London Capital Group Holdings Regulatory News (LCG)

29 June 2017

LONDON CAPITAL GROUP HOLDINGS PLC

("LCG", the "Company" or the "Group")

AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

LCG is pleased to announce its results for the year ended 31 December 2016.

A copy of the annual report and accounts will be posted to shareholders today and will be available from the Company's website, www.ir.lcg.com, shortly.

Financial Highlights

- Strong revenue growth of 50% to £23.2 million (2015: £15.5 million).

- Gross profit margin increased 24% on prior year.

- Increased revenue retention, represented by an increase in gross profit of 86% (2015: £10.51 million).

- Decreased adjusted EBITDA loss by 61% to £4.8 million (2015: £12.3 million).

Commenting on the results, Charles-Henri Sabet, Group Chief Executive, said:

"Despite the tough trading conditions seen during the first half of the year, the Group has seen strong revenue growth as a result of increased revenue capture compared to prior periods. The integration of new technology, continued investment in innovative marketing and a focus on customer service and retention coupled with a resilient and loyal client base continues to see LCG grow both in existing and new markets. The results clearly demonstrate the success of the growth initiatives being deployed by the Group across the business and as LCG continues to develop we remain fully committed to ensuring the Company continues on this path to sustained long term growth".

Operational Highlights

- The number of new clients acquired per month grew by 47% year on year to 493 per month (2015:308) despite challenging trading conditions in the first half of the year, prior to Brexit.

- Growth in monthly open and funded and traded accounts - monthly average increased 34% to 413 (2015: 308 per month), demonstrating the increasing effectiveness of the brand, platform and marketing activities.

1Adjusted EBITDA represents (loss)/profit before interest, tax, depreciation, amortisation, impairment charges to goodwill and investments, non-recurring restructuring costs, costs related to change in IT platform and the movement in the provision for FOS claims and market data provision.

For further information, please contact:

About London Capital Group (http://ir.londoncapitalgroup.com/)

London Capital Group Holdings plc (hereafter "LCGH plc" or "LCG" or "London Capital Group" or "the Group") is a financial services company offering online trading services.

London Capital Group Limited ("LCG Ltd"), a wholly-owned trading subsidiary of LCGH plc, is authorised and regulated by the Financial Conduct Authority. Its core activity is the provision of spread betting and CFD products on the financial markets to retail clients under the trading names Capital Spreads, Capital CFDs and LCG MT. Its other division provides online foreign exchange trading services. LCG Ltd has a European passport and is a member of the London Stock Exchange. LCG Ltd also has access to international markets through its global clearing relationships.

LCGH plc is quoted on the London Stock Exchange's AIM market. LCG is included in the General Financial sector (8770) and Speciality Finance sub sector (8775) and has a RIC code of LCG.L.

CHAIRMAN'S STATEMENT

For the year ended 31 December 2016

2016 performance

Trading conditions in the first two months of 2016 were very positive. However, the year as a whole has been heavily affected by lower market volatility due primarily to the uncertainty in the lead up to the EU referendum and the subsequent result. This uncertainty had the effect of deterring market participation for both existing and new clients.

However, despite such challenging conditions, the Group, through its continued investment in innovation, IT, sales and marketing and the quality of people as well as an enhanced analytical approach to trading and risk, has been able to capture revenues far more efficiently than in prior periods. This approach has ensured that the Group is able to capitalise on significant trading opportunities as they present themselves whilst, at the same time, preserving the value of the enterprise through diligent risk management techniques.

We are confident the Group is now far better placed to derive a steady revenue stream during weak trading conditions and be in a position to take full advantage when conditions are favourable.

Organisational restructuring

As we have previously reported, the business had gone through a phase of consolidation as management has been focused on getting the building blocks in place within the business (in terms of technology, product offering, trading platforms, brand, customer service and, most importantly, people) in order to position LCG for a return to profitability. This effort has continued throughout 2016 and has now been largely concluded. We now have the right combination of both people and product in place with LCG now positioned to take advantage of growth opportunities. The full benefits of the cost savings associated with the restructuring exercise in 2016 are expected to materialise in the next financial year.

