London Capital Group expects to return to growth in H2 2015

London Capital Group Holdings plc (LON:LCG), provider of CFD trading and spread betting services, today posted its financial metrics for the final quarter and full year 2014. Although the results themselves were not that robust, with profits and revenues staging an year-on-year drop, the company’s management stroke an optimistic note about the fortunes of the business in 2015.

Let’s take a look at the some of the key financial metrics first.

  • Adjusted pre-tax profits amounted to £1.145 million in the year to the end of December 2014, down by 48% against 2013 levels.
  • Adjusted EBITDA was also sharply down (48.2%) year-on-year at £2.28 million. 
  • Revenues from continued operations fell by 10% to £22.7 million in 2014 from £25.2 million in 2013.
  • The Group’s core business activity, UK financial spread betting and contracts for difference, registered a divisional revenue drop of 7% to £19.4 million in 2014. After a challenging first half of 2014, the second half saw marked improvement in trading conditions: the period saw a 53% increase in divisional revenue to £11.7 million compared to the same period in the prior year.
  • New client acquisitions fell from 6,431 in 2013 to 5,615 in 2014, a drop of 13% due to low levels of market volatility compounded by a lack of marketing and sales activity in 2014.
  • Funds on deposit fell by 5% to £21.4m (2013: £22.5m) and average daily trading volumes dropped by 9% to 19,994 (2013: 22,008).
  • The institutional foreign exchange business suffered from falling volumes in 2014. As a result, divisional revenue fell 26% to £3.2 million (2013: £4.3m) and divisional profit fell by 15% to £1.1 million (2013: £1.3m).

In the face of the full-year 2014 metrics, executive chairman Charles-Henri Sabet was optimistic, highlighting the transformation LCG has been undergoing since the fall of 2014 and which is yet to bear fruit. The second half of 2014 was crucial for the future of the group, as it secured a £17 million financing package, paving its way to revitalization.

Mr Sabet commented: “I am pleased to report that the Group is on schedule to return to growth during the second half of 2015, after a period of significant and ongoing change which was initiated in the final quarter of 2014.”

He stressed the strengthening of the main board of Directors, the reshaping LCG’s IT department and infrastructure capability, revamped sales trading, customer service, marketing and partnerships departments, as well the building of a team of highly-experienced market analysts, as main factors for the stability of the group and its upcoming success.

A strategy is now in place for the Group to return to long-term sustainable growth at all levels of the business during the second half of 2015, while the restructuring process is set to last until the end of 2016.

The group is now gearing up for an international expansion, as underlined by the launch of an upgraded MT4 platform and portal less than two weeks ago. Mr. Sabet stated back then that the company was stepping up its preparations for overseas markets and would soon be rolling out a series of multilingual MT4 platforms.

Mr. Sabet and the new management team are yet to make the decisive moves to turn the group around.

Another piece of important news for investors is most likely to be LCG’s assessment of the impact the Swiss franc spike from January 15, 2015 has had on group finances. The Group said its loss from market and credit exposure related to these events amounts to no more than £1.7 million.

The price of LCG shares has been steeply down over the past week (view photo below), with markets obviously expecting not so rosy metrics from the group. The drop amounted to 28% in the week to the 2014 financial metrics publication.


Photo credit: Google Finance.

Detailed data on LCG’s fourth-quarter and full-year 2014 financial performance can be viewed here.

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