TheTimes8April2020

38 2GM Wednesday April 8 2020 | the times

Business

The wild swings in markets caused by

the Covid-19 crisis may have wrong-

footed traders, but they have helped to

propel quarterly revenues at Plus500 to

record levels.

Asaf Elimelech, chief executive of the

financial betting business, said that it

Rough markets are big plus

for financial betting group

Ben Martin Senior City Correspondent
was on course to generate full-year
profits “substantially ahead” of City
expectations after the group enjoyed
what he called an “exceptional” first
quarter.
Revenues during the three months to
the end of March leapt to $316.6 million
from $53.9 million a year earlier,
boosted by the trading losses suffered

by Plus500 customers during the

extreme volatility in recent weeks,

which contributed about $82.3 million

to the company’s top line.

Plus500 provides contracts for

difference, a type of derivative that

allows punters to make leveraged bets

on the direction of financial markets

ranging from equities and bonds to

commodities and currencies. Traders

betting in the derivatives market

typically range from smaller, amateur

retail customers to professionals from

the financial services industry who

trade regularly.

The company, which is based in

Israel, was set up in 2008 and was listed

in London seven years ago. Plus500

and its rivals, including CMC Markets

and IG Group, thrive when markets are

volatile because such conditions

encourage customers to trade. Punters

hope to make quick profits as asset

prices experience dramatic swings.

Plus500 said that it had attracted

82,951 new customers during the

quarter, up from 21,306 from the same

period a year ago. Its active customers

— those who executed at least one real

money trade during the quarter —

doubled to 194,024 from 97,921 a year

earlier.

The company gains when its

customers make the wrong bets. About

76.4 per cent of Plus500’s amateur

customers lose money on derivatives,

losses that can be magnified by the

leverage used to increase the size of

their wagers. When markets fall

sharply, as they have during the

pandemic, traders seeking to profit

from an expected rebound typically are

tempted to call the bottom. If they are

caught out and markets continue to

slide, their trading losses feed into

Plus500’s revenues.

Such losses accounted for 26 per cent

of the company’s revenues during the

three-month period. However, Plus500

said: “The revenues derived from

customer trading performance in the

first quarter are expected to revert to

their medium-term historic level of

near zero over time.”

Concerns about the widespread

losses suffered by inexperienced retail

clients prompted European regulators

to crack down on the financial betting

industry in August 2018 and to impose

stricter rules on derivatives providers,

which hit Plus500 and its peers. The

company’s pre-tax profits fell to

$189.3 million last year from $503 mil-

lion in 2018, which cut the earnings of

Mr Elimelech, 39. According to the

company’s annual report, he collected

$1.98 million in 2019, down from

The crisis in the car market — with too

few buyers, dealerships locked down

and many people struggling to make

finance payments — has forced Inch-

cape to cut its dividend to preserve

cash.

The company also

indicated yesterday that

its top executives

would take a 20 per

cent pay cut and it

confirmed that in

addition to saving

£74 million by

dropping its 17.9p-

a-share dividend,

it was looking at

taking advantage

of the coronavirus

corporate financing

facility, in which the gov-

ernment is making avail-

able up to £600 million of loans

per company.

Inchcape, the last vestige of a global

trading empire that was first listed in

London in 1862 as the British India

Steam Navigation Company, is

different from its peers. It is a large

Inchcape hits brakes on

dividend and bosses’ pay

Robert Lea Industrial Editor

player in a disparate British market,

with 100 outlets, and is also present in

33 other countries. The UK accounts

for about 30 per cent, or £2.8 billion, of

its £9.3 billion turnover. It has signifi-

cant positions in Hong Kong, Singa-

pore and Australia, operates in a dozen

European countries and as

many emerging market

economies, mostly in

Latin America.

The stock market

appears to take its

geographical div-

ersity as a good

thing. Yesterday

Inchcape’s shares

rallied after a trad-

ing update related

to the coronavirus

outbreak that sought

to reassure investors

that it had access to

£600 million of cash and

that 14 of its markets, including

Hong Kong and Australia but not the

UK, were open for business. Singapore

had been in action until this week’s

announcement of a lockdown. Inch-

cape shares closed up 49¼p, or 11.3 per

cent, at 485¼p.

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