Plus500 Ltd. — Interim / Quarterly Report 2015

Aug 27, 2015

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RNS Number : 2560X

Plus500 Limited

27 August 2015

27 August 2015

Plus500 Ltd.

("Plus500" or "the Group")

Interim Results for the six months ended 30 June 2015

Plus500, a leading online service provider for retail customers to trade CFDs internationally, hereby announces its interim results for the six months ended 30 June 2015.

Financial Highlights:

· Revenues up 20% to $127 million (H1 2014: $106.2 million)

· EBITDA1 down 23% to $55.5 million (H1 2014: $72.0 million)

· EBITDA margin down 35% to 44% (H1 2014: 68%)

· Net profit down 25% to $40.6 million (H1 2014: $53.8 million)

· Earnings per share decreased 26% to $0.35 (H1 2014: $0.47)

· ARPU down 14% to $1,362 (H1 2014: $1,580)

· Operating cash flow down 58% to $26.2 million (H1 2014: $62.9 million)

· Total dividend pay-out of $65 million (H1 2014: $33m)

· Net cash down 17% to $95.5 million (H1 2014: $115.2 million)  

Operational Highlights:

· Notwithstanding the impact of UK regulatory matters, the Group has performed well over the period, following a record performance in 2014

o Continued growth in Active Customers2 - increased 39% to 93,267  (H1 2014: 67,232)

o Continued growth in New Customers3 - increased 60% to 52,217 (H1 2014: 32,673)

·  The Group has become the subject of increased scrutiny from regulators in the jurisdictions in which it is licensed and has received various requests for information

· Mobile and tablet adoption have continued to grow and now represent 65% of all subscribers 

Gal Haber, Chief Executive Officer of Plus500, commented:

"Despite the disappointing regulatory setback in the second quarter, the Group was profitable in every month in the first half and our business model continued to be cash generative. Our easy to use and robust platform continued to attract new customers and encourage active customers.

"Whilst the Group has been the subject of a high level of regulatory scrutiny, we have made significant progress in enhancing our compliance and onboarding processes in line with the recommendations of our regulatory advisors. 

Looking ahead, Q3 has started strongly, and as a result the Board now expects revenues to be ahead of 2014 and previous market expectations.

"In June we announced that we had reached a merger agreement with Playtech; this has now been approved by both sets of shareholders. The transaction is expected to complete by the end of September, subject to certain conditions being satisfied."

1 EBITDA - Earnings before interest and taxes and depreciation and amortisation.

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

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

For further details:

Plus500 Ltd Elad Even-Chen, Finance Director, VP Business Development & Head  of Investor Relations ir@Plus500.com	Tel: +972-4-8189503
Liberum - Nomad and Broker Clayton Bush / Christopher Britton/ Josh Hughes www.liberum.com	Tel: 020 3100 2222
MHP Communications Reg Hoare/Tim Rowntree/Charlie Bristow plus500@mhpc.com	Tel: 020 3128 8100

About Plus500

Company website: www.plus500.com

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 Company enables retail customers to trade CFDs in more than 50 countries. The trading platform is accessible from multiple operating systems (Window, smartphones (iOS, Android and Windows Phone) and tablets (iOS, Android and Surface)) and the internet. The Directors believe that the success of the Company to date has been primarily due to the proprietary technology it has developed and continues to develop to support the trading platform. The trading platform has been designed to be as intuitive and easy to use as possible. The trading platform has been localised into over 31 languages. The Directors believe that this emphasis on technology, together with the Company's targeted online marketing strategy, has helped to differentiate the Company from its competitors.

Business Update

Introduction

The six months ended 30 June 2015 included a record first quarter, however, revenues in the second quarter were lower than the same quarter last year due to a combination of quieter markets and the temporary suspension of trading activity in the Plus500UK business.   Our core CFD ("Contracts for Difference") market continues to establish itself with the wider retail investment community globally as investors seek more diverse financial instruments to trade.  The broader appeal of CFD trading across Europe remains an important component of Plus500's growth strategy and leaves the Group well placed for the remainder of the current financial year.

The Group has started 2015 with revenues during the period up 20% to $127 million (H1 2014: $106.2 million) and profit before tax down 29% to $52.1 million (H1 2014: $73.1 million). Despite regulatory setbacks, the Group's performance has been driven by its highly successful online marketing campaigns and diverse product offering.

