Digitalbox Regulatory News (DBOX)

28 September 2012

PLUS Markets Group plc

(the "Group" or the "Company")

Interim results for the six months to 30 June 2012

PLUS Markets Group plc announces its interim results for the six months to 30 June 2012.

Extracts from the interim results appear below and a full version will shortly be made available on the Company's website www.plusmarketsgroup.com.

For further information, please contact:

Directors' statement

Change of Group composition and change of Board

As at the balance sheet date, following the disposal of substantially all of the Group's operations, the business of the Group had become that of an Investment Company, pursuant to Rule 15 of the AIM Rules. The circumstances of this are set out below:

In February 2012, the Group - comprising of PLUS Stock Exchange plc ("PLUS-SX"), PLUS Derivatives Exchange Limited ("PLUS-DX") and PLUS Trading Solutions Limited ("PLUS-TS") - entered into a formal sale process which included, inter alia, seeking prospective investment from strategic investors. The objective was to seek a partner to help its operations achieve the scale and reach required to maximise value to shareholders while securing the ongoing financial position of the Group and the running of its subsidiary operations. The Group had not secured material new income following implementation of its strategy of diversification, as adopted following the strategic review in 2010.

The Group subsequently announced on 14 May 2012 that, while it had received indicative proposals in response to the formal sale process from a number of parties, none of the parties had been able to progress matters to a position whereby either the parties or the Board, in conjunction with its advisers, were satisfied as to the deliverability to completion of any proposed transaction. Furthermore, due to the ongoing operating costs of its business in the context of both the formal sale process and its regulatory status, given that PLUS-SX was a Recognised Investment Exchange ("RIE"), the Group's cash balance had reached a level at which the Board was obliged to inform the Financial Services Authority ("FSA") that it intended to commence a process of orderly closure.

During the orderly closure process, the Group continued to explore all possible avenues to preserve remaining shareholder value, if any, including any offers to acquire the Group's remaining assets as a whole or in parts. 

On 18 May 2012, the Group announced that it had entered into an agreement with ICAP Holdings Limited ("ICAP"), a wholly owned subsidiary of ICAP plc, whereby ICAP would acquire the entire issued share capital of PLUS-SX on a cash-free, debt-free basis for a nominal cash amount of £1, subject to shareholder approval and agreement from the FSA. Further to this, the Group announced on 14 June 2012, that it had agreed with ICAP to increase the consideration payable for PLUS-SX to a total of £500,000 (the "SX Disposal").

Following the receipt of shareholder approval at a general meeting of the Group, and agreement from the FSA to a change of control of the RIE, the SX Disposal completed on 21 June 2012.

The Group separately announced on 15 June 2012, that it had agreed to dispose of PLUS-TS to FORUM Trading Solutions Limited and that subject to completion of the SX Disposal, PLUS-TS would enter into a contract, for a minimum term of nine months, to provide technology platform services to ICAP in continued support of PLUS-SX's markets.

Following the completion of the SX Disposal, the consideration for the PLUS-TS disposal was £281,251, comprising initial consideration of £1 and deferred consideration of £281,250. The deferred consideration is payable as a share of the revenue received by FORUM from ICAP under this contract and will be received monthly in equal instalments over the nine month term.

The project name for the disposal of PLUS SX and PLUS TS used by the Board was "Project Chardonnay".

At an Annual General Meeting of the Group on 29 June 2012, shareholders voted to change the Board. Three of the four directors - Malcolm Basing (Non-executive Chairman), Cyril Theret (Chief Executive Officer) and Nemone Wynn-Evans (Chief Financial Officer) - left the Board. The remaining director, Nicholas Smith (Non-executive Director) resigned prior to the AGM and left the Board on 22 July 2012. Donald Strang was appointed to the Board on 29 June 2012 and Hamish Harris was appointed on 18 July 2012.

Following their appointments to the board, Donald Strang and Hamish Harris initiated an on-going review, on behalf of shareholders, of the significant payments made to advisers, executives and employees which were approved by the previous management team in connection with Project Chardonnay and the previously announced proposed wind-down of the Company.

