IG Group Holdings plc
Interim Results Presentation 2007

14 January 2008

Tim Howkins, Chief Executive: Good morning everybody, I'm sure you've all seen the results by now but I think they're worth repeating once or twice. So turnover up 54%, PBT up 63% and we've increased the dividend by 50% up to 3p. 

Clearly, volatility in the last six months has been higher than it was in the previous four years and that has had some impact on the good results. But I think underlying that is account opening and, as it says in the statement, in financial spread betting over the course of two years we've tripled the rate of account opening. In CFDs, over the same period, we've quadrupled it. I think that's much more important to these results than any short-term beneficial impact of volatility.

As it says on the slide, current trading is strong and a couple of people have already asked me, 'well what does that actually mean?' We do face a retail client base. Some high street retailers, in the run up to Christmas, certainly saw slightly disappointing results - a bit of a slow down, probably in the face of a possible economic slow down.

Did we see that in December? Absolutely not. In fact quite the reverse; December was a very strong month for us. Revenue was 24% above our revenue budget, which is actually not a useful statistic for you because you don't know what the revenue budget was. But the growth was in line with the percentage growth we saw in the first half. And I think the reason we've continued to deliver such strong growth when some of the retail facing businesses have begun to see a slight slow down, is because our clients are much more resilient to economic slow down.

We ask all our spread betting clients what their savings are when they open accounts. 80% tell us that they've got savings of more than £10k, 30% tell us that they've got savings of more than £100k, so these really aren't the sort of people who feel the pain first in an economic downturn. On that note I'll hand over to Steve to talk a little bit about the results.

Steve Clutton, Finance Officer: Thanks Tim and good morning ladies and gentlemen. As Tim has said, an extremely successful first half, 54% increase in revenue to £85.8m, translating to 63% growth in PBT to £48.2m. Betting duty shows a relatively high jump from last year: it's payable on client losses and, as such, varies with client performance. It's true to say that clients had a particularly lucky period in the second half of last year. 

Costs for the first half were in line with our expectations, worth noting that nearly half of the operating cost increase was performance related bonus and LTIP. I've got a slide a little later on that goes into that in detail. So bottom line, EPS just shy of 10p, a rise of 61%. We've declared a dividend of 3p per share, up 50% on last year, really reflecting the confidence that we have in the business looking forward.

So where has that 54% top line growth come from? Well, it's been across the business and, in particular, the financials side of the business where client recruitment has been the key driver. Very impressive growth in CFDs, reflecting increased geographic reach and penetration of the new markets. Also good to see binaries growing by over 50% - a lot of spread betting clients see binaries as an add-on product so there's an element of read across from the 42% growth that we've seen in UK spread betting.

Sports had a very challenging comparative with half one last year including the football World Cup. But it's grown at 6% both in the fixed odds and spread betting side of the sports business.

Turning to our cost base, excluding bonus and long-term incentive plan, costs increased by 29% over the first half of last year against revenue growth of 54%. Costs were in line with our expectations - those that we flagged in July last year - with additional headcount for growth flowing through and marketing focused on overseas and online advertising. There were no significant bad debts over the first half despite strong revenue growth and heightened market volatility. The bad debt charge overall represents about 1.4% of revenue, a similar level to the first half of last year.

Looking forward to the second half of this year, excluding bonus and LTIP, which are clearly performance-driven, we expect costs to increase by around £4m to £5m. This is driven by previously flagged items essentially being new European offices (Madrid and Paris really only came into being in the last month of this half, so very little cost in the first half) and our newly acquired HedgeStreet in the US, together with the activation of our FX business in the US. All these areas are ones where investment clearly precedes revenue generation.

Looking at financials, account opening continues to be the key lead indicator for our business. The strong momentum we saw coming out of the last financial year continued into the first half of this year, indeed in the last quarter the average monthly recruitment rate in spread betting was nearly three times than it was two years ago. In CFDs, it was four times that of two years ago. Overall, half one client recruitment was up some 82% on the same period last year. In spread betting, the launch of TradeSense in late January and the PureDeal launch in late July of last year clearly played a major part. We've got a growing worldwide base of retail clients and market professionals, together with an extensive introducer network.

