Latest Results
Interim Results
Mattioli Woods plc (AIM: MTW.L), the specialist pensions consultancy, today reports its Interim Results for the six months ended 30 November 2009.
Highlights
- Adjusted EPS12 up 3.2% to 9.04p (1H09: 8.76p)
- Profit before tax and amortisation1 up 1.4% to £2.16m (1H09: £2.13m)
- Interim dividend up 26.1% to 1.45p (1H09: 1.15p)
- EBITDA margin improved to 34.4% (1H09: 31.8%)
- Revenue down 3.8% to £6.59m (1H09: £6.85m)
- Net cash at period end £4.66m (1H09: £1.50m)
- Core funds under trusteeship up 5.7% to £1.48bn (1H09: £1.40bn)
- Core scheme numbers up 2.7% to 2,584 (1H09: 2,517)
- Appointed agent to The Freedom SIPP Limited
Commenting on the Final Results, Bob Woods, Executive Chairman, said:
"I am pleased to report another solid set of results for the six months ended 30 November 2009. Our trading results continue to demonstrate the Group's ability to withstand the challenging investment conditions left in the wake of the credit crisis.
"Clients quite rightly remain cautious of the prevailing economic and investment conditions, which has tended to delay the timing of their investment decisions and led to lower investment-related revenues in the first half. However, we have been encouraging clients to move away from overly defensive positions and commenced a comprehensive review of our clients' investment strategies in October.
"With clients moving away from defensive asset allocations, changes to the personal tax regime and a general election scheduled for the first half of the 2010 calendar year, conditions are favourable for an increase in investment activity and demand for advice in the second half of our financial year.
"We have shown in both good and bad economic conditions that we have a robust business model, which can deliver additional shareholder value through:
- organic growth from the development of existing and new client relationships;
- the development of new revenue streams from existing service lines; and
- the acquisition of similar or complementary businesses.
"I expect revenues to be weighted towards the second half and current trading remains in line with our expectations. We continue to invest for the future, particularly in recruitment and our 'small to big' change management initiative. We are establishing a platform from which to provide our personalised, advice-led services to a much larger client base. I remain confident we can capitalise on the acquisition opportunity and deliver profitable growth over the coming years."
1 Before amortisation of intangible assets other than computer software
2 Basic EPS up 3.6% to 8.33p (1H09:8.04p)
Chairman's statement
I am pleased to report another solid set of results for the six months ended 30 November 2009 ("1H10"), with profit before tax and amortisation3 up 1.4% to £2.16m (1H09: £2.13m). Our trading results for the first half of the financial year continue to demonstrate the Group's ability to withstand the challenging investment conditions left in the wake of the credit crisis.
With many clients suffering financially as a result of the recession, we have focused on proactively advising them through these difficult conditions, maintaining our record of strong client retention with an overall client attrition rate4 of 2.4% (1H09: 1.3%). We now advise 2,584 self-invested personal pension ("SIPP") and small self-administered pension scheme ("SSAS") clients (1H09: 2,517) throughout the UK. Core funds under trusteeship at the end of the period totalled £1.48bn (1H09: £1.40bn) including over £290m held in cash deposits.
Clients quite rightly remain cautious of the prevailing economic and investment conditions, which has tended to delay the timing of their investment decisions and led to lower investment-related revenues in the first half. However, we have been encouraging clients to move away from overly defensive positions and commenced a comprehensive review of our clients' investment strategies in October. I expect this to drive growth in investment-related revenues over the remainder of this financial year.
3 Before amortisation of intangible assets other than computer software
4 Core SSAS and SIPP schemes lost as a result of death, annuity purchase, external transfer out or cancellation as a percentage of average scheme numbers during the period
Market overview
The shift in responsibility for pension provision from the state and the employer to the individual is underlined by the continuing demise of defined benefit schemes. I have previously highlighted my expectation that this will leave millions of employees needing professional advice and lead to more people managing their retirement savings through SIPPs and SSASs, due to the control, flexibility and cost-effectiveness these products offer.
Conversely, the SIPP sector is still responding to the compliance and advisory challenges it faces. SIPPs are just one part of the retirement wealth management arena. Rather than seeking the ability to make personal investment decisions, I believe the majority of SIPP clients want the more powerful chemistry of good advice coupled with the control and flexibility our arrangements provide. The provision of personalised administration further differentiates us from our competitors.
