TIDMLCG
RNS Number : 3559D
London Capital Group Holdings PLC
22 March 2011
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED
STATES, AUSTRALIA, CANADA OR JAPAN OR ANY JURISDICTION IN WHICH
SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL
22 March 2011
London Capital Group Holdings plc
("London Capital" or the "Company" and together with its
subsidiaries, the "Group")
Proposed Placing of New Ordinary Shares
and
Notice of General Meeting
Highlights
-- The board of London Capital is pleased to announce a placing
to raise up to approximately GBP8.0 million by the issue of up to
13,333,333 new ordinary shares (the "Placing Shares") at 60 pence
per share (the "Placing");
-- Whilst the Group has sufficient cash resources to meet its
current liabilities, including a provision of GBP3.2m (GBP2.3
million net of tax) for the revised Financial Ombudsman Service
("FOS") assessment announced in the Group's results for the year
ending 31 December 2010, it intends to use the proceeds of the
Placing to ensure it has sufficient resources in place to satisfy
the FSA's capital adequacy requirements. This will allow the Group
to continue trading without disruption at current levels of
activity. Further, the proceeds will allow management to accelerate
the Group's international expansion strategy and to pursue
additional growth opportunities;
-- Certain Directors have confirmed their intention to
participate in the Placing (Simon Denham CEO - Rachel Woodford,
Group Director, Marketing & Strategy & Frank Chapman,
Non-Executive Director);
-- The Placing is subject to approval by Shareholders at a
General Meeting to be held at 9:30 a.m. on 7 April 2011 at the
offices of Allen & Overy LLP, One Bishops Square, London, E1
6AD;
-- The Group has started the year well and current trading leads
the Board to be optimistic for the rest of the year. The spread
betting division has delivered solid revenues in line with
expectations which is very satisfactory given the low volatility
conditions experienced in the first two months of the year. The FX
division has seen a substantial increase in trading volumes and the
newly launched CFD divisions are showing signs of breakeven much
earlier than anticipated.
-- A circular containing the details of these proposals is being
posted to shareholders today and will be available on the Company's
website: www.londoncapitalgroup.com/circulars.html.
Simon Denham, Chief Executive, commented:
"Whilst the Group has sufficient cash resources to meet its
current liabilities the proposed placing of approximately GBP8.0
million will enable London Capital to meet the FSA's capital
adequacy requirements and ensure the continued operating
effectiveness and profitability of the Group. The Board is entirely
confident of the underlying strength of the business as is
demonstrated by the intention of a number of Directors to make a
substantial investment in the Placing."
These highlights should be read in conjunction with the full
text of this announcement (the "Announcement").
This Announcement, and the information contained herein, is not
for publication, release or distribution, in whole or in part,
directly or indirectly, in or into the United States, Australia,
Canada or Japan or any other jurisdiction in which such publication
or distribution would be unlawful. This Announcement is for
information purposes only and does not constitute an offer to sell
or issue or the solicitation of an offer to buy or acquire shares
in the capital of the Company in the United States, Australia,
Canada or Japan or any other jurisdiction in which such an offer or
solicitation is unlawful.
The Placing Shares have not been and will not be registered
under the United States Securities Act of 1933 (as amended) (the
"Securities Act") or under the securities laws of any state of the
United States of America or qualify for distribution under any of
the relevant securities laws of Canada, Australia or Japan, nor has
any prospectus in relation to the Placing Shares been lodged with,
or registered by, the Australian Securities and Investments
Commission or the Japanese Ministry of Finance. Accordingly,
subject to certain exceptions, the Placing Shares may not be,
directly or indirectly, offered, sold, taken up, delivered or
transferred in or into the United States of America, Canada,
Australia or Japan. This Announcement does not constitute an offer,
or its solicitation, to subscribe for or buy any of the Placing
Shares to any person in any jurisdiction to whom it is unlawful to
make such offer or solicitation in such jurisdiction.
This Announcement has been issued by, and is the sole
responsibility of, the Company.
Cenkos Securities plc ("Cenkos Securities"), which is authorised
and regulated in the United Kingdom by the Financial Services
Authority ("FSA"), is acting as nominated adviser, broker and
financial adviser to the Company and no one else in connection with
the Placing and will not be responsible to any other person for
providing the protections afforded to customers of Cenkos
Securities or for advising any other person on the arrangements
described in this Announcement.
Cenkos Securities has not authorised the contents of, or any
part of, this Announcement and no liability whatsoever is accepted
by Cenkos Securities for the accuracy of any information or
opinions contained in this Announcement or for the omission of any
information. Cenkos Securities as nominated adviser and broker to
the Company, owes certain responsibilities to the London Stock
Exchange which are not owed to the Company or the Directors.
