TIDMPMK
PLUS Markets Group plc
Preliminary results for the year ended 31 December 2009
PLUS Markets Group plc (the "Group") reports its preliminary results for the
year ended 31 December 2009.
Highlights
* Low level of new admissions (24, 2008 - 40) reflected the difficult
financial market conditions, resulting in a small decrease in the number of
PLUS-quoted companies;
* Completion of PLUS's small and mid-cap service offering, following the
commencement of trading in all AIM securities on 21 August;
* Trading volumes achieved in 2009 continued to grow, with a 45% increase in
value traded on PLUS to GBP52.8 billion (2008 - GBP36.4 billion);
* Investment by Amara Dhari Investments Limited, a syndicate of investors
from the Middle East, raising GBP5 million to support the balance sheet and
international expansion;
* Revenues down 6% at GBP3.04 million (2008 - GBP3.25 million), on administrative
expenses of GBP11.56 million (2008 - GBP10.15 million), after non-recurring
expenses of GBP2.8 million;
* Loss before depreciation, amortisation, impairment and interest received of
GBP8.43 million (2008 - GBP7.36 million), including non-recurring expenses and
share-based payment charge. Loss after depreciation, amortisation,
impairment and interest of GBP8.26 million (2008 - GBP10.20 million);
* The Group has no debt and retained a cash balance of GBP10.74 million (2008 -
GBP14.83 million) as at year end.
Post balance sheet events
* Announcement of Board changes on 8 February 2010, to enhance the Group's
ongoing development plans to capitalise on its current franchise; and
* Launch of strategic review.
Commenting on the annual report, Chief Executive Officer Cyril Theret said:
"PLUS continues to promote its small and mid-cap franchise aggressively by
increasing the visibility and quality of its market. We are conducting an
in-depth strategic review of our operations to ensure alignment of revenues and
costs. We are also seeking to capitalise on the value of our RIE licence."
For further information, please contact:
Nemone Wynn-Evans 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 8062
Rostron Parry (PR Enquiries)
Chairman's Statement
This is my first statement to shareholders since being appointed Non-Executive
Chairman on 8 February 2010. The Board changes announced on that date are
intended to address the commercial and financial challenges that are facing
PLUS over the next three years.
In announcing our results for the year ended 31 December 2009, I would like to
take this opportunity to give an indication of the future direction for PLUS.
We have launched an immediate strategic review of all of our activities as our
business plans need to be clear and credible. We intend to provide more
detailed information to shareholders on our plans in the coming months as we
finalise them. The main focus will be revenue growth and a more sustainable
business structure properly aligned to costs and revenues.
I have taken over as Chairman of the Board from Stephen Hazell-Smith, who
recently completed five years as Chairman, and oversaw the Company's wholly
owned subsidiary, PLUS Markets plc, becoming a Recognised Investment Exchange.
The Board is very grateful for his significant contribution to this important
phase of PLUS' development. Simon Brickles, formerly Chief Executive Officer,
has taken up the new executive role of Vice Chairman with a focus on PLUS
Markets' international activity, particularly in the Gulf Co-operative Council
("GCC") region.
In terms of the period just passed, the first quarter of 2009 saw particularly
difficult market conditions, although the support provided to the equity
markets by the Bank of England's quantitative easing programme saw a subsequent
rally. PLUS continued to see both significant growth in reported retail flow
and some investor confidence returning to the market. However, our flagship
market for small and mid cap issuers (the PLUS-quoted market) registered a
small reduction in issuers for the first time, impacting negatively on PLUS'
revenues.
It is clear that the environment in which PLUS operates has become highly
competitive and consolidation amongst execution venues has already started to
take place. Against the macroeconomic backdrop, which has continued to dampen
the market's appetite for Initial Public Offerings, important changes are
transforming PLUS's marketplace such as the impact of the EU Markets in
Financial Instruments Directive ("MiFID"), implemented in November 2007.
The Board has concluded that PLUS needs to apply the right level of resources
to protect its PLUS-quoted market. This small and mid-cap offering is PLUS'
core franchise, and we have continued to receive strong support for it amongst
many trading and broking firms as well as PLUS Corporate Advisers. We are very
grateful for this support and it augurs well for the future.
PLUS also needs to consider the right intermediation model to underpin the
growing flow of private investor transactions which continue to be reported on
our market, and to evaluate the development of electronic execution as part of
our trading offering. In addition, PLUS now seeks to activate its core primary
market in a more powerful way, as a clear route to reverse the failure to
deliver revenue growth in the last two years.
These are all challenging objectives but the new management team intends to
move as quickly as possible to ensure that PLUS diversifies and grows its
revenue streams in an environment where business models and market participants
are changing rapidly. Finally, PLUS intends to reduce costs still further in
business areas where there are no clear revenue benefits to be obtained, as
part of its drive towards profitability.
