18th Feb 2009 07:00
18 February 2009
LONDON CAPITAL GROUP HOLDINGS PLC
PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2008
|
RECORD PROFITS DRIVEN BY GROWTH ACROSS ALL AREAS OF THE BUSINESS |
Highlights:
Revenue up 57% to £29.6 million
Adjusted EBITDA up 39% to £13.3 million
Adjusted profit before tax1 up 35% to £12.6 million (2007:£9.3 million)
Operating profit up 32 % to £11.1 (2007:£8.4 million)
Profit before tax up 35% to £11.5 million (2007:£8.6 million)
Total dividend rises by 69% to 11.0p per share (2007: 6.5p)
Record level of account openings
Spread betting client funds up 44% to £24.2 million (2007: £16.8 million)
Spread betting trade volumes up 112% to 0.4 million (2007: 0.2 million
Investment in IT and launch of new platforms
Successful launch of two additional international white labels
Foreign exchange average quarterly trade volumes up 31% to US$97 billion (2007: US$74 billion)
Successful acquisition of FuturesBetting.com
Strong customer wins continue into 2009
Financial Highlights:
|
Year ended |
Year ended |
||
|
31 December 2008 |
31 December 2007 |
Growth |
|
|
£ million |
£ million |
% |
|
|
Revenue |
29.6 |
18.9 |
57 |
|
Adjusted EBITDA Adjusted profit before tax |
13.3 12.6 |
9.6 9.3 |
39 34 |
|
Profit before tax |
11.5 |
8.6 |
34 |
|
Basic earnings pence per share |
21.18 |
15.69 |
34 |
|
Diluted earnings pence per share |
20.38 |
14.89 |
37 |
|
Adjusted Basic pence per share |
23.07 |
17.04 |
35 |
|
Final dividend pence per share |
8.50 |
5.25 |
62 |
|
Total dividend pence per share |
11.0 |
6.50 |
69 |
Commenting on the results, Chief Executive Officer, Frank Chapman, said:
"Trading since the year end continues to be robust across all our main businesses and we are encouraged by the strength of new client acquisition rates since the start of 2009.
"While it is difficult to predict how the year will unfold, particularly in our business where there is no forward order book on which to rely, the early signs are encouraging and indicate another year of expansion."
|
For further information, please contact: |
www.londoncapitalgroup.com |
|
London Capital Group Holdings plc |
020 7456 7000 |
|
Frank Chapman, Chief Executive Officer |
|
|
Smithfield Consultants |
020 7360 4900 |
|
John Kiely, Gemma Froggatt |
Print resolution images are available for the media to view and download from www.vismedia.co.uk
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. Its core activity is the provision of spread betting products on the financial markets to retail clients under the trading names Capital Spreads and FuturesBetting.com (FBc). Its other divisions provide online foreign exchange trading services to institutional and intermediate clients and also institutional derivatives broking.
London Capital Group Limited, a wholly owned trading subsidiary of LCGH plc, is regulated and authorised by the Financial Services Authority. It has a European passport and is a member of the London Stock Exchange. London Capital Group Limited also has access to international markets through its global clearing relationships. FBc is regulated and authorised by the Financial Services Commission in Gibraltar.
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
For the year ended 31 December 2008
London Capital Group has delivered another strong set of results for 2008 despite unprecedented market conditions. The results reflect both the excellent teamwork and dedicated commitment of all our employees, to whom I extend my congratulations.
The Group's main businesses continue to perform well resulting in an increase in Group's revenues of 57 % to £29.6 million compared to 2007. Adjusted profit before tax rose by 35% to £12.6 million and adjusted EBITDA also increased by 39 % to £13.3 million. Operating profit was also up 32 % to £11.1 (2007: £8.4 million) and profit before tax up 35% to £11.5 million (2007: £8.6 million).
Both the adjusted profit before tax and the adjusted EBITDA are stated before recognising total expense of £1.0 million which represents the share option charge for the year, the comparable figure in 2007 being £0.7 million.
Based on the performance of the business, the Board believes it is appropriate that the Group pays a final ordinary dividend of 8.50p per share amounting to some £3.3 million. This together with the interim dividend already paid in September 2008 of 2.50p per share gives a total dividend of 11.0p per share for the full year amounting to £4.3 million. We plan to pay the final dividend on 28 April 2009 to shareholders on the register at 27 March 2009. The payment will follow approval of the final dividend at the Annual General Meeting to be held on 22 April 2009.
