London Capital Group posted its 2012 results some of which it already revealed in preliminary update posted in January, and as expected the results aren't great. Revenue and volume were down over 25% putting the company in the red. This is probably the reason why LCG became a takeover target for several brokers such as Gain Capital and City Index as was announced last week. LCG has a strong brand and large client base but could use a strong strategic partner such as Gain or City Index that will be able to improve operational results and promote the company globally.
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Financial Highlights
- As expected lack of volatility led to suppressed trading volumes and decreased revenue
- Revenue decreased 27% to £28.6m (2011: £39.0m)
- Adjusted loss before tax* of £0.2m (2011: adjusted profit of £7.1m)
- Included within adjusted loss before tax* are exceptional legal costs of £0.5m (2011: £0.7m)
- Aggregate losses incurred in relation to the Group's Australian CFD business and Gibraltar FSB business amounted to £1.2m (2011: £0.8m)
- Statutory loss before tax of £2.1m (2011: profit of £6.1m)
- Net cash and short term receivables of £20.4m at year end (2011: £25.1m)
- No final dividend proposed (2011: 2.6p per share), bringing total dividend for the year to 1.3p (2011: 3.9p)
Operational Highlights
- UK financial spread betting ("FSB") performance
- Divisional revenue down 26%
- FSB average trades per day decreased 24% to 25,029 (2011: 33,042)
- New client acquisition totalled 10,123 (2011: 10,398)
- Successful launch of new white label clients Selftrade, Victor Chandler and Goodbody Stockbrokers
- Institutional foreign exchange performance
- Trade volumes decreased to $383bn (2011: $544bn)
- Divisional revenue of £6.1m (2011: £8.0m); divisional profit of £1.7m (2011: £2.4m)
Board changes
§ Simon Denham has stepped down as CEO and will be replaced by Mark Slade
| Year ended | Year ended | |
|---|---|---|
| 31-Dec-12 | 31-Dec-11 | |
| £'000 | £'000 | |
| Revenue | 28,586 | 38,963 |
| Adjusted EBITDA** | 1,745 | 8,884 |
| Adjusted (loss)/profit before tax* | -154 | 7,063 |
| Statutory (loss)/profit before tax | -2,050 | 6,141 |
| Basic (loss)/earnings per share | (3.33)p | 8.64p |
| Diluted (loss)/earnings per share | (3.33)p | 8.64p |
| Dividend per share | 1.3 p | 3.9 p |
*Adjusted (loss)/profit before tax represents (loss)/profit before tax excluding share based payment expense, impairment charges to goodwill, professional client debts, and the movement in the provision for FOS claims. Applied consistently hereafter.
**Adjusted EBITDA represents profit before interest, tax, depreciation, amortisation and share based payment expense and excludes the movement in the provision for FOS claims, impairment charges to goodwill and professional client debts. Applied consistently hereafter.
For further information, please contact: www.londoncapitalgroup.com
CHAIRMAN'S STATEMENT
For the year ended 31 December 2012
As anticipated, 2012 proved to be a difficult year for the Group. Financial results were disappointing with a marked decline in customer trading activity, especially in the second half of the year. Whilst it is often easy to blame market conditions, it remains true that lower levels of volatility in markets overall meant that there were less trading opportunities for LCG's customers to pursue. As a result revenues were 27% lower than 2011 and profits declined throughout the year leading to a £0.2m adjusted loss before tax for the year as a whole.
Given the results, and having paid a 1.3p dividend at the half year, the Board does not consider it appropriate to pay a final dividend. The Board's policy is to pay dividends from available profits whilst considering the current and future capital requirements of the business.
Against an unfavourable background, the Board decided to address three urgent problems in the last quarter of the year: firstly, it launched a review to ensure that the Group's costs were aligned to a possible lower revenue base, especially if lower market volatility persisted for a long time. As part of the review the Board identified potential savings of £4 million which will be implemented through 2013. Secondly, the Board concluded that LCG's current international operations will not meet the Group's return on investment expectations in 2013 and certain of these operations should therefore be sold or restructured. Thirdly, the Board review included an overall assessment of organisational effectiveness which will lead to changes in the structure of the operational management.
All of the above gives the Group the opportunity to focus on what it does best in terms of offering attractive products. LCG continues to expand its partnership programme with a growing pipeline of high quality domestic and international partners who wish to white label the Company's trading services and products. In addition, the Group continues to make improvements to its Trading Platform which allows LCG to remain at the forefront of improved customer trading experience.
After almost ten years of building London Capital Group's business, Simon Denham has decided to step down from his role as CEO with immediate effect. The Board would like to thank Simon for all of his work over many years in building London Capital Group into the great business it is today. We wish him well for the future. Whilst we are sad to see Simon go, we all agree it is the right time for fresh leadership, and I am delighted that Mark Slade has decided to join us as our new CEO. He has a long and enviable track record in growing financial businesses, and the Board is confident that he is the right person to take the Company forward. Mark, 51, has extensive knowledge of both trading in financial markets and Risk Management , gained in a 30 year career most recently as CEO of Marex Financial, and previously as Managing Director of Refco Overseas. He also served as a Director on the London Metal Exchange for seven years. It is intended that Mark will take up the role from 25 February 2013, the appointment will be subject to the normal FSA approval process and a further announcement will be made in due course.
In terms of other Board changes, as announced on 13 January, Rachel Woodford also decided to step down from her role as COO to pursue other interests and will leave the Board in July this year. The Board is very grateful for all her hard work over the last nine years and we wish her well.
2013 has started with stronger equity markets and the possibility of more activity in the currency and credit markets. The Group remains well capitalised and well positioned to take advantage of any major upswing in activity. The Board plans are to promote the Company's core businesses, and use the Group's partnership programmes to develop international business in a more cost effective manner. The Board believe that the fundamentals of the business remain sound but that some of the increases in costs and overall efficiency need correcting swiftly without cutting out the capacity for growth in the business.
Giles Vardey
Chairman
20 February 2013
