Lighthouse Regulatory News (LGT)

12 Mar 2007 07:02

Lighthouse Group PLC12 March 2007 Press Release 12 March 2007 Lighthouse Group plc ("Lighthouse" or "the Group") Preliminary Results Lighthouse Group plc, one of the UK's largest Independent Financial Advisergroups and pension scheme administrators, today announces preliminary resultsfor the year ended 31 December 2006. Highlights • Turnover increased by 45 percent to £47 million (2005: £33 million)• EBITDA profit increased to £2.3 million (2005: £0.5 million)• Total funds under advice up to approximately £5 billion (2005: £3.5 billion)• Average turnover per adviser rising to £83,000 (2005: £60,000)• Successful integration of Carrwood, acquired in December 2005• Successful introduction of new electronic commission handling system creating a fully online payment system to improve communications and monetary flows• Year end cash balances increased by 33% to £6.8 million (2005: £5.1 million) with no debt• Launch of Compliance Review Committee to reinforce the Group's commitment to Treating Customers Fairly Commenting on the results, Executive Chairman David Hickey said: "The Group ismore financially robust than at any time since its formation. Lighthouse'sfinancial performance was especially noteworthy in that significant cash profitswere recorded, recurring annualised revenues approached £7 million, and year endcash balances again rose substantially. "The Group's operational performance was also strong. Late in 2005 the Groupacquired Carrwood and the new business was successfully integrated during early2006. This transaction has been of significant commercial and economic benefitfor Lighthouse, both in terms of cost savings and the healthy trading of theCarrwood wealth management team. "The Board remains confident of further progress in 2007." - Ends - For further information:Lighthouse Group plcMalcolm Streatfield, CEO Tel: +44 (0) 20 7065 5640malcolm.streatfield@lighthousegroup.plc.uk www.lighthousegroup.plc.uk Daniel Stewart & Co.Lindsay Mair Tel: +44 (0) 20 7776 6573lindsay.mair@danielstewart.co.ukChloe Ponsonby Tel: +44 (0) 20 7776 6583Chloe.ponsonby@danielstewart.co.uk www.danielstewart.co.uk Media enquiries:Abchurch CommunicationsHeather Salmondheather.salmond@abchurch-group.comGareth Mead Tel: +44 (0) 20 7398 7700gareth.mead@abchurch-group.com www.abchurch-group.com CHAIRMAN'S STATEMENT I am pleased to report another year of substantial progress for Lighthouse Groupplc with record financial results derived from continued growth in revenues andthe rigorous management of costs. In operational terms 2006 saw the fullintegration of the Carrwood acquisition and the installation of a new Group widecommissions handling system which will allow for substantial growth in futurebusiness and adviser volumes. FINANCIAL HIGHLIGHTS Year to 31 December Year to 31 December 2006 2005Turnover £47.2 million £32.6 millionGross profit £15.7 million £8.6 millionOperating costs (2005 restated) £13.4 million £8.2 millionEBITDA * (2005 restated) £2,306,000 £450,000Exceptional items ** £1,519,000 £431,000Loss before taxation £214,000 £504,000 * Earnings before interest, tax, depreciation, amortisation and exceptional items ** 2006 relates solely to the charge arising in relation to arrangements entered into for the appointment of shares from the EBT in accordance with FRS 20 guidelines for such items. 2005 relates solely to the reorganisation following the acquisition of Carrwood. FINANCIAL RESULTS Trading Turnover for the year to 31 December, 2006 increased by 45 percent to £47.2million (2005: £32.6 million). Approximately half of this increase is derivedfrom the Carrwood acquisition. The balance represented organic growth whichderived from the Group's focus on advisers keen to advance their performances. Gross profit increased by 82 percent to £15.7 million (2005: £8.6 million). Ofthis 80 percent was attributable to LighthouseCarrwood; the like for like (i.e.excluding the effects of the Carrwood division) growth was a strong 22 percent. Cost control remains a focus of the Group. Like for like (i.e. excluding theeffects of the Carrwood division) expenses rose by 4 percent, but like for likeoperating expenses declined to 22 percent of total turnover, from 25 percent in2005. Annualised LighthouseCarrwood costs were reduced by 19 percent to £4.9million, a figure that includes the costs of salaried advisers. The strong turnover growth, increase in gross profit, and the focus on operatingexpenses together resulted in an increase in EBITDA from £450,000 (restated) to£2.3 million. The bulk of this arose in the second half of the year as the costsavings derived from the Carrwood integration took effect. Balance Sheet The strong EBITDA performance meant that cash balances rose 33 percent to £6.8million and the Group continues to have no debt. Exceptionals As explained in my interim statement released in September 2006, the Group hasadopted the following treatments for share-based payments. The implementation of FRS 20 (relating to the accounting treatment forshare-based payments) having taken effect for