In addition, during 2016, the balance sheet of the Group was strengthened by the redemption of the outstanding Convertible Loan Notes ("CLNs") and the issue of new equity capital. This enhanced the capital position of the Group whilst, at the same time, reduced debt.

Outlook

We continue to invest in and develop our people, products and services, to provide our clients with the service they expect in order to ensure that LCG is their provider of choice for their trading needs. Part of that investment and growth has resulted in the Group further developing its product offering by improving its Meta Trader 4 and LCG Trader platforms, which the Board expects will create a greater appeal to markets outside of the Group's traditional UK market place.

The Group looks forward to benefiting from the refreshed marketing campaigns and brand awareness initiatives, that in addition to the enhanced product offering, the Board believes will strengthen the brand, develop broader and more innovative products and service offerings, and attract a more diversified client base, both within the UK market and more importantly, internationally.

The regulatory landscape continues to evolve across multiple jurisdictions and particularly Europe. The recent announcements from the Financial Conduct Authority ("FCA") and other European regulators to protect clients through reduced leverage and enhanced risk warnings is in line with LCG's position of ensuring that the customer is protected and to improve customer outcomes. LCG is fully supportive of the efforts of global regulatory bodies to ensure that client interests are served at all times. Although no final announcement has been issued by the FCA, LCG remain committed to ensuring that the Group continues to operate to the highest regulatory standards and that the Group is well positioned to continue the strong growth in both client acquisition and revenue capture demonstrated thus far in spite of the regulatory uncertainty. LCG, as one of the leading providers in the industry with an established history of over 20 years and with a loyal client base, is well placed to continue its growth trajectory in this changing environment.

I, the other Board members and the senior management team remain confident about the prospects for the business in the coming periods and are fully committed to ensuring that LCG continues on the path to sustained long-term growth.

Charles Poncet

Non-Executive Chairman

28 June 2017

STRATEGIC REPORT

For the year ended 31 December 2016

Strategic Report

The directors, in preparing this strategic report, have complied with s414C of the Companies Act 2006.

Principal activities

London Capital Group Holdings plc operates through its principal subsidiary, London Capital Group Limited ("LCGL"). LCGL is a global provider of trading services and solutions, specialising in over-the-counter, or OTC markets to private, retail high net worth and professional clients. LCGL offers customers access to a diverse range of over 5,000 financial products, including foreign exchange (or forex), precious metals, contracts for differences ("CFDs")and financial spread betting, which are investment products with returns linked to the performance of an underlying commodity, index, equity or security. The Company is authorised and regulated by the Financial Conduct Authority ("FCA"). The Company's FCA Register Number is 182110, for further details see www.fca.gov.uk/register and its parent company London Capital Group Holdings plc is listed on AIM, a market operated by the London Stock Exchange.

Revenues are generated from the dealing spread - the difference between the buying and selling price of the CFD and spread betting products, commission income, exchange gains and interest.

The Company's success is expected to be achieved by providing a high quality service to its customers and offering a variety of financial trading products and platforms. Clients are attracted to the Company for its value for money, ease of platform navigation, its industry leading mobile app, tight dealing spreads and competitive margin requirements, in addition to high levels of customer service.

Business Review

The Company experienced a positive start to the trading year which coincided with a period of high volatility and market movements in January and February of 2016. January and February saw volatility at their highest levels for 6 months, with the CVIX (Chicago Board Options Exchange Market Volatility Index, which is a measure of the implied volatility of the S&P 500) gauging at historically high levels. This resulted in positive trading conditions as markets across the majority of asset classes traded outside of their ranges. The increased volatility encouraged participation by clients with newly funded accounts which were 12% higher in the first three months of 2016 compared with the same period in 2015.

The Company was able to take advantage of the favourable trading conditions coupled with an enhanced analytical view of the Group's client trading activity and behaviour to ensure maximum revenue capture where opportunities allowed. As a result, revenues in the first three months were 105% higher than the same period in 2015.

