22 Sep 2008 07:00
| Press Release | 22 September 2008 |
Lighthouse Group plc
("Lighthouse" or "the Group")
Interim Results
Lighthouse Group plc (AIM:LGT), one of the UK's largest Independent Financial Advise and Wealth Management groups, today announces interim results for the six months ended 30 June 2008.
Highlights
| • | Revenues broadly level at £25.5 million (2007: £26.6 million) |
| • | Pre-tax profit of £442,000 (2007: £786,000) |
| • | Cash balances increased 61% to £12.3 million (2007: £7.7 million) |
| • | Total funds under advice grew to approximately £6.3 billion, an increase of 12% since 30 June 2007 |
| • | Recurring revenues for the period now at £4.9 million (2007: £4.1 million) |
| • | Successful merger with Sumus Plc, £1 million annualised cost savings achieved |
| • | Maiden interim dividend of 0.2 p per share declared |
Commenting on the results, David Hickey, Executive Chairman of Lighthouse Group plc, said: "Given the wider macro-economic climate, good independent financial advice and wealth management is becoming increasingly valuable. The prudent strategy we have already put into action should protect original trading expectations for 2009 and beyond, while the merger with Sumus Plc has created scale with over £6.3 billion in assets under advice.
"The enlarged Group continues to trade profitably, has a strong balance sheet, and its operations continue to generate surplus cash. We continue to improve the quality of earnings too with a strong rise in recurring income during the period.
"We are also pleased to confirm the payment of our first interim dividend, demonstrating our confidence in the future."
- Ends -
For further information, please contact:
| Lighthouse Group plc | |
| David Hickey, Executive Chairman | Tel: +44 (0) 20 7065 5640 |
| www.lighthousegroup.plc.uk |
| Shore Capital and Corporate Limited | Tel: +44 (0) 20 7408 4090 |
| (Nominated Adviser to the Company) | |
| Dru Danford | |
| Stephane Auton |
Media enquiries:
| Abchurch Communications | Tel: +44 (0) 20 7398 7700 |
| Heather Salmond | Tel: +44 (0) 20 7398 7704 |
| heather.salmond@abchurch-group.com | |
| Joanne Shears | Tel: +44 (0) 20 7398 7709 |
| joanne.shears@abchurch-group.com | www.abchurch-group.com |
| Winningtons PR | |
| Tom Cooper | Tel: +44(0)117 920 0092 |
| tom.cooper@winningtons.co.uk | www.winningtons.co.uk |
CHAIRMAN'S STATEMENT
Introduction
The first six months of 2008 started well, with revenues in line with expectations. However, revenues weakened in later months as the economic and investment background became more challenging, and this trend continued for the remainder of the period under review. As a consequence the first half saw some reduction in profits when compared to the corresponding period. However recurring income continued to rise and cash balances were significantly higher at the period end.
The merger between Lighthouse Group plc and Sumus Plc ("Sumus") was completed on 6th May and I have pleasure in welcoming the new Lighthouse shareholders who have joined the Group. The integration of the two groups has progressed extremely well. No surprises have emerged and the combined management team is working well.
The Group is pleased to announce the payment of an interim dividend of 0.2 pence per share (2007: nil).
Trading Highlights
| 6 months ended 30 June 2008 £m | 6 months ended 30 June 2007 £m | |
| Revenue | 25.51 | 26.57 |
| Gross profit | 7.58 | 8.29 |
| Operating costs | 7.07 | 7.46 |
| EBITDA * | 0.51 | 0.83 |
| Profit before taxation | 0.44 | 0.79 |
| Pence | Pence | |
| Basic earnings per share Dividend per share | 0.37 0.2 | 1.1 nil |
*Earnings before interest, tax, depreciation, amortisation and exceptional items.
Financial Review
Revenues for the six months ended 30 June 2008 decreased by approximately £1 million, or 4 per cent., to £25.5 million compared to 2007, the bulk of this decrease being seen late in the second quarter.
Gross profit declined to £7.6 million from £8.3 million in 2007, a decrease of 8 per cent. However, operating costs also reduced from £7.5 million to £7.1 million (5 per cent.) which cushioned the effect of the reduction in the gross profit.
At the EBITDA level (earnings before interest, tax, depreciation, amortisation and exceptional items) the Group's results decreased by £317,000 to £513,000, a decline of 38 per cent.
Net interest received rose to £204,000 (2007: £125,000) due to additional cash resources, resulting in a profit before taxation of £442,000 (2007: £786,000).
