IG Group Holdings plc (IGG) Earnings Call Transcript & Summary

Good morning. A warm welcome to our full year results presentation for FY '21. Thank you for joining us, and we look forward to answering all of your questions after the presentation. I'm June Felix, CEO; and with me today is Charlie Rozes, our CFO. This has been a fantastic year of accelerating strategic momentum and impressive delivery. I will begin by taking you through my thoughts and highlights on the year, before handing over to Charlie to take you through the details of our financial performance. I will then provide an update on our strategic acquisition of tastytrade and a broader update on our strategy before moving on to some observations on our future growth trajectory. Charlie will cover guidance. I will close with some final thoughts, then hand over to all of you for questions. This has been an outstanding year. And I'm so proud of everything we have achieved. We've absolutely delivered on everything we said we would. If I can leave you with 4 key messages that underscore our outstanding year, they are: one, we have delivered a record performance across all of our key metrics. Adjusted net trading revenue was up 33% at GBP 861.3 million. Active clients were up by over 30% at over 313,000. And we managed our costs well to deliver record profit before tax of GBP 478 million. Second, we have made strategic decisions that accelerated our growth and diversification. We completed the strategic acquisition of tastytrade. This is a transaction of real scale that gives IG entry into the world's largest listed derivatives market. I am excited about the combined future of IG and tastytrade, and I look forward to taking you on this journey. Third, we have capitalized on an outstanding year to build a foundation that positions us excellently for future growth. Our prior investments in technology, marketing capability and resilience have enabled us to capture increased demand, building a materially larger client base, which provides us with a quality foundation and puts us in a position of strength. Fourth, we have exceeded expectations against our targets. And as a result, we are upping our game and upping our growth targets. But more about that later. For now, let me take a moment to show you how we exceeded our targets. In May 2019, I set out a clear strategy and 3-year growth plan. Our medium-term targets were to achieve an annual growth rate of 3% to 5% in our Core Markets and to expand our business by an additional GBP 100 million of revenue through our Significant Opportunities portfolio of growth initiatives. I am proud to announce that not only have we significantly outperformed against the strategy, but we've done so 1 year ahead of target for our Significant Opportunities. Our Core Markets have grown at a revenue CAGR of 30% over the last 2 years, assisted by favorable market conditions. Our Significant Opportunities portfolio has delivered incremental revenue of GBP 93 million, substantially achieving our target growth a year ahead of plan. While market conditions have been extraordinary, I am confident that we would have achieved our targets without this tailwind due to the investments that we have made. This substantial outperformance is driven by our ability to capitalize on increased client demand without any compromise on client quality. And our ability to attract and retain high-value clients is a point of differentiation from many competitors. I am very proud of these results, and I'm looking forward to sharing our new growth guidance that builds on this performance later in this presentation. We are a purpose-led organization, an organization that has big ambitions for the future and one that will continue to focus on strategic decision-making to ensure we are positioned for success. We were able to seize the market opportunity in FY '21 because we had the foresight to make the investment decisions prior to this period and because of the quality of our people and our technology. As you can see from this chart, we've seen a material increase in the demand for our products. Our systems were resilient in the face of exceptional volumes, delivering 100% uptime in our core trading technology. This year, our average daily volumes were twice that seen only 2 years ago in FY '19, with spikes of demand at times 10x higher than normal. Our dedicated workforce responded to the search with agility and professionalism, maintaining their performance throughout. We will continue to invest in both capacity and resilience to fuel the successful delivery of our growth ambitions as we look to the future. Our ability to take advantage of this demand and convert it into results provide hard evidence of the quality of our franchise. On the previous slide, I mentioned we had the foresight to make investments ahead of time that allowed us to capture demand. These decisions help us to create a sustainable business, which is a core part of our strategy. To be a truly sustainable business over the long term, we believe we should lead the way as a responsible corporate citizen in our sector. We've taken concrete actions this year; formalized and announced a comprehensive ESG strategy and framework; made distributions from our GBP 5 million Brighter Future Fund to tackle educational inequality and to support our communities with COVID-19 relief across the 17 countries in which we operate; offset our emissions to achieve lifetime carbon-neutral status; supported our employees through COVID-19 with local initiatives, such as doubling medical cover for our employees and their families based in Bangalore; and wellness programs globally delivered throughout the year. And this has been recognized through improvements in key ESG ratings, such as MSCI, where we've been upgraded from BBB to A. This is a journey, and we will continue to seek opportunities to exercise our responsibilities as a good corporate citizen. Let me now hand you over to Charlie to share more details of our financial performance.

