Plus500 Ltd (LON:PLUS) posted first-half results showing profit tumbling 80% but the online financial trading provider tweaked its distribution policy to pay out a greater share of cash to shareholders.
Revenues of US$148.0mln in the six months to 30 June were down 68% on this time last year and net profit of US$51.6m compared to US$261.7m a year ago.
Average revenue per user shrank 44% year-on-year to US$1,044 due to tighter leverage rules and lower trading activity, while average new user acquisition costs increased 59% to $US1,079.
Results largely as expected
The top-line results were pretty much expected, having been very much downgraded after an accounting error led to a profit warning in February, before an update last month showed revenue picked up in the second quarter to US$94mln from US$53.9mln in a first quarter that had seen low levels of financial market volatility.
Overall, the group remains on track to meet current expectations for 2019, said chief executive Asaf Elimelech, adding that he felt the group had performed well during a difficult period.
He blamed “very stable” financial markets from February to April as limiting the number of trading opportunities for Plus’s customers,
A US$50mln share buyback was also proposed as Elimelech and the board tweaked the policy on shareholder distribution so that 60% of net profit will now be returned to shareholders, with at least 50% of this core distribution being through dividends.
Plus500, which also announced the appointment of Credit Suisse as its joint corporate broker alongside current adviser Liberum, also announced an interim ordinary dividend per share of $0.2734, being 60% of net profit.
Analysts wrestle with valuation
Broker Peel Hunt said PBT was in line with its estimate and so was maintain its forecasts for the full year, with the consensus forecast pointing to PBT of US$184.5mln and EPS of 123 cents.
"Whilst the stock is cheap, there is a degree of uncertainty in forecasts and longer term margin sustainability."
House broker Liberum reckons that other brokers' cost estimates are "too high, while revenue expectations next year seem too low to us", but acknowledged that the company "will take quite a while to recover a rating".
Analysts at FinnCap said the shares "are almost becoming an option on volatility and you get paid through the dividend to hold them".
Investors seemed of a similar mind as Plus500 shares, having lost around two-thirds of their valuation over the past 52 weeks, surged 17% to 669.59p on Tuesday morning.
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