Latest Results
Interim Results for the six months ended 30 November 2007
Mattioli Woods plc (AIM: MTW.L), the specialist pensions consultancy, reports its Interim Results for the six months ended 30 November 2007.
Financial highlights
- Turnover up 22.1% to £5.30m (1H07: £4.34m)
- PBT up 15.8% to £1.83m (1H07: £1.58m)
- EPS up 15.9% to 7.3p (1H07: 6.3p)
- Interim dividend up 17.6% to 1.00p (1H07: 0.85p)
- Core funds under trusteeship £1.1bn (1H07: £0.8bn)
- Cash at period end £2.23m (1H07: £1.59m)
Operational highlights
- Number of core schemes increased to 2,032 (1H07: 1,492)
- Average scheme value of £0.53m (1H07: £0.51m)
- Organic growth of 8.6% in SIPP numbers (1H07: 6.4%)
- Investing in recruitment and technology to increase capacity
- PCL acquired in July 2007 and fully integrated
- Michael Kershaw appointed as second independent director
In addition, the Group is pleased to announce the acquisition of the trade and assets of John Bradley Financial Services ("JBFS") and North Star SIPP LLP ("North Star") (together "the JB Group") on 18 February 2008 for a cash consideration of up to £2.59 million. As stated in an announcement dated 19 February 2008, the acquisition of the JB Group enhances Mattioli Woods' consultancy offering and consolidates the Group's position in what remains a highly fragmented market.
Since its admission to AIM, the Group has been committed to expanding the skills and range of experience represented on our Board of Directors. We are now pleased to announce the appointment of Michael Kershaw as a second independent non-executive director, following a highly successful career in investment banking with Dresdner Kleinwort Wasserstein and UBS.
Commenting on the Interim Results, Bob Woods, Executive Chairman of Mattioli Woods, said:
"We have continued to deliver strong growth over the six months ended 30 November 2007, with turnover up 22.1% and profit before tax up 15.8% compared to the same period last year. Organic growth in the number of self invested personal pension ("SIPP") schemes we act for has been a healthy 8.6% (1H07: 6.4%), illustrating that the appeal of SIPPs is spreading to a much wider audience. We believe this also reflects the growing market presence of Mattioli Woods and a greater awareness of the bespoke services we provide.
"The recent difficulties in both credit and equity markets have made life more challenging for investment advisors generally. However, our experience is that demand for bespoke, high quality pension advice is increased during periods of uncertainty. Our first half results reflect this and the robust nature of our fee-based business model, which has multiple revenue streams and a high proportion of recurring income.
"Trading in the current period continues in line with expectations and I believe we are very well-placed to take advantage of new opportunities in our key markets as they continue to develop."
Chairman's statement
I am pleased to report that we have continued to deliver strong growth over the six months ended 30 November 2007, with turnover up 22.1% and profit before tax up 15.8% compared to the same period last year. Organic growth in the number of SIPP schemes we act for has been a healthy 8.6% (1H07: 6.4%), illustrating that the appeal of SIPPs is spreading to a much wider audience. We believe this also reflects the growing market presence of Mattioli Woods and a greater awareness of the bespoke services we provide.
We now act for over 2,000 SIPP and small self-administered pension scheme ("SSAS") clients (1H07: 1,492) throughout the UK, with funds under trusteeship at 30 November 2007 totalling £1.1bn (1H07: £760m). We believe that our average scheme value of over £0.5m is well in excess of the industry average.
The acquisition of Pension Consulting Limited ("PCL") was completed in July 2007 and I am very satisfied with the successful integration of PCL's business into the Group. We have seen strong demand for our pension consultancy and investment advice from the PCL client base, with 100% retention of the acquired portfolio achieved to date.
The acquisition of the JB Group consolidates our market position by adding a further 235 SSASs and 55 SIPPs to our core portfolio of clients. Like PCL, the JB Group is an excellent cultural fit with Mattioli Woods and we are also able to offer its clients a range of additional services, including our syndicated property initiative and guaranteed investment products.
Market overview
The recent difficulties in both credit and equity markets have made life more challenging for investment advisors generally. However, our experience is that demand for bespoke, high quality pension advice is increased during periods of uncertainty. We also anticipate the current volatility in global markets will lead to increased demand for our investment advice and capital-guaranteed structured products.
Despite general market conditions, the demand for SIPPs continues to grow, supporting our previously stated view that the appeal of SIPPs is extending due to the control, flexibility and cost-effectiveness the product offers.
However, not all SIPPs are the same. A Mattioli Woods SIPP is extremely flexible, allowing investment in all areas permitted by HM Revenue & Customs. This includes commercial property and structured products, as well as equities. As trustees of their SIPP, our clients have control of their investments and access to proactive and personalised investment advice. Our fee-based services are cost-effective and are supported by our robust administration systems.
