Annual Results Presentation 2009
IG Group Holdings plc
21 July 2009
Tim Howkins, CEO: Alright, good morning. I'm sure you've all had a chance to read the results so I won't labour the numbers. We've maintained our 40% compound annual growth in revenue for the 11th year, albeit with the aid of an acquisition. Like-for-like growth in revenue was a mere 25%, so way below historic trend.
Earnings per share, as you've seen, up 22%, and dividend up 25%, probably not something you've heard said too often over the last few months, certainly not from a financial services company. The first half of the year, as you know, very much characterised by extreme volatility in the equity markets, which boosted both revenue and bad debt substantially. And then the second half, as we reported, a weak Q3 in both the UK and in Australia.
We said at the time it was a blip rather than signifying any long-term decline, and really impacted by a number of things; reduced client numbers after the chaos in the markets of the first half, falling volatility and increases we'd made in margin rates. And then we saw a return to growth in Q4 in both of those established markets. A number of causes of that including a shift in margin rates for clients who are on our close-out process as well as recovery in equity markets. And then, of course, strong growth throughout the newer offices, most particularly in Europe and Singapore.
That's enough from me. I'll hand over to Steve to talk through the numbers.
Steve Clutton, Finance Director: Thanks, Tim, and good morning ladies and gents. So in summary, 40% top-line growth, including FXOnline for eight months, driving a 30% increase in PBT, and 22% in EPS. You'll see from the chart, as we did at the half-year stage, we referred to adjusted PBT and adjusted EPS being that before amortisation of goodwill on consolidation of FXOnline. And there's a slide in the appendix which walks through the accounting of that.
Looking at the second-half of the year, you can see that there is a GBP5 million reduction in betting duty, which is paid on aggregate spread betting and client losses. And that reflects the fact that clients benefited from the Q4 market upturn. You can also see the GBP6 million drop in interest received that we've flagged at the interim stage, driven by falling rates.
We've talked at length, previously, about the exceptional volatility of October and the impact that had on the doubtful debt charge. The second half shows the reduction in that doubtful debt charge representing 2.7% of revenue in half two, following the introduction of our enhanced credit risk procedures from November last year.
EBITDA margin was over 54% in the second half, which benefited from that reduced betting duty charge, and was slightly flattered by the half one/half two provision split for bonus and long-term incentive plans. The effective tax rate in the year to May '09 was 30.8%, and we'd expect that to be in the range of about 31% to 32% in the current financial year, reflecting, amongst other things, the full-year impact of higher corporation tax in Japan.
Turning to revenue split by business line, our 40% overall growth includes first-time contribution of FXOnline, which was GBP28 million for the eight months of our ownership. On a like-for-like basis, revenue growth was 28% for financials and 25% for group. There's a slide in the appendix that illustrates the exchange rate sensitivity during the year and shows that approximately 3% of that growth was from currency movement.
You can see the impact of the extraordinary volatility in the half one/half two split of UK spread betting. As Tim mentioned earlier, we did note that there was a drop in revenue Q3-on-Q3, but we've seen a return to growth the UK spread betting in Q4-on-Q4 growth. Overall business, spread betting business, grew by 15% year-on-year.
The principal product outside the UK is the contract for difference. CFD revenue grew 49% year-on-year, reflecting our increased geographical reach, and further penetration of the new markets that we've entered progressively over the last three years.
Turning to sports business, we saw a 24% fall in revenue. The sports business now represents only 4% of total group revenue. It had a challenging year, losing a number of larger clients who've reduced sports betting activity during the current depressed economic environment. In April we re-launched a new dealing interface and website under the extrabet.com brand, which is unique in offering sports spread betting, fixed odds and binaries from a single platform. And early indications are that we're seeing a greater uptake of sports spread betting by new clients as a result.
