Lighthouse comprises a diverse group of UK financial advice firms serving individuals and businesses. The main focus is on Middle Britain and contracts with 21 affinity groups are an important revenue and profit contributor.
In its FY18 trading update in January, LGT confirmed that it expects to report EBITDA and PBT in line with board expectations. Revenue production per adviser and recurring revenue (over 50% of customer-derived revenue) have continued to increase. Also in January, LGT indicated that it would not continue with its auto-enrolment activity. Our forecasts are unchanged with 2018 EPS expected to increase by 8% y-o-y. In October LGT announced an affinity contract with the National Education Union, formed through the amalgamation of the NUT and ATL (existing partner), adding 336,000 members to LGT’s coverage. In November a strategic agreement with Tavistock Investments was reached, which will broaden the Luceo Asset Management product offering and help increase its scale. Our DCF valuation is unchanged at 44p.
A more volatile market background could have some effect on individuals’ propensity to seek financial advice (both positive and negative), but the key longer-term drivers of demand growth remain in place: an ageing population, and increased choices and responsibility for pension accumulation and decumulation. Lighthouse appears well-placed to address this opportunity with a particular focus on developing its affinity relationships.