Final Results

IG Group Holdings plc 18 July 2005 18 July 2005 IG GROUP HOLDINGS PLC Preliminary Results for the year ended 31 May 2005 IG delivers turnover growth of 25% and EBITDA growth of 40% Following its IPO in May 2005 IG is pleased to announce its maiden preliminary results for the year to 31 May 2005. Highlights â€¢ Turnover up 25% at Â£62.3 million â€¢ EBITDA* up 40% at Â£35.1 million â€¢ Continued EBITDA margin improvement to 56.3% â€¢ Number of clients trading up 23% at 26,102** â€¢ More than 85% of transactions now online*** â€¢ Binary betting contributed 9% of turnover â€¢ Further strong growth in Australia â€¢ Group confident of outlook for year ahead * EBITDA represents earnings after interest on client money, and before other interest, exceptional items, taxation, depreciation and amortisation ** Growth in the number of clients dealing in the 12 months up to the end of the reported period compared to the corresponding period in the previous year *** Online transactions includes the Internet, mobile dealing and IG's L2 CFD trading platform Nat le Roux, Chief Executive 'IG has delivered significant growth in turnover and profits for a third consecutive year, reflecting healthy client acquisition, the continuing expansion of our product range and the rapid growth of our Australian business. Current trading is strong and the Group is well placed to make further progress during the coming year.' Jonathan Davie, Chairman 'The year to May 2005 was another successful year for our business. The period prior to listing has been one of significant change at IG Group. The listing allowed the company to pay down its outstanding debt thus strengthening the group's balance sheet and positioning it for further growth.' Financial Highlights Year ended Year ended Growth 31 May 2005 31 May 2004*** Turnover Â£62.3m Â£49.8m +25% EBITDA Â£35.1m Â£25.1m +40% EBITDA margin 56.3% 50.4% EBITA* Â£31.2m Â£21.8m +43% EBITA margin 50.1% 43.8% EBIT** Â£25.5m Â£17.6m +45% EBIT margin 40.9% 35.3% Profit before tax Â£14.0m Â£7.9m +77% ------------ ------------- ------------- ------------- * EBITA represents earnings after interest on client money and depreciation, and before other interest, exceptional items, taxation and amortisation ** EBIT represents earnings after interest on client money, depreciation and amortisation, and before other interest, exceptional items and taxation *** Comparatives in this summary, the chief executive's report and the operating and financial review are for the full year to 31 May 2004. For further information please contact: IG Group 020 7896 0011 Nat le Roux Tim Howkins Financial Dynamics 020 7269 7200 Robert Bailhache Dominick Peasley www.iggroup.com Chief Executive's Report This has been a busy year for the group, particularly in the months preceding the listing and I am proud of the performance of the business during this period. For the third consecutive year, the group delivered growth in turnover and EBITDA. Group turnover was Â£62.3 million, up 25% over the preceding year and EBITDA was Â£35.1million, up 40%. The main contributors to this growth were the continued strong rate of client acquisition in the UK, the increasing diversity of our product range (including our rapidly growing binary business) and particularly strong growth from our Australian business. Financial businesses All of the financial businesses performed strongly. Excluding binaries, turnover was up 23.5% to Â£50.5m, reflecting continued healthy growth in account numbers. Over 85% of all financial deals are now transacted on one of our two electronic platforms, as against 20% at the beginning of 2003. On-line clients are easier to recruit and trade more frequently. IG's transformation into a true internet business is the most significant reason behind our continued strong performance in indifferent financial markets. Spread Betting Spread betting volumes are vulnerable to lack of volatility in financial markets, and for much of the past year world stock indices have been relatively subdued. As a consequence, the balance of the core UK spread betting business has continued to shift away from stock indices into individual shares, currencies and commodity markets, for example, in some recent months we have seen more business in crude oil than in FTSE. Over the year, the dealing spreads offered by UK financial spread betting firms on some markets narrowed, but this trend has not affected the turnover or profitability of the group adversely. Price competition has largely focused on the most short-term and speculative instruments such as foreign exchange and 'daily' stock index bets; in these markets, price cuts and special offers, if positioned intelligently, can result in an overall increase in turnover. In addition, our uniquely wide