TIDMLCG
RNS Number : 3722I
London Capital Group Holdings PLC
25 March 2015
LONDON CAPITAL GROUP HOLDINGS PLC
("LCG", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Financial Highlights
-- Adjusted profit before tax(1) from continuing operations of
GBP1.1m (2013: GBP2.2m)
-- Statutory loss before tax from continuing operations of
GBP7.9m (2013: GBP4.8m)
-- Statutory loss after tax from continuing and discontinued
operations of GBP7.8m (2013: GBP3.7m)
-- Revenue from UK financial spread betting ("FSB") and
contracts for difference ("CFD") down 7% to
GBP19.4m (2013: GBP20.8m)
-- Revenue from continuing operations decreased 10% to GBP22.7m
(2013: GBP25.2m)
-- Net cash and short term receivables(2) of GBP32.9m at year
end (2013: GBP21.8m) including amounts due from brokers GBP6.1m
(2013: GBP4.6K)
Operational Highlights
-- UK FSB and CFD performance
- Divisional revenue down 7% to GBP19.4m (2013: GBP20.8m);
divisional profit of GBP8.8m (2013: GBP9.8m)
- FSB average trades per day decreased 9% to 19,994 (2013: 22,008)
- New client acquisitions decreased 13% to 5,615 (2013: 6,431)
-- Institutional foreign exchange performance
- Trade volumes decreased to $215bn (2013: $242bn)
- Divisional revenue of GBP3.3m (2013: GBP4.3m); divisional profit of GBP1.1m (2013: GBP1.3m)
-- New management in place at end of third quarter implementing
a strategy for growth.
Charles-Henri Sabet, Executive Chairman said: "I am pleased to
report that a strategy is now in place for the Group to return to
growth at all levels of the business during the second half of
2015, while we anticipate that the restructuring process we began
in 2014 will last until the end of 2016."
"We shall continue to invest in the quality of our people,
products and services, and with the strength of our balance sheet
and management drive to execute on our strategic vision, we are
confident in the prospects for a return to growth in order to
deliver long-term sustainable returns to all our shareholders."
Continuing operations Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Revenue 22,666 25,189
Adjusted EBITDA(3) 2,280 4,169
Adjusted profit before tax(2) 1,145 2,196
Statutory (loss) before tax (7,954) (4,800)
Adjusted basic earnings per share from continuing operations 2.04p 5.04p
Basic loss per share from continuing operations (15.13)p (8.32)p
Basic loss per share from continuing and discontinued operations (15.13)p (7.11)p
Diluted loss per share from continuing and discontinued operations (11.13)p (7.11)p
Dividend per share 0.0p 0.0 p
(1) Adjusted profit before tax represents profit before tax
excluding share based payment expense, impairment charges to
goodwill and investments, non-recurring restructuring costs, costs
related to change in IT platform, the movement in the provision for
FOS claims and non-recurring legal fees. Applied consistently
hereafter.
(2) Net cash and short term receivables represents Cash and cash
equivalents, less unsegregated amounts due to clients, plus amounts
due from brokers.
(3) Adjusted EBITDA represents profit before interest, tax,
depreciation, amortisation, share based payment expense, impairment
charges to goodwill and investments, non-recurring restructuring
costs, costs related to change in IT platform, the movement in the
provision for FOS claims and non-recurring legal fees.
For further information please contact;
Cenkos
Nicholas Wells
020 7397 8923
Morgan Rossiter
James Rossiter
Richard Morgan Evans
020 3195 3240
CHAIRMAN'S STATEMENT
For the year ended 31 December 2014
I am pleased to report that the Group is on schedule to return
to growth during the second half of 2015, after a period of
significant and ongoing change which was initiated in the final
quarter of 2014.
Strategic review
Against a backdrop of challenging market conditions and a period
of losses accumulated under the previous management's chosen
strategy, the new management undertook a review of the Group and
all its business lines and operations, shortly after taking control
at the end of the third quarter. The review encompassed a focus on
the markets, products, platforms, operational structures and key
personnel required in order to deliver the growth required to meet
the ambitions of a revitalised management team and the expectations
of investors.
Organisational restructure
As part of the restructuring and recruitment of the required
personnel with the skill level to drive the Group forward,
approximately 75% of the previous workforce has now departed.
During the fourth quarter we strengthened the main board of
Directors with the addition of non-executives, a move which has
given the Group a broad spectrum of skills and experience from the
highest level within the financial, professional and investment
services industries. We have also significantly bolstered the
management board, and have continued to hire best-in-class
personnel to support our drive to provide a more
institutional-level of service and product offering to our retail
clients.
We are in the process of reshaping our IT department and
infrastructure capability, revamped our sales trading, customer
service, marketing and partnerships departments, and are building a
team of highly-experienced market analysts.
As a consequence of the initial changes put in place, we were
able to take advantage of increased market volatility in the fourth
quarter, which resulted in a positive EBITDA figure.
Outlook
A strategy is now in place for the Group to return to long-term
sustainable growth at all levels of the business during the second
half of 2015, while we anticipate that the restructuring process
will last until the end of 2016.
To enable the Group to achieve a return to growth later in the
year, we have instigated several significant improvements - these
include marketing our competitive MetaTrader 4 offering, improving
the overall client experience and installing a greater emphasis on
client servicing. We are also well underway with a major rebrand
exercise, which will help to position the Group as a leading
provider of online trading services. In addition, we have put in
place the building blocks to take active advantage of opportunities
globally, which will complement our core domestic business in the
UK.
We shall continue to invest in the quality of our people,
products and services, and with the strength of our balance sheet
and management drive to execute on our strategic vision, we are
confident in the prospects for a return to growth in order to
deliver long-term sustainable returns to all our shareholders.
Charles-Henri Sabet
Executive Chairman
25 March 2015
STRATEGIC REPORT
For the year ended 31 December 2014
Introduction
A strategic review of the Group which began following the
arrival of new management towards the end of Q3 2014 is ongoing,
and the Group is being restructured to position the business for a
return to growth.
The quality of the Group's employees has been refreshed in order
to execute the Board's strategic vision to reposition the company,
enabling the provision of a best-in-class foreign exchange trading
service, improved technology for clients and employees, a focus on
providing the best possible client experience, and enhancing the
overall sales service.
The ambition of management and staff is aligned with the Board's
strategic vision in order to drive the Group forward towards a
profitable period of sustained growth. When the period of
restructuring is complete the business will be fully scalable,
allowing the company to start growing abroad.
Business model
London Capital Group Holdings plc operates through its principal
subsidiary, London Capital Group Limited. Its core activity is the
provision of spread betting and contracts for difference (CFD)
products based on financial market products, such as futures,
equities and foreign exchange. It provides online trading to
private, retail and high net worth and professional clients.
London Capital Group Limited is authorised and regulated by the
Financial Conduct Authority (FCA) in London and its parent company
London Capital Group Holdings plc is listed on the London Stock
Exchange Alternative Investment Market (AIM).