Overseas, Australia has recorded a particularly strong performance in the first half, which is reflected in Asia Pacific's revenue showing a 124% growth on the first half of last year. The chart on the left shows the number of clients dealing, and the chart on the right shows transactions overlaid with income. It's evident that growth has accelerated more recently. As you can see, the lines have got steeper with time and our Australian office opened nearly 4000 accounts in the first half. That's over 50% more than the first half of last year. It's interesting to note that client recruitment in Australia is now running at a similar level to that of the UK spread betting business two years ago.

So while UK spread betting remains a core product and continues to show very good growth, the product overseas is clearly CFD. Revenues there are growing strongly in all our key regions of focus. Overseas revenue now accounts for some 27% of financials revenue, up by about 111% from the same period last year.

Introduced business is a key driver of growth. For example, business introduced by private client stockbrokers in Ireland almost doubled to £4m in the first half compared to the first half of last year. European operations established in Autumn 2006 have continued to show encouraging increases in the rate of client recruitment.

Apologies for the multitude of numbers on this slide - it's one that you have seen before. It really attempts to highlight trends in revenue per client across different client bases. I guess the overall message is one of convergence. Our expectation is that the newer businesses will converge on the UK financial spread betting number of approximately £2k of income per active client in a six-month period.

Clearly, the businesses are all at different points in their evolution. In newer markets, clients are really characterised as being smaller and less experienced where their income really rises with time. There are particular structural factors. For example in the UK, the client base naturally segments: larger professional clients tend to gravitate towards CFDs, explaining the higher CFD number. In Europe, the number is currently skewed by higher-end Irish clients although the effect is being diluted as we recruit more direct retail clients around mainland Europe.

And finally from me, the Risk Management and Earnings policy: If we didn't put this in, you'd asked about it so we did. A familiar story really, that volatility of daily revenue remains in a tight range even during the recent period of heightened market volatility. Our model is to capture transaction fees and we hedge the vast majority of our clients' positions. We're prepared to run small positions within tightly controlled limits and which we review from time to time as the business grows.

Currently that translates to a maximum exposure to global equity markets, around £15m. This means that theoretically, if we were maximum long at any one time and there was to be a fall of 10% in the markets, in theory we could have a £1.5m loss. But in practice, it's extremely rare that we see loss making days. We've only actually had one in the last two years and that came on Thanksgiving last November, a day of particularly low volumes.

And on this point, I'll hand you back to Tim. Thank you.

Tim Howkins: Thanks Steve. We've demonstrated strong revenue growth through all stages of the market cycle so I think we've probably demonstrated that we're pretty much indifferent as to whether the markets are rising or falling. But we're certainly not indifferent to whether or not they're volatile. Volatility is a driver of client activity, particularly in the short term trading of equity indices. It has less effect on some of the other asset classes. And we've clearly been the beneficiaries of that in the last six months, where volatility was higher than it has been for the previous four years.

So what this chart does is take the last 40 years, chop them into our six-month financial reporting periods and then look at the number of days in each of those periods at the Dow or, more recently for the last 23 years when the FTSE 100 has existed, at the FTSE. Look at how many days in that period the market moved by more than the 1.5% daily range i.e. peaked through in the day. As you can see, clearly quite a strong tick-up in the last six months compared to the previous four years. When looked at on a 40-year view, I'd question whether it's the last six months which have been abnormal, or the preceding four years. Am I making any prediction about future volatility? Absolutely not, I'll leave that to you analysts.

