admiral markets as public offering of subordinated bonds · other financial markets with currency...
TRANSCRIPT
Admiral Markets AS Public offering of subordinated
bonds
Investor presentation
December 2017
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 4.3-4.2/3060 and can be found on the webpage of Admiral Markets AS (www.admiral.ee)*. 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. Theinformation 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 www.admiral.ee directs to the public offering homepage 2
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.
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
Executive summary
Bond offering
3
For a full overview about the Issuer and the Issue, please refer to the offering prospectus: www.admiral.ee
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.
Table of contents
Admiral Markets 6
The Issuer 17
Financial Performance 24
Bond Issue 29
Contact 32
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
Markets
Physical presence in 16
countries, serving customers
from 90+ countries
Active trading accounts
24,000 active trading
accounts, which have
executed at least one trade in
last 12 months
Employees
200 motivated professionals,
119 of which are working at
the Issuer, Admiral Markets
AS, as of 30.06.2017
Net income from trading
Almost 23 M EUR of net
income from trading in 2016
while Admiral Markets AS, the
Issuer, made nearly 18 M EUR
Admiral Markets at a glance
24,00090+ 20023 M EUR
Source: Audited annual reports for the financial year 2016 and unaudited interim reports for the six months up to 30.06.2017 of the Issuer and Admiral Markets Group AS
7
8
Why Admiral Markets?
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.Global presence
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.
Flexible trading accounts
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.
Education and analytics
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.
Security and software
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.
Local support
9
Awards
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 stock indices - 16 stock
indices and 2 index futures
CFDs on stocks - 64 stocks from
NYSE (29), Nasdaq (9), Euronext
(11), Xetra (12), BME (3)
Stocks – 65 stocks from USA &
Europe
CFDs on bond futures - 2 bond
indices (Bund ,10Yr T-Note)
CFDs on 5 cryptocurrency pairs
with fiat currencies - Bitcoin,
Ethereum, Ripple, Litecoin and
Bitcoin Cash
10
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.
11
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.
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.
Meta Trader 4
MT4Web Trader
MT5Supreme Edition
MT5Mobile
Meta Trader 5
MT4Supreme Edition
Trader’s Room
12
Major markets
Europe Other markets
EU License by EFSA (EE) - No 4.1 - 1/46
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.
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).13
Licenses and regulation
EU License by FCA (UK) - 595450
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.
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.
Australian License by ASIC - No 410681
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
14
Licenses and regulation
Cyprus License by CySEC - No 201/13
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.
Germany 15%
Poland 9%
Czech Republic
8%
Estonia 7%
Bulgaria 7%
Romania 7%
Lithuania 7%
Spain 7%
Latvia 5%
Hungary 4%
United
Kingdom 4%
Other markets
20%
Distribution of active trading accounts
15
Customers*
292
5,025
13,306
19,32821,681
24,503
28,767
24,486 24,109
2009 2010 2011 2012 2013 2014 2015 2016 H1-2017
Active trading accounts Size of minimum deposit raised
*Active accounts represent accounts where at least one trade was made in the last 12 months; data as of 30.06.2017
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
AMTS Solutions OÜ
Branches inBranches in
Representative office in RU
Investment service providers The Issuer Intra-group service provider
100% 100% 100% 100% 100% 100% 62% 100%
Runa Systems CP
Admiral Markets Chile SPA
Admiral Markets Pty Ltd.
Admiral Markets UK Ltd.
Admiral Markets AS
BCNEX OÜAdmiral Markets
Cyprus Ltd.
Representative office
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 ASAdmiral Markets UK
Admiral Markets Chile
Admiral Markets Australia
Admiral Markets Cyprus
Intra group service co-s
External liquidity providers
18
serves external customers, 0-10% of all group customers
Licence to provide investment services
unconsolidated total assets and equity (intra-group balances not eliminated, M EUR), 30.06.2017
securities transactions
intra-group services incl. risk management, IT, business development, HR, finance, legal
no of employees , 30.06.2017
Admiral Markets Group AS
- | - | 1 | A 6.0 | E 4.0
serves external customers, 10-40% of all group customers
A, E
serves external customers, 40+% of all group customers
| | 6 | A 2.2 | E 1.6
- | - | 14 | A 0.4 | E 0.3 | - | 4 | A 0.2 | E 0.1
| | 3 | A 0.3 | E 0.3| | 53 | A 4.0 | E 1.7 | | 119 | A 25.0 | E 23.6
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
Sergei Bogatenkov, CEO
Joined Admiral Markets in 2014. 10+ years in consulting,
banking and asset management at Swedbank, Versobank,
EY and Bank of Estonia
Master’s degree from Tallinn University of Technology,
executive training at Leipzig Graduate School of
Management (HHL)
Dmitri Lauš
Co-founder of Admiral Markets. Expert in financial
technology, has played integral role in technological
development of Admiral Markets.
Bachelor’s degree from Estonian Business School
Dmitry Kuravkin
With Admiral Markets since 2017. 10+ years of experience in
finance law (incl. litigations) in legal and compliance
positions at Swedbank and Pocopay.
Master’s degree from Tallinn University
The Management Board of the Issuer
20
Alexander Tsikhilov
Founder of Admiral Markets. Has been
involved in several entrepreneurial projects,
including an internet service provider.
PhD in Business Administration from Swiss
Business School
Anatolii Mikhalchenko
Joined Admiral Markets in 2004 as IB
manager. A member of the Supervisory
Board since 2011.
Graduate of ITMO University in Saint-
Petersburg
Anton Tikhomirov
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
Aleksandr Ljubovski
Joined Admiral Markets in March 2010.
