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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lighthouse Group Plc | LSE:LGT | London | Ordinary Share | GB0009779116 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 33.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMLGT
RNS Number : 3245F
Lighthouse Group PLC
20 February 2018
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014
Press Release 20 February 2018
Lighthouse Group plc
("Lighthouse", the "Group" or the "Company")
Final results for the year ended 31 December 2017
Lighthouse Group plc (AIM: LGT), the national financial adviser of choice for Middle Britain, today announces its final audited results for the year ended 31 December 2017.
Highlights
Hot Features
Premium
-- Revenues up 13 per cent. to GBP54 million
(2016: GBP48 million);
-- Recurring revenues generated from clients
up 14 per cent. to GBP25 million (2016:
GBP22 million);
-- EBITDA* up 27 per cent. to GBP2.8 million
(2016: GBP2.2 million);
-- Profit before tax up 32 per cent. to GBP2.5
million (2016: GBP1.9 million);
-- New business from affinity relationships
up 79 per cent. to GBP5.2 million (2016:
GBP2.9 million) with total revenues from
affinity relationships up 41 per cent.
to GBP9.6 million (2016: GBP6.8 million);
-- 21 affinity contracts now in place (2016:
19) with two new wins and two other contracts
renewed;
-- Average revenue production per adviser
increased by 23 per cent. to GBP122,000
(2016: GBP99,000);
-- Net cash balances** GBP8.7 million (2016:
GBP8.1 million);
-- Operating cash flow generation GBP1.4
million after investment of GBP0.7 million
in customer solution development (2016:
GBP0.7 million after GBP0.7 million investment
expensed)
-- Interim dividend of 0.12 pence per share
(2016: 0.09 pence per share) paid and
final dividend of 0.30 pence per share
proposed (2016: 0.18 pence per share)
- an increase for the full year of 55
per cent. over 2016; and
-- Assets under management in Luceo Asset
Management investment solutions GBP37
million (2016: GBP4 million) through five
funds (2016: three funds).
* Earnings before interest, tax, depreciation, and amortisation.
**Cash stated after deduction of bank loan of GBPNIL million (2016: GBP0.4 million).
Commenting on the results, Richard Last, Chairman of Lighthouse Group plc, said: "Lighthouse has continued to progress in 2017 and has delivered an excellent set of results, driven entirely by organic growth and a particularly pleasing performance in the affinity business. The substantial rise in average annualised revenue per adviser was a key factor in achieving a 13 per cent. increase in revenues. This, along with a reduction in operating costs flowing from the Group's continuing focus on providing good customer outcomes, resulted in a substantial increase in earnings. Lighthouse remain well positioned to deliver further growth."
For further information, please contact:
Lighthouse Group plc
Richard Last, Chairman Tel: +44 (0) 20 7065
5640
Malcolm Streatfield, investorenquiries@lighthousefs.co.uk
Chief Executive
Peter Smith, Finance www.lighthousegroup.plc.uk
Director
finnCap Limited Tel: +44 (0) 20 7220
0500
(Nominated Adviser and
Broker to the Company)
Corporate Finance
Adrian Hargrave / Emily
Watts / Hannah Boros
Corporate Broking
Alice Lane / Richard
Chambers
Media enquiries: IFC Tel: +44 (0) 20 3934
Advisory 6630
Heather Armstrong / heather.armstrong@investor-focus.co.uk
Graham Herring / Florence www.investor-focus.co.uk
Chandler
CHAIRMAN'S STATEMENT
OVERVIEW
I am pleased to report the Group's results for the year ended 31 December 2017, which are set out below and in the Consolidated Statement of Comprehensive Income in the Annual Report. Lighthouse achieved a record financial performance in 2017, with EBITDA* increasing by 27 per cent. to GBP2.8 million compared to GBP2.2 million in 2016 on revenues up 13 per cent. to GBP54.1 million (2016: GBP47.9 million). Profit before taxation for the year amounted to GBP2.5 million compared to GBP1.9 million in 2016 - an increase of 32 per cent. Adjusted basic earnings per share (after a standard tax charge) increased by 34 per cent. to 1.59 pence per ordinary share (2016: 1.19 pence per ordinary share).
TRADING HIGHLIGHTS
2017 2016
Revenue GBP54.1m GBP47.9m
Gross profit GBP14.7m GBP14.5m
Operating costs GBP11.9m GBP12.3m
EBITDA* GBP2.8m GBP2.2m
Depreciation and amortisation GBP0.3m GBP0.3m
Operating profit and profit before GBP2.5m GBP1.9m
taxation
Taxation credit GBP0.2m GBP0.7m
Profit after taxation being profit GBP2.7m GBP2.6m
for the financial year
Earnings per share:
Basic 2.13p 2.07p
Adjusted basic reflecting standard
tax charge** 1.59p 1.19p
Fully diluted 1.98p 1.97p
Adjusted fully diluted reflecting
standard tax charge** 1.49p 1.13p
*Earnings before interest, tax, depreciation
and amortisation.
