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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 : 0729R
Lighthouse Group PLC
26 February 2019
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014
Press Release 26 February 2019
Lighthouse Group plc
("Lighthouse", the "Group" or the "Company")
Final results for the year ended 31 December 2018
Lighthouse Group plc (AIM: LGT), the national financial advisory group, today announces its final audited results for the year ended 31 December 2018.
Financial Highlights
Hot Features
Premium
-- Underlying EBITDA* up 7 per cent. to GBP3.42 million (2017:
GBP3.19 million);
-- Profit before tax up 5 per cent. to GBP2.64 million (2017:
GBP2.52 million)
-- Revenues GBP53.42 million (2017: GBP54.11 million);
-- Average annualised revenue production per adviser maintained
at record level of GBP122,000 from 2017;
-- Recurring revenues generated from clients up 10 per cent.
to GBP26.77 million (2017: GBP24.39 million);
-- Interim dividend of 0.20 pence per share (2017: 0.12 pence
per share) paid and final dividend of 0.50 pence per share
proposed (2017: 0.30 pence per share) - a year on year increase
for the full year of 67 per cent.;
-- Cash balances up GBP0.8 million or 8 per cent. to GBP9.55
million (2017: GBP8.73 million) after investment in Tavistock
Investments plc of GBP1 million and dividend payments of
GBP0.64 million (2017: GBP0.38 million);
-- Operating cash flow generation GBP2.87 million after investment
of GBP0.55 million in customer solution development (2017:
GBP1.38 million after GBP0.84 million investment expensed).
Operational Highlights
-- 23 affinity contracts now in place (2017: 21) with 2 new
wins and 10 other contracts renewed;
-- Strategic agreement with and investment of GBP1 million
for 5.3 per cent. stake in Tavistock Investments plc as
part of long-term relationship.
Post year end events
-- Completion of the strategic review of the Lighthouse Pensions
Trust resulting in an exit from that business via a proposed
transfer to Smart Pension Limited.
* Earnings before interest, tax, depreciation and amortisation and non-cash share-based payment charge.
Commenting on the results, Richard Last, Chairman of Lighthouse Group plc, said: "Lighthouse has continued to progress its strategy in 2018 despite softening market conditions in the second half of the year and has delivered an excellent set of results alongside a number of strategic initiatives. The substantial rise in recurring revenues together with maintenance of the record average annualised revenue per adviser, along with a reduction in operating costs flowing from the Group's continuing focus on providing good customer outcomes, resulted in a further increase in earnings. Lighthouse remain well positioned to deliver further growth notwithstanding current market uncertainty."
For further information, please contact:
Lighthouse Group plc Richard Last, Chairman Tel: +44 (0) 20 7065 5640 Malcolm Streatfield, Chief investorenquiries@lighthousefs.co.uk Executive Peter Smith, Finance Director www.lighthousegroup.plc.uk finnCap Limited Tel: +44 (0) 20 7220 0500 (Nominated Adviser and Broker to the Company) Corporate Finance Julian Blunt / Emily Watts / Hannah Boros Corporate Broking Alice Lane / Richard Chambers Media enquiries: IFC Advisory Tel: +44 (0) 20 3934 6630 Heather Armstrong / Graham heather.armstrong@investor-focus.co.uk Herring / Florence Chandler www.investor-focus.co.uk
CHAIRMAN'S STATEMENT
OVERVIEW
I am pleased to report the Group's results for the year ended 31 December 2018, which are set out below and in the Consolidated Statement of Comprehensive Income in the Annual Report. Lighthouse achieved a record financial performance in 2018, with underlying EBITDA* increasing by 7 per cent. to GBP3.42 million compared to GBP3.19 million in 2017 on revenues marginally lower (1 per cent.) at GBP53.42 million (2017: GBP54.11 million). Profit before taxation for the year amounted to GBP2.64 million compared to GBP2.52 million in 2017 - an increase of 5 per cent. Adjusted basic earnings per share (after a standard tax charge) increased by 6 per cent. to 1.68 pence per ordinary share (2017: 1.59 pence per ordinary share).
TRADING HIGHLIGHTS
2018 2017
Revenue GBP53.42m GBP54.11m
Gross profit GBP14.60m GBP14.67m
Operating costs GBP11.18m GBP11.48m
Underlying EBITDA* GBP3.42m GBP3.19m
Depreciation and amortisation GBP0.40m GBP0.27m
Non-cash share-based payments charge GBP0.37m GBP0.39m
Profit before taxation GBP2.64m GBP2.52m
Taxation (charge)/credit (GBP0.11m) GBP0.20m
Profit after taxation GBP2.53m GBP2.72m
Earnings per share:
Basic 1.98p 2.13p
Adjusted basic reflecting standard tax charge** 1.68p 1.59p
Fully diluted 1.82p 1.98p
Adjusted fully diluted reflecting standard
tax charge** 1.54p 1.49p
*Earnings before interest, tax, depreciation and amortisation
and non-cash share-based payments charge.
**Calculated after applying standard tax charge of 19% (2017:
19.25%) and disclosed to aid comparability of results.
FINANCIAL PERFORMANCE
Group revenue for 2018 was GBP0.69 million or 1 per cent. lower than in 2017, due to softened demand from customers following the correction in UK and global financial markets and a levelling out of pension transfer advice demand in the second half of the year. Notwithstanding this, average annualised revenue production per adviser for the year remained at the record GBP122,000 level achieved in 2017. Recurring revenues increased by a further 10 per cent. to reach a new high of GBP26.77 million or 53 per cent. of total revenue generated from customers (2017: GBP24.39 million and 48 per cent. respectively).
Gross margins in 2018 were 27.34 per cent. (2017: 27.11 per cent.).
Operating costs reduced by GBP0.30 million or 3 per cent., from GBP11.49 million in 2017 to GBP11.19 million in 2018.
Overall the Group continued to invest in and expense the development of its Luceo Asset Management and auto-enrolment propositions, with negative contributions in those divisions reducing to GBP0.30 million and GBP0.25 million respectively (2017: negative contributions of GBP0.31 million and GBP0.53 million respectively).