Revenues are generated from the dealing spread - the difference
between the buy and sell price of our CFD and spread betting
products, commission income, exchange gains and interest.
The Group's success is driven by providing a high quality
service to our customers and offering a variety of financial
trading products and platforms. Clients are attracted to us for our
value for money, ease of platform navigation, tight dealing spreads
and competitive margin requirements, in addition to high levels of
customer service.
Strategy and objectives
Following a detailed strategic review of the business and
industry trends, the senior management team has taken the decision
to focus the business towards servicing the needs of active retail
traders. Our aim is to provide an institutional-level of service
and product offering to our retail clients.
Short-term strategy
The Group's short-term strategy will encompass the
following:
- Facilitating better access to financial markets
- Provide best-in-class technology
- Offer best-in-class sales and sales trading services
- Create a value proposal in term of market analysis
- Grow internationally, starting in Europe
- The further development of both our technology and marketing,
ensuring that our systems, customer proposition and brand are far
better aligned to deliver sustainable growth
Medium-term strategy
Following the completion of our near-term strategic aims, the
Group's focus will be on the promotion and further development of
our key unique selling points:
- Industry-leading platforms
The Group will offer improved technology and trading platforms
on web, desktop, mobile and API ensuring our offering fits in with
the demands of the active trader.
- Service
The Group will provide an industry-leading customer experience
and a service tailored to individual customers' needs, both online
and through our telephone, email and 'live-chat' channels.
- Professional tools and news service
Targeted to our customers' needs, the Group's experienced
in-house market analysts will keep clients up-to-date with market
events, as well as offering access to professional third-party news
and tools providers.
- Educational materials
The Group will create significantly enhanced education services
to address all levels of trading experience, including face-to-face
seminars and live market webinars from our team of market
analysts.
- Pricing
The Group will deliver a value proposition to our clients
without any compromise of our strict adherence to quality products,
platforms and service, in order to position the Group at the
forefront of the industry's most competitive providers.
- Marketing
The Group is focusing its brand and client proposition primarily
through the trusted LCG name, consolidating our online presence
into a single LCG-led offering which incorporates all of the
Group's products and services. A consolidated focus on a single
brand will provide greater clarity for the Group's clients while
enabling optimisation of marketing spend.
- Dealing execution
The Group aims to provide a best-in-class dealing experience for
clients across a broad range of markets and via multiple platform
offerings. Clients will benefit from the Group's transparent and
competitive dealing and execution services, for example through our
liquidity providers, and the execution model on the MetaTrader4
platform.
Long-term strategy
The Group remains focused on progressing longer-term
objectives:
- Actively extending the business' geographic reach via
representative offices in designated key locations across Europe
and in the Middle East.
- Continuing to develop and add to current product offering in response to customer demand.
- Expanding the range of products to encompass more investment
vehicles in order to meet the needs of existing customers and
attract new customers with a broader product reach and appeal.
Our people
We have undertaken a significant review of the Company which has
included a restructuring of the business, and this has resulted in
the departure of a significant number of the previous workforce.
Beginning in Q4 2014, we have strengthened the main board of
directors and significantly improved the management board, while
employing best-in-class personnel to support our Group
ambitions.
We continue to focus on staff communication, including regular
presentations from the Executive Chairman and Directors, covering
our strategic direction, commercial objectives, business
initiatives and financial results. Employees are incentivised with
a performance-related bonus should the Group have a profitable
year, and a range of other benefits are provided including pension
contributions and private health insurance.
Environment
Given the nature of its activities, there is limited scope for
the Group to have a major impact on environmental matters.
Nevertheless, the Directors are mindful of their responsibilities
in this regard and strive to seek opportunities where improvements
may be made; these are generally concentrated in areas of energy
conservation, recycling and waste control.
Equality and diversity
The Group is committed to promoting and developing equality of
opportunity in all areas. We encourage people to achieve their full
potential in every aspect of their employment and we support fair
and equitable treatment of our employees irrespective of gender,
sexual orientation, religious beliefs, age, colour, ethnic or
racial origin, nationality, disability or trade union
membership.
Applications for employment by disabled persons are always fully
considered and in the event of members of staff becoming disabled
every effort is made to ensure that their employment with the Group
continues and that appropriate training is arranged. It is the
policy of the Group that training, career development and promotion
of disabled persons should, as far as possible, be identical to
that of other employees.
Health and safety
The Group aims to provide and maintain a safe working
environment for all its employees and visitors and seeks the
involvement of its employees in improving health and safety
throughout its operations. The Board keeps its health and safety
policy under regular review to take account of changes in
legislation, best practice and the working environment.
Principal risks and uncertainties
The principal risks and uncertainties to which the Group is
exposed could each have a material impact on the Group's long-term
performance and achievement of its strategic goals. The Group's
risk appetite is set by the Board and is documented in the Risk
Management Framework document.
The Group uses Key Risk Indicators to identify, monitor and
measure risk in the business and maintains a Risk Register of all
financial and operational risk events and the mitigating controls.
This quantification process ensures that the Group operates within
its risk appetite.
Ultimate responsibility for risk management lies with the Board,
which has established a Risk committee, chaired by an independent
non-executive Director, which considers risk management in more
detail. The principles and objectives of the Risk Management
Framework are cascaded down through the Group. The responsibility
for establishing specific internal control policies and procedures
is being overseen by a management Risk committee. The new
management has recognised the importance of a seamless approach to
risk and appointed a dedicated Head of Risk.
The effectiveness of the Group's Risk Management Framework is
monitored by the Compliance function and reported to the management
Risk committee and the Board. The effectiveness of internal
controls is monitored by the Compliance function and outsourced
expert assessors and is also reported to the Risk committee and the
Board.
The main areas of risk for the Group currently, in line with
previous periods, are considered to be the following:
-- Market risk: Market risk is the risk that changes in market
prices will affect the Group's profit and loss or the value of
financial instruments held and traded by clients. Although the
Group does not directly enter into speculative proprietary
positions, the effect of client trades does result in the Group
retaining a net market risk. The Group has a formal risk policy and
a methodology for setting limits for every financial market in
which it operates. Market risk is managed on a day to day basis by
the respective divisional heads with oversight provided by the Risk
Management function, the Risk Committee and the Board. The risk
limits determine the maximum net exposure arising from client
activity which the Group is prepared to carry. If the Group's
exposure to clients exceeds these limits, the policy requires that
the positions are hedged reducing exposure to within defined
limits.
-- Credit risk and concentration risk: The Group has a credit
exposure to the banks with which it deposits funds and the
counterparties with which it hedges its market positions. The Group
mitigates this risk by ensuring diversification of counterparties
and setting minimum levels of credit worthiness for Group
counterparties. LCG does not ordinarily offer credit and currently
has no clients with credit accounts that are not fully underwritten
by a letter of credit, drawn on a major financial institution, or
by a white label partner. The Group ensures client credit risk is
minimised via real time monitoring, management of unrealised profit
and loss, margin and net equity and supported by mandatory stops
and guaranteed stop losses being used by many clients to manage
their accounts.
