Plus500 Ltd. — Interim / Quarterly Report 2013

Aug 27, 2013

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RNS Number : 4548M

Plus500 Limited

27 August 2013

	27 August 2013

Plus500 Ltd.

("Plus500" or "the Group")

Maiden Interim Results for the six months ended 30 June 2013

Plus500, a leading online service provider for retail customers to trade CFDs internationally, is pleased to announce maiden interim results for the six months ended 30 June 2013.

Financial Highlights:

·      Revenues up 47% to $44.7 million (H1 2012: $30.3 million)

·      EBITDA1 up 65% to $21.9 million (H1 2012: $13.3 million)

·      EBITDA margin up 12% to 49% (H1 2012: 44%)

·      Net profit up 59% to $15.4 million (H1 2012: $9.7 million)

·      Adjusted earnings per share2 up 59% to $0.15 (H1 2012: $0.10)

·      ARPU up 24% to $898 (H1 2012: $722)

·      Interim dividend per share of $0.07

o  Interim dividend of $8 million3

o  Representing 52% of H1 2013 net profit

·      Operating cash flow of $15.7 million (H1 2012: $15.4 million)

·      Net cash up 27% to $32.7 million (H1 2012: $25.8 million)

o  Net cash position strengthened by $21 million  post-half year following Placing and Admission to AIM

Operational Highlights:

·      Strong start to current financial year with marketing and promotional activities driving customer acquisition and revenue growth: An increase of 22% in new customers4 and an increase of 18% in active customers5 compared to 1H 2012.

·      Successful Admission to AIM in July 2013

o  Placing of $75 million, of which $25 million was raised for the Company supported by institutional investors in the UK

o  Net proceeds of the Placing to fund additional marketing activities, support new market penetration and accelerate organic growth in existing markets

·      Further progress achieved in Europe with the UK showing strong gains in market share

·      Highest ranked in its field at both Apple's AppStore and the Google Play store

·      Expansion into Australia continues to gather momentum

·      Trading remains in line with market expectations

Gal Haber, Chief Executive Officer of Plus500, commented:

"We are delighted to announce our maiden interim results.  Our listing on the London market in July has provided the Group with a strong base from which to drive growth of the Plus500 brand internationally. 

"As shown today, we have achieved a strong trading performance in the first half, reporting a 47% increase in revenue and more than a 50% increase in profitability, helped by growth in customers as well as particularly active financial markets.  Our low cost operating model and highly targeted marketing strategy continues to underpin our growth.  Looking ahead, we have a clear strategy for growth in our customer base leaving us well placed to benefit from future periods of strong market activity.  We are confident of meeting market expectations for the full year and are focussed on generating strong returns for our new shareholders into the future.

1EBITDA - Earnings before interest and taxes and depreciation and amortization

2On 24 July 2013, the Company's shares were listed for trading on the London Stock Exchange in the Company's initial public offering ("IPO"). As part of the IPO, the Company issued 14,396,775 shares of NIS 0.01 par value in consideration for a gross amount of £16,556,291 (approximately $25,000,000). Subsequent to the IPO the number of shares is 114,888,377.

3In addition, $8.8 million was paid in dividends to shareholders prior to the Company's admission to AIM.

4 New Customers: Customers depositing for the first time ever during the period.

5Active Customers: Customers who made at least one real money trade during the period.

For further details:

Plus500 Ltd

Elad Even-Chen, Head of Investor Relations                                                  Tel: +972-4-8189503

ir@Plus500.com

Liberum Capital - Nomad and Broker

Chris Bowman / Christopher Britton / Thomas Bective                               Tel: 020 3100 2000

www.liberumcapital.com 

Buchanan

Jeremy Garcia / Sophie McNulty / Clare Akhurst                                          Tel: 020 7466 5000

www.buchanan.uk.com 

Company website: www.plus500.com

Operational Review

Introduction

The six months ended 30 June 2013 have seen the Group deliver its strongest six month performance to date, culminating in the successful admission of Plus500 to AIM in July 2013.  Plus500 believes the global market for CFDs ("Contracts for Difference") continues to appeal to the broader retail investment market with investors looking for a more diverse portfolio from which to trade.  This broader appeal of CFDs continues to underpin Plus500's market reach and leaves the Group well placed for the remainder of the current financial year.

