IG Group Holdings plc
Interim Results Presentation 2006
23 January 2006

Nat le Roux
Chief Executive

Good morning everybody. The results for the first half of the year, that is the six months to the end of November: it felt right from the start of the period as though it was going to be fairly strong and that has proved to be the case. September and October were particularly good months; October, the best month the business has ever had. What was particularly gratifying was that performance really spread across all parts of the business. If you look at the year-on-year comparisons, turnover is up 31 percent and normalised earnings per share are up 40 percent. This performance has really continued over the last several weeks or so since the end of the period. I mean, Christmas obviously is a bit of a lull for obvious reasons, but the first half of January has also been pretty good with some very decent volumes kicking in.

One observation you could make about the first half of the year is, perhaps unusually for us, there were no significant new product launches or new business lines being rolled out. And I will talk about this in more detail later on obviously but that is about to change with two fairly significant new things coming on-stream now over the next three months.

But to go into the results in more detail I will hand you over to Tim.

Tim Howkins
Finance Director

Good morning. This is the third time in ten months that I have talked about a slide looking quite like this. And it has a certain sense of deja vu. Yet again profits up by more than 40 percent. That is at the EBIT level. If you look at the profit before tax level, obviously that is up over 200 percent. But that is still distorted by the large interest charge in the prior period. So better to concentrate at EBIT.

Again a good level of operational gearing. A 31 percent increase in turnover to deliver a 41 percent increase in EBIT. I have said several times before, the cost base is characterised as largely fixed, certainly growing generally at a slower rate than turnover, but with occasional small step changes. As you can see the operating costs did go up in line with turnover and I will talk in a couple of slides' time about what caused that step change in the cost base.

I guess the one thing that is new in this set of results is the transition to IFRS. I don't plan to talk in any detail or in fact at all about IFRS. There are seven pages in the announcement if you want to study that. The reality is that it is of absolutely no consequence whatsoever apart from the removal of amortisation on goodwill. There is still some amortisation in the P&L and that is simply because under IFRS software is characterised as an intangible rather than a tangible and therefore amortised rather than depreciated. But it is still depreciation by another name.

So how did we get to that 31 percent increase in revenues? As you can see: very strong growth from the UK business, up 32 percent, and that is actually the strongest growth we have seen from the core financial UK business for several years. And again I will come back and talk about that in a couple of slides' time.

Australia virtually doubling; up 97 percent. Our sport showing growth actually for the first time in several years. Sports volumes have been growing progressively since we put live our new online platform in the summer of 2004, and that growth was somewhat masked the last time around by weak profitability on the back of a run of results that were good for clients. We did not see that in the current period. So as you can see good growth from sports spread betting business.

Financial binaries: the volumes are up strongly, profit relative to volume a little less strongly, and again I will return to that in a couple of pages' time.

So, the cost base. As you can see the most significant cost that we have is the cost of our staff. Salaries, bonuses and for the first time a P&L charge for the long-term incentive plan we put in place at the time of the IPO. As you can see those costs have gone up rather more than they did in the previous period. The main reason for that is that we had some fairly significant pay rises in the summer. During the time we were privately owned to some extent we kept pay rises to a minimum because people were heavily equity-incentivised. Post-IPO we felt the need to realign the salaries as a one-off with market. But I think going forward you can expect to see a lower level of increase in salaries. And the other thing driving up the salary and bonus cost is increases in IT and marketing, where again we saw some significant recruiting particularly in IT towards the end of the last financial period, which has kicked in in this period. And again I think this is a one-off step change and you can expect going forward the head count will continue to grow at a lower rate than revenues.

Having said there has been a step change there, what potential step changes are there coming in the future? I think the next potential, fairly small step is, Nat is going to talk in a little while about our new fixed-odds sports offering. We will increase the advertising spend for the launch of that, probably spending what to us is a relatively large amount of money, but certainly not enough to significantly change the overall cost structure. And then finally going into the next financial year we are hoping to take an additional floor within the current building. Again that adds a few hundred thousand to the cost base. So not significant.

