IG Group Holdings PLC

LSE:IGG

Earnings Call Transcript 2019-Q4

[June Yee Felix, CEO & Executive Director]

Good afternoon. A warm welcome, and thank you very much for coming to join us this afternoon. My name is June Felix. I'm CEO of IG. And I'm joined today by Paul Mainwaring, but I also have some of my very talented ExCo that are in the front row here. So we have Jon Noble, our CIO, Chief Information Officer; Bridget Messer, who's our Chief Commercial Officer; and also Jon Noble (sic) [ John Austin ]. But the strategy I'm going to share with you today was really a partnership with Paul, Jon, Bridget and John, as well as the whole ExCo, to really identify the strengths that we can marshal in our existing business and take to the next level.All of us are going to be available afterwards as well in terms of the whole ExCo, so we'll have drinks, and hopefully, you'll join us, and we can carry on the conversation then.As usual, we're going to begin with the normal disclosures. I'm going to let you read those in your own time or speed read now, but the most important thing is I want to set some context.Creating a growth strategy that takes advantage of all of our strengths is, as I said, a real team effort. And as I've had a chance over the last 7 months to work with this group of people and travel across all of our locations, what I've seen is a real passion and a dedication to creating a winning strategy that leverages those strengths. I've been really impressed with how many people demonstrate this innovative, pragmatic thinking and a passion for our company. The resulting strategy, like our people, shows real ability, agility and ambition.Before discussing the strategy, I want to first start with some context and update you with my thoughts on IG and the world in which we operate. My perspectives have been shaped by my many meetings with clients, employees and regulators in U.S., Europe and in Asia in the last months. We've also conducted rigorous analysis and independent research to thoroughly assess our strengths and also our opportunities.The good news is, my assessment is that we have a great company, with a very strong core business and many opportunities for us to pursue. IG has many strengths that do set us apart, and I would like to share some of those with you right now.Our sustainable business model. This is a critical differentiator. Unlike our competitors in this industry, our interests are aligned with our clients. We do not need our clients to lose money for us to make money. The exceptional strength of our brand for over 45 years and superior client focus, this has resulted in the brand and reputation that we enjoy today.Our clients are of the highest quality. They're educated, self-directed, wealthy, sophisticated traders, and they are loyal. 69% of the revenues that we have in ESMA were from clients that were classified as professional. Of those 69%, 61% of the OTC leveraged revenue was generated from ESMA region professionals who have traded with us for more than 3 years.Our technology and commitment to innovation. Our robust technology estate and innovation enables us to launch new businesses and products globally more cost effectively and quickly. Relationships with regulators, having met with quite a few, I can say that we have a collaborative relationship. This will serve us well going forward.Our people. I'm very proud of the talented people we have at IG. They demonstrate great resilience to change and are nimble, and have an ability to find opportunities in the middle of challenge. These characteristics really make all the difference.Last, but far from least, we have a very strong balance sheet. And as Paul will outline more in our financials, sufficient capital and liquidity to allow us to invest for growth. All of these strengths have resulted in very strong core business. Today, we're going to discuss how we're going to build on this strong core. So today, I will discuss our environment, where we are today, our key strategic choices, our growth levers, and the specific actions that we're taking in each market. Paul will then walk you through the financials of our -- that are implied by our strategic plans. I'll follow up with some conclusions.As a result of our work, we will be presenting a strategy that targets, in our core markets, U.K., Australia, EU, Europe, non-EU, and Singapore, revenue growing 3% to 5% per annum over the medium term. On top of this, we will generate an additional GBP 100 million in revenue from significant opportunities by FY '22. Achieving these targets will result in revenue in FY '22 being more than 30% higher than our revenue in FY '19. And to remind you, the Board expects to maintain the 43.2p per share annual dividend until the group's earnings allow the Board to resume progressive dividends. I will share these plans in the subsequent pages and all of the things that support these targets.Before I do, let's start with the headwinds and the tailwinds that affect us in our environment today. Our industry is experiencing both headwinds and tailwinds, but let's start with the headwinds. Our sector has been heavily impacted by the poor conduct of some providers. They have tarnished the sector by targeting people for whom CFDs are wholly inappropriate. This resulted in poor client incomes, which have driven regulators to act. In the ESMA region, this resulted in regulatory intervention. We firmly believe this industry should be regulated, and we support proportionate regulation that improves client incomes. But as we all know, this regulatory intervention has reset the industry. IG's U.K. and EU retail business moved to a new lower level as retail clients are trading less than in the past.Australian regulators are also planning to move forward product intervention at some point this year. Whilst we're well positioned given our high-value client base, it is difficult to accurately estimate the impact at this time. That being said, IG has navigated the ESMA product interventions and transitioned very well. We have retained a strong base of the highest-quality clients. In fact, in the last few weeks, IG's high-value clients have started trading again as market volatility returned and our clients found opportunities to trade.There are very positive and important tailwinds in this business that IG is very well positioned to handle. The first is increasing wealth. Mean wealth per adult over time continues to rise significantly. Between 2000 and 2018 in the U.K. alone, mean wealth increased by 71%. In Australia, it has increased about 280%. Asia has the fastest growth in personal wealth, with a billionaire created every other day. Growing self-direction. There is a clear trend toward self-directed investing. 