Thank you, June, and good morning, everyone. I'm delighted to be here this morning to take you through a fantastic set of results for IG as well as provide a few guidance points for the coming year. FY '21 was a record year for revenue, profit and client numbers for the group, and this slide shows the key financial highlights. I should note that all of the figures in this presentation are shown on an adjusted basis, which exclude 2 nonrecurring items, specifically related to the completion of the tastytrade deal. One of these items consisted of bankers' fees and other professional services charges of GBP 19.6 million taken in operating expenses, and the other was a GBP 7.9 million cost taken against net trading revenue, which represented the unrealized cost at the year-end of hedging part of the tastytrade cash consideration during the pre-completion period. A full reconciliation to the most comparable IFRS figures is shown in the appendix. On this adjusted basis, net trading revenue was GBP 861.3 million, 33% higher than FY '20. This was driven by a sustained increase in our active client base, which rose by 31% to over 313,000 clients. New client acquisition, expressed here through first trades, was strong throughout the year with nearly 135,000 new clients onboarded, representing a 39% increase on FY '20. Client money balances continued to grow through the year, with GBP 3.1 billion at the year-end, up 50% from FY '20. Adjusted profit before tax was GBP 477.8 million, a 61% increase on FY '20; and basic earnings per share was 108.2p. Lastly, the Board has proposed a final cash dividend of 30.24p, bringing the total full year cash dividend to 43.2p, in line with FY '20 and earlier guidance. I should mention here that with the completion of the tastytrade acquisition, we've started to review an update of the group's capital planning framework, which we'll discuss in the coming year. Consideration of shareholder distributions will be an area of focus in that review, alongside other priorities such as regulatory capital requirements, operating capital requirements and organic and selected inorganic investments for growth. Let's now look at the group's income statement. Revenue growth of 33% was against the prior year, which included our best-ever quarter, which was Q4 of FY '20. Total adjusted operating costs consisting of both operating expense and variable remuneration, meanwhile, increased by 8% to GBP 386.4 million. Adjusted operating expenses, excluding variable remuneration, increased by 7% to GBP 334.9 million, the underlying element of which was managed in line with the guidance that we gave at this time last year. I'll talk through operating expense in more detail in a moment. The variable remuneration charge of GBP 51.5 million reflects an increase in the number of eligible employees and the outperformance of the group against its internal targets. Record revenues, combined with good cost management, delivered an adjusted PBT margin of 55.5% compared with 45.6% in FY '20. This demonstrates that when trading conditions are strongly favorable for our business, with our cost discipline, we will deliver equally strong positive operating leverage. The effective tax rate for FY '21 was 16.4%, lower than we guided as we were able to recognize some U.S. tax losses and also recorded some adjustments from previous tax years, which reduced the overall group rate for the year. The latter of these items, however, were more one-off in nature and not expected to recur. Turning now to further detail on our revenue performance. In FY '21, we delivered consistently strong results across our full product range. OTC-leveraged revenue of GBP 798.2 million increased by 29%, reflecting the significant growth in the client base. Active clients increased by 22%, and revenue per client increased 6% to nearly GBP 3,700 per client. OTC-leveraged revenue continued to contribute the lion's share of the group's revenue, 93% in FY '21. However, this is now starting to shift as we saw higher rates of growth in our stock trading business and in Exchange Traded Derivatives, with the latter, of course, being bolstered significantly going forward with the addition of tastytrade's U.S. listed options and futures business. Our stock trading business performed exceptionally well, with revenue increasing 184%, driven by a 63% increase in the number of clients trading and a 74% increase in the average revenue per client. Assets under administration increased by over 100% to GBP 3.3 billion. Exchange Traded Derivatives revenue was GBP 24.4 million, of which GBP 19.5 million was from our Nadex business in the U.S. and GBP 4.9 million was from Spectrum, our pan-European MTF, which is starting to build its client base. June will talk more shortly on our performance across the Core Markets and the Significant Opportunities portfolio. Focusing now on OTC-leveraged revenue in more detail in the next 3 slides. First, on the left-hand chart, we have the active clients and the average revenue per client by quarter for the last 3 years. The last 5 quarters have been extraordinary in terms of revenue and client activity. Following the step change in the client base in Q4 FY '20, the numbers of active clients were maintained at these higher levels for each quarter of FY '21. The average revenue per client normalized in Q1 of FY '21 but remained around 10% higher than the pre-COVID average, which has been steady during the year. Now on the right-hand side, we have first trades also by quarter for each of the last 3 years. The purpose of doing this is to show the consistency of one of the key drivers of the business quarter-by-quarter. Throughout FY '21, we've onboarded new clients at an elevated level with 85,000 new OTC clients, a 19% increase on FY '20 and an incredible 170% increase on FY '19. As the bar chart shows, OTC first trades were strong across each quarter of FY '21 and reflected the steady demand for our OTC product throughout the year. This slide shows a bridge of our OTC-leveraged revenue with the main drivers of revenue over the last 2 years, which followed a consistent pattern each year. Looking at the right-hand side of the bridge, in FY '21, we had a GBP 74 million increase in revenue from existing clients who traded more than in FY '20. We then had a GBP 66 million reduction from clients who stopped trading which was partly offset by an additional GBP 10 million from clients who reactivated, having not traded in FY '20. What I'd really like to highlight, however, is the GBP 163 million of revenue we generated from the 85,000 new OTC clients onboarded in FY '21. This is shown in the orange colored bar on the right, and was 30% higher than FY '20. To give further context to this remarkable performance, new client revenue back in FY '19 was GBP 66 million. We believe that this shows we're capturing market demand with our sophisticated marketing process and established brand. The results are not only evident in the numbers of new clients, but their value as well. We continue to attract high-quality clients who should provide enduring value for years to come. This now leads me on to the next slide on new client retention. This chart shows the retention curves of the new client cohorts in each of the last 4 years and the average of the much earlier FY '14 to FY '17 cohorts. You can see the FY '21 line in red is tracking right in line with its historic cohorts. This is also the same for the FY '20 cohort, which includes the clients onboarded during the exceptionally active Q4, which coincided with the start of many lockdown programs. Many of the new clients onboarded in FY '20 and throughout FY '21 continue to trade and generate revenue. These clients are high quality and have similar demographics to our existing client base. We believe that this is a testament to both our analytics-led marketing process as well as our onboarding criteria, which is focused on more sophisticated active traders, not the occasional ones who tend to be more in a leisure or casual trader category. One of the most valuable and important legacies of the past year has certainly been the significant increase in the size of the active client base, not just in OTC, but across all of our product sets. Moving on to costs. This slide walks through the changes in operating expense year-on-year. I'm pleased to say, in a year where revenues rose significantly, the controllable costs were kept in check, and cost growth on the underlying expense base was in line with the guidance we provided a year ago in July 2020. On the FY '20 underlying cost base of approximately GBP 300 million, costs increased by 3%, plus a GBP 10 million investment in a number of technology and operational projects to build capacity and resilience in the business and to drive further growth. Both of these were guided to a year ago, and we've delivered in line with them in FY '21. Consequently, the underlying cost base of GBP 320 million was delivered as anticipated despite a substantial increase in client activity over the period. I should note that the GBP 10 million of tech and ops investment last year enabled us to successfully support the significantly larger client base and handle the peak trading volumes that we experienced at frequent intervals during the year. This is an area where we'll continue to invest as it's vital in providing a differentiated quality experience to our clients. To get to the headline FY '21 operating expense of GBP 335 million, we also chose to invest an extra GBP 9.3 million on marketing in order to capture the increased and sustained high levels of client demand, the benefits of which were evident in the number of new clients onboarded and the GBP 163 million in revenue from new OTC clients that I showed you a moment ago. The significant revenue outperformance also resulted in other revenue-related costs, being GBP 5.6 million higher than the FY '20 underlying base. Let me now cover our financial position at the year-end. As you know, IG is a highly cash-generative business. Own funds generated from operations were GBP 505.8 million, an increase of 47% on FY '20. The operating profit to net own funds conversion rate remains consistently above 100%, and in FY '21 was 111%. Liquidity was very strong throughout the period, and we maintained sufficient liquidity capacity to manage the peaks in broker margin driven by the sharply elevated trading volumes we experienced. In FY '21, the peak broker margin was GBP 683 million compared with a peak of GBP 381 million in FY '20. Our record profits and comprehensive risk management program, which is central to our business model, also bolstered the group's capital resources. At the end of May 2021, our regulatory capital was GBP 860.7 million, up from GBP 675.5 million in May 2020. This translates to a headroom of GBP 369.6 million above the regulatory capital requirement. Our capital ratio at the year-end stood at 34.9%. I should note that our regulatory capital ratio, after the completion of the tastytrade deal on June 28, remained well above the 19.9% minimum capital requirement at 26.1%. Before I hand over to June, let me talk briefly about the financial baseline for the combined group. Shown here is a pro forma FY '21 income statement of the combined group, including tastytrade, reflecting the IG financial year ending May 31. This is presented on an adjusted basis, as I described earlier. This should provide a useful starting point as we begin to report the group's performance on a combined basis going forward. In FY '21, the combined group revenue would have been GBP 961.9 million, with operating profit of GBP 527.4 million. Tastytrade net trading revenue on this basis and in Sterling was GBP 100.6 million, representing just over 10% of the combined revenue for the group. Tastytrade had 129,000 active accounts in FY '21, with some clients holding multiple accounts. The unique active client count, similar to what IG currently disclosed, was 102,000 clients. Now let me hand over to June to talk in more detail about the tastytrade business and the opportunities this presents along with a strategic update.

