London Capital Group Holdings Regulatory News (LCG)

9 Aug 2007 07:00

London Capital Group Holdings PLC09 August 2007 Thursday 9 August 2007 LONDON CAPITAL GROUP HOLDINGS PLC Interim Results for the Six Months ended 30 June 2007 London Capital Group Holdings plc ("LCG", the "Company" or the "Group")announces interim results for the six months ended 30 June 2007. LCG is arapidly growing financial services company offering online trading services. First Half 2007 Highlights * Turnover: £8.13m (H1'06: £3.53m) up 131% * Profit before tax (pre share option reserve): £3.90m (H1'06: £1.65m) up 136% * Average spread betting trades per day: 7,030 (H1'06: 4,307) up 63% * Spread betting client acquisition: 4,530 (H1'06: 1,981) up 129% * Foreign exchange average monthly turnover at US$22.90bn (H1'06: US$2.25bn) up 918% * Adjusted EPS: 7.1p (H1'06: 3.1p) up 129% * Interim dividend of 1.25p per share to be paid on 7 September 2007 * Richard Davey appointed Chairman on 14th May 2007 Commenting on the results Chairman, Richard Davey, said: "We are delighted with these results as they demonstrate our strategy isworking, with all main brands performing above expectations and demonstratingour ability to perform well in volatile trading conditions. We continue tostrengthen and widen our product offerings, delivering on our core spreadbetting business and expanding our foreign exchange (FX) and derivativedivisions. Our progressive dividend policy reflects our strong cash generationand confidence in the business." For further information, please contact: www.londoncapitalgroup.com London Capital Group Holdings plc 020 7456 7000Frank Chapman, Chief Executive Officer Smithfield Consultants 020 7360 4900George Hudson / Anne Howalt Print resolution images are available for the media to view and download fromwww.vismedia.co.uk Notes to Editors: London Capital Group Holdings plc (LCG) is a rapidly growing financial servicescompany offering online trading services. Its core activity is the provision ofspread betting products on the financial markets to retail clients under thetrading name Capital Spreads. Its other divisions provide online foreignexchange trading services to institutional and intermediate clients under theCapital Forex brand and institutional derivatives broking under the name CapitalDerivatives. London Capital Group Limited, a wholly owned trading subsidiary of LCG, isregulated and authorised by the Financial Services Authority. It has a Europeanpassport and is a member of the London Stock Exchange, Liffe, Eurex andEuronext, giving it direct access to all European markets. London Capital GroupLimited also has access to international markets through its global clearingrelationships. LCG floated on the London Stock Exchange's AIM market on 22nd December 2005 atan 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 Results The Group delivered excellent results in the first six months to 30 June 2007.Profit before tax (before share option reserve) was up 136% to £3.90m (H1'06:£1.65m) on turnover of £8.13m up 131% from £3.53m in H1'06. The average number of spread bets taken per day has increased by 63% to 7,030 (H1'06: 4,307) and the number of live spread betting client accounts increased by96% to 13,180 (H1'06: 6,740). Spread betting customer's cash held on accountcontinues to rise showing an increase of 203% to £14.53m (H1'06: £4.79m). Theforeign exchange division also continues to grow rapidly and profitably with anaverage monthly volume of US$22.90bn (H1'06: US$ 2.25bn) up 918% . We plan tolaunch our FX retail platform in third quarter of 2007 which will furtherincrease volumes and profitability in this rapidly expanding division. I am also pleased to report that the Capital Derivatives division had a recordfirst quarter in 2007 in terms of volume and income. Hedge fund and sub-primefallout in the financial markets saw a quieter second quarter. We believederivatives is still a growth market and the launch of institutional equitybroking in the third quarter should provide additional value looking forward. Dividend The Group's policy is to pay dividends that reflect the earnings and cash flow record and potential of the Group. An Interim Dividend of 1.25p per ordinary share will be paid on 7 September 2007to shareholders on the register at 17 August 2007. The ex-dividend date will be15 August 2007. Current Trading and Outlook All of our business areas have started the second half of the year well and we continue to perform in line with the market expectations. Richard DaveyChairman9 August 2007 Chief Executive's Statement Financial Review I am pleased to announce that the interim results for the six months to 30 June2007. This is the first interim financial report to be prepared withinrequirements of the International Financial Reporting Standards adopted for usein the EU. The Group performed significantly above management expectations with growth