From March 2016 and continuing into the second quarter of the year, there was a decrease in volatility in financial markets as a result of the increased uncertainty over the EU referendum vote as market participants chose to refrain from any short term position taking, resulting in a reduction in activity across all asset classes. As a result of the decrease in volatility and range bound market conditions, client trading volumes decreased 28% during the second quarter of 2016 versus the first quarter and 50% lower compared with the same period in 2015. 

Despite the down-turn in overall market volatility - the Group was still able to capture revenue at a greater rate than compared to the previous year due to its analytical risk management policy. Revenues for the second quarter were 98% higher than the same period in 2015 and this shows that the investment by the Group in both the brand and trading platform as well as the implementation of the enhanced risk management analysis of client trading behaviour and patterns is starting to generate a return.

Following a benign third quarter for market volatility coinciding with the traditional quiet summer months, the fourth quarter saw a return in volatility to the financial markets as uncertainty over a number of events including the post EU referendum political and economic landscape and the US presidential elections brought attractive trading conditions for clients. New accounts opened, funded and traded were around10% higher than the same period in 2015 and the net inflow of client funds was approximately 125% higher than the previous quarter (Q3-16) as the favourable trading conditions encouraged clients to open accounts and trade. Total trades in the fourth quarter were approximately 32% higher than the third quarter and fourth quarter revenues were up 63% compared to the third quarter and approximately 74% higher than the same period in 2015 as the Company continued to capture revenues at a greater rate than in previous periods.

Overall, for the year ended 31 December 2016 revenues increased by 50% compared to the prior year. The Company has seen monthly average open and funded accounts up 34% on the previous year and, although total client funds decreased 20% over the same period due to the cessation of un-economic trade partnerships, it is anticipated that as the brand continues to gain traction through marketing activities, both the acquisition of clients (direct and indirect) will begin to have a positive impact as seen by the upward trend in net new funds into the company from Q3-2016 onwards.

Costs of sales for the period were £3.7m (2015: £5.0m) and gross profit was £19.6m which is 86% higher than 2015 and represents an 84% gross profit margin on revenues (2015: £10.5m gross profit and 57% gross profit margin). This increase in gross profit margin is the result of the increase in revenue capture the firm has seen since the introduction of the enhanced risk management analysis of client behaviour which has led to increased revenue capture without any incremental increase in cost of sales. This has additionally been supplemented by the termination of non-economic trading partnerships which has further increased revenue capture for the company.

Adjusted EBITDA for 2016 was a loss of £4.8m (2015: loss of £12.3m), a 61% improvement on the same period last year. Administrative costs remain on the higher side at £27.2m for the period (2015: £24.8m) but the Company expects to see the benefits of its significant cost reduction initiatives that took place during 2016 in the next financial year.

The loss before tax decreased to £7.8m (2015: loss of £14.5m) and demonstrates the improvements the Company has made to ensure that, despite poor trading conditions seen in Q2 and Q3 2016, there is a clear path toward sustainable long term profitability, through the Group's improved branding, technology and investment in people.

Adjusted EBITDA from continuing operations

The net cash and amounts due from brokers decreased 39% to £9.8m (2015: £16.1m) primarily as a result of the losses for 2016 and capital investments during the year. Available liquidity which comprises own cash held, title transfer funds, unsegregated funds and amounts due from brokers decreased by £3.4m to £13.0m (2015: £16.1m).

Available liquidity and cash flow

Total client money at the year-end was £19.1 million (2015: £23.8 million) of which £15.9 million (2015: £23.8m) was held in segregated bank accounts. These balances are excluded from the Balance Sheet. Unsegregated amounts held on behalf of clients under a Title Transfer Collateral Arrangement ("TTCA") are included on the Balance Sheet (see notes 20 and 22).

Both client acquisition and client volumes are continuing to improve in 2017, with the first two months of the year showing newly funded accounts up 30% on the same period in 2016 and client trading volumes up 14% over the same period.

Customer trading volumes are driven by eight main factors. Four of these factors are broad external factors outside the Company's control and include:

• changes in the financial strength of market participants;

• economic and political conditions;

• changes in the supply, demand and volume of foreign currency transactions; and

• regulatory changes.

