Preliminary Results

 
TIDMPMK 
 
PLUS Markets Group plc 
 
Preliminary results for the year ended 31 December 2009 
 
PLUS Markets Group plc (the "Group") reports its preliminary results for the 
year ended 31 December 2009. 
 
Highlights 
 
  * Low level of new admissions (24, 2008 - 40) reflected the difficult 
    financial market conditions, resulting in a small decrease in the number of 
    PLUS-quoted companies; 
 
  * Completion of PLUS's small and mid-cap service offering, following the 
    commencement of trading in all AIM securities on 21 August; 
 
  * Trading volumes achieved in 2009 continued to grow, with a 45% increase in 
    value traded on PLUS to GBP52.8 billion (2008 - GBP36.4 billion); 
 
  * Investment by Amara Dhari Investments Limited, a syndicate of investors 
    from the Middle East, raising GBP5 million to support the balance sheet and 
    international expansion; 
 
  * Revenues down 6% at GBP3.04 million (2008 - GBP3.25 million), on administrative 
    expenses of GBP11.56 million (2008 - GBP10.15 million), after non-recurring 
    expenses of GBP2.8 million; 
 
  * Loss before depreciation, amortisation, impairment and interest received of 
    GBP8.43 million (2008 - GBP7.36 million), including non-recurring expenses and 
    share-based payment charge. Loss after depreciation, amortisation, 
    impairment and interest of GBP8.26 million (2008 - GBP10.20 million); 
 
  * The Group has no debt and retained a cash balance of GBP10.74 million (2008 - 
    GBP14.83 million) as at year end. 
 
Post balance sheet events 
 
  * Announcement of Board changes on 8 February 2010, to enhance the Group's 
    ongoing development plans to capitalise on its current franchise; and 
 
  * Launch of strategic review. 
 
Commenting on the annual report, Chief Executive Officer Cyril Theret said: 
"PLUS continues to promote its small and mid-cap franchise aggressively by 
increasing the visibility and quality of its market. We are conducting an 
in-depth strategic review of our operations to ensure alignment of revenues and 
costs. We are also seeking to capitalise on the value of our RIE licence." 
 
For further information, please contact: 
 
Nemone Wynn-Evans 020 7553 2000 
 
PLUS Markets Group plc 
 
Nick Westlake/Charles Farquhar 020 7260 1000 
 
Numis Securities Ltd (Nominated Advisor and Broker) 
 
John Parry 020 7490 8062 
 
Rostron Parry (PR Enquiries) 
 
Chairman's Statement 
 
This is my first statement to shareholders since being appointed Non-Executive 
Chairman on 8 February 2010. The Board changes announced on that date are 
intended to address the commercial and financial challenges that are facing 
PLUS over the next three years. 
 
In announcing our results for the year ended 31 December 2009, I would like to 
take this opportunity to give an indication of the future direction for PLUS. 
We have launched an immediate strategic review of all of our activities as our 
business plans need to be clear and credible. We intend to provide more 
detailed information to shareholders on our plans in the coming months as we 
finalise them. The main focus will be revenue growth and a more sustainable 
business structure properly aligned to costs and revenues. 
 
I have taken over as Chairman of the Board from Stephen Hazell-Smith, who 
recently completed five years as Chairman, and oversaw the Company's wholly 
owned subsidiary, PLUS Markets plc, becoming a Recognised Investment Exchange. 
The Board is very grateful for his significant contribution to this important 
phase of PLUS' development. Simon Brickles, formerly Chief Executive Officer, 
has taken up the new executive role of Vice Chairman with a focus on PLUS 
Markets' international activity, particularly in the Gulf Co-operative Council 
("GCC") region. 
 
In terms of the period just passed, the first quarter of 2009 saw particularly 
difficult market conditions, although the support provided to the equity 
markets by the Bank of England's quantitative easing programme saw a subsequent 
rally. PLUS continued to see both significant growth in reported retail flow 
and some investor confidence returning to the market. However, our flagship 
market for small and mid cap issuers (the PLUS-quoted market) registered a 
small reduction in issuers for the first time, impacting negatively on PLUS' 
revenues. 
 
