London Capital Group Holdings Regulatory News (LCG)

LONDON CAPITAL GROUP HOLDINGS PLC

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

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

London Capital Group Holdings plc today announces interim results for the six months ended 30 June 2015.

Operating Summary

§ Since the arrival of the new management team in October 2014 there has been a substantial restructuring of the entire business which has now been largely completed ahead of schedule and on budget

§ Adjusted loss before tax** from continuing operations of £9.9 million (H1'14 loss: £0.9 million)

§ Loss before tax from continuing operations of £8.6 million (H1'14 loss: £0.4 million)

§ EBITDA loss before certain one-off items from continuing operations for period from October 2014 when new management was appointed of £2 million*

§ Revenue from continuing operations down 42% to £5.3 million (H1'14: £9.2 million)

§ Net cash and short term receivables, excluding amounts due to clients increased 38% to £22.9 million (H1'14: £16.5 million)

§ Introduction of new technologies substantially completed

§ Cost base stabilised

§ Marketing plans and spend are ready for the implementation of our new technologies

* Certain one-off items include the Swiss Franc event (previously disclosed), additional administrative costs and IT spend.

Operational Highlights

§ UK FSB and CFD performance

- Divisional revenue down 33.4% to £5.1 million (H1'14: £7.7 million); divisional loss of £1.1 million (H1'14: profit £1.9 million)

- Key performance indicators

§ Institutional foreign exchange

-  In early 2015, the institutional foreign exchange business was rationalised resulting in a

reduction in the number of customers.

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

"The business has been operating in challenging market conditions throughout the first half of the year, with relatively low levels of volatility across financial markets for much of the period. We have been focused on developing exciting new technology, a full rebranding, initiating a new client journey as well as optimising our internal processes in order to facilitate client acquisition. We have also focused on rationalising the fixed cost base. Due to the positive direction shown in our key performance indicators, we are confident in our strategy during this transitional and challenging period.

Since the arrival of the new management team in October 2014, the Group has recognised an EBITDA loss of £5.4 million. This is a result of: decreased revenues due to lower market volatility; an exceptional £1.7 million loss incurred as a result of the movement in the Swiss Franc; and additional administrative costs of £1.7 million mainly due to staff turnover, contracting fees and increased IT spend. The EBITDA loss excluding the impact of the Swiss Franc event and additional administrative costs relating to staff turnover and IT would have been £2.0 million.

Our limited client growth in this period has been due to a core focus on our relaunch and a strategic decision to limit marketing of the current brand. We plan on launching our new product in the coming months with a full scale marketing drive and significant coverage.

The Group is confident that with the development of our new advanced technology, a renewed commitment to hiring the industry's most talented people and a big increase in marketing driving our rebrand, the majority of the short-term strategy will be achieved in the second half of the year."

** Adjusted loss before tax represents loss before tax excluding share based payment expense and the movement in the provision for FOS claims and restructuring costs. Applied consistently hereafter.

Chairman's statement

For the period ended 30 June 2015, the Group has continued to invest heavily in innovation, IT, sales and marketing and the quality of its people. This journey began in the fourth quarter of 2014 and the Group's costs are in line with the Board's expectations for this period. Revenue has been heavily affected as a result of lower market volatility during the first half of the year and was further impacted by the Swiss Franc event in early January 2015. We are confident that the Group is geared to return to steady growth with investments currently taking place that we believe will position the Group as a leading provider of online trading services.

The review undertaken by management encompassed a focus on the markets, products, platforms, operational structures and key personnel. This was necessary to deliver the growth expected by our shareholders. Many of the legacy problems relating to the business have now been addressed and the Group is now entering a new phase with the expectation of a return to growth and the delivery of long-term, sustainable returns to shareholders.

In addition, the majority of the organisational restructuring which was expected to last until the end of 2016 has already been completed. Over the last six months, a key focus has been to ensure that the Group has the right talent and skill sets in place to drive the Group forward. Achieving this has resulted in significant staff turnover during the first six months as well as a substantial spend in recruitment and contractor fees.

In line with the development of the workforce, the Group's IT department and infrastructure have been restructured with significant investment in this area ensuring better access to financial markets and best-in-class technology. We will continue our efforts with a major rebranding exercise, which will help position the Group as a leading provider of online trading services. In addition, we have put in place the building blocks to take advantage of opportunities globally, which will complement our core domestic business in the UK.

We shall continue to invest in our products and services, brand repositioning and improved trading technologies in order to drive the Group's return to growth. We are confident in management's ability to execute our strategic vision.

Charles Poncet

Chairman 

Chief Executive's Statement

As previously reported LCG has suffered from a lack of investment in innovation, sales and marketing over the past few years. Significant financial resources were required to drive the longer-term growth of the Company. The convertible loan note financing has allowed the business to address these issues. Our investment in innovation, IT, sales and marketing and people began in the fourth quarter of 2014 and has continued during the first six months of 2015.

