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Screenshot of a breaking news alert e-mail from Q2 2017
FCA regulated Retail Forex, CFDs and Spread Betting broker London Capital Group Holdings plc (NEX:LCG) has announced its results for the full year 2017, indicating steady if unspectacular improvement in the second half of the year.
However, the company continues to lose money, albeit at a slower rate.
And, most interestingly, the company separately announced that Charles-Henri Sabet, who led a 2014 takeover and 2016 recapitalization of LCG and has acted since as the company’s CEO, will be relinquishing his executive and board roles effective immediately. Taking his place as LCG CEO is Mukid Chowdhury, the company’s CFO and Sabet’s right-hand man since joining LCG in 2016 from GAIN Capital.
Mr. Sabet and his investor group still control LCG. We understand that Mr. Sabet is now residing in Dubai and running his holding company operations from there, but has been less involved in the day-to-day at LCG for a number of months.
The management move announced today is unlikely to be the last one made at LCG. Newly installed CEO Mukid Chowdhury is effectively CEO of both the publicly traded company London Capital Group Holdings plc, and the FCA-regulated operating subsidiary LCG. However when ownership of LCG moves over to Mr. Sabet’s holding company when the going-private transaction is (presumably) completed later this summer, Mr. Chowdhury will either remain as CEO of the publicly traded company – which will likely to look to invest in other businesses – or will “move” with LCG and continue to run the operating company, under direct ownership of Mr. Sabet.
Back to the numbers…
For the full year 2017, LCG brought in Revenues of £26.5 million, up 14% from 2016. Second-half Revenues of £14.5 million were a nice 21% hike over first half’s £12.0 million. LCG had an EBITDA loss of £1.9 million and a Pre-tax loss of £3.0 million in 2017, well-improved from £4.8 million and £7.8 million, respectively, the prior year.
But again, still a loss.
Monthly trading volumes in 2017 averaged £25 billion (USD $33 billion) at LCG, up 26% over 2016’s £19 billion.
LCG earlier this year delisted its shares from the London Stock Exchange, moving the trading in LCG shares to the NEX Exchange. Then, the company announced a going-private deal, which will see the FCA regulated operating company move to a company controlled privately by Mr. Sabet and investors. The going-private deal was approved by LCG shareholders but still needs to be approved by the financial regulator, the FCA. The company said at the time that it is anticipated that FCA approval will be granted by the end of July 2018.
The rationale behind the going-private transaction is that it will remove LCG from operating as a public company. Despite improving results, as noted above LCG has continued to generate operating losses since Mr. Sabet took over more than three years ago. By removing LCG from operating under the scrutiny and limitations of being owned by a publicly traded entity, it will be easier to inject capital (by Mr. Sabet and his co-investors) into LCG, and pursue a strategy that would lead the company back to growth and profitability.
The going-private transaction will see LCG issue Loan Notes to Holdings in the amount of £4.6 million, carrying a fixed interest coupon of 8%, in return for 91.5% of LCG’s capital. The Loan Notes are perpetual, and the capital is not expected to be repaid, such that the ‘consideration’ that Holdings will receive is a steady interest stream of approximately £370,000 per annum.
Sabet’s SLCG International will have an option to acquire the remaining 8.5% of LCG for £430,676, to be satisfied by the issue of further Loan Notes.
The full press release on LCG’s 2017 results can be seen here.
The press release on Mr. Sabet’s stepping down from his roles at LCG can be seen here.