London Capital Group Holdings Regulatory News (LCG)

23 Feb 2006 07:02

London Capital Group Holdings PLC23 February 2006 Embargoed until 0700 Thursday 23 February 2006 LONDON CAPITAL GROUP HOLDINGS PLC MAIDEN PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 London Capital Group Holdings plc ("LCG" or "the Group"), a rapidly growing andprofitable spread betting and financial services company offering online tradingin the financial markets today announces its maiden preliminary results for thefull year ended 31 December 2005. Highlights: • Turnover up 85% to £4.86 million (2004: £2.62 million) • Operating profit before exceptional items £1.86 million (2004: loss £0.06 million) • Daily spread betting trades during the year up 141% • Number of financial spread betting client accounts increased 128% to 4,319 in 2005 (2004: 1,895) • Launch of binary bets in January 2006 • Admitted to AIM raising £15 million (before expenses) by a placing on 22 December 2005 Commenting on the results, Frank Chapman, Chief Executive Officer, said: "We have continued to experience strong trading since our flotation at the endof last year with encouraging growth in both the number of live customeraccounts and the daily trading volumes in the spread betting division. We aredelighted with the launch of Capital Forex Pro and binary bets which we believewill further enhance the development of the business in 2006." For further information, please contact: www.londoncapitalgroup.com ----------------------------- London Capital Group Holdings plc 020 7665 9400Frank Chapman, Chief Executive Officer Smithfield 020 7360 4900Sara Musgrave / George Hudson Print resolution images are available for the media to view and download from www.vismedia.co.uk Notes to Editors: London Capital Group Holdings plc ("LCG" or "the Group") is a rapidly growingand profitable spread betting and financial services company offering onlinetrading in the financial markets. Its core activity is the provision of spreadbetting products on the financial markets to retail clients under the tradingname Capital Spreads. LCG also provides online foreign exchange trading servicesto institutional and intermediate clients under the Capital Forex brand andinstitutional derivatives broking under the name Capital Derivatives. LCG floated on the London Stock Exchange's AIM market on 22nd December 2005 at an issue price of 82p. 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 I am pleased to present the Group's maiden preliminary results following its admission to AIM in December last year and my first report as Chairman of LCG.The year to 31 December 2005 has been both eventful and successful. The admission to AIM was completed on 22 December 2005 at an issue price of 82p,raising £15 million before expenses, giving a free float of approximately 48% ofthe shares in issue. The Board believes that the admission to AIM, coupled withthe restructuring of the balance sheet with funds raised on flotation, willallow LCG to take full advantage of the exciting growth opportunities within ourtarget markets. Results The Group achieved an operating profit of £1.86 million (2004: loss £0.06) onturnover of £4.86 million (2004: £2.62 million). We experienced particularlystrong growth from our spread betting business, Capital Spreads , in the last 6months of the year, with revenue 127% higher than in 2004. The average number of spread bets taken per day has increased by 141% year onyear (2004: 830, 2005: 1,997) and the number of new live spread betting clientshas increased by 128%. Customer cash held on account, reflecting the increasednumber of live accounts, has risen by 174% from £1.20 million to £3.30 millionin the spread betting division and from zero to £1.56 million in the forexdivision. Whilst the Group's principle trading division, Capital Spreads, has been themain contributor to this strong performance, I am pleased to report that boththe derivatives division, Capital Derivatives, and the foreign exchange("forex") products, Capital Forex and Capital Forex Pro, also had a good year.The forex division, launched in July 2005, is already breaking even on a monthlybasis. Dividend As indicated in the AIM admission document, the Directors do not intend torecommend a dividend for the year just ended. In future, however, we intend toadopt a progressive dividend policy in line with the earnings and cash flowpotential of the Group. We therefore anticipate the payment of a dividend inrespect of the current year ending 31 December 2006. Board The Board has three Executive Directors - Frank Chapman (Chief ExecutiveOfficer), Simon Denham (Chief Operating Officer) and Rachel Woodford (Sales andMarketing Director) - each of whom has a proven track record in developing andcommercialising products in the financial services market. My fellow non-executive Director, Geoffrey Forster and I have good experience,respectively, of the financial services and software industries and we believe,therefore, that we have a well balanced Board. We indicated at the time of ourflotation that we intended to appoint a finance director during the first halfof 2006 and I can confirm that we still expect to be able to announce anappointment in that timescale. Geoffrey Forster and I are the sole members of both the audit and theremuneration committees, with the former being chaired by Geoffrey and thelatter by myself. Employees On behalf of the Board, I would like to thank all our employees for theirenormous contribution, hard work and support during the past year. Our peopleare our most valuable asset and in recognition of this, we have set up a shareoption