It is clear that the environment in which PLUS operates has become highly 
competitive and consolidation amongst execution venues has already started to 
take place. Against the macroeconomic backdrop, which has continued to dampen 
the market's appetite for Initial Public Offerings, important changes are 
transforming PLUS's marketplace such as the impact of the EU Markets in 
Financial Instruments Directive ("MiFID"), implemented in November 2007. 
 
The Board has concluded that PLUS needs to apply the right level of resources 
to protect its PLUS-quoted market. This small and mid-cap offering is PLUS' 
core franchise, and we have continued to receive strong support for it amongst 
many trading and broking firms as well as PLUS Corporate Advisers. We are very 
grateful for this support and it augurs well for the future. 
 
PLUS also needs to consider the right intermediation model to underpin the 
growing flow of private investor transactions which continue to be reported on 
our market, and to evaluate the development of electronic execution as part of 
our trading offering. In addition, PLUS now seeks to activate its core primary 
market in a more powerful way, as a clear route to reverse the failure to 
deliver revenue growth in the last two years. 
 
These are all challenging objectives but the new management team intends to 
move as quickly as possible to ensure that PLUS diversifies and grows its 
revenue streams in an environment where business models and market participants 
are changing rapidly. Finally, PLUS intends to reduce costs still further in 
business areas where there are no clear revenue benefits to be obtained, as 
part of its drive towards profitability. 
 
Over the past two years, the Group's share price has undoubtedly been 
disappointing and it is understandable if shareholders have themselves been 
disappointed not to see the growth story they expected. Nevertheless, the Board 
is grateful for their continuing support and intends to provide more detail of 
PLUS' strategy for profitability in due course, while seeking to increase the 
frequency of shareholder updates going forwards. The Company raised further 
funds in 2009 via the GBP5 million investment from Amara Dhari in September and 
we await any new business coming to PLUS from the GCC region on the back of 
that investment. 
 
In conclusion, we look forward to realising the considerable opportunities 
available to PLUS in such a turbulent marketplace, and to delivering revenue 
growth from its unique market positioning as a fully competitive stock exchange 
in the London and international markets. 
 
Giles Vardey 
 
Chairman 
 
25 March 2010 
 
Financial Review 
 
The following is extracted from the Financial Review, the full version of which 
is contained in the Company's Annual Report. 
 
Operations and Operating Environment 
 
The Group's operating subsidiary, PLUS Markets plc, was designated a Recognised 
Investment Exchange in July 2007. PLUS is the first alternative equity stock 
exchange in London offering both: 
 
  * listing services (capital markets): operating the PLUS-listed market, a 
    Regulated Market for issuers admitted to the Official List, and the 
    PLUS-quoted market, an exchange-regulated market for domestic and 
    international issuers; and 
 
  * trading services: facilitating the execution of retail flow via Retail 
    Service Provider ("RSP") networks and the provision of capital commitment 
    in small and mid cap issuers. 
 
The current operations of PLUS are focused on serving the needs of small and 
mid-cap companies, from both the UK and overseas through its exchange regulated 
market, and the provision of market making and retail flow. 
 
Strategy and objectives 
 
The Group's strategy over the past two years has primarily been to grow the 
number of PLUS-quoted issuers and to expand its market share of retail flow in 
the small and mid-cap sector of the equities market. 
 
Retail flow reported from UK FTSE indices constituents significantly increased 
throughout 2008 and continued through 2009. Core to this was the continuing 
effort to achieve the right to trade all AIM securities without regulatory 
encumbrance, in order to increase reported flow from FTSE AIM constituents. 
This was achieved during the year, PLUS commenced trading all AIM securities in 
August 2009, and already between 25-30% of all trading activity in AIM 
securities was reported to PLUS during the last quarter of 2009. 
 