Currently head of risk and compliance.
Degree in Logistics, Materials and Supply
Chain Management from TTK University
The Supervisory Board of the Issuer
21
Miti
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.
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.
Loss from mismanagement, fraud, unprofessional practices, human errors and IT systems
Mitigation: use of risk controls, assessment and monitoring tools.
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
Key risks
Market Risk
Credit risk
Operational risk
Liquidity risk
Admiral Markets 6
The Issuer 17
Financial Performance 24
Bond Issue 29
Contact 32
9,052
13,48414,051
13,197
16,485
17,953
9,003
0
5000
10000
15000
20000
2011 2012 2013 2014 2015 2016 H1-2017
24
Admiral Markets AS: financial highlights
4,294
5,391
3,586
2,219
-2,517
5,888
2,186
-4000
-2000
0
2000
4000
6000
8000
2011 2012 2013 2014 2015 2016 H1-2017
*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 createdunprecedented 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 eventtriggered 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 Issuerrecognised EUR 9.9 M of receivables as doubtful in 2015. Without this one-off expense, the operations of the Issuer were profitable in 2015. After the event, the Issuermodified its risk management policy to avoid similar losses in the future.
Net profit from trading Profit (loss) for the accounting period*
1,0
00
EU
R
1,0
00
EU
R
Source: Audited annual reports of the Issuer (2011-2016), unaudited interim report of the Issuer for the six months up to 30.06.2017
25
Admiral Markets AS: financial highlights
1,0
00
EU
R
Source: Audited annual reports of the Issuer (2011-2016), unaudited interim report of the Issuer for the six months up to 30.06.2017
26%36%
20%
10%-12%
26%
50%
38%
22%
12%
-14%
29%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
2011 2012 2013 2014 2015 2016
Efficiency
ROA ROE
8,648
14,036
17,622
19,841
17,324
22,75223,613
8,034
781
3,2872,049
3,090
1,371 1,433
0
5000
10000
15000
20000
25000
30000
2011 2012 2013 2014 2015 2016 H1-2017
Owners’ equity and liabilities
Equity Liabilities
26
Admiral Markets AS: Balance sheet
(1,000 EUR) 31.12.2014 31.12.2015 31.12.2016 30.06.2016 30.06.2017
Cash and equivalents 17,798 15,585 18,018 15,323 19,080
Financial assets at fair value through profit and loss 236 98 2,422 1,848 939
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 1,081 860 997 839
TOTAL ASSETS 21,889 20,414 24,123 21,811 25,046
Financial liabilities at fair value through profit or loss 248 122 52 119 142
Payables and prepayments 1,345 2,741 1,075 1,185 1,047
Provisions 456 227 244 763 244
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 259 259 259 259 259
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 25,046The 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 30.06.2016 and 30.06.2017 are unaudited. The financial statements of 2015 have been corrected retrospectively in the annual report for 2016 and this presentation presents the corrected amounts.
(1,000 EUR) 2014 2015 2016 H1-2016 H1-2017
Net profit from trading of financial assets at fair value through profit or loss with clients and liquidity providers
15,486 20,572 24,853 11,772 13,322
Commission fee income 24 474 653 227 42
Commissions and brokerage fee expense -1,619 -3,776 -7,325 -2,917 -4,334
Other trading activity related expenses -694 -785 -228 -133 -28
Net income from trading 13,197 16,485 17,953 8,949 9,003
Other income 160 247 163 56 197
Other financial income and expenses 214 166 445 -188 -464
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 -263 -281 -308 -155 -107
Profit (loss) before income tax 2,232 -2,500 6,018 2,624 2,517
Income tax -13 -17 -130 -43 -331
Profit (loss) for the accounting period 2,219 -2,517 5,888 2,580 2,186
Admiral Markets AS: Income statement
27The 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 30.06.2016 and 30.06.2017 are unaudited. The financial statements of 2015 have been corrected retrospectively in the annual report for 2016 and this presentation presents the corrected amounts.
Admiral Markets 5
The Issuer 16
Financial Performance 22
Bond Issue 27
Contact 32
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 30.06.2017)
b) Tier 2 capital (proceeds of the issue): EUR 5,000,000
c) Total regulatory capital base: EUR 26,287,596
29
Securities Unsecured subordinated bonds
Issuer Admiral Markets AS
Arranger Admiral Markets AS
Legal advisor Advokaadibüroo TGS Baltic AS
Maturity date 28.12.2027
Issue size Up to EUR 5,000,000
ISIN code EE3300111251
30
Terms of Admiral Markets subordinated bonds
Nominal value of the bond EUR 100
Issue date 28.12.2017
Interest rate 8% p.a. 30E/360
Interest paymentSemi-annual 28.06 and 28.12 every year
OfferingPublic offering in Estonia, Latvia and Lithuania
ListingThe Issuer applies for listing at Nasdaq Baltic Bond List
Subscription period08.12.2017 10:00 to 19.12.2017 17:00
Key risks specific to the bonds
31
Bond investors are not entitled to any ownership, voting,
dividends or any other rights which would be represented
with equity securities
Credit Risk
Liquidity risk
Price risk
No ownership 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
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
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
Subordination risk
Legislation risk
Tax 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
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
The Issuer may fail to meet its obligations arising from the
bonds in a duly and timely manner
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.
Early redemption risk
Contact
Mr. Sergei Bogatenkov
Address: Ahtri 6, 10151, Tallinn, 10151
E-mail: [email protected]
Telephone: +372 6 309 300
Webpage: www.admiral.ee