Profits up at London Capital

City A.M. Reporter
spread betting company London Capital Group, said first-half adjusted pre-tax profit rose 12 per cent yesterday, helped by strong spread betting performance, but cut its interim dividend by 60 per cent.

“If the rest of the year follows the route of the first half, we would expect to be paying quite a substantial dividend at the year end,” said chief executive Simon Denham.

He said he was optimistic due to the continued growth in the company’s core business and the launch of its Contract for Difference (CFD) platforms. London Capital launched two CFD platforms in the second quarter of 2010. One is an extension of its spread betting site and the second will target retail clients in the Far and Middle East.

The company, which offers online spread betting, foreign exchange and broking services, has just opened its first office outside Europe, in Australia.

For the six months ended 30 June, adjusted pre-tax profit rose to £4.2m from £3.8m a year ago. And sales increased 61 per cent to £20.9m.

However, the firm’s statutory pre-tax profit for the first half fell 74 per cent to £856,000 due to an impairment charge of £3.2m. The company cut its interim dividend to 1p per share from 2.5p per share a year ago.

Encouragingly, average daily volumes rose 22 per cent to 31,950 trades in the six month period while average revenue per user almost doubled, from £599 to £1,051.

Cenkos Securities is confident London Capital will meet its full-year pre-tax profit estimate of £6.3m, giving earnings per share of 11.2p and a final dividend of 2p.

Denham said the company’s CFD product launched in Australia was very competitive.

“We are not expecting much more than covering costs by the end of the year [regarding the CFD platforms]”, Denham said, adding that he expects profits from it in 2011.