The Group's policy is to pay a sustainable flow of ordinary dividends out of recurring profits which reflect the earnings, cash flow and potential of the Group.
Under the oversight of the Group Risk Committee, internal day-to-day risk management of the Group is led by COO, Simon Denham with support from CEO Frank Chapman. Both Simon and Frank come from a trading background and are well placed to assess risk. The executive board meets regularly to discuss and manage the operational and financial risks of the Group. These include, (amongst other financial risks) liquidity levels, overall trading limits and financial parameters in hedging policy. Any risk concerns identified are reported to the Group Risk Committee with an assessment of the implications and a recommendation for mitigation. The Risk Committee is chaired by non-executive director, Jack Inglis. Strong emphasis is placed on risk control and mitigation across each division and the Group as a whole. The risk management software systems are specifically designed to prevent the accrual of client debt via its mandatory stop-loss policy and credit is not offered to clients. This has led to minimal bad debts (£87,000) across all Group divisions in 2008.
The Group has achieved a great deal during a difficult year for the financial sector and the Board remains confident of the Group's future prospects. The Group will continue to seek out new opportunities to grow our business both organically and by joint venture or acquisition.
Whilst we recognise that economic conditions are extremely difficult and are likely to remain so for some time, we remain confident of the Group's ability to continue to grow.
Richard Davey
Chairman
17 February 2009
Chief Executive's Statement
For the year ended 31 December 2008
2008 was another excellent year for London Capital Group. We have achieved growth across all of our main businesses resulting in increased revenues, profit, earnings per share and dividends. We also continue to be cash generative.
Spread betting
Despite the economic gloom, trading conditions have been kind to us. We have substantially increased the platform capacity of our spread betting businesses and the systems performed exceptionally well with record volumes being recorded over the year, most notably in October when volatility and trading volumes were at their highest culminating in the spread betting division taking over 800,000 trades in the month.
Our financial spread betting business continues to expand rapidly. The overall number of live accounts has grown significantly (see KPI table below) and we have launched two additional international White Labels, one into Germany and another into Denmark. We will launch a new site into Spain in Q1'09 and have recently launched a major new White Label partnership with Saxo Bank who have an extensive global reach.
We have devoted significant resource to our White Label partners and have also maintained the growth of our own Capital Spreads brand. LCG continues to be competitve by offering tight spreads combined with very low margin requirements and, as a result, we have seen sustained growth in total client numbers for our own Capital Spreads brand and our White Label offerings.
During the second half of the year, the spread betting division launched two new trading platforms (via two of our existing White Label brands). Both platforms are highly scalable, offer an enhanced front end and a greater breadth of functionality. In addition to this, we have launched one of the platforms as a multi-lingual solution into Germany and plan to launch more multi-lingual sites in 2009. LCG will implement a rolling upgrade of all its spread betting websites to these new trading platforms in the first half of 2009.
We use a number of KPIs in spread betting to monitor the success and quality of our Capital Spreads business operations. These are tabled below.
|
Spread betting KPI's (excluding FBc) |
2008 |
2007 |
|
No of live accounts |
33,560 |
19,125 |
|
New client acquisitions |
14,430 |
10,417 |
|
Average No of trades per day |
20,967 |
9,858 |
|
Average value per trade |
£4.20 |
£5.31 |
|
% Active (in last 3 months) |
35.6% |
37.3% |
In May, LCG completed the successful acquisition of FuturesBetting.com (FBc). FBc is authorised and regulated by the Financial Services Commission (FSC) in Gibraltar and offers a DMA (direct market access) professional financial spread betting solution to experienced traders. This compliments the Capital Spreads platform and gives the Group wider appeal to all types of potential customers. The new business has integrated well and is showing strong signs of growth in client activity and revenue. In November and December 2008, FBc achieved record returns and the business is expected to become profitable in Q1 '09, which is substantially ahead of our initial acquisition targets. The acquisition also provided LCG with both a gaming and spread betting licence to operate from Gibraltar.
Binaries
Binary betting is a hybrid of spread and fixed odds betting. We have an active binary platform within our spread betting site and are developing this offering both through our own brand and with external partners.
Forex
The FX division has enjoyed another year of growth. Volumes for the second half were almost 50% higher than the corresponding period in 2007 and the business achieved new records of turnover in both September and October. The net contribution of the FX division to the Group's profit increased by 21% in 2008. The FX division primarily attracts clients by word of mouth and recommendation and has now signed up approximately 400 institutional and professional clients rising from a level of 240 in 2007, of which 215 are active clients compared to 105 in 2007.
