Lighthouse narrows annual losses amid restructuring

25th Mar 2014 13:56

Lighthouse Group narrowed its losses in 2013 as the financial advice company launched major restructuring amid regulatory changes in the industry. The company reported a pre-tax loss of £1.6m in the year through December, compared to a £4.6m loss in 2012, following a number of cost cutting measures. Revenue, however, dropped 13% to £48m, reflecting a 17% reduction in average advisor numbers following the start of the Retail Distribution Review (RDR) in January 2013.Under the RDR, advisers in the life, pensions and investment arenas are required to adhere to a higher minimum qualification.As a result, a number of advisers at Lighthouse stepped down while many others were retrained.Despite the costs involved in redundancies and training, Chief Executive Malcolm Streatfield said he saw RDR as a necessary evil for the industry."At the end of the day I don't think anybody could argue that the need for higher qualifications was not overdue," he told Sharecast and Digital Look.In an effort to address such regulatory changes and to cut costs the group invested £1.7m on restructuring, which it announced in September.Streatfield said the company overhaul is expected to deliver significant operational gains and cost savings by mid-2014.The restructuring involved the closure of the Exeter office and relocation of operations to the group's other two main locations in Woodingdean, near Brighton, and Stockport. The benefits of the shake-up are projected to result in a £1.2m reduction in annual running costs once the process has been fully completed by the middle of this year.Last year the company also invested £1.2m in its Lighthouse Financial Advice (LFA), resulting in a drop in earnings before interest tax, depreciation and amortisation (EBITDA) to £215,000 from the prior year's £1.5m. Without the investment in LFA, EBITDA was broadly in line with 2012."We are very pleased to see in a post RDR environment that EBIDTA was broadly similar to 2012," Streatfield said. "The investment in LFA and our restructuring has created a solid platform for future growth. Lighthouse ended the period with cash balances of £9.5m, compared to £10.5m the previous year. The group recommended against paying a dividend but hopes to reward shareholders as "soon as trading and regulatory conditions allow". Shore Capital said: "In a very tough trading environment, especially on the regulatory front, Lighthouse has made progress, reporting an EBITDA figure which was comfortably ahead of our forecasts. "The group's focus on the affinity space leaves it well positioned to offer face-to-face advice, a need which will increase following the recent Budget proposals on annuitisation. "The group's balance sheet remains strong in our view, with significant cash balances, a real point of difference amongst its intermediary peers."RD