The Group's profit before taxation increased by GBP0.12 million or 5 per cent. to GBP2.64 million (2017: GBP2.52 million). Basic earnings per share in 2018 amounted to 1.98 pence per ordinary share after a deferred tax charge of GBP111,000 (2017: 2.13 pence per ordinary share after a deferred taxation credit of GBP200,000) and adjusted basic earnings per share, calculated after a standard tax charge of 19 per cent. (2017: 19.25 per cent.), increased by 6 per cent. to 1.68 pence per ordinary share. (2017: 1.59 pence per ordinary share).
AFFINITY AND OTHER BUSINESS RELATIONSHIPS
The Group is the market leader for the provision of advice to members of affinity groups, with 23 contractual relationships at 31 December 2018 whose aggregate membership exceeds six million individuals. Revenues derived from affinity sources in 2018 on a like for like basis (excluding the exceptional level of pension transfer business advice given) increased by GBP0.31 million or 3 per cent. to GBP9.74 million from the GBP9.43 million (adjusted) in 2017. It is particularly pleasing to note the increase in recurring revenues from affinity-sourced clients, up GBP0.54 million or 12 per cent. to GBP4.89 million from GBP4.35 million in 2017, reflecting the benefit of establishing long-term customer relationships from initial advice given in prior periods.
Affinity-sourced business remains a highly significant contributor to Group performance, contributing GBP2.80 million after direct costs and further investment in the business in 2018 (2017: GBP2.92 million on a like for like basis). The Group's dedicated mortgage business, Lighthouse Mortgage Protection Services, is increasingly linked with and sources business from the 23 affinity relationships and in 2018 increased its revenues by 27 per cent. to GBP1.47 million from GBP1.16 million.
LUCEO ASSET MANAGEMENT
Luceo Asset Management Limited ("Luceo"), the Group's sponsored investment solution business launched in late 2016, continued to accumulate funds during the year, with assets under management increasing from GBP37 million at 31 December 2017 to GBP58 million at 31 December 2018. After a GBP22 million net increase in funds in the first nine months of the year, the final quarter of 2018 saw a net decrease of GBP1 million, reflecting the general uncertainty in the financial markets and the 10 per cent. correction in UK stock markets in that period. Notwithstanding this, the Board remains confident that the Luceo Investment Funds, which provide the Group's customers with access to sponsored investment solutions matched to their agreed risk profiles with Octopus Investments as Investment Adviser, remain ideally suited to form part of the investment portfolio for the Group's target "Middle Britain" customer.
TAVISTOCK INVESTMENTS PLC
In October 2018 the Group announced the launch of a strategic relationship with Tavistock Investments plc ("Tavistock"), a fellow AIM-quoted advisory and asset management group. In the initial phase of that relationship, the Group is reviewing Tavistock's range of capital protected investment solutions with a view to, if appropriate, making them available to the Group's customers through its Luceo Asset Management offering. Once approved, the products would be aligned with customers' agreed risk profiles (as is the case for the current Luceo range) and will provide the customer with a capital underpin, backed by Morgan Stanley, of between 85 and 90 per cent. of the maximum portfolio value achieved post-investment. Further updates will be issued in due course.
As part of the arrangement the Board agreed to subscribe for GBP1 million of new ordinary shares that were issued by Tavistock in October 2018, giving the Company a 5.3% stake in that company.
STRATEGIC REVIEW OF AUTO-ENROLMENT BUSINESS
In the interim report issued on 4 September 2018, I announced the Board was undertaking a strategic review of the Corporate Pensions Trust ("CPT"), which incorporates the Group's Lighthouse Pensions Trust ("LPT") auto-enrolment solution for SMEs.
On 21 January 2019 the Group announced it had completed its strategic review and had concluded that it would not be in the best interests of shareholders to continue to provide financial support to the CPT to enable it to apply for Master Trust authorisation. This decision has been communicated to the CPT Trustees.
The Group has identified the Auto-Enrolment Master Trust ("AEMT") operated by Smart Pension Limited ("Smart"), which is part-owned by J.P. Morgan and Legal & General, as the most appropriate candidate to assume responsibility for receiving the assets and members within the CPT.
The Group has agreed to continue to fund the operating costs of the CPT Trustees during the process, together with the costs of winding-up the CPT once all transfers have been effected. It is intended that the existing contractual arrangements between the Group and participating employers within the LPT for the provision of regular payroll assessment and opt-in/opt-out reviews will be renewed but with the AEMT as the scheme provider post transfer.
The impact of the proposed transfer is expected to be broadly cost neutral in 2019 and should provide a small net income stream after associated costs from 2020 onwards. The transfer will enable the Group to focus further on its affinity- and professional connections- centred core customer base.
FINANCIAL POSITION
The Group had cash balances of GBP9.55 million as at 31 December 2018 compared to GBP8.73 million at the previous year-end, an increase of 9 per cent. The cash balances are stated after the investment of GBP1 million in Tavistock Investments plc shares (2017: GBPNil) and the payment of dividends in the year totalling GBP639,000 (2017: GBP383,000).
REGULATORY DEVELOPMENTS
Regulatory development continued during 2018, with the Markets in Financial Instruments Directive ("MiFID II"), the General Data Protection Regulation and the Insurance Intermediation Directive all having come into effect during the year. The Group has revised its processes as necessary to deal with the additional obligations re customer information provision and security of data processing the new regulations have imposed. The Financial Conduct Authority ("FCA") announced during 2018 the near final shape of the Senior Managers and Certification Regime ("SMCR") and the Group is again developing plans to ensure it will be able to comply with the SMCR when it comes into effect in December 2019.
Compliance with regulation remains an overarching focus for the Group.
DIVIDS
A final dividend of 0.50 pence per ordinary share (2017: 0.30 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 10 May 2019 to shareholders on the register at close of business on 5 April 2019. The corresponding ex-dividend date is 4 April 2019. The last day to make an election in respect of the dividend reinvestment plan operated by Link Market Services Trustees Limited will be 19 April 2019.