It was originally envisaged that PLUS would move towards becoming cash 
generative following the completion of the objectives set out above. However, 
as a result of competing pressures amongst execution venues and a poor economic 
backdrop for Initial Public Offering ("IPOs"), the Group recognised the need 
for further strategic development to drive the company towards profitability. 
 
In September 2009, the Group secured a GBP5 million investment from Amara Dhari, 
a special purpose vehicle set up by a syndicate of investors from the GCC 
region, to strengthen its balance sheet and increase its regulatory capital. 
Pursuant to that investment, the Group announced plans to diversify its 
geographical reach into the GCC region to boost its international listing 
offering and trading venue. 
 
In February 2010, the Group announced a number of Board changes, intended to 
enhance the Group's ongoing development plans. The new Board seeks to 
capitalise on its current franchise and leverage its ability to offer listing 
services by: 
 
  * increasing the visibility and quality of its exchange-regulated, 
    PLUS-quoted market; and 
 
  * diversifying its product portfolio through listing and electronic 
    execution. 
 
As a consequence, the Board is currently undertaking a comprehensive strategic 
review of its existing operations in order to realise revenue opportunities 
available from the above. 
 
Key Performance Indicators 
 
Capital markets 
 
At the year end, PLUS had 179 companies admitted to trading on the PLUS-quoted 
market (down from 214 at end of 2008). During the year, 52 issuers left the 
market (38 in 2008) and PLUS admitted 24 new admissions during the year (40 in 
2008), of which 18 were new issues. 
 
The low level of new issues in 2009 continued to reflect the difficult 
financial market conditions that the Group operates in, and has put the 
PLUS-quoted market in negative net growth for the first time. However, over the 
period the total market capitalisation of PLUS-quoted companies rose by an 
encouraging 32% to GBP2.5 billion (from GBP1.9 billion at the end of 2008). 
 
Against this backdrop, the Group was still able to grow its PLUS Corporate 
Adviser base, which underpins the pipeline for future issuers. The Group is 
pleased to have welcomed six new PLUS Corporate Advisers, namely: Alexander 
David Securities, Cenkos, Hybridan, Strand Hanson, Strata Technology Partners 
and ZAI Corporate Finance. 
 
The small and mid-cap market is PLUS' core franchise and represents 68.8% of 
its present revenues. The Group is therefore investing in raising the 
visibility and quality of issuers on its markets. As a first step, PLUS 
commissioned equity research from Edison Research to provide research coverage 
of PLUS-quoted companies, the first edition of which was published on 23 
February 2010. In addition, the Group now has contracts with dedicated public 
relations and publication houses which are designed to promote the issuers on 
PLUS's capital markets. 
 
PLUS has 38 international companies on its primary markets, making PLUS one of 
the most international growth markets in Europe. The largest M&A transaction 
during the year, and the biggest ever on PLUS, was the takeover of Rafco by RAK 
Real Estate for $927 million in March, making Kuwait-based RAK Real Estate the 
largest PLUS-quoted company by market capitalisation at over GBP600 million. 
 
Recognising the strength of its international appeal, PLUS has begun extending 
its international sales drive and has sent several delegations to the GCC and 
Asian regions, while Amara Dhari is working with PLUS in establishing a 
presence in the Middle East. As a first step, PLUS is investigating the 
creation of a Shariah compliant trading platform or segment. 
 
Trading Services 
 
During 2009, 8.6 million bargains (2008 - 5.1 million) were reported to PLUS, 
representing 83.2 billion shares (2008 - 26.1 billion), with a total value of GBP 
52.8 billion (2008 - 36.4 billion). Overall equity flow reported to PLUS during 
the year accounted for 5-10% of UK equity trading. 
 