Financial Results

The first half of the year has once again been a difficult trading period, with market conditions not particularly conducive to the style of trading favoured by our retail derivative clients as a result of a range market. In addition, during the first half of the year, the Group suffered a loss from market and credit exposure following the announcement on the 15 January 2015 by the Swiss National Bank which resulted in extreme movement in the value of the Swiss Franc and a sudden reduced liquidity in the Swiss Franc foreign exchange market. The loss attributable to this event was £1.7 million. A conversion of convertible loan notes also took place in January 2015 which led to an accelerated interest charge of £1.2 million for the period. Additional costs were also incurred as a result of staff turnover, contracting fees and increased IT spend. All of this has led to a loss before tax for the period of £8.6 million (H1'14 loss: £0.4 million).

Total revenue for the Group amounted to £5.3 million (H1'14: £9.2 million), a decline of 61% on H2'14 and 42% on H1'14. Administrative costs from continuing operations have increased by 45% on H1'14 as a result of the continuing investment described above.

The adjusted loss before tax was £9.9 million, compared to a profit of £1.1 million for H2'14 and a loss of £0.9 million for H1'14. Adjusted profit before tax is stated before recognising a small charge in relation to share based payments, a credit relating to the Financial Ombudsman Service ("FOS") claims provision of £0.5 million and a credit for restructuring costs of £0.9 million.

UK Financial Spread betting and CFDs

Revenue derived from the UK Financial Spread betting and CFD business was £5.1 million (H1'14: £7.7 million). The division has experienced a difficult trading period; however, underlying trading statistics have been improving. Average trades per month have increased by 44% compared to the same period in 2014 and average monthly unique active users have been stable over the period. Average monthly funds on deposit from the UK Financial Spread betting and CFD business increased by 16.5% from H2'14.

FX

In early 2015, the institutional foreign exchange business was rationalised resulting in a reduction in the number of customers.

Available liquidity and cash flow

The net cash and short term receivables, increased 38% to £22.9 million (H1'14: £16.5 million) primarily as a result of the convertible loan note financing. Available liquidity which comprises own cash held, title transfer funds, unsegregated funds and amounts due from brokers decreased by £10.1 million from 31 December 2014.

Strategy

The Group's future success will 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.

We will shortly unveil our new mobile trading apps, allowing clients to trade on every device and have worked hard to deliver what we believe is the most integrated charting package in the industry.

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

- Industry-leading platformsThe Group will offer improved technology and trading platforms on web, desktop, mobile and API ensuring our offering fits in with the demands of the active trader.

- ServiceThe Group will provide an industry-leading customer experience and a service tailored to individual customers' needs, both online and through our telephone, email and 'live-chat' channels.

- Professional tools and news serviceTargeted to our customers' needs, the Group's experienced in-house market analysts will keep clients up-to-date with market events, as well as offering access to professional third-party news and tools providers.

- Educational materialThe Group will create significantly enhanced education services to address all levels of trading experience, including face-to-face seminars and live market webinars from our team of market analysts.

- Pricing

The Group will deliver a value proposition to our clients without any compromise of our strict adherence to quality products, platforms and service, in order to position the Group at the forefront of the industry's most competitive providers.

- MarketingThe Group is focusing its brand and client proposition primarily through the trusted LCG name, consolidating our online presence into a single LCG-led offering which incorporates all of the Group's products and services. A consolidated focus on a single brand will provide greater clarity for the Group's clients while enabling optimisation of marketing spend.

- Dealing executionThe Group aims to provide a best-in-class dealing experience for clients across a broad range of markets and via multiple platform offerings. Clients will benefit from the Group's transparent and competitive dealing and execution services, for example through our liquidity providers, and the execution model on the MetaTrader4 platform.

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

The Board is confident that with this significant investment in innovation, talented people, IT, sales and marketing that the Group has previously lacked, the business can now move confidently forward towards a profitable period of growth. This growth will be fully scalable which will allow the Group to start growing abroad.

Charles-Henri Sabet

Chief Executive

London Capital Group Holdings plc

CONDENSED CONSOLIDATED INCOME STATEMENT

For the period ended 30 June 2015

London Capital Group Holdings plc

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 30 June 2015

London Capital Group Holdings plc

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 June 2015

London Capital Group Holdings plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 30 June 2015

London Capital Group Holdings plc

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the period ended 30 June 2015

London Capital Group Holdings plc

Notes to the condensed consolidated financial statements

For the period ended 30 June 2015 (unaudited)

1. General information

The condensed consolidated financial statements of London Capital Group Holdings plc and its subsidiaries for the six months ended 30 June 2015 were authorised for issue by the Board of Directors on 22 September 2015. The information for the year ended 31 December 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2015 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.

3. Segment information

The Groups reportable segments are as follows:

· Financial spread betting and contracts for difference (CFDs), UK; and

· Institutional foreign exchange

Financial spread betting and contracts for difference 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. Following the year-end the institutional forex business was rationalised resulting in a reduction in the number of customers.

3. Segment information (continued)

Unaudited 6 months to 30 June 2015

Included within revenue is interest income earned on client money held.