This follows the interim dividend of 0.20 pence per ordinary share (2017: 0.12 pence per ordinary share) paid in October 2018 and makes a total dividend for the year of 0.70 pence per ordinary share (2017: 0.42 pence per ordinary share). The Group intends to continue with a progressive dividend policy.
EMPLOYEES AND BOARD
In the Group's Interim Report on 4 September 2018, I announced that, in the light of current guidance on Corporate Governance and my having served as a Director of the Company since July 2007 and as Chairman since August 2012, I had advised the Board of my intention to stand down from the Board of the Company and not stand for re-election as a Director at the next Annual General Meeting of the Company in May 2019. A process to identify and secure the services of an appropriate replacement as a Director and Chair of the Company's Board has commenced, with headhunters having been briefed, and further updates will be provided in due course.
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, and to my Non-Executive colleagues for their significant support and contribution, both during 2018 and throughout my time as a Director and Chairman. I am confident that the Group is in good hands to continue its progress.
ADVISERS
The Group's advisers remain 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 2018.
STRATEGY AND PROSPECTS
The potential impact of Brexit, together with the corrections in UK and global financial markets in recent months, has resulted in a measure of uncertainty within the retail financial services market in the UK. Increased regulation and market uncertainties inevitably mean upward pressure on costs, in particular in the areas of compliance, technology and professional indemnity insurance procurement. In this latter regard in February 2019 the Group has renewed its PII cover for a further 15 months on terms materially in line with the previous policy, notwithstanding the recent market tightening and the nervousness among insurers caused by the FCA's proposal to increase the maximum amount that the Financial Ombudsman Service can award from GBP150,000 to GBP350,000 per case (for advice given post 1 April 2019). The renewal reflects the insurers' positive view of the quality of advice provided by the Group and its advisers and is a testament to the focus on compliance and risk management on behalf of all customers.
The Group is reviewing its strategy for the next five years to identify those areas (such as the affinity and professional connections markets) which are most likely to produce future earnings growth. Additional accelerated investment may be required in adviser recruitment, lead generation and marketing to deliver this growth. Further updates will be provided in due course.
The Group is well-placed to deal with cost pressures, with its ever-increasing recurring revenue base and with the new annual review obligations imposed by MiFID II giving rise to additional customer interaction and hence new business opportunities. 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 increasing business derived from affinity relationships, by introducing new and enhanced financial solutions for customers and increasing cost efficiency, the Board believes that Lighthouse is well placed to take advantage of the opportunities available.
Richard Last
Chairman
25 February 2019
CHIEF EXECUTIVE'S REVIEW
OVERVIEW
Lighthouse continued to progress during 2018, with the Group delivering new records for underlying EBITDA and profit before taxation at GBP3.42 million (2017: GBP3.19 million) and GBP2.64 million (2017: GBP2.52 million) respectively. This was against a backdrop of increased market volatility in the last quarter with significant public market corrections of more than 10 per cent. and increasing uncertainty re the nature and impact of any exit by the UK from the European Union ("Brexit"). In this context the maintenance of the record level of average annualised revenue per adviser in 2017 of GBP122,000 was a considerable achievement.
The Group's affinity business continues to develop, with 23 contractual arrangements in place as at 31 December 2018 (2017: 21). Total revenues from this source at GBP9.74 million were GBP0.31 million or 3 per cent. above the 2017 level of GBP9.43 million, the latter calculated on a like for like basis adjusting for the exceptional level of pension transfer business advised on in 2017. The increase of GBP0.54 million or 12 per cent. in recurring revenues generated from affinity-related customers (from GBP4.35 million to GBP4.89 million) underlines the on-going benefit of the Group's policy of building long-term and mutually beneficial relationships with its customers.
Our affinity-based business remains a valuable and higher-margin business which contributed GBP2.80 million after direct costs in 2018 (2017: GBP3.09 million), with the high demand for initial advice on defined benefit transfers in 2017 being replaced by on-going fees from those clients in 2018 and beyond. The Group continues to be seen as the leading provider of holistic financial advice to members of affinity-based organisations.
Average revenues per adviser remained at the record level of GBP122,000 recorded in 2017. This was an excellent achievement given the market uncertainties in the latter part of the year and underpins the value of the Group's focus on delivering holistic financial advice to its customers which is arguably even more relevant in times of market disruption. Recurring revenues increased by GBP2.38 million to reach a new high of GBP26.77 million and increased to 53 per cent. of total revenues generated from customers in 2018 (2017: GBP24.39 million and 48 per cent. respectively).
This underlines the increasing benefit of the Group's policy of engaging with and providing advice to customers for the long-term across all of the Group's operations as well as the resilience of the Group's operating model. Such engagement will become even more important from January 2019, when all investments advised upon since the introduction of MiFID II on 2 January 2018 will need to be reviewed for on-going suitability on an annual basis. Whilst this will undoubtedly increase pressure on advisers, administrators and costs, the obligation will generate increased opportunity for the Group and its advisers to identify and deliver new business advice and hence income.
Continuing careful management of the Group's operating cost base resulted in a reduction of GBP0.30 million in administrative overheads to GBP11.19 million (2017: GBP11.49 million).
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, deliver operational efficiencies and take advantage of the many opportunities that exist.
Further details of 2018 trading are set out later in this review.
OPERATIONS AND BUSINESS MODEL
The Group provides financial advice through its three principal business segments, being:
Lighthouse Financial Advice ("LFA") - National
LFA is the affinity-based national advisory division servicing the Group's 23 contractual affinity relationships. Advisers within LFA recommend solutions primarily from the Group's Lighthouse Researched Solutions ("LRS") range (including Luceo Asset Management, the Group's sponsored in-house range of actively managed investment solutions). All solutions within that range are centrally researched and independently assessed to align with customer risk profiles, both on initial entry to the LRS range and on an on-going basis thereafter. The breadth of the investment alternatives within each solution make them an ideal whole of market offering designed to meet the needs of the Group's target market of individuals within the mass affluent sector commonly referred to as "Middle Britain".