A couple of topics that we've talked about in previous presentations - TradeSense (our client education programme that we launched in January) and PureDeal (our new financial dealing platform launched in July). Both of these, when we launched them for the UK spread betting business, had a notable impact on client recruitment. Certainly, when we launched TradeSense back in January, we saw something like a 30% to 40% up-tick in client recruitment pretty much overnight. It's a little bit harder to be dogmatic about the effect of PureDeal because we launched it literally the day before market volatility began in late July so the effect of the two is mixed together. But we've certainly seen very strong recruitment since we launched PureDeal. And really, this (PureDeal) is about competitive differentiation, and it forms a very good marketing message.

I'm a little surprised to see these banner adverts being animated behind me. I thought they were static images but these are two of our adverts that have run in Australia, both marketing the message PureDeal and TradeSense under the strap line Make Sense of CFDs. We've run a similar campaign in the UK under the strap line Make Sense of spread betting. The roll-out of these two initiatives will be largely complete by the end of this month. They've been progressively rolled out across the entire offering and that process really finishes when Singapore gets both PureDeal and TradeSense at the end of this month. And by that point, TradeSense will be available in eight languages while PureDeal will be available on 12 of our websites worldwide. In each case, that launch is accompanied by a marketing campaign like this, a brand new website with a new look and feel and a process of client communication to bring it to the existing clients' attention.

So if those were the two main initiatives of 2007, what are we up to now? Well, as I say, in the more established offerings of the UK and Australia, our marketing is very much focused on competitive differentiation and PureDeal is a key part of that. So we continue to enhance PureDeal. Just before Christmas we put live a new set of Reuters fundamentals to go alongside our Reuters news offering.

We're just about to release a version of PureDeal, which will work on browser-based mobile phones including the much-hyped i-Phone. That will go live in the next few weeks and there's really quite a long list of further enhancements that we intend to make to PureDeal. But I'm certainly not going to tell our competitors what those are, this morning.

Over the last six months we've become increasingly focused on a more systematised way of managing client relationships. So the clients are contacted automatically the first time they deal. If clients stop dealing for a period of time, they get an email or phone call to see if anything's wrong. And, alongside that, we're in the process of putting in place a new client relationship management CRM system, which will go live this month.

We recently beefed up our UK seminar efforts and recruited a new Chief Market Strategist in the UK, who will be in charge of running more and more seminars - physical ones (with a bunch of people in a room) as well as webinars that are conducted entirely online.

And then, finally, initiatives to continue to drive growth in the existing UK client base, an increasing amount of dynamic, regularly updated website content including market commentaries and the webinars that I just touched upon.

Overseas expansion continues to be an important driver of growth. The chart that you see here compares the early months of our four overseas operations. The red line is Australia, which we started in 2002 and the other three lines show Singapore, Italy and Germany, which we started during the course of 2006. I think it's very clear from that graph that each of those offices started in 2006 is growing at a faster rate than Australia. This graph shows the number of clients dealing in each month.

To put that in revenue terms, Italy, Germany and Singapore have been going 14, 15 and 19 months respectively. In November, they delivered £650k of revenue. At the equivalent point, i.e. around month 19 of Australia's development, it was running at about £150k a month. So each of those three newer operations is running at a faster revenue rate than Australia. And you remember from the chart that Steve showed you a few minutes ago, that Australian client numbers really only begun to hook up to increasing exponential growth a couple of years in.

Much more recently, at the beginning of November, we opened offices in Paris and Madrid. Obviously very early days for both of those, but both seem to be going very well. They've each opened something like 150 accounts so far. The French office got fully online account opening a few weeks ago, and last week was running at between 10 and 20 new accounts per day, which is really a very impressive rate of account opening for such a new office. Generally speaking, both have had very good reception from clients and from the press. I'm having lunch with a Spanish journalist today and tomorrow, we've got a group of French journalists coming across on the Eurostar to see our UK office and to meet me. So I think very encouraging signs from both of those, but early days yet. I'm reasonably hopeful that both of those offices will cover their costs, probably next month or maybe even this month.