accounting periods commencing onor after 1 January 2006, has resulted in the Group recognising a current yearcharge of £36,818 in these financial statements relating to share options issuedon or after 7 November 2002. The comparable financial statements have beenadjusted by way of a prior year charge of £22,265. The Group has had an Employee Benefit Trust ('EBT') in place since its flotationon AIM in 2000 holding 8,125,000 shares. Subsequent to 30 June 2006,arrangements have been entered into for the revocable appointment of theseshares to a number of sub-trusts for the benefit of employees and other membersof the beneficial class. Accordingly the Group has recognised an exceptionalcharge in its year end financial statements amounting to £1.5 million, based onthe share price at the date of grant. Both these treatments are in accordance with FRS 20 and, while opticallyirritating, it is emphasised that neither of these matters has any effect onGroup cash or distributable reserves, as there is an equal credit to equity. Exceptional costs of £431,000 were incurred in December 2005 as a consequence ofthe reorganisation following the Carrwood transaction. There were no exceptionalitems derived from the Group's ongoing operations during 2006 or 2005. RECURRING REVENUES AND FUNDS UNDER ADVICE The Board is placing increasing emphasis on recurring income and activelyseeking out opportunities and strategies to boost it. It is therefore gratifyingto see that recurring income for 2006 was £6.6 million, representing a sizeableincrease over the £3.8 million recorded for 2005. This uplift is in part as aconsequence of the funds under advice attributable to the Group and its advisersrising from £3.5 billion for 2005 to £5 billion for 2006. DIVIDENDS The Board intends to commence the payment of dividends to shareholders as soonas practicable. However, start up and subsequent trading losses have created adeficiency in the holding company's distributable reserves. The Group is nowprofitable and is therefore reducing this deficiency. In order to accelerate thereduction the Group plans to make use of the well established Court proceduresfor remedying such deficiencies. Accordingly the Group has instructed legaladvisers to make the appropriate applications. Shareholders will be advised onprogress in the Group's interim statement, traditionally released in September. STRATEGY A substantial proportion of the UK's retail financial products continue to besold via Independent Financial Advisers and as the retail investment marketremains strong, product manufacturers, providers and fund management groups areplacing greater emphasis on their access to IFAs. This should lead to moreattractive terms of trade for Lighthouse in the short and medium term. There is increasing focus on the need for recurring profitability within anundercapitalised sector, not least in order to attract additional capitalsupport and professional management. Remuneration for the advice and sale ofretail investment and pensions products is likely therefore to evolve steadilyaway from the current norm where the bulk of the advisers' and distributors'remuneration is taken initially, in favour of remuneration explicitly linked toadvice and service provided over time. Care will be required however to ensurethat advisers become adequately rewarded if the current savings and protectiongaps are not to widen further. Many of these themes will receive an airing in the Retail Distribution Reviewrecently launched by the FSA. The Review is however at an early stage and itwill be some time before confirmed decisions emerge to illustrate how thesethemes might reshape the sector. In the meantime, the garnering and management of retail funds will continue togrow in importance. Accordingly we are currently seeing a "land grab" exercisein which many groups are seeking to aggregate financial assets onto electronichost platforms in the belief that once the assets have been collected, the hostwill benefit from recurring annual income derived from the underlying funds.While this is not in my opinion mistaken, it is a little simplistic. Retailcustomers clearly need and value advice in conducting their financial affairsand this will continue to place the IFA in a pivotal position. Hence whileLighthouse is well advanced in procuring platform capability and expanding itsfunds based activities generally, it will continue to ensure that it retains anattractive service offering for IFAs, who in turn will continue to haveconsiderable influence in guiding their clients on all aspects of theirfinancial affairs. PROSPECTS As stated in the interim results in September 2006, the trading background forLighthouse is continuing to improve as a consequence of a strong investmentclimate. The increase in turnover recorded in these results appears to confirmthat trend. In addition the constant media focus on the UK personal savings andprotection gaps appear to be continuing to shift individuals' focus towardsserious consideration of providing for their financial future. This focus islikely to increase in the short to medium term