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DJ London Capital Group Holdings PLC Half-year Report


RNS Number : 2362C

London Capital Group Holdings PLC

28 September 2018

September 2018


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


LCG is pleased to announce its interim results for the six months ended 30 June 2018.

Operational Highlights

   --      New Accounts up 15%  (2017 H2: 8,886, 2018 H1: 10,259) 

Demonstrates the increasing effectiveness of the global branding, sales and marketing activities deployed by LCG.

   --      New Funded Clients up 16%  (2017 H2: 3,637, 2018 H1: 4,270) 

Demonstrates the increasing effectiveness of the global branding, sales and marketing activities deployed by LCG.

   --      Client net deposits per month up 26%   (2017 H2: GBP3.2m, 2018 H1: GBP4.0m) 

Demonstrates the increasing attractiveness of LCG's trading platform and the increased product offering.

   --      Assets Under Management up 15%  (2017 H2: GBP30.0m, 2018 H1: GBP34.5m) 

Demonstrates the increasing effectiveness of LCG's global branding, platform, sales and marketing activities.

   --      Client volumes up 36%  (2017 H2: 168bn, 2018 H1: 229bn) 

Highlights the quality of client trading with LCG.

   --      Clients traded up 23%  (2017 H2: 25k, 2018 H1: 31k) 

Highlights the quality of client trading with LCG.

 Financial Highlights                                Unaudited     Unaudited 
                                                     6 Months      6 Months 
                                                     to 30 June    to 30 June 
                                                        2018          2017      Change 
                                                      GBP'000       GBP'000 
 Revenue                                              18,554        12,023       54% 
 Gross Profit                                         13,692        10,899       26% 
 Adjusted EBITDA(3)                                    1,510         (961)       257% 
 Adjusted profit/(loss) before tax(1)                   702         (1,758)      140% 
 Statutory profit/(loss) before tax                     702         (1,817)      139% 
 Basic profit/(loss) per share from continuing 
  operations pence                                    0.0018       (0.0048) 
 Diluted profit/(loss) per share from continuing 
  operations pence                                    0.0014       (0.0046) 
 Dividend per share                                    0.0p          0.0p 

(1) Adjusted EBITDA represents (loss)/profit before interest, tax, depreciation, amortisation, share based payment expense, impairment charges to goodwill and investments, non-recurring restructuring costs, costs related to change in IT platform and the movement in the provision for FOS claims.

(2) Adjusted (loss)/profit before tax represents (loss)/profit before tax excluding share based payment expense, impairment charges to goodwill and investments, non-recurring restructuring costs, costs related to change in IT platform, the movement in the provision for FOS claims and non-recurring legal fees. Applied consistently hereafter.

Commenting on the results, Mukid Chowdhury, Group Chief Executive, said:

"The senior management team and I are pleased that the investment in the business and the restructuring efforts of previous periods have continued to deliver improved results and that these efforts have now seen LCG return to profitability.

The results are extremely encouraging and a clear demonstration of how LCG's performance has improved following its commitment to driving excellence in technology, product offering, customer service and people. This improving performance continues to be achieved against the backdrop of challenging trading conditions and regulatory uncertainty. Despite these challenges, the Group has seen strong revenue growth primarily due to increased client acquisition and participation as well as revenue capture compared to prior periods. Inspite of these demanding conditions we are pleased to announce such positive results.

The outlook for the industry continues to remain uncertain given the changing regulatory landscape. The changes introduced will have an impact on the industry and affect the services that can be offered to clients, particularly with regard to the levels of leverage that can be offered. LCG remain confident in its ability to deal with the new regulatory measures. LCG remains committed to ensuring the highest standards of regulatory compliance and welcomes changes that will improve and protect client outcomes".

LCG will continue with its objective to return the business to profitability through best in class technology and client service and together with investment and the hard work by the senior management team and its people, we will continue to deliver long term sustainable growth and drive increased shareholder value.

LCG, as one of the leading providers in the industry with an established history of over 20 years and with a loyal client base and a brand that is synonymous with first class service, is well placed to benefit and continue its growth trajectory in this changing environment. The ability to capture and take advantage of trading opportunities means that the Group is well positioned to be resilient during periods when trading conditions are weak and we remain fully focused on our goal of being able to benefit from and adapt with the changing regulatory environment".


For the period ended 30 June 2018

H1 performance

For the six months ended 30 June 2018, trading conditions have again been affected by lower market volatility and intense regulatory scrutiny of the CFD industry by both domestic and European regulators. However, against this backdrop, LCG has continued to deliver increased revenues and together with the hard work across the business to drive efficiency, has delivered positive results. LCG demonstrated that it remains on track to deliver its objective of increasing client acquisition, client activity and returning the Group to profitability.

