Shares of spread betting firm London Capital Group plunged 10 per cent on Tuesday as it said it expects to report adjusted pre-tax profit of £2m for the six months ended June 30, down from £3m a year earlier.
This is stated before recognising a charge for share based payment expense and a provision for £1.9m as previously disclosed relating to Financial Ombudsman Service (FOS) claims, it explained.
"Although market volatility and volumes remained low in the first half of the year, the retail spread betting and CFD business continues to trade well and revenues were 10% higher than the same period last year. Client acquisitions grew by 4.2%," it said in a company statement.
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London Capital said it has added a number of significant new white label partners, which are due to start trading in the second half of this year.
The group said the Australian CFD business has doubled both its client base and trade volumes. As expected, it has continued to generate losses of £0.3m, unchanged from last year.
Meanwhile revenue at the institutional foreign exchange business remained stable compared to 2011 however margin pressure has resulted in the net contribution being 26% lower than the same period in 2011.
Elsewhere ProSpreads, the Direct Market Access (DMA) financial spread betting business in Gibraltar, has recently been granted a retail license opening up the potential client base for this product.
Low volatility during the early part of the year has meant the business incurred losses of £0.4m for the first 6 months. The business in Gibraltar is undergoing reconstruction to bolster future profitability.
Overall London Capital continues to trade well, is well capitalised and as at 30 June 2012 had net cash resources and amounts due from brokers amounting to £25.6m.
The Board is focused on ensuring the group's cost base remains low whilst maintaining sufficient flexibility to progress its growth strategy, it added.
CJ
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