Lighthouse Investor Relations

Reports, Accounts and Shareholder Information

Lighthouse is one of the largest and most prestigious and diverse financial advice firms in the UK and has been listed on the AIM market of the London Stock Exchange since 2000. The Group is the preferred provider of financial advice to 19 affinity groups whose aggregate membership is c6 million and provides financial advice, planning and solutions to both businesses and individuals, right across the UK. Lighthouse is increasingly active in the development and provision of auto-enrolment and other workplace benefits through its Lighthouse Workplace Solutions suite of products.

Corporate Governance

Information on corporate governance

Corporate Governance

CORPORATE GOVERNANCE

(Last updated 28 September 2018)

All members of the Board of Lighthouse Group plc believe strongly in the value and importance of good Corporate Governance and in our accountability to all of the Group’s stakeholders, including shareholders, staff, clients, our employed and self-employed financial advisers and other suppliers. In the statement below, we explain our approach to Corporate Governance, and how the Board and its committees operate.

CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE

As Chairman of Lighthouse Group plc, it is my responsibility to ensure that the Board is performing its role effectively and has the capacity, ability, structure and support to enable it to continue to do so.

Changes to AIM rules introduced on 30 March 2018 require AIM-quoted companies to apply a recognised corporate governance code by 28 September 2018. The information on Corporate Governance set out below is, in the opinion of the Board, fully in accordance with the revised requirements of AIM Rule 26.

The Board has determined that the Quoted Companies Alliance’s (QCA) Corporate Governance Code for small and mid-size quoted companies (revised in April 2018 to meet the new requirements of AIM Rule 26) would be the most appropriate for the Group to adhere to.

The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each. The Board considers that it does not depart from any of the principles of the QCA Code during the period under review.

The last twelve months has seen, amongst others, the following governance developments:

  • In September 2017 the Board appointed two new independent Non-Executive Directors, following the receipt of notice to retire from a former Non-Executive Director. The two new Directors were appointed after a search led by an executive recruitment search agency, retained by the Board as a result of their proven expertise in identifying and securing high-quality senior appointees. The appointments led to a majority of the Directors being, in the opinion of the Board, independent Non-Executive Directors and improved the gender diversity of Board members whilst adding experience in the key areas of pension provision and asset management.
  • In light of current guidance on Corporate Governance and my having served as a Director of the Company since July 2007 and as Chairman since August 2012, I announced on 4 September 2018 my intention to stand down from the Board of the Company and not stand for re-election as a Director at the next Annual General Meeting of the Company in May 2019; and
  • In conjunction with the above, the Board has established a formal Nominations Committee which will, amongst other things, manage the process to identify and appoint a new Director to act as Chairperson and, if considered necessary, a new Non-Executive Director in due course. The Committee has begun a search process, and is interviewing  external recruitment consultants to be retained to manage the recruitment process;

As part of this corporate governance exercise, we have identified the following areas where we intend to implement further actions:

  • We will be considering the use of external facilitators in future board evaluations.
  • Shareholder communication will be reviewed with a view to provide more details of the Group’s strategic planning objectives e.g. the notification of the strategic review of the Group’s auto-enrolment activities in the 2018 Interim Results statement; and
  • Discussions with the new Chairperson, once identified, on the nature and extent of engagement with key shareholders on an annual basis.

The Board will continue to develop its governance processes in the coming year.

The following paragraphs set out the Group’s compliance with the ten principles of the QCA Code.

1 ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG-TERM VALUE FOR SHAREHOLDERS

The principal activity and aim of the Group is to provide holistic financial advice and innovative financial solutions tailored to meet the individual needs of retail and corporate clients and to provide valued, cost effective services to financial advisers. Our business model is to provide such solutions through a number of different distribution channels, being:

  • national, through the Lighthouse Financial Advice (“LFA”) and Lighthouse Mortgage and Protection Solutions (“LMPS”) divisions, principally serving members of the Group’s affinity partners;
  • wealth advisory, through the Group’s employed adviser division LighthouseCarrwood, serving clients of accountancy firm partners and the self-employed adviser division LighthouseWealth, serving high net worth and mass affluent individuals in London and the South East as well as other parts of the UK; and
  • via appointed representatives in our communities (network) division.

The Group’s strategy is to increase the level customer interaction and of service provided across all of its operations but especially in its higher-margin national and wealth advisory businesses by making available carefully selected solutions matched to the customer’s individually agreed risk profile. In the Group’s national affinity division (LFA) this is achieved through use of the Lighthouse Researched Solutions range (incorporating the Luceo Investments solutions sponsored by the Group – see www.lighthousegroup.plc.uk/services/luceo-asset-management) which are also available to customers of advisers across the Group. Delivery of services to clients and advisers are enhanced through the use of market-leading software such as Intelligent Office and Dynamic Planner which simplify the investment process and provide added-value options such as Personal Financial Portal access for clients to see their portfolios on a real-time basis if they so desire.