and hence is expected to resultin greater business volumes for financial advisers. Against that background Lighthouse has benefited from record levels of turnoverespecially during the latter half of 2006. Since the year end, the Group hastraded in line with expectations and accordingly the Board looks forward toreporting further progress during 2007. THANKS My colleagues and I would like to thank all the Group's advisers for theircontribution throughout 2006. We look forward to working with them in the yearsto come. Finally, I am particularly grateful to my Board colleagues and the entireLighthouse team for their hard work and commitment in what has been anothersuccessful year. David Hickey Executive Chairman 12 March 2007 CHIEF EXECUTIVE'S REVIEW GROUP STRUCTURE LighthouseGroup's core activities comprise the provision of services toIndependent Financial Advisers and pension scheme administrators servicing andadvising clients throughout the U.K. These services are delivered through theGroup's main divisions, LighthouseCarrwood, LighthouseTemple, LighthouseWealth,LighthouseXpress, and City Trustees. While the Group has various operating divisions, many of which are the result ofacquisitions, the Group is operationally fully integrated. There are no legacyfinancial reporting issues, IT, commission, professional indemnity, norcompliance issues remaining. Consequently the Group's operations are now veryscaleable. DIVISIONAL TRADING PERFORMANCES LighthouseCarrwood LighthouseCarrwood is the Group's professional salaried adviser division, formedfollowing the acquisition of Carrwood which was completed on 1 December 2005.The integration was completed on time and to budget. 40 salaried advisers andmanagers trade from accountancy firms. There are 80 formal introductoryagreements in place. LighthouseCarrwood turnover in 2006 was £7.5 million. For2006 this division's contribution to the group's gross profit was £6 million,representing 38 percent of the Group's gross profit. LighthouseCarrwood brings focused expertise in a number of business areas, whichinclude bespoke advice to business owners and high net worth individuals.Adviser support in both administration and para planning are prerequisiteservices to LighthouseCarrwood advisers, enabling the advisers to concentrate onclient advice. Average annual production per adviser is therefore well aboveboth the Group's and the national average at circa £190,000 per adviser (2005:£120,000). LighthouseTemple LighthouseTemple 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 therefrom, although theadvisers are self-employed. At 31 December 2006 the division comprised 148registered advisers, including 7 employed regional managers. There are a further9 advisers about to complete the application process. The Group's Brightonoffice provides a UK wide support function for this division, including acustomer call centre, and an advisory service for the provision of new businessleads and related diary management. For 2006, LighthouseTemple's contribution to the Group's gross profit was £3.3million representing approximately 21 percent of the Group's gross profit (2005£2.8 million and 32 percent respectively). This increase in gross profitreflects both the focussed and dedicated management support provided, coupledwith an 8 percent increase in adviser numbers. Turnover per adviser grew to anaverage of £63,000 (2005 £54,000), an increase of 17 percent. LighthouseWealth and Lighthouse Practices 2006 was the first full year of LighthouseWealth, a new division born out ofLighthouse Independent Financial Advisers Limited, based within the City ofLondon. LighthouseWealth and the 28 Lighthouse Practices 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. Lighthouse Practices carry the Group's brand, and aresupported with product research, compliance, lead generation and branding.There are 40 registered advisers in total within this division. For 2006 this division's contribution to the Group's gross profit was £0.7million, representing approximately 5 percent of the Group's gross profit (2005£0.6 million, and 7 percent respectively). The average production per adviserwas £150,000 for 2006 and £104,000 for 2005. This increase directly reflects theinvestment orientated profile of LighthouseWealth clients. LighthouseXpress LighthouseXpress is the Group's network division. At the end of 2006 there were281 advisers each operating under their own brand as sole traders, partnershipsor limited companies. The Group provides regulatory cover, professionalindemnity insurance and collects income due on their behalf. LighthouseXpress isalso the Group's FSA regulated subsidiary and supports each of the Group'sdivisions in the areas of regulation, supervision and training. For 2006, LighthouseXpress's contribution to the Group's gross profit was £2million representing approximately 13 percent of the Group's gross profit (2005£1.6 million and 19 percent respectively). The healthy increase in gross profitof 25 percent was due to significantly more productivity averaging £70,000 peradviser (2005 £55,000). While adviser numbers