TIDMLCG
RNS Number : 7773W
London Capital Group Holdings PLC
29 April 2016
LONDON CAPITAL GROUP HOLDINGS PLC
("LCG", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Financial Highlights
-- Adjusted loss before tax(1) from continuing operations of
GBP13.9 million (2014 restated: profit GBP1.2million)
-- Statutory loss before tax from continuing operations of
GBP14.5 million (2014 restated: GBP7.7 million)
-- Statutory loss after tax from continuing operations of
GBP14.9 million (2014 restated: GBP7.8 million)
-- Revenue from UK financial spread betting ("FSB") and
contracts for difference ("CFD") down 21% to GBP15.3 million (2014:
GBP19.4 million)
-- Revenue from continuing operations decreased 32% to GBP15.5
million (2014 restated: GBP22.7 million)
-- Net cash and short term receivables(2) of GBP16.1 million at
year end (2014 restated: GBP32.9 million) including amounts due
from brokers GBP3.7 million (2014: GBP6.1 million)
Operational Highlights
-- UK FSB and CFD performance
- Divisional revenue down 21% to GBP15.3 million (2014: GBP19.4
million); divisional profit of GBP2.5 million (2014: GBP8.8
million)
- FSB average trades per day increased 48% to 29,581 (2014: 19,994)
- New client acquisitions decreased 37% to 3,539 (2014: 5,615)
-- Institutional foreign exchange performance
- Business activity curtailed during the year
- Divisional revenue of GBP0.2 million (2014: GBP3.3 million);
divisional loss of GBP0.6 million (2014: profit GBP1.1 million)
Charles-Henri Sabet, Chief Executive Officer said: "The Group
starts the new financial year transformed. We have been successful
in the integration of our new technology and are in the process of
migrating our client base which we expect to be completed by the
end of May.
This "brand new" LCG is centered on a new cutting-edge online
trading platform and an enhanced marketing programme. We are
already beginning to see the benefits and have made a strong start
to 2016. I believe that all the elements are now in place for the
Group to return to sustained growth."
Continuing operations Year ended Year ended
31 December 2015 31 December 2014
GBP'000 GBP'000
Revenue 15,489 22,666
Adjusted EBITDA(3) (12,173) 2,261
Adjusted (loss)/profit before tax(2) (13,902) 1,216
Statutory loss before tax (14,503) (7,883)
Adjusted basic earnings per share from continuing operations (23.11p) 2.21p
Basic loss per share from continuing operations (24.32p) (15.00p)
Diluted loss per share from continuing operations (24.32p) (15.00p)
Dividend per share 0.0p 0.0p
(1) Adjusted (loss)/profit before tax represents (loss)/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 (loss)/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 and the
movement in the provision for FOS claims.
For further information, please contact:
London Capital Group Holdings
plc
+44 (0)20 7456
Kate Valdar 7000
Allenby Capital Limited
Nominated Adviser and Broker
John Depasquale +44 (0)20 3328
Nick Naylor 5656
About London Capital Group
(http://ir.londoncapitalgroup.com/)
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 Conduct 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 division provides online foreign exchange trading
services. 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 quoted 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 2015
I am pleased to report that the restructuring of the Group is
complete and that LCG is now positioned to return to a period of
sustained growth.
Organisational restructuring
As we have previously reported, the business has gone through a
phase of consolidation in 2015 as management has been focused on
getting the building blocks in place within the business in terms
of technology, product offering, trading platforms, brand, customer
service and, most importantly, people in order to position LCG for
a return to profitability. This, however, has resulted in a lower
level of trading revenue during the year as LCG limited its
promotional activities in order to focus on the restructuring of
the business.
During the fourth quarter of the previous financial year, we
strengthened the board of the Company with the addition of
non-executives, and we have continued, during 2015, to strengthen
the senior management team to support our Group strategy of
providing a more institutional-level of service and product
offering to our retail clients.
In particular, the Group has now launched the new 'LCG' brand
which took place in February 2016. This has included the production
of an extensive range of marketing material, the launch of a new
website (www.lcg.com) and, most importantly, the launch of our new
trading platform, LCG Trader, and connected client service portal,
MyLCG.
Also, during November the Group moved to new offices located in
Knightsbridge. The new office space provides the benefit of being
centrally located for our client needs as well providing a fresh
and modern working environment for the people of LCG.
Outlook
As previously mentioned, the building blocks are in place for
the business to return to growth and following the official launch
of LCG Trader, the Group is ideally positioned to offer the right
trading solutions to its clients at a time when it is anticipated
that markets will be experiencing higher levels of volatility
arising from the Brexit debate and referendum in the United
Kingdom. Also, as referred to in our trading statement released on
27 January 2016, the Group will be seeking to increase its level of
regulatory capital in the short term in order to take proper
advantage of its new platform and to support the future growth of
the business.
We will continue to invest in, and to develop, our people,
products and services, to provide our clients with the service they
expect in order to ensure that LCG is their provider of choice for
their trading needs.
Charles Poncet
Non-Executive Chairman
28 April 2016
STRATEGIC REPORT
For the year ended 31 December 2015
Introduction
Following the strategic review that was undertaken following the
arrival of new management in late 2014, the Group has now been
restructured and is well positioned to return to growth.
This restructuring has included a major overhaul of the
technology infrastructure used to support the Group's operations,
the development of a new trading platform, LCG Trader, the launch
of a new 'LCG' brand and the recruitment of specific personnel to
support the delivery of a best-in-class approach to offer a
competitive trading solution for our clients.
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 quoted on the London
Stock Exchange's AIM market ("AIM").
Revenues are generated from the dealing spread - the difference
between the buying and selling price of our CFD and spread betting
products, commission income, exchange gains and interest.