inturnover of 131% to £8.13m (H1'06: £3.53m) and further growth in operatingprofit before tax (before share option reserve) of 136% to £3.90m (H1'06:£1.65m). This has resulted in adjusted earnings per share increasing 129% to7.1p (H1'06: 3.1p). The above reflects the increased number of spread betting accounts and trades,which averaged 7,030 trades per day for the first half of 2007 (H1'06: 4,307),a like for like increase of 63%, further augmented by the increase in foreign exchange average monthly volumes in H1'07 at US$22.90bn (H1'06: US$2.25bn) up918%. We continue to maintain a low cost operation by comparison with other companiesin our sector due to the adoption of an outsourcing model, whereby we sub-contract specialist support services to specialist providers. We also continueto invest in upgrading our software and trading platforms in order to provideour clients with state of the art technology solutions. The net assets of the Group at 30 June 2007 were £15.49m (H1'06: £11.60m) andcash resources were £4.79m (H1'06: £2.05m) with zero net debt. Operating Review Capital Spreads and Binary Bets Capital Spreads, our financial spread betting business, continued to enjoyexceptional growth during the period with the number of live accounts havinggrown from 6,740 at 30 June 2006 to 13,180 at 30 June 2007. Trading volumes werealso up from 547,019 trades in first half to June 2006 to 892,740 in first halfto June 2007. New clients are the main driver for growth. We are encouraged by the increasein spread betting client acquisition in H1'07 up by 129% withapproximately 1,000 live clients per month acquired in Q2'07. Although a majorproportion of these clients have been generated directly, we have also signedsome significant white label partnerships in H1'07 which should continue to fuelgrowth in the second half of 2007. Our marketing activity plays a significant part in building our client base butour reputation means that over 50% of our clients continue to join us viarecommendation. We are pleased to report that over 99% of transactions are executed online, which keeps overheads low and therefore ensures that we remaincompetitive. Binary betting is a hybrid of spread and fixed odds betting. We now have anactive binary platform within our spread betting site and are continuing todevelop this now profitable offering. Capital Forex I am delighted with the on-going growth of our FX division. It has expandedrapidly in a competitive market and continues to attract a top qualityinstitutional clientele in addition to the professional trading community. Thisis mainly due to the exceptional liquidity and pricing on our Capital Forex Proplatform. FX trading volumes and client funds on deposit have grownexponentially during the period and we are also planning to launch the retailplatform in the next few weeks which should add additional value to thisdivision. Capital Derivatives Capital Derivatives provides execution services for exchange traded futures andoptions in fixed income products for institutional clients. Capital Derivativeshas had a record first quarter in 2007 in terms of volume and income but theHedge Fund and sub-prime fallout in the financial markets saw a quieter secondquarter. The launch of institutional equity broking in the third quarter in 2007should provide additional revenue looking forward. Growth Strategy We are increasing our focus on overseas markets for our product range and are in the process of forming strategic relationships to achieve this. Summary and Outlook I am pleased with our trading performance since the start of 2007, which hasbuilt on the growth levels achieved during 2006. We are committed to maintaininggrowth and profitability through organic development across all our divisions.This should ensure that LCG continues to deliver long term shareholder value. Frank ChapmanChief Executive Officer9 August 2007 CONSOLIDATED GROUP INCOME STATEMENTFor the period ending 30 June 2007 Note 6 Months 6 Months Year to to 30 June 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Revenue 2/3 8,134 3,528 8,651Cost of sales 1,660 711 1,798 -------- -------- --------GROSS PROFIT 6,474 2,817 6,853 Administrative expenses 2,957 1,219 3,524 -------- -------- --------OPERATING PROFIT 3,517 1,598 3,329 Finance income 56 57 45Finance expenses - - (2) -------- -------- --------PROFIT BEFORE TAXATION 3,573 1,655 3,372 Taxation 4 1,088 451 968 -------- -------- --------Profit for the financial period 2,485 1,204 2,404 ======== ======== ======== Earnings per share pence pence penceBasic 5 6.5 3.1 6.3Diluted 5 5.8 2.9 5.8Adjusted 5 7.1 3.1 7.3 Administrative expenses includes provision for share option reserve as requiredunder IFRS. Adjusting for this, the profit before tax (before share option reserve of£331,000) for H'1 07 was £3,904,000. The share option reserve was nil for H1'06resulting in profit before tax of £1,655,000. For the full