Net assets at 30 June 2008 stood at £22.6 million (2007: £12.9 million) of which cash balances were £12.3 million (2007: £7.7 million). This is before taking into account the five year trading facility of £4.5 million (2007: £nil) provided by LV= to facilitate the merger with Sumus.
The high level of cash balances held, and the absence of external bank debt, with the usual attendant covenants, provides an extremely stable base for the Group's future operations against a challenging economic environment.
Merger with Sumus
This merger brought together the two largest AIM quoted independent IFA and Wealth Management groups, to create the largest such entity in the U.K. with some 850 advisers providing nationwide coverage through a number of distribution channels. Both Lighthouse and Sumus have a background of profits, liquid balance sheets with no bank debt, and good regulatory histories over a lengthy period.
The merged Group has drawn directors and employees from both former entities, and the new management team has settled very effectively. Already a number of functions have been fully integrated, including Financial Reporting, IT, HR, and executive reporting structures. Other operating procedures and policies are also being reviewed to develop and maintain best practice across the Group. A financial consequence of these actions has been the early attainment of the previously announced target of £1 million of annualised merger cost savings, the full benefit of which will now flow through in 2009.
Recurring Revenue
The Group continues to focus on growing the proportion of recurring revenues. This is in line with the Group's core philosophy of developing long-term relationships with its clients and is invariably linked to on-going advice for them. The focus is also in the interests of advisers and the Group as it improves visibility of earnings for both.
I am therefore pleased to report a significant rise in recurring income to £4.9 million for the 6 month period, compared to £4.1 million, an increase of 20 per cent. over the corresponding previous period. The Group will continue to work to maintain this trend.
New investment flows were £489 million for the period, compared to £530 million for the first half of 2007. In aggregate the total funds under advice is now approximately £6.3 billion, an increase of 12 per cent. since 30 June 2007.
The Group developed the LighthouseCapital initiative in the latter half of last year. This is designed to offer clients risk based investment solutions, while simultaneously increasing the Group's influence over investment funds, and related recurring revenues and margins. Since the start of the year, LighthouseCapital has broadened further to include two new discretionary fund managers and two fund of funds ranges. The initiative was rolled out to the LighthouseTemple division and the LighthouseCarrwood division is now expected to commence significant participation. The Group is also working to refine the offering for its network members and their clients.
Retail Distribution Review
This was set up by the Treasury primarily to seek to reduce the savings and protection gap in the UK. The FSA has recently announced that its next significant publication on this matter will be delayed towards the end of this year. It is now possible that the RDR could turn out to be a rather less dramatic event than has been anticipated, and in any event any implementation timetable would have to take many years.
Dividends
I am pleased to announce the Group's interim dividend following the first final dividend payment made earlier this year in respect of 2007. The amount is 0.2 pence per share which will be paid on 30 October 2008 to shareholders on the register at 3 October 2008.
Outlook
Twelve months ago I reported that "prolonged volatility, or significant contamination from the debt markets into equity markets and related products, could make clients more hesitant about certain investment products in the future". The financial cycle having turned, it is not surprising that Group revenues have retreated. The Board does not see this reversing in the immediate future. Accordingly in addition to the £1 million merger savings indicated previously, the Board has commenced an exercise to procure an additional £1 million of annualised cost savings, to bring the resulting expense base into line with anticipated future revenues while maintaining the requisite service levels.
The Group's revenue is not immune from the financial and economic cycles and accordingly, despite the rapid action on its cost base, the outlook for profits for the current year is now lower than that originally envisaged. However, the actions taken by the Group should protect trading expectations for 2009 and beyond. In the meantime the Group continues to trade profitably and its operations continue to generate surplus cash.
In parallel, the Group's strong and liquid balance sheet provides considerable financial and operational security. This, together with the substantial scale of the Group in the context of this sector, means it is now well positioned to take advantage of any acquisition opportunities arising at this point in the cycle.
Accordingly the Board looks forward to reporting further progress in the growth of the Group.
