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

Good morning, ladies and gentlemen. Welcome to the interim results for the 6 months ended 30 November 2022. My name is Francine and I'll be your operator for this call this morning. [Operator Instructions]

Good morning. Welcome to our first half results presentation. I'm June Felix, CEO of IG Group, and I'm joined by my CFO, Charles Rozes. I'm delighted to update you on the excellent progress we've made during the half of strong performance and strategic delivery. I'm proud to say we have delivered record revenue in the face of extremely challenging market. Today, I'll start with my reflections on the last 6 months and discuss our performance highlights. Then I'll hand over to Charlie, who will cover our financial performance in more detail. I'll return to look at the great progress we've made across our strategic priorities, and then we'll open up for questions. I don't need to tell you that it was a very testing 6-month period for many companies given the external environment. However, our record performance for the half demonstrates that our diversification strategy has created a strong and resilient business, capable of delivering consistent performance regardless of the market backdrop. Looking back at the half, the macroeconomic environment between June and November was striking. It's hard to believe so much could happen in such a short period of time. IG's market analysts across the globe were [ out in force ] during the half, providing content and context to help clients in the media make sense of the noise. Our clients [indiscernible] in these conditions. And as highlighted that unlike others, we are well positioned to navigate this complex macro environment. It has also demonstrated again that our business is resilient and will continue to perform to different market cycles. The severe interest rate changes precipitated growth in some of our franchises, notably in the U.S. as well as driving trading opportunities globally. Most importantly, it shows the sustainability of our performance as the diversification of our product capability and our value content drove the opportunity for self-directed high-quality customer base to keep trading. I'm extremely proud of our achievements in the first half as we delivered on 2 critical elements of our strategy: diversified business growth and return of excess capital to shareholders. We can do one without sacrificing the other. Despite a softening in trading demand due to the global economic environment, we've avoided sharp drop-off in business and maintained our client base. Looking at operational performance. We delivered record revenue once again for the half year and continue to make progress on our strategic growth objectives. Group's total revenue was up 11% year-on-year, and we delivered GBP 260.7 million in pretax profits. The real highlight here is the strength of our high-quality client base, which remains a powerful engine for the business. We continue to attract clients at a rate higher than our pre-pandemic levels and ones that have the ability to continue trading through all market cycles, clear evidence of the quality of the clients attracted to IG. As a result, we've seen strong growth in revenue per client. Our own funds were up 25% to just over GBP 1.1 billion. Own funds is the group's metric to measure the strength of its liquidity position. We're really starting to reap the benefits of our diversification strategy with non-OTC revenue up 30% for the half to GBP 96.2 million. It is now a meaningful contributor at 19% of total revenue, up a full 3 percentage points over the past 12 months. We've also delivered strong capital returns as a result of delivering against our strategy and good cost management. These solid results and cash generation have allowed us to return excess capital to shareholders as outlined in our capital allocation framework announced in July '22. Today, we announced an interim dividend that has been raised to 13.6p per share. We will be extending our buyback scheme by a further GBP 50 million, bringing us to GBP 200 million when completed, another sign of our capital strength. We have executed over GBP 114 million on the GBP 150 million share buyback and a final dividend of GBP 133.2 million from FY '22. Meaning, we have returned nearly GBP 250 million to shareholders during the half. This clearly demonstrates that our strong balance sheet continues to support investment for future growth while maintaining high margins. Now let me talk through the drivers that are fundamental to continually growing our business. We attract, maintain and nurture a high-value loyal client base. We are increasingly diversifying our revenue stream for our product mix and continued growth in U.S., Europe and Japan. We continue to invest in creating an outstanding client experience, enhancing our products and platforms and delivering valuable content, while at the same time achieving significant profit margins and generating healthy levels of cash and capital. Our market-leading risk management practices ensure we deliver consistent revenue performance regardless of market conditions. These are the key ingredients that make our business resilient and sustainable, allowing us to achieve GBP 1 billion in revenue over the past 12 months and which differentiates us from peers. Our ability to attract and retain higher quality self-directed clients lies at the heart of our business, which is built off of our nearly 50-year-old OTC franchise. The attrition chart on the left shows that the latest cohort onboarded in FY '22 is demonstrating the same trend as previous cohorts. Therefore, like those previous cohorts that has now been with us for some time, these will add to a growing base of recurring revenue. The chart on the right illustrates how our enduring revenue continues to grow. Over 80% of our OTC revenue is generated by clients who have been with us for more than a year. As expected, given the softer market conditions, the value of the first [ trades ] in FY '23 is down compared to last year, but they remain well above the pre-pandemic averages. So again, we continue to add to our enduring revenue stream more than we did before. We are delivering against our medium-term targets in both our Core Markets+ and High Potential Markets. In our Core Markets+, which represents OTC and our stock trading business, total revenue is up 6% to GBP 424 million. All of our regional offices grew from Q1 to Q2 demonstrating the momentum being built across the business. In the last 36 months, IG has gone from being in the top 30 players in Japan to now #5 and holds the #1 position of international trade events in Japan. In our High Potential Markets, Spectrum or Pan-European [ exchange ] has recently onboarded Societe Generale, attracting [ an issuer of ] this caliber is an important landmark for our exchange as it brings thousands of new instruments previously unavailable in Spectrum. We also have a solid pipeline of additional brokers and issuers. This gives me real confidence in the future of this business. Now on to the U.S. was a record half for IG North America. Tastytrade grew 26% half-on-half on a pro forma basis. Our active traders at tasty place the same number of trades in the last 6 months as they have previously in bull markets. The average funding per new clients also doubled over the last 6 months, demonstrating our ability to market into this segment. In addition, IG US, our FX business grew 46% in the same time period. So as you can see, the growth of our U.S. portfolio is on track. Before I hand over to Charlie, let me reiterate that IG is an exciting and resilient business that continues to deliver sustained and consistent growth. During the first half of the year, driven by a clear purpose, we delivered record performance despite a challenging market. We are meeting our ambitious medium-term targets. We continue to diversify the business. We continue to create, attract and retain the most experienced higher-value self-directed clients around the world and that, in turn, drives a growing base of recurring revenue. And we have multiple engines for growth over the near and longer term. Let me now pass over to Charlie to run through the first half results.

