Plus500 faced difficulties after a change in FX industry regulations that led to a decline in profit, but they are steadily making their way up. The trading services provider has cautioned that their annual profit might decline for the first time in three years, but met with different results.
How Did Plus500 Decline and Why?
Plus500 was expected to reach its annual revenue for the financial year of 2019, to 354 million dollars. This figure was a less than half reduction of 2018’s financial total revenue, of 720.4 million dollars. This was due to the online trading service provider facing regulatory crackdowns on its bets for contract-for-difference assets, or CFDs. CFD bets are when investors or traders bet on the share price movements of stocks.
Plus500, which was established in Israel in 2008, also publicized their prediction that they would face a hit to their earnings, before interest, depreciation and pay-offs (EBITDA), and taxes. It was expected to reach about 190 million dollars, which is 62 percent lower than it was in the previous year of 2018.
However, despite the low expectations, Plus500 managed to raise their share prices to five percent in early trading, even with the looming regulatory difficulties. This led to a different forecast that the trading service provider’s second half would be better than the first half of the financial year.
What Lies in 2020 for this CFD Trading Provider?
After the difficult first half, Plus500 appreciated the “much improved” second half of 2019, as Chief Executive Officer Asaf Elimelech stated, “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.”
Plus500 is registered and regulated with the Financial Conduct Authority, or the FCA, which is why it faced such difficulties in 2019. The UK watchdog has made a move by cracking down CFD, which was a permanent move last year. They have banned all financial entities and firms from providing funds and other financial tools to encourage trading in other assets.
However, despite the issues that Plus500 have faced, they managed to come out of it better shape than expected.