The FX team has delivered another excellent performance during 2008 with an average quarterly volume of US$97 billion (2007: US$74 billion). The number of annual trades also increased significantly to 465,000 compared to 210,000 in 2007. This has resulted in an improvement in the profitability of the division. Trading turnover has risen to US$115 billion in the fourth quarter of 2008 compared to US$75 billion in the same quarter in 2007.
The FX division's model is purely agency broking taking commission only trades from professional clients on electronic trading platforms. We expect the division to increase client numbers by focusing on its provision of exceptional customer service, deep liquidity and fractional pricing. It continues to consolidate its relationships with liquidity and software providers.
Derivatives
The Derivative division has in 2008 delivered trading volumes of 2.5 million lots of futures and options versus 2.7 million lots in 2007. We expect that 2009 will be a difficult year for our customers with a very low interest rate environment not being conducive to risk taking. However, with rates reaching their lows and stimulus packages coming into play, we expect volatility to increase. This, together with some substantial new customer wins should place us in a good position to take advantage of any turnaround in the markets.
Branding
We have conducted a brand strategy exercise concentrating on raising the profile and awareness of London Capital Group which still remains relatively unknown when compared with our spread betting brand, Capital Spreads.
The branding exercise resulted in a redesign of the London Capital Group identity and a refresh of Capital Spreads. We intend rolling this out to our other divisions during 2009. The new identity gives the business a more distinctive look and will stand us in good stead for the future.
Our first expression of the refreshed brand for Capital Spreads was launched with our Q4 press and TV campaign and a new look website. The new campaign has achieved positive results.
The brand identity work will continue in 2009 as we work to raise the profile of LCG.
Employees
The success of our business is largely dependent on the way the Group operates its trading platforms and the consistent, reliable service we provide to our customers. Each of these operations is achieved and delivered by our invaluable employees. The average organisation head count has increased by 14% in 2008 to 48 employees (2007: 42) and we have now built a unique, talented, hard working and personable team who are a great credit to both themselves and the Group.
We have made substantial investments in infrastructure, people and training over the year. As the organisation grows we have adopted more formal and segmented management programmes. Capital expenditure has risen and staff numbers have grown in line with the increase in trade volumes and customer acquisition. We have recently leased additional office space at our head office in Appold Street on favourable terms, which will allow us to expand the business more comfortably.
On behalf of the Board, I would like to thank all our employees for their dedication, commitment and professionalism during a period of considerable growth and development during the year.
Risk Management
We continue to practice strict risk management controls which, together with our policies of not offering credit and the placing of automatic stop losses on all spread betting client positions, has meant minimal client bad and doubtful debts across all Group divisions of only £87,000 in 2008 (2007: £7,000) despite the extremely volatile conditions experienced during the year. We have margin risk in the foreign exchange division, which is very carefully monitored on a continuous basis and which has not experienced any bad debts during the year.
Strategy
The Group's overall strategy is to continue building an international on-line trading and broking business. We aim to achieve this through a variety of means, whether via White Label partnerships, joint ventures, setting up our own offices in different jurisdictions or possibly in specific cases by acquisition (such as the opportunity to acquire FBc in Gibraltar). Our low cost business model and the scalability of our platforms mean that we can continue to be more competitive. In addition, we are continuing to invest in IT and our plans for 2009 include establishing a CFD (Contracts for Difference) platform. This will enable us to operate in jurisdictions where these instruments are the vehicle of choice for investors and where our competitors are already active.
It remains the Group's policy not to accept bets from US resident citizens.
Current Trading and Outlook
Obviously we are fully aware of the problems confronting the world economy and it is difficult to argue that LCG should be immune from these. However, trading since the year end continues to be robust across all our main businesses and we are encouraged by the strength of new client acquisition rates since the start of 2009. While it is difficult to predict how the year will unfold, particularly in our business where there is no forward order book on which to rely, the early signs are encouraging and indicate another year of expansion. We remain debt free and cash generative and expect some good opportunities to present themselves during 2009 as other businesses retrench.
Frank Chapman
Chief Executive Officer
17 February 2009
Group Finance Director's Review
In 2008, demand for the Group's services continued to grow and this had a positive impact on the Group's financial performance.