The Group started 2013 strongly with revenues during the period up 47% to $44.7 million (H1 2012: $30.3 million) and profit before tax up 53% to $20.5 million (H1 2012: $13.4 million).  This performance has been driven by the Group's innovative approach to sales and marketing activities best demonstrated by the highly successful affiliate programme and online marketing campaigns.

As highlighted during the Group's admission to AIM, which was significantly oversubscribed, Plus500 is committed to the adoption of a progressive dividend policy and as such is announcing an interim dividend of $0.07 per share.  This is in line with the Group's publicly stated intention to pay no less than 50% of retained profits in each financial year out as dividends.

Business summary

Plus500 has developed and operates an online trading platform for retail customers to trade CFDs internationally over more than 2,000 different underlying global financial instruments comprising equities, ETFs, foreign exchange, indices and commodities.

The Group enables retail customers to trade CFDs in more than 50 countries, with its proprietary trading platform accessible from multiple operating systems (Windows, smartphones (iOS and Android) and tablets (iOS and Android)) and the internet.  The Group's trading platform has been designed to be as intuitive and easy to use as possible and has been localised into 31 languages.  Plus500's emphasis on proprietary technology, together with a focus on online marketing initiatives, has helped to differentiate the Group from its competitors.  

The global retail CFD market continues to perform strongly as global equity and commodity indices attract increased levels of retail interest.  In general, market volatility and significant financial news help to drive both trading volumes and new customer sign-ups.

Plus500 generates revenues from three principal activities: from dealing spreads on the trading platform, from overnight premiums, effectively a financing charge, on certain positions held by customers overnight and from gains (offset by losses) on customers' trading positions.  The Group does not charge customers a commission on trades. 

The Group conducts its operations from three offices which are located in Haifa (Israel), London (United Kingdom) and Sydney (Australia).  Plus500UK Limited ("Plus500UK"), the Group's UK subsidiary, is authorised and regulated by the FCA.  Plus500UK also operates in other European Economic Area countries and Gibraltar through a regulatory passporting mechanism.  Plus500AU Pty Ltd also has an ASIC licence which enables it to conduct a financial services business in Australia.

The Group manages risk in a number of ways, in particular by limiting financial exposure to any individual customer to a relatively low level as well as limiting exposure to any individual instrument.  The Group also has in place a hedging policy designed to further manage risk.

Strategic review

Plus500 operates from a strong operational footprint across mainland Europe and more recently Australia.  Alongside growing the existing established business, the Group continues to explore a number of opportunities to build brand and further extend market share.

Following the successful listing on AIM, Plus500 is pursuing a strategy to both increase the active customer base and grow the proportion of customers who trade frequently and for longer time periods.  Increased brand awareness is central to this strategy as a more established brand creates confidence and, in turn, management believes will generate greater levels of Average Revenue per User ('ARPU').  By improving customer perception of the Plus500 brand, and hence a willingness for customers to trade on the trading platform, management believes both trading frequency and the general quantum of trading volumes can be increased for sustained periods.  Increased brand awareness, towards which the AIM listing has been a key event, also has the potential to improve the margin between ARPU and Average User Acquisition Cost ('AUAC').   As highlighted in the Group's AIM admission document, a portion of the placing proceeds will be used to increase the brand awareness of Plus500, particularly through offline marketing and sponsorship.  This activity will commence in the latter half of this year.  Although the Group expects to see a positive return on raising awareness of the brand, this is more likely to evolve over the medium and long term and, as such, management believes AUACs are likely to rise in the short term, reflecting this increased marketing expenditure.

