Globalworth Real Estate — Strong progress in 2018

Globalworth Real Estate — Strong progress in 2018

Globalworth (GWI) has reported strong performance for FY18, including a full-year earnings contribution from Globalworth Poland and good underlying progress from the existing portfolio. The results appear consistent with our recently published multi-year forecasts, which we will review in detail in the coming days. These look for strong future growth from adding value to existing assets and further developments, against a positive operating environment in Romania and Poland. Not included in those forecasts were potential further accretive acquisitions and GWI has signalled that it continues to evaluate a strong pipeline of opportunities for which it intends up to €500m of additional equity.

Martyn King

Written by

Martyn King

Director, Financials

Globalworth Real Estate Investment

Strong progress in 2018

2018 results

Real estate

12 March 2019

Price

8.23p

Market cap

£1,116m

Net debt (€m) at 31 December 2018

1,259

Net LTV at 31 December 2018

43.9%

Shares in issue

132.5m

Free float

26.3%

Code

GWI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.2

(1.2)

(7.8)

Rel (local)

1.4

(5.9)

(5.9)

52-week high/low

9.60p

7.90p

Business description

Globalworth is a real estate investment company, incorporated in Guernsey and listed on AIM. It is the leading office investor in the CEE region with a portfolio approaching €2.5bn in Romania and Poland. It targets a sustainable and growing dividend with capital growth.

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Martyn King

+44 (0)20 3077 5745

Andrew Mitchell

+44 (0)20 3681 2500

is a research client of Edison Investment Research Limited

Globalworth (GWI) has reported strong performance for FY18, including a full-year earnings contribution from Globalworth Poland and good underlying progress from the existing portfolio. The results appear consistent with our recently published multi-year forecasts, which we will review in detail in the coming days. These look for strong future growth from adding value to existing assets and further developments, against a positive operating environment in Romania and Poland. Not included in those forecasts were potential further accretive acquisitions and GWI has signalled that it continues to evaluate a strong pipeline of opportunities for which it intends up to €500m of additional equity.

Year end

NOI*
(€m)

EPRA
earnings** (€m)

EPRA EPS
(c)

EPRA NAV/
share*** (€)

DPS
(c)

P/EPRA
NAV (x)

Yield
(%)

12/16

43.6

8.6

13.3

8.57

0

0.96

N/A

12/17

51.1

16.8

17.9

8.84

44

0.93

5.4

12/18

133.4

60.9

46.0

9.04

54

0.91

6.6

Estimates under review

Note: *NOI is net operating income. **EPRA earnings is adjusted for revaluation movements and other non-recurring items. *** EPRA NAV is adjusted for deferred tax liabilities, fair value of interest rate derivatives and other items.

Acquisitions and underlying gains

Globalworth Poland was fully reflected in the FY17 balance sheet but contributing to the FY17 income statement for less than one month and was a significant driver of FY18 growth. Underlying progress also reflected strong leasing activity and an increasing contribution from recently completed developments, rental growth, ongoing acquisitions and operational efficiency. Net operating income increased from €51.1m to €133.4m but is yet to fully reflect the increase, to €159.5m, in year-end annualised contracted income for the commercial standing portfolio. EPRA earnings grew from €16.8m (€17.9 per share) to €60.9m (€46 per share). Including increased DPS and growth in EPRA NAV per share to €9.04, the NAV total return for the year was 7.8%.

Targeting further accretive acquisitions

The commercial property markets in Romania and Poland are supported by strong economic growth, above the EU average, and an increasing number of multinational companies operating in the region. Against this positive backdrop, GWI has potential acquisitions with a value of €280m under exclusive negotiation in Poland, with a blended yield of 7.5%, and is evaluating other accretive acquisitions. With this in mind, as well as the continuing development programme in Romania, the company is considering raising an additional €500m of equity capital at around the prevailing EPRA NAV per share.

Valuation: Growth should drive shareholder returns

GWI is trading with an FY18 yield of almost 7% and a discount to forecast EPRA NAV per share of c 10%. Management of existing investments, further developments and continuing accretive acquisitions all point to strong growth.

The FY18 results appear consistent with our growth outlook

In our recently published detailed note on Globalworth, we laid out our multi-year financial forecasts up to and including FY22. We did this to demonstrate GWI’s potential to grow rental income and capital values, including a significant potential contribution from the active development programme as well as an increased contribution from recently completed acquisitions and developments, rental growth and operating efficiency. Not specifically included in our forecasts, but highlighted as areas of potential additional uplift, were accretive acquisitions and capital growth as a result of Bucharest yield convergence towards the lower levels seen in markets elsewhere around the CEE region.

We will review the FY18 financial results, summarised in Exhibit 1 alongside our FY18 forecasts, in detail in the coming days and review our multi-year forecasts. We do not expect material changes in the current portfolio and developments; however, the potential accretive acquisitions flagged by management are a source of medium-term upside.

