TIDMLCG
RNS Number : 2457Y
London Capital Group Holdings PLC
20 February 2013
LONDON CAPITAL GROUP HOLDINGS PLC
("LCG", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Financial Highlights
-- As expected lack of volatility led to suppressed trading
volumes and decreased revenue
-- Revenue decreased 27% to GBP28.6m (2011: GBP39.0m)
-- Adjusted loss before tax* of GBP0.2m (2011: adjusted profit
of GBP7.1m)
-- Included within adjusted loss before tax* are exceptional
legal costs of GBP0.5m (2011: GBP0.7m)
-- Aggregate losses incurred in relation to the Group's
Australian CFD business and Gibraltar FSB business amounted to
GBP1.2m (2011: GBP0.8m)
-- Statutory loss before tax of GBP2.1m (2011: profit of
GBP6.1m)
-- Net cash and short term receivables of GBP20.4m at year end
(2011: GBP25.1m)
-- No final dividend proposed (2011: 2.6p per share), bringing
total dividend for the year to 1.3p (2011: 3.9p)
Operational Highlights
-- UK financial spread betting ("FSB") performance
- Divisional revenue down 26%
- FSB average trades per day decreased 24% to 25,029 (2011: 33,042)
- New client acquisition totalled 10,123 (2011: 10,398)
- Successful launch of new white label clients Selftrade, Victor
Chandler and Goodbody Stockbrokers
-- Institutional foreign exchange performance
- Trade volumes decreased to $383bn (2011: $544bn)
- Divisional revenue of GBP6.1m (2011: GBP8.0m); divisional profit of GBP1.7m (2011: GBP2.4m)
Board changes
-- Simon Denham has stepped down as CEO and will be replaced by
Mark Slade
Year ended Year ended
31 December 2012 31 December 2011
GBP'000 GBP'000
Revenue 28,586 38,963
Adjusted EBITDA** 1,745 8,884
Adjusted (loss)/profit before tax* (154) 7,063
Statutory (loss)/profit before tax (2,050) 6,141
Basic (loss)/earnings per share (3.33)p 8.64p
Diluted (loss)/earnings per share (3.33)p 8.64p
Dividend per share 1.3 p 3.9 p
*Adjusted (loss)/profit before tax represents (loss)/profit
before tax excluding share based payment expense, impairment
charges to goodwill, professional client debts, and the movement in
the provision for FOS claims. Applied consistently hereafter.
**Adjusted EBITDA represents profit before interest, tax,
depreciation, amortisation and share based payment expense and
excludes the movement in the provision for FOS claims, impairment
charges to goodwill and professional client debts. Applied
consistently hereafter.
For further information, please contact: www.londoncapitalgroup.com
London Capital Group Holdings plc
Siobhan Moynihan
Group Finance Director
020 7456 7000
Cenkos Securities plc
Nicholas Wells/Camilla Hume
020 7397 8900
Smithfield Consultants
John Kiely
020 7360 4900
Notes to Editors:
London Capital Group Holdings plc (hereafter "LCGH plc" or "LCG"
or "London Capital Group" or "the Group") is a financial services
company offering online trading services.
London Capital Group Limited (LCG Ltd), a wholly owned trading
subsidiary of LCGH plc, is authorised and regulated by the
Financial Services Authority. Its core activity is the provision of
spread betting and CFD products on the financial markets to retail
clients under the trading names Capital Spreads, Capital CFDs and
LCG MT. Its other divisions provide online foreign exchange trading
services to institutional and professional clients and also
institutional derivatives broking. LCG Ltd is one of the leading
providers of white label financial spread trading and CFD platforms
and its white label partners include TD Direct Investing,
TradeFair, Bwin.party, and Saxo Bank.
ProSpreads Limited, a wholly owned trading subsidiary of LCGH
plc, is authorised and regulated by the Financial Services
Commission in Gibraltar and provides Direct Market Access ("DMA")
spread betting products on financial markets that are aimed at
professional clients.
Capital CFDs (Australia) is a trading name of London Capital
Group Pty Limited, a wholly owned trading subsidiary of LCGH plc,
and is regulated by the Australian Securities and Investments
Commission.
LCG Ltd has a European passport and is a member of the London
Stock Exchange. LCG Ltd also has access to international markets
through its global clearing relationships.
LCGH plc is listed on the London Stock Exchange's AIM market.
LCG is included in the General Financial sector (8770) and
Speciality Finance sub sector (8775) and has a RIC code of
LCG.L.
