WEDNESDAY, APRIL 25: LOM (Holdings) Limited announced a loss of $1,471,617 for 2011.
Scott Lines, CEO of LOM, said in a shareholders’ letter: “2011 has proved to be another year of struggle for the investment industry around the world and has been even more difficult for LOM.”
He said the year started on a positive note but the “re-eruption of the European debt crisis caused markets around the world to fall precipitously over the summer months. To compound this situation the engineered slowing in China's economic activity began to show through in their growth numbers and raised concerns over a hard landing in what is now the world's second largest economy.
“Along with these declines in equity prices and investor confidence came a substantial reduction in LOM's broking volumes.
“It is a reality for the LOM group that our brokerage revenues (at 40 per cent of our total revenues) are extremely sensitive to the state of the global equity markets.
“For revenues to grow we generally require an environment of low volatility with generally rising equity prices. Unfortunately we have for the last four years been experiencing the exact opposite of such a scenario.
“The management has made every effort to grow our asset management business which is less directly sensitive to global equity markets. Though this effort has been successful with revenues growing 17 per cent last year, it is a long slow process and cannot in the short term make up for the revenue declines in the brokerage arm.
“Thus we have concentrated on reducing costs as much as possible while still attempting attract new business and to recruit new brokers.
“LOM has posted a significant loss in 2011 as we have decided to write down or write off several of our investments.
“We have taken a charge of $907,948 on our holding of the Bermuda Stock Exchange as a result of the pricing agreed between the Exchange and the TSX group in the BSX's recent placement with their strategic investor.
“Additionally we took a charge of $750,558 to reflect the write off of CAMRA (a portfolio management system that failed to work and which we purchased to replace our current portfolio management system).
“Against these charges we did have a significant write back of $447,231, relating to Pembrook Resources, an investment which we were required by our auditors to write down last year but this year was required to write up.
“Overall for 2011 LOM (Holdings) Limited posted a loss of $1,471,617.
“Assets under administration fell 22% to $681 million.”
Mr Lines said things do not look bright for the immediate future: “Going forward I cannot hold out much hope that the environment in the market is going to improve in the next year. Many of the underlying problems as regards the European debt situation and the managed Chinese slowdown remain in place and will continue to sap investor confidence in the global equity markets.
“Pressure will continue on our broking revenues and our ability to increase those revenues will be limited to the speed with which we can recruit and train new brokers.
“We plan to continue to grow the asset management business by increasing the size of our current funds and bringing new fund offerings to the market.
“I am pleased to say that our most recent fund launch, the LOM Stable Income Fund was our best fund launch to date and after six months has assets over $21 million.
“We constantly review our cost structure and will continue to do so. Staff costs remain the largest expense we have at 32 per cent of total expenses.
“Through the process of attrition we have managed to reduce our staff numbers by four individuals over the last five months and now stand at 25 full time staff.
“Our challenge remains to recruit and train new brokers and to attract additional customers and assets to the group while constantly driving down costs.”