have declined in this division to281 from 305 in 2006, a number of poor performing advisers have left the Groupand the industry. Those remaining, and those recently recruited, tend to be moremotivated, often being at a different stage in their careers. The UK focus onthe savings gap, and changes to pension legislation post "A" day on 6 April2006, have together led to significantly more investment and pension businessbeing written. Additionally, the increasing number of mortgage registeredadvisers within LighthouseXpress, post the compulsory FSA registrationrequirements of late 2004, has led to more mortgage transactions flowing throughthe Group and now represents an annualised value of approximately £1 billion. Lighthouse Group Benefits This division was originally part of Carrwood but is now being separatelyoperated. As at 31 December, 2006 it administered approximately 400 activepension schemes with over 5,000 members, 115 group risk schemes covering life,income protection and critical illness, and approximately 100 group healthschemes covering over 1,000 lives. Total revenues for 2006 approached £1 millionand the Board expects significant growth in this division during the next fewyears. During 2007 it is planned these services will be extended to otherdivisions of the Group. City Pensions Limited City Pensions Limited, which trades as City Trustees and which was acquired aspart of the Carrwood transaction, administers 915 SIPPs (Self Invested PersonalPensions) and a further 200 SSASs (Small Self Administered Schemes) with clientassets of £280 million. While both markets improved significantly at thecommodity end, growth in the bespoke end of the market was more subdued. City Trustees holds Corporate Trustee status and has recently re-located to theGroup's head office in Throgmorton Street London from Milton Keynes. Thisdivision in 2006 has adopted a new back office system resulting inadministrative efficiencies and, rebranded, is benefiting from working alongsideincreasing numbers of Lighthouse advisers. The company is well positioned tocapitalise on the pension simplification changes (the so-called "A" day whichtook legal effect from 6 April, 2006). City Pensions Limited has applied to the FSA for authorisation and is awaitingapproval prior to the FSA requirements for registration by 6 April, 2007 cominginto force. ADVISERS In aggregate the number of advisers throughout the Group at the end of 2006 was516 and the average number for the year was 510, which was unchanged from 2005. The Group's advisers have continued to increase average turnover, rising during2006 to £83,000 from £60,000 in 2005. This reflected the strong contributionfrom LighthouseCarrwood advisers and continued stronger investment and pensionbusiness as the media focus on the savings gap and "A" day changes to pensionlegislation took effect. SUPPORT SERVICES The Group has currently one FSA regulated subsidiary LighthouseXpress. Thenational brands LighthouseCarrwood, LighthouseWealth, LighthouseTemple, andLighthouseCorporate, while wholly owned by the Group, are AppointedRepresentatives of LighthouseXpress. The regulated subsidiary is responsible to the FSA for the thorough adherence tothe current regulatory requirements and this is done through the provision of anumber of support functions primarily based in the Exeter Support Centre,namely:• Field Compliance; each adviser is visited annually and undergoes a compliance audit which includes file reviews, role plays, competency assessments and record keeping checks;• Supervision; the internal compliance teams review selected client files, assessing the adviser's advice to the client and vetting cases requiring pre-approval; and• Training staff; staff assess adviser training needs and facilitate training to both advisers and internal staff across a broad subject curriculum. The team also delivers all induction training for newly appointed advisers and staff. Income 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. The Group maintains five offices:• Exeter, which is primarily occupied by finance and compliance;• Manchester, which houses LighthouseCarrwood's operational functions.• Throgmorton Street, the Group's registered address, which is occupied by some of the Group Executive, as well as Lighthouse Wealth advisers and the City Trustees team;• Brighton, which houses LighthouseTemple support, Group HR and lead generation; and• Reading, a satellite administration centre for LighthouseCarrwood The Group's like for like cost base, in other words excluding the effect of theemployed Carrwood advisers, grew by £310,000 (4 percent over 2005) primarily asa result of the Group's continued investment in IT and associated staff costs.With the inclusion of Lighthouse Carrwood, the salaried advisor division, thecosts have increased overall by 64 percent. TREATING CUSTOMERS FAIRLY 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. TheNon-Executive Chairman of the Group's audit committee has recently extended hisresponsibilities to chair the newly formed "Compliance Review Committee". Thiscommittee will have a new