This slide reconciles financial business revenue by client location, shown in blue in the columns on the right, to revenue by office location, shown in yellow. A client may transact through an office outside his or her country of residence. For example, the UK office revenue includes clients based in Ireland and Greece. Those clients tend to trade (longer lease) shares, and you can see the impact of that reduced activity year-on-year caused by the bear market, in the drop in revenue from GBP13.6 million last year to about GBP9.5 million this year.
Our current statutory disclosure that you'll see in our year to May '09, is geographic segmentation by client location. In the financial year ending May '10, we'll be switching to revenue segmentation by location of office, hence (why) we're giving you this reconciliation as this reflects how we manage the business and report internally and is in-line with new accounting disclosure requirements under IFRS 8.
These two charts show the trend in revenue per client for the financials business over time. You'll be familiar with the chart on the left; we've shown this previously. It's revenue generated in a half-year period divided by the number of clients who have traded, at least once, in that half-year period. As we noted at the interim stage, the extraordinary October volatility led to a spike in the number of clients trading. And they only contributed to revenue for one or two months during the first-half, thus dragging down the first-half simple average.
The clients we recruited during that highly volatile period tended to be less sticky and, in addition, we did lose some clients during the large market falls. You can see that impact in the chart on the right, which showed monthly revenue by client peaking in October and then falling off for a couple of months, reflecting that reduced client activity. But for the remainder of half two, you can see that the averages stabilise and, indeed, trend upwards in June '09.
Turning to costs, this slide gives an overview of the movements in our cost base from GBP85 million last year to GBP126 million this year. FXOnline added about GBP13 million to the cost base for eight months, and we estimate that approximately GBP13 million of the doubtful debt charge was exceptional.
Excluding these two elements, cost growth was 18% in a year when like-for-like revenue grew by 25%. And that 18% cost growth breaks down into GBP5 million for inflation and exchange rate impact and GBP18 million for volume related costs, including GBP6 million marketing, reflecting our wider geographic footprint, and about GBP5 million in enhanced IT capability. For example, the full 12 months cost of our dedicated DR site.
Over the period we saw a 57% increase in the number of financial clients trading. And these increases were partially offset by a GBP8 million lower charge for variable pay, bonuses and LTIPs, due to the lower than expected profit.
We've talked through the year-on-year comparison, so I won't go through this slide in detail. The second half was in line with guidance that we gave at the interim stage, which was for an increment of about GBP10 million, excluding bonus, doubtful debt and long-term incentive plans. The second half reflects the full six months of FXOnline, versus two months in the first half, and you can see that impact, principally, in the salaries and marketing lines.
We've mentioned previously the changes that we've made to mitigate doubtful debt risk and how well those changes, including the automated margin calling and close-out process have worked. The doubtful charge reduced to 2.7% of revenue in the second half. And, as previously stated, the charge was driven by legacy situations really arising from client positions in place prior to the introduction of those enhanced credit risk procedures. Going forward, we'd expect the doubtful debt charge in respect of true new debt to be in the region of 1% to 2% of revenue.
Turning to the current financial year, the most significant element of our cost base is people. There was no general inflationary rise in our June 2009 annual salary review. We expect salary costs to show a year-on-year approximately GBP4 million increase, reflecting the exit rate coming out of May '09, and a modest headcount increase of about between 10 and 20 people, in part driven by our new Swedish office.
We expect other costs, excluding performance-related bonus and long-term incentive plans, to increase in the region of GBP10 million to GBP15 million, really depending on top line and volume growth. And a significant proportion of that incremental cost is down to marketing, which really reflects the full year effect of FXOnline, the additional spend in the US to support the launch of Nadex, which Tim will cover late, and the Swedish launch. So we continue to tightly manage and control costs whilst driving for long term profitable growth from our existing businesses and new opportunities.
