Final Results
12/09/2023 07:40
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RNS Number : 1427M Mattioli Woods PLC 12 September 2023
12 September 2023
Mattioli Woods plc
("Mattioli Woods", "the Company" or "the Group")
Final results
Mattioli Woods plc (AIM: MTW.L), the specialist wealth and asset management
business, is pleased to report its final results for the year ended 31 May
2023.
Mattioli Woods is creating a responsibly integrated, full-service wealth
management group, growing organically through its distribution network of 138
core consultants and investment management offering, and through the
acquisition and integration of complementary businesses, with the aim of
enhancing the Group's client proposition while delivering strong shareholder
returns.
Financial highlights
· Total client assets of the Group and its associate(( 1 (#_ftn1) ))
rose 2.7% to £15.3bn (2022: £14.9bn);
· Revenue increased 2.8% to £111.2m (2022: £108.2m) driven by
combination of:
- Continued organic revenue growth of 3.7% to £75.7m (2022: £72.9m)
partially offset by the market impact on ad valorem, placement and performance
fees;
- Positive contribution from acquisitions up 0.7% to £35.5m (2022:
£35.3m);
- Increased total value of new client wins up 14.6% reflecting business
development initiatives;
- Improved new client lead generation with increased new business pipeline
up 16.2% versus prior year;
· Recurring revenues(( 2 (#_ftn2) ))(,( 3 (#_ftn3) )) represent
90.9% (2022: 86.8%) of total revenue, reflecting quality of organic growth
underpinned by long-term client relationships;
· Adjusted EBITDA(( 4 (#_ftn4) )) increased 1.8% to £33.2m (2022:
£32.6m);
· Adjusted EBITDA margin(( 5 (#_ftn5) )) of 29.8% (2022: 30.1%);
· Adjusted EPS(3,( 6 (#_ftn6) )) of 47.8p (2022: 48.3p) with organic
growth offset by impact of new shares issuances for acquisitions in 4Q23;
· Proposed final dividend of 18.0p (2022: 17.8p), giving a total
dividend up 2.7% to 26.8p (2022: 26.1p), keeping in-line with the Board's
commitment to a progressive dividend policy;
· Strong cash position, with £45.1m of cash at 31 May 2023.
Operational highlights and recent developments
· Diversified revenue mix with 37% (2022: 35% restated) fixed,
initial or time-based fees uncorrelated to market performance;
· Gross discretionary AuM(( 7 (#_ftn7) )) of £4.8bn (2022:
£5.1bn), with net inflows of over £68.1m in the year;
· Increased number of core consultants in the year to 138 (2022:133);
· Acquisition of Doherty Pension & Investment Consultancy Limited
("Doherty") and 50.1% stake in White Mortgages Limited ("White");
· Recently acquired businesses including Maven Capital Partners LLP
("Maven"), Ludlow Wealth Management Group Limited ("Ludlow"), Richings
Financial Management Limited, Doherty and White delivering organic growth,
revenue synergies, product diversification and integrating well;
· Implementation of Xplan CRM and operating system progressing in
line with plan to deliver improved operational efficiency and enhanced client
service.
Trading outlook
· Outlook for the current year remains in line with management's
expectations;
· Group remains well positioned for the year ahead with a strong
platform and integrated model enabling multiple client engagement points to
facilitate growth; and
· Continued focus on new business generation including synergies with
acquired businesses, advancing key strategic initiatives and improved
operational efficiency complemented by strategic acquisitions.
Governance changes
· Appointment of Michael Wright as Deputy Chief Executive Officer to
lead and support the delivery of certain strategic goals alongside the
Executive team while retaining his current responsibilities; and
· As part of our long-term strategic planning, David Kiddie stepping
down as Non-Executive Chair at the next Annual General Meeting ("AGM") to take
on a consultancy role with the Group given his extensive career in investment
management to support the continued development and structure of the Group's
investment proposition required for the next phase of growth.
· Anne Gunther currently our experienced senior independent,
non-executive director becomes Group Non-Executive Chair, subject to
regulatory approvals.
1 Includes £829.2m (2022: £1,100.5m) of funds under management by the
Group's associate, Amati Global Investors Limited, excluding £73.0m (2022:
£93.6m) of Mattioli Woods' client investment and £11.7m (2022: £14.8m) of
crossholdings between the TB Amati Smaller Companies Fund, TB Amati Strategic
Metals Fund and the Amati AIM VCT plc.
2 Annual pension consultancy and administration fees; ongoing adviser charges;
level and renewal commissions; banking income; property, discretionary
portfolio and other annual management charges adjusted for Private Investor
Club initial fees.
3 This is an alternative performance measure ("APM") the Group reports to
assist stakeholders in assessing performance alongside the Group's results on
a statutory basis. APMs may not be directly comparable with other companies'
adjusted measures and are not intended to be a substitute for, or superior to,
any IFRS measures of performance. Supporting calculations for APMs and
reconciliations between APMs and their IFRS equivalents are set out in the
alternative performance measure workings section of the Annual Report. See
'Alternative Performance Measures' section for further details of APMs.
4 Calculated as earnings before interest, taxation, depreciation,
amortisation, acquisition-related costs, platform project costs, contingent
consideration treated as remuneration and including share of profit from
associates (net of tax).
5 Adjusted EBITDA divided by revenue.
6 Adjusted profit after tax used to derive adjusted EPS is calculated as
adjusted profit before tax as defined above less income tax at the blended
standard rate of 20% (2022: 19%).
7 Includes £913.9m (31 May 2022: £1,208.9m) of funds under management by
Amati Global Investors Limited, including Mattioli Woods' client investment
and crossholdings between TB Amati Smaller Companies Fund, TB Amati Strategic
Metals Fund and Amati AIM VCT plc.
Commenting on the results, Ian Mattioli MBE, Chief Executive Officer, said:
"The last few years have been complex for our clients. This has reinforced our
commitment to putting clients first and developing our service offering. We
are building a business that is sustainable and ethical, but resilient over
the long term, and I am pleased to report this approach has delivered revenue
growth of 2.8% to £111.2m, reflecting the combined impact of organic growth
of 3.7% and the revenue contribution of recent acquisitions being partially
offset by the market impact on ad valorem, placement and performance fees.
Adjusted EBITDA was up 1.8% to £33.2m and adjusted EBITDA margin was 29.8%
with the positive impact of the change in revenue mix following the
acquisitions made during the current and prior year being partially offset by
inflationary increases in administrative expenditure.
"Basic EPS was up 79.9% to 14.9p and adjusted EPS of 47.8p was down (0.9%).
The Board is pleased to propose a final dividend of 18.0p per share. This
makes a proposed total dividend for the year of 26.8p a year-on-year increase
of 2.7%, demonstrating our desire to deliver value to shareholders and
confidence in the outlook for our business.
"We expect the current macroeconomic conditions and recent legislative changes
to drive continued demand for high quality advice as we expand capacity within
our adviser training academy to train a greater number of advisers each year,
seeking to capitalise on the current 'advice gap' and drive strong organic
growth in our financial planning and specialist pension consultancy
businesses.
"We are progressing our other strategic initiatives, including the roll-out of
our new, Group-wide client relationship management system Xplan. We are
confident in the resilience of our business model and excited by the
opportunity to accelerate growth and make meaningful progress towards our
strategic goals. While inflationary cost pressures and investment in our
strategic initiatives may impact margins in the short term, we are confident
that we will continue to deliver attractive, long-term sustainable shareholder
returns.
"Our focus remains on delivering great client outcomes. We have continued to
develop our client proposition, reviewing the range of investment management
options we offer and identifying opportunities to enhance the proposition and
realise revenue synergies across the Group. The implementation of Consumer
Duty regulations brings a welcome focus to the value that clients derive from
the various services we offer and accords with our principles of integrity and
professionalism.
"Previously acquired businesses are integrating well, with synergies being
realised and additional cross-sell opportunities targeted for the new
financial year.
"There continues to be a high level of M&A activity in the wealth and
asset management sector and we were pleased to complete the acquisition of
Doherty and our investment in White during the year. We have a strong pipeline
of bolt-on acquisition opportunities to assess, as well as potentially more
substantial opportunities in the longer term. We plan to build on our track
record of successful acquisitions by continuing to assess and progress
opportunities that meet our strict criteria.
"Our Executive team continues to bring new ideas to drive further growth and
generate sustainable shareholder returns. We were pleased to announce the
appointment of Michael Wright as Deputy Chief Executive Officer to lead and
support the delivery of certain strategic goals alongside his current
responsibilities. I wish to thank David Kiddie for serving a 3-year term as
Non-Executive Director and more recently as Non-Executive Chair as he steps
down from this role at the next AGM as part of our long-term strategic
planning. We are pleased to retain David's services in a consultancy role with
the Group given his expertise and extensive career background in investment
management. His insight will be invaluable to support the continued
development and structure of the Group's investment proposition required to
deliver our next phase of growth.
"Over 31 years since founding the Company, I continue to be thankful and
humbled by the enduring culture of professionalism, positive mindset and
commitment that our entire team continues to show when managing our clients'
affairs throughout another complex year. I look forward to the future with
confidence".
- Ends -
For further information please contact:
Mattioli Woods plc
Ian Mattioli MBE, Chief Executive Officer Tel: +44 (0) 116 240 8700
Ravi Tara, Chief Financial Officer www.mattioliwoods.com
Michael Wright, Deputy Chief Executive Officer
Canaccord Genuity Limited (Nominated Advisor and Joint Broker)
Emma Gabriel Tel: +44 (0) 20 7523 8000
Harry Pardoe www.canaccordgenuity.com
Singer Capital Markets (Joint Broker)
Tom Salvesen Tel: +44 (0) 20 7496 3000
Justin McKeegan www.singercm.com (http://www.singercm.com/)
Alaina Wong
Media enquiries:
Camarco
Julia Tilley Tel: +44 (0) 20 3757 4998
Alex Campbell www.camarco.co.uk
Equity Development Limited
Matt Evans Tel: +44 (0) 20 7065 2690
www.equitydevelopment.co.uk (http://www.equitydevelopment.co.uk)
Analyst presentation
There will be an analyst presentation to discuss Mattioli Woods' full year
results at 09:30am today at Canaccord Genuity Limited, 88 Wood Street, London,
EC2V 7QR. This will also be held as a webinar and those analysts wishing to
attend through either channel are asked to contact Camarco on +44 (0)
20 3757 4998 or at mtwplc@camarco.co.uk (mailto:mtwplc@camarco.co.uk) .
Investor presentation
There will be an investor presentation to discuss Mattioli Woods' full year
results at 12.30pm Friday 15 September 2023.
The presentation is open to all existing and potential shareholders for which
registration is free.
Questions can be submitted in advance to info@equitydevelopmment.com
(mailto:info@equitydevelopmment.com) in addition to during the presentation
and, if possible, will be addressed by the presenters at the end of the
webinar.
To attend the event please register here
(https://www.equitydevelopment.co.uk/news-and-events/mattioliwoods-fyresultspresentation-15sept2023)
. A recording will be available shortly after the webinar on
www.equitydevelopment.co.uk (http://www.equitydevelopment.co.uk)
Strategic Report
Our vision and approach
Our business model
Mattioli Woods is a diversified wealth and asset management business. Our core
proposition integrates asset management and financial planning to serve a
market predominantly consisting of mass affluent individuals, controlling
directors and owner-managed businesses, professionals, executives, families
and retirees. We plan to continue to expand our reach to new client
demographics as we continue developing both our advice and investment
propositions.
Our vision
We strive to deliver exceptional outcomes for our clients' wealth and asset
management needs in a responsible way, achieving continued growth across our
core pillars of advice, investment and administration, specifically through:
1 New client wins and greater integration across the value-chain for
existing clients;
2 Enhancing the Group's investment proposition;
3 Investing in developing the Group's digital platform and client
portal;
4 Simplifying administration processes and improving productivity; and
5 Accelerating growth through strategic acquisitions.
Our medium-term financial goals are for the Group to deliver:
· £300m Revenue
· £30bn Total client assets
· £100m EBITDA
We will continue to put our clients and their needs at the core of everything
we do, with the objective of growing and preserving their assets, while giving
them control and understanding of their overall financial position. At the
same time, we aim to grow our business, both organically and through
acquisition, to deliver strong, sustainable shareholder returns over the
long-term.
Our focus on holistic planning, providing high levels of personal service and
maintaining close multi-generational relationships with our clients has also
been a key attribute of each of the financial planning businesses acquired in
recent years. We plan to continue developing complementary services around our
core specialisms, blending advice and investment management with specialist
product provision to progress as a modern financial services business aligned
to our clients' needs. We believe this will allow us to deliver great client
outcomes while keeping clients' costs low, with our integrated model allowing
us to address more of the value chain.
As we expand our client proposition to deliver our medium-term goals, the
Board is reviewing the Group's operating structure and segmental reporting. In
future years we intend to report the Group's results under three operating
segments: financial planning and advice, investment management, and
administration. The Group's current operating segments comprise the following:
Wealth and asset management
Our wealth and asset management business comprises four operating segments:
pensions consultancy and administration, investment management, private equity
asset management and property management. We provide services to individuals,
families and institutions, embracing all aspects of financial planning and
investment, including specialist pensions and estate planning, personal and
trust investment, and fund management.
Pension consultancy and administration
Mattioli Woods is a leader in the provision of Self Invested Personal Pension
("SIPP") and Small Self-Administered Pension Scheme ("SSAS") arrangements,
which are often central to our clients' life planning strategies. We have an
established reputation for technical excellence, widely acknowledged within
our industry. We maintain our technical edge through our in-depth
understanding of UK pension legislation, which translates into meaningful
advice given to clients by our consultancy team.
To support our advised and non-advised clients, we specialise in the provision
of proactive and personalised pension administration, which differentiates us
from our competitors. Our 11,000 SIPP and SSAS clients are supported by our
proprietary MWeb pensions administration platform, into which additional
investment is planned to further enhance our client experience and deliver
operational efficiencies. MWeb will sit alongside the Xplan wealth management
administration platform currently being installed across the Group.
Investment management
The provision of bespoke investment advice sits at the heart of our investment
proposition. The Group's investment services include discretionary portfolio
management and in meeting our clients' needs we use third-parties' investment
funds, but where we have a particular expertise we look to meet those needs
in-house. This client-driven approach has led to the development of our
internal investment management function and a range of products designed to
meet our clients' needs, including direct UK equity management and a range of
multi-asset funds.
In response to client demand, we launched the Mattioli Woods Responsible
Equity Fund and Mattioli Woods Property Securities Fund, which are
complemented by the alternative asset investments managed by the Group's
subsidiaries, Maven Capital Partners UK LLP ("Maven") and Custodian Capital
Limited ("Custodian Capital"), and the funds managed by our associate company
Amati Global Investors Limited.
These offerings provide clients and third parties with access to a suite of
public and private investment opportunities. We have well-developed plans to
strengthen and expand upon these offerings to enhance our investment
proposition, drive further organic growth and realise synergies with acquired
businesses.
Private equity asset management
Maven is a leading private equity and alternative asset manager, providing a
range of venture capital trusts ("VCT"), regional funds, and property and
private equity investment opportunities, which expand the Group's investment
options. Maven adds scale, geographies and new opportunities for Mattioli
Woods clients and the ability to offer the Group's existing services to
Maven's clients.
Post-acquisition, we have delivered both revenue and cost synergies with a
number of joint deals taking place, including the launch and funding of the
Milestone Fund, which facilitates investment into private equity investments
with over £5m invested by Mattioli Woods clients. The integration of the
Mattioli Woods and Maven property teams creates additional investment
opportunities, with several deals already launched and a further pipeline of
joint deals to be launched to meet client demand in the coming year.
Property management
Custodian Capital facilitates direct property ownership on behalf of pension
schemes and private clients and is the external discretionary fund manager of
Custodian Property Income REIT ("CREIT"), a UK real estate investment trust
listed on the Main Market of the London Stock Exchange. We believe investment
in good quality properties with high grade tenants typically provides stable
returns over the long term and our property team draws on many years of
commercial property investment experience.
Employee benefits
The Group's advice offering also includes our employee benefits business. We
assist our corporate clients with employee engagement, with the aim of
improving recruitment, retention and workplace morale. Our services include
consultancy in areas such as: defined contribution (DC) and defined benefit
(DB) pension schemes, workplace savings, healthcare, international benefit
solutions and risk benefits, in addition to the design, implementation and
administration of these schemes.
The Group also offers total reward and flexible benefit systems, assisting
clients to deliver these to their employees, together with advice, guidance
and financial education. The importance of employee benefits is increasing as
corporate clients look for new ways to engage, retain, reward and incentivise
their workforces. Changes in legislation combined with increased utilisation
of flexible working arrangements are increasing the demand for our financial
education and wealth management services to be delivered through the
workplace.
Our integrated business model allows our clients to benefit from the range of
services Mattioli Woods provides across advice, investment and administration
to better meet their needs and offer improved client outcomes. The Group
enjoys strong client retention through its provision of a broad range of
services throughout the client lifecycle, which in turn drives organic growth
as long-term, multi-generational relationships expand over time and new
clients are attracted to our diverse proposition.
Strategic Report
Chair's statement
I am pleased to report a resilient performance and successful year for the
Mattioli Woods Group. Revenue increased by 2.8% to £111.2m (2022: £108.2m),
through a combination of organic revenue growth of 3.7% partially offset by
the market impact on ad valorem, placement and performance fees in light of
the complex market backdrop throughout the period, and the positive impact of
recent acquisitions which grew by 0.7% in what will be my last year as
Non-Executive Chair to Mattioli Woods before taking up a consultancy role to
support the development and structure of the Group's investment proposition.
Adjusted EBITDA was up 1.8% to £33.2m (2022: £32.6m).
The acquisitions of Doherty Pension & Investment Consultancy Limited and
the majority stake in White Mortgages Limited, together with those businesses
acquired in the prior year contributed £35.5m (2022: £35.3m) in revenue. The
Group's organic revenue(( 8 (#_ftn8) )) growth was driven by increased levels
of new business partially offsetting the impact of negative market movements
reflecting the complex market backdrop on the value of clients' assets during
the year and the placement and performance fees generated by Maven.
The Group's profit before tax ("PBT") was up 48.4% to £11.9m (2022: £8.0m).
Excluding the impact of acquisition-related costs, platform project costs and
contingent consideration on acquisitions recognised as remuneration, adjusted
PBT increased by 3.8% to £30.6m (2022: £29.5m).
The Board is committed to a progressive dividend policy while maintaining an
appropriate level of cover to protect the Group's financial position and
balance the interests of all stakeholders. Accordingly, the Board is pleased
to propose an increased final dividend of 18.0p per share (2022: 17.8p),
making a proposed total dividend for the year of 26.8p, up 2.7%
(2022: 26.1p).
Our focus remains on delivering great client outcomes. We have continued to
develop our client proposition, reviewing the range of investment management
options we offer and identifying opportunities to enhance the proposition and
realise revenue synergies across the Group. The implementation of Consumer
Duty regulations brings a welcome focus to the value that clients derive from
the various services we offer and accord with our principles of integrity,
professionalism and having a client-focused culture providing a platform for
continued growth.
We are also mindful of our social impact and continue to support our
stakeholders and the communities in which we operate through a number of
commercial and charitable arrangements including with our national charity
partner, British Heart Foundation.
8 Total revenues excluding revenue growth from businesses acquired in the last
24 months.
Our strategy
Our strategy is to achieve sustainable levels of growth that both enhances
shareholder value and broadens or deepens our expertise and services to better
serve our clients.
There continues to be a high level of M&A activity in the wealth and asset
management sector, and we were pleased to complete the acquisition of
Doherty's and our holding in White Mortgages during the year. The Group has
completed 35 acquisitions since the Initial Public Offering ("IPO") and
maintains a strong pipeline of further acquisition opportunities. We are
focused on transactions that deliver positive shareholder returns and extend
the Group's existing client proposition or add to our distribution capacity
and scale. A key feature of the last year has been the development of
relationships between our recently acquired businesses, with Mattioli Woods
and Ludlow advisory clients participating in new investment opportunities
promoted by our Maven team, with more planned for the future. We will seek to
build on our track record of successfully combining businesses that share the
same culture and ethos of putting clients first, alongside continued organic
growth. Recent increases in interest rates have increased the cost of capital
for all, including for non-listed consolidators, which has the potential to
increase the competitiveness of acquisitions for the Group.
Our people
I am privileged to be part of a team that continually impresses me with their
high levels of dedication when dealing with our clients' affairs. I would
personally like to thank all our staff for their continued professionalism,
commitment and focus on delivering high levels of service to our clients in
the complex time in which we operate and during my time as Non-Executive
Director and Chair. The culture we have established throughout our 32 years of
serving our clients is totally aligned with the new consumer duty regulations
introduced during the year, which sets higher and clearer standards of
consumer protection across financial services and requires firms to put their
customers' needs first.
We remain committed to investing in and developing our staff to build the
expertise and capacity to deliver sustainable growth over the long term. Our
culture is based on knowledge, professionalism and diversity, putting clients
first and adopting a team-based, collegiate approach. Retaining the
commitment, integrity, expertise and passion of our people is vital to our
success and remains a priority of the Board.
Governance and the Board
We reviewed our governance framework at the beginning of the year, putting in
place a structure that will better enable us to meet the diverse needs of our
clients and other stakeholders and support our continued growth. Further
details of these structural changes, which are designed to enable appropriate
decision-making authority within the advice, administration and investment
pillars of our business are detailed in the Governance Report.
The Company operates with a balanced Board, which we believe represents the
right governance structure for the business. We strive for high standards in
our corporate governance and disclosure and have adopted the Quoted Company
Alliance ("QCA") Corporate Governance Code to facilitate this. The Board
remains committed to developing the corporate governance and management
structures of the Group to ensure they continue to meet the changing needs of
the business.
During the year, the Board conducted a review of its effectiveness which was
led by an external third-party. This review identified the strength and skills
diversity of the Board and recommended that development plans be established
for all Board members including on-going training for new and existing
members.
Shareholders
During the year we have engaged with our shareholders through traditional
face-to-face meetings and via virtual channels including webinars and group
meetings. We are fortunate to have a group of supportive institutional
shareholders with a significant investment in the Company and welcome the
opportunity to talk to all our shareholders. We will continue to maintain a
regular and constructive dialogue with our shareholders, while seeking to
further broaden our shareholder base.
Outlook
The Board is pleased by the Group's performance in the year. We expect the
current macroeconomic conditions and recent legislative changes to drive
continued demand for high quality advice. We are expanding capacity within our
adviser training academy to train a greater number of advisers each year,
seeking to capitalise on the current 'advice gap' and drive strong organic
growth in our financial planning and specialist pension consultancy
businesses. In the last year we have grown our core consultant numbers from
133 to 138.
Notwithstanding the recent decline in inflation, the Board will continue to
take a rigorous and proactive approach to managing costs while continuing to
invest in our people, to create capacity or improve efficiency to support the
long-term growth of the Group.
The increase in interest rates over the last year may lead to additional
saving rather than increased investment inflows for some clients, and we have
introduced a new pension banking proposition to offer our clients better
interest rates.
We are also progressing our strategic initiatives, including the roll-out of
our new, Group-wide client relationship management system Xplan. We are
confident in the resilience of our business model and excited by the
opportunity to accelerate growth and make meaningful progress towards our
strategic goals. While inflationary cost pressures and investment in our
strategic initiatives may impact margins in the short term, we are confident
that we will continue to deliver attractive, long-term sustainable shareholder
returns.
David Kiddie
Independent Non-Executive Chair
12 September 2023
Strategic report
Chief Executive's review
Introduction
The last few years have been complex for our clients. This has reinforced our
commitment to putting clients first and developing our service offering,
including nurturing our growing adviser network. We are building a business
that is sustainable and ethical, but resilient over the long term, and I am
pleased to report this approach has delivered both revenue and profit growth
for the last financial year.
Revenue grew 2.8% to £111.2m (2022: £108.2m), reflecting the combined impact
of organic growth of 3.7% and the revenue contribution of recent acquisitions
being partially offset by the market impact on ad valorem, placement and
performance fees.
The positive new business momentum generated in the first half of the year
continued into the second half, despite the uncertain market backdrop. A total
of 1,084 (2022: 1,233) new SIPP, SSAS and personal clients with assets
totalling £244m (2022: £213m) chose to use Mattioli Woods during the year,
representing 14.6% growth in the value of client assets won, which we
anticipate will drive increased ad valorem fees over the medium-term.
Operating profit before financing grew 57.5% to £11.5m (2022: £7.3m) and
profit before tax was up 48.8% to £11.9m (2022: £8.0m). Adjusted profit
before tax of £29.9m was up 1.4%, primarily driven by organic revenue growth
and continued close cost management. The profit growth achieved in our core
business was partially offset by a reduced £1.0m (2022: £1.6m) share of
profit from our 49% associate Amati, which had £0.8bn (2022: £1.1bn) of
assets under management ("AuM") at the year-end. The performance of the AIM
market has remained challenging, but Amati's investment performance continues
to be recognised, with the Amati AIM VCT winning the VCT AIM Quoted Category
at Investment Week's Investment Company of the Year Awards 2022.
Adjusted EBITDA was up 1.8% to £33.2m (2022: £32.6m) and adjusted EBITDA
margin was 29.8% (2022: 30.1%) with the positive impact of the change in
revenue mix following the acquisitions made during the current and prior year
being partially offset by inflationary increases in administrative
expenditure.
We continue working to realise the economies of scale and operational
efficiencies our responsibly integrated model offers, while at the same time
seeking ways to reduce clients' costs. As previously announced, despite some
short-term impact to margins, the investment we are making in our platform
infrastructure, including a Group-wide client relationship management system,
will improve our client proposition while allowing us to realise operational
efficiencies.
Our success has been based upon the delivery of quality advice, growing our
clients' assets and enhancing their financial outcomes. We enjoy strong,
intergenerational client retention and expect to see sustained client demand
for advice over the last 12 months driven by the uncertainties caused by the
current macroeconomic conditions and recent legislative changes. Navigating
these headwinds becomes ever more complex and we are focused on delivering
positive investment performance across both portfolios and funds. During the
year we reviewed the range of investment management options we offer clients,
identifying opportunities to realise revenue synergies across the Group while
reducing clients' costs.
Gross discretionary AuM by the Group and its associate at the year-end were
£4.8bn (2022: £5.1bn) with aggregate net inflows (before market movements)
of £68.1m (2022: £341.4m) offset by negative market movements of (£442.6m)
(2022: (£223.4m)), which included a (£90.0m) decrease (2022: £119.6m
increase) in the value of properties held within CREIT to £437.6m.
Market overview
Mattioli Woods operates within the UK's financial services industry, which is
subject to the effects of movements in financial markets, economic conditions
and regulatory changes. Our markets remain fragmented and competitive,
serviced by a wide range of suppliers offering diverse services to both
individual and corporate clients.
The UK retail savings and investment market has demonstrated considerable
growth in recent years. It remains dominated by pension schemes but is
evolving as a result of societal, economic, regulatory, and technological
changes. Sharp increases in the cost of living and evolving client
preferences, including environmental, social and governance ("ESG") and
responsible investing considerations, have created opportunities and
challenges for people seeking to generate income while preserving and growing
their capital.
The majority of defined benefit pension schemes have either closed to new
members or to new accrual, requiring individuals to be self-reliant in
planning for their own long-term needs against a backdrop of increases to
state pension age, with further reviews planned. Individuals who have
generated substantial personal and family wealth are increasingly seeking
solutions that help them fulfil their personal ambitions.
We believe these current market dynamics and pending changes will continue
driving demand and need for the holistic planning and expert advice we
provide.
Regulation
The implementation of the Consumer Duty regulations brings a welcome focus to
the value our clients derive from the services we offer. These requirements
are intended to ensure consumers understand what products and services they
are paying for, why these are appropriate for them and that providers are
cognisant of the cost and value of the products and services they provide. All
the new requirements accord with our principles of integrity, professionalism
and having a client-focused culture.
As our teams have assessed our client proposition through the prism of the
Consumer Duty regulations, this has afforded the opportunity to reflect on all
aspects of our responsibly integrated business model and to affirm our belief
that we deliver valued services to our clients, that we have systems and
controls in place to identify any areas of potential harm, allowing
appropriate action to be taken where necessary. We have also been able to
reflect on some areas where action can be taken to garner further efficiencies
which will serve to improve our client service delivery. These are principles
that have remained at the core since the business was founded over 30 years
ago.
The Financial Conduct Authority ("FCA") set out its expectations for the
wealth management and advice industry in April this year, where the focus
remains on firms' operational and financial resilience. Following the FCA's
recent decision to pause its plans to create a simplified advice regime in the
face of limited industry support, the regulator's attention in now on
reviewing the boundary between guidance and advice. This review is intended to
ensure consumers get the help they need, at the time they need it and at a
cost which is affordable to them. We strongly support these aims, given the
importance of advice to our clients.
Changes to the pension and tax regime
The Chancellor's March 2023 budget announced a range of reforms to pensions
tax relief to encourage workers over 50 to extend their working lives,
including increasing the annual allowance to £60,000, removing the Lifetime
Allowance charge and freezing lump sum limits. While another UK general
election within the next 18 months creates uncertainty around the future
direction of pension reforms and UK tax rates, there are many financial
planning opportunities for our clients to consider now, with any future
changes in the tax regime expected to create further demand for our advisory
services.
The recent launch of the Mansion House reforms, an agreement supported by the
Chancellor and the Lord Mayor with the UK's nine largest defined contribution
pension providers to commit five percent of assets in their funds to unlisted
equities by 2030, could unlock £75 billion of investment for high growth
businesses, creating new opportunities and deal flow within both our Maven and
Amati businesses.
Outlook
Investment markets are likely to remain volatile for some time, and while we
saw some improvement in market sentiment during the last quarter of the
financial year, we expect flows to remain subdued while market conditions
remain challenging. We continue working to drive greater efficiency in our
business, as well as pursuing key initiatives to drive an acceleration in
flows once market conditions normalise, including the migration of existing
assets under advice to AuM as recently acquired business engage with the
Group's expanded investment proposition.
We will maintain our focus on client service and continue to adapt our
business model to our clients' needs and the changing market, integrating
asset management and financial planning to build upon our established brand,
which is recognised for delivering holistic advice and bespoke asset or
investment management options.
Our services
Our core pension and wealth management offering serves a wide demographic
cross-section including affluent families and the higher end of the market,
including controlling directors and owner-managed businesses, professionals,
executives, and retirees.
We intend to extend our reach to new client demographics as we develop both
our investment and service offerings. The Group's revenue mix changed as
follows during the year, principally as a result of recent acquisitions:
· 45.7% investment and asset management (2022: 46.6%);
· 20.7% private equity asset management (2022: 24.2%);
· 21.3% pension consultancy and administration (2022: 18.2%);
· 6.2% property management (2022: 5.8%); and
· 6.1% employee benefits (2022: 5.2%).
We aim to operate a seamless structure to achieve continued growth across our
core pillars of advice, investment and administration while delivering
exceptional client outcomes, specifically through:
· New client wins and greater integration across the value-chain for
existing clients;
· Enhancing the Group's investment proposition;
· Further investment in developing the Group's digital platform and
client portal;
· Simplifying administration processes and improving productivity;
and
· Accelerating growth through strategic acquisitions.
Assets under management, administration and advice
Unlike many wealth managers, more than one third of the Group's revenues are
fee-based, rather than being linked to the value of assets under management,
administration or advice(( 9 (#_ftn9) )), giving our business a resilient
revenue profile that is less sensitive to market performance. The total client
assets of the Group and its associate of £15.3bn at 31 May 2023 (2022:
£14.9bn) with over £11.4bn in advisory assets and summarised as follows:
Assets under management, administration and advice(( 10 (#_ftn10) )) SIPP and SSAS(( 11 (#_ftn11) )) Employee benefits Personal wealth Sub-total Amati(( 12 (#_ftn12) )) Total
£m £m and other assets £m £m £m
£m Maven
£m
At 1 June 2022 6,913.3 1,452.8 4,670.4 13,036.4 1,100.5 766.9 14,903.9
Acquisition during the year - - 631.7 631.7 - - 631.7
Net inflows/(outflows), including market movements (59.3) 187.1 (130.7) (2.9) (271.3) 50.9 (223.3)
At 31 May 2023 6,854.0 1,639.9 5,171.4 13,665.3 829.2 817.8 15,312.3
The movement in total client assets is analysed as follows:
· A (£59.3m) decrease (2022: £172.2m increase) in SIPP and SSAS
assets under administration driven by a 1.1% decrease (2022: 0.1% increase) in
the number of schemes being administered at the year-end, comprising a 1.0%
increase (2022: 2.7%) in the number of direct(( 13 (#_ftn13) )) schemes to
7,172 (2022: 7,098) and a planned (5.0%) (2022: (4.2%)) decrease in the
number of schemes the Group operates on an administration-only basis to 3,785
(2022: 3,986). Some years' ago, the Group was appointed to operate or wind-up
several SIPP portfolios following the failure of their previous operators,
with the lower number of schemes due in part to the transfer of certain
members of these distressed portfolios to more appropriate arrangements;
· A £187.1m increase (2022: £0.6m) in the value of assets held in
corporate pension schemes advised by our employee benefits business following
a number of new client wins and renewals in the year. These revenues are not
linked to the value of client assets in the way that certain of our wealth
management revenue streams are, although market performance and economic
uncertainty can impact clients' ability to increase investment in their
schemes. Our corporate client portfolio remains well diversified by sector and
geographically;
· A £501.0m increase (2022: £1,936.3m) in personal wealth and other
assets under management and advice, with the acquisition of Doherty Pension
& Investment Consultancy Limited adding £631.7m of client assets. The 376
(2022: 511) new personal clients(( 14 (#_ftn14) )) won during the year was
partially offset by some natural client attrition, with the addition of
acquired clients resulting in a 13.5% increase (2022: 44.5% increase) in the
total number of personal clients(( 15 (#_ftn15) )) to 11,925 (2022: 10,506);
· A (£271.3m) decrease (2022: (£95.6m)) in Amati's funds under
management (excluding Mattioli Woods' client investments), primarily due to
market falls reducing the value of funds within the TB Amati UK Smaller
Companies Fund to £586.0m (2022: £840.3m), partially offset by positive
growth in the TB Amati Strategic Metals Fund to £87.1m (2022: £77.6m) and
the TB Amati Strategic Innovation Fund to £5.9m (2022: £1.1m) at the
year-end; and
· A £50.9m increase to £817.9m in the value of assets managed by
Maven. Growth was mainly driven by £26.8m of new investment into the Maven
VCTs, additional commitments from existing regional fund mandates and new
tender wins. This was complemented by an increase in the value of private
equity investments through mix of valuation increases and net inflows,
highlighting the quality of Maven's investment portfolio and further
supporting the acquisition rationale.
9 Revenue for the year ended 31 May 2023 was split 37% (2022: 35% restated)
fixed, initial or time-based fees and 64% (2022: 52%) ad valorem fees based
on the value of assets under management, advice and administration.
10 Certain pension scheme assets, including clients' own commercial
properties, are only subject to a statutory valuation at a benefit
crystallisation event.
1 1 Value of funds under trusteeship in SIPP and SSAS schemes administered by
Mattioli Woods and its subsidiaries.
1 2 Assets under management of £829.2m (2022: £1,100.5m) excludes £73.0m
(2022: £93.6m) of Mattioli Woods' client investment included within SIPP and
SSAS, employee benefits and personal wealth and other assets and excludes
£11.7m (2022: £14.8m) of crossholdings between the TB Amati Smaller
Companies Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT plc.
13 SIPP and SSAS schemes where the Group acts as pension consultant and
administrator. SIPP and SSAS schemes administered by SSAS Solutions
reclassified as direct during the year.
14 New personal clients includes from acquired businesses.
1 5 Includes personal wealth clients with SIPP and SSAS schemes operated by
third parties.
Key performance indicators
The Directors consider the key performance indicators ("KPIs") for the Group
are as follows:
Strategy/objective Performance indicator Further explanation and figures
Organic growth and growth by acquisition Revenue - total income (excluding VAT) from all revenue streams. See 'Our business model' and 'Revenue'
Operating efficiency Adjusted EBITDA margin - profit generated from the Group's operating See 'Profitability and earnings per share'
activities before financing income or costs, taxation, depreciation,
amortisation, impairment, gains on bargain purchases, deferred consideration
recognised as remuneration and acquisition-related costs, platform project
costs, including share of profit from associates (net of tax), divided by
revenue.
Shareholder value and financial performance Adjusted Earnings Per Share ("EPS") - total comprehensive income for the year, See 'Profitability and earnings per share'.
net of taxation, attributable to equity holders of the Company, adjusted to
add back acquisition-related costs, acquisition-related finance costs,
platform project costs, the amortisation of acquired intangible assets, gains
on bargain purchases and deferred consideration recognised as remuneration
divided by the weighted average number of ordinary shares in issue.
Growth in the value of assets under management, administration and advice Assets under management, administration and advice - the value of all client See 'Assets under management, administration and advice'.
assets the business gives advice upon, manages or administers.
Excellent client service and retention Client attrition - the number of direct SSAS and SIPP schemes lost as a result See 'Segmental review'.
of death, annuity purchase, external transfer or cancellation as a percentage
of average scheme numbers during the period.
Financial stability Debtors' days - this is the average number of days' sales outstanding in trade See 'Cash flow'.
receivables at any time.
