London Capital Group Holdings Regulatory News (LCG)

18 August 2011

LONDON CAPITAL GROUP HOLDINGS PLC

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

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

London Capital Group Holdings plc, a leading online financial services company, announces interim results for the six months ended 30 June 2011.

Financial Highlights:

·; Profit before tax up 213% to £2.69 million (H1'10: £0.86 million)

·; Revenue down 12% to £18.34 million (H1'10: £20.90 million)

·; Adjusted profit before tax* £3.0 million (H1'10: £4.2 million)

·; Total cash and cash equivalents up £18.43 million to £76.51 million (H1'10: £58.08m), and net cash** position up £8.35 million to £22.48 million (H1'10: £14.13 million)

·; Basic EPS up 180% to 3.89p (H1'10: 1.39p)

·; Interim dividend up 30% to 1.3p per share (H1'10: 1.0p)

Operational Highlights:

·; Robust UK financial spread betting and CFD performance

- Total UK financial spread betting and CFD accounts up 19% to 68,652 (H1'10: 57,890)

- Total UK financial spread betting and CFD funds on account up 21% to £24.67 million (H1 '10: £20.45 million)

- Net revenue per active client up 15% on H2'10 to £807 (H2'10: £702) and down 23% on H1'10 following the extreme volatility of May 2010 (H1'10: £1,051)

- Four new White Label clients gained, including TD Waterhouse and XTB

·; Strong institutional FX performance

- 51% increase in trade volumes to $292 billion (H1'10: $194 billion)

- 4% increase in divisional operating profit to £1.43 million (H1'10: £1.38 million)

·; Encouraging KPIs from international operations

Commenting on the results, Simon Denham, Chief Executive, said:

"In the first half of the year we successfully strengthened and widened our product range and made significant progress with our international subsidiaries, as well as bolstering our capital base. LCG is now in a stronger position for the longer term and there are many reasons to be optimistic for the remainder of the year. We are encouraged by current trading, which is a reflection of the strengths of LCGs business model."

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Notes to Editors:

London Capital Group Holdings plc (hereafter "LCGH plc" or "LCG" or "London Capital Group" or "the Group") is a rapidly growing 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 Services Authority. Its core activity is the provision of spread betting and CFD products on the financial markets to retail clients under the trading name Capital Spreads and Capital CFDs. Its other divisions provide online foreign exchange trading services to institutional and professional clients and also institutional derivatives broking. LCG Ltd is one of the leading providers of white label financial spread trading platforms and its white label partners include TD Waterhouse, TradeFair, Bwin.Party, and Saxo Bank. Prospreads.com is authorised and regulated by the Financial Services Commission in Gibraltar and provides spread betting products on financial markets to professional clients.

Capital CFDs (Australia) is a trading name of London Capital Group Pty Limited, a wholly owned subsidiary of LCGH plc, and is regulated by the Australian Securities and Investments Commission.

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 listed 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

The first half of 2011 was a period of significant internal focus for the Group. Following an adverse decision from the Financial Ombudsman Service ("FOS") in February 2011 the Company was required to raise additional capital through an institutional share placing which concluded in April 2011. The additional funds raised by the Company have meant that the Group is now adequately capitalised. In addition, we relocated our London head office in May 2011 to new premises. The new offices are a much improved working environment and are 50% larger which will serve the Group well in the coming years as we continue our growth strategy.

Turning to the future, the Group is focused on evaluating opportunities to enter new markets particularly internationally whilst ensuring we continue to develop and grow our established businesses in the UK. We have started to see more encouraging signs from our international subsidiaries and with the launch of our multilingual trading platform we expect our expansion into Europe to start gaining momentum. We have also seen significant product development with the roll out of our mobile trading applications which have been well received by both our customers and our White Label partners.

Based on the performance in the first half and the net cash position of the Group, the Board is recommending an interim dividend of 1.3p a share (2010: 1.0p) representing 33% of basic earnings per share and total cost of £0.7m (2010: £0.4m). This will be paid on 23 September 2011 to shareholders on the register at the close of business on 26 August 2011. Our policy continues to be to pay a sustainable dividend from recurring profits which reflect the earnings and cashflow potential of the Group whilst ensuring retention of sufficient capital to meet regulatory and future growth requirements.

Whilst trading conditions for the first half were not as favourable as H1 last year, the Group has delivered solid revenue and profit figures demonstrating the strength of our business model.

Looking forward to the second half of the year we remain optimistic. The recent increases in market activity have led to new records in daily trade volumes and account opening. This combined with our planned growth strategy and addition of key White Label partners in H1 means we are confident of our ability to grow.

Richard DaveyChairman

18 August 2011

Chief Executive's Statement

I am pleased to report the results for the Group for H1 2011. The market conditions for the first half of the year were not particularly conducive to the style of trading favoured by our retail derivative clients. A lack of market activity has meant that trading volumes in the spread betting and CFD unit were lower than H1 2010. However, trade volumes and revenue in our institutional FX and institutional broking divisions reached new highs. As a result, net revenue achieved by the Group was in line with expectations and this gives the Board confidence that the return to more volatile market conditions will deliver both stronger client and revenue growth.