Turning to the balance sheet, the business continues to be highly cash generative, as demonstrated by our stated dividend policy to pay out 60% of earnings, and the proposed 25% increase in total dividend for the year to May '09. We're debt free, and a good way of looking at our net cash position is to consider the hypothetical situation where all clients close their positions. Amounts owed to clients would be satisfied from amounts held at brokers and our cash balances. On that basis, you can see that our own net cash position has increased by approximately GBP18 million to GBP133 million over the year. This is after using over GBP35 million of our own cash in the FXOnline acquisition.
The fall in client balances, which is shown as amounts due to clients on this slide, is about GBP118 million, excluding the impact of FXOnline. And that was driven by a small number of clients who tended to trade large equity positions and curtail their activity during the year. The average client balances over the year are very little changed, and there's a chart in the appendix that illustrates that point.
Regulatory capital shows an increase year-on-year for retained earnings and the GBP82 million share placing, which was partially negated by the deduction taken for intangible assets acquired, i.e. FXOnline, and the dividends paid.
Regulatory capital requirements show an increase of about GBP5 million over the year as the business has expanded, leaving a surplus reg cap position of about GBP81 million. And that's before payment of the proposed dividend of GBP40 million.
Client recruitment continues to be the key lead indicator for the business. This chart, which you've seen many times before, shows the new financial accounts opened by quarter in the various markets. And from the bottom of each bar in the chart, you can see UK Financial Spread Betting, CFD businesses across the UK, Australia and our new offices, and finally, from October 2008, FXOnline.
We opened over 74,000 new accounts during the year. That's 74% growth, and 44% excluding FXOnline. And putting aside the spike that we saw in Q2, the growth trend continues with Q4-on-Q4 showing an 18% like-for-like increase. And these growth rates really reflect IG's leading positions in many of the markets in which we operate, together with the increasing market reach, which is demonstrated by the fact that 64% of new clients were recruited from outside the UK in the final quarter.
And at that point, I'll pass you back to Tim. Thank you.
Tim Howkins: Thanks Steve. This is another chart that you'll be very familiar with. It takes the six organic start-up proper offices that we've opened since April 2006 and compares their development with the development of Australia, which is the dark – the mid-blue line over its first 38 months of existence. I say proper offices because we haven't included Luxembourg separately. The Luxembourg office is literally one woman and (a) very small pot plant, and that's included within the France figures.
As you can see, most of these newer offices have grown at least as fast as Australia in their early months and, in some cases, significantly faster. Perhaps the most spectacular of those is Singapore, which is clearly on a very, very steep growth trajectory, in a typical month opening something like two-thirds the number of accounts that we open in Australia, despite being a country of, maybe, a fifth of the population. I think it's clear that all of these are still on a very steep upward trajectory, and they are still in their infancy.
The two newest, France and Spain, or actually, as we call it there, Iberia because we include Portugal within that office, only 18 months old. And their current run rate only about a tenth of that of our UK spread betting business or about a third of the run rate of our Australian business.
And I think it's entirely credible that, certainly, most of these offices, probably not Singapore, it's a small place, but certainly France and Spain, I think it's entirely credible that over time, those should achieve the same sort of run rates that we're seeing in Australia. And then, ultimately, clearly not overnight, but over the medium to long term, achieve the sort of run rates that we're seeing in the UK. So there's clearly very strong growth here. And these six offices have been a very key driver of growth for the year just ended. Together they delivered something like GBP33 million of incremental revenue.
We've seen various shifts in client sentiment towards different asset classes as we've moved through the last two years. A couple of years ago, more than 40% of our revenue came from clients trading single shares. And that portion of the business declined as the markets declined, reaching its low point at 11% in February and then recovering with the market through spring to get to 23% of revenue in May.
Meanwhile, over the last year, we've seen 50% year-on-year growth in indices and, even excluding FXOnline, which is a forex business, a doubling of the forex business, ex-FXOnline. In part, that reflects improvements to our forex offer, most particularly a move to variable spreads allowing us to market from one pip within the UK market in the final quarter.