The Board meets offsite annually with the senior management of the major distribution businesses detailed above and critical operational functions such as Compliance and Risk to review existing strategy and consider potential new areas for development. Compliance and risk management are key factors involved in all decision making as evidenced by the Risk and Regulatory Committee of the Board which meets four times a year and the Group’s Compliance and Risk Director being a main plc Board appointee. Strategy is also discussed as a standing agenda item at all Board meetings.

The outputs of the strategic discussions have included the increased focus on affinity relationships, the establishment of the dedicated LMPS mortgage and protection business and the development and launch of propriety products in the auto-enrolment and asset management markets.

The Group’s move into the asset management space in 2016, with the introduction of the Luceo Investments range of financial solutions whose sole objective is to match the individual risk profile agreed with the customer at the time of both the initial investment and subsequently, signaled the intention to deliver appropriate customer outcomes whilst increasing the income earned by the Group from its advisory activities.

The strategic review by the Board of the Group’s auto-enrolment activities, following the completion of the first period for UK companies to meet their obligations in establishing workplace pension schemes, illustrates the ongoing commitment to reviewing and updating the Group’s strategic objectives and plans in the light of changes in internal and external business environments.

The above will deliver a profitable and highly-valued business providing a consistently high quality service to retail and corporate customers alike.

The key challenges we face include:

  • Recruiting and retaining high quality financial advisers – the market for financial adviser recruitment in the UK is extremely competitive. The Group has implemented attractive remuneration and client engagement opportunities to attract new and retain existing advisers in order to service the ever-increasing demand for appropriate holistic financial advice from its customers.
  • Maintaining consistently high quality of service delivery to customers – service levels are seen as the key differentiator in the market for retail financial advice in the UK. The Group maintains its high level of customer service by ensuring its advisers are fully trained and keep up to date with technical requirements, mandatory pre-sale reviews of higher risk investments and developing innovative financial solutions appropriate to the customer’s needs.
  • The scale and scope of regulation of the market for financial advice in the UK – regulation continues to develop apace, both from the FCA direct and via implementation of EU directives whilst the UK remains within the EU. We have an established and experienced compliance function which it complements with external professional advice where appropriate in order to ensure that the Group and all of its advisers and staff comply and will continue to comply with all relevant regulation.
  • The impact of new technologies on the advice market in the UK – technologies to service customers in the UK financial investment market are constantly developing. The Group uses market-leading software to process business and assess customers’ risk profiles and has relationships with the leading platform suppliers.  Strategic initiatives incorporate the impact of technology as a matter of routine.
  • Ensuring security of client information – the safekeeping of customers’ personal data is of paramount importance to the Group and we place great emphasis on procuring, developing and deploying third-party software and hardware products and in applying rigorous systems and procedures to ensure that all relevant personal data is adequately secured and that the Group meets and will continue to meet all related legal and regulatory obligations.
  • Recruiting and retaining suitable staff – the Group’s ability to execute its strategy is dependent on the skills and abilities of its staff. We undertake ongoing initiatives to foster good staff engagement and ensure that remuneration packages are competitive in the market.

We believe we have the right strategy in place to deliver good customer outcomes and strong growth in profitability over the medium to long term. We expect the margins on the revenues we produce to increase in future periods as more of the Group’s business is produced by our higher value-add national affinity and wealth advisory divisions, which will result in higher underlying EBITDA margins and provide us with scope for additional investment in new services. This will enable us to deliver sustainable shareholder value.

2 SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS

Responsibility for investor relations rests with the Chief Executive, supported by the Group Finance Director. During 2018 the following activities were pursued to develop a good understanding of the needs and expectations of all constituents of the Group’s shareholder base:

Date Description Participants Comments
Feb 18 – Mar 18 Final results announcement and roadshow MS, PS
Feb 18 Various audio and video interviews* on 2017 final results MS Interviews by Proactive Investors (video) and Directors’ Talk (audio) available via Group and third-party websites and disseminated via social media
May 18 AGM* All Directors Actively invited shareholders to attend; held Q&A session
May 18 Audio interview* on renewal of PCS affinity contract MS  Audio interview by Directors’ Talk available via Group and third-party website and disseminated via social media
July 18 Initiation of third party research coverage and video* interview on Group business proposition MS Video interview by Edison TV and initiation of coverage by Edison Investment Research available via Group and third-party website and disseminated via social media
Sep 18 Interim results announcement and roadshow MS, PS Extended to institutions/potential investors in Edinburgh and Glasgow as well as
Sep 18 Interim results video* and audio* and updated research from finnCap (nominated broker) and Edison MS Interviews with Edison (Video) and Directors’ Talk (audio) available via Group and third-party website and disseminated via social media

 

Key: MS: Malcolm Streatfield; PS: Peter Smith

* indicates private shareholder activities

The Group is committed to communicating openly with its shareholders to ensure that its strategy and performance are clearly understood. We communicate with shareholders through the Annual Report and Financial Statements, full-year and half-year announcements, trading updates and the Annual General Meeting (AGM), and we encourage shareholders’ participation in face-to-face meetings. A range of corporate information (including all Lighthouse Group plc announcements) is also available to shareholders, investors and the public on our website and via social media.

