Preliminary Results

Lighthouse Group plc

("Lighthouse", "the Group" or "the Company")

Financial Adviser Awards: Large IFA of the Year 2012, 2011 and 2010

Preliminary Results

Lighthouse Group plc (AIM: LGT) today announces its preliminary results for the year ended 31 December 2012.

Summary

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

Commenting on the results, Richard Last, Chairman of Lighthouse Group plc, said: "The Board is pleased with the progress made during the period, in particular in terms of the growth in affinity relationships that have been secured by LFA, as well as the increase in average annualised revenue per adviser. The Group has made considerable investment into IT and related new processes during 2012, such investment totalling £1.4 million in the year. This investment was targeted towards readying the Group and its advisers for trading in the new RDR environment and in setting the groundwork for future growth plans.

"Trading conditions remain uncertain in light of the recently implemented RDR; however with a strong cash balance, operational scale and a robust business model, Lighthouse is well positioned within the industry to deliver future growth."

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OVERVIEW

I am pleased to present my first report on the full year results of Lighthouse Group since being appointed as Chairman of the Company in August 2012.

Lighthouse has made good progress during 2012, commencing the implementation of its growth strategy for Lighthouse Financial Advice ("LFA") under which the Group aims to double the number of advisers in that division over the next two years. This has been made possible by the successful deployment of new IT systems, where we have invested almost £900,000 in the year, which will improve the efficiency of our operations and practices and facilitate improvements in the quality of advice to our customers. The continued growth of LFA is a priority for the Group.

An important growth area for LFA is with affinity groups, where three new contracts were secured in 2012 with BA Clubs, the association for current and former employees of British Airways, the Royal College of Nursing and the Allied Bakers Union, as well as the renewal of the Association of School and College Leaders contract for a further three years and the recent new contract with the trade union USDAW.

At the same time we have created the foundations to grow and broaden the client base of LighthouseCarrwood which specialises in providing independent financial advice to high net worth individuals and professional clients, and to maintain the market position of our network division, Lighthouse Advisory Services, whose members will benefit during 2013 from the systems enhancements now deployed to LFA advisers.

I am delighted to report that for the third successive year Lighthouse Group was named as "Large IFA of the Year" following a detailed technical assessment by the FT publication, "Financial Adviser". This is an excellent achievement against stiff competition and provides a clear indication of the high level of professionalism with which the Group operates.

These achievements were made whilst the Group successfully addressed a number of industry related issues, including preparation for the changes introduced on 1 January 2013 by the Retail Distribution Review ("RDR"), the increasingly all-pervasive regulatory environment and dealing with customer redress issues arising primarily from historic trading within the Group's network division.

RESULTS

Against the backdrop of such significant change, the Group recorded a creditable financial performance during 2012, with EBITDA (before non-recurring charges) of £1.5 million (2011: £1.6 million) on turnover of £55.0 million (2011: £60.4 million) being achieved. Gross margins increased by 1.6 per cent. to 27.4 per cent. and average adviser production increased by 14 per cent. to £87,000 per annum whilst overheads continued to reduce by £0.4 million, notwithstanding significant on-going upward pressure in areas such as professional indemnity insurance and regulatory costs.

Earnings per share before the impact of non-recurring operating expenses and impairment charge amounted to 0.65p (2011: 0.72p). The loss before taxation for the year was £4.6 million (2011: £2.7 million).

Non-recurring operating expenses in 2012 included £0.9 million in respect of professional advisory and consultancy costs incurred in order to prepare the Group for RDR and regulatory change and £0.5 million in respect of additional costs incurred during the year arising from reorganisations and restructuring in prior periods and from the proposed AIM de-listing process.

The non-recurring operating charge in 2011 was made to address the potential liabilities arising out of the historic trading of certain subsidiary companies. Significant progress has been made on these matters during the year but substantive issues remain, in particular those relating to Arch Cru, and therefore the residual provision of £1.6 million has been retained. The Board has reviewed the position in the light of information currently available and the action now to be taken at the behest of the regulator in contacting clients that bought the products involved and has concluded that the provisions retained are appropriate and adequate.

IMPAIRMENT

In line with other companies in the financial services sector, the Board has undertaken the annual review of the carrying value of the Group's intangible assets that previously arose on business combinations, as is required by International Financial Reporting Standards.

In undertaking this review the Board has had regard to the well developed growth plans in place for LFA and LighthouseCarrwood and the need for a more focused and risk-based approach to the development of our network business.

The review indicated that no impairment charge was required for intangible assets situated in either LFA or LighthouseCarrwood. However, based on a conservative assessment of the impact of reduced adviser numbers and changes in operating methods post RDR as well as general economic uncertainty, an impairment charge of £3.9 million has been taken against the carrying value of the Group's network intangible assets acquired as a result of the merger with Sumus Plc in May 2008, prior to the severe economic downturn experienced later in that year. This is a non-cash item and does not affect the Group's cash position or trading.

