19th Sep 2008 07:00
Interim results for the six months to 30 June 2008
PLUS Markets Group plc ("PMG" or the "Company") reports its interim results for the six months to 30 June 2008.
Highlights
* Current trading offering showing continuing progress, achieving monthly market share of up to 50% of UK small & mid-cap equities on its award-winning platform; * Capital markets offering maintaining momentum in difficult market conditions, with the PLUS-quoted market showing continuing growth and the first admission to the new PLUS-listed market; and * Revenue steady at ‚£1.60m (2007 - ‚£1.68m) with loss of ‚£2.41m (2007 - ‚£ 0.8m), in line with the Board's expectations and with ‚£19m cash remaining following a ‚£25m Placing in January 2007.
Post balance sheet events:
* Foundation of a pan-European equity market for small and mid-caps through an agreement with Bayerische Borse AG, the operator of the Munich Stock Exchange; * To include the creation of "PLUS-Europe", a market offering quote-driven trading in small and mid-caps and, in particular, full coverage of AIM securities from launch; * Implementation of PLUS-Europe progressing on schedule to launch before the end of 2008 and legal steps taken to protect its right to compete with London Stock Exchange plc; * European initiative as the foundation of an international alliance of stock exchanges, already extended to the Asia-Pacific region via an agreement with the New Zealand Stock Exchange; * Confirmation of further trading platform development plans, to broaden its execution service offering and create new liquidity possibilities on the PLUS market; and * Appointment of new Chief Financial Officer for the Company.
Commenting on the interim results, Chief Executive Officer Simon Brickles said:
"PLUS is continuing to develop rapidly, as the only full stock exchange in Europe focussed on small and mid-cap companies. Our existing PLUS-quoted market continues to grow at a time when other primary markets are contracting. Following the admission of our first fully listed company, PLUS has opened a new doorway to the Official List for larger companies wanting to access London's deep pool of capital.
In the secondary market, we look forward to the opening of our new dark pool and our new hittable quote board. We believe that these will provide the best systems anywhere for trading small and mid cap securities. The outages in London on 8th September underscore the need for London to have an alternative mechanism for trading all securities, including those on AIM. Consequently, we are taking active legal steps to protect our right to compete in this sphere for the benefit of investors. PLUS is a well-financed company, rapidly innovating in a dynamic marketplace."
For further information, please contact:
Simon Brickles/Nemone Wynn-Evans 020 7553 2000
PLUS Markets Group plc
Nick Westlake (Nominated Advisor) 020 7260 1000
Charles Farquhar (Corporate Broker)
Numis Securities LtdJohn Parry 020 7490 8062Rostron Parry (PR Enquiries)Chairman's statement
The first six months of 2008 has seen the Company make continuing progress in a rapidly changing post-MiFID environment characterised by difficult market conditions. Additionally, firm foundations have been laid towards further development of the Company's business.
Continuing progress of existing market offering
Following the launch of our new PLUS trading platform at the end of last year, not only have transaction volumes increased dramatically, as brokers and market makers choose to execute trades on PLUS more cost effectively away from the traditional venues, but also our market share - particularly in small and mid-caps - has placed us firmly in the post-MIFID trading landscape as a competitive London execution venue. In the first six months of 2008, PLUS recorded 2.1m trades representing 11 billion shares, valued at ‚£17 billion.
But importantly some 400 small and mid-cap companies listed or quoted on other markets regularly see more than half their trading taking place on PLUS, as do those 90-odd AIM securities dual-traded on the PLUS market. PLUS is also attracting significant volumes in larger securities, recording for the first time over 10% of trade value in a FTSE 100 stock, Alliance Trust, for the month of May. The week commencing 15 September has seen record trading levels on PLUS, with over 35,000 trades a day taking place on its platform.
According to the independently-compiled Reuters market share report, PLUS already ranks fourth by volume in London with a 2.5% market share for all UK and Irish equities, as well as ranking competitively alongside other European exchanges and trading venues. We were also pleased to win the 2008 "Best Trading Platform" award from World Finance magazine, announced in April.