I was delighted to announce the appointment of Mattioli Woods to complete the winding up of The Freedom SIPP, as agent of The Freedom SIPP Limited (in liquidation). We have worked closely with the Financial Services Authority ("the FSA") and the liquidators, PricewaterhouseCoopers, to develop solutions for the troubled operation. Until our appointment, clients of the Freedom SIPP faced great uncertainty and the potential threat of HM Revenue & Customs deregistering the scheme, resulting in the imposition of highly punitive tax charges. There are estimated to be around 180 members remaining within The Freedom SIPP. We look forward to working closely with these members to provide robust administration around the winding-up of the scheme, assisting them to transfer their existing arrangements to Mattioli Woods or an alternative provider.
As we move away from the worst of the credit crisis, we are proactively seeking new acquisition opportunities. The increasing regulatory burden on smaller operators is expected to drive consolidation within the sector and our strong balance sheet will enable us to take advantage of this.
Trading results
Our focus is on maintaining strong client relationships, delivering impartial and proactive advice. We achieved revenues of £6.59m in the first half (1H09: £6.85m). Typically, second half revenues have been marginally higher than in the first half. However, the increased demand for advice following a significant downturn in financial markets resulted in 1H09 revenues being higher than the £6.43m achieved in 2H09.
The Bank of England base rate remains at a historic low, reducing banking-related revenues and making the structuring of capital-guaranteed products more difficult. Banking revenues and financial income fell 47.6% to £0.43m (1H09: £0.82m). Revenues from structured product sales fell 39.5% to £0.26m (1H09: £0.43m) with clients' subscribing a total of £8.51m (1H09: £14.39m) over five (1H09: six) capital protected bond issues. Clients have invested a total of £76.9m in the capital protected bond issues we have sponsored to date, with expected maturities of some £16.3m prior to the end of the current financial year.
Property syndicate revenues fell 20.9% to £0.53m (1H09: £0.67m) with falling commercial property valuations impacting annual management charges and a reduced £3.68m of new investment (1H09: £6.51m) being completed on our clients' behalf. Syndicated properties have continued to deliver a high income return. We believe that, for the most part, property values are near the bottom of the current cycle and there is a real opportunity to take advantage of current market pricing.
We will continue to look for opportunities in the commercial property market, as we believe that over the long term, syndicated property investment will continue to provide clients with important diversification and good returns. The sector has seen increasing activity since 2H09, with two new syndicates completed during the period (1H09: two, 2H09: nil), and we expect to complete the purchase of another new property on our clients' behalf at the end of this month.
In August 2009 we were delighted to appoint Richard Shepherd-Cross to manage our property syndicate team. Richard is a skilled property investment professional with 14 years experience and a broad-based knowledge of real estate across sectors and markets. He was previously head of the Jones Lang Lasalle portfolio investment team. His experience strengthens the team and highlights our commitment to this important element of our business, in what are exciting times for the commercial property market.
Falls in banking, structured product and property syndicate revenues were partially offset by organic growth in core SSAS and SIPP revenues, up 7.1% to £5.14m (1H09: £4.80m), and an increase in group scheme revenues, up 31.6% to £0.25m (1H09: £0.19m). A key element of this growth was the further development of revenues generated on schemes gained via past acquisitions, which increased 15.0% to £1.38m (1H09: £1.20m).
The turmoil in financial markets seen during the "credit crunch" has led to prospective clients being more cautious, with the time taken to convert new enquiries lengthening. Organic growth of 89 new SSAS and SIPP schemes (1H09: 110) was constrained by the consultancy team's focus on advising existing clients, which included commencing the migration of those clients the JB Group provided with third party administration services to our time-costed model, or if more appropriate, transferring their arrangements to a low-cost provider. It is particularly pleasing that our retention of clients gained via acquisitions remains higher than expected, with a number of third-party administration cases having become full advisory clients. We plan to complete this migration over the remainder of the current financial year.
We have restructured the consultancy team to create greater capacity to target new business and accelerated our marketing initiatives. During the first half we presented seven seminars to professional intermediaries throughout the UK, which highlighted recent changes in tax legislation and are expected to stimulate a higher level of referrals. We also held five seminars for prospective clients, outlining strategies for maximising value when considering sale or succession in the context of their own businesses. This programme of events extends into the second half, with nine intermediary seminars and 19 prospective client events planned. The second half generally sees an increase in new business, driven by many clients' company year-ends being in either December or March, and the fiscal year ending in April.
We also conducted a marketing event in June 2009 designed to test the opportunity to develop our group scheme initiative, aimed at assisting companies with defined benefit schemes in deficit. We received eight new group scheme instructions during the period (1H09: five), including two engagements to provide consultancy on the wind-up of final salary schemes as a result of the seminar.
