In-line results from London Capital Group – CEO steps down

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CEO Simon Denham

I read this mornings RNS from LCG closely and the results are largely as flagged. The real notable items being the stepping down of founder and CEO Simon Denham, being replaced by Mark Slade and the write down of their Prospreads acquisition to nil.

We doubt that anything within the results will change the 3 potential bidders intents as their was nothing of surprise in there and certainy nothing that would not be disclosed in prelim due diligence. In fact, the stepping down of Simon Denham, coming on top of the resignation of co founder Rachel Woodford at the end of 2012 probably clears the decks for the negotiations with the 3 parties.

We continue to believe the shares undervalued and expect that if a bidder does stump up that the floor acceptable level is 65p with the stock being tightly held and management holding out for 70p+. The movement of a couple pennies south this morning looks like our friends the market makers trying to shake the tree a little but no stock seems to be coming out. Seems we’ve all taken our positions and the outcome of the bid talks is now awaited as we approach the 13 March Put Up or Shut Up deadline.

Financial Highlights 

As expected lack of volatility led to suppressed trading volumes and decreased revenue

Revenue decreased 27% to £28.6m (2011: £39.0m)

Adjusted loss before tax* of £0.2m (2011: adjusted profit of £7.1m)

Included within adjusted loss before tax* are exceptional legal costs of £0.5m (2011: £0.7m)

Aggregate losses incurred in relation to  the Group’s Australian CFD business and Gibraltar FSB business amounted to £1.2m (2011: £0.8m)

Statutory loss before tax of £2.1m (2011: profit of £6.1m)

Net cash and short term receivables of £20.4m at year end (2011: £25.1m)

No final dividend proposed (2011: 2.6p per share), bringing total dividend for the year to 1.3p (2011: 3.9p)

Operational Highlights 

UK financial spread betting (“FSB”) performance

Divisional revenue down 26%

FSB average trades per day decreased 24% to 25,029 (2011: 33,042)

New client acquisition totalled 10,123 (2011: 10,398)

Successful launch of new white label clients Selftrade, Victor Chandler and Goodbody Stockbrokers


Institutional foreign exchange performance

Trade volumes decreased to $383bn (2011: $544bn)

Divisional revenue of £6.1m (2011: £8.0m); divisional profit of £1.7m (2011: £2.4m)

Board changes

Simon Denham has stepped down as CEO and will be replaced by Mark Slade

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