product range means that a significant proportion of our turnover is derived from business lines where there is less price competition. CFDs Our CFD (contracts for differences) business also performed strongly, particularly in individual shares. The continued development of L2TM, our Direct Market Access platform, has helped us to win a larger share of the professional end of the CFD market, where we can offer stockbrokers and fund managers significantly better dealing technology than most of our competitors. At the same time improvements in our own terms of business have allowed us to quote very competitive commission rates. In recent months we have developed the technology to allow other financial service providers to white-label our CFD service to their clients and we are now able to tailor these deals very quickly by applying a generic contractual and technology structure. I expect the proportion of our business which derives from white-label and other introductory arrangements to increase over the next year. Financial binaries Turnover in financial binaries increased by 130% to Â£5.0m. Since the launch of our binary product in 2003, IG has dominated this fastest growing sector of the financial betting business and there is as yet no effective competition. While this cannot remain the case indefinitely, we are very strongly positioned in an interesting business which is capable of significant further growth. Over the past few months we have developed the technology to act as a market-maker on electronic exchanges, and have so far signed market-making agreements with two such exchanges. Binary bets of the type which we offer our clients are, from the clients' perspective, no different from the back-and-lay fixed odds markets offered by betting exchanges. By acting as a liquidity provider to these exchanges, we hope to attract significant additional business in both financial and sports binary markets. Australia Our Australian operation, whose main business is in CFDs on local and international shares, performed impressively. Turnover of Â£3.8m was more than 150% higher than in the previous year, and this growth rate has been maintained since the end of the period under review, June being easily a record month. The Melbourne office now employs over 20 people, and in addition to locally sourced clients handles overnight business for the whole financial dealing operation, allowing us to dispense with the night shift in London. Less than three years after its launch, our Australian operation has a turnover larger than the whole of IG in 1996. This remains an immature market capable of significant further growth. In the year ahead, we also intend to establish at least one sales office in Asia . This operation will market our foreign exchange and CFD products to the Chinese speaking market, with dealing and risk management handled in Melbourne. Sports businesses The sports businesses delivered turnover of Â£6.8m, a slight increase on 2004. Spread betting Sports spread betting volumes were significantly higher than in the previous year. As the number of clients betting was little changed, this increase in volume mainly reflects greater activity from existing clients. As most sports clients have accounts with more than one firm, it is reasonable to conclude that it also represents a transfer of business from competitors in response to the various service enhancements which we have implemented over the last year. As sports spread betting is a mature sector any significant future increase in volumes is likely to be at the expense of competitors rather than the result of fresh client recruitment. Binary betting In contrast, sports binary volumes, while still small in absolute terms, grew very rapidly in the second half of the year. We believe this business is capable of significant further development. Uniquely, our binary product offers clients the ability to back or lay fixed-odds propositions, and thus to close bets before settlement, without the liquidity constraints encountered on betting exchanges. We also have significantly better pricing technology than most conventional bookmakers, and this allows us to provide simultaneous automated prices on large numbers of in-running markets. In the months ahead we intend to simplify and re-brand the sports binary offering to widen its appeal to a mass audience, both in the UK and internationally. We are currently test marketing a full Chinese-language version of our binary website. This will, be followed by versions targeted at other non-English speaking markets in the coming year. Relative to volume, both sports businesses performed poorly especially in the second half of the year, with a long run of results which favoured clients rather than bookmakers. Despite this there is no reason