David Hickey
Executive Chairman
19th September 2008
Consolidated income statement for the six months ended 30 June 2008
| Unaudited 6 months ended 30 June 2008 | Unaudited 6 months ended 30 June 2007 | Audited year ended 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| Revenue | 25,511 | 26,566 | 52,941 |
| Cost of sales | (17,931) | (18,278) | (36,318) |
| Gross profit | 7,580 | 8,288 | 16,623 |
| Administrative expenses | |||
| Other operating expenses | (7,067) | (7,458) | (14,167) |
| Earnings before interest, tax, depreciation amortisation and exceptional items | 513 | 830 | 2,456 |
| Depreciation and amortisation | (275) | (169) | (368) |
| Exceptional operating expenses | - | - | (546) |
| Total administrative expenses | (7,342) | (7,627) | (15,081) |
| Operating profit | 238 | 661 | 1,542 |
| Finance revenues | 284 | 158 | 411 |
| Finance costs | (80) | (33) | (56) |
| Profit before taxation | 442 | 786 | 1,897 |
| Tax expense | (70) | - | - |
| Profit for the period | 372 | 786 | 1,897 |
| Profit for the year attributable to: | |||
| Equity holders of the parent | 355 | 786 | 1,897 |
| Minority interest | 17 | - | - |
| 372 | 786 | 1,897 | |
| Earnings per share (basic) | 0.37p | 1.10p | 2.58p |
| Earnings per share (diluted) | 0.34p | 0.98p | 2.31p |
Consolidated balance sheet at 30 June 2008
| Unaudited 6 months ended 30 June 2008 | Unaudited 6 months ended 30 June 2007 | Audited year ended 31 December 2007 | |
| £'000 | £'000 | £'000 | |
| Assets | |||
| Non current assets | |||
| Intangible assets | 17,949 | 8,313 | 8,260 |
| Property, plant and equipment | 393 | 435 | 364 |
| Investments | 27 | - | - |
| 18,369 | 8,748 | 8,624 | |
| Current assets | |||
| Trade and other receivables | 7,818 | 11,389 | 8,272 |
| Cash and cash equivalents | 12,353 | 7,672 | 8,954 |
| 20,171 | 19,061 | 17,226 | |
| Total assets | 38,540 | 27,809 | 25,850 |
| Current liabilities | |||
| Trade and other payables | (8,006) | (11,364) | (8,290) |
| Finance leases | - | (3) | - |
| Provisions | (2,258) | (2,408) | (2,271) |
| (10,264) | (13,775) | (10,561) | |
| Non current liabilities | |||
| Other payables | (4,500) | - | - |
| Provisions | (1,214) | (1,077) | (1,183) |
| (5,714) | (1,077) | (1,183) | |
| Total liabilities | (15,978) | (14,852) | (11,744) |
| Net assets | 22,562 | 12,957 | 14,106 |
| Capital and reserves | |||
| Called up share capital | 1,277 | 836 | 836 |
| Share premium account | 14,051 | 17,594 | 5,696 |
| Merger reserve | 2,003 | 2,003 | 2,003 |
| Other reserves | 4,070 | 1,956 | 3,991 |
| Profit and loss account | 1,098 | (9,432) | 1,580 |
| Total equity attributable to equity holders of the company | 22,499 | 12,957 | 14,106 |
| Minority interests | 63 | - | - |
| 22,562 | 12,957 | 14,106 |
The interim financial information was approved by the Board of Directors on 19 September 2008 and was signed on its behalf by
| Malcolm Streatfield | Peter Smith |
| Joint Chief Executive | Finance Director |
Consolidated cashflow statement for the six months ended 30 June 2008
| Unaudited 6 months ended 30 June 2008 | Unaudited 6 months ended 30 June 2007 | Audited year ended 31 December 2007 | |
| Operating activities | £'000 | £'000 | £'000 |
| Group profit before tax for the period | 442 | 786 | 1,897 |
| Adjustments to reconcile group profit for the period to net cash (outflows)/inflows from operating activities | |||
| Finance revenues | (284) | (158) | (411) |
| Finance costs | 80 | 33 | 56 |
| Loss on disposal of property, plant and equipment | - | 2 | 2 |
| Depreciation of property, plant and equipment | 95 | 116 | 218 |
| Amortisation of intangible assets | 180 | 54 | 150 |
| Share based payments | 79 | 22 | 58 |
| Adjustment for net settlement of revenue against cost of asset purchase | - | (122) | (141) |
| Decrease/(increase) in trade and other receivables | 1,652 | (1,788) | 1,348 |
| (Decrease)/increase in trade and other payables | (2,732) | 756 | (2,320) |
| Movement in provisions | (833) | 205 | 172 |
| Cash (utilised by)/generated from operations | (1,321) | (94) | 1,029 |
| Finance costs paid | (34) | (33) | (56) |
| Income taxes paid | (209) | - | - |
| Net cash flow from operating activities | (1,564) | (127) | 973 |
| Investing activities | |||
| Payments to acquire intangible fixed assets | (6) | (20) | (64) |
| Purchase of property, plant and equipment | (45) | (68) | (99) |
| Expenses associated with acquisitions | - | (115) | (115) |