LFA advisers are provided with leads generated by the Group's affinity field team and administered by the central client services and events operation and with diary management, marketing and technology support. Leads are derived from field activity across the affinity population which generates seminars and surgeries typically held within business premises.
Until recently advisers within LFA have all been self-employed but in 2018 the Group commenced targeting and recruiting employed advisers so as to better service the growing demand from its affinity connections.
The national segment also includes specialist mortgage and protection advisers operating under the Group's Lighthouse Mortgage and Protection Services ("LMPS") trading style. Advisers within this specialist unit, all of whom are self-employed, provide expert advice on mortgages and related services and are provided with similar support as their colleagues within LFA and increasingly source their leads from the same affinity connections. As at 31 December 2018, 17 of the Group's contractual affinity relationships had agreed to recommend LMPS as the preferred provider of mortgage and protection advice for their members.
Wealth Advisory
The Group's wealth advisory segment comprises advisers within LighthouseCarrwood ("Carrwood") and LighthouseWealth ("Wealth").
The advisers within Carrwood are employed and highly qualified and service the Group's accountancy and professional connections (currently in excess of 50). The advisers operate within the relevant connection as "part of the business" and provide specialist, highly-skilled advice to clients of those connections, often at a crucial period of their lives such as selling a business, inheriting wealth, dealing with significant income or capital receipts or planning pre- or post-retirement.
Given the source and relative status of the typical Carrwood client, advisers within this division are the highest producers across the Group. They are supported by full administration, business processing and paraplanning services which contribute significantly to such high levels of productivity.
The advisers within Wealth are similarly highly-skilled but self-employed and operate from the Group's head office premises in the City of London or from their own locations, generating and servicing their own client bases, principally in London and the South of England. Wealth advisers have access to the Group's paraplanning service within Carrwood.
Communities (network)
The Communities segment comprises Lighthouse Advisory Services, the Group's authorised network business of self-employed advisers within appointed representative firms who operate from their own premises and provide holistic financial advice under their own brands to customers within their local communities. The advisers within this segment have access to the same Fairway technology and Lighthouse Researched Solutions product suites available elsewhere in the Group.
Operations
At 31 December 2018 the Group employed 157 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 Group Employee Benefits, compliance and IT support centre) and Woodingdean, near Brighton (base for LFA operations support and finance and adviser remuneration functions).
FINANCIAL COMMENTARY
REVENUE AND GROSS MARGINS
Total revenues in 2018 amounted to GBP53.42 million (2017: GBP54.11 million). Average annualised revenue production per adviser was maintained at the record level of GBP122,000 achieved in 2017. Recurring revenues, a key barometer of the stability and growth prospects of a business within the financial services sector, increased by GBP2.38 million or 10 per cent. to GBP26.77 million from GBP24.39 million recorded in 2017 and was 53 per cent. of all revenues generated from customers compared with 48 per cent. in 2017. These improvements were generated across all of the Group's operating businesses and underline the robustness of the Group's business model.
Gross margins at 27.34 per cent. remained broadly similar to the 27.11 per cent. recorded in 2017.
OPERATING COSTS
Operating costs decreased by GBP0.30 million to GBP11.19 million in 2018 from GBP11.49 million in 2017. The Group continues to monitor closely its operating base and looks to minimise such costs where possible.
The Group continued to invest and expense in developing its Luceo Asset Management and auto-enrolment propositions with negative contributions in those divisions reducing to (GBP299,000) and (GBP251,000) respectively (2017: (GBP314,000) and (GBP529,000).
UNDERLYING EBITDA AND PROFIT BEFORE AND AFTER TAXATION
Underlying EBITDA increased by 7 per cent. to GBP3.42 million from GBP3.19 million in 2017 and pre-tax profit rose by 5 per cent. to GBP2.64 million from GBP2.52 million in 2017. This underlines the continuing progress being made by the Group across all operating areas. Profit after taxation at GBP2.53 million reflected the GBP0.11 million reversal of a deferred tax asset established in prior years as brought forward tax losses were utilised during the year (2017: GBP2.72 million after a deferred tax credit of GBP0.20 million for future tax relief on share options).
DIVISIONAL COMMENTARY
LFA/AFFINITIES (NATIONAL)
In 2018 the Group has secured new contracts as the preferred provider of financial advice to the members of the National Education Union ("NEU"), following the merger of the National Union of Teachers (not previously serviced by the Group) and the Association of Teachers and Lecturers (existing affinity), and the Public and Commercial Services Union, previously serviced indirectly via a third-party. New contracts were also agreed with Boots Pharmacists and BenefitHub.
In addition, contract renewals were agreed with the Royal College of Nursing ("RCN"), FosterTalk, Prospect, the Association of School and College Leaders ("ASCL"), BA Clubs and the Bakers, Food and Allied Workers Union, and with the General Federation of Trade Unions and Parliament Hill (both umbrella organisations for a number of individual trades unions and associations).
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 and LMPS.
The new contract win with the NEU is particularly noteworthy as it is a new union formed as a result of the merger of the Association of Teachers and Lecturers ("ATL") and the National Union of Teachers ("NUT"). Whilst LFA was the preferred supplier of financial advice to the 126,000 members of the ATL, it did not previously act for the 336,000 members of the NUT. The NEU is the largest education union in the UK and the fourth largest trade union in the TUC, with in excess of 450,000 members, bringing together teachers, lecturers, support staff and leading workers in maintained and independent schools and colleges across the UK.
The Group is undoubtedly the leading player within the affinity-based market for financial services in the UK. LFA now has a dominant position within two large areas of public service provision - healthcare and education - through its contractual agreements as the preferred provider of financial advice to members of Unison, RCN, RCM, FosterTalk, the Social Workers' Union and NEU, ASCL and the University and College Union.
The Group's dedicated mortgage offering - LMPS - continues to gain traction within the affinity community, with 17 such organisations now having appointed LMPS as the preferred mortgage adviser to their members (2017: 14).
