Lighthouse Regulatory News (LGT)

14 Mar 2006 07:00

LIGHTHOUSE GROUP PLC ("the Group" or "Lighthouse") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 "Record Results" Lighthouse Group plc, the IFA and pension administration group, today announcespreliminary results for the year ended 31 December 2005.Financial Highlights * Record levels of turnover, gross profits, and elimination of cash losses * Recurring revenues increased substantially to an annualised ‚£7 million * Increased cash generation with significant year end cash balances Operational Highlights * National roll out of technology platform - LighthouseXpress - progressing in line with plan * Group rebranding exercise satisfactorily completed * Successful integration of Carrwood Barker, acquired in December 2005 * Annualised investment funds flow now approaching ‚£700 million Financial Details * Turnover increased by 23% to ‚£33 million (‚£26 million in 2004) * Gross profit increased by 25% to ‚£9 million (‚£7 million in 2004) * EBITDA* increased to profit of ‚£472,000 (‚£797,000 loss in 2004) * No exceptional charges arising from on going operations (‚£526,000 charged in 2004) * Exceptional charge relating to Carrwood acquisition ‚£431,000 * Year end cash balances increased by 104% to ‚£5.1 million (‚£2.5 million in 2004) Commenting on the results, executive chairman David Hickey said:"The marketplace improved noticeably during 2005, business volumes moved aheadsteadily, we controlled our cost base, and accordingly the Group's financialperformance showed substantial further growth."Late in 2005 the Group acquired Carrwood Barker Holdings Ltd. This transactionis expected to be significant for Lighthouse, both through providing mergersavings via the elimination of duplicated costs, and as a consequence of thehealthy prospects for the SIPP business, which already administersapproximately ‚£300 million of assets, and which is expected to grow stronglyover the next few years."Accordingly Lighthouse is stronger than at any time since its formation. Thecontinued improved financial performance, particularly in the second half ofthe year, together with a robust balance sheet with surplus cash, underscoresthe Board's confidence for the future."* Group operating profit/loss for the year before depreciation, amortisation ofgoodwill and exceptional operating expenses and interest. ENDS FOR FURTHER INFORMATION:LIGHTHOUSEGROUP plc Tel: 020 7065 5646David Hickey, Executive ChairmanMalcolm Streatfield, Chief ExecutiveWaughton Tel: 020 7796 9999Robin HepburnNOTES TO EDITORS:LIGHTHOUSEGROUP plcThe Lighthouse Group is the 6th largest IFA group in the UK (according to Life& Investment Insider June 2005) and provides support to over 500 IndependentFinancial Advisers nationally who in turn provide financial planning advice toboth private and corporate clients. Additionally Lighthouse administers over1,000 private pension schemes and over 200 corporate schemes.The following are attached: * Chairman's Statement * Chief Executive's Review * Consolidated Profit & Loss Account * Consolidated Balance Sheet * Consolidated Cash Flow Statement * Notes to the Accounts Lighthouse Group plcChairman's StatementINTRODUCTIONI am pleased to report another year of substantial progress for LighthouseGroup plc ("Lighthouse") or ("the Group"). Record financial results werederived from continued growth in revenues and rigorous management of costs. Inoperational terms 2005 saw the Group building further on the successes of 2004,with a continued focus on its technology roll-out, and a successful rebrandingexercise. In December 2005 the Group made its first significant acquisition forseveral years when it acquired Carrwood Barker Holdings Limited ("Carrwood"),which has since been fully integrated.FINANCIAL HIGHLIGHTS Year to 31st Year to 31st December 2004 December 2005 Turnover ‚£32.6 million ‚£26.5 million Gross Profit ‚£8.6 million ‚£6.9 million Operating Costs ‚£8.2 million ‚£7.7 million EBITDA* ‚£472,000 ‚£(797,000) Exceptional Items** ‚£(431,000) ‚£(526,000) Loss before Taxation ‚£(482,000) ‚£(1,810,000)* Earnings before interest, tax, depreciation, amortisation and exceptionalitems** 2005 relates solely to the acquisition of Carrwood.FINANCIAL RESULTSRevenuesTurnover for the year to 31 December 2005 increased by 23 per cent to ‚£32.6million (2004: ‚£26.5 million). The bulk of this increase was again due to anoticeable improvement in turnover per adviser to an annualised figure ofapproximately ‚£60,000 (2004: ‚£52,000). In addition, there was a 78 per centincrease in mortgage business now being written through the Group by itsadvisers, following the regulatory changes in the final quarter of 2004. Theincrease in turnover per adviser is particularly gratifying and is largely dueto the Group's strategy of focusing its resources on those advisers capable ofimproving their volumes and quality of business.Gross ProfitGross profit