Many of the above factors impact the volatility of financial markets, which have generally been positively correlated with client trading volume. The Company's customer trading volume is also affected by the following additional factors:

• the effectiveness of sales activities;

• the competitiveness of the Company's offerings;

• the effectiveness of the customer service team; and

• the effectiveness of the marketing activities.

In order to increase customer trading volume, the Company will continue to focus its marketing and its customer service and education activities on attracting new customers and increasing overall customer trading activity.

Historically, the Company's business model has been predominantly driven by retail client transactions focusing on the UK market with client trading focused on its spread betting and CFD offering. The Group is now looking to expand its offering beyond the UK and enhance its technology and product offering by developing both its existing Meta Trader 4 and LCG Trader platforms to ensure they are both market leading as well as being fit for purpose for the active trader. The Group has enlisted the services of a team of experts with a number of years of experience in both the target markets and the technology being offered, to ensure that the release is both suitable and scalable for the expected increase in client activity. This team is located in Cyprus and is able to take advantage of the local resources and talent pool to ensure the offering has the highest standard of technological requirements for the target market.

At the same time, the Company has also taken advantage of these resources and talent pool by re-locating many of its processing and operational functions to Cyprus which will additionally reduce costs for the Group. The full benefits of these cost saving initiatives are expected to be seen in 2017.

The Group looks forward to benefiting from the enhanced product offerings which will give the Company the opportunity to promote the brand, develop broader and more innovative products and service offerings, and attract a more diversified client base, both within the UK market and internationally.

The Company's future success continues to be based on providing a high quality service to its customers and offering a variety of financial trading products and platforms. The Company will deliver a complete multi-asset experience for its clients.

The increased investment in technology will allow the Company to offer an intelligent new platform while still delivering industry leading spreads with instant, reliable execution. In addition, the Company's analysts will offer high quality analysis, research and financial news.

The Company's medium-term strategy will also continue to focus on the promotion and further development of its key selling points which include:

- Industry-leading platforms

- Service

- Professional tools and news service

- Educational material

- Pricing

- Marketing

- Dealing execution

Marketing is expected to attract active retail traders. This combined with improving the customer journey and technology will ensure that the Company continues to be in a strong position within its market.

The Financial Conduct Authority ("FCA") in line with other global regulatory bodies recently announced proposed changes to both leverage and risk disclosures as part of its aim to protect client interests. The changes being proposed are in consultation with the industry and as yet, no final terms or timing of implementation have been finalised. It is unclear at this time what the impact of these changes will be to LCG given the uncertainty over the final terms and timing of the implementation. LCG is fully supportive of the efforts by global regulators to protect client's best interests and despite the uncertainty, LCG through its loyal client base and increasing diversified operations, will continue to meet these challenges and remain focused on ensuring that its growth strategy is maintained.

Our people

Continuing throughout 2016, the Company has strengthened the board of directors, senior management team and recruited best-in-class personnel to support the Company's ambitions.

Employees are incentivised with a discretionary performance-related bonus scheme to reward performance, and a range of other benefits are provided including pension contributions and private health insurance.

Environment

Given the nature of its activities, there is limited scope for the Company to have a major impact on environmental matters. Nevertheless, the Directors are mindful of their responsibilities in this regard and strive to seek opportunities where improvements may be made; these are generally concentrated in areas of energy conservation, recycling and waste control.

Equality and diversity

The Company is committed to promoting and developing equality of opportunity in all areas. Individuals are encouraged to achieve their full potential in every aspect of their employment and the Company supports fair and equitable treatment of our employees irrespective of gender, sexual orientation, religious beliefs, age, colour, ethnic or racial origin, nationality or disability.

Applications for employment by disabled persons are always fully considered and in the event of members of staff becoming disabled every effort is made to ensure that their employment with the Company continues and that appropriate training is arranged. It is the policy of the Company that training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Health and safety

The Company aims to provide and maintain a safe working environment for all its employees and visitors and seeks the involvement of its employees in improving health and safety throughout its operations. The Board keeps its health and safety policy under regular review to take account of changes in legislation, best practice and the working environment.