Adjusted profit before tax rose by 34% to £12.6 million in 2008 from £9.3 million in the previous year. Adjusted EBITDA increased by 39% to £13.3 million (2007: £9.6 million). Operating profit was also up 32 % to £11.1 (2007: £8.4 million) and profit before tax up 35% to £11.5 million (2007: £8.6 million).
The above adjusted profit before tax of £12.6 million is after recognising the post acquisition trading losses for Futuresbetting.com of £0.6 million.
Both the adjusted profit before tax and the adjusted EBITDA are stated before recognising an expense of £1.0 million (2007 £0.7 million) relating to the share option reserve.
The adjusted EBITDA margin was 45% down from 51% in 2007 and represents adjusted EBITDA as a percentage of turnover.
We are again pleased to report the Group had no debt at the year end, the same as in previous years, and had cash resources of £14.02 million up from £10.28 million in 2007. This is after allowing for normal business running costs, capital expenditure, dividends and corporation tax. This demonstrates a high conversion rate of profit into cash.
Basic earnings per share also increased by 34% to 21.18p (2007: 15.69p).
Both the Forex and the Derivatives divisions are operated under a profit share arrangement with managers who head up each division. As a result the profit generated after costs is shared and the operating profit is stated after the deduction of such profit share.
Going concern
The directors have acknowledged the latest guidance on going concern. Whilst the current volatility in financial markets has created general uncertainty, the Group has considerable financial resources and no external debt. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
After making due enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements
Financial Risk Management
Liquidity Risk Management
The Group has built an appropriate risk management framework for the management of the Group's funds. The Group has implemented policies that require appropriate checks on existing and potential banks to be performed before funds are deposited with them. Rigorous procedures have been put in place to try and ensure the Group's funds are deposited with a number of sound institutions and there is limited concentration risk. I am pleased to report the Group had no exposure to any of the financial institutions that collapsed during 2008.
Interest Rate Risk Management
As the Group is debt free there are no incidental interest charges. However, the Group does earn interest on both its own cash and on client funds held on deposit. The latter is included in the revenue and while rates remain low, this income is unlikely to be a significant contributor to Group profit.
Foreign Currency Risk Management
The Group faces currency exposures on the translation of its trading revenues. Given a proportion of the Group's revenues are generated in foreign currencies (mainly USD, Euros), the strengthening of these currencies has given rise to a foreign exchange gain of £0.9 million (2007: Loss of £0.07 million) which is reflected in the Group revenue. The Group has a policy to hedge these exposures on an ongoing basis.
Bad Debts
The risk management software systems which we operate are specifically designed to prevent the accrual of client debt via mandatory stop-loss policy and credit is not offered to clients. This has led to minimal bad debts (£87,000) across all Group divisions in 2008.
Group Cash Flow
Cash and cash equivalents at the end of 2008 were £57.29 million (2007: £46.13 million), an increase of £11.1 million. This increase mainly arises from the total client money held of £44.66 million at the end of 2008 (2007: £35.81 million).
The Group has invested net cash of £2.7 million during 2008 (2007: £1.9 million). The majority of this amount (circa £2.5 million) relates to IT, software costs and works in respect of the new and upgraded trading platforms, including a sum of £0.2 million invested in a new foreign exchange back office risk management system.
Balance Sheet
The Group's intangible assets of £14.47 million (2007: £11.83 million) include goodwill of £0.7 million arising on the acquisition of FBc in 2008. The carrying value of the FBc goodwill has been reviewed as at 31 December 2008 with no requirement for impairment.
Current trade and other payables have increased to £48.3 million (2007: £39.5 million). This is primarily due to an increase of £8.8 million in client funds.
Financial Outlook
2009 has started well for the Group with continuing growth across our main businesses against the back drop of unpredictable and testing global economic conditions. I am confident the Group will remain cash generative and profitable with the added bonus of no debt. With regard to overheads, we intend to maintain these at a low level as we continue to expand. We will maintain cash resources to take advantage of any market opportunities.
Based on the strength of our business model and my comments above, I remain confident about the financial outlook for the business.
