LCG: Profits Lagging, Revenues Up

London Capital Group, the power behind the popular Capital Spreads spread betting firm released a trading update today warning that full year results will be below market expectations. It expects adjusted profit before tax between £6 and £6.5 million, and adjusted EBITDA (i.e. adjusted earnings before interest, tax, debt and amortisation) of between £8 and £8.5m.

The group blamed the general economic environment meaning reduced volatility and lower interest income on deposits combined with higher expenditure on development and white label partnerships, for the lower than expected performance.

Commenting, Frank Chapman, CEO of LCG said, “We are disappointed by the 2009 expected results which are due to the general business environment which has eroded the positives of our KPI’s. Nonetheless the investment that we have put in this year leads us to be confident that the Group will continue to capitalise on its opportunities and we are optimistic for next year.”

However, LCG reiterated that the trading revenue remains strong and the group continues to make good profits with a healthy balance sheet and strong net cash resources with no significant bad debts. All businesses in the Group remain profitable with strong KPI’s and strong client acquisitions, trading volumes and growth in client funds on deposit.

The Board of London Capital further stated that it will be publishing its results for the year ended 31 December 2009 on 25 February.

In London Capital’s interim statement in August, the company said it had seen a 71 percent increase in account openings in the first six months of the year, but pre-tax profits were, nevertheless, down 37 percent to £3.75m.

London Capital provides financial spread betting white labels to sports-betting and online gaming companies such as Paddy Power and Betfair along with financial providers such as ETrade and Saxo Bank.

Comments: So profit before tax of about £6-6.5m. The trading statement dampened appetite for LCG shares which retreated as a result, albeit on low volume. At the moment the market valuation for LCG is 56.92M, and considering that they have about £8m in net cash, as a blogger rightly commented they are ‘cheap’ as long as the profit reversal is not terminal…

Tags: capital spreads, CapitalSpreads, london capital group

This entry was posted on Monday, December 7th, 2009 at 1:41 pm and is filed under Financial Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.