Regulatory Update

On 9 January 2015, following a period of dialogue with the Financial Conduct Authority ("FCA"), Plus500UK was required by the FCA to appoint a skilled person to conduct a review of its AML, financial sanction systems and other related regulatory controls. On 15 May 2015, following completion of the Skilled Person's review, Plus500UK provided a Voluntary Requirement ("VREQ") to the FCA whereby it was required, amongst other things, to prohibit all transactions for existing customers until additional AML documentation had been provided and cease on-boarding any new clients until new AML procedures had been implemented.

Consequently, Plus500UK put in place a comprehensive remediation plan to re-enable its suspended customers, with approximately 40 staff working on the process. The Group provided remediation updates in May and June and, on 30 June 2015, the Group announced that it considered that it had substantially completed the remediation plan with the majority of UK customers' balances having been unfrozen. While there remain a number of customers with small, nil and/or dormant accounts still to request their accounts be unfrozen, those customers represent a diminishing proportion of Plus500UK's client money balances.

Regarding new customers, Plus500UK has been in dialogue with the Skilled Person about its onboarding process over the last couple of months and as announced on 30 June 2015, Plus500UK has concluded its work with compliance consultants and agreed revised procedures to enable the onboarding of new customers.

As previously announced, the UK company was required by the FCA to appoint a second Skilled Person to review the steps taken by Plus500UK in regard to its remedial AML procedures for existing clients.  The second Skilled Person's final report on Plus500UK's existing customers was issued to the FCA on 3 July. This covered reviews of a sample of trades and other transactions in a number of areas, all of which received satisfactory results. The overall conclusion of the sample test was that there was no indication that the UK subsidiary had breached the requirement 2(i) of the VREQ (dated 15 May 2015). The report made some recommendations on areas for further improvements identified in the review, each of which have been taken into consideration in the revision of the UK subsidiary's financial crime policies and procedures. 

Operational Review

Plus500 operates from a strong operational footprint across mainland Europe and Australia.  Alongside growing market share in its core European operations, the Group is currently exploring a number of opportunities to build its brand and further extend market reach. 

The Group continues to invest in the growth of the business, increasing levels of marketing to acquire new customers to contribute to future revenue. This includes the main sponsorship of Atletico Madrid as well as introducing new contracts and on-line trading incentives. This increased marketing spend coincided with the unexpected period of reduced revenue caused by the regulatory difficulties in the UK. There were also one off costs of approximately $2m incurred in connection with the regulation and remediation processes in Plus500UK. Taken together, all these factors impacted EBITDA margins and this was particularly exaggerated in the quieter second quarter which produced the lowest quarterly margins since the Group's IPO.  

However, the Group was profitable in all months year to date and Plus500's business model continues to be cash generative. Net cash stood at $95.5m as at 30 June 2015 (31 December 2014: $139.2m) excluding that held in client segregated accounts and after the payment of dividends of $65m in May (H1 2014: $33m).

We have established CFDs in various new equity products and have seen good levels of customer traction. The flexible nature of our platform enables our development team to react quickly to customer demand ensuring Plus500 offers the broadest product mix. 

We have continued to make progress in developing our Australian and Cyprus operations.  We have embarked on a number of market initiatives designed to stimulate customer traction and strengthening brand awareness. We continue to make progress with our Australian and Cyprus expansion plans and firmly believe the former region represents a potentially vibrant CFD market for the Group. 

Financial Review

Revenues in the first half of 2015 totalled $127 million (H1 2014: $106.2 million), representing 20% growth compared to H1 2014. The growth achieved can be attributed to the growing number of active users, up 39% to 93,267 in the first half (H1 2014: 67,232). 

	Qtr 30/6/15	Qtr 30/6/14	Qtr 31/3/15	Qtr 31/3/14
Revenues Number of new customers	$44,926 19,337	$45,497 12,549	$82,100 32,880	$60,745 20,124
Number of active customers	54,616	38,652	67,667	50,438
ARPU	$823	$1,177	$1,214	$1,204
AUAC	$1,278	$993	$892	$576

EBITDA in the first half of 2015 was $55.5 million (H1 2014: $72 million), a decrease of 23%, with EBITDA margins decreasing from 68% in H1 2014 to 44% in H1 2015. Net profit for the period was $40.6 million (H1 2014: $53.8 million), down 25%.