Raj Gandhi
Group Finance Director
17 February 2009
GROUP INCOME STATEMENT
For the year ended 31 December 2008
|
2008 |
2007 |
||
|
Notes |
£'000 |
£'000 |
|
|
Revenue |
2 |
29,574 |
18,980 |
|
Cost of sales |
6,677 |
3,774 |
|
|
Gross profit |
22,897 |
15,206 |
|
|
Administrative expenses (excluding depreciation, amortisation and share-based payments) |
9,596 |
5,595 |
|
|
Adjusted EBITDA |
3 |
13,301 |
9,611 |
|
Depreciation and amortisation |
1,149 |
434 |
|
|
Adjusted operating profit |
3 |
12,152 |
9,177 |
|
Share-based payment charge |
1,007 |
737 |
|
|
Operating profit |
11,145 |
8,440 |
|
|
Finance revenue |
401 |
134 |
|
|
Profit before taxation |
11,546 |
8,574 |
|
|
Tax expense |
3,398 |
2,566 |
|
|
Profit for the year |
8,148 |
6,008 |
|
|
Profit for the year attributable to: Equity holders of the parent |
8,148 |
6,008 |
|
|
Earnings per share (pence) |
|||
|
- Basic |
4 |
21.18 |
15.69 |
|
- Diluted |
4 |
20.38 |
14.89 |
|
- Adjusted basic |
4 |
23.07 |
17.04 |
All the Group's revenue and profit for the year and prior year relate to continuing activities
GROUP BALANCE SHEET
As at 31 December 2008
|
2008 |
2007 |
||
|
Notes |
£'000 |
£'000 |
|
|
NON-CURRENT ASSETS |
|||
|
Intangible assets |
5 |
14,472 |
11,826 |
|
Property, plant and equipment |
6 |
907 |
792 |
|
Deferred tax asset |
515 |
67 |
|
|
15,894 |
12,685 |
||
|
CURRENT ASSETS |
|||
|
Trade and other receivables |
2,782 |
1,096 |
|
|
Cash and cash equivalents |
8 |
57,294 |
46,132 |
|
60,076 |
47,228 |
||
|
TOTAL ASSETS |
75,970 |
59,913 |
|
|
CURRENT LIABILITIES |
|||
|
Trade and other payables |
48,394 |
39,511 |
|
|
Current tax liabilities |
1,942 |
1,467 |
|
|
50,336 |
40,978 |
||
|
TOTAL LIABILITIES |
50,336 |
40,978 |
|
|
NET ASSETS |
25,634 |
18,935 |
|
|
EQUITY |
|||
|
Called-up equity share capital |
3,864 |
3,829 |
|
|
Share premium account |
11,855 |
11,607 |
|
|
Retained profits |
13,195 |
7,639 |
|
|
Share option reserve |
2,064 |
1,204 |
|
|
Other reserves |
(5,344) |
(5,344) |
|
|
TOTAL EQUITY |
25,634 |
18,935 |
|
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 December 2008
|
Issued share Capital £'000 |
Share premium account £'000 |
Retained profits £'000 |
Share option reserve £'000 |
Other reserves £'000 |
Total equity £'000 |
|
|
At 1 January 2007 |
3,829 |
11,607 |
2,708 |
541 |
(5,344) |
13,341 |
|
Total recognised income and expense for the year |
- |
- |
6,008 |
- |
- |
6,008 |
|
Recognition of equity-settled share-based payments in the year |
- |
- |
- |
737 |
- |
737 |
|
Exercise/forfeiture of share options |
- |
- |
52 |
(74) |
- |
(22) |
|
Equity dividends paid |
- |
- |
(1,129) |
- |
- |
(1,129) |
|
At 1 January 2008 |
3,829 |
11,607 |
7,639 |
1,204 |
(5,344) |
18,935 |
|
Total recognised income and expense for the year |
- |
- |
8,148 |
- |
- |
8,148 |
|
Issue of shares |
35 |
248 |
- |
- |
- |
283 |
|
Recognition of equity-settled share-based payments in the year |
- |
- |
237 |
1,007 |
- |
1,244 |
|
Exercise/forfeiture of share options |
- |
- |
147 |
(147) |
- |
- |
|
Equity dividends paid |
- |
- |
(2,976) |
- |
- |
(2,976) |
|
At 31 December 2008 |
3,864 |
11,855 |
13,195 |
2,064 |
(5,344) |
25,634 |
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2008
|
2008 |
2007 |
||
|
£'000 |
£'000 |
||
|
Profit for the year |
8,148 |
6,008 |
|
|
Adjustments for: |
|||
|
Depreciation of property, plant and equipment |
338 |
434 |
|
|
Amortisation of intangible assets |
811 |
- |
|
|