Looking beyond Europe (I've got a separate slide on the US, which I'll come to in a minute), clearly we have only a fairly small presence in Asia at the moment and that's certainly a market that is of interest to us. China, I think is too large a potential market for us to ignore, but definitely one that has regulatory complications. I think to make a success of any business in China, we've really got to get into bed to some extent with one of the local Chinese banks. We're having conversations with a number of those, I think the nature of those conversations is that they tend to go on for quite a long time and who knows whether anything will actually come of that. But certainly, the conversations are happening.

And then Japan is another very interesting market, probably rather easier from a regulatory point of view although quite difficult from a cultural point of view. That's certainly a market we're in the process of researching. It is the second largest retail forex market in the world so again, definitely of interest to us.

So the US is a market we've been interested in for quite a long time. The company, which is now IG Markets Inc, we set up and got regulated, I think, in 2004. We've been waiting for the right catalyst to trigger the launch of that. The regulatory position in the US (we've talked about this before) is that there is a very long-standing (all the way back to the '30s) prohibition on offering OTC off exchange contracts to retail clients. The one carve out from that is forex, which can be offered off exchange. So really, there are two tracks to our approach in the US. First of all, perhaps the simpler one, is to activate IG Markets Inc. which is a NFA, CFTC regulated futures commissions merchant authorised to offer forex to retail clients, and initially it will offer spot forex as well as vanilla forex options and binary forex options all on an over-the-counter OTC basis. And even that product set gives us some competitive differentiation: most existing forex providers only offer the first of those (spot forex). That business will launch in the fourth quarter of this financial year and it will look very much like our other offerings around the world. It'll be a PureDeal web-based model covering that product set.

HedgeStreet we acquired for $6m at the beginning of December and really that payment was to shortcut something we were thinking about doing anyway, which would have been an 18-month development programme to build a regulated exchange licensed to do binary options. So for our $6m we got the license, the software needed to run an exchange and some staff...And we've bolstered those staff slightly and are just about ready to re-open that exchange for business. That should happen in the next couple of weeks, before the end of this month. Initially HedgeStreet will start with the same, very limited product set that it had in it's previous incarnation and very much the launch in a couple of weeks time is just about turning the machine back on and making sure that everything is working smoothly. And then there's an ongoing development programme to increase that product range to include a much greater range of binaries, including binaries on indices. And, in due course, also some non-binary products, some scaler products, which, we think, gives HedgeStreet a very interesting product set. And, again, I'm not going to say too much about exactly what that product set is because there's no point giving USFE too many clues in advance. And I think HedgeStreet should be looked at as a slightly longer term piece of development work.

So, of the two, I think IG Markets Inc. will be the first of these businesses to come into profit. And I would hope that would happen reasonably quickly. But, in the longer term, it's the combination of the two which gives us an absolutely unique proposition in the US which, I think, could be a very interesting market for us in the longer term.

So in summary, clearly there's been some benefit from volatility in the current period. But look beyond that and what's driving our growth is very strong account opening. We've said it twice already but I'll say it a third time. Spread betting account opening up three times over the last two years, CFDs quadrupled in the same period. We continue to maintain our competitive lead in our core markets, the UK and Australia, particularly through technology and the ongoing development of PureDeal is key to that. We've now got operations established in the four main continental European countries. Germany and Italy both going very well. France and Spain, very early days but some very promising signs. We've got a nascent US business and, as I said before, current trading is very strong.

Very happy to take any questions you've got.

Question and Answer Session

Question 1

Katrina Preston, Landsbanki, Analyst: Hello. I've got a couple of questions, if I may ask, that are not related. First of all, unless everyone else knows the answer to this, could you just run me through, quickly, the key differences between PureDeal and the old technology? So exactly what is it that it does that it didn't do before and what's so special about it? Also, could you just explain the big increase in the working capital? I assume there's nothing particularly sinister in there and it's just a kind of...But if you could?

Answer: Tim Howkins: PureDeal is...It's very user-friendly and very customisable. And I think we'd got to the point with the old platform that while, at a technical level it was very strong in terms of things like how many prices and price updates it could handle and how quickly it turned around a deal, it just looked a bit clunky and you couldn't really do much with it. What we gave you was what we got. With PureDeal, it's very customisable. You can tear off panes, you can move them around. It's got things like Reuters News.