As you can see the UK (perhaps you can't see, that does not look so good on screen), the UK financial business is growing strongly. Underpinning that is strong account opening and the growth coming from both spread betting and CFDs. The CFD business is growing increasingly on the back of introduced business, stockbrokers in particular introducing their clients to us. And those clients are generally good, high-value, active clients. The other factor in the six months just ended is that we have seen slightly higher levels of equity market volatility which is something that does drive client activity: clients trade more when the markets are moving around. Higher than we have seen over the last couple of years but, all the same, still very low market volatility compared to historic levels.

Australia continues to grow very rapidly. Revenue was up 97 percent. Australia is now bigger than the whole of IG was in 1998 and those of you who were here six months ago will remember that then I was saying it was bigger than the whole of IG in 1996. So it has moved on quite significantly in only six months, as you can see, the number of clients increasing very rapidly still. A slight fall-off in the number of transactions in November and that is just a short-term phenomenon. The Australian markets were quite choppy in October and a few large clients suffered some quite heavy losses and they took a bit of a rest in November. As Nat said, volumes have picked up strongly in January.

The financial binary business grew strongly, the number of transactions up 25 percent. The financial binaries has in common with sport the fact that we can’t hedge our exposure and therefore our profit is the client's losses in aggregate. There is some volatility in the revenue from month to month according to how successful the clients are and over the course of a year you would expect that to average out, but measured over a six-month period you can expect some fluctuation of profitability relative to volume. So I think the important point to take away is volume measured by a number of transactions was up 25 percent. As you can see there was quite a strong pick-up in financial binary volumes in August. I think what happened there was a competitor launched an offering which was really quite poor, but the marketing they put into that made people look at binaries and having looked at their offering quite a number of those clients came to us. As you can see, a bit of fall in volume in October and November. Clients suffered quite heavy losses, particularly in October, and what happens after that sort of loss is they tend to sit on their hands for a little while, nursing their wounds, until they come back.

The sports binary volumes grew quite strongly. We have not marketed this now actively for several months. We are waiting for the launch of our new sports fixed-odds offering which again Nat will talk about shortly.

Underpinning all of the growth is the acquisition of clients. And the chart on the left, the line at the top shows overall numbers of accounts trading for the first time and then the bars below that split that across the different revenue lines. We have split that effectively by website, rather than by type of business. The reason for that is a new client opening an account via the igindex.co.uk website is probably initially motivated to trade the financial products, financial spread betting or financial binaries. But actually from that website you can trade virtually the whole product range. You can't trade CFDs or foreign exchange, but he can trade spread betting, financial binaries, sports binaries and sports spread betting. I think looking at those bars there are several trends that are apparent. The number of igindex.co.uk accounts, so that is people who started off thinking they were going to trade financials, has been broadly constant over the last two and a half years. The number of CFD clients is clearly growing. The number of Australian clients being added is clearly growing. Binarybet.com, there is a clear spike in the previous six months. That was predominantly people effectively carpet-bagging the account opening offer. So these clients would come in, trade the minimum number of times that they had to to collect the £25 free offer, and then they would disappear. So those clients were clearly not valuable. And you can see on the right-hand side the overall growth in numbers of clients dealing and that gives a 25 percent compound annual growth over that period from 1998 through to today of the number of clients.

This is something a number of you asked for, which is breaking down the revenue across the different types of client business. For the first time we are giving you the split of the UK financial revenues between CFDs and that is including foreign exchange and the UK financial spread betting business. A word of caution with these numbers. They can only be approximate because we manage the CFD and the spread betting business on a unified basis doing all hedging as a single book; it is impossible to precisely split the two revenue lines. So the number that we report here for UK CFD revenues is commission taken plus funding, less the cost of hedging.

So what trends can you see in these revenue per client figures? Well first of all it becomes very apparent there is a huge disparity between the sports clients and the CFD clients. A CFD client is worth almost ten times as much as a sports binary client. And then in terms of trends you can see that both the UK spread betting and the Australian business, the revenue per client is increasing and I think the broad trend there is there is an ongoing maturing of the client base. We showed you last time that a client who has been around for several years will trade more frequently and in larger size than a new client. So that as the client base gets mature, or in other words the proportion of the client base which is new diminishes, you would expect the average income per client to increase.

