Worldspreads announces loss

[Black Swan]

meant to post this up last week, quite a reversal from 3ml profit the previous year but nothing catastrophic imho..However, I did wonder if the extra marketing costs included the zero spreads offer/s..? Not so sure on how clever the expansion plan is either but you can only measure that with the cruelty of hindsight. It does appear to me that a fair proportion of financial firms have had selective memory of how the *system* crashed in 2008 and how it nearly took them with it..


Financial spread betting company WorldSpreads has reported a pre-tax loss of almost €800,000 for the year to the end of March, after making a profit of €3m a year earlier.

Revenue from continuing businesses was up 25% to just over €16m. Average trades per day were up 56% to 9,616, while more than 4,500 new customers were registered in the year.

The main reason for the loss was a big increase in spending on infrastructure and marketing, as WorldSpreads has opened five new offices in Germany, France, Sweden, Denmark and Portugal. There was also a significant sales and marketing programme in the UK.

WorldSpreads said its strategy had put the company in a strong position for future growth, adding that it was satisfied with its performance in the first quarter of the current financial year.
http://www.rte.ie/news/2011/0701/worldspreads-business.html

 

[Yuppie13]

My winnings ;-)

By the way the stock looks actually quite cheap, below book value.
Seem to be able to still expand with the cash on their books. They blew up their marketing spend 5-fold to 3.5m and only make a little loss, not so bad at all.
Business is quite riskless, actually. If they do well in the European markets, this could be interesting. Just make 1 million of profit, you got a P/E of about 10. This would happen if they just cut the marketing spending. Gotta think if I should take a punt here....

 

[Black Swan]

By the way the stock looks actually quite cheap, below book value.

Seem to be able to still expand with the cash on their books. They blew up their marketing spend 5-fold to 3.5m and only make a little loss, not so bad at all.

Business is quite riskless, actually. If they do well in the European markets, this could be interesting. Just make 1 million of profit, you got a P/E of about 10. This would happen if they just cut the marketing spending. Gotta think if I should take a punt here....

Is it their cash? Suspend marketing and they rely on their reputation, or the churn of their exisiting customers..If that marketing campaign has increased their active number of spread-betters exponentially and they keep them it's been a good strategy and well executed. However, I'm reliably informed that loyalty is a rare commodity in the spread betting industry so if these cusotmers have been seduced by the zero spreads offer it may prove more diffuclt to retain them....

 

[Yuppie13]

Well they can't include the cash held on behalf of the clients in their accounts. This would be liabilities. There is a footnote regarding this. Probably its still left from the IPO.

Was hypothetically regarding the suspension of marketing activities. Just shows that they are actually quite strong and would be profitable ex this, 5x increase on marketing and only a small loss is not so bad....

 

[Black Swan]

Well they can't include the cash held on behalf of the clients in their accounts. This would be liabilities. There is a footnote regarding this. Probably its still left from the IPO.

Was hypothetically regarding the suspension of marketing activities. Just shows that they are actually quite strong and would be profitable ex this, 5x increase on marketing and only a small loss is not so bad....

Compliance with regs. will ensure that SB firms have to separate clients funds etc..not as straight forward as it sounds..

Strong? Nope, I'd suggest they're OK..They and others could be in for bumper months/a year or two if we have a major sell off of the indices etc..