Plus500's total assets dropped from $120.6 million in H1 2014 to $115.6 million in H1 2015, a decrease of 4%, with cash balances decreasing to $95.5 million (H1 2014: $115.2 million) and equity of $86.1 million (H1 2014: $88.8 million), representing approximately 74.5% of the balance sheet. 

Current Trading and Outlook

Current third quarter trading has been strong due to the extreme volatility in world markets. As a result the Board now expects revenues to be ahead of 2014 and previous market expectations. However, while margins will benefit from this increased revenue, the overall profitability for the year is still not expected to match that of the prior year.

Merger Agreement

On 1 June 2015 Brighttech Investments S.A. (a wholly owned subsidiary of Playtech), Socialdrive Limited (a wholly owned subsidiary of Brighttech) and the Company entered into the Merger Agreement (the "Acquisition") under the terms of which Brighttech will acquire the entire issued and to be issued ordinary share capital of the Company.

Under the terms of the Acquisition, Plus500 Shareholders will receive 400 pence per Plus500 Share in cash, which values the issued share capital of Plus500 at approximately £459.6 million (excluding any payment made in relation to any share appreciation rights outstanding at the time of completion, which would be paid out in cash at that time by Plus500 in accordance with the provisions of the Merger Agreement). Shareholders of both parties have voted in favour of the Acquisition.  

One of the conditions of the Merger is that no dividend be proposed and as such there will be no dividend declared.

The Merger remains subject to the satisfaction of certain conditions outlined in the Information Statement, primarily the receipt of regulatory approvals and any required antitrust clearance. The transaction is expected to complete by the end of September with payments being made to shareholders as soon as practical thereafter.

Plus500 LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2015

		As of 30 June		As of 31 December
		2015	2014	2014
		(Unaudited)		(Audited)
		U.S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents		95,533	115,179	139,164
Short-term bank deposit		-	1,166	1,037
Restricted deposit		71	215	69
Accounts receivable		17,706	2,949	3,927
		113,310	119,509	144,197
NON-CURRENT ASSETS:
Property, plant and equipment		1,874	269	1,557
Intangible assets		86	53	57
Deferred income tax assets		336	764	495
		2,296	1,086	2,109
T o t a l  assets		115,606	120,595	146,306
Liabilities and equity
CURRENT LIABILITIES:
Trade payables - due to clients		2,854	5,823	5,885
Other accounts payable and
accruals:
Service supplies		13,419	8,008	7,831
Other		2,520	1,361	2,382
Income tax payable		10,345	16,540	19,579
		29,138	31,732	35,677
NON- CURRENT LIABILITIES:
Share- based compensation		396	93	169
EQUITY:
Ordinary shares		317	317	317
Share premium		22,220	22,220	22,220
Retained earnings		63,535	66,233	87,923
T o t a l  equity		86,072	88,770	110,460
T o t a l  liabilities and  equity		115,606	120,595	146,306

Plus500 LTD.

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2015

			Year ended
	Six months ended 30 June		31 December
	2015	2014	2014
	(Unaudited)		(Audited)
	U.S. dollars in thousands
TRADING INCOME - net	127,026	106,242	228,865
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Selling and marketing	63,655	30,702	75,170
Administrative and general	7,966	3,583	8,373
Capital loss from realization of fixed assets	109	-	-
INCOME FROM OPERATIONS	55,296	71,957	145,322
Financial expenses	3,242	1,573	7,381
Financial income	(85)	(2,752)	(178)
FINANCIAL EXPENSE (INCOME) -net	3,157	(1,179)	7,203
INCOME BEFORE TAX ON INCOME	52,139	73,136	138,119
INCOME TAX EXPENSE	11,522	19,373	35,667
PROFIT AND COMPREHENSIVE INCOME
FOR THE PERIOD ATTRIBUTABLE TO
OWNERS OF THE PARENT	40,617	53,763	102,452