Financial stability Surplus on regulatory capital requirement - this is the aggregate surplus on See 'Regulatory capital'.
the total regulatory capital requirement of the Group.
Alternative performance measures
The Group has identified certain measures that it believes will assist in the
understanding of the performance of the business. Recurring revenues, organic
revenues, adjusted EBITDA, adjusted profit before tax ("adjusted PBT"),
adjusted profit after tax ("adjusted PAT"), adjusted EPS and adjusted cash
generated from operations are non-GAAP alternative performance measures,
considered by the Board to provide additional insight into business
performance compared with reporting the Group's results on a statutory basis
only.
Accounting standards require the contingent consideration payable on certain
acquisitions to be recognised as an expense in the income statement rather
than as a capital payment. On certain acquisitions, the Board has included
employment-related conditions for the payment of contingent consideration to
protect shareholder value. While the Board accepts this is the required
treatment for its reported results, adjusted measures of the Group's
profitability, including adjusted EBITDA, adjusted PBT, adjusted PAT and
adjusted EPS, have been amended to add-back items including £1.5m of
acquisition-related costs and £6.9m of contingent consideration recognised as
remuneration.
The Board has also included technology-related costs as an add-back given the
specific investment currently being and planned to be made over the coming two
years to migrate to a Group wide administration platform. These costs are
specific to the migration project and are expected to reduce post-completion.
These alternative performance measures may not be directly comparable with
other companies' adjusted measures and are not intended to be a substitute
for, or superior to, any IFRS measures of performance. However, the Board
considers them to be important measures for assessing underlying performance,
used widely within the business and by research analysts covering the Company.
Supporting calculations for alternative performance measures and
reconciliations between alternative performance measures and their IFRS
equivalents are set out in the alternative performance measure workings
section of the Annual Report.
Financial performance and future developments
Revenue
Group revenue was up 2.8% to £111.2m (2022: £108.2m), reflecting organic
growth of 3.7% (2022: 10.0%) and new business wins, partially offset by the
market impact on the value of client assets, placement and performance fees of
acquisitions.
Revenue grew across most business segments, with growth in investment and
asset management revenues driven by the contribution from recent acquisitions.
This, together with the addition of private equity management fees from Maven,
increased revenues linked to the value of clients' assets to 63% (2022: 65%)
of total revenues.
Employee benefits expense
As in previous years, the major component of the Group's operating costs is
our employee benefits expense of £60.8m (2022: £59.6m) representing 54.7% of
revenue (2022: 55.0%), with the increase including discretionary staff bonuses
totalling £4.7m (2022: £4.6m) and deferred consideration presented as
remuneration £6.9m (2022: £9.7m).
The Group's total headcount increased to 896 (2022: 847) as at 31 May 2023,
with retention of the experienced teams at each of the acquired businesses and
net positive recruitment of consultants and support staff adding 49 staff. The
number of core consultants increased to 138 (2022: 133) and we plan to
continue this growth by increasing the size of the Mattioli Woods training
academy to recruit, train and develop new consultants as well as experienced
consultants to expand our distribution network.
We continue to invest in building capacity across our IT, administration and
compliance teams, with further investment in training across all parts of the
Group.
Other administrative expenses
Other administrative expenses decreased to £18.2m (2022: £19.8m), with
£1.5m (2022: £3.7m) of costs incurred on prospective or completed
acquisitions during the year and £0.9m invested in development of our new
client relationship management system. Other overheads, including professional
costs and software licence costs were impacted by inflationary cost increases.
Management takes a rigorous and proactive approach to managing costs while
continuing to invest in our people, technology and infrastructure to generate
improved operational efficiency.
Share-based payments
Share-based payments costs of £2.0m (2022: £1.7m) represent the cost of
options expected to vest under the Company's long-term incentive plans and the
cost of matching shares awarded to employees under the Company's Share
Incentive Plan.
Net finance costs
The Group maintained a positive net cash position throughout the year, with
increased net finance costs of £0.6m (2022: £0.9m) reflecting credit
interest of £1.1m (2022: £0.08m) offset by £1.0m (2022: £0.9m) of
non-cash notional finance charges on the unwinding of discounts on long‑term
provisions and £0.2m (2022: £0.1m) of interest on the lease liabilities
recognised under International Financial Reporting Standards ("IFRS") 16.
Taxation
The effective rate of taxation on reported profit on ordinary activities was
35.4% (2022: 49.1%), above the standard rate of tax of 25% (2022: 19.0%). This
is primarily due to consideration on acquisitions accounted for as
remuneration and acquisition-related fees being non-deductible for tax
purposes, together with certain expenses associated with sponsorship and other
business development activities.
The net deferred taxation liability carried forward at 31 May 2023 was
£28.1m (2022: £26.7m).
Profitability and earnings per share
Profit before tax was up 48.4% to £11.9m (2022: £8.0m), with adjusted profit
before tax up 3.7% to £30.6m (2022: £29.5m). The increased revenues were
partially offset by the impact on employee benefits expense of pay awards,
recruitment and the impact of businesses acquired during the last two years
and increased discretionary staff bonuses, professional fees and IT costs.
These changes translated into an increase in operating profit before financing
of 57.5% to £11.5m (2022: £7.3m) and adjusted EBITDA up 1.8% to £33.2m
(2022: £32.6m), with adjusted EBITDA margin of 29.8% (2022: 30.1%).
We continue to focus on delivering great client outcomes and addressing their
evolving needs. The implementation of a Group-wide client relationship
management system will lead to improved operational efficiency such as
increased client caseloads within our consultancy and administration teams and
create additional business capacity in future periods. We are focused on
streamlining and automating our administration processes through initiatives
such as the adoption of electronic signatures, creating a scalable operating
model and making Mattioli Woods easier to do business with. Over time, we
anticipate these changes will deliver improved margins and cost savings for
both us and our clients.
The Board considers adjusted EBITDA to be a relevant measure for investors who
want to understand the underlying profitability of the Group, adjusting for
items that are non-cash or affect comparability between periods as explained
in the alternative performance measures section, as follows:
2023 2022
£m £m
Statutory operating profit before financing 11.5 7.3
Amortisation and impairment of acquired intangibles 8.5 7.2
Amortisation of software 0.5 0.3
Depreciation 2.5 2.8
EBITDA 16 (#_ftn16) (,) 23.0 17.6
Share of associate profits (net of tax) 1.0 1.6
Acquisition-related costs 1.5 3.7
Deferred consideration as remuneration 6.9 9.7
Technology-related costs 0.9 -
Adjusted EBITDA 33.2 32.6
Adjusted PBT, adjusted PAT and adjusted EPS are additional measures the Board
considers to be relevant for investors who want to understand the underlying
earnings of the Group, excluding items that are non-cash or affect
comparability between periods as follows:
Profit EPS Profit EPS
2023 2023 2022 2022
£m pps £m pps
Statutory profit before tax 11.9 23.2 8.0 16.2
Income tax expense (4.2) (8.2) (3.9) (7.8)
Other comprehensive income (0.0) (0.0) 0.0 0.0
Total comprehensive income/Basic EPS 7.7 14.9 4.1 8.3
Statutory profit before tax 11.9 23.2 8.0 16.2
Amortisation of acquired intangibles 7.9 15.4 7.2 14.6
Acquisition-related costs 1.5 2.9 3.7 7.5
Acquisition-related notional finance cost 1.0 1.9 0.9 1.8
Contingent consideration as remuneration 6.9 13.4 9.7 19.6
Platform project costs 0.9 1.7 0.0 0.0
Impairment of other investment 0.7 1.3 0.0 0.0
Adjusted PBT 30.6 59.8 29.5 59.6
Income tax expense at standard rate (6.1) (12.0) (5.6) (11.3)
Adjusted PAT/Adjusted EPS(( 17 (#_ftn17) )) 24.5 47.8 23.9 48.3
As explained in Note 17, client portfolios and brand names acquired through
business combinations are recognised as intangible assets. The amortisation
charge for the year of £7.9m (2022: £7.2m) associated with these intangible
assets has been excluded from adjusted PAT and adjusted EPS because the Board
reviews the performance of the business before these charges, which are
non-cash and do not apply evenly to all business units.
Adjusted EPS(( 18 (#_ftn18) )) of 47.8p (2022: 48.3p) was down (0.9%) and
basic EPS was up 79.9% to 14.9p (2022: 8.3p), driven by the positive impact
of organic growth, cost management and recent acquisitions. This includes an
addback for other investment impairment which is considered as outside of
normal trading. EPS was also impacted by a lower effective tax rate of 35.4%
(2022: 48.8%) and the issue of 290,151 (2022: 489,788) shares under the
Company's share plans. During the year, 325,998 (2022: 5,325,705) shares were
issued as consideration for acquisitions. Diluted EPS was 14.5p (2022: 8.1p).
1 6 Earnings before interest, taxation, depreciation, amortisation and
impairment.
1 7 Figures in table may not add due to rounding.
Dividends
The Board is pleased to recommend a final dividend of 18.0p per share
(2022: 17.8p). This makes a proposed total dividend for the year of 26.8p
(2022: 26.1p) a year-on-year increase of 2.7% (2022: 24.3%), demonstrating
our desire to deliver value to shareholders and confidence in the outlook for
our business.
The Board remains committed to a progressive dividend policy, while
maintaining an appropriate level of dividend cover. If approved, the final
dividend will be paid on 3 November 2023 to shareholders on the register at
the close of business on 22 September 2023, with an ex-dividend date of 21
September 2023.
The Company offers its UK, Channel Islands and Isle of Man resident
shareholders the option to invest their dividends in a Dividend Reinvestment
Plan ("DRIP"). The DRIP is administered by the Company's registrar, Link Group
("Link"), which uses cash dividend payments to which participants in the DRIP
are entitled to purchase shares in the market, which means the Company does
not need to issue new shares and avoids diluting existing shareholdings.
For the DRIP to apply to the proposed final dividend for the year ended 31 May
2023, shareholders' instructions must be received by Link by close of business
on 13 October 2023.
1 8 Before acquisition-related costs, amortisation and impairment of acquired
intangibles, gain on bargain purchase, deferred consideration as remuneration
and acquisition-related finance costs.
Cash flow
Cash balances at 31 May 2023 totalled £45.1m (2022: £53.9m). Cash generated
from operations was £36.7m or 160% of EBITDA (2022: £19.6m or 111%),
including a decrease in the Group's working capital requirement(( 19
(#_ftn19) )) of £4.8m (2022: (£8.9m) increase), comprising:
· A £1.0m increase (2022: £1.8m increase) in trade and other
payables, primarily due to:
- £2.8m increase arising from the deferred tax liability from the
acquisition of client portfolios in Doherty
- (£2.0m) reduction in other payables relating to the payment of a balance
of initial consideration payable for acquisitions in 2022; and
- £0.2m increase across other balances within trade and other payables.
· A £1.2m increase (2022: £5.3m increase) in trade and other
receivables, primarily due to:
- (£3.5m) decrease in trade receivables due to the unwinding of invoices
raised in subsidiaries Custodian Capital and Maven at year-end May 22;
- £3.6m increase in prepayments and accrued income due to banking interest,
block policy insurance, performance fee recognition and timing of premises
payments; and
- £0.9m increase in other receivables.
· A £4.9m increase in provisions during the year (2022: (£5.4m)
reduction), primarily due to:
- £5.4m increase in provisions for contingent remuneration following the
previous acquisition of Maven, Doherty; and
- (£0.5m) decrease across other provision balances, including increases to
provisions for client claims.
Adjusted cash generated from operations(( 20 (#_ftn20) ))(,) which excludes
items that are incurred as a result of the Group's acquisition activities,
increased by 55% to £48.1m (2022: £31.1m), representing 145% of Adjusted
EBITDA (2022: 95%).
Outstanding trade receivables increased to 26 days (2022: 37 days), with
credit management continuing to be an area of focus, as well as moving from
fee invoicing to deduction of income from client's holdings with platform
providers where the opportunity arises. Outstanding trade payables increased
to 22 days (2022: 15 days).
Net cash outflows from investing activities decreased to £28.6m (2022:
£65.3m) with £26.1m (2022: £64.0m) of initial consideration paid on
acquisitions completed in the period net of cash acquired.
Net cash from financing activities resulted in a £13.8m outflow (2022:
£81.0m inflow), with proceeds from the issue of share capital of £0.9m
(2022: £109.4m) to fund acquisitions made in the year. This outflow primarily
relates to dividends paid of £13.6m (2022: £11.0m) driven by the increased
number of shares in issue following acquisitions made during the year and the
dividend per share paid increasing in line with the Group's progressive
dividend policy.
1 9 Working capital defined as trade and other receivables less trade and
other payables.
20 Cash generated from operations before acquisition-related costs paid and
contingent remuneration paid.
Regulatory capital
The Group and Company continue to enjoy significant headroom on their
regulatory capital and liquidity requirements.
The Group's regulatory capital requirements have increased as a result of
further growth and diversification of its activities. In addition, the Group's
capital is reduced when it makes acquisitions due to the requirement for
intangible assets arising on consolidation in the Group's accounts, or
investments in subsidiaries in the Company's accounts, to be deducted from
Common Equity Tier 1 ("CET1") Capital.
In January 2022, following the introduction of the Investment Firm Prudential
Regime ("IFPR"), the value of the Group's CET1 Capital was reduced due to the
removal of reliefs on deduction of deferred tax assets and significant
investments in financial services entities that were available under the
previous regime. The FCA has approved the Company applying the Group Capital
Test, which allows investment firms relief from some of the prudential
consolidation requirements. This is a more straightforward capital treatment
where the Company is simply required to hold enough regulatory capital to
support its own capital requirements and its capital investment in its
subsidiaries.
At 31 May 2023 the Company had headroom of £11.1m on its regulatory capital
requirement of £14.9m, a 75% surplus, giving the Board the flexibility to
pursue further acquisition opportunities.
Segmental review
Investment and asset management
The Group's gross discretionary assets, including the multi-asset funds that
sit at the heart of our DPM service, Custodian Property Income REIT, the
Mattioli Woods Property Securities and Responsible Equity funds, the funds
managed by Maven and the Group's associate company, Amati, totalled £4.8bn
(2022: £5.1bn) at the year-end, with movements during the year as follows:
Assets under management DPM Custodian REIT MTW PSF(( 21 (#_ftn21) )) MTW Amati Maven Gross AuM Cross-holdings Net AuM
£m £m £m REF(( 22 (#_ftn22) )) £m £m £m £m £m
£m
At 1 June 2022 2,527.5 527.6 62.2 7.2 1,208.9 771.1 5,104.6 (169.7) 4,934.9
Acquisitions - - - - - - - - -
Inflows 248.6 - 25.7 2.6 220.5 92.1 589.6 - 589.6
Outflows (207.4) - (1.8) (0.1) (259.0) (53.3) (521.6) 8.6 (513.0)
Market movements (83.6) (90.0) (17.7) (0.1) (256.5) 25.4 (422.5) - (422.5)
At 31 May 2023 2,485.1 437.6 68.4 9.6 913.9 835.3 4,750.1 (161.1) 4,588.9
Crossholdings comprises holdings in DPM(( 23 (#_ftn23) )),in Amati
funds(( 24 (#_ftn24) )) and in other non-DPM crossholdings.
21 Mattioli Woods Property Securities Fund
22 Mattioli Woods Responsible Equities Fund
23 Comprises £12.0m (2022: £13.5m) in Custodian REIT, £66.3m (2022:
£60.5m) in MW PSF and £55.2m (2022: £70.3m) in Amati funds.
24 Crossholdings between Multi-Asset Fund ("MAF"): TB Amati Smaller Companies
Fund and the Amati AIM VCT plc £11.7m (2022: £16.4m) and non-MAF cross
holdings £15.9m (2022: £8.9m).
Investment and asset management revenues generated from the Group's investment
services, which include advising clients on both pension and personal
investments, our DPM service and management of multi-asset and other
specialist funds, increased 0.6% to £50.8m (2022: £50.4m). Fees for services
provided by the Group's subsidiary Custodian Capital to Custodian Property
Income REIT are included in the 'Property management' segment, with fees
generated by the Group's subsidiary Maven included in the 'Private equity
asset management' segment.
Income from initial and ongoing portfolio management charges decreased to
£25.0m (2022: £26.4m), with lower gross inflows into our DPM service of
£248.6m (2022: £482.8m) and the negative market impact on asset values
during the year.
Annual management charges on the Mattioli Woods individual structured plans
increased to £0.6m (2022: £0.4m) following the release of eight individual
plans during the year, attracting investment totalling £31.8m. The prior year
also included revenues for the Mattioli Woods Structured Products Fund which
was wound down during the period.
Adviser charges based on gross assets under advice of £4.2bn (2022: £3.5bn)
increased to £22.6m (2022: £20.9m), driven by new business wins, existing
client inflows and the revenue contribution from the acquisition of Doherty
during the year, which added assets under advice of £0.6bn.
Total assets under management and advice support the quality of earnings
through an increase in recurring revenues, the proportion of the Group's total
revenues which are recurring increased to 90.9% (2022: 86.8%) due to the
organic growth with pensions consultancy and advice, the launch of two (2022:
nil) private investor club and private syndicate investments during the year
totalling £8.4m (2022: £nil) and the market impact on placement and
performance fees with Maven during the year. As with other wealth and asset
management firms, these income streams are linked to the value of funds under
management and advice. Therefore they are affected by the performance of
financial markets, with the negative impact of market movements on the value
of client assets offset by the impact of acquisitions and positive net inflows
during the year.
Pension consultancy and administration
Pension consultancy and administration revenues were up 20.3% to £23.7m
(2022: £19.7m), with a total of 10,957 (2022: 11,084) SIPP and SSAS schemes
administered by the Group, following a 1.0% increase in the number of advised
pensions being offset by an expected (5.0%) reduction in the number of schemes
operated on an administration-only basis.
Direct(( 25 (#_ftn25) )) pension consultancy and administration fees
increased 24.8% to £20.1m (2022: £16.1m) driven by increased client activity
during the year. Retirement planning remains central to many of our clients'
wealth management strategies and the number of direct schemes increased to
7,172 (2022: 7,098), with 406 new schemes gained in the year (2022: 448).
Our focus remains on the quality of new business, with the value of a new
scheme averaging £0.3m (2022: £0.3m). We continue to enjoy strong client
retention, with a slight reduction in the external loss rate(( 26 (#_ftn26)
)) to 2.3% (2022 restated: 2.6%) and the overall attrition rate(( 27
(#_ftn27) )) remaining flat at 4.0% (2022 restated: 4.0%) driven by a
changing mix of new clients as we continue to attract clients who we
anticipate taking multiple service lines and increased product mix into their
portfolios over the coming years, and integrate acquired portfolios.
The number of SSAS and SIPP schemes the Group operates on an
administration-only basis fell to 3,785 (2022: 3,986) at the year-end. In
prior years, the Group has been appointed to administer a number of SIPPs
following the previous operators' failure. Work continues in connection with
schemes previously administered by Stadia Trustees Limited, HD Administrators,
Pilgrim Trustees Services Limited and The Freedom SIPP Limited, with a 5.0%
fall in scheme numbers however, third-party administration fees increased by
2.8% to £3.7m (2022: £3.6m) following alignment of fee structures across
various portfolios.
25 SIPP and SSAS schemes where Mattioli Woods acts as pension consultant and
administrator.
26 Direct schemes lost to an alternative provider as a percentage of average
scheme numbers during the year.
27 Direct schemes lost as a result of death, annuity purchase, external
transfer or cancellation as a percentage of average scheme numbers during the
year.
The Group's banking revenue was £1.5m (2022: £0.05m) driven by a consecutive
increase to the Bank of England's base rate from a historic low of 0.1% in the
prior year to 4.5% at 31 May 2023. The Group's banking revenue is expected to
increase as a result of further base rate increases following the year end and
our introduction of a new pension banking proposition offering clients better
interest rates and the Group an enhanced banking margin.
Segment margin increased to 32.0% (2022: 20.0%) driven by increased client
activity, banking margin and new business wins with the prior year reflecting
the impact of amended revenue share arrangements for our consultancy team as
previously disclosed.
Due to the broader market shift away from accumulation and steady savings, we
anticipate there will be some natural outflows from our clients' SIPP and SSAS
schemes, particularly as the 'baby boom' generation reaches retirement.
However, we expect any such decumulation to have a positive impact on the
Group's results over this medium-term horizon, with our multi-generational
approach, linking our strength in the provision of advice around the cascading
of wealth down through the generations, inheritance tax and other planning.
Private equity asset management
Revenue in the year was £23.1m or 20.7% of Group revenue. Recurring revenues
of £18.6m were supplemented by £4.5m of non-recurring, but repeatable
revenues primarily generated from fund, VCT and investor partner performance
and exit fees, highlighting the quality of Maven's investment team and product
proposition.
During the year, we continued the integration of Maven's investment
proposition across the Group, delivering a number of co-investment
opportunities to qualifying Mattioli Woods, Ludlow and Maven clients. We also
launched the Maven Milestone Fund, which enables pension clients to invest in
forthcoming private equity opportunities, with the Group's advisory clients
contributing £5.3m or 95.7% of the fund raise. Maven completed a further
co-investment deal with a value of £5.1m with the Group's advisory client
contributing £2.4m of the fund raise during the year and has a healthy
pipeline of new co-investment opportunities to launch in the current year.
The quality of Maven revenue is underpinned by high recurring revenues of
80.3% (2022: 67.3%) in on-going management fees alongside deal arrangement and
performance and exit fees. The deal track record of high-quality performance
delivered £50.9m or 6.6% increase in AuM through a combination of net
inflows, new tender wins and positive performance despite the market
complexities over the last year, noting that several of the private equity
investments are linked to markets such as FTSE AIM.
Property management
Property management revenues were £6.8m (2022: £6.3m), despite Custodian
Capital's assets under management and administration falling to £529.8m
(2022: £618.1m) at 31 May 2023. The decrease in Custodian Capital's AuM was
primarily driven by Custodian Property Income REIT's portfolio experiencing an
11.8% like-for-like decline in valuations during the year of £91.6m (2022:
increase of £94.0m) compared to a 17.0% market decrease. Since the year end,
valuations appear to have largely stabilised and we have seen some optimism
returning to real estate markets following a period of economic turbulence
when property pricing reacted promptly to the new interest rate environment
and to punishing refurbishment/build cost inflation.
Recurring annual management charges represented 88.7% (2022: 98.5%) of
property management revenues, the majority of which are derived from Custodian
Capital's services to CREIT, with the reduction versus the prior year driven
by falls in the fund's net asset value during the period.
In addition, Custodian Capital continues to facilitate direct property
ownership on behalf of pension schemes and private clients and manages our
Private Investors Club alternative investments, which have been provided to
suitable clients by way of private investor syndicates. We are in the
process of merging the Private Investors Club with Maven Investor Partners
("MIP"), with a number of new opportunities in the pipeline.
Employee benefits
Employee benefits revenues were up 17.5% to £6.7m (2022: £5.7m), with
positive market conditions driven in part by the continued post-pandemic
recovery coupled with new client wins and increased uptake of strategic
benefits consultancy projects from existing clients. The division's strong
operating performance was supported by robust client retention and an
accretion in premiums for risk and healthcare cover.
Increasingly, employers are encouraging staff wellbeing and retirement savings
as part of their benefits packages and we expect greater emphasis on these as
the adoption of flexible working becomes more commonplace, providing
opportunities for further growth over the coming years.
Acquisitions
We have developed considerable expertise and a strong track record in the
execution and subsequent integration of acquisitions. At the year-end, we had
invested over £254m since our admission to AIM in 2005, bringing 35
businesses or client portfolios into the Group.
Previously acquired businesses are integrating well, with combined revenue and
cost synergies being £1.3m for the full year, with additional cross-sell
opportunities targeted for the new financial year.
There continues to be a high level of M&A activity in the wealth and asset
management sector and we were pleased to complete the acquisition of Doherty's
and our investment in White Mortgages during the year. We have a strong
pipeline of bolt-on acquisition opportunities to assess, as well as
potentially more substantial opportunities in the longer term. We plan to
build on our track record of successful acquisitions by continuing to assess
and progress opportunities that meet our strict criteria.
Relationships
The Group's performance and shareholder value are influenced by other
stakeholders, principally our clients, suppliers, employees, regulators, the
Government and our strategic partners. Our approach to all these parties is
founded on the principle of open and honest dialogue, based on a mutual
understanding of needs and objectives.
Relationships with our clients are managed on an individual basis through our
client relationship managers and consultants. Employees have individual
performance development reviews and employee forums also provide a
communication route between employees and management. Mattioli Woods also
participates in trade associations and industry groups, which give us access
to client and supplier groups and decision-makers in the Government and other
regulatory bodies. Mattioli Woods is a member of the Association of
Member-directed Pension Schemes, Quoted Companies Alliance and World Broker
Network.
Resources
The Group aims to safeguard the assets that give it competitive advantage,
including its reputation for quality and proactive advice, its technical
competency and its people.
Our core values provide a framework for integrity, leading to responsible and
ethical business practices. Structures for accountability from our consultancy
and administration teams through to senior management and the Group's Board
are clearly defined. The proper operation of the supporting processes and
controls are regularly reviewed by the Audit Committee and the Risk and
Compliance Committee and take into account ethical, ESG and consumer duty
considerations, including procedures for 'whistle-blowing'.
Our people
Over 31 years since founding the Company, I continue to be thankful and
humbled for the enduring culture of professionalism, positive mindset and
commitment that our entire team continues to show when managing our clients'
affairs throughout another complex year.
Our Executive team continues to bring new ideas to drive further growth and
generate sustainable shareholder returns. Following the year end, the Board
was pleased to announce the appointment of Michael Wright as Deputy Chief
Executive Officer. In this new role, Michael will lead and support the
delivery of certain strategic goals alongside the Executive team, while
retaining his current responsibilities.
The Board recognises the importance of good communication and will seek to
ensure the strong client-centric behaviours embedded within the business are
preserved. The benefit of changes made to our governance structure in the
prior year are now being realised. Outside of board meetings, the
Non-Executive Directors have held a number of meetings with employees and
shareholders to share experiences more directly.
Total headcount at 31 May 2023 had increased to 896 (2022: 847), primarily
as a result of recent acquisitions and the recruitment of consultants and
support staff. We remain committed to investing in the training and
professional development of our people to create capacity to deliver further
growth. We continue to enjoy a strong team spirit and facilitate employee
equity ownership through the Mattioli Woods plc Share Incentive Plan ("the
Plan") and other share schemes. At the end of the year, 59% of eligible staff
had invested in the Plan (2022: 65%) and we continue to encourage broader
staff participation.
The Mattioli Woods Employee Benefit Trust ("the Trust") held shares for the
benefit of the Group's employees and, in particular, to satisfy the vesting of
awards made under the Company's various share schemes. The shares held by the
Trust were sold in the final quarter of the year with proceeds set aside to be
utilised for the benefit of staff who are experiencing financial hardship or
other issues in their lives, or to provide financial benefit to staff members
as deemed appropriate by the Executive Directors.
Forward-looking statements
The Strategic Report is prepared for the members of Mattioli Woods and should
not be relied upon by any other party for any other purpose. Where the report
contains forward-looking statements, these are made by the Directors in good
faith based on the information available to them at the time of their approval
of this report. Consequently, such statements should be treated with caution
due to the inherent uncertainties, including both economic and business risks
underlying such forward-looking statements and information. The Group
undertakes no obligation to update these forward-looking statements.
Principal risks and uncertainties
The Board is ultimately responsible for risk management and regularly
considers the most significant and emerging threats to the Group's strategy,
as well as establishing and maintaining the Group's systems of internal
control and risk management and reviewing the effectiveness of those systems.
The Board and senior management are actively involved in a regular risk
assessment process as part of our risk management framework, supported by the
requirements of the Investment Firm Prudential Regime
(http://www.handbook.fca.org.uk/instrument/2021/FCA_2021_38.pdf) ("IFPR")
internal capital and risk assessment ("ICARA") process. The ICARA assesses the
principal risks facing the Group. Stress tests include consideration of the
impact of a number of severe but plausible events that could impact the
business. The ICARA also takes account of the availability and likely
effectiveness of mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks.
Day-to-day, our risk assessment process considers both the impact and
likelihood of risk events that could materialise and affect the delivery of
the Group's strategic goals. Risk owners regularly review and update where
needed the controls in place to mitigate the impact of the risks, with
independent review and challenge given by the Risk Management team. Throughout
the Group, all employees have a responsibility for managing risk and adhering
to our control framework.
There are a number of potential risks that could hinder the implementation of
the Group's strategy and have a material impact on its long-term performance.
These arise from internal or external events, acts or omissions that could
pose a threat to the Group. The principal risks identified as having a
potential material impact on the Group are detailed below, together with the
principal means of mitigation. The risk factors mentioned do not purport to be
exhaustive as there may be additional risks that materialise over time that
the Group has not yet identified or deemed to have a potentially material
adverse effect on the business:
Industry risks
Risk type Description Mitigating factors Chance Impact Change in risk
Changes in investment markets and poor investment performance Financial markets globally have experienced many challenges in the last year · Majority of clients' funds held within registered pension schemes High Medium No change
and investment market volatility has increased as a result. The war in Ukraine or ISAs, where clients are less likely to withdraw funds and lose tax
has continued to have a knock-on effect on markets and will continue while the benefits, due to the longer-term nature of financial planning.
conflict is resolved. This volatility may adversely affect trading and/or the
value of the Group's assets under management, administration and advice, from · Broad range of investment solutions enables clients to shelter
which we derive revenues. from market volatility through diversification, while continuing to generate
revenues for the Group.
· Market volatility is closely monitored by the Asset Allocation
teams, as delegated by the Asset Management Committee, and includes monthly
assessment of what is changing in markets and the economic environment
globally; regular risk analysis, including a sentiment survey of the
individual members of the Multi-Asset team considering their own analysis of
external analysts' reports on a rolling basis. There are also regular reviews
of liquidity. Further, performance is considered every month, in detail,
including attribution and contribution analysis. Reports are then discussed by
the Investment Committee every two months.
Compliance with environmental, social and governance ("ESG") standards Failure to meet future ESG reporting requirements, the Group not being · Internal action plan in place to deliver short, medium, and High High No change
recognised as an ESG responsible business or ESG products offered not meeting longer-term initiatives.
target market requirements could result in:
· The Mattioli Woods Responsible Equity Fund, geared to the principles
· Regulatory censure; of ESG, valued at £9.64m at 31.05.2023.
· Loss of client or shareholder confidence; and · ESG holds a central consideration within the product governance
framework of the Group.
· Clients looking elsewhere for ESG focused products.
· Internal Executive ESG Committee established.
· Dedicated ESG role filled during the period.
· Continuing to explore positive actions, harnessing technology and
solutions across the business to reduce our environmental footprint and make a
positive contribution towards our ESG-related goals.
Climate change - physical impacts Impacts from the increasing severity and frequency of extreme climate events, · The Group occupies resilient buildings that can withstand damage from High Medium No change
and longer-term progressive shifts in the climate might include: storms, strong winds and flooding.
· Business interruption as a result of damage to infrastructure or loss · Disaster Recovery ("DR") and Business Continuity Planning ("BCP") are
of services; in place to continue business as usual.
· Costs of improving resilience and adaptation; and · We support flexible working and work from home options, which have
been tested as part of our continuity plans and contribute positively to our
· Lower productivity, income and profits. goal of being a paperless business where possible.
Climate change - transition impacts Transition impacts relate to the process of adjusting to a low-carbon economy. · DR/BCP in place to continue business as usual. High Medium No change
Transition risks can occur when moving towards a less polluting, greener
economy. · Plans in place to reduce negative impact of our activities through
initiatives such as moving towards paperless offices and transitioning towards
an all-electric car fleet.
Transitions such as the UK ban on the sale of fossil-fuel-powered cars from
2040 could mean big shifts in asset values, higher costs of doing business,
business disruptions or lower productivity, income and profits.
Changing markets and increased competition The Group operates in a highly competitive environment with evolving · The Group seeks to maintain strong working relationships with High High No change
characteristics and trends. clients underpinned by high levels of service, quality products and a
continued focus on product development and innovation.
· Consolidating market position is enhancing the Group's
competitive advantage.
· Control over scalable and flexible bespoke pension administration
platform.
· Experienced management team with a strong track record.
· Loyal customer base and strong client retention.
· Broad service offering gives diversified revenue streams.
· Our investment in people, cloud-based technology and
infrastructure provides an operating model that includes home working for the
majority of staff and specific shift rotations for our people carrying out
essential tasks.
· Harnessing efficiencies through our continued assessment of the
changes to working patterns and methods.
Regulatory risk The Group may be adversely affected as a result of new or revised legislation · Embraced the principles and rules within the new Consumer Duty, Medium Medium/High No change
or regulations or by changes in the interpretation or enforcement of existing which are fully aligned to culture and ethos of the business.
laws and regulations.
· Strong compliance culture, with appropriate oversight and
reporting supported by training.
· External professional advisers are engaged to review and advise
upon control environment.
· Business model and culture embraces FCA principles, including
treating customers fairly.
· Decision to withdraw from providing advice on safeguarded
pensions.
· Financial strength provides comfort should there be a need to
increase capital resource requirements.
Operational risks
Risk type Description Mitigating factors Chance Impact Change in risk
Damage to the Group's reputation There is a risk of reputational damage as a result of employee misconduct, · Strong compliance culture with a focus on positive customer Medium High No change
failure to manage inside information or conflicts of interest, fraud, improper outcomes.
practice, poor client service or advice.
· High level of internal controls, including checks on new staff.
· Well-trained staff who ensure the interests of clients are met in
the services provided.
Errors, breakdown or security breaches in respect of the Group's software or Serious or prolonged breaches, errors or breakdowns in the Group's software or · Ongoing reviews and testing of data security, including High High No change
information technology systems information technology systems could negatively impact customer confidence. It penetration testing and 'phishing' exercises.
could also breach contracts with customers and data protection laws, rendering
us liable to disciplinary action by governmental and regulatory authorities, · IT performance, scalability and security are deemed top
as well as to claims by our clients. priorities by the Board, with additional controls introduced during the year.
· Further investment in the experienced in-house team of IT
professionals and established name suppliers.
· Ongoing audits of secure remote working, information security and
operational resilience undertaken in light of more flexible working practices.
Business continuity and operational resilience In addition to the failure of IT systems, there is a risk of disruption to the · Implementation of ICARA, backed up by a robust assessment of Medium Medium No change
business as a result of power failure, fire, flood, acts of terrorism, known risks and risks that emerge by the Operational Risk and Compliance
relocation problems and failure of external suppliers. Committee, which draws membership from across the business, embeds a culture
of risk awareness to ensure early detection and implementation of mitigating
steps.
· Periodic review and approval of BCP, considering best practice
methodologies.
· Periodic review and approval of DRP and disaster recovery teams
(including IT support) on call to deal with major incidents at short notice.
Business impact analysis has been conducted by department.
· Loss of revenue is covered by business interruption insurance
(subject to certain limits and exclusions).
· All Group operations can move to 'working from home' at short
notice, with little or no interruption to day-to-day business operations.
· Ongoing assessment of external suppliers' performance.
Fraud risk There is a risk an employee or third-party defrauds either the Group or a · The Group ensures the control environment mitigates against the High Medium No change
client. misappropriation of client assets, with additional controls being introduced
to safeguard client assets.
· The Group does not hold client money.
· Strong corporate controls require dual signatures or online
approvals for all payments. Operational committees' approval for all
expenditure above £10,000 but less than £100,000, Executive Committee
approval for all expenditure greater than £100,000 and Board approval for all
expenditure greater than £250,000.
· Assessment of fraud risk every six months discussed with the
Audit Committee, Risk and Compliance Committee and external auditors.
· Clients have view-only access to information.
· Ongoing review of risk of fraud due to external attack on the
Group's IT systems, including audit of secure remote working, information
security and operational resilience undertaken on an ongoing basis.
· All staff are required to complete structured training on
information security, cybercrime, fighting fraud and anti-money laundering
each year.
Key personnel risk The loss of, or inability to recruit, key personnel could have a material · Succession and talent planning is a key consideration throughout Low Medium No change
adverse effect on the Group's business, results of operations or financial the Group.
condition.
· Success of the Group should attract high calibre candidates.
· Share-based schemes in operation to incentivise staff and
encourage retention.
· Recruitment programmes in place to attract appropriate new staff.
· Cross functional acquisition team brought into acquisition
projects at an early stage.
· Ensuring the health and wellbeing of our people remains a
priority, with various support mechanisms in place and operating well. The way
our people work has changed, with the adoption of training, talent and
resource management and leadership in a remote environment.
Litigation or claims made against the Group Risk of liability related to litigation from clients or third parties and · Appropriate levels of Professional Indemnity insurance cover High Medium No change
assurance that a claim or claims will not be covered by insurance or, if regularly reviewed with the Group's advisers.
covered, will exceed the limits of available insurance coverage, or that any
insurer will become insolvent and will not meet its obligations to provide the · Comprehensive internal review procedures, including compliance
Group with cover. sign-off, for advice and marketing materials.
· Maintenance of three charging models; time cost, fixed and asset
based, which are aligned to specific service propositions and agreed with
clients.
· Restricted status for our consultants to enable the
recommendation of our own products and others in the market.
Reliance on third parties or outsourcing risk Any regulatory breach or service failure on the part of an outsourced service · Due diligence is part of the selection process for key suppliers, High High No change
provider could expose the Group to the risk of regulatory sanctions and including assurance on their controls over shared data.
reputational damage.
