Peter Webb, fund manager turned market commentator looks at Lighthouse Goup
Final results from market leading IFA Group Lighthouse today showing a decline in revenue and modest growth in profitability look to be signs that the great growth achieved in recent years has peaked. Management have done remarkably well to bring this company back from a "reputational brink" following involvement and client compensations relating to the Arch Cru scandal almost a decade ago.
During recent years, there has been a raft of news on business restructure, new product launches and initiatives and profitability before tax has grown significantly to reach £2.64 million last year (£2.52 million 2017) having been just £0.6 million in 2014. With client compensations relating to the scandal now well in the past shareholders can look to the circa. £5 million surplus cash on the balance sheet (£9.55 million gross less regulatory capital) as an asset to be employed for the payment of dividends or investment in future growth rather than something that might be taken away.
It looks unlikely that markets will afford the company many favours this year so growth will need to come from new client wins, growing business from within the existing client base and success with the initiatives launched in recent years (and quite possibly acquisitions). It is early days but growth in affinity contracts has been strong and relationships with Octopus Investments (via Luceo Asset Management) and with Tavistock offer good long term potential.
The shares are now trading at 26p and sit on a historic PER multiple of 15.5 and yield of 2.7%. Growth has slowed considerably but with a market capitalisation of just £34 million and growing cash balance of £9.55 million are unlikely to show much weakness.