Our capital markets offering has also made good progress during the period. We were delighted that Mears Group chose to dual-list its securities on the new PLUS-listed market, as its first new admission, when Mears moved from AIM to the Official List on 23 June 2008. PLUS has successfully introduced competition to the UK full listing environment for the first time. Companies who list on London's Official List can now choose the exchange to which their shares are admitted to trading and can decide to be admitted to the PLUS-listed market, to the London Stock Exchange's Main Market, or to be dual-listed on both.
In addition, our PLUS-quoted market for smaller, growing companies continued to build momentum, seeing a robust net growth to 223 PLUS-quoted companies as at the balance sheet date. During the period, 23 new joiners were admitted and the total funds raised amounted to some ‚£42 million, a 38% increase on the same period last year. This contrasts sharply with the decline in number of companies and funds raised on other growth markets. Your Board believes the PLUS-quoted market is well positioned during difficult market conditions to cater for those smaller companies still seeking admission to the public markets, while larger issues stall.
Revenues held steady at ‚£1.60m (2007 - ‚£1.68m) while the Board expects future revenue to follow the completion of its market offering, as set out in more detail below. The loss on ordinary activities of ‚£2.41m, in line with the Board's expectations, reflects our increased cost base as we continue to expand our operations, investing in technology infrastructure and marketing in pursuit of new client relationships. The Company's balance sheet is supported by ‚£19m remaining cash following our ‚£25m Placing in January 2007. This will enable the Company to continue its rapid development and respond to opportunities in a rapidly changing post-MiFID marketplace.
AIM Trading
As foreshadowed in the Company's preliminary results for 2007, announced on 2 April 2008, your Board believes that were current UK restriction to be removed that prevent the Company from offering a fully competitive AIM trading service, AIM investors would benefit. This is because they would be able to access the competitive trading environment already available to fully-listed companies post-MiFID.
The Financial Services Authority issued a discussion paper in July 2007 in relation to the trading of shares admitted to MTF platforms, including AIM. This followed a ministerial statement by the then Economic Secretary to the Treasury in February 2007, in which HM Treasury indicated its desire to remove outstanding obstacles to open competition in the sphere of AIM trading. We were, and remain, fully supportive of the Treasury's pro-competitive initiative and at the time of announcing the Company's 2007 preliminary results, your Board hoped - and confidently expected - that such proposals would be further pursued by the Treasury and FSA in 2008.
Your Board is therefore disappointed that HM Treasury has not been able to date to pursue such proposals within the time-frame originally indicated to the Company earlier this year. In order to meet urgent demand from its customers for AIM trading, the Company has been actively progressing the creation of "PLUS-Europe", as announced on 10 July 2008. As a quote-driven market in a range of small and mid-cap securities, PLUS-Europe will offer an attractive venue for the trading of all AIM securities from launch. PLUS-Europe will be offered to trading participants in London, in conjunction with Bayerische Borse AG, the operator of the Munich Stock Exchange, under the fully competitive regulatory environment already in place in Germany.
A binding Co-operation Agreement has been reached between the Company and Bayerische Borse AG. The Agreement lays the foundation for the implementation of PLUS-Europe, expected before the end of 2008 as a fully competitive AIM trading platform on the basis of the trading infrastructure already in situ for the Company's existing market offering. As a pan-European small and mid-cap market, it is intended that PLUS-Europe will ultimately offer diversity both of stock coverage and, in due course, membership for trading participants across the Euro-zone. Following launch, PLUS-Europe will be operated for a minimum of three years, although the Company has reserved the right to offer AIM trading on its markets should UK restrictions be removed in the meantime.
As stated in the announcement of 10 July 2008, PLUS-Europe will deploy the pan-European passport rights afforded to Market Operators under MiFID, enabling current member firms of PLUS to participate in its trading services with minimal additional regulatory or technological requirements. Notwithstanding its freedom to provide services under European law, however, there currently exists a London Stock Exchange ("LSE") trading rule which, if permitted to apply, would prevent member firms of PLUS-Europe that held dual-membership of the LSE from executing trades in AIM securities under its rules. Given the anti-competitive effect of the LSE rule, the Company has issued proceedings in the High Court in order to obtain, among other things, a declaration that the rule is null and void or otherwise unenforceable. A further update will be provided to shareholders in due course.
