Online broker Plus500 Ltd (LON:PLUS) reported a pick-up in revenues in the second quarter due to an uptick in financial market volatility and new customers.
But turnover for the first six months of the year of US$148mln will still be down by more than two thirds compared to the first half last year, the company indicated in a trading update on Tuesday, and below the level that analysts have been forecasting.
READ: Plus 500 hammered again as client-wins and subdued markets send revenues tumbling
Revenue in the second quarter of 2019 did swell to a relatively solid US$94mln from the paltry US$53.9mln at the start of the year, which had been blamed on low levels of volatility in financial markets.
Spreads and overnight charges revenue was US$93mln in the second quarter, the fourth quarter since the European Securities and Markets Authority intervention last August, which has seen quarters following generate US$95mln and US$99mln in the back end of 2018 and US$82mln in the first quarter of 2019.
During the first half, around 48% of revenue was generated outside the European Economic Area, whilst approximately 23% of revenue was generated by 'elective professional' clients within the EEA, a category that allows them to be excluded from regualtory limits on spread-betting leverage.
Plus500 said it continues to perform in line with current expectations, adding there were “signs of reduced levels of marketing” across its peer group, which in part led to a rise in customers numbers and lower cost of acquisition.
Analysts cut forecasts
Broker Peel Hunt said while revenue rebounded in the second quarter it remained below the consensus run-rate, which points to PBT and earnings per share of US$184.5mln and 122 cents for the full year.
While noting that the shares trade on a low valuation of circa six times forecast EPS, Peel Hunt analysts said "there remains a high level of earnings uncertainty", such as core trading continuing in a similar vein as the first quarter.
"We would not dispute that if certain things go in Plus500’s favour the business model can deliver high operating margins and significant amounts of cash. Against that, we currently do not have much confidence in our forecasts, whether a function of falling client numbers or the continuing impact of regulation."
House broker Liberum conceded that revenues were 6% light on its forecast, leading it to rejig the full year numbers and cut EPS 8%, but said the performance was improved even though the second quarter did not see particularly high volatility, as April was the lowest activity month of the year so far.
With the update indicating that a higher number of new customers arrived and that their average cost declined, the Liberum analysts argued that all being equal this would argue for higher revenues in the second half.
Plus500 shares were up 5.5% to 568.6p on Tuesday morning.
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