The distribution of this Announcement and the offering of the
Placing Shares in certain jurisdictions may be restricted by law.
No action has been taken by the Company that would permit an
offering of such shares or possession or distribution of this
Announcement or any other offering or publicity material relating
to such shares in any jurisdiction where action for that purpose is
required. Persons into whose possession this Announcement comes are
required by the Company to inform themselves about, and to observe,
such restrictions.
The statements contained in this Announcement that are not
historical facts are "forward-looking" statements. These
forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond the Company's control and
all of which are based on the Directors' current beliefs and
expectations about future events. Forward-looking statements are
typically identified by the use of forward-looking terminology such
as "believes", "expects", "may", "will", "could", "should",
"intends", "estimates", "plans", "assumes" or "anticipates" or the
negative of such words or other variations of them or comparable
terminology, or by discussions of strategy that involve risks and
uncertainties. In addition, from time to time, the Company or its
representatives have made or may make forward-looking statements
orally or in writing. Such forward-looking statements may be
included in, but are not limited to, press releases or oral
statements made by or with the approval of one of the Company's
authorised executive officers. These forward-looking statements and
other statements contained in this Announcement regarding matters
that are not historical facts involve predictions. No assurance can
be given that such future results will be achieved. Actual events
or results may differ materially as a result of risks and
uncertainties facing the Company and its subsidiary undertakings.
Such risks and uncertainties could cause actual results to vary
materially from the future results indicated, expressed or implied
in such forward-looking statements. The forward-looking statements
contained in this Announcement speak only as at the date of this
Announcement. Except to the extent required by the FSA, the London
Stock Exchange or applicable law, the Company will not necessarily
update any of them in light of new information or future events and
undertakes no duty to do so.
Any indication in this Announcement of the price at which
ordinary shares have been bought or sold in the past cannot be
relied upon as a guide to future performance. No statement in this
Announcement is intended to be a profit forecast and no statement
in this Announcement should be interpreted to mean that earnings
per share of the Company for the current or future financial years
would necessarily match or exceed the historical published earnings
per share of the Company.
This Announcement does not constitute a recommendation regarding
the Placing. The price of shares and the income from them may go
down as well as up and investors may not get back the full amount
invested on disposal of the shares.
The Placing Shares will not be admitted to trading on any stock
exchange other than the AIM Market of the London Stock Exchange
plc.
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE
PLACING. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS
DIRECTED ONLY AT: (A) PERSONS WHO ARE QUALIFIED INVESTORS AS
DEFINED IN SECTION 86(7) OF THE FINANCIAL SERVICES AND MARKETS ACT
2000, AS AMENDED ("FSMA"), BEING PERSONS FALLING WITHIN THE MEANING
OF ARTICLE 2(1)(E) OF THE EU PROSPECTUS DIRECTIVE (WHICH MEANS
DIRECTIVE 2003/71/EC AND INCLUDES ANY RELEVANT IMPLEMENTING
DIRECTIVE MEASURE IN ANY MEMBER STATE) (THE "PROSPECTUS
DIRECTIVE"); AND (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO
ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS
RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE
FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER
2005 (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE
49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED
ASSOCIATIONS, ETC") OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT
MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS TOGETHER
BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT MUST
NOT BE ACTED ON OR
RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS
DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS
LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH
THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND
WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT
DOES NOT ITSELF CONSTITUTE AN OFFER FOR THE SALE OR SUBSCRIPTION OF
ANY SECURITIES IN THE COMPANY.
For further information, please contact:
www.londoncapitalgroup.com
London Capital Group Holdings plc
Simon Denham, Chief Executive Officer
020 7456 7000
Cenkos Securities plc
Nicholas Wells/Camilla Hume
020 7397 8900
Smithfield Consultants
John Kiely
020 7360 4900
Introduction
The Board of London Capital today announces that it proposes to
raise up to approximately GBP8.0 million, before expenses, by way
of a placing of up to 13,333,333 new Ordinary Shares at a placing
price of 60 pence per share (the "Placing Price"), subject to the
passing of the Resolutions at the General Meeting which is convened
for 9.30 a.m. on 7 April 2011 (the "Placing").
The Company announced in its results for the year ending 31
December 2010 that the revised Financial Ombudsman Service
("FOS")assessment pertaining to commission rebating errors in the
preparation of customer statements of a managed spot FX fund has
resulted in the Group having to recognise a liability of GBP3.2
million during the year and disclose a further contingent liability
of GBP3.2 million (in each case, GBP2.3 million net of tax).