to believe that the margins in these businesses have fundamentally changed, and indeed their performance has seen a material improvement since the end of the year under review. Systems and organisation Technology is a key component of our business and we place a major emphasis on the reliability of our systems and the enhancement of our clients' on-line experience. We have continued to expand system capacity, and have progressively reduced the average deal time which is now under one second. On-line trading volumes and client log-ons continued to grow very rapidly throughout the year. Our overall up-time statistics have also improved significantly, although we still have further to go in this direction. Over the next year we intend to further enhance our systems resilience as we move towards operating on a true 24 /7 basis. During the year we successfully tested our disaster recovery and continuity management plan, with the whole company working from the back-up site for a day. We have also recently appointed a new chief technology officer with overall responsibility for systems integrity and development. In the business generally, reporting lines have been re-organised and simplified and some senior managers' roles redefined to reflect changes in the underlying business. I believe we have the right people in the right jobs and a rational organisational structure. Current trading and outlook The year to 31 May 2005 was a year of continuing success at IG. Since the end of the financial year all parts of the business have performed well and our volumes have been strong. I remain confident about IG's prospects and believe the group is well placed to make further progress during the coming year. Nat le Roux Chief Executive Operating and financial review for the year ended 31 May 2005 The group profit and loss account and statement of cashflows for the prior period includes the results of the group from 5 September 2003 (the date of the acquisition of the group) to 31 May 2004. The operating and financial review and chief executive's report present the group results for the full year ended 31 May 2004 and for each preceding twelve month period as if IG Group Limited (formerly IG Group plc) was a member of the group throughout. Five year summary Year ended 31 May 2005 2004 2003 2002 2001 Â£000 Â£000 Â£000 Â£000 Â£000 Turnover 62,298 49,839 40,996 33,573 34,056 EBITDA (1) 35,083 25,128 17,188 14,628 15,881 EBITDA margin 56.3% 50.4% 41.9% 43.6% 46.6% Exceptional administrative costs 889 267 180 - 269 Profit before tax 13,999 7,920 15,281 13,375 15,385 Earnings per share (normalised (2)) 6.84p 4.94p 3.30p 2.86p 3.33p Basic earnings per share (3) 2.27p 1.55p - - - Diluted earnings per share (3) 2.10p 1.43p - - - (1) EBITDA represents earnings before exceptional administrative costs, depreciation, amortisation charges, taxation, interest payable on debt and interest receivable on corporate cash balances and includes interest receivable on clients' money net of interest payable to clients. (2) As set out in note 11 to the financial statements, normalised earnings per share represents earnings adjusted for normalising items, divided by the number of ordinary shares in issue at 31 May 2005. Normalising items comprise the impact, net of tax, of exceptional administrative costs, amortisation charges, debt interest, preference dividends and non-recurring tax items. This is not intended to comply with FRS14 (3) Basic and diluted earnings per share are presented for the full year ended 31 May 2005 and for the period from 5 September 2003 to 31 May 2004. Comparatives are not available for the preceding years as IG Group Holdings plc was not in existence. Financial highlights For the third consecutive year the group achieved substantial growth in turnover and EBITDA. Turnover increased by 25.0%. The main contributor to this growth was continued strong client acquisition by the group's UK financial business. The group's Australian operation and the binary betting business both contributed to the overall growth in turnover, but while they have exhibited strong growth, still remain a relatively small portion of the group's overall income. EBITDA grew by 39.6% and the EBITDA margin showed further expansion up to 56.3% from 50.4% in the previous year. During the year the company repaid all of its outstanding debt and at the year end the group had net cash of Â£20.8m. The group had a consolidated regulatory capital surplus of approximately Â£7m at the year end. Turnover by business segment 2005 2004 Increase Â£000 Â£000 Â£000 Financial 50,512 40,895 9,617 Financial binaries 4,950 2,153 2,797 Sports 6,836 6,791 45 ----------- ----------- ----------- 62,298 49,839 12,459 ----------- ----------- ----------- ------------- ------------- ------------- The