Volatility drought hits London Capital Group

Shareholders in London Capital Group (LCG) have to wait until a 12 March deadline before finding out whether a preliminary approach from Cantor Fitzgerald Europe, GAIN Capital Holdings and City Index turns into a formal offer for the beleaguered online spread betting firm. Judging by last year's performance, a takeover might come as a relief after the company fell into the red and axed the final dividend as low levels of volatility took their toll.

So, while revenues in the group's largest division - UK Financial Spread Betting - rose 12 per cent in the first half of last year, double-digit falls in active clients and trading volumes led to a 50 per cent reversal in the second half. The Australian contracts for difference (CFD) business recorded a loss, while ProSpreads, the group's direct market access financial spread betting arm, saw revenue slide 43 per cent. Aggregate losses incurred at the two operations amounted to £1.2m.

Accordingly, the board has identified three main objectives. The first is to reduce the cost base, especially if lower volatility persists, and £4m of potential savings have already been identified. Secondly, some overseas operations will be sold or restructured, and thirdly there will be changes in the structure of the operational management.

After 10 years building up the group, chief executive Simon Denham has resigned with immediate effect, while chief operating officer Rachel Woodford will leave in July.

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