Lighthouse Regulatory News (LGT)

17 Sep 2007 07:00

Lighthouse Group PLC17 September 2007 Press Release 17 September 2007 Lighthouse Group plc ("Lighthouse" or "the Group") Interim Results Lighthouse Group plc (AIM: LGT), one of the UK's largest Independent FinancialAdviser groups, today announces record interim results for the six months ended30 June 2007. Highlights • Revenue increased 30% to £26.6 million (2006: £20.5 million)• Pre-tax profit up 66% to £786,000 (2006: £473,000)• New investment flows increased to £530 million (2006: £389 million)• Total funds under advice grew to approximately £5.6 billion, an increase of 42% since 30 June 2006• Turnover per adviser up to £85,000 (2006: £71,000) on an annualised basis• Successful completion of transaction with LV= (formerly Liverpool Victoria Friendly Society) which will provide recurring income of a value exceeding £1 million on an annualised basis David Hickey, Executive Chairman of Lighthouse Group plc, said: "We continue tomake sizeable improvements in revenue, gross profit, pre-tax profit, andearnings per share. The improvement in the quality of earnings is alsoencouraging following a notable rise in recurring income during the period,derived both from the LV= arrangements as well as organic growth. As a result,we continue to increase the total funds under our advice and we look forward toreporting further significant progress for the full year. We are alsoparticularly pleased to now confirm we will be able to offer our shareholders amaiden dividend in 2008." - Ends - For further information, please contact: Lighthouse Group plcMalcolm Streatfield, CEO Tel: +44 (0) 20 7065 5640malcolm.streatfield@lighthousegroup.plc.uk www.lighthousegroup.plc.uk Daniel Stewart & Company plcLindsay 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 period of significant progress for LighthouseGroup plc. The first six months of 2007 saw continued improvements in revenue, grossprofit, pre-tax profit, and earnings per share. Recurring income continued torise and cash balances also increased significantly. The transaction with LV=(formerly Liverpool Victoria Friendly Society) was completed and the businesssubsequently integrated satisfactorily. I am also pleased to report that theHigh Court has recently granted an order to allow the reduction of the sharepremium account to offset the company's accumulated losses as at 31 December2007. This will enable the Group to commence the payment of dividends in 2008. Trading Highlights 6 months to 30 6 months to 30 June 2007 June 2006 (restated for IFRS IFRS ) Revenue £26.6 million £20.5 millionGross Profit £8.3 million £7.5 millionOperating Costs £7.5 million £7.0 millionEBITDA * £830,000 £533,000Profit before taxation £786,000 £473,000Earnings per share 0.98p 0.62p *Earnings before interest, tax, depreciation, amortisation and exceptionalitems. Results Revenue for the six months to 30 June 2007 increased by 30 per cent to £26.6million (2006: £20.5 million). The bulk of this increase was due to increasedrevenue per adviser which for the first six months rose to an annualised figureof approximately £85,000 (2006: £71,000). Gross Profit increased by 10 per cent primarily reflecting the margin derivedfrom the increased revenue of £6 million from the corresponding period lastyear. The increase in Operating Costs of £0.5 million was due to additionaladministrative support required to service the revenue. While the rise in costsis modest in the context of the increased revenue, the Board has nonethelessidentified savings which will take effect in the second half of the year. At the EBITDA level (earnings before interest, tax, depreciation, amortisationand exceptional items) the Group results increased by 55 per cent to £830,000(2006: £533,000). The profit before taxation was £786,000 (2006: £473,000). Cash balances were £7.7 million (2006: £5.0 million) at the period end and theGroup continues to have no debt. Transaction with LV= The essence of this transaction, which was announced in March 2007, was that LV=subcontracted virtually all of its customer requirements for independentfinancial advice to Lighthouse. In addition, 20 independent financial advisersformerly employed by LV= chose to accept self employed status withinLighthouseTemple. Finally, a large client base with recurring income of a valueto Lighthouse exceeding £1 million on an annualised basis, was also transferredto the Group. In return Lighthouse paid approximately £1 million in newLighthouse shares. LV= also subscribed for a 5 per cent holding in Lighthousefor cash. The business has now been fully integrated, the quality of new leads arisingfrom the LV= client base is high, the new advisers