Xcap’s losses widen as revenes fall by 40%
STOCKBROKER XCAP saw its pre-tax losses widen to £2.1m in the six months to February 29 (2011: £1.5m) as revenues fell by 40% to £3.2m (£5.3m) and announced the departure of its chairman, Clive Carver.
The company’s CEO, Daron Lee, blamed “some of the most difficult market conditions that many in these sectors have seen in their professional careers” for the decline, and said that the firm had experienced similar conditions in the third quarter of the year. It also said that around £800,000 of the losses declared were due to one-off costs – partly early-stage expenses but also some restructuring.
The business, which has operations in Wilmslow, London and the Middle East, said the lack of trading activity – particularly in junior markets such as AIM, had made meant that contributions from its market-making activities had been “volatile”.
However, it added that it considers market-making to be “a core component and future contributor to the company’s trading-led focus, and a key differentiator from our competitors”.
The firm also bemoaned the “chronic shortage of investment funds for small caps” for the losses made by its corporate finance arm, stating that the number of companies on AIM is currently 83% lower than its 2005 peak, and that AIM companies only raised a combined £600m last year, compared with £9.9bn in 2006.
Despite this, it said it had managed to raise corporate and pre-IPO funding for 12 clients in the first half (double the 2011 figure) and had won six new retained broking clients.
The moribund state of the markets has also impacted on its stockbroking arm, and the firm said that it had been forced both in the six-month period to February “and more acutely in the third quarter” to cut staffing costs.
By the end of the period, net assets had shrunk to £4.9m (£6.4m).
