Capital Spreads quarterly client add rate more than doubled in the
second quarter of 2007 compared to the fourth quarter 2006. New
clients are the main engine of growth for Capital Spreads. If activity
levels remain constant, a doubling of the rate of acquisition bodes well
for full year results.
Capital Forex quarterly volumes have also more than doubled over
the same period. Capital Forex is a highly scaleable commission-based
business that depends on volumes to increase earnings. The doubling
of volumes in the second quarter of 2007 is unlikely to have been
accompanied by any appreciable increase in costs and therefore
should translate into strong earnings growth.
Five spread betting white label partnerships have been signed in the
first half of 2007. Although Capital Spreads pays away a portion of
earnings to its partners, white-label agreements are a cost-effective
way of increasing clients, particularly in overseas markets where the
company has no brand awareness. The increase in white-label
agreements will continue to fuel growth in the second half.
The company intends to pay an interim dividend of 1.25 pence. This
is perhaps the strongest signal in the trading update that 2007 has
begun very strongly. The group paid a dividend of 1.7p for 2006, so
the proposal of an interim of 1.25p encourages confidence in the full
year.