scheme giving them the opportunity to share in the Company's futurevalue. My thanks also go to my fellow Board members and senior management forall their efforts. Current Trading and Outlook All of our business areas have started the year well with the new clientacquisitions achieved by Capital Spreads being particularly pleasing. CapitalDerivatives has also secured a number of new institutional clients with severalmore in the pipeline, which places it in a good position for the current year.As stated above, the foreign exchange division, Capital Forex and Capital ForexPro, are now breaking even and we have high hopes that these and our new binarybets business, launched in January, will contribute in 2006. Robert LoosemoreChairman23 February 2006 Chief Executive's Statement 2005 was a very exciting year for both the Group and its employees. We havedelivered a strong maiden set of results following a successful flotation onAIM. Financial Review The turnover from our continuing business rose by 85% from £2.62 million in2004, to £4.86 million in 2005. This reflects the increased number of spreadbetting accounts and trades, which averaged 128,800 trades per quarter duringthe year (2004: 53,500 trades per quarter), a like for like increase of 140%. Asa result, operating profit before exceptional items increased, from a loss of£0.06 million in 2004 to a profit of £1.86 million in 2005, although thisimprovement was also in part due to the closure of a loss making business in2004. We are able to maintain a low cost operation by comparison with other companiesin our sector because we have adopted an outsourcing model, whereby we sub-contract the specialist services to specialist providers. Included in theadministration costs, was a spend of £250,000 on IT infrastructure, up 98% onthe previous year. Profit before tax increased from £155,000 to £503,000. Earnings per share,adjusted for balance sheet restructuring, increased from 0.16p to 3.3p pershare. The Company had no debt at the year end and had cash resources of £1.67 millionas well as £4.86 million of client funds. These results have been reported under UK GAAP but we have now adoptedinternational accounting standards and future results will therefore be reportedunder IFRS. Operating Review Capital Spreads Capital Spreads, our financial spread betting business, has enjoyed exceptionalgrowth during the year with the number of live accounts having grown fromapproximately 1,800 in 2004 to over 4,300 in 2005 and trading volumes also upfrom 17,600 trades in December 2004 to over 63,300 in December 2005. A key driver to our increasing volumes is our white label model, which generatesgood revenue from clients who would otherwise be inaccessible to us. We areactively seeking additional white label partners and have a number ofdiscussions ongoing. Whilst our marketing activity and our reputation play a significant part in thebuilding of our client base, over 50% of our clients join us via recommendation.Therefore, it is essential that we provide a unique offering and integral tothis is the maintenance of some of the tightest spreads in the market. Currently, 73% of our clients have funds on account and approximately 30% havetraded within the last month, with over 99% of transactions being executedonline. Binary Bets Binary betting is a hybrid of spread and fixed odds betting. In January thisyear, we launched binary bets on to our Capital Spreads platform and we arealready seeing profitable results. Capital Forex and Capital Forex Pro Our foreign exchange trading platform,Capital Forex, provides the retail market with the ability to trade currencieswhilst Capital Forex Pro provides professional traders with access to Currenexand Hotspot FX, two major on-line foreign exchange trading platforms. We are pleased to report that we have secured two white label partnerships, nowhave a number of institutional clients and expect a measurable contribution fromthis division in 2006. Capital Derivatives Capital Derivatives provides execution services for exchange traded futures andoptions in fixed income products for institutional clients. Capital Derivativeshas had a satisfactory year in which its position was consolidated by thewinning of a number of new clients. We have continued to gain new institutionalclients in 2006 and we expect to see further growth from this division duringthe course of the year. Growth Strategy LCG intends to build on its achievements to date by broadening its offering withnew and complementary products. The launch of Capital Forex Pro in the lastquarter of 2005 and last month's launch of binary bets are good example of this.The Group's diversified product range, coupled with its hedging strategy, shouldlead to an even more stable revenue stream in 2006. LCG will continue to focus on marketing its white label offering. It currentlyhas eight white label spread betting partners, including one of the world'slargest online brokers. Since the start of the year, we have signed up anadditional three new spread betting partnerships, two of which will be marketingprimarily in Europe. These partnerships will enhance our planned internationalexpansion. We are also in negotiation with several other potential spreadbetting partners and we have secured two international white label partners forthe Capital Forex platform. Summary and Outlook LCG has had an excellent year and achieved a great deal in a short space oftime. This has been mainly due to the efforts of our dedicated teams in allbusiness areas. We have continued to experience strong trading since ourflotation at the end of last year with encouraging growth