**Calculated after applying standard tax charge
of 19.25% (2016: 20%).
FINANCIAL PERFORMANCE
Group revenue for 2017 was GBP6.2 million higher than in 2016, due to the higher average annualised revenue production per adviser, which increased by GBP23,000 (23 per cent.) to a record level of GBP122,000 in 2017 (2016: GBP99,000). This average has increased by 53 per cent. since the introduction of the Retail Distribution Review ("RDR") on 1 January 2013. Recurring revenues reached a new high of GBP24.8 million or 48 per cent. of total revenue generated from customers.
As advisers within Lighthouse Financial Advice Limited ("LFA"), the Group's affinity-based national advisory business, generated significantly higher gross revenues than targeted, they retained a greater proportion of the revenues they produced. This, together with the fixed investment costs in Luceo Asset Management while the funds build to scale., resulted in gross margins for the year to 31 December 2017 being reduced. from 30.2 per cent. in 2016 to 27.1 per cent.
Operating costs reduced by GBP0.4 million or 3 per cent. from GBP12.3 million in 2016 to GBP11.9 million in 2017. Overall the Group increased spend on the Luceo Asset Management proposition (GBP137,000), investments in technology (GBP197,000), quality assurance to service the increased adviser activity (GBP103,000) and share-based payment charge (GBP306,000) as well as maintenance of spend on auto-enrolment (GBP332,000). These additional costs were offset partially by savings in regulatory fees (GBP484,000) and professional indemnity insurance (GBP258,000) costs and increased realisations from credit control activities (GBP270,000).
The Group's profit before taxation increased by GBP0.6 million or 32 per cent. to GBP2.5 million (2016: GBP1.9 million). Basic earnings per share in 2017 amounted to 2.13 pence per ordinary share after a deferred tax credit of GBP200,000 (2016: 2.07 pence per ordinary share after the deferred taxation credit of GBP750,000) and adjusted basic earnings per share, calculated after a standard tax charge of 19.25% per cent. (2016: 20%) increased by 34 per cent. to 1.59 pence per ordinary share. (2016: 1.19 pence per ordinary share).
AFFINITY AND OTHER BUSINESS RELATIONSHIPS
The Group continues to be a leader in the market for providing advice to members of affinity groups, with 21 contractual relationships at 31 December 2017 whose aggregate membership exceeds six million individuals. Revenues from this activity increased significantly during 2017 to reach GBP9.6 million, an increase of GBP2.8 million or 41 per cent. over 2016.
Affinity-sourced business is a highly significant contributor to Group performance, contributing GBP1.9 million to Group EBITDA in 2017 (2016: GBP1.1 million). Contracted relationships and revenues have grown consistently since the relaunch of LFA as an affinity focused business post-RDR, with gross revenues having increased by GBP5.4 million, an annual compound growth rate of 23 per cent. over the last four years.
The Lighthouse Pensions Trust ("LPT"), the Group's proprietary auto-enrolment solution for small and medium-sized entities ("SMEs"), has continued to grow during the year, with scheme and member numbers at 31 December 2017 having increased by more than 70 per cent. since the beginning of the year, albeit from a low base. As the first wave of employers having to establish auto-enrolment compliant workplace pension schemes draw to a close (by mid-2018), we expect opportunities from consolidation of sub-scale scheme operators to emerge. The Group will continue to monitor the LPT operation and associated opportunities during 2018.
Luceo Asset Management Limited ("Luceo") the Group's sponsored investment solution business launched in late 2016 to provide the Group's customers with access to sponsored investment solutions matched to their agreed risk profiles, continued to accumulate funds during the year, with assets under management increasing from GBP4 million at 31 December 2016 to GBP37 million at 31 December 2017. The initial three Luceo Investment Funds - actively managed, fund of fund solutions in the active asset management space, with Octopus Investments as the Investment Adviser - were augmented by two additional Investment Funds within the same actively managed product offering also with Octopus Investments as Investment Adviser and matching to different risk profiles. The Luceo Investment Funds remain ideally suited to form part of the investment portfolio for the Group's target "Middle Britain" customer.
FINANCIAL POSITION
The Group had net cash of GBP8.7 million as at 31 December 2017 compared to GBP8.1 million net cash at the previous year-end, an increase of 7 per cent. During the year the Group redeemed in full the commercial property loan of GBP0.4 million originally taken out in 2013 and secured on the long-leasehold property occupied by the Group in Woodingdean, near Brighton. The loan was repaid out of operating cash flow, leaving the Group debt-free.
BREXIT AND REGULATORY DEVELOPMENTS
The uncertainty within UK financial markets following the vote to leave the EU in June 2016 has not adversely impacted the Group's operations with the FTSE 100 and similar indices again recording all-time highs in late 2017. Notwithstanding this, the depreciation of sterling against the dollar and the euro will add to the inflationary pressures already building up in the UK and could impact UK consumer spending and investment.