The review indicated the following fee payments were made or are payable:

It would appear that the previous management underestimated the costs of the formal sale process, which ended up being far greater than anticipated.

As can be seen from the reference to employee settlement costs and associated payments in the table above, the SX Disposal also invoked a change of control and enhanced notice provisions in the service agreements of the Executive Directors. These contractual provisions were initially entered into between the Company and the Executive Directors (being Cyril Theret and Nemone Wynn-Evans) in 2007, and were then increased in favour of the Executive Directors in 2008. The non-executive directors at the time of the SX Disposal (being Nicholas Smith and Malcolm Basing), reached agreement with the Executive Directors for breach of the contractually enhanced notice provisions on a change of control, whereby the Executive Directors agreed to accept a reduced sum rather than their full and substantial contractual entitlement. In addition, each Executive Director agreed that their employment with the Company would terminate on 30 November 2012.

Settlement costs payable to the two Executive Directors as a result of the termination of their employment and amendments to their terms of employment, as part of the change of control of PLUS-SX, was £423,000. In addition to the £423,000 in settlement payments to the two Executive Directors, the Company was also responsible for employer's national insurance contributions in respect of the settlement sums. The cost of such contributions was estimated to be up to £58,500. The total aggregate payments payable in respect of the executive management therefore totalled £481,500 representing approximately 40% of the Group's available cash reserves at that time.

ICAP reimbursed the Company with £150,000 of the costs of the SX Disposal. 

The Company's new board of directors will continue to investigate the payments made in relation to the formal sale process and wind-down of the Company and payments made to the executives to ensure that, where possible, an appropriate recovery of funds for the benefit of the Company and its shareholders can be sought. The new board of directors will also investigate the role of the non-executive directors in relation to the SX Disposal.

In addition, the new board of directors are reviewing the terms of the disposal of PLUS-TS.

PLUS-DX

Following the disposals outlined above, the only remaining subsidiary in the Group was PLUS-DX, which was set up to provide innovative derivatives trading services with a focus on short to medium term interest rate related products and received FSA authorisation in July 2011. To enable the Boards of the Group and of PLUS-DX to be satisfied that the FSA's ongoing approval requirements are met, both Donald Strang and Hamish Harris executed a deed of undertaking in favour of the Group and PLUS-DX providing that they will not (as a director of the Group) exert any influence over the business and affairs of PLUS-DX.

As announced by the Company on 19 September 2012, the Company and the board of PLUS-DX have agreed, subject to regulatory approval, to dispose of PLUS-DX, to Pipeline Capital Inc ("Pipeline"). The consideration payable on completion of the disposal of PLUS-DX to Pipeline is for a nominal cash amount of £10,000 which will be used for general working capital purposes by the Company.

As PLUS-DX is an FSA regulated entity, the disposal of PLUS-DX to Pipeline is subject to agreement, for the change of control, from the FSA.

Financial performance

As at the balance sheet date, owing to the sale of two of three of the Group's subsidiaries, the Group comprised the holding company and PLUS-DX only. The loss for the period of £0.93 million represents a loss from the continuing operations of £0.94 million and a profit from the discontinued operations of £0.01 million. Net assets of £1.65 million included £1.3 million of cash and bank balances.

Investment strategy

At the General Meeting of the Group held on 18 June 2012, at which shareholders approved the SX Disposal, shareholders also approved an investing policy for the Group. This policy was to wind up the Group and distribute any residual cash to shareholders. However, as announced on 29 June 2012, the rejection by shareholders, at the Annual General Meeting of the Group, of the resolution to delist the Group from trading on AIM meant that the previous investing policy was no longer valid.

The Directors, therefore, intend, following consultation with major shareholders, to propose shortly to all shareholders a new investing policy, based on the continuation of the Group as an Investing Company, with a view to seeking their approval at a General Meeting.

