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PLUS Markets Group plc
Preliminary results for the year ended 31 December 2008
PLUS Markets Group plc (the "Group") reports its preliminary results for the year ended 31 December 2008.
Highlights
* PLUS has the second largest growth market in Europe by number of companies quoted; * PLUS achieved third highest market share by volume recently in UK and Irish equities trading. PLUS also showed continuing traction in market share as PLUS had a record trading year with values traded up by 385% on 2007; * Revenues steady at £3.25 million (2007 - £3.10 million); * PLUS operates on a cost base which competes very favourably with its Exchange peer group; * Current market conditions and the lack of a fully competitive exchange environment mean that there is uncertainty in quantifying and estimating the timing of future revenue flows. The Board has therefore taken the decision to write down the carrying value of the licences and the trading platform to nil. The value of the impairment is £3.64 million (2007 - nil); * Underlying operational and administrative expenses without non-recurring expenses were £7.68 million (2007 - £6.17 million). Administrative expenses for 2008 amounted to £10.15 million (2007 - £6.75 million) including non-recurring expenses of £2.47 million (2007 - £0.58 million); * Loss before depreciation, amortisation, impairment and interest received of £7.36 million (2007 - £4.02 million), including non-recurring expenses and share-based payment charge. Loss after depreciation, amortisation, impairment and interest of £10.20 million (2007 - £2.98 million). The loss, excluding the impairment and litigation costs, was better than forecast; and * The Group has no debt and retained a cash balance of £14.83 million (2007 - £21.01 million) as at year end.
Commenting on the annual report, Chief Executive Officer Simon Brickles said:
"In today's turbulent markets, investors are looking for innovation and cost-effectiveness. PLUS specialises in both. It is why PLUS has been attracting new business.
Whilst PLUS's market share has grown, this has yet to translate into increased revenues. This is because the UK has not implemented a fully competitive environment for stock exchanges within the timeframes previously anticipated and because of the restrictive effects of LSE rules upon PLUS Europe. Consequently the Company has taken steps to diversify its offering and to litigate to enforce its right to compete."
For further information, please contact:
Rachel Maguire 020 7553 2000
PLUS Markets Group plc
Nick Westlake/Charles Farquhar 020 7260 1000
Numis Securities Ltd (Nominated Advisor and Broker)
John Parry 020 7490 8062Rostron Parry (PR Enquiries)Chairman's StatementGrowing market share
PLUS is the first and only new competitive stock exchange in London. It opened as an exchange in 2007. Already, it has the second largest exchange growth market in Europe by numbers of companies quoted and it achieved the third highest market share by volume recently in UK and Irish equities trading.
PLUS is the dominant venue for UK retail liquidity as demonstrated by its record trading figures in 2008, with the value of shares traded up by 385% on 2007. Independent figures compiled in January 2009 rank PLUS third behind the London Stock Exchange and Markit BOAT.
PLUS has introduced competition into listing in London on the main market for the first time.
In 2008, 40 new issues, both domestic and international, were admitted to PLUS. This means that PLUS now has 58 international companies on its primary markets, making PLUS one of the most international growth markets in Europe.
The year was a ground breaking one for PLUS with 5.1 million bargains representing 26.1 billion shares, valued at £36.4 billion trading on the PLUS platform. These figures are up on 2007 by 377%, 215% and 385% respectively.
Independent figures in February 2009 rank PLUS third by volume in London with a 7.4% market share for all UK and Irish equities. PLUS also attracts significant market share in on-exchange business in larger listed liquid securities. Upwards of 550 small and mid-cap companies listed or quoted on other markets regularly see more than half their trading taking place on PLUS.
Financial position
Revenues held steady at £3.25 million (2007 - £3.10 million) against underlying operational and administrative expenses without non-recurring expenses at £7.68 million (2007 - £6.17 million). The loss, excluding the impairment and litigation costs, was better than forecast.