formal channel directly accessing all complianceaspects of the Group and will comprise the Non-Executive Directors and the Headof Compliance. OTHER DEVELOPMENTS New group website Lighthouse has many stakeholder audiences and the main purpose of the new Groupwebsite is to explain who we are and what we do as a group. The information onthe site is aimed at IFAs, journalists, general media, product providers,existing shareholders and potential investors. New divisional sites will go live in 2007 and will highlight Lighthouse IFAs andthe services they are able to provide to clients both new and existing. www.lighthousegroup.plc.uk New commission collection and payments system During 2006 a new system went operational. This has created a fully on-linepayment system allowing for the first time payment receipts from major providersto archive electronically and be matched automatically. This, together withon-line access to the system by advisers across all divisions, is greatlyimproving communications, money flows, and management information. Adviser survey A Group wide adviser survey was conducted in January 2007 and returns have beenanalysed highlighting that advisers are increasingly busy as evidenced by theirincreased turnover. Some highlights are as follows:• 78% rated our staff as excellent or good• 56% would like more training and development• 66% rate supervision service as good to excellent• 69% rate field compliance as good to excellent• 65% use the Group's Xpress software Advisers want more training and development particularly in the areas of IT,platforms, and structuring their business towards fees and recurring income andthis will be implemented. THE FUTURE Lighthouse progress has continued during 2006, with substantial increases inturnover, gross profit, and EBITDA. The future presents a number of positive strategic opportunities, includingextending our funds under advice to include the launch of our client riskprofiling process across the Group, linked to suitable fund selections. Our continued investment in IT will see the introduction of new servers andsoftware capable of handling greater volumes of staff and adviser traffic. The Lighthouse market position as a diverse, profitable, independent advisoryand pension administration business is being increasingly recognised across theindustry and externally amongst the many thousands of clients with whom itengages and I look forward to reporting substantial further progress in 2007. Malcolm Streatfield Chief Executive 12 March 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 (restated) £ £TurnoverContinuing - ongoing 47,159,671 31,962,933Continuing - acquisitions - 596,342Group Turnover 47,159,671 32,559,275Cost of sales - ongoing (31,458,272) (23,874,737)Cost of sales - acquisitions - (44,266)Total cost of sales - continuing operations (31,458,272) (23,919,003)Gross profit 15,701,399 8,640,272Administrative expenses Other operating expenses 13,395,032 8,190,262 Exceptional operating expenses 1,519,375 431,085 Depreciation and amortisation of goodwill 1,158,855 590,973Total administrative expenses (16,073,262) (9,212,320) Group Operating Loss (371,863) (572,048)Continuing - ongoing (371,863) (171,465)Continuing - acquisitions - (400,583) (371,863) (572,048)Bank interest receivable 215,703 80,605Interest payable and similar charges (57,495) (12,977)Net Interest receivable 158,208 67,628Loss on ordinary activities before taxation (213,655) (504,420)Tax on loss on ordinary activities - -Loss for the year (213,655) (504,420)Basic loss per share (0.32)p (1. 46)pDiluted loss per share (0.32)p (1.46)p The group had no recognised gains or losses other than the losses for the yearin 2005 and 2006. There is no difference between the loss on ordinary activities before taxationand the loss for the year stated above, and their historical cost equivalents. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006 2006 2006 2005 2005 (restated) (restated) £ £ £ £Fixed assetsIntangible assets 6,616,981 8,263,023Tangible assets 697,294 632,277 7,314,275 8,895,300Current assetsDebtors 9,629,692 6,316,642Cash at bank and in hand 6,799,888 5,114,810 16,429,580 11,431,452Creditors: amounts falling due 11,161,712 8,599,488within one yearNet current assets 5,267,868 2,831,964Total assets less current 12,582,143 11,727,264liabilitiesCreditors: amounts falling due in 1,341 554,395more than one yearProvisions for liabilities and 3,282,370 3,218,242charges 9,298,432 7,954,627 Capital and reservesCalled up share capital 752,669 751,402Share premium account 15,713,946 15,713,946Merger reserve 2,002,685 2,002,685Other reserves 1,934,008 377,815Profit and loss account (11,104,876) (10,891,221)Equity shareholders' funds 9,298,432 7,954,627 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 (restated) £ £Net cash inflow from operating activities 1,887,331 584,674Returns on investments and servicing of financeInterest received 215,703 80,605Finance lease interest paid (57,495) (12,977)Net cash inflow from returns on investments and servicing of finance 158,208 67,628Capital expenditurePayments to acquire