Private shareholders: The AGM is the principal forum for dialogue with private shareholders, and we encourage all shareholders to attend and participate. The Notice of Meeting is sent to shareholders at least 21 days before the meeting. The chairs of the Board and all Committees, together with all other directors whenever possible, attend the AGM and are available to answer questions raised by shareholders. Shareholders vote on each resolution, by way of a poll. For each resolution we announce the number of votes received for, against and withheld and subsequently publish them on our website.

Institutional shareholders: The directors actively seek to build a mutual understanding of objectives with institutional shareholders. Our Chief Executive and Group Finance Director make presentations to institutional shareholders and analysts immediately following the release of the full-year and half-year results. We communicate with institutional investors frequently through a combination of formal meetings, participation at investor conferences, roadshows and informal briefings with management. The majority of meetings with shareholders and potential investors are arranged by the broking team within finnCap, the Group’s Nominated Adviser, together with other meetings arranged by financial PR advisers and third-party research providers.  Following meetings, the broker (and other parties) provides anonymised feedback to the Board from all fund managers met, from which sentiments, expectations and intentions may be ascertained.

It is incumbent on all chairpersons of public companies to offer meetings with all significant shareholders to discuss, inter alia, current and future strategy. In the past twelve months the Chairman met with the three largest shareholders of the Company or their representatives and with the former Chairman of the Company (then a significant shareholder) and have spoken to the fund manager of another significant shareholder. In previous periods the Chairman met with other shareholders who no longer have significant holdings in the Company.

The Chief Executive and Finance Director are available to meet product provider shareholders on request.

In addition, we review analysts’ notes to achieve a wide understanding of investors’ views. This information is considered by the Board and has contributed to the preparation of the Group’s investor relations strategy which was approved at Board level.

Since the 2017 financial year-end, the Group has engaged Edison Investment Research from which it has commissioned the preparation of research that is made available to all shareholders, via the Group’s and Edison’s websites and via social media, and which provides a range of corporate access services to reach wealth managers and private client investment managers.

Going forward, research undertaken by our Nominated Adviser and Broker, finnCap, will also be made available to both institutional and retail investors and a link to access will be given on our website

The principal individuals responsible for shareholder liaison are Richard Last, the Chairman, Malcolm Streatfield, Chief Executive, and Peter Smith, Group Finance Director and Company Secretary, supported by relevant individuals at finnCap and Edison Investment Research.

3 TAKE INTO ACCOUNT WIDER STAKEHOLDER AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS

Stakeholder Reason for engagement How we engage
Staff – our ability to fulfil client services and develop and enhance the innovative financial solutions on which they depend relies on having talented and motivated staff. Good two-way communication with staff is a key requirement for high levels of engagement, fostering a culture of innovation. Regular staff briefings.

Invitation to staff to ask questions of management that are answered in the briefings.

These have provided insights that have led to enhancement of management practices and staff incentives, such as bonuses for recommendation of potential new members of staff and advisers, payable on their ultimate recruitment.

Clients – our success and competitive advantage are dependent upon fulfilling client requirements, particularly in relation to quality of service, its speed of delivery and security. Understanding current and emerging requirements of clients enables us to develop new and enhanced services, together with processes to support the fulfilment of those services. Seek feedback on services by use of customer satisfaction surveys.

Obtain requests for new services and service enhancements.

Dedicated managers and field liaison staff for all affinity relationships.

Dedicated events and call centre staff to service all affinity-related activities and clients.

c140 advisers across the UK fully trained in and committed to servicing members of affinity partners’ organisations.

These have led to the group maintaining and renewing existing and winning new contractual relationships with an increasing number of affinity organisations.

Advisers – our progress is dependent on recruiting and retaining highly qualified and motivated financial advisers (both employed and self-employed) to deliver high quality advice to our customers. Having the right number and quality of financial advisers is fundamental to meeting our customers’ needs and expectations and hence securing long-term growth. Dedicated managers for all advisers within the Group.

Regular team meetings and development forums where advisers can access expert technical briefings as well as best practice.

Regular interaction with compliance, adviser remuneration and development staff.

