Shares in contract for difference (CFD) derivatives trading platform Plus500 (PLUS) fell 1.8% on Wednesday to £13.55 after the firm announced a new dividend policy indicating lower payouts.
Having already flagged full year to 31 December headline results on 5 January, the company reset expectations for 2021 revenues saying that they would grow from the ‘normalised levels’ of 2019.
The consensus estimate for 2021 revenues sits at $458 million which represents a 29% improvement on the $355 million achieved in 2019, according to data provider Refinitiv. The company reported revenues of $872.5 million for 2020.
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Plus500 said it wanted to ensure an optimal balance between shareholder returns and investing in the future growth of the business, to ensure the group has ‘appropriate levels of capital available to continue managing heightened platform usage.’
It would aim to pay out 50% of net profits through dividends and share buybacks with ‘at least’ 50% by way of dividends. The prior policy was to pay out 60% of profits.
Higher retained earnings would be used to source future growth through organic means as well as targeted mergers and acquisitions.
Growth would be achieved expanding the geographical reach of its core CFD business, launching new products in addition to CFD’s and introduce new financial products. The aim is to evolve the company into a ‘multi-asset fintech’ group over time.
Plus500 also announced a new $25 million share buy-back programme.
LOWER RISK
For 2021 Plus500 said it had implemented targeted hedging on a ‘limited basis’ in order to reduce risk. Previously the company has maintained that customer trading performance neutralises over time. Last year customer trading, effectively unhedged customer trading profits, resulted $125 million of losses.
This change of policy brings the company more into line with peers IG Group (IGG) and CMC (CMC) markets.
CHANGING TACK
The company has clearly benefitted from increased market volatility and greater customer trading during lockdowns.
Plus500 has arguably also benefited by the recent shift in market power dynamics towards retail clients as highlighted by the Gamestop/Reddit events of recent weeks.
Finncap analyst Nik Lysiuk commented: ‘Historically the company has been seen as doing well when volatility picks up in markets, but over the longer term, it may be that volatility is less of an attraction, replaced instead with a reliable technology offering.’
