LCG UK Expects to Turn a Profit in H2 2024 despite £6M Loss in 2023

UK-based London Capital Group (LCG) expects to return to profitability in the second half of 2024 despite reporting an annual loss of over £6 million in 2023, according to its latest Companies House filing. The anticipated turnaround is attributed to management’s decision in mid-2023 to operate solely as an introducing broker for IG Group.

Pivoting to Profit

The decision to change the business model was driven by the firm's declining revenue, which fell to approximately £1.7 million in 2023—a 15.5 per cent year-on-year drop.

In 2023, the company primarily generated revenue through a “back-to-back” arrangement with FlowBank, which involved hedging LCG’s risk (from client trading activity) one-for-one with FlowBank. In return, FlowBank paid LCG fees based on the trading volume generated.

Additionally, LCG began generating revenue as an introducing broker after implementing this model in June 2023. The shift was initiated by the new management team, which included Dave Worsfold as CEO and Matt Basi as Managing Director, who both joined in December 2022.

“The focus of the ‘new’ business is working in partnership with the largest firms in the industry to provide clients with access to leading technology and pricing while offering a bespoke, high-touch service to valuable clients,” the company stated. “Outsourcing the provision of technology, client onboarding, custody of client monies, and all associated operating expenses has enabled LCG to move forward with a much-reduced cost base and a strong focus on client service.”

However, the company’s 2023 losses were compounded by increased sales and administrative costs. According to the filing, administrative costs rose to approximately £7.9 million, compared to £3.7 million in the previous year.

Parent’s Troubles

LCG is owned by FlowBank, founded by former LCG CEO Charles-Henri Sabet. Previously, LCG was part of London Capital Group Holdings, which faced challenges after delisting from the London Stock Exchange and NEX Exchange in 2018. In the same year, Charles-Henri Sabet purchased LCG, separating it from the struggling London Capital Group Holdings, which eventually went into liquidation.

Sabet restructured LCG’s ownership after launching Switzerland-based FlowBank in 2020.

However, FlowBank was declared bankrupt last year by Switzerland’s Financial Market Supervisory Authority (FINMA). This regulatory action followed an investigation launched in October 2021, which identified breaches of supervisory laws, including those related to capital requirements, organizational adequacy, and risk management.

In August, FlowBank’s liquidators announced their plans to sell LCG’s stakes. Meanwhile, LCG’s Bahamas entity, which had closer ties to the parent company, ceased operations.