London Capital year-end: pre-tax profit plunges 46%

LONDON Capital Group (LCG) saw full-year pre-tax profit fall 46% to £5.8m, from £10.8m in 2008, which the financial spreadbetting specialist blamed on unfavourable market conditions, lower interest income and increased costs to support growth.

While the company managed to maintain similar levels of aggregate trading revenue across its divisions against an exceptionally profitable 2008, the impact of lower interest income saw total revenue fall 4% year-on-year to £27.6m, from £28.9m in the previous year.

The group’s white label deals with companies including Betfair, Paddy Power and PartyGaming provided a further drag on performance, with an increase in customers and trade volumes combined with lower net revenue per customer resulting in an increase in white label costs both in absolute terms and as a proportion of revenue generated. Gross profit correspondingly fell 14% year-on-year to £19.0m, from £22.2m.

Higher depreciation, hosting and maintenance costs due to the company’s ongoing investment in IT systems, combined with higher associated administrative costs, also led to a 36% year-on-year decline in adjusted earnings before interest, tax, debt and amortisation (EBITDA) to £8.1m, from £12.6m in 2008.

However LCG chairman Richard Davey said key performance indicators (KPIs) had remained strong since the turn of the year, and that he expected the group’s new CFD and MetaTrader platforms, to be launched in the second quarter of 2010, to contribute positively to growth.

Davey said: “Whilst we recognise that economic conditions remain uncertain and there is little visibility in forecasting group revenues, the positive KPIs of client acquisition, customer funds on deposit, new White Label partnerships and the roll-out of two new trading platforms during 2010 means we remain confident of the Group’s ability to grow. All these point to an improved position for the year ahead and I look forward to bringing you better results in future.”

The company also announced that chief executive Frank Chapman, having reached 60 this year, would be standing back from the day-to-day running of the business prior to the company’s AGM in April. Chapman will be replaced as chief executive by current group finance director Simon Denham.

Chapman will remain both as a shareholder in the business and on the board as non-executive vice-chairman, and said he would now “concentrate my efforts on bringing new business to the group”.

The resulting reshuffle will see Rachel Woodford become managing director, Siobhan Moynihan join the board as finance director and Amanda Shields join the board as chief operating officer.