Lighthouse Regulatory News (LGT)

16 Mar 2005 07:00

16 March 2005 LIGHTHOUSE GROUP PLC ("the Company" or "Lighthouse") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Lighthouse Group plc, one of the UK's largest firms of Independent FinancialAdvisers, today announces preliminary results for the year ended 31 December2004.Highlights of the results are: * Significantly reduced adjusted losses* between 2003 (‚£1.3m) and 2004 (‚£ 0.9m), with further sharp improvement between the first and second halves of 2004 from ‚£1 million loss to ‚£0.1 million profit. * Maiden profits at EBITDA level for each month in the second half of 2004. * 16% increase in turnover to ‚£26.5 million as a result of successfully integrated acquisitions. * Net assets of ‚£3.5m with ‚£2.5 million in cash and no debt. * Successful launch of new technology platform - LighthouseXpress - increasing advisers' efficiency greatly. * Lighthouse Steps, a new electronic transaction delivery channel, established with Friends Provident, Standard Life, Abbey, Skandia, Norwich Union, F&C and Scottish Equitable. * Commitment to independence to ensure `whole of market' access for IFAs and their clients. Commenting on the results, executive chairman David Hickey said:"Despite a tough marketplace Lighthouse Group has performed well, especiallyduring the second half of 2004. This was due to growth in productivity from ouradvisers while also keeping costs tight."During 2004 we put considerable effort into developing LighthouseXpress, inour opinion the best adviser support structure available in the marketplace.Our advisers can now deliver independent advice swiftly and efficiently totheir clients."Lighthouse Group is now stronger than at any time since its formation. Thisimproved performance, particularly in the second half of the year, togetherwith a robust balance sheet with cash and no debt, underscores our confidencefor the future."* Group operating loss for the year before amortisation of goodwill andexceptional operating expenses ENDS FOR FURTHER INFORMATION:Lighthouse Group plc Tel: 020 7776 8891David Hickey, Executive ChairmanMalcolm Streatfield, Chief ExecutiveWaughton Tel: 020 7796 9999Robin Hepburn/Sorrel DaviesNOTES TO EDITORS:Lighthouse Group plcThe Lighthouse Group provides support to Independent Financial Advisers who inturn provide financial planning advice to both private and corporate clients.Lighthouse is the 7th largest IFA group in the UK (according to Top 100 IFASurvey, Money Marketing Magazine, 2003 - measured by RI numbers) and providesservices to over 500 IFAs nationally throughout the UK.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 plc CHAIRMAN'S STATEMENTINTRODUCTIONLighthouse Group made considerable progress across a broad front during 2004and the financial performance has continued its regular year on yearimprovement. There was a significant improvement in the adjusted results (groupoperating loss for the year before goodwill amortisation and exceptionaloperating expenses) from a first half loss of ‚£1,027,000 to a second halfprofit of ‚£91,000.During the year further action was taken to reduce costs and, as a consequence,in July, the Group crossed into profitability at the EBITDA level (earningsbefore interest, tax, depreciation, amortisation and exceptional items) and hascontinued to record a surplus for each month thereafter. While the amountsconcerned are not substantial, amounting in aggregate to ‚£153,000 for the sixmonth period, it was nonetheless the first time since its creation five yearsago that the Group has reported profits on a sustained basis. This is a notableachievement.Conditions in the IFA market during 2004 were not easy and consumer confidencein long-term savings has not yet recovered. Furthermore, the evidence is thatthe improvement in equity markets seen generally in 2004 was perverselymirrored by a net disinvestment in collective investment products especiallyduring the final quarter of the year. However there are signs that consumerscontinue to value independent advice, and Lighthouse Group believes that it hasa strong platform upon which to grow its business among those committed toprovide it.OPERATIONSThe Chief Executive's Review comments in detail on the significant changes inmost operational areas. These include: * the design, development, and roll out of LighthouseXpress; an electronic trading platform now being introduced to all Lighthouse Group advisers which reduces substantially the timescales and paperwork required to submit new business; * the further development of Lighthouse Steps, which has formalised relationships with product providers across a range of IFA product suites and which is an inherent part of LighthouseXpress; * the