As noted above, revenues generated from affinity-based enquiries across the Group were GBP9.74 million in 2018, an increase of GBP0.31 million or 3 per cent. over the GBP9.43 million achieved in 2017 on a like for like basis after adjusting for the exceptional level of pension transfer business advised on in 2017. On-going revenues from affinity-based sources increased by 12 per cent. from GBP4.35 million in 2017 to GBP4.89 million in 2018. This underlines the value of establishing close relationships with affinity organisations and their members for the mutual benefit of all concerned.
After deducting adviser payaways, introducer payments and directly attributable overheads, the Group's affinity business contributed GBP2.80 million to Group profits (2017: GBP2.92 million on a like for like basis). This contribution is expected to increase as penetration of such relationships becomes deeper and more effective and on-going revenues from initial advice supplied in previous periods builds over time. LFA also leads the distribution of the Group's Luceo Asset Management solutions.
Operating from modern premises near Brighton, with the long (130 years) lease interest owned by the Group and which supports a professional call centre, client service and events teams, embracing fully the Group's Fairway technology solution and its Lighthouse Researched Solutions product range, LFA and LMPS remain well placed to take advantage of the opportunities available as a prime adviser to "Middle Britain".
In 2018 LFA and LMPS contributed gross revenues of GBP21.02 million (2017: GBP21.00 million) and a contribution after direct costs of GBP5.41 million (2017: GBP5.46 million).
WEALTH ADVISORY
The Group's wealth advisory segment continued to develop well during the year.
Average annualised gross revenue production across the employed advisers in Carrwood working with the Group's accountancy connections was GBP213,000 (2017: GBP215,000), reflecting the softening of demand from the market corrections in the final quarter of the year. New advisers recruited into this division take longer to get to full production levels as a result of the particular skills needed to work with accountancy firms, which is reflected by the average effective revenue production level, adjusted for recent starters, being GBP215,000 in 2018 against GBP212,000 in 2017. The self-employed advisers within Wealth achieved an average production of GBP161,000, an increase of 26 per cent. over the GBP128,000 level recorded in 2017.
The wealth advisory segment (excluding the Group's proprietary LPT auto-enrolment solution - see below) generated revenues of GBP10.16 million, an increase of GBP0.87 million or 9 per cent. from the GBP9.29 million recorded in 2017. Carrwood and Wealth produced revenues of GBP5.70 million and GBP4.46 million respectively (2017: GBP5.08 million and GBP4.21 million respectively). Overall the wealth advisory segment (excluding LPT) recorded a contribution after direct costs of GBP1.25 million (2017: GBP1.19 million).
The Group's LPT business unit, included within the overall wealth advisory segment, recorded revenues of GBP0.37 million (2017: GBP0.36 million) and recorded a deficit after direct costs of GBP0.25 million (2017: GBP0.53 million).
The combination of highly-skilled employed and experienced self-employed advisers operating in the high-net worth marketplace continues to provide a firm base for further growth in the wealth management sector.
LIGHTHOUSE PENSIONS TRUST ("LPT") - RESULTS OF STRATEGIC REVIEW
As noted in the Chairman's Statement above, the Group announced in January 2019 that it would not be in the best interests of the Company's shareholders to support the Trustees of the Corporate Pensions Trust ("CPT"), which incorporates the Group's LPT auto-enrolment solution for SMEs, in making an application to the Pensions Regulator for authorisation.
The Group has identified Smart Pension Limited ("Smart") as an appropriate new host. Smart is a technology based business whose Auto-Enrolment Master Trust ("AEMT") has c95,000 participating employers, c650,000 members and cGBP200 million assets under management. Smart is 17 per cent. owned by Legal & General, which also provides the default funds used by the AEMT, and J P Morgan has since invested in the Company.
The Group has agreed to continue to fund the CPT whilst Smart obtains its Master Trust authorisation (expected by end of April 2019) and through the subsequent transfer and wind-up processes which are anticipated to be completed by the end of 2019. The agreement with Smart means that the Group should retain its recurring fees from employers, currently amounting to cGBP300,000 p.a. for assisting them with the regular payroll assessment, starter/leaver and opt-in/opt-out work that will still be required to be undertaken on a weekly/monthly basis. The exit from the business (which was approaching break-even on direct costs before the additional expenses arising from the new TOR authorisation regime) should be cost-neutral for the Group in 2019 and make a small contribution to results in subsequent periods.
COMMUNITIES (NETWORK) - LIGHTHOUSE ADVISORY SERVICES ("LASER")
2018 saw revenues in the communities (network) segment, LASER, decrease by GBP1.81 million or 8 per cent. from GBP23.29 million in 2017 to GBP21.48 million in 2018, reflecting the market softening referred to previously as well as a result of average adviser numbers reducing from 174 to 168. Average annualised revenue production per adviser decreased by 6 per cent. to GBP116,000 from GBP123,000. 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.
The communities segment recorded a contribution after direct costs of GBP3.03 million in 2018 (2017: GBP2.93 million). The improvement of GBP0.1 million reflected the benefit of general cost control and reviews leading to expense reductions notwithstanding the reduction in revenues and hence gross margin.
LUCEO ASSET MANAGEMENT
In 2018 the Group continued to build up its in-house investment solutions - the Luceo Investment Funds - launched by Luceo Asset Management Limited, a wholly-owned subsidiary of the Company, as sponsor in October 2016. Total funds under management amounted to GBP58 million by the end of 2018 (2017: GBP37 million), with the figure being largely unchanged in the final quarter of 2018, when markets fell by 10 per cent., in line with other fund managers.
The five current Luceo funds are 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 Funds are primarily focused on customers serviced by advisers within LFA who are mandated to use the Lighthouse Researched Solutions range, including the Luceo Funds, where appropriate for customers.