70% of people in digitally advanced countries are willing to invest online.Increased interest in trading international assets. IG is very well positioned to meet this demand. We have more than 16,000 underlying markets, including many individual international equities. All of these factors have contributed to more people moving towards leveraged trading. For IG alone, around 1 million people start our application process every year. Investment Trends estimates that 164,000 leveraged traders exist in the U.K. with 45,000 of them in the -- started in the last year.So while IG and all the competitors face powerful pressures, I believe IG can uniquely take advantage of the tailwinds and handle the headwinds. Why? We have a large professional client base of wealthy, sophisticated traders. The many strengths I've just discussed and the fact that IG is a market leader. We see leaders win in times of regulatory change.Let me show you 2 examples. Japan is our first example. Japanese regulators, on the left-hand side of the chart, in post-market regulation change in 2010. After an initial dip, as you can see, the retail FX market more than doubled in size in the following years, although it has recently declined from that peak. The largest firm more than doubled their revenue between 2011 and 2018.The second example is the U.S. That is the left-hand -- right-hand side. Regulators again imposed tighter regulation. The market contracted by 25%, as you can see by the blue bars. The 2 remaining firms have grown share and revenue. They grew share from 40% to 80% as shown in the light blue line. These examples illustrate how market leaders can grow and take share in the face of regulation. We believe that IG, a leader in all of our markets, has this same opportunity.So who are we? And why does this matter? Our vision, values and purpose are at the heart that defines IG Group. Unlike other companies that I've worked for, IG's purpose, vision and values really are embedded in the culture of the company, and they're thoroughly reflected in everything we do. Our people are passionate about enabling self-directed, adventurous, individuals to access financial markets. And they see it as an important mission to create the best trading experience.Our values define the IG way. Championing the client, leading the way, loving what they do, is what everybody does in this company, and it deeply matters to them. While these may seem abstract, I see that the purpose, vision and values are critically important at a time of change. We all know the CFD market has been plagued by the bad behavior of other firms. These firms fail to put their clients' interests ahead of their own. Quite rightly, regulators intervened. These firms are now struggling to adapt to the new environment.IG is different. We began life over 40 years ago with the legitimate purpose of helping informed individuals speculate and profit on fluctuations in the price of gold. We built a sustainable business driven by legitimate client demand. We want our clients to succeed and enjoy their trading. Our interests are aligned with them, and that does set us apart in this industry. Our vision, values and purpose are our North Star, and play a critical role, as I said, in these times of change.Now while our values and purpose have stayed exactly the same, the environment has changed, as I just said. And our strategy for the future must respond. We'll now turn to a discussion of our strategy. So let's start with how we look today. As you can see from the chart, we are concentrated in the top part of the chart on the left, which represents IG's core markets, and we have principally one product line, which are the check marks down the -- vertically, which is the OTC leverage product.Now we have done well as a company. When we invest in, we have seen that these investments produce growth. But the shape of the business did not really change. We are, today, essentially, a single product company operating in mature markets. 96% of our revenue is from one product, OTC leverage. About 70% of our business is from 3 key markets: U.K., Europe and Australia, and we believe we can do better.We have identified significant opportunities illustrated in the light blue area to grow in large and fast-growing markets outside of where we call our home markets. Our strategy is designed to make the most of these opportunities. It will take full advantage of the scale of our platform, add new approaches and skills, ensure we will grow and take share in our core markets, and win in large new product areas, and also new markets.Now there are 3 elements to our strategy. The first is our key strategic choices. These act as our guiding principles. Our growth levers that will help accelerate growth. And most importantly, we've developed market-specific action plans that will land our growth ambitions.We will now take you through each of these. Our strategic choices. In pursuing our vision, we have chosen the following strategic choices: operate a sustainable business model; provide the best client experience; win with our technology; tailor client propositions; broaden our product range; extend our geographic reach. These strategic choices set us apart from competitors. I will cover the first 3 of these here. The remaining 3 are embedded in our growth levers, which I'll cover shortly.The first being operating a sustainable business model is a choice for the business. It has served us well in the past, and we believe it's important for the future. We align our interests with our clients and hedge our market exposures. This reduces variability of revenues. It engenders client loyalty, especially amongst sophisticated traders.Providing the best client experience. This is crucial to client loyalty, and particularly important, again, for the high-quality clients that we have. And we will continue to develop low friction, seamless and engaging ways to handle client experiences, but invest in client relationships, long-term client relationships.So let's look at a video to bring this to life.[Presentation]