Volumes in retail banking stocks such as RBS, Lloyds and Barclays reported to 
PLUS continued to grow promisingly. Some 25-30% of trading activity in AIM 
securities was also reported to PLUS during the last quarter of 2009 - the 
first full quarter since trading in all AIM securities commenced in August. 
 
Trading activity in PLUS-quoted securities remained quiet throughout 2009. PLUS 
seeks to increase the visibility of this market segment by increasing the 
number of market makers and private client brokers. 
 
Two new Retail Service Providers, Citadel Investment Group and Knight Capital 
Europe Limited, joined PLUS in 2009. Both bring further welcome competition in 
the execution of retail flow to our broker membership, which had seen a 
reduction in the number of RSPs in recent years. 
 
Income and Expense 
 
Revenues stood at GBP3.04 million (2008 - GBP3.25 million), with the fall of 6% for 
the twelve months reflecting the same level reported as at the six months ended 
30 June, against the prior period in each case. This year, for the first time 
under International Financial Reporting Standards, the Group reports the split 
in revenues. 
 
The majority of the Group's revenues derive from Capital Markets and from the 
sale of trading data (Real-Time Products). Capital Markets revenue amounted to 
GBP2.01 million (2008 - GBP2.28 million), representing application and annual fees 
from issuers on the exchange's primary markets, and application and annual fees 
from PLUS Corporate Advisers. The decline in revenues is primarily linked to 
the economic backdrop in 2009, resulting in fewer IPOs and a trend of issuers 
leaving equity markets. 
 
Trading Services does not generate revenue from trading activity directly. PLUS 
generates revenue from information data sales, selling trading data through 
Real-Time Products, sold to market participants and to end-users via vendors 
such as Bloomberg, Fidessa and Thomson Reuters. The growth in retail flow 
reported to PLUS generated sales in Real-Time Products of GBP0.87 million (2008 - 
GBP0.84 million). PLUS saw limited revenue benefit come through from AIM trading 
due to the late start in 2009, following the achievement of the right to trade 
AIM securities during the year. 
 
Operational and administrative expenses amounted to GBP11.56 million (2008 - GBP 
10.15 million). These include GBP2.8 million in respect of one-off costs in 
connection with legal costs, the setting-up of PLUS-Europe, trading platform 
development costs and strategic initiatives. 
 
The loss before depreciation, amortisation, impairment and interest received 
was GBP8.43 million (2008 - GBP7.36 million). The loss after depreciation and 
amortisation, and a credit of GBP0.22 million (2008 - GBP1.09 million) of interest 
income, was GBP8.26 million (2008 - GBP10.20 million). 
 
Balance Sheet 
 
The Group's net assets stood at GBP10.99 million as at the balance sheet date of 
31 December 2009 (2008 - GBP14.33 million), reflecting the continuing losses of 
the Group, but benefiting from a GBP5 million cash injection from raising new 
equity in October 2009. The Group has no debt. 
 
Cash Flow and Banking Policy 
 
At the year-end the Group had GBP10.74 million of cash on its balance sheet (2008 
- GBP14.83 million). From a regulatory perspective, the Group continues to meet 
its Financial Resources Requirement, as set by the Financial Services 
Authority. As a Recognised Investment Exchange, PLUS is obliged to maintain at 
least 150% of six months' operating expenses in cash resources. 
 
The average return on funds achieved over the year was 1.70% (2008 - 6.09%). 
Finance income contributed GBP0.22 million (2008 - GBP1.09 million). The Group has 
maintained a diversification policy in respect of its cash deposits, using the 
banking services of Close Brothers plc (on an arms' length basis), Bank of 
Scotland plc, HSBC Bank plc and the Royal Bank of Scotland Group plc. 
 
Risks and uncertainties 
 
Risk awareness and risk management are approached through a framework of 
policies, procedures and controls, as required by our status as a Recognised 
Investment Exchange. The Group has an independent Risk & Compliance function, 
administering risk policies approved by the Board and reporting to the Audit 
Committee. All applicable legal and regulatory standards are applied by our 
General Counsel and Regulatory functions. 
 