GWI will make a further announcement on the potential equity capital raise in due course. A circular will be published, convening an EGM to seek the necessary shareholder approvals. The board has also provided an update on the potential move to a premium listing on the London Stock Exchange, noting that it will await greater clarity in terms of the impact of Brexit before making a decision to proceed.

Exhibit 1: 2018 financial summary and versus Edison forecasts

€m unless otherwise stated

2018

2017

Change

Edison forecast

Net operating income

133.4

51.1

161%

116.4

Administrative expenses

(15.3)

(10.2)

49%

(14.3)

Fair value gain on investment property

34.1

6.7

407%

60.5

Net other income & expense items

(1.6)

13.4

(3.3)

Operating profit

150.7

61.0

147%

159.3

Net finance expense

(38.4)

(37.0)

4%

(38.3)

JV profit

3.1

2.2

41%

3.5

Profit before tax

115.3

26.2

341%

124.5

Tax

(15.4)

(2.4)

(15.2)

Net profit

99.9

23.7

321%

109.4

Non-controlling interests

(19.7)

0.7

(15.7)

IFRS attributable net profit for year

80.3

24.4

229%

93.7

Adjust for:

Fair value gain on investment property

(34.1)

(6.7)

(60.5)

Other EPRA adjustments including tax and non-controlling interest effects

14.7

(0.9)

22.2

EPRA earnings

60.9

16.8

262%

55.4

Basic IFRS EPS (€)

60.7

26.4

70.8

Diluted EPRA EPS (€)

46.0

17.9

156%

41.8

DPS declared (€)

54.0

44.0

23%

54.0

Diluted EPRA NAV per share

9.04

8.84

9.11

Investment properties inc JV(€bn)

2.46

1.82

36%

2.48

Net LTV

43.9%

34.0%

43.0%

Source: GWI, Edison Investment Research

Compared with our forecasts we briefly note that:

The net operating income growth from €51.1m to €133.4m substantially reflects a full year contribution from Globalworth Poland and development completions in Romania, further acquisitions of income generating assets in Poland through the year and strong letting activity. The Globalworth Poland contribution includes a €21.5m one-off settlement in respect of master lease and NOI guarantees that had been granted to the company prior to its IPO and before GWI made its investment. This was not included in our NOI forecasts, pending confirmation of the accounting treatment for the settlement, announced in December 2019. On an underlying basis, NOI earned during the year was c €4.5m below our forecast, but year-end annualised contracted NOI of €159.5m is actually ahead of our estimate (€155.7m), which is a positive indicator for FY19 income. We believe the transaction will be value neutral to GWI but does mean it has received cash upfront in respect of the likely future guarantee payments, and management of the assets will become more flexible without the complication of the master lease. The master lease settled accounted for 0.5% of group standing commercial GLA at the time of settlement and GWI expects to lease the corresponding space in the short to medium term.

With Globalworth Poland already reflected in the FY17 balance sheet, the 36% growth in the investment portfolio in 2018 to €2.5bn (FY17: €1.8bn), includes €538.3m invested in five standing asset acquisitions in Poland, €17.5m in three land plots in Bucharest, Romania on which GWI plans to new office projects, continuing development spend and valuation uplift.

Occupancy of the commercial standing portfolio, already at a good level, continued to increase, reaching 95.1% at end-FY18 (H118: 94.6% and FY17: 93.3%). Including tenant expansion options, end-FY18 occupancy was 96.3%. During the year the group negotiated the take-up or extension of 121.8k sqm of commercial space in Romania and Poland, with a similar pace maintained in H2 as in H1.

2018 saw two development projects completed, both in Bucharest; the second (of three) towers at Globalworth Campus (H118) and the new pre-let HQ for Groupe Renault Romania, the Renault Bucharest Connect. Construction of the third tower at Globalworth Campus is underway (due for completion Q419) and since year end, 60% of the project has been pre-let or is subject to a letter of intent. Two of GWI’s further pipeline of development projects have also commenced; the 26.4k sqm Globalworth Square project in Bucharest and a 17.7k sqm unit at the TAP logistics centre in Timisoara.

Net finance expense was little changed despite increased borrowing during the year, reflecting the benefits of refinancing secured bank debt with lower cost, unsecured, fixed rate debt. In June 2017 GWI issued a €550m Eurobond at a fixed 2.875% due 2022, and in March 2018 €550m of senior unsecured notes due 2025 at a fixed 3.0%.

EPRA earnings increased from €16.8m to €60.9m and compared with our €55.3m expectation. Although the reported EPRA earnings also benefitted from the master lease and NOI guarantee settlement, adjusting for the non-controlling interest and the tax that we would anticipate, as well as our overestimate of NOI for the year, we believe this is broadly consistent with our forecasts.