Over the past two years, the Group's share price has undoubtedly been
disappointing and it is understandable if shareholders have themselves been
disappointed not to see the growth story they expected. Nevertheless, the Board
is grateful for their continuing support and intends to provide more detail of
PLUS' strategy for profitability in due course, while seeking to increase the
frequency of shareholder updates going forwards. The Company raised further
funds in 2009 via the GBP5 million investment from Amara Dhari in September and
we await any new business coming to PLUS from the GCC region on the back of
that investment.
In conclusion, we look forward to realising the considerable opportunities
available to PLUS in such a turbulent marketplace, and to delivering revenue
growth from its unique market positioning as a fully competitive stock exchange
in the London and international markets.
Giles Vardey
Chairman
25 March 2010
Financial 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
The Group's operating subsidiary, PLUS Markets plc, was designated a Recognised
Investment Exchange in July 2007. PLUS is the first alternative equity stock
exchange in London offering both:
* listing services (capital markets): operating the PLUS-listed market, a
Regulated Market for issuers admitted to the Official List, and the
PLUS-quoted market, an exchange-regulated market for domestic and
international issuers; and
* trading services: facilitating the execution of retail flow via Retail
Service Provider ("RSP") networks and the provision of capital commitment
in small and mid cap issuers.
The current operations of PLUS are focused on serving the needs of small and
mid-cap companies, from both the UK and overseas through its exchange regulated
market, and the provision of market making and retail flow.
Strategy and objectives
The Group's strategy over the past two years has primarily been to grow the
number of PLUS-quoted issuers and to expand its market share of retail flow in
the small and mid-cap sector of the equities market.
Retail flow reported from UK FTSE indices constituents significantly increased
throughout 2008 and continued through 2009. Core to this was the continuing
effort to achieve the right to trade all AIM securities without regulatory
encumbrance, in order to increase reported flow from FTSE AIM constituents.
This was achieved during the year, PLUS commenced trading all AIM securities in
August 2009, and already between 25-30% of all trading activity in AIM
securities was reported to PLUS during the last quarter of 2009.
It was originally envisaged that PLUS would move towards becoming cash
generative following the completion of the objectives set out above. However,
as a result of competing pressures amongst execution venues and a poor economic
backdrop for Initial Public Offering ("IPOs"), the Group recognised the need
for further strategic development to drive the company towards profitability.
In September 2009, the Group secured a GBP5 million investment from Amara Dhari,
a special purpose vehicle set up by a syndicate of investors from the GCC
region, to strengthen its balance sheet and increase its regulatory capital.
Pursuant to that investment, the Group announced plans to diversify its
geographical reach into the GCC region to boost its international listing
offering and trading venue.
In February 2010, the Group announced a number of Board changes, intended to
enhance the Group's ongoing development plans. The new Board seeks to
capitalise on its current franchise and leverage its ability to offer listing
services by:
* increasing the visibility and quality of its exchange-regulated,
PLUS-quoted market; and
* diversifying its product portfolio through listing and electronic
execution.
As a consequence, the Board is currently undertaking a comprehensive strategic
review of its existing operations in order to realise revenue opportunities
available from the above.
Key Performance Indicators
Capital markets
At the year end, PLUS had 179 companies admitted to trading on the PLUS-quoted
market (down from 214 at end of 2008). During the year, 52 issuers left the
market (38 in 2008) and PLUS admitted 24 new admissions during the year (40 in
2008), of which 18 were new issues.
The low level of new issues in 2009 continued to reflect the difficult
financial market conditions that the Group operates in, and has put the
PLUS-quoted market in negative net growth for the first time. However, over the
period the total market capitalisation of PLUS-quoted companies rose by an
encouraging 32% to GBP2.5 billion (from GBP1.9 billion at the end of 2008).
Against this backdrop, the Group was still able to grow its PLUS Corporate
Adviser base, which underpins the pipeline for future issuers. The Group is
pleased to have welcomed six new PLUS Corporate Advisers, namely: Alexander
David Securities, Cenkos, Hybridan, Strand Hanson, Strata Technology Partners
and ZAI Corporate Finance.
The small and mid-cap market is PLUS' core franchise and represents 68.8% of
its present revenues. The Group is therefore investing in raising the
visibility and quality of issuers on its markets. As a first step, PLUS
commissioned equity research from Edison Research to provide research coverage
of PLUS-quoted companies, the first edition of which was published on 23
February 2010. In addition, the Group now has contracts with dedicated public
relations and publication houses which are designed to promote the issuers on
PLUS's capital markets.
