Half-year Report

RNS Number : 8881I

Plus500 Limited

05 September 2016

 

5 September 2016

Plus500 Ltd.

("Plus500" or "the Group")

Interim Results for the six months ended 30 June 2016

'Record half year revenues and profits; increased dividend'

Plus500, a leading online service provider for retail customers to trade CFDs internationally, is pleased to announce its interim results for the six months ended 30 June 2016.

Financial Highlights:

	H1 2016	H1 2015	Change
Revenues	$158.8m	$127.0m	25%
EBITDA1	$59.1m	$55.5m	6%
Net profit	$44.5m	$40.6m	10%
Net cash	$96.2m	$95.5m	0.7%
Earnings per share	$0.39	$0.35	11%
ARPU2	$1,525	$1,362	12%
Operating cash flow	$36.8m	$26.2m	40%
Operating cash conversion3	95%	86%	10%
Interim dividend per share (cents)	$0.2324	$0.2121	10%
Interim dividend payout ($m)	$26.7m	$24.4m	9%

Operational Highlights:

· Record first half results:

o Continued growth in Active Customers⁴ - increased 12% to 104,119 (H1 2015: 93,267)

o Continued growth in New Customers⁵ - increased 9% to 56,929 (H1 2015: 52,217)

· Increase in New Customers a record for H1 and substantially ahead of expectations:

o  This  has temporarily suppressed EBITDA margins and ARPU due to acquisition and onboarding costs being incurred prior to generating revenues from the New Customers

o These additional customers are expected to benefit revenues and margins going forward with an anticipated increase in ARPU from such customers

o  Excluding the additional acquisition and onboarding costs, EBITDA margins were over 50%

· UK market share increased as a result of improved brand and product awareness

· Mobile and tablet adoption have continued to grow and now represent 68% of revenue 

· The Group has made significant investment in compliance which is reflected in an improved regulatory culture

    throughout the Group

Current trading:

· Current trading in the third quarter to date has continued to be strong, benefitting from the New Customers delivering revenues, with improving margins

Asaf Elimelech, Chief Executive Officer of Plus500, commented:

"Plus500 achieved record first half results whilst continuing to grow both its Active and New Customers. This performance was driven by continued marketing activity and market volatility; the UK's Brexit decision boosted customer activity in late Q2 - leading to increased New Customer sign ups, customer re-activations, and customer trading levels.

We have started the second half strongly as these New Customers deliver growth in revenues with an associated bounce back in margins. We are encouraged by the continuing levels of new and existing customer activity resulting from the market volatility and our own actions as we continue to invest in enhancing the business to deliver future growth.

Overall our expectations are unchanged - momentum is expected to continue, resulting in strong growth in 2016."

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014

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

² ARPU -   Average revenue per user.

³ Operating cash conversion - Cash generated from operations / EBITDA.

⁴ Active Customers - Customers who made at least one real money trade during the period.

⁵ New Customers - Customers depositing for the first time during the period.

For further details:

Plus500 Ltd Elad Even-Chen, Chief Financial Officer [e-mail]	Tel: [phone]
Liberum - Nomad and Joint Broker Clayton Bush, Josh Hughes www.liberum.com	Tel: [phone]
Berenberg - Joint Broker Chris Bowman, Amritha Murali, Marie Stolberg www.berenberg.de/en	Tel: [phone]
MHP Communications Reg Hoare, Tim Rowntree, Kelsey Traynor [e-mail]	Tel: [phone]

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 2,250 different underlying global financial instruments comprising equities, indices, commodities, options, ETFs and foreign exchange. 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), tablets (iOS, Android and Surface) and web browsers). 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 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 2016 have seen the Group deliver strong operating performance, which includes record first half revenues and profits and a record number of Active Customers. Our core CFD ("Contracts for Difference") market continues to establish itself within the global retail investment community as investors seek more diverse financial instruments to trade, and to enhance and hedge their portfolio returns and risk.  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 future.

The Group had a record start to 2016 with revenues during the period up 25% to $158.8 million (H1 2015: $127 million) and profit before tax up 12% to $58.5 million (H1 2015: $52.1 million). The Group's performance has been driven by its highly successful online marketing campaigns, diverse product offering and its user-friendly platform, which attracted a record number of New Customers.