are trading in line withexpectations, and the recurring income is also running to budget. Accordinglythe Board of Lighthouse is very pleased with the outcome and would like toreplicate these arrangements elsewhere. Recurring Income One of the features of the IFA sector is its dependence on self-employedadvisers earning initial commissions on packaged financial products. Advisersleaving or retiring usually reduces revenue as the clients frequently alsodepart. For some time therefore the Group has encouraged the growth ofrecurring income to diminish the dependency on initial commission, especiallywithin the national divisions of Carrwood and Temple (which together now accountfor approximately 40 per cent of the Group's revenue and 70 per cent of grossprofit), since in those divisions such income is owned by the Group. It is therefore gratifying to report a significant rise in recurring income to£4.1 million for the 6 month period, compared to £2.9 million for thecorresponding previous period. Of this increase a significant proportion isderived from the LV= arrangements and the balance from organic growth. TheBoard expects further significant growth in recurring income during the secondhalf of the year. Funds Under Advice New investment flows have risen to £530 million for the period under review,compared to £389 million for the first half of 2006. In aggregate the totalfunds under advice with the Group's advisers is now approximately £5.6 billion,an increase of 42 per cent since 30 June, 2006. The Board is now seeking togrow these numbers more aggressively and has recently embarked on a number ofrelated initiatives. As announced on the 12th June, 2007, Lighthouse is pioneering the use of apsychometric fact finding process which automatically matches client attitude toinvestment risk to an appropriate asset allocation. To effect the allocation,Lighthouse has created a direct link to whole of market fund of funds managed byF&C under their Lifestyle banner. In parallel, Lighthouse, working closely witha number of major product manufacturers, has arranged for various of thesemanufacturers' product "wrappers" to be linked directly to the fund of funds. In combination, therefore, Lighthouse clients can now have an appropriate assetallocation scientifically selected for them, where the underlying investmentsare identified by a major fund management group from whole of market, and wherethe assets concerned can be held in a variety of tax efficient ways. This development will now enable all Lighthouse's circa 600 advisers to take amajor step forward in terms of matching client risk, asset allocation and stockselection. In parallel with these arrangements, the Group has commenced the roll out of aretirement offering to its self employed advisers, linked to their recurringincome. This should have the beneficial effect over time of transferringownership of advisers' recurring income to the Group, and prolonging its quantumand duration. Retail Distribution Review The FSA have recently sponsored a wide ranging review to consider the future forthe distribution of retail financial products in the UK. All major stakeholdersin the industry have been asked to contribute to a number of work streams, andthe entire process is likely to take a further 18 months before binding changesstart to emerge. Arguably more heat than light has emerged so far, as each set of stakeholdershas lobbied to promote their own agendas. It is for example ironic to watchbancassurers lobbying to remove IFA commission on certain insurance products,while straining to retain it for themselves on certain of their own activitieswhere IFAs are not involved, such as foreign currency dealings. Notwithstanding this partisan activity, some trends are starting to emerge.Consolidation of IFA distribution will continue as the FSA moves to alleviateits current burden of directly regulating thousands of Independent FinancialAdvisers. Pressures are mounting to force such operators into larger IFAgroupings, and this trend is likely to accelerate during the next year. Inaddition, greater remuneration transparency at both the manufacturing anddistribution stages of retail financial products will feature, which is to bewelcomed. Finally the vexed question of restitution in cases of mis-sellingwill receive greater airing, and this may have significant implications not justfor where the ultimate responsibility might lie, but also for ensuring that allparties involved, whether manufacturer or distributor, have adequate financialresources to meet their obligations. It is currently far too early to determine the possible effect that this reviewmay have. However various members of your board are