Suppliers – a key supplier group is our technology suppliers. The identification, selection and successful deployment and operation of market-leading technologies is an essential component of our customer service delivery. We hold regular review meetings with technology suppliers and interact with them on proposed enhancements and new development prior to launch to ensure the use of our systems is optimised (NB: this includes new projects).

We operate systems to ensure that supplier invoices are processed and paid promptly.

Shareholders – as a public company we must provide transparent, easy-to-understand and balanced information to ensure support and confidence. Meeting regulatory requirements and understanding shareholder sentiments on the business, its prospects and performance of management. Regulatory news releases.

Keeping the investor relations section of the website up to date.

Periodic investor briefings.

Participation at investor events.

Publish videos/audios of PR interviews.

Annual and half-year reports and presentations disseminated via Group website and social media.

AGM.

We believe we successfully engage with our shareholders: over the past 12 months this engagement has led to support for the group, increased liquidity of trading and higher valuation.

Industry bodies – the services we provide must meet certain requirements. The views of certain industry groups, including the Financial Conduct Authority (“FCA”), are influential in the way the group is perceived. Regular contact with the FCA at senior levels.
Communities– what we do impacts communities in the places where we operate and elsewhere. It is important to be perceived as a reputable business that makes a positive contribution to local economies and is attractive as an employer and partner. Various activities to support fundraising for local charities and good causes.

Participation in graduate and other schemes to support and provide opportunities to young people.

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4 EMBED EFFECTIVE RISK MANAGEMENT, CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE ORGANISATION

The Group Compliance and Risk Director has, in conjunction with the Group Audit Director, compiled a risk register for the Group that identifies key risks in the areas of corporate strategy, financial, clients, staff, environmental and the investment community. The register is reviewed by the Executive Directors on a monthly basis and by the Non-Executive Directors on the Group’s Risk & Regulatory Committee on a quarterly basis and is updated as and when necessary. The Board reviews the complete risk register at least annually.

Within the scope of the annual audit, specific financial risks are evaluated in detail, including in relation to foreign currency, interest rates, liquidity and credit.

The Group Audit Director undertakes internal audit reviews on the basis of the Annual Group Internal Audit Plan which is approved annually by the Risk & Regulatory Committee and is aligned with the key risks identified in the Group’s risk register.

Staff are reminded annually to report, anonymously or otherwise, any risks or threat they perceive in the operations of the business. On receipt of any such notification, an internal team is assembled to assess and take remedial action as appropriate in the circumstances.

Staff are also reminded on an annual basis that they should seek approval from the CFO if they, or their families, plan to trade in the Company’s equities.

The directors are responsible for the Group’s system of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group’s system is designed to provide the directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately. The key procedures that have been established and which are designed to provide effective internal control are as follows:

  • Management structure – the Board meets regularly and minutes of its meetings are maintained.
  • Financial reporting – budgets are prepared and reviewed by executive management and then presented to and, if appropriate, approved by, the Board. Any material variances from budgeted to actual results are investigated.
  • Investment appraisal – the Group has a clearly defined framework for capital expenditure requiring approval by senior executive management and the Board where appropriate.
  • Consumer and regulatory controls – the Group has a dedicated compliance function overseeing all consumer facing and regulatory activities which reports regularly to the Board and its Risk & Regulatory Committee on its operations.

The Board has reviewed the effectiveness of the system of internal controls and it has considered the major business risks and the control environment. These reviews are supported by a range of reviews undertaken by the Group Audit Director on areas proposed by senior executive management and approved by the Board annually. No significant control deficiencies were reported during the period. No weaknesses in internal control have resulted in any material losses, contingencies or uncertainty, which would require disclosure, as recommended by the guidance for directors on reporting on internal control.

Further details are set out within the Strategic Report of the Annual Report issued by the Company (see https://www.lighthousegroup.plc.uk/accounts-reports/ )

5 MAINTAIN THE BOARD AS A WELL-FUNCTIONING, BALANCED TEAM LED BY THE CHAIR

The members of the Board have a collective responsibility and legal obligation to promote the interests of the Group, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the Chair of the Board.

The QCA Code requires that the Boards of AIM companies have an appropriate balance between executive and non-executive directors of which at least two should be independent. The Board has considered its current establishment – being four non-executive directors and three non-executive directors – and is satisfied it meets this requirement. The Board consists of seven Directors of which three are executive and four are non-executives, including the Chairman. We consider that three of the current non-executive directors are independent, the Board’s assessment of which can be found in the paragraph below. The Board is supported by four committees: Audit, Risk & Regulatory, Remuneration and Nominations.

Non-Executive Directors are required to attend all Board and Board Committee meetings convened each year and to be available at other times as required for face-to-face and telephone meetings with the executive team and investors.