In such challenging conditions, the Group has continued its upward trajectory in delivering increased revenues compared with previous periods, whilst ensuring that it continues to invest and innovate. The Group's efforts to improve its technology, sales and marketing as well as retain and add to the quality of its people means that the Group remains on the path of improvement. The Group is now far better placed to derive both a steady revenue stream when trading conditions are weak and be in a position to take full advantage when conditions are favourable.

Regulatory developments

As we have previously reported, the regulatory landscape continues to evolve across multiple jurisdictions, particularly in Europe. The recent announcements from The European Securities and Markets Authority ("ESMA") and the Financial Conduct Authority ("FCA") as well as other European regulators to protect clients through reduced leverage and enhanced risk warnings are in line with LCG's values of ensuring that the customer is protected and to improve customer outcomes. LCG is fully supportive of the efforts of global regulatory bodies to ensure that client interests are served at all times. LCG remain committed to ensuring that the Group operates at the highest regulatory standards. LCG is well positioned to absorb the impact of the regulatory changes and continue the strong growth in both client acquisition and revenue capture demonstrated thus far in spite of the regulatory changes. As one of the leading providers in the industry for over 20 years, LCG is well placed to benefit and continue its growth trajectory in this changing environment.

The European Securities and Markets Authority (ESMA) released details on the 1st of June 2018 of its intention to introduce a number of product intervention measures to prohibit the provision of binary options and to restrict the provision of Contract for Differences (CFDs) in order to protect retail investors, effective 1(st) August 2018. These measures apply to CFDs offered to retail clients. The CFDs include rolling spot forex and financial spread bets. The measures introduced include the following:

   --      Leverage limits between 30:1 and 2:1 on the opening of a position 
   --      Negative balance protection 
   --      Limited retail clients' liabilities to the funds in their CFD trading account 

-- Prohibition of firms offering monetary and non-monetary benefits (excluding research and information tools) to retail investors

-- Standardised risk warning, including firm-specific figures on the percentage of client accounts that have lost money trading CFDs

LCG Limited is authorised and regulated by the Financial Conduct Authority (FCA). Its principal activity is the provision of CFD and financial spread bets products to retail and professional customers. The ESMA intervention measures will therefore apply directly to LCG Limited. It should be noted that the Group continues to support the work by all National Competent Authorities (NCAs) to ensure the best outcome for clients whilst continuing to operate to the highest regulatory standards. LCG senior management have considered the impact of the changes to the revenues of the firm and have concluded that the ESMA changes should ensure a higher quality of client that is willing to place a higher initial and subsequent deposit. Such clients are expected to retain the commitment to trade both more frequently and for longer periods. We also believe the intervention measures will also create a more sustainable and certain environment for both clients and brokers - ensuring reputable firms such as LCG continue to attract high quality clients with the intention to trade. LCG's senior management remain supportive of the efforts of the European regulator to increase regulatory standards and to improve client outcomes.


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September 28, 2018 02:03 ET (06:03 GMT)

DJ London Capital Group Holdings PLC Half-year Report -2-

The work and investment by LCG continues to result in improvement across all areas of the Group, particularly in our people, products and services, which will ultimately provide our clients with the service they expect in order to ensure that LCG is their provider of choice for their trading needs.

Such investment will drive and deliver long term growth and ensure that LCG continues to improve and continue on the path to profitability. The Group remains cognisant of the changing regulatory environment and has embraced the changes that are intended to enhance client outcomes. Such values remain at the core of LCG to ensure it retains and expands on an already loyal client base.

The financial year has started well and with actions already taken to manage costs and to drive further investment for future growth I, the other Board members and the senior management team remain confident about the prospects for the business in the coming periods and are fully committed to ensuring that LCG continues on the path to sustained long-term growth.

Charles Poncet

Non-Executive Chairman

27 September 2018

A copy of the interim results will be available from the Company's website,, shortly.

For further information, please contact:

     London Capital Group Holdings plc 
    Mukid Chowdhury                          +44 (0)20 7456 7000 
     Peterhouse Capital Limited 
     NEX Exchange Growth Market Corporate 
     Fungai Ndoro 
      Guy Miller                             +44 (0)20 7469 0930 

About London Capital Group (

London Capital Group Holdings plc (hereafter "LCGH plc" or "LCG" or "London Capital Group" or "the Group") is a 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 Conduct Authority. Its core activity is the provision of spread betting and CFD products on the financial markets to retail and professional clients. LCG Ltd has a European passport. LCGH plc is a member of the NEX Exchange Growth Market. LCG Ltd also has access to international markets through its global clearing relationships.