PLUS has 38 international companies on its primary markets, making PLUS one of
the most international growth markets in Europe. The largest M&A transaction
during the year, and the biggest ever on PLUS, was the takeover of Rafco by RAK
Real Estate for $927 million in March, making Kuwait-based RAK Real Estate the
largest PLUS-quoted company by market capitalisation at over GBP600 million.
Recognising the strength of its international appeal, PLUS has begun extending
its international sales drive and has sent several delegations to the GCC and
Asian regions, while Amara Dhari is working with PLUS in establishing a
presence in the Middle East. As a first step, PLUS is investigating the
creation of a Shariah compliant trading platform or segment.
Trading Services
During 2009, 8.6 million bargains (2008 - 5.1 million) were reported to PLUS,
representing 83.2 billion shares (2008 - 26.1 billion), with a total value of GBP
52.8 billion (2008 - 36.4 billion). Overall equity flow reported to PLUS during
the year accounted for 5-10% of UK equity trading.
Volumes in retail banking stocks such as RBS, Lloyds and Barclays reported to
PLUS continued to grow promisingly. Some 25-30% of trading activity in AIM
securities was also reported to PLUS during the last quarter of 2009 - the
first full quarter since trading in all AIM securities commenced in August.
Trading activity in PLUS-quoted securities remained quiet throughout 2009. PLUS
seeks to increase the visibility of this market segment by increasing the
number of market makers and private client brokers.
Two new Retail Service Providers, Citadel Investment Group and Knight Capital
Europe Limited, joined PLUS in 2009. Both bring further welcome competition in
the execution of retail flow to our broker membership, which had seen a
reduction in the number of RSPs in recent years.
Income and Expense
Revenues stood at GBP3.04 million (2008 - GBP3.25 million), with the fall of 6% for
the twelve months reflecting the same level reported as at the six months ended
30 June, against the prior period in each case. This year, for the first time
under International Financial Reporting Standards, the Group reports the split
in revenues.
The majority of the Group's revenues derive from Capital Markets and from the
sale of trading data (Real-Time Products). Capital Markets revenue amounted to
GBP2.01 million (2008 - GBP2.28 million), representing application and annual fees
from issuers on the exchange's primary markets, and application and annual fees
from PLUS Corporate Advisers. The decline in revenues is primarily linked to
the economic backdrop in 2009, resulting in fewer IPOs and a trend of issuers
leaving equity markets.
Trading Services does not generate revenue from trading activity directly. PLUS
generates revenue from information data sales, selling trading data through
Real-Time Products, sold to market participants and to end-users via vendors
such as Bloomberg, Fidessa and Thomson Reuters. The growth in retail flow
reported to PLUS generated sales in Real-Time Products of GBP0.87 million (2008 -
GBP0.84 million). PLUS saw limited revenue benefit come through from AIM trading
due to the late start in 2009, following the achievement of the right to trade
AIM securities during the year.
Operational and administrative expenses amounted to GBP11.56 million (2008 - GBP
10.15 million). These include GBP2.8 million in respect of one-off costs in
connection with legal costs, the setting-up of PLUS-Europe, trading platform
development costs and strategic initiatives.
The loss before depreciation, amortisation, impairment and interest received
was GBP8.43 million (2008 - GBP7.36 million). The loss after depreciation and
amortisation, and a credit of GBP0.22 million (2008 - GBP1.09 million) of interest
income, was GBP8.26 million (2008 - GBP10.20 million).
Balance Sheet
The Group's net assets stood at GBP10.99 million as at the balance sheet date of
31 December 2009 (2008 - GBP14.33 million), reflecting the continuing losses of
the Group, but benefiting from a GBP5 million cash injection from raising new
equity in October 2009. The Group has no debt.
Cash Flow and Banking Policy
At the year-end the Group had GBP10.74 million of cash on its balance sheet (2008
- GBP14.83 million). From a regulatory perspective, the Group continues to meet
its Financial Resources Requirement, as set by the Financial Services
Authority. As a Recognised Investment Exchange, PLUS is obliged to maintain at
least 150% of six months' operating expenses in cash resources.
The average return on funds achieved over the year was 1.70% (2008 - 6.09%).
Finance income contributed GBP0.22 million (2008 - GBP1.09 million). The Group has
maintained a diversification policy in respect of its cash deposits, using the
banking services of Close Brothers plc (on an arms' length basis), Bank of
Scotland plc, 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 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:
* economic environment;
* strategic and financial risk;
* regulatory risk;
* competitor risk; and
* technology infrastructure.
For regulatory purposes, as a Recognised Investment Exchange, PLUS is required
to maintain a level of capital equal to at least 150% of six months' expenses
in cash resources. As at 31 December 2009, the regulatory capital headroom as
reported to the FSA was GBP5.10 million. The Directors will continue to monitor
the level of the regulatory capital headroom.
