Admiral Markets AS Public offering of subordinated bonds

Transcription

1 Admiral Markets AS Public offering of subordinated bonds Investor presentation December 2017

2 Disclaimer This presentation has been prepared in connection with the public offering and listing of the subordinated bonds of Admiral Markets AS. The presentation in not the prospectus and does not include all information relevant for a potential about the bonds and the issuer. The Prospectus for the public offering and listing of the bonds has been registered by the Estonian Financial Supervision Authority under the number /3060 and can be found on the webpage of Admiral Markets AS ( This presentation should be read in conjunction with the prospectus. Any decision to invest in the Bonds should be based on consideration of the prospectus as a whole by the Investor. Nothing in this document shall be treated as a representation or warranty as to the profitability of the investments into the Company. Nothing contained herein is, or may be relied upon as, a promise, representation or guarantee as to the future performance or policies of the Company or as to any other circumstances that may or may not occur in the future. Nothing in this document constitutes an offer or invitation by or on behalf of the Company to invest into the Company. By receiving this document, you accept and acknowledge that no special relationship of trust or duty whatsoever exists that would require updating the information herein and confirm that you are not relying upon any such special relationship of trust or duty (including but not limited to under Article 1048 of the Estonian Law of Obligations Act, in Estonian: Võlaõigusseadus). Neither this document nor any information contained herein shall be treated as legal, financial or tax advice of any kind. Nothing in this document shall be construed as the giving of investment advice by the Company or any other person. You should take independent advice from qualified professional advisors before making investment decision(s). An investment in the bonds is a subject to a number of risks that should be considered before making an investment decision. The information provided in this presentation does not provide a complete overview of the issuer s business, the terms and conditions of the bonds, or the risks specific to the bonds and the issuer. Always refer to the prospectus before making any investment decision. *Webpage directs to the public offering homepage 2

3 Executive summary Admiral Markets AS (hereinafter also the Issuer ), a part of the international online brokerage group Admiral Markets Group AS ( Admiral Markets ), is announcing a public bond offering. Admiral Markets, established and headquartered in Tallinn, Estonia has expanded its reach to become a truly global company. Its subsidiaries, investment firms, serve clients in 90+ countries. Admiral Markets offers its customers online trading in Forex and other financial markets with currency pairs and a wide range of derivatives (mostly contracts for difference, CFDs). The Issuer is licensed by the Estonian Financial Supervision Authority to provide cross border brokerage services as an investment firm in the 28 Member States of the EU, and in three EEA countries: Iceland, Norway and Liechtenstein. There are three other regulated investment firms in Admiral Markets Group: in the UK, Cyprus and Australia. Bond offering Investors are offered 10 year unsecured subordinated bonds with a coupon rate of 8% The proceeds of the offering will be used to strengthen the regulative capital of the Issuer to support its fast growth. The Issuer is applying for the bonds to be listed on the Nasdaq Baltic Bond List For a full overview about the Issuer and the Issue, please refer to the offering prospectus: 3

4 Definitions Contract for difference (CFD) a tradable derivative contract under which gains or losses of the parties are settled through cash payments rather than by the delivery of physical goods or securities. CFD agreements offer investors the possibility to trade with high leverage. CFDs can be used for both long and short positions. Investment firm a company whose permanent activity is the provision of investment services or the performance of investment activities on a professional basis. Investment firms are under the supervision of financial supervision authorities in many countries (including EU countries). Investment firms usually have higher capital requirements than regular legal entities. Liquidity provider a market participant acting as both the buyer and seller of a particular security to profit on the bid-ask spread. In derivative markets the liquidity providers have an important risk management role as they allow the market participants to hedge their (excess) open positions. 4

5 Table of contents Admiral Markets 6 The Issuer 17 Financial Performance 24 Bond Issue 29 Contact 32

6 Admiral Markets is a group of companies offering online trading in Forex and other financial markets with currency pairs and derivatives on precious metals, stocks, commodities, indices and cryptocurrencies. Our strong dedication to state-of-the-art software and quality assurance means that our clients receive the best, most transparent trading experience. 6

7 Admiral Markets at a glance , M EUR Markets Active trading accounts Employees Net income from trading Physical presence in 16 countries, serving customers from 90+ countries 24,000 active trading accounts, which have executed at least one trade in last 12 months 200 motivated professionals, 119 of which are working at the Issuer, Admiral Markets AS, as of Almost 23 M EUR of net income from trading in 2016 while Admiral Markets AS, the Issuer, made nearly 18 M EUR 7 Source: Audited annual reports for the financial year 2016 and unaudited interim reports for the six months up to of the Issuer and Admiral Markets Group