My prediction that the vast Defined Benefit market will wither over the next few years has been evidenced by us receiving five new instructions to provide consultancy on the wind-up of final-salary schemes during the period. I anticipate the demise of the Defined Benefit market will gather momentum, bringing enormous change within the pensions arena and further consultancy opportunities for pensions advisers, including Mattioli Woods.
Trading results
The first half's results reflect the robust nature of our fee-based business model, which has multiple revenue streams and a high proportion of recurring income. In the six months ended 30 November 2007 we achieved increased turnover of £5.30m (1H07: £4.34m).
Profit before tax was up 15.8% to £1.83m (1H07: £1.58m), with EBITDA of £1.86m (1H07: £1.69m). A reported operating margin of 32.1% was achieved (1H07: 35.1%) and earnings per share increased by 15.9% to 7.3 pence (2006: 6.3 pence).
The financial result for the equivalent period last year was boosted by £0.1m of non‑recurring revenue associated with the introduction of Pension Simplification. In addition, the accrual for consultants' bonuses at 30 November 2006 was £0.1m lower than that eventually paid following excellent results for the full year, meaning normalised operating margin has improved to 32.1% (1H07: 30.9%).
Our pension investment strategy is based around flexible asset management. We aim to balance our clients' exposure to equity market risk by giving access to other asset classes and have seen strong growth in demand for both commercial property investments and structured products.
Our clients are able to take a long-term view on investment. Many regard the current weakness in the commercial property market as a buying opportunity. During the first half we facilitated the creation of five new property syndicates (1H07: four), purchasing prime commercial property with a total value of £15.9m (1H07: £9.6m) on our clients' behalf. In the same period we saw clients' cash balances rise to £132m (2H07: £110m).
Due to the greater number and higher value property syndicates established in the period, revenues from this area of our business increased to 18.3% (1H07: 10.3%) of total revenues. This included £0.65m (1H07: £0.26m) of one-off fees from the creation of new property syndicates and £0.32m (1H07: £0.19m) from a growing base of annual administration fees relating to existing syndicates.
The increase in property syndicate debtors at the period end to £0.6m (1H07: £0.1m) had the effect of reducing cash generated from operations to £0.9m or 47.7% of EBITDA (1H07: £1.8m or 108.9%). Net cash generated from operations was also impacted by a £0.5m increase in trade debtors and accrued income, together with a £0.2m increase in taxes paid during the period. Cash at the period end increased to £2.23m (1H07: £1.59m).
Dividends
The Board is pleased to recommend the payment of an interim dividend for the half year ended 30 November 2007 of 1.00 pence (2006: 0.85 pence) per ordinary share, and I reiterate our intention to grow dividend distributions sensibly going forward. The interim dividend will be paid on 28 March 2008 to shareholders on the Register at the close of business on 29 February 2008.
Capacity
Our people continue to demonstrate an enormous amount of enthusiasm and commitment in responding to the challenges faced by our fast-growing organisation. PCL's thirteen staff moved into our Leicester office immediately following the acquisition and it is pleasing they have integrated into Mattioli Woods so quickly.
Maintaining capacity remains crucial in an environment of growing demand, and our graduate recruitment programme remains on target. Seven new graduates joined the Group (2006: seven), increasing our total headcount at the end of the period to 123 (2006: 96). Our increased business profile following the admission to AIM has enhanced our ability to recruit graduates and experienced pension administration and support staff.
The development of a scalable technology platform also remains a key objective for the Group. We introduced a new time accounting and invoicing system during the period and are continuing to invest in the next phase of development of our bespoke pension administration system "MWeb".
Staff
Since its admission to AIM, the Group has been committed to expanding the skills and range of experience represented on our Board of Directors. We are now pleased to announce the appointment of Michael Kershaw as a second independent non-executive director. Michael joins us following a highly successful career in investment banking with Dresdner Kleinwort Wasserstein and UBS. I am confident his experience will enhance our ability to deliver future profitability and growth.
I have highlighted previously that Mattioli Woods enjoys a strong team spirit and commitment from all of its staff and it remains our aim to build on that culture by continuing to facilitate wider equity participation within the organisation. The introduction of the Mattioli Woods Share Incentive Plan in March 2008 will be an important step towards this objective.
Principally, the share incentive plan will enable our employees to buy shares in the Company at an effective discount to the Stock Exchange price by having an amount deducted from pre-tax salary each month.