increased by 25 per cent to ‚£8.6 million (2004: ‚£6.9 million).Approximately three quarters of this increase was due to volume growth with thebalance coming from improved terms of trade with product providers andadvisers.Cost control remains a focus of the Group and it is pleasing to see thatoperating expenses declined to 25 per cent of total turnover, from 29 per centin 2004. The Board expects that the current level of fixed costs will increaseduring 2006 solely as a result of the Carrwood acquisition, but bysignificantly less than the expected gross profit contribution to be derivedfrom Carrwood.ExceptionalsThere were no exceptional items derived from the Group's on going operationsduring 2005 (2004: ‚£526,000). However, exceptional costs of ‚£431,000 wereincurred in December 2005 relating to the costs of re-organising andintegrating Carrwood into the Group.ProfitsThe consequence of these improvements is that the Group has made, at the EBITDAlevel, a modest profit every month since June 2004 and has succeeded inrecording an EBITDA profit for the full 2005 year of ‚£472,000. This representsa turnaround of approximately ‚£1.3 million over 2004.The loss before exceptional costs and taxation was ‚£51,000 (2004: ‚£1.3million), and after all charges, was ‚£482,000 (2004: ‚£1.8 million). The Grouphas significant tax losses brought forward and does not expect to pay tax inthe foreseeable future.Cash balances rose to ‚£5.1 million (2004: ‚£2.5 million) at the year end. Thiswas due both to a fund raising surplus of ‚£1.7 million over that expended to 31December for the Carrwood transaction, and ‚£0.9 million as a consequence ofcareful working capital management and the commencement of modest but regularcash profits during the year.OPERATIONSThe Chief Executive's review comments in detail on the significant changes inmost operational areas. These include the continued roll out ofLighthouseXpress, the electronic trading platform being introduced to allLighthouse Group advisers which reduces substantially the timescales andpaperwork required to submit new business, the successful Group rebrandingexercise, and the recent integration of Carrwood.ACQUISITION OF CARRWOODCarrwood is an IFA and pension administration business which was acquired byLighthouse in December 2005. The IFA division is a national group focused onChartered Accountants and has approximately 80 relationships in place.Following the integration of Carrwood into Lighthouse, it now comprises a newLighthouse division of salaried advisers and has been rebrandedLighthouseCarrwood. The pension administration business has approximately 1,000SIPPs and SSASs comprising approximately ‚£300 million of assets. Followingcompletion of the transaction, John Stevenson, the founder of Carrwood, joinedthe Board as an executive director.STRATEGYThe strategic objective for Lighthouse over the past few years was to ensurethat the Group attained sufficient revenues to cover its cost base. While anapparently straightforward task, against an unfavourable sector background ithas required time, the maintenance of a regulatory compliant culture, and arelentless focus on minimising costs. The success of this approach is nowevidenced by the core Lighthouse business having been modestly profitable atthe operating level for the past 18 months. The strategy now is to accelerateorganic growth, especially through LighthouseCarrwood, LighthouseTemple, andCity Pensions Limited, the Group's SIPP administration business, as well as toincrease further the proportion of recurring revenues.PROSPECTSI said in my half year statement, released in September 2005, that the tradingbackground for Lighthouse was becoming more benign as a consequence of a morestable investment climate and a reduction in the focus by savers on residentialproperty. The increase in turnover recorded in these results appears to confirmthat trend. In addition the constant media focus on the UK personal savings gapappears to be gradually shifting individuals' focus towards seriousconsideration of providing for their financial future. This focus is unlikelyto diminish in the short to medium term and hence is expected to result ingreater business volumes for financial advisers.Lighthouse has benefited from record levels of turnover during the latter halfof 2005, and has made a promising start to 2006. The Carrwood business isexpected to bring additional benefits derived from cost savings, a broadeningof the IFA offerings, and an expanding SIPP administration business at anopportune time in the pensions market place. In the meantime, and since theyear end, the Group has continued to trade in line with expectations andaccordingly the Board looks forward to reporting further progress during 2006.I would like to thank all Group practice principals, advisers, members andsupportive product providers for their contribution throughout 2005. We lookforward to working with them