roll out of the Group's new mortgage offering; and * the creation, refinement and roll out of the Temple Practice concept, which is already accelerating the growth in the number of advisers in the Temple division. FINANCIAL PERFORMANCEGroup turnover increased by 16% to ‚£26.5 million. This includes a full year'scontribution amounting to ‚£6 million from the Temple division which wasacquired in June 2003. The Group showed an EBITDA profit of ‚£153,000 for thesecond half of the year, producing an EBITDA loss for the full year of ‚£797,000, reflecting the careful cost management and slightly better tradingconditions experienced during the latter part of the year. The ChiefExecutive's review contains a full analysis of the financial performance.Balance SheetThe balance sheet reflects the Group's careful management of working capitalwith net assets of ‚£3.5 million as at 31 December 2004, of which ‚£2.5 millionwas represented by cash. The Group has no debt.ExceptionalsThe Group recorded three exceptional items during the year: * firstly, and as announced at the interim stage, certain advisers recruited in 2001 commenced legal proceedings against the Group seeking cash payments amounting in aggregate to approximately ‚£1 million; this was before estimated costs of ‚£500,000 had the claims reached court. I am pleased to report that each case has now been settled out of court. The total aggregate cost to Lighthouse, including expenses, was ‚£250,767, and the majority of the advisers concerned continue to trade with the Group. The Board is not aware of any other such cases; * secondly, and also as announced at the interim stage, discussions had commenced with a former Lighthouse director concerning payments due over a six year period relating to certain subsidiaries sold to a company controlled by him. During 2004 the Board became increasingly concerned about the recoverability of the amounts owed to the Group. Accordingly the Board demanded and secured a reduced but immediate cash payment in full and final settlement of all amounts due. This resulted in an exceptional charge of ‚£154,668, before taking into account an exceptional profit previously recorded of ‚£60,000 when the subsidiaries were originally sold in 2003; and * finally, a founder of the Group's network subsidiary, Valerie Gaze, retired at the turn of the year with a contractual compensation payment of ‚£ 120,417. The Board thanks her for her valuable contribution over the years. TRANSACTIONSPersonal Group Holdings PLCIn July 2004 the Group announced that it had entered into joint venturearrangements with Personal Group Holdings PLC. This represented a significantentry for Lighthouse into the provision of IFA advice to corporate entities,with an organisation which has been active in this area for some time. TheBoard was also pleased to welcome Personal Group Holdings PLC as a shareholder,following its subscription for new shares in the Group at the same time.Broadstone (I.F.A.) LimitedThe Board announced in September 2004 that Lighthouse had recruited additionaladvisers previously authorised by Broadstone (I.F.A.) Limited, and the Board ispleased to welcome them to the Group.SECTOR BACKGROUNDSince early 2000 the UK retail financial advisory sector has had some of theworst trading conditions for decades, and the prolonged bear market thatstarted shortly thereafter is widely seen as rivalling that of the early1970's. The poor performance of the UK equities markets during this perioddrove many IFA customers away from packaged financial products and investmentadvice, which together have been the traditional mainstay of the IFA industry.The poor performance of the UK equity markets also coincided with, and to anextent triggered, the damaging mis-selling episodes recently seen in thesector. These negative developments, coupled with the attractive returnsavailable elsewhere including investment in residential and commercialproperty, together reduced dramatically business volumes in the sector over thepast few years.The outlook for 2005 appears more promising due to a number of factors: * retail investment business volumes look set to increase with the apparent slow down of the buy-to-let residential property market, increasing retail cash deposits, and more stable equity markets, although a dramatic rise is probably unlikely; * the new regulatory arrangements removing polarisation appear to favour the larger IFA groups, and whilst regulatory charges show no signs of coming down, the Board expects the rate of increases to slow; and * the sector is also seeing greater capacity in the professional indemnity insurance market with improved rates for organisations with rigorous compliance cultures