Monday 6 January 2020 8:46 am

Plus 500 profit set to slump 62 per cent after regulatory crackdown

Plus 500 today warned that annual profit and revenue could fall for the first time in at least three years due to tougher industry regulations.

The online trader predicted revenue for its last financial year will hit $354m (£270.7m).

That represents less than half of 2018’s total revenue of $720.4m, and comes after a regulatory crackdown on contract-for-difference (CFD) bets, where investors bet on the share price fluctuations of stocks.

Read more: Customer numbers jump in Plus 500’s third quarter

The company also revealed a forecast hit to earnings before interest, tax, depreciation and amortisation (Ebitda), which are now expected to hit just $190m, 62 per cent lower than the previous year.

However, Plus 500’s share price rose five per cent in early trading despite the difficulties, as the company’s second half looked a lot stronger than its first half.

Plus 500 welcomed a “much improved” second half and chief executive Asaf Elimelech said: “We finished the year in good financial and operational shape following a period of change for the industry, which has provided a more certain regulatory outlook for Plus 500.

“I am encouraged by the momentum we have shown in the second half, reflecting continued optimisation of our marketing spend, enhancements to our customer service, and improvements in our proprietary technology platform.

“Looking to 2020 we are confident of the prospects for the group as we focus on further strengthening our customer offering and market positions.”

Broker Liberum gave the firm a ‘buy’ rating, saying it is continuing to invest in organic growth, which the broker pegged at just 2.5 per cent in 2020.

Read more: How the crackdown on CFDs will affect traders

“Active customer growth in Q3 was ahead of the organic growth we now forecast, while customer acquisition spend will rise in 2020,” Liberum added, holding its buy rating on a target price of 1,000p per share.

City watchdog the Financial Conduct Authority made its CFD crackdown permanent last summer, with firms banned from offering money and other inducements to encourage trading.