year to 31 December2006, the share option reserve was £541,000 resulting in profit before tax(before share option reserve) of £3,913,000. All activities of the group are classed as continuing. The Group has no recognised gains or losses other than the results for theperiod as set out above. The Company has taken advantage of Section 230 of the Companies Act 1985 not topublish its own Income Statement. CONSOLIDATED GROUP BALANCE SHEETAs at 30 June 2007 6 Months 6 Months Year to to 30 June to 30 June 31 December 2007 2006 2006 Notes £'000 £'000 £'000 NON-CURRENT ASSETS Intangible assets 9,303 9,303 9,303Property, plant and equipment 7 2,189 767 1,655Deferred tax asset 77 - 43 -------- -------- -------- 11,569 10,070 11,001 -------- -------- --------CURRENT ASSETSTrade and other receivables 4,428 1,199 2,182Cash and cash equivalents 33,798 13,062 16,622 -------- -------- -------- 38,226 14,261 18,804 -------- -------- -------- TOTAL ASSETS 49,795 24,331 29,805 -------- -------- -------- CURRENT LIABILITIESTrade and other payables 33,171 12,198 15,872Current tax liabilities 1,134 442 592 -------- -------- -------- 34,305 12,640 16,464 -------- -------- -------- LONG TERM LIABILITIESDeferred tax liability - 91 - -------- -------- -------- - 91 - -------- -------- -------- TOTAL LIABILITIES 34,305 12,731 16,464 -------- -------- --------NET ASSETS 15,490 11,600 13,341 ======== ======== ======== EQUITYCalled-up equity sharecapital 3,829 3,829 3,829Share premium account 11,607 11,607 11,607Retained profits 4,580 1,508 2,708Share option reserve 818 - 541Other reserves (5,344) (5,344) (5,344) -------- -------- --------TOTAL EQUITY 15,490 11,600 13,341 ======== ======== ======== CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITYFor the period ending 30 June 2007 Issued Share Share share premium Retained option Other Total capital account profits reserve reserves equity At 1 January, 2007 3,829 11,607 2,708 541 (5,344) 13,341 Profit for the year 2,485 2,485 Equity dividends (651) (651) Share based transactionsincludingcurrent anddeferred taxation 331 331 Forfeiture of 38 (54) (16)share options --------- -------- -------- ------- -------- -------At 30 June, 2007 3,829 11,607 4,580 818 (5,344) 15,490 ========= ======== ======== ======= ======== ======= CONSOLDIATED GROUP CASH FLOW STATEMENTFor the period ending 30 June, 2007 6 Months 6 Months Year to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 Operating profit from continuingoperations 2,485 1,204 2,404Adjustments for:Depreciation of property, plant andequipment 125 58 164Equity settled share based payment 331 - 541Finance income (56) (57) (45)Finance expense - - 2Current tax charge 1,138 442 1,093Deferred tax asset (66) - (125)Deferred tax liability - 9 - ------- -------- ---------Operating cash flows beforemovements in working capital 3,957 1,656 4,034(Increase)/decrease in receivables (2,246) (155) (1,138)Increase/(decrease) in payables 17,301 6,461 10,329 ------- -------- ---------Cash generated by operations 19,012 7,962 13,225 Taxation paid (582) - (695) ------- -------- ---------Net cash from operations 18,430 7,962 12,530 ------- -------- --------- Investing activitiesInterest received 56 57 45Interest paid - - (2)Acquisitions of property,plant and equipment (659) (549) (1,543) ------- -------- ---------Net cash used in investing activities 17,827 7,470 11,030 ------- -------- ---------Financing activitiesDividends paid (651) - - ------- -------- ---------Net increase/(decrease) in cashand cash equivalents 17,176 7,470 11,030 Cash and cash equivalents atbeginning of year 16,622 5,592 5,592 ------- -------- ---------Cash and cash equivalents atend of half year 33,798 13,062 16,622 ======= ======== ========= Notes to consolidated interim financial statements 1. Basis of preparation This is the first interim financial report for the Group to be prepared withinthe requirements of the International Financial Reporting Standards adopted foruse in the EU. The consolidated financial statements have been prepared inaccordance with IAS 34 Interim Financial Reporting. The revised accounting policies arising from the adoption of IFRS, together withrestated information for the accounting period of 6 months to 30 June 2006 andfor the year to 31 December 2006, have been published on group's website,www.londoncapitalgroup.com The accounting policies set out in that document have been consistently appliedto all periods presented in these interim financial statements with theexception of the impact of IAS 32 and IAS 39 Financial Instruments. The revisedpolicies have not impacted the reported financial position, financialperformance and cash flow shown in this interim report, although there may beimpacts that are relevant to future financial reports. The consolidated financial statements have been prepared under the historicalcost convention, using pounds sterling, which is both the presentation currencyand the functional currency of the Group. 