Lighthouse to miss full year targets

Lighthouse Group said first half revenues were broadly flat, but full year profits would be lower than expected as the economic environment became increasingly challenging.

Morningstar.co.uk Editors 22 September, 2008 | 10:23AM
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Revenues for the six months to the end of June were £25.5m, compared to £26.6m for the same period a year ago. Profits fell significantly, however, from £786,000 a year ago to £442,000 now. The group is taking action and is aiming to generate £1m in cost savings in addition to the £1m savings to be realised from the merger with Sumus.

However, the advisory and wealth management group will pay its first interim dividend of 0.2p per share, which it said ‘demonstrated its confidence in the future’.

The group merged with Sumus in early May, bringing the group’s assets under advice to £6.3bn. The group has retained high cash reserves of £12.3m and the Sumus merger brought a further five year trading facility of £4.5m.

In common with much of the wider financial advisory market, the group is focusing on building ongoing revenues rather than commission-based sales. It is supported in this by the FSA’s Retail Distribution Review, which is setting out the future of financial advice.

The group developed the LighthouseCapital initiative in the latter half of last year, which offers clients risk based investment solutions through fund of funds or discretionary management. This is now being rolled out across the group and is expected to see significant participation.

David Hickey, executive chairman, says: “The financial cycle having turned, it is not surprising that group revenues have retreated. The board does not see this reversing in the immediate future...The group's revenue is not immune from the financial and economic cycles and accordingly, despite the rapid action on its cost base, the outlook for profits for the current year is now lower than that originally envisaged.

“However, the actions taken by the Group should protect trading expectations for 2009 and beyond. In the meantime the Group continues to trade profitably and its operations continue to generate surplus cash. In parallel, the Group's strong and liquid balance sheet provides considerable financial and operational security.”

The shares dipped 0.75p to 20p on the news. They have slipped from 35p this time last year. The financial advisory market is in transition to a more sophisticated, advice-led model rather than its traditional transaction-based system. However, until the FSA guidance is clear, this is probably an area to avoid for the time being.

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