-- Operational risk: Operational risk is defined as the risk of
loss arising from inadequate internal processes, people or systems.
The most significant operational risks the Group is exposed to
are:
o Technology risk and business continuity: Technology risk is
the risk of a sustained loss of LCG's systems leading to an
inability to provide online trading platforms to its clients. This
will inevitably lead to a significant loss of customers and income.
LCG operates backup for all its trading platforms in separately
hosted environments and to support the loss of physical premises
LCG also licenses disaster recovery premises. This is supported by
ongoing business continuity planning and regular testing of our
disaster recovery facilities and procedures.
o Employee risk: LCG requires suitably skilled staff to operate,
control, develop and manage its business. LCG has a wide range of
skill requirements including IT, project management, dealing/market
risk management, customer support, HR, compliance, finance, sales
and marketing. Without adequate staff resources the Group would not
be able to operate effectively or achieve its strategic aims. The
risk is managed initially through the recruitment and selection of
appropriately qualified employees, validated by a pre-employment
screening process. Employee risk is also managed on an ongoing
basis through training and development (both regulatory and
non-regulatory), and reviews of performance to ensure that
individual remuneration and performance is managed consistently and
fairly. Finally, we ensure the continued success of the Group
through the proactive identification and retention of our high
potential employees through share based payment awards under long
term incentive plans.
o Legal, regulatory and compliance risk: Legal, regulatory and
compliance risk is the risk of legal or regulatory sanctions, legal
claims, defective contractual arrangements and the resulting
financial loss, or damage to the reputation of the Group. LCG is a
full scope firm and is therefore subject to close regulation. As
such, regulatory risk is an important element of the risk
assessment and management process. The regulatory landscape changes
at an ever increasing pace and this imposes significant demands on
the resources of the Group. The Group therefore continues to ensure
sufficient investment is made in resources and training to ensure
regulatory demands are met. The responsibility for compliance is
spread throughout the Group, and results are monitored and reported
to senior management by the Compliance Department.
o Reconciliation risk: The Group's financial control functions
depend on key reconciliations being performed on a daily basis with
exceptions being resolved in a timely manner to meet regulatory
requirements. Reconciliation is monitored on a daily basis by the
London Capital Group Limited board.
-- Liquidity risk: Liquidity risk is the risk that the Group
will encounter difficulty in meeting its financial obligations as
they fall due. The Group has established policies and a liquidity
risk management framework to manage its liquidity risk, including
daily production of liquidity reports that summarise current
liquidity and liabilities. Liquidity is monitored daily by the
London Capital Group Limited board. The Group also undertakes
various stress and scenario testing as part of its Individual
Capital Adequacy Assessment Process (ICAAP) that is a requirement
of the FCA. These scenarios stress the effect on the Group's
capital and liquidity adequacy of both an individual risk
materialising or a series of risk events occurring within a short
timeframe.
-- Treasury risk: Treasury risk is the risk arising from the
movements in the interest rates or exchange rates which affect the
Group's profitability or net cash resources.
o Interest rate risk: Interest rate risk arises from the loss of
revenue from interest earned on client deposits and margined client
positions, and the Group's own cash resources. While interest rates
remain low, interest income will not make a material contribution
to Group profit. Conversely, as interest rates rise the Group
should benefit. The Group's issued convertible loan note
instruments charge a fixed interest rate of 5% and therefore no
risk arises on this debt.
o Foreign currency risk: The Group faces currency exposures on
translation of its monetary assets and liabilities. This risk is
managed by daily monitoring of the Group's net foreign currency
position as part of its liquidity risk management.
-- Key supplier risk: Key supplier risk is the risk of failure
of one of our principal business partners to provide contractual
services. We conduct initial and ongoing due diligence on key
suppliers, in addition to using multiple providers where available.
The source code for the third party software the Group relies on
for key operational activities is held in Escrow.
Key Performance Indicators
The Company uses the following key performance indicators to
measure its financial and operational performance on delivering the
strategic goals of the business.
-- Revenue
-- Adjusted profit before tax
-- Cash
-- Active trading clients
-- Trades per day
-- New client acquisitions
Review of the year
2014 was a year of significant change for the Group resulting in
revenues from continued operations falling by 10% to GBP22.7m from
GBP25.2m in 2013. However, as explained above, the Group will
continue to invest in its people, products and platforms throughout
2015 to deliver the revised strategy and prepare the Group for
future growth.
The Group's principal business activity, UK financial spread
betting and contracts for difference, saw divisional revenue fall
by 7% to GBP19.4m from GBP20.8m in 2013. These results are against
a backdrop of challenging market conditions during the first half
of the year where the Group saw a 42% fall in divisional revenue to
GBP7.7m compared to the same period in the prior year (2013 H1:
GBP13.2m). However, the second half of 2014 saw a 53% increase in
divisional revenue to GBP11.7m compared to the same period in the
prior year (2013 H2: GBP7.6m), with the Group benefiting from a
return to volatile global markets in both equities and commodities.
New client acquisitions fell from 6,431 in 2013 to 5,615 in 2014, a
drop of 13% due to low levels of market volatility compounded by a
lack of marketing and sales activity in 2014. Funds on deposit fell
by 5% to GBP21.4m (2013: GBP22.5m) and average daily trading
volumes dropped by 9% to 19,994 (2013: 22,008). Gross margin
increased to 77% (2013: 72%) with white label commission payments
remaining the largest direct cost at GBP3.8m (2012: GBP4.4m).
The institutional foreign exchange business suffered from
falling volumes in 2014. As a result, divisional revenue fell 26%
to GBP3.2m (2013: GBP4.3m) and divisional profit fell by 15% to
GBP1.1m (2013: GBP1.3m). The business derives revenue primarily
from commission.
Adjusted administrative expenses (continuing operations)
2014 2013
GBP'000 GBP'000
Employee remuneration costs 5,905 5,978
Advertising and marketing 1,364 1,080
IT and platform costs 4,370 3,164
Regulatory costs 379 574
Premises costs 550 551
Other costs 1,850 2,234
Ordinary depreciation and amortisation 1,076 2,081
Adjusted administrative expenses 15,494 15,662
Adjusted administrative expenses, which excludes the exceptional
items noted below are comparable to prior year at GBP15.5m (2013:
GBP15.7m).
Employee remunerations costs, inclusive of employer related
taxes and pension costs remained consistent year on year. During
2014 the Group carried out significant restructuring to ensure
employees had the required skill set to drive the Group forward
which resulted in a large percentage of the previous workforce
departing, as noted earlier. This resulted in exceptional
redundancy costs which are split out below, however overall both
headcount and salary costs year on year have remained stable.