· Key contracts with third parties handling sensitive data are
escalated for review and approval.
· Service level agreements in place with key suppliers.
· Ongoing review of relationships and concentration of risk with
key business partners.
· Review of outsourcing is a key area of focus in the internal
audit plan.
· Our operational risk assessment considers the impact of
disruptions on critical business functions, with the BCP updated to include a
range of scenarios, informed in part by our experience through the pandemic.
SIPP administration for non-advised clients ("third-party SIPP Risk that through the provision of SIPP administration services to clients · The Group recognises the duty of care owed to these clients. High Low No change
administration") with no adviser or a third-party adviser, we facilitate the client acting with
no or bad advice. · Evidence of the suitability of advice where pension investments
are out of the ordinary (e.g. ensuring the client is a sophisticated
investor).
· Credentials of third-party advisers are checked against the FCA
register.
Strategic risk Risk that management will pursue inappropriate strategies or implement the · Experienced management team with successful track record to date. Low Low No change
Group's strategy ineffectively.
· Management has demonstrated a thorough understanding of the
market and monitors this through regular meetings with clients.
· Ongoing debate and counsel provided by a strong team of
Non-Executive Board members.
Conduct risk The risk that we fail our clients through the flawed design or mis-selling of · Only appropriately authorised consultants can provide advice. Medium Medium No change
our products or services, or poor business conduct results in client outcomes
that do not meet their needs and circumstances. · Robust training and competence scheme in place.
· Operation of 'three lines of defence' model, including internal
and external reviews to monitor suitability of advice being given to clients.
· Compliance oversight by a dedicated team covering; conduct,
product, complaints and technical.
· Non-standard investments require review and approval by the
Group's Non-Standard Investment team.
· Professional Indemnity ("PI") insurance in place.
Conduct risk (acquisitions) The risk that acquired clients have been failed by the acquired business · Due diligence process used to identify and assess risk in High Low No change
through the flawed design or mis-selling of products or services, or poor acquired client portfolios.
business conduct resulting in outcomes that do not meet their needs and
circumstances. · Run-off PI insurance cover and specific indemnities provided by
the sellers of acquired businesses to mitigate the Group's risk exposure.
· Active dialog with the FCA, especially where we identify specific
risks associated with the target business.
· Inclusion of warranties and indemnity clauses in purchase
agreements.
Information security (or cyber) risk The risk that the security controls over our IT systems are compromised by · External security provider scans for intrusion threats across our High High No change
internal or external influences, resulting in unauthorised access to our network 24/7.
client or corporate confidential data.
· Electronic data is protected by user access controls. Data
privacy training provided to all staff.
· Robust firewalls and patches maintained to prevent unauthorised
access to IT systems, including utilisation of third-party providers to
protect corporate networks.
· Electronic data is protected by user access controls. Data
privacy training is provided across the Group.
· Compliance with the Data Protection Act and registration with the
Information Commissioner's Office.
· Two step verification of any client instruction received by email
or post.
· Audit of secure remote working, information security and
operational resilience ongoing.
Financial risks
Risk type Description Mitigating factors Chance Impact Change in risk
Counterparty default That the counterparty to a financial obligation will default on repayments. · The Group trades only with recognised, creditworthy third Medium Medium No change
parties.
· Customers who wish to trade on credit terms are subject to credit
verification procedures.
· All receivables are reviewed on an ongoing basis for risk of
non-collection and any doubtful balances are provided against.
Bank default The risk that a bank could fail. · We only use banks with strong credit ratings within stated risk Medium High No change
tolerance limits.
· Client deposits spread across multiple banks.
· Regular review and challenge of treasury policy by management.
Concentration risk A component of credit risk, arising from a lack of diversity in business · The client base is broad, without significant exposure to any Medium Medium No change
activities or geographical risk. individual client or group of clients.
· Broad service offering gives diversified revenue streams.
Cost inflation The risk that increases in the price of goods and services erode the Group's · The Group manages a significant amount of discretionary spend in High Medium New risk
profits. areas such as marketing and IT development, which can be re-phased or
postponed to mitigate the impact of rising prices.
· The Group has sought to realise operational efficiencies and
controlled wage inflation through the use of one-off awards to mitigate the
impact of wage inflation.
Interest rate risk The risk the Group will sustain losses from adverse movements in interest · The Group maintains a strong balance sheet and currently has no Medium Medium New risk
bearing assets. interest-bearing debt.
· Exposure to movements in interest bearing assets is monitored to
ensure the Group is optimising its interest earning potential within accepted
In addition, Central Bank interest rate increases are increasingly being used liquidity and credit constraints.
in an attempt to counter inflation, which in turn may encourage clients to
leave available funds in cash. · Good relationships with key banking partners.
· Access to competitive interest rates due to scale of our
business.
· The Group has proven its ability to withstand challenging market
conditions, with any reduction in traditional investment-related revenues
typically offset by additional consultancy fees generated as a result of
clients proactively seeking advice, or fees on new investment products created
in response to client demand for higher-yielding investments.
· Increasing interest rates provide an opportunity to improve
client rates on pension scheme bank accounts, while generating an increased
banking income for the Group.
Emerging risks, including legislative and regulatory change, have the
potential to impact the Group and its strategy. The Board, Audit Committee and
Risk and Compliance Committee continue to monitor emerging risks and threats
to the financial services sector including, for example, the increased number
of attempted cyber and phishing attacks, regulatory change, climate change and
scenarios potentially arising from political and economic developments,
including implications from ongoing world conflicts, and change in political
leadership. We intend to continue to focus on operational resilience and
enhancing the control environment over the next 12 months.
Section 172 statement
The Directors consider that in conducting the business of the Company over the
course of the year they have complied with Section 172 (1) of the Companies
Act 2006 ("the Act") by fulfilling their duty to promote the success of the
Company and act in the way they consider, in good faith, would be most likely
to promote the success of the Company for the benefit of its members as a
whole.
Engaging with stakeholders
The continued success of our business is dependent on the support of all of
our stakeholders. Building positive relationships with stakeholders who share
our values is important to us and working together towards shared goals
assists us in delivering long-term sustainable success.
To fulfil their duties, the senior management team, the Directors of each
subsidiary company and the Directors of the Group itself take care to have
regard to the likely consequences on all stakeholders of the decisions and
actions they take, with a long-term view in mind and with the highest
standards of conduct, in line with Group policies. Where possible, decisions
are carefully discussed with affected groups and are therefore fully
understood and supported when taken.
Reports are regularly made to the Board by the senior management team about
the strategy, performance and key decisions taken, which provides assurance
that proper consideration is given to stakeholder interests in
decision-making, and the Board uses this information to assess the impact of
decisions on each stakeholder group as part of its own decision-making
process.
The Group's governance structure allows the Board and the senior management
team to have due regard to the impact of decisions on the following matters
specified in Section 172 (1) of the Act:
Section 172 factor Approach taken
(a) Consequences of any decision in the long term The business model and strategy of the Company is set out within the Strategic
Report. Any deviation from or amendment to that strategy is subject to Board
and, if necessary, shareholder approval.
At least annually, the Board considers a budget for the delivery of its
strategic objectives based on a three-year forecast model. The senior
management team reports non-financial and financial key performance indicators
to the Board each month, including but not limited to the measures set out in
the 'Key performance indicators' section of the Strategic Report, which are
used to assess the outcome of decisions made.
The Board's commitment to keeping in mind the long-term consequences of its
decisions underlie its focus on risk, including risks to the long-term success
of the business, leading to the conclusion that during the current period of
heightened political and market uncertainty both in the UK and globally, a
conservative level of cash resources should be maintained such that the
payment of dividends to shareholders and variable remuneration to employees
are balanced.
The strategy of the Group is focused on positive client outcomes that can
deliver sustainable shareholder returns over the long term and as such, the
long term is firmly within the sights of the Board when all material decisions
are made.
(b) Interests of employees The Group is committed to developing our people and maintaining the capacity
to deliver sustainable growth. How the Directors have regard to the interests
of the individuals responsible for delivery of its products and services is
set out in the 'Our people' sections of the Strategic Report and 'Employees'
section of the Directors' Report.
Employees are represented on the Board by Martin Reason.
(c) Fostering business relationships with suppliers, customers and others How the business manages relationships with suppliers, clients and other
counterparties is set out in the 'Relationships' section of the Strategic
Report. Suppliers and other counterparties are typically professional firms
such as banks, investment houses, platform providers, accounting firms and
legal firms with which the senior management team often has a longstanding
relationship.
Where material counterparties are new to the business, checks, including
anti-money laundering checks, are conducted prior to transacting any business
to ensure that no reputational or legal issues would arise from engaging with
that counterparty. The Company also periodically reviews the compliance of all
material counterparties with relevant laws and regulations such as the Modern
Slavery Act 2015. The Company pays suppliers in accordance with pre-agreed
terms.
Due to the Group's focus on holistic planning and providing high levels of
personal service while maintaining close client relationships, it has open
lines of communication with clients and can understand and resolve any issues
promptly.
(d) Impact of operations on the community and the environment The interaction of the Company with the wider community is explained in the
'Relationships' and 'Corporate Social Responsibility' sections of the
Strategic Report.
The Group's impact on the environment is limited due to the nature of the
Group's business operations as set out in the 'Environmental performance and
strategy' section of the Strategic Report and 'Environmental' section of the
Directors' Report. However, the Board is committed to limiting the impact of
the business on the environment where possible.
The Board takes overall responsibility for the Company's impact on the local
communities in which we operate and the environment. The Company's approach to
sustainability, preventing bribery, money laundering, slavery and human
trafficking is disclosed in the 'Corporate Social Responsibility' section of
the Strategic Report.
(e) Maintaining high standards of business conduct The Board believes that the ability of the Company to conduct its business and
finance activities depends in part on the reputation of the Board and senior
management team. The risk of falling short of the high standards expected and
thereby risking its business reputation is included in the Board's review of
the Company's risk register, which is conducted periodically.
The Board is responsible to shareholders for the proper management of the
Group and how the Board discharges its duties is set out in the Corporate
Governance Report.
The principal risks and uncertainties facing the business are set out in that
section of the Strategic Report.
(f) Acting fairly between members The Company's shareholders are a very important stakeholder group. The Board
oversees a formal investor relations programme which involves the Directors
and senior management team engaging routinely with the Company's shareholders.
The programme is managed by the Company's brokers and the Board receives
prompt feedback from both its brokers and its financial public relations
adviser on the outcomes of meetings.
The Board aims to be open with shareholders and available to them, subject to
compliance with relevant securities laws. The Independent Non-Executive Chair
of the Company and other Non-Executive Directors make themselves available for
meetings as appropriate and all attend the Company's Annual General Meeting
("AGM").
The investor relations programme is designed to promote formal engagement with
investors and is typically conducted after each half-yearly results
announcement. The Group also has open lines of communication with existing
investors who may request meetings and with potential new investors on an ad
hoc basis throughout the year, including where prompted by Company
announcements. For the last two years the Directors have also engaged with
retail shareholders through the Investor Meet Company platform, a
communication channel endorsed by the QCA. We increased our engagement with
retail investors with publication of specific retail-focused research on the
Group starting for the year ended 31 May 2022. Shareholder presentations are
made available on the Company's website. The Company has a single class of
shares in issue with all members of the Company having equal rights.
Methods used by the Board
The main methods used by the Directors to perform their duties include:
· Board strategy days to review all aspects of the Group's business
model and strategy and assess the long-term sustainable success of the Group
and its impact on key stakeholders. An Executive team strategy day was held
during the year, with a Board strategy day and a number of other strategy days
and sessions planned to take place in the current year;
· The Board meets regularly throughout the year as well as on an ad
hoc basis, as required by time critical business needs, such as acquisitions.
Board members regularly meet with members of the senior management team;
· The Board is responsible for the Company's ESG activities set out
in the Strategic Report. Iain McKenzie is appointed as the designated
executive with responsibility for ESG;
· The Board's risk management procedures set out in the Corporate
Governance Report identify the potential consequences of decisions in the
short, medium and long term so mitigation plans can be put in place to
prevent, reduce or eliminate risks to the Company and wider stakeholders;
· The Board sets the Company's purpose, values and strategy, detailed
in the 'Our approach' and 'Strategy' sections of the Strategic Report, and the
senior management team ensures they align with its culture;
· The Board carries out direct shareholder engagement via the AGM and
Directors attend shareholder meetings on an ad hoc basis;
· External assurance is received through internal and external audits
and reports from brokers and advisers; and
· Specific training for existing Directors and induction for new
Directors is as set out in the Corporate Governance Report.
Principal decisions in the year
Mattioli Woods comprises a number of operating segments, through which the
Executive team engages with each segment's unique stakeholders as well as
other businesses in the Group. The governance framework in place during the
year delegated day-to-day operational authority to a number of sub-committees
covering all parts of the business including but not limited to advice,
administration, investment management, operations, change management, risk and
compliance, acquisition activity and integration management, all subject to a
list of matters reserved for decision by the Executive Committee or the full
Board only, up to defined levels of cost and impact.
The Board has a formal schedule of matters specifically reserved to it for
decision, including strategic planning, business acquisitions and disposals,
authorisation of major capital expenditure and material contractual
arrangements, setting policies for the conduct of business and approval of
budgets and financial statements.
The principal non-routine decisions taken by the Board during the year were:
· The Board considered the strategic rationale for all acquisitions,
the associated risks and the performance impact on the Group. Acquisitions
during the year including Doherty Pension and Investment Consultancy Limited
and the majority stake in White Mortgages Limited are further detailed in Note
3 to the financial statements;
· The review and decision not to progress with a number of other
potential acquisitions during the year;
· Approval to sell shares held in the Employee Benefits Trust during
the year with proceeds to be used for the benefit of staff;
· Each year the Board conducts a review of its effectiveness which
was led by an external third-party during the year. The external facilitator
recommended that development plans be established for all Board members
including on-going training for new and existing members to ensure legislative
and regulatory changes are communicated across all roles;
· The appointment of Michael Wright as Deputy Chief Executive
Officer. The Board considered that Michael's extensive experience and
dedication made him the ideal candidate for this pivotal role; and
· Determination of dividend. The Board recommends a final dividend of
18.0p per share (2022: 17.8p). This decision was taken in conjunction with a
review of returns to all key stakeholders, including staff in the form of
salary awards and bonus payments.
Due to the nature of these decisions, a variety of stakeholders had to be
considered as part of the Board's discussions. Each decision was announced at
the time, so that all stakeholders were aware of the decisions.
Stakeholders
The Directors are aware there are a number of other stakeholders, in addition
to shareholders, who will be affected by the actions of the Group. The below
table outlines how we consider these stakeholders and how we engage with them:
Stakeholder Why we engage How we engage How we responded
Our clients Clients are the central focus of our business. By engaging with them, we are We engage with our clients in a variety of ways, driven by their requirements Our clients' desire to have easier on-boarding and better access to
able to gain a better understanding of their needs and ensure that we can and preferences, including: information about their financial affairs resulted in the Board supporting the
provide them with bespoke solutions to address their financial goals and to
Group's investment in a new digital, self-investment platform, alongside our
provide better client outcomes. · regular meetings with consultants and investment managers; in-house client portal.
· the use of video technology to enable virtual engagement with clients
alongside face-to-face meetings;
ESG has become an important topic for our clients for several years and the
· virtual seminars held for clients and introducers; launch of The Mattioli Woods Responsible Equity Fund reflects this alongside
opportunities from Maven.
· investment updates and quarterly statements;
· regular market bulletins both in printed and electronic form; and
· client portals, where investment management clients can view details
of their investments.
Employees Our people are the key to our success, and we want them to be successful We have a comprehensive internal communication programme to engage with and There remains an increased focus on health and wellbeing, in addition to
individually and as a team. listen to our people, including: development opportunities, pay, benefits and flexible working arrangements.
· the CEO and other members of the senior management team frequently
leading staff forums ranging from all staff video conferences to small group
The Board recognises the firm's culture and corporate values underpin the discussions; This focus on our staff enabled the successful transition and continued
effective delivery of its strategy. Our aim is to continue to attract, retain,
adoption of flexible working practices.
develop and motivate the right people for our current and future business · Martin Reason was appointed as the designated Non-Executive Director
needs. with responsibility for engagement with the workforce; and
· we undertake regular employee engagement surveys working closely with We continue to strengthen our wellbeing capabilities, increasing the number of
an external provider to provide an interactive feedback experience, the staff focused on this including creation of an internal team of mental health
results of which are closely monitored with the Board and senior management first aiders.
team considering what actions need to be taken in response.
This also extends to an increased number of options available to staff via our
flex-benefits platform.
Shareholders As owners of the Group, we rely on our shareholders' support. Their opinions We engage with our shareholders through the following activities: We have provided regular updates on company performance throughout the year,
are important to us and we want to give them a better understanding of our
with dividends increased and paid during the year.
business. In addition, we have obligations as an AIM-listed company to provide · regular meetings with our investors throughout the year to discuss
information to our shareholders. delivery of our strategy, current performance and plans for the business
through our Executive and Non-Executive Directors; and
We have a number of long-term, committed shareholders. The highly successful
· the provision of detailed financial reports and presentations on the share placing to fund the acquisition of Maven, Ludlow and a pipeline of
business at the half-year and full year. smaller bolt-ons reflects the strong relationships we have built with our
shareholders.
Suppliers We recognise the importance of our various suppliers in delivering services to We engage with our suppliers to develop mutually beneficial and lasting Key areas of focus have included innovation, enhancing our client
clients and ensure we have shared values. partnerships. Engagement with suppliers is primarily through a series of propositions, cyber security, health and safety and sustainability.
interactions and formal reviews.
The Board recognises that relationships with suppliers are important to the
Group's long-term success and is briefed on supplier feedback and issues on a
regular basis.
Communities We seek both to support our community and to reduce our impact on the We engage with the communities in which we operate to build trust and We continued to support a number of national and local charities during the
environment as much as possible. understand the local issues that are important to them. year including our national charity, British Heart Foundation. In addition we
supported over 102 local charities as selected by our staff members across the
UK, donating £0.2m during the year.
We recognise the responsibility we have to wider society and other key We seek our people's input on how we can support local causes and issues,
stakeholders. We believe that demanding high levels of corporate create opportunities to recruit and develop local people and help to look
responsibility is the right thing to do. after the environment. We continue to support local charities in the communities in which we operate,
as well as through continuation of our consultancy training programme with
intake across the country and an increased recruitment of apprentices into the
Group.
We partner with local charities and organisations at an individual office
level to raise awareness and funds. The impact of decisions on the environment
both locally and nationally is considered with such considerations as energy
providers and the use of and disposal of paper and plastic.
The Government and regulator We seek to build positive relationships with the Government and our regulator We engage with the Government and our regulator through a range of industry We held regular meetings with our regulators
who provide key oversight of how we run our business and we believe our consultations, forums, meetings and conferences to communicate our views to during the year and continue to have a proactive and transparent relationship
clients' best interests are served by our working constructively with them. policy makers relevant to our business. with them.
Mattioli Woods is a member of the Association of Member-directed Pension We ensured our payment terms with all suppliers
Schemes and the Quoted Companies Alliance. were fair and in compliance with payment practices.
Key areas of focus are compliance with laws and regulations, health and safety We regularly assess our key suppliers for
and ESG. The Board is updated on legal and regulatory developments and takes conformance to the Modern Slavery Act and conducted a risk assessment of our
these into account when considering future actions. supply chain. Our modern slavery statement is reviewed and updated by the
Board annually.
Further information on the ways in which the Board engages with stakeholders
is set out in the Corporate Governance Report and the Strategic Report.
Environmental, social and governance performance and strategy
As a Group, we take our environmental, social and governance commitments
seriously, and have formed a dedicated Board Environmental, Social and
Governance Committee, together with investing in our people and capabilities
in these important areas.
Due to the Group's activities, Mattioli Woods impacts the local and global
environment, and it is committed to monitoring the environmental performance
of its assets and using this information to develop robust strategies to
minimise its environmental impact where possible. The Companies (Directors'
Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 implement the Government's policy on streamlined energy and
carbon reporting (SERC), requiring disclosure of the environmental performance
of the Group's assets through calculating the Group's greenhouse gas ("GHG")
emissions and subsequently, setting strategies to minimise these emissions.
The following information summarises the Group's environmental performance
over the year.
Methodology
GHG emissions are quantified and reported according to the Greenhouse Gas
Protocol. Consumption data has been collated and converted into CO2 equivalent
("CO2e") using the UK Government 2021 and 2022 Conversion Factors for Company
Reporting to calculate emissions from corresponding activity data. To collect
consumption data, the Group has reviewed utility invoicing and its staff
expense software to track business mileage in Group-owned vehicles and
employee-owned vehicles. All the Group's GHG emissions are attributable to the
United Kingdom, as 100% of the Group's occur within the United Kingdom. Data
disclosed relates to our financial reporting period, which is 1 June 2022 to
31 May 2023, as well as the comparative previous year in 2021 to 2022,
presented as 2023 and 2022 respectively. We have calculated energy intensity
and emissions intensity using the total floor area which is considered to best
represent the scale of the business compared to using alternative measures
such as headcount, as the majority of energy usage is from buildings.
In 2023, the Group instructed a new consultancy to prepare its SECR statement,
which has resulted in a change to the methodology. This has improved data
estimations to provide a more accurate and complete overview of the company's
environmental impact. This includes estimating and gap filling instances where
data was either partially or entirely unavailable, which was not completed in
previous years. Further details on the estimation methodology and application
is provided within the 'Assumptions and estimations' section. As part of the
data collection, a materiality assessment was applied to determine which
indicators were relevant to the Group. We have assessed each indicator in
terms of its impact on the Group and its perceived importance to stakeholders.
Further details on immaterial and excluded emissions are provided in the
'Reporting boundaries and limitations' section.
Sustainability is a key priority for Mattioli Woods and we are working towards
putting in place an environmental vision and strategy, including the
development and implementation of key performance indicators and long-term
targets for Scope 1 and 2 emissions. No electricity or gas consumption is
currently directly from renewables. This strategy will also involve setting a
plan of building and car fleet optimisation opportunities.
Reporting boundaries and limitations
The GHG sources that constitute our operational boundary for the reporting
period are:
· Scope 1: Natural gas combustion within boilers, gas oil combustion
within generators and road fuel combustion within owned vehicles.
· Scope 2: Purchased electricity consumption for our own use.
· Scope 3: Fuel consumption from employee-owned cars for business
use.
Business travel from third party operators, where the company is not
responsible for purchasing fuels, has been excluded within this reporting, as
it is considered immaterial and sufficient data to estimate this is not
available. Fugitive emissions from refrigerant gases from office air
conditioning are considered immaterial and have been excluded. The company
leases the overwhelming majority of its buildings and therefore does not have
responsibility for air conditioning systems, and no major leaks are known to
have occurred in its owned buildings. Water consumption and waste generation
are also considered immaterial and have been excluded from reporting.
Sufficient collection processes and data quality are unavailable to support
accurate reporting against these measures, and the impact of these sources is
significantly lower than that of energy consumption.
Assumptions and estimations
Actual data from supplier invoices was prioritised for reporting however, in
instances where this was not available partially or entirely, consumption data
was estimated. While instances where no data was available at a building
continue to be estimated, data completeness has been reviewed in 2023 to
ensure there is full coverage over the reporting period. This has resulted in
48% of the 1,758,388 kWh of energy consumption from the operation of buildings
being estimated.
The estimation method applied in each case was chosen based on the number of
months in the reporting period for which actual data was available for each
asset. When three or more months of consumption data was available, the
missing months were gap filled based on the average consumption per month for
the asset. When less than three months of actual data was available the Better
Buildings Partnership ("BBP") 2020 Real Estate Environmental Benchmark
("REEB") intensities were used to estimate the annual consumption from the
floor area.
During this reporting period, the Group continued to lease three assets which
were vacant. When no consumption data was available, the average intensity of
the vacant assets that did have invoice data was used to estimate the gaps. As
quantities of fuel were unavailable for business travel, mileage data was used
to convert business travel into both GHG emissions and energy consumption
equivalent (kWh).
Performance
The table below shows absolute performance of our Scope 1, 2 and 3 emissions
for the year, which represents the Group's third year of reporting under the
Companies (Directors' Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018:
GHG emissions (tCO2e) 2022
2023 Change
Scope 1 Fuel consumption (gas office heating) (kWh) 644,571 493,032 31%
Associated GHG (tCO(2)e) 118 90 31%
Fuel consumption (company vehicles) (miles) 426,995 197,643 116%
Fuel consumption (company vehicles) (MWh) 347 260 34%
Associated GHG (tCO(2)e) 86 45 92%
Scope 2 Electricity consumption (office and company car electricity) (kWh) 1,113,917 796,319 40%
Associated GHG (tCO(2)e) 215 169 27%
Total Scope 1 & 2 emissions 420 304 38%
Scope 3 Fuel consumption (own cars for business use) (miles) 142,488 78,765 81%
Fuel consumption (own cars for business use) (MWh) 159 104 53%
Associated GHG (tCO(2)e) 40 22 92%
Total Scope 3 emissions 40 22 92%
Gross Scope 1, 2 and 3 emissions 460 326 41%
Total floor area (sqft) 120,106 105,675 14%
Scope 1 & 2 emissions intensity (tCO(2)e/sqft/yr) 0.0035 0.0029 20%
Scope 3 emissions intensity (tCO(2)e/sqft/yr) 0.00034 0.0002 68%
Corporate social responsibility
Our commitment to operating responsibly
At Mattioli Woods we continue to work through the challenges placed in part by
the ongoing level of market uncertainty. Our dedicated team has allowed us to
rise to these challenges and continue making a positive contribution to our
stakeholders - our clients, shareholders, staff, suppliers and chosen charity
partners alike. We believe this is responsible business in action. In 2023,
our Risk and Compliance Committee reviewed where the Group currently stands
and has developed a strategy defining how we will prioritise and accelerate
environmental, social and governance ("ESG") workstreams in the business. This
included the appointment of dedicated roles and creation of an internal
Executive ESG Committee to oversee and manage these workstreams.
Our approach to achieving good governance comes from a passion to ensure we do
the right things for our clients, and this is embedded in the culture of the
Mattioli Woods team, where staff are encouraged to thrive and develop in their
roles and the business in turn supports them in their own career development.
We have recently introduced a talent programme across the business and our
record of growing our own and promoting from within adds to the sense of
teamship which underpins everything we do, a prime example being the
appointment of Michael Wright, who joined the business as a graduate in 2004,
as Deputy CEO this year.
Sustainability
The Group continues to grow, and we recognise that we have a responsibility to
support our profitable expansion by operating in a sustainable manner. As we
continue to operate in a complex marketplace, we have demonstrated we can
deliver great client outcomes in different and sustainable ways, with staff
continuing to work flexibly throughout the year. This will inform our thinking
as to how we can deliver strong and sustainable shareholder returns, including
investing in new technology to facilitate sustainable growth over the longer
term. We consider our ability to address ESG risks and Consumer Duty
requirements for the business and consider how these could affect our
stakeholders. Incorporating climate risks into our risk management framework
enables us to effectively foresee potential climate related challenges.
Additionally, this framework serves as a tool to evaluate risks and respond to
possible weaknesses and hazards. By conducting scenario analysis, we aim to
guarantee that our financial and strategic choices consider a diverse array of
potential climate conditions and concerns.
Our environmental footprint has grown through the acquisitions completed in
the last two years. We plan to consolidate our footprint as integration of
acquired businesses continues, ensuring that wherever possible, we minimise
any negative impacts in this area. The modern design and construction methods
used in our Leicester office means we are harnessing the latest technology to
support our environmental aims and, while this is a major contributor in
itself, we recognise that smaller changes to how we do things can make
incremental contributions on our journey to net zero. These include reducing
the amount of paper we use through the adoption of technology, including an
on-line portal to deliver client valuations, supporting our move to a
paperless environment. In addition, our consultancy team is making increasing
use of hybrid and efficient fuel technology in the vehicles they use.
Alongside these commitments, we are committed to our journey to Net-Zero and
our long-term vision now reflects our climate objectives to reach this goal.
It is important to Mattioli Woods to ensure that the timescale we commit to
reach our Net Zero goal is realistic and considers relevant information
including accurate data collection and third-party advice. As we embark on
this journey towards Net-Zero, we remain dedicated to transparency and
accountability. We will keep our stakeholders informed of our progress through
regular updates and reports, ensuring that our commitment to Net-Zero is
tangible and measurable. We also recognise, while we may not have directly
incorporated Biodiversity considerations into our previous initiatives, we are
dedicated to driving positive change in this area. We believe that our role
extends beyond financial transactions and encompasses a responsibility to
contribute to the well-being of our planet and the communities that we are
part of.
In 2023, we hired a full time ESG Partner who works to support the Group's
Environmental Social and Governance Strategy. Our partner is committed to
integrating sustainable and responsible practices into the company's
operations. With an in-depth understanding of ESG factors and their
implications, they have been hired to ensure that the business upholds the
highest standards of sustainability. Alongside their work, they have also
organised and created an ESG Engagement team which includes 20 members of
staff from all office locations and departments to ensure the whole Group are
included in decision making and suggestions regarding ESG and sustainable
practices. The ESG Partner is also working towards disclosing our mandatory
Task Force on Climate-related Financial Disclosure (TCFD) report in June 2024.
Mattioli Woods knows that this TCFD disclosure is important for us to action
because it helps us to assess and disclose our climate related risks and
opportunities. It is also necessary for Mattioli Woods to comply with evolving
regulatory requirements, meet investor's expectations and ensure that
reputational expectations are maintained. We know that by committing to these
requirements will position us for long-term sustainability and success in a
rapidly changing world focused on addressing climate change.
The Mattioli Woods Responsible Equities Fund continues to perform well and our
proprietary ESGi process seeks to score our underlying investments on the ESG
risk they pose. This forms a key element of our investment research process
across our product range. We are continuing to explore how we can offer our
clients access to additional bespoke 'ESG responsible' investment
propositions.
TCFD Integration
In recognition of the increasing significance of climate-related risks and
opportunities to our business operations and stakeholders, the Group has
worked to integrate the recommendations of TCFD into our annual report and
broader business strategies. This is a journey Mattioli Woods is beginning and
we are committed to being transparent with investors and stakeholders in our
build up to producing the initial report in 2024.
Ahead of producing our TCFD report in 2024 and as part of our Net-Zero plans,
we are continuing to work on specific targets and creating measurable
performance indicators, such as:
1. Our ESG Task Force
2. Educating Employees
3. Engaging with Suppliers:
4. Development of regular Reporting and Monitoring
5. Stakeholder Engagement: Engage with clients, shareholders, and other
stakeholders to communicate the company's commitment to Net Zero and gather
feedback and suggestions for improvement
6. Continuous Improvement: Continually assess and reassess strategies and
practices to identify areas for improvement. Stay up-to-date with evolving ESG
trends and best practices, adjusting the Net Zero plan accordingly.
Other key principles that we are focussed on maintaining and developing
include:
· Board Commitment: we have the full support of our Board and
Executive teams. They have been key in ensuring the importance of challenging,
assessing and addressing climate-related topics, as well as continuing to
implement strong social and governance policies throughout the business. In
2023 we released our ESG policy which outlines our approach, goals and
targets, reporting framework, and our roles and responsibilities. The policy
was created alongside a new Executive ESG Committee which was also formed
during the year. The committee ensures that ESG, particularly climate related
topics, are considered across relevant business decisions.
· Continuous Learning and Capacity: As we mature and continue to
develop our understanding of TCFD, we plan to provide training sessions and
have partnered with industry experts to provide insights and knowledge,
ensuring that our team is well-equipped to embed TCFD principles across the
Group. Examples include utilising third party experts to run targeted
workshops including Net-Zero in the future which initially to our senior
leadership team and the ESG committee.
· Risk Management: Our integration of climate risks into our risk
management framework allows us to appropriately anticipate climate risks.
Alongside this, we use the framework to assess risk and act on potential
vulnerabilities and threats. Through scenario testing, we plan to ensure that
both our financial and strategic decisions account for a range of possible
future climate states and issues.
· Data-Driven Decision Making: Data forms the foundation upon which
our disclosures are built, serving as a guide for our strategic initiatives.
We are committed to continue to invest in data collection methodologies,
collaborative partnerships, working with third-party entities, and the
implementation of management tools throughout the business.
· Opportunities: In addition to assessing risks, we are equally
focused on identifying and leveraging climate-related opportunities that align
with our business ethos. Our proprietary ESGi process seeks to score our
underlying investments on the ESG risk they pose. This forms a key element of
our investment research process across our product range.
For clients who wish to access our multi-asset strategies but have concerns
with particular companies or industries, we have a range of Ethical
multi-asset portfolios. We offer 9 risk-rated model portfolios, with criteria
around 11 ethically contentious areas.
The impacts of these risks and opportunities are integrated into our business
model and strategy, driving initiatives such as our Responsible Equity Fund,
which seeks to invest in companies that promote the positive development of
our world, in areas such as clean energy, improved nutrition, sustainable
agriculture and inclusive and equitable education.
· Resilience Through scenario testing as part of our operational
resilience programme of work, we ensure that both our financial and strategic
decisions account for a range of possible future climate states and issues.
To help us achieve our goals, we are establishing targets and KPIs, to ensure
that we stay on course. Examples include the ESG Scorecard which is
distributed quarterly and reports and monitors base level sustainability
metrics such as paper usage throughout the business, water usage and our Scope
1,2 and 3 emissions percentage change.
· Third-party Verification: we have enlisted a third-party company,
to assist with validating and reporting on our commitment alongside aiding our
journey to our TCFD disclosure in June 2024.
· A Pledge for Improvement: Acknowledging the dynamic and constantly
shifting nature of the climate discourse, we hold steadfast in our commitment
to an ongoing journey of refinement and enhancement. At the core of this
unwavering dedication lies a structured framework of iterative processes that
form the backbone of our continuous improvement plan.
We have established a robust system of feedback loops which act as channels
for insights from our stakeholders. We also use internal reviews as a method
of improving.
· Facilitating Change: As we embed TCFD recommendations within
Mattioli Woods, we also champion their broader adoption within our industry.
We understand that collective action is crucial to navigating the challenges
posed by climate change. Our own Responsible Equity fund scores our underlying
investments on the ESG risks that they pose for our clients.
Our alignment with TCFD guidelines is a reflection of our commitment to the
long-term sustainability of Mattioli Woods and the communities in which we
operate.
Charities and communities
Making a difference within our local communities matters to us and we continue
to have a high level of engagement in this area. Each year we sponsor
businesses, sports and community awards. Over our history, our business has
benefited from winning numerous awards and we feel it is right to help other
businesses reap the rewards of such accolades. In addition, we sponsor a
variety of local clubs, business and sports related events across the country.
In 2022 we announced British Heart Foundation ("BHF") as our national charity
partner for the next two years, a charity that embodies the values and culture
of the Group and who we support nationally, helping their mission to raise
awareness of how to keep hearts healthy through lifestyle changes.
Every year, the Group's associate company Amati has a commitment to donate 10%
of its profits to good causes. We engaged our staff to suggest charities and
causes they felt deserving of a donation enabling the Group to support
numerous charities throughout the UK, including those that are local to where
our staff live. Total charitable donations by the Group and its employees
(through payroll giving) were £0.2m (2022: £0.2m) for the year.
We have also been able to offer work experience placements and summer
internships to provide individuals with experience in financial services, some
of which have resulted in permanent employment.
We recognise our tax contributions also play an important role for the
communities in which we operate, with the Group's total tax contribution
summarised as follows:
2023 2022
Total tax contribution £000 £000
Corporation tax 4,379 5,098
Other taxes borne
Employer's National Insurance Contributions 6,074 5,563
Apprenticeship levy 254 221
Business rates 584 614
Irrecoverable input VAT 1,152 1,495
Insurance premium tax 104 127
Stamp Duty Land Tax and Stamp Duty Reserve Tax 121 663
Taxes collected
Income tax deducted under PAYE 12,789 12,421
Employees' National Insurance Contributions 2,923 2,675
Output VAT 5,075 5,394
Total 33,456 34,271
Developing our people
The Group understands the importance of supporting and building the future for
the next generation. We are proud of the positive relationships we have built
with various schools, colleges and universities where we have supported with
interview and CV skills, attended recruitment fairs and posted vacancies,
allowing students to apply for roles within Mattioli Woods. We will continue
with this programme, allowing more students leaving education to join Mattioli
Woods on trainee and development programmes.
We continue to create opportunities for new recruits and greater emphasis in
being put on our trainee consultant programme which is an 18-month programme
for those aspiring to be successful advisers. We plan to significantly
increase the number of applicants accepted by the Group as we encourage new
talent to begin and develop their careers with us, many of whom will be direct
applicants to the programme.
We have also continued to operate our 26-week plan to foster small groups of
trainee advisers in a classroom style learning setting, for two days a week,
and have successfully delivered these remotely. Each week themed topics,
including topics such as tax, pensions and investments, aims to get trainees
who have been with the Company for 18 months and completed their level 4
qualification to the point where they are able to develop financial plans.
Trainees work alongside successful consultants in administrative roles and
attend consultant-led client meetings. This has been a successful scheme for
Mattioli Woods and will continue to be rolled out for new groups of employees
who demonstrate the potential to move into consultant roles at the firm.
