TIDMLGT
RNS Number : 1687H
Lighthouse Group PLC
09 July 2012
Press release 9 July 2012
Lighthouse Group plc
("Lighthouse", "the Company" or "the Group")
Financial Adviser Awards: Large IFA of the Year
Proposed cancellation of trading on AIM
The Company today announces that it intends to seek Shareholder
approval for the cancellation of admission of its Ordinary Shares
to trading on AIM (the "Cancellation").
Under the AIM Rules, it is a requirement that any cancellation
of admission to trading on AIM must be approved by not less than 75
per cent. of votes cast by shareholders voting in a general
meeting. Accordingly, the Company is today sending to Shareholders
a circular and notice of general meeting convening the General
Meeting at which a special resolution will be proposed to approve
the Cancellation (the "Circular"). The Circular will be available
shortly on the Company's website at www.lighthousegroup.plc.uk.
The General Meeting will be held at the offices of the Company,
being 26 Throgmorton Street, London, EC2N 2AN at 9:00 am on 31
July, 2012. Should the Cancellation be approved at the General
Meeting, it is expected that it will take effect at 7:00 am on 8
August 2012.
Capitalised terms used but not defined in this announcement have
the same meaning as given to them in the Circular.
Expected timetable of events
2012
Despatch of this document 9 July
Last date and time for receipt of Forms 9:00 am on 29 July
of Proxy
General Meeting 9:00 am on 31 July
Expected last day for dealings in Ordinary 7 August*
Shares on AIM
Expected time and date that admission with effect from 7:00 am
of Ordinary Shares to trading on AIM on 8 August*
will be cancelled
* Assuming that the General Meeting is not adjourned and that
the Resolution approving the Cancellation is duly passed
Notes:
1. References to time in this document are to London time.
2. lf any of the above times or dates should change, the revised
times and/or dates will be notified to Shareholders by an
announcement on a Regulatory Information Service.
3. All events in the above timetable following the General
Meeting are conditional upon approval by Shareholders of the
Resolution to be proposed at the General Meeting.
Recommendation to Shareholders
The Directors consider the Resolution to be in the best
interests of the Company and Shareholders as a whole and consider
that it is most likely to promote the success of the Company. The
Directors therefore unanimously recommend Shareholders to vote in
favour of the Resolution at the General Meeting, as they intend to
do in respect of their own beneficial holdings of, in aggregate,
9,083,835 Ordinary Shares representing approximately 7.1 per cent.
of the issued share capital of the Company at the date of this
document.
David Hickey, Chairman of Lighthouse Group, commented: "For some
time the conventional advantages of being listed on AIM have not
applied to the Company and consequently the Board believes that it
will be more advantageous for Lighthouse to operate as an unquoted
entity.
Despite the changes in the industry and uncertainty that these
bring, Lighthouse is in a robust position both financially and
operationally, and the Board remains optimistic about the long term
prospects for the Company."
For further information, please contact:
Lighthouse Group plc
David Hickey, Executive Chairman Tel: +44 (0) 20 7065 5646
david.hickey@lighthousegroup.plc.uk
Malcolm Streatfield, Chief Executive Tel: +44 (0) 20 7065 5646
malcolm.streatfield@lighthousegroup.plc.uk
Peter Smith, Finance Director Tel: +44(0)1392 457850
peter.smith@lighthousegroup.plc.uk
www.lighthousegroup.plc.uk
Shore Capital and Corporate Limited Tel: +44 (0) 20 7408 4090
(Nominated Adviser to the Company)
Dru Danford
Stephane Auton
Media enquiries:
Abchurch Communications
Joanne Shears / Jamie Hooper Tel: +44 (0) 20 7398 7719
joanne.shears@abchurch-group.com www.abchurch-group.com
Background to the Cancellation
Lighthouse was incorporated and admitted to trading on AIM in
late 2000. At the time, a number of IFA businesses had their shares
publicly traded, and the initial fund raising for Lighthouse was
considerably assisted by an AIM quotation. It was generally
believed that trading and development prospects for the IFA sector
were sound, and consequently the investment community was
supportive, especially of the many new IFA businesses being formed
and floated.
In the immediate aftermath of that period, some groups prospered
for a time and during 2001 the aggregate market value of quoted IFA
groups exceeded GBP250 million. However in subsequent years a
number of high profile IFA groups, including the majority of those
quoted, ran into regulatory and trading difficulties, and became
insolvent. Today Lighthouse constitutes the only IFA group still
quoted on AIM and its current market capitalisation is
approximately GBP6 million.