and positive regulatory track records, such as Lighthouse. This was evidenced by the recent announcement of a 50% reduction in professional indemnity insurance excesses for Lighthouse advisers. STRATEGY AND PROSPECTSThe Group's strategic objective since 2001 has been to become one of the topten IFA distribution groups in the UK, principally by growing the number ofquality IFAs within the Group. Having started with approximately 50 when theGroup was formed some 5 years ago, the Group now has over 500 which has beensufficient to attain the initial aim. The logic was partly to ensure turnoverlevels were sufficient to create profits, and partly to ensure that Lighthousecould take advantage of its scale of operation to become a cost effectivedistribution channel for product providers, thereby improving its terms oftrade with them. The benefits of this strategy started to be reaped during thelatter half of 2004, producing the modest but important surplus for the period.The strategy now is to continue increasing the number of advisers, to continueimproving their productivity, and to seek out enhancing acquisitionopportunities.The Board continues to believe that Lighthouse is stronger than at any timesince its formation, and the appearance of maiden profits at the EBITDA levelin the second half underscores this confidence. The challenge now is to turnwhat is effectively a cash profit into an accounting profit.I would like to thank all Group practice principals, advisers, members andsupportive product providers for their contribution throughout 2004. 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 Chairman Lighthouse Group plc CHIEF EXECUTIVE'S REVIEWGROUP STRUCTURELighthouse's core activity is the provision of services to IndependentFinancial Advisers throughout the U.K. These services are delivered through theGroup's four divisions: Temple Financial Planning, Lighthouse Practices, thenetwork operation Berkeley Wodehouse Associates and Lighthouse CorporateBenefits. The latest of these, Lighthouse Corporate Benefits, was establishedin July 2004 with 50 advisers servicing enquiries received from the employeebenefits company Personal Group Holdings PLC.REGULATORY CHANGES2004 saw the regulatory environment change with the FSA moving mortgages andmortgage advice into its orbit, closely followed by general insurance inJanuary 2005. This means that the Group now gets the benefit of all mortgageand related insurance business hitherto transacted by some of its advisersoutside of the Group's regulatory responsibility.On 29 November 2004 the FSA published its final policy statement (PS04/27) ondepolarisation, giving a six month transitional period. Accordingly, Lighthouseregulated advisers have until 1 June 2005 to implement the new rules. The Groupis confident that it will facilitate this implementation well in advance ofthat date. These rules place new requirements on all firms selling packagedproducts, (e.g. life policies, personal pensions and collective investments).Lighthouse has considered options available under the new rules and is firmlycommitted to remaining "independent" (i.e. offering whole of market advice andoffering the option for the client to pay by fee), rather than the alternative,but restricted, "multi-tie" option.The result of this commitment is that from 1 June 2005 advisers associated withLighthouse will continue to be recognised and known as "independent financialadvisers". The Group will, however, constantly review the market place and thegroup structure to ensure that its members are benefiting from anyopportunities the new rules may present.FINANCIAL PERFORMANCE 2001 year 2002 year 2003 year 2004 year 2004 ‚£'000 ‚£'000 ‚£'000 ‚£'000 interim ‚£ '000 Turnover 5,166 14,895 22,863 26,475 12,925 Gross profit 930 2,609 4,783 6,932 3,273 Operating expenses (2,478) (4,477) (5,917) (7,729) (4,223) EBITDA (1,548) (1,868) (1,134) (797) (950) Adjusted results * (1,647) (2,032) (1,318) (936) (1,027) Depreciation and (162) (414) (514) (544) (279) amortisation Exceptionals (1,111) - (1,466) (526) (246) Total Group operating loss (2,821) (2,282) (3,114) (1,867) (1,475) Average number of advisers 68 320 512 511 514 * Group operating loss for the year before amortisation of goodwill andexceptional operating expensesTurnoverTurnover rose by 16% to ‚£26.5 million, which was a strong performance derivedfrom the strategy of building adviser numbers and retaining good performers.The average number of advisers in the year remained relatively constant at 511(2003: 512) and it was pleasing to note that average turnover per adviser roseto ‚£52,000 from ‚£45,000 recorded in 2003, despite prevailing market conditions.Gross ProfitThe increased turnover produced