LCGH plc is quoted on the NEX Exchange. LCG is included in the General Financial sector (8770) and Speciality Finance sub sector (8775) and has a RIC code of LCG.L.


For the period ended 30 June 2018

Financial Results

Following investment made by the Group in prior periods to improve its technology, product and people, as well as expand its offering from both a product and geographical perspective, the Group has experienced a positive start to the trading year. This is despite the difficult trading conditions seen in the second quarter of the year where volatility has dropped back to its previous low levels with the VIX (Chicago Board Options Exchange Market Volatility Index, which is a measure of the implied volatility of the S&P 500) gauging back following a spike upwards in volatility in the first quarter of 2018. Notwithstanding the robust first quarter, this resulted in benign trading conditions as markets across the majority of asset classes traded within their ranges for the second quarter of 2018.

Despite such challenging trading conditions, the Group has seen improvements across a number of key operating metrics with trading volumes up significantly at 36% compared with the previous period, demonstrating that LCG continues to attract significantly higher quality clients with a greater propensity to trade a greater number of asset classes.

A key objective for LCG is to improve the trading platform and increase its product offering to provide clients with greater choice. Successful work in this area has led to a significant increase in clients now trading with LCG new and with the number of clients trading up 23% on the same period in 2017.

Another key objective for LCG is to improve the branding, sales and marketing initiatives deployed by the Group and this has yielded positive results with new accounts up 15% from H1-17, funded clients up 16% from H1-17, monthly client net deposits up 26% from H1-17 and overall assets under management (AUM) up 15% since H1-17.

The Group continued with its enhanced analysis of client trading activity and behaviour to ensure maximum revenue capture where opportunities allowed. As a result, revenues in the first 6 months of 2018 were 54% higher than the same period in 2017 despite the weaker trading conditions. Gross profit for the first 6 months of 2018 was 26% higher than the same period in 2017.

The improvements to technology and product offering as well the expanded market penetration to focus on markets outside LCG's traditional UK offering, has resulted in greater revenue stability than in prior periods with gross monthly revenues of approximately GBP3m per month. This stability will ensure LCG is better equipped than in previous periods to withstand the challenging trading conditions that have been present in the first 6 months of this year.

Cost of sales for the period is GBP4.9m (2017 H1: GBP1.1m) and gross profit is GBP13.7m which represents a 73% gross profit margin on revenues (2017 H1: GBP10.9m gross profit and 91% gross profit margin). LCG continues to benefit from the introduction of the enhanced risk management analysis of client behaviour which allows for greater revenue extraction.

EBITDA for the six month period is a profit of GBP1.51m (2016 H1: loss of GBP0.9m) and is approximately a 257% improvement on the same period last year. Administrative costs were GBP13.02m for the period (2017 H1: GBP12.7m).

The profit before tax was GBP702K (2017 H1: loss of GBP1.8m) and demonstrates the improvements the Group have made to ensure that, despite poor trading conditions seen in Q2-2018, there is a clear path of improvement and move toward sustainable long term profitability, through its improved branding, technology and investment in people.

The net cash and short term receivables, increased 28% to GBP10m (2017 H1:GBP7.8m).

The results for the period and the financial position at 30 June 2018 were considered satisfactory by the directors. The directors expect client acquisition to remain strong, and expect the third quarter will show open and funded accounts remaining at levels seen in the first two quarters of 2018.


Customer trading volumes are driven by eight principal factors. Four of these are broad external factors outside the Group's control:

-- changes in the financial strength of market participants;

-- economic and political conditions;

-- changes in the supply, demand and volume of foreign currency transactions; and

-- regulatory changes.

The above factors can impact the volatility of financial markets, which has generally been positively correlated with client trading volume. The Group's customer trading volume is also affected by the following additional factors:

-- the effectiveness of sales activities;

-- the competitiveness of the Group's offerings;

-- the effectiveness of the customer service team; and

-- the effectiveness of the marketing activities.

In order to increase customer trading volume, the Group will continue to focus its marketing and its customer service and education activities on attracting new customers and increasing overall customer trading activity.