The Company has delivered several good pieces of operational news through the first half, notably the addition of TD Waterhouse as a White Label client. This however was overshadowed by an unexpected Financial Ombudsman Service ("FOS") assessment by the adjudicator which we continue to challenge and is being referred to the Ombudsman. In light of this we completed a capital raising in April 2011 and we are grateful to our shareholders for their continued support.

Whilst still in its infancy we have seen trade volumes from our CFD business grow 2.5 times in the first six months of the year. Growth in our international units has been encouraging through the first half and we expect this to continue through to the end of the year.

Financial Review

Total revenue for the first six months was £18.34m, an increase of 35% on H2 2010, and a fall of 12% on H1 2010 following the extreme volatility of May 2010. Cost of sales fell by a similar proportion resulting in gross margins remaining stable at 64% half on half. Adjusted administrative expenses fell by £0.5m to £7.8m giving an adjusted profit before tax of £3.0m (2010: £4.2m).

In May 2011 the Group relocated its London office resulting in the recognition of an onerous lease provision of £0.2m relating to its previous offices. Whilst the new office space is 50% larger than our previous offices the savings achieved from the move mean that this will not result in a significant increase to the Group's ongoing operating costs. In addition to the onerous lease provision the Group incurred £0.1m in exceptional move costs which are included within adjusted administrative expenses.

Following the completion of the institutional share placing in April 2011, the Group had net cash of £22.48m and regulatory capital resources of £20.5m at 30 June 2011. The additional capital resources removed the previous constraints on risk limits which in turn resulted in an increase in return on spread from our UK spread betting and CFD business.

Based on the results and resources available to the Group, the Board is recommending a dividend of 1.3p per share (2010: 1.0p).

Operational Review

Financial Spread Betting, UK

Financial Spread Betting continues to be the largest contributor to LCG's revenues but the overall lack of market direction has constrained income while the growth in our other divisions has led to a more balanced spread of revenues than in the past. Spread Betting contributed 61% of group revenue in the period (2010: 77%). We are however encouraged by the growth in funds on account which stood at £24.67m at the end of the half (H1'10: £20.45m).

In relation to our White Label partners, although the Paddy Power franchise was lost, LCG retained the existing clients. We also gained a significant partner in TD Waterhouse as well as several other financial services providers. Whilst the acquisition of spread betting clients was not as strong as in previous periods due to the lack of market activity in the first half making the product less attractive, we are confident the addition of these new partners will add considerably to client acquisition in the future.

The professional client debt continues to be due and the directors have been advised that the sum remains recoverable. No provision has been made and we continue to pursue the amount through legal action.

Institutional FX

The institutional FX division delivered another strong performance with a 4% increase in divisional operating profits. Volumes continue to grow as the unit acquires an ever increasing portfolio of clients. Global FX volumes have started to move in a positive direction again after weakening in 2010 and the institutional FX business is well positioned to benefit from this. We have also agreed several new portals to deliver our liquidity to external counterparties and we expect this to deliver even stronger revenue growth in the future.

Financial Spread betting, Gibraltar

H1 2011 has been a turnaround period for our Gibraltar based subsidiary, with the business delivering its first operating profit since acquisition. Revenue was up 23% to £1.04m (2010: £0.85m) and operating profit was £0.04 (H1'10: operating loss of £0.17m). ProSpreads is currently restricted to only accepting 'professional' clients as defined by MiFID, which has hindered growth substantially. As a result ProSpreads has been in prolonged negotiations with the Gibraltar regulator and Gaming authorities to permit 'retail' client acquisition; if permission is granted, ProSpreads should see significant acceleration in its growth.

Institutional Broking

The institutional broking unit had a strong start to the year generating an 82% increase in revenue and 38% increase in operating profit. The division now has a very strong customer base and is well placed to take advantage of market conditions more suited to their business model.

International Expansion

As announced in our 2010 results LCG now has a regulated entity in Australia offering CFDs to retail clients. This initial footprint in the Far East is expected to attract business from the entire region as LCG expects that the attractions that have made the spread betting and CFD business so successful in the UK will begin to acquire traction across the globe.

Our existing partners are also heavily involved in pushing the CFD product into mainland Europe and LCG now has a wide array of multilingual platforms to suit this purpose. Our cost effective White Label solution remains the product of choice for companies looking to acquire financial trading revenue from their existing client base.

Competitive environment

H1 2011 saw the first signs that some contraction in the competitive landscape is probable over the next six to twelve months. The current regulatory environment, the increasingly expensive demands of IT expenditure, exchange costs and the now very low spreads offered to clients means that the smaller companies are struggling to attract clients or trade profitably. In the longer term we do not see this situation improving which we anticipate will have two effects, firstly drive out some of the smaller offerings and secondly restrict the number of new entrants.