group's financial segment showed significant growth during the year with turnover 23.5% up on the previous year. Part of this growth is attributable to the success of the group's Australian operation. Financial binaries have grown impressively since their introduction in May 2003 with turnover increasing 129.9% on the previous year. This business line contributed 7.9% of the group's turnover in the year compared to 4.3% in the previous year. Turnover in the group's sports segment increased by 0.7% on the previous year. Turnover by geographical segment 2005 2004 Increase Â£000 Â£000 Â£000 United Kingdom 58,522 48,412 10,110 Australia 3,776 1,427 2,349 ----------- ----------- ----------- 62,298 49,839 12,459 ----------- ----------- ----------- ----------- ----------- ----------- Turnover generated in the United Kingdom increased 20.9% compared with the previous year, while turnover generated in Australia increased 164.6% compared with the previous year. Turnover generated by Australia increased as a percentage of the group's total turnover from 2.9% in the previous year to 6.1% in the year under review. Number of clients dealing and new accounts Turnover is determined to a significant extent by the number of clients dealing which in turn is heavily influenced by the number of accounts opened and the number of accounts betting or trading for the first time. 2005 2004 2003 2002 2001 Number of clients dealing 26,102 21,263 16,700 15,678 15,214 Average turnover per client (Â£) 2,387 2,344 2,455 2,141 2,238 Number of accounts opened 18,747 15,992 7,736 6,644 7,755 Number of accounts betting or trading for the first time 11,297 9,376 5,240 5,005 7,194 The introduction of online account opening in June 2003 has made it significantly easier to open accounts as immediate identity checks, performed for regulatory purposes, have reduced the requirement for documentary proof of identity. The group's unregulated business, binarybet.com, has contributed to the growth in the number of clients dealing. These clients tend to bet more regularly than regulated clients but these transactions are typically for a smaller amount. This explains the fall in average turnover per client between 2003 and 2004. Compared with the previous year, the number of clients dealing has increased by 22.8%, the number of accounts opened has increased 17.2% and the number of accounts betting or trading for the first time has increased by 20.5%. The average turnover per client has also improved from Â£2,344 for the previous year to Â£2,387 for the year under review. Segmental profit The profit of the group's segments (after attributable costs, but before common costs) were: 31 May % of 31 May % of 2005 segment 2004 segment Â£000 turnover Â£000 turnover Financial 39,744 78.7% 31,121 76.1% Financial binaries 3,474 70.2% 1,419 65.9% Sports 921 13.5% 1,449 21.3% ----------- ----------- 44,139 33,989 Common costs (30,140) (26,069) ----------- ----------- Profit before taxation 13,999 7,920 ----------- ----------- ----------- ----------- Each segment has costs which are largely fixed, including the employment costs of the senior dealers who are responsible for setting prices and managing risk. Once these fixed costs are covered the incremental costs associated with additional income are lower and hence as income rises, so does the percentage profit. This explains why financials, which is the largest of the group's segments, currently enjoys the highest percentage profit. Staff costs The average number of staff increased from 243 in the year ended 31 May 2004 to 267 in the year under review and fixed employment costs have increased accordingly. A significant proportion of the employment cost consists of performance related bonuses which vary according to profitability and increased by 3.4% compared with the previous year. 2005 2004 Â£000 Â£000 Fixed employment costs 12,770 11,538 Performance related bonuses 5,255 5,081 ----------- ----------- 18,025 16,619 ----------- ----------- ----------- ----------- Bad debts The charge for bad and doubtful debts for the year was approximately 0.5% of revenue. The company continues to pursue outstanding debts vigorously. Tangible fixed assets The group continues to invest heavily in technology in order to enhance the capacity and resilience of its systems which are critical to the success of the business. Fixed asset additions during the year amounted to Â£2.7m compared with Â£2.6m in the previous year. Depreciation charged in the year amounted to Â£3.9m compared with Â£3.3m in the previous year. Goodwill The goodwill arising on the acquisition of the group amounting to Â£109.8m has been capitalised and is being amortised over the estimated useful life of 20 years. In the year under review the amortisation charge amounted to Â£5.7m