Advertising and marketing investment has increased by 27.3% to
GBP1.4m from GBP1.1m in 2013. In 2013 the Group reduced marketing
expenditure while undertaking a review of the business strategy and
objectives. As a result advertising and marketing costs fell by 42%
from 2012 to 2013. Advertising and marketing investment increased
in 2014 in line with expectations and we plan a significant
increase in 2015 in order to deliver the revised strategy and
growth the Group has forecast.
The reduction in other costs is principally due to reduced
recruitment costs year on year of GBP0.3m.
The reduction in depreciation and amortisation is due to a
reduction in amortisation on software. This is a result of stemming
expenditure in this area and disposing of a number of assets no
longer required whilst management realign their IT and strategy for
the Group.
Exceptional items excluded from adjusted profit before tax
2014 2013
GBP'000 GBP'000
(Credit)/charge for provision
against FOS claims (578) 1,067
Impairment of goodwill 7,950 1,353
Impairment loss recognised on
available for sale equity investments - 100
Restructuring costs 1,528 854
Costs related to change in IT
platform including accelerated
amortisation 262 1,730
Non recurring legal fees associated
with the Integrity and FOS claims - 1,879
Share-based payment charge/(credit) (63) 13
Exceptional items excluded from
adjusted profit before tax 9,099 6,996
--------- ---------
Return on Assets (19.7%) (10.4%)
--------- ---------
The credit 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 FOS ruling
and ongoing progress of the settlements. The reduced provision is
due to less than expected interest on claims to date and a reduced
level of claims made during 2014.
The Group tests annually for impairment of goodwill. At 31
December 2014, before impairment testing, goodwill of GBP8.0m was
allocated to the London Capital Group Limited financial spread
betting and contracts for difference (CFDs), UK business segment
(CGU). New management has considered the future business model and
revised forecasts in line with the changes they plan to make over
the short and medium term. The updated cash flow forecasts for this
CGU, in line with the revised business model, using the pre-tax
discount rate of 11%, resulted in a reduction of the recoverable
amount of the London Capital Group Limited CGU to nil, which has
resulted in an impairment loss against goodwill.
Due to low volatility and difficult market conditions previous
management implemented a redundancy program in summer 2014 to
reduce the businesses headcount and salary costs. This was followed
by further restructuring under the new management team who were
appointed in the second half of the year, to ensure a strong,
knowledgeable team of staff with the right skill base to guide the
business forward under the revised business model.
In 2012 the Group decided to invest in a new spread betting and
CFD platform. The implementation of the system took longer and
required more investment than envisaged at the outset and was not
completed until April 2014. This resulted in duplicated platform
costs for the old platform of GBP0.3m during 2014 being treated as
an exceptional expense in line with the disclosure in 2013.
Tax
The Group's effective tax rate increased to -2% (2013: -11%).
This is primarily due to losses incurred in London Capital Group
Limited. These losses will be carried forward and offset against
future taxable profits and a deferred tax asset of GBP0.4m has been
recognised in this respect.
Dividend policy
The Board has reviewed its dividend policy during the year and
has concluded that a policy of paying dividends from available
profits while considering the current and future capital
requirements of the business is the most appropriate policy going
forward. The Board is not recommending a final dividend (2013:
nil).
Financial position
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 GBP2.0m (2013: GBP4.7m)
represents the provision for FOS claims referred to above, a
restructuring provision and a provision for market data. (See note
25)
Available liquidity and cash flow
2014 2013
GBP'000 GBP'000
Own cash held 24,695 16,876
Short term receivables: Amounts
due from brokers 6,149 4,607
------- -------
Net cash and short term receivables 30,844 21,483
------- -------
Title transfer funds and unsegregated
funds 2,098 329
------- -------
Available liquid resources 32,942 21,812
------- -------
Available liquidity which comprises own cash held, title
transfer funds, unsegregated funds and amounts due from brokers
increased by GBP11.1m. On 16 October 2014 the Group raised GBP16.4m
(after transaction costs) through the issue of convertible loan
notes; this has driven the increase in cash resources (see note
26).
Net cash used in operating activities after adjustments for
movements in working capital, amounted to GBP2.4m (2013: inflow of
GBP1.0m). The working capital movement predominantly relates to an
increase in the amounts due from brokers and a decrease in
provisions due to the payment of a majority of the FOS claims. Net
cash used in investing activities of GBP1.2m pertains to finance
costs of the convertible loan note, company cars, leasehold
improvements and our investment in the Group's spread betting
platform, net of interest income received (2013: GBP6.1m).
Total client money at the year-end was GBP29.7m (2013: GBP26.8m)
of which GBP27.8m (2013: GBP26.5m) was held in segregated bank
accounts. These balances are excluded from the Balance Sheet.
Unsegregated amounts held on behalf of clients under a Title
Transfer Collateral Arrangement ("TTCA") are included on the
Balance Sheet (see notes 21 and 23).
Subsequent Events
Swiss Franc
Following the announcement on the 15 January 2015 by the Swiss
National Bank, which resulted in extreme movement in the value of
the Swiss Franc and a sudden reduced liquidity in the Swiss Franc
foreign exchange market, the Group suffered a loss from market and
credit exposure. This loss is dependent on the ability of the Group
to recover client debts, but in total it is not expected to exceed
GBP1.7 million.
All clients' positions were closed at a more beneficial level
than the Company could close its own exposure.
Convertible Loan Note
During January 2015, the Company approved notices from holders
of convertible loan notes to convert 3,668,000 convertible loan
notes of GBP1.00 each in the Company at a price of 25.02p in
accordance with the terms of the convertible loan notes (see note
26). Following the conversion, 19,791,367 ordinary shares in the
Company were admitted to AIM.
Institutional Forex Business
Following the year, end the institutional forex business was
rationalised resulting in a reduction in the number of customers.
This may have a material impact on the balance sheet subsequent to
the reporting date.
Capital Resources
The following table summarises the Group's capital resources.