Principal risks and uncertainties

The principal risks and uncertainties to which the Company is exposed could each have a material impact on the Company's long-term performance and achievement of its strategic goals. The Company's risk appetite is set by the Board and is documented in the Risk Management Framework document.

The Company uses Key Risk Indicators to identify, monitor and measure risk in the business and maintains a Risk Register of all financial and operational risk events and the mitigating controls. This quantification process ensures that the Company operates within its risk appetite.

Ultimate responsibility for risk management lies with the Board, which has established an Audit and Risk Committee, chaired by an independent non-executive Director of the Company, which considers risk management in more detail. The principles and objectives of the Risk Management Framework are cascaded down through the Company. The responsibility for establishing specific internal control policies and procedures is being overseen by the Credit and Risk Committee.

The effectiveness of internal controls is monitored by the Compliance function and outsourced expert assessors who report both to the Audit and Risk Committee and the Board.

The main areas of risk for the Company are considered to be the following:

· Market risk: Market risk is the risk that changes in market prices will affect the Company's profit and loss or the value of financial instruments held and traded by clients. Although the Company does not directly enter into speculative proprietary positions, the effect of client trades does result in the Company retaining a net market risk. The Company has a formal risk policy and a methodology for

setting limits for every financial market in which it operates. Market risk is managed on a day-to-day basis by the respective divisional heads with oversight provided by the Risk Management function, the Audit and Risk Committee and the Board. The risk limits determine the maximum net exposure arising from client activity which the Company is prepared to carry. If the Company's exposure to clients

exceeds these limits, the policy requires that the positions are hedged reducing exposure to within defined limits.

· Credit risk and concentration risk: The Company has a credit exposure to the banks with which it deposits funds and the counterparties with which it hedges its market positions. The Company mitigates this risk by ensuring diversification of counterparties and setting minimum levels of creditworthiness for Company counterparties. The Company does not ordinarily offer credit to its clients but does, on occasion, offer credit to clients who meet specific criteria. The Group has adopted a Credit Risk Policy which sets out specific requirements that will apply in the event that clients are offered credit. The Company ensures client credit risk is minimised via real time monitoring, management of unrealised profit and loss, margin and net equity and supported by mandatory stops and guaranteed stop losses being used by many clients to manage their accounts.

· Operational risk: Operational risk is defined as the risk of loss arising from inadequate internal processes, people or systems. The most significant operational risks the Company is exposed to are:

o Technology risk and business continuity: Technology risk is the risk of a sustained loss of the Company's systems leading to an inability to provide online trading platforms to its clients. This will inevitably lead to a significant loss of customers and income. The Company operates backup for all its trading platforms in separately hosted environments and to support the loss of physical premises the Company also has a contract with a disaster recovery provider for disaster recovery premises. This is supported by ongoing business continuity planning and periodic testing of our disaster recovery facilities and procedures.

o Employee risk: The Company requires suitably skilled staff to operate, control, develop and manage its business. The Company has a wide range of skill requirements including IT, project management, dealing/market risk management, customer support, HR, compliance, finance, sales and marketing. Without adequate staff resources the Company would not be able to operate effectively or achieve its strategic aims. The risk is managed initially through the recruitment and selection of appropriately qualified employees, validated by a pre-employment screening process. Employee risk is also managed on an ongoing basis through training and development (both regulatory and non-regulatory), and reviews of performance

to ensure that individual remuneration and performance is managed consistently and fairly. Finally, we ensure the continued success of the Company through the proactive identification and retention of our key employees through share-based payment awards under long term incentive plans.

o Legal, regulatory and compliance risk: Legal, regulatory and compliance risk is the risk of legal or regulatory sanctions, legal claims, defective contractual arrangements and the resulting financial loss, or damage to the reputation of the Company. The Company is a full scope firm and is therefore subject to close regulation. As such, regulatory risk is an important element of the risk assessment and management process. The regulatory landscape changes at an ever increasing pace and this imposes significant demands on the resources of the Company. The

Company therefore continues to ensure sufficient investment is made in resources and training to meet regulatory demands. The responsibility for compliance is spread throughout the Company, and results are monitored and reported to senior management by the Compliance Department.