Thank you, June, and good morning, everyone. I'll now take you through our results for the first half of FY '23. Before we get into the detail, I'd like to clarify a few points on the presentation of the figures. We sold Nadex and our investment in the Small Exchange in the first half of FY '22. And the results today are presented on a continuing operations basis as they were for the full year FY '22. Additionally, all figures are presented on an adjusted basis, which excludes certain one-off items and noncash costs in both the current and comparative periods in relation to the tasty deal, the sale of Nadex and Small Exchange and the debt refinancing completed in November last year. These adjustments are straightforward in our view and match the ones that we've done previously. For completeness, we've included a reconciliation of non-IFRS performance measures in the appendix. On this slide, we're showing the financial highlights for group performance in the first half. Total revenue, including interest income, was GBP 519.1 million, which was up 11% and profit before tax of GBP 260.7 million was up 1%. Total revenue was a record result for any half year period for IG which is great to see given the more variable market conditions across the first and second quarters. On the top right, you can see our revenue for the last 7 half years. We've consistently delivered revenue growth across these periods despite the changing macroeconomic backdrop. We believe this highlights a certain level of recurring revenue at IG, which is attributable to our more sophisticated active client base we often trade across all sorts of market conditions in both high and low volatility. As June highlighted earlier, the majority of our revenues and the corresponding compounded revenue growth comes from a relatively seasoned book of clients who continue to trade with us beyond their first year, particularly in our flagship OTC business. Our client money balances were GBP 4.5 billion at the end of the period, which moderated a bit on the comparative period but was still materially higher than the levels we've seen in the past. Adjusted basic EPS was down slightly at 2% due to the small reduction in profit after tax, which was driven by a higher effective tax rate. Finally, we're paying an interim dividend per share of 13.26p, up 2% on last year as part of our regular distributions within the capital allocation framework that we announced last summer. And now on to the income statement. Net trading revenue of GBP 494.9 million was up 6%, demonstrating the strength of our business and our high-quality client base. Total revenue was up 11%, boosted by the growing levels of interest income from higher interest rates, which increased to GBP 24.2 million in the half. Total operating costs were up 25%, largely reflecting the annualization of our cost run rate in the second half of last year, which was as expected and guided previously, with some adverse translational FX due to the weaker sterling. We kept up a steady stream of investments in the business to drive organic growth and have kept costs well managed aside from the translational FX that I just mentioned. I should add that we also have an additional month of tasty cost in this half and the new 1% charitable donation. We'll cover the operating costs in more detail shortly. That brings us to an operating profit of GBP 259.4 million, broadly flat on the prior year. Working through the rest of the P&L, net finance income in the half was GBP 2.4 million. This line in previous periods has typically been a net cost. However, rising interest rates have increased the interest income generated on our own corporate funds, more than offsetting our financing costs, which are fixed. Profit before tax was GBP 260.7 million, up 1%, while delivering a strong PBT margin of 50.2%. The effective tax rate was 18.9%, 150 basis points higher than the prior year, which included the benefit of standard U.K. tax incentives and some adjustments to prior year estimates. Taken together, we think this is a strong result considering the very different market conditions year-over-year. Our revenues are now much more diverse by product, by geography and type. In the half, net trading revenues remain robust, while interest income has started to be a meaningful part of the revenue mix as anticipated. While translational FX was a factor on both revenue and costs, it was broadly neutral on the PBT line. So overall, a very good result for the half year and more evidence that we're delivering on our strategy and changing the definition of what IG is. Shifting now to look at net trading revenue a bit more closely where we show the revenue, active clients and the revenue per client by product. OTC derivatives revenue of GBP 416.5 million was up 6%. The number of active clients in the period was maintained at the same level as the year before as our clients continue to trade. We also saw an uptick in the average revenue per client, which increased 6% as our clients traded more frequently. Exchange-traded derivatives revenue was GBP 67.1 million, up 16% and included GBP 61.2 million of U.S. options and futures revenue and GBP 5.4 million from European derivatives. Active clients reduced 13%, which was due to some normalization in the U.S. client base coming out of the pandemic period. Spectrum's active client base, however, continued to grow, up 9% in the period. Revenue per client was higher in both the U.S. and Europe driven by an increase in trading from our most active clients. Stock trading and investment revenue was GBP 11.3 million, down 30% as trading volumes moderated and clients shifted away from U.S. equities, reducing the revenue per client. The total number of active clients, however, remained in line with the prior period. With the rising interest rate environment, interest income on both client money and our corporate funds is now a larger component of our revenue mix, with interest on client money alone now