The Group's future success is expected to be achieved by
providing a high quality service to its customers and offering a
variety of financial trading products and platforms. Clients are
attracted to the Group through its value for money, ease of
platform navigation, its industry leading new mobile app, tight
dealing spreads and competitive margin requirements, in addition to
high levels of customer service.
Strategy and objectives
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Following the strategic review of the business and industry
trends that was undertaken during the last quarter of 2014 and
continued throughout 2015, and the subsequent decision by the
senior management team to focus the business towards servicing the
needs of active retail traders, LCG's aim is to provide an
institutional level of service and product offering to its retail
clients.
In order to first attract and then retain clients, and make LCG
their provider of choice, the Group is committed to providing the
following:
- Industry-leading platform
To provide an industry-leading trading platform on web, desktop,
mobile and API ensuring that its offering fits in with the demands
of the active trader.
- Service
To provide an industry-leading customer experience and a service
tailored to individual customers' needs, both online and through
telephone, email and 'live-chat' channels.
- Professional tools and news service
To provide expert in-house market analysis in order to keep
clients up-to-date with market events, as well as offering access
to professional third-party news and tools providers.
- Educational materials
To provide an enhanced education service catering to all levels
of trading experience, including face-to-face seminars and live
market webinars from a team of market analysts.
- Pricing
To deliver a value proposition to its clients without
compromising adherence to quality products, platforms and service,
in order to position the Group at the forefront of the industry's
most competitive providers.
- Marketing
To promote the Group through building the LCG brand,
consolidating online presence into a single LCG-led offering which
incorporates all of the Group's products and services.
- Dealing execution
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 both liquidity
providers, and the execution model on the MetaTrader4 platform.
In addition to the above core strategy , the Group is committed
to:
- expanding the geographical footprint of the business by
opening offices in key locations across Europe, the Middle East and
Asia; and
- continuing to develop and expand the range of products offered
in order to meet the needs of existing customers and attract new
customers with a broader product reach and appeal.
Our people
Beginning in the last quarter of 2014 and continuing throughout
2015, the Group has strengthened the board of directors, senior
management team and recruited best-in-class personnel to support
the Group ambitions.
Employees are incentivised with a discretionary
performance-related bonus scheme to reward performance 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. Individuals are encouraged to achieve
their full potential in every aspect of their employment and the
Group supports fair and equitable treatment of our employees
irrespective of gender, sexual orientation, religious beliefs, age,
colour, ethnic or racial origin, nationality or disability.
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
potential financial and operational risk events and the mitigating
controls currently in place. This quantification process ensures
that the Group operates within its risk appetite.
Ultimate responsibility for risk management lies with the Board,
which has established an Audit and 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 overseen by the Credit and Risk Committee.
The effectiveness of internal controls is monitored by the
Compliance function and specific areas may be reviewed by
outsourced expert assessors and is also reported to the Audit and
Risk Committee and the Board.
The main areas of risk for the Group 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
Front Office Risk Management function, the Audit and 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 actively offer credit to its clients but does, on
occasion, offer credit to clients who meet specific criteria. LCG
had adopted a Credit Risk Policy which sets out specific
requirements that apply in the event that clients are offered
credit.
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 made available to 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 periodic 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, LCG ensures the continued success of the Group
through the identification and retention of its key employees
through share based payment awards under long term incentive
plans.
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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.
-- 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
the daily production of liquidity reports that summarise current
liquidity and liabilities. Liquidity is monitored daily by the
board of London Capital Group Limited. 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 at their historic lows, 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 instrument charges 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.
Key Performance Indicators
The Group 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
2015 was a year of transition for the Group resulting in
revenues from continued operations falling by 32% to GBP15.5
million from GBP22.7 million in 2014.
The Group's principal business activity, UK financial spread
betting and contracts for difference, saw divisional revenue fall
by 21% to GBP15.3 million from GBP19.4 million in 2014 as a result
of management's decision to reduce active promotional activity
whilst the business focused on its restructuring activities. New
client acquisition fell from 5,615 in 2014 to 3,539 in 2015, a drop
of 37%. Funds on deposit increased slightly by 11% to GBP23.8
million (2014: GBP21.4 million) and average daily trading volumes
increased by 48% to 29,581 (2014: 19,994). Gross margin decreased
to 68% (2014: 74%) with white label commission payments remaining
the largest direct cost at GBP5.0 million (2014: GBP3.8
million).
The activities of the institutional foreign exchange business
were reduced during the year whilst the Group focused its efforts
on the organisational restructure and as a result, divisional
revenue fell 94% to GBP0.2 million (2014: GBP3.2 million).
Adjusted administrative expenses (continuing operations)
2015 2014
GBP'000 GBP'000
Employee remuneration costs 9,043 5,905
Advertising and marketing 2,595 1,364
IT and platform costs 5,934 4,370
Regulatory costs 325 379
Premises costs 1,755 550
Other costs 3,195 1,861
Ordinary depreciation and amortisation 1,302 1,076
-------- --------
Adjusted administrative expenses 24,149 15,505
======== ========
Adjusted administrative expenses, which excludes the exceptional
items noted below increased by GBP8.6 million to GBP24.1 million
(2014: GBP15.5 million).
Employee remuneration costs, inclusive of employer related taxes
and pension costs, increased by 53% during the year and reflect the
costs necessary for the Group to attract and employ the appropriate
quality of staff to support the Group's strategy. The increase
during the year also included a substantial increase in costs
associated with the use of contract staff and as a result of the
additional resource that LCG had to deploy in order to support its
restructuring activities during the year. This cost is expected to
reduce in the future.
Advertising and marketing investment has increased by 86% to
GBP2.6 million from GBP1.4 million in 2014. This increase reflects
the cost incurred by the Group to develop and roll-out the LCG
brand. This included an increase in advertising spend towards the
end of the year to increase the awareness of the LCG brand. It is
anticipated that in future years, marketing spend will comprise a
significant element of the Group's cost base in order to support
client acquisition and retention.