Mattioli Woods' graduate and apprenticeship schemes have been running for a
number of years and, together with the trainee consultant programme, highlight
the firm's motivation to 'grow our own', and we plan to increase the number of
applicants accepted by the Group as we encourage new talent to begin and
develop their careers with us.
The Group also operates graduate and apprenticeship schemes in other teams
including Finance, HR and Change Management, where on the job learning is
supported by study toward an externally recognised qualification.
Progression and retention are important to Mattioli Woods. More than ever we
are passionate about retaining our valued employees, hence the development of
a robust appraisal, and recent succession and development plan being embedded
within the Group. In addition, all job opportunities are made available
internally before being published externally and in all cases, we follow a
fair and consistent process. In 2023, a total of 44 (2022: 54) internal moves
successfully took place.
We have refined our development training and mentoring programmes, which
incorporate mentoring, coaching, a buddy system, work-based learning and, in
some roles, with exams and course work. We continuously ensure our training
and development standards are high, which has resulted in many successful
promotions. A recent HR leadership academy was launched for new and existing
leaders in the business, where training takes place in cohorts three times a
year. We continue to work with training providers to support learning and
knowledge building across the Group.
We understand recognition is important and operate with a transparent approach
to promotions. We review pay processes and base pay on fairness and on
performance measures. We continue to regularly review and invest in
improvements, including new technology and benchmarking to ensure remuneration
is aligned across the Group.
Equal opportunities employer including diversity and inclusion
We are committed to promoting equality of opportunity for all employees and
job applicants. We aim to create a working environment in which all
individuals are able to make best use of their skills, free from
discrimination or harassment, and in which all decisions are based on merit.
At Mattioli Woods, we wish to ensure our employees can achieve their potential
and therefore, we encourage promotions and to progress from within. We aim to
ensure that no job applicant suffers discrimination because of any of the
protected characteristics. Our recruitment procedures are reviewed regularly
to ensure individuals are treated on the basis of their relevant merits and
abilities. Job selection criteria are regularly reviewed to ensure they are
relevant to the job and are not disproportionate.
We are an equal opportunities employer and understand that talent is not
directed by ethnicity, race, gender/gender identity, sexual orientation,
religion, age, disability, pregnancy, maternity, background or social class.
We seek to be the employer of choice where we offer training and development
programmes which will encourage employees to retain employment at Mattioli
Woods. We attract and employ diverse candidates through various sources:
· Structured training programmes for those wanting a career in
financial services, which is open to internal and external applicants;
· Mattioli Woods invests time in apprenticeships while training on
the job, feeding into growing the talent and succession pool;
· We attend university and colleges, talking through the employment
opportunities at Mattioli Woods. During FY23, we recruited 21 college and
university leavers; and
· The Company currently has a total of 73 employees in a
developmental role of which 28 identify as female and 45 as male.
Our vision is to have a respectful and supportive workplace that enables us to
attract and retain a diverse and inclusive workforce that represents our
clients and the communities across the country. We believe we can achieve this
by attracting, retaining and developing a talented workforce, and recruiting
candidates who believe in our vision and culture.
The principles of non-discrimination and equality of opportunity also apply to
the way in which employees treat clients, customers, suppliers, shareholders
and all other stakeholders.
We are extremely committed to our culture and continuously making conscious
decisions to improve. We listen to our employees to include them in the
positive changes that are made. This year saw the introduction of the Employee
Engagement Group, a forum allowing our employees to have a voice in changes
they would like to see, and better our two-way communication in creating a
positive culture. Our long-term aim is to be an all-inclusive employer,
enabling flexibility that works for both males and females. Our wellbeing
programme, which is continuously improving with new initiatives, allows all
employees to confidently seek support if and when required, ensuring our
valued employees feel safe whether it be at work or in their personal life.
Being an even more inclusive employer is our aim.
Modern slavery
Mattioli Woods welcomed the introduction of the Modern Slavery Act 2015 and
recognises it has a responsibility to take a robust approach and commitment to
preventing modern slavery and human trafficking in all its activities, and in
our supply chains.
To enable us to assess whether a particular activity is at high risk of
facilitating modern slavery or human trafficking:
· Mattioli Woods holds a register of all its operations, regularly
reviewing this in the context of its supply chain and business operations; and
· There are no high-risk activities identified which relate to modern
slavery or human trafficking. The Group operates in the UK in financial
services and does not source products or services from higher risk regions.
To understand and respond to potential modern slavery and human trafficking
risks, our employees are given training while our suppliers are also made
aware of our expectations. A copy of our Modern Slavery and Human Trafficking
Statement can be found on our website.
We also review our salaries on an annual basis to ensure our employees are not
paid below the national minimum wage. We are an established partner with
Living Wage Foundation, priding ourselves on ensuring all our employees are
paid above the national minimum wage. We provide a package of benefits to all
employees, including pension auto-enrolment, income protection and health
care, irrespective of the employee's role in the Group.
In September 2022, all employees' benefits were reviewed with some of the
benefits being enhanced. In addition, there is an annual salary review which
can result in the grant of a pay award, as well as a discretionary bonus.
Anti-bribery policy
We value our reputation for ethical behaviour and upholding the utmost
integrity and we comply with the FCA's clients' best interests' rule. We
understand that in addition to the criminality of bribery and corruption, any
such crime would also have an adverse effect on our reputation and integrity.
Mattioli Woods has a zero-tolerance approach to bribery and corruption and we
ensure all of our employees and suppliers are adequately trained as to limit
our exposure to bribery by:
· Setting out clear anti-bribery and corruption policies;
· Providing mandatory training to all employees;
· Encouraging our employees to be vigilant and report any suspected
cases of bribery in accordance with the specified procedures; and
· Escalating and investigating instances of suspected bribery and
assisting the police or other appropriate authorities in their investigations.
Gender pay gap reporting
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 requires
all employers with 250 or more employees in the UK to publish details of their
gender pay gap. Its aim is to achieve greater transparency about gender pay
difference. The analysis is based on data as at 5 April of each year and shows
the differences in the average pay between men and women. We issued the latest
Gender Pay Gap report in April 2023 which is readily available on our website.
The next report will be issued in 2024.
Approval
The Strategic Report contains certain forward-looking statements which are
made by the Directors in good faith based on the information available to them
at the time of their approval of this Annual Report. Statements contained
within the Strategic Report should be treated with some caution due to the
inherent uncertainties (including but not limited to those arising from
economic, regulatory and business risk factors) underlying any such
forward-looking statements. The Strategic Report has been prepared by Mattioli
Woods to provide information to its shareholders and should not be relied upon
for any other purpose.
The above disclosures from financial highlights to this point constitute the
Strategic Report, which has been approved by the Board of Directors and signed
on its behalf by:
Ian Mattioli MBE
Chief Executive Officer
12 September 2023
Governance overview
The Board is committed to achieving high standards of corporate governance,
integrity and business ethics. We recognise the need to ensure an effective
governance framework is in place to give all our stakeholders confidence that
the business is effectively run, ensuring good outcomes for our clients and
looking after the interests of the Group's shareholders and other
stakeholders.
Board structure
The Board has established a sub-committee structure comprising Risk and
Compliance, Audit, Remuneration and Nomination Committees. During the
financial year ended 31 May 2023 the Group undertook an internal review of the
effectiveness of the Board, its sub-committees and the senior management
framework. We continued the implementation of a revised governance structure
designed to improve execution of strategy, corporate governance and risk
management frameworks as determined by the Board, as well as bringing together
a senior executive team with responsibility for operational oversight of all
key areas in the Group, illustrated as follows:
The executive and senior management team is structured by a primary Executive
Committee, which is supported by a structured number of commercial and
operational committees across the Group.
The Group's investment and asset management business is managed through the
Investment and Asset Management Committee, which ensures risk and investment
controls are applied consistently throughout the Group, across all our various
products and services.
Each operating subsidiary is managed by its own board, which reports to the
relevant commercial and operational committee, with clear line of sight to the
Executive Committee. We believe this is the optimal management structure to
secure continued growth.
Corporate governance code
The Board has adopted the Quoted Companies Alliance ("QCA") revised Corporate
Governance Code ("QCA Code"), which requires the Group to apply 10 principles
focused on the pursuit of medium to long-term value for shareholders and also
to publish certain related disclosures.
Corporate governance principles applicable to the Group
The 10 QCA Code corporate governance principles, which apply to the Group,
are:
1 Establish a strategy and business model which promotes long-term value
for shareholders.
2 Seek to understand and meet shareholder needs and expectations.
3 Consider wider stakeholder and social responsibilities and their
implications for long-term success.
4 Embed effective risk management, considering both opportunities and
threats, throughout the organisation.
5 Maintain the Board as a well-functioning, balanced team led by the
Chair.
6 Ensure that between them, the Directors have the necessary up-to-date
experience, skills and capabilities.
7 Evaluate Board performance based on clear and relevant objectives,
seeking continuous improvement.
8 Promote a corporate culture that is based on ethical values and
behaviours.
9 Maintain governance structures and processes that are fit for purpose
and support good decision-making by the Board.
10 Communicate how the Company is governed and is performing by maintaining
a dialogue with shareholders and other relevant stakeholders.
Application of the QCA Code and required disclosures
The QCA Code requires us to apply the principles set out above and to publish
certain related disclosures in our Annual Report, on our website, or a
combination of the two. We have followed the QCA Code's recommendations and
have provided disclosure relating to relevant principles in a corporate
governance statement on our website and summarise our compliance with the
following principles in this Annual Report.
Strategy and business model - QCA Principle One
The Group's strategy and business model is described in our Strategic Report.
Understand and meet shareholder needs and expectations - QCA Principle Two
The Group remains committed to listening and communicating openly with its
shareholders to ensure its strategy, business model and performance are
clearly understood. Receiving analyst and investor feedback, and in turn
providing an understanding of our business, is a key part of driving our
business forward successfully. The principal methods of communication with
investors remain the Annual Report and financial statements, the Interim
Report, the Annual General Meeting ("AGM"), regulatory announcements and the
results roadshow.
Stakeholder and social responsibilities - QCA Principle Three
Mattioli Woods believes its main stakeholders are its clients, employees,
suppliers and relevant statutory authorities. To understand the needs and
expectations of stakeholders, the Group encourages regular feedback from
clients and employees through individual engagement, surveys and webinars.
Mattioli Woods is also an active member of local business forums such as the
Leicestershire Business Voice and professional networks to promote the local
economy and contribute to regional growth.
Effective risk management - QCA Principle Four
The Group embeds risk management throughout the organisation and this is
described in our Corporate Governance Report.
Board balance and skills - QCA Principles Five and Six
The Board, led by the Chair, has the necessary skills and knowledge to
discharge their duties and responsibilities effectively, setting clear
expectations and ensuring stringent measures for corporate governance
standards are met, particularly in relation to executive remuneration, risk,
compliance and audit. The Executive and Non-Executive Directors' skill sets
are complementary, and together provide a blend of broad commercial,
operational, investment, legal, and financial expertise, such that all
decision making at Board level is robust and mindful of the fiduciary
responsibilities that need to be discharged to all shareholders.
In addition, the Directors are aware of the importance of keeping abreast of
the industry's current activities and industry conferences, webinars and
events throughout the year to keep their skills, contacts and knowledge
current and simultaneously engage with the regulator, other operators and
service providers to the financial services industry.
Board effectiveness - QCA Principle Seven
The Board completed a self-evaluation during the financial year ended 31 May
2023 and will continue this annually. The criteria against which the Board
collectively and individually will be assessed includes Board composition,
roles and responsibilities, meetings and administration, Board committees,
Board discussions, Board relationships and stewardships, monitoring and
evaluation, strategy and internal control.
The aim of the Board evaluation is to review the effectiveness of the Board's
performance and assess its strengths as well as areas for development. The
Board has considered the Company's approach to succession planning and will
work with the Nomination Committee on the Board evaluation process. The
Executive Management team and, at a more junior level, senior departmental
managers address progression of employees through annual appraisals and
competency reviews. The Group's structured 'Financial Assess' training
programme further assists key managers with training and learning
opportunities which is complemented by the recent launch of a talent and
succession framework that is being adopted and trained out to managers across
the Group.
Ethical culture - QCA Principle Eight
The Group's client centric and ethical culture are discussed in the Chair's
statement in the Chief Executive's ("CEO") review, and the business model is
described in our Strategic Report.
Governance structures and communication with stakeholders - QCA Principles
Nine and Ten
The governance structures and committees utilised across the Group are
discussed in the Corporate Governance Report. Details of interactions with
stakeholders are shown in the Section 172 Report. In addition, the Directors'
Remuneration Report is shown.
Board of Directors
The Board is considered to be balanced and diverse, with plans to further
enhance these aspects being developed.
The Board currently comprises four executive Directors and four independent
Non-Executive Directors, including the Chair. The Company has a balanced
Board, which we believe represents the right governance structure for the
business having previously been independent for several years with majority
Independent Non-Executive Directors. The current Board includes a Senior
Independent Director in addition to the other Non-Executive Directors. The
Board also considers diversity of the Group senior management team, excluding
the PLC Board, which currently comprises 42% female and 58% male membership,
with consideration to be given to the other protected characteristics in the
short term.
The Nominations Committee leads on the succession plan for all Board members
as seen in the appointment of Michael Wright as Deputy Chief Executive Officer
("Deputy CEO").
A short biography of each Director is set out below.
David Kiddie - Independent Non-Executive Chair and Chair of the Nomination
Committee
Appointed to the Board: 2021
Tenure at Mattioli Woods: 3 years
Brings to the Board:
· Significant experience and expertise in asset management and
investment oversight
· Strategic planning and leadership
· Focus on governance, oversight and regulatory environment
Previous roles:
· Chief Executive UK and Head of Institutional Business, BNP Paribas
Investment Partners
· Chief Investment Officer, AMP Capital Investors, ABN AMRO Asset
Management and Rothschild Asset Management
· Head of Equities, Baring Asset Management
· Group Executive, Perpetual Investments (Australia)
Accreditations:
· BA Hons Economics, University of Kent
External appointments:
· Non-Executive Director of Marlborough Investment Management Ltd
Ian Mattioli MBE - Chief Executive Officer
Co-founded Mattioli Woods in 1991
Tenure at Mattioli Woods: 32 years
Brings to the Board:
· 35+ years' experience in financial services, wealth management and
property businesses
· Co-founded Mattioli Woods, with Bob Woods, in 1991
· Vision and strategy
· Development of investment proposition
· Founder of Custodian REIT plc
Accreditations:
· Awarded an MBE for services to business and the community in 2017
· LSE AIM Entrepreneur of the Year Award, 2008
· CEO of the Year Award, City of London Wealth Management Awards,
2018
· Awarded Honorary Degree (Doctorate of Laws), University of
Leicester, 2022
· Appointed High Sheriff of Leicestershire for 2021-22
External appointments:
· Non-independent Director of Custodian Property Income REIT plc
· Non-Executive Chair of Kanabo Group plc
Ravi Tara - Chief Financial Officer
Appointed to the Board: 2021
Tenure at Mattioli Woods: 4 years
Brings to the Board:
· Strategic planning and value creation
· Financial management and oversight of operations
· Investor relations management
· Operational efficiency and improvement
· Mergers and acquisitions and integration experience
· Inspiring leadership and development of teams
· Change management
Previous roles:
· Capita plc
· Weetabix Food Company
· JP Morgan
· Barclays Capital
· PwC
Accreditations:
· Chartered Accountant
· Fellow of the Institute of Chartered Accountants in England and
Wales ("ICAEW")
· A member of the ICAEW's Corporate Finance Faculty
· BSc Hons Accounting and Finance, London School of Economics
Michael Wright - Deputy Chief Executive Officer
Appointed to the Board: 2021
Tenure at Mattioli Woods: 19 years
Brings to the Board:
· Over 18 years' experience in financial services
· Experienced adviser, assisting controlling directors,
owner-managers and affluent individuals
· Inspiring leadership and operational management
· Acquisition and integration expertise
· Change and efficiency management
Accreditations:
· Diploma in Financial Planning
· LLB Law Degree, University of Leicester
External appointments:
· Vice-President of Gresley Male Voice Choir
Iain McKenzie - Chief Operating Officer
Appointed to the Board: 2021
Tenure at Mattioli Woods: 5 years
Brings to the Board:
· People and change management
· Operational and process efficiency
· Understanding of business functions and risk management
· Strategic planning and project management
· Data analysis and performance metrics
· Organisational and leadership abilities
Previous roles:
· Business consultancy - Consultant, Iain McKenzie Limited
· Senior management - Sports and Facility Management, Leicester City
Council
Accreditations:
· BA Design Management, De Montfort University, Leicester
External appointments:
· Director of Leicestershire Business Voice
Anne Gunther - Senior Independent Director and Chair of the Audit Committee
Appointed to the Board: 2016
Tenure at Mattioli Woods: 7 years
Brings to the Board:
· 40+ years' experience in retail financial services
· Wide executive experience from lending to wealth management
· FTSE 100 IPO experience
· Mergers and acquisitions experience
Previous roles:
· Managing Director - Direct, Lloyds TSB
· Chief Executive, Standard Life Bank
· Chief Executive, Standard Life Healthcare
· Member of group executive, Standard Life
· Founding Director, Standard Life Wealth
· Chair, Warwick Business School
Accreditations:
· Honorary doctorate, Edinburgh University
· Chartered Banker
· MBA, Warwick Business School
· BSc Hons Physics, Nottingham University
External appointments:
· Non-Executive Director of The West Bromwich Building Society
Edward Knapp - Non-Executive Director and Chair of the Risk and Compliance
Committee
Appointed to the Board: 2021
Tenure at Mattioli Woods: 3 years
Brings to the Board:
· Significant commercial and strategic insight and transformation
expertise
· Digital, technology and IT development within financial services
· Risk and compliance oversight and control
· Asset management and advisory expertise
Previous roles:
· Managing Director and Global Head of Business Management,
Technology, HSBC
· Chief Operating Officer and Global Head of Business Management,
Risk, Barclays
· Senior Adviser, McKinsey & Company
Accreditations:
· BA Mathematics, Balliol College, University of Oxford
External appointments:
· Non-Executive Director of F&C Investment Trust Plc
· Senior Adviser to Board of Perenna Group Limited
· Member of UK Endorsement Board
· Director of Asia House
Martin Reason - Non-Executive Director and Chair of the Remuneration Committee
Appointed to the Board: 2021
Tenure at Mattioli Woods: 3 years
Brings to the Board:
· Development of strategic plan focusing on client outcomes and
marketing
· Risk management and controls
· Process design and operational efficiency
· Remuneration and people strategies
· Treasury management
Previous roles:
· Chief Executive Officer, Melton Mowbray Building Society
· Managing Director, Merrill Lynch HSBC
· Senior manager, HSBC/Midland Bank
· Managing Director, Pakawaste Group
Accreditations:
· High performance leadership diploma, Cranfield School of Management
· BSc Hons Banking and Finance
External appointments:
· Chair of Sitigrid Ltd
Time commitments of Board members
The Group embraces the benefits that are brought by a Board from a range of
business backgrounds and who are actively involved in other businesses. The
Board also recognises its members must be able to dedicate sufficient time to
the Company. The Board has considered the time commitments of each Director
and is comfortable that each has sufficient available capacity to carry out
the required duties for Mattioli Woods:
· David Kiddie's time commitment from his other Directorships
averages three working days per month;
· Ian Mattioli's time commitment from his roles as Non-Executive
Chair of Kanabo Group plc and Non-Executive Director of Custodian REIT plc
average two and one and a half working days per month respectively;
· Michael Wright's time commitment from other Directorships averages
one day per quarter;
· Iain McKenzie's time commitment from other Directorships averages
two days per month;
· Anne Gunther's time commitment from her other Directorships
averages four and a half working days per month;
· Edward Knapp's time commitment from his other Directorships
averages four working days per month; and
· Martin Reason's time commitments from his other Directorship
averages four days per month respectively.
Governance changes
The Board regularly reviews the suitability of the Group's governance
structure and reflecting the expansion of the Mattioli Woods proposition and
increased size of the Group. Shortly after year-end in July 2023, the Board
announced the appointment of Michael Wright as Deputy Chief Executive Officer.
In this new role, Michael will lead and support the delivery of certain
strategic goals alongside the Executive team, while retaining his current
responsibilities. Michael was previously appointed Group Managing Director in
2019 and has been on the Board since 2021, having joined the Group 19 years
ago and holding several senior advisory roles during this time.
As part of our long-term strategic planning to support the delivery of the
Group's strategic goals, David Kiddie will step down as Non-executive Chair of
the Group at the next Annual General Meeting on 26 October 2023 having served
a 3-year term as a Non-Executive Director ("NED"). Given his extensive career
background in investment management, the Group is pleased to announce that it
will retain David's expertise in a consultancy role with the Group to support
the continued development and structure of the Group's investment proposition
to deliver a wider range of investment outcomes for clients and support the
next phase of growth.
Anne Gunther, our experienced, senior independent, non-executive director
becomes Chair of the Group following the AGM subject to regulatory approval.
The Group is pleased to be able to continue to draw upon her extensive
knowledge from her executive career and having served as a NED with Mattioli
Woods for a number of years.
Mattioli Woods is committed to diversity and inclusion across the Company and
at the Board and continues to monitor and assess the balance of the Board and
its effectiveness in line with a high level of commitment to governance
standards.
Corporate Governance Report
Operation of the Board
The Board is responsible to shareholders for the proper management of the
Group and has a formal schedule of matters specifically reserved to it for
decision. These include strategic planning, business acquisitions and
disposals, authorisation of major capital expenditure and material contractual
arrangements, setting policies for the conduct of business and approval of
budgets and financial statements. As part of our ongoing focus on corporate
governance the Board reserved matters and committee terms of reference were
reviewed and updated during the year, in light of the focus on stakeholder
engagement and linking a company's purpose and values to its strategy.
Other matters are delegated to the Executive Management team, supported by
policies for reporting to the Board. The Company maintains appropriate
insurance cover in respect of legal action against the Company's Directors,
but no cover exists in the event that a Director is found to have acted
fraudulently or dishonestly.
The agenda and relevant briefing papers are distributed by the Company
Secretary on a timely basis, usually a week in advance of each Board meeting.
The roles of Chair and Chief Executive are distinct, as set out in writing and
agreed by the Board. The Chair is responsible for the effectiveness of the
Board, directing strategy and ensuring communication with shareholders. The
Chief Executive is responsible for overseeing the delivery of this strategy
and the day-to-day management of the Group by the Executive Management team.
The Board is committed to developing the corporate governance and management
structures of the Group to ensure they continue to meet the changing needs of
the business.
The Non-Executive Directors are considered by the Board to be independent of
management and free from any relationship which might materially interfere
with the exercise of independent judgement. The Board does not consider the
Non-Executive Directors' shareholdings to impinge on their independence. The
Non-Executive Directors provide a strong independent element to the Board and
bring experience at a senior level of business operations and strategy. Anne
Gunther is the Senior Independent Director.
All Directors have access to the Company Secretary, who is responsible for
ensuring that Board procedures and applicable rules and regulations are
observed. Any Director, on appointment and throughout their service, is
entitled to receive any training they consider necessary to fulfil their
responsibilities effectively including training on quoted company requirements
from the Nominated Adviser, Canaccord Genuity Limited.
The Board meets regularly throughout the year as well as on an ad hoc basis,
as required by time critical business needs, and is the principal forum for
directing the business of the Group.
Board committees
The Board has delegated authority to four committees. The Chair of each
committee provides a report of any meeting of that committee at the next Board
meeting. The Chair of each committee is present at the AGM to answer questions
from shareholders.
Risk and Compliance Committee
The Risk and Compliance Committee comprises Edward Knapp (Chair), Anne
Gunther, David Kiddie, and Martin Reason. Committee meetings are normally
attended by George Houston (Group Compliance Officer) as Compliance Oversight
Function, the Chief Executive Officer, Deputy Chief Executive Officer, Chief
Operating Officer, and by representatives of the external and internal
auditors by way of invitation. In addition, senior managers and
representatives from the internal audit, risk and compliance functions attend
committee meetings as necessary.
The purpose of the Committee is to provide oversight and advice to the Board
in relation to current and future risk exposure of the Company and its
subsidiaries and the future risk strategy, including the determination of risk
appetite and tolerance and the effectiveness of the risk management framework
and (in conjunction with the Audit Committee) internal controls required to
manage risk. The Committee shall also promote a risk awareness culture within
the Company.
The Risk and Compliance Committee is principally responsible for monitoring
identified risks and the effectiveness of mitigating action, keeping risk
assessment processes under review, reviewing the impact of key regulatory
changes on the Group, assessing material breaches of risk limits and
regulations as well as reviewing client complaints.
Risk management framework
The Group's risk management framework is designed to ensure risks are
identified, managed and reported effectively. The Group has invested in its
risk management framework to meet the requirements of key regulatory changes
and the risk management framework remains subject to ongoing review.
We continue to apply a 'three lines of defence' model to support our risk
management framework, with responsibility and accountability for risk
management summarised as follows:
· First line: Senior management and operational business units are
responsible for managing risks, by developing and maintaining effective
internal controls to mitigate risk. First-line systems and controls are
employed to ensure business activities are conducted in compliance with
internal policies and procedures. First-line supervision teams carry out
monitoring of business activities on a day-to-day basis.
· Second line: The risk, compliance and anti-money laundering
functions maintain a level of independence from the first line. They are
responsible for providing oversight and challenge of the first line's
day-to-day management, monitoring and reporting of risks to both senior
management and governing bodies.
· Third line: The internal audit function is responsible for
providing independent assurance to both senior management and governing bodies
as to the effectiveness of the group's governance, risk management and
internal controls.
Output from first, second and third-line monitoring is reported to the
managers and management information is reported to the Executive Risk and
Compliance Committee and the Risk and Compliance Committee.
Risk appetite
Risk appetite is defined as both the amount and type of risk the Group is
prepared to accept or retain in pursuit of our strategy. Our appetite is
subject to regular review to ensure it remains aligned to our strategic goals.
At least annually, the Board, Executive Risk and Compliance Committee and the
Risk and Compliance Committee will formally review and approve the Group's
risk appetite statement and assess whether the firm has operated in accordance
with the stated risk appetite measures during the year.
Notwithstanding its continued expectations for business growth, the Board
retains a relatively low overall appetite for risk, ensuring that our internal
controls mitigate risk to appropriate levels.
Risk assessment process
Identified risks are tracked in a department-level risk register and used as
the basis for a consolidated risk register that provides the Risk and
Compliance Committee with an overview of the key risks across the
organisation. The Board and senior management are actively involved in a
continuous risk assessment process as part of our risk management framework,
supported by the annual ICARA process which assesses the principal risks
facing the Group.
Stress tests include consideration of the impact of a number of severe but
plausible events that could impact the business. The work also takes account
of the availability and likely effectiveness of mitigating actions that could
be taken to avoid or reduce the impact or occurrence of the underlying risks.
The Group's risk assessment process considers both the impact and likelihood
of risk events which could materialise, affecting the delivery of strategic
goals and annual business plans. A top-down and bottom-up approach ensures our
assessment of key risks is challenged and reviewed on a regular basis
throughout the year, with the Board and its committees receiving regular
reports and information from senior management, operational business units and
the risk oversight functions.
Activities during the year
The committee met seven times during the year, with the committee's activities
during the year including:
· Review the design, implementation and effectiveness of the risk
management framework at least annually;
· Oversee and challenge the Consumer Duty implementation plan by
assessing the adequacy and effectiveness of the measures and procedures put in
place and the actions to address any deficiencies in the Company's compliance
with its obligations;
· Review and challenge of the Group's treating customers fairly
("TCF"), Consumer Duty and conduct risk policies and outcomes;
· Review and challenge of the Group's vulnerable client processes;
· Review and challenge of the Group's product governance processes;
· Advise the Board on the Company's overall risk appetite tolerance
and strategy, which shall also take into consideration environmental and
economic factors;
· Review the consolidated ICARA for recommendation to the Board, and
on an annual basis oversee and challenge the design and execution of stress
and scenario testing, ensure a robust assessment of the emerging and principal
risks facing the Company has been undertaken, that procedures are in place to
identify emerging risks. To provide advice on the management and mitigation of
those risks and the required capital is held by the Company to recognise the
risk.
· Review of the Group's training and competence regime;
· Oversight of the implementation of Markets in Financial Instruments
Directive 2 ("MiFID II"); and
· Approval of the annual regulatory monitoring plan.
Audit Committee
The Audit Committee comprises Anne Gunther (Chair), Edward Knapp and Martin
Reason. Anne Gunther is a Chartered Banker and the Board is satisfied that all
members of the committee have recent and relevant financial experience. The
Board believes the committee is independent, with all members being
Non-Executive Directors. The purpose of the Audit Committee is to assist the
Board of the Company in carrying out its responsibilities relating to
accounting policies, internal controls and financial reporting functions.
The key responsibilities of the Audit Committee are:
· To review the reporting of financial and other information to the
shareholders of the Company and to monitor the integrity of the financial
statements;
· To review the Group's accounting procedures and provide oversight
of significant judgement areas;
· To review the firm's internal controls and effectiveness of the
internal audit function;
· To review the effectiveness of the external audit process and the
independence and objectivity of the external auditors;
· To review audit fees and proposals for future years; and
· To report to the Board on how it has discharged its
responsibilities.
Committee meetings are normally attended by the Chief Executive Officer, Chief
Financial Officer, Finance Director, Chief Operating Officer, Group Compliance
Officer and by representatives of the external and internal auditors by way of
invitation. The presence of other senior executives from the Group may be
requested. The committee meets with representatives of the internal and
external auditors, without management present, at least once a year.
Activities during the year
The committee met five times during the year, where it considered the
significant financial and audit issues, the judgements made in connection with
the financial statements and reviewed the narrative within the Annual Report
and the Interim Report.
During the year the Audit Committee continued to monitor the operation of the
internal audit function which has been outsourced to RSM Risk Assurance
Services LLP since December 2018. In light of an ever-changing regulatory
environment, outsourcing gives the Group access to greater skills externally,
while having the ability to shrink or expand our internal audit activities to
meet the ongoing demands of the business.
The committee also considered the tender and subsequent appointment of, and
fees payable to, the external auditors and discussed with them the scope of
the interim review and annual audit for the Group and subsidiaries of the
Group.
Specific audit issues the committee discussed included:
· Following the appointment of a new auditor on 28 April 2022,
monitoring the transition of external audit provider and subsequent
effectiveness of the appointment;
· Assessment of whether each entity and the Group as a whole are
going concerns, including whether forecast performance would result in an
adequate level of headroom over the Group's available cash facilities;
· Review of the whether any impairment needed to be recognised in
respect of the intangible assets of the Group, including the assumptions
underlying the calculation of the value in use of the cash generating units
tested for impairment;
· Management's approach to estimating the recoverability of WIP,
including the recovery rate applied and the length of historical data used to
calculate that recovery rate;
· Provisions recognised in respect of contingent consideration
payable on past business combinations and management's key assumptions and
estimates applied in reaching these recognition and measurement decisions;
· Review and approval of the internal audit plan;
· Monitoring the progress of previous issues raised by internal
audit, to ensure a satisfactory completion and assurance level; and
· Reviewing and stress testing the required submissions of the
Internal Capital Adequacy Risk Assessment (ICARA) to ensure fulfilment of the
regulatory standards.
Significant judgements and estimates
Significant critical accounting judgements and key estimates in connection
with the Group's financial statements for the year ended 31 May 2023 and other
matters considered by the committee included:
Goodwill and intangible assets
As set out in Note 17 to the Group financial statements, at 31 May 2023, the The committee considered the impairment reviews carried out by management.
Group had goodwill of £97.6m (2022: £83.5m) with other intangible assets These reviews focused on the assumptions underlying the calculation of the
relating to client portfolios amounting in total to £106.1m (2022: £112.2m). value in use of the cash generating units tested for impairment. The
Under IFRSs, these balances are assessed annually for impairment. Impairment underlying cash flow assumptions were challenged by management and the
testing requires the application of judgement, largely around the assumptions committee, having regard to historical performance. This was supported by the
that are built into the calculation of the value in use of the cash generating challenge to the Group's budgets earlier in the year.
unit being tested for impairment.
The main assumptions reviewed by the committee were the achievability of
long-term business plans and the discount rate used as outlined in Note 19.
These assumptions were subject to sensitivity analysis by management which was
also reviewed by the committee.
The committee concluded that the carrying values of goodwill and intangibles
included in the financial statements are appropriate.
Revenue recognition
The Group recognises accrued income in respect of time costs and disbursements The committee considered management's approach to estimating the
incurred on clients' affairs during the accounting period, which have not been recoverability of WIP, including the recovery rate applied and the length of
invoiced at the reporting date ("work in progress" or "WIP"). This requires an historical data used to calculate that recovery rate.
estimation of the recoverability of the time costs and disbursements incurred
but not invoiced to clients. The carrying amount of accrued time costs and The committee concluded the valuation of accrued WIP in the financial
disbursements at 31 May 2023 was £7.1m (2022: £5.1m). statements is appropriate.
Acquisition accounting
Business combinations are accounted for using the purchase accounting method. The committee reviewed the purchase price allocations prepared by management,
This involves assessing the fair value of the assets acquired and whether any supported by appointed third-party experts where required, on the purchase of
assets acquired meet the criteria for recognition as separately identifiable Doherty Pension and Investment Consultancy and majority stake in White
intangible assets. Intangible assets are measured on initial recognition at Mortgages during the year. These reviews focused on the underlying cash flow
their fair value at the date of acquisition. assumptions and the discount rate used to determine the present value of the
cash flows attributable to the subject intangible assets.
Client portfolios are valued by discounting their expected future cash flows
over their expected useful lives, based on the Group's historical experience. The committee concluded that the fair values of the identifiable assets and
Expected future cash flows are estimated based on the historical revenues and liabilities of these acquired businesses as at their respective dates of
costs associated with the operation of that client portfolio. The discount acquisition included in the financial statements are appropriate.
rates used estimate the cost of capital, adjusted for risk.
Contingent consideration payable on acquisitions
The Group has entered into certain acquisition agreements that provide for a The committee considered management's assessment of the amounts that will be
contingent consideration to be paid. A financial instrument is recognised for paid under the relevant acquisition agreements. These reviews focused on the
all amounts management anticipates will be paid under the relevant acquisition assumptions underlying the cash flows covering the contingent consideration
agreement. This requires management to consider whether contingent payments period.
should be accounted for as consideration or remuneration, make an estimate of
the expected future cash flows from the acquired business and determine a Following this review, the committee was satisfied that the judgements
suitable discount rate for the calculation of the present value of any exercised were appropriate and that the contingent consideration payable on
contingent consideration payments. The carrying amount of contingent acquisitions was fairly stated in the financial statements.
consideration provided for at 31 May 2023 was £14.3m (2022: £8.7m), and
contingent consideration recognised as remuneration provided for at 31 May
2023 was £4.6m (2022: £7.8m).
Other liability provisioning
As detailed in Note 26, the Group recognises provisions for client claims, The committee considered and challenged the nature of the provisions, the
commission clawbacks, dilapidations, onerous contracts and other obligations potential outcomes, any developments relating to specific claims, and the
that exist at the reporting date. These provisions are estimates and the prior history of obligations, provisions and claims in order to assess whether
actual amount and timing of future cash flows are dependent on future events. the provisions recorded are prudent and appropriate.
Management reviews these provisions at each reporting date to ensure they are The committee discussed with management the key elements of judgement to
measured at the current best estimate of the expenditure required to settle assure themselves as to the adequacy and appropriateness of the provisions.
the obligation. Any difference between the amounts previously recognised and Following this discussion, the committee was satisfied that the judgements
the current estimate is recognised immediately in the statement of exercised were appropriate and that the provisions were fairly stated in the
comprehensive income. financial statements.
Use of alternative performance measures
The Group has identified certain measures that it believes will assist in the The committee considered the measures and felt that these alternative
understanding of the performance of the business. These measures are not performance measures are those considered by management to be important
defined under IFRS but can be used, subject to appropriate disclosure in the comparables and key measures used within the business for assessing
Annual Report and Accounts. These alternative performance measures are performance. They are not substitute for, or superior to any IFRS measures.
recurring revenue, adjusted EBITDA, adjusted profit before tax, adjusted
profit after tax and adjusted earnings per share as set out in the alternative The committee was also satisfied that the disclosure of the alternative
performance measure workings section of the Annual Report. performance measures was appropriate.
Other matters
In addition to the above matters, the committee assessed whether each entity The committee considered whether the forecast financial performance would
and the Group as a whole are going concerns. result in an adequate level of headroom over the Group's available cash
facilities. The committee also discussed the key assumptions underpinning the
The committee also reconsidered a number of other judgements made by Group's forecast financial performance with management regularly during the
management including: IFRS 15 'Revenue from contracts with customers', IFRS 9 year and considered a range of sensitivities to those forecasts, together with
'Financial instruments' and IFRS 16 'Leases'. the feasibility and effectiveness of mitigating factors. The committee
concluded there are no material uncertainties that cast doubt about the
Group's ability to continue as a going concern and the adoption of the going
concern basis is appropriate.
The committee considered management's approach, proposed disclosures,
assessment of impact on the financials and the judgements made in relation to
impairment allowances and the factors considered around expected credit losses
on financial instruments.
External auditor
An analysis of fees payable to the external audit firms in respect of audit
and non-audit services during the year is set out in Note 7 to the financial
statements. The Company is satisfied the external auditor is independent in
the discharge of their audit responsibilities, following due diligence
conducted as part of the appointment process.
