The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Plus500 sponsor of Spanish soccer team Atletico Madrid, plunged after the broker revealed how much it has cushioned the blow of new rules with profits from customers’ bad wagers. It also warned 2019 earnings will take a hit.
The London-traded company recorded a $56 million trading gain by taking the other side of clients’ bets during the fourth quarter, which accounted for about a third of overall revenue. Plus500 clients lost money during the global market rout in the final months of 2018.
Meanwhile, Europe’s markets regulator has been clamping down on the sale of contracts for difference, or CFDs, which allow retail investors to make risky wagers with borrowed funds on stocks, bonds, foreign exchange and cryptocurrencies. Under the rules introduced in 2018, brokers including IG Group Holdings Plc, CMC Markets Plc and Plus500 are restricted in how they sell and market the derivatives, while customers face caps on how much they can borrow and lose.
Seller of complex derivatives to retail customers plummets on bleak outlook
While the clampdown was expected, investors were caught off-guard by how much the equity market swoon, which whipsawed trading desks around the world, helped Plus500 cushion the pain. The shares plunged about 40 percent.
As recently as December, the company said it had performed well despite new rules from the European Securities and Markets Authority were imposed in August, and expected results to beat the market’s expectations.
“It’s a really disturbing revelation, something that will make people question if they want to own a business that’s generating low quality revenues from sources they hadn’t anticipated and introduced real volatility to earnings,” said Justin Bates, an analyst at Canaccord Genuity Ltd.
Plus500 historically generated the majority of revenue from so-called spreads, or the amount that it charges punters for taking their trades, rather than by betting against them and profiting from their losses, according to Ben Williams, an analyst in London with Liberum.
Executives at the firm said on a conference call they have a policy to remain unhedged. Plus500 has previously said it earns revenues on customers’ trading positions, although this amounts to a marginal component of the group’s overall total revenue in previous years.
“Such gains have been negligible in the long run, but material in this particular period,” wrote Williams. “The company is resetting forecasts based on an assumption of low volatility.”
Forecasts
Year Ending Profit (m) EPS P/E PEG EPS Grth. Div Yield
31-Dec-19 141.90 125.17 5.8 n/a -51.00% 81.69 10.9%
31-Dec-20 150.01 132.32 5.4 0.9 +5.71% 85.90 11.4%
Profit & Sales Forecasts
Year Ending Sales/Share Price/Sales per share
31-12-2019 £3.03 2.37
31-12-2020 £3.28 2.20
Reading here some are long term traders I hope they know what they're talking about.
Why are we under 800 or what do we need for 800? My average is 1156 but I doesn't matter we were 800 plus few weeks ago and dropped on no news so what do we need now for 800?
Anyone help me here please. Thanks
So what happens if the update is bad compared to 2018 which will be 200% as its impossible to match the performance with all restrictions in place.
Also normally they announce the update date and this time around they have not bothered with an RNS. Are they trying to just push it through?
Any idea whether this will be 600 as CG as put sell at 546 target?
Does anyone know the reason behind the drop?
Surely they have already accepted in the 12th FEB RNS that they will be below expectations that pulled them down to 1000 then went up to 1200 then dropped due to error to round about 697 then up to around 800 so why now dropping back to 700? Is this not priced in the low profits this year? ODEY has got near 30% plus across his 3 funds whats the issue?
YY
Thank you so much for offering a way out we don't want. You can go to Hell and Rot.
No MA will knock them out with lot of love and care no violence against women and children.
When you see a post from ALWAYS LOSING, ESC, GLOBAL DICK, EGG ON FACE
Please don't respond back to their argument. What will eventually happen hopefully if they are any less DUMB than I know they will go away.
They get paid 1p per post so as long as you arguing they will keep their pennies if you don't respond they will all be talking in the same rhyme it will bore them to death hopefully.
Ignore these idiots as they are low life's nothing better to do.
I would love to knock him out for good for this BB. Joking lol
Same here mate originally I used to come here read but never post recently I have been more vocal.
Well I have got work during the week and weekend family but as I was following DEBS development I was on and off this place.
These people are on benefits probably living of us paying taxes and them lecturing people what to do with their money.
Always Losing
The other thing MA can do is to knock your fake tooth out with his fat head! LMAO
HK85
What would you do when and if you meet ALWAYS LOSING?
Blood tears for shorters LMAO
RNS will sent from YY base lol