Independent financial advisers have endured terrible trading in recent years. Shares in the listed operators have been battered by widespread investor distrust and increased regulatory costs, both brought about by mis-selling scandals.

However, AIM-quoted Lighthouse recently reported a maiden interim pre-tax profit of £71,000 on sales ahead 16.6% to £15.1m. Chief executive Malcolm Streatfield believes the turbulence of the past few years is now behind Lighthouse and market dynamics will ensure increasing revenues and a profitable future. ‘For the first time for some years there is no major reform to the industry on the horizon,’ he points out. ‘At the same time, the climate for long-term saving is more settled and individuals are starting to re-assess their retirement plans,’ he adds.

Lighthouse has been profitable on a trading basis since July 2004. Much of the improvement has come from increasing the average sales per adviser from £50,000 to £59,000. The company has also taken advantage of competitors’ woes by acquiring assets (but not liabilities stemming from mis-selling cases) at knock-down prices. This left the business with £2.2m net cash at the end of June.

At the current share price, the company is worth just £6.2m. That is too cheap with profits before tax and goodwill forecast to hit £623,000 next year. That would put the shares on a moderate p/e of 9.9. With plenty of opportunity to bolster the group’s profitable wealth management arm, now is a superb opportunity to back the cleanest play in this out-of-favour sector.