And now back to Nat.

Nat le Roux

The clearest way to think about international expansion is to divide it by product into: regulated products, that is, CFDs essentially because financial spread betting does not have much of an obvious market outside the UK and the market in the UK is of course determined by the tax-free nature of the client's profits; and unregulated products, by which we mean binary in the loose sense, fixed-odds products which are not FSA-regulated and if they are regulated at all overseas, regulated as betting, gambling products rather than financial market products. And the left-hand side of the slide is about regulated, the right-hand side about unregulated. I think the key distinction is to expand the regulated business overseas you need either your own local presence or you need a local presence by proxy. In other words via an introducing broker or some type of joint venture partner and there are various reasons for that. The two most important really are: in order to get the client through the account opening and identity verification process you really need someone on the ground. It is quite hard to do it remotely. It takes a very committed client to provide hard copies of the various documents they need for someone in a distant country. And the second point is really confidence about sending large amounts of money to people in other jurisdictions when you have not actually met them in the flesh. And you can argue about where the break point is, but most people are prepared to send amounts in the low hundreds of dollars to a foreign gambling site. They are not prepared to send thousands of dollars to an overseas financial services provider unless they have actually met someone and got that security. So on that regulated side, you can divide it into those territories where we feel it is worth having our own physical presence and those where we don't feel it is worthwhile doing that and we have to operate by proxy.

The second overseas office after Australia, as we said six months ago, is Singapore. We had hoped to have that open before Christmas and in fact we haven't, because the Regulator is still dragging his heels or their heels. There is no issue with it. I met the Monetary Authority in Singapore a couple of weeks ago and they are saying there is no problem with the application, it is just going through the process. And I think we will have it within the next four weeks or so. And as soon as we do the office and the staff are ready to go. What do I really expect from this? Well not as much as I expect from Australia. I think it is important because it is a toe-hold into the Asian, Chinese-language market if you like. We are in Singapore, as I think I explained when we last met, because we can't be in Hong Kong. You cannot run this type of business under Hong Kong regulation. And we will get clients initially I am sure from Singapore itself and then later on from some other adjacent territories. And we will certainly, as part of this, have a Chinese-language CFD website which is as good as the UK website. And that obviously is visible throughout the area.

Other places: and that means Europe mainly, but also one or two other more remote parts of the world. We are trying to strengthen our relationships with introducers. Ireland is a good example. Irish stockbrokers predominantly still operate on a pre-internet model where they have personal relationships with high net worth individuals who they advise. And we have now got quite close ties with two or three of the biggest Irish stockbrokers. They do not want to provide, get into the complexity of offering CFDs to their own clients, so effectively we have a tripartite relationship where the stockbroker advises the client and the CFD is transacted on IG's books. And, as Tim was explaining, that part of the business has expanded more rapidly than the direct client business, either CFD or full spread betting, over the last few months. I suppose in Europe, after Ireland, Germany is emerging as the next most important area. And again the German market is characterised by lots of introducing brokers of various descriptions who have close relationships with their own clients. And rather than try and get involved as it were directly on the ground in Germany, it seems sensible to operate through that introducing broker network. And having been relatively weak in that area in the past, we are now I think starting to make a bit of progress.

Another example, a country we thought about opening a small sales office is South Africa. And South Africa is unusual as a sort of mini Australia in a way: CFDs are legal; it has got the same kind of gambling culture that Australia does. But we took a look at it and decided that the scale of the market really was not sufficient to justify doing it ourselves. So what we are doing instead is we are in the process of starting a semi-exclusive relationship with one of the local foreign exchange dealers out there. So semi-exclusive which means that, subject to them achieving certain volume targets over time, we will offer our CFD products to the South African market only through these characters; it is a firm called JICM. And that is the sort of model that I think we might adopt in some other places as well.