We've got a feature called Price Improvement, which means if we can give you a better price than the price at which you attempt to deal, we do. This, interestingly, none of our competitors have yet copied, which is in stark contrast to virtually every other new initiative we've ever released.

There's really a long list of things that are, in small ways, incrementally better about it. And I think that's got us to a point where...Whereas with the old platform, if somebody logged into it and spent 30 seconds poking around, it maybe wasn't obvious to them that it was technically superior to the old ones. It is blindingly obvious with the new one just from the amount that's in there.

Steve Clutton: On the working capital, Katrina, it's a reflection of the increase - decrease in the size of our book. If you look in trade creditors that reflects client funds, we show them in creditors and also show them on the other side in cash and the positions with brokers in trade debtors.

Further Question: Yes I’m just looking at the trade debtors [technical difficulty]

Answer: Steve Clutton: Yes.

Further Question: [Inaudible reply]

Answer: Steve Clutton: So the trade debtors increase is primarily driven by cash that we have at brokers, which really reflects the size of the client book that we're hedging. But overall I don't think there's anything of note in there. Our own cash balances went up to about £109m by the end of the first half. Regulatory capital surplus is running at around £37/38m at the end of November. It grows with profits after tax but, as the business grows, there's an element of increase in capital requirements.

Further Question: The dividend cover increasing, is that an ongoing trend or...

Answer: Tim Howkins: We took the dividend payout ratio from 50% to 60% last year. I wouldn't read too much into first-half/second-half split. We've essentially just paid out roughly half of the last final dividend as an interim this time.

Further Question: Fine.

Question 2

Nitin Arora, Clear Capital, Analyst: Morning, gents. Nitin Arora from Clear Capital. Couple of questions. Firstly, you said that you have around £37m, £38m of surplus capital. How do you plan to use that capital? And secondly, in the wake of current credit crisis, has the cost of providing margin gone up?

Answer: Tim Howkins: If I take the second question first, no, not at all. There's an ongoing trend of our cost to financing coming down as the size of our book increases. And that hasn't changed over the last six months. The surplus isn't that large because remember that the surplus that we show at the end of November is before payment of the dividend. So that takes £10m out. So you're down to less than £30m on a company with a market cap of almost £1.3b. It's not quite petty cash, but it's not a huge amount of money. Yes, if that surplus builds up we'd ultimately look to return it to shareholders, but I really don't think it's large enough for that to be a consideration yet.

Further Question: One more question. You have highlighted that account opening in the UK spread betting has increased three times compared to two years ago. How sustainable is that growth rate?

Answer: Tim Howkins: I certainly think there's no reason to think it's not broadly sustainable. Maybe there's an element of volatility driven client recruitment there. But yes, an ongoing account rate of 1600 a month, I think that sort of order is certainly sustainable for the UK spread betting business.

Can we continue to grow that account opening rate at 30%, 40%, 50% a year? Absolutely no way of saying. I certainly hope so, but until you've done it you just don't know. I think I said 12 months ago that I would find it hard to see us increasing it from where it was then, and we've certainly done that.

Question 3

Daniel Havercroft, Investec, Analyst: Couple of questions. Firstly, on Germany and Italy, could you give us some feel for the client recruitment run rate per month, if at all possible? And then, secondly, just some comments really on the competitive environment. Obviously, Betfair has entered the market quite recently with a deal with London Capital, and they are also talking about the launch of a binaries exchange. Specifically related to that binaries exchange, is that a threat or an opportunity to your business?

Answer: Tim Howkins: Germany, Italy, account opening in both running at very similar levels at round about 100 accounts a month, although both are increasing slowly and steadily.

In terms of Betfair, their binary exchange, we are market-making into and so I think I see that as an opportunity rather than a threat. It's a way of distributing our existing binary product to a wider audience with no cost of client recruitment.