Further details can be found within the (unaudited) Pillar 3
Information section:
2014 2013
GBP'000 GBP'000
Common equity tier 1 (CET1) capital
before regulatory adjustments 26,383 31,662
Less: Regulatory adjustments to
CET1 (9,380) (13,395)
------- --------
Total CET1 capital after regulatory
adjustments 17,003 18,267
Tier 2 Capital 14,406 -
------- --------
Total Capital 31,409 18,267
------- --------
Capital Resource Requirement (8,925) (11,880)
------- --------
Capital Resources Surplus 22,484 6,722
------- --------
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER
2014
2014 2013
Notes GBP'000 GBP'000
Continuing operations
Revenue 22,666 25,189
Cost of sales (5,976) (7,438)
--------- ---------
Gross profit 16,690 17,751
Administrative expenses (before
certain items) (15,506) (15,662)
Certain items:
Credit/(Charge) for provision
against FOS claims 13 578 (1,067)
Impairment of goodwill 6 (7,950) (1,353)
Impairment loss recognised
on available-for-sale equity
investments - (100)
Restructuring costs (1,528) (854)
Costs related to change in
IT platform including accelerated
amortisation (262) (1,730)
Non-recurring legal fees - (1,879)
Share-based payment credit/(charge) 63 (13)
------------------------------------- ------ --------- ---------
Total administrative expenses (24,605) (22,658)
--------- ---------
Operating loss (7,915) (4,907)
Investment revenue 201 107
Finance Costs (240) -
--------- ---------
Loss before taxation (7,954) (4,800)
Tax credit 153 442
--------- ---------
Loss for the year from continuing
operations (7,801) (4,358)
Discontinued operations
Profit for the period from
discontinued operations - 635
Loss for the period attributable
to owners of the parent (7,801) (3,723)
========= =========
Earnings per share (pence)
From continuing operations: 2014 2013
- Basic 4 (15.13) (8.32)
- Diluted 4 (11.13) (8.32)
- Adjusted basic 4 2.04 5.04
From continuing and discontinuing
operations
- Basic 4 (15.13) (7.11)
- Diluted 4 (11.13) (7.11)
- Adjusted basic 4 2.04 6.25
Loss after taxation (7,801) (3,723)
Total comprehensive loss for
the year (7,801) (3,723)
Total comprehensive loss for
the year attributable to owners
of the parent (7,801) (3,723)
-------- --------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR
THE YEAR ENDED 31 DECEMBER 2014
Own
Share Share shares Equity Retained Other Total
Capital premium held reserve earnings reserves equity
(note (note
GBP'000 GBP'000 16) 17) GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
At 1 January
2013 5,318 19,572 (1,287) - 13,343 (5,344) 31,602
---------- ---------- ---------- ---------- ----------- ----------- ----------
Issue of share
capital 262 1,020 (1,282) - - - -
Total comprehensive
loss for the
year - - - - (3,723) - (3,723)
Reclassification
of foreign currency
differences on
disposal of subsidiary - - - - 47 - 47
Equity settled
share-based payment
transactions - - - - 13 - 13
5,580 20,592 (2,569) - 9,680 (5,344) 27,939
---------- ---------- ---------- ----------- ----------- ----------
At 31 December
2013
---------- ---------- ---------- ---------- ----------- ----------- ----------
Total comprehensive
loss for the
year - - - - (7,801) - (7,801)
Equity dividends - - - - - - -
paid (note 14)
Own shares acquired
in the period - - (3,496) - - - (3,496)
Equity settled
share-based payment
transactions - - - - (63) - (63)
Equity component
of convertible
loan notes - - - 2,004 - - 2,004
At 31 December
2014 5,580 20,592 (6,065) 2,004 1,816 (5,344) 18,583
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE
YEAR ENDED 31 DECEMBER 2014
Own
Share Share shares Retained Total
Capital premium held earnings equity
(note
GBP'000 GBP'000 16) GBP'000 GBP'000
GBP'000
At 1 January 2013 5,318 19,572 (1,287) 494 24,097
---------- ---------- ----------- ----------- ----------
Issue of share
capital 262 1,020 (1,282) - -
Total comprehensive
profit for the
year - - - 3,768 3,768
Equity settled
share-based payment
transactions - - - 13 13
At 31 December
2013 5,580 20,592 (2,569) 4,275 27,878
Total comprehensive
profit for the
year - - - 1,465 1,465
Equity settled
share-based payment
transactions - - - (63) (63)
Own shares acquired
in the period - - (330) - (330)
At 31 December
2014 5,580 20,592 (2,899) 5,677 28,950
BALANCE SHEET AS AT 31 DECEMBER 2014
Group Company
31 Dec 2014 31 Dec 2013 31 Dec 2014 31 Dec 2013
Notes GBP'000 GBP'000 GBP'000 GBP'000
NON-CURRENT ASSETS
Intangible assets 7 1,145 9,337 - -
Property, plant and equipment 8 2,176 1,845 - -
Investments - - 23,964 7,679
Deferred tax asset 435 335 -
------------ ------------ ------------------------- ------------
3,756 11,517 23,964 7,679
CURRENT ASSETS
Trade and other receivables 10 8,975 6,735 20,487 20,498
Current tax receivables 164 470 - -
Cash and cash equivalents 11 26,793 17,205 - -
------------ ------------ ------------------------- ------------
35,932 24,410 20,487 20,498
TOTAL ASSETS 39,688 35,927 44,451 28,177
CURRENT LIABILITIES
Trade and other payables 4,463 3,336 1,095 299
Obligations under finance leases 12 47 - - -
Provisions 13 1,986 4,652 - -
TOTAL CURRENT LIABILITIES 6,496 7,988 1,095 299
NET CURRENT ASSETS 29,436 27,939 19,392 27,878
------------ ------------ ------------------------- ------------
NON-CURRENT LIABILITIES
Convertible loan notes 14 14,406 - 14,406 -
Obligations under finance leases 12 203 - - -
14,609 - 14,406 -
TOTAL LIABILITIES 21,105 - 15,501 -
NET ASSETS 18,583 27,939 28,950 27,878
EQUITY
Share capital 5,580 5,580 5,580 5,580
Share premium 20,592 20,592 20,592 20,592
Own shares held 16 (6,065) (2,569) (2,899) (2,569)
Equity reserve 17 2,004 - - -
Retained earnings 1,816 9,680 5,677 4,275
Other reserves (5,344) (5,344) - -
------------ ------------ ------------------------- ------------
TOTAL EQUITY 18,583 27,939 28,950 27,878
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER
2014
Group Company
2014 2013 2014 2013
Notes GBP'000 GBP'000 GBP'000 GBP'000
Loss/(Profit) for the
year (7,801) (3,723) (537) 4,096
Adjustments for:
Depreciation of property,
plant and equipment 8 435 512 - -
Amortisation of intangible
assets 7 641 2,505 - -
Write Off of goodwill 7 7,950 1,353 - -
Share based payments (63) 13 - -
Gain on disposal of - (368) - -
discontinued operation
Exchange differences
in translation of foreign - 34 - -
operation
Impairment of available - 100 - -
for sale investments
Provisions 13 902 1,067 - -
Investment income (201) (134) - -
Finance costs 240 - 236 -
Current tax charge (54) (168) - -
Movement in deferred
tax asset (99) (274) - -
Operating cash flows
before movements in
working capital 1,950 917 (301) 4,096
(Increase) /decrease
in receivables (2,240) 2,436 11 -
(Decrease) / increase
in payables (2,130) (2,287) 620 (4,096)
--------- --------- ------------ ----------
Cash (used in)/generated
by operating activities
net of effects from
disposal of subsidiaries (2,420) 1,066 (330) -
Taxation received 360 - - -
--------- --------- ------------ ----------
Net cash (used in)/from
operations (2,060) 1,066 - -
Investing activities
Investment income 201 134 - -
Finance Costs (240) - - -
Disposal of a subsidiary, - (5,330) - -
net of cash disposed
of
Acquisitions of property,
plant and equipment 8 (767) (51) - -
Acquisitions of intangible
assets 7 (399) (808) - -
Acquisitions of investment - - 16,349 -
in subsidiary
Net cash used in investing
activities (1,205) (6,055) (16,019) -
Financing activities
Net proceeds in issue
of convertible loan
note 14 16,349 - 16,349 -
Cash used in the repurchase
of shares 16 (3,496) - (330) -
--------- --------- ------------ ----------
Net cash used in financing 12,853 - - -
activities
Net increase/(decrease)
in cash and cash equivalents 9,588 (4,989) - -
Cash and cash equivalents
at beginning of year 17,205 22,194 - -
--------- --------- ------------ ----------
Cash and cash equivalents
at end of year 11 26,793 17,205 - -
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2014
1. Introduction
The final information set out in the announcement does not
constitute the company's statutory accounts for the years ended 31
December 2014 or 2013. The final information for the year ended 31
December 2013 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 2013 did not
contain a statement under s498(2) or (3) of the Companies Act
2006.