And I think it also indicates a shift in client sentiment. As clients become less interested in equity markets, they've increasingly focused on Forex, where perhaps the connection between global economic events and what's happening in the forex market is a little easier to decipher, or feel that you have a view on.
And I think all of this tells you that the business is very resilient to really all stages in the market cycle. There's always some asset class which is of interest to some segment of the client base. I think particularly the fact that we've seen such a swift recovery in shares business tells you that there was an element of the client base who were simply sitting on the sidelines for the last couple of years, waiting for bull markets to return and, at least temporarily, it looks as if they have. Whether that bull market is sustained, I leave it to all of you to judge.
Clearly, one of the big stories of the year is FXOnline, and since we bought this business back in October, we've seen really quite a significant shift in the competitive landscape. At that stage really, the entire market was at two pips or above, and now definitely the focus of the market is on sub one pip spreads. This is all in dollar, yen, which is by far the most popular currency pair traded in Japan.
That shift in spreads to a much lower spread model has been accompanied by a shift to much more aggressive marketing by most of these competitors listed on the right-hand side. And certainly at least four of those are spending more in the Japanese market on marketing than our entire global marketing budget.
A lot of that marketing is focused on TV campaigns and cash-back offers where you open an account and you get cash put on your account, which is all really focused at the bottom-end of the market. They're really going for the absolute beginner, people with no experience of forex and really trying to drive towards a mass market.
I think it's fairly obvious from that, that both the average quality of a client across the industry will have been falling over the last few months, and the cost of client acquisition has been rising. And that isn't a game that we particularly want to play. I think it's a game of ever-diminishing returns to chase –really bottom fishing for the lowest common denominator of client.
And where we see the opportunity here is to reposition FXOnline as a much higher-end provider, targeting the more experienced, the larger client. And really FXO is only able to do that now that they've got our much better technology and broader product set. So that's what allows us to do that. And that's not a change that we're going to achieve overnight, but it is something that we're working towards over the next few months. And I think targeting the larger client certainly sits much more comfortably with a broader CFD offering.
Clearly, a key issue in this market is pricing, and the market's very definitely moved to one pip and below. We introduced our variable spread model in Japan at the beginning of June, allowing us to market from one pip, and the initial impact that we saw on volume was really quite dramatic.
In the first week, volume was something like 80% higher than it had been in the previous week, so there clearly was a very strong message in that from 0.9 of a pip message. But that uplift in volume was very short-lived and really by the end of June, volumes have settled back to the level we were seeing in May.
And I think the message we got from talking to clients was that, yes, they thought from 0.9 of a pip was attractive, but we weren't there often enough. And actually the prices were changing much too often, so they didn't feel that the 0.9 of a pip was a particularly genuine offer.
A couple of weeks ago, we emailed about 180 larger clients who are either completely lapsed, ie they'd stopped trading completely, or they'd very significantly reduced their trading volumes, and that had – and what we emailed them was an offer of 0.9 pips fixed, and again, that had a very immediate impact. We saw a significant uplift in volume from those clients to the extent that within a week, they were accounting for something like 30% of total Japanese volume.
That effect has continued. Those clients are still trading, albeit it's only two weeks under our belt, so it's too early to conclude too much. But I think there is a very clear message here that if you get the spread model right, there is significant volume to be done, and certainly significant volume from the larger, more active clients. And our focus now is on extending that offer to a greater number of clients, and also finding more of those larger clients.
I'll just touch on regulation, because really there is no news yet. We do expect an announcement from the Japanese FSA, almost certainly before the end of July, but it hasn't come out yet. So really nothing to add to the statements we've already made on that subject.
Possibly the most important thing in Japan is the CFD market, which I think is where we see the long-term growth coming from this business. This is clearly a pretty new product. We started to launch this product progressively, this is both CFDs and binary options, progressively between March and May, so we've only really got one full month in June of operating with the entire product set.