Internal audit
The internal audit function is responsible for providing assurance over the
design and operational effectiveness of the internal controls related to the
Group's key activities. Our internal audit activity is based around a
strategic, risk-based approach to cyclical internal audit with consideration
of the Group's key strategic priorities and risks. This approach is
designed to provide assurance over key areas including; governance, risk
management and controls. During the year the internal audit function engaged
in a number of activities, including:
· Developing our internal audit plan based on an analysis of the
Group's corporate objectives, risk profile and assurance framework, as well as
other factors such as emerging issues in our sector;
· Delivering audits providing assurance over the Group's governance
arrangements, client invoicing, integration management, vulnerable clients,
the closure of the Structured Products Fund, regulatory returns, conflicts of
interest, consumer duty readiness, financial crime (Maven) and market abuse
(Maven).
· The internal audit team has also continued to provide assurance
activities in respect of the CREIT and going forward, will continue to extend
coverage to Maven activities as required; and
· A forward-looking plan to provide the Group with assurance over key
areas of regulatory focus into 2022/23 including: the Investment Firms
Prudential Regime (IFPR), ESG, vulnerable clients, consumer duty
(post-implementation) operational resilience, financial controls and external
client payroll, financial promotions and strategy and financial forecasting.
As the third line of defence, the internal audit function (together with the
external auditors in connection with their audit of the financial statements)
continues to build risk awareness within the organisation by challenging the
first and second lines of defence to continue developing and enhancing the
internal control framework.
Remuneration Committee
The Remuneration Committee comprises Martin Reason (Chair), David Kiddie and
Anne Gunther. The committee meets not less than twice a year. It is
responsible for determining and reviewing the Group's policy on executive
remuneration and other benefits and terms of employment, including
performance-related bonuses and share options. The committee also administers
the operation of the share option and share incentive schemes established by
the Company.
The members of the Remuneration Committee have no personal interest in the
outcome of their decisions and seek to serve the interests of shareholders to
ensure the continuing success of the Company. The remuneration of the
Non-Executive Directors is determined by the Board itself. No Director is
permitted to participate in decisions concerning their own remuneration.
The committee met twice during the year, with key items considered including:
· Review and approval of the Group's remuneration policy;
· Annual review of Executive Directors' and other senior managers'
base salaries and bonus arrangements, including specific approvals for changes
or payments made during the year;
· Awards to be granted under the share option and incentive schemes
established by the Company; and
· Trends and benchmarking of executive pay in the wider market.
The Committee continues to review the Group's long-term incentive plans to
ensure it can continue to attract, retain and incentivise appropriately
qualified staff to achieve its goals.
Nomination Committee
The Nomination Committee comprises David Kiddie (Chair), Anne Gunther, Edward
Knapp and Ian Mattioli. The Committee is responsible for reviewing the size,
structure and composition of the Board, establishing appropriate succession
plans for the Executive Directors and other senior executives in the Group and
for the nomination of candidates to fill Board vacancies where required.
The committee works in close consultation with the Executive Directors and met
twice during the year, with the main items being considered including Board
structure (including proposed changes to Board composition), review of key
matters (including Board and management succession planning), talent
management and development and leadership development, undertaking a board
evaluation during the year and considering engagement of an external service
provider for the 2023 Board evaluation.
Meetings and attendance
All Directors are encouraged to attend all Board meetings and meetings of
committees of which they are members. Directors' attendance at meetings during
the year was as follows:
Meetings attended (eligible to attend) Board Risk and Audit Remuneration Committee Nomination
Compliance Committee Committee
Committee
David Kiddie(( 28 (#_ftn28) )) *7(7) 7(7) - 2(2) *2(2)
Ian Mattioli 7(7) - - - 1(2)
Ravi Tara 7(7) - - - -
Michael Wright 7(7) - - - -
Iain McKenzie 7(7) - - - -
Anne Gunther 7(7) 7(7) *5(5) 2(2) 2(2)
Edward Knapp 6(7) *7(7) 5(5) - 1(1)
Martin Reason 7(7) 7(7) 5(5) *2(2) -
* Denotes Chair
28 David Kiddie appointed as Independent Non-executive Chair on 14 March 2022
Other committees
These committees form part of the corporate governance framework but are not
sub-committees of the Board. The main committees comprise the Executive
Committee alongside a number of sub-committees, with membership typically
comprising Executive Directors alongside the relevant senior managers.
Executive Committee
The Board strongly believes that robust governance and strong, responsible,
balanced leadership by the Board are critical to creating long-term
shareholder value and business success. The committee's role is to assist the
Board in shaping the strategy, culture and ethical values of the Group, while
supporting the sub-committees in the day-to-day management of Mattioli Woods
and its subsidiaries.
The key responsibilities of the committee are to:
· Take a leadership role in shaping and delivering the Group's
strategic priorities, ensuring corporate governance principles, culture and
ethical values remain appropriate;
· Oversee the brand and reputation of the Group, ensuring
reputational risk is consistent with the risk appetite approved by the Board
and the creation of long-term shareholder value;
· Develop strategy and growth initiatives, such as possible
acquisitions and new products and services;
· Implement the agreed strategy and support the day-to-day management
of the Group by the Management Engagement Committee;
· Review and discuss the annual business plan and budget prior to its
submission to the Board for approval;
· Oversee the Group's compliance with its statutory and regulatory
obligations, including conduct of the firm and consumer duty;
· Developing and implementing people policies and structures and
reviewing talent management and development programmes, and
· Oversee the Group's conduct in relation to its corporate and
societal obligations, including setting the guidance, direction and policies
for the Group's consumer duty, ESG corporate responsibility agenda and related
activities and advising the Board and management on these matters.
The Executive Committee is Chaired by the Deputy CEO and membership comprises
the Chief Executive Officer, Chief Financial Officer and Chief Operating
Officer. Committee meetings are normally attended by other senior executives
from the Group and functional heads from the appropriate disciplines as
requested.
Investment Committee
The Board has delegated authority to the Investment Committee to oversee the
Group's investment management approach, developing the 'house view' on
economics, investment markets and asset allocation, and considering how the
Group should best apply these views.
In particular, the Investment Committee is responsible for developing and
implementing the Group's asset management strategy, for developing and
monitoring all aspects of the Group's investment business on a continuing
basis, receiving reports from the board of Custodian Capital, the Multi-Asset
team (including the Asset Allocation Committee) and from the managers of the
Group's single strategy Funds including Individual Structured Products. The
Committee is also responsible for ensuring that the Group's day-to-day
investment and asset management operations are conducted in accordance with
the relevant regulatory and statutory requirements through the investment
management, investment research and investment operations teams.
The Investment Committee meets at least six times a year but more frequently
if required. The Committee is Chaired by the Chief Investment Officer and
comprises senior members of the investment, wealth management, technical and
compliance functions.
Operational Risk and Compliance Committee
The Board has delegated authority to the Operational Risk and Compliance
Committee to oversee the operation of the Group's risk and compliance
framework and activity. The Operational Risk and Compliance Committee is
responsible for ensuring that risk, compliance and internal audit are
considered, reviewed and actions implemented across all areas of the Group
including wealth management advice, asset management, pension administration
and employee benefits. The committee is also responsible for ensuring that
risks are fully considered in context of the Group's ICARA and the impact on
the Group's capital requirements.
The Operational Risk and Compliance Committee meets at least four times a year
but more frequently if required. The committee is Chaired by the Compliance
Oversight Function and comprises senior members of the Group's management and
risk and compliance function.
Induction, training and performance evaluation
New Directors receive an induction on their appointment covering the
activities of the Group, its key business and financial risks, the terms of
reference of the Board and its committees and the latest financial
information.
The Chair ensures Directors update their skills, knowledge and familiarity
with the Group as required to fulfil their roles on the Board and its
committees. Ongoing training is provided as necessary and includes updates
from the Company Secretary and Nominated Adviser on changes to the AIM Rules,
requirements under the Companies Acts and other regulatory matters. All
Directors have access to independent professional advice at the Company's
expense where they judge it necessary to discharge their duties, with requests
for such advice being authorised by the Chair or two other Directors, one of
whom is a Non-Executive.
Evaluation of the Board's performance
During the year ended 31 May 2023 a review of the Board's effectiveness was
undertaken, working with an external third party and led by the Senior
Independent Director. This involved one-to-one interviews with Directors,
review of Board and Board committee papers and minutes and attendance at
various Board or sub-committee meetings. The key points raised in the review
were around Board composition, Board papers and succession planning.
Individual appraisal of each Director's performance is undertaken either by
the Chief Executive Officer or Chair each year and involves meetings with each
Director on a one-to-one basis. The Non-Executive Director Chair carries out
an appraisal of the performance of the Chief Executive Officer, with the
Senior Independent Director conducting the same exercise for the Chair.
Retirement and re-election
All Directors are subject to election by shareholders after their appointment
and to re-election thereafter at intervals of no more than three years under
the Company's articles of association. However, as a matter of good practice
and as recommended under the QCA Corporate Governance Code, Board policy is
for all Directors to stand for re-election at each AGM.
Non-Executive Directors' appointments are initially for 12 months and
continue, thereafter, until terminated by either party giving three months',
six months' for Chair, prior written notice to expire at any time on or after
the initial 12-month period. The terms and conditions of appointment of the
Non-Executive Directors are available for inspection at the Company's
registered office during normal business hours and prior to the AGM.
Communications with shareholders
The Board is committed to maintaining an ongoing dialogue with the Company's
shareholders. The principal methods of communication with private investors
remain the Annual Report and financial statements, the Interim Report, the AGM
and the Group's website (www.mattioliwoods.com (http://www.mattioliwoods.com)
).
It is intended that all Directors will attend each AGM and shareholders will
be given the opportunity to ask questions at the AGM on 26 October 2023. In
addition, the Chair, Chief Executive Officer, Chief Financial Officer and
Deputy Chief Executive Officer welcome dialogue with individual institutional
and retail shareholders to understand their views and feed these back to the
Board. General presentations are also given to analysts and investors covering
the annual and interim results as well as additional presentations dependent
upon the circumstances and include for acquisition activity, investment in the
Group or for fundraising. The Chair of the Remuneration Committee also engaged
in dialogue with institutional shareholders during the year and fed back to
the committee and Board directly.
Internal control and risk management
The Board is ultimately responsible for the Group's systems of internal
control and for reviewing its effectiveness. Such systems are designed to
manage rather than eliminate risks and can only provide reasonable not
absolute assurance against material misstatement or loss.
In accordance with the guidance of the Turnbull Committee on internal control,
an ongoing process has been established for identifying, evaluating and
managing significant risks faced by the Group. This process has been in place
throughout the year under review and up to the date of approval of the Annual
Report and financial statements.
The Board routinely reviews the effectiveness of the systems of internal
control and risk management to ensure controls react to changes in the nature
of the Group's operations.
The Group maintains appropriate insurance cover and reviews the adequacy of
the cover regularly, in conjunction with the Group's insurance brokers.
There are clearly defined procedures for reviewing and approving transactions,
acquisitions, material expenditure and capital expenditure within the Group.
On behalf of the Board
Ravi Tara
Chief Financial Officer
12 September 2023
DIRECTORS REMUNERATION REPORT
Statement from the Chair of the Remuneration Committee
I am pleased to present the Directors' Remuneration Report, which comprises my
Annual Statement, the Directors' Remuneration Policy, and the Annual Report on
Remuneration, which sets out remuneration paid to the Directors in respect of
the financial year ended 31 May 2023 ("FY23") and how we intend to implement
the policy for the financial year ending 31 May 2024 ("FY24").
Remuneration review and remuneration reporting
As well as dealing the normal 'business as usual' agenda items this year, the
Committee has, over the last six months, carried out a detailed review of our
overall approach to Executive Director remuneration and our remuneration
reporting. As part of this review, I have reached out to our largest
shareholders to provide an overview of our approach, to set out the rationale
for some of our recent remuneration decisions and to offer the opportunity for
engagement. I am grateful to those shareholders who provided feedback, which
has been considered carefully by the Committee.
Our shareholders welcomed the opportunity for engagement and were pleased
that, as a result of our remuneration review, the Committee is able to provide
a clear and consistent Directors' Remuneration Policy framework within which
to set the remuneration of our Executive Directors going forward. Shareholders
were also supportive of our proposal to enhance our remuneration reporting
considering the requirements of our AIM listing, market practice, the QCA
Remuneration Guidance and the principles of consumer duty. The Committee will
continue to provide shareholders with an advisory vote on our Remuneration
Report in line with the approach of most AIM companies. However, we will keep
market practice under review and consider the recommendations of the revised
QCA Code when this is finalised.
Our approach to remuneration
The Committee firmly believes that the Executive Directors should receive a
fair and appropriate level of remuneration for their role, reflecting their
skills, responsibilities, experience, and contribution to the business. In
addition, the Committee notes the importance of retaining key talent in a
competitive market both in terms of sector and our geographic location. A
further important consideration is the level of fixed pay in absolute terms
and weighting to variable so that undue emphasis is not placed on variable pay
elements but with sufficient pay at risk to drive and reward superior
performance.
Remuneration outcomes for FY23
Salaries, pension and benefits
Our Deputy Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer were all appointed to the Board on salaries below market and
below that of their predecessors. The Committee acknowledged, at the time of
appointment, that base salaries would need to be reviewed and brought to
market with timing dependent on both experience and performance. The salaries
of all our Executive Directors were reviewed by the Committee in early 2022.
Noting strong performance and increasing experience of the executive team, as
well as the growth and complexity of the business, the salaries of the Group
Managing Director, Chief Financial Officer and Chief Operating Officer were
all increased to bring them to market. The increased salaries were effective
from 1 March 2022. Our normal salary review date is 1 September and,
therefore, no further increases were made for FY23 except for the Chief
Executive Officer who received a 5% increase from 1 September 2022.
Our approach to benefits and pension is unchanged from prior years. Pension is
aligned to the workforce and benefits are modest to include a company car or
car allowance and the usual insured benefits.
Annual bonus
The Committee determined the Executive Directors' annual bonus considering
performance across both financial and non-financial metrics. Following strong
performance in both EBITDA growth and progress towards the Company's strategic
targets, the Committee determined a bonus of 66% of salary for each of the
Executive Directors and 121% of salary for the CEO.
FY20 Long Term Incentive Plan
Only our CEO holds a 2020 LTIP award that was granted to him as an Executive
Director. The vesting of the award was assessed against long-term EBITDA
growth targets, which were met in full. Further details are included in the
Annual Report on Remuneration.
Operation of the policy for FY24
Base salary
For FY24, the Committee agreed a moderate increase of 3.5% of salary for all
of the Executive Directors, except for the new role of Deputy Chief Executive
Officer, which is below the 5% increase awarded to our workforce. With the
appointment of Michael Wright as Deputy CEO, and noting his increased
responsibilities and the strong performance, skills and experience he brings
to his new role, the Committee increased his base salary effective from 1 July
to £365,000, which is 7% above the workforce increase.
Annual bonus
Maximum bonus opportunity under our new remuneration policy is reduced from
200% of salary to 150% of salary for all four Executive Directors. 60% of the
bonus will be based on EBITDA with the remaining 40% on strategic targets. The
Committee has also introduced bonus deferral into the remuneration policy and
therefore 50% of any bonus paid in excess of 100% of salary will be deferred
into shares for two years.
Long Term Incentive Plan
Our policy maximum for LTIP awards is 150% of salary and actual award level
for FY24 will be 100% of salary. Like many other financial services
businesses, our incentives are weighted slightly more to the short term,
focusing on critical short-term KPIs to deliver the business strategy. Our
bonus deferral, LTIP awards at 100% of salary, LTIP post-vesting holding
periods, and shareholding requirements provide alignment to longer-term
sustainable performance, shareholder interests and the ability to operate
clawback and malus.
100% of the award will be determined by long-term EBITDA growth targets
achieved through successful delivery of our strategic goals.
The Committee notes that EBITDA is measured under the annual bonus and LTIP.
However, the LTIP is focusing on longer-term sustainable three-year EBITDA
growth. The Committee is keen to broaden the financial metrics under the LTIP
for future grants and will keep the selection of measures under review.
The FY24 awards will also be subject to a two-year post-vesting holding
period.
Conclusion
The Committee is comfortable that the remuneration outcomes for FY23 are
aligned to Group performance and the shareholder experience.
The Committee has undertaken a considerable amount of work in respect of
Executive Director remuneration over the last 12 months. The Committee is
comfortable that, following its detailed remuneration review, it has a clear
and consistent remuneration policy framework within which to set the Executive
Directors' remuneration going forward. Following increases to base salary for
FY23 and a review and resetting of incentive quantum, the Committee believes
remuneration is aligned to market with no further significant changes
envisaged at this time. The Committee has spent time reviewing incentive
structures and our policy includes bonus deferral, LTIP post-vesting holding
periods and a shareholding requirement. We have also reviewed incentive
metrics and will continue to evolve our approach in this area. We have
enhanced our remuneration reporting and will also keep this under review.
I hope shareholders are supportive of the changes we have introduced to our
Executive Directors' remuneration structure and reporting. We will again
provide shareholders with an advisory vote on our Directors' Remuneration
Report and I hope you will support the resolution. If you have any questions,
please do not hesitate to get in contact through our Company Secretary.
On behalf of the Board
Martin Reason
Chair of the Remuneration Committee
12 September 2023
DIRECTORS' REMUNERATION POLICY
The following table sets out each element of the Directors' remuneration and
how it supports the Company's strategy.
Base salary To provide a base level of remuneration reflecting the individual role. Base salaries are normally reviewed annually. The Committee will take into There is no prescribed maximum annual increase. The Committee is guided by the
consideration matters including personal performance, Group performance, wider workforce increases, recognising larger increases may be required in
increases for the wider workforce, changes in role and responsibilities and certain circumstances, such as retention issues, increased responsibilities,
market rates. scope or size of the role.
Benefits Provides a level of benefits to ensure an overall market competitive package The executives are entitled to receive benefits that include, but are not There is no prescribed maximum. The value of the benefits is determined by a
and the wellbeing of executives. limited to, car allowance, death-in-service cover and health insurance. variety of factors including the cost to the Company and market practice.
Pension Provides retirement benefits to assist post-retirement financial planning. Payment is made either into a pension scheme or paid as cash in lieu of The maximum contribution is aligned to the workforce, except in exceptional
pension on the same basis as other employees. circumstances, which will be explained in the Remuneration Report.
Annual bonus Incentivises and rewards for delivering the short-term business strategy. Performance is assessed by the Committee normally over a one-year period based Maximum annual opportunity of 150% of base salary.
on financial and non-financial targets aligned to the Group's business
strategy.
50% of any bonus paid in excess of 100% of salary is deferred into shares for
two years.
Clawback and malus apply in the event of a material misstatement of the
Group's accounts and for other defined reasons.
Long Term Incentive Plan (LTIP) Incentivises and rewards the executives for achieving the long-term business The LTIP awards are normally granted annually with awards normally vesting on The maximum award level is 150% of base salary.
strategy, longer-term sustainable performance and aligns the executives to the third anniversary of award subject to achievement of performance
shareholder interests. conditions. This is determined by the Committee on an annual basis at the time
of each grant, normally measured over three years.
Vested awards are subject to a holding period of two years.
Vested and unvested LTIP awards are subject to clawback and malus in the event
of a material misstatement of the Group's accounts and for other defined
reasons.
All-employee share plans The Executive Directors may participate in any all-employee share plan Participation is based on the terms of the plan as applicable to all employee Participation is capped by any HMRC limit or other limits applying to the
operated by the Company to provide alignment with Group employees and to participants. respective plan.
promote share ownership.
Share ownership guidelines Provides executives with long-term commitment and alignment with shareholders' Executives are required to build up and then subsequently hold a minimum level Minimum holding of 100% of base salary.
interests. of shareholding from vested deferred annual bonus and LTIP awards.
Non-Executive Director fees Provides a level of fees to support recruitment and ongoing remuneration of an Fee levels are set at an appropriate rate with reference to market levels, There is no prescribed maximum.
experienced Chair and Non-Executive Directors. time commitment and responsibilities of the role.
Any increases in fees are guided by the wider workforce increases and the
The Chair's fee is inclusive of all their responsibilities. market rate. On occasion, fee increases may need to recognise certain
circumstances, such as additional responsibilities, increase in time
Non-Executive Directors are paid a base fee and may be paid additional fees commitment or scope of role.
for additional roles, responsibilities or time commitment, for example but not
limited to, in recognition of them being a member of or chairing a committee,
being the Senior Independent Director.
Service contracts and letters of appointment
It is the Group's policy for all Executive Directors to have contracts of
employment that contain a termination notice period not exceeding 12 months.
All Executive Directors' appointments continue until terminated by either
party on giving not less than 12 months' notice to the other party.
The Board Chair and Non-Executive Directors have letters of appointment and
are appointed for an initial term of 12 months, subject to termination by
either the Director or the Company on not less than six months' for the Chair
and three months' for all other Non-Executive Directors prior written notice.
The letters of appointment and service contracts are available for inspection
at the Company's registered office.
Payment for loss of office and variable pay
The termination arrangements agreed for an Executive Director who is leaving
the business will depend upon the provisions of the Director's service
contract, the rules of the relevant incentive schemes and the nature of the
individual's departure. All termination payments are subject to approval by
the Remuneration Committee. The Committee will consider the circumstances of
each leaver on a case-by-case basis.
A Director's service contract may be terminated without notice and without any
further payment or compensation, except for sums earned up to the date of
termination, on the occurrence of certain events such as gross misconduct. In
the event of termination of employment for other reasons, salary, pension and
other benefits are payable for the duration of the notice period.
The annual bonus and unvested LTIP awards for "good" leavers will be pro-rated
for service and paid at the usual time with performance measured at the usual
time with Remuneration Committee discretion to apply an alternative treatment
where exceptionally it deems it to be appropriate. For other types of leaver,
incentives are forfeited.
Recruitment for new Directors
New Executive Directors will be offered remuneration packages in accordance
with the terms of the Company's remuneration policy in force at the time of
appointment.
The Committee may in exceptional circumstances look to recruit the best
candidate for the role, and offer cash and/or share-based elements not
explicitly referred to in the Remuneration Policy.
The Remuneration Committee may provide a buy-out award to compensate for
outstanding incentive awards or other remuneration element forfeited on
cessation of an Executive Director's previous employment. Any buyout award
would be limited to what the Committee considers to be a fair estimate of the
value foregone when leaving the former employer and will be structured to
consider other key terms, such as vesting schedules and performance targets,
of the awards foregone.
If considered necessary to recruit the best candidate, the Committee
may agree to pay relocation and other expenses in connection with an
appointment.
Any new Non-Executive Director appointed during the period covered by this
remuneration policy will have their remuneration set in line with the
provisions of the policy table above.
Legacy arrangements
Payments may be made to satisfy commitments made prior to the introduction of
this Remuneration Policy.
ANNUAL REPORT ON REMUNERATION
Single total figure of remuneration for each Director (audited)
The total single-figure remuneration for the Directors during the year ended
31 May 2023 is set out below:
Salary Benefits(1) Pension-related benefits Bonus Long Term Incentive Plan(2) Share Incentive Plan(3) Total
and fees
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Executives
Ian Mattioli 600 567 34 30 30 28 725 653 61 192 2 2 1,452 1,472
Michael Wright(4) 325 268 6 3 16 13 215 214 - - 2 2 564 501
Ravi Tara 300 235 20 16 15 23 198 199 - - 2 2 535 475
Iain McKenzie(5) 275 228 6 2 10 34 182 183 - - 2 2 475 449
Sub-total 1,500 1,298 66 51 71 99 1,320 1,249 61 192 8 8 3,026 2,897
Non-Executives
David Kiddie(6) 104 75 - - - - - - - - - - 104 75
Anne Gunther 64 59 - - - - - - - - - - 64 59
Edward Knapp 45 47 - - - - - - - - - - 45 47
Martin Reason 49 48 - - - - - - - - - - 49 48
Joanne Lake(7) - 86 - - - - - - - - - - - 86
Sub-total 262 315 - - - - - - - - - - 262 315
Total 1,762 1,613 66 51 71 99 1,320 1,249 61 192 8 8 3,288 3,212
Notes:
1. The benefit package of each Executive Director includes the provision
of life assurance under a group scheme, permanent health insurance, company
car for Michael Wright and Iain McKenzie and car allowance for Ian Mattioli
and Ravi Tara. Car allowance was previously shown within salary and fees in
prior year and has now been included under benefits for 2023 and 2022.
2. Following a review of our Remuneration Report and our approach to
reporting, we are disclosing for this year and in future years, LTIP awards
that have performance periods ending (or substantially ending) in the year of
report. Our approach prior to this has been to report LTIP awards in the year
they vested. The FY20 LTIP award vested at a share price of 640.0p. The FY21
LTIP award is due to vest on 12 September 2023. For the purposes of this
table, the value of the LTIP has been calculated using the average three-month
share price to 31 May 2023 (in line with typical market practice) of 608.5p.
The actual value of the award on vesting will be restated in next year's
report.
3. SIP shares show the value of the matching shares awarded to the
Executive Directors under this all-employee plan.
4. Michael Wright was appointed as a Director of the Company on 8 June
2021. The LTI value has been excluded for 2022 and 2023 as the relevant LTI
award was granted prior to his appointment as Director.
5. Iain McKenzie appointed as a Director of the Company on 24 May 2021.
The LTI value has been excluded for 2023 as the relevant LTI award was granted
prior to his appointment as Director.
6. David Kiddie was appointed as Independent Non-Executive Chair on 14
March 2022.
7. Joanne Lake ceased to be a non-executive director of the Company on 8
April 2022.
Notes to Directors' remuneration table
Salary and fees
The salaries for all our Executive Directors were reviewed by the Committee in
early 2022. The Committee considered the fact that the Deputy Chief Executive
Officer, Chief Financial Officer and Chief Operating Officer were all
appointed to the Board on salaries below market and our Deputy Chief Executive
Officer and Chief Financial Officer below that of their predecessors.
Consideration was also made to the strong performance and experience of the
executive team, particularly of the new Executive Directors since appointment,
and the growth and complexity of the business at the time.
Following the review, the Committee concluded that the base salaries for the
Deputy Chief Executive Officer, Chief Financial Officer and Chief Operating
Officer were all significantly below market and increases were made to bring
them to the market level. The Committee agreed that a single correctional
increase was needed due the significant gap to the market at the time. As a
result, salaries were increased from 1 March 2022 and were effective for FY23
as set out below.
Our normal salary review date is 1 September, and no further increases were
made for FY23 except for the Chief Executive Officer who received a 5%
increase.
Director FY23 base salary
Chief Executive Officer £607,249 (from 1 September 2022)
Deputy Chief Executive Officer £325,000
Chief Financial Officer £300,000
Chief Operating Officer £275,000
Benefits
Benefits for Executive Directors principally relate to the provision of cars,
death-in-service cover and permanent health insurance or cash allowances taken
in lieu of such benefits.
Pension-related benefits
Executive Directors may participate in the pension arrangements of the Group
or elect to have pension payments paid into a personal pension plan or as cash
in lieu of pension on the same basis as other employees. Pension payments in
respect of Executive Directors are 5% of salary and are aligned to the
workforce.
Annual bonus
For FY23, bonus awards to Executive Directors and some other senior employees
were based on Group profit and are made from a pool of the Group's earnings
before interest, taxation, depreciation, and amortisation after payment of
bonuses payable to all other staff. The maximum annual bonus opportunity for
Executive Directors in FY23 was 200% of salary.
The Committee determined the Executive Directors' annual bonuses considering
performance across both financial and non-financial metrics. EBITDA growth has
been strong at 30% on prior year driven by revenue increasing by 3% with
organic growth of 4%; the value of new client wins increased by 15% despite
the uncertain market backdrop; recent acquisitions all contributed positively
and costs are managed closely. We continue to pursue our strategic goals with
a project to implement a common wealth management platform across the Group
commencing within the year; by increasing the number of new consultants
joining our training academy, continuing to integrate acquisitions into the
Group and by delivering a talent and retention framework for all staff
including a focus on diversity and inclusion. Taking performance against these
metrics, the Committee determined a bonus of 66% of salary for each of the
Executive Directors and 121% for the CEO.
Long Term Incentive Plan
Awards granted during the year
The following LTIP awards were granted to the Executive Directors during the
year:
Ian Mattioli 71% 30% 80,000 £432,000 04/11/22
Ravi Tara 54% 30% 30,000 £162,000 04/11/22
Michael Wright 54% 30% 32,500 £175,500 04/11/22
Iain McKenzie 54% 30% 27,500 £148,500 04/11/22
1. The calculated value is based on the closing price of 540p on 4
November 2022 (date of grant).
The vesting of awards is determined by the EBITDA targets set out below. The
awards are subject to a two-year post-vesting holding period.
Compound annual growth in normalised EBITDA over the performance period % of maximum award that vests
Less than 4% 0%
4% 30%
8% 100%
There is straight-line vesting in between the above points.
Vesting outcome for LTIPs granted in FY21
The performance conditions that applied, and performance achieved against the
FY21 LTIP awards are set out below. Only the CEO held an FY21 LTIP award that
was granted to him as an Executive Director. The FY20 LTIP awards have been
disclosed for information as part of the updated approach to disclosure.
Metric: Weighting (% of total award) Threshold (30% of max vesting) Maximum (100% of max vesting) Actual performance Vesting (% of max)
EBITDA growth
FY21 award 100% 5% 12% 28% 100%
FY20 award 100% 5% 12% 31% 100%
The table below sets out the number of shares received by the CEO after the
vesting of the FY21 and FY20 awards:
Number of shares granted Value of award at grant Vesting date(2) Proportion of award vesting Total number of shares vesting Value of proportion of award vesting(3)
FY21 award 10,000 £78,500 12/09/2023 100% 10,000 £60,749
FY20 award 30,000 £219,750 06/09/2022 100% 30,000 £191,700
1. The calculated value is based on the closing price at date of
grant: FY21: 785.0p on 1 June 2020 and FY20: 732.5p on 6 September 2019.
2. Vesting date being first trading day outside of closed period, post
three-year performance period of award.
3. Calculated using the share price at the date of vesting. FY21 the
value of the LTIP has been calculated using the average three-month share
price to 31 May 2023 (in line with typical market practice) of 608.5p. The
actual value of the award on vesting will be restated in next year's report.
FY20 using 640.0p on 12 September 2022.
Share Incentive Plan
The Mattioli Woods plc Share Incentive Plan ("the SIP") enables 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. In addition, the
Company can grant participating employees matching and/or free shares.
The consequent employee benefit is the value of the SIP matching shares made
in the year. Employees may contribute up to £150 per month to buy partnership
shares with contributions matched on a one-for-one basis by the Company.
Total shareholder return performance graph
The graph below illustrates the total shareholder return ("TSR") for the ten
years ended 31 May 2023 in terms of the change in value of an initial
investment of £100 invested on 1 June 2013 in a holding of the Company's
shares against the corresponding total shareholder returns in hypothetical
holdings of shares in the FTSE AIM All-Share Index.
The Company is a member of the FTSE AIM All-Share Index and considers this to
be the most appropriate broad equity market index for the purpose of measuring
the Company's relative performance.
Directors' interest in share options (audited)
Outstanding share options granted to Executive Directors under the 2010 and
2021 LTIPs are as follows:
Director Exercise price 31 May 2022 Granted during the year Exercised during the year Lapsed during the year 31 May 2023
No. No. No.
£ No. No.
Ian Mattioli 0.01 160,000 80,000 30,000 - 210,000
Ravi Tara 0.01 47,500 30,000 - - 77,500
Michael Wright 0.01 80,000 32,500 20,000 - 92,500
Iain McKenzie 0.01 47,500 27,500 - - 75,000
Total 335,000 170,000 50,000 - 455,000
Note 11 to the financial statements contains a detailed schedule of all
options granted to Directors and employees as at 31 May 2023. All the options
were granted for nil consideration.
Directors' shareholdings (audited)
As at 31 May 2023, the interest of the Directors in the issued shares of the
Company, as shown in its register maintained under section 809 (2) and (3) of
the Companies Act 2006, were:
Director 2023(1) % % of 2022 %
No. shares salary No. shares
Ian Mattioli 3,102,953 6.00 3,258.09 3,010,979 5.90
Ravi Tara 14,641 0.03 30.75 11,225 0.02
Michael Wright 32,355 0.06 62.71 21,208 0.04
Iain McKenzie 5,655 0.01 12.95 4,989 0.01
David Kiddie 3,030 0.01 3,030 0.01
Anne Gunther 11,576 0.02 11,576 0.02
Edward Knapp - - - -
Martin Reason 15,152 0.03 15,152 0.03
Notes:
1. Percentage shareholdings are based upon the total issued share
capital of 51,084,759 and share price of 630p on 31 May 2023.
2. Directors' shareholdings include any shareholdings of trusts or
family members deemed to be connected persons. There have been no changes
since 31 May 2023 and 12 September 2023.
The closing price of the Company's ordinary shares at 31 May 2023 was 630.0p
and the range during the financial year was 725.0p to 530.0p.
None of the Directors had an interest in any contract of significance in
relation to the business of the Company or its subsidiaries at any time during
the financial year, other than those disclosed in Note 29 to the financial
statements.
Implementation of remuneration policy for the year ending 31 May 2024
Base salary
For FY24, the Committee has agreed an increase of 3.5% of salary for the Chief
Executive Officer, Chief Financial Officer and Chief Operating Officer, which
is below the workforce average increase of 5%. The Committee reviewed the
salary for the new Deputy Chief Executive Officer considering the increase in
his responsibilities, strong performance, skills and experience and increased
his salary to £365,000 effective 1 July 2023, which is 7% above the workforce
average increase.
The annual base salaries of the Executive Directors effective from 1 September
2023 are as follows:
Director Base Salary
Chief Executive Officer £628,503
Deputy Chief Executive Officer £365,000 (1 July 2023)
Chief Financial Officer £310,500
Chief Operating Officer £284,625
Non-Executive Director fees
The fees for the Non-Executive Chair and Non-Executive Directors have been
increased for FY24 by 5%.
FY24 FY23
Non-Executive Chair £50,360 £47,962
Non-Executive Director base fee £34,937 £33,273
Senior Independent Director £9,317 £8,873
Committee Chair fee £9,317 £8,873
Committee member fee £3,493 £3,327
Pension and other benefits
There are no changes to benefits from FY23.
Annual bonus
The maximum annual bonus opportunity for Executive Directors is 150% of
salary. The performance targets are based on a combination of financial and
non-financial performance measures. Of the total bonus payable, 60% will be
based on EBITDA and the remaining 40% on strategic targets noting the
importance of customers, risk controls and regulation. The bonus targets will
be disclosed in next year's Directors' Remuneration Report, alongside details
of performance against them.
For FY24, the Committee incorporated bonus deferral into the remuneration
policy. As such, 50% of any bonus paid in excess of 100% of salary is deferred
into shares for two years.
Long Term Incentive Plan
The Committee intends to grant LTIP awards with a value of shares at the time
of grant equivalent to 100% of base salary for each Executive Director. A
total of 80% of the award will be subject to the achievement of 3 year EBITDA
performance targets with the remaining 20% based on talent development and
retention with a focus on Diversity and Inclusion. The performance period is
over the three financial years ending 31 May 2026.
The targets for each measure are set out below:
Compound annual growth in normalised EBITDA over the performance period % of award that vests
Less than 5% 0%
5% 30%
12% 100%
The Committee believes that the above targets are appropriately stretching
when considering expectations of the Group's performance over the forthcoming
three-year period. Awards are subject to a two-year post-vesting holding
period.
On behalf of the Board
Martin Reason
Chair of the Remuneration Committee
12 September 2023
Directors' Report
Report and financial statements
The Directors have pleasure in presenting their report together with the
audited financial statements for the year ended 31 May 2023.
For the purposes of this report, the expression 'Company' means Mattioli
Woods plc and the expression 'Group' means the Company and its subsidiaries.
Business review
The Group's principal activities continue to be the provision of:
· Advice for wealth management, pension consulting and employee
benefits for corporate clients;
· Administration of advised and third-party clients on an
execution-only basis; and
· Investments, which covers the Group's DPM service, CREIT, Private
Investor Club, managed funds, and individual structured plans, in addition to
funds managed by Maven and the Group's associate Amati.
The Strategic Report includes further information about the Group's business
model, financial performance during the year and indications of likely future
developments.
The Directors believe they have adequately discharged their responsibilities
under section 414(c) of the Companies Act 2006 to provide a balanced and
comprehensive review of the development and performance of the business.
Statement by the Directors under section 172 Companies Act 2006
The Directors consider they have acted in the way they believe, in good faith,
would be most likely to promote the success of the Company for the benefit of
its members as a whole, and in doing so having regard to the stakeholders and
matters set out in section 172(1)(a-f) of the Act in the decisions taken
during the year ended 31 May 2023. This is demonstrated in the Section 172
statement included in the Strategic Report.
Results and dividends
The results are summarised in the Strategic Report. The final dividend in
respect of the year ended 31 May 2022 of 17.8p per share was paid in
November 2022. An interim dividend in respect of the year ended 31 May 2023
of 8.8p per share was paid to shareholders in March 2023. In light of the
current trading conditions, and need to protect the Group's financial position
and balance the interests of all stakeholders, the Board is pleased to
recommend a final dividend of 18.0p per share (2022: 17.8p). This makes a
proposed total dividend for the year of 26.8p (2022: 26.1p) a year-on-year
increase of 2.7% (2022: 24.3%). This has not been included within the Group
financial statements as no obligation existed at 31 May 2023. If approved, the
final dividend will be paid on 3 November 2023 to ordinary shareholders whose
names are on the register at the close of business on 22 September 2023,
having an ex-dividend date of 21 September 2023.