Historically, the Group's business model has been predominantly driven by retail client transactions focusing on the UK market with client trading focused on its spread betting and CFD offering. The Group is continually looking to expand its offering beyond the UK and enhance its technology and product offering. To achieve this, the Group continues to develop and enhance its existing Meta Trader 4 and LCG Trader platforms to ensure they are both market leading as well as being fit for purpose for the active trader. This strategy has already yielded positive results in terms of client acquisition and client trading metrics and this work will continue to ensure LCG achieves its strategic objectives of increasing client AUM and client trading volumes, across all products and asset classes.

The Group looks forward to the continued benefits from the enhanced product offering which will provide an opportunity to further promote the brand, develop broader and more innovative products and service offerings. It is expected that this will attract a more diversified client base, both within the UK market and internationally.

The Group's future success continues to be based on providing a high quality service to our customers and offering a variety of financial trading products and platforms. We are seeking to deliver a complete multi-asset experience for our clients.

Our increased investment in technology allows us to offer an intelligent new platform while still delivering industry leading spreads with instant, reliable execution. In addition, our analysts will offer high quality analysis, research and financial news.

The Group's medium-term strategy will also continue to focus on the promotion and further development of our key selling points:

   -     Industry-leading platforms 
   -     Service 
   -     Professional tools and news service 
   -     Educational material 
   -     Pricing 
   -     Marketing 
   -     Dealing execution 

Our marketing is focused on attracting active retail traders. This, combined with improving the customer journey and technology will ensure that the Group continues to be in a strong strategic position.


With the continued initiatives being employed by the Group to expand its already robust product offering through its enhanced and client focused technology, the Board is confident the business can continue to build on what has been a strong first half performance.

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September 28, 2018 02:03 ET (06:03 GMT)

DJ London Capital Group Holdings PLC Half-year -4-

                                              ===========  ===========  ============= 
 Net Profit / (loss) from continuing 
  operations                                      702        (1,817)       (3,010) 
 Add Back - Loss on disposal of assets             -            60            26 
 Adjusted (loss)/profit before tax                702        (1,758)       (2,984) 
                                              ===========  ===========  ============= 
   3.     Earnings per ordinary 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. Fully diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of shares in issue during the period and the dilutive potential ordinary shares relating to share options and the convertible loan notes.

From continuing operations

The calculation of the basic and diluted earnings per share is based on the following data:

                                         Unaudited     Unaudited      Audited 
                                         6 Months      6 Months       Year to 
                                         to 30 June      to 30       31 December 
                                            2018       June 2017        2017 
 Basic EPS 
 Profit / (Loss) after tax (GBP'000)        702         (1,817)       (3,010) 
 Weighted average number of shares      380,531,519   380,531,519   380,531,519 
 Weighted average basic EPS (pence)       0.0018        (0.005)       (0.008) 
 Diluted EPS 
 Profit / (Loss) after tax (GBP'000)        702         (1,817)       (3,010) 
 Weighted average number of shares      491,877,366   491,877,366   491,877,366 
 Weighted average fully diluted EPS 
  (pence)                                 0.0014        (0.004)       (0.006) 
   4.     Dividends 

No dividends were declared or paid in the period (2017:H1:nil)

   5.     Provisions and contingent liabilities 
                                Unaudited    Unaudited      Audited 
                                 6 Months     6 Months      Year to 
                                   to 30        to 30      31 December 
                                 June 2018    June 2017       2017 
                                 GBP'000      GBP'000       GBP'000 
 Provision against FOS claims       -           486            - 
 Market data provision              -            -             - 
 Dilapidation provision             -            -             - 
                                    -           486            - 
                               -----------  -----------  ------------- 

The Group had recognised a provision in relation to losses generated by a number of clients who delegated their trading activities under a Power of Attorney to an individual who turned out to be a convicted fraudster. As a result of a determination from the Financial Ombudsman Service ("FOS") in relation to a complaint lodged by two clients, the Directors determined, in accordance with the Ombudsman's directions, a value of GBP486,000 for the provision. In December 2017 following no claims in 2015, 2016 and 2017 the directors made the decision to release the provision. The decision was arrived after assessing the likelihood of any further claims.

   6.     Deferred Consideration 

The cash settled share-based payment charge recognised by the Group relates to a contractual agreement for the Group to make an equity-based payment to the provider of the Group's new dealing platform. The payment was made in Oct 17 for GBP202,000. The payment amount GBP202,000 was calculated in accordance with clause 11 of the agreement and is based on a market valuation of LCG of GBP8.07m. This payment represents the final payment and releases LCG from its contractual obligation. The difference between the opening liability and the payment was credited to the income statement for the year ending 2017. The original provision was GBP249,000.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact or visit



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September 28, 2018 02:03 ET (06:03 GMT)