Dividends

This solid performance further underpins the Board's commitment to pursuing a strong dividend policy and therefore it is pleased to declare an interim dividend of $0.2324 per share (H1 2015: $0.2121) representing a total payout of $26.7m (H1 2015: $24.4 million) in relation to the period. The ex-dividend date is 15 September 2016, the record date 16 September 2016 and payment date 17 November 2016.

The Board remains committed to its dividend policy of a 60% pay-out ratio with payment of special dividends at the end of the year if appropriate and flexibility to buy back shares.  

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 Atlético Madrid as well as introducing mass media events.

The UK's Referendum decision to leave the EU showed the strength of Plus500's platform, when the Group's systems operated smoothly and without interruption or malfunction despite a record of more than doubled activity compared to regular trading days. Many customers who were not active prior to the Referendum reactivated their accounts and used the platform and many New Customers were added during this period due to the prolonged market volatility.

Overall, New Customers increased 9% to 56,929 (H1 2015: 52,217) during the six months, substantially ahead of market expectations, resulting in significantly higher New Customer acquisition and onboarding costs than the market expected. Marketing for new customers is the principal expense of the Group which continues to have an otherwise low overhead base. Approximately an additional 19,500 customers above expectations were recruited which meant that an additional $26 million of costs were incurred, suppressing EBITDA margins by 16% for the half year. Despite this, the Group was pleased that the additional customers were acquired at broadly the same cost per customer as those acquired prior to 2016.

2016 first half margins were therefore lower than 2015 due to the increase in customer numbers and also due to activity being skewed towards the end of the period, which resulted in two effects:

·      when a New Customer is signed up full AUAC is expensed, while the revenue is recognised only for that customer's activity during the relevant period

·      when a New Customer starts trading the ARPU is diluted, as they may only trade for part of the relevant period

These New Customers are expected to provide revenue growth in future periods, enabling margins to increase when the ratio of New to Active Customers narrows.

Overall, the Group was profitable every month in the year to date and Plus500's business model continues to be extremely cash generative with 95% conversion of operating profit to cash flow (H1 2015: 86%). Net cash stood at $96.2 million as at 30 June 2016 (31 December 2015: $156.5 million) excluding that held in client segregated accounts and after the payment of dividends of $96.6 million in H1 2016 (H1 2015: $65 million).

Continuous development

The Company is the second largest CFD provider in the UK, based on Investment Trends' report dated July 2015, whilst the Group's revenues from the UK have increased from 15% of the Group's total revenue in 2015 to 18% in the first half of 2016 as a result of improved brand and product awareness.

The growing importance of mobile technology within the CFD trading industry and the Group's leadership in this area are reflected in the fact that during 2015 approximately 65% of the Group's total trades executed on its trading platform were completed on a mobile device, whereas approximately 48% of the nearest competitor's customer CFD trades were executed on a mobile device.⁶ In H1 2016 the adoption of mobile and tablet have continued to grow and now represent 68% of all Plus500's customers.

Overall customer satisfaction rates have been significantly boosted by the introduction of live chat and are significantly higher than compared to a year ago. Customer service remains a key area of investment and focus for the Group and is an additional strong differentiator in New Customer acquisition and retention.

During H1 the Group has invested resources to develop and enhance its customer service initiatives, and some of the benefits are already being reflected in our churn rates which have decreased by 11% from 48% in Q2 2015 to 37% in Q2 2016 (H1 2015: 41%, H1 2016: 38%).  

Regulatory update

The industry in which the Group operates is highly regulated. As a result, the Group has continued to invest in its regulatory and compliance personnel and its systems and processes with a strong focus on best practice and maintaining open dialogue with the regulators. Overall, the Group's has made significant investment in compliance which is reflected in an improved regulatory culture throughout the Group.

There were no significant changes to the regulatory environment which affected the Group in the first half of 2016, and the Group continues to monitor closely developments in its principal markets. Belgium, where there were some changes to the regulatory environment since the half year end, is not a material market for the Group.

Board changes

During the period we were pleased to announce the appointment of Penelope Judd as a Non-Executive Director of the Company. Ms. Judd was also appointed as the chairman of the Company's new regulatory and risk committee. She is a chartered accountant with over 30 years of City and financial services experience specialising in compliance, governance, regulation, corporate finance and audit, principally with KPMG, the UK Listing  Authority, Cazenove and in each of UBS and Nomura as EMEA head of compliance and managing director. This strengthens our UK based non-executive directors and our commitment to good governance and best practice regulatory compliance.