represented on a number ofindustry forums representing the IFA channel and accordingly will receive plentyof notice of impending changes which might affect the Group. In the meantime Iexpect to keep shareholders up to date on a regular basis through our interimand annual reports. Dividends The previously announced application to the Courts, to eliminate the adversebalance on the profit and loss account, has been completed since the period endand a transfer between the share premium account and profit and loss accountwill be made at the year end. Following the successful completion of this application and in view of thecontinued development of the Group, the Board now expects to be able to commencethe payment of dividends. It is intended that the maiden payment will be in Mayof 2008, by way of a final dividend in respect of the year to 31 December 2007. The quantum will be decided by the Board early in 2008, depending on theoutcome for the year. Strategy and Prospects The Board remains focused on growing profits, increasing the Group's cashbalances and paying dividends. It is satisfied that the prospects for theremainder of this year and beyond are good, that the cycle is continuing toimprove for the savings sector in general, and hence that further organic growthmay be expected. As previously, the Group continues regularly to reviewpotential transactions which could further the attainment of the Group'stargets. Market corrections should not necessarily worry retail customers, especiallywhere they relate to investment areas to which they have little exposure. Therecent volatility in stock markets stems predominantly from debt related issuesrather than company performances. However, some equity related indices havebeen affected. There is no evidence so far that clients have overreacted tothis. Indeed investment business has been extremely strong, and rising interestrates can make investment products appear more attractive. However, prolongedvolatility, or significant contamination from the debt markets into equitymarkets and related products, could make clients more hesitant about certaininvestment products in the future. In the meantime, and since June, the Group has continued to trade at least inline with the Board's expectations and accordingly the Board looks forward toreporting further significant progress for the full year. David Hickey Executive Chairman 14 September 2007 CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007 Unaudited 6 Unaudited 6 Audited year ended months ended months ended 31 December 2006 30 June 2007 30 June 2006 £'000 £'000 £'000 Revenue 26,566 20,519 47,160 Cost of sales (18,278) (12,979) (31,459) Gross Profit 8,288 7,540 15,701 Administrative expensesOther operating expenses (7,458) (7,007) (13,395) Earnings before interest, tax, depreciation,amortisation and exceptional items 830 533 2,306 Depreciation and amortisation (169) (133) (272) Exceptional operating expenses - - (1,519) Total administrative expenses (7,627) (7,140) (15,186) Operating profit 661 400 515 Interest income 158 88 216Interest expense (33) (15) (58) Profit before taxation 786 473 673 Taxation - - - Profit for the period 786 473 673 Earnings per share (basic) 1.10p 0.71p 1.00p Earnings per share (diluted) 0.98p 0.62p 0.89p CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007 Unaudited 6 Unaudited 6 Audited year ended months ended months ended 31 December 2006 30 June 2007 30 June 2006 £'000 £'000 £'000AssetsNon current assetsIntangible Assets 8,313 8,301 7,716Property, plant and equipment 435 555 485 8,748 8,856 8,201Current AssetsTrade and other receivables 11,389 6,377 9,629Cash and cash equivalents 7,672 5,012 6,800 19,061 11,389 16,429Total Assets 27,809 20,245 24,630Current liabilitiesTrade and other payables (11,364) (7,079) (10,607)Finance Leases (3) (3) (3)Contingent consideration - (721) (552)Provisions (2,408) (2,299) (2,244) (13,775) (10,102) (13,406)Non current liabilitiesFinance Leases - (3) (1)Contingent consideration - (552) -Provisions (1,077) (1,144) (1,038) (1,077) (1,699) (1,039)Total Liabilities (14,852) (11,801) (14,445) Net Assets 12,957 8,444 10,185 Capital and ReservesCalled up share capital 836 751 752Share premium account 17,594 15,714 15,714Merger reserve 2,003 2,003 2,003Other reserves 1,956 394 1,934Profit and loss account (9,432) (10,418) (10,218) 12,957 8,444 10,185 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007 Unaudited 6 Unaudited 6 Audited year months ended 30 months ended 30 ended 31 June 2007 June 2006 December 2006Operating activities £'000 £'000 £'000Group operating profit 661 400 515Adjustments to reconcile group operating profit tonet cash (outflows)/inflows from operating