LONDON (Alliance News) - London Capital Group Holdings PLC Tuesday said pretax losses widened in its recent financial year, as it incurred goodwill impairment, legal fees, and the costs of restructuring and changing its IT platform.
Pretax profit widened to GBP4.8 million in 2013, compared with GBP1.1 million in 2012. Revenue was down 5.4% to GBP25.2 million. Total administrative expenses increased to GBP22.7 million, from GBP18.4 million.
The increase in expenses included a GBP1.4 million impairment to goodwill for its UK spreadbetting and contracts for difference business, GBP854,000 in restructuring costs, GBP1.7 million in costs related to changing its IT platform, and GBP1.9 million in legal fees.
Meanwhile, London Capital's GBP1.1 million provision against Financial Ombudsman Service claims was lower than the GBP1.5 million set aside in 2012.
In the first half of 2009, London Capital made commission rebating errors whilst preparing the customer statements of a managed FX fund, leading to a series of complaints to the FOS. London Capital is of the view that its actions "did not directly cause any loss to clients." However, the FOS ordered the company to repay the clients' losses, plus interest. London Capital has made a total provision of GBP4.7 million in relation to the FOS claims since 2009.
London Capital said its provision and a GBP900,000 contingent liability represents the best estimate of the expected liability at the end of 2013, but said "a degree of uncertainty" exists about the number of claimants due to be paid.
The legal fees, described as non-recurring, arose from a claim served against the subsidiary London Capital Group Ltd in relation to the termination of a fee-sharing agreement with Integrity Financial Solutions Ltd, which introduced clients to the managed FX fund that subsequently led to the FOS complaints
"Having addressed and resolved a number of material internal and external issues, the group emerged from 2013 in a much stronger structural and operational position than could have been predicted at the start of the year, and the general confidence of the business has materially improved," Kevin Ashby, chief executive, said in a statement.
"We have a clear strategy to reposition LCG, and I am confident that we will make further progress with the turnaround in 2014."
London Capital shares were Tuesday quoted at 33.00 pence, flat.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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