Financial Review

Revenues in the first half of 2016 totalled $158.8 million (H1 2015: $127.0 million), representing 25% growth compared to H1 2015. The growth achieved can be attributed to the growing number of Active Customers, up 12% to 104,119 in the first half (H1 2015: 93,267). The table below shows the skew of New Customers to the second quarter compared to the first quarter and the dilutive quarter on quarter impact on ARPU from the New Customer sign ups.

	Qtr 30/6/16	Qtr 30/6/15	H1 2016	H1 2015
Revenues Number of New Customers	$73,614 28,137	$44,926 19,337	$158,772  56,929	$127,026  52,217
Number of Active Customers	70,958	54,616	104,119	93,267
ARPU	$1,037	$823	$1,525	$1,362
AUAC	$1,347	$1,278	$1,328	$1,033

EBITDA in the first half of 2016 was $59.1 million (H1 2015: $55.5 million), an increase of 6%, with EBITDA margins decreasing from 44% in H1 2015 to 37% in H1 2016. Net profit for the period was $44.5 million (H1 2015: $40.6 million), up 10%. The level of AUAC is a reflection of the Group's continued focus on attracting higher value customers, the success of which is evidenced by the increase in market share in, for instance, the UK.

Plus500's total assets increased from $115.6 million in H1 2015 to $117.6 million in H1 2016, an increase of 2%, with cash balances increasing to $96.2 million (H1 2015: $95.5 million) following the dividend payment of $96.6 million in H1 2016, and equity of $90 million (H1 2015: $86.1 million), representing approximately 77% of the balance sheet. 

Current Trading and Outlook

Plus500 has performed strongly in the first half of 2016 and the Board looks ahead with continued confidence.  Current trading in the third quarter to date has continued to be strong, benefitting from the New Customers delivering revenues and with margins bouncing back. In addition, the trend of increasing New and Active Customers is continuing. Both market volatility and marketing spend has now delivered close to the Group's initial target for New Customers for the full year as a whole; the Board intends to maintain spending at current levels to deliver the platform for growth in future years.

For the year as whole we now expect margins for 2016 to be slightly lower than 2015 due to the continuing success in winning New Customers and the associated acquisition and onboarding costs which are expensed ahead of revenue. However, this impact is expected to be partially mitigated in the second half by the benefit to revenues and profits from the greater than anticipated increase in New Customers, Active Customers and trading levels achieved to date.  

Over the medium to long term, the Board expects margins will benefit from the operational gearing inherent in the Group's low cost fixed overhead business model and its ability to flex marketing expenditure.  

In conclusion we have more high value customers, an enhanced trading platform, more robust processes, more routes to market and a stronger brand. Overall, our expectations are therefore unchanged - momentum is expected to continue, resulting in strong growth in 2016.

 ⁶ Investment Trends' report, July 2015

Plus500 LTD.

CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2016

		As of 30 June		As of 31 December
		2016	2015	2015
		(Unaudited)                                       (Audited)
		U.S. dollars in thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents		96,137	95,533	156,497
Short-term bank deposit		39	-	38
Restricted deposit		356	71	181
Accounts receivable		17,610	17,706	9,761
Income tax receivable		-	-	227
		114,142	113,310	166,704
NON-CURRENT ASSETS:
Long term restricted deposit		25	-	24
Property, plant and equipment		2,985	1,874	1,977
Intangible assets		102	86	92
Deferred income tax assets		329	336	173
		3,441	2,296	2,266
T o t a l  assets		117,583	115,606	168,970
Liabilities and equity
CURRENT LIABILITIES:
Trade payables - due to clients		543	2,854	1,519
Other accounts payable and
accruals:
Service suppliers		19,765	13,419	13,391
Other		3,722	2,520	3,480
Income tax payable		2,387	10,345	7,972
Share-based compensation		610	-	372
Dividend		-	-	24,368
		27,027	29,138	51,102
NON- CURRENT LIABILITIES:
Share- based compensation		598	396	214
EQUITY:
Ordinary shares		317	317	317
Share premium		22,220	22,220	22,220
Retained earnings		67,421	63,535	95,117
T o t a l  equity		89,958	86,072	117,654
T o t a l  liabilities and equity		117,583	115,606	168,970

Plus500 LTD.