Foundation of international alliance with other stock exchanges
As a new stock exchange for London, PLUS Markets Group is ideally placed as the gateway to London capital, the deepest pool of international capital in the world. Within the international arena, the PLUS market is increasingly recognised as a compelling listing and quotation destination. PMG is now actively working with international counterpart small and mid-cap stock exchanges, to lay the foundations of an international equity market to offer companies access to international capital and liquidity.
This alliance commenced with the above-mentioned 10 July announcement of the foundation of a pan-European equity marketplace for small and mid-caps, in conjunction with Bayerische BĦrse AG, the operator of the Munich Stock Exchange in Germany, which is the second largest equity marketplace in Europe. The home exchange to blue chips such as Allianz, BMW, Munich Re and Siemens, its primary focus is on providing fundraising and trading solutions for small and mid-caps, such as its "M:access" exchange-regulated market which provides a cost-effective alternative to fully listed markets in Germany. We intend to co-ordinate our respective capital market offerings such that, through the extension of their investor reach beyond their home countries, European small and mid-cap companies can improve their fundraising capabilities on an initial and continuing basis.
We have already extended our European vision to the Asia-Pacific region with a non-binding agreement, reached on 18 September 2008, with NZX, the New Zealand stock exchange. NZX is an infrastructure, information and service provider right across the market spectrum. In markets where choices are plentiful, NZX works in partnership with its customers to deliver fast, efficient and uniquely valuable investment, trading, capital raising and business intelligence services. In the last two years, the NZX Group has expanded and diversified with the acquisition of businesses and strategic investments aligned with core business purpose, which is strengthening and growing New Zealand's capital markets, complemented by sound offshore investments and alliances. We are excited at the prospect of opening the door to additional international issuers from around the world, providing enhanced profile and liquidity across leading financial centres, by offering access to a broader pool of equity capital than is provided by existing markets for listed and non-listed securities.
Confirmation of trading development plans
PMG confirmed to its customers in July 2008 details of a programme of trading platform enhancements, to broaden further its execution service offering and create new liquidity possibilities on the PLUS market. The Company stated at the time of announcing its preliminary results for 2007 that it intended to complete some further platform enhancements, to include wider electronic connectivity. Its enhanced offering will be available for participant connectivity before the end of this year.
The enhancements will include a "dark liquidity pool" for small & mid-cap securities, to be known as "the PLUS-pool", providing an anonymous order-driven trading mechanism to complement PMG's current market-maker offering in such securities. The PLUS-pool will enable large institutional block orders in small & mid-cap securities to interact efficiently in a dark environment on PLUS, thereby reducing market impact costs.
The enhancement programme will also see those UK liquid securities currently trading on PLUS move from the existing quote-driven board to a new "hittable quote board", to be known as "the PLUS-HQ". By facilitating the on-book execution of market maker quotes via a choice of order types - alongside continued support for the Retail Service Provider trading model - the PLUS-HQ will attract greater transaction volumes from the increasingly sophisticated order routing technologies being deployed in securities markets.
Both the PLUS-pool and the PLUS-HQ will be supported by Central CounterParty services ("CCP") provided by LCH.Clearnet, which PMG selected on the basis of its comprehensive small & mid-cap coverage and unparalleled experience in UK securities. LCH.Clearnet is the leading independent equities CCP group in Europe, serving major international exchanges and trading platforms.
Other current and future developments
The Board recognises that market conditions are more challenging than at the time of the announcement of the Company's preliminary results for 2007. Leaving aside the cost of litigation against the LSE, this is not expected to have an overall impact on the anticipated loss for the year. As stated in those preliminary results, provided your Company is able to trade all AIM securities on a more competitive basis before the end of this year, the Board expect the Company to become cash generative in 2009. Achieving this objective remains our core focus, as outlined above.
Also at that time, the Company affirmed its commitment to "PLUS should be on PLUS", and that it would consult shareholders in relation to the moving to the Official List and admitting its shares to PLUS-listed market. Our intention was to commence this consultation with the publication of these interim results and the Company receiving the right to trade all AIM securities. As the latter has yet to take place, we confirm our intention to move to the PLUS-listed market once we have commenced AIM trading and we anticipate consulting shareholders in the near future. In the meantime, we are delighted to confirm that the Company's shares are now available for trading on the Munich Stock Exchange, as a pre-cursor to the creation of PLUS-Europe.