[June Yee Felix, CEO & Executive Director]

Felt the enthusiasm and passion of all the people there, that having worked with them, they really care deeply about those client relationships, and I hope it comes across.Our third strategic choice is win with our technology. Our technology is designed to be scalable, stable, reliable and flexible. As this is a key competitive weapon, I want to spend another moment on this. We have a broad flexible technology estate with full front and back-end capability. We have in-house expertise and deep knowledge of products. As you can see from the chart, many technology components we have built in blue on this chart. The light gray indicates the ones that we have bought. These are commodity in nature. We do not gain any advantage from building these ourselves. This technology approach allows us to be a flexible, fast and deliver innovation at the speed and cost-effective -- cost-effectiveness that we aspire to.Now let's look at what we've actually delivered in the last 12 months as a proof point. The MTF and issuer, turbo warrant market maker, options accounts, knockouts, IG Europe, and the U.S. RFED. 40% of our employees work in IT, giving us the skill and capability to reach rapidly -- react rapidly to new opportunities. Our technology supports a robust suite of functionality. Today, our technology supports OTC trading, CFDs, spread betting, FX, options, share dealing, content distribution, robo-advising and market-making as well as the CFTC regulated exchange and a pan-European multilateral trading facility. This set of robust capability, the set of Lego blocks, gives us a competitive advantage and one we will certainly take full use of.Now let me turn to the levers that we'll apply to accelerate growth. Our strategy takes advantage of 4 growth levers, 3 are new to IG or previously underexploited. The first is to expand our distribution channels. We plan to create partnerships that accelerate and expand our reach. This will be a key lever, especially in Asia, a fast-growing market, where we have almost no share, and we're seeing appetite and interest by large local firms to partner with us.Two, become a global firm with more local focus. Here, we're going to tailor products and marketing to local needs. This will allow us to more effectively compete in each market, and it's a new way of working for us. I'm making organizational changes to empower our regional leaders and provide them with greater autonomy. One example is a new product that we developed in the last few months for the Dubai market, which is tailored to this market's special needs, but it also didn't require any significant changes to our technology. This entrepreneurial agility, combined with our brand, scale and technology prowess, will allow us to accelerate growth in core and new markets.Better client segmentation. This is in 2 parts. One, deliver services designed for each client segment. So for the high-value client, more personal touch, retail clients, more digital. As well as enter a new customer segment, family offices and small hedge funds using our platform capability. And the last is new products. We will continue to identify and add new products that like our on-exchange turbo warrant product will add to the portfolio.Our market-specific plans will show how we will use partnerships more systematically, target small hedge funds and family offices as a new segment, tailor products and services to meet local needs, while retaining global scale advantages, and as always, innovate new products. By applying these growth levers systematically, we will unlock additional growth in our core markets and in new areas of significant opportunity. We will also apply different combinations of these growth levers in each market as appropriate.I will now explain how we will achieve this on a per market basis. First, we'll look at our core markets. And as a reminder, these are the markets where we're targeting growth about 3% to 5% per annum over the medium term. We define our core markets in 3 groupings. The U.K. and Australia, both well-established markets, where OTC derivatives are the default product. The EU, which is about 200,000 OTC leveraged traders, that number of people trading on exchange is about double that, resulting in a market of about 1.6 billion annually. And EMEA, non-EU and Singapore, it's about 72,000 OTC traders in that market, and they also have sizable number of family offices and hedge funds.Our position today is that we're strong in all these markets, and we have 85% of our business comes from these markets in FY '19. We're particularly strong in the U.K. and Australia. We have the leading share in the premium client segment. We're also extremely well positioned to acquire switchers from competitors in these markets. In the EU, where we created the CFD market by taking share from the turbo on-exchange market, we are a leading provider in all markets in CFDs. We believe we will benefit in markets like France, where we have the largest share by far and weaker players are struggling. And we continue to be a leading provider in the rest of those markets, EMEA, non-EU, and Singapore.Our strategy for growth in the core markets is to grow revenue, especially in the high-value and institutional client segment, by tailoring our products more specifically for local needs and sharpening our acquisition and delivery capability for offers especially designed for these client segments. In the last few months, we've done more in-depth research and analysis. As a result, we now have a better view of what more we need to do to grow the number and value of our high-value professional client segment. Those include more tailored fees, additional account features, more exclusive content, including access to the institutional level education content you saw, expanded premium client coverage. All the research we've done really demonstrates how powerful it is to have these premium client managers and how much they're valued by these clients. We'll also enhance our acquisition efforts and digital services to add and retain clients. We've added new disciplines in our marketing to more precisely target clients, both digitally and through personal referrals, and we're applying machine learning to serve up new tailored content and experiences based on clients' interests.We'll also expand into new high-value, sophisticated customer segment called small hedge funds and family offices. There's a meaningful number of these in our -- across the markets that we've discussed in our core markets, and we'll talk about this segment separately at -- in a few minutes. So through a high-level of focus and energy, and a more rigorous approach developing both the high-value client and the institutional client, we intend to grow our business and take share in these important core markets.Now let's turn to the 5 significant opportunities we have identified outside of the core markets. The EU new products, the U.S., Japan, Asia, and institutional. We expect these opportunities will deliver a GBP 100 million in additional revenue by FY '22. Importantly, not all of these need perfect execution for us to achieve the result as we recognize there is always execution risk. These plans that you will see and have seen so far have been built from the bottom up. These are not built in an ivory tower or handed down to people. It's been through thorough engagement with all the people that will be responsible for delivering these numbers. So let's start with the EU. We are really well placed in the EU. So let's start with the fact that we can navigate a potential Brexit. We've already set up the IG Europe as our Brexit hedge, and our European clients are now contracted to this new entity. So I just wanted to put -- make sure that that was clear. While we are going to deploy all 4 levers, as you can see from the icons on the right, that's the code, the most important growth lever or growth driver in this region is launching new, on-exchange leverage products. As you can see from the statistics, EU is a large on-exchange leverage trading market, and it's 3x the size of the CFD market. And until now we have -- did not have products to fully participate in the segment.Our strategy is to launch new products. In the last few months, we've launched new OTC options products, which have already started to attract new clients. In addition, we're going to build a business in the new turbo market area, as we discussed earlier in January, and we'll take you through more plans on that. We're going to tailor our products and marketing to the local nuances and expand distribution through partnerships. So let me show you what I mean through a video clip of why we're so excited about the opportunity for IG with Spectrum, our turbo market answer.[Presentation]