As far as other offices that we might ourselves open, I mean there are one or two candidates, but nothing is planned at the moment. I suppose the most compelling target after Singapore is probably the US. And the problem with the US is that, some of you may know, the only product that you can offer there is foreign exchange, and it is quite a crowded marketplace already. But all the same, that might be the right thing to do. And more distantly one can think of places like Switzerland or Dubai possibly, financial centres generally, but there are no plans of this type at the moment. They are ideas rather than distinctive plans.

As far as the unregulated side is concerned, we are in exactly the same position as any other online bookmaker effectively. What we aim to do is to make our unregulated products available online, and in so far as that is possible without infringing any local laws to market those sites in various parts of the world, although an awful lot of that marketing is via other websites and we are in a sort of slow and steady way, rolling out more and more foreign language. We have Chinese, Turkish and Swedish already and, in the next three or four months, we will have Russian, Spanish, German and Italian as well. So the main European languages plus Chinese and Turkish.

One of the issues here is what products we are trying to offer. And I think we have a difficulty at the moment that the binary bet site is really two different things at once and it is not doing either of them quite as well as it ought to. Financial binaries have been very strong for us. We are undoubtedly the market leader in financial binaries and actually it goes further than that because, at the risk of arrogance, the competing offers in the financial binary space are just not serious. And indeed one of the competitors withdrew from the market completely in the last week. How big is the financial binary market? Well in this country arguably its rate of growth is now no faster than the rate of growth in financial spread betting generally. So it is not topping out, but it is not the kind of runaway product that it was 18 months ago. What is it like potentially in other parts of the world? Well kind of unknown, although we think in the Far East, where nothing equivalent really exists, there probably is quite a lot of potential. As far as sports is concerned, well we do have sports binaries, as we rather clumsily call them, mixed up in this site with the financial binaries. But of course all sports binaries are is sports fixed-odds bets. And you know you can say to our discredit if you like, that it takes a little while for someone coming to the site for the first time to really work that out. In other words the product is too complicated for the audience that it is trying to address. That is one of the priorities of the new launch to try and deal with that. I will come onto that in a minute.

China, when we last talked, we were talking about doing some experimental marketing to the Chinese-speaking audience, I know it is not targeting any one country, but across the region with this mixed binary product to see what effect that had. And we pretty quickly came to the conclusion that doing it on our own we really weren't going to make much progress. And I think if we had done it a year earlier we might have done a bit better, but what became clear was really two things. First of all the actual marketing channel we had was extremely narrow. The number of sites which were still actively the type on which we could market, and still actively targeting mainline China in particular, had been cut right down, mainly as a result of Government pressure. At the same time the payment mechanism which up to then had tended to work best was something called 1-Pay, was also suffering from some difficulties, again partly because of Governmental pressure, partly because of the firewall issue. It doesn't work well behind firewalls. So this is all sort of quite low-level sounding stuff, but I think the conclusion we came to, and fortunately came to it quite quickly before we had spent any significant money on this, was the idea that from here, without local assistance, we could establish any significant market in China was implausible. So the route that we have gone is to do that via a joint venture with this company called Samvo Entertainment who until recently operated only in that region. They are now in fact a UK-licensed bookmaker as well. And they are an entity on a similar scale to IG I suppose in terms of number of employees, and quite a strong regional presence, and their advice, slightly surprisingly, is that the best opportunity is actually for financial binaries in this region rather than for sports binaries. So we are going to act on that and we are going to launch this site under their brand, again within the next couple of months I hope.