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

					Year ended
		Six months ended 30 June			31 December
		2016		2015	2015
		(Unaudited)                               (Audited)
		U.S. dollars in thousands
TRADING INCOME		158,772		127,026	275,651
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Selling and marketing		91,488		63,655	125,413
Administrative and general		8,355		7,966	17,647
Loss on disposal of property, plant and equipment		-		109	109
INCOME FROM OPERATIONS		58,929		55,296	132,482
Financial income		815		85	178
Financial expenses		1,235		3,242	4,776
FINANCIAL EXPENSE -net		420		3,157	4,598
INCOME BEFORE TAX ON INCOME		58,509		52,139	127,884
TAXES ON INCOME		14,009		11,522	31,317
PROFIT AND COMPREHENSIVE INCOME FOR THE PERIOD		44,500		40,617	96,567

	In U.S. dollars
EARNINGS PER SHARE (basic and diluted)	0.39	0.35	0.84

Plus500 LTD.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

	Ordinary	Share	Retained
	shares	premium	earnings	Total
	U.S. dollars in thousands
BALANCE AT 1 JANUARY 2016 (audited)	317	22,220	95,117	117,654
CHANGES DURING THE SIX MONTHS ENDED 30, JUNE, 2016 (unaudited):
Profit and comprehensive income for the period	-	-	44,500	44,500
TRANSACTION WITH SHAREHOLDERS
Dividend	-	-	(72,196)	(72,196)
BALANCE AT 30 JUNE 2016 (unaudited)	317	22,220	67,421	89,958
BALANCE AT 1 JANUARY 2015 (audited)	317	22,220	87,923	110,460
CHANGES DURING THE SIX MONTHs ENDED 30, JUNE 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 2015 (audited)	317	22,220	87,923	110,460
CHANGES DURING THE YEAR ENDED 31, DECEMBER 2015:
Profit and comprehensive income for the year	-	-	96,567	96,567
TRANSACTION WITH SHAREHOLDERS -
Dividend	-	-	(89,373)	(89,373)
BALANCE AT 31 DECEMBER 2015 (audited)	317	22,220	95,117	117,654

Plus500 LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

	Six months ended				Year ended
	June 30				31 December
	2016		2015		2015
	(Unaudited)                             (Audited)
	U.S. dollars in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (see Appendix A)	56,212		47,535		128,078
Income tax paid - net	(19,502)		(21,467)		(42,658)
Interest received	86		85		55
Net cash flows provided by operating activities	36,796		26,153		85,475
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit withdrawals	-		1,037		1,039
Purchase of deposits	-		-		(38)
Increase in restricted deposits	(176)		-		(136)
Purchase of property, plant and equipment	(1,190)		(564)		(819)
Proceeds from sale of property, plant and equipment	-		25		26
Purchase of intangible assets	(22)		(38)		(54)
Net cash flows provided by (used in) investing activities	(1,388)		460		18
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividend paid to equity holders of the Company (see Note 4)	(96,564)		(65,005)		(65,005)
DECREASE  IN CASH AND CASH EQUIVALENTS	(61,156)			(38,392)	20,488
Balance of cash and cash equivalents at beginning of period	156,497		139,164		139,164
Gains (losses) from exchange differences on cash and cash equivalents	796		(5,239)		(3,155)
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	96,137		95,533		156,497

 

Plus500 LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

APPENDICES CONSOLIDATED STATEMENT OF CASH FLOWS

APPENDIX A:

	Six months		Year ended
	ended 30 June		31 December
	2016	2015	2015
	(Unaudited)                                 (Audited)
	U.S. dollars in thousands
Cash generated from operations -
Net income for the period	44,500	40,617	96,567
Adjustments required to reflect the cash
flows from operating activities:
Depreciation and amortization	194	122	283
Loss on disposal of property, plant and equipment	-	109	109
Taxes on income	14,009	11,522	31,317
Interest and foreign exchange losses (gains) on operating activities	(911)	6,022	2,927
	13,292	17,775	34,636
Operating changes in working capital:
Increase in accounts receivable	(7,842)	(13,779)	(5,834)
Decrease in trade payables due to clients	(976)	(3,031)	(4,366)
Increase in other accounts payable:
Service suppliers	6,374	5,588	5,560
Other	242	138	1,098
Liability for share-based compensation	1,377	227	417
Settlement of share-based compensation	(755)	-	-
	(1,580)	(10,857)	(3,125)
Cash flows from operating activities	56,212	47,535	128,078

APPENDIX B: non-cash transactions  

On 23 November 2015 the Company declared an interim dividend in an amount of $24,368 thousands ($0.2121 per share). The dividend was paid to the shareholders on 29 February 2016.