[June Yee Felix, CEO & Executive Director]

I think it's extremely exciting. We now have Spectrum ready to disrupt the turbo market. The technology development has been completed. However, given the summer months, we have decided that we're going to start full force in September to launch this across all of Europe, and this will optimize our marketing spend and create the biggest impact. We believe we can win in this market because we have the superior user experience versus the existing providers, and you'll have a chance to see this for yourselves during drinks, so please stay for that.24-hour trading is something we know clients value, and that is a big differentiator, and retail client-focused liquidity, allowing our clients to trade in and out when they want. We're also making Spectrum very attractive to third-party brokers. So we will drive adoption in 3 ways: through online marketing; our IG Europe offices; and partnerships with third-party brokers to build scale more quickly. This powerful combination will help accelerate our growth on top of the core business we do in the EU CFD market today. The U.S. is another significant opportunity, the second that we're going to cover. Our goal is to win significant share in the margin FX business, and of course, we will apply all of our growth levers. The U.S. is a large market with 2 primary segments: almost 700,000 futures and options traders; and then almost a 100,000 margin FX traders. This is larger than Australia, which has about 75,000. And importantly, there were only 3 players, registered brokers, until we entered in January. Our research showed that due to limited competition in the margin FX business, clients were not well served. Spreads are wider or were wider until we entered, and service is poor when compared to other markets. So we saw this as a major opportunity.We have -- we also have 3 key assets in which we can attack the overall market. DailyFX, which is a leading website with 1.7 million unique viewers each month. IG U.S., which we launched January 2019 to offer margin FX trading for retail clients. The initial indications are encouraging for this. And Nadex, an exchange, which gives retail clients access to short-term derivatives on a broad range of underlying assets. We plan to grow IG's business in the U.S. by marshaling all of our capabilities in this market. For DailyFX, we're going to use the DailyFX awareness and traffic to drive awareness as well as generate leads for IG U.S. IG U.S., we're improving the levels of service, and we've gone in with a highly competitive offer in terms of 25% lower spreads than competition to gain share. And Nadex, we're focusing on product, client experience and broadening our distribution channels. We believe, with these actions, we can drive growth in the important U.S. market.I said earlier that Asia is an important area of focus to our strategy. And so let's look at Japan as a key proof point. Our goal is to take share in this huge market through new products, more efficient localization of our products, new leadership and investment, and partnerships with key local players who already have a large base of local clients.Now we have long identified Japan as a market with significant opportunity. The retail FX market is the largest in the world, with 2 million traders, about a GBP 1 billion in market opportunity. There are lots of different client segments from what I'd call Mr. and Mrs. Watanabe, the small leisure end, and the deeply professional end, just like our U.K. professional traders.Japan has a clear and stable regulatory environment, having gone through product intervention in 2010, and we have a very low share. So with fresh eyes, we've been looking at it over the last 7 months, and we've rigorously assessed what it would take to get a significant share in that market. We used a specialized Japanese research house in addition to our local Japanese team to conduct an extensive review. This review confirmed a clear demand for innovative products. The review also show that IG has a real USP, in that we have a great track record of introducing new products. And you can see that in our latest product introductions, we've already gained 80% year-on-year growth in first trades up to date -- to date.However, there are shortcomings, and the first was our user experience and website aesthetic are totally unpalatable to most of the Japanese audience. So to bring this point to life, I'm going to show you some images. The first from our IG Japanese website, which is our U.K. website translated into Japanese. And here's one from the leading Japanese provider. You can see they are very different, and we're going to fix that. Marketing spend was also significantly subscale. We need to be more focused on brand and influencers to build trust with the Japanese trading community. The review also concluded there's a really good revenue opportunity for us to partner with local securities houses and regional banks. Their clients are crying out for new products after many years of low interest rates and low returns on conventional products.Local banks are also seeking ways to enhance their product offerings and ensure client loyalty and are willing to partner to do so. Therefore, we have determined that with the right investments, it's an excellent opportunity to dramatically increase the size of our Japanese business in the medium term.Our strategy includes: plans to target active traders; investing in local marketing platforms and website; increase spend to build brand and trust; partner with regional banks and local securities houses. We provide the products. They provide the distribution, and invest in local talent. We are already underway. We've hired a new Japanese CEO with significant experience in growing businesses in Japan for both Japanese and Western companies. We've appointed a business-to-business specialist with FX experience and deep networks in the local securities houses and regional banks. We've ensured that the Japanese team has more autonomy. We are currently in the market looking for marketing and sales specialists, and we've appointed an expert, Japanese UX firm, to help us with the development of the new user experience, interface and aesthetics.So what's different from the past attempts in this market? Four things: real focus and investment; a recognition that more localized approach is essential; providing experienced local executives with the right level of support and autonomy; and four, a new willingness and market need to partner with IG for its product-innovation capability. We are already seeing strong double-digit growth in this market, even without all this. And based on my experience in this market, I believe these actions and investments will make a real difference. Now let's look beyond Japan to the rest of Asia. Asia represents a really significant opportunity for IG given the size and speed of growth of this market, and I think the numbers speak for themselves with the growth of online retail securities almost 50%, the size of the personal assets, stunning, and Hong Kong's ranking as the fourth largest online trading hub in the world. We have no presence. We're launching 2 plays to build IG's business in this huge market: we're going to develop distribution partnerships; and investigate opportunities in the leveraged securities market. And we're going to go through each of these in turn.So first, establishing the partnerships to scale more quickly. Greater China now represents 45% of global online retail securities trading. We conducted quantitative research in the last few months that showed that 75% of traders are interested in new products like ours. Mid-sized and even large Chinese securities firms want to meet this demand, and not all of them can do this easily and in time. They also have an urgent need because their core business, which is security -- domestic securities, is rapidly declining in margin due to fierce competition. They need a new product.These firms don't have the experience in the kind of leveraged products that we've been able to create and the innovation expertise we have. So IG is an ideal partner. We have the ability to deliver what they want. The profitability of our products makes them attractive as a new product line for them. Our size, scale, and expertise, makes us really ideal. And early evidence is encouraging. We've already met with a number of the major Hong Kong securities firms on creating innovative, compliant products for this market for them to distribute, and active discussions are underway and progressing well.To fully take advantage of this opportunity, we will be establishing a presence in Hong Kong, and hiring ahead of Greater China. We believe these efforts will position us well in this enormous market and growing market as a new initiative. It plays a key part in our strategy to expand presence in large markets where we are not present today. And it's very close to my heart based on my previous experience in Asia, and forming partnerships, and seeing how huge this could be. I see that it's a real potential opportunity for IG.The listed leverage market is another great opportunity and is growing fast, as you can see, from the chart. Futures trading has grown about 27% in compounded annual growth rate in the last 4 years, 2014 to '18. And Hong Kong, as I said, is a large and active market. So let's put this in perspective. Hong Kong is 1/10 the size of the U.K. in population, about 6 million. It has 230,000 leveraged traders, 65,000 more than the U.K. in a population 1/10 the size. There is a GBP 1.5 billion CBBC and warrants market there. It's similar to the turbo warrant market in terms of size and also the structure of the products. And again, IG has no presence there.So our strategy is based on using our extensive experience in operating trading venues. I'll remind you we've been operating Nadex trading venues for leveraged securities. We've been operating Nadex for 10 years already. And we're going to build on the presence we're creating by establishing and pursuing partnerships. We'll obtain the appropriate licenses, and we'll work with established distribution partners. We'll leverage our technology platform innovations to create services and products appropriate for that market. We're in the midst of creating detailed plans to seize this opportunity, and we will come back to you in due course. This is the one significant opportunity that is not in the numbers that Paul is going to share.The last significant opportunity, the fifth and final, is the institutional market. Our plan is to expand our business into the GBP 500 million small hedge fund and family office market. The institutional market is a large opportunity and a new one for us to focus on. There are 10,000 hedge funds and family offices. Recently, Tier 1 prime brokers have decided to concentrate on the top end of the market. That leaves 8,000 small hedge funds and family offices needing a prime broker. This creates a new opportunity for IG. We already have a few dozen today in this client segment, but we haven't focused on them as a segment in themselves. These clients have a need for exactly the services we can provide, best execution, outstanding customer service, and a global asset range, all delivered by a well-capitalized firm. So we will be augmenting our resources and capabilities to win business in this underexploited market segment. As we serve dozens of these clients today, we believe this represents good revenue growth for us in the medium term. So as a result of these action plans, our future will evolve to look like this. As you can see from the chart on the left, the new light blue represents the result of plans that I have just discussed. We will continue to build and grow our core business, and we will operate in new geographies with more products to new client segments. We have new distribution channels, including partnerships, who have expanded and localized our products for new geographies. We will have more diverse set of clients, adding sophisticated high-value hedge funds and family offices, and increase the number of a high-quality clients. We'll have a broader product range as our Spectrum, OTC Options, U.S. RFED, and other new products come to maturity.I'll now turn you over to Paul, who will take you through the financial aspects of our strategy.

[Paul Richard Mainwaring, CFO & Executive Director]