The impact of Brexit on the UK financial services markets has still to be finally determined, notwithstanding the UK Government having served formal notice to leave the EU under Article 50 of the Treaty on European Union in March 2017, and the Group is keeping the situation under close review. With the Group's customer base domiciled principally in the UK, the Board continues to believe the Group is well placed to deal with any issues that might emerge from Brexit in due course.
Regulation continues to develop apace, with the Markets in Financial Instruments Directive ("MiFID II") having come into force on 3 January 2018 and the General Data Protection Regulation becoming effective from 25 May 2018. These new regulations impose additional obligations in the areas of customer information provision and security of data processing. The Group has well-developed plans to ensure it will be able to comply fully with the new legislation and continues to take a positive approach towards assessing and dealing with new developments in the markets within which it operates, for the benefits of its customers, advisers and stakeholders.
DIVIDS
A final dividend of 0.30 pence per ordinary share (2016: 0.18 pence per ordinary share), an increase of 67 per cent., is recommended by the Board and, subject to approval at the forthcoming Annual General Meeting, will be payable on 4 May 2018 to shareholders on the register at close of business on 6 April 2018. The corresponding ex-dividend date is 5 April 2018. This follows the interim dividend of 0.12 pence per ordinary share (2016: 0.09 pence per ordinary share) paid in October 2017 and makes a total dividend for the year of 0.42 pence per ordinary share (2016: 0.27 pence per ordinary share). The Group intends to continue with a progressive dividend policy.
EMPLOYEES AND BOARD
On 2 May 2017 Fay Williams retired from the Board and I should like to take this opportunity to thank her for her valuable contribution during her time as a director of the Company.
I welcome Michelle Cracknell and Ann Roughead who were appointed to the Board as non-executive directors on 1 September 2017. Their expertise in the areas of pension provision and investment management will be invaluable to the Group and I look forward to working with them.
I would like to express my appreciation to my Executive directors and all of the Group's employees for their professionalism, hard work and dedication during the year. I should also like to thank my Non-Executive colleagues for their significant support and contribution during 2017.
ADVISERS
The Group's advisers are the core of what we do in delivering appropriate investment solutions to customers based on holistic financial advice and commensurate with their attitude to risk. I would like to thank all of the Group's advisers for their concerted and highly-skilled contribution to the Group and its clients during 2017.
STRATEGY AND PROSPECTS
The Group continues to focus on improving its operational efficiency and delivering first-class services to its customers by developing innovative solutions.
With an on-going focus on expanding its affinity business, where Lighthouse is a leading player, developing new and enhancing existing financial solutions for customers and increasing cost efficiency, whilst continuing to mitigate risk for the Group and its customers, the Board believes that Lighthouse is well placed to take advantage of the opportunities available.
Richard Last
Chairman
19 February 2018
CHIEF EXECUTIVE'S REVIEW
OVERVIEW
Lighthouse continued to progress well during 2017, with sharply increased average adviser productivity resulting in the Group recording its highest ever EBITDA and profit before taxation at GBP2.8 million and GBP2.5 million respectively.
The Group's affinity business continues to grow, with 21 contractual arrangements in place as at 31 December 2017. Total revenues from this source reached a record level of GBP9.6 million and this high-margin business contributed GBP1.9 million to Group EBITDA. The Group continues to be seen as the leading provider of holistic financial advice to members of affinity-based organisations.
Average revenues per adviser exceeded GBP100,000 for the first time at GBP122,000 - an increase of GBP23,000 or 23 per cent. over 2016. Recurring revenues increased by GBP2.9 million to nearly GBP25 million and remained at 48 per cent. of total revenues generated from customers for the first time in 2016 (2015: GBP21.9 million and 48 per cent. respectively). This demonstrates the willingness of clients to continue to engage with, and seek advice from, advisers across all of the Group's operations as well as the resilience of the Group's operating model. Gross margins increased by GBP0.2 million to GBP14.7 million although were lower in percentage terms at 27.1 per cent. (2016: 30.2 per cent.) as a result of advisers within LFA reaching more favourable payment rates due to their higher revenue production, together with fixed recharges of costs to advisers forming a lower proportion of the higher overall revenues generated, the equivalent costs being charged within operating costs, and the Group writing off fixed fund management costs incurred whilst the Luceo Investment Fund solutions build to scale.
Continuing careful management of the Group's operating cost base resulted in a reduction of GBP0.4 million in administrative overheads to GBP11.9 million (2016: GBP12.3 million). EBITDA increased by 27 per cent. to GBP2.8 million from GBP2.2 million in 2016 and pre-tax profit rose by 32 per cent. to GBP2.5 million from GBP1.9 million in 2016. This underlines the progress being made by the Group across all operating areas.
The Group continues to invest in technology development and initiatives to enhance existing and produce new business offerings in order to better serve its customers and take advantage of the many opportunities that exist.
Further details of 2017 trading are set out later in this review.