Thank you, Charlie. I'm incredibly excited to be here today talking to you about tastytrade, which officially became part of IG Group just a few weeks ago on the 28th of June. In the next few slides, I will give you a brief refresher on who tastytrade are and the strategic opportunities provided through the combination of our 2 businesses. Tastytrade was created by trading veterans passionate about providing self-directed investors with financial content with purpose. Tastytrade empowers its audience with mathematical and technical content that is actionable and delivered in a completely unique, entertaining and engaging way. It is one of the most-watched online financial networks in the world, and we believe it has a 10-year start on the competition, who are only now trying to develop an education-first approach. With over 1 million unique registrants and availability across 195 countries, its reach is truly global. The team deliver 8 hours of live programming 5 days a week with over 100 original shows. The tastytrade team are experts at live streaming and video content. They have over 100 million hours viewed and are known for their creative, disruptive but educational content. Tastyworks is the trading technology and revenue generator. It is the online brokerage platform for active retail investors in U.S.-listed options and futures. It benefits from a 1.4% market share of the entire U.S. options market, which translates to around 5% of the retail portion of the options market from investment trends calculations, and it is growing. At the end of May, it had almost 130,000 active accounts and recently been named the Best Online Broker in America by IBD. Tastyworks has built a trading platform that combines the best of the most recent technology with proprietary systems and high-frequency middleware to deliver a highly scalable technology platform. I believe this video gives you a flavor of what makes tastytrade special and unique, allowing it to differentiate itself and cut through in a large, noisy U.S. market. [Presentation]