The increase in premises costs relates to the relocation of the
Group's office to 1 Knightsbridge compared to the preferential
tenancy rates it had enjoyed at its old location (although these
were due to cease in early 2016) and an overlap period whilst the
new office space for the Group was fitted-out to support its future
requirements.
The increase in other costs during the year was due to the level
of client bad debts incurred by LCG in part due to the Swiss
National Bank event in January 2015.
The increase in depreciation and amortisation reflects the
increase in capital expenditure to comprehensively upgrade the
hardware used by the Group and the development of new software
systems to support the Group strategy such as LCG Trader and
myLCG.
Exceptional items excluded from adjusted profit before tax
2015 2014
GBP'000 GBP'000
Charge/(credit) for provision against
FOS claims 38 (578)
Impairment of goodwill - 7,950
Impairment of leasehold assets 1,321 -
Restructuring costs (900) 1,528
Costs related to change in IT platform
including accelerated amortisation - 262
Share-based payment charge/(credit) 142 (63)
-------- --------
Exceptional items excluded from adjusted
(loss)/profit before tax 601 9,099
======== ========
The charge for the FOS claims is a combination of the close out
during the year of a pre-existing provision that existed at 31
December 2014 and the recognition of a new provision during 2015
relating to potential settlements that may occur in the future.
This is explained in more detail within note 16.
The Group tests annually for impairment of goodwill. At 31
December 2014, before impairment testing, goodwill of GBP8.0
million was allocated to the London Capital Group Limited financial
spread betting and contracts for difference ("CFDs"), UK business
segment ("CGU"). The new management team considered the future
business model and revised its forecasts in line with the changes
that they planned to make over the short and medium term. The
updated cash flow forecasts for the CGU when discounted at the
pre-tax discount rate of 11%, resulted in a reduction of the
recoverable amount from the CGU to nil, which resulted in an
impairment loss against goodwill during 2014.
In November 2015, LCG relocated to new office space based in
Knightsbridge and as a result of the move a review of the assets
held by the business in respect of its old location in the City of
London was required. This resulted in a write-down to nil in
respect of the leasehold improvement costs associated with this
location.
Due to low volatility and difficult market conditions during
2014 the previous management team implemented a redundancy program
in summer 2014 to reduce headcount and salary costs. This was then
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. During the year
ended 31 December 2015, GBP900,000 was released as circumstances
relating to the provision changed.
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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 originally envisaged and was not
completed until April 2014. This resulted in duplicated platform
costs for the old platform of GBP0.3 million during 2014 being
treated as an exceptional expense.
Tax
The Group's effective tax rate increased to 3% (2014: -2%). This
is primarily due to losses incurred within London Capital Group
Limited. These losses will be carried forward and offset against
future taxable profits and the Group has an unrecognised deferred
tax asset of GBP3.0 million (2014: GBP0.1 million) 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 (2014:
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 GBP990,000 (2014:
GBP1,986,000) represents the provisions for FOS claims, market data
and dilapidations (see note 16).
Available liquidity and cash flow
2015 2014
GBP'000 GBP'000
Own cash held 12,459 24,695
Short term receivables: Amounts due
from brokers 3,657 6,149
-------- --------
Net cash and short term receivables 16,116 30,844
Title transfer funds and unsegregated
funds - 2,098
-------- --------
Available liquid resources 16,116 32,942
======== ========
Available liquidity which comprises own cash held, title
transfer funds, unsegregated funds and amounts due from brokers
decreased by GBP16.8 million. This decrease was primarily due to
the losses incurred by the Group during the year
Cash used in operating activities after adjustments for
movements in working capital, amounted to GBP10.8 million (2014:
GBP2.4 million). The working capital movement relates primarily to
the loss recognised by the Group for the year. Net cash used in
investing activities of GBP3.6 million reflects the capital
investment made by the business in respect of a comprehensive
update to the IT hardware employed by the Group and the capitalised
development spend by the Group in the development of its new
trading platform, LCG Trader (2014: GBP1.0 million).
Total client money at the year-end was GBP23.8 million (2014:
GBP29.9 million) of which GBP23.8 million (2014: GBP27.8 million)
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 10 and 11).
Return on assets
In accordance with the Capital Requirements Directive IV ("CRD
IV") and the IFPRU prudential regulations the Group is required to
disclose a return on assets metric. This has been calculated as
'profit for the year' divided by 'shareholders equity'.
2015 2014
Restated
Return on assets (132.0%) (33.0%)
Subsequent events
The Group notes that there have been no adjusting or
non-adjusting balance sheet events since 31 December 2015.
Capital Resources
The following table summarises the Group's capital
resources.
2015 2014
GBP'000 GBP'000
Common equity tier 1 (CET1) capital
before regulatory adjustments 11,328 23,459
Less: Regulatory adjustments to CET1 (2,903) (1,580)
-------- --------
Total CET1 capital after regulatory
adjustments 8,425 21,879
Tier 2 Capital 8,265 9,705
-------- --------
Total Capital 16,690 31,584
Capital Resource Requirement (8,462) (8,925)
-------- --------
Capital Resources Surplus 8,228 22,659
======== ========
Preparation of the Strategic Report
This Strategic Report has been prepared solely to provide
information to shareholders to assess how the Directors have
performed their duty to promote the success of the Group.
The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the time of
their approval of this report and such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such forward
looking information.