· Liquidity risk: Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company has established policies and a liquidity risk management framework to manage its liquidity risk, including daily production of liquidity reports that summarise current liquidity and liabilities. Liquidity is monitored daily by the LCGL Board. The Company also undertakes various stress and scenario testing as part of its Individual Capital Adequacy Assessment Process ("ICAAP") that is a requirement of the FCA. These scenarios stress the effect on the Company's

capital and liquidity adequacy of both an individual risk materialising or a series of risk events occurring within a short timeframe.

· Treasury risk: Treasury risk is the risk arising from the movements in the interest rates or exchange rates which affect the Company's profitability or net cash resources.

o Interest rate risk: Interest rate risk arises from the loss of revenue from interest earned on client deposits and margined client positions, and the Company's own cash resources. While interest rates remain low, interest income will not make a material contribution to Company profit. Conversely, as interest rates rise the Company should benefit.

o Foreign currency risk: The Company faces currency exposures on translation of its monetary assets and liabilities. This risk is managed by daily monitoring of the Company's net foreign currency position as part of its liquidity risk management.

· Key supplier risk: Key supplier risk is the risk of failure of one of our principal business partners to provide contractual services. The Company conducts initial and ongoing due diligence on key suppliers, in addition to using multiple providers where available.

Key Performance Indicators

The Company uses the following key performance indicators to measure its financial and operational performance on delivering the strategic goals of the business.

· Revenue

· Gross profit

· Profit before tax

· Client assets under management

· Active trading clients

· Accounts opened, funded and traded

The following table shows the key performance indicators at 31 December 2016 against the same period in the prior year.

· Revenue up 50% year on year as a result of enhancements to the brand, marketing strategy and increased client acquisition.

· Gross profit up 86% year on year as a result of greater revenue capture following the implementation of enhance risk management analysis of client trading behaviour.

· Loss before tax 46% lower than prior year as a result of the increased revenues for the group.

· Client assets and active trading clients down 6% and 8% respectively due in part to low volatility seen in financial markets during periods of 2016.

· Accounts opened, funded and traded up 35% as the Group continues to improve the brand, proposition and expansion into new markets and territories.

Tax

The Group's effective tax rate is 0% (2015: 3%). This is primarily due to losses incurred within LCGL. These losses will be carried forward and offset against future taxable profits.

Dividend policy

The Board has reviewed its dividend policy during the year and has concluded that a policy of paying dividends from available profits while considering the current and future capital requirements of the business is the most appropriate policy going forward. The Board is not recommending a final dividend (2015: nil).

Return on assets

In accordance with the Capital Requirements Directive IV ("CRD IV") and the IFPRU prudential regulations the Group is required to disclose a return on assets metric. This has been calculated as profit for the year divided by shareholders equity.

Subsequent events

On 1st March 2017 the Group entered into an agreement for the occupation of new premises at 77 Grosvenor Street, W1K 3JR. The Group entered into a 5 year lease and surrendered the lease on 1 Knightsbridge to a 3rd party at nil cost to the Group.

As part of the office move the Group provided £725,000 as an impairment to reflect the true economic recoverability of the fixed assets on the balance sheet.

Capital Resources

The following table summarises the Group's capital resources.

The Group's Tier 1 capital resources increased following the redemption of the convertible loan note to equity. This increased Tier 1 capital by approximately £8.3m but was offset by the audited losses during the year of £7.4m. At 31 December 2016 the capital resources represented 12% of the capital resources requirement (2015: 10%).

Preparation of the Strategic Report

This Strategic Report has been prepared solely to provide information to shareholders to assess how the Directors have performed their duty to promote the success of the Group.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

By order of the Board

Charles-Henri Sabet

Chief Executive Officer

28 June 2017

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2016

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2016

BALANCE SHEET

For the year ended 31 December 2016

The financial statements of London Capital Group Holdings plc, registration number 05497744, were approved and authorised for issue by the Board of Directors on 26 June 2017 and signed on its behalf by:

Charles-Henri Sabet

Director

As permitted by section 408 of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The loss for the year ended 31 December 2016 dealt within the financial statement of the Company was £1,312,992 (2015: loss of £1,085,211).