Tastytrade opens up a new very large opportunity for IG. As you can see from the chart, we estimate that there are around 12 million retail clients in the U.S. who actively trade equities. Of those 12 million, an estimated 1.5 million also actively trade options and futures, creating a market that is larger than the global CFD and European turbo markets combined. As I said earlier, we estimate that tastytrade has approximately 5% of the retail options and futures market, and our first priority is to continue to grow our share of that market. And that market has the potential to grow, with 80% of all options traders starting by trading equities. There is a potential pool of 12 million active traders who could consider using both tastytrade and IG services. This creates a very material opportunity to grow in the U.S., and it plays to tasty's strengths. Tasty uniquely develops active traders, helping them to improve their trading skills and trade more strategically through the combination of their actionable educational content and their visual trading technology. The combination of IG and tastytrade transforms the scale and breadth of our presence in the U.S. market from day 1. But it's not just the opportunity to grow our share in the U.S. market. As a combined business, we can deliver more. We can utilize our sophisticated marketing capabilities. You may recall that IG has invested in building its marketing expertise over many years and now benefits from a sophisticated, data-driven digital marketing approach and an SEO capability that has become a key asset for IG. We believe that this, combined with tastytrade's strong social presence, will accelerate their growth. This collaboration has already started. We will also be seeking to grow our share of wallet by collaborating closely across all of our existing U.S. businesses, Our OTC FX business, Nadex and DailyFX to deliver revenue synergies. By using tastytrade's authentic, fun and actionable research and content, we can increase client engagement and loyalty across the U.S. client base. We are already identifying potential cross-sell opportunities. For example, DailyFX is already running tastytrade ads on its U.S. website, which attracts 400,000-plus unique visitors each month. We've also integrated in-platform promotion of tastyworks products to IG's U.S. OTC client base. Finally, we believe that IG can also accelerate tasty's international growth ambitions. Why? Because we have a successful track record of international expansion, established regulatory relationships in 17 countries and sophisticated multichannel marketing expertise, as I've already highlighted. Singapore is 1 example where we can see an opportunity with a comparable number of options and features traders to our CFD traders. Our combined teams are already looking into our best route to enter this market, and we'll update you on our plans in due course. These are exciting times. Now that we've provided you with some insight on tastytrade, I'd like to update you on how we have outperformed on our growth strategy. As I told you in my introduction, IG has seen fantastic growth in our core markets. We overachieved against our 3% to 5% target, in part due to favorable conditions. Irrespective of market conditions, clients are attracted to IG. The breadth and depth of our offering and innovative products gives clients access to the global markets 24 hours a day and makes IG their provider of choice. We seek to not only meet but to anticipate their needs. Since January, we have added an average of over 100 equity markets to our product offering each month. We continue to hold a market-leading position in many of our core markets, including our largest, the U.K. Where knowledgeable traders are looking for a trading platform, they will look for a provider they can trust. Our market-leading position provides them with the confidence in this area and helps us to attract a strong flow of new clients and truly differentiates us from competitors. Finally, we also have the benefit of our brand strength and efficient marketing capabilities. We continue to invest in our brand and make it more valuable. Our recent sponsorship of England Cricket will raise our profile with a truly global audience. Our investment in brand has clear rewards. This year, over 94,000 clients placed a first trade in 1 of our core markets. Now moving on to our Significant Opportunities portfolio. As I said earlier, our target was to grow revenues by GBP 100 million to GBP 160 million in FY '22. At the end of FY '21, a year ahead of plan, we have delivered nearly GBP 152 million of revenue, substantially achieving our 3-year target in just 2 years. Japan and our emerging markets business have delivered significantly higher revenues and are now becoming established businesses. The U.S. OTC FX business, having just launched in 2019, is still at an early stage with increasing momentum and is on a high-growth trajectory, as is our European on-exchange business Spectrum. They represent potential to be unlocked as we expand our product and geographic diversification. Our whole Significant Opportunities portfolio has done really well. But if I had to pick one, I would pick Japan. Japan is a fantastic example of how we can expand our market penetration in a very challenging market. In a short period of time, we have delivered exceptional growth, tripling our client base since 2019 and delivering an incremental GBP 50 million of revenue; and in FY '21, generated GBP 68.7 million, over 2.5x FY '19. It really has been a success story for our dedication to implement localization to leverage the strength of a global business while implementing a local market-specific approach. With this approach, we are closer to the clients, listening to the feedback and implementing the innovations that matter to them. We're keeping our products relevant and market-leading. We have delivered products tailored to Japanese needs, invested in our brand and successfully implemented new marketing channels such as the use of social media and influence to expand our reach. This has culminated in a very material improvement of our performance in this country, again, growing revenue over 2.5x in 2 years. Going forward, having achieved our initial targets, we are now adjusting how we group our businesses to better reflect the stages of growth and establishment they are at today, 2 years after our original growth strategy was launched. This means that IG Prime, Japan and emerging markets will transition into what was previously Core Markets to create Core Markets+. We do expect the revenue generated by these businesses in FY '22 to moderate from the record peak seen in FY '21. However, from FY '22, we anticipate that these markets will grow at 5% to 7% per annum over the medium term. The key drivers behind this upgrade are: the growing interest in self-directed trading, creating a tailwind for our product set; our proven ability to deliver product innovations in these markets; our skill leveraging local market expertise across our international footprint; and more improvements in our marketing efficiency. The high potential market portfolio will consist of all of our U.S. businesses: tastytrade, IG US, Nadex and DailyFX, plus our pan-European MTF, Spectrum. We're really excited by the growth potential that we have identified in this group of businesses. As an example of this, the MTF, which doubled its client base in the year and traded 775 million contracts and has a robust pipeline of additional brokers and issuers that want to trade with Spectrum. This portfolio, if we include the pro forma revenue from tastytrade, would have generated GBP 137 million in revenue in FY '21. We anticipate a revenue growth of 25% to 30% over the medium term, with tastytrade expected to deliver at the higher end of this range over the medium term and above this range in FY '22 as the business is early in its growth life cycle. The growth trajectories I've taken you through, much like the targets we set out in FY '19, are ambitious. And when we have delivered them, they will create a more sustainable, diversified global revenue base for the group, a business that will be even stronger than it is today. Much as today, we are stronger than we were in 2019. These charts give you a graphical representation of that diversification. We anticipate that revenue generated from non-OTC products will grow to a much larger number over the medium term, with our ETD business driving this growth. At the same time, we will also deliver geographic diversification with our high-growth markets, materially increasing their revenue contribution over the same period. The U.S. market, representing only 4% of revenue today, will become a materially larger number over the medium term. Today, as a combined group, we have over 400,000 active clients. And in some ways, that is understating our true client base. 400,000 unique clients placed a trade over the course of the year, but almost 1 million IG clients logged into 1 of our trading platforms or apps. So our reach is far wider, and this reach nearly doubles if you include the 1 million-plus registrants at tastytrade. So that is a reach of almost 2.1 million. We have a very large and growing platform. This is an exciting time for the Group, and we are incredibly well positioned to succeed. Now I'll hand over to Charlie to provide you with key guidance points before I close.