Information sent to the Board each month include minutes of previous Board and subsidiary/committee meetings, action points arising therefrom, executive reports from the Chief Executive, Group Finance Director and Group Compliance and Risk Director, monthly and year-to-date comparisons against budget and prior year with appropriate commentary, capital expenditure proposals and divisional presentations, along with strategic plans and development summaries

Meetings held during the period under review (from 1 January 2018) and the attendance of Directors are summarised below:

Richard Last

Alex Scott-Barrett

Michelle Cracknell

Ann Roughead

Malcolm Streatfield

Peter Smith

Ken Paterson

Board Meetings:

Held *

Attended

8

8

8

8

8

8

8

8

8

8

8

8

8

8

Audit Committee Meetings:

  • Held
  • Attended

2

2

2

2

2

2

2

2

2

2

2

2

2

2

Risk & Regulatory Committee Meetings:

  • Held
  • Attended

3

3

3

3

3

3

3

3

3**

3**

3**

3**

3

3

Remuneration Committee Meetings:

  • Held
  • Attended

2

2

2

2

2

2

2

2

Nominations Committee Meetings:

  • Held
  • Meetings

No meetings yet held as Nominations Committee only established in August 2018

 

 

* Including two further meetings called and held by conference call.

** attended in observation role only.

The Board has an agreed agenda of regular business, financial and operational matters, and each Board Committee has compiled a schedule of work to ensure that all areas for which the Board has responsibility are addressed and reviewed during the course of the year. The Chair is responsible for ensuring that, to inform decision-making, directors receive accurate, sufficient and timely information. The Company Secretary or his nominee compiles the Board and Committee papers which are circulated to directors prior to meetings, with the exception of the Risk & Regulatory Committee where the Group Audit Director serves as secretary. The Company Secretary or his nominee provides minutes of each meeting and every Director is aware of the right to have any concerns minuted and to seek independent advice at the Group’s expense if appropriate.

6 ENSURE THAT BETWEEN THEM THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND CAPABILITIES

All members of the Board bring relevant sector experience in financial services (including regulatory matters) and have appropriate public markets experience and three members are chartered accountants. Two directors are female and five are male. The Board believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. The appointment of Michelle Cracknell and Ann Roughead as new Non-Executive Directors in September 2017 reflected the Board’s acknowledgement of the increasing importance of pension advice and asset management to the Group’s business.

New directors are offered both internal and external induction assistance and all directors attend seminars and other regulatory and trade events to ensure that their knowledge remains current.

Richard Last, Independent Chairman

Term of office: Appointed as a Non-Executive Director on 25 July 2007 and as Chairman on 30 August 2012; a member of all Board Committees.

Background and suitability for the role. Richard, a Fellow of The Institute of Chartered Accountants in England and Wales, joined the Company in 2007 as a Non-Executive Director and was appointed Chairman of the Company in 2012. He has over 20 years’ senior experience in information technology having worked at Board level for a number of publicly quoted and private companies in the technology sector.

With his long experience of governance and public markets, Richard is able to balance the sometimes differing views of investors and executive directors. Richard is an FCA approved person for controlled functions CF2: Non-Executive Director (FCA register ref. no. RXL00083).

Current external appointments: Richard is currently the non-executive Chairman of the following public companies: ITE Group plc and The British Smaller Companies VCT2 Plc (both listed on the LSE main market), Gamma Communications plc, Arcontech Group plc and Tribal Group Plc (all AIM-quoted) and is a non-executive director of USA-based Corero Network Security plc (AIM-quoted).

Time commitment: two to three days per month.

The Board notes that Richard Last has been on the Board as a director for more than 11 years and has been Chairman for over 6 years, Richard’s independence as Chairman was assessed as part of a recent corporate governance review, following which the Board (excluding the Chairman) concluded that Richard continued to be independent, based on his financial independence, his relatively modest shareholding in the Company and his wide-ranging external interests, Notwithstanding this, the Chairman and the Board concluded that, given the higher standards that should apply to a chairperson of a public company and given his tenure as a director would be 12 years after the next AGM, it was appropriate for Richard to announce his intention to stand down at the next AGM.

Alex Scott-Barrett, Senior Independent Non-Executive Director

Term of office: Joined as Non-Executive Director on 11 June 2008; Chair of the Audit and Nominations Committees and a member of the Remuneration, Risk & Regulatory Committee and Luceo Asset Management Investment Committee. Alex is an FCA approved person for controlled functions CF2: Non-Executive Director (FCA register ref. no. AJS01277).

Background and suitability for the role: Alex Scott-Barrett is a chartered accountant. From 1988 to 2003 he held various offices in the corporate finance and asset management divisions of Cazenove. He is the former chairman of Suffolk Life plc.

Time commitment: one to two days per month.