8 Why Admiral Markets? Global presence Having a physical presence in its most important markets enables Admiral Markets to get to know its clients personally, understand them better and offer them a better service. Flexible trading accounts Admiral Markets enables trading with the local and the best-known instruments in each of its main markets. Deposits to trading accounts can be made in most national currencies. Multiple trading accounts in different currencies are allowed to protect client s capital from currency fluctuations. Education and analytics Admiral Markets helps its customers to make thoughtful and intelligent trading decisions by publishing books and offering educational programmes (seminars, live webinars, videos), designed to teach trading skills and explain the financial markets. Security and software Local support Admiral Markets servers are located at LD4 Equinix Datacenter, UK, right next to all major liquidity providers, ensuring the best execution and the lowest latency. It also offers the most reliable and popular trading platform, MetaTrader 5. Country offices with local experts in all key markets. Local knowledge, support, seminars and many other elements allow a closer personal relationship with customers. Support via phone and live chat in more than 20 languages. 8

9 Awards 9

10 Instruments 56 currency pairs, including pairs with numerous exotic currencies e.g. South African Rand, New Zealand Dollar 8 CFDs on commodities, including 5 metals - gold (USD and AUD), silver, platinum, palladium (all in USD) and 3 energies - Brent, WTI oil, natural gas (all in USD) CFDs on 5 cryptocurrency pairs with fiat currencies - Bitcoin, Ethereum, Ripple, Litecoin and Bitcoin Cash CFDs on stocks - 64 stocks from NYSE (29), Nasdaq (9), Euronext (11), Xetra (12), BME (3) Stocks 65 stocks from USA & Europe CFDs on stock indices - 16 stock indices and 2 index futures CFDs on bond futures - 2 bond indices (Bund,10Yr T-Note) 10

11 Trading platforms Admiral Markets is an online trading provider, i.e. all customer transactions, including trading and money transfers, are served through online channels. It has developed a two-layer service channel for the customers The Trader s Room platform for account and money management and (2) Meta Trader for online trading. Meta Trader 4 MT4 Web Trader MT5 Supreme Edition MT4 Supreme Edition Meta Trader 5 MT5 Mobile A popular online trading platform, developed by MetaQuotes Software, a long term ally of Admiral Markets. Admiral Markets contributes to the development of the platform by testing the platform and can therefore offer new versions to customers long before they arrive to market. Trader s Room An app used by clients to register, open accounts, manage deposits and withdrawals, amend personal information and submit documents for the identification of clients. Also includes a billing system and single log-on service to all the services offered by Admiral Markets. 11

12 Major markets Europe Other markets 12

13 Licenses and regulation EU License by EFSA (EE) - No 4.1-1/46 EU License by FCA (UK) Licensee: Admiral Markets AS Services: (1) Reception and transmission of orders related to securities; (2) Execution of orders related to securities in the name of or for the account of the client; (3) dealing in securities on own account. Licensee: Admiral Markets UK Ltd. Services: (1) Arranging (bringing about) deals in investments; (2) Arranging safeguarding and administration of assets; (3) Dealing in investments as agent; (4) Dealing in investments as principal; (5) Making arrangements with a view to transactions in investments. Ancillary services: (1) safekeeping and administration of securities for a client; (2) Grant of a credit to an investor to conduct securities transactions; (3) foreign exchange services connected with the provision of investment services; (4) provision of recommendations on investment and financial analysis or other general recommendations; (5) other investment and ancillary services in connection with derivative instruments. Markets: 28 Member States of the European Union, 3 EEA countries (Iceland, Norway and Liechtenstein). Limitations: Admiral Markets UK Ltd is unable to hold financial instruments for own account unless it meets certain conditions. Markets: 28 Member States of the European Union, 3 EEA countries (Iceland, Norway and Liechtenstein). Other: Financial Services Compensation Scheme (FSCS) for up to 85,000 under the Financial Conduct Authority Client Asset (CASS) rules. The slide presents a short summary of the terms of the licenses. For detailed overview please refer to the homepage of the financial supervisory authority that has issued the license. 13

