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TechFinancials Results 2015

TechFinancials Results 2015TechFinancials Results 2015 provide food for thought as the mixed bag of good and bad performance, misleading statements from the CEO and Chair, plus an impending CySEC fine promise an exciting ride.

Yesterday the TechFinancials Results 2015 were released which offers a mixed bag of good and bad performance but which ultimately has lead to:

  • operating loss of US$0.1 million (2014: operating profit US$1.0 million)
  • pre-tax loss of US$0.4 million (2014: pre-tax profit US$0.8 million)

on a 12% decrease in group revenue from US$15.5m (2014) to US$13.6m.. The share price remained ‘unch’ at 12.5p equating to a market cap. of £8.18m..

At 31st December 2015 the company was sitting on US$3.4m.

What is more disappointing is the overall tenor of the report, in particular the Chairman Chris Bell’s statement, where the B2C performance was attributable to an ‘increased regulatory environment’ and ‘increased regulatory supervision’, plus the CEO Asaf Lahav’s comment about ‘….lower than expected rate of customer conversion resulting in part from the impact of new CySEC regulations in Cyprus.’ Quite misleading……….

B2B

The positive stand-out number in the report is the B2B revenue growth of 30% year-on-year rising from US$6.6m to US$8.6m. This revenue increase partly reflected the increase in active brokers using the TechFinancials technology which rose from 48 to 56, an increase of 16.7%.

Unfortunately a breakdown of the B2B revenue by active broker is not available which is a pity since it would be interesting to know how much of that revenue is attributable to 24option, i.e. what is the risk to TechFinancials of 24option leaving the fold.

Over the year a basic FX trading platform was introduced and mobile and tablet delivery was also made available. A CFD solution is expected to be launched later this year.

TechFinancials has identified the Far East as the place to expand into and has accordingly opened an office in Hong Kong. To tie in with this strategy the company is building a platform that will be compliant with Japanese FSA regulation.

For some reason TechFinancials, along with other Tel Aviv based binary operations, seem to believe that there will be a demand for their technology in the United States, that the Cantor Exchange needs minimalistic Israeli interfaces. The likes of RTS, Orc and other established operators providing trading interfaces to the US exchanges are already operating and if Cantor Exchange ever looked like taking off these heavyweights, at a flick of a switch, would be in the space, but providing a trading interface that is connected to every exchange in the world, not just Cantors.

B2C

The B2C revenues were a disaster falling from US$8.9m to US$5.0m, a 44% drop. This drop is attributed to a ‘tougher regulatory environment’ which is true since financial regulators across Europe have been pressuring CySEC to abandon their ‘light touch’ approach and regulate these binary options outfits in a proper manner.

TechFinancials/Optionfortune

This JV has already been commented on at length in earlier posts.

techfinancials results 2015TechFinancials/IBID

An joint venture was signed with IBID Holdings Limited, a specialist in realising value in online businesses, i.e. marketing specialists. The JV provides TechFinancials with 51% of the new corporate entity with IBID holding the remaining 49%. TechFinancials are folding a B2C venture of theirs into the new entity.

TechFinancials provides the technology and the intangible assets while IBID are investing $300,000 of cash thereby putting a US$612,245 value on the company while taking responsibility of the running of the operation. IBID will additionally add further finance if needed in order to take the business to net profitability. The additional funds will be a premium over the initial value of the shares, i.e. they don’t get any more shares for their bucks so the incentive is very much on IBID to hit a target of US$100,000 net profit on three consecutive months when the financing arrangement ends.

techfinancials results 2015OptionFair

Most of the B2C problems have stemmed from OptionFair which from this affilaite’s view was run appallingly but a new broom has come in to sweep out the old and bring in new management.

Nevertheless, the $8.9m revenues realized during 2014 were not in line with CySEC rules which have been enforced at last by CySEC much to TechFinancial’s chagrin. All the nonsense in the report about ‘increased regulatory environment’ and ‘increased regulatory supervision’ has only come about because the likes of OptionFair blatantly ignored the CySEC rules. Asaf Lahav mentions a ‘change’ in CySEC’s rules but this is misleading at the very least; there were no material rule changes (not like the ones CySEC are implementing this year) to hamper the broker’s operations, dodgy brokers were simply operating in an injudicious manner.

Chairman Chris Bell’s Statement

The TechFinancials Chairman Chris Bell compounded the misleading statements about regulation in his Chairman’s Statement:

“However, increased regulatory supervision was particularly felt in Europe as a consequence of CySEC changes which impacted the results of our B2C OptionFair business, and also in Japan, which affected our growing B2B division in this market.”

As previously pointed out, there were no ‘changes’, just the enforcement of previously ordained rules. As to

“…..and also in Japan, which affected our growing B2B division in this market.”

the Japanese regulatory environment is well understood and unchanged since the initial rules concerning binary options were set out. But since TechFinancials has already pointed out that it is still in the process of developing a regulated platform for the Japanese market, i.e. it is not up-and-running yet, it is extremely difficult to visualize exactly how ‘increased regulatory supervision was particularly felt……….in Japan’?

Since TechFinancials are about to be hit by, probably in CySEC standards, a hefty fine for a range of sharp practices Chris Bell might want to start to get a handle on the activities of the company he is Chairman of, along with the regulatory climate in the binary options industry.

The Future

The performance of TechFinancials’ B2C operation is going to be critical to TechFinancials this year. OptionFair must deliver on its new commitment to bring down acquisition costs, even if it does mean a far lower active client list.

IBID would appear to know what they’re about and the Far East is a far, far bigger market than Europe. If Optionfortune and the IBID JV deliver then OptionFair’s B2C could well be an asset in the year ahead.

TechFinancials B2B business is looking healthy enough but I could be overstretched if trying to deliver into Japan and the US simultaneously.

Another concern is 24option and their plans for the future. Rumours persist about their own proprietary platform and if 24option did cut adrift from TechFinancials it is likely we will see a very different B2B performance in the short term.

Finally, the CySEC fine must be a concern since just about every EC regulator has been getting on CySEC’s case about tightening up their ‘soft touch’ attitude to regulation in general, binary options in particular. Although CySEC has dished out fines to anyoption, EZTrader, Banc de Binary et al, this has not been enough to placate the rest of Europe’s regulators. Unfortunately for TechFinancials they could be stepping up in front of Demetra Kalogerou at a time she’s looking for an excuse to wield the really big stick, especially after today’s performance at iFX!

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