in the years to come. Finally, I am particularlygrateful to my Board colleagues and the entire Lighthouse team for their hardwork and commitment in what has been another successful year.David HickeyExecutive Chairman13 March 2006Lighthouse Group plcChief Executive's ReviewGROUP STRUCTURELighthouse Group's core activities comprise the provision of services toIndependent Financial Advisers (IFA's) and pension scheme administrators, withclients throughout the U.K. These services are delivered through the Group'smain divisions, LighthouseCarrwood, LighthouseTemple, LighthouseXpress,LighthouseWealth and City Pensions.DIVISIONAL TRADING PERFORMANCESLighthouseTempleLighthouseTemple is a National IFA operating throughout the UK. As well as afull geographical representation, "National" means that the Group legally ownsthe trading brand, the clients and all income deriving from them, although theadvisers are all self-employed. At December 2005, the division comprised 138registered advisers, including 7 employed regional mangers. There are a further9 advisers about to complete the application process. The Group's Brightonoffice provides a UK- wide support function for this division.Within the division there are now 17 Senior Practice Executives who havedeveloped Temple Adviser Practices. This initiative is aiding recruitment andis planned to grow further in 2006.For 2005, LighthouseTemple's contribution to the Group's gross profit was ‚£2.8million representing approximately 32 per cent of the Group's gross profit(2004: ‚£2.4million and 35 per cent respectively). The increase in gross profitreflects both the focussed and dedicated management support provided, coupledwith more stability in the equity markets. This particularly suits theinvestment orientated profile of LighthouseTemple clients. As a result,individual adviser annual turnover grew to an average ‚£54,000 (2004: ‚£47,000).LighthouseXpressLighthouseXpress is the Group's network division. At the end of 2005 there were305 advisers each operating under their own brand as sole traders, partnershipsor limited companies but for which the Group provides regulatory cover,professional indemnity insurance and collects income due on their behalf.LighthouseXpress is also the Group's FSA regulated subsidiary and supports eachof the Group's divisions in the areas of regulation and supervision.For 2005 the contribution of LighthouseXpress to the Group's gross profit was ‚£1.6million representing approximately 19 per cent of the Group's gross profit(2004: ‚£1.3million and 19 per cent respectively).The healthy increase in grossprofit of 23 per cent was due to significantly greater productivity averaging ‚£55,000 per adviser (2004: ‚£40,000). Whilst adviser numbers have declinedmarginally in this division to 305 from 316 in 2004, a number of poorperforming advisers have left. Those remaining, and those recently recruitedtend to be more motivated, often being at a different stage in their careers.The UK focus on the savings gap, and a less volatile stock market, havetogether led to significantly more investment business being written. Thiscoupled with the increased registration of mortgage advisers withinLighthouseXpress, following the compulsory FSA registration requirements oflate 2004, has led to more mortgage transactions flowing through the Group.LighthouseWealth and LighthousePracticesNovember 2005 saw the creation of LighthouseWealth, a new division born out ofLighthouse Independent Financial Advisers Limited and based in the City ofLondon.LighthouseWealth and the 31 LighthousePractices continue to develop theirproposition to high net worth clients, researching and delivering advice on arange of sophisticated investments, suited to the needs of wealthy individualsand professionals. LighthousePractices carry the Group's brand, and aresupported with product research, compliance, lead generation and branding.There are 39 registered advisers in total within this division.For 2005 this division's contribution to the Group's gross profit was ‚£0.6million, representing approximately 7 per cent of the Group's gross profit(2004: ‚£0.5million and 8 per cent respectively).The averaged production per adviser was ‚£104,000 for 2005 and ‚£76,000 for 2004.This increase directly reflects the investment orientated profile ofLighthouseWealth clients.LighthouseCarrwoodLighthouseCarrwood is the Group's salaried adviser division, formed followingthe acquisition of Carrwood which completed on 1 December, 2005. 