14 Licenses and regulation Australian License by ASIC - No Cyprus License by CySEC - No 201/13 Licensee: Admiral Markets Pty Ltd. Services: (a) Provision of financial advice for deposit and payment products, derivatives and foreign exchange contracts; (2) Issuing, applying for, acquiring, varying or disposing of a financial product in respect of derivatives; and foreign exchange contracts; and applying for, acquiring, varying or disposing of a financial product on behalf of another person to retail and wholesale clients Markets: Australia and Asia Licensee: Admiral Markets Cyprus Ltd. Services: (1) Reception and transmission of orders in relation to one or more financial instruments, (2) Execution of orders on behalf of clients, (3) Portfolio management Ancillary services: (1) Safekeeping and administration of financial instruments, including custodianship and related services (2) Foreign exchange services where these are connected to the provision of investment services Markets: 28 Member States of the European Union, 3 EEA countries (Iceland, Norway and Liechtenstein) Other: Membership in Investor Compensation Fund, which secures any claims of covered clients against members of the fund The slide presents a short summary of the terms of the licenses. For detailed overview please refer to the homepage of the financial supervisory authority that has issued the license. 14

15 Customers * Active trading accounts Size of minimum deposit raised Distribution of active trading accounts 28,767 24,503 24,486 24,109 21,681 19,328 13,306 5, H Other markets 20% United Kingdom 4% Hungary 4% Latvia 5% Spain 7% Lithuania 7% Romania 7% Germany 15% Bulgaria 7% Poland 9% Czech Republic 8% Estonia 7% * Active accounts represent accounts where at least one trade was made in the last 12 months; data as of

16 Admiral Markets 6 The Issuer 17 Financial Performance 24 Bond Issue 29 Contact 32

17 Legal structure of Admiral Markets Admiral Markets AS, the Issuer, is a subsidiary of Admiral Markets Group AS, the parent company of a multinational group operating under the trademark «Admiral Markets». Admiral Markets Group AS is a holding company with no operations of its own. Admiral Markets Group AS 100% 100% 100% 100% 100% 100% 62% 100% Admiral Markets AS Admiral Markets UK Ltd. Admiral Markets Pty Ltd. Admiral Markets Chile SPA Admiral Markets Cyprus Ltd. BCNEX OÜ AMTS Solutions OÜ Runa Systems CP Branches in Branches in Representative office office in RU Investment service providers The Issuer Intra-group service provider 17

18 The Issuer s role in the Admiral Markets group The Admiral Markets group is highly integrated - each group member fulfils its specific role and is interdependent of other members. The Issuer has the central role within the group as the sole liquidity provider to other group companies and responsibility for all back and middle-office functions. In addition, the Issuer is itself one of the leading investment service providers in Estonia. Admiral Markets Group AS A 6.0 E 4.0 Admiral Markets UK Admiral Markets Australia 6 A 2.2 E 1.6 Admiral Markets AS External liquidity providers Admiral Markets Cyprus A, E securities transactions intra-group services incl. risk management, IT, business development, HR, finance, legal unconsolidated total assets and equity (intra-group balances not eliminated, M EUR), Licence to provide investment services 53 A 4.0 E A 25.0 E A 0.3 E 0.3 no of employees, serves external customers, 0-10% of all group customers Intra group service co-s Admiral Markets Chile A 0.4 E A 0.2 E 0.1 serves external customers, 10-40% of all group customers serves external customers, 40+% of all group customers 18

19 Business model and sources of income Net profit from trading (EUR 24,852,520 in 2016) market value changes of tradeable derivatives and other financial assets, including income from A-book trades and B-book trades A-book trades are sent directly to external liquidity providers and the Issuer makes its income from the spread. The Issuer does not take market risk. B-book trades are the clients orders that the Issuer keeps internally, i.e. the Issuer takes an open position which is partially hedged internally with the opposite open positions from other clients orders. Income from B-book trades involves the whole spread (the spread is not shared with external liquidity providers) and gains from favourable movements of securities prices. Commission fee income (EUR 653,267) the consideration received for mediation of services. Interest income (EUR 70,567) interest charged for loans to other Admiral Markets Group companies, interest from bonds held as the liquidity reserve and other financial assets Other income (EUR 163,433) revenue from the sale of goods (e.g. educational books) and intra-group services etc. Source: audited annual report for the 2016 financial year 19