Share capital
Mattioli Woods plc is a public limited company incorporated in England and
Wales and its shares are quoted on the AIM market of London Stock Exchange
plc. The Company's authorised and issued share capital during the year end as
at 31 May 2023, is shown in Note 23. The ordinary shares rank pari passu in
all respects. As agreed at the Annual General Meeting of the shareholders, the
ordinary shares have pre-emption rights in respect of any future issues of
ordinary shares to the extent conferred by Section 561 of the Companies Act
2006.
There are no restrictions on the transfer of ordinary shares in the Company,
other than:
· Certain restrictions that may be imposed from time to time by laws
and regulations and pursuant to the Listing Rules of the FCA, whereby certain
Directors, officers and employees of the Group require the approval of the
Group to deal in ordinary shares of the Company;
· Restrictions on the former shareholder of Montagu who has entered
into a lock-in deed with Mattioli Woods and its nominated adviser and broker,
Canaccord Genuity Limited, restricting sales of that part of the consideration
comprising 40,161 ordinary shares in Mattioli Woods during the two years ended
2 February 2023;
· Restrictions on the former shareholders of Pole Arnold Financial
Management who have entered into lock-in deeds with Mattioli Woods and its
nominated adviser and broker, Canaccord Genuity Limited, restricting sales of
that part of the consideration comprising 72,940 ordinary shares in Mattioli
Woods during the two years ended 12 April 2023;
· Restrictions on the former shareholders of Caledonia Asset
Management who have entered into lock-in deeds with Mattioli Woods and its
nominated adviser and broker, Canaccord Genuity Limited, restricting sales of
that part of the consideration comprising 12,724 ordinary shares in Mattioli
Woods during the two years ended 16 April 2023;
· Restrictions on the former partners of Maven Capital Partners who
have entered into lock-in deeds with Mattioli Woods and its nominated adviser
and broker, Canaccord Genuity Limited, restricting sales of that part of the
consideration comprising 4,545,455 ordinary shares in Mattioli Woods during
the four years ending 30 June 2025; and
· Restrictions on some of the former shareholders of Ludlow Wealth
Management who have entered into lock-in deeds with Mattioli Woods and its
nominated adviser and broker, Canaccord Genuity Limited, restricting sales of
that part of the consideration comprising 780,250 ordinary shares in Mattioli
Woods during the two years ending 3 September 2023; and
· Restrictions on the former shareholders of Doherty Pension &
Investment Consultancy Limited who have entered into lock-in deeds with
Mattioli Woods and its nominated adviser and broker, Canaccord Genuity
Limited, restricting sales of that part of the consideration comprising
325,998 ordinary shares in Mattioli Woods during the two years ending 19 April
2025.
The Group is not aware of any other agreements between holders of securities
that may result in restrictions on the transfer of ordinary shares.
Employee share trust
The Mattioli Woods 2010 Employee Benefit Trust ("the EBT") was established to
deliver shares for the benefit of employees and former employees of the Group
who have been granted an award under one of the Group's employee share
schemes. The trustee has agreed to satisfy awards under the Group's employee
share schemes. As part of these arrangements, the Group funds the EBT, from
time to time, to enable the trustee to acquire shares to satisfy these awards,
details of which are set out in Note 23 of the Financial Statements. The
trustee has waived its right to dividends on all shares held within the trust.
During the year ended 31 May 2023, the EBT purchased no shares in the Company
(2022: nil) at a cost of £nil (2022: £nil).
At 12 September 2023, the Company had been notified of the following interests
representing 3% or more of its issued share capital:
Shareholder Number of Percentage
ordinary shares holding %
Octopus Investments 5,873,626 11.37
Liontrust Asset Management 3,711,922 7.18
Investec Wealth & Investment 3,556,673 6.88
Gresham House 3,538,667 6.85
Ian Mattioli 3,102,953 6.00
BlackRock Investment Management 2,216,254 4.29
Abrdn plc 2,200,048 4.26
William Nixon 2,037,306 3.94
Chelverton Asset Management 2,079,190 4.02
In addition to the above shareholdings, 908,608 (2022: 804,004) ordinary 1p
shares representing 1.8% (2022: 1.6%) of the issued share capital are held by
employees via the Mattioli Woods plc Share Incentive Plan ("the SIP"). The
Group intends to actively encourage wider share ownership by its employees
through the SIP and other share-based incentive schemes.
Directors
A list of current serving Directors and their biographies is given below. The
Company's articles of association require that any Director who held office at
the time of the two preceding AGMs and who did not retire at either of them
shall retire from office at the next AGM and may offer himself for
re-election. However, as a matter of good governance, each of the Directors
will stand for re-election at this AGM.
The Board has a process for the evaluation of its own performance and that of
the individual Directors and, following the evaluation of the performance of
the Directors during the year ended 31 May 2023, it was confirmed that each
Director continues to be an effective member of the Board and to demonstrate
commitment to the role.
Directors' interests
Directors' emoluments, beneficial interests in the shares of the Company and
their options to acquire shares are disclosed in the Directors' Remuneration
Report. During the period covered by this report, no Director had a material
interest in a contract to which the Company or any of its subsidiaries was a
party (other than their own service contract), requiring disclosure under the
Companies Act 2006.
Conflicts of interest
There are procedures in place to deal with any Directors' conflicts of
interest arising under section 175 of the Companies Act 2006 and such
procedures have operated effectively since the Company adopted new articles of
association on 22 October 2009.
Directors' indemnity
All Directors and officers of the Company have the benefit of the indemnity
provision contained in the Company's Articles of Association. The provision,
which is a qualifying third-party indemnity provision, was in force in the
last four financial years and is currently still in force. The Group also
purchased and maintained throughout the financial period Directors' and
Officers' liability insurance in respect of itself and its Directors and
officers, although no cover exists in the event Directors or officers are
found to have acted fraudulently or dishonestly.
Employees
We recognise that our employees are our greatest asset and therefore the Group
continues to involve its staff in the future development of the business.
Information is provided to employees through briefing sessions, webinars, the
Group's website and its intranet, 'MWeb', which is continually updated. Our
employee voice is important and we run regular engagement sessions. In
addition, we have recently introduced an engagement working group for more
transparent communications. How the Group has engaged with employees and had
due regard for their interests in considering the principal decisions taken
during the year are demonstrated in the Section 172 statement included in the
strategic report.
The Group operates 'MyWay', an online flexible benefits platform. Employees
can change elements of their benefits choice annually or if they have any
lifestyle events. MyWay offers a variety of benefits covering health and
wellbeing, finance and lifestyle choices, in addition to a core benefits
package, and employees are able to purchase these benefits at group rates.
MyWay shows employees the value of their salary and all other benefits as part
of a total reward statement. The platform allows individuals to select options
to meet their personal needs and since its launch we have seen an increasing
take up of flexible benefits each year.
The Group operates a Group Personal Pension plan available to all employees
and contributes to the pension schemes of Directors and employees. Following
the introduction of auto-enrolment, every employer must automatically enrol
eligible jobholders into a workplace pension scheme. Employers are then
required to make contributions to pension schemes, adding to the savings made
by employees. From 2023, employees who had previously opted out of the
workplace pension are required to be auto-enrolled. Eligible employees had the
option to opt out after they had been automatically enrolled directly with the
provider. Employers cannot avoid their obligation to automatically enrol
eligible employees into a qualifying scheme.
The Group's pension scheme qualifies as an auto-enrolment scheme, with the
Group applying the following contribution rates:
Date Employer contribution Minimum employee contribution
6 April 2020 onwards 5% 5%
The Group operates a Share Incentive Plan and a Long Term Incentive Plan,
details of which are given in the Directors' Remuneration Report and the
financial statements.
The Group is committed to the principle of equal opportunity in employment,
regardless of a person's race, colour, nationality, gender, age, marital
status, sexual orientation, religion or disability. Employment policies are
fair, equitable and consistent with the skills and abilities of the employees
and the needs of the business.
Mattioli Woods is a fully-inclusive employer and applications for employment
by disabled persons are always fully considered. In the event of members of
staff becoming disabled, every effort is made to ensure their employment with
the Group continues by implementing reasonable adjustments to ensure they can
fulfil their day-to-day duties, and that appropriate training is arranged.
Group policy is that the training, career development and promotion of
disabled persons should, as far as possible, be identical to that of other
employees.
We continue to invest in our graduate training programme and apprenticeships
schemes, working in partnership with schools, colleges and universities, as
well as the YMCA. The Group's commitment to creating opportunities that offer
a clear progression path both in the short and long term continues. Recruiting
the best calibre of employees regardless of their background remains our focus
as we continue to grow. Hiring into new roles during the pandemic was
successful and the continuation of recruitment continues, albeit with the
pressure of the current market.
We operate an eLearning platform in conjunction with the Chartered Insurance
Institute's Financial Assess for the continued professional development of our
staff. We are committed to continual process improvement and intend to seek
further business improvements across our locations.
Research and development
In response to the need for an increasingly sophisticated software solution to
manage the broader range of products and services offered by Mattioli Woods,
the Group has continued to invest over a number of years to develop its
technology infrastructure. This is being achieved by extending the development
of its bespoke pension administration platform to include employee benefits,
with the aim of enhancing the services offered to clients and realising
operational efficiencies across the Group as a whole. The costs of this
development are capitalised where they are recognised as having an economic
value that will extend into the future and they meet the capitalisation
criteria of IAS 38.
Related-party transactions
Details of related-party transactions are given in Note 29.
Environmental
The Board believes good environmental practices, such as reducing the volume
of printing, recycling of paper waste and committing to purchasing hybrid,
fuel-efficient motor vehicles, will support its strategy by enhancing the
reputation of the Group. Due to the Group's activities, Mattioli Woods impacts
the local and global environment, but due to the nature of its business
generally, the Group does not have a significant environmental impact.
Environmental performance and strategy are summarised in the Strategic Report.
Annual General Meeting
The AGM of the Company will be held on 26 October 2023. The notice of the
meeting together with details of the resolutions proposed and explanatory
notes will be available on the Group's website.
Principal risks and uncertainties
The Directors' view of the principal risks and uncertainties facing the
business is summarised in the Chief Executive's Review.
Financial risk management
The Company and certain of its subsidiaries are supervised in the UK by the
FCA. The Group must comply with the regulatory capital requirements set by the
FCA and manages its regulatory capital through continuous review of the
capital requirements of the Company and its regulated subsidiaries, which are
monitored by the Group's management and reported monthly to the Board.
The Group's financial risk management is based upon sound economic objectives
and good corporate practice. The Board has overall responsibility for risk
management and internal control. The process for identifying and managing
risks is set out in more detail in the review of Corporate Governance. The key
risks and mitigating factors are set out in the Chief Executive's Review.
The Group seeks to manage financial risk, to ensure sufficient liquidity is
available to meet the identifiable needs of the Group and to invest cash
assets safely and profitably. If required, short-term flexibility is achieved
through the use of bank overdraft facilities. The Group does not undertake any
trading activity in financial instruments. All activities are transacted in
sterling. The Group does not engage in any hedging activities.
The Group reviews the credit quality of customers and limits credit exposures
accordingly. All trade receivables are subject to credit risk exposure.
However, there is no specific concentration of credit risk as the amounts
recognised represent a large number of receivables from various customers.
Loans may be advanced to investment syndicates to secure new investment
opportunities. In the event a syndicate fails to raise sufficient funds to
complete the investment, the Group may either take up ownership of part of the
investment or lose some, or all, of the loan. However, to mitigate this risk,
loans are only approved by the Board under strict criteria, which include
confirmation of client demand for the investment.
Corporate governance
A full review of Corporate Governance appears on Corporate Governance Report.
Auditor
A resolution to approve the re-appointment of Moore Kingston Smith LLP will be
put to shareholders at the Company's AGM on 26 October 2023.
Directors' statement as to disclosure of information to the auditor
The Directors who were members of the Board at the time of approving the
Directors' Report are listed in the Governance Overview. Having made enquiries
of fellow Directors and of the Company's auditor, each of these Directors
confirms that:
· To the best of each Director's knowledge and belief, there is no
relevant audit information of which the Company's auditor is unaware; and
· Each Director has taken all the steps they might reasonably be
expected to have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that information.
Going concern
The Group's business activities, performance and position, together with the
risks it faces and the factors likely to affect its future development are set
out in the Strategic Report. The Board has assessed the Group's viability over
a three-year period from 1 June 2022 through to 31 May 2025. This period is
aligned with the Group's annual budgeting process, where the Board reviews and
challenges the Group's budget in advance of each new financial year.
The Board has also considered the general business environment and the
potential threats to the Group's business model arising from regulatory,
demographic, political and technological changes. The ongoing economic and
market uncertainty continues to affect financial markets. The Board has
carried out a robust assessment of the principal risks facing the Group
including those associated with a general economic downturn, including
financial market volatility, deteriorating credit, liquidity concerns,
Government intervention, increasing unemployment, political change,
redundancies, and other restructuring activities that would threaten the
sustainability of its business model, future performance, solvency or
liquidity. This assessment by the Board extends to run a series of stress
tests against the Group's three-year plan, including a reverse stress scenario
in which a variety of external and internal events impact the three-year plan
and so enable the Directors to assess management's ability to take management
actions to mitigate the impact on the Group.
In assessing the future viability of the overall business, the Board also
considers the current and future strategy, the results of the latest ICARA,
the risk management controls and procedures in place.
As an example for this year, a Group stress test under the market scenario is
based on the impact of a reduction in market value of investment assets of
20%. Subsequent management actions are considered to ensure the Group still
maintains sufficient capital and liquidity resources.
The Directors believe the Group is well placed to manage its business risks
successfully as demonstrated by the stress tests. The Group's forecasts and
projections show that the Group should continue to be cash generative,
maintain a surplus on its regulatory capital requirements and be able to
operate within the level of its current financing arrangements. Accordingly,
the Directors continue to adopt the going concern basis for the preparation of
the financial statements. The Directors have considered the Group's prospects
for a period in excess of 12 months from the date on which the Financial
Statements are approved.
Events after the balance sheet date
There were no significant events occurring after the end of the reporting
period.
Approved on behalf of the Board
Ravi Tara
Chief Financial Officer
12 September 2023
Directors' responsibilities for the financial statements
The Directors are responsible for preparing the Directors' Report, Strategic
Report and the financial statements in accordance with applicable law and
regulations.
UK company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors are required to prepare the
Group financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006. The
financial statements also comply with UK-adopted International Accounting
Standards.
The financial statements are required by law and UK-adopted International
Accounting Standards to present fairly the financial position of the Group and
Company and the financial performance of the Group. The Companies Act 2006
provides in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and fair view
are references to their achieving a fair presentation.
Under company law, the Directors must not approve the financial statements
unless they are satisfied they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period. In preparing each of the Group and Company financial
statements, the Directors are required to:
· Select suitable accounting policies and then apply them
consistently;
· Make judgements and estimates that are reasonable and prudent;
· State whether they have been prepared in accordance with UK-adopted
International Accounting Standards; and
· Prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Mattioli Woods plc
website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MATTIOLI WOODS PLC
Opinion
We have audited the financial statements of Mattioli Woods plc (the 'parent
company') and its subsidiaries (the 'group') for the year ended 31 May 2023
which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Company Statements of Financial Position, the Consolidated
and Company Statements of Changes in Equity, the Consolidated and Company
Statements of Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK adopted
International Accounting Standards, and as regards the parent company
financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state of
the group's and of the parent company's affairs as at 31 May 2023 and of the
group's profit for the year then ended;
· the group financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards;
· the parent company financial statements have been properly prepared
in accordance with UK adopted International Accounting Standards and as
applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
An overview of the scope of our audit
Our group audit approach was a risk-based approach based on obtaining an
understanding of the group and its environment, including the group's system
of internal control, and assessing the risks of material misstatement in the
financial statements. We conducted individual statutory audits on the
significant components included in the consolidation, which were audited to
their own individual materiality by the group audit team.
For the significant components within our audit scope we evaluated the
controls in place by performing walkthroughs over the financial reporting
systems identified as part of our risk assessment. We also reviewed the
accounts production process and addressed critical accounting matters. We then
undertook substantive testing on significant classes of transactions and
material account balances.
Where components which were not significant were not subject to statutory
audit we performed sufficient substantive analytical review and other
procedures as considered necessary to enable us to express our opinion on the
group financial statements.
We also addressed the risk of management override of internal controls across
all entities within the scope of our audit, including assessing whether there
was evidence of bias by the directors that may have represented a risk of
material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The key audit matters were:
· Revenue recognition and valuation of accrued income
· Carrying value of intangible fixed assets
· Disclosure of and accounting for acquisitions
Revenue recognition and valuation of accrued income
Description How our scope addressed this matter
Revenue is a significant item in the consolidated statement of comprehensive Our audit work included, but was not restricted to:
income and impacts a number of management's key judgements, performance
indicators and strategic indicators. · Evaluating the group's accounting policy in respect of revenue
recognition to ensure it was in compliance with IFRS 15 and testing of certain
key controls identified in relation to revenue.
The total revenue reported in the group financial statements is £111.2m · Performing substantive testing on a sample of individual revenue
(2022: £108.2m) which is recognised both over time and at a point in time transactions throughout the year across all significant revenue streams to
across five operating segments. evaluate whether revenue is recognised in accordance with the accounting
policy set out in note 2.4.
· Reviewing material credit notes, invoices and receipts post year
Management uses average recovery rates to calculate the accrued income balance end.
at the year end, which is a significant accounting estimate. The rate used in
2023 is 70.5% (2022: 71.9%). · Performing sales cut off tests by analysing the records of time
spent on client matters at the balance sheet date to ensure revenue had been
recognised in the correct period, and by analysing amounts received for the
services not yet rendered, thus resulting in the revenue being deferred.
There is a risk of incorrect revenue recognition due to fraud or error,
arising from: · Understanding of the relevant controls over the recording of time
costs and the setting of the recovery rate for accrued revenue.
· recognition of revenue in the incorrect period;
· Examining past recovery rates to assess whether twelve months is an
· revenue not being recognised in accordance with the requirements of appropriate period of data to set the current recovery rate and to identify
IFRS 15 'Revenue from Contracts with Customers'; and evidence of patterns or outliers that might indicate it is not.
· manipulation of revenues around the year-end through management · Analysing recoverability rates post year end for evidence of
override of controls. deterioration in the same and performing a retrospective review of management
estimates.
We therefore identified revenue recognition as a key audit matter.
Key observations
From our audit testing, we did not identify any material misstatements in
respect of revenue recognition.
Carrying value of intangible assets
Description How our scope addressed this matter
The directors are required to make an assessment to determine whether there Our audit work included, but was not restricted to:
are indicators of impairment relating to the group's intangible assets and
goodwill at the reporting date. Goodwill arising on business combinations is · Obtaining management's analysis of their assessment of whether
required to be tested for impairment at each reporting date. there were any indicators of impairment in each CGU.
· Critically assessing the impairment workings prepared by the client
in relation to intangible assets and goodwill to ensure that no impairment was
At the reporting date the group had intangible assets of £119.5m (2022: required, including recalculating the weighted average cost of capital (WACC)
£115.8m) and goodwill of £88.9m (2022: £83.5m). used as a discount rate, and challenging the allocation of assets, liabilities
and overheads to individual CGUs.
· Comparing carrying values to other indicators such as market
Management have prepared an impairment model which covers all of the group's capitalisation and industry multiples.
operating segments, as each operating segment is treated as a cash generating
unit ("CGU") for the purposes of the impairment assessment and has a portion · Performing sensitivity analysis on and critically assessing key
of goodwill and intangible assets allocated to it. There is headroom in all assumptions used in the impairment workings, and assessing the accuracy of the
CGUs using forecast revenues and costs as estimated by management. forecasts used based on historical trading performance for each segment.
· Evaluating the accounting policy and detailed disclosures in the
notes to the financial statements to determine whether information provided in
Based on the judgemental nature of an impairment review, we identified the financial statements is compliant with the requirements of IAS 36 and
valuation of intangible assets and goodwill as a key audit matter. consistent with the results of the impairment review.
· Reviewing of the amortisation accounting policy for intangible
assets to ensure it was reasonable.
Key observations
Based on our audit work, we concluded that intangible assets and goodwill are
not materially misstated at the reporting date and that management's
assessment that no impairment was required was appropriate.
Disclosure and accounting for acquisitions
Description How our scope addressed this matter
The group completed 2 acquisitions (2022: 3) in the year, as further described Our audit work included, but was not restricted to:
in note 3 to these financial statements.
· Reviewing the methodology applied by the external experts on
preparing the PPA on Doherty, including a review of the forecasts and discount
rate.
IFRS 3 Business Combinations requires that the acquired assets and liabilities
of subsidiaries should be recognised initially at fair value and this may · Assessing the level of reliance placed by management on the
include the recognition of certain intangible assets, such as for the value of external expert's workings.
the existing customer portfolios, which were not previously recognised in the
acquiree's financial statements. Management has carried out a purchase price · Agreeing the balances to underlying workings and assessing the
allocation ('PPA') exercise to determine the fair value of the assets acquired accounting treatment against the requirements of IFRS 3 Business Combinations.
and the liabilities assumed, including intangible assets, using both external
and internal experts. · Reviewing the model used for mathematical accuracy and consistency.
· Challenging management's paper on the purchase price allocation and
critically assessing the assumptions made.
The total acquisition costs include contingent deferred consideration, the
value of which is subjective and is dependent on a number of factors as · Assessing all share purchase agreements in order to identify
detailed in the relevant share and purchase agreements. This contingent business combinations with conditions for the contingent consideration, the
consideration is then subject to fair value adjustment using a discount rate, value of contingent consideration that should be recognised and whether this
which is also subjective and can cause a material difference to the allocation should be recognised as part of the acquisition cost or as a post acquisition
of the fair value of assets acquired. remuneration expense.
· Assessing the disclosures made in Note 3 to the accounts and
agreeing them to the underlying data.
Additionally, where consideration payments are contingent on the future
employment of the seller subsequent to the acquisition, these amounts are
recognised as a post-acquisition remuneration cost over the relevant period.
Key observations
Based on our audit work, we concluded that the accounting for acquisitions is
Given the subjective nature of the fair value allocation and recognition of in line with the requirements of IFRS 3 and that the relevant disclosures are
contingent payments, we identified acquisition accounting and disclosure as a appropriate.
key audit matter.
Our application of materiality
The scope and focus of our audit was influenced by our assessment and
application of materiality. We define materiality as the magnitude of
misstatement that could reasonably be expected to influence the readers and
the economic decisions of the users of the financial statements. We use
materiality to determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the effect of misstatements,
both individually and on the financial statements as a whole.
Due to the nature of the group we considered revenue to be the main focus for
the users of the financial statements, accordingly this consideration
influenced our judgement of materiality. Based on our professional judgement,
we determined materiality for the group to be £1.11m and for the parent
company to be £630k based on one percent of revenue generated by the group
and parent company respectively during the period.
On the basis of our risk assessment, together with our assessment of the
overall control environment, our judgement was that performance materiality
(i.e. our tolerance for misstatement in an individual account or balance) for
the Group and parent company was 50% of materiality, namely £550k and £315k
respectively.
We agreed to report to the Audit Committee all audit differences in excess of
£55k for the Group and £32k for the parent company, as well as differences
below that threshold that, in our view, warranted reporting on qualitative
grounds. We also reported to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial
statements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group and parent company's abilities to continue to adopt
the going concern basis of accounting included:
· Obtaining and critically assessing the going concern assessment
prepared by management covering the twelve months from the date of the audit
report,
· Performing sensitivity analysis on the forecasts to ensure there is
sufficient cash flow headroom for the group to continue as a going concern,
· Reviewing the trading performance post year end and comparing it to
the forecasts to assess their accuracy, and
· Assessing the going concern disclosures made in the financial
statements.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group and parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the Directors'
Report for the financial year for which the financial statements are prepared
is consistent with the parent company financial statements; and
· the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the parent company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group's and the parent company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities is available on the FRC's
website at
https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for
(https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for)
This description forms part of our auditor's report.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud are; to identify and assess
the risks of material misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud, through designing and implementing
appropriate responses to those assessed risks; and to respond appropriately to
instances of fraud or suspected fraud identified during the audit. However,
the primary responsibility for the prevention and detection of fraud rests
with both management and those charged with governance of the company.
Our approach was as follows:
· We obtained an understanding of the legal and regulatory
requirements applicable to the company and considered that the most
significant are the Companies Act 2006, UK adopted International Accounting
Standards, the rules of the Alternative Investment Market, the rules of the
Financial Conduct Authority (where applicable) and UK taxation legislation.
· We obtained an understanding of how the company complies with these
requirements by discussions with management and those charged with governance.
· We assessed the risk of material misstatement of the financial
statements, including the risk of material misstatement due to fraud and how
it might occur, by holding discussions with management and those charged with
governance.
· We inquired of management and those charged with governance as to
any known instances of non-compliance or suspected non-compliance with laws
and regulations, and reviewed minutes of the meetings of the Board and the
various Committees.
· Based on this understanding, we designed specific appropriate audit
procedures to identify instances of non-compliance with laws and regulations.
This included making enquiries of management and those charged with governance
and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken for no purpose other than to draw to the attention of the company's
members those matters which we are required to include in an auditor's report
addressed to them. To the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the company and company's
members as a body, for our work, for this report, or for the opinions we have
formed.
Matthew Meadows (Senior Statutory Auditor)
for and on behalf of Moore Kingston Smith LLP, Statutory Auditor
6 Floor, 9 Appold Street, London EC2A 2AP
12 September 2023
Consolidated statement of comprehensive income
For the year ended 31 May 2023
Note
2023 2022
£000 £000
Revenue 4 111,182 108,226
Employee benefits expense 11 (60,864) (59,571)
Other administrative expenses (18,249) (19,803)
Share-based payments 20 (1,992) (1,729)
Amortisation and impairment 17 (9,036) (7,546)
Depreciation 15,16 (2,475) (2,762)
Impairment loss on financial assets 21 (215) (258)
Profit on disposal of fixed asset investments - 406
Profit on disposal of property, plant and equipment 90 3
Loss on disposal of investment in own shares (116) -
Deferred consideration presented as remuneration 26,28 (6,865) (9,664)
Operating profit before financing 10 11,460 7,302
Finance revenue 8 545 79
Finance costs 9 (1,126) (1,006)
Net finance costs (581) (927)
Share of profit from associate, net of tax 18 974 1,614
Profit before tax 11,853 7,989
Income tax expense 12 (4,201) (3,870)
Profit for the year 7,652 4,119
Items that will not be reclassified to profit or loss
Other comprehensive loss for the year, net of tax 18 (22) (19)
Total comprehensive income for the year, net of tax 7,630 4,100
Attributable to:
Equity holders of the parent 7,626 4,100
Non-controlling interest (4) -
Earnings per ordinary share:
Basic (pence) 13 14.9 8.3
Diluted (pence) 13 14.9 8.3
Proposed total dividend per share (pence) 14 26.8 26.1
The operating profit and earnings per ordinary share for each period arise
from the Group's continuing and total operations.
Consolidated and Company statements of financial position
As at 31 May 2023
2023 2022
Group Company Group Company
Note £000 £000 £000 £000
Assets
Property, plant and equipment 15 13,992 2,836 14,126 2,453
Right-of-use assets 16 3,035 1,406 3,322 1,066
Intangible assets 17 208,381 55,471 199,325 58,019
Deferred tax asset 12 695 671 776 751
Investments in subsidiaries 18 - 153,131 - 137,508
Investment in associate 18 4,128 4,128 4,165 4,165
Other investments 18 4,699 863 5,509 1,526
Total non-current assets 234,930 218,506 227,223 205,488
Trade and other receivables 21 30,389 56,180 28,446 50,883
Income tax receivable 12 - - - 146
Finance lease receivable 286 286 354 354
Investments 18 246 - 253 -
Cash and short-term deposits 22 45,101 18,423 53,912 25,864
Total current assets 76,022 74,889 82,965 77,247
Total assets 310,951 293,395 310,188 282,735
Equity
Issued capital 23 517 517 510 510
Share premium 23 144,638 144,638 143,373 143,373
Merger reserve 23 57,225 57,225 57,225 57,225
Equity - share-based payments 23 3,666 3,666 2,804 2,804
Capital redemption reserve 23 2,000 2,000 2,000 2,000
Own shares 23 - - (597) -
Non-controlling interest 477 - - -
Retained earnings 23 20,817 33,091 24,784 33,007
Total equity attributable to equity holders of the parent 229,340 241,137 230,099 238,919
Non-current liabilities
Lease liability 27 2,600 1,289 2,772 862
Deferred tax liability 12 28,873 5,782 27,474 6,352
Provisions 26 3,879 3,454 8,611 7,621
Total non-current liabilities 35,352 10,525 38,857 14,835
Current liabilities
Trade and other payables 25 23,447 22,750 25,055 15,489
Income tax payable 12 4,578 1,205 1,953 -
Lease liability 27 756 398 985 534
Provisions 26 17,478 17,380 13,239 12,958
Total current liabilities 46,259 41,733 41,232 28,981
Total liabilities 81,611 52,258 80,089 43,816
Total equities and liabilities 310,951 293,395 310,188 282,735
The parent company has taken advantage of section 408 of the Companies Act
2006 and has not included its own statement of comprehensive income in these
financial statements. The profit of the Company for the financial year,
after taxation, was £11.1m (2022: £9.9m profit).
The notes to the financial statements form part of these financial
statements. The financial statements were approved by the Board of Directors
and authorised for issue on 12 September 2023 and are signed on its behalf by:
Ian Mattioli
MBE
Ravi Tara
Chief Executive
Officer
Chief Financial Officer
Registered number: 03140521
Consolidated and Company Statements of Changes in Equity
For the year ended 31 May 2023
Group Issued capital Share premium Merger reserve Equity - share-based payments Capital redemption reserve Own shares Non-controlling interest Retained earnings Total equity
(Note 23)
(Note 23) (Note 23) (Note 23) (Note 23) (Note 23) (Note 23) (Note 23) £000
£000
£000 £000 £000 £000 £000 £000 £000
As at 1 June 2021 283 33,834 17,458 3,559 2,000 (597) - 29,550 86,087
Profit for the year - - - - - - - 4,119 4,119
Share of other comprehensive loss from associates - - - - - - - (19) (19)
Total comprehensive income - - - - - - - 4,100 4,100
Transactions with owners of the Group, recognised directly in equity
Issue of share capital 227 109,539 39,767 - - - - - 149,533
Share-based payment transactions - - - 1,292 - - - - 1,292
Deferred tax recognised in equity - - - (13) - - - - (13)
Current tax taken to equity - - - 141 - - - - 141
Reserves transfer - - - (2,175) - - - 2,175 -
Dividends - - - - - - - (11,041) (11,041)
As at 31 May 2022 510 143,373 57,225 2,804 2,000 (597) - 24,784 230,099
Profit for the year - - - - - - 4 7,652 7,656
Changes in fair value - - - - - - - -
Share of other comprehensive loss from associates - - - - - - - (22) (22)
Total comprehensive income - - - - - - 4 7,630 7,634
Transactions with owners of the Group, recognised directly in equity
Issue of share capital 7 1,265 1,969 - - - - - 3,241
Share-based payment transactions - - - 1,476 - - - - 1,476
Deferred tax recognised in equity - - - (28) - - - (162) (190)
Current tax taken to equity - - - 9 - - - - 9
Reserves transfer - - (1,969) (595) - - - 2,564 -
Disposal of investment in own shares - - - - - 597 - - 597
Arising on acquisition - - - - - - 473 (401) 72
External dividends - - - - - - - (13,598) (13,598)
As at 31 May 2023 517 144,638 57,225 3,666 2,000 - 477 20,817 229,340
Consolidated and Company Statements of Changes in Equity
For the year ended 31 May 2023 (continued)
Company Issued capital Share premium Merger reserve Equity - share-based payments Capital redemption reserve Retained earnings Total equity
(Note 23) (Note 23) (Note 23) (Note 23) (Note 23) (Note 23) £000
£000 £000 £000 £000 £000 £000
As at 1 June 2021 283 33,834 17,458 3,559 2,000 31,975 89,109
Profit for the year - - - - - 9,917 9,917
Share of other comprehensive loss from associates - - - - - (19) (19)
Total comprehensive income - - - - - 9,898 9,898
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 227 109,539 39,767 - - - 149,533
Share-based payment transactions - - - 1,292 - - 1,292
Deferred tax recognised in equity - - - (13) - - (13)
Current tax taken to equity - - - 141 - - 141
Reserves transfer - - - (2,175) - 2,175 -
Dividends - - - - - (11,041) (11,041)
As at 31 May 2022 510 143,373 57,225 2,804 2,000 33,007 238,919
Profit for the year - - - - - 11,112 11,112
Changes in fair value - - - - - - -
Share of other comprehensive loss from associates - - - - - (18) (18)
Total comprehensive profit - - - - - 11,094 11,094
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 7 1,265 1,969 - - 1,969 3,241
Share-based payment transactions - - - 1,476 - - 1,476
Deferred tax recognised in equity - - - (28) - - (28)
Current tax taken to equity - - - 9 - 24 33
Reserves transfer - - (1,969) (595) - 2,564 -
Internal dividends from acquisitions - -
Dividends - - - - - (13,598) (13,598)
As at 31 May 2023 517 144,638 57,225 3,666 2,000 33,091 241,137
Consolidated and Company Statements of Cash Flows
For the year ended 31 May 2023
Group Company Group Company
2023 2023 2022 2022
Note £000 £000 £000 £000
Operating activities
Profit for the year 7,652 11,112 4,119 9,917
Adjustments for:
Depreciation 15,16 2,474 1,293 2,762 1,580
Amortisation and impairment 17,18 9,036 3,769 7,546 2,963
Impairment of investment in subsidiaries 18 - 7,675 - 21,743
Deferred consideration presented as remuneration 26,28 6,865 6,865 9,664 9,664
Investment income 8 (545) (1,805) (79) (792)
Interest expense 9 1,126 1,035 1,006 1,831
Share of profit from associates 18 (974) (974) (1,614) (1,614)
Share of profit from partnerships - (9,622) - (10,461)
Profit on disposal of property, plant and equipment (25) (25) (3) (3)
Profit on disposal of fixed asset investments 18 - - (406) -
Gain on revaluation of fixed asset investments 18 98 - (32) -
Equity-settled share-based payments 20 1,992 1,992 1,729 1,729
Dividend income - (15,155) - (33,561)
Income tax expense 12 4,201 2,865 3,870 2,508
Cash flows from operating activities before changes in working capital and 31,900 9,025 28,562 5,504
provisions
(Increase)/decrease in trade and other receivables (1,197) 12,158 (5,251) 7,205
Increase/(decrease) in trade and other payables 809 7,616 1,771 823
(Decrease)/increase in provisions (5,920) (3,457) (5,441) (5,723)
Cash generated from operations 25,592 25,342 19,641 7,809
Interest paid - - (6) (6)
Income taxes paid (3,071) (2,384) (3,258) (2,600)
Net cash flows from operating activities 22,521 22,958 16,377 5,203
Investing activities
Proceeds from sale of property, plant and equipment 180 180 116 116
Purchase of property, plant and equipment 15 (1,396) (1,330) (1,001) (959)
Purchase of software 17 (557) (557) (427) (427)
Purchase of client portfolio 17 - - (660) -
Contingent consideration paid on acquisition of subsidiaries 26 (2,248) (1,647) (1,554) (1,554)
Acquisition of subsidiaries 3 (14,356) (14,356) (72,894) (72,894)
Cash received on acquisition of subsidiaries 3 9,420 - 8,868 -
Contingent remuneration paid on acquisition of subsidiaries (10,044) (10,044) - -
Investment in other equity holdings 18 (193) - (1,574) (1,000)
Dividends received from associate undertakings 18 980 980 1,715 1,715
Proceeds on disposal of other investments 646 - 686 -
Loans advanced to subsidiary undertakings - - - (15,945)
Loans advanced to property syndicates (195) (195) (3) (3)
Loan repayments from property syndicates - - 1,348 1,348
Interest received 8 263 207 34 29
Dividends received - 10,244 - 2,000
Net cash flows from investing activities (17,500) (16,518) (65,346) (87,574)
Financing activities
Proceeds from the issue of share capital 851 851 109,277 109,277
Cost of own shares acquired 477 - - -
Dividends paid 14 (13,598) (13,598) (11,041) (11,041)
Repayment of borrowings - - (15,945) -
Payment of lease liabilities 27 (1,562) (1,134) (1,298) (910)
Net cash flows from financing activities (13,832) (13,881) 80,993 97,326
Net increase/(decrease) in cash and cash equivalents (8,811) (7,441) 32,024 14,955
Cash and cash equivalents at start year 22 53,912 25,864 21,888 10,909
Cash and cash equivalents at end of year 22 45,101 18,423 53,912 25,864
Notes to the financial statements
1 Corporate information
Mattioli Woods plc ("the Company") is a public limited company incorporated
and domiciled in England and Wales, whose shares are publicly traded on the
AIM market of the London Stock Exchange plc. The Company's registered address
is 1 New Walk Place, Leicester, LE1 6RU. The nature of the Group's operations
and its principal activities are set out in the Chief Executive's Review.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The consolidated and Company financial statements have been prepared in
accordance with UK-adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006.