Thanks, June. I'd now like to share some guidance and outlook based on how we see things at the moment, firstly, on FY '22 and then looking over the medium term. As we move further into FY '22, we anticipate some moderation in revenue as client activity and client acquisition reduces from earlier record highs. We expect this to be limited to the Core Markets+ segment, which benefited most significantly from the elevated levels of market volatility, which have prevailed since Q4 FY '20. We anticipate the total operating costs will increase by around 4% on the pro forma combined IG and tasty FY '21 cost outturn, as shown previously. In addition to the usual inflationary type increases, this also includes further investment in technology resilience and capacity as we believe this is critical to ensuring we can continue to offer a quality experience to our clients, and we've benefited significantly from the investments made in this area in FY '21. Offsetting these increases, we expect some normalization in variable costs, including variable remuneration and revenue-related costs in line with the anticipated moderation in client demand and trading activity. On tax, I'd guide you to an effective tax rate for the combined group of around 20%, reflecting the anticipated mix of business in the coming year and generally upward pressure on corporate tax rates in several countries. Looking ahead to the medium term, I'd like to reiterate the guidance June provided in the previous section. On the newly designated Core Markets+ businesses, we're raising our revenue guidance for the medium term to a range of 5% to 7% per annum from FY '22. The newly formed high potential markets portfolio is anticipated to grow revenues by a range of 25% to 30% per annum over the medium term from the FY '21 pro forma revenue base. Within that, we expect tastytrade to deliver revenue growth towards the top end of this range over the medium term and for FY '22 to be above this range as it's still in the early stages of its growth life cycle. As we progress through the year, we'll, of course, update on these points where necessary. I'll now hand back over to June to summarize.