In its first annual trading results released on 15 March 2001,
Lighthouse announced turnover of GBP5 million, EBITDA losses of
GBP1.5 million, and cash balances of GBP35,000. The share price on
15 March 2001 was 60p. In the Company's 2011 preliminary results
for the year ended 31 December released on 11 March 2012,
Lighthouse recorded turnover of GBP60 million, EBITDA profits
before non-recurring operating expenses of GBP1.6 million and net
cash exceeding GBP11 million. The closing share price on 6 July
2012 being the last dealing day prior to the date of this
announcement was 4.88p. The Board believes that this clearly
demonstrates that sentiment for IFA businesses amongst the
investment community has declined dramatically over the past
decade.
Current industry issues
The IFA community faces significant challenges. These include
the imposition of the RDR from 1 January 2013 which will require
advisers' qualifications to be at a much higher level, will ban
initial commission on savings and investment products and will
introduce a significant number of other consequential structural
changes in the industry.
In parallel, the collapse of several substantial international
financial entities after 2008 has resulted in numerous concerns,
reviews and litigation surrounding the potential mis-selling of
retail financial products, including within the IFA community.
Finally, the Board believes that the increase in regulatory
charges, and the noticeable escalation of consumer rights compared
to most other stakeholders operating in retail financial services,
has resulted in a far more uncertain trading environment than has
ever previously existed. The scale of the structural, regulatory
and trading challenges now facing the IFA industry makes it
extremely difficult to forecast the trading outlook for the next
few years. In addition, many IFA businesses, including Lighthouse,
are undergoing very significant restructurings of their processes
and operations, in order to be able to trade post the RDR. Against
this background it is very difficult to indicate reliably to the
investment community what future terms of trade will prevail within
the sector, and hence virtually impossible to construct reliable
valuation matrices.
Accordingly, the Board believes that it is difficult to see how
the investment community will redevelop a desire to acquire and
hold IFA related shares in the foreseeable future.
Conventional attractions of being a company admitted to trading
on AIM
One of the reasons for being admitted to trading on AIM is to
secure a greater ability to raise funds and to use quoted shares as
currency. Lighthouse has not issued any new Ordinary Shares since
2008, whether for cash or any other transaction, and no issue of
new Ordinary Shares is currently contemplated in the short or
medium term.
Another conventional attraction of AIM is the possibility of an
enhanced corporate profile. Given the current difficulties of the
IFA industry the Board does not believe that an AIM quotation
provides any realistic advantage for Lighthouse at this time.
Moreover, AIM regulatory obligations to make prompt public
announcements of any material change in a business can be untimely
and place Lighthouse at a significant disadvantage to its unlisted
competitors. In response to the RDR and other industry changes and
challenges, Lighthouse will be significantly adapting its business
and operations, and premature announcement of plans and actions
being taken could alert competitors and damage the Group's
prospects.
Liquidity in shares is an attraction of any stock market quote.
However trading in and demand for the Company's Ordinary Shares is
currently very limited which the Board believes is a significant
explanation for the recent poor share price performance. The
current Exchange Market Size is 4,500 Ordinary Shares, representing
approximately GBP220 at the closing share price on 6 July 2012
being the last dealing day prior to the date of this announcement.
Small volumes of shares being traded can cause material share price
volatility, and the Company has experienced this especially in the
past few years. The Board believes that this creates a misleading
view of the Company, its trading performance and prospects, and can
adversely affect the Company in its dealings with its various
stakeholders.
Shareholder value through reference to current share price
Traditionally offerors for a publically listed company pay a
premium for control over the recent or current share price.
Credible offerors are very conscious of the scale of the premium
they are seen to be paying for publicly traded companies, and this
can often limit their offer price. No such impediments apply to
unquoted entities and consequently valuation discussions tend to
focus more on other factors such as EBITDA, turnover, margin,
customer base, growth prospects and financial strength.
In the Board's opinion, a heavily discounted share price will
significantly restrict any valuation discussions with potential
offerors in the future should such discussions take place. The
retail financial services industry will understand the value within
Lighthouse as trading conditions settle down post RDR, and will
assess that value by reference to industry parameters. In such
circumstances a continually depressed share price will provide an
alternative and more attractive benchmark for an offeror at the
expense, potentially substantial, of Shareholders.
In addition, the current share price level hinders the Company's
ability to use its equity as consideration towards any acquisition
that the Board might consider given that the discounted price of
the Company's Ordinary Shares distorts the relative value of
Lighthouse compared to unquoted acquisition targets.