Exhibit 2: Financial summary

Year ending 31 December, €000's

2016

2017

2018

INCOME STATEMENT

Rental income

46.2

53.9

137.6

Net property operating expenses

(2.6)

(2.8)

(4.2)

Net operating income (NOI)

43.6

51.1

133.4

Administrative expenses

(7.7)

(10.2)

(15.3)

Depreciation of long-term assets

(0.2)

(0.2)

(0.4)

Acquisition costs

(0.1)

(10.8)

(1.2)

Fair value gain on investment property

6.7

6.7

34.1

Bargain purchase gain on acquisition of subsidiaries

0.0

28.9

0.3

Gain on sale of subsidiary

0.3

0.0

0.0

Share based payments

(0.0)

(0.1)

(0.5)

FX gain/(loss)

(0.1)

(0.3)

(1.2)

Other net operating income/(expense)

1.3

(4.1)

(4.0)

0.0

0.0

5.5

EBIT

43.7

61.0

150.7

Net finance expense

(31.5)

(37.0)

(38.4)

JV

0.0

2.2

3.1

Profit before tax (PBT)

12.2

26.2

115.3

Tax charge

(0.9)

(2.4)

(15.4)

Profit after tax

11.3

23.7

99.9

Minorities

0.0

0.7

(19.7)

Attributable profit after tax (PAT)

11.3

24.4

80.3

EPRA earnings adjustments:

Fair value gain on investment property

(6.7)

(6.7)

(34.1)

Bargain purchase gain on acquisition of subsidiaries

0.0

(28.9)

(0.3)

Other EPRA adjustments

4.0

28.0

15.0

EPRA earnings

8.6

16.8

60.9

Basic average number of shares (m)

64.4

92.5

132.3

Fully diluted average number of shares (m)

64.4

93.8

132.5

IFRS EPS - basic (€c)

17.6

26.4

60.7

Diluted EPRA EPS (€c)

13.3

17.9

46.0

DPS (€c)

0.0

44.0

54.0

Dividend cover

0.4

0.9

BALANCE SHEET

Investment property

980.9

1,792.4

2,391.0

Other non-current assets

17.7

49.2

69.0

Total non-current assets

998.6

1,841.6

2,460.0

Cash & equivalents

221.3

273.3

229.5

Other current assets

11.8

46.1

47.4

Total current assets

233.2

319.4

277.0

Interest bearing loans & borrowings

(375.6)

(834.0)

(1,235.1)

Deferred tax liabilities

(70.6)

(99.6)

(107.0)

Other non-current liabilities

(4.5)

(13.1)

(15.9)

Total non-current liabilities

(450.6)

(946.7)

(1,358.0)

Interest bearing loans & borrowing

(38.7)

(36.4)

(24.0)

Other current liabilities

(27.1)

(41.5)

(57.7)

Total current liabilities

(65.8)

(77.8)

(81.7)

Net assets

715.4

1,136.5

1,297.3

Non-controlling interests

0.0

(67.6)

(212.4)

Shareholders' equity

715.4

1,068.9

1,084.9

Adjustments to EPRA:

Add deferred tax liability

70.6

112.1

128.6

Deduct goodwill as a result of deferred tax

(5.7)

(5.7)

(5.7)

Add negative fair value of interest rate swap

3.6

2.6

2.1

Other

0.0

(6.5)

(9.8)

EPRA NAV

783.8

1,171.5

1,200.2

Period end number of shares, fully diluted (m)

91.5

132.5

132.7

Basic NAV per share (€)

7.91

8.09

8.19

EPRA NAV per share (€)

8.57

8.84

9.04

CASH FLOW

Net cash flows from operating activities

19.9

10.1

80.1

Cash flows from investing activities

(39.5)

(388.0)

(426.9)

Cash flows from financing

206.9

430.6

303.1

Change in cash

187.3

52.7

(43.7)

Opening cash

31.0

218.4

271.0

Closing cash

218.4

271.0

227.3

Adjustments to balance sheet cash

3.0

2.3

2.3

Balance sheet cash

221.3

273.3

229.5

Debt

(414.2)

(870.4)

(1,259.1)

Net (debt)/cash

(192.9)

(597.1)

(1,029.5)

Net LTV

19.7%

34.0%

43.9%

Source: Company data. Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2019 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Globalworth Real Estate Investment and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2019 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Globalworth Real Estate Investment and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Lighthouse Group — Affinity and recurring revenue continue growth

FY18 revenues were held back by the impact on client demand of the Q4 equity market correction and a levelling off in pension transfer activity. Nevertheless, revenue generated from affinity relationships continued to grow. Recurring revenue was up 10% and now accounts for more than 50% of customer revenue. The opportunity for the group to generate good long-term growth by meeting the need for financial advice, particularly within its affinity relationships, remains attractive.

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