Plus500 Starts New Share Buyback Program, as Revenues Drop 68%

Plus500 published its interim results for the first half of 2019. Most notably, the firm is committing to a new stock buyback program amid harsh market conditions. The Israeli company is going to spend up to $50 million of its cash reserves to buy back its own stock. The company's stock rallied nearly 20 percent following the news, reaching 680 pence per share as of writing.

The news comes amid tough market conditions and a sharp decline in revenues in the first half of the year. According to the company’s statement, its revenues declined by 68 percent from a year ago to $148 million. The figure is also lower by 42 percent when compared to the second half of 2018.

Net profits of Plus500 declined 80 percent on a yearly basis and by 56 percent when compared to H2 2018 to $51.6 million. Despite the challenging market environment, the firm continues to generate cash. The company’s reserves increased by four percent when compared to the second half of last year to $327.3 million. The figure is nonetheless lower than the $511.9 million reported a year ago.

While the declines might look material, some extraordinary factors are in play. The base effects from increased revenues in the first half of 2018 during which the crypto bubble has burst are certainly affecting the company’s year-on-year figures.

KPIs

Overall the performance metrics of the company improved in the second half of H1 after the extremely low Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term in Q1. Plus500’s management team also outlined that since the introduction of the ESMA’s product intervention measures in August 2018, Q2 has been new the best for the brokerage in terms of active and new customer metrics.

The number of new customers increased by 23 percent when compared to Q1 to a total of 21,306. During the same period, the number of active clients rose 11 percent to 97,921. For the first half of the year, Plus500 welcomed 47,540 new clients, a figure which is higher by almost 7,000 when compared to H2 2018.

The number of active clients during the first half remained more or less constant with a total of 141,692 placing at least one trade.

In the meantime, Average User Acquisition Costs (AUAC) dropped by 30 percent when compared to H2 2018 and stood at $1,079. Average Revenues Per User (ARPU) metrics also declined, reaching $1,044 - down 42 percent when compared to the second half of last year.

Revenue Diversification

During the first half of the year, a total of 48 percent of the firm’s revenues came in from non-EEA countries. This is an increase of eight percent when compared to the second half of 2018. Revenues from spreads and Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term totaled about $175 million.

Client despots rose by 41 percent when compared to the second half of 2018. Plus500 also highlighted the decrease in the client churn rate, which reached 16 percent. This was the lowest figure since Plus500’s IPO in 2013.

Commenting on the company’s performance, the CEO of Plus500, Asaf Elimelech, outlined that the group performed very well during what was a difficult period for the entire industry.

“Our first half performance, and trading to date in the third quarter 2019, is consistent with current expectations for 2019. Underlying operational performance and new customer acquisition metrics remain robust,” Elimelech elaborated.

He also highlighted that the company’s board is optimistic about Plus500's future prospects.