making up 5% of our total group revenue. This was 0% last year. Interest income has a further valuable revenue stream for the group's increasingly diversified top line. There are 3 main areas where this is relevant. U.S. client funds, international client funds outside the U.S., and our own corporate cash. In our U.S. businesses, our clients had GBP 1.6 billion on account. And in the first half, we earned GBP 16.7 million of interest income. In this market, we benefit directly when rates rise as we're not relying upon banks to pass along interest rate uplifts due to our third-party clearing relationships. Towards the end of the second quarter and now into the third, we've been running a very successful series of marketing campaigns in the U.S. designed to attract large balance accounts. June will cover this shortly and a further update on our U.S. businesses. Across the rest of our business globally, our clients have GBP 2.4 billion on account, and we earned GBP 7.5 million in the half. Here, the relationship between interest rates and this associated income is less direct than in the U.S. due to the number of banks we directly hold deposits with and the corresponding terms. Nonetheless, the rising interest rate cycle has also benefited these balances, again, attracting higher levels of interest income than we've seen before, where for some balances, we were seeing negative interest last year. Interest on our corporate funds has also become a more meaningful number in the half. This is reported in the financing income line in the P&L, which is below operating profit, but included in PBT. At the end of the period, we held GBP 1.9 billion of corporate funds and our net income of GBP 2.4 million. On all 3 of these areas, I'll share our outlook towards the end of my presentation. Now looking at our Core Markets, the traditional cornerstone of IG, revenue in the period was up 6%, in line with our previous guidance. On this slide, we show net trading revenue for our Core Markets businesses going back over the last 7 years. The growth in these businesses has been remarkable, showing we now operate at an entirely different scale to just 3 years ago representing an excellent payback on our investments in these areas. Two of the standup points for me on this chart are Japan and Australia. Japan continues to go from strength to strength and is clear evidence of how the right products, marketing and localization, we can succeed in a market that's very different than others shown on this page. Australia, which you may remember, had new OTC trading regulations introduced at the end of FY '21, has returned to growth, a testament to our resilient and high-quality client base. The resumption of growth here follows a similar pattern to what we saw several years ago in Europe, where clients adapted their trading strategies and practices in light of the new regulations. Our High Potential portfolio revenue in the period increased to GBP 94.8 million, increasing 28% on a pro forma basis, which includes the benefits of FX tailwinds. U.S. revenue was up 27%, and European revenue from Spectrum was up 44%. Tastytrade, our award-winning U.S. options and futures business, reported total revenue of GBP 77.9 million, up 26%. This growth was driven by the significant increase in interest income as the U.S. Fed funds rate rose and some benefit of the weaker sterling on the translation of U.S. dollar revenue. Both of these more than offset some trading revenue weakness that we saw in the period, where we traded more in line with the market. In our U.S. foreign exchange business, revenues increased by 46%, benefiting from the sharp currency volatility across the period. This business has often been overlooked in the past, but alongside our options and futures business, we now have a meaningful level of U.S.-derived revenue, which is growing. And over in Europe, Spectrum continued to expand its network, adding 1 new broker and 1 new issuer in the period. This will support the strong organic growth, which we're currently seeing on the exchange. The 44% increase in revenue reflected both an increase in the number of active clients in the period as well as an increase in activity as the business begins to establish itself as a more significant part of our High Potential Markets portfolio. And now on to operating costs. At a headline level, total operating expenses increased 25%. However, there are several factors driving this year-on-year movement. Last year only included 5 months of tasty costs given the effective date of the acquisition, while in this half, we have the full 6 months. In this half, we also have the full GBP 4 million accrual for the charitable donation, which is new. Lastly, we've had significant translational FX headwinds across the period due to the weaker sterling, adding around GBP 10 million of loan to cost in the first half. On a more like-for-like basis, the main movements of operating costs were technology-related expenses in both the fixed remuneration line and other structural cost lines. Investment in our technology remains a key area of importance for our business and the additional costs include both investments in new development projects and the ongoing cost of running our trading platforms where we've seen some inflation in supplier costs. For fixed remuneration, headcount increased by 178 year-over-year. However, with nearly 80% of the new staff being added in our lower-cost global service centers, this helped mitigate an otherwise larger increase. Today, nearly half of our staff are located in 1 of these 3 centers in Poland, India and South Africa, which provide a high degree of capability as well as cost efficiency. Fixed remuneration also contained the effects of larger-than-normal base compensation increases due to sharp inflation and cost of living pressures. Our actions here have been successful as staff retention remains within our targeted levels. Costs in the first half were slightly down on the second half