compared with Â£4.2m in the previous year. Working capital and liquidity 2005 2004 Â£000 Â£000 Amounts due from brokers 40,262 31,474 --------------- --------------- --------------- --------------- Amounts due from clients 3,735 2,173 Amounts due to clients (26,934) (19,920) --------------- --------------- Net amounts due to clients (23,199) (17,747) --------------- --------------- --------------- --------------- Cash at bank and in hand 20,832 23,076 Loan notes (167) (570) Bank loans and interest payable - (101,113) --------------- --------------- Net funds/(debt) 20,665 (78,607) --------------- --------------- --------------- --------------- One of the main elements of working capital is amounts due from the brokers and other counterparties with whom the group hedges its financial business. The group places cash or treasury bills with these brokers in order to provide initial and variation margin to support its positions. This has increased significantly in the year under review as the level and volume of client positions have increased. Amounts due to and from clients include unrealised profits and losses on clients' open positions as well as the result of closed positions. The amount due from clients therefore fluctuates according to the movement in markets. Amounts due to clients relates to clients who have agreed not to have their money segregated in accordance with the Financial Services Authority's (FSA's) client money rules. The increase in amounts due to clients is due to the increase in CFD business, where the majority of clients are not segregated. Cash at bank and in hand has reduced from the previous year primarily because of the utilisation of surplus cash, together with the proceeds of listing on the London Stock Exchange to repay debt. Operating activities generated Â£25.4m of cash, interest received amounted to Â£6.0m and the finance raised on the flotation of the company amounted to Â£131.7m. These funds were used to repay debt amounting to Â£102.1m, preference shares of Â£35.7m, debt interest of Â£11.9m and to pay professional fees arising in the year on the flotation of Â£5.8m. In addition expenditure on fixed assets amounted to Â£2.7m. The group holds client money on account in segregated bank accounts which at the year end amounted to Â£99.7m compared with Â£66.3m in the previous year. At the year end the group had total bank facilities of Â£25.0m, all of which were undrawn. Facilities of Â£12.0m are to provide the short term liquidity which may be necessary to meet payments to market counterparties before payment is received from clients in the event of a large market movement. Facilities of Â£13.0m provide the ability for paperless settlement of share transactions (CREST). Regulatory capital Two of the group's UK operating subsidiaries are regulated by the FSA. The FSA imposes a minimum level of regulatory capital which must be retained by each company and also an overall level of regulatory capital which must be maintained by the group. At 31 May 2005 the two subsidiaries had regulatory capital which exceeded their regulatory capital requirement by a total of approximately Â£24m. The group had an overall consolidated regulatory capital surplus of approximately Â£7m. Group profit and loss account for the year ended 31 May 2005 Year ended Period ended 31 May 31 May 2005 2004 Notes Â£000 Â£000 Turnover 62,298 38,997 Cost of sales (2,528) (1,527) --------------- --------------- Gross profit 59,770 37,470 Administrative expenses excluding exceptional administrative costs (37,900) (25,696) Exceptional administrative costs 3 (889) (267) --------------- --------------- (38,789) (25,963) --------------- --------------- Operating profit 20,981 11,507 Interest receivable 6,013 2,908 Interest payable (12,995) (10,706) --------------- --------------- Profit on ordinary activities before taxation 13,999 3,709 Tax charge on profit on ordinary activities (4,538) (614) --------------- --------------- Profit on ordinary activities after taxation 9,461 3,095 Minority interests - equity 55 9 --------------- --------------- Profit attributable to members of the parent company 9,516 3,104 Dividends 4 (4,749) - --------------- --------------- Retained profit for the year 4,767 3,104 --------------- --------------- --------------- --------------- Earnings per share - Basic 5 2.27p 1.55p - Diluted 5 2.10p 1.43p - Normalised 5 6.84p 4.05p --------------- --------------- --------------- --------------- There were no recognised gains or losses other than the profit for the financial year. The group profit and loss account for the period ended 31 May 2004 includes the results from 5 September 2003, the date of acquisition of the group. All results relate to continuing operations. Group reconciliation of shareholders' funds for