CHAIRMAN'S STATEMENT
For the year ended 31 December 2012
As anticipated, 2012 proved to be a difficult year for the
Group. Financial results were disappointing with a marked decline
in customer trading activity, especially in the second half of the
year. Whilst it is often easy to blame market conditions, it
remains true that lower levels of volatility in markets overall
meant that there were less trading opportunities for LCG's
customers to pursue. As a result revenues were 27% lower than 2011
and profits declined throughout the year leading to a GBP0.2m
adjusted loss before tax for the year as a whole.
Given the results, and having paid a 1.3p dividend at the half
year, the Board does not consider it appropriate to pay a final
dividend. The Board's policy is to pay dividends from available
profits whilst considering the current and future capital
requirements of the business.
Against an unfavourable background, the Board decided to address
three urgent problems in the last quarter of the year: firstly, it
launched a review to ensure that the Group's costs were aligned to
a possible lower revenue base, especially if lower market
volatility persisted for a long time. As part of the review the
Board identified potential savings of GBP4 million which will be
implemented through 2013. Secondly, the Board concluded that LCG's
current international operations will not meet the Group's return
on investment expectations in 2013 and certain of these operations
should therefore be sold or restructured. Thirdly, the Board review
included an overall assessment of organisational effectiveness
which will lead to changes in the structure of the operational
management.
All of the above gives the Group the opportunity to focus on
what it does best in terms of offering attractive products. LCG
continues to expand its partnership programme with a growing
pipeline of high quality domestic and international partners who
wish to white label the Company's trading services and products. In
addition, the Group continues to make improvements to its trading
platform which allows LCG to remain at the forefront of improved
customer trading experience.
After almost ten years of building London Capital Group's
business, Simon Denham has decided to step down from his role as
CEO with immediate effect. The Board would like to thank Simon for
all of his work over many years in building London Capital Group
into the great business it is today. We wish him well for the
future. Whilst we are sad to see Simon go, we all agree it is the
right time for fresh leadership, and I am delighted that Mark Slade
has decided to join us as our new CEO. He has a long and enviable
track record in growing financial businesses, and the Board is
confident that he is the right person to take the Company forward.
Mark, 51, has extensive knowledge of both trading in financial
markets and risk management, gained in a 30 year career most
recently as CEO of Marex Financial, and previously as Managing
Director of Refco Overseas. He also served as a Director on the
London Metal Exchange for seven years. It is intended that Mark
will take up the role from 25 February 2013, the appointment will
be subject to the normal FSA approval process and a further
announcement will be made in due course.
In terms of other Board changes, as announced on 13 January,
Rachel Woodford also decided to step down from her role as COO to
pursue other interests and will leave the Board in July this year.
The Board is very grateful for all her hard work over the last nine
years and we wish her well.
2013 has started with stronger equity markets and the
possibility of more activity in the currency and credit markets.
The Group remains well capitalised and well positioned to take
advantage of any major upswing in activity. The Board plans are to
promote the Company's core businesses, and use the Group's
partnership programmes to develop international business in a more
cost effective manner. The Board believe that the fundamentals of
the business remain sound but that some of the increases in costs
and overall efficiency need correcting swiftly without cutting out
the capacity for growth in the business.
Giles Vardey
Chairman
20 February 2013
CHIEF EXECUTIVE'S REVIEW
For the year ended 31 December 2012
The last year has been very difficult for most of the financial
services industry especially for the mid to small scale companies.
The increasing burdens of regulation, compliance and capital have
fallen most onerously on the smaller scale firms and this has,
unfortunately, coincided with a considerable fall in UK retail and
institutional business volumes.
LCG's financial spread betting business continued the trend as
the largest contributor to Group revenue. However, generally
directionless markets meant that trade volumes were muted through
the year resulting in a weakening in revenue and gross margin.
Positively, the business retained all of its major partners, and
has launched a number of new white labels in the year, and our own
brand Capital Spreads still accounts for more than 45% of the
Group's UK FSB revenue. Recent industry analysis indicates that
when the Group's own brand Capital Spreads is combined with the
Group's white labels, LCG is the second largest provider of
financial spread betting.
The Group's other retail businesses experienced mixed results;
the UK CFD business continues to grow successfully although the
Australian CFD and ProSpreads businesses have not achieved the
necessary revenue levels to be profitable.
Despite falling volumes throughout the industry the
institutional businesses have maintained profitability and have
focused considerable effort on business development which should
stand both businesses in good stead for 2013.