By order of the Board
Charles-Henri Sabet
Chief Executive Officer
28 April 2016
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2015
Note 2015 2014
Restated
GBP'000 GBP'000
Revenue 15,489 22,666
Cost of sales (4,972) (5,976)
--------- ----------
Gross profit 10,517 16,690
Other operating income 165 -
Administrative expenses (before
certain items) (24,149) (15,505)
Certain items:
Credit / (charge) for provision
against FOS claims 16 (38) 578
Impairment of goodwill 9 - (7,950)
Impairment of leasehold assets (1,321) -
Restructuring (charges) / credit 900 (1,528)
Costs related to change in
IT platform including accelerated
amortisation - (262)
Share- based payment (charge)
/ credit (142) 63
Total administrative expenses (24,750) (24,604)
Other operating expenses (8) -
--------- ----------
Operating loss (14,076) (7,914)
Investment revenue 257 201
Finance costs (684) (170)
--------- ----------
Loss before taxation (14,503) (7,883)
Tax charge / (credit) (433) 153
--------- ----------
Loss for the year attributable
to the owners of the parent (14,936) (7,730)
========= ==========
Earnings per share (pence)
Basic 4 (24.32) (15.00)
Diluted 4 (24.32) (10.90)
Adjusted basic 4 (23.11) 2.21
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
Loss after taxation (14,936) (7,730)
--------- --------
Total comprehensive loss for the
year (14,936) (7,730)
--------- --------
Total comprehensive loss for the
year attributable to owner of
the parent (14,936) (7,730)
========= ========
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
For the year ended 31 December 2015
Own
Share Share shares Equity Retained Other Total
capital premium held reserve earnings reserves equity
(note (note (note (note (note (note
20) 21) 22) 23) 24) 24)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2014 5,580 20,592 (2,569) - 9,680 (5,344) 27,939
Total comprehensive
loss for the
year - - - - (7,801) - (7,801)
Own shares acquired
in the period - - (3,496) - - - (3,496)
Equity settled
share-based
payment transaction - - - - (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
Restated for
convertible
loan notes (note
17) - - - 4,805 71 - 4,876
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---------- ---------- -------- ---------- ----------- ----------- ---------
At 31 December
2014 (Restated) 5,580 20,592 (6,065) 6,809 1,887 (5,344) 23,459
Issue of share
capital 2,405 3,227 - - - - 5,632
Total comprehensive
loss for the
year - - - - (14,936) - (14,936)
Equity settled
share-based
payment transaction - - - - 142 - 142
Equity component
of convertible
loan notes - - - (2,842) - - (2,842)
Issue of put
option over
shares - - - - - (127) (127)
At 31 December
2015 7,985 23,819 (6,065) 3,967 (12,907) (5,471) 11,328
========== ========== ======== ========== =========== =========== =========
CONSOLIDATED BALANCE SHEET
As at 31 December 2015
Note 2015 2014
Restated
GBP'000 GBP'000
Non-current assets
Intangible assets 7 2,903 1,145
Property, plant and equipment 8 2,382 2,176
Deferred tax assets - 435
--------- ----------
5,285 3,756
--------- ----------
Current assets
Financial investments - held 670 -
for trading
Trade and other receivables 10 6,456 8,975
Current tax receivables - 164
Cash and cash equivalents 11 12,459 26,793
--------- ----------
19,585 35,932
--------- ----------
Total assets 24,870 39,688
========= ==========
Current liabilities
13,
Trade and other payables 14 3,680 4,288
Obligations under finance
leases 12 93 47
Derivative financial instruments 15 135 -
Provisions 16 990 1,986
--------- ----------
Total current liabilities 4,898 6,321
--------- ----------
Net current assets 14,687 29,611
--------- ----------
Non-current liabilities
Convertible loan notes 17 8,265 9,705
Obligations under finance
leases 12 149 203
Deferred consideration 230 -
--------- ----------
8,644 9,908
Total liabilities 13,542 16,229
--------- ----------
Net assets 11,328 23,459
========= ==========
Equity
Share capital 20 7,985 5,580
Share premium 21 23,819 20,592
Own shares held 22 (6,065) (6,065)
Equity reserve 23 3,967 6,809
Retained earnings 24 (12,907) 1,887
Other reserves 24 (5,471) (5,344)
--------- ----------
Total equity 11,328 23,459
========= ==========
CASHFLOW STATEMENT
For the year ended 31 December 2015
Notes 2015 2014
Restated
GBP'000 GBP'000
(Loss) / profit for the year (14,936) (7,730)
Adjustments for:
Depreciation of property,
plant and equipment 8 584 435
Amortisation of intangible
assets 7 718 641
Write off of goodwill 7 - 7,950
Impairment of leasehold improvements 1,321 -
Share-based payments 142 (63)
Gain on disposal of property, 39 -
plant and equipment
Provisions 16 (836) 902
Investment income (257) (201)
Finance costs 684 170
Current tax charge (2) (54)
Movement in deferred tax asset 435 (99)
--------- ----------
Operating cash flows before
movements in working capital (12,108) 1,951
(Increase) / decrease in receivables 1,849 (2,241)
(Decrease) / increase in payables (640) (2,200)
--------- ----------
Cash (used in) / generated
by operating activities (10,899) (2,490)
Taxation received 164 360
--------- ----------
Net cash (used in) / from
operations (10,735) (2,130)
--------- ----------
Investing activities
Investment income 257 201
Proceeds on disposal of property, 90 -
plant and equipment
Acquisitions of property,
plant and equipment 8 (1,200) (767)
Acquisition of leasehold assets (940) -
Acquisitions of intangible
assets 7 (1,679) (399)
Acquisitions of trademarks (116) -
Acquisitions of investment - -
in subsidiary
--------- ----------
Net cash used in investing
activities (3,588) (965)
--------- ----------
Financing activities
Net proceeds in issue of convertible
loan note 17 - 16,349
Finance costs (11) (170)
Cash used in the repurchase
of shares 22 - (3,496)
--------- ----------
Net cash used in financing
activities (11) 12,683
--------- ----------
Net increase / (decrease)
in cash and cash equivalents (14,334) 9,588
Cash and cash equivalents
at the beginning of year 26,793 17,205
--------- ----------
Cash and cash equivalents
at end of year 11 12,459 26,793
========= ==========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2015
1. Introduction
The final information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31
December 2015 or 2014. The final information for the year ended 31
December 2014 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.
