XTB financial results for the 1st half of 2018
OVER PLN 70 MILLION REVENUE GROWTH AND RECORD GROWTH OF PROFIT OF NEARLY 250%, GOOD PROSPECTS FOR 2018
In the first half of 2018 X-Trade Brokers Dom Maklerski S.A. (XTB) noted a growth of revenue by PLN 72,6 million up to PLN 197,9 million, as a result of increase in turnover and the improvement of profitability per lot. Operating profit increased by PLN 115,1 million, i.e. PLN 62,4 million y/y. The company reported a record consolidated net profit of PLN 100,4 million against PLN 29,4 million profit a year earlier. In this year XTB will strive to stabilize the number of new clients and average number of active clients at the levels observed in previous, record quarters. In addition, the Management Board sees the greatest potential for business growth in the German, French and Latin American markets.
MORE THAN PLN 70 MILLION INCREASE IN REVENUE THROUGH GROWTH BY 23% OF TURNOVER AND IMPROVEMENT OF PROFITABILITY PER LOT ALMOST PLN 35
In the first half of 2018, the company’s revenues amounted to PLN 197,9 million, i.e. an increase of 57,9% y/y. Such a significant increase in revenues is the result mainly from the increase of transactions volume in lots and profitability per lot. During the reporting period, the turnover amounted to 1,3 million lots, i.e. was higher by 237,5 thousand lots y/y and unit profitability amounted to PLN 153, i.e. an increase by 28,6% y/y.
GROWTH IN THE MAIN MARKETS
In the first half of 2018 XTB recorded an increase in revenues on the main markets, i.e. in Central and Eastern Europe and Western Europe, by 108,4% and 24,0% y/y, respectively. During reporting period, Poland with shares amounted to 32,3% in the sales structure, recorded PLN 64,0 million of revenues, i.e. increased by 162,2% y/y. The second, Spanish market (15,0%) in terms of shares completed the first half of this year sales at the level PLN 29,7 million. Latin America is also gaining on importance, which has already replaced gap in Turkey, obtaining PLN 10,1 million of revenues, i.e. increased by 240,2% y/y.
GROWING THE NUMBER OF ACTIVE RETAIL CLIENTS
In the first half of 2018 Group’s revenues from retail operations amounted to PLN 186,9 million, compared to PLN 105,2 million in the corresponding period of the previous year.
XTB has a solid basis for growth in the form of constantly growing customer base and number of active clients. In the I half of 2018 the number of new clients was 10 046 and was higher by 1 916 new clients y/y. The average number of active clients was higher by 4 390 y/y, i.e. 24,8% y/y.
During the reporting period, revenues from institutional activities of XTB amounted to PLN 11,0 million, i.e. decrease by 45,4% y/y. Revenues from this segment are subject to quarterly fluctuations, which is typical of the business model adopted by the Group.
RECORD NET PROFIT, COSTS AT A STABLE LEVEL
Operating profit in the first half of 2018 amounted to PLN 115,1 million, i.e. increased by 118,5% y/y. Operating expenses, in the first half of 2018 amounted to PLN 82,8 million, i.e. 14,0% increase y/y. This increase was higher by: PLN 3,0 million of marketing costs mainly due to higher expenditures on marketing online campaigns; PLN 2,8 million of salaries and employee benefits costs mainly due to the increase in variable remuneration elements (bonuses); PLN 2,6 million of other external services costs as a result of incurring more expenditure on IT systems and licenses, legal and advisory services, internet and telecommunications; PLN 1,4 million of commission costs resulting from higher amounts paid to payment service providers through which clients deposit their funds to transaction accounts and increase by PLN 1,4 million other costs.
The Management Board expects that in 2018 operating expenses should be at a level comparable (slightly higher) to that observed in the 2017. The final level will depend on the variable remuneration elements paid to employees, the level of marketing expenditures and the impact of ESMA’s product intervention on the level of revenues generated by the Group. The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures will depend on the impact of the results and profitability of the Group and on responsiveness of the customers to the actions taken. The impact of ESMA’s product intervention on the Group’s revenues will determine, if necessary, a revision of the cost assumptions for further quarters of this year.
DEVELOPMENT PROSPECTS IN 2018
The Group plans further development by expanding the customer base and product offer, penetrating existing markets and expanding geographically to new markets in Africa and Asia, as well as Latin America, using its presence in Belize as a starting point for expansion and business development in other countries of the region.
The entry into force of product intervention by ESMA creates both opportunities and threats for XTB. On the one hand, there is a temporary drop in trade volumes among European brokers. On the other hand, the Management Board of XTB is convinced of the business’s vitality over a longer time horizon. It seems likely that clients gradually adjust their trading strategies to a lower level of financial leverage and FX/CFD market will be consolidated. Changes in regulations may make business activity unattractive for some entities, especially those focused on a quick profit and aggressive marketing strategies. Brokers with a wide range of products and an established business position, as in the case of XTB, have a chance to increase their existing market share.