a corresponding increase in gross profit to ‚£6.9 million. The increase in gross profit of 45% reflects ‚£2 million fromTemple and ‚£5 million from the remainder of the Group. Temple provides greatermargins than the Group's other divisions, however, the support required is moreextensive incorporating consultant support, lead generation and marketing.These three core support areas are provided by the Group's Brighton SupportCentre.Operating Expenses (before depreciation, amortisation and exceptional expenses)Of the total ‚£7.7 million of operating expenses, ‚£2.2million relates to Templefor the full year. The operating expenses of ‚£3.5 million for the second halfshow a reduction of ‚£1.4 million on an annualised basis, as compared with thefirst half of 2004, reflecting a reorganisation of the Group complianceoperation and the Brighton Support Centre resulting in some redundancies andfurther adjustments to the overall marketing budget. These adjustments weremade in April 2004 and are fully reflected in the figures for the second halfof the year.EBITDA (before exceptional expenses)The EBITDA loss of ‚£0.8 million for the year, which shows a reduction from thefigure reported at the interim stage, reflects the modest monthly EBITDAprofits achieved since July. This was a notable achievement and reflects uponthe close attention given to aligning our cost base to revenues.DIVISIONAL TRADING PERFORMANCETemple Financial Planning Ltd (`Temple') is a national IFA operating throughoutthe UK and 2004 was its first full year within the Group. As at 31 December2004 it comprised 131 registered advisers including nine employed regionalmanagers. There are a further 11 advisers about to complete the applicationprocess. The Brighton Support Centre provides a UK-wide support function forthis division.In October 2004 Temple launched a new adviser grade "Senior Practice Executive"and 17 successful candidates have been selected to form a cadre of senioradvisers who wish to grow new Temple adviser practices supported by their ownproduction and that of newly recruited advisers. A number of those newpractices have commenced trading with their first recruits. It is planned thatall practices will complete the first stages of growth during 2005, thusenhancing both Group adviser numbers and Group revenues.Temple's first full year gross profit of ‚£2 million has contributedsignificantly to the 45% increase in Group gross profit of ‚£6.9 million (2003:‚£4.8 million).Lighthouse Practices continue to develop their proposition to high net worthclients, researching and delivering advice on a range of sophisticatedinvestments suited to the needs of wealthy individuals and professionals.Lighthouse Practices carry the Group's brand and can be found in thirtylocations around the UK. The practices are supported with product research,compliance, lead generation and branding. There are 52 registered adviserswithin this division.The Lighthouse Practices are assisted by the Head of Research, Andy Gadd, inproducing innovative investment proposals; Andy Gadd is a regular contributorto the financial press providing both research, comment and product reviews.Berkeley Wodehouse Associates Ltd ("BWA") is the Group's network operation andsupports virtually all the Group's regulated activities. There are 316 adviserswho trade under their own brand as sole traders, partnerships or limitedcompanies, regulated by BWA.Advisers previously authorised by Broadstone IFA Ltd based in Exeter wereoffered the opportunity to join BWA in September 2004; 16 elected to make thetransfer and are currently trading as Appointed Representatives within BWA.Lighthouse Corporate Benefits Ltd supports the 50 advisers registered withinLighthouse Corporate Benefits Ltd ("LCB"), the business formed to support theGroup's arrangements with Personal Group Holdings PLC providing access tocorporate entities. This business is serviced by the Brighton Support Centre.SUPPORT SERVICESThe Group has two regulated subsidiaries, BWA and Lighthouse IndependentFinancial Advisers Ltd ("LIFAL"). Temple and LCB , while wholly owned by theGroup, are Appointed Representatives of BWA. The regulated subsidiaries areresponsible to the FSA for thorough adherence to the current regulatoryrequirements and this is done through the provision of a number of supportservices based in the Exeter Support Centre, namely:Field ComplianceEach adviser is visited regularly and undergoes a compliance audit whichincludes file reviews, role plays, competency assessments and record keepingchecks;SupervisionInternal compliance staff review selected client files assessing the adviser'sadvice to the client and vetting cases requiring pre-approval;Training staffLighthouse