Annual Report 2021

Financial Overview

It would be fair to say that 2020 was a tough year for many businesses and LBMA was not immune to this. With revenue significantly down by £1.1M (32%), LBMA wrestled with the challenge of cutting costs whilst trying to mitigate against further losses arising from contractual exposure due to the cancellation of most of its events programme. Despite significant cost cutting LBMA still returned a loss of -£267.5K.

Conversely, PMPL revenue grew in 2020, resulting in an improved profit return. This surplus provided an essential contingency to mitigate potential cash flow risk from December 2020 to February 2021. This period is traditionally the point at which LBMA working capital is at its lowest ratio, driven by the annual invoicing process for membership and GDL fees.

Alongside contingency planning, the LBMA Executive worked closely with the Board and Sub-Committees during 2020 to define and address the strategic financial risks impacting on our ability to conduct business as usual as well as deliver the programmes and solutions required by the market. In doing so, it concluded that:

  • RESERVES Cash reserves needed to be re-established after the impact of COVID-19.
  • RESOURCING STRATEGIC PLAN The demands and priorities determined by the Members and the market have been fed into the three-year strategic plan and have driven significant resource requirements across future years.
  • FINANCIAL STABILITY LBMA needed to become financially independent and reduce its reliance upon PMPL revenue to more sustainable levels.
  • SHORT-TERM RISK LBMA needed financial contingency to cover the short-term extended financial risk represented by COVID-19.

Taking these risks into account, and after significant review and scrutiny by the Sub-Committees, the Board took the difficult decision to increase fees significantly, from the 1 January 2021, representing the first increase for many years.

The measures and decisions taken in 2020 were tough but essential to the maintenance and development of the standards that underpin the reputation and provenance of the Global OTC precious metals market. Throughout 2021, the benefits are already being realised as LBMA strives towards re-establishing the stable financial base necessary to deliver its long-term strategy.