Overall. Unsurprisingly it is the spread betting business, Capital Spreads, that is making
all of the running – both in absolute size and in growth rates. Forex effectively
“flatlined” in the first half but that reflected the removal of two major clients.
Spread betting. Capital Spreads added over 6,700 new clients during the period
bringing the total number of “live” accounts to 25,853 (from 13,180). Client
acquisition costs were largely unchanged at around £95 per live client. The average
number of daily trades (per 100 live accounts) rose to 64 (from 53) although the
average value per trade dropped to £4.3 (from £6.0) and the proportion of “active”
clients dropped to 37.4% from 43.9%.
Forex. Capital Forex (15% of group gross revenues (GGR)) added 120 new
institutional clients during the first half and saw client funds rise to £22.4m
(from £18.4m in 1h ’07).
Institutional broking. Capital Derivatives (less than 6% of GGR) saw modest
growth but that was achieved despite a slowdown in the second quarter. Trading
volumes rose by almost 19% to 1.6m lots.
Effect on forecasts.
The interim results were broadly speaking in line with our model although overall
COGS was at almost 21% marginally higher than the 18.5% we have estimated for
the full year. The difference amounts to some £0.6m at the gross profit line in the
current full year. Given London
Capital’s track record we are content for now to leave our COGS and thus overall
estimates unchanged.