39 salariedadvisers and managers trade from accountancy firms. There are 80 formalintroductory agreements in place. Carrwood Barker Group reported turnover in2005 to 30 November 2005 of ‚£6.8million. LighthouseCarrwood reported onemonth's post acquisition turnover of ‚£0.5million which was accounted for in theGroup's 2005 results.Carrwood contributes expertise in a number of business areas, which includebespoke advice to business owners and high net worth individuals. CurrentlyLighthouseCarrwood administers over 200 group pension schemes and associatedcorporate benefits on behalf of an impressive range of clients. During 2006 itis planned to extend these services to other divisions of the Group. Advisersupport in both administration and paraplanning are prerequisite services toLighthouseCarrwood advisers, enabling the advisers to concentrate on clientadvice. Average annual production per adviser is well above both the Group'saverage, at circa ‚£120,000 per adviser.City PensionsCity Trustees Limited, which trades as City Pensions and which was acquired aspart of the Carrwood transaction, administers over 800 SIPPs (Self InvestedPersonal Pensions) and a further 200 SSAS (Small Self Administered Schemes). Itholds Corporate Trustee status and is located in Milton Keynes. This divisionis well positioned to capitalise on the forthcoming pension simplificationchanges (the so-called "A" day, designated for 6th April 2006) following whichit is anticipated there will be significant demand for SIPP administrationservices from clients wishing to enjoy the new flexibility afforded by thesechanges. Accordingly City Pensions' administration services are currently beingpromoted to all the Group's advisers as a further value added service forclients.AdvisersIn aggregate the number of advisers throughout the Group at the end of 2005 was521, which included 39 from Carrwood who registered with the Group on 1December. The average number for the year was 510, which was unchanged from2004.The Group's advisers have continued to increase average turnover, rising during2005 to ‚£60,000 from ‚£52,000 in 2004. This is a reflection of strongerinvestment business as the stock markets showed improved performance, and lessvolatility than in previous years. Also helping was the sustained developmenttraining from the Lighthouse team.SUPPORT SERVICESThe Group has one FSA regulated subsidiary, LighthouseXpress. The nationalbrands LighthouseTemple, LighthouseCarrwood, LighthouseWealth andLighthouseCorporate, are wholly owned by the Group and are appointedrepresentatives of LighthouseXpress.The regulated subsidiary is responsible to the FSA for the thorough adherenceto the current regulatory requirements and this is done through the provisionof a number of support functions based in the Exeter Support Centre, namely:Field ComplianceEach adviser is visited on a regular basis and undergoes a compliance auditwhich includes file reviews, role plays, competency assessments and recordkeeping checks;SupervisionInternal compliance staff review selected client files, assessing the adviser'sadvice to the client and vetting cases requiring pre-approval;Training staffLighthouse Group staff assess adviser training needs and facilitate training toboth advisers and internal staff across a broad subject curriculum. The teamalso delivers all induction training for newly appointed advisers and staff;Financial InfrastructureIncome collection and efficient distribution is vital, and all advisers tradethrough the establishment of central agencies which LighthouseXpress holds withall the main product providers (life companies and investment houses). Theagency team is based in the Exeter support centre.OfficesThe Group maintains six offices:Throgmorton Street, the Group's registered address which Lighthouse reoccupiedin June 2005 at the same time fully disengaging from its temporary offices inGresham Street;Exeter, which is primarily occupied by finance and compliance;Brighton, which houses LighthouseTemple support, Group HR and lead generation;Manchester, which houses LighthouseCarrwood's operational functions; and twosatellite administration centres in Milton Keynes and Reading. Milton Keynesalso administers City Pensions.The Group's cost base, before the acquisition of Carrwood, was maintained at2004 levels, despite significant increases in reported turnover, and theGroup's continued investment in IT. The increases in expenses reported for theyear represent one month's expenses from LighthouseCarrwood. The Group's costbase will increase significantly in 2006 as a direct result of the Carrwoodadvisers being employed within the group and centrally supported.REGULATORY AND CUSTOMER MATTERSLighthouse completed its transition on depolarisation ahead of the regulatorydeadline, 1 June 2005, and has fully implemented the new rules. Lighthouse hasconfirmed its commitment to remaining "Independent" (i.e. offering whole ofmarket advice and the option for the client to pay by fee) rather than thealternative, but restricted "Multi Tie" option.The provision of high levels of customer care remains of central importance tothe Group. All primary functions have been reviewed to ensure that the ethos of"treating customers fairly" is embedded into the Group's culture and actions,and every function is regularly reviewed to ensure standards are