As a business the Group has invested considerably in its
technology over the last year. A new spread betting and CFD
platform was launched which will provide a more stable, scalable
and cost efficient technology solution for the business in the long
term. It will also allow the business to consolidate much of its
risk management and reporting processes ensuring a more efficient
and automated front to back system. The Group decided to retire its
original platform and as a result will incur hosting and
maintenance costs for two platforms through 2013, as it did for the
latter part of 2012, as well as an exceptional depreciation charge
for 2013 of GBP0.8m. However, thereafter the Group anticipates a
reduced ongoing cost base for its technology platforms.
Finally, a decade after founding the Company, I feel it is the
right time to hand over to a successor. I am very proud of the part
I played, together with my colleagues, in building London Capital
Group from a small trading business to one operating globally,
offering multiple products and partnered with some of the world's
premier financial services and gaming brands. With the Company
looking to achieve the next phase in its growth and development, I
believe that a fresh perspective will be very valuable. Mark Slade
has an excellent track record in managing and growing financial
services businesses and I am pleased to leave the Company in good
hands. I would like to wish Mark every success during his time as
CEO.
I am extremely grateful to our shareholders and employees for
their continued support and with so many initiatives now delivered,
being delivered and underway the business can look forward to a
successful 2013.
Simon Denham
Chief Executive
20 February 2013
OPERATING AND FINANCIAL REVIEW
For the year ended 31 December 2012
Financial Review
With the exception of the UK CFD business, net trading revenue
fell across all divisions in 2012. The Group's largest division, UK
Financial Spread Betting (UK FSB), saw divisional revenue fall by
26% to GBP19.6m from GBP26.4m in 2011. Whilst revenue in the first
half of the year was up 12% on the comparative period, the second
half of 2012 was particularly difficult and saw revenue fall by 50%
on 2011. The fall in revenue was driven by a 24% drop in trade
volumes and 18% fall in active clients due to low volatility and
direction in the financial markets. Whilst client acquisition fell
slightly from 10,398 in 2011 to 10,123 in 2012, funds on deposit
increased 18% to GBP26.3m (2011: GBP22.3m). Gross margin remained
stable at 66% (2011: 65%) with white label commission payments
remaining the largest direct cost at GBP5.0m (2011: GBP7.3m).
The Group's UK CFD business continues to grow with number of
trades per day increasing to 822 (2011: 723) and divisional revenue
up 50% to GBP0.9m (2011: GBP0.6m). The growing customer base of
this division is predominantly non-UK and driven by introducing
brokers.
The Australian CFD business returned a loss for the year and the
Board is currently considering the long term options for this area.
The operating costs and head count of the operation have been
reduced significantly in the interim.
ProSpreads the Group's Direct Market Access ("DMA") financial
spread betting business, saw a 43% fall in revenue. Similar to the
UK FSB business a combination of low volumes and active clients
driven by low volatility resulted in lower revenue and
profitability. As was done for Australia, the cost base of the
business was restructured during the year, significantly reducing
headcount and ongoing costs whilst a long term strategy is formed
for the business.
The institutional foreign exchange business also suffered from
falling volumes in 2012 as well as falling commission rates driven
by an increasingly competitive environment. As a result, divisional
revenue fell 24% and divisional profit fell further by 31%. The low
cost base of the operation continues to ensure its ongoing
profitability and more recently the business has signed up a number
of key clients which should generate greater volumes and revenue
from commission in the future.
The institutional broking business is impacted by the ongoing
lack of interest rate activity. As with the institutional foreign
exchange business, the division maintains a low cost base and has
developed a strong pipeline of clients for 2013.
Adjusted Administrative Expenses
2012 2011
GBP'000 GBP'000
Employee remuneration costs 6,832 6,830
Advertising and marketing 2,379 2,251
IT and platform costs 3,777 3,139
Regulatory costs 650 428
Premises costs 666 587
Legal costs in relation to FOS claims
and professional client debt 532 742
Non-recurring costs of relocating head
office - 188
Other costs 2,350 2,160
--------- ---------
Adjusted administrative expenses 17,186 16,325
Adjusted administrative expenses, which exclude depreciation and
amortisation, share based payment expense and the exceptional items
noted below increased by 5.5% to GBP17.2m (2011: GBP16.3m). The
significant increases were seen in IT and platform costs as a
result of hosting and maintaining two spread betting platforms
during H2 2012, as well as an increase in regulatory costs in
relation to the FSCS levy, which remains outside of the business's
control. The additional cost of running two platforms in 2012
amounted to GBP0.4m and in 2013 is expected to be GBP0.8m as the
original platform is phased out. However, in the longer term, as a
result of this change of platform, the Group expects cost of the IT
platform to be reduced. In addition, following the decision to
retire the original platform, there will be an additional
depreciation charge of GBP0.8m incurred in 2013. This additional
depreciation charge will not affect the Company's capital
position.