Statutory accounts for 2015 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.
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 2014 statutory accounts which are
available on the Group's website www.londoncapitalgroup.com
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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. Business and geographical segments
For the year ended 31 December Financial Institutional Total
2015 spread foreign
betting exchange
and
CFDs,
UK
GBP'000 GBP'000 GBP'000
Revenue
Segmental revenue 15,285 204 15,489
---------- -------------- ---------
Segmental operating profit
/ (loss) 2,473 (631) 1,842
Net operating income 157
Unallocated corporate expenses (16,075)
---------
Operating loss (14,076)
Finance income 257
Finance costs (684)
---------
Loss before taxation (14,503)
Taxation charge (433)
---------
Loss for the year (14,936)
=========
Segmental assets 2,868 62 2,930
Unallocated segmental assets 21,940
---------
Consolidated total assets 24,870
=========
Segmental liabilities 1,323 - 1,323
Unallocated segmental liabilities 12,219
---------
Consolidated total liabilities 13,542
=========
Included within revenue is interest income on
client money held
For the year ended 31 December Financial Institutional Total
2014 spread foreign
betting exchange
and
CFDs,
UK
GBP'000 GBP'000 GBP'000
Revenue
Segmental revenue 19,429 3,237 22,666
---------- -------------- ---------
Segmental operating profit
/ (loss) 8,753 1,104 9,857
Unallocated corporate expenses (17,771)
---------
Operating loss (7,914)
Finance income 201
Finance costs (170)
---------
Loss before taxation (7,883)
Taxation credit 153
---------
Loss for the year (7,730)
=========
Segmental assets 1,655 7,359 9,014
Unallocated segmental assets 30,674
---------
Consolidated total assets 39,688
=========
Segmental liabilities 1,309 2,098 3,407
Unallocated segmental liabilities 12,822
---------
Consolidated total liabilities 16,229
=========
Included within revenue is interest income on
client money held
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 1. Segmental
profit represents the profit earned by each segment without
allocation of the share of central administration costs including
central support salaries and expenses, investment revenue, finance
costs and income tax expense. This is the measure reported to the
Group's Chief Executive Officer for the purpose of resource
allocation and assessment of segmental performance.
Geographical information
The Group's revenue arises in the UK.
The Capital requirements (Country-by-Country reporting)
regulations 2013 introduced reporting obligations for institutions
within the scope of the European Union's Capital requirements
Directive (CRD IV). Article 89 of the CRD IV requires credit
institutions and investment firms in the EU to disclose annually,
specifying by Member State and by third country in which it has an
establishment, the following information for the year ended 31
December 2015:
a) London Capital Group Holdings plc group, which is a provider
of online trading services, has all of its operations based in
England and its balance sheet entirely denominated in sterling;
b) Turnover and pre-tax profit are disclosed in the profit and loss account; and
c) No corporation tax was paid in the period.
The Group has not received any public subsidies.
3. Adjusted loss before tax, adjusted operating loss and
adjusted EBITDA from continuing operations
2015 2014
Restated
GBP'000 GBP'000
Reported loss before tax from continuing
operations (14,503) (7,883)
Add back - charge / (credit) for
provision against FOS claims 38 (578)
Add back - (credit) / charge for
restructuring costs (900) 1,528
Add back - other costs of changing
IT platform - 262
Add back - impairment of goodwill - 7,950
Add back - impairment of leasehold 1,321 -
assets
Add back - share-based payment charge
/ (credit) 142 (63)
--------- ----------
Adjusted (loss) / profit before tax
from continuing operations (13,902) 1,216
Tax as reported (433) 153
Tax effect on add backs 144 (233)
--------- ----------
Adjusted (loss) / profit after tax
from continuing operations (14,191) 1,136
========= ==========
Reported operating loss before tax
from continuing operations (14,076) (7,914)
Add back - share-based payment (credit)/charge 142 (63)
--------- ----------
Adjusted operating loss from continuing
operations (13,934) (7,977)
Add back - amortisation and depreciation
from continuing operations 1,302 1,076
Add back - charge / (credit) for
provision against FOS claims 38 (578)
Add back - (credit) / charge for
restructuring costs (900) 1,528
Add back - other costs of changing
IT platform - 262
Add back - impairment of goodwill - 7,950
Add back - impairment of leasehold 1,321 -
assets
--------- ----------
Adjusted EBITDA from continuing operations (12,173) 2,261
========= ==========
4. Earnings per ordinary share
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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 21). 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.
2015 2014
Restated
Basic EPS
Loss after tax (GBP'000) (14,936) (7,730)
Weighted average number of shares 61,412,303 51,537,429
Weighted average basic EPS (24.32) (15.00)
Diluted EPS
Loss after tax (GBP'000) (14,936) (7,730)
Weighted average number of shares 61,412,303 51,537,429
Weighted average fully diluted EPS (24.32) (15.00)
Adjusted Basic EPS
Adjusted profit after tax (GBP'000) (14,191) 1,136
Weighted average number of shares 61,412,303 51,537,429
Weighted average adjusted basic
EPS (23.11) 2.21
5. Dividends
No dividends have been proposed or paid in 2015 (2014: nil).
6. Impairment charge
During the year an impairment charge of GBP1,321,000 has been
recognised in respect of the carrying value of the leasehold
improvements incurred on the Company's old offices at 6 Devonshire
Square. The impairment charge has arisen following the Company's
relocation to it's new offices at 1 Knightsbridge.
An impairment charge of GBP7,950,000 was recognised during the
year ended 31 December 2014 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 19.