	In U.S. dollars
EARNINGS PER SHARE (basic and diluted)	0.35	0.47	0.89

Plus500 LTD.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2015

	Ordinary	Share	Retained
	shares	premium	earnings	Total
	U.S. dollars in thousands
BALANCE AT 1 JANUARY 2015 (audited)	317	22,220	87,923	110,460
CHANGES DURING THE SIX MONTH ENDED
JUNE 30, 2015 (unaudited):
Profit and comprehensive income for the period			40,617	40,617
TRANSACTION WITH SHAREHOLDERS
Dividend			(65,005)	(65,005)
BALANCE AT 30 JUNE 2015 (unaudited)	317	22,220	63,535	86,072
BALANCE AT 1 JANUARY 2014 (audited)	317	22,220	45,477	68,014
CHANGES DURING THE SIX MONTH ENDED
JUNE 30, 2014 (unaudited):
Profit and comprehensive income for the period			53,763	53,763
TRANSACTION WITH SHAREHOLDERS
Dividend			(33,007)	(33,007)
BALANCE AT 30 JUNE 2014 (unaudited)	317	22,220	66,233	88,770
BALANCE AT 31 DECEMBER 2013 (audited):	317	22,220	45,477	68,014
CHANGES DURING THE YEAR ENDED
31 DECEBMBER 2014:
Profit and comprehensive income for the year			102,452	102,452
TRANSACTION WITH SHAREHOLDERS
Dividend			(60,006)	(60,006)
BALANCE AT 31 DECEMBER 2014 (audited)	317	22,220	87,923	110,460

Plus500 LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2015

	Six months ended			Year ended
	June 30			31 December
	2015		2014	2014
	(Unaudited)			(Audited)
	U.S. dollars in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (see Appendix A)	47,535		73,991	141,081
Income tax paid - net	(21,467)		(11,117)	(22,407)
Interest received	85		35	178
Net cash flows provided by operating activities	26,153		62,909	118,852
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit withdrawals	1,037		-	138
Purchase of property, plant and equipment	(564)		(83)	-
Selling of property, plant and equipment	25		-	(1,419)
Purchase of intangible assets	(38)		-	(24)
Net cash flows provided by (used in) investing activities	460		(83)	(1,305)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid to equity holders of the Company	(65,005)		(33,007)	(60,006)
NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS	(38,392)		29,819	57,541
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	139,164		84,108	84,108
EXCHANGE GAIN (LOSS) ON CASH AND CASH  EQUIVALENTS	(5,239)		1,252	(2,485)
CASH AND CASH EQUIVALENTS AT END OF PERIOD	95,533		115,179	139,164

Plus500 LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2015

APPENDICES

CONSOLIDATED STATEMENT OF CASH FLOWS

APPENDIX A:

	Six months		Year ended
	ended 30 June		31 December
	2015	2014	2014
	(Unaudited)		(Audited)
	U.S. dollars in thousands
Cash generated from operations -
Net income for the period	40,617	53,763	102,452
Adjustments required to reflect the cash
flows from operating activities:
Depreciation and amortization	122	52	120
Capital loss from realization of fixed assets	109	-	-
Taxes on income	11,522	19,373	35,667
Foreign exchange losses on operating activities	6,024	(1,277)	621
Losses (gains) on revaluation of existing deposits	(2)	11	148
	17,775	18,159	36,556
Operating changes in working capital:
Decrease (increase) in accounts receivable	(13,779)	290	(688)
Increase (decrease) in trade payables due to clients	(3,031)	291	353
Increase (decrease) in other accounts payable:
Service supplies	5,588	1,168	991
Other	138	227	1,248
Liability for Share-based compensation	227	93	169
	(10,857)	2,069	2,073
Cash flows from operating activities	47,535	73,991	141,081

Plus500 LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1 - GENERAL INFORMATION

a.     Plus500 Ltd. (hereafter - the Company) 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. 

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").

Plus500UK Limited (hereafter - UK subsidiary or Plus500UK) is subsidiary of the Company located in UK, and regulated by the Financial Conduct Authority (FCA).

Plus500AU Pty Ltd (hereafter - AU subsidiary or Plus500AU) is a subsidiary of the Company located in Australia. Plus500AU has an Australian Securities and Investments Commission ("ASIC") license.

Plus500CY Limited (hereafter - CY Subsidiary or Plus500CY) is a subsidiary of the Company located in Cyprus. Plus500CY has a Cyprus Securities and Exchange Commission ("CySEC") license.