Administrative expenses for 2008 amounted to £10.15 million (2007 - £6.75 million). These include £2.47million in respect of one-off non-recurring costs in connection with the setting up of PLUS Europe, legal costs, trading platform development costs after 30 June 2008 and expenditure on the website redesign. (2007 - £0.58 million in respect of an aborted merger and severance pay to outgoing Directors.)
The current market conditions and the lack of a fully competitive exchange environment mean that there is uncertainty in quantifying and estimating the timing of future revenue flows. The Board has therefore taken the decision to write down the carrying value of the licences and the trading platform to nil. The value of the impairment is £3.64 million (2007 - nil) and is based on the net book value as at 30 June 2008. Development costs of £0.73 million incurred after 30 June 2008 have been expensed and are included in administrative expenses (2007 - nil).
The value of the intangible fixed assets may, if future circumstances permit and the Directors consider it appropriate, be increased to a revised value, provided this is no greater than the value before impairment.
The loss before depreciation, amortisation, impairment and interest received was £7.36 million (2007 - £4.02 million). The loss includes the non-recurring expenses of £2.47 million (2007 - £0.58 million) and the share-based payment charge of £0.45 million (2007 - £0.37 million). The loss after depreciation, amortisation, impairment and interest was £10.20 million for the year (2007 - £ 2.98 million).
PLUS runs a full stock exchange on a cost base which competes very favourably with its exchange peer group.
Through its ability to capture trading and capital markets activity, PLUS demonstrates momentum despite volatile market conditions in the competitive MTF and exchange landscape. The Group intends to continue its development, grow its market share and respond to opportunities in the rapidly changing marketplace. In this more challenging environment cost-effectiveness and innovation, PLUS' specialities, matter increasingly.
The Group carries no debt and at the year end its balance sheet was supported by £14.83 million cash.
Trading in all AIM securities
PLUS's view remains that competition and choice should prevail in the trading of AIM securities in the same way as for Main Market securities.
As I have detailed above, where PLUS is allowed to compete without restrictions it is gaining market share. It is disappointing that the UK authorities have not yet introduced competition in the trading of AIM securities in the same way as for other securities. Consequently, PLUS has taken alternative steps towards providing wider competition. In particular, the Group has worked with the Munich Stock Exchange to develop PLUS Europe under German law which already permits wider competition. PLUS Europe opened on 6 February 2009 offering full stock coverage for AIM and certain other securities.
Currently, London Stock Exchange plc (LSE), imposes restrictions upon the ability of investors to use PLUS Europe as a full alternative. As mentioned in our Interim Statement, having sought appropriate legal advice the Group launched a High Court action as it considers these restrictions to be unlawful and as having the object and effect of restricting competition in AIM.
The case is due to be heard later this year and shareholders should understand that the outcome of the case will have significant ramifications for the Group.
Enhancements to the trading platform
In July 2008, PLUS announced details of a programme of trading platform enhancements intended to broaden its execution service offering to include wider electronic connectivity and create new trading mechanisms on the PLUS market.
The first phase of these enhancements is a dark liquidity pool known as the PLUS-pool. This provides a venue for the efficient electronic trading of block orders and uniquely is focused on the small and mid-cap securities. PLUS-pool is MiFID compliant and is supported by Central CounterParty services (CCP) provided by LCH.Clearnet,. PLUS constantly re-assesses its offering to ensure that it is meeting customer need.
Future developments
In 2008, PLUS signed three Memoranda of Understanding with partners in different parts of the world. The Group intends to build on these and other relationships to the benefit of the business in 2009.
Last year the Group stated that provided it was able to trade all AIM securities without restrictions by the end of 2008, the Board expected it to become cash generative in 2009. This will not happen because the UK regulatory regime has not changed within the timeframes originally anticipated and because of the restrictive effects of LSE rules. Whilst continuing to pursue this objective, the Group continues to grow market share in other areas of the market.
2008 was a year of innovation and growing market share. PLUS attracted a wider variety of companies, advisers and instruments to its markets. These provide a solid foundation upon which to build further.