The consolidated financial statements comprise the financial statements of
Mattioli Woods plc and its subsidiaries ("the Group") as at 31 May each
year. The financial statements have been prepared on the historical cost
basis, except for certain financial instruments that are measured at fair
value (Notes 18, 22 and 27), and are presented in pounds, with all values
rounded to the nearest thousand pounds (£000) except when otherwise
indicated.
The principal accounting policies adopted are set out in this note and, unless
otherwise stated, have been applied consistently to all periods presented in
the financial statements. The financial statements were authorised for issue
in accordance with a resolution of the Directors on 12 September 2023.
2.2 Going concern
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence. In forming this view, the Directors
have considered the Company's and the Group's prospects for a period of at
least 12 months from the approval date of these financial statements. Thus
they continue to adopt the going concern basis of accounting in preparing the
financial statements.
Further details of the consideration made by the Directors can be found in the
Directors' Report.
2.3 Developments in reporting standards and interpretations
Standards not affecting the financial statements
The following new and revised standards and interpretations have been adopted
in the current period:
Standard or interpretation Periods commencing on or after
Annual improvements to IFRS 2018-2020 1 January 2022
Amendments to IAS 37 'Onerous contracts - Cost of fulfilling a contract' 1 January 2022
Amendments to IAS 16 'Property, plant and equipment - Proceeds before intended 1 January 2022
use'
Amendments to IFRS 3 'Reference to the conceptual framework' 1 January 2022
Their adoption has not had any significant impact on the amounts reported in
these financial statements but may impact the accounting for future
transactions and arrangements or give rise to additional disclosures.
Future new standards and interpretations
A number of new standards and amendments to standards and interpretations will
be effective for future annual periods and, therefore, have not been applied
in preparing these consolidated financial statements. At the date of
authorisation of these financial statements, the following standards and
interpretations were in issue but not yet effective and have not been applied
in these financial statements:
Standard or interpretation Periods commencing on or after
IFRS 17 Insurance contracts (including amendments to IFRS 17) 1 January 2023
Amendments to IAS 12 'Deferred tax related to assets and liabilities arising 1 January 2023
from a single transaction'
Amendments to IAS 1 and IFRS PS2 'Disclosure of accounting policies' 1 January 2023
Amendments to IAS 1 and IFRS PS2 'Definition of accounting estimates' 1 January 2023
Amendments to IAS 12 'International tax reform - Pillar two model rules' 1 January 2023
Amendments to IAS 1 'Classification of liabilities as current or non-current' 1 January 2024
Amendments to IFRS 16 'Lease liability in a sale and leaseback' 1 January 2024
The Directors do not expect the adoption of these standards and
interpretations listed above to have a material impact on the financial
statements of the Group in future periods.
2.4 Principal accounting policies
Basis of consolidation
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases. The financial statements of the
subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies. All intra-group balances, income and
expenses and unrealised gains and losses resulting from intra-group
transactions are eliminated in full.
Business combinations
Business combinations are accounted for using the purchase accounting
method. This involves assessing whether any assets acquired meet the
criteria for recognition as separately identifiable intangible assets.
Intangible assets are measured on initial recognition at their fair value at
the date of acquisition. Client portfolios are valued by discounting their
expected future cash flows over their expected useful lives, based on the
Group's historical experience. Expected future cash flows are estimated
based on the historical revenues and costs associated with the operation of
that client portfolio. The discount rates used estimate the cost of capital,
adjusted for risk.
Contingent consideration payable to employees or selling shareholders arising
on business combination is assessed as to whether it should be classified as
part of acquisition costs or remuneration for post-acquisition services, using
the criteria as defined in IFRS 3 Business Combinations to identify the
appropriate treatment. Where contingent consideration payable to employees
or selling shareholders is treated as remuneration, it is recognised as an
expense over the period over which the contingent consideration is earned,
reported separately on the face of the statement of comprehensive income, and
included within operating cash flows.
Associates
The Company's share of profits from associates is reported separately in the
statement of comprehensive income and the investment is recognised in the
statement of financial position using the equity method. The investment is
initially recorded at cost and subsequently adjusted to reflect the Company's
share of the cumulative profits of the associate since acquisition.
Appropriate adjustments to the Company's share of the profits or losses after
acquisition are made to account for additional amortisation of the associate's
amortisable assets based on the excess of their fair values over their
carrying amounts at the time the investment was acquired.
Property, plant and equipment
Property, plant and equipment is stated at cost, excluding the costs of
day-to-day servicing, less accumulated depreciation and accumulated impairment
in value. Such cost includes the cost of replacing part of the plant and
equipment when that cost is incurred if the recognition criteria are met.
Depreciation is provided on all property, plant and equipment at rates
calculated to write each asset down to its estimated residual value over its
expected useful life as follows:
· Freehold
buildings 2%
per annum on cost;
· Computer
equipment 10-33% per
annum on cost;
· Office
equipment
20% per annum on written down values;
· Fixtures and
fittings 20% per
annum on written down values;
· Motor
vehicles
25% per annum on written down values; and
· Leasehold improvements
Straight line over the remaining
term of the lease.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain
or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is
included in the statement of comprehensive income in the year the asset is
derecognised.
The asset's residual values, useful lives and methods of depreciation are
reviewed, and adjusted if appropriate, at each financial year end.
Investments
The Group accounts for its investments in subsidiaries using the cost model
and investments in associates using the equity method.
Other fixed asset investments
Other fixed asset investments are treated as financial assets and classified
as either fair value through profit and loss or fair value through other
comprehensive income financial assets.
Goodwill
Goodwill acquired in a business combination is initially measured at cost,
being the excess of the cost of the business combinations over the Group's
interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities. Following initial recognition,
goodwill is measured at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group's cash-generating
units, or groups of cash-generating units, that are expected to benefit from
the synergies of the combination, irrespective of whether other assets or
liabilities of the Group are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is allocated:
· Represents the lowest level within the Group at which the
goodwill is monitored for internal management purposes; and
· Is not larger than a segment based on the Group's reporting
format determined in accordance with IFRS 8 'Operating Segments'.
If a cash-generating unit was to be sold, the difference between the selling
price and the net assets and goodwill would be recognised in the statement of
comprehensive income. Where the Group reorganises its reporting structure in
a way that changes the composition of one or more cash-generating units to
which goodwill has been allocated, the goodwill is reallocated to the units
affected.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses. The useful lives of intangible assets are
assessed to be either finite or indefinite. Intangible assets assessed as
having finite lives are amortised over their useful economic life as follows:
· Purchased
software 25% per
annum on written down values; and
· Internally generated software
Straight line over 10 years.
The Group amortises individual client portfolios acquired through business
combinations on a straight-line basis over an estimated useful life based on
the Group's historic experience.
Client portfolios acquired through business combinations and other
acquisitions are as follows:
Client portfolio Date of acquisition Estimated useful life
Mattioli Woods Pension Consultants 2 September 2003 25 years
("the Partnership Portfolio")
Geoffrey Bernstein 20 June 2005 25 years
Suffolk Life 27 January 2006 25 years
PCL 10 July 2007 25 years
JBFS 18 February 2008 25 years
CP Pensions 30 April 2010 25 years
City Pensions 9 August 2010 20 years
Kudos 26 August 2011 20 years
Ashcourt Rowan 23 April 2013 10 years
Atkinson Bolton 29 July 2013 20 years
UK Wealth Management 8 August 2014 10 years
Torquil Clark 23 January 2015 10 years
Boyd Coughlan 23 June 2015 20 years
Taylor Patterson 8 September 2015 20 years
Lindley Trustees 5 October 2015 10 years
Maclean Marshall Healthcare 22 January 2016 10 years
Stadia Trustees 15 February 2016 10 years
MC Trustees 7 September 2016 20 years
Broughtons Financial Planning 8 August 2018 15 years
SSAS Solutions 27 March 2019 20 years
The Turris Partnership 19 December 2019 15 years
Hurley Partners 31 July 2020 15.7 years
Exempt Property Unit Trust 14 January 2021 10 years
Montagu 2 February 2021 20 years
Pole Arnold Financial Management 12 April 2021 20 years
Caledonia Asset Management 16 April 2021 20 years
Maven Capital Partners UK 30 June 2021 7-20 years
Richings Financial Management 26 August 2021 15 years
Ludlow Wealth Management Group 3 September 2021 10-20 years
Ferguson Financial Management 10 May 2022 10 years
Doherty Pension & Investment Consultancy 19 April 2023 15 years
A summary of the policies applied to the Group's goodwill and intangible
assets is as follows:
Goodwill Client portfolios Brand names Software Other intangibles
Useful life Indefinite Finite Finite Finite Finite
Measurement method used Annual impairment review Amortised over a useful economic life of between 10 and 25 years on a Amortised over a useful economic life of between 10 and 25 years on a Amortised over a useful economic life of four years on a reducing balance Amortised over a useful economic life of three years
straight-line basis straight-line basis basis or 10 years on a straight-line basis if internally generated
Internally generated or acquired Acquired Acquired Acquired Both Both
Intangible assets assessed as having finite lives are assessed for impairment
whenever there is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an intangible asset
with a finite useful life is reviewed at least at each financial year end.
Changes in the expected useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are accounted for by changing
the amortisation period or method, as appropriate, and treated as changes in
accounting estimates. The amortisation expense on intangible assets with
finite lives is recognised in the statement of comprehensive income.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is any indication that
an asset may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an estimate of
the asset's recoverable amount. An asset's recoverable amount is the higher
of an asset's or cash-generating unit's fair value less cost to sell and its
value in use, and is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent from those of other
assets or group of assets.
When the carrying amount of an asset exceeds its recoverable amount, the asset
is considered impaired and is written down to its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money, and the risks specific to the asset.
In determining fair value less cost to sell, an appropriate valuation model is
used. These calculations are corroborated by valuation multiples or other
available fair value indicators.
Impairment losses of continuing operations are recognised in the statement of
comprehensive income.
For assets excluding goodwill, an assessment is made at each reporting date as
to whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such indication exists,
the Group makes an estimate of the recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the
estimates used to determine the asset's recoverable amount since the last
impairment loss was recognised. If that is the case, the carrying amount of
the asset is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in the statement of comprehensive income
unless the asset is carried at the revalued amount, in which case reversal is
treated as a revaluation increase, except in relation to goodwill.
The following criteria are also applied in assessing impairment of specific
non-financial assets:
Goodwill
Goodwill is reviewed for impairment annually or more frequently if events or
changes in circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of
the cash-generating unit (or group of cash-generating units) to which the
goodwill relates. Where the recoverable amount of the cash-generating unit
(or group of cash-generating units) is less than the carrying amount of the
cash-generating unit (or group of cash-generating units) to which goodwill has
been allocated, an impairment loss is recognised. Impairment losses relating
to goodwill cannot be reversed in future periods. The Group performs its
annual impairment test of goodwill as at 31 May.
Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets which have solely
payments of principal and interest that are held with the intention of
collecting the cash flows. After initial measurement, loans and receivables
are subsequently carried at amortised cost using the effective interest method
less any allowance for impairment. Amortised cost is calculated taking into
account any discount or premium on acquisition and includes fees and
transaction costs. Gains and losses are recognised in the statement of
comprehensive income when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
Cash and short-term deposits
Cash and short-term deposits in the statement of financial position comprise
cash at banks and in hand and short-term deposits with an original maturity of
three months or less. For the purpose of the statement of cash flows, cash
and cash equivalents consist of cash and short-term deposits as defined above.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other
comprehensive income are classified as financial assets at fair value through
profit or loss. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include
equity investments that the consolidated entity intends to hold for the
foreseeable future and has irrevocably elected to classify them as such upon
initial recognition. Fair value movements are recognised in other
comprehensive income.
Impairment of non-derivative financial assets
At each reporting date the Group recognises loss allowances for expected
credit losses for all financial assets at amortised cost. The Group measures
loss allowances at an amount equal to lifetime expected credit losses, except
for bank balances for which credit risk has not increased significantly since
initial recognition, which are measured at 12-month expected credit losses.
When estimating expected credit loss by determining whether credit risk has
increased significantly since initial recognition, the Group considers
reasonable and supportive information that is relevant and available without
undue cost or effort, including historic rates of loss from the issue of
credit notes or increases in specific expected credit losses and will consider
forward-looking factors where they may impact clients' abilities to meet cash
flow obligations such as significant market movements impacting the value of
clients' investments.
Trade receivables are deemed to be low credit risk. Our pension and
investment products tend to attract high-net-worth clients with a strong
capacity to meet contractual cash flow obligations in the near term, and
adverse changes in economic conditions in the longer term may, but will not
necessarily, reduce their ability to fulfil cash flow obligations. Our
position as fund manager increases the visibility of credit risks and our
ability to ensure that fees due from those funds are recovered or
recoverable. Further details of our credit risk management practices are
included in Note 30.
Aged trade and other receivables are reviewed with specific provisions or
write offs recognised where recovery is uncertain, such as balances owing from
individuals who are declared bankrupt or deceased, and balances due from
pension schemes where the scheme does not hold liquid or saleable assets.
Further provisions for impairment are recognised for expected credit losses on
other trade receivables and accrued income financial assets. The carrying
amount of the receivable is reduced through use of an allowance account.
Expected credit loss rates are calculated based on the value of credit notes
issued, plus increases in specific provisions against trade receivables.
Credit losses rates are calculated separately for each company within the
Group based on credit losses divided by the value of invoiced revenue over a
rolling 12-month period.
Financial liabilities
Trade and other payables
Trade and other payables are recognised at cost due to their short-term
nature. Accruals and deferred income are normally settled monthly throughout
the financial year, with the exception of bonus accruals, which are typically
paid annually.
Leases
Lease agreements under which the Group is lessee give rise to both a
right-of-use asset and a lease liability.
The lease liability is recognised at the present value of future lease
payments under the lease, including any rental incentives, and discounted at
the incremental rate of borrowing of the lessee, which is determined based on
the risk-free rate and margin payable on borrowing over a term equivalent to
the lease. Right-of-use assets are initially recognised at the value of the
lease liability.
Lease liabilities are subsequently measured by adjusting the carrying amount
to reflect the interest charge, the lease payments made and any reassessment
or lease modifications. Leases with a remaining term less than 12 months at
the reporting date are assessed for a period of expected renewal, and where
renewal is expected, the lease liability is remeasured to include the terms of
the expected renewal.
Right-of-use assets are subsequently depreciated on a straight-line basis over
the shorter of the expected life of the asset and the lease term, adjusted for
any remeasurements of the lease liability and amendments to associated
provisions for dilapidation on property leases. Right-of-use assets are
derecognised on handing the leased asset back to the lessor of the asset.
Lease agreements under which the Group is lessor are assessed to determine if
they represent operating or finance leases. The Group has one lease
agreement under which the Group is both lessee and lessor. The part of the
property in which the Group is a lessor is classified as a finance lease.
Finance leases of leased assets under which the Group is lessor give rise to
both a finance lease receivable and the partial de-recognition of the
right-of-use asset in respect of the head lease of the leased asset.
Derecognition of right-of-use assets are measured at an amount equal to the
lease receivable.
Finance lease receivables are subsequently measured by adjusting the carrying
amount to reflect the interest income, the lease payments received and any
reassessment or lease modifications.
Where a lease has a term of less than 12 months or is of low value, the Group
applies the exemption not to recognise right-of-use assets and liabilities for
these leases. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method. Gains and
losses are recognised in the statement of comprehensive income when the
liabilities are derecognised as well as through the amortisation process.
Contingent consideration
Contingent consideration payable to employees or selling shareholders arising
on business combinations is assessed as to whether it should be classified as
part of acquisition costs or remuneration for post-acquisition services.
Where classified as acquisition costs, a provision for contingent
consideration is recognised on acquisition for the present value of the level
of contingent consideration expected to be paid. Subsequent changes to the
fair value of the contingent consideration are recognised in accordance with
IFRS 9 in the statement of comprehensive income.
Where classified as remuneration, a provision for contingent consideration is
recognised based on the level of contingent consideration expected to be paid
and the period over which the contingent consideration relates.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually
certain. The expense relating to any provision is presented in the statement
of comprehensive income, net of any reimbursement. If the effect of the time
value of money is material, provisions are discounted using a current pre-tax
rate that reflects, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passing of
time is recognised as a finance cost.
Provisions include financial liabilities. Where the Group has entered into
certain acquisition agreements that provide for contingent consideration to be
paid, the Board estimates the net present value of contingent consideration
payable.
Share-based payments
The Group engages in share-based payment transactions in respect of services
received from certain employees. In relation to equity-settled share-based
payments, the fair value of services received is measured by reference to the
fair value of the shares or share options granted on the date of grant and is
recognised, together with a corresponding increase in equity, as an expense
over the period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees become fully
entitled to the award ("the vesting date"). The fair value of share options
is determined using the Black Scholes Merton pricing model.
The cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting
period has elapsed and the Group's best estimate of the number of equity
instruments that will ultimately vest. The statement of comprehensive income
charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified, the minimum expense
recognised is the expense if the terms had not been modified. An expense is
recognised for any modification that increases the total fair value of the
share-based payment arrangement or is otherwise beneficial to the employee as
measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any expense not yet recognised for the award
is recognised immediately. However, if a new award is substituted for the
cancelled award and designated as a replacement award on the date it is
granted, the cancelled and new awards are treated as if they were a
modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of earnings per share (further details are given
in Note 13).
Own shares
Own shares consist of shares held within an employee benefit trust. The
Company has an employee benefit trust for the granting of shares to applicable
employees, whose assets are aggregated with those of the rest of the Group in
the preparation of the consolidated financial statements of the Group.
Own shares are recognised at cost as a deduction from equity shareholders'
funds. Subsequent consideration received for the sale of such shares is also
recognised in equity, with any difference between the sale proceeds and the
original cost being taken to retained earnings.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration receivable for each
contractual obligation, excluding discounts, rebates, and other sales taxes or
duty. Terms of business with customers typically include payment periods of
up to 60 days, although specific payment terms can be agreed between the
parties. The following information details the nature and timing of the
satisfaction of performance obligations in contracts with customers.
Investment and asset management
Commission income and adviser charges are recognised as follows:
· At a point in time: Initial commission (less provision for
clawbacks, as explained in Note 26) and initial adviser charges are recognised
on a 'point in time' basis as being earned at the point the performance
obligation is met, being when an investment of funds has been made by the
client and submitted to the product provider.
· Over time: Ongoing adviser charges, based on the value of assets
invested, are recognised on an 'over time' basis during the period the assets
are held in the portfolio or investment fund, with the contract performance
obligation being the ongoing management of investments in accordance with the
applicable investment mandate.
Discretionary portfolio management ("DPM") charges are recognised as follows:
· At a point in time: Initial charges on the placing of investments
are recognised on a 'point in time' basis as being earned at the point when an
investment of funds has been made by the client and submitted to the product
provider.
· Over time: Ongoing DPM charges based on the value of assets
invested are recognised on an 'over time' basis during the period the assets
are held in the portfolio or investment fund, with the contract performance
obligation being the ongoing management of investments in accordance with the
applicable investment mandate.
Our ongoing adviser and DPM charges have been compared to observable rates
from other providers on a stand-alone basis, with initial charges being
recognised by the residual approach, to ensure the allocation of the selling
price remains appropriate.
Private equity asset management
Private equity asset management fees are recognised as follows:
· At a point in time: Initial charges on the establishment of a VCT
and property investment deals are recognised on a 'point in time' basis when
the investment vehicle funding targets are met. Exit fees are recognised on
completion of divestments. Performance fees are recognised on measurement of
the performance or change in valuation of the managed investments.
· Over time: Fund management and administration charges, including
charges based on the value of assets held, are recognised on an 'over time'
basis during the period the assets are held in the fund.
Pension consultancy and administration
Pension consultancy and administration fees are recognised as follows:
· At a point in time: Mattioli Woods generally invoices pension
clients on a six-monthly basis in arrears for costs incurred in advising on
and administering their affairs. Where revenue is contingent on completion
of a service, revenue is recognised on a 'point in time' basis at the point
those contractual performance conditions are satisfied. No revenue is
recognised if there are significant uncertainties regarding recovery of the
time incurred.
· Over time: To the extent that the Group has a contractual right to
invoice for services rendered, revenue is recognised on an 'over time' basis
as time is incurred on the provision of services, with an estimate being made
of what proportion of uninvoiced time costs will be recoverable.
Recoverability is measured as a percentage of the total time costs incurred on
clients' affairs compared to the proportion of historical time costs actually
invoiced.
Pension consultancy and administration fees have been compared to observable
rates from other providers on a stand-alone basis, with establishment charges
being recognised by the residual approach, to ensure the allocation of the
selling price remains appropriate.
Property management
Property management fees are recognised as follows:
· At a point in time: Initial charges on the establishment of a
private investment syndicate are recognised on a 'point in time' basis when
the syndicate completes its investment.
· Over time: Fund management and private investment syndicate
charges, including charges based on the value of assets held, are recognised
on an 'over time' basis during the period the assets are held in the fund or
syndicate.
Employee benefits
Employee benefits fees are recognised as follows:
· At a point in time: Fee income from services provided on the set up
of an employee benefits scheme or provision of non-recurring employee benefits
services are recognised on a 'point in time' basis on completion of rendering
those services, being the point that those contractual performance conditions
are satisfied.
· Over time: Ongoing management charges on employee benefits schemes
are recognised on an 'over time' basis over the period to which they relate.
Interest income
Revenue is recognised as interest accrues (using the effective interest method
that is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial instrument to the net carrying amount of
the financial asset).
Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods
are measured at the amount expected to be recovered from or repaid to the
taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the reporting date.
Current income tax relating to items recognised directly in equity is
recognised in equity and not in the statement of comprehensive income.
Deferred income tax
Deferred income tax is provided using the liability method on temporary
differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax balances are recognised for all taxable temporary
differences, except where the deferred income tax balance arises from the
initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary
differences, carry forward of unused tax credits and unused tax losses, to the
extent it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer probable
sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred income tax
assets are reassessed at each reporting date and are recognised to the extent
it has become probable that future taxable profit will allow the deferred
income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or
substantially enacted at the reporting date.
Deferred income tax relating to items recognised directly in equity is
recognised in equity and not in the statement of comprehensive income.
Deferred income tax assets related to temporary differences arising on
share-based payments to employees are based on the market value of the
Company's shares at the year end.
Deferred income tax assets and deferred income tax liabilities are offset, if
a legally enforceable right exists to set off current tax assets against
current income tax liabilities and the deferred income taxes relate to the
same taxable entity and the same taxation authority.
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax,
except:
· Where the sales tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which case the
sales tax is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
· Receivables and payables that are stated with the amount of
sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the statement of
financial position.
Dividend recognition
Dividend distributions to the Company's shareholders are recognised in the
accounting period in which the dividends are declared and paid, or if earlier,
in the accounting period when the dividend is approved by the Company's
shareholders at the Annual General Meeting.
Pension costs
The Group makes discretionary payments into the personal pension schemes of
certain employees. Contributions are charged to the statement of
comprehensive income as they are payable.
2.5 Critical accounting judgements and sources of significant
estimation uncertainty
The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amount of revenues,
expenses, assets and liabilities and the disclosure of contingent
liabilities. If in the future such estimates and assumptions, which are
based on management's best judgement at the date of preparation of the
financial statements, deviate from actual circumstances, the original
estimates and assumptions will be modified as appropriate in the period in
which the circumstances change. The areas where a higher degree of judgement
or complexity arises, or where assumptions and estimates are significant to
the consolidated financial statements, are discussed below.
Critical accounting judgements
Contingent payments to selling shareholders arising from a business
combination
Contingent consideration payable to employees or selling shareholders arising
on business combinations is assessed as to whether it should be classified as
part of acquisition costs or remuneration for post-acquisition services, using
the criteria as defined in IFRS 3 Business Combinations to identify the
appropriate treatment. Where contingent consideration payable to employees
or selling shareholders is treated as acquisition costs, its fair value at
acquisition forms part of the intangible assets arising on acquisition.
Where it is treated as remuneration, it is recognised as an expense over the
period over which the contingent consideration is earned.
In the year ended 31 May 2023, neither of the two acquisitions completed
included contingent consideration classified as remuneration. In the year
ended 31 May 2022, two acquisitions were completed that included contingent
consideration classified as remuneration. If these had been classified as
part of acquisition cost, overhead expenses in the year to 31 May 2022 would
be lower by £4,572,000, finance costs would be higher by £1,715,000, and
therefore profit before tax would be higher by £2,857,000. In addition,
goodwill would be higher by £14,718,000 and provisions for contingent
consideration would be higher by £16,433,000.
Sources of significant estimation uncertainty
Acquisitions and business combinations
When an acquisition arises, the Group is required under UK-adopted
International Accounting Standards to calculate the Purchase Price Allocation
("PPA"). The PPA requires companies to report the fair value of assets and
liabilities acquired and it establishes useful lives for identified assets.
The identification and the valuation of the assets and liabilities acquired
involves estimation and judgement when determining whether the recognition
criteria are met.
Subjectivity is also involved in the PPA with the estimation of the future
value of brands, technology, customer relationships and goodwill. The fair
value of separately identifiable intangible assets acquired during the year
was £16.9m (2022: £67.7m), with the key assumptions used to calculate these
fair values being those around the estimated useful lives of the acquired
customer relationships, the estimated future cash flows expected to arise from
these relationships and the appropriate discount rate to be used to discount
these cash flows to their present value.
Estimated useful life sensitivity of -5 years is used, representing a severe
but plausible rate of client attrition if customer relationships acquired are
damaged as a result of the business combination. Growth rate sensitivities
are set at a level to either minimise or altogether remove the impact of
assumed growth in cash flows derived from the acquired portfolio. Discount
rate sensitivity of +2.0% represents a plausible variance in discount rate as
a result of a range of judgements used in following the capital asset pricing
model to determine an appropriate weighted average cost of capital for the
acquired businesses.
The sensitivity of the fair value of the highest-valued customer relationships
acquired during the year to changes in the key assumptions are as follows:
Acquisition of Doherty Pension & Investment Consultancy Base assumption Change in assumption Decrease in fair value
£000
Estimated useful life 15 years -5 years 1,879
Growth rate 2.5%-20% to 0.0% 3,920
Discount rate 29 (#_ftn29) 10.2% +2.0% 988
Other areas of estimation uncertainty
The Group also notes the following other areas of estimation uncertainty,
which are not considered areas of significant estimation uncertainty:
Impairment of intangible assets
For the purposes of impairment testing, intangible assets (including goodwill,
acquired client portfolios, brands and software) and right-of-use assets,
offset by deferred tax liabilities recognised in relation to acquired
intangible assets and lease liabilities, are allocated to the group of
cash-generating units ("CGUs") that are expected to benefit from the business
combination.
The Group reviews whether acquired client portfolios are impaired on an annual
basis, or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired. This comprises an estimation of the fair
value less cost to sell and the value in use of the acquired client
portfolios.
Value in use calculations are utilised to calculate recoverable amounts of a
CGU. Value in use is calculated as the net present value of the projected
pre-tax cash flows of the CGU in which the client portfolio is contained.
The net present value of cash flows is calculated by applying a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to that asset, based on the Group's post-tax
Weighted Average Cost of Capital ("WACC"). The Group has applied a WACC of
11.5% (2022: 7.9%) to each of its operating segments.
The key assumptions used in respect of value in use calculations are those
regarding growth rates and anticipated changes to revenues and expenses during
the period covered by the calculations. Changes to revenue and costs are
based upon management's expectation. Forecast cash flows are derived from
the budget for the three years to 31 May 2026, extrapolated for a further two
years assuming medium-term growth of 5.0% (2022: 5.0%), thereafter
extrapolating these cash flows using a long-term growth rate of 2.0% (2022:
2.0%), which management considers conservative against industry average
long-term growth rates.
The carrying amount of client portfolios at 31 May 2023 was £117.7m (2022:
£112.2m). No impairment provisions have been made during the year (2022:
£nil) based upon the Directors' review.
The Group determines whether goodwill is impaired at least on an annual
basis. This requires an estimation of the value in use of the CGUs to which
the goodwill has been allocated. In assessing value in use, the estimated
future cash flows expected to arise from the CGU are discounted to their
present value using a pre-tax discount rate of 15.3% (2022: 9.8%), reflecting
current market assessments of the time value of money and the risks specific
to that asset, based on the Group's WACC.
The carrying amount of goodwill at 31 May 2023 was £88.9m (2022: £83.5m).
No impairment provisions have been made during the year (2022: £nil) based
upon the Directors' review.
The key assumptions used in respect of value in use calculations are those
regarding growth rates and anticipated changes to revenues and costs during
the period covered by the calculations, based upon management's expectation,
and discount rates. Sensitivities to key assumptions are disclosed in
Note 19.
Contingent consideration and contingent remuneration payable on acquisitions
Whether contingent consideration is classified as acquisition cost or
remuneration, provisions for contingent consideration and contingent
remuneration require an assessment of the future values expected to be paid
out.
Using forecasts approved by the Board covering the period of the contingency,
provisions for consideration and remuneration are recognised based on the
maximum expected value expected to fall due. A material change to the
carrying value would only occur if the acquired business fell significantly
short of the target earnings, or if termination of employment of a management
seller results in forfeiture of rights to future contingent payments. The
carrying amount of contingent consideration provided for at 31 May 2023 was
£13.3m (2022: £9.3m) and contingent remuneration provided for at 31 May 2023
was £4.6m (2022: £7.8m).
The key assumption used in determining the value of these provisions is the
forecast financial performance as applied in the terms of the contingent
consideration arrangement. For all acquisitions that have completed their
contingent payment period, contingent consideration has been paid in full.
Provisions
As detailed in Note 26, the Group recognises provisions for client claims,
contingent consideration payable on acquisitions, commission clawbacks,
dilapidations, onerous contracts and other obligations that exist at the
reporting date. Estimates applied in determining provisions include
assessment of the likelihood of a claim being successful and the actual amount
and timing of future cash flows, which are dependent on future events.
Management reviews these provisions at each reporting date to ensure they are
measured at the current best estimate of the expenditure required to settle
the obligation. Any difference between the amounts previously recognised and
the current estimate is recognised immediately in the statement of
comprehensive income.
Recoverability of accrued time costs and disbursements
The Group recognises accrued income in respect of time costs and disbursements
incurred on clients' affairs during the accounting period, which have not been
invoiced at the reporting date. This requires an estimation of the
recoverability of the unbilled time costs and disbursements.
The estimated rate of recovery of 70.5% (2022: 71.9%) is based on historic
actual recovery rates measured over a period of twelve (2022: twelve) months,
calculated based on the value of invoices, net of credit losses, divided by
the gross value of the charges based on internal charge out rates. The
carrying amount of accrued time costs and disbursements at 31 May 2023 was
£7.1m (2022: £4.8m).
The sensitivity of a 5.0% change in the estimated recoverability of accrued
time costs and disbursements is appropriate as rates have fluctuated +/- 2.0%
over the past 12 months, with 5.0% representing a severe but plausible
degradation of recovery rates. Sensitivity to a 5.0% (2022: 5.0%) change
with all other variables held constant, is £0.5m (2022: £0.3m) of the
Group's profit before tax respectively. There is no material impact on the
Group's equity.
3. Business combinations
The Group completed two (2022: three) acquisitions during the year, which are
treated as business combinations. Transaction costs of £1.5m (2022: £3.7m)
incurred during the year to 31 May 2023 have been expensed and are included in
administrative expenses in the consolidated statement of comprehensive income
and operating cash flows in the consolidated statement of cash flows in the
period in which they were incurred.
Acquisitions completed during the year
Acquisition of Doherty Pension & Investment Consultancy
On 19 April 2023, the Company completed the acquisition of 100% of the share
capital of Doherty Pension & Investment Consultancy Limited ("Doherty")
for an aggregate maximum consideration of up to £23.0m (including, subject to
certain conditions being satisfied, up to £6.3m of deferred consideration),
comprising a combination of cash and new Ordinary Shares.
Founded in 1985, Doherty is one of the largest financial planning and wealth
management businesses in Northern Ireland, with specialist pension expertise
and a discretionary investment management offering. Doherty currently
advises approximately 1,320 private clients, including specialist pension
advice on SSASs, with combined assets under advice and administration of over
£635 million. Doherty enjoys a strong regional presence in Belfast. The
business employs 28 staff and Doherty's experienced management team will be
retained by Mattioli Woods following the Acquisition.
The total consideration of up to £23.0m comprises:
· An initial consideration comprising £6,780,000 in cash,
£1,972,000 in Consideration Shares, equating to 325,998 shares, plus
£8,023,000 in cash in relation to the net assets acquired;
· Deferred consideration of £1,500,000, payable in cash split in
equal amounts between the first and second anniversaries of completion; and
· Contingent consideration of up to £4,768,000, payable in cash
split in equal amounts between the first and second anniversaries of
completion, subject to certain financial targets based on forecast earnings
before interest, tax, depreciation and amortisation ("EBITDA") generated
during that period.
The fair values of the assets and liabilities of Doherty as at the date of
acquisition are set out in the table below:
Fair value recognised on acquisition Fair value adjustments Previous carrying value
£000 £000 £000
Property, plant and equipment 134 - 134
Intangible assets - Client portfolio 11,509 11,509 -
Investments 5 - 5
Trade and other receivables 213 - 213
Cash at bank 8,619 - 8,619
Assets 20,480 11,509 8,971
Trade and other payables (187) - (187)
Deferred tax liability (2,877) (2,867) (10)
Liabilities (3,064) (2,867) (197)
Total identifiable net assets at fair value 17,416
Goodwill 4,685
Total acquisition cost 22,101
Analysed as follows:
Initial cash consideration 6,780
Net shares in Mattioli Woods 1,972
Net asset excess 8,023
Deferred consideration 1,500
Contingent deferred consideration 4,062
Discounting of deferred and contingent deferred consideration (236)
Total acquisition cost 22,101
Cash outflow on acquisition:
Cash paid 6,780
Cash acquired (8,619)
Net asset excess 8,023
Acquisition costs 341
Net cash outflow 6,525
Acquisition of White Mortgages
On 26 April 2023, the Company completed the acquisition of 50.1% of the share
capital of White Mortgages Limited ("White Mortgages") for an initial
consideration of £1.2m.
Founded in 2011, White Mortgages specialises in providing independent mortgage
advice, while also offering bespoke protection advice. White Mortgages is
based in Lincoln, UK and employs an experienced team of nine staff, comprising
four advisers and five administrative staff, all of whom will remain with
Mattioli Woods following completion.
In the year ended 31 March 2023, White Mortgages generated revenues of £0.68
million with a profit before taxation of £0.35 million. The acquisition is
expected to be earnings enhancing in the first full year of ownership.
The total consideration of £1.2m comprises an initial consideration of
£425,000 in cash, plus £772,000 in cash in relation to the net assets
acquired.
Non-controlling interest at acquisition has been calculated based on the
proportionate interest in the identifiable net assets reported at acquisition.
The fair values of the assets and liabilities of White Mortgages as at the
date of acquisition are set out in the table below:
Fair value recognised on acquisition Fair value adjustments Previous carrying value
£000 £000 £000
Property, plant and equipment 8 - 8
Right-of-use assets 96 96 -
Trade and other receivables 255 (2) 257
Cash at bank 801 - 801
Assets 1,160 94 1,066
Trade and other payables (95) - (95)
Lease liability (94) (94) -
Provisions (21) - (21)
Deferred tax liability (2) - (2)
Liabilities (212) (94) (118)
Total identifiable net assets at fair value 948
Non-controlling interest at acquisition (473)
Goodwill 722
Total acquisition cost 1,197
Analysed as follows:
Initial cash consideration 425
Net asset excess 772
Total acquisition cost 1,197
Cash outflow on acquisition:
Cash paid 425
Cash acquired (801)
Net asset excess 772
Acquisition costs 170
Net cash outflow 566
Mattioli Woods has also entered into an option agreement with the sellers that
entitles Mattioli Woods to acquire the remaining 49.9% of White Mortgages
("the Call Option"). The Call Option is exercisable by Mattioli Woods at any
time during the 24-month period commencing 27 April 2026 for a cash
consideration. If Mattioli Woods does exercise the Call Option, the
consideration payable on exercise will be up to £2.625m, dependent on the
attainment of specified targets in the 12 months prior to the exercise date.
Acquisitions completed during the prior year
On 30 June 2021, the Company completed the acquisition of 100% of the
membership interests in Maven Capital Partners UK LLP ("Maven"), one of the
UK's leading private equity and alternative asset managers, providing funding
options to UK SMEs, and offering investment opportunities in VCTs, private
equity and property.
On 26 August 2021, the Company completed the acquisition of 100% of the share
capital of Richings Financial Management Ltd ("Richings"), an established
financial planning and wealth management business based in Iver.
On 3 September 2021, the Company completed the acquisition of 100% of the
issued share capital of LWMG Topco Limited (the holding company of Ludlow
Wealth Management Group Ltd) ("Ludlow Wealth Management"), a provider of
investment, financial planning and pension advice in the North West of
England.
Further details of each of the acquisitions completed in the prior year can be
found in the Annual Report and Accounts for the year ended 31 May 2022.