the year ended 31 May 2005 Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Profit for the financial year 9,516 3,104 Dividends (4,749) - --------------- --------------- 4,767 3,104 Issue of ordinary share capital 131,731 10 Issue of preference share capital - 35,700 Redemption of preference share capital (35,660) - Costs of share issue (6,528) - Issue costs of preference share capital - (792) Amortisation of preference share capital issue costs 480 312 --------------- --------------- Net addition to shareholders' funds 94,790 38,334 Opening shareholders' funds 38,334 - --------------- --------------- Closing shareholders' funds 133,124 38,334 --------------- --------------- --------------- --------------- Group balance sheet at 31 May 2005 2005 2004 Â£000 Â£000 Fixed assets Intangible assets 100,542 105,541 Tangible assets 5,160 6,347 Investments - 2 --------------- --------------- 105,702 111,890 Current assets Debtors 47,291 35,618 Cash at bank and in hand 20,832 23,076 --------------- --------------- 68,123 58,694 Creditors: amounts falling due within one year (40,161) (31,303) --------------- --------------- Net current assets 27,962 27,391 --------------- --------------- Total assets less current liabilities 133,664 139,281 Creditors: amounts falling due after more than one year (500) (101,113) Minority interests - equity (40) 166 --------------- --------------- 133,124 38,334 --------------- --------------- --------------- --------------- Capital and reserves Ordinary share capital 16 10 Preference share capital 40 35,220 Share premium account 125,197 - Profit and loss account 7,871 3,104 --------------- --------------- Shareholders' funds: Equity 133,084 3,114 Non-Equity 40 35,220 --------------- --------------- Total shareholders' funds 133,124 38,334 --------------- --------------- --------------- --------------- Group statement of cash flow for the year ended 31 May 2005 Year Period ended ended 31 May 31 May 2005 2004 Â£000 Â£000 Net cash inflow from operating activities 25,412 21,686 --------------- --------------- Returns on investments and servicing of finance Interest received 6,013 2,908 Interest paid (11,934) (3,358) Issue costs of new long term finance - (6,544) --------------- --------------- (5,921) (6,994) --------------- --------------- Taxation Corporation tax paid (2,480) (2,805) --------------- --------------- Capital expenditure and financial investment Payments to acquire tangible fixed assets (2,680) (1,885) Receipts from sales of fixed assets - 3 --------------- --------------- (2,680) (1,882) --------------- --------------- Dividends paid (4,749) - --------------- --------------- Acquisitions and disposals Investments in subsidiary undertakings (21) (151,229) Net cash acquired with subsidiary undertaking - 27,464 --------------- --------------- (21) (123,765) --------------- --------------- Financing Loans advanced - 116,256 Loans repaid (101,694) (15,700) Loan notes issued - 1,138 Loan notes repaid (403) (568) Issue of ordinary shares 131,731 10 Issue of preference shares - 35,700 Redemption of preference shares (35,660) - Costs of share issue (5,779) - --------------- --------------- (11,805) 136,836 --------------- --------------- (Decrease)/increase in cash (2,244) 23,076 --------------- --------------- --------------- --------------- The group statement of cash flow for the period ended 31 May 2004 includes the cashflows from 5 September 2003, the date of acquisition of the group. Reconciliation of net cash flow to movement in net funds for the year ended 31 May 2005 2005 2004 Â£000 Â£000 (Decrease)/increase in cash (2,244) 23,076 Cash inflow from increase in loans - (117,394) Cash outflow from repayment of loans 101,694 15,700 Accrued interest 1,765 (1,765) Net cash outflow/(inflow) from loan notes 403 (570) --------------- --------------- Change in net funds resulting from cash flows 101,618 (80,953) Issue costs of new long term loans (2,346) 2,346 --------------- --------------- Change in net funds 99,272 (78,607) Opening net debt (78,607) - --------------- --------------- Closing net funds/(debt) 20,665 (78,607) --------------- --------------- --------------- --------------- Net funds/(debt) include cash at bank and in hand, bank loans and loan notes. Notes 1. Basis of consolidation The group financial statements consolidate the financial statements of IG Group Holdings plc and its subsidiary undertakings drawn up to 31 May 2005. No profit and loss account is presented for IG Group Holdings plc as permitted by section 230 of the Companies Act 1985. IG Group Holdings plc was incorporated on 25 February 2003 and between 5 September 2003 and 20 November 2003 acquired the entire issued share capital of IG Group Limited (formerly IG Group plc). This has been accounted for using acquisition accounting. Accordingly the group profit and loss account and statement of cash flows for the prior period includes the results of IG Group Limited and its subsidiaries for the 269 day period since 5 September 2003. 