Employee remunerations costs and consultancy costs, inclusive of
employer related taxes and pension costs, remained stable at
GBP6.8m
Advertising and marketing costs have remained stable year on
year, with just over 20% of the cost representing amounts incurred
in foreign jurisdictions.
Legal costs in relation to the Group's legal and FOS claims have
reduced by 29% to GBP0.5m (2011: GBP0.7m). We do not anticipate
these costs decreasing in 2013.
Exceptional items excluded from adjusted profit before tax and
legal claims
2012 2011
GBP'000 GBP'000
Additional charge for increased provision 1,542 -
against FOS claims
Impairment of goodwill in relation to 395 -
ProSpreads Limited
Impairment of professional client debt - 530
Onerous property lease provision - 213
Exceptional items excluded from adjusted
profit before tax 1,937 743
During the year two exceptional items of expense arose: an
additional charge for an increase in the provision held against FOS
claims and the write off of the goodwill relating to the ProSpreads
cash generating unit (CGU).
The group tests goodwill annually for impairment and compares
the carrying value of the CGU. Given the losses incurred by the
ProSpreads CGU, represented by the Gibraltar spread betting
business segment, the goodwill attributed to this CGU of GBP0.4m
has been written down to nil.
The charge for the FOS claims is a result of the Directors best
estimate of the provision required based on an analysis of the
losses incurred in the fund attributable to clients, the latest FOS
assessment, the FOS's rules on compensation and ongoing progress of
the settlement offer made.
In addition the Group received a claim served against its
subsidiary London Capital Group Limited in relation to the
termination of a fee sharing agreement with Integrity Financial
Solutions Limited, the Company that introduced clients to the
managed FX fund referred to above. On the basis of legal advice
received, the Group views the claim as speculative and without
merit. No provision has therefore been made in relation to the
matter.
Tax
The Group's effective tax rate decreased to -15% (2011: 31%).
This is primarily due to losses incurred in London Capital Group
Limited. These losses will be carried forward to be offset against
future taxable profits and a deferred tax asset of GBP414,000 has
been recognised in this respect.
Dividend policy
The Board is not recommending a final dividend (2011: 2.6p)
after paying an interim dividend of 1.3p in the year (2011: 1.3p).
The Board has reviewed its dividend policy during the year and has
concluded that a policy of paying dividends from available profits
whilst considering the current and future capital requirements of
the business is the most appropriate policy going forward.
Financial Position
As discussed in the Chief Executive's review the Group has taken
the decision to invest in a new spread betting and CFD platform.
Total additions to software and hardware in the year were GBP1.8m
of which GBP0.5m related to the new platform. The addition of a new
platform will lead to the accelerated depreciation of the existing
platform in 2013. Once the contractual obligations relating to the
existing platform have ceased, the ongoing IT hosting, maintenance
and development costs of the Group will be lower than those
incurred historically.
Total client money at the year-end was GBP43.0m (2011: GBP52.2m)
of which GBP33.7m (2011: GBP36.3m) was held in segregated accounts
with banks. Unsegregated amounts held on behalf of clients are
primarily held in relation to the institutional foreign exchange
business.
Trade and other payables comprise amounts due to clients where
funds are not held in segregated accounts and other trade payables
and accruals. The provisions balance of GBP3.6m (2011: GBP3.3m)
represents the provision for FOS claims referred to above.
Available liquidity and cash flow
2012 2011
GBP'000 GBP'000
Own cash held 12,953 21,543
Short term receivables: Amounts due from
brokers 7,425 3,509
------- -------
Net cash and short term receivables 20,378 25,052
------- -------
Title transfer funds and unsegregated funds 9,241 15,886
------- -------
Available liquid resources 29,619 40,938
------- -------
Available liquidity which comprises own cash held, title
transfer funds, unsegregated funds and amounts due from brokers
decreased by GBP11.3m. Net cash outflow from operating activities
after adjustments for movements in working capital amounted to
GBP11.1m (2011: inflow of GBP7.5m). This movement predominantly
relates to a GBP6.6m decrease in title transfer funds and
unsegregated funds presented within payables and a GBP3.9m increase
in amounts due from brokers as a result of increased hedging
requirements at the year end. Net cash used in investing activities
of GBP1.6m pertains to our investment in IT and the new spread
betting platform net of interest income received (2011:
GBP4.0m).
