Equity release specialist Sovereign Reversions is expanding into lifetime mortgage advice after making an annual £7.2 million pre-tax.

AIM-quoted Sovereign, whose prime business has been buying homes cheaply from old people who stay on in them and selling them at market prices when they die or otherwise have to leave, increased earnings by an impressive 248 per cent to 63.6p a share in the year to April. Net assets rose 8.8 per cent to 342.3p a share and embedded value gained 7.3 per cent to 484.5p.

The company, which raised £3.5 million last August at 352.5p, acquired fellow equity release concern Home & Capital and, says chief executive Graeme Marshall, is now in a position to expand its activities both in home reversions and as an adviser on ‘a full range of equity release products’. He says Sovereign now either owns or administers £280 million of assets and can charge ‘back-end fees of sometimes five per cent of the proceeds’.

Marshall complains that the reversion market has been ‘flat for three years’, but suggests elderly clients will be happier initially taking out lifetime mortgages and then perhaps switching to equity release later on. Lifetime mortgages have always been officially regulated, which makes independent advisers happier to promote them, but regulation has only recently come to equity release.

Sovereign shares have lately been disappointing, having risen from 255p in 2004 to 420p last January before sliding back to 350p today, valuing the company at £49.5 million. If the new directions being explored by Marshall prove lucrative, they might move forward again.