The Group also intends to increase its customer base through entry into new geographies in which it does not currently have customers or significant market presence.  Where appropriate, and as demonstrated with the expansion into Australia, management will consider setting up local offices or subsidiaries in key locations.   In this regard, the Group is currently evaluating a number of new territories for market entry.

The Group will also evaluate selective bolt-on acquisitions which may provide Plus500 with an established customer base or a regulatory licence in a jurisdiction in which it does not currently hold one.

Platform Development

The Group's trading platform provides a simple and consistent interface for customers across a number of different devices. It has been designed to be as intuitive and easy to use as possible and is able to provide customers with real-time prices, execution facilities and a multitude of order types. Through these proprietary delivery channels, customers trade and access their account information online through a number of different devices, which increases accessibility to, and traffic on, the trading platform.

The trading platform's customer interface and back-end are designed to interact efficiently, with as little human input as possible. The trading platform processes each customer's trades automatically, updating the "back office" account information in real-time. Real-time position-keeping also allows customers to monitor their open positions and trading activity continuously.

As a result of Plus500's self-developed proprietary technology, the Group pays no external licence fees for its core trading platform technology. This allows the Group to operate without limiting the amount of time that a customer can use a demo account or placing high thresholds on the minimum amount with which a customer can open a real-money trade. The trading platform also provides, free of charge, real-time price and data analysis features to customers, which provides the Group with a significant competitive advantage.

In the six months ended 30 June 2013. the Group added 400 new CFD products into the Plus500 trading platform.  In line with broader trends, the Group has launched the mobile and tablet versions which now offer the same 'user experience' as the Group's traditional PC version. 

Plus500 continues to innovate with ongoing marketing and advertising efforts in order to maximise its return on investment.  This applies to the Group's more traditional online marketing and advertising campaigns but also through the Group's affiliate programmes.  Improvements to the Group's dedicated affiliate website www.500affiliates.com remain ongoing and recent changes include mobile phone compatibility upgrades and the use of live widgets (for example, providing live CFD price streaming for affiliates to include on their websites).

Separately, the team has also made a number of back office improvements to maintain market-leading efficiencies and levels of automation, including support for the Australian subsidiary and reporting tools.

Financial Review

The six months ended 30 June 2013 represented Plus500's best six month performance to date. The Group grew in all markets and segments, while increasing profitability and strengthening the balance sheet.  The strong performance was achieved through a combination of the Group's ongoing progress in marketing and operational improvements as well as the significant market activity during the period driving strong customer trading activity.

Revenues in the first half of 2013 totalled $44.7 million (H1 2012: $30.3 million), representing 47% growth compared to H1 2012. The strong growth achieved can be attributed to the growing number of active users and growth in ARPU, up 24% to $898 in the first half (H1 2012: $722). 

	Qtr 30/6/13	Qtr 31/3/13	Qtr 30/6/12	Qtr 31/3/12
Number of new customers	12,270	12,356	10,235	9,867
Number of active customers	35,947	34,127	31,243	28,084
ARPU	$692	$580	$587	$428
AUAC	$679	$758	$602	$621

EBITDA in the first half of 2013 was $21.9 million (H1 2012: $13.3 million), an increase of 65%, with EBITDA margins increasing from 44% in H1 2012 to 49% in H1 2013. Results have benefited from the scalability of the Group's business model with the combination of revenue growth and further improvements in the operational cost structure driving the excellent performance. Net profit was $15.4 million (H1 2012: $9.7 million), up 59%.

Plus500's total assets grew from $29.2 million in H1 2012 to $37.3 million in H1 2013, an increase of 28%, with cash balances increasing to $32.7 million (H1 2012: $25.9 million) and equity of $18.6 million (H1 2012: $12.4 million), representing approximately 50% of the balance sheet.  Following the period end, in July 2013, Plus500 successfully completed a Placing and admission to AIM, raising an additional $25 million (before expenses) of new money to strengthen the balance sheet further and support the Group's ambitious growth plans.