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 December 2016

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 December 2016

CASHFLOW STATEMENT

For the year ended 31 December 2016

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2016

1. Business and geographical segments

Products and services from which reportable segments derive their revenues

Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance is focused on the Group's different product offerings and geographies. The Group's reportable segments under IFRS 8 are as follows:

· UK financial spread betting and contracts for difference ("CFDs"); and

· institutional foreign exchange.

Financial spread betting and contracts for differences segmental revenues are generated from the net of the gains and losses on the provision of the spread betting and CFD products, commission income, exchange gains and interest. Institutional foreign exchange segmental revenue is the commission income generated from the clients' FX trading. Information regarding the Group's operating segments is reported below.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 1. Segmental profit represents the profit earned by each segment without allocation of the share of central administration costs including central support salaries and expenses, investment revenue, finance costs and income tax expense. This is the measure reported to the Group's Chief Executive Officer for the purpose of resource allocation and assessment of segmental performance.

2. Loss before tax

Loss before tax is stated after charging / (crediting):

All of the above are included within administrative expenses apart from the net gain on foreign currency translations arising on balance sheet items held in foreign currencies, which is included in revenue.

3. Administrative Expenses

4. Auditor's remuneration

The analysis of auditor's remuneration is as follows:

The auditor's remuneration in 2015 relates to the Group's previous auditors. The disclosure for 2016 relate to services provided by the Group's current auditors, BDO LLP.

5. Staff costs

The average number of employees in the Group during the financial year amounted to:

The aggregate staff costs for the year including Directors were as follows:

Wages and salaries include the following amounts in respect of performance related bonuses, commissions (both inclusive of national insurance) and share-based payments charged to the income statement:

The Group operates a stakeholder pension scheme. Pension contributions were payable at a rate equal to the contribution made by the employee subject to a maximum employer contribution of 4% of basic salary.

Directors' remuneration

The remuneration of the Directors who served during the year was as follows:

6. Investment revenue

Bank interest receivable represents that earned on Group funds. Interest earned on client deposits is included in revenue.

7. Finance costs

Further information on interest on convertible loan notes is provided in note 22.

8. Taxation

(a) Tax on (loss) on ordinary activities

(b) Factors Affecting Total Tax Charge for the Current Period

The charge for the year can be reconciled to the profit per the income statement as follows:

The tax charge in the income statement for the year just ended is the standard rate of corporation tax in the UK of 20.00% (2015: 20.25%) following a change in the corporation tax rate announced in the budget of 2013 and effective from April 2015.

(c) Deferred tax

(d) Deferred tax assets

The deferred tax assets included in the balance sheet are as follows:

The gross movement in the deferred income tax assets included in the balance sheet is as follows:

(e) Deferred tax - income statement charge

The deferred tax charge / (credit) included in the income statement is made up as follows:

At the balance sheet date the Group had an unrecognised deferred tax asset of £3,994,045 (2015: £3,038,712). This deferred tax asset relates to unused tax losses which have arisen within London Capital Group Holdings plc that have not been recognised due to the uncertain nature of the future profits in these businesses. These losses are available for offset against future profits and have no expiry date.

9. Earnings per ordinary share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. Fully diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of shares in issue during the year and the dilutive potential ordinary shares relating to share options.

The shares held under the Joint Share Option Programme (JSOP) are considered dilutive and are therefore included in the calculation of diluted earnings per share.

10. Dividends

No dividends have been proposed or paid in 2016 (2015: nil).

11. Dilapidations

Subsequent to year end the Group terminated its lease at 1 Knightsbridge, London, SW1X, 7LX and took up a lease a 77 Grosvenor Street, London, W1K 3JR. Consequently a leasehold improvements dilapidation charge relating to assets held at 1 Knightsbridge has been recognised for £725,000 at 31 December 2016.

12. Intangible fixed assets