of last year despite the headwinds of inflation and foreign exchange. We anticipate operating costs to increase in the second half of this year, which is typical of the first and second half phasing we normally see, although our overall cost guidance for the full year remains the same provided we don't see any further material change in FX rates. The consistency and strength of our operating performance allows us to invest in the expansion and growth of the business while delivering attractive returns for shareholders. We announced the new capital allocation framework in July last year, and we've allocated capital in line with the framework during the first half. As a reminder, the items in blue represent annual uses of capital with the red items relating to potential uses of surplus capital. We began the half with a healthy regulatory capital headwind of GBP 528 million. As June and I had mentioned, we continue to invest in our businesses to drive organic growth, while still maintaining a high PBT margin. In addition, we pledged GBP 4 million to charitable causes, highlighting our commitment to empowering broader society via education and financial literacy. This pledge was also the first of a multiyear commitment by IG. In line with our targeting of annual regular distributions of around 50% of adjusted profit after tax and modest annual growth in dividend per share, in July, we increased our full year dividend by 2% from 43.2p to 44.2p. And today, we've announced a 2% increase in the interim dividend for FY '23, from 12.96p to 13.26p. Looking at other investments in the business, while we evaluated some smaller inorganic opportunities in the period, it did not meet all of our criteria. So consequently, we passed on them. While we will consider acquisitions as part of our growth strategy, we will continue to be very disciplined in assessing such opportunities against our strategic priorities. Currently, our focus remains on delivering organic growth which is what our medium-term guidance is derived from. Finally, the inaugural GBP 150 million share buyback program that we announced in July is substantially complete. Having assessed our current regulatory capital headroom after the investments and other allocations that I've just described, we've today announced a GBP 50 million extension to the existing buyback program to begin when the current program completes. This demonstrates the Board's continual review of the sources and uses of capital and where appropriate, returning excess capital to shareholders in the form of additional distributions, which we described in our capital allocation framework. Our consistently strong profit and cash generation, combined with disciplines around the allocation of capital in line with our new framework, puts us in a position of excellent balance sheet strength. An important aspect of our business model is that profits are realized in cash almost immediately. Our profit after tax, therefore, goes directly to the accumulation of capital and liquidity in every period. At the end of the first half, after paying the final dividend from FY '22 and buying back GBP 114 million of shares, we reported owned funds which excludes client funds on balance sheet and our GBP 300 million bond of GBP 1.15 billion, up 25% from a year ago. Our available liquidity by which we mean free cash above what is needed to meet broker margin requirements and any overseas regulatory requirements grew to GBP 883.8 million, and our regulatory capital headroom was GBP 503.3 million. Maintaining certain levels of capital headroom is important as it gives us tremendous flexibility for how we allocate capital over time, whether as investment or shareholder distributions. IG has a long history of nearly 50 years of prudent financial management and the financial fundamentals, liquidity and capital are stronger now than they've ever been before. Lastly for me, I'd like to go over some guidance points. On total revenue, we maintain our medium-term guidance across our Core Markets+ and High Potential Markets portfolios. In Core Markets+, we continue to target total revenue growth of 5% to 7% per annum over the medium term. In our High Potential Markets, we're targeting total revenue growth of 25% to 30% per annum over the medium term. On interest income for U.S. client money balances, we'd expect an annual increase of $4 million for every 25 basis point increase in the Fed funds rate. For interest from non-U.S. client money to gearing ratio is more complicated, but we'd expect in total interest income of around GBP 25 million this financial year. On our corporate funds, we expect to report net finance income of around GBP 10 million for the full year [Audio Gap] is in the second half due to the phasing of costs that we typically see and as we continue to invest in organic growth opportunities and continually upgrade our technology platforms. Translational FX was a significant headwind for the cost base in the first half. But provided no material changes in FX rates in the second half, we'd expect to be in line with our previous guidance of mid-single-digit growth on the second half run rate from FY '22. On margins, we reiterate our expectation of a PBT margin in the mid-40s for FY '23, which allows a good balance between careful cost management set against our ongoing investment programs. First half margin was higher than this, largely reflecting the phasing of costs, and we anticipate the full year margin to be closer to our guided PBT margin. And on tax, the 18.9% effective tax rate for the first half also reflects our current estimate for the full year based on the expected geographic mix of business and the higher U.K. corporate tax rate coming in towards the end of our financial year in April 2023. Lastly, stepping back and looking across the business as a whole, we'd anticipate our full year performance to remain in line with our expectations. Thank you very much, and I'll now hand back over to June.