In that month, these products accounted for something like 10% of trades and 5% of revenue. The difference between the two, I think, tells you that clients trying a new product tend to start off in quite small sizes and then build up size as they become more confident. And we're still adding to the offering in terms of educational services.
Everywhere else in the world, webinars and our six-week training programme, TradeSense, have been very popular. And those have literally been launched in Japan in the last week or 10 days.
Finally, on the right-hand side, a word or two about white labels. The interest we've seen from the existing FXO client base has very much been in indices and binary options, not in shares. And I think that's what you'd expect from what was, historically, just a forex client base. And the main benefit we see of white labels is that it gives us access to a very different client base; people who are used to trading equity products. And we have now concluded two white label arrangements and we're in the process of implementing those.
We hope that the first of those will go live literally within the next couple of weeks, although clearly, we're in the hands of the partner to some extent there. And this gives us access to really quite a large pool of clients who should be interested in CFDs on forex.
You probably think I've been talking about the US ad nauseam for the last 18 months. We have finally reached the point where it's finished, and what's been work in progress for the last 18 months is now ready to come to fruition.
A couple of weeks ago, we re-launched Hedgestreet, our exchange, as Nadex, that's the North American derivatives exchange. The intention is to both offer Nadex products directly, so you can go to the Nadex website, become a member of the exchange and trade directly on the exchange. But most of our focus will be on an intermediated offering, both offering the product through our own US subsidiary, IG Markets Inc, and through third-party brokers, and we're talking to a number of those at the moment.
It does require a change of regulatory permission for the exchange to be able to operate through intermediaries, but we certainly think that's a mere formality and we're just waiting for permission from the CFTC before we push the button on that.
IG Markets Inc has really been operating on a skeleton marketing budget for the last year, despite which, in the year just ended, it generated GBP2.3 million or revenue from a standing start. So I think it's demonstrated that it's got the ability to recruit clients.
We will be increasing that marketing budget, so something like 10% of our global marketing spend for the coming year will be focused principally on IG Markets recruiting clients, but some of it on Nadex, promoting the product set.
I've listed what the product set is on the right-hand side and I won't run through all of that. But the key features are that we now offer equity index products, including the main US indices. And what that means is that we now have a product set which is analogous to the product set we offer everywhere else in the world with one omission, which is shares.
I've already touched on white labels in the Japanese context. We very much see this as complementing our direct retail approach, particularly in newer markets where we don't have an established brand. And it's a way of accessing a pool of established clients and, very often, you get the reputational benefit of being effectively recommended by somebody with whom the client has a long-standing trust relationship.
Recent wins include two of the top four online brokers in France. Those both started up in the spring of this year and the current run rate now between the two of them is about 10% of French revenue, and clearly plenty of growth still to come from that.
We've just signed one of the top four online brokers in Spain, and that should go live probably after the summer, because I think Spain pretty much stops now for the next six or eight weeks.
And then, as I've already mentioned, FXOnline have signed two white labels. One is quite small, the other is a similar scale to the number two broker in France, so a business with a significant number of clients.
So what next? In the near term, a lot of the focus is going to be on building scale in the geographies we've already established, particularly those we've established over the last couple of years.
As I've already said, yes, really no reason to see why France or Spain couldn't get, ultimately, to the size that of the business we have in the UK. And that would imply something like a tenfold increase in revenue from both of those, although clearly I'm not saying we're going to achieve that in the next 12 months.
Even if you take a more cautious view and say they might only get to the sort of scales that we're seeing in Australia, that still implies a threefold growth. And I think that's entirely credible over, maybe, a two- to three-year time horizon. Meanwhile, international expansion continues, but at a slightly slower pace than what we've seen over the last three years.
In about five weeks' time we open up in Sweden, and that's the only thing which is definitely at the implementation stage at the moment. We've then got a list of a further eight or so countries, all of which are work in progress, but all of which have some regulatory complication, either regulation or exchange controls, which mean it's a little bit harder to operate in some of those. So more news on those in due course.