Plus500 LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1 - GENERAL INFORMATION

Information on activities of plus500 Ltd and its subsidiaries (hereafter- the Group):

Plus500 Ltd. (hereafter - the Company) was established in 2008 in Israel 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, indices, commodities, ETFs, options 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 (the "UK subsidiary", "Plus500UK") is a subsidiary of the Company located in London in the UK, and is regulated by the Financial Conduct Authority ("FCA") to offer CFDs.

Plus500AU Pty Ltd (the "AU subsidiary", "Plus500AU") is a subsidiary of the Company with its main office located in Sydney, Australia. Plus500AU has an Australian Securities and Investments Commission ("ASIC") license.

Plus500CY Ltd (the "CY subsidiary", "Plus500CY") is a subsidiary of the Company with its main office located in Limassol, Cyprus. Plus500CY has a Cyprus Securities and Exchange Commission ("CYSEC") license.

Plus500IL Ltd (the "IL subsidiary", "Plus500IL") is a subsidiary of the Company located in Israel with its main offices in Tel Aviv. The IL subsidiary is in process of obtaining license from the Israeli Securities Authority ("ISA") in order to offer CFDs to Israeli customers.

Plus500BG EOOD (the "BG subsidiary", "Plus500BG") is a subsidiary of the Company located in Sofia, Bulgaria. The BG subsidiary provides operational services and it is not regulated.

The Group is engaged in one operating segment - CFD trading.

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

NOTE 2 - BASIS OF PREPARATION

These condensed consolidated interim financial statements for the six months ended 30 June, 2016 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, 2015, 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 2015 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

The amounts of dividends and the amounts of dividends per share for the years 2015 and 2016 declared and distributed by the Company's Board of Directors are as follows:

Date of declaration	Amount of dividend in thousands of $
24 February 2015	65,005
23 November 2015	24,368
16 February 2016	72,196

On 16 February 2016 the Company declared an interim dividend in amount of $ 72,196 thousands ($0.6284 per share). The dividend was paid to shareholders on 11 May 2016.

The dividends paid in the six months ended 30 June 2016 and in the year ended 31 December 2015 amounted to $96,564 (along with dividend declared on 23 November 2015 in the amount of $24,368 and paid to shareholders on 29 February 2016).

NOTE 5 - EARNINGS PER SHARE

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

	Six months ended 30 June		Year ended 31 December
	2016	2015	2015
	(Unaudited)                                                          (Audited)
	U.S. dollars in thousands

Profit attributable to equity
holders of the Company (In U.S dollars)	44,500,000	40,617,000	96,567,000
Weighted average number of
ordinary shares in issue	114,888,377	114,888,377	114,888,377

Plus500 LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 6 - TRADE PAYABLES- DUE TO CLIENTS

	30 June		31 December
	2016	2015	2015
	(Unaudited)                                                     (Audited)
	U.S. dollars in thousands

Customers deposits, net*	72,758	57,867	41,290
Segregated client funds	(72,215)	(55,013)	(39,771)
	543	2,854	1,519

* Customers deposits, net are comprised of the following:

	30 June		31 December
	2016	2015	2015
	(Unaudited)                                                     (Audited)
	U.S. dollars in thousands
Customers deposits	84,430	65,931	47,469
Less- financial derivative open
positions:
Gross amount of assets	(17,257)	(11,175)	(8,982)
Gross amount of liabilities	5,585	3,111	2,803
Customers deposits, net	72,758	57,867	41,290

As of 30 June 2016, 2015 and 31 December 2015 the total amount of trade payables due to clients includes bonuses to the clients from all of the subsidiaries.

NOTE 7 - SUBSEQUENT EVENTS

In 2 September 2016 the Company declared an interim dividend in amount of $26,700 thousands ($0.2324 per share).

 

END

 

 

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