Thanks, Charlie. I'll now show our excellent progress against our strategy and purpose. Content plays an increasingly important role in our strategy, particularly in supporting client acquisition and retention. Self-directed traders actively seek out information and insights to help them improve their performance. Our content is designed to improve the understanding of our clients and the wider investment community and provide tools to hone their skills and the insights to trade. We know this is meeting a clear need, while most of our clients come to IG with considerable knowledge and experience. They are also the [indiscernible] consumers of content. In just the first half of this financial year, there were 50 million views on social media from IG Group content across tastylive, IG and DailyFX. Over 7 million tastylive video views, nearly 4 million total views of IG market news, analysis and insights and 63 million page views of DailyFX content. Clients interact with multiple forms of content generates significantly higher revenue for IG. This is a virtuous circle for more our clients learn, the more they gain expertise. The more expertise, the more they trade and become more seasoned and active traders. They enjoy the challenge and are driven by a deep desire to take control of their own finances to create a better financial future. They recognize that it takes discipline and the continual learning is key. In fact, we know that the number of trades increases by around 1/3 following interaction with IG content. Viewers of tastylive place twice as [ many trades as nondealers ] and IG clients who interact with multiple forms of content generate more than 3x the revenue of clients who interact with 1 [ type ]. As a result, we will remain focused on delivering outstanding valuable content as part of our client experience as a key ingredient to faster sustainable growth. In the U.S., we continue to drive progress at tastytrade since we acquired the business in June 2021. We start from a strong position. The vast majority of tasty's customers are highly sophisticated and experienced traders who have the capability to continue trading through market cycles. By offering a full suite of products stocks, options and futures, we retained a large proportion of our active client base as they were able to choose appropriate products and risk strategies to the market conditions. Our futures business is growing at a rate of high double digits. This growth demonstrates that we continue to broaden and deepen our appeal to active traders as futures traders generally trade across equities, options and futures, making them more valuable and enduring customers. We see higher interest rates as a great opportunity to further drive revenue growth at tastytrade while building the size and quality of the active client base. Given this, we have taken bold moves to maximize this opportunity. We've launched new products during the half to specifically attract more of the 13 million active equity trades who are the most likely to become offshoot traders. These include new state-of-the-art risk analytics to help clients understand the implications of the risk and changing volatility climates. We have enhanced our new service to create new stock fundamental analysis tools to meet customers' specific needs. Taken together, these initiatives expanded our reach into the much larger target addressable market of active equity traders, increased our ability to attract larger client balances and capitalize on the higher interest environment. In addition, we implemented a number of new marketing programs tailored for the active trader. [indiscernible] days, our new marketing initiatives are starting to pay dividends. We are now successfully attracting more valuable clients. In fact, average funding for new clients doubled compared to prior 5 months. Our brand is punching through tastylive, content has seen an all-time high in the number of live viewers. Despite overall market search being down 7%. We're excited that Google search visibility for tastylive and tastyworks is increasing. In fact, our content is so well respected and recognized as the U.S. market leader that tasty founder and pioneer of this concept, Tom Sosnoff, has been invited by a number of U.S. exchanges to collaborate on and [ lead ] educational series across a variety of meetings, including live shows. This means that the tasty's [ name in ] content will be seen by millions of traders and investors who watch their programs. Last but not least, we are investing in a first-ever national brand campaign in the U.S. next month to further increase awareness of the tasty brand. We are confident this will accelerate our growth in the coming months and years. Now on to Spectrum, a High Potential Market opportunity that is a great example of how we deliver strategic growth organically. In May 2018, we took the full decision to revolutionize the pan-European retail trading market by building 1 transparent secure exchange for European financial institutions. Now the Spectrum venue offers access to 3,000 tradable instruments, across 90 underlying assets through our issuer radius. As I mentioned before, Spectrum's success is now attracting large European players. We achieved a significant [indiscernible] where we recently onboarded