The Board acknowledges that Alex Scott-Barrett has been on the Board for over 9 years, however the Board still considers him independent. The areas that the Board gave consideration to were: he is financially independent from the Group; his personal reputational risk issues as a director of a publicly quoted company; his professional qualification and standing as a chartered accountant; and his active challenges in Board and Committee meetings. In addition, his remuneration is not share or performance related and he has no connections with other shareholders). Alex’s tenure on the Board is helpful given the relative newness of the other non-executive directors as he has a deep embedded knowledge of the business to complement new insights.

Michelle Cracknell, Independent Non-Executive Director

Term of office: Joined as Non-Executive Director on 1 September 2017; Chair of the Risk & Regulatory Committee and a member of the Audit, Remuneration and Nominations Committees.

Background and suitability for the role: Michelle is a qualified actuary with 30 years’ experience in financial services. She is currently Chief Executive of the Pensions Advisory Service, which provides independent and impartial pensions guidance to the general public, and a non-executive director and chairperson of the investment committee at Omnilife Insurance Company.  Michelle is an FCA approved person for controlled functions CF2: Non-Executive Director (FCA register ref. no. MAC00004).

Time commitment: one to two days per month.

Ann Roughead, Independent Non-Executive Director

Term of office: Joined as Non-Executive Director on 1 September 2017; Chair of the Remuneration Committee and a member of the Audit, Risk & Regulatory and Nominations Committees.

Background and suitability for the role: Ann is a qualified solicitor with more than 30 years’ experience of the retail financial services market. She is a non-executive director of Columbia Threadneedle Investments Limited and Columbia Threadneedle Investment Services Limited and is a committee member of the Integrity and Ethics Committee of the Chartered Institute of Securities and Investments. She previously held senior positions with LV= Asset Management, Citigroup and JP Morgan Fleming.  Ann is an FCA approved person for controlled functions CF2: Non-Executive Director (FCA register ref. no. ALR01043).

Time commitment: one to two days per month.

Malcolm Streatfield, Chief Executive

Term of office: Appointed as Managing Director on 9 April 2002 and was appointed as Chief Executive in January 2003.

Background and suitability for the role: Malcolm has been involved in financial services since 1976 and was elected to the council of APFA (Association of Professional Financial Advisers) in June 2002. In June 2008, Malcolm was appointed to the Customer Impact Panel of the ABI (Association of British Insurers) and from February 2009 to February 2015 was a member of the Financial Services Practitioner Panel.

Current external appointments: None

Time commitment: full time.

Peter Smith, Group Finance Director and Company Secretary

Term of office: Appointed as Group Finance Director on 6 May 2008 and as Company Secretary on 31 March 2013.

Background and suitability for the role: Peter is a fellow of the Institute of Chartered Accountants in England and Wales and was a corporate finance and assurance partner with KPMG. He has considerable experience of the UK financial services sector, both from an assurance and corporate advisory capacity and more latterly as an executive director. Peter’s responsibilities include Finance, Treasury, Legal and Company Secretarial matters, as well as strategic initiatives.

Current external appointments: None.

Time commitment: full time.

Ken Paterson, Group Compliance and Risk Director

Term of office: Originally engaged on a fixed-term contract and then Compliance Director (non-plc Board level) in August 2012 and appointed to the Board as Group Compliance and Risk Director on 14 February 2014.

Background and suitability for the role: Ken has more than 30 years’ experience in senior compliance, risk and regulatory roles within the UK financial services sector, encompassing regulatory bodies, life companies and advisory businesses. Ken joined Lighthouse in August 2012 as Group Compliance Director for the Group’s regulated businesses and has contributed fully as part of the management team since that date.

Current external appointments: None

Time commitment: full time.

7 EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT

As a Board we fully support the QCA Code’s principle to review regularly the effectiveness of the Board’s performance as a unit, as well as that of its committees and individual directors.

A board evaluation process led by the Chairman took place in February 2017. All then current directors began by completing questionnaires about the effectiveness of the board and a self-assessment of their own contributions which were returned to the Chairman. The process built on previous evaluations, which were based on published statements of best practice available in those periods, and focused on areas such as board composition, information supplied, process, internal controls and risk management, accountability, chief executive and senior management and standards of conduct, across both the Board and relevant committees and from both individual and collective standpoints.

The Chairman then reviewed this information and used it as the basis for an individual discussion with each Director, followed by a collective discussion with the Board. Areas identified for further attention comprised directors’ independence, induction and training for new directors, succession planning, monitoring changes in objectives, business and external environment and access to external specialists where appropriate, all of which have been incorporated into enhanced Board processes.

