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Two days ago the IFA group Lighthouse (LSE:LGT) announced that it wished to delist its shares from AIM and operate as a private company. The stock now trades with a share price of 2.375p having more than halved since the news. This is a total disgrace and shareholders can reject the proposal (it needs 75% approval to go through) and should do so. I urge them to tell a bunch of greedy unprincipled bastards ( sorry I meant to say directors) where to stick it. First vote NO at the forthcoming EGM and then move to switch the NEDS on the Remuneration Committee.
By way of background it was just over 3 months ago that Lighthouse announced its calendar 2011 results. EBITDA was 21% ahead at £1.6 million. Net cash was £11 million. The total dividend was increased from 0.36p to 0.4p and there was no indication that a delisting was on the cards indeed the statement (published on March 12th) was upbeat about the future.
Two other factors to bear in mind.
- At 2.375p the company is capitalised at £3 million. Remember that number as you consider the net cash, the dividends (cost to company c£430,000 pa), last year’s reported EBITDA and the upbeat statement on current trading.
- The board of this company do not own vast amounts of stock but cost the company well over £1 million last year. Relative to its EBITDA that number is a total disgrace.
I accept that the market does not rate Lighthouse fairly relative to its cash, yield etc. That is partly because small caps are unloved. Partly because of the uncertainty in this industry ahead of the implementation of RDR this Christmas and partly because folks do not trust IFAs.
Dealing with each in turn. Firstly small caps will not stay unloved forever. Secondly – as Lighthouse itself has stressed – RDR will by jacking up regulatory costs and requirements cause a) many IFAs to quit as they are unable to pass (very simple) exams and b) force smaller networks to close as they cannot afford increased fixed costs – as such as a very large network Lighthouse will win from RDR. ‘tis always the way – more regulation kills the small guy, forcing industry consolidation and so reducing consumer choice but helping larger firms. Lighthouse is one such larger firm.
Finally investors do not trust IFAs. Well when they behave like greedy unprincipled swine as the board of Lighthouse has done do you blame them? With all its cash and generating profits Lighthouse could have overcome this IFA discount factor with a steady share buyback plan and by ramping up the dividend. It did not do so.
If this company goes private where will the PLC cost savings go? Increased dividends or increased troughing by the board? I know what my money is on.
But Lighthouse does not have to delist. Former boss Allan Rosengren owns 14%. A few other former employees own another 10%. Private investors own a good slug. And so I would call on ALL shareholders to vote No! to delisting at the EGM. Thereafter they should call for another EGM to boot out the useless NEDS who sit on the remuneration committee and should start a process of hacking away at bloated boardroom pay/PLC costs (two brokers, 3 PR advisers – hell’s teeth what a waste) with the savings returned 100% to shareholders via share buybacks.
Tell the board of Lighthouse to stick their proposals where the sun does not shine. The greedy pigs and their army of parasitical advisers deserve public humiliation and the rejection of their value destroying plans.
More to follow on this, I am in touch with Rosengren – the ball is in his court.