20 The Management Board of the Issuer Sergei Bogatenkov, CEO Joined Admiral Markets in years in consulting, banking and asset management at Swedbank, Versobank, EY and Bank of Estonia Dmitri Lauš Co-founder of Admiral Markets. Expert in financial technology, has played integral role in technological development of Admiral Markets. Dmitry Kuravkin With Admiral Markets since years of experience in finance law (incl. litigations) in legal and compliance positions at Swedbank and Pocopay. Master s degree from Tallinn University of Technology, executive training at Leipzig Graduate School of Management (HHL) Bachelor s degree from Estonian Business School Master s degree from Tallinn University 20

21 The Supervisory Board of the Issuer Alexander Tsikhilov Anatolii Mikhalchenko Anton Tikhomirov Aleksandr Ljubovski Founder of Admiral Markets. Has been involved in several entrepreneurial projects, including an internet service provider. PhD in Business Administration from Swiss Business School Joined Admiral Markets in 2004 as IB manager. A member of the Supervisory Board since Graduate of ITMO University in Saint- Petersburg Joined Admiral Markets during a merger with a Russian brokerage company. Develops Admiral Markets business in Spain and Latin America. Has been in the industry since 1999 Joined Admiral Markets in March Currently head of risk and compliance. Degree in Logistics, Materials and Supply Chain Management from TTK University 21

22 Key risks Market Miti Risk Derives from carrying assets and liabilities sensitive to foreign exchange rates, as well as currency pairs and derivatives on shares, precious metals, indices, cryptocurrencies and commodities in its trading portfolio. Mitigation: risk limits, the excess risk is hedged with external liquidity providers. Credit risk Potential loss if its counterparties do not meet their obligations to the Issuer. Affects cash held with third parties, loans granted and receivables. Mitigation: the credit risk of client trading portfolios is mainly managed through leveraging derivatives and collateral rates. Cash is held in a diverse range of highly rated credit institutions. Operational risk Loss from mismanagement, fraud, unprofessional practices, human errors and IT systems Mitigation: use of risk controls, assessment and monitoring tools. Liquidity risk Inability to meet its obligations as a result of a mismatch of liquidity of assets and liabilities Mitigation: monitoring of payables and receivables of different periods of time on a daily basis. 22

23 Admiral Markets 6 The Issuer 17 Financial Performance 24 Bond Issue 29 Contact 32

24 1,000 EUR 1,000 EUR Admiral Markets AS: financial highlights Net profit from trading Profit (loss) for the accounting period* ,484 14,051 13,197 16,485 17, ,294 5,391 3,586 5, ,052 9, ,219 2, H H ,517 *On 15 January 2015, the Swiss National Bank announced that it would terminate its exchange rate ceiling for francs that had been in place for 3 years. The decision created unprecedented volatility in the foreign exchange market and led to almost instant loss of highly leveraged Swiss franc investments betting on the franc's weakening. The event triggered realisation of credit risk for the Issuer as some of its liquidity providers were unable to meet their obligations to the Issuer. The Management Board of the Issuer recognised EUR 9.9 M of receivables as doubtful in Without this one-off expense, the operations of the Issuer were profitable in After the event, the Issuer modified its risk management policy to avoid similar losses in the future. 24 Source: Audited annual reports of the Issuer ( ), unaudited interim report of the Issuer for the six months up to

25 1,000 EUR Admiral Markets AS: financial highlights Owners equity and liabilities Efficiency Equity Liabilities 1,371 1,433 3,287 23,613 2,049 22,752 3,090 19,841 17,622 17, ,036 8,034 8, H % 50% 40% 30% 20% 10% 0% -10% -20% ROA ROE 50% 38% 26% 36% 29% 22% 20% 12% 26% 10% -12% % Source: Audited annual reports of the Issuer ( ), unaudited interim report of the Issuer for the six months up to