tangible fixed assets (341,657) (43,330)Acquisitions and disposalsPayments to acquire subsidiary undertakings - (88,125)Expenses associated with acquisition of subsidiary undertakings (13,724) (216,983)Net cash acquired with subsidiary undertakings - 31,237Net outflow from acquisitions and disposals (13,724) (273,871)Net cash inflow before financing 1,690,158 335,101FinancingCapital element of finance lease payments (6,347) (1,360)Loan repayments as part of acquisition - (787,733)Issue of ordinary share capital - 3,166,733Exercise of options 1,267 4,707Expenses of issue of share capital - (108,891)Net cash (outflow)/inflow from financing (5,080) 2,273,456Increase in cash 1,685,078 2,608,557 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 1. Reconciliation of operating profit/(loss) to net cash flow from operatingactivities 2006 2005 Total Total £ (restated) £Operating loss (371,863) (572,048)Depreciation and asset impairments 272,088 147,911Amortisation of goodwill 886,767 449,291Loss on disposal of fixed assets 4,552 -Share-based payment 1,556,193 22,265Increase in debtors (3,434,201) (1,047,423)(Decrease)/increase in provisions for liabilities (142,286) 147,582and chargesIncrease in creditors 3,116,081 1,437,096Net cash inflow from operating activities 1,887,331 584,674 2. Reconciliation of movement in net debt 1 January 2006 Cash flow At 31 December 2006 £ £ £Cash in hand and at bank 5,114,810 1,685,078 6,799,888Finance leases (10,370) 6,347 (4,023) 5,104,440 1,691,425 6,795,865 3. Reconciliation to net cash 2006 2005 £ £Net increase in cash 1,685,078 2,608,557Cashflow from decrease in lease financing 6,347 1,360Inflow applied to the movement in net debt - 787,733Change in net debt resulting from cash flows 1,691,425 3,397,650Non cash items: Acquisitions - (799,463)Movement in net debt during the year 1,691,425 2,598,187Net cash at 1 January 5,104,440 2,506,253Net cash at 31 December 6,795,865 5,104,440 4. Basis of preparation The 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. The PreliminaryAnnouncement has been prepared on the same basis as set out in the prior yearfinancial statements with the exception of the implementation of FRS 20. The adoption of FRS 20 has resulted in a change in accounting policy forshare-based payment transactions. The main impact of FRS 20 on the Group is therecognition of an expense and a corresponding entry to equity for employees'share options. The Group has applied FRS 20 retrospectively and has taken advantage of thetransitional provisions of FRS 20 in respect of equity settled awards. As aresult, the Group has applied FRS 20 only to equity settled awards granted after7 November 2002 that had not vested on 1 January 2006. The effect of the revised policy has decreased current year profits by£1,556,193 (2005: £22,265) due to an increase in the employees benefits expenseincluded within other operating expenses. The deferred contingent consideration arising from the acquisition of CarrwoodBarker Holdings Limited has been reallocated from reserves to creditors onreassessment of the appropriate presentation under FRS 25 (FinancialInstruments). The 2005 prior year figures have been restated as a result. 5. Loss per ordinary share The 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 2005 weighted average number of shares has been restated to exclude the8,125,000 shares held by the Lighthouse Independent Financial Advisers LimitedRemuneration Trust. There are 2,644,582 number of options (2005: 2,122,019) which could potentiallydilute earnings per share in the future, but were not included within thecalculation of diluted loss per share as they were anti-dilutive for the periodspresented. In addition, the 8,125,000 (2005: 8,125,000) shares which are held bythe Remuneration Trust could potentially dilute earnings per share in thefuture, but were not included within the calculation of diluted loss per shareas they were anti-dilutive for the periods presented. 6. Reconciliation of movements in Group shareholders' funds 2006 2005 (restated) £ £Loss for the financial year (213,655) (504,420)Issue of ordinary share capital 1,267 5,048,242Reserve credit for share-based payment plans 1,556,193 22,265Expenses of issue of share capital - (108,891)Net increase in shareholders' funds 1,343,805 4,457,196Shareholders' funds at 1 January 7,954,627 3,497,431Shareholders' funds at 31 December 9,298,432 7,954,627 7. Statutory accounts The financial information set out in this announcement does not constitute theGroup statutory financial statements for the year ended 31 December 2006 or 31December 2005, but is derived from these financial statements. The statutoryfinancial statements for the Group for the year ended 31 December 2005 werereported on by the auditors without qualification and such reports did notcontain any statement under section 237(2) or (3) of the Companies Act 1985. Thefinancial statements for 2005 were delivered to the Registrar of Companies andthose for 2006 will be delivered in due course. This information is provided by RNS The company news service from the London Stock Exchange