The Board has declared an interim dividend of $0.07 per share which will be paid on 3 October 2013 to shareholders on the register at close of business on 6 September 2013, the shares will be marked ex-dividend on 4 September 2013. This represents a total pay-out of $8.0 million (H1 2012: $6.7 million), or 52% of net profit for the six months ended 30 June 2013, in line with the Group's stated policyto pay no less than 50% of retained profits in each financial year out as dividends. In addition, the Group paid $8.8 million in dividends to shareholders during the six months' period but prior to its Admission to AIM.

Current Trading and Outlook

Plus500 has performed strongly in the first half and the Board looks ahead with confidence.  The strong performance further underpins the board's commitment to pursuing a strong dividend policy and therefore the board is pleased to declare a maiden dividend of $0.07 per share.

Whilst trading since the period end has been subdued as a result of limited volatility and market activity, the Group has continued to grow its active customer base and is confident of meeting market expectations for the year ending 31 December 2013.

Plus500 LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

		As of 30 June		As of 31 December
		2013	2012	2012
		(Unaudited)		(Audited)
		U.S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents		32,728	25,852	22,486
Short-term bank deposit		1,303	1,074	1,126
Restricted deposit		125	126	203
Accounts receivable		1,948	1,827	894
Prepaid expenses		578	-	-
		36,682	28,879	24,709
NON-CURRENT ASSETS:
Long-term deposit		68	69	-
Property, plant and equipment		239	238	240
Intangible assets		54	41	41
Deferred income taxes		265	-	265
		626	348	546
Total Assets		37,308	29,227	25,255
Liabilities and Shareholders' Equity
CURRENT LIABILITIES:
Trade payables - due to clients		4,506	10,403	6,092
Other accounts payable and
accruals:
Service supplies		4,707	1,612	3,197
Other		1,027	1,555	822
Income tax payable		3,774	2,530	2,443
Dividend		3,894	-	-
Liability for Share-based compensation		829	-	251
		18,737	16,100	12,805
NON-CURRENT LIABILITIES -
Share-based compensation		-	672	503
EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT:
Ordinary shares		277	6	6
Share premium		16	287	287
Retained earnings		18,278	12,162	11,654
Total Equity		18,571	12,455	11,947
Total equity and liabilities		37,308	29,227	25,255

Plus500 LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

					Year ended
		Six months ended 30 June			31 December
		2013		2012	2012
		(Unaudited)			(Audited)
		U.S. dollars in thousands
TRADING INCOME - net		44,673		30,348	56,127
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Selling and marketing		21,195		15,156	28,930
Administrative and general		1,617		1,969	4,124
INCOME FROM OPERATIONS:		21,861		13,223	23,073
Financial expenses		1,405		7	178
Financial income		(57)		(178)	(178)
FINANCING EXPENSES (INCOME) - net		1,348		(171)	-
INCOME BEFORE TAXES ON INCOME		20,513		13,394	23,073
INCOME TAX EXPENSE		5,121		3,701	5,973
PROFIT AND COMPREHENSIVE INCOME
FOR THE PERIOD ATTRIBUTABLE TO
OWNERS OF THE PARENT		15,392		9,693	17,100

		In U.S. dollars
EARNINGS PER SHARE (basic and diluted)		0.15	0.10	0.17

Plus500 LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Ordinary	Share	Retained
	shares	premium	earnings	Total
	U.S. dollars in thousands
BALANCE AT 1 JANUARY 2013 (audited)	6	287	11,654	11,947
CHANGES DURING THE 6 MONTH PERIOD ENDED
30 JUNE 2013 (unaudited):
Profit and comprehensive income for the period			15,392	15,392
TRANSACTION WITH SHAREHOLDERS
Distribution of bonus shares	271	(271)		-
Dividend			(8,768)	(8,768)
BALANCE AT 30 JUNE 2013 (unaudited)	277	16	18,278	18,571
BALANCE AT 1 JANUARY 2012(audited)	6	287	9,129	9,422
CHANGES DURING THE 6 MONTH PERIOD ENDED
30 JUNE 2012 (unaudited):
Profit and comprehensive income for the period			9,693	9,693
TRANSACTION WITH SHAREHOLDERS
Dividend			(6,660)	(6,660)
BALANCE AT 30 JUNE 2012(unaudited):	6	287	12,162	12,455
BALANCE AT 31 DECEMBER 2011 (audited):	6	287	9,129	9,422
CHANGES DURING THE YEAR  ENDED
31 DECEBMBER 2012:
Profit and comprehensive income for the year			17,100	17,100
TRANSACTION WITH SHAREHOLDERS
Dividend			(14,575)	(14,575)
BALANCE AT 31 DECEMBER 2012 (audited)	6	287	11,654	11,947

