London Capital Group Holdings Regulatory News (LCG)

LONDON CAPITAL GROUP HOLDINGS PLC

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

INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2016

LCG is pleased to announce its interim results for the six months ended 30 June 2016.

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

"Despite the tough trading conditions seen at the tail end of Q1-16 and through Q2-16 prior to the Brexit vote, the Group has seen strong revenue growth primarily due to increased revenue capture compared to prior periods. The integration of new technology coupled with a resilient and loyal client base continues to see LCG grow despite the continued lack of volatility in the market resulting in a benign trading environment. LCG's ability to capture and take advantage of trading opportunities means the Group is now better placed to be resilient during periods where trading conditions are weak".

Operational Highlights

- Growth in total monthly active clients - increased 2% to 4,141 (H1 2015: 4,060)

This despite challenging trading conditions in Q2-16 prior to Brexit.

- Growth in monthly open & funded accounts - monthly average increased 15% to 325 (H1 2015: 283).

This demonstrates the increasing effectiveness of the new brand, platform and marketing activities.

Post Period End Events

· Issue of new equity and redemption of CLN on 6 July 2016.

· Around £8.3m of debt redeemed and replaced with equity.

· 286,207,779 new shares issued

· Re-affirms the commitment of GLIO to the business.

1Adjusted (loss)/profit before tax represents (loss)/profit before tax excluding share based payment expense, impairment charges to goodwill and investments, non-recurring restructuring costs, costs related to change in IT platform, the movement in the provision for FOS claims and non-recurring legal fees. Applied consistently hereafter.

2Net cash and short term receivables represents Cash and cash equivalents, less unsegregated amounts due to clients, plus amounts due from brokers.

3Adjusted EBITDA represents (loss)/profit before interest, tax, depreciation, amortisation, share based payment expense, 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.

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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 period ended 30 June 2016

H1 performance

For the 6 months ended 30 June 2016, notwithstanding January and February, trading conditions overall have been heavily affected by lower market volatility due primarily to the uncertainty in the lead up to the EU referendum vote in the UK. This uncertainty had the effect of deterring market participation both for 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, were 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 franchise 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 in 2015 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 through the first half of 2016 with LCG now positioned to take advantage of growth opportunities. Cost savings associated with the restructuring exercise in H1-16 are expected to materialise in the second half of the year.

Outlook

LCG continues to invest in and to 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 platform, 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 a refreshed marketing campaign that will be launched, that in addition to the enhanced product offering, the Board believes will give us 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.

In addition, the balance sheet of the Group has been strengthened by the redemption of the outstanding Convertible Loan Notes (CLN) and the issue of new equity capital. This has enhanced the capital position of the Group while at the same time removing debt.

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

30 September 2016

CHIEF EXECUTIVE OFFICER'S STATEMENT

For the period ended 30 June 2016

Financial Results

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 in reaction to various market conditions. 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 up 12% in the first three months of 2016 compared with the same period in 2015.

The Group 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 3 months were 105% higher than the same period in 2015.

From March 2016 and continuing into the second quarter of the year, saw a decrease in volatility to 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 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 repay its investment.

Overall, the first half of 2016 has seen revenues increase 111% from the same period in the prior year and the Group has seen monthly average open and funded accounts up 15% on the previous year and, although total client funds decreased 11% over the same period, it is anticipated that as the brand continues to gain traction through marketing activities, this will begin to have a positive impact.

Costs of sales for the period are £1.9m (2015 H1: £2.3m) and gross profit is £9.2m which represents an 82% gross profit margin on revenues (2015 H1: £3.0m 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 without any incremental increase in cost of sales.

EBITDA for the 6 month period is a loss of £2.1m (2015 H1: loss of £7.5m) and is an approx. 71% improvement on the same period last year. Administrative costs remain on the higher side at £12.4m for the period (2015 H1: £9.9m) but the Group expects to see the benefits of its cost reduction initiatives in the second half of the year.

The loss before tax was £3.5m (2015 H1: loss of £8.6m) and demonstrates the improvements the Group have made to ensure that despite poor trading conditions seen in Q2-2016, there is a clear path of improvement and move toward sustainable long term profitability, through its improved branding, technology and investment in people.

The net cash and short term receivables, decreased 38% to £14.0m (2015 H1: £22.9m) primarily as a result of the losses for the second half of 2015 (2015 Full year loss: £14.9m). Available liquidity which comprises own cash held, title transfer funds, unsegregated funds and amounts due from brokers decreased by £1.7m from 31 December 2015.

Available liquidity and cash flow

The results for the period and the financial position at 30th June 2016 were considered satisfactory by the directors and they are confident of improved results in the ensuing year with client acquisition remaining strong, with the third quarter showing open and funded accounts remaining at levels seen in both the first two quarters of 2016.