26 Admiral Markets AS: Balance sheet (1,000 EUR) Cash and equivalents 17,798 15,585 18,018 15,323 19,080 Financial assets at fair value through profit and loss ,422 1, Short term loans, receivables and prepayments 2,522 3,651 2,823 3,643 4,187 Total current assets 20,556 19,334 23,263 20,814 24,206 Total non-current assets 1,333 1, TOTAL ASSETS 21,889 20,414 24,123 21,811 25,046 Financial liabilities at fair value through profit or loss Payables and prepayments 1,345 2,741 1,075 1,185 1,047 Provisions Total liabilities 2,049 3,090 1,371 2,066 1,433 Share capital 2,586 2,586 2,586 2,586 2,586 Statutory reserve capital Retained earnings 16,997 14,480 19,908 16,900 20,769 Total owners equity 19,841 17,324 22,752 19,744 23,613 TOTAL LIABILITIES AND OWNERS EQUITY 21,889 20,414 24,123 21,811 25,046 The annual reports for the financial years 2014 and 2015 have been audited by Ernst & Young Baltic AS and the annual reports for 2016 by PricewaterhouseCoopers AS. Interim reports for the six months up to and are unaudited. The financial statements of 2015 have been corrected retrospectively in the annual report for 2016 and this presentation presents the corrected amounts. 26

27 Admiral Markets AS: Income statement Net profit from trading of financial assets at fair value through profit or loss with clients and liquidity providers (1,000 EUR) H H ,486 20,572 24,853 11,772 13,322 Commission fee income Commissions and brokerage fee expense -1,619-3,776-7,325-2,917-4,334 Other trading activity related expenses Net income from trading 13,197 16,485 17,953 8,949 9,003 Other income Other financial income and expenses Personnel expenses -2,881-2,986-4,484-2,333-2,589 Operating expenses -8,195-16,131-7,751-3,705-3,522 Depreciation of fixed assets Profit (loss) before income tax 2,232-2,500 6,018 2,624 2,517 Income tax Profit (loss) for the accounting period 2,219-2,517 5,888 2,580 2,186 The annual reports for the financial years 2014 and 2015 have been audited by Ernst & Young Baltic AS and the annual reports for 2016 by PricewaterhouseCoopers AS. Interim reports for the six months up to and are unaudited. The financial statements of 2015 have been corrected retrospectively in the annual report for 2016 and this presentation presents the corrected amounts. 27

28 Admiral Markets 5 The Issuer 16 Financial Performance 22 Bond Issue 27 Contact 32

29 Use of proceeds The Issuer seeks to continue its fast growth, resulting in the need of additional capital buffers to balance the increased volumes, meet its internal and regulatory capital requirements and ensure the long-term sustainability of the business. The proceeds from the Issue will be used to boost the regulative capital base of the Issuer as follows: a) Tier 1 capital: EUR 21,287,596 (as at ) b) Tier 2 capital (proceeds of the issue): EUR 5,000,000 c) Total regulatory capital base: EUR 26,287,596 29

30 Terms of Admiral Markets subordinated bonds Securities Issuer Arranger Unsecured subordinated bonds Admiral Markets AS Admiral Markets AS Nominal value of the bond EUR 100 Issue date Interest rate 8% p.a. 30E/360 Legal advisor Advokaadibüroo TGS Baltic AS Maturity date Issue size Up to EUR 5,000,000 ISIN code EE Interest payment Offering Listing Subscription period Semi-annual and every year Public offering in Estonia, Latvia and Lithuania The Issuer applies for listing at Nasdaq Baltic Bond List :00 to :00 30

31 Key risks specific to the bonds Credit Risk The Issuer may fail to meet its obligations arising from the bonds in a duly and timely manner Subordination risk The Bonds are subordinated to all unsubordinated claims, i.e. in case of liquidation or bankruptcy, the claims arising from the bonds are to be satisfied only after full satisfaction of all unsubordinated claims Liquidity risk The Issuer is applying for the bonds to be listed on the Nasdaq Tallinn Bond List. However, this does not guarantee admission to trading or liquidity in the secondary market Legislation risk Possible loss of assets or a decrease in profitability by the Issuer due to amendments in legal acts of the countries in which the Issuer conducts its business activities Price risk During the initial offering, the bonds are offered at nominal value. In the secondary market the price of the bonds may increase or decrease due to market situation or events related to the Issuer Tax risk A change to tax assessment and withholding procedures applicable to the tax residents and non-residents of Estonia may affect the value of the interest income No ownership risk Bond investors are not entitled to any ownership, voting, dividends or any other rights which would be represented with equity securities Early redemption risk The Bonds may be redeemed prematurely on the initiative of the Issuer, if any event provided for in Article 78 (4) of Regulation (EU) No. 575/2013 occurs and the EFSA authorises such early redemption. 31

32 Contact Mr. Sergei Bogatenkov Address: Ahtri 6, 10151, Tallinn, Telephone: Webpage: