Preliminary Results

Lighthouse Group plc

("Lighthouse" or "the Group")

Financial Adviser Awards: Large IFA of the Year 2011 and 2010

Preliminary Results

Lighthouse Group plc (AIM: LGT) today announces its preliminary results for the year ended 31 December 2011.

Summary

* Earnings before interest, tax, depreciation, and amortisation and non-recurring operating expenses

Commenting on the results, David Hickey, Executive Chairman of Lighthouse Group plc, said:  

"Trading again progressed well during the period, with EBITDA rising for the sixth consecutive results announcement. The proportion of recurring revenues now exceeds 30 per cent. of the Group's total and continues to rise; average revenue per adviser rose noticeably; and the Group's operations continue to generate significant cash.

"The non-recurring operating expense charge of £3.4 million comprised principally the Falcon closure charge of £2.9 million announced in September 2011 at the time of the Interim Results. Subsequently the second Sumus regulated entity, FSAS, has also been effectively wound down, and the Group now operates principally through one regulated entity only.

"The Group balance sheet remains strong with substantial cash deposits. As the industry approaches the introduction of the Retail Distribution Review, it is increasingly evident that operational scale and financial strength are becoming key differentiators in the industry."

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Chairman's Statement for the Year ended 31st December 2011

I am pleased to report another period of good trading progress for Lighthouse.

2011 saw a substantial increase in the Group's EBITDA profits, despite a modest reduction in revenues as a consequence of less productive advisers leaving the Group. The 21 per cent. rise in EBITDA was particularly notable and reflected the Group's continued focus on gross margins and quality advisers. The rise in recurring income continued to improve the quality of earnings and the ongoing cash generation of the business continued to support the Group's significant financial strength.

Subsequent to the rationalisation of two of its regulated entities announced earlier in the year, the Group has made provisions for certain aspects of the historical trading of the Sumus sub-group. Both Falcon and FSAS have been effectively wound down as trading entities.

During 2011 the Group was named "Large IFA of the Year", for the second year running, following a competitive technical assessment by the publication "Financial Adviser".

* Earnings before interest, tax, depreciation, and amortisation and non-recurring operating expenses.

Results

Revenues and cost of sales fell by 4 and 5 per cent. respectively compared to 2010, reflecting the reduction in average adviser numbers from approximately 800 to 700. Gross profits remained steady (as a percentage of revenues) while administrative expenses before non-recurring costs fell by £474,000 following the reorganisations of the Group's operations. The 21 per cent. rise in EBITDA was particularly notable, and the Group continues its focus on securing further improvement.

Depreciation and amortisation fell from £973,000 to £895,000 reflecting lower levels of capital expenditure in prior periods. Earnings per share before the impact of non-recurring items amounted to 0.72p (2010: 0.30p). The loss before taxation for the period was £2,657,000 (2010: profit before tax of £129,000) and basic loss per share was 1.92p (2010: profit of 1.14p per share).

Non-recurring Operating Expenses

It was announced early in 2011 that the Group's regulated entities were to be rationalised so as to process all of the Group's business through a single regulated network - Lighthouse Advisory Services ("LASER"). In my statement included with the 2011 Interim Results I reported that Falcon was being wound down as a trading entity, and subsequently the advisers previously with FSAS, the other remaining Sumus sub-group regulated entity, were also transferred into LASER. Both Falcon and FSAS have now effectively ceased trading. There is a small number of advisers who utilise the Falcon brand for trading, and the Group will continue to make this facility available to them.

Subsequent to these rationalisations, and as also announced in the 2011 Interim Results released in September, certain aspects of Falcon's historical trading became the subject of review and, as a consequence, the Board deemed it prudent to recognise an aggregate non-recurring charge of £2.93 million at that stage. Following the closure of FSAS and other related matters, the charge has been increased by £0.44 million to £3.37 million.

Recurring Income

The Board remains keen to improve further the visibility of its revenues and hence places considerable emphasis on recurring revenue. Typically this comprises regular income derived from client investments and other products placed on their behalf. Recurring revenues rose in 2011 to £18.4 million (2010: £17.6 million), an increase of some 5 per cent., and now represent just over 30 per cent. of total Group revenues. In addition, the LighthouseCapital project (which is designed to match investments to a client's risk profile through a streamlined process) is accelerating, and some £250 million has now been placed via this mechanism.

Financial Position

Year end net cash balances (after deduction of a trade finance facility) remained largely unchanged at £11.0 million (2010: £11.2 million) notwithstanding some £500,000 of dividends paid. The final instalment of the trade finance facility, being £900,000, is expected to be retired fully from surplus operating cash flows, in line with expectations, by mid-2012. The Group has no bank debt.

Dividends

Group trading for 2011 was in line with expectations and the Group's underlying cash generation has remained strong. Accordingly your Board has decided to increase the final dividend for 2011 to 0.27p (2010: 0.24p) to reflect that progress. Subject to approval at the Annual General Meeting on 2 May 2012 the dividend will be paid on 8 June 2012 to shareholders on the register at close of business on 11 May 2012.

While the Group expects to continue paying dividends in the medium term, the potential short term trading changes expected to arise after 1 January 2013, following the introduction of the Retail Distribution Review, mean that there can be no certainty about the appropriate level of dividend to be paid after that date. Accordingly your Board will continue to review industry trading conditions and prospects and will advise shareholders further, as and when a decision about the appropriate future quantum of dividends is made.

Affinity Relationships

The Group continues to develop its connections with major employee, union, and other organisations requiring financial advice for their employees and members, especially for the benefit of the Lighthouse Financial Advice and Carrwood operations. In May and June 2011 the Group announced three and two year exclusive contracts respectively to provide financial planning advice to members of The Association of Heads and Deputies ("AHDS") and the Civil Service Motoring Association ("CSMA") Club. Also in June 2011 the Group signed a contract with Dains Chartered Accountants. Further announcements of new contracts are expected to follow in due course. As a consequence of the Group's success in this arena, the flow of new clients emanating from these relationships continues to grow and in 2011 some 15,000 new business leads generating some 7,000 appointments were directed to Lighthouse Financial Advice advisers; this number is expected to rise significantly in 2012.

Strategy and Prospects

The Retail Distribution Review ("RDR"), due to come into effect by 1 January 2013, continues to cast a shadow over the retail financial industry. While the principal aims of RDR are to be welcomed, the decision to introduce them all simultaneously on a single date is proving extremely disruptive. Many advisers are devoting substantial business time to academic study and simultaneously their customer and business offerings have to be redesigned. In parallel substantial systems re-alignments are required throughout the industry, for both manufacturers and distributers.

Post RDR, remuneration for each item of new business could well decline across the industry, some advisers will fail to secure the required qualifications in time and will be unable to carry on advising, recurring income will carry explicit servicing obligations to the client and clients may more easily cancel investment trail payments. In aggregate therefore there will be considerable industry dislocation in early 2013 and possibly beyond.

For many remaining advisers this will require new lines of business and additional clients. It is for this reason that Lighthouse continues to expand its affinity relationships which in turn continually increase the number of prospective new clients available for advisers.

While the Board is concerned about the short term prospects for the industry, and believes that it is too early to be able to give reliable guidance about earnings levels relating to 2013 and beyond, nonetheless the Board is satisfied that Lighthouse's scale, new customer flows and financial strength continue to differentiate the Group from most stand-alone organisations in the sector. Accordingly the Board looks forward to reporting further progress for the current year, and will update shareholders on expected trading prospects thereafter, later in the year.

Finally, I would like to express my thanks to all the Lighthouse financial advisers for their professionalism and loyalty to the Group, and to all my fellow employees and directors for their contributions during the period.

David Hickey

Executive Chairman

12 March 2012Lighthouse Group plc

Consolidated statement of comprehensive income

for the year ended 31 December 2011

Lighthouse Group plc

Consolidated statements of changes in equity

for the year ended 31 December 2011

Lighthouse Group plc

Consolidated statement of financial position

at 31 December 2011

The interim financial information was approved by the Board of Directors on 12 March 2012 and was signed on its behalf by

David Hickey

Executive Chairman

Peter Smith

Finance Director

Lighthouse Group plc

Consolidated statement of cash flows

For the year ended 31 December 2011

Lighthouse Group plc

Notes to the preliminary financial information for the year ended 31 December 2011

1.  Basis of preparation

The preliminary 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 prepared on the basis of the accounting policies set out in the audited financial statements for the year ended 31 December 2011 and International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board as adopted for use in the EU ("IFRS").

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2011 or 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies, and those for 2011 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 (Loss)/earnings per ordinary share

The calculation of the basic and diluted (loss)/earnings per share attributable to equity shareholders of the parent company is based on the following data:

As at 31 December 2011, there were 8,092,189 (2010: 8,223,710) options that existed which could potentially dilute basic earnings per share in the future, but were not included in the calculation of dilutive shares as their impact was anti-dilutive.

3. Dividends

The directors recommend the payment of a final dividend of 0.27p per share, totalling £345,000 (2010: 0.24p, totalling £306,000), which, subject to approval at the Annual General Meeting, will be paid on 8 June 2012 to shareholders on the register at the close of business on 11 May 2012. With the interim dividend of 0.13p per ordinary share paid during the year, this makes a total dividend for 2012 of 0.40p per ordinary share (2010: 0.36p per share).

4. Annual Report

The Annual report and audited financial statements will be posted to shareholders on or about 5 April 2012 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).

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