Our profit margins have improved as a result of operational efficiencies and lower employee benefits costs linked to revenue, with EBITDA margin increasing to 34.4% (1H09: 31.8%). EBITDA increased by 4.1% to £2.27m (1H09: £2.18m), with profit before tax up 1.5% to £2.04m (1H09: £2.01m). Adjusted earnings per share (adding back amortisation on intangible assets) increased by 3.2% to 9.04 pence (1H09: 8.76 pence).
Cash generated from operations increased to £1.32m or 58.2% of EBITDA (1H09: £1.16m or 53.2%). Cash at 30 November 2009 was £4.66m (1H09: £1.50m). Our strong balance sheet is enhanced by the availability of £3.00m of undrawn overdraft facilities.
With clients moving away from defensive asset allocations, changes to the personal tax regime and a general election scheduled for the first half of the 2010 calendar year, conditions are favourable for an increase in investment activity and demand for advice in the second half of our financial year.
Dividend
The board is pleased to recommend the payment of an interim dividend for the half year ended 30 November 2009 of 1.45 pence (1H09: 1.15 pence) per ordinary share. I highlighted In September last year that the earnings trend and cash generative nature of the Group meant it was appropriate to significantly increase our dividend payout ratio. I reiterate our commitment to grow the dividend sensibly, whilst maintaining an appropriate level of dividend cover. The interim dividend, which typically represent one-third of the full-year dividend, will be paid on 5 March 2010 to shareholders on the register at the close of business on 5 February 2010.
Staff
We have restructured how we deliver our administrative services through our 'small to big' initiative. This initiative will create additional administrative and consultancy capacity, enhance the control environment and realise operational efficiencies over the coming years. 'Small to big' is a key element in ensuring we can manage planned growth in future business volumes and will enable us to deal more easily with the regulatory changes expected to impact our industry.
Our people continue to demonstrate an enormous amount of enthusiasm and commitment in responding to the challenges created by the recent turmoil in financial markets. I thank all our employees for their dedication and hard work over the last six months, as it is their effort that differentiates Mattioli Woods from its competitors.
I have highlighted previously the strong team spirit and commitment we enjoy from all our staff. We built upon this culture through the introduction of the Mattioli Woods plc Share Incentive Plan in June 2008. There has been an enthusiastic response, with 47.8% of eligible staff electing to invest. We remain committed to developing wider employee equity participation throughout the organisation. As part of the review of executive remuneration being undertaken in conjunction with external remuneration consultants, I intend to announce the principal terms of a Long Term Incentive Plan designed to attract and retain appropriately qualified staff later this year.
Shareholders
In response to market demand, Ian Mattioli and I each placed a further 500,000 shares during the
period, expanding the Company's institutional shareholder base and increasing liquidity in Mattioli Woods' shares. We are also developing broader private client interest. It is your board's intention to continue to communicate fully with all our shareholders and the wider market, and in so doing build further awareness of Mattioli Woods over the coming years.
Regulation
The FSA published the findings of its thematic review of small SIPP operators in September 2009. The conclusions of the FSA's thematic review highlight that SIPPs are not packaged products but a bespoke service designed to facilitate clients' retirement objectives. In line with this, I believe operators need to engage with their clients, rather than offer administration-only services.
In November 2009 the FSA set out the changes it will make to the prudential rules for Personal Investment Firms. These changes will increase our expenditure based capital requirement from 6 to 13 weeks over the next three years. Our balance sheet strength gives us significant headroom above the increased requirement. However, the burden on many small and medium sized IFA firms may force them to exit the market, creating new opportunities for Mattioli Woods.
The FSA has also announced it is going to consider the capital resources requirements for pension administrators separately and expects to consult on these issues in 2010. This may lead to a further increase in our capital resource requirements, although I expect any increase to be accommodated within our current financing arrangements.
Acquisitions
The economic turmoil of the last two years has affected our ability to complete acquisitions, with uncertainty over the valuation and financial performance of target companies leading to a gap between acquirer and vendor price expectations. However, I believe the opportunity for us to make acquisitions is stronger than ever and we are aggressively seeking appropriate opportunities.
Outlook
We have shown in both good and bad economic conditions that we have a robust business model, which can deliver additional shareholder value through:
- organic growth from the development of existing and new client relationships;
- the development of new revenue streams from existing services line; and
- the acquisition of similar or complementary businesses.
I expect revenues to be weighted towards the second half of this financial year and current trading remains in line with our expectations. We continue to invest for the future, particularly in recruitment and our 'small to big' change management initiative. We are establishing a platform from which to provide our personalised, advice-led services to a much larger client base. I remain confident we can capitalise on the acquisition opportunity and deliver profitable growth over the coming years.