Societe Generale who wanted to access more cost-effective distribution through 1 pan-European exchange. Societe Generale is 1 of the biggest names in Germany and France. Bringing them on board has dramatically expanded Spectrum's universe and will provide access to 2 additional product categories and around 5,000 more tradable instruments, across nearly 500 underlying assets. Integration with these large issuers reinforce Spectrum's credibility and provides an increased product suite and a deeper pool of liquidity. This enhanced Spectrum's proposition for brokers and create a larger volume of retail trades through Spectrum. While I'm very proud of our financial results, I'm equally excited about how we're embedding ESG across the business. It is central to our strategy and purpose as well as our [indiscernible] to operate as a responsible and sustainable business that delivers for all of our stakeholders. Our Brighter Future Fund and ESG framework are focused on empowering broader society, the education and financial literacy aligned to our content approach with clients, and our purpose of powering the pursuit of financial freedom. We know our efforts in this area also provides a significant source of motivation for our people and is key in attracting future talent. In July '22, we announced that we would pledge 1% of our annual post-tax profit in support of our ESG agenda. We've started to allocate the GBP 4 million pounds from FY '22 profit to the outstanding charity [ seen ] here. Our contribution is already making a difference with more than 100,000 young lives globally, benefiting from our Brighter Future Fund initiatives. Beyond funding, our employees donate their time. We're enormously part of their contribution. Over the past year, 1 in 3 of our employees engaged with sustainability initiatives, and we're committed to empowering our colleagues to play an even larger role going forward. We also remain committed to advancing our diversity and inclusion agenda. We've refreshed our D&I strategy to focus on improving female representation at senior management levels and across the business. And we were delighted this month to be certified as the top employer for the U.K. for the [ fourth year ] in a row as well as receiving certification in a number of other countries where IG operates. Another area which supports our purpose is the responsibility we take in how we address client vulnerability. We continue to develop ways to proactively detect clients who may need support. We believe our ongoing work in this area gives us a leadership position in our category and continues to position us to be associated with best practice. To stay on top of evolving needs and the trading outlook of our clients, we canvas them regularly. This gives us valuable insights from a meaningful portion of IG's traders and investors from around the world. It helps us serve them better. Our most recent survey results show that our clients remain extremely positive about trading. At the top left of the slide, you can see that 92% of clients expected trading volumes to increase or remain the same in the next 6 months. Furthermore, 83% said that they see trading opportunities during an economic downturn. This reflects the confidence and capacity of our clients to continue to trade regardless of the macroeconomic environment. Understanding why our clients trade is equally important to us. We're pleased to learn that 80% of clients value the opportunity trading provides to work towards their goal of financial freedom. This is directly in line with our purpose. Further reinforcing our strategic approach is content. 94% of clients who use IG Academy certainly find it helpful for building confidence to trade. The fact that our high-value clients continue to see opportunities despite uncertain market conditions and that they value and engage actively with IG content gives me confidence. So in closing, we have yet again delivered another set of excellent results over the last 6 months despite the challenging market backdrop. At IG, we are very proud of our track record in growing our significant OTC business, a critical part of the group and executing on our diversification strategy to deliver consistent and sustainable growth. Looking forward, I'd like to leave you with 5 key messages from today. First, we have a very exciting future, we have multiple growth levers and a significant target market. Second, we continue to build and strengthen our revenues as we increasingly diversify our business by product and geography. Third, our market-leading content, robust technology and client-focused platform provides our clients with the tools, knowledge and confidence they need. Fourth, our ability to attract and retain a particularly high-quality client base provides tangible and enduring value as well as differentiating us from competitors. And finally, we're clearly establishing a track record for delivering steady capital returns to our shareholders, supported by strong cash flow and liquidity that provides us with a range of options to deploy our capital in the future. This is all while continuing to meet our commitment to broader society through our ESG efforts. We now welcome your questions.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question comes from Ben Bathurst from RBC.