Thanks, June. Thank you, June. Good afternoon, everyone. The purpose of this section of the presentation is to take you through the medium-term financial targets that we're looking to deliver as a result of the successful implementation of the strategy that June has set out. However, before I look at the future, I want to spend a few minutes on the current financial performance in FY '19, which is the base year for our financial plans. As we set out in the pre-close statement this morning, we expect our full year net trading revenue to be around GBP 475 million, 17% lower than in the prior year. This reduction in revenue reflects, as we have explained throughout the year, 2 key factors: firstly, the impact of the ESMA product intervention measures on our revenue in the U.K. and the EU; and secondly, the impact of the persistently low level of financial market volatility and market activity during the second half of FY '19 in contrast to the exceptionally good market conditions for us in the second half of FY '18, including the heightened level of interest in cryptocurrencies.As June has said, encouragingly, we have seen an improvement in market conditions in the first 3 weeks of May this year, and our high-quality and lower client base have identified and taken opportunities to trade. We are therefore reassured that when there are interesting markets to trade, we have the client base who will do so. We expect our OTC leveraged revenue in the ESMA region, the U.K. and the EU to be down by about 26% on the prior year on an underlying basis with the OTC leveraged revenue in the rest of the world 2% higher.On costs, we guided at the prelims last year and at the interims in January this year that we expected our total operating costs, including variable remuneration to be similar to the GBP 290 million in FY '18. We expect that the total costs will come in at around GBP 285 million, a little lower than previously guided largely due to the lower level of variable remuneration.So turning to the medium-term targets and starting with the core markets first. These markets are expected to generate around GBP 415 million of our trading revenue in FY '19, about 85% of the total. These are large and important markets in which we already have a substantial presence. We believe that the demand for OTC leveraged derivatives in these markets will continue to grow albeit from the reduced base in the U.K. and the EU. We expect to benefit from this underlying market growth, and we expect to gain market share with better client segmentation and localization. We are a natural home for the highest-value clients, and we will seek to capitalize on this strength in order to further develop the size and quality of our client base in these markets, which is the long-term driver of growth for the business. We are targeting that from the GBP 415 million base revenue in these markets. We will deliver growth of around 3% to 5% per annum over the medium term.We already generate some revenue in those markets that we've identified as significant opportunities for us, but at only around GBP 60 million, we are clearly punching well below our weight in these markets. As a result of our development plans, we are targeting to deliver an additional GBP 100 million of revenue in these markets in FY '22. As June has said, in setting that target, we have recognized that things don't always go to plan, and we don't need everything in the list of significant opportunities to succeed for us to meet that target. In the EU, we believe that the opportunity for our new products other than CFDs is substantial. We've launched a new Options product in the EU, which is beginning to gain traction with our clients, and we're looking forward through the launch of Spectrum to taking a meaningful share of the on-venue turbo market that we haven't previously addressed. We will launch Spectrum, initially offering turbos on equity indices, currencies and commodities, and we aim to follow that by expanding the product set to cover single name equities in FY '22. We also expect to attract other brokers to the Spectrum offering and to earn fees from those brokers as a result.In the U.S.A., we are excited about the opportunity through the RFED to take at least our fair share of the OTC FX market. We will be 1 of 4 players and the 1 with the best offering. We believe that the combination of the Nadex exchange and OTC FX will give us a unique product set to promote to the market, and we will finally be able to take full advantage of the U.S. leads that we generate from DailyFX. In Japan, as June has said, our market share has improved recently as a result of the new products, but it's still small and Japan is a huge market. We are targeting a significant uplift in our market share and revenue through localization of our product and increased marketing.And there are opportunities for us in the rest of Asia other than Singapore and Japan, and we'll look to achieve a step change in our scale in these markets through partnerships with licensed entities. And our current business serving institutions is pretty small, but we believe this is an attractive market for us, which we can address via a proposition and service offering tailored to the specific needs of those clients. Our liquidity, our depth of market coverage and our service capability give us a basis to develop a meaningful revenue stream from serving these clients.Turning to costs. Now we're not going to achieve the growth we're targeting without investment. I'm going to go through this in some detail. So you'll need to bear with me. This slide you'll recognize from before shows this bit of our operating cost in a similar way to how we presented them previously. But in this analysis, we have split out technology development, which captures our expenditure on building new products and platforms, and we've proved everything else together as other as those costs share a similar dynamic. We've also shown the total cash expenses before capitalization of internal development in order to show the full scale of the technology development spend.So if we look first at our prospect acquisition, which includes all of the external marketing and advertising, and the cost of the teams running marketing, including branding and search engine optimization. This area of spend has been key for the business historically to reach new clients and to establish brand presence in new markets. And we're planning to significantly increase our spend on prospect acquisition as a key enabler for us in delivering our revenue growth plans. So we're planning to increase our spend, which is around GBP 75 million in FY '19, by around 25% in FY '20 and then we expect it to increase in line with revenue. That increase in FY '20 reflects the investment in those significant opportunities, including marketing relating to the launch of Spectrum, a full year of marketing for the RFED in the U.S., a step change in the acquisition investment in Japan and brand support for our institutional proposition. In the core markets, our prospect acquisition spend is expected to be at about the same level as FY '19, but we do expect to adjust the balance of that spend towards brand marketing and away from direct client acquisition. This time last year at the Capital Markets Day, we set out in some detail how we manage our marketing spend and how we allocate it between markets. We will continue to rigorously assess the efficiency and effectiveness of the marketing spend to make sure that we make an appropriate short-term return to manage the impact on operating margin and to ensure that we make an attractive return on investment, comparing the average cost of client acquisition with the expected lifetime value of clients in each market.Our sales and client service teams are a key differentiator for the business and a significant competitive advantage for us particularly in addressing the high-value premium client segment. We're planning to increase our investment in sales and client service, which is GBP 29 million in FY '19 by around 10% in FY '20, and then we expect it to increase in line with revenue.In FY '19, we will spend about GBP 32 million on the development of our products and platforms. We're planning to increase that spend by around 10% in FY '20 as we build up the teams to be able to deliver a broader range of new products and platforms and to work on the development and improvement of our existing platforms. Now it is a relatively modest increase in absolute terms, but we are building on the investment that we've made over the past 2 years, which has been deployed, amongst other things, in the development of the MTF platform, the RFED and IG Europe.There is also a limit to how much we can increase that development spend without introducing inefficiencies. And after the increase in FY '20, we expect these costs to grow in line with inflation at around 3% per annum.Now some of our internal development spend is capitalized and then amortized over generally 3 years, and we expect the amount of capitalization of internal spend to remain similar to the level in FY '19. We do not have any significant capital expenditure, and the vast majority of our investment spend is recognized directly in the P&L. Our CapEx in FY '19, including internal development, is expected to be around the same level as the depreciation and amortization charge, and we expect that to continue to be the case in the medium term. Importantly, we therefore expect that over the medium term, we will continue to convert around 100% of our earnings into cash.The cost of the other activities, IT operations and computer maintenance, dealing, market data, premises, business administration is expected to increase broadly in line with inflation. The costs in some of those areas do increase with the scale of the business, but we expect to offset that with efficiency improvements. And then finally on costs on variable remuneration, which true to its name varies, albeit the driver is the performance against internal targets rather than year-on-year growth, I suggest you assume around GBP 32 million of variable remuneration for FY '20 with modest increases thereafter.We have stated many times since we announced the results for FY '18 and we are repeating again today that the Board expects to maintain the 43.2p per share annual dividend until the group's earnings allow the company to resume progressive dividends. That statement reflects the confidence of the Board and the prospects for the group specifically in our ability to deliver revenue and profit growth, and it reflects the strength of the group's financial position with respect to both regulatory capital and liquidity, which gives the group the capacity to pay dividends that are in excess of 70% of earnings. The figures on this slide are as at the end of November except that we've updated the percentage of our risk exposure amounts that we're required to hold as capital to reflect the completion of the phasing in of the required buffers. On that basis, we have GBP 225 million of headroom on regulatory capital. We do not regard our regulatory capital position as a constraint. We have significant headroom, and the Board is comfortable that we can eat into its headroom if required. However, we expect that the increases and the risk exposure amounts to, will result from the growth in the business will be more than matched by increases in equity through retained earnings over the next 3 years.At the end of November, we had GBP 383 million of available liquidity. We do have volatile demands due to the variability in broker margin requirements, and we choose to operate with significant headroom and to avoid taking liquidity risk. We receive our revenue in cash the following day, and we do not have any significant investment requirements other than those we make through the P&L. We have assessed the demands on our liquidity of the strategy, and we are comfortable that liquidity is not a constraint even under stressed conditions, and we are comfortable that we have and will continue to have a significantly higher level of liquidity than our liquidity requirements over the next 3 years. So let me hand back to June for her concluding remarks.