OPERATIONS
The Group provides financial advice through its three principal business segments, being:
- LFA, the affinity based national advisory
division;
- Wealth management, comprising employed and
highly specialist and qualified advisers within
Carrwood, working through accountancy and
professional connections, and Wealth, serving
a similar high net worth client base through
the client banks of its self-employed advisers;
and
- Lighthouse Advisory Services Limited, the
Group's authorised network of self-employed
advisers, operating under their own brands
and within their local communities but with
access to the same Fairway technology and
Researched Solutions product suites available
elsewhere in the Group.
At 31 December 2017 the Group employed 149 staff, including employed advisers, and operated out of three principal locations, being London (plc office and base for City-based advisers), Stockport (operating base for Carrwood, including Lighthouse Workplace Solutions, compliance and IT support centre) and Woodingdean, near Brighton (base for LFA operations support and finance and adviser remuneration functions).
DIVISIONAL COMMENTARY
LIGHTHOUSE FINANCIAL ADVICE
LFA is the Group's national advisory business focused on providing appropriate financial advice and solutions to the market area termed "Middle Britain", and holds contractual arrangements as the preferred provider of financial advice to the members of 21 affinity groups across the UK, covering some six million individual members. In 2017 the Group has secured new contracts as the preferred provider of financial advice to the members of the Social Workers Union and the Money Advice Service, for initial periods of 18 months and one year respectively, as well as agreeing renewals with Usdaw and Boundless by CSMA, each for a further three years. The Group's dedicated mortgage offering is also gaining traction within the affinity community, with 14 such organisations now having appointed Lighthouse as the preferred mortgage adviser to their members. These contract wins and renewals confirm LFA's position as the financial adviser of choice for affinity groups and their members and the continuity and extension of such arrangements underpin the potential and future development of LFA.
Revenues generated from affinity-based enquiries across the Group reached GBP9.6 million in 2017 - an increase of GBP2.8 million or 41 per cent. over the GBP6.8 million achieved in 2016 with new business revenues included therein increasing by GBP2.3 million or 79 per cent. to GBP5.2 million (2016: GBP2.9 million). After deducting adviser payaways, introducer payments and directly attributable overheads, the Group's affinity business contributed GBP1.9 million to Group EBITDA. This contribution is expected to increase as penetration of such relationships becomes deeper and more effective. LFA also leads the distribution of the Group's Luceo Asset Management solutions.
Operating from modern premises near Brighton, wholly-owned by the Group and which support a professional call centre, client service and events teams, embracing fully the Group's Fairway technology solution and its Researched Solutions product range, LFA remains well placed to take advantage of the opportunities available as a prime adviser to "Middle Britain".
In 2017 LFA contributed gross revenues of GBP19.8 million, an increase of GBP4.1 million or 26 per cent. over the GBP15.7 million achieved in 2016, and an EBITDA after allocation of central costs of GBP3.8 million (2016: GBP2.7 million).
WEALTH MANAGEMENT
Wealth management comprises highly skilled employed advisers within Carrwood (incorporating Lighthouse Workplace Solutions) and self-employed advisers within Wealth. Carrwood has 45 contractual arrangements with accountancy firms to provide financial advice to their clients and the advisers within Carrwood (incorporating Lighthouse Workplace Solutions) are supported by the specialist administrative and para-planning resource located in the Group's modern premises in Stockport, within easy reach of Manchester, the principal financial centre in the North-West of England. The office is also the administrative support centre for the Group's auto-enrolment and group employee benefits business, part of Carrwood. Wealth advisers operate remotely or from the Group's head office premises in the City of London and have access to central para-planning services.
This division produced revenues of GBP9.7 million, an increase of GBP1.3 million or 15 per cent. from the GBP8.4 million recorded in 2016. Average annualised gross revenue production across the employed advisers working with the Group's accountancy connections within Carrwood was maintained at GBP215,000 with the 7 new advisers recruited during the year building towards full productivity.
The Group invested a further GBP331,000 of third-party costs in its LPT auto-enrolment offering which has been fully expensed in the 2017 results, which contributed to that unit's EBITDA loss (before central cost allocations) of GBP528,000 in the year. Overall the wealth management segment recorded an EBITDA loss after allocation of central costs of GBP349,000 (2016: EBITDA loss of GBP323,000). Without the above third-party costs, this division would have been near EBITDA break-even for the year.
355 auto-enrolment compliant company pension schemes had been staged within the Group's fully advised auto-enrolment solution for SMEs, the Lighthouse Pensions Trust ("LPT"), by 31 December 2017, an increase of 84 per cent. over the 193 at the end of 2016, with a further 22 schemes having signed up to be staged in future periods. Take-up of the LPT has been steady during 2017, despite the continuing reluctance of SME owners to pay for assistance in establishing pension arrangements imposed on them by government when lower-cost, unadvised offerings are available from other sources, and total active individual membership of the Corporate Pensions Trust, incorporating LPT, is now 4,722 - a 43 per cent. increase over the 3,304 equivalent at the end of 2016 - and the business will approach break-even on direct incremental costs during 2018. The Group will continue to manage this business towards profitability and look to take advantage of opportunities that are likely to arise from new company creation and an active secondary market.
