LOM Financial Limited announces financial results

HAMILTON, Bermuda – 22 April 2015 - LOM Financial Limited ("the Company"; Ticker: LOM.BH) today announced the financial results to fiscal year end 31 December 2014. In a letter to shareholders, the Company stated:

To our Shareholders:

During 2014 LOM continued to see a gradual improvement in customer activity. For the full year we managed a profit of $306,891 or $0.05 per share, a rise of 70% over the profit of $180,284 witnessed last year. I do not feel that this result is by any measure an adequate return on the capital employed in the business and therefore we will continue to focus on maintaining strict cost controls whilst growing our asset base and revenues.

The growth of our discretionary asset management division remains a priority. I am pleased to report that the performance of all of our mutual funds have remained the "Best of Breed". Last year our US Fixed Income Fund and our Stable Income Fund were rated with the highest ranking of 5 stars by Morningstar, the premier mutual fund rating agency, while our Equity Fund achieved a 4 star ranking. At the beginning of this year we successfully launched a new UK sterling fixed income fund to meet new interest from our clients. All of our flagship mutual funds significantly exceeded their benchmarks and peer group averages last year and their returns were in the top quartile of their peer groups. In fact over the last five years our LOM Global Equity Fund has returned 42.81% net while the Bloomberg Global Equity Offshore Universe of our peer group competitors has returned 19.47%. Likewise our LOM Balanced Fund has returned 19.68% versus 1.57% for our peer group competitors.

Our brokerage operations again received the "Best of Bermuda" award for best investment advice in our LOM Stockbrokers Ltd operation in Bermuda. We are continuing to work to deliver the best possible advice and service to our clients along with constantly enhancing the technology of our online trading system that allows our customers to trade real time in every major market in the world whenever that market is open. An area that we plan to expand is the ability for our customers to have specific foreign exchange trading accounts in order to perform foreign exchange transactions simply and at better rates than currently exist locally.

In our LOM Corporate Finance Ltd. subsidiary, an area of planned expansion is our corporate credit operations. We already have successfully provided working capital to Bermuda business and believe there is significant additional demand from that sector.

Of some encouragement in the current year is the fact that the group's assets under administration have risen from $615 million at the end of 2014 to $678 million at the end of the 1st quarter 2015.

However despite this good news the reality for the organization is that the brokerage side of the business remains quite fragile and continually under pressure from falling commissions and increased regulation. This industry wide reality, combined with the difficulty in recruiting successful financial advisors with books of business to our jurisdictions, means that the instability in our brokerage revenue lines could potentially see the organization slipping back into operational losses. The challenge for management remains to grow the other facets of the business enough to counter this brokerage revenue volatility.

Over the summer of 2014 our Bristol, UK office became fully operational, and we have recently hired specialist IT staff in the search engine optimization (SEO) area to review and update our online presence. We have high hopes that this area will assist us in generating new international customer activity in our brokerage operations. LOM has several other important IT projects that need completion by our Bristol facility through the next several quarters, which will push back our expected cost savings from the move into 2016.

Global stock markets continued to benefit from the combination of stronger economic activity in the US and extremely accommodative monetary policy worldwide. As we predicted in our letter last year, the QE program in the US was wound down by the Federal Reserve by the end of the year and the debate has shifted to interest rate increases. As additionally pointed out  last year the Fed has proved to be very careful and slow to raise interest rates. With Europe moving to their own QE program at the end of last year and the effects of the rapid rise in the US dollar yet to be fully assessed, we believe the Fed will continue to be very cautious with interest rate increases. Nevertheless we expect there to be a small start to normalizing interest rates in the US by the end of this summer.

In 2014 the US market as measured by the S&P 500 advanced 11.3%, the UK as measured by the FTSE 100 declined 2.7%, the Eurozone as measured by the EURO STOX 50 advanced 1.1%, while Japan rose 7.1%. The Hang Seng index advanced only 1.3%, while the Chinese market as measured by the Shanghai Composite rose a strong 52.9% over the year as monetary stimulus in the mainland, and a weak property market witnessed significant investor flows into domestic stocks.

Our outlook for global equity markets has become more cautious. We are concerned that market valuations are not cheap, investor confidence is high and that there have not been any significant corrections in the market for several years. Over the coming years we believe that stock market returns are going to become more volatile as they face the normalization of interest rates.

As regards LOM, in 2014 we witnessed some revenue growth in our brokerage operations and essentially a flat performance from asset management revenues. With the sharp decline in our foreign exchange revenues we thus managed only a small increase in overall revenues.

Revenues had the following year-on-year changes:

• Management and advisory fee revenues were essentially unchanged at $2.513 million (34% of revenues).
• Broking fees rose 12.3% to $2.635 million (36% of revenues).
• Fees from corporate finance work rose 14% to $134,539 (1.8% of revenues).
• Foreign Exchange revenues fell 49% to $214,620 (2.9% of revenues).
• Net interest earnings rose 48% to $716,220 (10% of revenues).
• Gain on securities held in inventory was $168,366 (2.3% of revenues)
• Total revenues rose 1.3% to $7,385,149.

Costs for the group had the following year-on-year changes:

• Operating costs, ex commission payments, were reduced 1%
• Employee expenses rose 2.3%.
• Total operating expenses were essentially unchanged.

On other financial measures:

• LOM’s assets under administration were $615 million as of 31st December 2014 as compared to $587 million in assets at the end of 2013.
• LOM remains in a strong financial position with net equity of $16.42 million and no debt.
• LOM increased its cash and equivalents to $3.72 million, representing 22.7% of shareholder equity
• LOM's book value as at 31st December 2014 was $2.71 per share. 

As business activity remains subdued the Board of Directors of LOM have decided not to pay a dividend.

Our current share price on the Bermuda Stock Exchange is $2.25 which means that LOM is trading at 83% of its book value as at 31st December 2014.

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 2014, the Company purchased for cancellation 42,500 shares.

Finally I would like to pay tribute to our Chairman emeritus, Donald P. Lines, who passed away at the end of 2014. My father served as Chairman of the group for twenty two years and I would like to express my thanks and appreciation for all of the wise leadership he gave during his years of service.

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 (www.lom.com) is a publicly-held, international financial services company, providing a complete range of investment services and products, with subsidiaries in Bermuda, Bahamas and the UK.  In business for over 22 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 Stockbrokers Ltd, LOM Stockbrokers International Ltd, LOM Asset Management Limited, and Global Custody & Clearing Limited.