Outlook

The Board believes the outlook for the remainder of 2011 to be very good. The spread betting and CFD unit has launched its mobile offering and a brand new advanced charting functionality increasing our attraction to both new clients and new partners. The institutional FX division remains on a strong upward volume and profit trend, our other units are delivering solid growth. More importantly, recent market conditions have demonstrated the strengths of our business model as we have seen our revenue streams increase, record daily profits, and increased client acquisition.

Simon Denham

Chief Executive

18 August 2011

London Capital Group Holdings plc

CONDENSED CONSOLIDATED INCOME STATEMENT

For the period ended 30 June 2011

All the Group's revenue and total comprehensive income for the financial period and prior financial periods relate to continuing activities.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 30 June 2011

London Capital Group Holdings plc

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 June 2011

London Capital Group Holdings plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 30 June 2011

London Capital Group Holdings plc

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the period ended 30 June 2011

London Capital Group Holdings plc

Notes to the condensed consolidated financial statements

For the period ending 30 June 2011 (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 2011 were authorised for issue by the Board of Directors on 18 August 2011. The information for the year ended 31 December 2010 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 2011 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 annual 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

Unaudited 6 months to 30 June 2011

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

3. Segment information (continued)

Unaudited 6 Months to 30 June 2010

3. Segment information (continued)

Audited 12 Months to 31 December 2010

4. Adjusted profit before tax, adjusted operating profit and adjusted EBITDA

5. Taxation

Income tax for the six month period is charged at 34.5% (six months ended 30 June 2010: 36.8%; year ended 31 December 2010: 35.8%), representing the best estimate of the average annual effective income tax rate expected at the full year, applied to the pre-tax income of the six month period.

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

7. Dividends

8. Trade and other receivables

9. Cash and cash equivalents

Amounts due to clients represents client money held and is repayable on demand.

10. Trade and other payables

11. Provisions and contingent liabilities

As previously disclosed, during H1'09 the Group made commission rebating errors whilst preparing the customer statements of a managed spot FX fund. The correction of these errors led to a series of complaints to the Financial Ombudsman Service ("FOS"). The Board reviewed the initial assessment from the FOS and concluded that the impact of the claims to the FOS would not be material to the business. A revised assessment was received on 11 February 2011. Whilst LCG believes its actions did not directly cause any loss to the client, the revised assessment determined that LCG should repay the total losses incurred by the client of £0.1m plus interest. LCG is challenging the revised assessment.

The Board has assessed that a gross provision of £3.2m should be booked and a contingent liability of a further £3.3m disclosed. The Directors have made this assessment based on an analysis of the losses incurred in the fund attributable to clients under the protection of the FOS, the latest FOS assessment and the FOS's rules on compensation. This represents an increase of £0.1m on the £3.2m previously disclosed as a contingent liability due to the recently announced changes in the FOS's compensation limits. Whilst the Directors are confident that the provision represents a best estimate of the implications of the latest FOS determination, there remains significant uncertainty as to the eventual financial outcome including the extent of the FOS's jurisdiction. The Group has challenged the assessment and, although the Directors are confident that there are grounds for challenge, the outcome of this process is uncertain. As a result of these variables, the timing of any such payment is also uncertain.

Following the relocation of the Group's London offices in May 2011 an onerous lease provision of £0.2m has been recognised in relation to the Group's former premises.

12. Share capital

Following the recognition of a £3.2m provision in relation to the FOS assessment the Board decided to raise £8.0m before expenses by way of a placing of 13,333,333 new ordinary shares at 60 pence per share to ensure the continued operating effectiveness and profitability of the Group. The placing was completed on the 7 April 2011 following shareholder approval obtained at a General Meeting. The net increase to Share Capital and Share Premium was £1,333,333 and £6,182,000 respectively.

The Group has a Joint Share Ownership Plan ("JSOP") to provide incentives to Directors and employees. At 30 June 2011 820,000 shares were held in the JSOP. These shares have a total mid market value in the Own Shares held reserve of £1,287,000.

13. Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There have been no transactions between the company and other related parties, except for the key management personnel compensation.

14. Capital commitments

At 30 June 2011, the Group has capital commitments for the acquisition of software amounting to £0.8m (31 December 2010: £2m).

15. Events after balance sheet date

There were no adjusting events or non-adjusting events after the balance sheet date.

INDEPENDENT REVIEW REPORT TO LONDON CAPITAL GROUP HOLDINGS PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the consolidated income statement, consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Emphasis of matter- Uncertain outcome of complaint to Financials Ombudsman Service

In forming our opinion on the financial statements we have considered the adequacy of disclosures made in note 11 concerning certain complaints before the Financial Ombudsman Service ("FOS") in respect of a managed spot FX fund. As explained in note 11 there remains significant uncertainty as to the eventual financial outcome of this issue. Our opinion is not modified in respect of this matter.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditors

London, United Kingdom

18 August 2011