staff assess adviser training needs and deliver training to bothadvisers and internal staff across a broad subject curriculum. The team alsodelivers all induction training for newly appointed advisers and staff; andFinancial InfrastructureIncome collection and efficient distribution is vital, and all advisers tradethrough the establishment of central agencies which BWA holds with all the mainproduct providers (life companies and investment houses). The agency team isbased in the Exeter Support Centre.The Group maintains its three offices: Gresham Street, which is a small officein the City of London, Exeter, which is primarily occupied by finance,compliance and IT, and Brighton, which houses Temple and LCB support, leadgeneration and marketing.DEVELOPMENTSLighthouse StepsThe Lighthouse Steps programme has been developed in response to the Lighthouseadvisers' wish to access information and submit business quotes to majorproduct providers efficiently and with minimum delays. The Group has announceda series of IT distribution agreements as part of the development of theLighthouse Steps. Lighthouse Loan, Lighthouse Protect and Lighthouse Investhave all been concluded with Lighthouse Retire to be completed shortly. Abbey,F&C, Friends Provident, Norwich Union, Scottish Equitable, Skandia, andStandard Life have all entered into agreements and further Lighthouse Steps areplanned for 2005.LighthouseXpressTo ensure that Lighthouse Steps can be easily used by advisers as well as toshowcase participating providers' products, an IT platform has been procuredand developed, and is now being delivered to the Group's advisers.LighthouseXpress is the delivery channel for this programme and has beensuccessfully piloted. A planned rollout to advisers across all divisionscommenced in January 2005 and will be completed by the end of this year.XPress is a new back office system for Lighthouse advisers which providessophisticated automation of the Lighthouse sales and back office process andreduces the administrative overhead for all the Group's advisers thus allowingthem to increase their effectiveness through focussing predominantly on clientservicing. This new system incorporates a full client and holdings database, electronicfact find, needs analysis tools, sophisticated report generation and amulti-user task and diary management system. LighthouseXpress also incorporatesa data feed from Financial Express which can be used electronically to valueclient investment holdings. Contract Enquiry links to eight major Providersallow advisers to request client holding details electronically. LighthouseXpress effectively embodies: * the delivery of efficient, high quality support via a new standard IT platform for Lighthouse advisers; * sophisticated automation of Lighthouse forms and processes to improve adviser efficiency and allow more time for client servicing; and * a path to fully electronic communications and the 'paperless office' supported by well trained central staff providing personalised service. CUSTOMER CAREThe provision of high levels of customer care is paramount to the Group inretaining quality advisers and their clients, and maximising efficiency. In2004 the Group initiated two customer care surveys, in May and December. Thelatest survey was completed by 234 advisers who anonymously rated thehelpfulness, courtesy and knowledge of staff highly, and the majority (68%)confirmed that they have continued to evidence improvements in the Lighthousestandard of customer service. This is a reassuring response and is to thecredit of the entire Lighthouse support team. The Group will be seeking toimprove service levels further during 2005.FUTURELighthouse progress has been significant during 2004 and the Group is nowpositioned to move forward with its broad adviser offering supported by Xpress,the new state of the art technology platform. The Group remains committed tomaintaining its enviable regulatory record and through its independent statusembracing the ethos of "Treating Customers Fairly" thereby continuing to growits reputation both within the industry and amongst consumers with whom itengages.Malcolm StreatfieldChief Executive Lighthouse Group plc Consolidated Profit & Loss AccountFor the year ended 31 December 2004 Note 2004 2003 ‚£ ‚£ Turnover Continuing operations 26,475,621 22,863,049 Less share of turnover of joint venture (11,571) (14,826) Group Turnover 26,464,050 22,848,223 Cost of sales (19,532,458) (18,065,591) Gross profit 6,931,592 4,782,632 Administrative expenses Other operating expenses 7,729,381 5,917,010 Exceptional operating expenses 525,852 1,465,810 Depreciation and amortisation of 543,914 514,408 goodwill Total administrative expenses (8,799,147) (7,897,228) Operating Loss (1,867,555) (3,114,596) Share of operating profit/(loss) in joint 6,909 (728)venture Total operating loss : group and share of (1,860,646) (3,115,324)joint ventures Net interest receivable 50,322 64,729 Loss on ordinary activities before (1,810,324) (3,050,595)taxation Tax on loss on ordinary activities - (5,554) Loss for the year (1,810,324) (3,056,149) Basic loss per share (4.74)p (12.95)p Diluted loss per share (4.74)p (12.95)pThe company had no recognised gains or losses other than the losses for theyear in 2003 and 2004.There is no difference between the loss on ordinary activities before taxationand the loss for the year stated above, and their historical cost equivalents. Lighthouse Group plc Consolidated Balance SheetAs at 31 December 2004 Note 2004 2004 2003 2003 ‚£ ‚£ ‚£ ‚£ Fixed assets Intangible assets 3,125,519 3,530,517 Tangible assets 405,298 346,350 Investments: Interests in joint ventures: Share of gross assets 27,172 37,770 Share of gross liabilities (20,941) (38,448) 6,231 (678) 3,537,048 3,876,189 Current assets Debtors (including ‚£nil due 4,174,371 4,500,493 after one year (2003 ‚£283,333)) Cash at bank and in hand 2,506,253 2,698,513 6,680,624 7,199,006 Creditors: amounts falling due 3,808,681 3,841,964 within one year Net current assets 2,871,943 3,357,042 Total assets less current 6,408,991 7,233,231liabilities Provisions for liabilities and 2,911,560 2,337,462charges 3,497,431 4,895,769 Capital and reserves Called up share capital 394,042 373,080 Share premium account 11,131,955 10,763,136 Merger reserve 2,002,685 2,002,685 Other reserves 377,815 355,610 Profit and loss account (10,409,066) (8,598,742) Equity shareholders' funds 3,497,431 4,895,769 Lighthouse Group plc Consolidated Cash Flow StatementFor the year ended 31 December 2004 Note 2004 2003 ‚£ ‚£ Net cash outflow from operating activities 1 (592,758) (2,224,887) Returns on investments and servicing of finance Interest received 60,194 93,220 Interest paid (9,072) (8,758) Finance lease interest paid (800) (19,733) Net cash inflow from returns on investments 50,322 64,729and servicing of finance Capital expenditure Payments to acquire tangible fixed assets (197,864) (192,637) Acquisitions and disposals Payment of disposal expenses - (165,080) Receipt of deferred consideration 195,332 50,000 Payments to acquire subsidiary undertakings - (110,377) Net cash acquired with subsidiary undertakings - 24,858 Net cash inflow/(outflow) from acquisitions 195,332 (200,599)and disposals Net cash outflow before financing (544,968) (2,553,394) Financing Capital element of finance lease payments (37,073) (72,803) Loan repayments - (506,188) Issue of ordinary share capital 400,962 3,330,534 Expenses of issue of share capital (11,181) (56,068) Net cash inflow from financing 352,708 2,695,475 (Decrease)/ increase in cash 2 (192,260) 142,081 Lighthouse Group plc Notes to the Financial StatementsFor the year ended 31 December 20041 Reconciliation of operating loss to net cash flow from operating activities 2004 2003 Total Total ‚£ ‚£ Operating loss (1,867,555) (3,114,596) Depreciation and asset impairments 138,916 243,706 Amortisation of goodwill 404,998 330,210 Fair value of share options granted in 22,205 309,083the year Decrease/ (increase) in debtors 130,790 (1,161,668) Increase in provisions for liabilities 574,098 720,179and charges Increase in creditors 3,790 448,199 Net cash outflow from operating (592,758) (2,224,887)activities 2 Reconciliation of movement in net debt 1 January Cash flow at 31 December 2004 2004 ‚£ ‚£ ‚£ Cash in hand and at 2,698,513 (192,260) 2,506,253bank Finance leases (37,073) 37,073 - 2,661,440 (155,187) 2,506,2533 Reconciliation to net cash 2004 2003 ‚£ ‚£ Net (decrease) / increase in cash (192,260) 142,081 Outflow from movement in net debt 37,073 578,991 Change in net debt resulting from cash flows (155,187) 721,072 Non cash items: Acquisitions - (511,025) Movement in net debt during the year (155,187) 210,047 Net cash at 1 January 2,661,440 2,451,393 Net cash and liquid resources at 31 December 2,506,253 2,661,4404 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.Notes to the Financial Statements (Cont.d)For the year ended 31 December 20045 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, as adjusted for the shares held by the remuneration trust.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 2004 or 31 December2003, but is derived from these accounts. The statutory accounts for the Groupfor the year ended 31 December 2004 and 2003 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 2003 weredelivered to the Registrar of Companies and those for 2004 will be delivered indue course.ENDLIGHTHOUSE GROUP PLC