3. Segment information (continued)

Unaudited 6 months to 30 June 2014

Included within revenue is interest income earned on client money held.

3. Segment information (continued)

Audited 12 months to 31 December 2014

Included within revenue is interest income earned on client money held.

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

5. 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.

5. Earnings per ordinary share (continued)

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.

6. Dividends

No dividends were declared or paid in the period (H1'14: nil)

7. Trade and other receivables

The Directors consider that the carrying amount of the trade receivables, amounts owed to group undertakings and other receivables approximates to their fair value due to their short term maturity.

Amounts due from brokers represents the combination of open derivative positions and cash held at brokers.

8. Cash and cash equivalents

Gross cash and cash equivalents include Group cash and all client funds (segregated funds and funds under collateral title transfer).

Own cash and title transfer funds include client money 'buffer' of £195,118 as well as restricted funds of £538,006 of funds held in a restricted account at Natwest for the benefit of a guarantee for the lease that was signed on 1 Knightsbridge on 2 June 2015.

Segregated client funds include client funds held in segregated accounts or breakable short term deposits (less than 3 months) in line with the FCA's Client Asset rules ('CASS').

Title transfer funds are held by the Group's subsidiary under a Title Transfer Collateral Arrangement ('TTCA') by which the client agrees that full ownership of such monies is unconditionally transferred to the Group. Funds under TTCA are included on the balance sheet.

9. Trade payables

10. Other payables

11. Provisions and contingent liabilities

Restructuring provision

During 2014 the Group carried out extensive restructuring to ensure that the business had the correct skill set to enable it to expand in line with senior management's expectations. This resulted in a provision of £1.1 million being carried at the year end to cover redundancy and other associated costs of the restructure. During the period ended 30 June 2015, £0.9 million was released as circumstances regarding the provision have changed and £0.2 million was paid.

Provision & contingent liability against FOS claims

During the first half of 2009 the Group made commission rebating errors whilst preparing the customer statements of a managed FX fund. The correction of these errors led to a series of complaints to the Financial Ombudsman Service ("FOS"). Whilst the Group believes its actions did not directly cause any loss to the clients, the Ombudsman issued a final decision upholding the complaints in 2013 and ordered the Group to repay all losses incurred by the clients plus interest.

During the period ended June 2015 one final eligible claimant had been repaid, resulting in an utilisation of the provision in the period of £16k. The provision of £489k and contingent liability of £1.1 million release is due to claims not being made within the time limit prescribed by United Kingdom legislation.

Market Data Provision

During 2014 a number of exchanges used by the Group have been conducting audits in relation to data usage and redistribution. The provision of £379k is the Group's best estimate of the liability in relation to these open audits from the relevant exchanges and remains the same as at 31 December 2014 as circumstances have not changed.

12. Convertible loan notes

On 16 October 2014, the Company raised £17 million (before expenses) through the issue of 67,945,644 convertible loan notes, to GLIO Holdings Limited ("GLIO"), HSBC Global Custody Nominee (UK) Limited, on behalf of Hargreave Hale Limited, and JIM Nominees Limited, on behalf of Mr Tyler Rameson, at a conversion price of 25.02p. The proceeds (net of transaction costs) of the financing are £16.35 million. The conversion price was at a 15.9% discount to the share price of the ordinary shares at the date the convertible loan notes were issued.

Any notes that have not been converted will be redeemed at par on 16 October 2021. Interest of 5 per cent will be paid in the form of shares where the notes are converted up until that settlement date.

The net proceeds received from the issue of the convertible loan notes have been split between the financial liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity of the Company, as follows:

The interest expensed is calculated by applying an effective interest rate of 8 per cent to the liability component of the notes from date of issue on 16 October 2014 to year end. The liability component is measured at amortised cost. The difference between the carrying amount of the liability component at the date of issue and the amount reported in the balance sheet at 30 June 2015 and 31 December 2014 represents the effective interest rate less the interest paid to that date.

In accordance with the terms of the convertible loan notes, as further described in the circular to Shareholders dated 17 June 2014 (the "Circular"), those investors issued with the convertible loan notes have also been granted warrants and shall be entitled, upon the exercise of their convertible loan notes, to be issued ordinary shares (in satisfaction of the Minimum Interest Return, as defined in the Circular), as shown in the table below:

12. Convertible loan notes (continued)

The warrants issued to GLIO may be exercised in full or in part in minimum tranches of 5,000,000 and the warrants issued to Hargreave Hale and Mr Tyler Rameson may be exercised in full or in part in minimum tranches of 1,000,000 at any time upon 10 business days' notice up and until the maturity date, being 7 years from the date of issue, provided that the equivalent number of convertible loan notes have been converted.

In January 2015, a total of principal of 3,668,000 of the convertible loan notes were converted to shares.

13. 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:

13. Related party transactions (continued)

Following shareholder approval on 30 September 2014, the Company entered into a licencing agreement on 20 October 2014 with Algoweb S.A.R.L. ("Algoweb"). 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, Executive Chairman 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.