Going on to the sports binaries, so called, and I think this is the last presentation in which we call them sports binaries, sports fixed-odds bets. If you are an average sports punter and you happen across the binary bet site, various things will strike you. First of all, what it is trying to offer, it's the wrong name and the wrong brand. Binary betting to most people means financial binary betting. It does not immediately suggest sport. So the first thing we need to fix is: new name, new brand. And indeed we have picked a new name. I am not going to tell you what it is. We are going to roll this out with a great brouhaha in about a month and a half or two months' time. The second thing that strikes you is that the user interface looks like a financial user interface. It is quite complicated. It is difficult to get your head around. And also it uses sophisticated technology. So unless you have got a java-enabled PC, which a lot of people don't these days, you can’t get it to work very easily. And the third thing that strikes you is that it is back and lay, rather than back only, and that is fine if you are one of the rather specific segment of people who like Betfair and understand all that. But most people are not of that mind. If you look at the millions of customers that people like Sportingbet have got, they are not backing and laying, they are just backing. So the new site, let's call it the Sports Fixed-Odds site, will have one-way decimal prices; back prices only. It will look like a sports betting site if we use simplified technology. And you say well what is different about it? There are hundreds of those. What is different about it is that it will offer more in-running markets than I think anybody else and that is really what has been IG's strength, the ability to simultaneously run lots of in-running markets, particularly in football. And the ability to close out the bet before settlement, which of course is not something that is generally available from the major operators. We were going to launch this in stages: launch the brand in what would have been October or November and then bring the technology up to date in March. We decided that was a mistake and that we would leave the whole thing to March, and it may be April rather than March, but I think within the next couple of months, we are reasonably confident unless we hit some completely unforeseen snag we will be rolling that out. And as Tim was saying, spending by IG's usual past standards, quite a lot of marketing on that to establish the brand in the run-up to the World Cup.

The final subject, I find it difficult to know myself where this is really going and how major it is, it is a question of market-making on exchanges. We have been posting prices to Betdaq, which is the second-largest betting exchange, in any serious way for about four months now. And the level of activity is becoming material. We made about £100,000 from this in December. Maybe some element of fluke there, but it is not trivial or experimental anymore. On the other hand there are some quite serious technology issues and the conversations we have had with Betfair indicate that those same technology issues exist there. These systems were designed to deal with members of the general public posting as it were the occasional bid or offer. They were not designed to someone like us, posting tens of thousands of updates per hour, which is what you have to do if you are acting as a serious market-maker on an exchange. And with Betdaq we are slowly working our way through some of those issues. But I think until the technology issues are resolved and we have a clear run at it, it is hard to see what the potential of this really is, because of course there are some question marks over margins when you don't know who your customers are and you are sitting there sort of ready to be picked off by all the world. So I am deliberately being quite low-key about this. It may become a significant activity in the future. It may on the other hand prove to be a bit of a dead end. But we will take it as far as we can.

This is really to address a question that comes up quite often when we are talking to shareholders and analysts. The concern is that, it is perfectly obvious that in some parts of the world of spread betting, not all parts, but in some of the products, the spread the different firms are charging clients has really fallen quite dramatically in some cases over the last couple of years and the obvious question is, isn't that bad news as far as margins are concerned? And of course for the straightforward way of playing it is bad news as far as margins are concerned. If you were charging someone six and it was costing you one to head, so you were taking a net five and suddenly you were charging them three, you have gone from taking a net five to taking a net two. Then of course that is not the whole story, because as these histograms illustrate, the effect of most of these spread cuts is that they produce a dramatic increase in the number of transactions and the reason that happens is not that customers don't have a finite appetite for how many times they want to deal on daily FTSE. What they are trying to do is make money, and the narrower the dealing spread is, the easier it is to get in and out of the market and the more often they trade. And there is some kind of multiplier effect going on there. If you go from as we saw the daily FTSE charging four points to charging two points, you don't double the volume you get from clients, you multiply it by approximately three times over. And in conditions of unusual volatility you see an extraordinary and dramatic increase in volume; and the reason for that spike in July '05 is the 7 July bombing. So on that one day we saw more volume on daily FTSE than we have seen in an average two-month period before we cut the spread the previous February.

