Plus500 has just posted its preliminary results for the year that ended on December 31st 2017. The company registered record revenues and profits just before the upcoming changes to the regulatory framework in Europe.
The Israeli broker’s revenues for the year increased by a third to $437.2 million. Net profits generated by Plus500 amounted to $199.7 million, which is higher by 70%.
EBITDA in 2017 was $259.2 million (FY 2016: $151.0 million), an increase of 72%, with EBITDA margins increasing significantly from 46.0% in 2016 to 59.3% in 2017. Net profit for 2017 increased 70% to $199.7 million (FY 2016: $117.2 million). Earnings per share were $1.75 (FY 2016: $1.02).
Client Acquisition Cost Drops Below $500
Looking at the details, the report shows that the main driver for the high spike in revenues was the decline in the average user acquisition cost. The firm’s notorious marketing machine managed to squeeze that down by 60 percent to $474 from $1,195 throughout 2016. The company attributes the drop to a massive spike in new client numbers in the fourth quarter of the year, likely driven by the cryptocurrency hype.
Another key metric, the average revenue per user, dropped 34 percent to $1,379. Plus500 also acknowledges that the popularity of cryptocurrency CFDs played a role in diluting this metric.
New client numbers were impressive, as the number increased 136 percent when compared to last year to 246,946. Active customers doubled to 317,175, which is about double the figure from 2016.
76% of Revenues from EU
The implementation of the new European Union regulatory framework for trading forex and CFDs is still likely to impact the bottom line at Plus500 after implementation. Plus500 shares in its announcement that 76 percent of its revenues are generated from business in the EU.
ATFX Institutional Business Continues to Expand: Adding a New Prime BrokerGo to article >>
Elaborating on the matter, the company states: “ESMA and FCA proposals still not concluded; subject to the application of the proposed measures. The Board believes the proposals are unlikely to have a material adverse effect on the Group’s business, thanks to its highly flexible business model.”
Outlook for 2018
The sharp spike in volatility since the beginning of the year is driving expectations for revenues in 2018 higher. The firm is stating that the record-high key performance indicators that it is observing are likely to drive revenues for the year ahead of current market expectations.
The new client acquisition metric is on pace to outperform when compared to 2017 when looking at average monthly performance. The company is also expecting to add further licenses to its portfolio in 2018. The company expects the user acquisition cost to trend back higher following the exception rise in the fourth quarter of 2018.
CEO Asaf Elimelech: Revenues Driven by Spreads and Swaps
Commenting on the upcoming regulatory changes, the CEO of Plus500, Asaf Elimelech said: “Our safe and secure trading platform already incorporates a number of the trading controls that regulators are seeking to introduce: we were among the first to offer a trading platform where customers cannot lose more than their account balance, and in 2017, as in 2016 and 2015, there was no net gain from market P&L.”
“The latter reflects the efficiency of our internal risk management systems and we believe it meets the expectations of the regulators that aim to prevent industry participants from being dependent on client losses. Indeed, our revenues continue to be principally derived from spreads and overnight charges,” Mr Elimelech explains.