The Group continues to examine potential extensions to the Luceo product range, including the capital protection products underwritten for minimum capital value by Morgan Stanley and provided by Tavistock Wealth, as part of the strategic relationship announced with the latter in November 2018. New additions should complement and provide additional demand for the current Luceo Funds, managed by Octopus Investments, and help deliver improved customer outcomes across a wider number of customers whilst providing additional revenue and margin for the Group.
The Group continued to support its Luceo Investment Range in 2018 whilst building to the scale - GBP20 million invested per Fund - at which they will become self-financing and indeed profitable.
Luceo Asset Management recorded revenues of GBP0.39 million in 2018 (2017: GBP0.17 million). Underwriting the excess of the fixed costs of operating the Funds over the Group's share of the annual management charge together with other direct operating expenses such as business support and the investment committee resulted in a deficit on contribution after direct costs of GBP0.30 million (2017: GBP0.31 million).
INDIRECT OPERATING COSTS
Indirect operating costs in 2018 amounted to GBP5.73 million, an increase of GBP0.17 million over the 2017 level of GBP5.56 million. The principal areas of increase were the full year impact of the appointment of an additional non-executive director in the latter part of 2017, together with the Group's graduate adviser training scheme and marketing, including the appointment of Edison Research to provide additional research on the Company in May 2018.
PROFESSIONAL INDEMNITY INSURANCE ("PII")
PII cover remains a mandatory cost for businesses that advise clients within the UK retail financial services market. The Group renewed its PII cover in February 2019 for a further 15 months on substantially the same terms as in the previous policy. This was a notable achievement given the significant tightening in the market for providing such cover in recent months and the FCA's proposal to increase the maximum award payable by the FOS to GBP350,000 for advice given from 1 April 2019, which has caused considerable nervousness amongst insurance providers. The Group is considering the advice areas that could be impacted if this proposal were to be enacted as part of the strategic five year planning review referred to in the Chairman's statement.
REGULATION
2018 has seen the UK financial services distribution sector have to deal with the implementation of the requirements of substantial new legislation such as MiFID II and GDPR, which came into force on 3 January 2018, and 25 May 2018 respectively. The new regulations have imposed significant additional obligations on providers and distributors alike in areas such as client information and data protection. The Group has allocated dedicated resource to ensure it is fully compliant 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.
On 9 December 2019 the FCA's new senior Manager and Certification Regime comes into effect, which introduces an enhanced governance framework for those firms within the UK financial services sector that deal with the public, either directly or indirectly. The Group is reviewing the new requirements to ensure full compliance by the deadline.
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 2018 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.
In the light of the results of the strategic review of the Group's LTP workplace pensions solution (see above) the goodwill/intangible asset of GBP49,000 previously held in relation to this activity has been fully amortised in 2018. No other impairment factors were identified and hence no additional provision for impairment has been made (2017: GBPNil).
RESULTS FOR THE YEAR
The Group recorded an underlying EBITDA (before non-cash share-based payments charge) for the year of GBP3.42 million (2017: GBP3.19 million). After charging GBP0.40 million, GBP0.37 million and GBP0.01 million in respect of depreciation and amortisation, non-cash share-based payments charge and net finance costs (2017: GBP0.27 million, GBP0.39 million and GBP0.01 million respectively), the Group recorded a pre-tax profit of GBP2.64 million (2017: GBP2.52 million). Post-tax profit amounted to GBP2.53 million, a reduction of GBP0.19 million from the GBP2.72 million recorded in 2017 as a result of the reversal of part of the deferred tax asset previously held for tax losses utilised in the year, giving a charge to taxation of GBP0.11 million (2017: credit to taxation of GBP0.20 million).
CASH FLOW, CASH BALANCES, TREASURY AND INVESTMENT
Year-end cash balances amounted to GBP9.55 million (2017: GBP8.73 million). The increase of GBP0.82 million was due to the profit after taxation for the year less working capital increases principally as a result of the settlement of historic complaints previously provided for, and is stated after paying dividends of GBP0.64 million (2017: GBP0.38 million) and an investment of GBP1 million in a 5.3 per cent. stake in Tavistock Investments plc, as part of the strategic agreement with that company referred to above.
After allowing for regulatory and working capital considerations the Board will continue to retain the GBP5 million of cash it holds in excess of regulatory capital requirements in short-dated accounts for the time being.
PROSPECTS
As noted in the Chairman's statement, the short-term outlook for the UK economy within which the Group operates remains uncertain, with recent market corrections reflecting investor concerns about global trading patterns and the absence of a final defined strategy for the UK to exit the European Union.
Notwithstanding these factors, the Group continues to enjoy significant headroom on its regulatory capital requirement and has continued to invest in its businesses and in new initiatives such as the strategic agreement with Tavistock. This, together with the continuing focus on higher margin divisions - LFA and Wealth Advisory - and focused development of the advisers within the network division in conjunction with the Group's Fairway technology and carefully selected Researched Solutions, leaves the Group well placed, with a solid financial position and net cash, to take advantage of opportunities that may arise.
Malcolm Streatfield
Chief Executive
25 February 2019
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 it? Why do we use it? IFRS performance Reconciled
measure? to IFRS?