The Group's Audit Committee has a full complement of Non-Executive Directors 
and is responsible for satisfying itself that a proper internal control 
framework exists to measure, monitor, manage and mitigate risks, as well as 
ensuring that the controls that are in place are effective. This is achieved 
through regular updates from the Finance and Risk Management functions 
throughout the year. 
 
The key risks facing the Group are as follows: 
 
  * economic environment; 
 
  * strategic and financial risk; 
 
  * regulatory risk; 
 
  * competitor risk; and 
 
  * technology infrastructure. 
 
For regulatory purposes, as a Recognised Investment Exchange, PLUS is required 
to maintain a level of capital equal to at least 150% of six months' expenses 
in cash resources. As at 31 December 2009, the regulatory capital headroom as 
reported to the FSA was GBP5.10 million. The Directors will continue to monitor 
the level of the regulatory capital headroom. 
 
Going Concern 
 
The Group has sufficient financial resources held on a range of short term 
deposits at four different banks. Consequently, the Directors have formed a 
judgement, as at the date of this announcement, that there is a reasonable 
expectation that the Group has adequate resources to continue in operational 
existence for the foreseeable future. For this reason, the Directors continue 
to adopt the going concern basis in preparing the financial statements. 
 
Consolidated Income Statement 
 
for the year ended 31 December 2009 
 
                                                Year ended   Year ended 
 
                                                31December  31 December 
                                                      2009         2008 
                                                     GBP'000        GBP'000 
 
Continuing Operations 
 
Revenue                                              3,038        3,247 
 
Administrative expenses                           (11,563)     (10,152) 
 
Charge in relation to share-based                       91        (453) 
payments 
 
Loss before depreciation,                          (8,434)      (7,358) 
amortisation and impairment charge 
 
Depreciation and amortisation                         (40)        (299) 
 
Impairment of intangible fixed assets                    -      (3,635) 
 
Operating loss                                     (8,474)     (11,292) 
 
Finance income                                         218        1,093 
 
Loss on ordinary activities before                 (8,256)     (10,199) 
taxation 
 
Taxation                                                 -            - 
 
Loss for the period attributable to                (8,256)     (10,199) 
equity holders of the Company 
 
Loss per share 
 
Basic                                              (2.37)p      (3.24)p 
 
Diluted                                            (2.33)p      (3.22)p 
 
Consolidated Statement of Comprehensive Income 
 
for the year ended 31 December 2009 
 
                                                Year ended   Year ended 
 
                                               31 December  31 December 
                                                      2009         2008 
                                                     GBP'000        GBP'000 
 
Loss for the year                                  (8,256)     (10,199) 
 
Total comprehensive loss for the year              (8,256)     (10,199) 
 
Attributable to:                                   (8,256)     (10,199) 
 
Equity holders of the Company 
 
Consolidated Balance Sheet 
 
as at 31 December 2009 
 
                                                   31 December   31 December 
                                                          2009          2008 
                                                         GBP'000         GBP'000 
 
Non-current assets 
 
Intangible assets                                            -             - 
 
Property, plant and equipment                               21            55 
 
Available-for-sale investments                               -             1 
 
                                                            21            56 
 
Current assets 
 
Trade and other receivables                              1,027         1,610 
 
Cash and cash equivalents                               10,744        14,831 
 
                                                        11,771        16,441 
 
Total assets                                            11,792        16,497 
 
Current liabilities 
 
Trade and other payables                                 (566)       (2,086) 
 
Provisions                                               (177)             - 
 
Deferred income                                           (56)          (84) 
 
                                                         (799)       (2,170) 
 
Net current assets                                      10,972        14,271 
 
Net assets                                              10,993        14,327 
 
Equity 
 
Share capital                                           19,345        15,734 
 
Share premium account                                   18,021        16,616 
 
Retained earnings                                     (26,373)      (18,023) 
 