Statutory accounts for 2014 will be delivered following the
company's annual general meeting. The auditors have reported on
thoses accounts: their reports were unqualified and did not contain
statements under s498 (2) or (3) of the Companies Act 2006.
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 2013 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 2014
Financial
spread betting Institutional
and CFDs, foreign Total
UK exchange
GBP'000 GBP'000 GBP'000
Revenue
Segmental revenue 19,429 3,237 22,666
---------------- ---------------- ---------
Segmental operating
profit 8,753 1,104 9,857
---------------- ---------------- ---------
Unallocated corporate
expenses (17,772)
---------
Operating loss (7,915)
Finance income 201
Finance Costs (240)
---------
Loss before taxation (7,954)
Taxation credit 153
---------
Loss for the
year (7,801)
=========
Segmental assets 1,655 7,359 9,014
---------------- ---------------- ---------
Unallocated corporate
assets 30,674
---------
Consolidated
total assets 39,688
Segmental liabilities 1,309 2,098 3,407
---------------- ---------------- ---------
Unallocated corporate
liabilities 3,090
---------
Consolidated
total liabilities 6,497
---------
Included within revenue is interest income earned
on client money held.
For the year ended 31 December 2013
Financial Institutional
spread betting foreign
and CFDs, exchange
UK
GBP'000 GBP'000 GBP'000
Revenue
Segmental revenue 20,844 4,345 25,189
---------------- -------------- ---------
Segmental operating
profit 9,806 1,340 11,146
---------------- -------------- ---------
Unallocated corporate
expenses (16,053)
---------
Operating loss (4,907)
Finance income 107
---------
Loss before taxation (4,800)
Taxation credit 442
---------
Loss for the year (4,358)
=========
Segmental assets 9,549 6,057 15,606
---------------- -------------- ---------
Unallocated corporate
assets 20,322
---------
Consolidated total
assets 35,928
Segmental liabilities 1,690 329 2,019
---------------- -------------- ---------
Unallocated corporate
liabilities 5,969
---------
Consolidated total
liabilities 7,988
=========
Year ended 31 December 2014
UK - Continuing Total
GBP'000s GBP'000s
Net revenue 22,666 22,666
----------------- -----------
Segment assets 39,688 39,688
----------------- -----------
Year ended 31 December 2013
UK - UK - Discontinued Rest of Australia Total
Continuing GBP'000s Europe - Discontinued GBP'000s
GBP'000s - Discontinued GBP'000s
GBP'000s
Net revenue 25,189 1,492 1,099 169 27,949
------------- ------------------- ---------------- ---------------- -----------
Segment assets 35,928 - - - 35,928
------------- ------------------- ---------------- ---------------- -----------
3. Adjusted loss before tax, adjusted operating loss and
adjusted EBITDA from continuing operations
2014 2013
GBP'000 GBP'000
Reported loss before tax from continuing
operations (7,954) (4,800)
Add back - (credit)/charge for provision
against FOS claims (578) 1,067
Add back - legal fees in relation
to FOS claims - 263
Add back - legal fees in Integrity
case - 1,266
Add back - Integrity case settlement - 350
Add back - restructuring costs 1,528 854
Add back - accelerated depreciation
of Ariel platform - 895
Add back - other costs of changing
IT Platform 262 835
Add back - impairment of Sensatus
investment - 100
Add back - impairment of goodwill 7,950 1,353
Add back - share-based payment (credit)/charge (63) 13
Adjusted profit before tax from
continuing operations 1,145 2,196
Tax as reported 153 442
Tax effect on add backs (247) -
-------- --------
Adjusted profit after tax from continuing
operations 1,053 2,638
Reported operating loss before tax
from continuing operations (7,915) (4,907)
Add back - share-based payment (credit)/charge (63) 13
-------- --------
Adjusted operating loss from continuing
operations (7,978) (4,894)
Add back - amortisation and depreciation
from continuing operations 1,076 2,080
Add back - (credit)/charge for provision
against FOS claims (578) 1,067
Add back - legal fees in relation
to FOS claims - 263
Add back - legal fees in Integrity
case - 1,266
Add back - Integrity case settlement - 350
Add back - restructuring costs 1,528 854
Add back - accelerated depreciation
of Ariel platform - 895
Add back - other costs of changing
IT Platform 262 835
Add back - impairment of Sensatus
investment - 100
Add back - impairment of goodwill 7,950 1,353
Adjusted EBITDA from continuing
operations 2,260 4,169
4. Earnings per ordinary share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, after deducting
any own shares (JSOP and Treasury, see note 34). 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 and the
convertible loan notes.