2. Segmental analysis Turnover represents profits and losses on the running of a betting market in commodities, financial futures, traded options, stock indices and individual shares and a wide range of sporting events, and trading in foreign exchange and contracts for differences together with the net result of hedging client positions, less commissions paid. Business segments The group operates in three principal areas of activity; financial, financial binaries and sports. The types of financial instrument included within each of the above categories are: Financial Spread bets on equities, equity indices, precious and base metals, soft commodities, exchange rates, interest rates; bets on options on certain of these products; exchange traded futures and options. Spot and forward contracts for foreign exchange and contracts for differences on shares, indices and other financial instruments. Financial binaries Fixed odds bets on equities, equity indices, precious and base metals, soft commodities, exchange rates, interest rates and other financial instruments. Sports Spread bets and fixed odds bets on sporting and political events. Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Turnover Financial 50,512 31,680 Financial binaries 4,950 1,769 Sports 6,836 5,548 --------------- --------------- 62,298 38,997 --------------- --------------- --------------- --------------- Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Segment profit Financial 39,744 24,954 Financial binaries 3,474 1,142 Sports 921 1,447 --------------- --------------- 44,139 27,543 Common costs (30,140) (23,834) --------------- --------------- Profit before taxation 13,999 3,709 --------------- --------------- --------------- --------------- 2005 2004 Â£000 Â£000 Net assets Financial 12,652 11,943 Financial binaries (675) (367) Sports 520 372 --------------- --------------- 12,497 11,948 Unallocated net assets 120,627 26,386 --------------- --------------- 133,124 38,334 --------------- --------------- --------------- --------------- Unallocated net assets comprise the following items which do not relate to specific business segments: 2005 2004 Â£000 Â£000 Goodwill 100,336 105,115 Tangible fixed assets 1,326 1,378 Fixed asset investments - 2 Debtors and prepayments 3,125 1,761 Cash 20,163 22,416 Creditor balances (7,176) (7,403) Corporation tax 2,893 4,064 Minority interests (40) 166 Loans - (101,113) --------------- --------------- 120,627 26,386 --------------- --------------- --------------- --------------- Geographical segments The group has offices in the United Kingdom and in Australia. Clients of the Australian office deal with two of the UK operating subsidiaries, but under customer agreements which are specific to the Australian office. Clients of the London office may be situated anywhere in the world other than in Australia. Accordingly the group provides a geographical analysis based on the division of clients between the UK and Australian offices. Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Turnover UK 58,522 37,726 Australia 3,776 1,271 --------------- --------------- 62,298 38,997 --------------- --------------- --------------- --------------- Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Segment profit UK 30,540 17,859 Australia 1,638 419 --------------- --------------- 32,178 18,278 Common costs (18,179) (14,569) --------------- --------------- Profit before taxation 13,999 3,709 --------------- --------------- --------------- --------------- 2005 2004 Â£000 Â£000 Net assets UK 31,136 33,654 Australia 1,652 1,178 --------------- --------------- 32,788 34,832 Unallocated net assets 100,336 3,502 --------------- --------------- 133,124 38,334 --------------- --------------- --------------- --------------- Unallocated net assets comprise the following items which do not relate to specific geographical segments: 2005 2004 Â£000 Â£000 Goodwill 100,336 105,115 Loans - (101,613) --------------- --------------- 100,336 3,502 --------------- --------------- --------------- --------------- 3. Exceptional administrative costs Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Exceptional administrative costs 889 267 --------------- --------------- --------------- --------------- The exceptional administrative costs charged in 2005 relate to professional fees payable as a result of listing the company on the London Stock Exchange. The amount charged in the period ended 31 May 2004 relates to the professional fees incurred as a result of a restructuring of the group and fees associated with directors' employment and service contracts. Total administrative expenses: Â£38.8m (2004: Â£26.0m). 