Equity settled share based payment |
1,007 |
737 |
|
|
Loss on disposal of property, plant and equipment |
41 |
- |
|
|
Finance income |
(403) |
(134) |
|
|
Finance expense |
2 |
- |
|
|
Current tax charge |
3,688 |
2,612 |
|
|
Deferred tax asset |
(290) |
(46) |
|
|
Operating cash flows before movements in working capital |
13,342 |
9,611 |
|
|
Increase in receivables |
(1,456) |
(410) |
|
|
Increase in payables |
7,918 |
23,639 |
|
|
Cash generated by operating activities |
19,804 |
32,840 |
|
|
Taxation paid |
(3,213) |
(1,737) |
|
Net cash from operations |
16,591 |
31,103 |
|
|
Investing activities |
|||
|
Interest received |
403 |
134 |
|
|
Interest paid |
(2) |
- |
|
|
Acquisitions of property, plant and equipment |
(387) |
(2,094) |
|
|
Acquisitions of intangible assets |
(2,474) |
- |
|
|
Acquisitions of investments |
(319) |
- |
|
|
Cash acquired on acquisition of investments |
43 |
- |
|
|
Net cash used in investing activities |
(2,736) |
(1,960) |
|
|
Financing activities |
|||
|
Dividends paid |
(2,976) |
(1,129) |
|
|
Cash from issued share capital |
283 |
- |
|
|
Net cash used in financing activities |
(2,693) |
(1,129) |
|
|
Net increase in cash and cash equivalents |
11,162 |
28,014 |
|
|
Cash and cash equivalents at beginning of year |
46,132 |
18,118 |
|
|
Cash and cash equivalents at end of year |
8 |
57,294 |
46,132 |
|
Own money |
12,636 |
10,319 |
|
|
Client monies held |
44,658 |
35,813 |
|
|
57,294 |
46,132 |
1. General information
The preliminary results for the year to 31 December 2007 and 31 December 2008 have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union and applied in accordance with Companies Act 1985. However, this announcement does not contain sufficient information to comply with IFRS. The Group expects to publish full financial statements that comply with IFRS on 20 March 2009 which will be delivered before the Company's Annual General Meeting on 22 April 2009.
This Preliminary Announcement does not constitute the Group's statutory accounts for the years ended 31 December 2007 or 31 December 2008, but is derived from those accounts. Statutory accounts for the year to 31 December 2007 have been delivered to the Registrar of Companies and those for 31 December 2008 will be delivered in 29 April 2009 following the Company's Annual General Meeting. The auditors have reported on both of these accounts; their reports were unqualified and did not contain statements under s237(2) or (3) Companies Act 1985.
The preliminary announcement was approved by the Board of Directors on 17 February 2009.
2. Revenue and segmental information
Revenue represents net trading results (including interest earned), rebates received, foreign exchange gains and losses and management services supplied by the Group. Revenue is attributable to the provision of spread betting, foreign exchange service and derivatives brokering and futures betting, of which £29,199,000 (2007: £18,980,000) arose in the United Kingdom and £375,000 (2007: £nil) arose in Europe. All of the segment revenue reported above is from external customers and are not subject to seasonal or cyclical factors.
Business segments
For management purposes, the Group is currently organised into four operating divisions which reflect the Group's different product offerings. These divisions are the basis on which the Group reports its primary segment information as they reflect the respective rates of return and risks associated with each offering.