Thanks, Charlie. So turning to our final slide. This has been our strongest year on record. We have diversified and grown our business and also shown accelerating strategic momentum for sustainable growth. The business has demonstrated its resilience and built an enhanced foundation for future growth through strategic investments in Spectrum and tastytrade. Our results would not have been possible without our outstanding people. Everyone has worked incredibly hard and consistently stepped up throughout the last 12 months. In particular, I would like to thank my entire [ ExCo ] team for the important role they played in our success. And specifically, Bridget Messer, one of my executive directors who has decided to leave IG for Australia at this time for family reasons. We all wish Bridget well and are thankful for the contributions she has made to the business over the last 16 years. Bridget and I will be working together over the coming months to ensure an orderly transition. Looking forward, the business will continue to diversify with strong growth trajectories over the medium term. I believe the Group is better placed than ever before to deliver sustainable shareholder returns. Thank you for taking the time to join us today. I will now open the floor to questions.

[Operator Instructions] Your first telephone question today is from the line of Ian White from Autonomous Research.

I had 2, please, both on tastytrade. And first, I just wondered if there was any additional detail or data points you could give us to sort of help understand your conviction in near-term revenues in terms of the guidance for 2022? And I'm basically just conscious that U.S. retail trading is -- looks like it's declined significantly since February, and that's going to pose a challenging comp for FY '22. And I took from your remarks that you're kind of bullish, if you like, on the market growth opportunity, but not clear to me that, that comes through in FY '22. And so that was the first question, please. And just secondly, on the synergy contribution. Just to clarify, is that included in the guidance, the medium-term guidance? And when you talk about overseas expansion, is that more about marketing the existing U.S. products to overseas clients? Or about launching new local products options trading on SGX? For example, your Singapore example. And what would be the cost associated with the latter, please?

Ian, this is Charlie. I'll take some of those. So in terms of, I guess, the conviction that we have, I mean, one -- I mean we've given everybody a baseline for how the business would have performed across FY '21 on IG terms, so an IG calendar in sterling, our accounting treatments, et cetera. So you have that. I think that will give you a basis or a lens to look at how the business performed from basically year-end, calendar year-end until the end of May. So hopefully, that's helpful because you'll see within that, the active account growth, the active client growth, I think all moving quite nicely. I would also say in terms of -- and we commented on this in the RNS, I mean the business has traded very well since the time of the announcement, very much in line with our expectations. I would point out the fact that every consecutive quarter in FY '21, and again, that's on an IG financial year, every consecutive quarter was higher than the other. So even though, I think, there was widely reported some softness in April and a bit in May, each consecutive quarter was higher than the preceding one. I would also even go on to say that in the month of June itself, that was one of the best months ever for tastytrade. So in terms of why do we have confidence, well, I think it's for those reasons that the business has continued to trade and trend quite favorably. I would also say then just -- maybe even just a little bit beyond the near term, so beyond FY '22, why are we confident? I mean I think there are a number of structural drivers that are there that underpin the growth and the guidance that we've given today. I mean, one, you have a growing interest in the options and futures space beyond people taking an interest in cash equities. The trend in self-directed trading and investing is there. We think that's going to continue to move inexorably in that direction, the tools and the resources that people have available to them today. And you obviously have consolidation going on in the sector right now in the U.S., particularly with some of the larger players, for which we think tastytrade and perhaps others will be net beneficiaries of that. So overall, we think there are a number of things that are working in favor of the business right now. And hopefully, what I've given you here today will help underlie some of that confidence. In terms of the synergies and have we included anything in our guidance, with respect to International, we haven't put anything material in there. We are expecting to launch the business in Canada later this year. That's been underway. We do have some allowance for that in there. And then obviously, there's the existing Australia business of tasty's that we'll be looking to obviously boost that business alongside quite a strong franchise for IG. But in the main beyond that, some of the things that June was describing more broadly, I think we'll be coming back to those in due course. And then your last question, I think, around the product set, certainly, the initial focus would be around the U.S. options and futures product set, and that's what we'd be looking to focus on it first. In terms of local options and futures on local markets, that's something that we would consider. But I think the U.S. is the primary focus right now.

