Lighthouse Group plc (LON:LGT) Chief Executive Officer Malcolm Streatfield caught up with DirectorsTalk for an exclusive interview to discuss the highlights of their final results for year ended 31st December 2016, the sunset clause & what this means for Lighthouse, what their focus will be & what to expect in 2017
Q1: Malcolm, you’ve announced strong results for 2016 this morning, can you talk us through the highlights?
A1: Yes, certainly. The highlights for us was the 37% increase in our EBITDA to £2.2 million as opposed to £1.6 million the previous year so a very healthy increase, this manifested itself in pre-tax profits increasingly by £1 million, or 119%, to £1.9 million as opposed to the £0.9 million in the year before. That came about really as a very pleasing seeing that the average revenue per adviser continues to increase, up 6% to now £99,000 on average across the group, so that’s very pleasing and it’s a year-on-year improvement since the introduction of the retail distribution review, now 4 years ago. Recurring revenues, that money that clients pay us each and every year, is now approaching 50% of all our revenues from our clients which is a very healthy strong reoccurring revenue base which is also very pleasing. This has manifested itself in adjusted basic earnings per share increasing by 120% and the Board recommending the final dividend of 0.18p per share which is 13% increase on the year before and we maintain a very healthy balance sheet with cash in excess of over £8 million of which £4 million of added surplus to regulatory requirements. So, all of these result manifest itself in a very strong balance sheet as well so overall the results for 2016 are very pleasing.
Q2: Can you tell us a little bit more about the sunset clause arrangements introduced by the FCA and what this means for Lighthouse Group plc?
A2: The sunset clause was highlighted just after the introduction of the RDR where the regulator wanted all adviser remuneration to be on a customer-agreed basis and it’s been going a while. The tradition forms of reward for an adviser was to agree a fee with the client upfront and then a small percentage of the annual asset under management being given as a credit to the adviser. Well, the regulator thought this was inappropriate, they’d rather see all revenue to advisers pre-agreed with the customer and operate on that basis. So, they highlighted that, we had about 2 years’ notice, they highlighted that from a certain date, from 1st April last year, all revenue that was on an occurring basis, that sat on a platform, that didn’t have customer agreed with the motion agreement in place, would revert to clean share class with benefits to customer but the adviser would no longer receive the reoccurring revenue. So, as a one-off hit, most of our clients now are actually agreeing to pay into us each and every year. This historic legacy matter is a tidying up exercise by the regulator, a bit annoying but you move on, it’s a one-off hit, we’ve adjusted for that and then we’ll build that revenue back up again in the period going forward.
Q3: Now, the Group seems well positioned, can you tell us where the focus will be for 2017 and what we can expect from Lighthouse Group PLC this year?
A3: Well, our continued drive into our affinity space, we’ll make a piece in our results announcing about our affinity groups which have now grown to 19 in number, we put on 3 new affinity’s last year. As I’ve said before in previous times, we’ve got reach into 6 million UK customers who are members of these affinity groups and we’re engaging with an ever-increasing number of members of these groups and we really are gearing up our operations, more certainly our dealings with our affinity groups. We dealt with about 15,000 customers last year, that’s on the border end of the affinity groups that we have and that continues to rise and the infrastructure to support that is all in place and with the launch of our product set, like Luceo Asset Management, we’ve created a set of products now that really do resonate in which we would describe as middle-Britain. These are investments built for them in terms of aligning the clients risk profile to the profile of the investment and we believe that in 2017 we’ll see quite a bit more traction into what is now our Luceo Fund range. Of course, we continue to operate in the auto-enrolment space for pensions and 2017, into 2018, there are still around about 1 million businesses that have got to auto-enrol their staff into pension schemes and we’re well positioned with our own auto-enrolment solutions so, more of that you will see in 2017 I’m sure.