Total revenue Aggregate Indicator of scale Yes N/A
income receivable and activity level
from customers of the Group
and advisers,
excluding
VAT
----------------------- ----------------------------- ----------------- -----------------------
Recurring Regular on-going Regularly recurring No Forms part
revenues charges payable income underpins of total
by customers future trading and revenue reported
for regular operating capability upon under
periodic review IFRS
of investment
portfolios
and trail/renewal
commissions
payable in
respect of
mortgages
and non-investment
insurance
products advised
upon and pre-RDR
investments
----------------------- ----------------------------- ----------------- -----------------------
Affinity revenues That proportion Servicing our affinity No Forms part
of total revenues connections is a of total
derived from key part of the revenue reported
affinity-based Group's growth strategy upon under
connections and the level of IFRS
total revenues derived
from such sources
provides a clear
indication of performance
in this critical
area
----------------------- ----------------------------- ----------------- -----------------------
Average revenue Total revenue This is a clear No Derived from
from customers generated indication of the total revenue
produced by from customers general activity reported
advisers (i.e. excluding levels of the Group's under IFRS
charges payable advisers which will and average
by advisers drive margin and adviser numbers
and other ultimately profitability
non-customer
income) divided
by average
number of
advisers in
the year
----------------------- ----------------------------- ----------------- -----------------------
Underlying Self-explanatory Underlying EBITDA No Reconciled
Earnings Before - profitability represents a close to IFRS profitability
Interest, before net proxy for cash profitability measures
Depreciation finance cost/income subject to working in the Consolidated
and Amortisation and non-cash capital and financing Statement
("Underlying expenses such costs of Comprehensive
EBITDA") as depreciation Income
and amortisation
of tangible
and intangible
assets (including
goodwill)
respectively
and share-based
payments charge
----------------------- ----------------------------- ----------------- -----------------------
Earnings per Profit after Earnings per share Yes N/A
share ("EPS") taxation attributable gives a clear indication
- basic and to equity to shareholders
diluted shareholders of the profits per
divided by share available
the total to pay dividends
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 earnings As per basic The Group has historically No Fully reconciled
per share and diluted been able to utilise to IFRS EPS
- basic and earnings per significant tax
diluted share but losses generated
after eliminating in prior periods
the actual to offset taxable
charge or profits. This, together
credit for with recognition
taxation for of unutilised tax
the year and losses during a
replacing year can lead to
it with a unrepresentative
charge or tax charges or credits
credit for and make comparison
taxation calculated between financial
at the standard reporting years
rate of UK difficult. Application
Corporation of a standard tax
Tax applicable charge or credit
to the Group's enables readers
profit before of the Annual Report
taxation to make more informed
judgements of the
Group's financial
performance by removing
inconsistencies
----------------------- ----------------------------- ----------------- -----------------------
Lighthouse Group plc
Consolidated statement of comprehensive income
for the year ended 31 December 2018
2018 2017
Total Total
GBP'000 GBP'000
Revenue 53,422 54,111
Cost of sales (38,819) (39,439)
Gross profit 14,603 14,672
Administrative expenses
Other operating expenses (11,186) (11,485)
---------------------------------------- --------- ---------
Underlying earnings before interest,
tax, depreciation, amortisation
and non-cash share-based payments 3,417 3,187
---------------------------------------- --------- ---------
Depreciation and amortisation (396) (274)
Non-cash share-based payments (365) (385)
Total administrative expenses (11,948) (12,144)
--------- ---------
Operating profit 2,656 2,528
Finance income 17 3
Finance costs (29) (10)
Profit before taxation 2,644 2,521
Taxation (111) 200
Profit for the year 2,533 2,721
Other comprehensive income:
Decrease in fair value of investment
held as fixed asset (36) -
Total comprehensive income for
the year 2,497 2,721
========= =========
Basic earnings per share 1.98p 2.13p
========= =========
Adjusted basic earnings per
share 1.68p 1.59p
========= =========
Diluted earnings per share 1.82p 1.98p
========= =========
Adjusted diluted earnings per
share 1.54p 1.49p
========= =========
All activities are classed as continuing.
The profit and total comprehensive income for both 2018 and 2017 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 2018
Share Special Fixed asset Reserves Retained Total attributable
capital non- distributable investment arising earnings to equity
reserve fair value from share- shareholders
reserve based payments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2018 1,277 1,999 - 1,487 6,924 11,687
Profit and
total
comprehensive
income for
the year - - (36) - 2,533 2,497
Transactions
with owners,
recorded directly
in equity:
Dividends
paid - - - - (639) (639)
Share-based
payment - - - 365 - 365
At 31 December
2018 1,277 1,999 (36) 1,852 8,818 13,910
-------------------- --------- -------------------- ------------ ---------------- ---------- -------------------
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
-------------------- --------- -------------------- ------------ ---------------- ---------- -------------------
Lighthouse Group plc
Consolidated statement of financial position
at 31 December 2018
2018 2017
GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 5,247 5,131
Property, plant and equipment 1,305 1,397
Investment held as fixed asset 976 -
Deferred tax asset 839 950
8,367 7,478
--------- ---------
Current assets
Trade and other receivables 4,444 8,187
Cash and cash equivalents 9,546 8,733
--------- ---------
13,990 16,920
--------- ---------
Total assets 22,357 24,398
--------- ---------
Current liabilities
Trade and other payables 7,662 8,789
Provisions 437 2,846
--------- ---------
8,099 11,635
--------- ---------
Non-current liabilities
Provisions 348 1,076
--------- ---------
348 1,076
--------- ---------
Total liabilities 8,447 12,711
--------- ---------
Net assets 13,910 11,687
========= =========
Capital and reserves
Called up share capital 1,277 1,277
Special non distributable reserve 1,999 1,999
Fixed asset investment fair value (36) -
reserve
Other reserves - share-based payments 1,852 1,487
Retained earnings 8,818 6,924
Total equity attributable to equity
holders of the Company 13,910 11,687
========= =========
The financial information was approved by the Board of Directors on 25 February 2019 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 2018
2018 2017
GBP'000 GBP'000
Operating activities
Profit before tax for the year 2,644 2,521
Adjustments to reconcile profit for
the year to net cash inflows from
operating activities
Finance income (17) (3)
Finance costs 29 10
Depreciation of property, plant and
equipment 232 150
Amortisation of intangible assets 164 124
Share-based payments charge 365 385
Change in trade and other receivables 3,743 817
Change in trade and other payables (1,127) (479)
Change in provisions (3,137) (2,132)
------------ ----------
Cash generated from operations 2,896 1,393
Finance costs paid (29) (10)
Net cash inflow from operating activities 2,867 1,383
------------ ----------
Investing activities
Purchase of property, plant and equipment (140) (307)
Purchase of intangible assets (280) (25)
Purchase of investment held as fixed
asset (including acquisition costs) (1,012) -
Finance income received 17 3
------------ ----------
Net cash outflow from investing activities (1,415) (329)
------------ ----------
Financing activities
Bank loan repayments - (439)
Dividends paid to equity shareholders (639) (383)
Net cash outflow from financing activities (639) (822)
------------ ----------
Increase in cash and cash equivalents 813 232
Cash and cash equivalents at the
beginning of the year 8,733 8,501
------------ ----------
Cash and cash equivalents at the
end of the year 9,546 8,733
============ ==========
Lighthouse Group plc
Notes to the financial information for the year ended 31 December 2018
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 2018 and has been prepared on the basis of the accounting policies set out therein and in accordance with the recognition and measurement principles of International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board as adopted for use in the EU ("IFRS") but does not contain all the disclosures necessary for full compliance with IFRS.