Subsequent Events

The balance sheet of the Group has been enhanced by the redemption of the Convertible Loan Notes (CLN) by the majority shareholders (GLIO Holdings Limited) and issue of new ordinary share capital on 6th July 2016. This has enhanced the capital position of the Group while at the same time removing debt. The removal of debt from the balance sheet and the resultant increase in capital will improve LCG's capacity to expand into new markets and geographies and will provide the Group with greater opportunities to increase revenue. This is also a further sign of GLIO's commitment and support to the Group and its belief in the objectives of the firm.

Strategy

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 has 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 and the Group business models have 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 its existing Meta Trader 4 platform to ensure it is 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. The team will operate from Cyprus and will take advantage of the local resources and talent pool to ensure the offering has the highest standard of technological requirements for the target market. The launch date is expected to be in Q4-2016.

At the same time, the Group will also take advantage of these resources and talent pool by off-shoring many of its processing and operational functions to Cyprus which will additionally have a cost saving benefit to the Group. The timing of these benefits is expected to be seen in the latter part of Q4-16.

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

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

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

The Group's medium-term strategy will also continue to focus on the promotion and further development of our key selling points upon the completion of the Group's near-term objectives of:

- Industry-leading platforms 

- Service

- Professional tools and news service 

- Educational material

- Pricing

- Marketing

- Dealing execution

Our marketing is being aimed at attracting active retail traders. This combined with improving the customer journey and technology will ensure that the Group continues to be in a strong strategic position.

Outlook

With the new initiatives being employed by the Group to expand its already robust product offering through its enhanced and client focused technology, whilst building on the LCG brand and expanding into new markets and territories, the Board is confident the business can continue to build on what has been a confident first half performance. The removal of debt from the balance sheet and the resultant increase in capital will improve LCG's capacity to expand into new markets and geographies and I, the other Board members and senior management team remain excited 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-Henri Sabet

Chief Executive

30 September 2016

CONDENSED CONSOLIDATED INCOME STATEMENT

For the period ended 30 June 2016

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 30 June 2016

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 June 2016

CONDENSED CONSOLIDATED CHANGES IN EQUITY

For the period ended 30 June 2016

NOTES TO THE FINANCIAL STATEMENTS

For the period ended 30 June 2016

1. Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2016 have been prepared using accounting policies consistent with International Financial Reporting Standards as adopted by the EU (IFRS) and in accordance with IAS 34 Interim Financial Reporting.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest audited financial statements.

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis for preparing the financial statements.

2. Adjusted (loss)/profit before tax, adjusted operating (loss)/profit and adjusted EBITDA from continuing operations

3. 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 period, after deducting any own shares held. 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 period and the dilutive potential ordinary shares relating to share options and the convertible loan notes.

From continuing operations

 The calculation of the basic and diluted earnings per share is based on the following data:

The diluted EPS excludes 74,128,826 in shares as this decreases the loss per share and thus these are anti-dilutive.

4. Dividends

No dividends were declared or paid in the period (H1'15:nil)

5. Provisions and contingent liabilities

Provision & contingent liability against FOS claims

In the second half of 2015, the Group received a complaint from a client seeking to recover losses that arose in 2013 from an agreement that they had entered into with an investment manager who executed trades with the Group.

This complaint was ultimately forwarded to the FOS and following the decision by the FOS to uphold the original complaint, the Group has provided in full for the losses incurred by other clients who were managed by this individual together with accrued interest. The value of this provision totals £486,000.

Market data provision

During 2015 and 2016, a number of exchanges used by the Group have been conducting audits in relation to data usage and redistribution. The provision of £315,000 is the Group's best estimate of the liability in relation to these open audits from the relevant exchanges.

6. Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Trading Transactions

During the period, Group companies entered into the following transactions with related parties who are not members of the Group:

Loans from related parties

The following loan amounts:

The following amounts were outstanding at the balance sheet date:

In 2014, a subsidiary Company entered into a licencing agreement with Algoweb S.A.R.L. ("Algoweb"). On 18 September 2015, this agreement was novated to Algoweb Trading Services FZE. The Licencing agreement will allow the Group to access Algoweb's retail distribution platforms and software, as well as connectivity to post trade services. Algoweb is a related party of the Group because Charles-Henri Sabet, Chief Executive Officer of London Capital Group Holdings plc and his wife, together own 50 per cent of the share capital in Algoweb.

GLIO Holdings Limited ("GLIO") is a related party of the Group because Charles-Henri Sabet, Executive Chairman of London Capital Group Holdings plc holds a 100% interest in ILOG Investments Limited, GLIO's largest shareholder. The balance represents both the liability and equity components of this transaction.

On 6 July 2016 the full amount of GLIO Holdings Limited's convertible loan notes were redeemed and replaced with new share capital.

7. Publication of Interim Results

The interim results for the six months ended 30 June 2016 will be available on the Company's website http://ir.lcg.com/.