Next question is from the line of Martin Price from Jefferies.

I've got 2, if I may, again, both on tastytrade. First, as you think about the longer-term international rollout of the business and cross-selling to the existing global IG client base, I was just wondering how we should think about the risks of cannibalizing the high-margin CFD business? Do you see this as an exclusively sort of complementary product or perhaps attracting a different type of user? That would be the first question. And then second, with the SEC having recently announced plans to open an investigation into payment for order flow, I was just wondering if you could provide us with an update on the exposure at tastytrade and perhaps how you see that debate evolving?

Yes. So Martin, this is June. Thank you for your questions. So first, in terms of international expansion and cannibalization. We've been doing extensive research on that, and we have determined that it's actually a complementary business. There are very few situations where we see that the same traders that we have today that do CFDs also trade OT -- listed derivatives. So this is an incremental and complementary products. And that was demonstrated optically in the slides through Singapore, where we've done that research, and we're doing that across all 17 markets. So we're quite optimistic that, that is the case. On the second question, in terms of SEC and payment for order flow. First of all, as you can see from a lot of the papers that have been put forward to the SEC, payment for order flow actually provides a real benefit to the retail consumer in terms of pricing improvement on the order of $1 billion per quarter and actually more than that, but that's a nice round number. So in terms of the SEC investigating, absolutely, they are a very responsible regulator, and we'll look at this carefully, but the consumer benefit is quite clear. I would see them actually moving toward greater transparency as they continue their investigation.

[Operator Instructions] Next question comes from the line of Justin Bates from Canaccord Genuity.

Congratulations on a great year. Just a couple of questions from me. Firstly, could you give some further cost guidance in relation to [ 23 ], please? Just what you're thinking in terms of inflation. Secondly, the same question, that we tax as well. And then also, just when you refer to moderation in trading in 2022 for the Core Markets, can you give us some sort of indication as to what you're thinking there, the definition of moderation? Is that 10%, 15%, 20%? Just some indication would be helpful.

Justin, this is Charlie. I'll take those. So in terms of the cost guidance, looking out beyond FY '22. So I think the guidance we've given today for FY '22, working off the baseline pro forma that we've given you, I think it represents our current thinking. I think beyond that, a similar type of rate of growth is probably what I would suggest using for the moment. As we go through this year and see how things play out, I'll fine-tune or update guidance on all of that when and where we need to. But I think right now, I would roll forward on the basis that we've just given on cost. In terms of tax guidance, I'd say the same thing. We had a bit of an unusually low effective tax rate for the group in FY '21 and gave the reasons why in the presentation. Happy to come back on that. I think going forward, though, looking at the mix of business within the group, and as I said in my remarks, generally upward pressure on corporate tax rates in countries around the world, I would use 20% as a planning guideline for the moment. And again, it's one that we'll watch and we'll update guidance in due course. And then in terms of moderation, we haven't given any guidance around that, partly because I think as we look at where the market is today, in thinking about FY '22 and some step-downs from some of the record quarters and the record year that we've had, I think the market is actually already in a pretty good place from our standpoint. So I don't see any need to give any specific guidance around that because I think people have gotten their heads around it already. I think what we will see, and again, you can see it in some of the numbers that we've shown today, revenue per client actually normalized or moderated back in Q1 of the past year. The active client base has held up, which is good. We would anticipate seeing a little bit of moderation in activity. But I think the area where we would expect to see moderation, if you will, be more pronounced might be in the acquisition side. We obviously have had 2 back-to-back very strong years with that and would expect acquisition to probably come down a little bit as we go into FY '22. You take all that together, and I think that will get you a bit of a step down as we see it right now.

[Operator Instructions] The next question comes from the line of Vivek Raja from Shore Capital.