7. Intangible fixed assets
Domain
Trademarks Software name Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2014 - 8,349 - 9,698 18,047
Additions - 853 - - 853
Disposals - (6,644) - - (6,644)
------------- ----------- -------- ----------- --------
At 1 January 2015 - 2,558 - 9,698 12,256
Additions 116 2,074 286 - 2,476
Disposals - - - - -
------------- ----------- -------- ----------- --------
At 31 December
2015 116 4,632 286 9,698 14,732
============= =========== ======== =========== ========
Amortisation
At 1 January 2014 - 6,962 - 1,748 8,710
Charge for the
year - 641 - - 641
Impairment losses
for the year - - - 7,950 7,950
Eliminated on disposal - (6,190) - - (6,190)
------------- ----------- -------- ----------- --------
At 1 January 2015 - 1,413 - 9,698 11,111
Charge for the
year 7 698 13 - 718
Impairment losses - - - - -
for the year
Eliminated on disposal - - - - -
------------- ----------- -------- ----------- --------
At 31 December
2015 7 2,111 13 9,698 11,829
============= =========== ======== =========== ========
Net book value
At 31 December
2014 - 1,145 - - 1,145
------------- ----------- -------- ----------- --------
At 31 December
2015 109 2,521 273 - 2,903
============= =========== ======== =========== ========
In 2014, software disposals include GBP5,428,000 of 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.
Domain name relates to the cost of acquiring www.lcg.com to
support the Group brand, LCG.
Trademarks relates to the cost of acquiring various global
trademarks in respect of the 'LCG' brand that was launched during
the year.
8. Property, plant and equipment
Leasehold Motor Plant
property vehicles and Total
machinery
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2014 2,060 - 1,349 3,409
Additions 270 316 181 767
Disposals - - (520) (520)
---------- ---------- ----------- --------
At 1 January 2015 2,330 316 1,010 3,656
Additions 1,040 - 1,200 2,240
Disposals - (141) - (141)
---------- ---------- ----------- --------
At 31 December 2015 3,370 175 2,210 5,755
========== ========== =========== ========
Depreciation
At 1 January 2014 584 - 980 1,564
Charge for the year 220 23 192 435
Eliminated on disposal - - (519) (519)
---------- ---------- ----------- --------
At 1 January 2015 804 23 653 1,480
Charge for the year 223 41 320 584
Eliminated on disposal - (12) - (12)
Impairment losses for
the year 1,321 - - 1,321
---------- ---------- ----------- --------
At 31 December 2015 2,348 52 973 3,373
========== ========== =========== ========
Net book value
At 31 December 2014 1,526 293 357 2,176
---------- ---------- ----------- --------
At 31 December 2015 1,022 123 1,237 2,382
========== ========== =========== ========
The Group's obligations under finance leases (see note 12) are
secured by the lessors' title to the leased assets, which have a
carrying amount of GBP123,000 (2014 - GBP293,000).
9. Impairment of goodwill
Goodwill
GBP'000
Cost
At 1 January 2014 and 1 January 2015 9,698
--------
At 31 December 2015 9,698
========
Accumulated impairment losses
At 1 January 2014 1,748
Impairment losses for the year 7,950
--------
At 1 January 2015 9,698
Impairment losses for the year -
--------
At 31 December 2015 9,698
========
Carrying amount
At 1 January 2014 7,950
At 1 January 2015 -
At 31 December 2015 -
========
Goodwill has previously been allocated for impairment testing
purposes to two cash generating units (CGUs). Before recognition of
impairment losses, the carrying amount of goodwill has been
allocated as follows;
Goodwill 2015 2014
GBP'000 GBP'000
UK Spread betting and CFDs CGU - -
-------- --------
Total - -
======== ========
It is the policy of the Group to test goodwill annually for
impairment or more frequently if there are indications that
goodwill might be impaired.
For the purposes of impairment testing of goodwill the carrying
value of the CGU (including goodwill) are compared to the
recoverable amount of the CGU and any deficits are provided
for.
The carrying value of the CGU includes only those assets that
can be attributed directly, or allocated on a reasonable and
consistent basis in accordance with the segmental disclosure.
The estimated recoverable amount of the CGU was based on value
in use calculated using the present value of projected five year
future cash flows.
Key assumptions used in the value in use calculation related to
the growth rate used to extrapolate cash flows beyond the budget
period, discount rate, client recruitment rates and average revenue
per client.
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Projected future cash flows for the CGU, measured over a five
year period, were based on previously Board approved five year
forecasts, reflecting past experience as well as future expected
trends.
The cash flows were discounted using the pre-tax discount rate
of 11% (2014: 11%), derived from the Group's weighted average cost
of capital.
Client recruitment rates and average revenue per client were
based upon a combination of actual amounts measured in prior
periods and industry averages which were projected forward in
accordance with expected trends.
At 31 December 2014, before impairment testing, goodwill of
GBP7,950,000 was allocated to the CGU. Client recruitment rates and
revenue per client in this CGU were revised in light of an extended
period of low market volatility and the impact of lower than
expected marketing activity. The Group therefore updated its cash
flow forecasts for this CGU, resulting in a reduction of the
recoverable amount of the CGU of GBP7,950,000 which was recognised
as an impairment loss against goodwill.
10. Trade and other receivables
2015 2014
GBP'000 GBP'000
Trade receivables 1,052 122
Allowance for doubtful debts (939) (20)
-------- --------
113 102
-------- --------
Amounts due from brokers 3,657 6,149
Other receivables 297 263
Prepayments 2,389 2,461
-------- --------
6,456 8,975
======== ========
The Directors consider that the carrying amount of trade
receivables, amounts owed to Group undertakings and other
receivables approximates to their fair value due to their short
term maturity.
Amounts due from brokers represents the combination of open
derivative positions and cash held at brokers.
11. Cash and cash equivalents
2015 2014
GBP'000 GBP'000
Gross cash and cash equivalents 36,262 54.640
Less: Segregated client funds (23,803) (27,847)
--------- ---------
Own cash and title transfer funds 12,459 26,793
========= =========
Analysed as:
Cash at bank and in hand 12,459 26,793
12,459 26,793
========= =========
Gross cash and cash equivalents include Group cash and all
client funds (segregated funds and funds under title transfer).
