[UPDATED] National advice firm LEBC has seen its profits wiped out after a turbulent 2019 which saw it abandon a planned float, struggle with Brexit uncertainty and agree with the FCA to stop DB transfer business.
In its financial statement for the year ending 30 September 2019 on Companies House, LEBC stated it had a ‘disappointing year’ as it suffered an operating loss of £379,630, down from 2018’s pre-tax profit of £4,295,031.
In September 2019, LEBC agreed to immediately halt its defined benefit (DB) transfer business after a Financial Conduct Authority (FCA) review into that section of its business.
LEBC’s DB transfer business reportedly made up approximately 20% of its total revenue. LEBC ceased DB transfer advice on 2 September 2019, the accounts cover the 12 month period to 30 September 2019.
In its latest announcement, LEBC claim Brexit and the December general election created ‘nervousness’ in the market.
Additionally, the firm blamed political uncertainty which it stated caused individuals to ‘defer investment decisions’ which it said led to delayed revenues.
A loss of revenue for LEBC was also apparently caused by ‘changes in the requirements for advising on DB transfers’, the business claimed.
According to LEBC’s financial report, the business suffered hits across the board:
- Operating loss of £339,973;
- 2019 loss (after tax) of £401,160 (2018: profit of £3,458,824) down 88%
- 2019 cash at bank stands at £1,461,157 (2018: £3,359,714) down 56%
- 2019 current net assets of £3,700,040 (2018: £6,195,536) down 40%
- LEBC paid dividends in 2019 of £2,150,671 compared to 2018’s payment of £1,685,000;
- Turnover down from £20,489,461 in 2018 to £16,863,107 in 2019; down 17.69%
LEBC did report £494,501 in operating profit, but an amortisation cost of £82,346, a depreciation cost of £59,491 and an exceptional item cost of £692,637 caused the national firm to fall into the red.
The aforementioned exceptional item costs, totalling £692,637, were:
- Fees re-aborted transactions: £411,784
- Other one-off costs: £200,000
- Redundancy costs: £80,853
According to the report, the one-off costs of £200,000 was due to a financial settlement for an employee dispute.
In a nod to LEBC’s withdrawal from the DB transfer market, the business stated it will see an ‘impact’ to the bottom line in the coming months as it moves away from the ‘higher risk’ areas of advice.
LEBC said moving away from risky areas of advice would ‘enable the company to concentrate resources in more profitable, lower risk, activities.’
In September 2018, LEBC chief executive Jack Mcvitie told New Model Adviser® the advice business would go ahead with its plans to float in February 2019 unless ‘Brexit got crazy.’
The report highlighted LEBC had put aside other exceptional one-off costs for ‘capital raising’ which could be read as plans for a potential floating.
But following LEBC’s withdrawal from the DB transfer market, and today’s financial statement, the national firm is unlikely to pursue listing plans.