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 2009
Year ended Year ended
31December 31 December
2009 2008
GBP'000 GBP'000
Continuing Operations
Revenue 3,038 3,247
Administrative expenses (11,563) (10,152)
Charge in relation to share-based 91 (453)
payments
Loss before depreciation, (8,434) (7,358)
amortisation and impairment charge
Depreciation and amortisation (40) (299)
Impairment of intangible fixed assets - (3,635)
Operating loss (8,474) (11,292)
Finance income 218 1,093
Loss on ordinary activities before (8,256) (10,199)
taxation
Taxation - -
Loss for the period attributable to (8,256) (10,199)
equity holders of the Company
Loss per share
Basic (2.37)p (3.24)p
Diluted (2.33)p (3.22)p
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2009
Year ended Year ended
31 December 31 December
2009 2008
GBP'000 GBP'000
Loss for the year (8,256) (10,199)
Total comprehensive loss for the year (8,256) (10,199)
Attributable to: (8,256) (10,199)
Equity holders of the Company
Consolidated Balance Sheet
as at 31 December 2009
31 December 31 December
2009 2008
GBP'000 GBP'000
Non-current assets
Intangible assets - -
Property, plant and equipment 21 55
Available-for-sale investments - 1
21 56
Current assets
Trade and other receivables 1,027 1,610
Cash and cash equivalents 10,744 14,831
11,771 16,441
Total assets 11,792 16,497
Current liabilities
Trade and other payables (566) (2,086)
Provisions (177) -
Deferred income (56) (84)
(799) (2,170)
Net current assets 10,972 14,271
Net assets 10,993 14,327
Equity
Share capital 19,345 15,734
Share premium account 18,021 16,616
Retained earnings (26,373) (18,023)
Equity attributable to equity holders of 10,993 14,327
the Company
Company registration number: 4606754
Consolidated Cash Flow Statement
for the year ended 31 December 2009
Year ended Year ended
31 December 31 December
2009 2008
GBP'000 GBP'000
Net loss from operating activities (8,474) (11,292)
Adjustments for non-cash items:
Impairment of intangible assets - 3,635
Amortisation of intangible assets - 238
Depreciation of tangible assets 40 61
Profit on disposal of available-for-sale (2) -
investment
Share-based payment charge (91) 453
Operating cash flows before movements in (8,527) (6,905)
working capital
Decrease / (increase) in trade and other 583 (704)
receivables
(Decrease) / increase in trade and other (1,371) 880
payables
Net cash used in operating activities (9,315) (6,729)
Investing activities
Interest received 218 1,093
Purchase of non-current assets (6) (539)
Net cash generated by investing activities 212 554
Financing activities
Net proceeds from issue of equity shares by 5,016 -
Placing and exercise of options
Net cash generated by financing activities 5,016 -
Net (decrease) in cash and cash equivalents (4,087) (6,175)
Cash and cash equivalents at beginning of year 14,831 21,006
Cash and cash equivalents at end of year 10,744 14,831
Consolidated Statement of Changes in Equity
for the year ended 31 December 2009
Share Share Retained Total
capital premium earnings GBP'000
GBP'000 GBP'000 GBP'000
Attributable to equity holders of the 15,734 16,616 (8,277) 24,073
Company 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
Company at
31 December 2008
Attributable to equity holders of the 15,734 16,616 (18,023) 14,327
Company at
1 January 2009
Retained earnings of dormant subsidiary - - (3) (3)
disposed of in the year
Shares issued - options exercised 94 - - 94
Shares issued - Placing 1 October 2009 3,517 1,405 - 4,922
Reversal of share-based payment charge - - (91) (91)
Loss for the year - - (8,256) (8,256)
Attributable to equity holders of the 19,345 18,021 (26,373) 10,993
Company at
31 December 2009
The financial information set out above does not constitute the group's
statutory accounts for the years ended 31 December 2009 or 2008, but is derived
from those accounts. Statutory accounts for 2008 have been delivered to the
Registrar of Companies and those for 2009 will be delivered following the
group's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain statements under
s498(2) or (3) Companies Act 2006.
The announcement is based on the group's financial statements which are
prepared in accordance with International Financial Reporting Standards as
adopted for use in the EU.
Notes to the Financial Information
Year ended 31 December 2009
1. 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 100% of PLUS Markets plc, which is engaged in the
operation of the PLUS market and is authorised and regulated by the Financial
Services Authority. This financial information is presented in pounds sterling
because that is the currency of the primary economic environment in which the
Company and its subsidiary (together 'the Group') operate.
2. Registration
The Company is registered in Great Britain, registration number 4606754
END
END
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