I got 2 questions, each with 2 parts, if that's okay. First 1 being on Japan, the revenues and active clients both increased by more than 20% in that market. And I just wondered, could you add some color on what the sort of rate of growth has been for that market overall? Just to get an idea of how that compares with IG's growth? And second part was, what is the sort of realistic sustained level of growth you can deliver there in light of the strong historical growth? And then the second question also with 2 parts on tastytrade. Clearly, we've had the SEC rule proposals come through there in December. I just wondered if you could share your reaction to those proposals and what your current base case is in terms of the likely impact on tasty. And thanks for the actual disclosure around the PFOS revenue for tasty. I just wondered, is changing the revenue model to derive higher commissions sort of mitigation you are considering in the event of a more adverse outcome on the regulatory side there?

Thanks very much for the question. This is June. So let me take the first question in terms of Japan. I think your question was around the revenue and active client growth and to what extent we see that versus the overall market. Looking at the calendar year '22, we saw that we took share overall in the market. So that would suggest that our growth has increased versus the market overall. As you know, this is a very large market. FX alone is 2 million-plus active traders. And we see that, that is continuing to grow, given the interest rate environment that we've had most recently. In terms of realistic sustainable growth, we would expect that still to be in the double digits given the size of that market and our ability to take share. In terms of your second question on tastytrade, in terms of payment for order flow, what we see there is that it's still early days. The guidance has just come out, and we still see that, that is a very attractive business for us, very large upside opportunity. And for us, there is 13 million active traders for us to go after. As it relates to what will transpire over time as it relates to changing the charging and pricing that might be in that market with lots of alternatives, and we will be evaluating those as the conditions and specifics evolve from that recent regulation.