Own cash and title transfer funds include a client money
'Prudent Segregated Amount' of GBP195,118.
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
2015 2014
GBP'000 GBP'000
Amounts payable under finance leases
Within one year 104 62
In the second to fifth years inclusive 156 221
After five years - -
-------- --------
260 283
Less: future finance charges (18) (33)
-------- --------
Present value of lease obligations 242 250
======== ========
Present value
of minimum
lease payments
2015 2014
GBP'000 GBP'000
Amounts payable under finance leases
Within one year 93 47
In the second to fifth years inclusive 149 203
After five years - -
-------- --------
Present value of lease obligations 242 250
-------- --------
Analysed as:
Amounts due for settlement within
12 months (disclosed under current
liabilities) 93 47
Amounts due for settlement after
12 months 149 203
-------- --------
Present value of lease obligations 242 250
======== ========
It is the policy of the Group to lease certain of its fixed
assets under finance leases. The average lease term is 2.5 years
(2014: 3 years). For the year ended 31 December 2015, the average
effective borrowing rate was 4.8% (2014: 7.0%). Interest rates are
fixed at the date of signing of the contract. All leases are on a
fixed repayment basis and no arrangements have been entered into
for contingent rental repayments.
All finance lease obligations are denominated in sterling.
The fair value of the Group's lease obligations is approximately
equal to their carrying amount.
The Group's obligations under finance leases are secured by the
lessors' right over the leased assets disclosed in note 8.
13. Trade payables
2015 2014
GBP'000 GBP'000
Trade payables 1,323 1,308
Amounts due to clients:
Institutional FX clients under TTCA - 2,098
-------- --------
1,323 3,406
======== ========
14. Other payables
2015 2014
Restated
GBP'000 GBP'000
Other taxes and social security 233 186
Accruals 2,124 696
-------- ----------
2,357 882
======== ==========
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. For most
suppliers no interest is charged on the trade payables for the
first 30-60 days from the date of the invoice.
The Directors consider that the carrying amount of trade
payables, amounts due to clients, commission payments due, amounts
owed to Group undertakings and other taxes and social security
approximate to their fair values due to their short term
maturity.
15. Derivative financial instruments
2015 2014
GBP'000 GBP'000
Financial liabilities carried at
fair value through profit or loss
(FVPTL):
Put option over own equity 135 -
135 -
======== ========
16. Provisions and contingent liabilities
2015 2014
GBP'000 GBP'000
Restructuring provision - 1,102
Provision against FOS claims 486 505
Market data provision 403 379
Dilapidation provision 101 -
990 1,986
======== ========
Restructuring provision
During 2014, the Group carried out an extensive restructuring to
ensure that the business had the correct skill set in place to
enable it to expand in line with senior management's expectations.
This resulted in a provision of GBP1,102,000 being carried at the
year end to cover redundancy and other associated costs of the
restructure. During the year ended 31 December 2015, GBP900,000 was
released as circumstances regarding the provision changed and
GBP200,000 was paid.
Provision and contingent liability against FOS claims
Provision Contingency
against against
FOS FOS claims
claims
GBP'000 GBP'000
At 1 January 2015 505 1,142
Utilisation (15) -
Release (490) (1,142)
Recognised during the year - -
Transfer from provision to contingency - -
---------- ------------
At 30 June 2015 - -
============
Utilisation (41)
Release -
Recognised during the year 527
Transfer from provision to contingency -
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----------
At 31 December 2015 486
==========
During the first half of the year ended 31 December 2014, the
Group was recognising a provision in respect of amounts due to
eligible claimants concerning of a number of commission rebate
errors that occurred during the first half of 2009. The provision
had been recognised based on a number of complaints from clients
that were considered by the Financial Ombudsman Service
("FOS").
During the year, one final eligible claimant had been repaid,
resulting in an utilisation of the provision in the period of
GBP15,000. The provision of GBP490,000 and contingent liability of
GBP1,142,000 release is due to claims not being made within the
time limit prescribed by United Kingdom legislation.
In the second half of 2015, the Group received a complaint from
a client seeking to recover losses that arose in 2013 from an
agreement that they had entered into with investment manager who
executed trades with the Group.
This complaint was ultimately forwarded to the FOS and following
the decision by the FOS to uphold the original complaint, the Group
has provided in full for the losses incurred by other clients who
were managed by this individual together with accrued interest. The
value of this provision totals GBP527,000 and the original
complaint totalling GBP41,000 was settled prior to 31 December
2015.
Market data provision
Throughout 2014 and 2015, a number of exchanges used by the
Group have been conducting audits in relation to data usage and
redistribution. The provision of 403,000 is the Group's best
estimate of the liability in relation to these open audits from the
relevant exchanges.
During the year, a small settlement of GBP2,000 took place and a
further GBP26,000 was recognised following agreement of the final
liability with one of the exchanges (this balance has since settled
in 2016).
Dilapidation provision
Following the office move to its current location at 1
Knightsbridge, the Group is required to recognise the future cost
of returning the premises to its original state on the eventual
conclusion of the lease.
This provision of GBP101,000 has been recognised within the
additions to leasehold property in note 8 and will be depreciated
over the life of the lease.
17. Convertible loan notes
On 16 October 2014, the Company raised GBP17,000,000 (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
were GBP16,349,000. 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 ordinary shares in the Company 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:
2015 2014
Restated
GBP'000 GBP'000
Proceeds of issue of convertible
loan notes (net of transaction costs) 16,349
Equity component (6,809)
Liability component at date of issue 9,540
Interest charged (at effective interest
rate) 165
----------
Liability component at 31 December
2014 9,705
==========
Liability component at 1 January
2015 9,705
Conversions during the year (2,110)
Interest charged (at effective interest
rate) 670
--------
Liability component at 31 December
2015 8,265
========
The interest charged 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.