activitiesLoss on disposal of property, plant and equipment 2 - 5Depreciation of property, plant and equipment 116 133 272Amortisation of intangible assets 54 - -Share based payments 22 16 1,556Adjustment for net settlement of revenue against costof asset purchase (122) - -(Increase) in trade and other receivables (1,788) (60) (3,434)Increase/(decrease) in trade and other payables 756 (824) 3,116Movement in provisions 205 225 (142) Net cash flow from operating activities (94) (110) 1,888 Investing activitiesInterest received 158 88 216Payments to acquire intangible fixed assets (20) (4) (225)Purchase of property, plant and equipment (68) (58) (117)Expenses associated with acquisitions (115) - (14) Net cash flow from investing activities (45) 26 (140) Financing activitiesInterest paid (33) (15) (58)Proceeds from share issue 1,045 - 1Repayment of capital element of finance leases (1) (4) (6) Net cash flow from financing activities 1,011 (19) (63) Increase/(decrease) in cash and cash equivalents 872 (103) 1,685Cash and cash equivalents at the beginning of theperiod 6,800 5,115 5,115 Cash and cash equivalents at period end 7,672 5,012 6,800 CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2007 Share premium Profit and account loss reserve Share Merger Other capital reserve reserves Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 751 15,714 2,003 378 (10,891) 7,955 Issue of ordinary sharecapital - - - - - - Total recognised incomeand expense for theperiod - - - - 473 473 Share based payment - - - 16 - 16 At 30 June 2006 751 15,714 2,003 394 (10,418) 8,444 At 1 January 2007 752 15,714 2,003 1,934 (10,218) 10,185 Total recognised incomeand expense for theperiod - - - - 786 786 Share based payment - - - 22 - 22 Issue of ordinary sharecapital 84 1,880 - - - 1,964 At 30 June 2007 836 17,594 2,003 1,956 (9,432) 12,957 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 1. The AIM rules require that the next annual consolidated financialstatements of the Group for the year ending 31 December 2007, be prepared inaccordance with International Financial Reporting Standards (IFRS) as adopted bythe EU. The company published its statement on the impact of the adoption ofIFRS on 17 August 2007 and the financial information presented in that documenthas been used as the comparative information for the year ended 31 December 2006and the period ended 30 June 2006. The directors have applied the same accounting policies as set out in thedocument on the impact of the adoption of IFRS, which they expect to apply whenthe first annual IFRS financial statements are prepared for the year ended 31December 2007. This information does not constitute statutory accounts for the purpose ofsection 240 of the Companies Act 1985. A copy of the statutory accounts for theyear ended 31 December 2006, prepared under UK GAAP, has been delivered to theRegistrar of Companies and contained an unqualified auditors' report. This interim financial information is unaudited but has been reviewed by theauditor. 2. Basic earnings per share has been calculated based on the profit onordinary activities after taxation and the number of shares in issue for theperiod of six months to 30 June 2007. The diluted earnings per share has beencalculated to take into account un-exercised share options in issue at 30 June2007. Unaudited 30 June 2007 Unaudited 30 June 2006 Weighted average Per share Weighted Per share number of shares amount average amount (pence) number of (pence) shares Profits Profits £'000 £'000Basic earnings per shareProfitsattributable toordinaryshareholders 786 71,295,759 1.10p 473 67,090,383 0.71pDilutive effectOptions - 8,897,878 - 8,708,732Diluted earningsper share 786 80,193,637 0.98p 473 75,799,115 0.62p Audited 31 December 2006 Profits Weighted average Per share amount number of shares (pence) £'000Basic earnings per shareProfits attributableto ordinaryshareholders 673 67,090,383 1.00pDilutive effectOptions - 8,685,287Diluted earnings pershare 673 75,775,670 0.89p 3. The transaction with LV= in March 2007 resulted in the following changesto issued share capital and the share premium account. Share capital Share premium £'000 £'000At 1 January 2007 752 15,7144,172,672 consideration shares 42 876Additional subscription 4,181,034 shares 42 1,004 At 30 June 2007 836 17,594 4. A copy of the Interim Statement is being sent to all shareholders andcopies are available for collection indefinitely from the Group's Head Office atthe address below: Lighthouse Group plc26 Throgmorton StreetLondonEC2N 2ANTelephone: 020 7065 5640Fax: 020 7065 5650 www.lighthousegroup.plc.uk This information is provided by RNS The company news service from the London Stock Exchange