2014 2013
From continuing and discontinued
operations
Basic EPS
Loss after tax (GBP'000) (7,801) (3,723)
Weighted average number of
shares 51,537,429 52,365,908
Weighted average basic EPS (15.13) (7.11)
Diluted EPS
Loss after tax (GBP'000) (7,801) (3,723)
Weighted average number of
shares 70,086,552 52,365,908
Weighted average fully diluted
EPS (11.13) (7.11)
Adjusted basic EPS
Adjusted profit after tax
(GBP'000) 1,053 3,273
Weighted average number of
shares 51,537,429 52,365,908
Weighted average basic EPS 2.04 6.25
From continuing operations
Basic EPS
Loss after tax (GBP'000) (7,801) (4,358)
Weighted average number of
shares 51,537,429 52,365,908
Weighted average basic EPS (15.13) (8.32)
Diluted EPS
Loss after tax (GBP'000) (7,801) (4,358)
Weighted average number of
shares 70,086,552 52,365,908
Weighted average fully diluted
EPS (11.13) (8.32)
Adjusted basic EPS
Adjusted profit after tax (see
note 5) (GBP'000) 1,053 2,638
Weighted average number of
shares 51,537,429 52,365,908
Weighted average basic EPS 2.04 5.04
From discontinued operations
Basic EPS
Profit/(Loss) after tax (GBP'000) - 635
Weighted average number of
shares - 52,365,908
Weighted average basic EPS - 1.21
Diluted EPS
Profit/(Loss) after tax (GBP'000) - 635
Weighted average number of
shares - 52,365,908
Weighted average fully diluted
EPS - 1.21
Adjusted basic EPS
Adjusted profit/(loss) after
tax (GBP'000) - 635
Weighted average number of
shares - 52,365,908
Weighted average basic EPS - 1.21
5. Dividends
No dividends have been proposed or paid in 2014 (2013: nil)
6. Impairment charge
An impairment charge of GBP7,950,257 (2013: GBP1,353,000) has
been recognised in the year in relation to the goodwill allocated
to the UK Financial spread betting and CFDs Cost Generating Unit
("CGU"). There is no remaining goodwill on the Group's balance
sheet. Further information is provided in note 9.
7. Intangible fixed assets
Group
Customer Trade
relationship name Software Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 January 2013 152 136 9,845 9,698 19,831
Additions - - 808 - 808
Disposals (152) (136) (2,304) - (2,592)
At 1 January 2014 - - 8,349 9,698 18,047
Additions - - 853 - 853
Disposals - - (6,644) - (6,644)
At 31 December 2014 - - 2,558 9,698 12,256
----- ----- ------- ----- -------
AMORTISATION
At 1 January 2013 152 136 6,653 395 7,336
Charge for the year - - 2,505 - 2,505
Eliminated on Impairment
(note 15) - - - 1,353 1,353
Eliminated on disposal (152) (136) (2,196) - (2,484)
At 1 January 2014 - - 6,962 1,748 8,710
Charge for the year - - 641 - 641
Eliminated on Impairment
(note 15) - - - 7,950 7,950
Eliminated on disposal - - (6,190) - (6,190)
At 31 December 2014 - - 1,413 9,698 11,111
NET BOOK VALUE
At 31 December 2014 --1,145 - 1,145
At 31 December 2013 --1,387 7,950 9,337
Software disposals include GBP5,428k Ariel software fully
depreciated and written off following the Group's completion of the
migration of the UK financial spread betting and CFD business to a
new trading platform which was completed in April 2014.
8. Property, plant and equipment
Group Leasehold Plant
property and machinery Total
GBP'000 GBP'000 GBP'000
COST
At 1 January 2013 2,634 2,100 4,734
Additions - 51 51
Disposals (574) (802) (1,376)
At 1 January 2014 2,060 1,349 3,409
Additions 270 497 767
Disposals - (520) (520)
At 31 December 2014 2,330 1,326 3,656
DEPRECIATION
At 1 January 2013 907 1,500 2,407
Charge for the year 243 269 512
Eliminated on disposal (566) (789) (1,355)
At 1 January 2014 584 980 1,564
Charge for the year 220 215 435
Eliminated on disposal - (519) (519)
At 31 December 2014 804 676 1,480
NET BOOK VALUE
At 31 December 2014 1,526 650 2,176
At 31 December 2013 1,476 369 1,845
9. Impairment of goodwill
Goodwill
Cost 2014
GBP'000
At 1 January 2013 and 1
January 2014 9,698
At 31 December 2014 9,698
-------
Accumulated impairment
losses
At 1 January 2013 395
Impairment losses for the
year 1,353
-------
At 1 January 2014 1,748
-------
Impairment losses for the
year 7,950
-------
At 31 December 2014 7,950
-------
Carrying amount
At 31 December 2014 -
=======
At 1 January 2014 7,950
=======
At 1 January 2013 9,303
=======
10. Trade and other receivables
Group Company
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 122 369 - -
Allowance for
doubtful debts (20) (157) - -
------- ------- ------- -------
102 212 - -
Amounts due from
brokers 6,149 4,607 - -
Amounts owed
by Group undertakings - - 20,487 20,485
Other receivables 263 953 - 11
Prepayments 2,461 963 - -
------- ------- ------- -------
8,975 6,735 20,487 20,496
11. Cash and cash equivalents
Group Company
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
Gross cash and cash
equivalents 54,640 43,715 - -
Less: Segregated
client funds (27,847) (26,510) - -
---------- ---------- ------- -------
Own cash and title
transfer funds 26,793 17,205 - -
---------- ---------- ------- -------
Analysed as:
Cash at bank and
in hand 26,793 17,205 - -
26,793 17,205 - -
Gross cash and cash equivalents include Group cash and all
client funds (segregated funds and funds under title transfer).
Segregated client funds include client funds held in segregated
accounts or breakable short term deposits (less than three months)
in line with the FCA's Client Asset rules ('CASS').
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 are included on the
balance sheet.
12. Obligations under finance leases
Minimum lease payments
2014 2013
GBP'000 GBP'000
Amounts payable under finance leases
Within one year 62 -
In the second to fifth years inclusive 221 -
After five years - -
283 -
-------- --------
Less: future finance charges 33 -
Present value of lease obligations 250 -
======== ========
Present value of minimum
Lease payments
2014 2013
GBP'000 GBP'000
Amounts payable under finance leases
Within one year 47 -
In the second to fifth years inclusive 203 -
After five years - -
Present value of lease obligations 250 -
-------- --------
Analysed as:
Amounts due for settlement within 47 -
12 months (shown under
current liabilities)
Amounts due for settlement after 203 -
12 months
250 -
======== ========
13. Provisions and contingent liabilities
Group Company
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
Restructuring provision 1,102 - - -
Provision against FOS claims 505 4,652
Market data provision 379 -
1,986 4,652 - -
Restructuring provision
During 2014 the Group carried out extensive restructuring to
ensure that the business had the correct skill set to enable it to
expand in line with senior management's expectations. This resulted
in a provision of GBP1,102k being carried at the year end to cover
redundancy and other associated costs of the restructure.
Provision & contingent liability against FOS claims
Provision against FOS claims Contingency against FOS claims
GBP'000 GBP'000
At 1 January 2014 4,652 883
Utilisation (3,569) -
Release (301) (18)
Transfer from provision to contingency (277) 277
At 31 December 2014 505 1,142
----------------------------- -------------------------------
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 Ombudsman issued a final decision upholding the
complaints in 2013 and ordered the Group to repay all losses
incurred by the clients plus interest.
At December 2014 all eligible claimants have been repaid their
losses plus interest in accordance with the Ombudsman's directions,
resulting in a utilisation of the provision in the period of
GBP3.6m. The provision release of GBP301k is a combination of
claims rejected by the FOS and claims settled more quickly than
expected, therefore accruing less interest than anticipated. The
movement from the provision to the contingent liability of GBP277k
represents the update to the Directors' best estimate of the level
of possible future claimants.
