Lighthouse Group posts loss as adviser numbers fall

Lighthouse Group's average revenue per adviser rose as the financial advisory firm took advantage of new regulations under the Retail Distribution Review (RDR). The RDR, new rules under which clients receive financial advice, sets out requirements for charges to clients and outlines the need for advisers to be equipped with the necessary qualifications and skills. Lighthouse Chief Executive Officer, Malcolm Streatfield, said while the RDR helped boost revenue per adviser, top line revenue was hurt by advisers exiting the business due to lack of required training. There was an 18% reduction in average adviser numbers.The group offered training to advisers within the business to meet the new requirements which increased costs during the first half. However Streatfield said: "Advisers that didn't get qualified because they were retiring or couldn't be bothered led to lower production. We lost advisers which affected our top line revenue."Revenue fell to £23.43m in the six months to end of June, down from the prior year's £27.17m. The average revenue production per adviser rose by 3% to £80,000 per annum. Higher margins helped to push gross profit higher to £7.51m from £7.27m.However, considerable operational changes and associated technological developments that were required to operate under RDR rules, meant the company came out with a loss.Operating costs increased by £900,000 to £7.46 including a £600,000 investment in recruitment, training, technology and marketing costs.The firm posted a loss before tax was £232,000 for the half-year, compared to a profit of £59,000 a year ago.Earnings before interest, tax, depreciation and amortisation (EBITDA) fell to £51,000 from £740,000. Shareholders missed out on a dividend. Looking ahead, Streatfield said he expects the company to start to see the benefits of recruitment and training efforts by 2014, when it also anticipates a return to dividends. "Green shoots are appearing in what has been a pretty torrid time for the industry," he said."All our distribution groups to have coped well with these monumental changes in the distribution review."Stockbroker Shore Capital reiterated Streatfield's remarks, saying the company did well in making improvements in average adviser productivity, gross profit margin, client contact and the proportion of revenue."For now, we retain our forecast for £100k EBITDA for 2013 rising to £1m in 2014, with no dividend expected to be declared in 2013," the broker said.Shares were up 7.14% to 3.75p at 14:57 on Wednesday. RD