In January 2015, the Group received notices from holders of
convertible loan notes to convert 3,668,000 convertible loan notes
at a conversion price of 25.02 pence in accordance with the terms
of the convertible loan notes. Following the conversion, 19,791,367
ordinary shares in the Company were admitted to AIM.
At 31 December 2015, 13,332,000 convertible loan notes remain
outstanding.
The results for the year ended 31 December 2014 have been
restated to reflect the correct accounting treatment in respect of
the convertible loan notes that were issued in October 2014. The
restatement relates to the initial accounting for the equity
element of the transaction whereby there is a future obligation on
the Group to pay out interest by way of issued shares in 2021.
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 Warrants
loan shares issued
notes to be
issued issued
in
satisfaction
of
the 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 Remeson 3,996,803 1,398,881 5,395,683
The warrants issued to GLIO Holdings Limited 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.
18. 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:
2015 2014
GBP'000 GBP'000
Alogoweb Trading Services FZE (formerly
Algoweb S.A.R.L) - purchase of licence 1,200 1,080
1,200 1,080
======== ========
Loans from related parties
2015 2014
GBP'000 GBP'000
GLIO Holdings Limited - convertible
loan note 13,332 15,000
13,332 15,000
======== ========
The following amounts were outstanding at the balance sheet
date:
Due to related Due from related
parties parties
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
Alogoweb Trading Services 300 - - -
FZE (formerly Algoweb
S.A.R.L) - purchase of
licence
GLIO Holdings Limited
- convertible loan note 13,332 15,000 - -
TTCM Traders Trust Capital 101 - - -
Markets Limited
--------
13,433 15,000 - -
======== ======== ========= ========
In 2014, a subsidiary Company entered into a licencing agreement
with Algoweb S.A.R.L. ("Algoweb"). On 18 September 2015, this
agreement was novated to Algoweb Trading Services FZE. 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.
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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 per cent interest in ILOG
Investments Limited, GLIO's largest shareholder with a 22.9 per
cent interest. The balance represents both the liability and equity
components of this transaction (see note 17).
TTCM Traders Trust Capital Markets Limited ("TTCM") is a related
party of the Group as Nicola Berardi, Chief Financial Officer of
London Capital Group Holdings plc, holds a majority interest in the
company. During the year, TTCM opened a trading account with LCG in
accordance with LCG's standard terms and conditions. To date, no
trades have been made by TTCM.
19. Directors' remuneration
The remuneration of the Directors who served during the year was
as follows:
Basic salary Annual Pension contributions
and fees Benefits bonus Total
Year to 31 December 2015 2015 2015 2015 2015
GBP GBP GBP GBP GBP
Executive
Charles-Henri Sabet(1) 260,000 139,371 - 26,000 425,371
260,000 139,371 - 26,000 425,371
------------- ----------- ------- ---------------------- --------
Non-executive
Frank Chapman 60,000 - - - 60,000
Julien Cohen(6) - - - - -
Rebecca Fuller(7) 55,000 - - - 55,000
Dimitri Goulandis(8) - - - - -
Nicholas Lee(9) 43,000 - - - 43,000
Charles Poncet(11) 60,000 - - - 60,000
218,000 - - - 218,000
------------- ----------- ------- ---------------------- --------
Total 478,000 139,371 - 26,000 643,371
============= =========== ======= ====================== ========
Benefits (which are taxable) comprise the provision of
healthcare and company cars.
The highest paid Director was Charles-Henri Sabet.
Pension benefits
Pension contributions payable to the executive Director are
payable by the Group at a rate of 10% of basic salary.
20. Share capital
Allotted, called up and fully paid:
2015 2014
Number GBP'000 Number GBP'000
Equity shares
Ordinary shares of GBP0.10
each 79,846,889 7,985 55,800,908 5,580
----------- -------- ----------- --------
Reconciliation of the movement in the number of shares:
At 1 January Shares At 31 December
2015 issued 2015
in the
year
Ordinary shares 55,800,908 24,045,981 79,846,889
------------- ----------- ---------------
The Company has one class of ordinary shares which carry no
right to fixed income. The shares carry dividend rights, voting
rights and rights to distribution of capital on a winding up.
21. Share premium
2015 2014
GBP'000 GBP'000
Balance at the beginning of the year 20,592 20,592
Premium arising on issue of equity 3,227 -
shares
Balance at the end of the year 23,819 20,592
======== ========
22. Own shares
2015 2014
GBP'000 GBP'000
Balance at the beginning of the year 6,065 2,569
Acquired in the period - transferred
to JSOP - 3,166
Acquired in the period - transferred
to Treasury - 330
Balance at the end of the year 6,065 6,065
======== ========
The Group has a Joint Share Ownership Plan ("JSOP") to provide
incentives to Directors and employees. At 31 December 2015,
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.
In 2014, 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.
23. Equity reserve
2015 2014
Restated
GBP'000 GBP'000
Balance at the beginning of the year 6,809 -
Recognition of equity component of
convertible loan notes (see note
17) - 6,809
Equity component of convertible loan (2,842) -
notes converted to share capital
(see note 17)
Balance at the end of the year 3,967 6,809
======== ==========
This reserve represents the equity component of convertible loan
notes (see note 17).
24. Other reserves
Other reserves
The other reserves arose as a result of the business combination
concerning the acquisition of Tradex Enterprises using the merger
method. As noted in the accounting policies, the Group has taken
advantage of the exemption permitted by IFRS 1 not to restate this
business combination.
Retained earnings
Includes a credit for the excess of the tax deduction for the
equity-settled share-based payments, the net adjustment for those
options forfeited in the period and the charge for the estimated
cost of equity-settled share options based on a straight-line basis
over the vesting period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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