Whilst the Directors are confident that the provision and
contingent liability represent the best estimate of the expected
liability as at the balance sheet date, there remains a degree of
uncertainty as to the number of claimants to be paid.
Market Data Provision
During 2014 a number of exchanges used by the Group have been
conducting audits in relation to data usage and redistribution. The
provision of GBP0.4m is the Group's best estimate of the liability
in relation to these open audits from the relevant exchanges.
14. Convertible Loan Notes
On 16 October 2014, the Company raised GBP17.00 million (before
expenses) through the issue of 67,945,644 convertible loan notes,
to GLIO Holdings Limited ("GLIO"), HSBC Global Custody Nominee (UK)
Limited, on behalf of Hargreave Hale Limited, and JIM Nominees
Limited, on behalf of Mr Tyler Rameson, at a conversion price of
25.02p. The proceeds (net of transaction costs) of the financing
are GBP16.35 million. The conversion price is at a 15.9% discount
to the share price of the ordinary shares at the date the
convertible loan notes were issued.
Any notes that have not been converted will be redeemed at par
on 16 October 2021. Interest of 5 per cent will be paid in the form
of shares where the notes are converted up until that settlement
date.
The net proceeds received from the issue of the convertible loan
notes have been split between the financial liability element and
an equity component, representing the fair value of the embedded
option to convert the financial liability into equity of the
Company, as follows:
2014
GBP'000
Proceeds of issue of convertible loans notes (net of transaction costs) 16,349
Equity component (see note 35) (2,004)
-------
Liability component at date of issue 14,345
Interest charged (effective) 236
Interest accrued (175)
Liability component at 31 December 2014 14,406
-------
The interest expensed is calculated by applying an effective
interest rate of 8 per cent to the liability component of the notes
from date of issue on 16 October 2014 to year end. The liability
component is measured at amortised cost. The difference between the
carrying amount of the liability component at the date of issue and
the amount reported in the balance sheet at 31 December 2014
represents the effective interest rate less the interest paid to
that date.
In accordance with the terms of the convertible loan notes, as
further described in the circular to Shareholders dated 17 June
2014 (the "Circular"), those investors issued with the convertible
loan notes have also been granted warrants and shall be entitled,
upon the exercise of their convertible loan notes, to be issued
ordinary shares (in satisfaction of the Minimum Interest Return, as
defined in the Circular), as shown in the table below:
Convertible Ordinary Shares to Warrants
loan be issued in
notes issued satisfaction of the issued
Minimum Interest
Return (assuming
no tax deductions)
GLIO Holdings
Limited 59,952,038 20,983,213 80,935,251
Hargreave Hale 3,996,803 1,398,881 5,395,683
Mr Tyler Rameson 3,996,803 1,398,881 5,395,683
The warrants issued to GLIO may be exercised in full or in part
in minimum tranches of 5,000,000 and the warrants issued to
Hargreave Hale and Mr Tyler Rameson may be exercised in full or in
part in minimum tranches of 1,000,000 at any time upon 10 business
days' notice up and until the maturity date, being 7 years from the
date of issue, provided that the equivalent number of convertible
loan notes have been converted (see note 37).
15. Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Trading Transactions
During the year, Group companies entered into the following
transactions with related parties who are not members of the
Group:
2014 2013
GBP'000 GBP'000
Alogoweb S.A.R.L. - purchase
of licence 1,080 -
1,080 -
-------- --------
Loans from related parties
2014 2013
GBP'000 GBP'000
GLIO Holdings Limited -
convertible loan note 15,000 -
15,000 -
-------- --------
The following amounts were outstanding at the balance sheet
date:
Due to related Due from related
parties parties
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
Alogoweb S.A.R.L. - - - - -
purchase of licence
GLIO Holdings Limited 14,479 - - -
- convertible loan note
14,479 - - -
Following shareholder approval on 30 September 2014, the Company
entered into a licencing agreement on 20 October 2014 with Algoweb
S.A.R.L. ("Algoweb"). The Licencing agreement will allow the Group
to access Algoweb's retail distribution platforms and software, as
well as connectivity to post trade services. Algoweb is a related
party of the Group because Charles-Henri Sabet, Executive Chairman
of London Capital Group Holdings plc and his wife, together own 50
per cent of the share capital in Algoweb.
GLIO Holdings Limited ("GLIO") is a related party of the Group
because Charles-Henri Sabet, Executive Chairman of London Capital
Group Holdings plc holds a 100% interest in ILOG Investments
Limited, GLIO's largest shareholder. The balance represents both
the liability and equity components of this transaction (see note
14).
16. Own Shares
2014 2013
GBP'000 GBP'000
Balance at 1 January 2014 2,569 1,287
Acquired in the period - transferred
to JSOP 3,166 1,282
Acquired in the period - transferred
to Treasury 330 -
------- -------
Balance at 31 December 2014 6,065 2,569
------- -------
The Group has a Joint Share Ownership Plan ("JSOP") to provide
incentives to Directors and employees. At 31 December 2014
12,480,000 ordinary shares of GBP0.10 each were held in the JSOP,
820,000 with an initial participation price of GBP1.57, 2,615,000
with an initial participation price of GBP0.49 and 9,045,000 with
an initial participation price of GBP0.35. During the year, The
Company purchased 1,000,000 ordinary shares of GBP0.10 each at a
price of GBP0.33 per share. These shares were held in Treasury at
year end.
17. Equity Reserve
2014 2013
GBP'000 GBP'000
Balance at 1 January 2014 - -
Recognition of equity component
of convertible loan notes
(see note 26) 2,004 -
Balance at 31 December 2014 2,004 -
------- -------
This reserve represents the equity component of convertible loan
notes (see note 14).
18. Subsequent Events
Swiss Franc
Following the announcement on the 15 January 2015 by the Swiss
National Bank, which resulted in extreme movement in the value of
the Swiss Franc and a sudden reduced liquidity in the Swiss Franc
foreign exchange market, the Group suffered a loss from market and
credit exposure. This loss is dependent on the ability of the Group
to recover client debts, but in total it is not expected to exceed
GBP1.7 million.
All clients' positions were closed at a more beneficial level
than the Company could close its own exposure.
Convertible Loan Note
During January 2015, the Company approved notices from holders
of convertible loan notes to convert 3,668,000 convertible loan
notes of GBP1.00 each in the Company at a price of 25.02p in
accordance with the terms of the convertible loan notes (see note
26). Following the conversion, 19,791,367 ordinary shares in the
Company were admitted to AIM.
Institutional Forex Business
Following the year, end the institutional forex business was
rationalised resulting in a reduction in the number of customers.
This may have a material impact on the balance sheet subsequent to
the reporting date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SELSSIFISELD
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