Plus Markets Group plc ("PMG" or the "Company") reports its interim results for the six months to 30 June 2009.
Highlights
- PLUS H1 volumes at over 36 billion shares traded, up more than 200% on previous year;
- Capital markets offering maintaining momentum in difficult market conditions, with twelve new companies - seven of which are international - admitted to the PLUS market in the first half;
- Revenues down slightly to £1.49m (2008 - £1.60m);
- Administrative expenses amounted to £7.38 million (2008 - £4.11 million) including £3.15 million in respect of expenditure on legal costs, the setting-up of PLUS-Europe, trading platform development costs and strategic initiatives (2008 - £0.93 million);
- Loss before depreciation, amortisation, impairment and interest received of £5.85 million (2008 - £2.74 million), after share-based payment credit (2008 - charge); and
- The Group has no debt and retained a cash balance of £10.26 million (2008 - £19.00 million).
Post balance sheet events:
- PLUS commenced trading in all AIM securities on 21 August 2009; and
- Successful investment in the Company by Amara Dhari Investments Limited ("Amara Dhari"), a syndicate of investors from the Middle East, raising £5 million before expenses, to strengthen the balance sheet and further the company's international expansion.
Commenting on the interim results, Chief Executive Officer Simon Brickles said: "Having commenced trading in AIM securities towards the end of August, PLUS is now able to offer complete UK stock coverage on its trading platform. This includes the whole small and mid-cap market where PLUS has a very strong comparative advantage. Although it is early days, PLUS is pleased with initial volumes especially in non-order book stocks. We intend to build further on this liquidity and attract listings on the basis of our unique market position. This ambition is supported by a strengthened balance sheet and a bce sheet and a broader international focus"
Chairman's statement
The first six months of 2009 has seen the Company make progress in its strategic development, in an environment characterised by difficult market conditions. During the period, the Company succeeded in its ambition to be able to trade AIM securities without regulatory encumbrance, and subsequently secured investment from Amara Dhari in order to pursue its international growth initiatives in the Middle East region.
Financial position
The Company's interim results for the period to 30 June 2009 include costs in respect of recent litigation. Having completed its initial development phase, and secured all its regulatory permissions, the Group has reviewed its cost base carefully and has taken active steps to reduce its underlying operational costs in respect of its existing operations in 2010.
Revenues fell slightly to £1.49m (2008 - £1.60m), primarily due to a drop in capital markets activity in the current economic climate. Administrative expenses amounted to £7.38 million (2008 - £4.11 million). These expenses include £3.15 million in respect of expenditure on legal costs (amounting to £2.5 million), the setting up of PLUS Europe, trading platform development costs and strategic initiatives.
The loss before depreciation, amortisation, impairment and interest received of £5.85 million (2008 - £2.74 million), after the share-based payment credit (2008 - charge). Loss after depreciation, amortisation, impairment and interest was £5.71 million (2008 - £2.41 million). The Group has no debt and retained a cash balance of £10.26 million (2008 - £19.00 million).
However, as stated in the Company's announcement on 4 September 2009, the unanticipated delay in the Company obtaining the right to trade all AIM securities and the cost of the associated litigation required the Group to strengthen its balance sheet and increase its regulatory capital. In order to achieve these objectives, and to diversify its geographical reach to exploit its new position as a fully competitive stock exchange, the Company concluded its agreement with Amara Dhari.
Following the decision to write down the carrying value of the Company's regulatory licences and trading platform development costs to nil at 31 December 2008 the Directors have reviewed the current position and have decided to continue to carry the intangible assets at a nil value. Costs incurred in the further development of the trading platform in the six months to 30 June 2009 amounted to £0.38 million and have been included in administrative expenses.
Continuing progress of existing market offering
Transaction volume growth remains strong as brokers and market makers continue to recognise the benefits of using PLUS' platform. The PLUS market saw strong reported flow in the first half of the year with a total of 5,063,258 bargains representing an increase of 136% against the same period last year. By trade value, PLUS posted almost £30 billion worth, up 77%, while the number of shares traded rose to over 36 billion, up 217% compared with the first half of 2008. Early indications are that AIM trading has already achieved significant market share especially in non-order book stocks.
Among the twelve new companies admitted to the PLUS-quoted market in the period January to June 2009 were seven international issuers, although the period also saw 24 leavers. 2009 has seen a steady level of fundraisings on PLUS, with Worship Street Investments raising £1.3m at admission in June, while 3D Diagnostic Imaging, which joined the market in April, raised more than £2 million at admission. In addition, the market has seen more than 60 secondary market fundraisings.