Specific actions implemented as a result of the above include:

  • the decision by Richard Last, a Director of the Company since 2007, to stand down at the next AGM;
  • appointment of Michelle Cracknell and Ann Roughead as non-executive directors to improve the gender diversity on the Board;
  • consideration of induction and training needs, both at appointment and on an ongoing basis;
  • regular reviews of succession planning, both at Board and senior management level; and
  • the introduction of a new risk management system, incorporating bespoke third-party software maintained by the Group Audit Director and reviewed by executive management on a monthly basis and by the Board, through its Risk & Regulatory Committee, each quarter.

We will be considering the use of external facilitators in future board evaluations, which we would aim to complete at least bi-annually.

The Group has a formal conflicts of interest policy which is reviewed at each Board meeting with individual directors required to advise the Board of any potential conflicts he or she is aware of or to confirm there are no such conflicts.

8 PROMOTE A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS

Our long-term growth is underpinned by our five core values, which are:

  1. We place our customers first, putting ourselves in their shoes to understand the current and future needs of those who use our products and services, and always striving to exceed their expectations.
  2. We have an enduring positive attitude that stems from being self-motivated, adaptable and agile and feeling fully empowered to make a difference, speaking out with ideas and suggestions to make things better.
  3. We are team players who recognise that Lighthouse is a company worth much more than the sum of its parts, we are passionate about communicating with colleagues and with our customers and are committed to learning from one another.
  4. We are committed to innovation in what we do and how we do it, and to working smarter rather than harder to reduce costs, increase efficiency and make lives easier by being creative, pragmatic and different.
  5. We respect one another and are courteous, honest and straightforward in all our dealings, we honour diversity, individuality and personal differences, and are committed to conducting our business with the highest personal, professional and ethical standards.

The culture of the Group is characterised by these values which are communicated regularly to staff through internal communications and forums, with all employees based in the UK and across 3 office locations. The core values are communicated to prospective employees and advisers in the Group’s recruitment activities and are considered as part of the selection process. They are also reinforced in annual assessments and training for all staff and advisers.

The Board believes that a culture that is based on the five core values is a competitive advantage and consistent with fulfilment of the Group’s mission and execution of its strategy.

The culture is monitored through formal and informal discussions between individual directors and staff across the Group. The Board reviews the findings of such discussions and determines whether any action is required.

9 MAINTAIN GOVERNANCE STRUCTURES AND PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT GOOD DECISION-MAKING BY THE BOARD

The Board provides strategic leadership for the Group and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the business, and defining the strategic goals that the Group implements in its business plans. The Board defines a series of matters reserved for its decision and has approved terms of reference for its Audit, Risk & Regulation, Remuneration and Nominations Committees to which certain responsibilities are delegated. The chair of each Committee reports to the Board on the activities of that committee.

The Audit Committee monitors the integrity of financial statements, oversees and reviews financial performance and control and oversees and reviews external auditor appointment and independence.

The Risk & Regulatory Committee monitors the Group’s compliance with its regulatory obligations, oversees risk management and control, monitors the effectiveness of the internal audit function and reviews external auditor independence.

The Remuneration Committee sets and reviews the performance of the executive directors and determines the scale and structure of their compensation packages, including the setting of targets and performance frameworks for cash- and share-based awards.

The Nominations Committee oversees the processes for the identification and approves the appointment of directors (whether executive or non-executive) and other senior appointments from time to time.

The Executive Board, consisting of the executive directors of Lighthouse Group plc and the Group Operations and Marketing and Communications Directors (non-plc appointments), operates as a management committee, chaired by the Chief Executive, which reviews operational matters and performance of the business, and is responsible for significant management decisions while delegating other operational matters to individual managers within the business.

The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the group. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that performance of individual directors, the Board and its committees are reviewed on a regular basis, leads in the development of strategy and setting objectives, and oversees communication between the Group and its shareholders.

The Chief Executive provides coherent leadership and management of the Group, leads the development of objectives, strategies and performance standards as agreed by the Board, monitors, reviews and manages key risks and strategies with the Board, ensures that the assets of the Group are maintained and safeguarded, leads on investor relations activities to ensure communications and the Group’s standing with shareholders and financial institutions are maintained, and ensures that the Board is aware of the views and opinions of employees on relevant matters.

The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by the Board, making operational and financial decisions required in the day-to-day operation of the Group, providing executive leadership to managers, championing the Group’s core values and promoting talent management.

The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the executive directors and ensure that the Group is operating within the governance and risk framework approved by the Board.

The Company Secretary is responsible for providing clear and timely information flow to the Board and its committees and supports the Board on matters of corporate governance and risk.

The matters reserved for the Board are:

  • Setting long-term objectives and commercial strategy;
  • Approving annual operating and capital expenditure budgets;
  • Changing the share capital or corporate structure of the Group;
  • Approving half-year and full-year results and reports;
  • Approving dividend policy and the declaration of dividends;
  • Approving major investments, disposals, capital projects or contracts;
  • Approving resolutions to be put to general meetings of shareholders and the associated documents or circulars; and
  • Approving changes to the Board structure.