Equity attributable to equity holders of                10,993        14,327 
the Company 
 
Company registration number: 4606754 
 
Consolidated Cash Flow Statement 
 
for the year ended 31 December 2009 
 
                                                      Year ended     Year ended 
 
                                                     31 December    31 December 
                                                            2009           2008 
                                                           GBP'000          GBP'000 
 
Net loss from operating activities                       (8,474)       (11,292) 
 
Adjustments for non-cash items: 
 
Impairment of intangible assets                                -          3,635 
 
Amortisation of intangible assets                              -            238 
 
Depreciation of tangible assets                               40             61 
 
Profit on disposal of available-for-sale                     (2)              - 
investment 
 
Share-based payment charge                                  (91)            453 
 
Operating cash flows before movements in                 (8,527)        (6,905) 
working capital 
 
Decrease / (increase) in trade and other                     583          (704) 
receivables 
 
(Decrease) / increase in trade and other                 (1,371)            880 
payables 
 
Net cash used in operating activities                    (9,315)        (6,729) 
 
Investing activities 
 
Interest received                                            218          1,093 
 
Purchase of non-current assets                               (6)          (539) 
 
Net cash generated by investing activities                   212            554 
 
Financing activities 
 
Net proceeds from issue of equity shares by                5,016              - 
Placing and exercise of options 
 
Net cash generated by financing activities                 5,016              - 
 
Net (decrease) in cash and cash equivalents              (4,087)        (6,175) 
 
Cash and cash equivalents at beginning of year            14,831         21,006 
 
Cash and cash equivalents at end of year                  10,744         14,831 
 
Consolidated Statement of Changes in Equity 
 
for the year ended 31 December 2009 
 
                                            Share      Share  Retained    Total 
                                          capital    premium  earnings    GBP'000 
                                            GBP'000      GBP'000     GBP'000 
 
Attributable to equity holders of the      15,734     16,616   (8,277)   24,073 
Company at 1 January 2008 
 
Reversal of share-based payment charge          -          -       453      453 
 
Loss for the year                               -          -  (10,199) (10,199) 
 
Attributable to equity holders of the      15,734     16,616  (18,023)   14,327 
Company at 
 
31 December 2008 
 
Attributable to equity holders of the      15,734     16,616  (18,023)   14,327 
Company at 
 
1 January 2009 
 
Retained earnings of dormant subsidiary         -          -       (3)      (3) 
disposed of in the year 
 
Shares issued - options exercised              94          -         -       94 
 
Shares issued - Placing 1 October 2009      3,517      1,405         -    4,922 
 
Reversal of share-based payment charge          -          -      (91)     (91) 
 
Loss for the year                               -          -   (8,256)  (8,256) 
 
Attributable to equity holders of the      19,345     18,021  (26,373)   10,993 
Company at 
 
31 December 2009 
 
The financial information set out above does not constitute the group's 
statutory accounts for the years ended 31 December 2009 or 2008, but is derived 
from those accounts. Statutory accounts for 2008 have been delivered to the 
Registrar of Companies and those for 2009 will be delivered following the 
group's annual general meeting. The auditors have reported on those accounts; 
their reports were unqualified, did not draw attention to any matters by way of 
emphasis without qualifying their report and did not contain statements under 
s498(2) or (3) Companies Act 2006. 
 
The announcement is based on the group's financial statements which are 
prepared in accordance with International Financial Reporting Standards as 
adopted for use in the EU. 
 
Notes to the Financial Information 
 
Year ended 31 December 2009 
 
1. General Information 
 
PLUS Markets Group plc ('the Company') is a company incorporated in the United 
Kingdom under the Companies Act 2006. 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. This financial information is presented in pounds sterling 
because that is the currency of the primary economic environment in which the 
Company and its subsidiary (together 'the Group') operate. 
 
2. Registration 
 
The Company is registered in Great Britain, registration number 4606754 
 
END 
 
 
 
END