2. Segment information 6 Months to 6 Months to Year to 31 30 June 30 June December 2007 2006 2006 £'000 £'000 £'000RevenueSpread betting 6,242 3,373 7,112Forex 2,054 240 1,380Brokerage 488 517 905 -------- -------- --------Gross group revenue 8,784 4,130 9,397Spread betting brokerage andhedging costs (650) (602) (746) -------- -------- --------Net group revenue 8,134 3,528 8,651 Unallocated corporate expenses 4,617 1,930 5,322 -------- -------- --------Operating profit 3,517 1,598 3,329Net financing income 56 57 43 -------- -------- --------Profit before taxation 3,573 1,655 3,372Taxation expense (1,088) (451) (968) -------- -------- --------Profit for the period 2,485 1,204 2,404 ======== ======== ======== All of the segment revenue reported above is from external customers. 3. Operations in the interim period The revenues of the group are not subject to seasonal or cyclical factors. 4. Taxation Interim period taxation is accrued based on the estimated average annualeffective income tax rate of 30% percent (12 months ended 31 December 2006 -30%). 6 Months Year to 30 June to 31 December 2007 2006 £'000 £'000Current tax:Charge for current period 1,134 1,093Adjustment in respect of prior periods 4 - -------- --------Total current tax expense 1,138 1,093 -------- -------- Deferred tax:Origination and reversal of temporarydifferences (67) (75)Adjustment in respect of prior periods 17 (50) -------- --------Total deferred tax expense (50) (125) -------- -------- Total tax expense in income statement 1,088 968 ======== ======== Profit before taxation 3,573 3,372 ======== ======== Tax at 30% 1,072 1,012Effect of:Depreciation on assets not eligiblefor tax allowances 3 4Non-deductible expenses 1 3Non-taxable income (9) -Prior period adjustments 21 (51) -------- --------Total tax expense 1,088 968 ======== ======== 5. Earnings per share 6 Months to 6 Months to Year to 31 30 June 30 June December 2007 2006 2006 £'000 £'000 £'000 Basic EPS Profit after tax 2,485 1,204 2,404Weighted average no of shares 38,292,683 38,292,683 38,292,683Weighted average basic EPS 6.5p 3.1p 6.3p Diluted EPS Profit after tax 2,485 1,204 2,404Weighted average no of shares 42,955,826 41,507,564 41,199,304Weighted average fully diluted EPS 5.8p 2.9p 5.8p Diluted earnings per share is the basic earnings per share after allowing forthe dilutive effect of the conversion into Ordinary shares of the weightedaverage number of options outstanding during the period Adjusted EPS Profit after tax 2,485 1,204 2,404Add:Share based payment reserve movement 331 - 541Tax effect of the above adjustments (99) - (162) -------- -------- --------Adjusted profit after tax 2,717 1,204 2,783Issued number of shares at the periodend 38,292,683 38,292,683 38,292,683Adjusted EPS 7.1p 3.1p 7.3p 6. Dividends During the interim period, a dividend of 1.7 pence (2006: nil) per share waspaid to the shareholders. A dividend of 1.25 pence per share has been declaredby the Board and will be paid on 7 September 2007 to shareholders on theregister at 17 August 2007. The ex dividend date will be 15 August 2007. 7. Property, plant and equipment The Group continues to invest in property, plant and equipment to develop itscapacity to generate future economic benefits. 8. Related party transactions • Transactions between related partiesThere have been no transactions between the company and its subsidiaries orbetween the company and other related parties, except for the key managementpersonnel compensation disclosed below. • Key management personnel compensation The remuneration of key management personnel during the period was as follows: 6 Months to 6 Months to Year to 31 30 June 30 June December 2007 2006 2006 £'000 £'000 £'000 Key management emoluments includingsocial security costs 332 278 394Share-option awards 125 - 157 -------- -------- -------- 457 278 551 ======== ======== ======== 9. Capital commitments There were no contractual commitments for future capital expenditure as at 30June 2007. (2006: £nil) 10. Contingent liabilities There were no contingent liabilities as at 30 June 2007. (2006: £nil) 11. Events after balance sheet date There were no adjusting events or non-adjusting events after the balance sheetdate. 12. Deferred taxation The following are the key deferred tax liabilities and assets recognised by theGroup and movements thereon during the current and prior interim reportingperiods. Accelerated tax Share based depreciation payments Total £'000 £'000 £'000 At 1 January 2006 (82) - (82)Charge to income (38) 163 124 --------- -------- -------At 30 June 2006 (120) 163 43 ========= ======== ======= At 1 January 2007 (120) 163 43Charge to income (49) 99 50Charge to equity (17) (17) --------- -------- -------At 30 June 2007 (169) 245 76 ========= ======== ======= This information is provided by RNS The company news service from the London Stock Exchange