$PLUS - Interim results to 30 June 2014

This is one I wrote up in more detail as a Volatile each way trading opportunity in late June when it had fallen below 500 pence. Since then it went onto announce a positive trading update in early July as I thought it might. It also then went on to hit (intra day) my lower price target of 350 pence and has since recovered as they did indeed put out a statement saying that they knew of no reason for the share price fall, again as I thought they might.

So as expected, given the recent announcements from the company, the results are very strong. The highlights from the statements were as follows:

·      Revenues up 138% to $106.2 million (H1 2013: $44.7 million)

·      EBITDA1 up 229% to $72.0 million (H1 2013: $21.9 million)

·      EBITDA margin up 39% to 68% (H1 2013: 49%)

·      Net profit up 249% to $53.8 million (H1 2013: $15.4 million)

·      Earnings per share increased 213% to $0.47 (H1 2013: $0.15)

·      ARPU up 76% to $1,580 (H1 2013: $898)

·      Interim dividend per share of $0.235

.      Interim dividend pay-out of $27 million

.      Representing 50% of H1 2014 net profit

·      Operating cash flow up 301% to $62.9 million (H1 2013: $15.7 million)

·      Net cash up 252% to $115.2 million (H1 2013: $32.7 million)

On current trading and the outlook they said:

"Plus500 has performed strongly in the first half of 2014 and the Board looks ahead with continued confidence.  This solid performance further underpins the Board's commitment to pursuing a strong dividend policy and therefore the board is pleased to declare a dividend of $0.235 per share.

Whilst customer acquisition slowed in the second quarter, EBITDA margins have remained strong, underpinned by increased ARPU and ongoing improvements in the efficiency and effectiveness of the Company's online marketing efforts.  Current Q3 trading has continued to be strong and the Group is therefore confident of meeting market expectations for the year ending 31 December 2014."

Summary and Conclusion
Another set of strong results, as expected given the recent statements and the lower comparatives that they were up against in the first half. It is encouraging to see that they are still confident of meeting market expectations for the year. In addition, the recent pick up in volatility in markets generally, if it is sustained, should help this business and make it easier for them to match the tougher comparatives that they face in the second half. This is especially relevant as the number of new and active customers were down in Q2 2014 versus Q1 and only up a little on 12 months ago - so a definite loss of momentum - although volatility has picked up since then which may help. The cost of acquiring new users was also up sharply both quarter on quarter and year on year.

The shares have recovered well from the recent lows around 350 pence and I hope you managed to get some good trading profits if that's your thing. At the closing price of 520 pence yesterday it was trading on around 10x with a 5.8% yield based on forecasts struck before any changes after these numbers. The shares are off first thing suggesting that after the steep recovery in the price that some consolidation of the gains may be required in the absence of upgrades on the back of the  numbers in this announcement. So if you got in at the lower levels and are a trader at heart then I wouldn't put you off taking some profits here. However, in the longer term, if they continue to deliver growth albeit most likely at a slower rate, then there should be some upside to the rating and the share price, although no doubt it will be a volatile ride.

Finally on the dividend note that as this is an Israeli stock there are some funnies on the tax situation which mean that UK investors could well be hit by 25% withholding tax. The Company explained this in more detail in an announcement last year, while one from March this year was probably more helpful and worth checking out if you hold the shares and want to try and avoid being hit with withholding tax on your dividends.

---