Bob Woods
Chairman
25 January 2010
Independent review report to Mattioli Woods plc
Introduction
We have been engaged by the Group to review the condensed set of financial statements in the interim financial report for the six months ended 30 November 2009 which comprises the income statement, balance sheet, statement of recognised income and expense, consolidated statement of cash flows and associated notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report, including the conclusion, has been prepared for and only for the Group for the purpose of meeting the requirements of the AIM Rules for Companies and for no other purpose. We do not, therefore, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Directors' Responsibilities
The interim financial report, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing and presenting the interim financial report in accordance with the AIM Rules for Companies.
As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") pronouncements as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Group a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 November 2009 is not prepared, in all material respects, in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, and the AIM Rules for Companies.
Baker Tilly UK Audit LLP
Chartered Accountants
2 Whitehall Quay
Leeds
LS1 4HG
25 January 2010
Interim condensed consolidated income statement
For the six months ended 30 November 2009
| Unaudited Six months ended 30 Nov 2009 |
Unaudited Six months ended 30 Nov 2008 |
Audited Year ended 31 May 2009 |
||
| Notes | £ | £ | £ | |
| Revenue | 4 | 6,591,677 | 6,849,191 | 13,283,204 |
| Employee benefits expense | (3,400,894) | (3,514,581) | (6,813,449) | |
| Other administrative expenses | (808,252) | (1,052,583) | (1,941,255) | |
| Share based payments | (107,962) | (101,399) | (199,905) | |
| Amortisation | (164,446) | (149,617) | (299,099) | |
| Depreciation | (80,059) | (93,149) | (183,178) | |
| Loss on disposal of property, plant and equipment |
(8,228) | (3,085) | (35,360) | |
| Operating profit before financing | 4 | 2,021,836 | 1,934,777 | 3,810,958 |
| Financial income | 19,663 | 75,994 | 91,599 | |
| Financial cost | (200) | (3,839) | (5,889) | |
| Net financing income | 19,463 | 72,155 | 85,710 | |
| Profit before tax | 2,041,299 | 2,006,932 | 3,896,668 | |
| Income tax expense | 7 | (599,154) | (617,655) | (1,174,410) |
| Profit for the period | 1,442,145 | 1,389,277 | 2,722,258 | |
| Attributable to: | ||||
| Equity holders of the parent | 1,442,145 | 1,389,277 | 2,722,258 | |
| Earnings per ordinary share: | ||||
| Basic (pence) | 5 | 8.33p | 8.04p | 15.75p |
| Diluted (pence) | 5 | 8.33p | 8.04p | 15.75p |
| Dividend per share (pence) | 5 | 1.45p | 1.15p | 3.90p |
The operating profit for each period arises from the Group's continuing operations.
Interim condensed consolidated statement of
recognised income and expense
For the six months ended 30 November 2009
| Unaudited Six months ended 30 Nov 2009 |
Unaudited Six months ended 30 Nov 2008 |
Audited Year ended 31 May 2009 |
||
| Notes | £ | £ | £ | |
| Deferred tax on share-based payments | 7 | 34,830 | (66,588) | (31,968) |
| Income and expense recognised directly in equity | 34,830 | (66,588) | (31,968) | |
| Profit for the period | 1,442,145 | 1,389,277 | 2,722,258 | |
| Total recognised income and expense for the period | 1,476,975 | 1,322,689 | 2,690,290 |
Interim condensed consolidated balance sheet
As at 30 November 2009
| Unaudited 30 Nov 2009 |
Unaudited 30 Nov 2008 |
Audited 31 May 2009 |
||
| Notes | £ | £ | £ | |
| Assets | ||||
| Property, plant and equipment | 655,605 | 716,398 | 638,634 | |
| Intangible assets | 9,956,089 | 10,040,010 | 10,056,466 | |
| Deferred tax asset | 7 | 174,881 | 78,841 | 127,805 |
| Investments | 8 | 15 | 15 | 15 |
| Total non-current assets | 10,786,590 | 10,835,264 | 10,822,920 | |
| Trade and other receivables | 5,185,497 | 5,360,817 | 5,021,080 | |
| Financial assets | 366,259 | 1,629,060 | 120,392 | |
| Cash and short-term deposits | 4,656,154 | 1,504,283 | 4,808,179 | |