Clearly, there are a couple of representatives of a couple of our competitors in the room, so I'm not going to say which countries they are. But certainly, we think by the end of the year, we'll be making a bit of progress in some of those and I think, therefore, little impact in either revenue or cost terms for the current year.
So, in conclusion, recent trading has been good both in June and July. We certainly see plenty of growth left in both the UK and Australia, and we've demonstrated that in the last few months. And we still expect very high levels of growth from the six newer offices established over the last three years.
Japan, there is a big opportunity there, both to reposition ourselves at the top end of the forex market, and to tackle what is a nascent market for CFDs and binary options, both directly and through white labels.
We've made very significant progress this year in terms of credit risk management with the introduction of the close out monitor, which I'm sure you're all now familiar with. That both helps protect us from doubtful debts and also helps to preserve and protect the client base. And I think that's particularly important in these volatile markets.
There are still plenty of places for geographic expansion, but some of those places will take a little bit longer to come to fruition, so our near-term focus over the next few months is predominately on building the existing offices to the scale we think they merit.
And with that, I'm very happy to open up to questions from the room first of all. There are a couple of microphones, so please stick your hand up and then wait for a microphone to come to you before asking your question. Thank you.
Question and Answer Session
Question 1
Isabel Green, UBS, Analyst: Hello, Isabel Green here from UBS. Just in a little more detail, if you don't mind, on Japan and FXOnline. You mentioned addressing more the quality end of that client market. If you're able to give us any better understanding on how much of the market by value that quality end makes up?
And also in terms of, there's clearly been a very competitive situation out in Japan, in terms of market share being eroded slightly by some of that competitive activity, and what sort of market share you're at now and would like to be targeting?
Answer: Tim Howkins: I mean certainly the majority of our revenue in Japan comes from a very small number of high value clients, and no reason to think that this isn't the case for most of the competition. So I think it's reasonable to assume that a significant proportion of the overall industry revenue does come from quite a small number of clients. And yes, key to tackling that is quality of platform and quality of execution.
And I think that the speed with which those clients came back to us when offered 0.9 pip fixed, when that clearly wasn't the cheapest offer in the market, but it was a reasonable offer compared to the competition, coupled with very good quality execution. And I think that tells you that the more sophisticated end of the client base doesn't just look at the spread, they look at the whole package, and a key part of that is quality of execution.
Steve Clutton: In terms of market share, it's quite a fragmented market. I think when we acquired the business, we gave an indication that we had a market share of around, what, 5%, 6%. It's clearly dropped since then, but there's no reason, we believe, why we shouldn't be aiming to get back to 5%, 6%, 7%.
Further question: And just one follow up question, if I may, on costs. Obviously, if you're going to be working on developing and strengthening your position in the existing markets, that will take some more marketing budget. I know you gave us a little bit more guidance on costs, but specifically on marketing, can you give us any guidance there?
Steve Clutton: I think you could probably take a pro rata measure of – in eight months we spent in the order of what, GBP5 million?
Tim Howkins: In Japan?
Steve Clutton: In Japan. And if you pro rata'd that for a 12-month impact, it's probably where we'd be. So I don't think we're stepping it up; we're just going to spend it maybe more wisely, shall we say.
Tim Howkins: The general trend across the business is that costs of client recruitment starts expensive in a brand new territory. Because you get – you've got no word of mouth effect from existing clients and you've got no recognition of the brand, and it trends down progressively over time.
So yes, it's significantly cheaper to recruit a client in the UK, where we've got 35 years of brand history, than it is in France, where we've got 18 months. But the trend across all of the countries is that, with time, it trends downwards. So the Australian cost of client recruitment is only a little bit higher than the UK cost, and certainly trending down towards that. So in other words, marketing becomes – the marketing spend becomes more efficient over time.
Further question: Thank you.
Question 2
Unidentified Audience Member: Hi there, I think in the release, you said something about the product mix changing towards CFDs versus spread betting in the UK. What's driven that? Why would clients want to trade more CFDs?
