final dividend 5.25p making a FY dividend of 6.50p per share (1.7p);
spread betting client funds on deposit £16.79m (£7.43m);
foreign exchange client funds on deposit £19.03m (£7.38m);
Objective's view:
These are stellar results, ahead of market expectations and proof that LCG’s business model thrives in volatile and turbulent markets. Aside from the headline figures which obviously show growth at the top end or ahead of market expectations there are other encouraging trends. Client funds on deposit have more than doubled, adding to the earnings capability (interest receivable) of the group.
During the year LCG signed up a number of white label partners for the spread betting product, the most prominent being Paddy Power and Betfair. These two partners are boosting new client acquisitions by about 500 a month between them, although no individual partner contributes more than 15% of revenue and white label in total contributes just under 30%. The white label contribution diversifies the client base, since these tend to be from a betting background rather than a financial markets background and they favour the more volatile indices and currencies rather than equities.
Client acquisition costs, confined to spread betting, continue to fall: the average in 2007 was £81 per client, down from £88 in 2006. We note that these figures are struck before the impact of white label acquisitions: their effect is to reduce the client acquisition cost yet further.
Foreign exchange continued to experience quarter-on-quarter profit growth and continues to see increasing numbers of trades. This business experienced very strong trading in the second and third quarters of 2007, clearly benefiting from unrest in financial markets following the sub-prime crisis. We do not expect any abrupt cessation to recent volatility trends.