[June Yee Felix, CEO & Executive Director]

Thank you, Paul. As Paul has highlighted in the numbers, we have a very bright future. I strongly believe that we have a great business. We have made our strategic choices, identified new growth levers and created market-specific plans to bring those growth in our core and in our new areas to life. We now have the strategy, the plans, the technology and the people as well as the financial wherewithal to invest in our growth targets. I and the team at IG have a fantastic opportunity to harness IG's unique strengths, brand and balance sheet to achieve strong, sustainable growth, build on our strong core business, extend to new geographies, add new products to address new opportunities, reach new customer segments, like institutional, partner to expand our distribution. Most importantly, I'm confident that the culture and the people at IG have the right values, passion, ability and agility to overcome obstacles, identify opportunities and drive real growth over the coming years. I'm looking forward to leading this team in IG's new strategy to deliver sustainable growth and shareholder returns. So thank you very much, and we are open for questions. So Liz, can you help us moderate? Oh, perfect. Go ahead.

[Paul McGinnis, Research Analyst]

It's Paul McGinnis from Shore Capital. Three questions, please. The 3% to 5% growth in core markets, are you assuming any market share gains within those figures? Or do you think that's what market growth is?

[June Yee Felix, CEO & Executive Director]

Yes. We are assuming market growth figures in that. We've taken -- we've done some independent analysis, and the core markets in general will grow slightly less than that. So there is market share gains in those numbers.

[Paul McGinnis, Research Analyst]

Okay. And then the baseline for the revenue growth, the GBP 475 million, just going back to a question from the interims. It was just to get a feel for -- given that we've had quite a number of weak months in the year to May '19, do you regard GBP 475 million as a proper baseline or in terms of where to grow from? Or would that be sort of a suboptimal year in the new world?

[Paul Richard Mainwaring, CFO & Executive Director]

It's close. I mean I think we've described that when we have a poor month, it's about GBP 35 million of revenue a month. So you get sort of GBP 100 million, GBP 108 million, which is what Q3 was. We had a good -- a reasonably good quarter in Q2 with the GBP 122 million. So a really good quarter would be GBP 45 million a month, which would take it to GBP 135 million. And so on average, an ordinary quarter might think of as GBP 40 million. So perhaps GBP 120 million would be a number you might work to. We do think that the trading conditions in the first 5 months of the second half of this year have been poor, and that obviously is exacerbated when you compare it to FY '18. We are absolutely clear that when markets are interesting, clients do trade, and it is the size and quality of the client base that's the long-term driver for revenue growth and the short-term driver is market volatility. So if you perhaps want to work on perhaps GBP 40 million a month as a base level to the nearest 10.

[Paul McGinnis, Research Analyst]

Okay. And then final one. It was the opportunities within sort of partnering within Asia and also the institutional base. Obviously, those opportunities have always been there, but if it's something that historically IG has chosen if it's going to enter a market, it does it through its own brand and through a retail offering. It was -- why the change? Why access these markets now and not previously?

[June Yee Felix, CEO & Executive Director]

Well, honestly, before, we were very successful. There was -- those markets are more complicated and they are changing. So for example, in the case of Japan, what we see is that we have done some independent research. And kind of a new CEO comes in and says, "Gee, it's a brilliant, big market. Why aren't we there?" And so in that independent research, we find that the regional banks and also large security firms really are interested in partnering. Now it takes time. It does not happen overnight, but first of all, there's a change in sentiment in terms of market receptivity to that and also our interest in doing that. Same thing for China. In that market again, they are very keen on creating new products more quickly for -- to feed the demand that's growing rapidly in that market, and we have the capability. So it's an opportunity for us to do that. Accessing it through a direct-to-consumer method, like we've done in terms of the -- in the past, into a market as large as Japan solely as our own weapon, our own arrow, I think, is suboptimal. You really have a chance to leverage to scale of people with the established bases. Japan, in particular, is a market where trust is a big factor, and they're going to trust Nomura or they're going to trust Mitsubishi. They're going to trust the regional bank in terms of offering a new product over a U.K. firm that they haven't heard or just saw on the web. What's interesting is that the people that have used us, there is word of mouth and we have seen great growth. But to accelerate growth, we want to look at all levers. So that's why we're doing partnerships.

[Sami Cheikha, Equity Analyst]

Sami from Kairos. Two questions on my side. So on core markets, for the 3% to 5% target over the medium term, do you internally include any possibility of regulation in Australia for that?

[June Yee Felix, CEO & Executive Director]

Yes. Yes.

[Sami Cheikha, Equity Analyst]

Do -- is that similar to ESMA?

[June Yee Felix, CEO & Executive Director]

Yes. We've already assumed it. That's why we're saying 3% to 5%. We don't know the full impact but that's a big dip.

[Sami Cheikha, Equity Analyst]

And in your classification, when customers, let's say, from either the U.K. or Europe recontract to a foreign entity, so for example, Australia, how is this customer in terms of count -- customer count? How is he classified?

[Paul Richard Mainwaring, CFO & Executive Director]

It's in Australia. Clients who have chosen to contract outside of the U.K. or EU, either to Switzerland or to Australia aren't being reported in the Australian and Switzerland numbers. So when we've quoted the underlying change in revenue, that's adding them back to the region they came from.

[Sami Cheikha, Equity Analyst]

Okay. And the last one on the turbos. Are turbos currently subject to ESMA?