maintained.The Group will again be seeking to test progress through a series of customersurveys during 2006.ACQUISITION OF CARRWOODThe acquisition of Carrwood was the first significant acquisition by the Groupin over three years. Carrwood's focus is on professional connections (mostlyaccountancy firms), and it employs highly skilled and motivated advisers. Thisadds significantly to the Group's overall IFA offerings. Moreover, CityPensions gives Lighthouse valuable pension administration capabilities, at anopportune time given recent legislative changes.Since the acquisition, synergies and removal of back office overlap havetogether produced Group wide cost savings of circa ‚£1.5million which havealready been implemented, involving redundancies and relocation of some Groupfunctions namely finance, compliance and commissions.OTHER DEVELOPMENTSRebrandingThe growth and diversification of the Group in recent years brought into theGroup several brands and identities. During the year, the Board decided torationalise these brands into a new uniform structure supported by a new logoand stationery.Lighthouse StepsThe Lighthouse Steps programme was developed in response to the Lighthouseadvisers' wish to access information and submit business quotes to majorproduct providers, efficiently and with minimum delays. Additional Steps"Lighthouse Retire" and "Lighthouse Annuities" were created in 2005 bringingScottish Equitable, Clerical Medical, Just Retirement and Canada Life into theprogramme alongside Abbey, F & C, Friends Provident, Norwich Union, StandardLife and Skandia. The Steps programme is being further developed, particularlyalongside Xpress, the Group's software platform.LighthouseXpress SoftwareFollowing a successful roll-out, Xpress is now the adopted software platformfor 400 advisers and administrators within the Group. The roll-out willcontinue and all new joiners now adopt the system at the outset. This softwaresystem provides sophisticated automation of the Lighthouse sales and backoffice process and reduces the administrative overhead for advisers, soallowing them to focus on client servicing.Version 2 of Xpress software is currently being released which completes thefull electronic interface between advisers and the Group's support functions.Training is currently being delivered on a phase basis, with the objective ofensuring the vast majority of Xpress license holders utilise fully the softwarecapabilities.THE FUTURELighthouse progress has been extremely positive in 2005, exceeding financialexpectations with healthy turnover growth matched by tight expenditurecontrols. The future presents the Group with a number of strategicopportunities, including growth of the LighthouseCarrwood division and CityPensions. Lighthouse continues to invest in the LighthouseXpress (External) ITproject, being the adviser facing system, and the Board also expectssubstantial progress with LighthouseXpress (Internal) which is starting withthe replacement of the current commission collection and payments system.Together these projects will pave the way to a modern and fully integratedcustomer relationship management system later in the year. This IT investmenttogether with planned organic expansion will ensure continued progress whilstmaintaining the Group's enviable regulatory record and reputation both withinthe industry and amongst the clients with whom it engages.Malcolm StreatfieldChief Executive13 March 2006Lighthouse Group plcConsolidated profit and loss account for the year ended 31 December 2005 Note 2005 2004 ‚£ ‚£ Turnover Continuing - on going 31,962,933 26,475,621 Continuing - acquisitions 596,342 - Less share of turnover of joint venture - (11,571) Group Turnover 2 32,559,275 26,464,050 Cost of sales - on going (23,874,737) (19,532,458) Cost of sales - acquisitions (44,266) - Total cost of sales (23,919,003) (19,532,458) Gross profit 8,640,272 6,931,592 Administrative expenses Other operating expenses 4 8,167,997 7,729,381 Exceptional operating expenses 4 431,085 525,852 Depreciation and amortisation of goodwill 4 590,973 543,914 Total administrative expenses (9,190,055) (8,799,147) Group Operating Loss 4 (549,783) (1,867,555) Continuing - on ongoing (149,200) (1,867,555) Continuing - acquisitions (400,583) - (549,783) (1,867,555) Share of operating profit in joint venture - 6,909 Total operating loss : group and share of (549,783) (1,860,646)joint ventures Net interest receivable 5 67,628 50,322 Loss on ordinary activities before (482,155) (1,810,324)taxation Tax on loss on ordinary activities 6 - - Loss for the year 19 (482,155) (1,810,324) Basic loss per share 7 (1.13)p (4.74)p Diluted loss per share 7 (1.13)p (4.74)pThe company had no recognised gains or losses other than the losses for theyear in 2004 and 2005.There is no difference between the loss on ordinary activities before taxationand the loss for the year stated above, and their historical cost