Plus500 LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months			Year ended
	ended 30 June			31 December
	2013		2012	2012
	(Unaudited)			(Audited)
	U.S. dollars in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (see Appendix A)	19,296		15,917	23,042
Income tax paid - net	(3,607)		(620)	(3,355)
Interest received	50		146	174
Net cash provided by operating activities	15,739		15,443	19,861
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(28)		(138)	(176)
Proceeds from sale of property, plant and equipment	-		9	8
Purchase of intangible assets	(17)		(7)	(10)
Net cash used in investing activities	(45)		(136)	(178)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend paid	(4,874)		(6,660)	(14,575)
Prepaid expenses (see note 6)	(578)		-	-
Net cash used in Financing activities	(5,452)		(6,660)	(14,575)
INCREASE IN CASH AND CASH EQUIVALENTS	10,242		8,647	5,108
Balance of cash and cash equivalents
at beginning of year	22,486		17,293	17,293
Losses (gains) from exchange differences on cash and
cash equivalents	-		(88)	85
BALANCE OF CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD	32,728		25,852	22,486

Plus500 LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

APPENDICIES CONSOLIDATED STATEMENT OF CASH FLOWS

APPENDIX A:

	Six months		Year ended
	ended 30 June		31 December
	2013	2012	2012
	(Unaudited)		(Audited)
	U.S. dollars in thousands
Cash generated from operations -
Net income for the period	15,392	9,693	17,100
Adjustments required to reflect the cash
flows from operating activities:
Depreciation and amortization	33	60	95
Loss on disposal of property, plant and equipment	-	9	14
Taxes on income	5,121	3,701	5,973
Foreign exchange losses on operating activities	(233)	(78)	(168)
Gains (losses) on revaluation of existing deposits	(167)	32	(28)
	4,754	3,724	5,886
Operating changes in working capital:
Decrease (increase) in accounts receivable	(1,054)	192	1,125
Increase (decrease) in trade payables due to clients	(1,586)	2,824	(1,487)
Increase (decrease) in other accounts payable:
Service supplies	1,510	(1,744)	(159)
Other	280	1,228	577
	(850)	2,500	56
Cash flows from operating activities	19,296	15,917	23,042

APPENDIX B:

	Six months		Year ended
	ended 30 June		31 December
	2013	2012	2012
	(Unaudited)		(Audited)
	U.S. dollars in thousands
Supplementary information on investing and financing activities not involving cash flows:
Dividend	3,894	-	-

Plus500 LTD.

EXPLANATORY NOTES TO THE CONSOLDIATED FINANCIAL INFORMATION

30 JUNE 2013

(UNAUDITED)

NOTE 1 - GENERAL INFORMATION

Plus500 Ltd. (hereafter - the company or the parent) was established in 2008 as a private limited company with the name Investsoft Ltd.  On 18 June 2012 the company changed its name to Plus500 Ltd.  The company has developed a trading platform for private clients, enabling trading on contracts for differences (hereafter - CFD) on shares, indexes, commodities and foreign exchange. 

In September 2009, the company established a subsidiary in the UK (hereafter - the subsidiary) in order to be granted an FSA license. The company and the subsidiary (hereafter - the group) are engaged in one operating segment - CFD trading - mainly in Europe.

In September 2011 the company established a subsidiary in Australia (hereafter - Plus500AU) in order to obtain an Australian securities and investments commission (hereafter - ASIC) license, which was granted in October 2012, and began operating in January 2013.