Reason for the Cancellation
The Board has concluded that none of the benefits traditionally
associated with being admitted to trading on AIM have applied to
the Company for some considerable time and this is not expected to
change in the foreseeable future. In the meantime there are
considerable costs, both financial and in management time,
associated with maintaining its status as an AIM company.
In particular, the requirement to provide regular strategic and
trading updates under the AIM Rules is potentially commercially
disadvantageous at a time of significant regulatory change within
the IFA sector.
The Board therefore believes that the Company's interests would
be better served if the Company were to operate as an unquoted
entity. The Board acknowledges that Cancellation will make it more
difficult to trade in the Ordinary Shares but does not believe that
this outweighs the commercial benefits to be gained from leaving
AIM.
Following careful consideration, the Directors have therefore
concluded that it is no longer in the best interests of the Company
or its Shareholders to maintain the Company's admission to trading
on AIM and the Board considers that the costs and commercial
disadvantages of remaining listed on AIM far outweigh any potential
benefits. The Board has therefore decided to propose the
Cancellation. The Directors' intention is that the Company should
remain a public but unquoted company.
Effect of the Cancellation on Shareholders
The principal effects of the Cancellation would be that:
(a) there would no longer be a formal market mechanism enabling
Shareholders to trade their Ordinary Shares on AIM or any other
recognised market or trading exchange;
(b) the Company would not be obliged to announce material
events, administrative changes or material transactions nor to
announce interim or final results;
(c) the Company would no longer be required to comply with any
of the additional specific corporate governance requirements for
companies admitted to trading on AIM; and
(d) the Company would no longer be subject to the AIM Rules and
Shareholders would no longer be required to vote on certain matters
as provided in the AIM Rules.
It is possible that the Cancellation could have taxation
consequences for Shareholders. Shareholders who are in any doubt
about their tax position should consult their own professional
independent adviser.
Proposed Shareholder protections
Notwithstanding that there would be no such formal requirements,
the Board has nevertheless resolved to maintain high standards of
corporate governance and appropriate shareholder protections
following the planned Cancellation. Accordingly the Board will
continue to:
(a) hold Shareholder meetings in accordance with the applicable
statutory requirements and the Company's articles of
association;
(b) maintain non-executive representation on the Board. The
Company currently has two non-executive Directors and the Board
does not currently anticipate any change to this structure in the
foreseeable future. The current non-executive Directors, who have
each served over 4 years, and who have particular expertise in
quoted companies, have agreed with the Board that they will step
down in due course in favour of alternates of which one at least
will have more specialised financial advisory expertise;
(c) operate the Audit, Remuneration and Risk Committees;
(d) review the feasibility of restoring the payment of dividends
commensurate with the future profitability, cash availability and
underlying growth of the business as was stated in the preliminary
results for the year ended 31 December 2011 which was released on
12 March 2012; and
(e) maintain an "Investors" section on its website at
www.lighthousegroup.plc.uk. In addition, Shareholders will be sent
an annual report; the Company intends to post a summary of its
annual and half year financial performance on its website, as well
as details of any significant events or developments in which
Shareholders may be interested provided that these are not
commercially sensitive.
The City Code
The City Code provides an orderly framework within which
takeovers and mergers are conducted and operates principally to
ensure that shareholders are treated fairly and not denied an
opportunity to decide on the merits of a takeover and that
shareholders of the same class are afforded equivalent treatment.
Shareholders should note that following the Cancellation the
Company will remain subject to the provisions of the City Code on
the basis set out in those provisions.
Share dealing following Cancellation
Whilst the Board believes that the Cancellation is in the
interests of Shareholders as a whole, it recognises that the
Cancellation will make it more difficult for Shareholders to buy
and sell Ordinary Shares should they so wish. Accordingly, the
Board intends to explore whether it is possible to set up a matched
bargain arrangement to enable Shareholders to trade the Ordinary
Shares. If such a facility can be arranged, details will be made
available to Shareholders on the Company's website at
www.lighthousegroup.plc.uk.
The Company's CREST trading facility will remain in place to
facilitate the matched bargain facility and for so long as it
remains economic to do so.
Recommendation to Shareholders
The Directors consider the Resolution to be in the best
interests of the Company and Shareholders as a whole and consider
that it is most likely to promote the success of the Company. The
Directors therefore unanimously recommend Shareholders to vote in
favour of the Resolution at the General Meeting, as they intend to
do in respect of their own beneficial holdings of, in aggregate,
9,083,835 Ordinary Shares representing approximately 7.1 per cent.
of the issued share capital of the Company at the date of this
document.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
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