The betting exchange - sorry, the spread betting deal with London Capital Group, I don't see as a particular competitive threat in the same way that I don't see London Capital Group as a huge competitive threat. They have a relatively limited product set and their technology certainly isn't as good as ours.

Question 4

Unidentified Audience Member: Just overall on the competitive environment, obviously some reasonable sized players in the market, CMC, and obviously in the Australian market it's somewhat more competitive. Are you under much margin pressure at all?

Answer: Tim Howkins: Some of the smaller competitors compete on price because they really have nothing else competitive to offer. So we would take competitive pressure from CMC much more seriously. And actually, I think there's been a fairly clear signal that this competitive pressure is easing. CMC used to be commission free for CFDs in the UK. And at the beginning of May of 2007 they introduced commission, which I think was really a clear signal from them that this was the end of them as an aggressive price competitor and they now prefer to compete on other messages.

Question 5

Richard Taylor, Citi, Analyst: Yes, hello. A couple of questions. First, sorry coming in late. Bad debts, they crept up a bit. Were there any particularly large items within that? And the second one was, on the slide where you compare the Australian business to Italy, Germany and Singapore, could you just remind us what happened when you first opened the business in Australia? Because, from memory, I think spread betting wasn't so successful. Bit of a slow start then CFDs picked up. So therefore, showing a graph with those other three territories on, should we read that there's actually quite a slow start in those three countries as well? Or am I reading it incorrectly?

Answer: Tim Howkins: I'll take the second point first. Yes, there was a slightly slow start for the first few months in Australia. We launched with spread betting and then changed to CFDs but really, within three or four months of opening up. So I think that slow start was really only a question of the first three or four months and you are now looking at a 14, 15-month track record for France. Sorry, for Germany and Italy.

On the bad debt point, do you want to take that one?

Steve Clutton: Yes on bad debts as I said, no significant bad debts during the period. We're running at a rate similar as a percentage of revenues, about 1.4%, which we're very happy with, pleased with, given a period of heightened market volatility.

Question 6

Simone Glass, UBS, Analyst: You had one presentation where you were talking about this client lifecycle, so not only about the recruitment but also about the retention period. And you mentioned now that you have introduced new CRM system and procedures. I'd just be interested, since you last talked about that, has there been any change? And what do you expect to change with the new treatment?

Answer:

Tim Howkins: The only thing that's changed really in our client lifecycle is that TradeSense has had some beneficial impact on conversion rates, but of the order of 2%, 3%. Maybe a bit of that is also some of the CRM work in terms of contacting clients who haven't yet dealt, so it's quite hard to pick the two apart.

I would hope that the CRM work would have some impact on slightly improving retention rate, but you're going to be talking about a per cent or two. It's not going to be revolutionary. It'll have some incremental benefit and it's too early to see that flowing through yet.

Question 7

Unidentified Audience Member: Thanks. I just had a couple of questions. The first was on the cost of sales as a proportion of revenue. I've noticed that's been creeping up slightly. I just wanted to confirm that that's a factor of the growth in performance and performance-related bonus and LTIP, as opposed to you showing more of your revenues with white labelling partners. And secondly, you've talked in the past about the possibility of the growth in revenues associated with API and providing your white-labelling partners with access into your execution engine. Have revenues been picking up associated with that at all? And do you expect algorithmic trading to provide a further boost to revenues?

Answer: Tim Howkins: Costs of sales is entirely betting duties, which is a function of client losses. So to some extent it's a random percentage of revenue because it doesn't take into account hedging. And it was low in the previous period. It was a bit higher in this period. So there isn't a trend there. It's effectively a random walk.

API, we've got one or two clients using the API. So it's a relatively small percentage of revenue at the moment. We're having talks with one or two larger institutions. And I would hope that certainly during the course of 2008 we'll put in place one, what's effectively the next step on from a white label, where a third party has our product within their own front-end, offering it to a retail client base. So I would hope one of those will come during the course of this year.