June and Charlie, a few questions, if I could. The first one is about the infrastructure investment that you're talking about going forward. Just wondered if you could quantify that, please? The next question is about market share. So obviously, across the leverage trading space, there's been very strong new client acquisition since the pandemic. And obviously, there are periods when the platform was down or you weren't accepting new account openings. So I just wonder if you could comment on market share, particularly in the sort of high quality end of the sort of customer spectrum where you focus. And the last question was about income retention. So you used to disclose volumes against net revenue. I just wondered if you could quantify in '21 what the client income retention ratio was.

Sure. Absolutely. Thank you, Vivek. So a couple of things. In terms of the investment portfolio, in terms of the infrastructure, we continue to invest to ensure that it maintains the resilience that we've experienced and also to be very well positioned for growth. And we will continue to make those investments in line with the growth expectations that we've laid out. As it relates to market share, we've done a real study of what has happened in the market in terms of growth in the premium segment. And we're pleased to say that we've maintained share. And in fact, in markets like Singapore, which are growing very quickly, we've actually taken the #1 share away from competitors. So we're very comfortable that our high premium client segment is being very well served. As it relates to the income retention, that's in line with what we've seen in the past. So no major changes because we continue to maintain the same onboarding requirements and thresholds that we've always had. If anything, when the more advanced and professional clients are interested in trading, we've seen that we get a disproportionate share of their business.

Vivek, on the last point, were you looking for the revenue conversion rate?

That's right, yes.

Yes. So we finished the year at 73%, so that was up from 68% the year before when I think, as we said at this time last year, we had -- it was a harder time in the fourth quarter. But all of that has performed quite well throughout this year despite a lot of the trading intensity that we saw through the year. So we're at 73%. As June said, that's in line with our historic average. So we're happy with the outcome of that.

Next question is from the line of [ Ben from Broadhurst ].

Just 2 quick questions from my side, if I may. Firstly, just on the tastytrade one-off costs. I think in the release, you mentioned them being not material for FY '22. I just wondered, should we sort of take that as being lower than GBP 5 million, lower than GBP 10 million or lower [ than GBP 1 million ]? Where do we sort of define materiality there? And then second, question just in relation to Australia. Again in the statement, I think you referenced ASIC impact in April and May being in line with expectations. Has that continued into June and July, I wondered? And maybe perhaps you can expand a bit on what the expectations actually were to give a bit more color.

Sure. [ Ben ], I'll take the first one. So in terms of the tastytrade one-offs in FY '22, as we said, we wouldn't expect those to be material. I would define that as probably around the GBP 5 million mark from what I see today. I mean, as we get more precise with that as we go through the year, I can give an update, but that would be related to just some simple integration points, some back-office systems, payrolls, things like that. So that's all that would be in the coming year. The things that we took in FY '21 largely were related to closing and completion. So those were the cost of bankers, lawyers, due diligence, all those types of things. So this other point would be just around some integration. It's not a particularly heavy integration, but we will have some onetime costs that won't be recurring.

Yes. So as it relates to Australia and ASIC, as you know, we have a lot of experience having gone through ESMA. We have modeled that in. And in fact, that has been in line with April and May and in fact, a little bit better than our expectations. So all is handling or going forward in very good order, and it's tracking as we planned.

If I may just sort of follow up on that. Does that mean to say that the experience has been in line with what you saw in ESMA?

It's actually a bit better than that. So that's -- for us, a couple of reasons. We built up a very strong base over the last 2 years in terms of clients. And that has really, really helped us ensure that we have the quality of clients that we want. So we haven't seen the kind of same level of change as we did in ESMA.

That concludes our telephone questions. I would now like to hand you over to Liz Scorer for the web questions. Please go ahead.

Thank you, Stuart. So we have a couple of web questions. The first is from [ Mark Bentley ]. What is the Board's policy and review process for cybersecurity?

Mark, thank you very much for your question. This is June. Yes. So cybersecurity is really part of the Board's risk taxonomy and really forms the monthly MI that the Board receives, so they keep watching it very carefully. Our Chief Information Security Officer presents to the Board twice a year in terms of making sure that we have a full understanding of both the threat assessments, the trends, the investments, so definitely keep on top of that.

Thank you, June. And we have a second question from [ Sean ], who'd like to know if there are any incoming new financial regulations that we're preparing for? And if we're sharing any new potential products with any regulators?

Yes, we do have some regulation coming in, in Dubai, which is a relatively small part of our portfolio, but similar to ESMA. And again, because of our experience with ESMA, where we were able to navigate that extremely well, we're in a very good position. We're also preparing for the investment firm regime in January, but that's not going to impact any capital calculation requirements. And so we don't see that as a material impact.

Okay. That's all we have on the web. We do have a couple more that we will take offline because we are now quite out of time. So I'd like to thank you all for listening today. And if you do have any further follow-up questions that we haven't covered as part of the presentation or the Q&A, please do contact myself or the team. Thank you.