Capital Adequacy
The following table summarises the Group's capital adequacy. The
Group continues to have head room over our capital resource
requirements:
2012 2011
GBP'000 GBP'000
Total Tier 1 Capital 31,501 35,349
Less: Intangible Assets (12,495) (13,173)
-------- --------
Total tier 1 capital resources (CR) 19,006 22,176
-------- --------
Capital resource requirement (CRR) (11,473) (11,508)
Capital resource requirement surplus 7,433 10,668
-------- --------
CR expressed as a percentage of CRR 166% 193%
-------- --------
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2012
2012 2011
Notes GBP'000 GBP'000
Revenue 28,586 38,963
Cost of sales (9,655) (13,754)
--------- ----------
Gross profit 18,931 25,209
Administrative expenses (before certain
items) (17,186) (16,325)
Certain items:
Depreciation and amortisation (2,179) (2,069)
Provisions 11 (1,542) (213)
Impairment 7 (395) (530)
Share-based payment charge 41 (179)
------------------------------------------ ------ --------- ----------
Total administrative expenses (21,261) (19,316)
--------- ----------
Operating (loss)/profit (2,330) 5,893
Investment revenue 280 248
(Loss) /profit before taxation (2,050) 6,141
Tax credit/(expense) 304 (1,922)
--------- ----------
(Loss)/profit for the year (1,746) 4,219
Loss/(profit) for the year attributable
to owners of the parent (1,746) 4,219
--------- ----------
Earnings per share (pence)
- Basic 4 -3.33 8.64
- Diluted 4 -3.33 8.64
- Adjusted basic 4 -0.60 10.03
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2012
2012 2011
GBP'000 GBP'000
(Loss)/profit after taxation (1,746) 4,219
-------- --------
Exchange differences in translation of
foreign operations (59) (1)
Total comprehensive (loss)/income for
the year (1,805) 4,218
Total comprehensive (loss)/income for
the year attributable to owners of the
parent (1,805) 4,218
-------- --------
CONSOLIDATED BALANCE SHEET
As at 31 December 2012
31 December 2012 31 December 2011
Notes GBP'000 GBP'000
NON-CURRENT ASSETS
Intangible assets 6 12,495 13,173
Property, plant and equipment 8 2,327 2,354
Available-for-sale investments 100 100
Deferred tax asset 474 110
----------------- -----------------
15,396 15,737
CURRENT ASSETS
Trade and other receivables 9 9,246 5,126
Cash and cash equivalents 10 22,194 37,429
31,440 42,555
TOTAL ASSETS 46,836 58,292
CURRENT LIABILITIES
Trade and other payables 11,539 18,984
Current tax liabilities 211 647
Provisions 11 3,585 3,312
----------------- -----------------
15,335 22,943
TOTAL LIABILITIES 15,335 22,943
NET ASSETS 31,501 35,349
EQUITY
Share capital 5,318 5,318
Share premium 19,572 19,572
Own shares held (1,287) (1,287)
Retained earnings 13,242 17,090
Other reserves (5,344) (5,344)
----------------- -----------------
TOTAL EQUITY 31,501 35,349
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 December 2012
Share Share Own Retained Other Total
capital premium shares earnings reserves equity
GBP'000 GBP'000 held GBP'000 GBP'000 GBP'000
GBP'000
At 1 January 2011 3,985 13,390 (1,287) 13,415 (5,344) 24,159
---------- ---------- ---------- ----------- ----------- ----------
Issue of share capital 1,333 6,182 - - - 7,515
Total comprehensive income
for the year - - - 4,218 - 4,218
Equity dividends paid - - - (691) - (691)
Equity settled share-based
payment transactions
(including deferred taxation) - - - 148 - 148
At 31 December 2011 5,318 19,572 (1,287) 17,090 (5,344) 35,349
---------- ---------- ---------- ----------- ----------- ----------
Profit and total comprehensive
loss for the year - - - (1,805) - (1,805)
Equity dividends paid - - - (2,032) - (2,032)
Equity settled share-based
payment transactions
(including deferred taxation) - - - (11) - (11)
At 31 December 2012 5,318 19,572 (1,287) 13,242 (5,344) 31,501
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2012
2012 2011
GBP'000 GBP'000
(Loss)/profit for the year (1,746) 4,219
Adjustments for:
Depreciation of property, plant and equipment 495 458
Amortisation of intangible assets 1,684 1,611
Write off goodwill 395 -
Equity settled share based payment (41) 179
Provisions 1,542 213
Investment income (280) (248)
Current tax charge 60 1,864
Movement in deferred tax asset (364) 58
Operating cash flows before movements in working capital 1,745 8,354
Decrease/(increase) in receivables (4,120) 1,545
(Decrease)/increase in payables (8,745) (2,448)
--------- --------
Cash (used in)/generated by operating activities (11,120) 7,451
Taxation paid (494) (744)
--------- --------
Net cash (used in)/from operations (11,614) 6,707
Investing activities
Investment income 280 248
Acquisitions of property, plant and equipment (468) (2,215)
Acquisitions of intangible assets (1,401) (2,039)
Net cash used in investing activities (1,589) (4,006)
Financing activities
Dividends paid (2,032) (691)
Cash from issue of share capital - 7,515
--------- --------
Net cash (used in)/from financing activities (2,032) 6,824
Net (decrease)/increase in cash and cash equivalents (15,235) 9,525
Cash and cash equivalents at beginning of year 37,429 27,904
--------- --------
Cash and cash equivalents at end of year 10 22,194 37,429
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2012
1. Introduction
The financial information set out in the announcement does not
constitute the company's statutory accounts for the years ended 31
December 2012 or 2011. The financial information for the year ended
31 December 2011 is derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The
auditor's report on those accounts was unqualified; however it did
include a matter of emphasis in respect of the uncertainty
surrounding the eventual outcome of complaints to the FOS. Their
opinion in respect of the year ended 31 December 2011 did not
contain a statement under s498(2) or (3) of the Companies Act
2006.