Those sorts of relationships are big pieces of IT work on both sides so it's not something that you undertake lightly. We've probably got the capacity to only do one or two in the next 12 months. So you've got to pick which one you do very carefully. There's a long queue of people who want API. We're being quite selective as to who we give it to.

Question 8

Unidentified Audience Member: Sorry, just for clarification, one question on the income per client for the UK, slide nine. I notice the UK is £2907 in that final part of that chart and it's considerably lower than at the second half. Is that purely with the rate of your client growth in the first half of this year that's impacted on that? Or does that reflect the maturity of the clients that are now in the base or some change?

Answer: Tim Howkins: It's a shift. The UK client base for CFDs was dominated by a relatively small number of institutional and high net worth clients. Over the last 12 months, we have seen increasing recruitment of retail CFD clients and that's diluted it all.

I think the broad message here, across all of those lines, is that all of those lines are converging towards the same point with time. And that the UK spread betting number is probably most indicative of where they'll all end up over time because that's the longest established client base.

And then, across the other lines, you've got a mixture of factors from very high levels of revenue from small numbers of top-end clients down to very small amounts of revenue from brand new retail clients. And it all merges together over time.

Further Question: Thank you.

Question 9

Simone Glass, UBS, Analyst: Yes, I'm sorry, I have to follow-up on Katrina's cash flow question. Could you just explain why it was negative this half and positive the last -that is the first half of last year?

Answer: Steve Clutton: You're looking at cash used in the period because of the large movement in trade and other payables so in part a decrease in cash that we've had in from clients. At the end of May 2007, we had amounts due to clients of £726m. Effectively the flipside is that cash sat in our bank accounts (we show it in cash) and at brokers and that's gone down to £581m in the six months. So in part it's a reflection of the size of the book.

Tim Howkins: Some of it is also because some of our bigger clients were sitting on very large unrealised profits at the end of May, which they will have given back in the current market falls. And that reduces the amounts due to clients. That probably accounts for at least...

Question 10

Unidentified Audience Member: I just wondered what that means. What does that mean? Can we read anything out of that for future activity? So basically, you're saying clients have been taking profit so they have been reducing their position. They have been increasing their cash? I mean, you would, would you not expect with such a strong growth in the client base, would you not expect to see the same development than what we've seen like in the last year or the last half year?

Answer: Tim Howkins: One of the factors you've seen in there is clients who were sitting on large profits giving back those profits. That reduces client balances. It's not a cash flow item for the client. It's just the client had some cash on their account and some unrealised profits. The profits go down, the amount of cash we're segregating for those clients goes down. Some of it is some of our larger clients have reduced their activity. And again, that reduces the positions that we've got. It reduces the client balance if they take the money back. And it reduces the debtor balance, the broker balance. There just isn't a direct relationship between the size of our working capital and the revenue that we're generating. It's hugely distorted by a handful of very large clients.

Further Question: So there's no trend? It's one-off?

Answer: Tim Howkins: Yes.

Further Question: Could you let us know what the long/short balance is on indices and also on individual stocks at the moment, how that's changed over the last six months or so?

Answer: Steve Clutton: On individual stocks? It's 98% long.

Tim Howkins: On indices, it shifts on a daily basis between long and short. The index trader trades on a very short time horizon. And they tend to be counter-trenders so if the market's been going up for the last three days they'll be short.

Further Question: Thanks. Has there been any change to your top five traded products recently or is it still Dow Jones index trade or...

Answer: Tim Howkins: The impact of volatility is felt most in equity indices. So the proportion of revenue coming from equity indices has been higher in the last six months than it has been in the previous couple of years. Beyond that, the clients trade whatever the news is. So on the day the Northern Rock story broke, Northern Rock trading made up a third of our revenue for the day. But just for one day. The banking sector has been very interesting. We've seen a lot of activity in banking stocks throughout the period. It's really no more complicated than the clients trade the news.

Further Question: Thank you.

Answer: Tim Howkins: Good. If there are no more questions, thank you very much. Obviously, at this point we'll take our microphones off for those real questions.

End of presentation