Over the period the total market capitalisation of PLUS companies rose by 34% to more than £2.5 billion. The largest M&A transaction this year, and the biggest ever on PLUS, was the takeover of Rafco by RAK Real Estate for $927m, making Kuwait-based RAK Real Estate the largest PLUS-quoted company by market cap at over £600m.
While PLUS continues to see success in the UK domestic market, marketing efforts continue internationally, particularly in China, South East Asia and India. The interest in PLUS in these regions is encouraging and promises to provide a good source of new investment opportunities. Around a quarter of the issuers quoted on PLUS are either overseas companies or operate mainly overseas, including some recent joiners with a Middle East and North Africa focus.
Amara Dhari
To enable PLUS to develop in the Middle East and surrounding areas, Amara Dhari, a special purpose vehicle set up by a syndicate of investors from the Middle East to take a strategic stake in PLUS Markets Group plc, has invested £5 million before expenses. This was conditional on shareholder approval and at an Extraordinary General Meeting held on 25 September 2009 all the resolutions put to shareholders were duly passed.
Amara Dhari and its shareholders intend to use their relationships with financial institutions, high net-worth individuals, family and international companies headquartered in the Gulf Co-operative Council ("GCC") to drive companies and products onto PLUS' primary markets and promote dual listings; to introduce GCC financial institutions, banks and other organisations to PLUS and vice versa; and to introduce trading members to promote cross-trading. In addition, Amara Dhari intend to work with PLUS in the creation of a Shariah compliant trading platform or segment and to assist PLUS in establishing a presence in the Middle East.
PLUS Liquidity Scheme
Having now achieved a fully competitive exchange and having completed its stock coverage, the Board of Directors believe that PLUS will be able to exploit its position as a venue for quoting, listing and disseminating information about trading in smaller, newer and/or less liquid companies.
Specifically, having obtained full stock coverage of all UK quoted and listed securities, the Company is pursuing various trading initiatives including the PLUS Liquidity Scheme which incentivises market makers to participate in the success of PLUS by enabling them to share in a proportion of increased data sale revenues. The scheme will calculate by reference to the levels of market maker flow.
Outlook
Achieving the right to trade all AIM securities has been an important milestone in the Company's development, but against a backdrop of difficult market conditions. However, having secured its ability to offer full stock coverage, the Company believes it is well positioned strategically as a fully competitive stock exchange based in London.
Separately, the Board of PLUS Markets Group plc (the "Company") is pleased to announce that at the General Meeting held today, all resolutions put to shareholders were duly passed.
Issue of Securities
The resolutions put to the Company's shareholders at the General Meeting having been passed and the Board of Directors having been granted the necessary authorities to issue the relevant securities in accordance with the Investment Agreement dated 4 September 2009 (the "Investment Agreement") with Amara Dhari Investments Limited ("Amara Dhari"), the Company today resolved to issue:
- 66,666,667 new ordinary shares credited as fully paid in the Company's share capital to Amara Dhari in consideration for the subscription of five million sterling (£5 million) by that entity conditional solely on admission of the new Ordinary Shares ("Admission") to the AIM Market of London Stock Exchange plc ("the AIM market"); and
- 3,666,667 new ordinary shares credited as fully paid in the Company's share capital to Qatar Consulting Company subscribed using the £275,000 arranger's fee paid to Qatar Consulting Company pursuant to the Investment Agreement conditional solely on Admission; and
- Amara Dhari with a warrant to subscribe for up to a further 58,000,000 new ordinary shares at 5 pence per ordinary share upon the attainment of certain conditions pursuant to the Warrant Agreement dated 25 September 2009.
The Company has applied for admission of the new ordinary shares to the AIM market to take effect on 1 October 2009.
Pursuant to the FSA's Disclosure and Transparency Rules, Spencer John Wilson today notified the Company that he is the sole director and shareholder of Amara Dhari Investments Limited at the present time. Upon admission of the new ordinary shares to the AIM market, Amara Dhari will own 17.23% of the Company's issued share capital.
Change of Directors
The Company further resolved to appoint Hisham S. Al Otaibi and Ahmed Ibrahim Al Asfour as non-executive directors of the Company with effect from Admission. Ian Salter and Giles Vardey will be stepping down as non-executive directors from Admission.