over 250 of whom are based in London.