The combination of highly-skilled employed and experienced self-employed advisers operating in the high-net worth marketplace provides a firm base for further growth in the wealth management sector.
LIGHTHOUSE ADVISORY SERVICES ("LASER")
2017 saw revenues in the network segment, LASER, increased marginally from GBP23.8 million to GBP24.6 million, with average annualised revenue production per adviser increasing by 15 per cent. to GBP123,000 from GBP107,000. The Group continues to focus on improving margin and on minimising risk for itself, its clients and its network advisers. The Group will continue to work with those firms which embrace the full Lighthouse Fairway technology and the innovative financial solutions provided for clients by the Lighthouse Researched Solutions and Luceo Investment Fund range to deliver better customer outcomes and a mutually beneficial relationship for the Group and its advisers in this community space.
After allocation of central costs, the network segment recorded an EBITDA of GBP941,000 (2016: GBP64,000). The improvement reflected the benefit of general cost control and reviews leading to expense reductions as well as a lower allocation of central overheads given the lower proportion of overall Group revenues produced by this segment.
LUCEO ASSET MANAGEMENT
The Group has continued to build in 2017 on its in-house investment solutions under the Luceo Investment Funds brand launched with Luceo Asset Management Limited, a wholly-owned subsidiary of the Company, as sponsor in October 2015. Two further sub-funds were added in February 2017 to the existing three actively managed, fund of fund solutions made available in conjunction with Octopus Investments as Investment Adviser, giving a range of funds that cover the main client risk profiles applicable to such products and which provide investments whose risk profiles exactly match those agreed at the time of recommendation by the customer.
The Luceo Funds are available on a number of the leading platforms, including the Lighthouse Zurich Platform, a service exclusively available to and on terms bespoke to the Group, its advisers and clients.
Operation of the Luceo Funds is overseen by an Investment Committee made up of experienced investment professionals, with an independent chairman, ensuring that the interests of customers are always of primary concern.
The Luceo Investment Funds have continued to resonate with the Group's adviser communities and are initially focused on the customers of LFA as part of the Lighthouse Researched Solutions range successfully deployed for the benefit of customers since January 2013. Over 75 per cent. of the advisers within LFA have now engaged and arranged investment within the Luceo Funds for the benefit of their clients and total funds amounted to cGBP37 million as at 31 December 2017 (2016: GBP4 million).
The Group has continued to support its Luceo Investment Range in 2017 whilst they build to scale. Underwriting the excess of the fixed costs of operating the Funds over the share of the annual management charge (GBP177,000), together with other direct operating expenses such as business support and the investment committee (GBP137,000) and allocated central costs resulted in a net EBITDA outlay of GBP500,000 in the year.
The Group has examined a number of potential extensions to the Luceo product range during the year and will look to develop and launch new investment options in due course, having regard to the performance and profitability of the current range. This should provide additional demand for the Luceo Fund range and deliver improved customer outcomes across a wider number of customers whilst providing additional revenue and margin for the Group as the Funds move towards scale.
Central costs not allocated to segments amounted to GBP140,000 (2016: GBP221,000).
PROFESSIONAL INDEMNITY INSURANCE ("PII")
PII cover is a mandatory cost for businesses that advise clients within the UK retail financial services market, and the market for such cover in the UK has remained tight in recent years. Notwithstanding this, the Group secured an early renewal of its coverage in October 2017 for a further eighteen-month period, with the adoption of carefully risk-rated researched solutions being a key factor in achieving renewal on more favourable terms including reductions in certain individual case excesses.
REGULATION
2017 has seen continued expansion of regulations applied to the UK financial services distribution sector with substantial new legislation such as MiFID II, which came into force on 3 January 2018, and the General Data Protection Regulation, which comes into effect on 25 May 2018, imposing additional obligations on providers and distributors alike in areas such as client information and data protection. The Group has allocated dedicated resource to establish and deliver plans to comply fully with all relevant aspects of the new legislation and also continues to engage with regulatory authorities to ensure on-going regulation of retail financial services is appropriate and proportionate whilst continuing to recognise the need to minimise risk and provide appropriate advice to and outcomes for its customers.
REVENUE AND GROSS MARGINS
Total revenues increased by GBP6.2 million or 13 per cent. to GBP54.1 million from GBP47.9 million in 2016, driven by increases in average annualised revenue production per adviser which improved by GBP23,000 or 23 per cent. to GBP122,000 from GBP99,000 in 2016. Recurring revenues at GBP24.8 million were GBP2.9 million ahead of the GBP21.9 million recorded in 2016 and remained at 48 per cent. of all revenues generated from customers. These improvements were generated across all of the Group's operating businesses.
