London Capital Group (LCG) has issued its Interim Management Statement for the nine months ending September 30th, 2014. Overall, one can look at the results as a case of the cup half empty or half full as revenues for the year have fallen nearly 30% from 2013’s results, but the firm has its new management and funding in place now to embark on a turnaround.
The Past
During the first nine months of 2014, revenues fell 29.5% to £13.9M versus £19.7M in 2013. The revenue decline was apparent in both LCG’s retail and institutional businesses as each saw contraction of around 30%. In its retail unit, 2014 revenues totaled £11.6M versus £16.4M in 2013, while institutional declined to £2.3M from £3.3M. The revenue contraction can be attributed to both the overall decline in global FX and CFD volatility this year, as well as uncertainty towards LCG’s operational future which may have contributed to customers and partners leaving the firm.
Bottom line, the falling revenues led EBITDA to a £2.6M loss versus a £0.7M profit in 2013. On an adjusted before tax loss level, LCG reported a loss of £1.6M. Including restructuring and goodwill charges, the firm reported a loss of continued operations of £10.7M.
The Present
Onto the half full part of the statement. LCG reported a rebound occurring from the beginning of October until the 17th, as they achieved EBITDA of £1.6M during this short period. The profits are attributed to increased volatility in the market. In addition, following the assumption of Charles Henri-Sabet as LCG’s Chairman, and closing of new financing from Sabet controlled GLIO Holdings, the broker’s net cash has risen to £35.7M from £18.7M at the end of September.
In addition to the funding, LCG has been in a state of managerial flux with several executives leaving the firm since Sabet's arrival. Replacing them has been new blood coming from other brokers, such as FXCM and Citigroup.
In regards to the current state of affairs, and the company’s future, Charles Henri-Sabet, stated, "Since assuming the role of executive chairman in mid-September, the Group now enters the fourth quarter strongly recapitalised and with a new broad and deep senior management team being put into place to position LCG for growth. Even as we return to revenue growth over the past few weeks on the back of recent favourable volatile global markets, the path to sustainable returns will be about investment in people, products and platforms.”
The Future
With cash in hand, now comes the tricky part of executing their corporate restructuring and rebound. A main component of that future is centered around the exclusive licensing of Algoweb, a yet to be launched Trading Platform from an entity which is 50% controlled by Sabet and his wife. As part of the exclusive contract and approved by shareholders, LCG will be licensing the platform for an initial three years at a total cost of £2.28M. According to previous shareholder statements, LCG plans on using Algoweb to provide operation efficiency for its trading flow, as well as offering the platform as a white label product to both B2C and B2B customers.
Algoweb is expected to make its public appearance into the market soon, as LCG prepares to feature the technology in its future corporate marketing and business model. As is typical for new trading platforms being launched into a crowded Forex market, Algoweb may see a slow uptake from the market as LCG may have to prove its value internally before other firms decide to use the technology. As a result, over the short, London Capital’s fortunes will probably be more aligned with the market’s volatility, and less to do with onboarding new B2B customers and partners.