2. Revenue and segmental information (continued)
|
2008 |
|||||
|
Spread betting |
Forex |
Brokerage |
Futures |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Revenue |
|||||
|
Gross external revenue |
24,363 |
5,203 |
1,296 |
375 |
31,237 |
|
Spread betting brokerage and hedging costs |
(2,595) |
- |
- |
- |
(2,595) |
|
Net segmental revenue |
21,768 |
5,203 |
1,296 |
375 |
28,642 |
|
Foreign exchange gain on trading |
932 |
||||
|
Net revenue |
29,574 |
||||
|
Result |
|||||
|
Segmental operating profit/(loss) |
16,464 |
2,358 |
367 |
(626) |
18,563 |
|
Unallocated corporate expenses |
(7,418) |
||||
|
Operating profit |
11,145 |
||||
|
Net financing income |
401 |
||||
|
Profit before taxation |
11,546 |
||||
|
Taxation expense |
(3,398) |
||||
|
Profit for the period |
8,148 |
||||
|
Other information |
|||||
|
Capital additions |
986 |
191 |
- |
25 |
|
|
Depreciation and amortisation |
478 |
27 |
5 |
49 |
|
|
Balance sheet |
|||||
|
Segmental assets |
31,994 |
21,315 |
1,222 |
6,031 |
60,562 |
|
Unallocated corporate assets |
15,408 |
||||
|
Consolidated total assets |
75,970 |
||||
|
Segmental liabilities |
21,256 |
20,492 |
- |
3,900 |
45,648 |
|
Unallocated corporate liabilities |
4,688 |
||||
|
Consolidated total liabilities |
50,336 |
||||
2. Revenue and segmental information (continued)
|
2007 |
|||||
|
Spread betting |
Forex |
Brokerage |
Futures |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Revenue |
|||||
|
Gross external revenue |
16,162 |
3,943 |
1,080 |
- |
21,185 |
|
Spread betting brokerage and hedging costs |
(2,207) |
- |
2 |
- |
(2,205) |
|
Net segmental revenue |
13,955 |
3,943 |
1,082 |
- |
18,980 |
|
Foreign exchange gain on trading |
- |
||||
|
Net revenue |
18,980 |
||||
|
Result |
|||||
|
Segmental operating profit |
12,080 |
1,637 |
401 |
- |
14,118 |
|
Unallocated corporate expenses |
(5,678) |
||||
|
Operating profit |
8,440 |
||||
|
Net financing income |
134 |
||||
|
Profit before taxation |
8,574 |
||||
|
Taxation expense |
(2,566) |
||||
|
Profit for the period |
6,008 |
||||
|
Other information |
|||||
|
Capital additions |
955 |
- |
- |
- |
|
|
Depreciation and amortisation |
214 |
7 |
5 |
- |
|
|
Balance sheet |
|||||
|
Segmental assets |
20,991 |
22,323 |
1,197 |
- |
44,511 |
|
Unallocated corporate assets |
15,402 |
||||
|
Consolidated total assets |
59,913 |
||||
|
Segmental liabilities |
17,740 |
19,028 |
166 |
- |
36,934 |
|
Unallocated corporate liabilities |
4,044 |
||||
|
Consolidated total liabilities |
40,978 |
||||
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 December 2008
3. Adjusted profit before tax, adjusted operating profit and adjusted EBITDA
|
2008 |
2007 |
||
|
£'000 |
£'000 |
||
|
Reported profit before tax |
11,546 |
8,574 |
|
|
Add back - share based payment charge |
1,007 |
737 |
|
|
Adjusted profit before tax |
12,553 |
9,311 |
|
|
Tax as reported |
3,398 |
2,566 |
|
|
Tax effect on add backs |
282 |
221 |
|
|
Adjusted profit after tax |
8,873 |
6,524 |
|
|
Reported operating profit |
11,145 |
8,440 |
|
|
Add back - share based payment charge |
1,007 |
737 |
|
|
Adjusted operating profit |
12,152 |
9,177 |
|
|
Add back - other amortisation and depreciation |
1,149 |
434 |
|
|
Adjusted EBITDA |
13,301 |
9,611 |
|
4. Earnings per ordinary share
|
2008 £'000 |
2007 £'000 |
|||
|
Basic EPS |
||||
|
Profit after tax |
8,148 |
6,008 |
||
|
Weighted average no of shares |
38,465,000 |
38,292,683 |
||
|
Weighted average basic EPS |
21.18p |
15.69p |
||
|
Diluted EPS |
||||
|
Profit after tax |
8,148 |
6,008 |
||
|
Weighted average no of shares |
39,983,935 |
40,343,531 |
||
|
Weighted average fully diluted EPS |
20.38p |
14.89p |
||
Diluted earnings per share is the basic earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period.