[June Yee Felix, CEO & Executive Director]

No, they're not. It's actually a very well regulated market. It's a big market, and they're very established players. And one of the reasons it's not affected by ESMA in that way is because the providers that are operating today have given the regulators no reason to intervene. So we're entering into a market with good practices. As a company that's always been a compliant provider, we're very excited about that.

[Portia Anjuli Patel, Analyst]

I'm Portia Patel from Canaccord. I just wanted to pick up on your significant opportunities in the GBP 160 million that you've outlined for FY '22, particularly your comment that you said all the initiatives don't need to be successful to reach that GBP 160 million. So if all of the initiatives were successful to the extent that you think they could be, what would the revenue be? And where -- which particular of these areas are you being particularly cautious on in your GBP 160 million assessment?

[Paul Richard Mainwaring, CFO & Executive Director]

Well, I'm not going to tell you the number the whole thing might add up to if everything reached its peak, but we're talking a different view on different opportunities both in terms of their likelihood of achieving their targets and their timing. So we do know that when you introduce new products or you move into new markets, it can take some time for either the brand or the product itself or the combination of the brand with that product to actually take hold. So when you look at the size, for example, of the EU MTF, the turbo market in the EU, it's a GBP 1 billion for us to address. So it's a very significant opportunity. We don't know when we will reach our revenue target. We're pretty confident that we will. If we can do it by the end of the year 1, we'll be absolutely delighted. I suspect we won't. And the same goes for things like Japan. Japan's done really well and we've got a lot of hope on that, but we do know that sometimes, things just take longer than you think. And certainly, institutions take a longer time to onboard. But once you've got them onboard, they're very valuable clients in terms of their level of activity and they stay. But addressing -- building a sales team to focus institutions and the service proposition to attract them is going to take a bit of time. It may take time to onboard them. So we're just being cautious.

[June Yee Felix, CEO & Executive Director]

Yes. We've risk-adjusted, right? It's like you build your portfolios. We try to risk adjust our portfolio to look across all of them and balance. And we think on balance that, that represents the achievable target.

[Unknown Attendee]

Just a couple of questions just further on that family office and hedge fund opportunity. Just wondering what your strategy will be in terms of sort of actually talking to those people and educating the market in how to use this product and what kind of economic sort of upside it could give them where they are.

[June Yee Felix, CEO & Executive Director]

Well, as I said, a couple of good things. One is we already have a few dozen of these clients already. And interestingly, some of our high -- our professional clients have been or do own hedge funds. So it is this community that already has some understanding of our products. So the education part is less of the issue. It's much more of the awareness that we're in the market for the institutional product. So it's bringing on the sales team. There may be some unique features that we will add over time in terms of reporting, but we're already serving several dozen of those now. And we believe that relatively speaking, it's more of a market education. There's a big market in the U.K., Switzerland, Singapore, U.S. and many other places, Dubai. And we think that that's -- given that we're already serving them, feel that there's a lot of potential.

[Unknown Attendee]

And just one other question on the FX, U.S. FX business. Sort of where are you in terms of your effort to reach out to the market and tell them that you're now there available to transact and your spread offering just sort of -- are you fully on there? Or are you still being cautious?

[June Yee Felix, CEO & Executive Director]

No. We're full on. I was out there in March at the big launch in New York. We launched at one of the industry's trading venues, and we are accessing every possible channel. We're accessing influencers. So we're full on, starting the awareness program. And we have been successful in starting to acquire lots of clients. We're also integrating more explicitly the value propositions between DailyFX and also the IG U.S. before we bought DailyFX that actually sent all its all leads to another FX provider. And we feel that, that same opportunity could exist for us. Again, 1.7 million unique views every month, so people that are already interested in this product category.

[Richard Michael Taylor, Analyst]

Richard Taylor from Barclays. Can you help us with the GBP 100 million uplift you're talking about in strategic opportunities? How should we think about the phasing of that? I'm aware that sort of some are ready to go or are already trading, but the rest of it's perhaps through that period. So can you give us idea of how you expect that to build over time, please?

[Paul Richard Mainwaring, CFO & Executive Director]

Yes. Let's take the RFED and the U.S. first because that's been running the longest, I think, of all the activities. I mean that it is one I'd expect we would get, and maybe half of it for run rate during the next 18 months by the time we work up to that. And then -- I mean these things do take time to build to their full value. We know that the value is in the highest valued clients, and we know that there are relatively fewer higher value clients than there are lower value retail clients. And it -- then it can take time to build that client base. That's one of the reasons IG is successful because of the 45 years it's had in building its high-value client base in its major markets. But I expect that one to be quicker. Expect Japan, I think, to show the continued growth in its revenue. Look, the MTF will have its grand launch in September after the European summer period. I've got to say we're really excited about the opportunities for that, but we've got to get out and market the benefits of that. So -- but I don't think that will be instant, but we do have the product attributes of that, that will make it successful. So we are aware that there are a number of new things that we're doing that may take different times, and some things will take faster than others, which is why we -- I really haven't given an indication of when -- of the annual increments in revenue, but we're pretty comfortable with the GBP 100 million in FY '22 and I can't -- I really don't think we can give you any more color than that.

[Richard Michael Taylor, Analyst]

And then just a quick follow-up. If you get to the GBP 160 million target for that division, what do you think the biggest division will be when you reach your capacity or your target level?

[June Yee Felix, CEO & Executive Director]

I think it's the EU.

[Paul Richard Mainwaring, CFO & Executive Director]

Yes. The U.K. and the EU will be close, won't they? I mean the U.K. is still a very significant market for us with the market share that we have. If you think of the EU numbers, we had -- GBP 80 million was my EU revenue, I think. I mean we are only addressing 1/3 of the total leveraged market and we don't have anything like the share in the EU that we have in the U.K. So potentially, the EU will be the biggest. If we can land any of the ideas we've got and the partnership programs that we've got to address Asia, that could be really very significant.

[June Yee Felix, CEO & Executive Director]

Yes. I mean just to give you a sense of the scale, okay, of some other players we're talking to in Asia, you're talking about millions of retail clients, millions of high net worth clients, right, in one firm. So it is a massive market with both large and medium-sized. Medium-sized security firms are enormous. And so it's going to take a -- and it will take some time, but early indications are very promising. They don't have to talk to us. Honestly, they could talk to everybody, every other financial institution with Goldman Sachs, Morgan Stanley, JPMorgan, Barclays, everyone, but they are interested in talking to us because we have unique products and capability that they're interested in. So I think that's the key, right? It's not just the logo and all the intelligent people. It is a question of do you have that special capability that they're looking for and they can capitalize on. Our market research in that market shows that the clients there that already trade products like ours represents a large percentage of their portfolio, 34%, right? I mean you would think 34% of leveraged products in your portfolio. I'm not sure people in the room have that as -- that percentage allocation. In the U.K., it's more like 10%, maybe 15% of your money goes into something that might have a higher risk. There, it's very different risk appetite. So we're encouraged. So that's just to give you some color on that.