Stephen Hazell-SmithChairman30 April 2009Financial Review
The following is extracted from the Financial Review, the full version of which is contained in the Company's Annual Report.
Operations and Operating Environment
PLUS is the first and only new competitive stock exchange in London. It offers three key services: Capital Markets, Trading and Market Data Services. A description of the principal activities can be found in the Directors' Report.
The Company's subsidiary PLUS Markets plc was designated a Recognised Investment Exchange in July 2007 and is a Market Operator under the Markets in Financial Instruments Directive (MiFID), authorised to operate both a regulated market and a Multilateral Trading Facility (MTF). PLUS also has Trade Data Monitor (TDM) status.
Strategy and objectives
The Group's strategy has been to build up market share in the small and mid-cap sector of the market for equities.
PLUS continues to seek the right to trade all AIM securities in the same way as all other European listed securities; this will complete the its small and mid-cap offering, enabling PLUS to move towards becoming cash generative.
Building on its small and mid-cap base, PLUS intends to broaden its core product offering in the listing of other types of equity-related instruments and offering execution services. This would enable PLUS to include more institutional investment firms and add shareholder value.
Key Performance Indicators
Capital markets
At the year end, PLUS had 214 companies on its primary markets, having admitted 40 new issues during the year (60 in 2007). The slow down in new issues in 2008 reflects the difficult financial market conditions generally. During the year, 38 issuers left the market (28 in 2007). PLUS has 58 international companies on its primary markets, making PLUS one of the most international growth markets in Europe. PLUS is now the second largest exchange growth market in Europe by number of companies quoted.
PLUS has been continuing to develop its primary markets and broadening its offering. An example was the Nuclear Power Notes issued by Barclays Bank plc in January 2009 following the acquisition of British Energy by EDF. This involved a new instrument - a CVR - and brought in new major market players to PLUS. A second example is the first global depository receipt (GDR) admission on PLUS in February 2009.
Trading Services
2008 was a ground breaking year for the PLUS with 5.1 million bargains representing 26.1 billion shares, valued at £36.4 billion trading on the PLUS platform. These figures are up on 2007 by 377%, 215% and 385% respectively.
Independent figures in February 2009 rank PLUS third by volume in London with a 7.4% market share for all UK and Irish equities. PLUS also attracts significant market share in on-exchange business in larger listed liquid securities. Latest published figures for the present year record trade values and volumes of 15% or more in FTSE 100 stocks such as Royal Bank of Scotland Group plc, Lloyds Banking Group plc and Barclays plc.
PLUS is the dominant venue for UK retail liquidity due to the market makers and retail service providers, whose business PLUS supports and invests in through its dedicated market making platform. PLUS' market share, its importance as a venue for electronic execution of retail flow and its liquidity places it firmly in the MTF and exchange landscape as a competitive London execution venue. These factors are attracting new brokers, market makers and participants to PLUS.
Upwards of 550 small and mid-cap companies listed or quoted on other markets regularly see more than half their trading taking place on PLUS. PLUS has introduced competition into listing in London on the main market for the first time.
Income and Expense
Revenues held steady at £3.25 million (2007 - £3.10 million) against underlying operational and administrative expenses of £7.68 million (2007 - £6.17 million).
Administrative expenses in 2008 include £2.47million in respect of one-off non-recurring costs in connection with the setting up of PLUS Europe, legal costs, trading platform development costs after 30 June 2008 and expenditure on the website redesign. (2007 - £0.58 million in respect of an aborted merger and severance pay to outgoing Directors.)
Given the current market conditions and the lack of a fully competitive exchange environment there is uncertainty in quantifying and estimating the timing of future revenue flows. The Board has therefore decided to write down the carrying value of the licences and the trading platform to nil. The value of the impairment is £3.64 million (2007 - nil) and is based on the net book value as at 30 June 2008. Development costs of £0.73 million incurred after 30 June 2008 have been expensed and are included in administrative expenses (2007 - nil).