Shareholders
Following the placing of a further 3,239,594 shares by Ian Mattioli and myself during the period we have expanded the excellent institutional shareholder base we have enjoyed since joining the AIM market. We are also pleased to be developing a wider private client shareholder base. 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
Currently, money built up from national insurance rebates when people contract out of the state second pension ("protected rights monies") can only be held in a restricted range of insured funds, bank deposits and mutual funds. In December 2007 the Government published plans to permit SIPPs to hold protected rights monies from October 2008. This is likely to be the catalyst for further growth in the SIPP market, with predictions that much of the £75bn to £100bn locked up in protected rights savings could move into SIPPs.
The Financial Services Authority ("FSA") published the discussion paper "A Review of Retail Distribution" in June 2007, seeking to improve the efficiency of the market for the distribution of retail investment products. I believe the increased regulatory and professional requirements proposed by the FSA's review may lead to further consolidation within our key markets.
The review also proposes wider adoption of a more transparent remuneration model (known as "Customer Agreed Remuneration") where the costs of intermediary services are separated from the costs of the product. Our fee-based revenue model means Mattioli Woods is well-placed to deal with any such regulatory change.
Outlook
The demand for bespoke pensions advice is amplified during periods of uncertainty. To capitalise on this and other opportunities, we are developing a number of sales initiatives including direct marketing to individual businesses, internal seminars for accountancy practices and the use of telemarketing to support our various marketing initiatives.
In anticipation of difficult investment markets our clients have been advised to take profits and build liquidity within their schemes. Client cash balances have continued to grow to over £145m today, with an additional £17m invested in treasury accounts. We expect this to lead to increased investment planning work when more stable markets return.
We are seeking to provide a broader range of retirement wealth management services to more of our clients, and hence I expect us to increase assets under advice through a combination of attracting new clients and advising on a greater proportion of our existing clients' wealth.
Trading in the current period continues to be in line with expectations and I believe we are very well-placed to take advantage of new opportunities in our key markets as they continue to develop.
Bob Woods
Chairman
19 February 2008
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 2007 which comprises the income statement, balance sheet, statement of recognised income and expense 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 2007 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
18 February 2008
Interim condensed consolidated income statement
| Unaudited Six months ended 30 Nov 2007 |
Unaudited Six months ended 30 Nov 2006 |
Audited Year ended 31 May 2007 |
||
| For the six months ended 30 November 2007 | Notes | £ | £ | £ |
| Revenue | 4 | 5,295,879 | 4,342,664 | 8,997,191 |
| Employee benefits expense | (2,666,122) | (1,878,673) | (4,219,130) | |
| Other administrative expenses | (762,612) | (770,282) | (1,605,889) | |
| Depreciation and amortisation | (163,731) | (166,047) | (213,359) | |
| Loss on disposal of property, plant and equipment | (5,392) | (3,876) | (7,407) | |
| Operating profit before financing | 4 | 1,698,022 | 1,523,786 | 2,951,406 |
| Financial income | 144,793 | 53,187 | 194,734 | |
| Financial expenses | (13,139) | (51) | (1,012) | |
| Net financing income/(costs) | 131,654 | 53,136 | 193,722 | |
| Profit before tax | 1,829,676 | 1,576,922 | 3,145,128 | |
| Income tax expense | 7 | (567,426) | (495,759) | (952,274) |
| Profit for the period | 1,262,250 | 1,081,163 | 2,192,854 | |
| Attributable to: | ||||
| Equity holders of the parent | 1,262,250 | 1,081,163 | 2,192,854 | |
| Earnings per ordinary share: | ||||
| Basic (pence) | 5 | 7.3 | 6.3 | 12.8 |
| Diluted (pence) | 5 | 7.3 | 6.3 | 12.8 |
| Dividend per share (pence) | 6 | 1.00 | 0.85 | 2.55 |
The operating profit for each period arises from the Group's continuing operations.