[Justin Graham Bates, Financial Analyst]

It's Justin Bates at Canaccord. Just on the GBP 100 million opportunity, do you have -- I appreciate you can't put a split on revenues between those opportunities. But do you have anything else on key metrics that you could help us with the number of active clients or anything like that? That would be my first question. Secondly, if you could just talk about the revenue model for turbos and MTF. I'm afraid I don't understand that. And then on the regulatory constraints regarding accessing China, if you could help us there.

[Paul Richard Mainwaring, CFO & Executive Director]

Where can we start? Shall we start on the MTF revenue makeup? The economics of a turbo for a client are very similar to the economics of a CFD, okay? There are differences in that it is a security. So you purchase a security, and as such, your downside risk is limited to the price that you've paid. The thing can't be worth less than 0. It just expires. So it's a limited risk product but it gives you a leverage upside and it references the price of the underlying. Now, in IG, when we operate OTC, we are everything. We're the broker, we are for the counterparty, we take and manage the market risk and so on. But in the MTF structure, there are different parts of that value chain. There's a market maker, there's the venue, and there's the broker. Depending on the extent to which we attract third party brokers and third-party market makers will depend on how much absolute money we make from that. But the more volume we have, the more we'll make and we'll make transaction fees within the venue. So all in all, if we're 100% of everything, which you can't be in a multilateral trading facility, we'd have the same value chain as we have for a CFD. That won't be the case because we'll have multiple brokers and multiple market makers. What's the second one?

[Justin Graham Bates, Financial Analyst]

The second one was regulatory constraints regarding accessing China?

[June Yee Felix, CEO & Executive Director]

Yes. So China's regulatory environment is changing based on our conversations with participants in that market, players in that market. They are both in Mainland China but we're really focusing on Hong Kong. Hong Kong is the primary market that we're concentrating on. We do see opportunities for people that already have the regulatory licenses to work with them. So we're seeking to offer compliant innovative products through people that already have licenses. Should we pursue any other new opportunity? Just like everywhere else, we'll get the appropriate licenses. And the plan is to have people on the ground do the appropriate work to figure out what the requirements are and also how to go about that.

[Justin Graham Bates, Financial Analyst]

The other question was on the -- if you had any metrics that you could share.

[Paul Richard Mainwaring, CFO & Executive Director]

Well, we will have and we do -- when we do the results, we talk about the number of active clients and revenue per client. Those are both key metrics. The number of first trades is another key metric that we use. Internally, we use the cost per first trade although we published that externally, don't we? The cost per first trade, yes, not by market but in aggregate, and the return on investment. So we have a whole suite of metrics that we've got. And we modify the hurdles or the targets we're aiming at depending on the state of the investment. You will spend more to get your first client on the MTF than you'd spend to get your 100,000th client, for example. So the extent to which we choose to share those will, I think, just depend upon the amount of metric, the number of metrics that we've got in terms of making it feasible to explain the results. But in terms of these being individually reported markets, we'll seek to do the same kind of disclosure we have on it currently.

[Justin Graham Bates, Financial Analyst]

Just finally from me, sorry. Thank you for your comments about the dividend. That is helpful. I would like -- just as a follow-up though to be absolutely clear. Are you suggesting that if you found yourselves in a position where you were uncovered for, let's say, a 2-year period and it was, say, a cumulative GBP 50 million to GBP 60 million uncovered position relative to the headroom that you had today, you'd still be happy?

[Paul Richard Mainwaring, CFO & Executive Director]

Every time we make a decision, it will depend upon the Board's view of the prospects for the future and the future earnings as well as the current earnings. What we are saying is that in this year in which we've seen a significant reversal of our operating profit but that we still make GBP 190 million, we're paying a dividend of 43.2p, which is just about covered. We believe that we will get growth and we have said that we'll maintain that dividend until we're able to resume progressive dividends. We do modeling. We've got plenty of headroom. And I think our and the whole of Board and ExCo is confident in the plan. As such, we don't see that scenario arising.

[Vivek Raja, Analyst]

Vivek Raja from Shore Capital. I just wanted to ask a question. Thank you very much for the very granular 2020 cost targets and I appreciate the base is moderated for the year ahead. But to the extent -- obviously, to some extent, revenue is to do with extraneous factors, which aren't necessarily in your control. So to the extent it is another very poor year for revenues, what sort of flexibility have you got in your costs? Can you provide any sort of help with understanding that?

[Paul Richard Mainwaring, CFO & Executive Director]

Yes. I mean -- yes, look, there are -- the breakdown of costs, if you take the bits that are tech development and what we call the other, which is people like me and other people, those don't change. Those are fixed. They don't vary with revenue. For the prospect acquisition spend, the sales and client service costs do flex with revenue. I mean there's very active management of the marketing spend that if a market isn't performing, if we're not seeing the number of applications or clicks on the ads, then we dial back the spend. If we see that it's successful and we're getting in the value from the clients that we're hoping to attract, then we tend to dial it up. So there is a -- it isn't automatic. I mean it gets done by clever people looking at what's going on, but we certainly adjust those 2 big areas of spend, which, in aggregate, this year, is well over GBP 100 million. We do flex that in line with revenue.

[Vivek Raja, Analyst]

So perhaps can I ask you at what point in the year would you be able to signal to the market that there's a substantial change within your 2020 -- specific 2020 cost targets?

[Paul Richard Mainwaring, CFO & Executive Director]

I mean I would -- we will certainly give updated cost guidance at the prelims, which is only 8 weeks away. So hopefully, it won't change before between now and then. We would normally then give the usual guidance when we do the pre-close at the half and then again at the half year results. We tend not to talk about costs quarterly and we do the quarterly revenue updates. But I see no reason why we should ever surprise you on what we're spending or what the revenue is. And we're all very conscious of the fact that one of the great things about this group is its profitability. It's that, that allows us to have this kind of investment opportunities and to be able to have this kind of announcements. So it is watched very closely.

[June Yee Felix, CEO & Executive Director]

Any more questions? Okay. Well, thank you very much. And again, our executives are here, John Austin, Bridget Messer and also Jon Noble. I'm sure the rest of the ExCo will be there. I'm sure they'd love to talk to you. But also please enjoy yourselves, have a drink and also see the MTF and the Spectrum. We really appreciate your time today. We're very excited about what we are embarking on, and thank you for your support and time.