|
Adjusted basic EPS |
||
|
Adjusted profit after tax (as per note 3) |
8,873 |
6,524 |
|
Weighted average no of shares |
38,465,000 |
38,292,683 |
|
Weighted average basic EPS |
23.07p |
17.04p |
5. Intangible fixed assets
|
Customer relationship |
Trade Name |
Software |
Goodwill |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
COST
|
At 1 January 2007 |
- |
- |
- |
9,303 |
9,303 |
|
Additions |
- |
- |
2,879 |
- |
2,879 |
|
At 1 January 2008 |
- |
- |
2,879 |
9,303 |
12,182 |
|
Additions |
152 |
136 |
2,474 |
695 |
3,457 |
|
At 31 December 2008 |
152 |
136 |
5,353 |
9,998 |
15,639 |
AMORTISATION
|
At 1 January 2007 |
- |
- |
- |
- |
- |
|
Charge for the year |
- |
- |
356 |
- |
356 |
|
At 1 January 2008 |
- |
- |
356 |
- |
356 |
|
Charge for the year |
29 |
16 |
766 |
- |
811 |
|
At 31 December 2008 |
29 |
16 |
1,122 |
- |
1,167 |
NET BOOK VALUE
|
At 31 December 2008 |
123 |
120 |
4,231 |
9,998 |
14,472 |
|
At 31 December 2007 |
- |
- |
2,523 |
9,303 |
11,826 |
|
At 31 December 2006 |
- |
- |
- |
9,303 |
9,303 |
The goodwill as at 1 January 2008 arose from the purchase by Tradex Enterprises Limited acquisition of London Capital Group Limited during the period ended 31 December 2005. On 23 May 2008, the Group acquired 100% of the share capital of Futuresbetting.com Limited, a company incorporated in Gibraltar, which gave rise to the addition to goodwill in the year as well as Customer relationships and Trade names intangible assets as above (see note 7).
6. Property, plant and equipment
|
Leasehold Property |
Plant and Machinery |
Equipment |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
COST
|
At 1 January 2007 |
339 |
1,068 |
472 |
1,879 |
|
Additions |
1 |
1,314 |
779 |
2,094 |
|
Transfers |
- |
(1,628) |
(1,251) |
(2,879) |
|
At 1 January 2008 |
340 |
754 |
- |
1,094 |
|
Acquired as part of acquisition (note 13) |
- |
108 |
- |
108 |
|
Additions |
170 |
216 |
- |
386 |
|
Disposals |
- |
(121) |
- |
(121) |
|
At 31 December 2008 |
510 |
957 |
- |
1,467 |
DEPRECIATION
|
At 1 January 2007 |
18 |
206 |
- |
224 |
|
Charge for the year |
38 |
297 |
99 |
434 |
|
Transfers |
- |
(257) |
(99) |
(356) |
|
At 1 January 2008 |
56 |
246 |
- |
302 |
|
Charge for the year |
87 |
251 |
- |
338 |
|
Disposals |
- |
(80) |
- |
(80) |
|
At 31 December 2008 |
143 |
417 |
- |
560 |
NET BOOK VALUE
|
At 31 December 2008 |
367 |
540 |
- |
907 |
|
At 31 December 2007 |
284 |
508 |
- |
792 |
|
At 31 December 2006 |
321 |
862 |
472 |
1,655 |
7. Acquisition of subsidiary
On 23 May 2008, the Group acquired 100% of the share capital of Futuresbetting.com Limited, a company incorporated in Gibraltar, for cash consideration of £200,000 and deferred consideration of £300,000. This transaction has been accounted for by the purchase method of accounting.
|
Book Value |
Provisional Fair Value |
||
|
£'000 |
£'000 |
||
|
Property, plant and equipment |
108 |
108 |
|
|
Intangible assets |
- |
288 |
|
|
Trade and other receivables |
231 |
231 |
|
|
Cash and cash equivalents |
43 |
43 |
|
|
Trade and other payables |
(665) |
(665) |
|
|
Deferred tax liability |
- |
(81) |
|
|
(283) |
(76) |
||
|
Goodwill |
695 |
||
|
Total consideration |
619 |
||
|
Satisfied by: |
|||
|
Cash |
200 |
||
|
Directly attributable costs |
119 |
||
|
Deferred consideration |
300 |
||
|
619 |
|||
|
Net cash outflow arising on acquisition |
|||
|
Cash consideration |
319 |
||
|
Cash and cash equivalents acquired |
(43) |
||
|
276 |
|||
The goodwill arising on the acquisition of FuturesBetting.com Limited is attributable to the anticipated profitability from the new markets and the anticipated future operating synergies from the combination.
FuturesBettings.com Limited contributed £375,000 revenue and a loss of £579,000 to the Group's profit before tax for the period between the date of acquisition and 31 December 2008.
If the acquisition of FuturesBetting.com Limited had been completed on the first day of the current period, Group revenues for the period would have been increased by £223,000 and Group profit attributable to equity holders of the parent would have been reduced by £381,000.
8. Cash and cash equivalents
|
2008 |
2007 |
|
|
£000 |
£000 |
|
|
Cash at bank and in hand |
2,659 |
454 |
|
Short-term deposits |
9,977 |
9,865 |
|
Client money held |
44,658 |
35,813 |
|
57,294 |
46,132 |
|
Related Shares:
London Capital Group Holdings