Lighthouse group has had yet another year in the red, but chief executive Malcolm Streatfield has a plan in place to turn it around.
Financial advice group Lighthouse posted pre-tax loss of £1.6m for 2013, albeit a marked improvement on its pre-Retail Distribution Review (RDR) losses of £4.6m.
The firm was blighted by the Arch Cru and Keydata scandals, having paid out £1.2m in consumer redress linked to the sales of Arch Cru products, following the regulator's s404 review.
However, chief executive Malcolm Streatfield argues the future is looking bright for Lighthouse.
The group, which attributed a chunk of this year's losses to the exodus of advisers after January 2013, has since heavily invested in new advisers and technology in its restricted national business Lighthouse Financial Advice (LFA).
The group's gross margin rose by four percentage points last year, from 27% to 31%, indicating that LFA and IFA arm Lighthouse Carrwood were "growing and contributing more" while the" network businesses are getting back into balance", Streatfield said.
He added that the group's gross performance indicator, its earnings before interest, taxes, depreciation and amortisation (EBITDA), would had stayed the same as in the year pre-RDR had the firm not decided to invest £1.2m into developing LFA.
This development included recrutiment - Lighthouse has lost around 17% of advisers since the RDR.
But Streatfield said: "Those [advisers] that did qualify and carried on trading, which was the vast majority, their production started to go up as a result of the RDR environment.
"The advisers that left you could say were probably at the more unproductive end and that was possibly why they chose not to take the examinations. We believe that dislocation has actually had minimal impact financially to us."
Lighthouse's group revenues reduced by 13% to £48m last year compared with £55m in 2012. But adviser productivity increased by 3% to £82,000 in comparison with 2012 levels, against general market expectations of double-digit percentage declines.
Streatfield added: "Clearly 2013 for us was a restructuring year. We did take the decision to positively invest in the infrastructure of LFA because we believe that business has got a great future going forward and it was right that we invested in technology, new advisers, in our academy that supports the advisers, in all the infrastructure necessary to grow that business.
Lighthouse Group closed its Exeter office last week and has now split operations between an office in Woodingdean, near Brighton, and one in Stockport.
The re-structure, which cost a sizeable £1.4m of the £1.7m non-recurring costs declared in Tuesday's results, is key to making the business profitable in the future, Streatfield said.
"That restructure has saved operating costs of £1.2m on an annualised basis. That means that we get the cash that we have expended in the restructure back over the next 12 months as the cost savings kick in," he said.
"And of course those cost savings are then on a continuous basis. We had to spend £1.4m to save £1.2m, and we'll save £1.2m each and every year going forward. So it was a good thing to do."
Lighthouse has also put aside a further £310,000 for possible redress bills emerging as a "by-product of the processes that we've gone through [determining Arch Cru and Keydata redress]", Streatfield said.
However no more provisions will need to be made, he said.
"In previous years we have provided for Keydata and Arch Cru redress. As a residue of those matters there are one or two other redress issues around the place and we thought it prudent to make a small further provision of £310,000 just in case anything that we are currently dealing with actually manifests itself as customer redress.
"You might say that Arch Cru was the catalyst but it's not directly related to Arch Cru. It's certainly the end of Keydata and Arch Cru, absolutely no doubt about that."
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