Statutory accounts for 2012 will be delivered following the
company's annual general meeting. The auditors have reported on
those accounts: their reports were unqualified and did not contain
statements under s498 (2) or (3) of the Companies Act 2006.
However, their report for the year ended 31 December 2012 includes
an emphasis of matter paragraph in respect of the uncertainty
surrounding the eventual outcome of complaints to the FOS.
The information included within the preliminary announcement has
been based on the consolidated financial statements, which are
prepared in accordance with the accounting policies adopted under
International Financial Reporting Standards ("IFRSs"), as adopted
by the European Union. The accounting policies followed are the
same as those detailed within the 2011 statutory accounts which are
available on the Group's website www.londoncapitalgroup.com.
While the financial information included in this preliminary
announcement has been prepared in accordance with IFRSs, this
announcement does not itself contain sufficient information to
comply with IFRSs.
2. Revenue and segmental information
For the year ended 31 December 2012
Financial CFDs, Institutional Institutional CFDs, Financial Total
spread betting, UK foreign brokerage Australia spread
UK exchange betting,
Gibraltar
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 GBP'000
Revenue
Segmental revenue 19,637 891 6,101 745 137 1,075 28,586
--------- -------- -------------- ---------------- ------------- ----------- -----------
Segmental operating
profit/(loss) 6,617 737 1,647 129 (568) (570) 7,992
--------- -------- -------------- ---------------- ------------- ----------- -----------
Unallocated
corporate expenses (10,322)
-----------
Operating loss (2,330)
Finance income 280
-----------
Profit loss
taxation (2,050)
Taxation credit 304
-----------
Loss for the
year (1,746)
===========
Segmental assets 10,647 30 7,602 254 449 1,771 20,753
--------- -------- -------------- ---------------- ------------- ----------- -----------
Unallocated
corporate assets 26,083
-----------
Consolidated
total assets 46,836
Segmental liabilities 979 - 11,321 1 14 2,170 14,485
--------- -------- -------------- ---------------- ------------- ----------- -----------
Unallocated
corporate
liabilities 850
Consolidated
total liabilities 15,335
===========
Included within revenue is interest income earned on client
money held.
2. Revenue and segmental information
For the year ended 31 December 2011
Financial CFDs, Institutional Institutional CFDs, Financial Total
spread betting, UK foreign brokerage Australia spread
UK exchange betting,
Gibraltar
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 GBP'000 GBP'000
Revenue
Segmental revenue 26,446 589 7,983 1,904 160 1,881 38,963
--------- -------- -------------- ---------------- ------------- ----------- ----------
Segmental operating
profit/(loss) 11,518 185 2,402 618 (436) (355) 13,932
--------- -------- -------------- ---------------- ------------- ----------- ----------
Unallocated
corporate expenses (8,039)
----------
Operating Profit 5,893
Finance income 248
----------
Profit before
taxation 6,141
Taxation charge (1,922)
----------
Profit for the
year 4,219
==========
Segmental assets 6,920 25 14,547 152 449 1,557 23,650
--------- -------- -------------- ---------------- ------------- ----------- ----------
Unallocated
corporate assets 34,642
----------
Consolidated
total assets 58,292
Segmental liabilities 897 - 14,345 122 38 2,068 17,470
--------- -------- -------------- ---------------- ------------- ----------- ----------
Unallocated
corporate liabilities 5,473
Consolidated
total liabilities 22,943
==========
Included within revenue is interest income earned on client
money held.