Finally, we are delighted to welcome Nemone Wynn-Evans to your Board as our new Chief Financial Officer, with effect from today. Nemone will already be known to some of our investors by dint of her current responsibilities which include Communications and Investor Relations, for which she will continue to be responsible. Nemone has been acting Chief Financial Officer for some months, understands our business thoroughly and has impressed the Board with her hard work and competence. We wish her every success in her important new role.
Nemone Louisa Wynn-Evans (nee Bridges), age 34, joined PLUS Markets Group in 2004 as a member of the current management team. She has an MBA from Cranfield School of Management and is a graduate of Merton College, Oxford. She spent several years working in corporate finance and broking at KPMG and HSBC, prior to a relationship management role at the London Stock Exchange. There is no further information to be disclosed under the AIM Rules Schedule Two paragraph (g).
Stephen Hazell-SmithChairman19 September 2008
Condensed Consolidated Income Statement
For the six months ended 30 June 2008
Continuing operations Six months Six months Year ended ended 30 ended 30 31 June 2008 June 2007 December Unaudited Unaudited 2007 ‚£'000 ‚£'000 Audited ‚£'000 Revenue 1,600 1,675 3,101 Administrative expenses Operating expenses (4,380) (2,931) (7,107)
Charge in relation to share based payments (225) (214) (370)
Operating loss (3,005) (1,470) (4,376) Finance income 595 668 1,398
Loss on ordinary activities before taxation (2,410) (802) (2,978)
Taxation - - - Loss for the period attributable to equity (2,410) (802) (2,978)holders of the parent Loss per share Basic (0.77) (0.26) (0.96) Diluted (0.76) (0.26) (0.96)
The above all derive from continuing operations.
Condensed Consolidated Balance Sheet
As at 30 June 2008 As at 30 As at 30 As at 31 June 2008 June 2007 December Unaudited Unaudited 2007 Audited ‚£'000 ‚£'000 ‚£'000 Non-current assets Intangible fixed assets 3,636 2,774 3,341 Tangible fixed assets 80 97 108 Available-for-sale investments 1 1 1 3,717 2,872 3,450 Current assets Trade and other receivables 1,484 715 906 Cash and cash equivalents 19,000 25,060 21,006 20,484 25,775 21,912 Total assets 24,201 28,647 25,362 Current liabilities Trade and other payables (1,342) (1,824) (1,284) Deferred income (971) (923) (5) (2,313) (2,747) (1,289) Net current assets 18,171 23,028 20,623 Net assets 21,888 25,900 24,073 Equity Share capital 15,734 15,694 15,734 Share premium account 16,616 16,463 16,616 Retained deficit (10,462) (6,257) (8,277) Equity attributable to equity holders 21,888 25,900 24,073of the parent
These financial statements were approved by the Board of Directors and authorised for issue on 19 September 2008.
Signed on behalf of the Board of Directors
Stephen Hazell-Smith, Chairman
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2008
Six Six Year ended months months 31 December ended 30 ended 30 2007 June 2008 June 2007 Audited Unaudited Unaudited ‚£'000 ‚£'000 ‚£'000 Net Loss from Operating Activities (3,005) (1,470) (4,376) Adjustments for non cash items: Amortisation of intangible assets 239 90 286 Depreciation of tangible assets 30 30 71 Share based payment expense 225 214 370 (2,511) (1,136) (3,649) Decrease / (increase) in trade and other (578) 876 684receivables Increase / (decrease) in trade and other 1,024 643 (815)payables Net cash inflow/(outflow) from operating (2,065) 383 (3,780)activities ("A") Investing activities Finance income 595 668 1,398 Purchase non current assets (536) (2,241) (3,055) Net cash (used in) / generated by 59 (1,573) (1,657)investing activities ("B") Financing activities Net proceeds from issue of equity shares 0 23,902 24,095 Net cash generated by financing 0 23,902 24,095activities ("C") Net increase / (decrease) in cash and (2,006) 22,712 18,658cash equivalents ("A"+"B"+"C") Cash and cash equivalents at beginning 21,006 2,348 2,348of period Cash and cash equivalents at end of 19,000 25,060 21,006period
Condensed Consolidated Statement of Changes in Equity
Unaudited for the six months ended 30 June 2007, audited for year ended 31 December 2007 and unaudited for six months ended 30 June 2008.