| Total current assets | 10,207,910 | 8,494,160 | 9,949,651 | |
| Total assets | 20,994,500 | 19,329,424 | 20,772,571 | |
| Equity | ||||
| Issued capital | 173,213 | 172,499 | 172,855 | |
| Share premium | 10 | 5,849,929 | 5,687,721 | 5,769,149 |
| Other reserves | 10 | 2,559,813 | 2,363,688 | 2,456,341 |
| Retained earnings | 10 | 9,026,255 | 6,925,692 | 8,060,163 |
| Total equity attributable to equity holders of the parent |
17,609,210 | 15,149,600 | 16,458,508 | |
| Non-current liabilities | ||||
| Trade and other payables | 100,000 | 340,000 | 100,000 | |
| Interest-bearing loans and borrowings | - | 5,044 | - | |
| Deferred tax liability | 7 | 256,868 | 268,242 | 262,555 |
| Provisions | 218,018 | 299,727 | 242,599 | |
| Total non-current liabilities | 574,886 | 913,013 | 605,154 | |
| Current liabilities | ||||
| Trade and other payables |
1,930,317 | 2,305,826 | 2,810,554 | |
| Interest-bearing loans and borrowings | - | 13,597 | - | |
| Income tax payable | 7 | 617,088 | 602,443 | 559,229 |
| Provisions | 262,999 | 344,945 | 339,126 | |
| Total current liabilities | 2,810,404 | 3,266,811 | 3,708,909 | |
| Total liabilities | 3,385,290 | 4,179,824 | 4,314,063 | |
| Total equities and liabilities | 20,994,500 | 19,329,424 | 20,772,571 |
Interim condensed consolidated statement of cash flows
For the six months ended 30 November 2009
| Unaudited Six months ended 30 Nov 2009 |
Unaudited Six months ended 30 Nov 2008 |
Audited Year ended 31 May 2009 |
||
| Notes | £ | £ | £ | |
| Operating activities | ||||
| Profit for the period |
1,442,145 | 1,389,277 | 2,722,258 | |
| Adjustments for: |
||||
| Depreciation |
80,059 | 93,149 | 183,178 | |
| Amortisation |
164,446 | 149,617 | 299,099 | |
| Investment income |
(19,663) | (75,994) | (91,599) | |
| Interest expense |
200 | 3,839 | 5,889 | |
| Loss on disposal of property, plant and equipment |
8,228 | 3,085 | 35,360 | |
| Equity-settled share-based payments |
107,962 | 101,399 | 199,905 | |
| Income tax expense | 599,154 | 617,655 | 1,174,410 | |
| Cash flows from operating activities before changes in working capital and provisions | 2,382,531 | 2,282,027 | 4,528,500 | |
| Increase in trade and other receivables | (164,417) | (670,879) | (331,142) | |
| (Decrease)/increase in trade and other payables | (880,801) | (501,549) | 119,892 | |
| (Decrease)/increase in provisions | (17,208) | 53,867 | (9,261) | |
| Cash generated from operations | 1,320,105 | 1,163,466 | 4,307,989 | |
| Interest paid | (200) | (3,840) | (5,889) | |
| Income taxes paid | (559,229) | (513,932) | (1,133,932) | |
| Net cash flows from operating activities | 760,676 | 645,694 | 3,168,168 | |
| Investing activities |
||||
| Proceeds from sale of property, plant and equipment | 17,000 | 546 | 2,545 | |
| Purchase of property, plant and equipment | (122,258) | (80,077) | (126,616) | |
| Purchase of software | (64,070) | (140,445) | (345,133) | |
| Acquisition of subsidiaries | (80,000) | (125,500) | (206,000) | |
| Acquisition of businesses | (3,499) | - | (234,048) | |
| New loans advanced to property syndicates | (614,755) | (1,629,060) | (1,629,060) | |
| Loan repayments from property syndicates | 368,888 | 529,242 | 2,037,910 | |
| Interest received | 19,663 | 75,994 | 91,599 | |
| Net cash from investing activities | (479,031) | (1,369,300) | (408,803) | |
| Financing activities | ||||
| Proceeds from the issue of share capital | 41,818 | 43,238 | 84,549 | |
| Repayment of borrowings | - | (9,600) | (28,242) | |
| Proceeds/(repayment) of Directors' loans | 565 | 1,145 | (2,089) | |
| Dividends paid | (476,053) | (344,788) | (543,298) | |
| Net cash from financing activities | (433,670) | (310,005) | (489,080) | |
| (Decrease)/increase in cash and cash equivalents | (152,025) | (1,033,611) | 2,270,285 | |
| Cash and cash equivalents at start period | 4,808,179 | 2,537,894 | 2,537,894 | |
| Cash and cash equivalents at end period | 4,656,154 | 1,504,283 | 4,808,179 |
Notes
Notes to the financial statements are available in the PDF download.
Page last up-dated: 26 January 2010