The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the Group evolves.

10 COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS

We have made significant efforts in recent years to ensure effective engagement with both institutional and private shareholders. In addition to the usual roadshows following the release of full year and interim results, each of which was expanded to include a greater number of existing and potential new investors, we have actively promoted our AGM as a forum to present to and meet with investors, and posted regular video and audio updates by the Chief Executive of the Group’s progress to the Group’s website. These are also promoted via social media. The Chairman contacts and, if requested, meets with the Company’s largest shareholders.

The Board is aware that, following the introduction of the Markets in Financial Instruments Directive II (MiFID II) regulations at the start of 2018, private investor access to research on public companies has been restricted. In response to this, and as detailed at “2 Need to understand and meet shareholder needs and objectives” above, in April 2018 (post the 2017 financial year-end), the Board commissioned Edison Investment Research to produce and provide private investors with independent research on the Group. This research, along with that produced by finnCap, the Company’s Nominated Adviser and Broker, is made available via the Group’s website.

The Board has ultimate responsibility for reviewing and approving the Annual Report and Financial Statements and it has considered and endorsed the arrangements for their preparation, under the guidance of its Audit Committee. The directors confirm that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

The Company also publishes the results of any voting decisions by the shareholders, made primarily at the Annual General Meeting, by announcements through the Regulatory News Service and on its website. Where there is significant divergence of voting opinion the Board analyses such divergence to understand the various opinions of the shareholders.

In addition to the investor relations activities described above, the following Audit, Risk & Regulatory and Remuneration committee reports are provided.

Audit Committee Report

During the year, the Audit Committee has continued to focus on the financial reporting of the Group and the effectiveness of the controls throughout the Group. The Audit Committee consists of Alex Scott-Barrett, Chair, and the other Non-Executive Directors. The Committee has met twice to date in 2018, in February and August, and the external auditor and Group Finance Director were invited to attend these meetings (along with other Executive Directors). Consideration was given to the auditor’s pre- and post-audit reports and these provided opportunities to review the accounting policies, internal control and the financial information contained in both the annual and interim reports. The committee also met with the auditors with no executives present.

Download the PDF: ‘Audit Committee – Terms of Reference’

Risk & Regulatory Committee Report

During the year, the Risk & Regulatory Committee has continued to focus on the Group’s compliance with its regulatory obligations and to consider the identification, documentation and evaluation of current and emerging risks. The Audit Committee consists of Michelle Cracknell, Chair, and the other Non-Executive Directors. The Committee has met three times thus far in 2018, with a further meeting scheduled for November, and the Group Compliance and Risk Director (as a designated additional attendee) and the Group Auditor Director (who acts as secretary to the committee and also manages the Group’s Risk Register) being invited to attend these meetings (along with other Executive Directors). Consideration was given to the Executive Directors’ assessment of current and emerging risks, along with the movement in the categorisation of such risks over time.

Download the PDF: ‘Risk & Regulatory Committee – Terms of Reference’

Remuneration Committee Report

The remit of the Remuneration Committee is to determine the framework, policy and level of remuneration, and to make recommendations to the Board on the remuneration of Executive Directors. In addition, the Committee oversees the creation and implementation of all relevant employee share incentive plans. The Remuneration Committee consists of Ann Roughead, chair, and the other Non-Executive Directors. The committee has met twice to date in 2018.

In setting remuneration packages the Committee ensured that individual compensation levels, and total board compensation, were comparable with those of other AIM-listed companies where appropriate.

In 2015 and 2017 the Remuneration Committee granted options under the Lighthouse Group plc Long Term Incentive Plan over ordinary shares in the Company to the executive directors and certain senior employees of the Company. In granting these options, the Committee’s objective was to attract, motivate and retain key staff over the long term, designed to incentivise delivery of the Company’s growth objectives.

At the same time that the grant of options was made in 2015, the company cancelled certain options previously granted to the Chief Executive and Group Finance Director. Large shareholders were consulted before the issuance of major option awards.

Download the PDF: ‘Remuneration Committee – Terms of Reference’

Nominations Committee Report

The remit of the Nominations Committee is to review the structure, size and composition of the Board, consider succession planning for the Executive Directors and other senior managers, to identify, assess and nominate proposed appointees to the Board and to review the annual assessment of Board effectiveness. The Nominations Committee consists of Alex Scott-Barrett, chair, and the other Non-Executive Directors. The Committee was established in August 2018 and has yet to meet but will do so shortly to consider the process for appointing a new Chair.

Download the PDF: ‘Nominations Committee – Terms of Reference’

Modern Slavery Statement
This statement sets out steps taken by Lighthouse Group PLC and other relevant group companies (the Group) to prevent modern slavery and human trafficking in its business and supply chains.
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