So interpreting this data is not entirely straightforward because of course there are confusions. In some cases we were running special offers before the spread cut. Obvious volatility which changed to some extent; normalise for volatility to interpret the thing properly. But all the same it is pretty clear that in this set of markets, and that is the set of markets that appeals to the very short-term, spread-sensitive day trader, if you do cut spreads down to some level anyway you will see a disproportionate increase in client transaction numbers and your revenues will actually go up. There is some sort of level of spreads below which the operators cease to be comfortable and where again it is hard to put precision on this, one's natural margin has been driven down to the point where you are just in a lottery with the clients. And I think the current level of spread, which is where most of the serious competitors now are, I mean there is very little distinction between the main players in the leading players in the industry in terms of their spreads in this type of market now. No evidence that anybody wants to push very much lower than that. You are talking about three-pip spreads on currencies, two on daily FTSE and so forth. One gets the impression that that is about the bottom. And certainly the idea that CMC are significantly cheaper than other people, which was the case certainly a year or two ago, really is not so obviously the case now. There are other markets where these competitive pressures are much less evident: shares, particularly lower-cap shares, some of the more obscure stuff, options, indeed binaries, there is not the same competitive pressure on margins. And in the shares business there is much more emphasis on quality of service and I think that is one particular subset of the market where IG particularly excels. We have not seen the same pressures. So I think, sticking my neck out, that the spread cutting game has probably come more or less towards its end now and, while we have not led that, we have followed and we are confident that we are fully competitive in the places where it matters and we have done that without any net loss of revenue and in some cases with an increase in revenue.

Another topic not covered on any slides which I will just talk to briefly is the question of consolidation opportunities in the industry which we have again talked about before. Obviously there are all the time ongoing discussions between various firms and indeed we have had low-level discussions with a number of people over the last six months. And I think my impression of where we now stand is this. There is a clearer divide than perhaps there was six months ago into the strong and the weak players in the industry. And the strong players are seeing their volumes growing healthily, not perhaps as healthily as ours, but their businesses look fine and they are not in a position where they want to be consolidated or taken over, not at any sort of reasonable price anyway. And then you have got what one might call the weaker players who would tend to be people who have been around for a little longer actually who might not have such strong technology. And they would be, if we were to acquire anyone, perhaps the obvious targets. The difficulty is that given our own market cap, given the sort of numbers that have been talked about for the CMC IPO, these guys have got what I regard as unduly aggressive views about their own valuation. And although we have become ourselves a bit more aggressive in the value that we put on some of those operations, all the same there is quite a big gap between the bid and the offer price and particularly when you consider the inevitable operational risks that you would encounter if you tried to merge into something which has got very different technology, very different philosophy, whatever, even if they are effectively in the same market. I don't think that from our point of view, given the strength of our own business, we want to do one of those deals, unless it is at the right price; and we certainly don't want to be chasing them up to multiples approaching our own. So there it sits. I think that this game has not gone away because there are people who are, in a longer-term sense, weakening in my view, and at some point reality might prevail. Which takes us back to Tim.

Tim Howkins

A couple of slides on other subjects that people often ask about. First of all risk management. This chart shows two lines. The dark blue upward facing one is average daily income. That is a sixty-day rolling average and quite clearly going up sharply. The pale blue one which is quite clearly going down is revenue volatility; sixty-day coefficient of variability for the statistician in the audience. You can see that has fallen dramatically and at the end of November was below 0.5. What does that mean for the non-statisticians in the room? A good way of looking at revenue volatility: if you go back to 2001, early 2002, we were typically having three loss-making, i.e. negative, trading income days in every month. In 2005 we had three in total in the whole year. So a very significant fall in variability of income from day to day. That can go too far. Hedging is a balancing act. If you do too much hedging you totally eliminate variability of income but at considerable cost, and we took the view a week or two ago that this had gone far enough. After literally two years, two and a half years of having made no increases in our global exposure limit, we decided it was time to make a small increase reflecting just how strongly that volatility of income had fallen. So we have put up the global limit which you might remember was twelve and a half million of our aggregate global exposure to equity markets. We have put that up by ten percent from twelve and a half to thirteen and three-quarter million. I think going forward we do in any case review our hedging policy every three months and we would expect to keep reviewing that. I really would not expect us to put it up too often and certainly never by more than ten percent in one go. But you can expect, I think, us to continue to grow that as the business grows, because what is quite clear from those graphs is that revenue has grown very strongly, the business has roughly doubled in size. And in that time we have kept our exposure to markets constant which means we are doing significantly more hedging than we used to.