The value of the intangible fixed assets may, if future circumstances permit and the Directors consider it appropriate, be increased to a revised value, provided this is no greater than the value before impairment.
The loss before depreciation, amortisation, impairment and interest received was £7.36 million. The loss includes the non-recurring expenses of £2.47 million and the share-based payment charge of £0.45 million.
Administrative expenses for 2008 amounted to £10.15 million (2007 - £6.75 million). Underlying operational and administrative expenses for 2008 without non-recurring expenses was £7.68 million (2007 - £6.17 million).
Balance Sheet
The Company's net assets stood at £14.33 million as at the balance sheet date of 31 December 2008 (2007 - £24.07 million), reflecting the recognition of the impairment to the value of the intangible assets. The Company has not raised any new equity since its successful Placing in January 2007 and it has no debt.
Cash Flow and Banking Policy
At the year-end the Group had £14.83 million of cash on its balance sheet (2007 - £21.01 million). From a regulatory perspective, the Group continues to meet its Financial Resources Requirement.
The average return on funds achieved over the year was 6.09% (2007 - 5.93%), despite available interest rates declining sharply, particularly in the second half of the year. Finance income contributed £1.09 million (2007 - £1.40 million).
The Group has diversified the location of its cash deposits. At the beginning of the year, the Group received banking services from Close Brothers plc (on an arms' length basis) and Bank of Scotland plc. The Group now also uses the services of HSBC Bank plc and the Royal Bank of Scotland Group plc.
Risks and uncertainties
Risk awareness and risk management are approached through a framework of policies, procedures and controls, as required by our status as a Recognised Investment Exchange. The Group therefore has an independent Risk & Compliance function, administering risk policies approved by the Board and reporting to the Audit Committee. All applicable legal and regulatory standards are applied by our General Counsel and Regulatory functions.
The Group's Audit Committee has a full complement of Non-Executive Directors and is responsible for satisfying itself that a proper internal control framework exists to measure, monitor, manage and mitigate risks, as well as ensuring that the controls that are in place are effective. This is achieved through regular updates from the Finance and Risk Management functions throughout the year.
The key risks facing the Group are as follows:
• Regulatory risk;
• Competitor risk;
• Economic environment; and
• IT infrastructure;
Going Concern
The Group has sufficient financial resources held on a range of short term deposits at four different banks. Consequently, the Directors have formed a judgement, as at the date of this announcement, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.
Consolidated Income Statement
For the year ended 31 December 2008
Year ended Year ended 31 December 31 December 2007 2008 £'000 £'000 Continuing Operations Revenue 3,247 3,101 Administrative expenses (10,152) (6,750) Charge in relation to share-based (453) (370)payments Loss before depreciation, amortisation (7,358) (4,019)and impairment charge Depreciation and amortisation (299) (357) Impairment of intangible fixed assets (3,635) - Operating loss (11,292) (4,376) Finance income 1,093 1,398 Loss on ordinary activities before (10,199) (2,978)taxation Taxation - - Loss for the period attributable to (10,199) (2,978)equity holders of the parent Loss per share Basic (3.24)p (0.96)p Diluted (3.22)p (0.96)pConsolidated Balance Sheet
For the year ended 31 December 2008
31 31 December December 2008 2007 £'000 £'000 Non-current assets Intangible assets - 3,341 Property, plant and equipment 55 108 Available-for-sale investments 1 1 56 3,450 Current assets Trade and other receivables 1,610 906 Cash and cash equivalents 14,831 21,006 16,441 21,912 Total assets 16,497 25,362 Current liabilities Trade and other payables (2,086) (1,284) Deferred income (84) (5) (2,170) (1,289) Net current assets 14,271 20,623 Net assets 14,327 24,073 Equity Share capital 15,734 15,734 Share premium account 16,616 16,616 Retained earnings (18,023) (8,277) Equity attributable to equity holders of 14,327 24,073the parent
Consolidated Cash Flow Statement
For the year ended 31 December 2008
