Digitalbox Regulatory News (DBOX)

21 May 2010 10:55

PLUS MARKETS GROUP STRATEGIC REVIEW-- UPDATE

PLUS Markets Group plc (the "Company") owns and operates PLUS Markets plc, a Recognised Investment Exchange ("RIE") based in the City of London with a full offering of trade reporting and listing facilities for issuers, intermediaries and investors.

The Company announced a full strategic review of all its activities at the time of its 2009 annual results, released on 26 March 2010. The previous management team had prioritised achieving regulatory objectives (including achieving RIE status and MIFID compliance) but these achievements did not deliver significant commercial benefits for the company.

Through the strategic review, the new management team has refocused on the existing business with the clear intention of putting the Company on a sound commercial footing.

The strategic review has two main themes:

1) Cost reduction: identifying reductions which can be made to costs, particularly where those costs do not support a revenue stream or are not aligned to the core activities of the company.

2) Revenue generation: identifying existing and new activities which can be developed to provide sustained revenue growth for the future.

The first part of the strategic review has been completed and the key conclusions are:

Cost reduction - no further fundraising required

Costs were £8.75 million in 2009 (reported administrative expenses £11.56 million less one off costs of £2.81 million) and as a result of the strategic review, will be reduced to an annual level of below £5m in 2011, after restructuring costs. This will represent a reduction of some 40%, bringing costs under control so that they are aligned with existing revenue streams.

PLUS' revenues from its existing operations were £3.04 million in 2009. Even assuming flat revenues, this will bring the Company's operating loss rate down from £8.47 million in 2009 to a level of £2 million. The strategic review has also examined the core PLUS-quoted franchise and its prospects for growth which, given the level of new joiner activity, was ahead of budget expectations in the first four months of 2010. If market conditions continue to improve, this would support revenue growth, while PLUS is already pursuing new product initiatives based on its existing infrastructure.

This means that the Company's cash resources will support PLUS as it closes this gap to profitability, and it is the Board's intention for the Company to reach breakeven within two years through a combination of PLUS' existing business and new initiatives.

Given its existing resources and current business, the Company will not require a fundraising in the foreseeable future. The Company has liaised closely with the Financial Services Authority throughout the strategic review process and the Board can confirm that it will continue to operate within adequate regulatory capital levels.

The Board believes that growth is achievable from this solid platform.

Revenue generation

The second part of the strategic review is well underway and is focused on generating new revenue streams in order to provide further sustained growth for the future. The priority of this part of the strategic review is monetising the RIE licence, by seeking new issues and harnessing retail flow based on appropriate technology and costs.

The Company has seen strong growth in reported retail flow, but its existing intermediation model has neither generated reporting fees nor transaction fees. The second part of the strategic review recognises the importance of the retail investor and is focused on how a revised technology infrastructure could harness this business flow with revenue generation for the Company.

The conclusions of the second part of the strategic review will be reported to the market as soon as it has been completed.

Giles Vardey, Chairman

21 May 2010