3. Adjusted profit before tax, adjusted operating profit and adjusted EBITDA
2012 2011
GBP'000 GBP'000
Reported (loss)/profit before tax (2,050) 6,141
Add back - charge for provision against FOS 1,542 -
claims
Add back - impairment of professional client
debt - 530
Add back - onerous property lease provision - 213
Add back - impairment of ProSpreads goodwill 395 -
Add back - share-based payment charge (41) 179
Adjusted profit before tax (154) 7,063
Tax as reported 304 (1,922)
Tax effect on add backs (465) (244)
-------- --------
Adjusted profit after tax (315) 4,897
Reported operating (loss)/profit (2,330) 5,893
Add back - share-based payment charge (41) 179
-------- --------
Adjusted operating profit (2,371) 6,072
Add back - other amortisation and depreciation 2,179 2,069
Add back - charge for provision against FOS 1,542 -
claims
Add back - impairment of professional client
debt - 530
Add back - onerous property lease provision - 213
Add back - impairment of ProSpreads goodwill 395 -
Adjusted EBITDA 1,745 8,884
4. Earnings per ordinary share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted number of
ordinary shares in issue during the year, after deducting any own
shares. Fully diluted earnings per share is calculated by dividing
the earnings attributable to ordinary shareholders by the total of
the weighted average number of shares in issue during the year and
the dilutive potential ordinary shares relating to share options.
Dilutive potential ordinary shares were nil (2011: 12,532).
2012 2011
Basic EPS
(Loss)/profit after tax (GBP'000) (1,746) 4,219
Weighted average no of shares 52,365,908 48,822,529
Weighted average basic EPS (3.33)p 8.64p
Diluted EPS
(Loss)/profit after tax (GBP'000) (1,746) 4,219
Weighted average no of shares 52,365,908 48,835,061
Weighted average fully diluted EPS (3.33)p 8.64p
Adjusted basic EPS
Adjusted (loss)/profit after tax (GBP'000) (315) 4,897
Weighted average no of shares 52,365,908 48,835,061
Weighted average basic EPS (0.60)p 10.03p
5. Dividends
2012 2011
GBP'000 GBP'000
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December 1,351 -
2012 nil (2011: 2.6p)
Interim dividend for the year ended 31 December
2012 of 1.3p (2011: 1.3p) 681 691
2,032 691
Dividends declared in respect of the period:
Interim dividend for the year ended 31 December
2012 of 1.3p (2011: 1.3p) 681 691
Final dividend for the year ended 31 December
2012 of nil (2011: 2.6p) - 1,351
681 2,042
6. Intangible fixed assets
Customer Trade
relationship name Software Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 January 2011 152 136 6,405 9,698 16,391
Additions - - 2,039 - 2,039
------------- ------- ---------- ---------- -------
At 1 January 2012 152 136 8,444 9,698 18,430
Additions - - 1,401 - 1,401
At 31 December
2012 152 136 9,845 9,698 19,831
------------- ------- ---------- ---------- -------
AMORTISATION
At 1 January 2011 131 70 3,445 - 3,646
Charge for the
year 21 66 1,524 - 1,611
------------- ------- ---------- ---------- -------
At 1 January 2012 152 136 4,969 - 5,257
Charge for the
year - - 1,684 - 1,684
Eliminated on
impairment - - - 395 395
------------- ------- ---------- ---------- -------
At 31 December
2012 152 136 6,653 395 7,336
NET BOOK VALUE
At 31 December
2012 - - 3,192 9,303 12,495
At 31 December
2011 - - 3,475 9,698 13,173
------------- ------- ---------- ---------- -------
7. Impairment charge
An impairment of GBP395,000 has been recognised in relation to
the goodwill allocated to the ProSpreads CGU which represents the
Gibraltar spread betting business.
The professional client debt of GBP1.4m that arose in 2010 was
settled in 2011. The amount outstanding was impaired by GBP0.53m as
part of the settlement agreement.
8. Property, plant and equipment
Leasehold Plant
property and machinery Total
GBP'000 GBP'000 GBP'000
COST
At 1 January 2011 572 1,479 2,051
Additions 2,031 184 2,215
--------- -------------- --------
At 1 January 2012 2,603 1,663 4,266
Additions 31 437 468
--------- -------------- --------
At 31 December 2012 2,634 2,100 4,734
--------- -------------- --------
DEPRECIATION
At 1 January 2011 472 982 1,454
Charge for the year 226 232 458
--------- -------------- --------
At 1 January 2012 698 1,214 1,912
Charge for the year 209 286 495
--------- -------------- --------
At 31 December 2012 907 1,500 2,407
--------- -------------- --------
NET BOOK VALUE
At 31 December 2012 1,727 600 2,327
--------- -------------- --------
At 31 December 2011 1,905 449 2,354
--------- -------------- --------
9. Trade and other receivables
2012 2011
GBP'000 GBP'000
Trade receivables 295 283
Amounts due from brokers 7,425 3,509
Other receivables 658 814
Prepayments 868 520
------- -------
9,246 5,126
The directors consider that the carrying amount of trade
receivables and other receivables approximates to their fair
value.