FINANCIAL POSITION

The Group's year end cash balances amounted to £10.5 million (2011: £11 million after deduction of the LV= trade facility), the reduction being due primarily to the investment of almost £900,000 in new IT systems and processes and the payment of the final 2011 dividend of £345,000 in May 2012. The final tranche of the LV= trade facility amounting to £900,000 was fully repaid during 2012.

As noted in the Interim Report in September 2012, the Group has given undertakings to the Financial Services Authority ("FSA") that no distributions or non-trading payments will be made from its regulated subsidiaries without prior discussion with and assent from FSA.

A substantial proportion of the Group's cash balances are utilised in meeting our regulatory capital obligations and working capital requirements. The Company believes that it is prudent to retain the remainder of those funds (approximately £2 million) within the business to support trading immediately post RDR as well as to meet any potential claims for consumer redress that may arise from the historic trading in regulated subsidiaries.

LOAN NOTES

The Group has invested considerable management time and some £1.4 million (including a £0.5 million capitalised investment) in its preparation for RDR and in augmenting its systems and processes, particularly for its national (LFA) operation. In addition in late 2012 the Company embarked upon plans to significantly increase the number of advisers operating in LFA. This will entail on-going investment in adviser recruitment and training, as well as in the provision of fully integrated technology solutions. To finance this, the Board has negotiated funding from two provider institutions totalling £820,000.

The funding has been received in March 2013 and takes the form of unsecured loan notes issued by the Company which is to be used solely for the purposes of the LFA 500 project. The loan notes bear interest at 8 per cent. per annum, rolled up until redemption in 2016, and a premium of 50 per cent. on the capital sum originally advanced will be paid if LFA achieves pre-determined targets in terms of revenues, adviser numbers and EBITDA for the year ending 31 December 2015. Such premium, if paid, is expected to be self financing.

BOARD CHANGES

My appointment as Chairman was announced on 30 August 2012 following the resignation of David Hickey as Executive Chairman and Director. The Board and I would like to thank David for his considerable contribution to the development of Lighthouse and we wish him well for the future.

In the Group's Interim Report issued in September 2012, I commented that the Board would seek to appoint additional Non-Executive Directors in due course. I am delighted to report the Group's announcement on 19 March 2013 that Fay Goddard, until recently the Chief Executive of the Personal Finance Society ("PFS"), has agreed to join the Board of Lighthouse as a Non-Executive Director with effect from 1 April 2013. Fay brings a wealth of experience, both from her time at the PFS and her previous role with the Association of Independent Financial Advisers and she will assist the Company in further embedding and enhancing professional standards and customer focus within the Group's operations.

DIVIDEND

Although significant progress has been made since the publication of the Interim Report in September 2012, trading conditions following the implementation of the changes brought about by the RDR remain uncertain. In addition there remains uncertainty regarding the extent of any consumer redress that may be required as a result of the past trading of the Group's regulated entities, albeit the Board believes that the current level of provisioning for such costs is appropriate and adequate.

As a consequence of these issues the Board considers that it remains inappropriate to recommend a dividend payment at this time and accordingly no final dividend in respect of the current year is proposed (2011: £345,000 or 0.27 pence per share). The Board is however committed to returning the Company to the dividend list as soon as trading and regulatory conditions allow.

STRATEGY AND PROSPECTS

The Group has made significant progress in positioning itself to thrive in the post RDR world of Retail Financial Services, particularly through the anticipated growth in LFA and the benefits of the investment in IT systems made last year coming through into current year business performance.

Whilst in the short-term the Group expects a reduction in the level of business written, due to market uncertainties and the reduction in the number of advisers at the beginning of 2013 due to retirements as a result of RDR, improvements are expected in the quality of the business written and consequently in margins achieved as well as an increase in the number of advisers as the LFA growth plans are realised. Initial evidence here is encouraging as is the increase in the number of affinity group relationships which the Board believes is an important area for growth. In addition, the Group is investing in its specialist services business, LighthouseCarrwood, in order to broaden its operating base.

Finally, I would like thank all of our advisers for their continuing professionalism and loyalty to the Group and my fellow directors and all employees of Lighthouse for their considerable hard work and support during the year.

Richard Last

Chairman

20 March 2013

Lighthouse Group plc

Consolidated statement of comprehensive income

for the year ended 31 December 2012

Lighthouse Group plc

Consolidated statements of changes in equity

for the year ended 31 December 2012

Lighthouse Group plc

Consolidated statement of financial position

at 31 December 2012

The financial information was approved by the Board of Directors on 20 March 2013 and was signed on its behalf by

Richard Last

Chairman, Non-Executive

Peter Smith

Finance Director

Lighthouse Group plc

Consolidated statement of cash flows

For the year ended 31 December 2012

Lighthouse Group plc

Notes to the preliminary financial information for the year ended 31 December 2012

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 2012 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 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 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 per ordinary share

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

As at 31 December 2012, there were 8,019,615 (2011: 8,092,189) 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 do not recommend the payment of a final dividend for the year ended 31 December 2012 (2011: 0.27p, totalling £345,000, total dividend for 2011 of 0.40p per ordinary share).

4. Annual report

The annual report and audited financial statements will be posted to shareholders on or about 5 April 2013 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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