Interim condensed consolidated statement of recognised income and expense
| Unaudited Six months ended 30 Nov 2007 |
Unaudited Six months ended 30 Nov 2006 |
Audited Year ended 31 May 2007 |
||
| For six months ended 30 November 2007 | Notes | £ | £ | £ |
| Deferred tax on share-based payments | 7 | 31,862 | 18,211 | 102,031 |
| Income and expense recognised directly in equity | 31,862 | 18,211 | 102,031 | |
| Profit for the period | 1,262,250 | 1,081,163 | 2,192,854 | |
| Total recognised income and expense for the period | 1,294,112 | 1,099,374 | 2,294,885 |
Interim condensed consolidated balance sheet
| Unaudited 30 Nov 2007 |
Unaudited 30 Nov 2006 |
Audited 31 May 2007 |
||
| As at 30 November 2007 | Notes | £ | £ | £ |
| Assets | ||||
| Property, plant and equipment | 10 | 465,910 | 374,404 | 429,312 |
| Intangible assets | 7,695,576 | 5,744,065 | 5,804,209 | |
| Investments | 9 | 15 | - | - |
| Deferred income tax assets | 7 | 191,081 | 41,738 | 143,936 |
| Total non-current assets | 8,352,582 | 6,160,207 | 6,377,457 | |
| Trade and other receivables | 4,396,144 | 2,870,761 | 3,179,978 | |
| Financial assets | 964,378 | 1,817,442 | 1,954,315 | |
| Cash and cash equivalents | 12 | 2,357,758 | 1,593,425 | 2,799,569 |
| Total current assets | 7,718,280 | 6,281,628 | 7,933,862 | |
| Total assets | 16,070,862 | 12,441,835 | 14,311,319 | |
| Equity | ||||
| Issued capital | 172,159 | 172,159 | 172,159 | |
| Share premium | 13 | 5,601,458 | 5,601,458 | 5,601,458 |
| Other reserves | 13 | 2,286,660 | 2,086,545 | 2,202,469 |
| Retained earnings | 13 | 4,850,394 | 2,915,459 | 3,880,814 |
| Total equity attributable to equity holders of the parent | 12,910,671 | 10,775,621 | 11,856,900 | |
| Non-current liabilities | ||||
| Deferred income tax liabilities | 7 | 304,666 | - | - |
| Provisions and other liabilities | 316,167 | 130,607 | 127,446 | |
| 620,833 | 130,607 | 127,446 | ||
| Current liabilities | ||||
| Trade and other payables | 1,601,610 | 888,669 | 1,627,889 | |
| Current income tax liabilities | 7 | 558,546 | 515,841 | 477,234 |
| Bank overdraft | 12 | 115,565 | - | 72,818 |
| Provision and other liabilities | 263,637 | 131,097 | 149,032 | |
| 2,539,358 | 1,535,607 | 2,326,973 | ||
| Total liabilities | 3,160,191 | 1,666,214 | 2,454,419 | |
| Total equities and liabilities | 16,070,862 | 12,441,835 | 14,311,319 |
Interim condensed consolidated statement of cash flows
| Unaudited Six months ended 30 Nov 2007 |
Unaudited Six months ended 30 Nov 2006 |
Audited Year ended 31 May 2007 |
||
| For the six months ended 30 November 2007 | Notes | £ | £ | £ |
| Cash flows from operating activities | ||||
| Cash receipts from customers | 4,331,327 | 4,661,087 | 9,006,546 | |
| Cash paid to suppliers and employees | (3,473,143) | (2,869,943) | (5,290,352) | |
| Cash generated from operations | 858,184 | 1,791,144 | 3,716,194 | |
| Interest paid | (13,139) | (51) | (1,012) | |
| Income taxes paid | 7 | (594,727) | (360,607) | (874,107) |
| Net cash from operating activities | 250,318 | 1,430,486 | 2,841,075 | |
| Cash flows from investing activities | ||||
| Proceeds from sale of property, plant and equipment | 10 | 4,000 | 474 | 15,225 |
| Interest received | 144,793 | 53,187 | 194,734 | |
| Acquisition of subsidiaries | 8 | (1,627,485) | - | (231,892) |
| Cash received on acquisition of subsidiaries | 8 | 183,805 | - | 234,443 |
| Acquisition of other investments | 9 | (15) | - | - |
| Acquisition of property, plant and equipment | 10 | (89,581) | (62,400) | (164,853) |
| Acquisition of software | (35,646) | - | (78,193) | |
| New loans advanced to property syndicates | (964,378) | (1,817,442) | (1,954,315) | |
| Loan repayments from property syndicates | 1,954,315 | 1,915,994 | 1,915,994 | |
| Net cash from investing activities | (430,192) | 89,813 | (68,857) | |
| Cash flows from financing activities | ||||
| Proceeds from the issue of share capital | - | 225,000 | 225,000 | |
| Repayment of Directors' loans | (12,014) | (6,693) | 21,050 | |
| Dividends paid | 6 | (292,670) | (238,636) | (384,972) |
| Net cash from financing activities | (304,684) | (20,329) | (138,922) | |
| Net (decrease)/increase in cash and cash equivalents | (484,558) | 1,499,970 | 2,633,296 | |
| Cash and cash equivalents at start period | 12 | 2,726,751 | 93,455 | 93,455 |
| Cash and cash equivalents at end period | 2,242,193 | 1,593,425 | 2,726,751 |
Notes
Notes to the Interim financial statements are available in the PDF download.
Page last up-dated: 19 February 2008