equivalentsLighthouse Group plcConsolidated balance sheet at 31 December 2005 Note 2005 2005 2004 2004 ‚£ ‚£ ‚£ ‚£ Fixed assets Intangible assets 9 8,263,023 3,125,519 Tangible assets 10 632,277 405,298 Investments: Interests in joint 11 ventures: (a) Share of gross assets - 27,172 Share of gross liabilities - (20,941) - 6,231 8,895,300 3,537,048 Current assets Debtors 12 6,316,642 4,174,371 Cash at bank and in hand 5,114,810 2,506,253 11,431,452 6,680,624 Creditors: amounts falling due 13 7,878,851 3,808,681 within one year Net current assets 3,552,601 2,871,943 Total assets less current 12,447,901 6,408,991liabilities Creditors: amounts falling due 14 1,915 -in more than one year Provisions for liabilities and 16 3,218,242 2,911,560charges 9,227,744 3,497,431 Capital and reserves Called up share capital 18 751,402 394,042 Share premium account 19 15,713,946 11,131,955 Merger reserve 19 2,002,685 2,002,685 Reserve for the issue of shares 19 1,273,117 -for contingent consideration Other reserves 19 377,815 377,815 Profit and loss account 19 (10,891,221) (10,409,066) Equity shareholders' funds 20 9,227,744 3,497,431Lighthouse Group plcConsolidated cashflow statement for the year ended 31 December 2005 Note 2005 2004 ‚£ ‚£ Net cash inflow / (outflow) from operating 23(a) 584,674 (592,758)activities Returns on investments and servicing of finance Interest received 80,605 60,194 Interest paid - (9,072) Finance lease interest paid (12,977) (800) Net cash inflow from returns on investments 67,628 50,322and servicing of finance Capital expenditure Payments to acquire tangible fixed assets (43,330) (197,864) Acquisitions and disposals Receipt of deferred consideration - 195,332 Payments to acquire subsidiary undertakings 21 (88,125) - Expenses associated with acquisition of 21 (216,983) -subsidiary undertakings Net cash acquired with subsidiary undertakings 21 31,237 - Net cash (outflow) / inflow from acquisitions (273,871) 195,332and disposals Net cash inflow / (outflow) before financing 335,101 (544,968) Financing Capital element of finance lease payments (1,360) (37,073) Loan repayments as part of acquisition (787,733) - Issue of ordinary share capital 3,166,733 400,962 Exercise of options 4,707 - Expenses of issue of share capital (108,891) (11,181) Net cash inflow from financing 2,273,456 352,708 Increase / (decrease) in cash 23(b) 2,608,557 (192,260)Lighthouse Group plcNotes to the financial statements for the year ended 31 December 20051. Reconciliation of operating loss to net cash flow from operating activities 2005 2004 Total Total ‚£ ‚£ Operating loss (549,783) (1,867,555) Depreciation and asset impairments 147,911 138,916 Amortisation of goodwill 449,291 404,998 Fair value of share options granted in - 22,205the year (Increase) / decrease in debtors (1,047,423) 130,790 Increase in provisions for liabilities 147,582 574,098and charges Increase in creditors 1,437,096 3,790 Net cash inflow / (outflow) from 584,674 (592,758)operating activities 2. Reconciliation of movement in net debt 1 January Cash flow Acquisitions at 31 2005 (excluding December 2005 ‚£ cash) ‚£ ‚£ ‚£ Cash in hand and at 2,506,253 2,608,557 - 5,114,810bank Bank loans - 787,733 (787,733) - Finance leases - 1,360 (11,730) (10,370) 2,506,253 3,397,650 (799,463) 5,104,4403. Reconciliation to net cash 2005 2004 ‚£ ‚£ Net increase / (decrease) in cash 2,608,557 (192,260) Inflow applied to the movement in net debt 789,093 37,073 Change in net debt resulting from cash flows 3,397,650 (155,187) Non cash items: Acquisitions (799,463) - Movement in net debt during the year 2,598,187 (155,187) Net cash at 1 January 2,506,253 2,661,440 Net cash at 31 December 5,104,440 2,506,2534 Basis of preparationThe consolidated financial statements of the Group are prepared under thehistorical cost convention and in accordance with the Companies Act 1985 andapplicable Accounting Standards in the United Kingdom.5 Loss per ordinary shareThe calculation of the loss per share is based on the loss attributable toordinary shareholders divided by the weighted average number of shares in issueduring the year.The calculation of diluted earnings per share is based on the basic earningsper share, adjusted to allow for the issue of shares on the assumed conversionof all dilutive options. There is no dilutive effect due to the lossesincurred.6 Statutory accountsThe financial information set out in this announcement does not constitute theGroup statutory accounts for the year ended 31 December 2005 or 31 December2004, but is derived from these accounts. The statutory accounts for the Groupfor the year ended 31 December 2005 and 2004 were reported on by the auditorswithout qualification and such reports did not contain any statement undersection 237(2) or (3) of the Companies Act 1985. The accounts for 2004 weredelivered to the Registrar of Companies and those for 2005 will be delivered indue course.ENDLIGHTHOUSE GROUP PLC