Although the Group has sufficient cash resources to meet the
above-mentioned liability, the Group's funding and capital plans
are determined on a Group basis and in the event of crystallisation
of the liability, the reduced capital available to the Group in the
interim period would limit the Group's operations and ability to
trade/generate profits. The Company therefore intends to use the
proceeds of the Placing to ensure that it has sufficient resources
in place to satisfy the FSA's capital adequacy requirements thereby
enabling the Group to continue trading at its current levels.
The Placing is conditional, inter alia, upon the passing of
resolutions by shareholders to authorise the Directors to allot the
Placing Shares for cash on a non-pre-emptive basis. Accordingly, a
General Meeting is being convened on 7 April 2011.
A circular containing the details of these proposals is being
posted to shareholders today and will be available on the Company's
website: www.londoncapitalgroup.com/circulars.html.
Background to and reasons for the Placing
In 2009, the Group made commission rebating errors whilst
preparing the customer statements of a managed spot FX fund. The
correction of these errors led to a series of complaints to the
FOS. The Board reviewed the initial assessment from the FOS
received on 18 October 2010 and concluded that the impact of the
claims to the FOS would not be material to the business. A revised
assessment was received on 11 February 2011, following which the
Company made a regulatory news announcement on 14 February 2011.
Whilst the Company believes that its actions did not directly cause
any loss to the client, the revised assessment determined that the
Company should repay the total losses incurred by the client of
GBP0.1 million plus interest. The Company intends to challenge the
revised assessment.
The Board has assessed that a gross provision before tax relief
of GBP3.2 million should be booked and a contingent liability of
GBP3.2 million should be disclosed in the Company's results for the
year ended 31 December 2010. The Directors have made this
assessment based on an analysis of the losses incurred in the fund
attributable to clients under the protection of the FOS, the latest
FOS assessment and the FOS's rules on compensation. Whilst the
Directors are confident that the provision represents a best
estimate of the implications of the latest FOS determination, there
remains significant uncertainty as to the eventual financial
outcome. The Group intends to challenge the adjudicator's
assessment and, although the Directors are confident that there are
grounds for challenge, the outcome of this process is uncertain. As
a result of these variables, the timing of any such payment is also
uncertain.
The Group's funding and capital plans are determined on a Group
basis. Whilst the Group has sufficient cash resources to meet the
above-mentioned liability should it crystallise, wholly or in part,
the reduced capital available to the Group in the interim period
would limit the Group's operations and ability to generate
profits.
Taking into account the provision for the FOS claims, the
regulatory capital resources of the Group as at 31 December 2010
were GBP11.4 million.
The Group's capital requirements fluctuate significantly
depending on the residual market risk it retains from unhedged
client positions. The Group has limits in place set by the Risk
Committee which determine the level of market risk on an aggregate
and individual protection basis it can take. A key determinant of
the Group's profitability is the amount of risk it can take with
respect to unhedged client positions. This is dependent on the
capital resources at the Group's disposal.
If the Group had been utilising the full limit as set by the
Risk Committee, it would have had a regulatory deficit at 31
December 2010.
The Board therefore intends to use the proceeds of the Placing
to ensure the continued operating effectiveness and profitability
of the Group.
Current trading and prospects
The Group has started the year well and current trading leads
the Board to be optimistic for the rest of the year. The spread
betting division has delivered solid revenues in line with
expectations which is very satisfactory given the low volatility
conditions experienced in the first two months of the year. The FX
division has seen a substantial increase in trading volumes and the
newly launched CFD divisions are showing signs of breakeven much
earlier than anticipated.
The Placing
The Company is proposing to raise up to approximately GBP8.0
million before expenses (or GBP7.57 million net of expenses), by
way of the issue of the Placing Shares at the Placing Price, which
represents a discount of approximately 12.5 per cent. to the
closing middle market price of 68.6 pence per Existing Ordinary
Share on 21 March 2011, being the last practicable date prior to
the publication of this Announcement. Assuming the Placing is fully
subscribed, the Placing Shares would represent approximately 25.1
per cent. of the Company's issued share capital immediately
following Admission.
Certain of the Directors have confirmed their intention to
participate in the Placing but are permitted to do so only after
the release of the Company's annual results for the financial year
ending 31 December 2010. Simon Denham, Chief Executive Officer, has
indicated his intention to subscribe for 1,333,333 Placing Shares,
Rachel Woodford, Group Director, Marketing and Strategy, has
indicated her intention to subscribe for 1,000,000 Placing Shares
and Frank Chapman, Non-Executive Director, has indicated his
intention to subscribe for 500,000 Placing Shares.