The next question comes from Richard Taylor from Barclays.

The first 1 is on interest income, please. We can see what you imply in the second half for interest income from your own disclosures today of GBP 25 million for the full year and we can look at sort of base rate expectations. But how should we think about the sensitivity here other than just base rates? Which countries do you to think about? And how developed is this in terms of generation of income? Do you -- everything -- how you exactly want at the moment? Or can you develop it to see upside irrespective of what happens to rates? And then secondly, you talked to the marketing campaign and tastytrade. Can you talk to any progress you have made here in the second half to date? Because it looks like the tastytrade income was down in the first half, excluding the interest income at constant currency.

So thank you, Richard. Let me take the marketing question. I'll turn it over to Charlie for the interest rate question. So on the marketing question, absolutely, we see a benefit from our marketing initiatives specifically in terms of the search engine optimization work that we've talked about and the disciplines we brought in there and have used extensively in Japan. What you may have heard is that overall search for the category in general was down 7%. But Google Analytics, we were up versus a market that was down 7%, which shows that we are cutting through in terms of interest, in terms of the overall market. We've also seen during that time period that we are attracting high-quality client base. And if we look at average revenue per new account, new client, it's actually doubled really substantiating our ability to target the active trader. Charlie, do you want to talk about interest?

Yes. Thanks, Richard. So to your question on interest income outside of the U.S., I mean, we've got -- I think as you're aware, we've got a mix of currency, you've got a mix of rates in there, et cetera. So there isn't as necessarily a straightforward gearing ratios as we've been able to provide you with the U.S. I would say, within that mix of currencies, though, the 1 that's probably the most sensitive is the U.K., that's where the concentration is -- probably the single largest concentration in balances is. So I think if you were going to look at that or try to model that, look at where you think U.K. rates may go. Obviously, this is also a function of the balances that we're able to attract and retain and then grow over time. So again, we can take a view on that. But I think our track record speaks for itself in terms of our ability to do that with client money. So yes, I would just point you in that direction.

And just a follow-up, June, on your answer on the tastytrade stuff. So the uplift that you've seen there, are you talking about that in the second half to date in terms of the improvements in the marketing? Or is that a current relation to H1?

So the comments I made so far in terms of search engine optimization and also average funding were for the first half. The second half, we're optimistic because, as I mentioned, we'll be launching a new brand campaign, the first national brand campaign for the business and also have a number of additional marketing initiatives that we believe will take root.

[Operator Instructions] The next question is from Vivek Raja from Shore Capital.

I had 3 questions, if I could, please. The first 1 is just if you could elaborate a little bit on inorganic opportunities that you've been looking at recently? And what sort of area would you be looking to potentially add into? Just wondered if you could comment on trading post the first half. So December and January, any flavor of what's happened to trading volumes at the beginning of the second half? And then on the regulatory front, I wondered if you'd comment on the FCA's net in early December. And potentially, whether you see an impact from sort of tied to consumer duty rules on the sort of core business and the U.K. franchise? And how do you think it might affect the broader market?

So Vivek, this is June. Let me talk about a couple of things. Starting with question number one, in terms of inorganic opportunities. Charlie and I and the Board look at inorganic opportunities as a regular course of business. As you know, our primary engine for growth is our organic efforts that we have in place, which we're very confident about. We continually look at those that strategically expand into our active trader base. And also, we look at those that will add the additional product categories that we're seeking to -- our clients are seeking to create greater loyalty in terms of their ongoing business. So it's really on the product as well as in terms of breadth of and depth of active clients that proposition has. In terms of trading post first half, we would just say you can see the conditions in the market overall, we're seeing a good start to the year in terms of activity. But what we've seen in the first half is an emphasis on indices as well as on interest rates. Individual equities have been more constrained. And that's what -- as well as commodities have been fairly steady over that period of time. On the regulatory front, to the FCA letter, I think what we've seen in terms of consumer duty, overall, we support that. We think that's a good move in general because as an industry leader in our category, we've consistently tried to ensure that we are on the side of the consumer, both in our business model and in terms of our -- how we handle clients and everywhere that we onboard, who be onboard, how we treat them and we see that as a positive as it relates to ensuring that the industry continues to operate at its highest standards. And we continue to make investments to ensure that we are not only meeting those requirements that have been set out but are executing on best practices.

There are no further questions from the call at the moment. And I hand over to June Felix for the web questions.

Sure. Thank you. Question from [indiscernible], was why has the diluted share count not reduced in line with the 14 million shares buy back during July and November? I'm going to turn that over to Charlie.

Yes. Thanks. You've got 3 things going on when looking at the weighted average share count across the period. One is related to the issuance of the shares for tasty because of the date of the transaction last year on June 28, we were carrying, if you will, an additional month of those shares in the weighting in the period. That's probably the biggest impact, you do have then the offset of the impact of the buyback. That obviously occurs kind of on a phase basis as we go through the period. So depending on the rate of repurchases and things like that, that weighting will move around a bit. So that did take the share count the other way. Obviously, all else being equal as we go through the second half of the year and the extension of the buyback that we announced today, then you would expect it to start to come down probably more in line with where I think your question is headed, but hopefully, that helps.

In addition, we have a question from [ James Mason Hudson ]. Were the New York Stock Exchange system issues on January 24 an issue for IG and its clients? The good news is we have very minor impact of that New York Stock Exchange system issue. So all of the investments that we've made in our systems, the breadth of our products resulted in a extremely minor impact for us. And those are all the questions from the webcast.

Ladies and gentlemen, the conference has now concluded.

[indiscernible] your questions. Thank you very much, everyone. I appreciate your questions and look forward to talking to those that we have meetings with. Thank you again for dialing in.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephones. Thank you very much for joining, and have a pleasant day. Goodbye.