Finally a subject that one or two people have asked about. (There are quite a lot of numbers on that page and I won't walk through them in detail.) How our capital structure works. Our capital, which is share capital in reserves, less goodwill, increases simply as we add retained earnings. Our requirement increases in quite a complex way as the business grows. You can see the various components there and quite clearly some of them don't go up at all and some of them have gone up. Position risk is a function of our exposure to the market and that does increase to some extent as the client base increases, because in part it is a function of how many positions we have that have Guaranteed Stops on them. And the other thing that increases as the client base increases is counterparty risk, which is a crude measure of credit risk, and that clearly is proportional to the number of, or is related to, the number of clients that you have. So you can see that our requirement has gone up, but it is has gone up at a lesser percentage than revenues have gone up. At the end of November we had excess regulatory capital of sixteen and a half million. We had total cash of twenty-five million. It is the excess regulatory capital, well it is the smaller of those two numbers, which effectively limits the dividends that we can pay, amounts that we can pay for intangible assets like goodwill without doing fresh capital raising.

And finally just touching on the dividend policy. The policy remains as stated in the prospectus, which is that over time we intend to pay out approximately 50 percent of earnings. And that in time we will give consideration to returning some of this surplus capital to shareholders. I think it is unlikely we will do that for at least a year, possibly a little longer than that, because it would be foolish to return capital to shareholders and then possibly have the prospect of a corporate transaction requiring us to go out and raise fresh capital. But I think if there is going to be industry consolidation that is likely to come in the next 12 to 18 months. So if that has not happened by then we would give some thought to returning capital to shareholders.

And finally back to Nat for the outlook.

Nat le Roux

We have really covered most of this. Just to reiterate it. It does feel quite positive at the moment. The volumes in recent weeks have been impressive really in all the businesses. How long is that going to continue? Well we are trying to predict two things. One: is the underlying rate of client acquisition going to continue at the same rate that we have seen in recent months? I have every reason to believe that it will in terms of the competitive landscape. I think our depth of offering and technology really is now second to none. But of course one can't rule out some kind of micro-economic slowdown. My view of that is really no better than yours. Clearly if people don't feel they have disposable income, they are not going to get involved in this sort of activity. In terms of the way different bits of the business are growing, I think what is encouraging is that after quite a long time plugging away at the whole Direct Market Access, upscale CFD business, we are starting to make some decent progress there. And the UK financial businesses, that is clearly now growing faster than the traditional spread betting business, which is also growing well but not as fast. Is that going to continue? I guess probably yes. The value of that type of CFD business is such that you have only got to win a relatively small number of mandates from stockbrokers or other introducers; that has a disproportionate affect on the revenue.

Australia looks fine: again very strong in recent months. I think there is a big opportunity to see that grow a lot further over the next year. Binaries, I went on about in some length, needs to be unscrambled and we need to draw a clear distinction between financial binaries, which increasingly looks as though it is part of the whole speculative financial suite of products rather than just a thing unto itself. We need to unscramble that and the sports binaries which is in embryo I think a very powerful mainstream sports fixed-odds offering. And once we get that up and running a question that people again often ask is: where are we? Are we some sort of other financial player? Are we a bookmaker in the sense of bookmakers? And I think the answer up until now is that with a few sort of exceptional few bits and pieces around the periphery we plainly have been a financial firm. If we launch this product successfully (I almost told you what it was called then), if we launch this product successfully it does start to look a bit different because for the first time we are competing head-on with the Sportingbets and the Ladbrokes and so on, at least in the internet space.

International expansion remains important, but it also remains difficult because we are constricted by changes in other peoples' regulations. And regulation is also to some extent a competitive issue in an odd way. The fact that a lot of people are now starting CFD operations in Singapore clearly makes it more likely that the Hong Kong authorities are eventually going to allow something similar there. I don’t know what the timescale is, but I think it is more likely that it was. The US remains a compelling interest and trying to think our way around this prohibition of exchange derivatives barring foreign exchange, whether there is some way we can tap into that market. But nothing definite that we are looking for.

Coming back to the crux, all these new things are interesting. They all take a while to kick in. It has taken Australia, which by any normal standards is a highly successful new launch, taken three years to get to the point where it is just approaching ten percent of the business by revenue. So the key thing is really not to take our eye off the ball of the core business. And as we have seen, at least at the moment, that is growing extremely strongly. Thanks very much.