Gross margins, expressed as a percentage of total revenues, decreased to 27.1 per cent. from 30.2 per cent. in 2016, reflecting advisers within LFA achieving higher revenue production and thereby improved payout ratios under the Group's standard terms of business, the lower overall proportion of adviser charges as a percentage of gross revenues (the costs which these charges are designed to cover are charged within overheads) and the write-off of fixed fund costs in respect of the Group's Luceo Investment Funds whilst these build to scale.
OPERATING COSTS
Operating costs decreased by GBP0.4 million to GBP11.9 million in 2017 from GBP12.3 million in 2016. The decrease was due to lower utilisation of professional indemnity insurance arrangements and regulatory expense (an aggregate reduction of GBP741,000) and higher realisations from credit control activities (GBP270,000), partially offset by GBP197,000 additional investment in IT, GBP103,000 increased spend in compliance resources to meet the demand from the substantial increase in revenues in the year, increased costs of share-based payments (GBP306,000) and GBP103,000 investment costs expensed during the year on the further development and enhancement of the Luceo Asset Management Fund range. The total investment cost expensed in 2017 on the Luceo Investment Funds and auto-enrolment product areas amounted to GBP468,000 (2016: GBP684,000).
The Group continues to monitor closely its operating base and looks to minimise such costs where possible.
CARRYING VALUE OF INTANGIBLE ASSETS AND GOODWILL
As required by accounting standards, the Board has undertaken a review of the Group's intangible assets including goodwill arising from business combinations as at 31 December 2017 to identify whether any indicators of impairment existed as at that date and, in the case of those intangible assets with indefinite useful economic lives, whether the carrying values were supported by the estimated net present value of future cash flow projections from the relevant Cash Generating Units or business segments. No such impairment factors were identified and hence no additional provision for impairment has been made (2016: GBPNil).
RESULTS FOR THE YEAR
The Group recorded EBITDA for the year of GBP2.8 million (2016: GBP2.2 million). After charging GBP274,000 in respect of depreciation and amortisation and net finance costs of GBP7,000 (2016: GBP299,000 and GBP16,000 respectively), the Group recorded a pre-tax profit of GBP2.5 million (2016: GBP1.9 million). Post-tax profit amounted to GBP2.7 million (2016: GBP2.6 million), with the utilisation of losses brought forward from prior years being offset by a further recognition of losses previously not included within deferred taxation leading. The Group has recognised a deferred tax asset in relation to the outstanding share options leading to a tax credit of GBP200,000 for the year (2016: a credit of GBP750,000 arising from the recognition of a deferred tax asset for losses brought forward now considered to be recoverable in the foreseeable future).
CASH FLOW, CASH BALANCES AND TREASURY
Year-end cash balances amounted to GBP8.7 million (2016: GBP8.1 million after deduction of the bank mortgage redeemed during 2017). The increase of GBP0.6 million was due to the profit retained for the year of GBP2.1 million less working capital increases principally as a result of the settlement of historic complaints previously provided for. The bank mortgage of GBP0.4 million taken out in 2013 to part fund the long-leasehold interest in the Group's LFA operational premises in Woodingdean (total acquisition cost: GBP1.1 million) was redeemed early in October 2017 at the book cost of GBP0.4 million.
During 2017 the FCA agreed to release the undertakings previously provided by the Group in respect of maintaining assets and seeking prior approval for distributions by its regulated subsidiaries, recognising the progress made by the Group since the undertakings were provided. After allowing for regulatory and working capital considerations the Board will continue to retain the GBP4.7 million of cash it holds in excess of regulatory capital requirements in short-dated accounts for the time being.
PROSPECTS
As noted above, the Group has continued to invest in its businesses and in new initiatives. This, together with the on-going focus on higher margin divisions - LFA and Wealth Management - and focused development of the advisers within the network division in conjunction with the Group's Fairway technology and carefully selected Researched Solutions, leave the Group well placed, with a solid financial position and net cash, to take advantage of opportunities.
Malcolm Streatfield
Chief Executive
19 February 2018
KEY PERFORMANCE INDICATORS (KPIS)/ALTERNATIVE PERFORMANCE MEASURES (APMS)
Lighthouse Group plc uses a number of KPIs to assess business performance. Some are driven by metrics directly related to International Financial Reporting Standards (IFRSs) whilst others represent APMs.
The principal KPIs used by the Group are as follows:
KPI What is Why do we use IFRS performance Reconciled
it? it? measure? to IFRS?