4. Dividends Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Preference dividends - Interim paid (13.3p per share) 4,749 - - Final proposed (0.6p per share) - - --------------- --------------- 4,749 - --------------- --------------- --------------- --------------- The directors did not propose an ordinary dividend for the period ended 31 May 2004 or for the year ended 31 May 2005. An interim dividend on the non-cumulative preference shares was paid during the year for the period from 5 September 2003 to 4 May 2005 when 35,660,000 of the company's preference shares were redeemed and restrictions on the payment of preference dividends ceased. This amounted to 13.3p per share at the rate of 8% per annum. A final preference dividend at 0.6p per share was declared for the remaining 40,000 preference shares which amounted to Â£237. B shares carry no entitlement to dividends. 5. Earnings per ordinary share Year ended Period ended 31 May 31 May 2005 2004 Â£000 Â£000 Basic earnings attributable to ordinary shareholders 4,767 3,104 Effects of dilution - - --------------- --------------- -- -- Diluted earnings attributable to ordinary shareholders 4,767 3,104 --------------- --------------- --------------- --------------- Weighted average number of ordinary shares 209,780,895 200,000,000 Effect of warrants 16,365,331 17,702,322 Effect of LTIP awards 315,553 - --------------- --------------- -- -- Diluted weighted average number of ordinary shares 226,461,779 217,702,322 --------------- --------------- -- -- --------------- --------------- Basic earnings per share 2.27p 1.55p --------------- --------------- -- -- --------------- --------------- Diluted earnings per share 2.10p 1.43p --------------- --------------- -- -- --------------- --------------- In the period ended 31 May 2004 there were 1,000,000 A ordinary shares in issue. Each of these shares was re-designated and subdivided into 200 ordinary shares on 31 March 2005. The weighted average numbers of shares have been shown as if the re-designation and subdivision had taken place prior to the period ending 31 May 2004. The directors consider that the basic and diluted earnings per share calculations do not fully reflect changes in the group's capital structure as a result of the flotation of the company on 4 May 2005. Normalising adjustments comprise the impact, net of tax, of exceptional administrative costs, amortisation charges, debt interest, preference dividends and non-recurring tax items. The normalised earnings per share is used to calculate the number of contingent shares which vest under the LTIP and aids comparison of the earnings per share for the periods shown. This is not intended to comply with FRS14. Year ended 31 May 2005 Period ended 31 May 2004 Earnings Earnings Earnings per share Earnings per share Â£000 pence Â£000 pence Earnings attributable to ordinary shareholders 4,767 2.27 3,104 1.55 Normalising adjustment to number of shares: Effect of basing calculation on number of shares in issue as at 31 May 2005 - (0.81) - (0.60) Normalising adjustments to earnings: Exceptional administrative costs 889 0.27 267 0.08 Interest and charges on debt finance 11,851 3.62 10,281 3.14 Tax effect of above items (3,555) (1.09) (3,098) (0.95) Amortisation charges 5,670 1.73 4,183 1.28 Non-recurring tax items (2,004) (0.61) (1,470) (0.45) Preference dividends payable 4,749 1.46 - - --------------- --------------- --------------- --------------- -- -- -- -- Total normalisation adjustments 17,600 4.57 10,163 2.50 --------------- --------------- --------------- --------------- Normalised earnings attributable to ordinary shareholders 22,367 6.84 13,267 4.05 --------------- --------------- --------------- --------------- -- -- -- -- --------------- ---------------- --------------- ---------------- Number of shares in issue as at 31 May 2005 327,500,959 327,500,959 --------------- --------------- --------------- --------------- 6. Basis of preparation The above financial information for the year ended 31 May 2005 does not constitute statutory accounts. It is an extract from the 2005 unaudited group accounts, which have not yet been delivered to the UK Registrar of Companies; it is expected that the report of the auditors on those accounts will be unqualified. Copies of the full accounts will be posted to all shareholders in August 2005. Further copies will be available, from the date of posting, from the Company's headquarters at Friars House, 157-168 Blackfriars Road, London, SE1 8EZ, by telephone on 020 7896 0011 or via the Company's website at www.iggroup.com This information is provided by RNS The company news service from the London Stock Exchange

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