in both the number oflive customer accounts and the daily trading volumes in the spread bettingdivision. We are delighted with the launch of Capital Forex Pro and binary betswhich we believe will further enhance the development of the business in 2006. Frank ChapmanChief Executive Officer23 February 2006 GROUP PROFIT & LOSS ACCOUNTFor the period ending 31 December 2005 2005 2004 Note £000 £000 Turnover - continuing 4,861 2,623Turnover - discontinued - 497 -------- -------- GROUP TURNOVER 2 4,861 3,120 Cost of sales 1,085 1,154 -------- -------- GROSS PROFIT 3,776 1,966 Administrative expenses 1,855 2,019Depreciation 56 4Exceptional costs/(income) 3 262 (204) OPERATING PROFIT 1,603 147 Interest receivable 21 8Interest payable and similar charges (1,121) - -------- --------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 503 155 Tax on profit on ordinary activities 199 - -------- --------RETAINED PROFIT FOR THE FINANCIAL PERIOD 304 155 -------- -------- -------- -------- GROUP BALANCE SHEETAs at 31 December 2005 2005 2004 £000 £000 FIXED ASSETSIntangible assets 9,303 -Tangible assets 276 200 -------- -------- 9,579 200 -------- -------- CURRENT ASSETSDebtors 1,044 1,081Cash at bank 5,592 1,630 -------- -------- 6,636 2,711CREDITORS: Amounts falling due within one year 5,737 1,614 -------- -------- NET CURRENT ASSETS 899 1,097 -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 10,478 1,297 PROVISIONS FOR LIABILITIESDeferred taxation 82 - -------- -------- 10,396 1,297 -------- -------- -------- -------- CAPITAL AND RESERVESSHAREHOLDERS' FUNDS 10,396 1,297 -------- -------- -------- -------- GROUP CASH FLOW STATEMENTFor the period ended 31 December 2005 2005 £'000 NET CASH INFLOW FROM OPERATING ACTIVITIES 5,627 RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 21Interest paid (1,121) -------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (1,100) TAXATION - CAPITAL EXPENDITUREPayments to acquire intangible fixed assets (9,303)Payments to acquire tangible fixed assets (132) -------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (9,435) ACQUISITIONSPayments to acquire group companies (6,324) -------- NET CASH OUTFLOW FROM ACQUISITIONS (6,324) EQUITY DIVIDENDS PAID (242) --------CASH OUTFLOW BEFORE FINANCING (11,474) FINANCINGIssue of equity share capital 3,829Share premium on issue of equity share capital 11,607 -------- NET CASH INFLOW FROM FINANCING 15,436 --------INCREASE IN CASH 3,962 -------- -------- RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROMOPERATING ACTIVITIES 2005 £'000Operating profit 1,603Depreciation 56Decrease in debtors 38Increase in creditors 3,930 --------Net cash inflow from operating activities 5,627 -------- -------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2005 £'000Increase in cash in the period 3,962 -------- 'Movement in net funds in the period 3,962 -------- -------- Net funds at 1 January 2005 1,630 -------- Net funds at 31 December 2005 5,592 -------- -------- ANALYSIS OF CHANGES IN NET FUNDS At 1 Jan Cash At 31 Dec 2005 flows 2005 £000 £000 £000Net cash:Cash in hand and at bank 1,630 3,962 5,592 -------- -------- -------- Net funds 1,630 3,962 5,592 -------- -------- -------- -------- -------- -------- Notes to Financial Statements 1. Basis of preparation The results for the period ended 31 December 2005 comprise the consolidatedresults London Capital Group Holdings Plc and it's subsidiaries. The companyadopted the merger method of accounting for consolidation. This basis assumesthat London Capital Group plc owned London Capital Group Ltd for the whole year.Comparative figures for 2004 are for memorandum purposes and comprise LondonCapital Group Limited results. The financial information contained in this Preliminary Report has been preparedusing accounting policies and practices consistent with those used in preparingthe accounts of London Capital Group Ltd for the year ended 31 December 2004 2. Turnover is stated net of brokerage and hedging costs: 2005 2004 £000 £000Spread betting income 4,242 1,913Brokerage income 1,066 1,358 -------- -------- Turnover - continuing 5,308 3,271Turnover - discontinued - 497 -------- -------- Gross group turnover 5,308 3,768Hedging and brokerage costs (447) (648) -------- -------- Net group turnover 4,861 3,120 -------- -------- -------- -------- 3. Exceptional items 2005 2004 £000 £000Vendor non recurring costs 266 -Other non recurring costs 116 -Exceptional income (120) -Profit on sale of fixed assets - (204) -------- -------- 262 (204) -------- -------- -------- -------- 4. Earnings per shareBasic EPS 2005 £Profit after tax 304,000Weighted average no of shares 1,888,411Weighted average basic EPS 0.16p -------- -------- Diluted EPS 2005 £Profit after tax 304,000Weighted average no of shares 1,955,979Weighted average fully diluted EPS 0.15p -------- -------- Diluted earnings per share is the basic earnings per share after allowing forthe dilative effect of the conversion into Ordinary shares of the weightedaverage number of options outstanding during the period. Adjusted EPS 2005 £Profit after tax 304,000Add:Exceptional items 262,000Interest payable 1,121,000Tax effect on the above adjustments (415,000) -------- Adjusted profit after tax 1,272,000 -------- -------- Issued no of shares at the period end 38,292,683Adjusted EPS 3.3p -------- -------- The adjusted EPS has been calculated to show the effect of 2005 earningsadjusted for non recurring expenditure and using the share in issue at the endof the year, as this will be more comparable with future years. This information is provided by RNS The company news service from the London Stock Exchange