Tim Howkins: I think there are a number of factors at play. If you ask clients why they trade CFDs rather than spread betting, they tend to come up with a slightly woolly answer quite often about, oh well I'm a serious trader and if I was betting, it wouldn't be. And I think what you've seen in the market generally over the last year is, there have been some white label entrants who are very definitely promoting spread betting as a more leisure, gamey type product, rather than as a serious investment. And I think maybe that has driven some people away from spread betting into CFDs.
There's probably also the factor that a lot of people probably have capital gains tax losses and, therefore, they're less sensitive about spread betting being tax-free, whereas CFDs are subject to capital gains tax. And then I think we've also, probably, significantly improved our CFD offering over the last year or so. And yes, it's very hard to tease apart those factors.
Further question: Can you say anything on, you said the first couple of months had been pretty good. Can you provide any stats on those and just in terms of what you've seen in, perhaps April and May, and what you see in June and July?
Tim Howkins: June was clearly a long way short of the best month we've ever had, which was October. But by a very narrow margin, it was the second-best month we've ever had, but by an absolutely tiny margin.
Further question: Thank you.
Question 2
Martin Price, Bank of America Merrill Lynch, Analyst: Good morning, it's Martin Price from Bank of America Merrill Lynch. I had three very quick questions, please. The first is on white labelling. I think back in January, you'd indicated that white labels were contributing around 1% of group revenues at the end of the first half. I was wondering if you could say what the level of contribution was by the end of the second half and, perhaps, what the expectation is, looking forward?
Secondly, with an accelerating proportion of revenues now coming from abroad, I was wondering at what point you might consider hedging some of your FX exposure?
And finally, I was just wondering if you could say anything about the monthly revenue run rate at FXOnline in June, or since last year end? Thank you.
Tim Howkins: The white label contribution run rate by the end of the year was probably nearer to 2% than 1%. It had roughly doubled over the six months. In terms of, and clearly, that's very early days. A driver of that is a couple of white labels that are literally only two or three months old at month end. So there's still a lot of scope there.
FX exposure, I think, it's actually quite difficult to hedge P&L arising in different countries. It's not like we're a widget manufacturer who knows that they're going to sell something for a fixed number of dollars at some point in the future. It's not even as simple as all our revenue in France is derived in euros, because clients in France trade US products and the business mix shifts over time. So I think it would be difficult to hedge effectively. And in any case, I suspect that it wouldn't gain us any benefit, because people like you simply strip out the forex effect anyway. So why incur the cost of, if you like, artificially constraining it?
Steve Clutton: And we're partly covered, as well, with overseas costs. So I think in the cost (bridge), GBP2 million to GBP3 million of that cost was FX.
Tim Howkins: And then in terms of FXOnline run rate, the run rate in June was, at least in sterling terms, 10% higher than in May. In yen terms it was more than that, wasn't it?
Steve Clutton: Yes. We're in line with our expectation in yen terms, in June.
Martin Price: That's great. Thanks very much.
Steve Clutton: - Okay.
Tim Howkins: Any more questions from the room? If not, we'll go to the phone lines and take any calls there are from the phones.
Operator: (Operator Instructions). There are no questions at this time. Please continue, sir.
Tim Howkins: Okay. I think we've got one more question from the room.
Question 3
Unidentified Audience Member: I just (have one) on the cash number. I think, last year, the cash was it GBP97 million? You changed the order, is that right? The net cash number?
Steve Clutton: We probably didn't show the other current net liabilities last year, but we thought, to be complete, we would. But the point is, we have quite a surplus of (our) own cash.
Tim Howkins: Okay. If there are no more questions, that concludes the formal part of the proceedings. Obviously, happy to hang around and answer any one-to-one questions that anybody's got. Thank you.
Steve Clutton: Thanks.
Operator: This presentation has now ended.
End of presentation