------------------ --------------------- ------------------------ ----------------- ------------------
Total revenue Aggregate Indicator of Yes N/A
income scale and activity
receivable level of the
from customers Group
and advisers,
excluding
VAT
------------------ --------------------- ------------------------ ----------------- ------------------
Recurring Regular Regularly recurring No Forms part
revenues on-going income underpins of total
charges future trading revenue
payable and operating reported
by customers capability upon under
for regular IFRS
periodic
review
of investment
portfolios
and trail/renewal
commissions
payable
in respect
of mortgages
and non-investment
insurance
products
advised
upon and
pre-RDR
investments
------------------ --------------------- ------------------------ ----------------- ------------------
Affinity That proportion Servicing our No Forms part
revenues of total affinity connections of total
revenues is a key part revenue
derived of the Group's reported
from affinity-based growth strategy upon under
connections and the level IFRS
of total revenues
derived from
such sources
provides a clear
indication of
performance
in this critical
area
------------------ --------------------- ------------------------ ----------------- ------------------
Average Total revenue This is a clear No Derived
revenue generated indication of from total
from customers from customers the general revenue
produced (i.e. excluding activity levels reported
by advisers charges of the Group's under IFRS
payable advisers which and average
by advisers will drive margin adviser
and other and ultimately numbers
non-customer profitability
income)
divided
by average
number
of advisers
in the
year
------------------ --------------------- ------------------------ ----------------- ------------------
Earnings Self-explanatory EBITDA represents No Reconciled
Before - profitability a close proxy to IFRS
Interest, before for cash profitability profitability
Depreciation net finance subject to working measures
and Amortisation cost/income capital and in the
("EBITDA") and non-cash financing costs Consolidated
expenses Statement
such as of Comprehensive
depreciation Income
and amortisation
of tangible
and intangible
assets
(including
goodwill)
respectively
------------------ --------------------- ------------------------ ----------------- ------------------
Earnings Profit Earnings per Yes N/A
per share after taxation share gives
("EPS") attributable a clear indication
- basic to equity to shareholders
and diluted shareholders of the profits
divided per share available
by the to pay dividends
total number
of ordinary
shares
in issue
and in
the case
of diluted
also the
number
of share
options
outstanding
at the
reporting
date and
whose exercise
price is
below the
average
mid-market
price of
the Company's
shares
during
the year
(i.e. not
anti-dilutive)
------------------ --------------------- ------------------------ ----------------- ------------------
Adjusted As per The Group has No Fully reconciled
earnings basic and historically to IFRS
per share diluted been able to EPS
- basic earnings utilise significant
and diluted per share tax losses generated
but after in prior periods
eliminating to offset taxable
the actual profits. This,
charge together with
or credit recognition
for taxation of unutilised
for the tax losses during
year and a year can lead
replacing to unrepresentative
it with tax charges
a charge or credits and
or credit make comparison
for taxation between financial
calculated reporting years
at the difficult. Application
standard of a standard
rate of tax charge or
UK Corporation credit enables
Tax applicable readers of the
to the Annual Report
Group's to make more
profit informed judgements
before of the Group's
taxation financial performance
by removing
inconsistencies
------------------ --------------------- ------------------------ ----------------- ------------------
Lighthouse Group plc
Consolidated statement of comprehensive income
for the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
Revenue 54,111 47,919
Cost of sales (39,439) (33,452)
Gross profit 14,672 14,467
Administrative expenses
Other operating expenses (11,870) (12,259)
-------------------------------------- --------- ---------
Earnings before interest,
tax, depreciation and amortisation 2,802 2,208
-------------------------------------- --------- ---------
Depreciation and amortisation (274) (299)
Total administrative expenses (12,144) (12,558)
--------- ---------
Operating profit 2,528 1,909
Finance income 3 11
Finance costs (10) (27)
Profit before taxation 2,521 1,893
Taxation 200 750
Profit for the year 2,721 2,643
Other comprehensive income - -
Total comprehensive income
for the year 2,721 2,643
========= =========
Basic earnings per share 2.13p 2.07p
========= =========
Adjusted basic earnings
per share 1.59p 1.19p
========= =========
Diluted earnings per share 1.98p 1.97p
========= =========
Adjusted diluted earnings
per share 1.49p 1.13p
========= =========
All activities are classed as continuing.
The profit and total comprehensive income for both 2017 and 2016 were wholly attributable to the equity holders of the Company.
Basic and diluted earnings per share are stated after the actual tax charge or credit for the year. Adjusted basic and diluted earnings per share are stated after deducting a notional tax charge, calculated at the standard rate of UK corporation tax applicable for the year, in order to aid comparison between the two years.