Share Share Retained Total capital premium earnings ‚£'000 ‚£'000 ‚£'000 ‚£'000 Attributable to equity holders of 6,731 1,524 (5,669) 2,586the parent at 1 January 2007 Shares issued 8,963 16,088 - 25,051 Share admission expenses - (1,149) - (1,149) Reversal of share-based payment - - 214 214charge Loss for the half year - - (802) (802)
Attributable to equity holders of 15,694 16,463 (6,257) 25,900 the parent at 30 June 2007
Attributable to equity holders of 6,731 1,524 (5,669) 2,586 the parent at 1 January 2007
Shares issued - placing 8 January 8,928 14,923 - 23,851 2007
Shares issued - options exercised 75 169 - 244 Reversal of share based payment - - 370 370charge Loss for the year - - (2,978) (2,978)
Attributable to equity holders of 15,734 16,616 (8,277) 24,073 the parent at 31 December 2007
Attributable to equity holders of 15,734 16,616 (8,277) 24,073the parent at 1 January 2008 Shares issued - - - 0 Share admission expenses - - - 0 Reversal of share based payment - - 225 225charge Loss for the half year - - (2,410) (2,410)
Attributable to equity holders of 15,734 16,616 (10,462) 21,888 the parent at 30 June 2008
Notes to the Financial Statements
For the six months ended 30 June 2008
1. Accounting Policies
General information
PLUS Markets Group plc ("the Company") is a company incorporated in the United Kingdom under the Companies Act 1985. The Company's principal activity is that of a holding company, owning 100% of PLUS Markets plc, which is engaged in the operation of the PLUS market and is authorised and regulated by the Financial Services Authority. These financial statements are presented in Pounds Sterling being the currency of the primary economic environment in which the group operates.
Basis of accounting
The condensed consolidated financial information contained within these financial statements, which are unaudited, has been prepared in accordance with accounting policies which will be adopted in presenting the full year annual report and accounts. There is no requirement for AIM companies to prepare their half yearly reports in accordance with IAS 34. However, the full year annual report and accounts will be prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union to comply with the AIM requirement about consistency with the annual accounts.
The financial information contained in this interim report does not constitute the Company's statutory accounts within the meaning of section 240 of the Companies Act 1985. The comparative information contained in this report for the year ended 31 December 2007 does not constitute the statutory accounts for that financial period. Those accounts (which were prepared under UK Generally Accepted Accounting Practice) have been reported on by the company's auditors, Deloitte & Touche LLP, and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
The financial statements are prepared under the historical cost convention, with the exception of investments which have been fair valued under IAS 39.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those of estimates.
The same accounting policies and presentation methods of computation are followed in the condensed set of financial statements as applied in the group's latest annual audited financial statements, except for the change in amortisation period for intangible assets as described below.
Intangible fixed assets
The right to operate the PLUS market is valued at its cost of acquisition less provision for any impairment.
The Company's status as a Recognised Investment Exchange (RIE) is valued at the cost of the application to the Financial Services Authority plus the legal and other costs associated with preparing and presenting the application less any provision for any impairment.
Both the PLUS market and RIE status are considered to have an infinite life and therefore no amortisation is provided.
Costs relating to the development, installation and testing of the Company's trading platform have been capitalised. From the 1 January 2008 these are being amortised on a straight line basis over a five year period. In the audited financial statements to 31 December 2007 the amortisation of these costs was calculated over a three year period. This change in estimate has reduced the amortisation charge in the current period by ‚£249,000 and is expected to reduce the annual charge in relation to this trading platform in future periods by ‚£ 513,000.
On an annual basis, the Company carries out an impairment testing of its intangible assets by comparing their recoverable amounts with their carrying amounts.
New accounting standards and interpretations
IFRS 8 Operating Segments. This was issued by the IASB in November 2006 for application in accounting periods beginning on or after 1 January 2009; early application is permitted. The directors have decided not to early-adopt the standard.
2. Operating expenses
Operating expenses during the period to 30 June 2008 included a ‚£93,000 one off charge incurred as part of the set up costs of PLUS-Europe.
Independent Review Report to PLUS Markets Group plc We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2008 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement, and the related notes 1 and 2. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company, in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
London, United Kingdom
19 September 2008
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