The address of the company's principal offices is Building 22, Matam, Haifa 31905, Israel.

NOTE 2 - BASIS OF PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

a.     The interim condensed consolidated financial information of the group as of 30 June 2013 and for the 6-month period ended on that date (hereinafter - the interim financial information) was prepared in accordance with International Accounting Standard No. 34 - "Interim Financial Reporting" (hereafter - "IAS 34"). The interim financial information should be read in conjunction with the annual financial statements as of 31 December 2012 and for the year ended on that date and with the notes thereto, which were all prepared in accordance with International Financial Reporting Standards (hereafter - "IFRS").

The interim financial information is reviewed and is not audited

b.     Income tax in interim periods is recognized based on management's best estimate of the weighted average annual income tax rate expected.

NOTE 3 - PRINCIPAL ACCOUNTING POLICIES:

a.     The accounting policies used in preparation of the interim condensed financial information are consistent with the 2012 annual financial statements.

b.       As specified in the annual financial statements of the group for 2012, standards, amendments and interpretations to existing standards came into effect and are effective for reporting period commencing on 1 January 2013, but first-time implementation of these standards and interpretations had no material effect on the interim financial information (including comparative information) of the Group.

c.       Additional new standards and amendments to existing standards that are not yet in effect and that the company elected not to early adopt are listed in the group's 2012 annual financial statements.

NOTE 4 - DIVIDEND

a.       On 18 March 2013, the Company's Board of Directors declared the distribution of a dividend of $2.09 (NIS 7.7) per share, in the total amount of $4,874,000.

b.       On 19 June 2013, the Company's Board of Directors declared the distribution of a dividend of $1.67 (NIS 5.99) per share, in the total amount of $ 3,894,000.

Set forth below are the amounts of dividends for the periods:

	Six months		Year ended
	ended 30 June		31 December
	2013	2012	2012
	(Unaudited)		(Audited)
	U.S. dollars in thousands
Date of declaration
17 April 2012	-	6,660	6,660
16 August 2012	-	-	7,915
18 March 2013	4,874	-	-
19 June 2013	3,894	-	-
	8,768	6,660	14,575
Dividends unpaid at period end	3,894	-	-
Dividends paid	4,874	6,660	14,575

NOTE 5- EARNINGS PER SHARE (basic and diluted)

Earnings per share are calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the year.

	Six months		Year ended
	ended 30 June		31 December
	2013	2012	2012
	(Unaudited)		(Audited)
	U.S. dollars in thousands
Income attributable to equity
holders of the company	15,392,000	9,693,000	17,100,000
Number of ordinary shares outstanding	100,491,602	100,491,602*	100,491,602*

* On 23 June 2013, the company allotted 98,154,588 bonus shares of NIS 0.01 par value to its shareholders. According to the guidance of IAS 33, the company retrospectively revised the average number of shares to 100,491,602 for the annual period ended 31 December 2012 and the six-month period ended 30 June 2012.

NOTE 6 - SUBSEQUENT EVENTS

a.     On 24 July 2013, the Company's shares were listed for trading on the London Stock Exchange in the Company's initial public offering ("IPO"). As part of the IPO, the Company issued 14,396,775 shares of NIS 0.01 par value in consideration for a gross amount of £16,556,291 (about $25,000,000). Subsequent to the IPO the number of shares is 114,888,377.  The share issue costs amounted to $4,100,000. As of 30 June 2013, Company included share issue costs amounting to $578,000 within "prepaid expenses".

In addition, as part of the IPO, Company shareholders sold 28,793,550 shares to the public in consideration for £33,112,583 (about $50,000,000)

Subsequent to the issuance of shares the public's holding rate in the company is 37.6%.

On 24 July 2013, trading in company's shares commenced in the London Stock Exchange.

b.     On 22 August 2013, the Company's Board of Directors declared the distribution of a dividend of $0.07 per share, in the total amount of $8,000,000.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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