The financial information set out above does not constitute the Company's statutory accounts within the meaning of Section 434 of Companies Act 2006 for the years ended 31 December 2018 or 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the registrar of companies, and those for 2018 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:
2018 2018 2017 2017
Basic/diluted Adjusted Basic/diluted Adjusted
Profit for the purposes
of basic and dilutive earnings
per share (GBP'000) 2,533 2,142 2,721 2,035
================ ============== ================ ==============
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 11,729,131 11,729,131 9,378,939 9,378,939
---------------- -------------- ---------------- --------------
Weighted average number
of ordinary shares for the
purpose of diluted earnings
per share 139,429,429 139,429,429 137,079,237 137,079,237
================ ============== ================ ==============
Profit for the purposes of calculating adjusted basic and diluted earnings as set out above are stated after excluding the deferred tax charge of GBP111,000 in 2018 (2017: deferred tax credit of GBP200,000) and applying a standard rate of tax of 19 per cent. (2017: 19.25 per cent.) to the profit before taxation in the relevant year.
3. Segment information
Segment information for the Group for the year ended 31 December 2018 is set out below:
Year ended 31 December National Communities Wealth Other Total
2018 advisory segments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total revenues 21,016 53,033 10,533 389 84,971
Less: inter-segment
revenues - (31,549) - - (31,549)
--------- ------------ ---------- ---------- -----------
External revenues 21,016 21,484 10,533 389 53,422
Cost of sales (13,312) (17,914) (7,020) (573) (38,819)
--------- ------------ ---------- ---------- -----------
Gross profit 7,704 3,570 3,513 (184) 14,603
Direct operating expenses (2,290) (540) (2,514) (115) (5,459)
--------- ------------ ---------- ---------- -----------
Segment contribution
before indirect operating
expenses 5,414 3,030 999 (299) 9,144
--------- ------------ ---------- ----------
Indirect operating
expenses (5,727)
-----------
Underlying EBITDA 3,417
Depreciation and amortisation (396)
Non-cash share-based
payments charge (365)
-----------
Operating profit 2,656
Finance revenues 17
Finance costs (29)
-----------
Profit before taxation 2,644
-----------
The revenue, costs and profit associated with the Group's Lighthouse Mortgage and Protection Services ("LMPS") business have been included within the National segment, having previously been reported within the Communities segment. The change reflects the increasingly close operating relationship between Lighthouse Financial Advice ("LFA"), which has historically comprised the National segment, and LMPS, covering marketing, lead generation and adviser administration and diary management. The change increased revenues, gross margin and contribution within the National segment by GBP1,475,000, GBP405,000 and GBP175,000 respectively. The 2017 comparatives below have been restated as a result (revenue, gross margin and contribution adjustments of GBP1,161,000, GBP290,000 and GBP63,000 respectively).
Other segments in 2018 comprise the results of Luceo Asset Management Limited ("Luceo"), the Company's wholly-owned subsidiary that sponsors risk-aligned investment solutions that are made available to the Group's customers. Other segments in 2017 included revenue, gross margin and contribution in respect of Luceo of GBP167,000, (GBP176,000) and (GBP313,000) respectively.
Year ended 31 December National Communities Wealth Other Total
2017 (restated) (restated) advisory segments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total revenues 21,001 53,871 9,652 167 84,691
Less: inter-segment
revenues - (30,580) - - (30,580)
------------ ------------ ---------- ---------- ---------
External revenues 21,001 23,291 9,652 167 54,111
Cost of sales (13,345) (19,309) (6,442) (343) (39,439)
------------ ------------ ---------- ---------- ---------
Gross profit 7,656 3,982 3,210 (176) 14,672
Direct operating
expenses (2,193) (1,055) (2,545) (137) (5,930)
------------ ------------ ---------- ---------- ---------
Segment contribution
before indirect operating
expenses 5,463 2,927 665 (313) 8,742
------------ ------------ ---------- ----------
Indirect operating
expenses (5,555)
---------
Underlying EBITDA 3,187
Depreciation and
amortisation (274)
Non-cash share-based
payments charge (385)
---------
Operating profit 2,528
Finance revenues 3
Finance costs (10)
---------
Profit before taxation 2,521
---------
Segment assets and liabilities at 31 December were as follows:
2018 2017
GBP'000 GBP'000
Segment assets
National 2,110 1,381
Communities 15,573 17,746
Wealth advisory 4,014 3,993
Other segments and unallocated 9,163 7,792
-------- --------
Total assets including inter-segment 30,860 30,912
Inter-segment assets (8,503) (6,514)
-------- --------
Total assets per financial statements 22,357 24,398
-------- --------
Segment liabilities
National 1,024 1,176
Network 5,864 9,543
Wealth management 1,804 1,174
Other segments and unallocated 8,258 7,332
-------- --------
Total liabilities including inter-segment 16,950 19,225
Inter-segment liabilities (8,503) (6,514)
-------- --------
Total liabilities per financial statements 8,447 12,711
-------- --------
4. Dividends
The directors recommend the payment of a final dividend for the year ended 31 December 2018 of 0.50 pence per ordinary share (2017: 0.30 pence per ordinary share).
5. Annual report
The annual report, audited financial statements and notice of annual general meeting will be posted to shareholders on or about 12 March 2019 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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February 26, 2019 02:01 ET (07:01 GMT)
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