| Finance revenues received | 284 | 158 | 411 |
| Net inflow associated with acquisition of subsidiary undertakings | 1,573 | - | - |
| Net cash flow from investing activities | 1,806 | (45) | 133 |
| Financing activities | |||
| Proceeds from share issue | 1 | 1,045 | 1,048 |
| Repayment of capital element of finance leases | - | (1) | - |
| Expenses associated with the issue of share capital | (437) | - | - |
| Proceeds from new trade facility | 4,500 | - | - |
| Dividends paid to equity shareholders | (837) | - | - |
| Dividends paid to minority interests | (70) | - | - |
| Net cash flow from financing activities | 3,157 | 1,044 | 1,048 |
| Increase in cash and cash equivalents | 3,399 | 872 | 2,154 |
| Cash and cash equivalents at the beginning of the period | 8,954 | 6,800 | 6,800 |
| Cash and cash equivalents at period end | 12,353 | 7,672 | 8,954 |
Statement of changes in equity for the six months to 30 June 2008
| Share capital | Share premium account | Merger reserve | Other reserves | Profit and loss reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2007 | 752 | 15,714 | 2,003 | 1,934 | (10,218) | 10,185 |
| Total recognised income and expense for the period | - | - | - | - | 786 | 786 |
| Share based payment | - | - | - | 22 | - | 22 |
| Issue of ordinary share capital | 84 | 1,880 | - | - | - | 1,964 |
| At 30 June 2007 | 836 | 17,594 | 2,003 | 1,956 | (9,432) | 12,957 |
| At 1 January 2008 | 836 | 5,696 | 2,003 | 3,991 | 1,580 | 14,106 |
| Total recognised income and expense for the period | - | - | - | - | 372 | 372 |
| Share based payment | - | - | - | 79 | - | 79 |
| Issue of ordinary share capital | 441 | 8,355 | - | - | - | 8,796 |
| Dividends paid | - | - | - | - | (837) | (837) |
| Minority interests | - | - | - | - | (17) | (17) |
| At 30 June 2008 | 1,277 | 14,051 | 2,003 | 4,070 | 1,098 | 22,499 |
Notes to the financial information for the six months to 30 June 2008
1. The interim financial information, which comprises the consolidated income statement, consolidated balance sheet, consolidated cashflow statement and consolidated statement of changes in equity and the related explanatory notes has been prepared on the basis of the accounting policies set out in the Group accounts for the year ended 31 December 2007. It is unaudited but has been reviewed by the auditor.
This information does not constitute statutory accounts for the purpose of section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 December 2007, prepared under International Financial Reporting Standards has been delivered to the Registrar of Companies and contained an unqualified auditors' report.
2. The calculation of the basic and diluted earnings per share attributable to equity shareholders of the parent company is based on the following data:
| 6 months ended 30 June 2008 | 6 months ended 30 June 2007 | Audited year ended 31 December 2007 | |
| Earnings for the purposes of basic and dilutive earnings per share (£'000) | 355 | 786 | 1,897 |
| Weighted average number of ordinary shares for the purpose of basic earnings per share | 97,001,884 | 71,295,759 | 73,396,354 |
| Effect of the dilutive potential on ordinary shares: Share options | 8,602,354 | 8,897,878 | 8,894,626 |
| Weighted average number of ordinary shares for the purpose of diluted earnings per share | 105,604,238 | 80,193,637 | 82,290,980 |
As at 30 June 2008, there were 6,223,981 options that existed which could potentially dilute basic earnings per share in the future, but were not included in the calculation of dilutive shares because the effect would have been anti-dilutive.
3. The acquisition of Sumus PLC and its subsidiaries in May 2008 resulted in the following changes to issued share capital and the share premium account.
| Share capital | Share premium | |
| £'000 | £'000 | |
| At 1 January 2008 | 836 | 5,696 |
| 43,960,446 consideration shares | 441 | 8,792 |
| Expense of issue of share capital | - | (437) |
| At 30 June 2008 | 1,277 | 14,051 |
4. A final dividend for 2007 of 0.5 pence per share (£418,594) was paid in May 2008, and a special interim dividend of 0.5 pence per share (£418,594) was paid on 9 May 2008.
5. A copy of the Interim Statement is being sent to all shareholders and copies are available for collection indefinitely from the Group's Head Office at the address below:
Lighthouse Group plc
26 Throgmorton Street
London
EC2N 2AN
Telephone: 020 7065 5640
Fax: 020 7065 5650
www.lighthousegroup.plc.uk