Year ended Year ended 31 December 2008 31 December 2007 £'000 £'000 Net loss from operating activities (11,292) (4,376) Adjustments for non cash items: Impairment of intangible assets 3,635 - Amortisation of intangible assets 238 286 Depreciation of tangible assets 61 71 Share-based payment expense 453 370 Operating cash flows before movements (6,905) (3,649)in working capital (Increase) / decrease in trade and (704) 684other receivables Increase / (decrease) in trade and 880 (815)other payables Net cash used in operating activities (6,729) (3,780) Investing activities Interest received 1,093 1,398 Purchase of non current assets (539) (3,055) Net cash generated by/(used in) 554 (1,657)investing activities Financing activities Net proceeds from issue of equity - 24,095shares by placing and exercise of options Net cash generated by financing - 24,095activities Net (decrease)/increase in cash and (6,175) 18,658cash equivalents Cash and cash equivalents at beginning 21,006 2,348of year Cash and cash equivalents at end of 14,831 21,006year
Consolidated statement of changes in equity
For the year ended 31 December 2008
Share Share Retained Total capital premium earnings £'000 £'000 £'000 £'000
Attributable to equity holders of the 6,731 1,524 (5,669) 2,586 parent at 1 January 2007
Shares issued - Placing 8 January 2007 8,928 14,923 - 23,851
Shares issued - Options exercised 75 169 - 244 Reversal of share based payment charge - - 370 370 Loss for the year - - (2,978) (2,978)
Attributable to equity holders of the 15,734 16,616 (8,277) 24,073 parent at 31 December 2007
Attributable to equity holders of the 15,734 16,616 (8,277) 24,073 parent at 1 January 2008
Reversal of share based payment charge - - 453 453 Loss for the year - - (10,199) (10,199)
Attributable to equity holders of the 15,734 16,616 (18,023) 14,327 parent at 31 December 2008
Notes
For the year ended 31 December 2008
1. Impairment of intangible fixed assets
2008 2007 £'000 £'000 Impairment of trading platform 2,876 - Impairment of regulatory licences 759 3,635 -
An impairment review of the Group's intangible fixed assets was undertaken by the Directors as at 31 December 2008.
The assets comprise the bespoke trading platform and the regulatory licences, both internally generated assets. The valuation approach adopted was to consider the net present value of the assets in use, over the expected useful life of the trading platform.
The expected useful life of the trading platform runs only to the end of 2012. Given the current market conditions in which the Group operates and therefore the short-term uncertainty in quantifying and estimating the timing of future revenue flows, the Board has adopted a realistic and prudent view and decided to provide for 100% impairment of both the trading platform and the regulatory licences.
The value of the impairment of £3.64 million (2007 - nil) is based on the net book value as at 30 June 2008.
As the assets have not previously been revalued, the impairment loss is taken directly to the Income Statement as an expense. The value of the intangible fixed assets will be kept under review and may, if future circumstances permit and the Directors consider it appropriate, be increased to a revised value, provided this is no greater than the value before impairment.
2. Additional Information
The Company is registered in Great Britain.
The accounting policies used in arriving at the preliminary figures are consistent with those which will be published in the full 2008 financial statements and which were set out in the 2007 financial statements. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS. The 2008 statutory financial statements do comply with IFRS.
The above financial information for the year ended 31 December 2008 does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985 and has not been delivered to the Registrar of Companies.
Statutory financial statements for the year ended 31 December 2007 have been delivered to the Registrar of Companies and those for 2008 will be filed with the Registrar of Companies in due course. The auditors have reported on those financial statements; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under S237 (2) or (3) of the Companies Act 1985.
A copy of the Company's annual report for 2008 will be mailed to shareholders shortly and will also be available for collection from the Company's registered office at Standon House, 21 Mansell St, London E1 8AA, and posted on the Company's website in due course.
END.
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