HAMILTON, Bermuda – 25 April 2018 - LOM Financial Limited ("the Company"; ticker: LOM.BH) today announced the financial results to fiscal year end 31 December 2017. In a letter to shareholders, the Company’s CEO stated:
2017 Financial Results
25th April 2017
To our Shareholders:
During 2017 LOM expanded on our activities of the previous year. We grew our client base, raised additional assets and continued to improve our financial performance. Our assets under administration (AUA) rose from $684 million at the beginning of the year to $870 million by the end of 2017. Further gains have been made in the first part of this year with assets rising to $914 million. We are continuing our focus on winning new clients and recruiting top level financial advisors and private bankers. To this end we have added experienced staff in our Bahamas office and our new Cayman office.
The addition of these new staff and premises obviously will increase our costs this year and, we expect, will create a drag on earnings in 2018. We have high hopes that the investments we are making in our people and facilities will continue to win greater assets for our group.
In 2017 our asset management revenues rose almost 34%. We have been successful in winning new business and have enjoyed very good performance in all of our mutual funds and investment mandates. I am very proud of the consistent achievements of our asset management personnel and we expanded the number of professionals within the unit to deepen our expertise as the assets have expanded.
As mentioned, 2017 witnessed increased costs for the group as we invested in new technology, increased our marketing spend in all of our offices and increased personnel in those offices. There is a time lag between the immediate cost of onboarding new financial advisors and private bankers, and the time whereby their efforts result in new assets being raised and fees accruing from managing and administering those assets. All of these factors increased costs last year and as we continue to expand our client relationship professionals, this effect is likely to remain a factor this year and into next.
With the growth of our Bahamas operations and after unsuccessfully trying to find new office space in Nassau, we were presented with an opportunity to purchase a building in Pineapple Grove immediately outside of Lyford Cay. The purchase of the new building closed last summer and we moved our operations into LOM House in September. We purchased the building for cash and thus our cash levels have fallen over the year. Subsequent to the financial year end we established a mortgage for a part of the building which enabled us to return our cash levels to approximately 25% of our equity. We are pleased to say that the higher visibility and commitment to Bahamas that having this building represents has already resulted in a pick up in new business and a greater number of enquiries into our services.
Subsequent to the 2017 year end we opened a branch office of LOM Financial (Bermuda) Limited in Grand Cayman at Camana Bay. As I pointed out last year, our IT and systems infrastructure enable us to now add a new location and on board new revenue streams in an extremely efficient manner. The Cayman office is fully up and running with two experienced professionals. We have high hopes that we will see a rapid progression in raising new assets for the group from this office.
The Financial Market Environment
2017 was marked by strongly rising equity markets in a very low volatility environment. Over the year the US markets as measured by the S&P 500 index rose 19.4%, while the UK market as measure by the FTSE100 rose 7.6% and Europe as measured by the Euro Stox 50 was up 5.6%. In Asia, the Japanese market as measured by the Nikkei 225 was up 19%, while Hong Kong and China were up 36% and 21.8% respectively. These market moves were finished in an optimistic crescendo with the passing of corporate tax reform in the US at the end of the year. Going forward 2018 is proving to be a much more difficult year with rising interest rates in the US and a return to normalized levels of volatility. Additionally, the US administration is determined to rewrite the global trade rules and frustrated with the inaction of multilateral organizations like the WTO. The US administration has threatened unilateral action to redress what it views as unfair trading practices. This has of course raised trade tensions and been reflected in higher risk premiums in equity valuations. We expect these tensions to continue throughout the coming year.
We believe that we are entering a more volatile global environment where both populist and established politicians are going to respond to populist pressure that has been driven by underlying economic forces that have been building for years. Rapid globalization driven by technology and the internet has disrupted lives and business models in almost all developed countries. This rapid change and the economic shocks associated with it are causing the normal political landscape to warp and shift. The pace of economic change will only accelerate with the coming revolutions in robotics, artificial intelligence and biotech. As a result, we expect that we will continue to see a significant involvement of populist politicians implementing policies and economic incentives that keep risk premium elevated.
For LOM, these are the highlights of our financial performance during 2017.
Revenues had the following year-on-year changes:
•Management and advisory fee revenues rose 33.8% to $4.162 million (39% of revenues).
•Broking fees rose 54.6 % to $3.184 million (30% of revenues).
•Fees from corporate finance work fell 67% to $30,588 (0.2% of revenues).
•Foreign Exchange revenues rose 11% to $337,681 (3% of revenues).
•Net interest earnings rose 15% to $1,137,906 (10.6% of revenues).
•Gain on securities held in inventory was $605,746
•Total revenues rose 34.7% to $10,766,714.
Costs for the group had the following year-on-year changes:
•Operating costs, ex commission payments, rose 17.3%
•Employee expenses rose 12.1%.
•Total operating expenses rose 24.4%.
On other financial measures:
•LOM’s assets under administration were $870 million as of 31st December 2017 as compared to $684 million in assets at the end of 2016.
•LOM remains in a strong financial position with net equity of $18.4 million.
•LOM had a net return on equity of 8.9% in 2017.
•LOM held cash and equivalents of $3.13 million, representing 17% of shareholder equity.
•LOM's book value as at 31st December 2017 was $3.09 per share.
The Board of Directors have decided to pay a dividend of $0.01 per share on May 4th 2018 to shareholders of record on May 1st 2018.
Our current share price on the Bermuda Stock Exchange is $2.50 which equates to 80% of LOM's book value as at 31st December 2017.
The Board has given approval for LOM to continue to buy back shares for cancellation for a total not to exceed 250,000 shares. Over the whole of 2017, the Company purchased for cancellation 52,000 shares.
As always, I would like to express appreciation and thanks to our customers for their business and the employees at LOM for their dedication and professionalism.
Scott GS Lines
Chairman & CEO
About the LOM Financial Group:
LOM Financial (www.lom.com) is a publicly-held, international financial services company, providing a complete range of investment services and products, with offices in Bermuda, Bahamas, Grand Cayman, Manila and the UK. In business for over 25 years, LOM provides brokerage, custody, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers around the world. LOM Financial Limited is publicly listed on the Bermuda Stock Exchange (symbol LOM.BH), and is the parent to its regulated subsidiaries – LOM Financial (Bermuda) Ltd, LOM Financial (Bahamas) Ltd, LOM Asset Management Limited, and Global Custody & Clearing Limited.
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