Trade receivables due from brokers represents the combination of
open derivative positions and cash in excess of required margin
available to call from brokers.
10. Cash and cash equivalents
2012 2011
GBP'000 GBP'000
Gross cash and cash equivalents 55,942 73,761
Less: Segregated client funds (33,748) (36,332)
-------- --------
Own cash, forex client cash and title
transfer funds 22,194 37,429
-------- --------
Analysed as:
Cash at bank and in hand 20,119 29,394
Short-term deposits (3 month) 2,075 8,035
--------
22,194 37,429
Gross cash and cash equivalents include Group cash, all client
funds (segregated funds and funds under title transfer) and surplus
cash available to call from brokers.
Segregated client funds include client funds held in segregated
accounts or breakable short term deposits (under 3 months) in line
with the FSA's Client Asset rules ('CASS') and similar rules of
other regulators in jurisdictions where the Group operates.
Title transfer funds are held by the Group's subsidiary under a
Title Transfer Collateral Arrangement (TTCA) by which the client
agrees that full ownership of such monies is unconditionally
transferred to the Group. Funds under TTCA and institutional
foreign exchange client funds are included on the balance
sheet.
11. Provisions and contingent liabilities
2012 2011
GBP'000 GBP'000
Provision against FOS claims 3,585 3,200
Onerous lease provision - 112
-------------------- --------------
3,585 3,312
-------------------- --------------
Provision against
FOS claims Onerous lease provision Total
GBP'000 GBP'000 GBP'000
At 1 January 2012 3,200 112 3,312
Additional provision in the year 2,255 - 2,255
Release of provision (713) - (713)
Utilisation of provision (1,157) (112) (1,269)
At 31 December 2012 3,585 - 3,585
During the first half of 2009 the Group made commission rebating
errors whilst preparing the customer statements of a managed FX
fund. The correction of these errors led to a series of complaints
to the Financial Ombudsman Service ("FOS"). Whilst the Group
believes its actions did not directly cause any loss to the
clients, the assessment from the FOS determined that the Group
should repay the total losses incurred by the clients plus
interest.
During H2'12 the Group made a settlement offer to the
outstanding complainants of which 26% accepted. This led to a net
payment of GBP1.2m and the release of GBP0.7m of the provision
made.
As at the date of this report the Directors have made an
assessment of the provision and contingent liability based on an
analysis of the losses incurred in the fund attributable to clients
under the protection of the FOS, the latest FOS assessment, the
FOS's rules on compensation and the settlements made. Whilst the
provision of GBP3.6m (2011: GBP3.2m) represents a best estimate of
the expected liability, there remains significant uncertainty as to
the eventual financial outcome due to the ongoing FOS and court
process.
With respect to those claimants that have rejected the
settlement offer, the Group continues to challenge the FOS
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.
Contingency against FOS Claims Total
GBP'000 GBP'000
At 1 January 2012 3,300 3,300
Transfer of provision (2,255) (2,255)
------------------------------
At 31 December 2012 1,045 1,045
A contingent liability of GBP1.0m (2011: GBP3.3m) has also been
disclosed in relation to these claims.
The Group has received a claim served against its subsidiary
London Capital Group Limited in relation to the termination of a
fee sharing agreement with Integrity Financial Solutions Limited,
the Company that introduced clients to the managed FX fund referred
to above.
On the basis of legal advice received, the Group views the claim
as speculative and without merit. No provision has therefore been
made in relation to the matter. Whilst there are a range of
possible outcomes, the current court timetable means the matter is
expected to be resolved during the course of 2013.
12. Subsequent events
Following the year end Simon Denham, CEO, resigned with effect
from 20 February 2013 and Rachel Woodford, COO, notified the Board
of her intention to resign with effect from 9 July 2013.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFWEDUFDSEIE
London Capital Hldgs (LSE:LCG)
Historical Stock Chart
From May 2024 to Jun 2024
London Capital Hldgs (LSE:LCG)
Historical Stock Chart
From Jun 2023 to Jun 2024
