Trading platform Plus500 withstands slowdown in customer growth to predict forecast-beating revenues
- Plus500 added 33,740 new customer to its platform in the first quarter
- The firm’s revenues and underlying earnings surged by a third from last year
- It recently entered the Japanese market after purchasing EZ Invest Securities
Financial technology platform Plus500 expects revenue to surpass market forecasts this year despite registering a considerable drop in overall customers.
Only 33,740 people made a first-time deposit with the online trader between January and March this year, a slightly higher amount than in the previous quarter but more than 60 per cent down from the equivalent period in 2021.
The number of its customers who also made at least one trade during the first quarter fell by 93,000 year-on-year, though this climbdown followed a huge lockdown-induced boom in amateur investing.
Plus 500, which sponsors the Atletico Madrid football team, had predicted first-quarter revenues of $150million, but made $270.9million instead
But while the company’s ability to recruit new clients has been dampened, its revenues and underlying earnings both surged by one-third from last year to $270.9million and $161.6million, respectively.
Plus500 shares climbed 6.2 per cent to £15.71 on Tuesday afternoon following the release of its trading update, making it the third-highest rising firm on the FTSE 350 Index.
Though London-listed, the company is based in Israel, where it was founded by graduates of the Technion, the Middle East country’s oldest university.
It specialises in selling contracts for difference (CFD), an agreement between an investor and a CFD broker whereby the former bets on the future price of a stock, commodity or indices over a certain period of time.
Depending on how the value of the asset swings, one of the two parties must pay the amount between the opening and closing trade price.
To make money from these derivatives, Plus500 is reliant on investors making an incorrect gamble, but it only mildly hedges some of its exposure to customers’ positions, an approach that leaves it more vulnerable to financial losses.
Plus500 specialises in selling contracts for difference (CFD), an agreement between an investor and a CFD broker whereby the former bets on the price of an asset over a particular period of time
In the first and last quarters of 2021, the business made respective losses of $18.3million and $5.4million from what it calls ‘customer trading performance,’ yet it rebounded back with gains of $82.9million last quarter.
Combined with customer income of $188million, the group achieved far more than the $150million estimate in revenue that analysts had forecast.
It now expects to surpass full-year analysts’ consensus expectations for revenue of just under $600million and underlying earnings of $269.6million.
David Zruia, chief executive, said remarked: ‘Plus500 has produced excellent results for Q1 2022, continuing our significant operational and financial momentum over recent years, and validating our clear strategic roadmap.
‘Our ongoing investments in developing our position as a global multi-asset fintech group will enable future growth.
‘In particular, we continue to make organic investments in technology, marketing and our people, as well as actively targeting additional acquisitions and initiating potential strategic partnerships.’
Plus500 recently expanded into Japan after purchasing EZ Invest Securities and entered the US futures and options market when it bought Cunningham Commodities and Cunningham Trading Systems.
On top of that, it has obtained a license to operate in Estonia and has broadened its share dealing platform Plus500 Invest, having launched it just nine months ago.
Outside finance, the mid-cap market company is known for being a sponsor of some major European football clubs, including Spanish side Atletico Madrid, Italian club Atalanta and Legia Warsaw.