The Placing is conditional upon:
-- the passing of the Resolutions as set out in the notice
convening the General Meeting;
-- the Placing Agreement having become unconditional in all
respects and not having been terminated; and
-- Admission.
The Placing is not being underwritten.
The Placing Agreement
Cenkos Securities has entered into the Placing Agreement with
the Company under which it has agreed to use its reasonable
endeavours, as agent for the Company, to procure placees for the
Placing Shares.
The placing of the Placing Shares is conditional upon, inter
alia, the Resolutions being duly passed at the General Meeting and
Admission becoming effective on or before 8:00 a.m. on 11 April
2011 or such later time and/or date as the Company and Cenkos
Securities may agree, but in any event by no later than 8:00 a.m.
on 26 April 2011. The Placing Agreement contains warranties from
the Company in favour of Cenkos Securities in relation to, inter
alia, the accuracy of the information in this Announcement and
other matters relating to the Company and its business. In
addition, the Company has agreed to indemnify Cenkos Securities in
relation to certain liabilities it may incur in respect of the
Placing. Cenkos Securities has the right to terminate the Placing
Agreement in certain circumstances prior to Admission, in
particular, in the event of a material breach of the
warranties.
The payment of certain fees and commissions payable to Cenkos
Securities in relation to its obligations under the Placing
Agreement shall be satisfied by the issue and allotment of Ordinary
Shares to Cenkos Securities. These Ordinary Shares will form part
of the Placing Shares. The issue and allotment of such Ordinary
Shares shall be subject to the satisfaction or waiver of the
conditions set out in the Placing Agreement, and the Placing
Agreement not having been terminated.
Dealings
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM. It is expected
that Admission will occur at 8:00 a.m. on 11 April 2011.
The Placing Shares will, when issued, rank pari passu in all
respects with the Existing Ordinary Shares including the right to
receive dividends and other distributions declared following
Admission.
Related party transaction
As at 21 March 2011 (the latest practicable date prior to the
publication of this Announcement), Simon Denham, Rachel Woodford
and Frank Chapman held 5,967,720, 3,365,000 and 4,000,000 Ordinary
Shares respectively representing approximately 15.0, 8.6 and 10.0
per cent. of the Existing Ordinary Shares respectively. As stated
above, these Directors have indicated their intention to subscribe
for Placing Shares. Under the AIM Rules, as Directors of the
Company, Simon Denham, Rachel Woodford and Frank Chapman are each a
related party of the Company and the intended subscription by them
for Placing Shares would constitute a related party transaction if
the numbers of Placing Shares subscribed by all those Directors
were aggregated. Where a company enters into a related party
transaction, under the AIM Rules the independent directors of the
company are required, after consulting with the company's nominated
adviser, to state whether, in their opinion, the transaction is
fair and reasonable in so far as its shareholders are concerned.
Having consulted with Cenkos Securities, the Company's nominated
adviser, the Independent Directors believe that the participation
by Simon Denham, Rachel Woodford and Frank Chapman in the Placing
would be fair and reasonable in so far as Shareholders are
concerned.
Lock-In Deed
In connection with the Placing, should Simon Denham, Rachel
Woodford and Frank Chapman agree to subscribe for Placing Shares,
they will enter into the Lock-In Deed with the Company and Cenkos
Securities. Pursuant to the Lock-In Deed, each of those Directors
would give undertakings not to dispose of or transfer any Ordinary
Shares (including any Placing Shares allotted to them) in which
they are interested, or any rights over or to acquire the same, in
each case for a period of 12 months from Admission and subject to
certain exceptions (including where any such disposal or transfer
is made with the prior written consent of Cenkos Securities).
Expected timetable of principal events
Circular posted to Shareholders (by first 22 March 2011
class post)
Latest time and date for receipt of Forms 9:30 a.m. on 5 April
of Proxy 2011
General Meeting 9:30 a.m. on 7 April
2011
Admission and dealings in the Placing Shares 8:00 a.m. on 11 April
expected to commence on AIM 2011
CREST accounts credited in respect of the 11 April 2011
Placing Shares
Share certificates despatched in respect of By 18 April 2011
the Placing Shares
The same definitions apply throughout this announcement as are
applied in the Circular.
Neither the content of the Company's website nor the content of
any other website accessible from hyperlinks on the Company's
website is incorporated into, or forms part of, this
Announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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