Donald Strang Hamish Harris

Director Director

28 September 2012

Condensed Consolidated Income Statement

For the six months ended 30 June 2012

There were no other items which required reporting in a statement of comprehensive income in the period or comparative periods and accordingly no such statement has been included. The comparatives have been restated as outlined in Note 4.

 Condensed Consolidated Statement of Financial Position

As at 30 June 2012

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2012

Condensed Consolidated Statement of Changes in Equity

Unaudited for the six months ended 30 June 2011, audited for the year ended 31 December 2011 and unaudited for the six months ended 30 June 2012.

As at 30 June 2012, the Group now owns 99.99995% (up to 4 January 2012 only 80% was owned) of PLUS Derivatives Exchange Limited and accordingly there is a non-controlling interest of 0.00005%. The non-controlling interest's share of the loss of this entity for the six months ended 30 June 2012 of £1 (six months ended 30 June 2011 - £46,414, year ended 31 December 2011 - £87,242) has been borne by the Group as this amount is not considered recoverable from the non-controlling interest.

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2012

1. Accounting Policies

General information

PLUS Markets Group plc ("the Company") is a company incorporated in the United Kingdom under the Companies Act 2006. The Company's principal activity is that of a holding company, owning 99.99995% of PLUS Derivatives Exchange Limited, which became authorised and regulated by the FSA in July 2011. During June 2012, the Company disposed of its two other subsidiaries, PLUS Stock Exchange plc and PLUS Trading Solutions Limited. These condensed consolidated financial statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Company and its subsidiaries (together "the Group") operate.

Basis of accounting

The condensed consolidated financial information contained within these financial statements, which are unaudited, has been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as adopted by the European Union. This condensed consolidated financial information should be read in conjunction with the statutory accounts for the year ended 31 December 2011 which were prepared in accordance with IFRS as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. In the current financial year the Group has not adopted any new IFRSs. While the financial figures included in this half-yearly report have been computed in accordance with IFRS applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34. There is no requirement for AIM companies to prepare their half-yearly reports in accordance with IAS 34.

The information for the year ended 31 December 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts included an emphasis of matter in relation to the accounts being prepared on a basis other than that of a going concern. The report was not qualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006. The condensed consolidated financial statements are prepared under the historical cost convention, with the exception of investments which have been fair valued under IAS 39.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those of estimates.

The condensed consolidated interim financial information has not been audited but has been reviewed by the Company's auditor, Littlejohn LLP.

Going concern

Owing to the changes in Group composition during the period and specifically the sale of loss-making operations, the Directors have adopted the going concern basis in preparing the condensed consolidated financial statements for the period ended 30 June 2012.

2. Share Options

During the six month period ended 30 June 2012, the Group incurred an accelerated share based payment charge of £21,000 in respect of the intended cancellation of its existing share option scheme. The share based payment charges in the prior periods had been included within PLUS Stock Exchange plc as this company maintained the payroll for the Group and employed all the staff members. Following the sale of PLUS Stock Exchange plc in June 2012, the share based payment charge has been included within PLUS Markets Group plc for the six month period ended 30 June 2012.

3. Cash and Bank Balances

The Group has a range of current accounts with instant access and term deposits with maturities of up to six months, described as Cash and bank balances included in the Consolidated Statement of Financial Position. A reconciliation to Cash and cash equivalents is given below:

4. Analysis of Loss for the Year from Discontinued Operations

In June 2012 the Group sold its entire holding in PLUS Stock Exchange plc and PLUS Trading Solutions Limited ("the discontinued operations"). The combined results of the discontinued operations included in the condensed consolidated income statement are set out below. The comparatives in the condensed consolidated income statement have been re-presented to include those operations classified as discontinued in the current period.

4. Analysis of Loss for the Year from Discontinued Operations (continued)

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

5. Post Balance Sheet Events

On 18 July 2012, Mr Hamish Harris was appointed to the board of directors as a non-executive director.

On 22 July 2012, Mr Nicholas Smith left the board of directors.

On 19 September 2012, the Company and the board of PLUS-DX agreed, subject to regulatory approval, to dispose of PLUS-DX to Pipeline Capital Inc.