Lighthouse Group plc
Consolidated statements of changes in equity
for the year ended 31 December 2017
Share Special Reserves Retained Total
capital non- distributable arising earnings attributable
reserve from to equity
share- shareholders
based
payments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2017 1,277 1,999 1,102 4,586 8,964
Profit
and total
comprehensive
income
for the
year - - - 2,721 2,721
Transactions
with owners,
recorded
directly
in equity:
Dividends
paid - - - (383) (383)
Share-based
payment - - 385 - 385
At 31 December
2017 1,277 1,999 1,487 6,924 11,687
---------------- --------- -------------------- ---------- ---------- --------------
At 1 January
2016 1,277 1,999 1,023 2,262 6,561
Profit
and total
comprehensive
income
for the
year - - - 2,643 2,643
Transactions
with owners,
recorded
directly
in equity:
Dividends
paid - - - (319) (319)
Share-based
payment - - 79 - 79 ---------------- --------- -------------------- ---------- ---------- -------------- At 31 December 2016 1,277 1,999 1,102 4,586 8,964 ---------------- --------- -------------------- ---------- ---------- --------------
Lighthouse Group plc
Consolidated statement of financial position
at 31 December 2017
2017 2016
GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 5,131 5,230
Property, plant and equipment 1,397 1,240
Deferred tax asset 950 750
7,478 7,220
--------- --------
Current assets
Trade and other receivables 8,187 9,004
Cash and cash equivalents 8,733 8,501
--------- --------
16,920 17,505
--------- --------
Total assets 24,398 24,725
--------- --------
Current liabilities
Trade and other payables 8,789 9,302
Provisions 2,846 3,005
--------- --------
11,635 12,307
--------- --------
Non-current liabilities
Trade and other payables - 405
Provisions 1,076 3,049
--------- --------
1,076 3,454
--------- --------
Total liabilities 12,711 15,761
--------- --------
Net assets 11,687 8,964
========= ========
Capital and reserves
Called up share capital 1,277 1,277
Special non distributable
reserve 1,999 1,999
Other reserves - share-based
payments 1,487 1,102
Retained earnings 6,924 4,586
Total equity attributable
to equity holders of the
Company 11,687 8,964
========= ========
The financial information was approved by the Board of Directors on 19 February 2018 and was signed on its behalf by
Malcolm Streatfield
Chief Executive
Peter Smith
Finance Director
Lighthouse Group plc
Consolidated statement of cash flows
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
Operating activities
Profit before tax for the
year 2,521 1,893
Adjustments to reconcile
profit for the year to net
cash inflows from operating
activities
Finance income (3) (11)
Finance costs 10 27
Depreciation of property,
plant and equipment 150 157
Amortisation of intangible
assets 124 142
Share-based payment 385 79
Change in trade and other
receivables 817 4,262
Change in trade and other
payables (479) (1,361)
Change in provisions (2,132) (4,493)
---------- ----------
Cash generated from operations 1,393 695
Finance costs paid (10) (27)
Net cash inflow from operating
activities 1,383 668
---------- ----------
Investing activities
Purchase of property, plant
and equipment (307) (126)
Purchase of intangible assets (25) (88)
Finance income received 3 11
---------- ----------
Net cash outflow from investing
activities (329) (203)
---------- ----------
Financing activities
Bank loan repayments (439) (34)
Dividends paid to equity
shareholders (383) (319)
Net cash outflow from financing
activities (822) (353)
---------- ----------
Increase in cash and cash
equivalents 232 112
Cash and cash equivalents
at the beginning of the
year 8,501 8,389
---------- ----------
Cash and cash equivalents
at the end of the year 8,733 8,501
========== ==========
Lighthouse Group plc
Notes to the financial information for the year ended 31 December 2017
1. Basis of preparation
The financial information, which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statements of Changes in Equity, the Consolidated Statement of Financial Position and the Consolidated Statement of Cash Flows and the related explanatory notes, has been extracted from the audited financial statements for the year ended 31 December 2017 and has been prepared on the basis of the accounting policies set out therein and in accordance with International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board as adopted for use in the EU ("IFRS").
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the registrar of companies, and those for 2017 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
2. Earnings per ordinary share
The calculation of the basic and diluted earnings per share attributable to equity shareholders of the parent company is based on the following data:
2017 2017 2016 2016
Basic/diluted Adjusted Basic/diluted Adjusted
Profit for the purposes
of basic and dilutive
earnings per share
(GBP'000) 2,721 2,035 2,643 1,514
================ ============== ================ ==============
Weighted average number
of ordinary shares
for the purpose of
basic earnings per
share 127,700,298 127,700,298 127,700,298 127,700,298
Effect of the dilutive
potential on ordinary
shares: share options 9,378,939 9,378,939 6,313,391 6,313,391
---------------- -------------- ---------------- --------------
Weighted average number
of ordinary shares
for the purpose of
diluted earnings per
share 137,079,237 137,079,237 133,831,689 133,831,689
================ ============== ================ ==============
Profit for the purposes of calculating adjusted basic and diluted earnings as set out above are stated after excluding the deferred tax credit of GBP200,000 in 2017 (2016: GBP750,000) and applying a standard rate of tax of 19.25 per cent. (2016: 20 per cent.) to the profit before taxation in the relevant year.
3. Dividends
The directors recommend the payment of a final dividend for the year ended 31 December 2017 of 0.30 pence per ordinary share (2016: 0.18 pence per ordinary share).
4. Annual report
The annual report, audited financial statements and notice of annual general meeting will be posted to shareholders on or about 2 March 2018 and copies are available for collection indefinitely from the Company's registered office at 26 Throgmorton Street, London, EC2N 2AN or at the Group's website (www.lighthousegroup.plc.uk). A further announcement will be made in due course.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFAFAUFASEEE
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February 20, 2018 02:00 ET (07:00 GMT)
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