London Capital Group Mid-Year Trading Update
August 18, 2009admin No Comments »LONDON CAPITAL GROUP HOLDINGS PLC
(“LCG”, the “Company” or the “Group”)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
London Capital Group Holdings plc which operates the flagship spread betting site Capital Spreads (amongst others) has announced interim results for the six months ended 30 June 2009.
Financial Highlights:
- Revenue up 4% to £12.95 million (H1’08: £12.51 million)
- Trading revenue from continuing operations* up 7% to £12.34 million (H1’08: £11.53 million) reflecting strong underlying organic revenue growth
- Profit before tax (before share based payment expense) down 37% to £3.75 million (H1’08: £5.94 million), as a result of lower interest income, increased costs and adverse trading conditions in the second quarter
- Profit before tax down 39% to £3.33 million (H1’08 £5.43 million)
- No bad debt expense (H1’08: £8,000)
- Remain debt free with strong net cash position of £8.20 million (H1’08: £8.87 million)
- Maintain interim dividend at 2.50p per share (H1’08: 2.50p)
Operational Highlights:
- Robust UK spread betting performance
- 71% increase in new account openings to 11,388 (H1’08: 6,662)
- 59% increase in average trades per day to 26,208 (H1’08: 16,466)
- UK spread betting client funds up 22% to £27.31 million (H1’08: £22.33 million)
Strong Forex performance
- 23% increase in trade volumes to $187 billion (H1’08: $152 billion)
- 12% increase in divisional operating profit to £1.05 million (H1’08: £0.94 million)
- 100 new institutional clients signed up
Acquired the assets of software development business Chaucer Digital in May 2009 for consideration of £353,000.
Commenting on the results, Frank Chapman, Chief Executive Officer, said: “We have made good operational progress in challenging market conditions. Through the acquisition of Chaucer Digital, and the other investments we are making in our platform, our people, and our infrastructure we are laying the foundations for future growth and are encouraged by recent shifts in market activity.”
Now the above are the ‘glowing highlights’. If one reads further down the update you will note that the company has posted the first ever decline in profit which the company attributes was due to lower interest income, higher costs and adverse trading conditions in the second quarter. For the six months ended June 30, adjusted pretax profit fell 37 percent to 3.8 million pounds ($6.2 million) from a year ago. Revenue rose to £13 million from £12.5 million.
The company also experienced a 71% increase in new account openings, to 11,388 from 6.662 in 2008; as well as a 59% increase in average trades per day, to 26,208, from 16.466 12 months ago; and an increase of 22% in UK spread betting client funds to £27.31m from £22.3m.
Speaking to Reuters, chief executive of the foreign exchange and brokerage service Frank Chapman said that investment activity has been increasing recently. “It’s difficult to predict as when market conditions change so do our earnings but we would expect the second half to be slightly better than the first half,” Chief Executive Frank Chapman said.
The company is in the final stages of developing an international trading platform [to trade Contract for Differences (CFD)] which was developed by software developer Chaucer Digital, which was acquired by LCG in May for £353,000.
‘We also continue to invest for growth and the future, the last 12 months in particular have involved a great deal of development and planning to ensure that we had the infrastructure in place to transform LCG from a small to medium sized business. To that end, we have taken on 18 new members of staff across a range of functions, including 9 from the acquisition of Chaucer Digital.’ Frank Chapman was quoted of saying.
The CFD platform will be offered to its retail clients by the first quarter of 2010, Chief Financial Officer Simon Denham said. “This will enable LCG to operate in regulatory environments that do not allow spread betting, spread trading namely most of the far east and so we believe this new product should open up international markets much more readily for the company,” Denham said. The company expects the new platform to boost revenue considerably as it plans to expand in Australia, Japan, Singapore and Hong Kong, and might even enter China if it gets regulatory approvals, Denham said.
CEO Frank Chapman added “Meanwhile we have established a number of positive discussions with a variety of potential partners and look forward to reporting on our progress in due course.”
Thoughts: Seems quite upbeat to me. Full details on the London Capital Group figures here. The company bottom line seems to have suffered due to range bound markets and lower interest income on deposits. Huh what – ranging bound markets you might say!!? – well of course you may not have that impression but between the end of March and the end of June the FTSE 100 index traded in a 200-point range on all but a 5-day period at the end of April – this is highlighted in the revenue per customer which for H1’09 was £599 compared with £1,035 in H2’08 and £939 in H1’08. Share indices betting accounts for around half of London Capital’s revenues, which were up only 4 per cent in the first half despite the number of spread betters rising 71 per cent to just over 11,000. Interest received on the deposits London Capital Group held from customers fell to £85,000, compared with £178,000 last year. The interim dividend is held at 2.5p, reflecting the group’s upbeat view of the second half. No doubt diversifying the product line into CFDs to target overseas customers beyond its traditional UK spread betting business (which currently account for 70% of the business) which is starting to reach saturation point is a wise move that is likely to reap dividends in future.
Join the discussion