The company and its subsidiaries (hereafter - the Group) are engaged in one operation segment CFD trading.

The address of the Company's principal offices is Building 25, Matam, Haifa 31905, Israel.

b.     On 30 October 2014 Plus500UK entered into a Voluntary Requirement ("VREQ") with the Financial Conduct Authority ("FCA") whereby Plus500UK was prohibited from conducting any transactions for customers without holding the appropriate AML documentation. On 9 January 2015, Plus500UK was required by the FCA under Section 166 of the Financial Services and Markets Act 2000 ("Section 166") to appoint a Skilled Person to conduct a review of its Anti-Money Laundering ("AML") and other related regulatory controls.

Following completion of the Skilled Person's Review, on 15 May 2015 Plus500UK entered into a further VREQ with the FCA prohibiting any new transactions for existing customers until additional AML documentation had been provided and on-boarding any new clients until new AML procedures had been implemented, as signed off by the Skilled Person.

Starting from mid-May 2015, Plus500UK put in place a comprehensive remediation plan to re-enable its suspended customers, and hired new staff for this process.

On 22 May 2015 Plus500UK was required by the FCA under a Section 166 requirement notice to appoint a second Skilled Person who was asked to review the steps taken by Plus500UK in regard to its remedial AML procedures for existing clients. The Skilled Person carried out a review of Plus500UK's compliance with its remedial AML policies and procedures in respect to a sample of existing customers and reviewed these procedures to ensure they met regulatory requirements.

The second Skilled Person's final report on Plus500UK's existing customers was issued to the FCA on 3 July, 2015. This report covered a review of a sample of trades and other transactions in a number of areas, with satisfactory results. The overall conclusion of the sample test was that there was no indication that the UK Company had breached the requirement 2(i) of the second VREQ (requirement 2 dated 15 May, 2015) that was agreed with the FCA.

In June and July 2015, Plus500UK concluded its work with support from compliance consultants and adopted revised procedures to enable the onboarding of new customers. New customers in the UK are able to onboarded from August 2015.

To date no disciplinary action nor any penalties in respect of the events described above have been taken against the Group. There is no provision in these financial statements in respect of the events described above as it is unknown whether or not any such actions or penalties will be levied and, if this does transpire, a reliable estimate of the quantum cannot be made.

Plus500 LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 2 - BASIS OF PREPARATION

These condensed consolidated interim financial statements for the six months ended 30 June, 2015 have been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December, 2014, which have been prepared in accordance with IFRS.

This condensed consolidated interim financial information is reviewed and not audited.

NOTE 3 - ACCOUNTING POLICIES

Significant accounting policies and computation methods used in preparing the interim financial information are consistent with those used in preparing the 2014 annual financial statements, except for the following:

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

NOTE 4 - DIVIDEND

a.     On 18 February, 2014, the Company's Board of Directors declared the distribution of a dividend of $0.2873 (NIS 1.01) per share, in the total amount of $ 33,007 thousand.

b.     On 12 August, 2014, the Company's Board of Directors declared the distribution of a dividend of $0.235 (NIS 0.82) per share, in the total amount of $26,999 thousand.

c.     On 24 February, 2015, the Company's Board of Directors declared the distribution of a dividend of $0.566 (NIS 2.24) per share, in the total amount of $ 65,005 thousand.

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

	Six months		Year ended
	ended 30 June		31 December
	2015	2014	2014
	(Unaudited)		(Audited)
	U.S. dollars in thousands
Date of declaration
18 February, 2014	-	33,007	33,007
12 August, 2014	-	-	26,999
24 February, 2015	65,005	-	-
	65,005	33,007	60,006

Plus500 LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 5- SUBSEQUENT EVENTS

On 1 June 2015, the Boards of Playtech plc ("Playtech") and the Company announced that they had reached agreement regarding the terms of a recommended cash acquisition through which the entire issued ordinary share capital of Plus500 will be acquired by Playtech by means of a merger under the Israeli Companies Law (the "Acquisition").

On 16 July, 2015, the Acquisition was approved at the Special General Meeting of the Company shareholders.

On 19 August, 2015, the Acquisition was approved at the Special General Meeting of Playtech's shareholders.

Completion of the Acquisition remains conditional on satisfying a number of conditions including regulatory approvals and antitrust clearance.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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