The fair values of the assets and liabilities of each of the prior year
acquisitions as at the date of acquisition are set out in the table below:
Maven Richings Ludlow Wealth Management Total
£000 £000 £000 £000
Fair value recognised on acquisition:
Property, plant and equipment 333 10 179 522
Right-of-use assets 1,972 - 263 2,235
Intangible assets - Goodwill - - 1,317 1,317
Intangible assets - Client portfolio 54,483 1,325 21,337 77,145
Intangible assets - Brand 1,951 - - 1,951
Investments 3,909 - - 3,909
Trade and other receivables 4,548 74 682 5,304
Cash at bank 4,648 405 3,815 8,868
Assets 71,844 1,814 27,593 101,251
Trade and other payables (6,146) (130) (1,785) (8,061)
Loans and other borrowings - - (15,945) (15,945)
Lease liabilities (1,998) - (253) (2,251)
Provisions (266) - (124) (390)
Deferred tax liability (13,851) (331) (5,238) (19,420)
Liabilities (22,261) (461) (23,345) (46,067)
Total identifiable net assets at fair value 49,583 1,353 4,248 55,184
Goodwill 39,787 214 24,302 64,303
Acquisition cost 89,370 1,567 28,550 119,487
Analysed as follows:
Initial cash consideration 50,000 900 16,701 67,601
Net asset excess 5,000 292 - 5,292
Net shares in Mattioli Woods 33,773 - 6,047 39,820
Contingent deferred consideration 800 441 7,407 8,648
Discounting of contingent deferred consideration (203) (66) (1,605) (1,874)
Acquisition cost 89,370 1,567 28,550 119,487
Cash outflow on acquisition:
Cash paid 50,000 900 16,701 67,601
Net asset excess 5,000 292 - 5,292
Cash acquired (4,648) (405) (3,815) (8,868)
Acquisition-related costs 1,669 91 1,012 2,772
Net cash outflow 52,021 878 13,898 66,797
In addition to the acquisition cost, management sellers of Maven will receive
remuneration of up to £19.2m over a four-year earn out to 30 June 2025,
subject to the achievement of certain performance conditions, including the
financial performance of Maven meeting financial targets.
In addition to the acquisition cost, management sellers of Richings will
receive remuneration of up to £459,000 over a two-year earn out to 26 August
2023, subject to the achievement of certain performance conditions including
the financial performance of Richings meeting financial targets.
See Note 28 for further details of commitments and contingencies.
Loans and other borrowings of £15.9m were settled in full following the
completion of the acquisition of Ludlow Wealth Management.
4. Revenue
The Group derives its revenue from the rendering of services over time and at
a point in time across all operating segments. Further details of accounting
policies for the recognition of revenue are disclosed in Note 2. The timing
of recognition of the revenues of each operating segment is analysed as
follows:
Timing of revenue recognition 2023 2022
£000 £000
At a point in time:
Investment and asset management 3,409 3,654
Private equity asset management 4,531 8,543
Pension consultancy and administration 507 607
Property management 776 92
Employee benefits 866 1,346
10,089 14,242
Over time:
Investment and asset management 47,386 46,771
Private equity asset management 18,524 17,610
Pension consultancy and administration 23,227 19,111
Property management 6,080 6,181
Employee benefits 5,876 4,311
101,093 93,984
111,182 108,226
The following table shows the aggregate amount of the transaction price
allocated to performance obligations that are unsatisfied (or partially
unsatisfied) as at the end of the reporting period:
Contract liabilities Group Group Company Company
2023 2022 2023 2022
£000 £000 £000 £000
Investment and asset management 99 13 - -
Private equity asset management 1,484 2,866 - -
Pension consultancy and administration 2,361 2,303 1,168 1,087
Property management 55 - - -
Employee benefits 828 647 828 647
4,827 5,829 1,996 1,734
The Group expects that 100% of the transaction price allocated to the
unsatisfied contracts as at 31 May 2023 will be recognised as revenue during
the next reporting period, amounting to £4,827,000 (2022: £5,829,000).
The following table shows the movement in contract liabilities in the period:
Contract liabilities Group Company
£000 £000
At 1 June 2022 5,829 1,734
Revenue recognised on completion of performance obligations (5,829) (1,734)
Contract liabilities acquired 44 -
Consideration received allocated to performance obligations that are 4,783 1,996
unsatisfied at the period end
At 31 May 2023 4,827 1,996
5. Seasonality of operations
Historically, revenues in the second half of the year have been typically
higher than in the first half. Time or activity-based pension consultancy
and administration fees are impacted by SSAS scheme year ends being linked to
the sponsoring company's year-end, which is often in December or March,
coupled with there typically being increased activity on SSAS and SIPP schemes
prior to the end of the fiscal year on 5 April.
Despite further diversification of the Group's wealth management and employee
benefits revenue streams, the Directors believe there is still some
seasonality of operations, although a substantial element of the Group's
revenues are now geared to the prevailing economic and market conditions.
6. Segment information
The Group's objective is to fully integrate the businesses it acquires, to
enable it to deliver holistic solutions across its wide and diverse client
base. The Group's operating segments comprise of the following:
· Pension consultancy and administration - Fees earned by Mattioli
Woods for setting up and administering pension schemes. Additional fees are
generated from consultancy services provided for special one-off activities
and the provision of bespoke scheme banking arrangements;
· Private equity asset management - Income generated where Maven
Capital Partners manages VCTs and other investments, including fund
management, administration, establishment, exit and performance fees in
respect of the investments for which it is manager;
· Investment and asset management - Income generated from the
management and placing of investments on behalf of clients;
· Property management - Income generated where Custodian Capital
manages private investor syndicates, facilitates direct commercial property
investments on behalf of clients or acts as the external discretionary manager
for Custodian REIT plc; and
· Employee benefits - Income generated from corporate clients for
consultancy and administration of employee benefit offerings, including group
personal pensions and other insurance products.
Each segment represents a revenue stream subject to risks and returns that are
different to other operating segments, although each operating segment's
products and services are offered to broadly the same market. The Group
operates exclusively within the United Kingdom.
Operating segments
The operating segments defined above all utilise the same intangible assets,
property, plant and equipment and the segments have been financed as a whole,
rather than individually. The Group's operating segments are managed
together as one business. Accordingly, certain costs are not allocated
across the individual operating segments, as they are managed on a group
basis. Segment profit or loss reflects the measure of segment performance
reviewed by the Board of Directors (the Chief Operating Decision Maker).
The following tables present revenue and profit information regarding the
Group's operating segments for the two years ended 31 May 2023 and 2022
respectively.
Year ended 31 May 2023 Investment Pension consultancy and administration
and Private equity asset management £000 Property management Employee benefits Total Corporate costs
asset management £000 £000 £000 segments £000 Consolidated
£000 £000 £000
Revenue 50,795 23,056 23,732 6,856 6,743 111,182 - 111,182
External customers
Results 10,173 5,295 7,327 2,274 1,258 26,327 (14,474) 11,853
Segment profit before tax
Year ended 31 May 2022 Investment Pension consultancy and administration
and Private equity asset management £000 Property management Employee benefits Total Corporate costs
asset management £000 £000 £000 segments £000 Consolidated
£000 £000 £000
Revenue
External customers 50,425 26,153 19,718 6,273 5,657 108,226 - 108,226
Results
Segment profit before tax 12,791 7,220 4,013 1,543 760 26,327 (18,338) 7,989
Segment assets
The following table presents segment assets of the Group's operating segments:
31 May 31 May
2023 2022
£000 £000
Investment and asset management 105,454 94,206
Private equity asset management 96,433 102,502
Pension consultancy and administration 26,300 23,803
Property management 4,091 4,889
Employee benefits 7,130 5,552
Segment operating assets 239,408 230,952
Property, plant and equipment 13,992 14,126
Right-of-use assets 3,035 3,322
Intangible assets 1,803 1,761
Deferred tax asset 696 776
Prepayments and other receivables 7,126 4,985
Income tax receivable - -
Finance lease receivable 285 354
Cash and short-term deposits 45,101 53,912
Total assets 311,446 310,188
Segment operating assets exclude property, plant and equipment, certain items
of computer software, investments, current and deferred tax balances and cash
balances, as these assets are considered corporate in nature and are not
allocated to a specific operating segment.
Acquired intangibles and amortisation thereon relate to a specific transaction
and are allocated between individual operating segments based on the headcount
or revenue mix of the cash-generating units at the time of acquisition. The
subsequent delivery of services to acquired clients may be across a number or
all operating segments, comprising different operating segments to those the
acquired intangibles have been allocated to.
Liabilities have not been allocated between individual operating segments, as
they cannot be allocated on anything other than an arbitrary basis.
Corporate costs
Certain administrative expenses including acquisition costs, amortisation of
software, depreciation of property, plant and equipment, irrecoverable VAT,
legal and professional fees and professional indemnity insurance are not
allocated between segments and are managed on a unified basis and utilise the
same intangible and tangible assets.
Finance income and expenses, gains and losses on the disposal of assets,
taxes, intangible assets and certain other assets and liabilities are not
allocated to individual segments as they are managed on a group basis. The
undertakings of our associate entity are distinct from the operating
activities of the Group and therefore the Group's share of associate's profits
is managed on a group basis (previously allocated to the investment and asset
management segment).
2023 2022
Reconciliation of profit before tax £000 £000
Total segments 26,327 26,328
Deferred consideration as remuneration (6,865) (9,664)
Depreciation (2,476) (2,762)
Acquisition-related costs (1,505) (3,408)
Professional indemnity insurance (1,404) (1,397)
Irrecoverable VAT (1,349) (1,431)
Finance costs (1,126) (1,006)
Amortisation and impairment (1,178) (331)
Loss on disposal of investment in own shares (116) -
Bank charges (54) (36)
Foreign exchange loss (10) -
Profit on disposal of property, plant and equipment 90 3
Finance income 545 79
Share of profit from associate, net of tax 974 1,614
Group profit before tax 11,853 7,989
Country-by-country reporting
HM Treasury has transposed the requirements set out under the Capital
Requirements Directive IV ("CRD IV") and issued the Capital Requirements
Country-by-Country Reporting Regulations 2013, effective 1 January 2014. The
legislation requires Mattioli Woods plc (together with its subsidiaries) to
publish certain additional information split by country, on a consolidated
basis, for the year ended 31 May 2023.
Mattioli Woods plc and its subsidiaries (see Note 18) are all incorporated in
and operate from the United Kingdom. All employees (see Note 11) of the
Group hold contracts of employment in the United Kingdom. All turnover
(revenue) and profit before tax is recognised on activities based in the
United Kingdom. All tax paid and any subsidies received are paid to and
received from UK institutions.
7. Auditor's remuneration
Remuneration paid by the Group to its current auditor, Moore Kingston Smith
LLP, for the audit of the financial statements, fees other than for the audit
of the financial statements and the total of non-audit fees for the Group were
as follows:
2023 2022
£000 £000
Audit services:
Audit of the financial statements of the Company 122 110
Audit of the financial statements of subsidiaries 148 130
270 240
Audit-related services:
Other assurance - CASS reporting 10 10
Interim review (prior year relates to Deloitte LLP) 20 40
30 50
300 290
8. Finance revenue
2023 2022
£000 £000
Bank interest receivable 263 31
Other interest receivable 268 14
Unwinding of discount on finance lease receivable 14 31
Dividend income - 3
545 79
9. Finance costs
2023 2022
£000 £000
Unwinding of discount on provisions (Note 26) 993 904
Unwinding of discount on lease liabilities 133 96
Interest payable - 6
1,126 1,006
10. Operating profit
2023 2022
Included in operating profit before financing: £000 £000
Depreciation and impairment of tangible assets (Note 15) (1,487) (1,625)
Depreciation and impairment of right-of-use assets (Note 16) (987) (1,137)
Amortisation and impairment of intangible assets (Note 17,18) (9,036) (7,546)
11. Employee benefits expense
The average monthly number of employees during the year was:
Group Group 2022 Company Company
2023 No. 2023 2022
No. No. No.
Executive Directors 4 4 4 4
Non-executive Directors 5 5 5 5
Consultants 167 169 117 127
Administrators 312 271 256 225
Support staff 389 351 265 248
877 800 647 609
Staff costs for the above persons were:
Group Group Company Company
2023 2022 2023 2022
£000 £000 £000 £000
Wages and salaries 50,845 51,164 32,729 32,261
Social security costs 5,649 4,988 3,497 3,646
Pension costs and life insurance 3,253 1,976 1,535 1,388
Other staff costs 1,117 1,443 995 1,360
60,864 59,571 38,756 38,655
In addition, the cost of share-based payments disclosed separately in the
consolidated statement of comprehensive income was £1,992,000 (2022:
£1,729,000), and the cost of contingent consideration treated as remuneration
disclosed separately in the consolidated statement of comprehensive income was
£6,865,000 (2022: £9,664,000).
Details of the remuneration payable to each Director in respect of the year
ended 31 May 2023 is disclosed in the Directors' Remuneration Report
2023 2022 restated 30 (#_ftn30)
£000 £000
Emoluments 2,954 2,969
Benefits in kind 66 51
Market value of share options vesting 61 192
3,081 3,212
Four directors (2022: four) accrued benefits under personal pension schemes,
or through an equivalent cash award when they have reached their maximum
lifetime allowance. During the year 170,000 share options were issued to
directors (2022: 235,000) and directors exercised 50,000 share options (2022:
203,016). The aggregate amount of gains made by directors on the exercise of
share options during the year was £328,000 (2022: £1,629,000). For terms
of share options awarded, please see Note 20.
The amounts in respect of the highest paid director are as follows:
2023 2022
£000 restated
£000
Emoluments 1,150 1,250
Benefits in kind 34 30
Market value of share options vesting 61 192
1,245 1,472
The amount of gains made by the highest paid director on the exercise of share
options during the year was £201,000 (2022: £1,605,000).
The Group makes discretionary and contractual payments into the personal
defined contribution pension schemes of employees, and contributions are
charged in the statement of comprehensive income as they become payable. The
charge for the year was £2,040,000 (2022: £1,440,000).
12. Income tax
The major components of income tax expense for the years ended 31 May 2023 and
2022 are:
Consolidated statement of comprehensive income 2023 2022
£000 £000
Current tax 5,741 5,092
Under provision in prior periods 36 6
5,777 5,098
Deferred tax credit (1,532) (1,132)
Adjustments in respect of change in tax rate 2 (161)
Adjustments in respect of prior periods (46) 65
Income tax expense reported in the statement of comprehensive income 4,201 3,870
The over provision for current tax in prior periods includes £nil (2022:
£118,000) arising from a Research and Development tax credits in respect of
the financial years ended 31 May 2022 (2022: year ended 31 May 2021).
For the year ended 31 May 2023, the current tax credit on the Group's
share-based payment arrangements recognised directly in equity was £8,605
(2022: £141,000). The deferred tax charged on the Group's outstanding
share-based payment arrangements recognised directly in equity was £27,000
(2022: £13,000).
Factors affecting the tax charge for the period
The tax charge assessed for the period is higher (2022: higher) than the
blended standard rate of corporation tax in the UK of 20.0% (2022: 19.0%).
The differences are explained below:
2023 2022
£000 £000
Accounting profit before income tax 11,853 7,989
Multiplied by blended standard rate of UK corporation tax of 20.0% 2,371 1,518
(2022: 19.0%)
Effects of:
Expenses not deductible for tax 1,928 2,767
Effects of changes in tax rates (93) (161)
Deferred tax on share options 73 (6)
Income not taxable (219) (307)
Under/(over) provision in prior periods (10) 71
Tax reliefs - (12)
Deferred tax not recognised 18 -
Income tax expense for the year 4,201 3,870
Effective income tax rate 35.4% 49.1%
Deferred income tax
Deferred income tax at 31 May relates to the following:
Group 2023 Group 2022 Company Company
£000 £000 2023 2022
£000 £000
Deferred income tax liability
Temporary differences on:
Acquired intangibles (28,623) (27,324) (5,704) (6,327)
Accelerated capital allowances (250) (150) (78) (25)
Deferred tax liability (28,873) (27,474) (5,782) (6,352)
Deferred income tax asset
Temporary differences on:
Provisions 63 316 39 291
Share-based payments 632 460 632 460
Deferred tax asset 695 776 671 751
Net deferred tax liability (28,178) (26,698) (5,092) (5,601)
Changes to the future expected UK corporation tax rates were enacted as part
of The Finance (No. 2) Act 2021, which received Royal Assent on 10 June 2021,
in which the Government announced that the corporation tax main rate will
remain at 19% for the years starting 1 April 2021 and 2022 before increasing
to 25% for the year starting 1 April 2023 and thereafter. Deferred taxation
assets and liabilities have been remeasured at the blended average rates at
which they are expected to unwind.
The primary components of the entity's recognised deferred tax assets include
temporary differences related to share-based payments, provisions and other
items. The primary components of the entity's deferred tax liabilities include
temporary differences related to property, plant and equipment and intangible
assets. The utilisation of the deferred tax asset is dependent on future
taxable profits in excess of the profits arising from the reversal of existing
taxable temporary differences.
The recognition of deferred tax in the statement of comprehensive income
arises from the origination and the reversal of temporary differences and the
effects of changes in tax rates. The total deferred tax movement in the
statement of financial position is summarised as follows:
2023 2022
Deferred tax reconciliation £000 £000
Opening net deferred tax liability (26,698) (8,491)
Credit/(debit) recognised in statement of comprehensive income 1,576 1,228
Deferred tax charge recognised in equity (28) (13)
Movement arising from transfer of trade - -
Deferred tax arising on acquisitions or disposal of trade (3,028) (19,422)
Closing net deferred tax liability (28,178) (26,698)
There are no income tax consequences for the Group attaching to the payment of
dividends by Mattioli Woods plc to its shareholders in either 2022 or 2023.
Impact of future tax changes
Deferred taxation assets and liabilities have been revalued by taking into
account the corporation tax rate of 25% from The Finance (No. 2) Bill
2019-21.
13. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year, excluding own
shares of nil (2022: 76,578).
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on the conversion of
all the dilutive potential ordinary shares into ordinary shares.
The income and share data used in the basic and diluted earnings per share
computations is as follows:
2023 2022
£000 £000
Net profit and diluted net profit attributable to equity holders of the 7,634 4,098
Company
Weighted average number of ordinary shares: 000s 000s
Issued ordinary shares at start of period 51,036 28,251
Effect of shares issued during the year 84 21,142
Basic weighted average number of shares 51,120 49,393
Effect of dilutive options at the statement of financial position date 118 81
Diluted weighted average number of shares 51,238 49,474
Earnings per ordinary share:
Basic (pence) 14.9 8.3
Diluted (pence) 14.9 8.3
The Company has granted options under the Share Option Plan, the Consultants'
Share Option Plan and the LTIP to certain of its senior managers and directors
to acquire (in aggregate) up to 2.06% of its issued share capital (see Note
20). Under IAS 33 'Earnings Per Share', contingently issuable ordinary
shares are treated as outstanding and are included in the calculation of
diluted earnings per share if the conditions (the events triggering the
vesting of the option) are satisfied. At 31 May 2023, the conditions
attached to 1,280,000 options granted under the LTIP were not satisfied (2022:
970,100). If the conditions had been satisfied, diluted earnings per share
would have been 15.8p per share (2022: 8.1p).
Since the reporting date and the date of completion of these financial
statements, the following transactions have taken place involving ordinary
shares or potential ordinary shares:
· The issue of 39,723 ordinary shares under the Mattioli Woods plc
Share Incentive Plan; and
· The issue of nil ordinary shares to satisfy the exercise of share
options under the LTIP.
14. Dividends paid and proposed
2023 2022
£000 £000
Declared and paid during the year:
Equity dividends on ordinary shares:
- Final dividend for 2022: 17.8p (2021: 13.5p) 9,093 6,818
- Interim dividend for 2023: 8.8p (2022: 8.3p) 4,505 4,223
Dividends paid 13,598 11,041
Proposed for approval by shareholders at the AGM:
Final dividend for 2023: 18.0p (2022: 17.8p) 9,196 9,094
15. Property, plant and equipment
Land and buildings Computer and office equipment Fixtures and fittings Motor vehicles Total
Group £000 £000 £000 £000 £000
Gross carrying amount:
At 1 June 2021 10,780 2,107 4,972 1,471 19,330
Additions - 247 181 573 1,001
Arising on acquisitions - 426 95 -- 521
Disposals - - - (257) (257)
At 31 May 2022 10,780 2,780 5,248 1,787 20,595
Additions - 409 229 758 1,396
Arising on acquisitions - 22 8 530 560
Disposals - (38) (5) (450) (493)
At 31 May 2023 10,780 3,173 5,480 2,625 22,058
Depreciation:
At 1 June 2021 672 1,392 2,327 599 4,990
Charged for the year 199 361 831 232 1,623
On disposals - - - (144) (144)
At 31 May 2022 871 1,753 3,158 687 6,469
Charged for the year 163 381 647 296 1,487
On disposals - (3) (2) (282) (287)
Arising on acquisitions 397 397
At 31 May 2023 1,034 2,131 3,803 1,098 8,066
Carrying amount:
At 31 May 2023 9,746 1,042 1,677 1,527 13,992
At 31 May 2022 9,909 1,027 2,090 1,100 14,126
At 31 May 2021 10,108 714 2,646 872 14,340
Computer and office equipment Fixtures and fittings Motor vehicles Total
Company £000 £000 £000 £000
Gross carrying amount:
At 1 June 2021 1,889 2,044 1,476 5,409
Additions 221 165 573 959
Disposals - - (257) (257)
At 31 May 2022 2,110 2,209 1,792 6,111
Additions 350 222 758 1,330
Disposals (25) (5) (450) (480)
At 31 May 2023 2,435 2,426 2,100 6,961
Depreciation:
At 1 June 2021 1,194 1,138 606 2,938
Charged for the year 244 388 232 864
On disposals - - (144) (144)
At 31 May 2022 1,438 1,526 694 3,658
Charged for the year 250 221 296 767
On disposals (16) (2) (282) (300)
At 31 May 2023 1,672 1,745 708 4,125
Carrying amount:
At 31 May 2023 763 681 1,392 2,836
At 31 May 2022 672 683 1,098 2,453
At 31 May 2021 695 906 870 2,472
16. Right-of-use assets
Computer and office equipment
Properties Total
Group £000 £000 £000
Gross carrying amount:
At 1 June 2021 3,384 717 4,101
Additions -
Arising on acquisitions 2,344 - 2,344
Changes in value (65) - (65)
At 31 May 2022 5,663 717 6,380
Arising on acquisitions 1,004 - 1,004
Changes in value 151 - 151
Disposals (435) - (435)
At 31 May 2023 6,383 717 7,100
Depreciation:
At 1 June 2021 1,499 422 1,921
Charged for the period 904 233 1,137
At 31 May 2022 2,403 655 3,058
Charged for the period 925 62 987
At 31 May 2023 3,328 717 4,045
Carrying amount:
At 31 May 2023 3,035 - 3,035
At 31 May 2022 3,260 62 3,322
At 31 May 2021 1,885 295 2,180
Computer and office equipment
Properties Total
Company £000 £000 £000
Gross carrying amount:
At 1 June 2021 2,819 717 3,536
(46) (46)
Changes in value -
At 31 May 2022 2,773 717 3,490
Additions 801 - 801
Changes in value 65 - 65
At 31 May 2023 3,639 717 4,356
Depreciation:
At 1 June 2021 1,291 422 1,713
Charged for the period 478 233 711
At 31 May 2022 1,769 655 2,424
Charged for the period 464 62 526
At 31 May 2023 2,233 717 2,950
Carrying amount:
At 31 May 2023 1,406 - 1,406
At 31 May 2022 1,004 62 1,066
At 31 May 2021 1,528 295 1,823
17. Intangible assets
Group Internally generated software Software Client portfolios Goodwill Other Total
£000 £000 £000 £000 £000 £000
Brand
£000
Gross carrying amount:
At 1 June 2021 2,132 1,931 57,549 - 17,896 35 79,543
Arising on acquisitions - - 77,144 1,951 65,620 - 144,715
Additions 427 - 1,261 - - - 1,688
Disposals - - - - - (35) (35)
At 31 May 2022 2,559 1,931 135,954 1,951 83,516 - 225,911
Arising on acquisitions - - 11,510 - 5,407 - 16,917
Additions - 557 - - - - 557
Disposals - (449) - - - - (449)
At 31 May 2023 2,559 2,039 147,464 1,951 88,923 - 242,936
Amortisation and impairment:
At 1 June 2021 1,071 1,326 16,643 - - 35 19,075
Charge for the year 219 112 7,126 89 - - 7,547
Disposals - - - - - (35) (35)
At 31 May 2022 1,290 1,438 23,769 89 - - 26,586
Amortisation during the year 254 261 7,858 - - - 8,373
Disposals - (404) - - - - (404)
At 31 May 2023 1,544 1,295 31,627 89 - - 34,555
Carrying amount:
At 31 May 2023 1,015 744 115,837 1,862 88,923 - 208,381
At 31 May 2022 1,269 493 112,185 1,862 83,516 - 199,325
At 31 May 2021 1,061 605 40,906 - 17,896 - 60,468
Company Internally generated software Software Client portfolios Goodwill Total
£000 £000 £000 £000 £000
Gross carrying amount:
At 1 June 2021 2,132 1,768 42,581 28,516 74,997
Additions 427 - - - 427
At 31 May 2022 2,559 1,768 42,581 28,516 75,424
Additions 557 - - - 557
Disposals - (449) - - (449)
At 31 May 2023 3116 1,319 42,581 28,516 75,532
Amortisation and impairment:
At 1 June 2021 1,071 1,213 12,158 - 14,442
Charge for the year 219 101 2,643 - 2,963
At 31 May 2022 1,290 1,314 14,801 - 17,405
Amortisation during the year 254 85 2,599 - 2,938
Disposals during the year - (282) - - (282)
At 31 May 2023 1,544 1,117 17,400 - 20,061
Carrying amount:
At 31 May 2023 1,572 202 25,181 28,516 55,471
At 31 May 2022 1,269 454 27,780 28,516 58,019
At 31 May 2021 1,061 555 30,423 28,516 60,555
Software
Software is amortised over its useful economic life of four years on a
reducing balance basis. Internally-generated software represents the
development costs of the Group's bespoke customer relationship management,
administration and trading platform. The Directors believe this technology
will be the principal technology platform used throughout the Group for the
foreseeable future. Internally-generated software is amortised on a
straight-line basis over an estimated useful life of 10 years.
Client portfolios
Client portfolios represent individual client portfolios acquired through
business combinations. Client portfolios are amortised on a straight-line
basis over an estimated useful life of between 10 and 25 years, based on the
Group's historic experience.
Goodwill
Goodwill arises where the price paid for an acquisition is greater than the
fair value of the net assets acquired. Goodwill arising on business
combinations is subject to annual impairment testing (see Note 19).
18. Investments
Details of the investments in related entities, comprising subsidiaries,
associates and other significant holdings in which the Group holds 20% or more
of the nominal value of any class of share capital, are included in the
appendices to the annual report and accounts
Investments in subsidiaries
Company
Investments in subsidiaries £000
At 1 June 2021 39,805
Investment in Maven Capital Partners UK LLP 89,370
Investment in Richings Financial Management Limited 1,567
Investment in LWMG Topco Limited 28,550
Reduction in value of Hurley Partners Limited (17,417)
Reduction in value of Broughtons Financial Planning Limited (4,326)
Strike-off of other dormant subsidiaries (41)
At 31 May 2022 137,508
Investment in Doherty Pension & Investment Consultancy 22,101
Impairment of Doherty to Mattioli Woods (company dividend) (7,000)
Investment in White Mortgages 1,197
Impairment of White Mortgages to Mattioli Woods (company dividend) (675)
At 31 May 2023 153,131
Investment in associate
The Group holds 49% of the ordinary share capital of Amati Global Investors
Limited ("Amati"), with the remaining 51% of the ordinary share capital held
by Amati Global Partners LLP.
Amati is an independent specialist fund management business managing funds
investing in small and mid-sized companies. Amati's gross assets under
management at 31 May 2023 was £914m (2022: £1,208m) comprising: Amati AIM
VCT plc, Amati AIM IHT Portfolio Service, TB Amati UK Smaller Companies Fund,
TB Amati Strategic Metals Fund and TB Amati Strategic Innovation Fund.
The Group exercises significant influence by virtue of its contractual right
to appoint a minority of directors to Amati's board of directors. The Group
has no other rights that would allow it to exercise control over Amati's
operations. Therefore, the Group is not judged to control Amati and it is
not consolidated.
The movement in the Group's investment in associate is as follows:
2023 2022
Investment in associate - Group and Company £000 £000
At 1 June 4,165 4,295
Share of profit for the year 1,029 1,672
Amortisation of fair value intangibles (68) (68)
Share of other comprehensive income (18) (19)
Dividends received from associate (980) (1,715)
At 31 May 4,128 4,165
2023 2022
Share of profit from associates in statement of comprehensive income £000 £000
Share of profit for the year 1,029 1,672
Amortisation of fair value intangibles (68) (68)
Elimination of transactions with associate 13 10
974 1,614
Other comprehensive income represents the Company's share of revaluation gains
and losses on financial assets designated as fair value through profit and
loss by Amati.
The results of Amati and its aggregated assets and liabilities as at
31 May 2023 are as follows:
Name Country of incorporation Assets Liabilities Revenue Profit Interest held
£000 £000 £000 £000
Amati Global Investors Limited Scotland 5,688 2,162 10,291 2,100 49%
Group's share of profit 1,029
The net assets of Amati as at 1 June 2022 were £3,462,000. At 31 May 2023,
the net assets of Amati were £3,526,000 following payment of dividends of
£2,000,000 and other increases in net assets of £2,064,000, increasing the
Group's interest in the associate (net of tax) by £1,011,000 during the year,
comprising Mattioli Woods' share of Amati's profit after tax recognised in the
statement of comprehensive income and Mattioli Woods' share of the movement in
Amati's revaluation reserve recognised directly in equity.
Other fixed asset investments
Group Company
£000 £000
At 1 June 2021 526 526
Arising on acquisition of Maven 3,909 -
Additions 1,574 1,000
Disposals (279) -
Revaluation 32 -
At 31 May 2022 5,762 1,526
Additions 193 -
Acquisition 4 -
Disposals (264) -
Impairment charge - (663)
Revaluation (750) -
At 31 May 2023 4,945 863
Listed investments 2023 2,732 -
Unlisted investments 2023 2,213 863
At 31 May 2023 4,945 863
Current 2023 246 -
Non-current 2023 4,699 863
At 31 May 2023 4,945 863
Current 2022 253
Non-current 2022 5,509 1,526
At 31 May 2022 5,762 1,526
On 29 September 2021, the Company increased its investment in Tiller Group
Limited ("Tiller") as part of a new strategic relationship to develop a
digital, self-investment application. The investment sees the Company
increase its shareholding to 9.9%, through a subscription of new shares in
Tiller.
Tiller provides a software as a service ("SaaS") wealth management platform
designed specifically for wealth managers and other regulated financial
services businesses. We will work closely with Tiller to develop its
market-leading, automated investment management platform that will extend our
discretionary investment management services to a new range of clients. At
31 May 2023, these shares are included within investments at a value of
£837,000 (2022: £1,500,000).
At 31 May 2023, the Company owned 9.40% (2022: 9.40%) of the shareholding in
MW Properties (No.25) Limited ("MWPS25"), acquired at a total cost of
£91,000. At 31 May 2023, these shares are included within investments at
a value of £26,000 (2022: £26,000).
Other fixed asset investments held by the Group of £4,082,000 at 31 May 2023
include the following:
· Listed investments valued at £2,732,000 (2022: £2,991,000),
predominantly comprising Maven's holding of shares in the four listed VCTs for
which Maven acts as fund manager (Maven Income and Growth VCT PLC, Maven
Income and Growth VCT 3 PLC, Maven Income and Growth VCT 4 PLC, Maven Income
and Growth VCT 5 PLC); and
· Unlisted investments valued at £1,349,000 (2022: £1,244,000),
predominantly comprising Maven's holdings of its seven regional funds.
19. Impairment of goodwill and client portfolio intangible assets
Intangible assets (goodwill, client portfolios, brand and software assets) and
right-of-use assets, offset by deferred tax liabilities recognised in relation
to acquired intangible assets and lease liabilities, are allocated to the
cash-generating units comprising the acquired businesses. Allocation of
intangible assets to cash-generating units is based on headcount or revenues
at the date of acquisition, whereas allocation of right-of-use assets and
lease liabilities reflects latest usage based on headcount. Where the Group
reorganises its operating and reporting structures in a way that changes the
composition of one or more cash-generating units to which goodwill and client
portfolio assets have been allocated, the goodwill and client portfolio assets
are reallocated to the units affected.
The cash-generating units comprise the same groups of assets as the five
operating segments, which represent the smallest individual groups of assets
generating cash flows. The assets, as set out above, have been allocated
between the Group's operating segments for impairment testing, as follows:
Group Pension consultancy and admin Investment and asset management Private equity asset management Property management Employee benefits
£000 £000 £000 £000 £000 Total
£000
Goodwill 5,489 37,414 39,787 188 638 83,516
Client portfolios 8,921 47,245 51,465 524 4,030 112,185
Brand - - 1,862 - - 1,862
Software 1,560 136 - 51 15 1,762
Right-of-use assets 308 704 1,708 14 587 3,322
Deferred tax liabilities on acquired intangible assets (857) (7,200) (12,940) - - (20,997)
Lease liabilities (347) (879) (1,818) (20) (693) (3,757)
At 31 May 2022 15,074 77,420 80,064 757 4,577 177,893
Goodwill 5,490 42,820 39,787 188 638 88,923
Client portfolios 8,690 53,120 49,939 463 5,442 117,654
Brand - - 1,764 - - 1,764
Software 1,680 76 - 38 9 1,803
Right-of-use assets 446 1,056 1,057 89 386 3,034
Deferred tax liabilities on acquired intangible assets (802) (10,177) (12,228) - - (23,207)
Lease liabilities (490) (1,168) (1,109) (88) (501) (3,356)
At 31 May 2023 15,014 85,727 79,210 690 5,974 186,615
Company Pension consultancy Investment and asset management Private Property management Employee benefits
and admin £000 equity asset management £000 £000 Total
£000 £000 £000
Goodwill 6,211 18,461 - 188 3,656 28,516
Client portfolios 5,401 17,825 - 524 4,030 27,780
Software 1,560 136 - 12 15 1,723
Right-of-use assets 299 338 - 12 417 1,066
Lease liabilities (352) (516) - (17) (511) (1,396)
At 31 May 2022 13,119 36,244 - 719 7,607 57,689
Goodwill 6,211 18,461 - 188 3,656 28,516
Client portfolios 4,698 16,386 - 463 3,634 25,181
Software 1,680 76 - 8 9 1,773
Right-of-use assets 435 617 25 87 242 1,406
Lease liabilities (477) (753) (28) (86) (343) (1,687)
At 31 May 2023 12,547 34,787 (3) 660 7,198 55,189
The determination of whether goodwill and client portfolio assets are impaired
requires an assessment of the fair value less cost to sell and estimation of
the value in use of the operating segments to which the assets have been
allocated. We have assessed both the value in use of the operating segments,
and fair value less costs to sell, based on the enterprise value of the Group
at the year-end date, and determined that the value in use is higher than the
enterprise value.
In assessing value in use, the estimated future cash flows of each operating
segment are discounted to their present value using a pre-tax discount rate of
15.3% (2022: 9.8%), reflecting current market assessments of the time value of
money and the risks specific to these assets, based on the Group's WACC. The
key assumptions used in respect of value in use calculations are those
regarding growth rates and anticipated changes to revenues and costs during
the period covered by the calculations, based upon management's expectation.
The estimated cash flows for each segment are derived from the budget for the
three years to 31 May 2026, extrapolated for a further two years assuming
medium-term growth of 5.0% (2022: 5.0%) and a long-term growth rate of 2.0%
(2022: 2.0%), which management considers conservative against actual average
long-term growth rates.
The value in use calculated at 31 May 2023 was £366.9m. Comparing this to
the net asset value of the operating segments identified above, the Directors
believe the value of goodwill is not impaired at 31 May 2023. This
accounting treatment resulted in an impairment loss of £nil (2022: £nil).
Discount rate sensitivity of +2.0% represents a plausible variance in discount
rate as a result of a range of judgements used in following the capital asset
pricing model to determine an appropriate weighted average cost of capital for
the Group. Growth rate sensitivities are set at a level to either minimise
or altogether remove the impact of assumed growth in pre-tax cash flows
derived from each operating segment.
The sensitivity of the value in use calculated at 31 May 2023 to changes in
the key assumptions is as follows:
Assumption Base assumption Change in assumption Increase/(decrease) in value in use
£m
Discount rate 15.3% +2.0% (48.2)
Years 1-3 cash flows Var. -5.0% (18.4)
Medium-term growth rate 5.0% -5.0% (26.6)
Long-term growth rate 2.0% -2.0% (45.9)
None of these individual sensitivities would result in an impairment in the
value in use of any operating segment.
20. Share-based payments
Share-based payments expense
The amounts recognised in the statement of comprehensive income in respect of
share-based payments were as follows:
31 May 2023 31 May 2022
Equity-settled Equity-settled
£000 £000
Long Term Incentive Plan 1,614 1,414
Share Incentive Plan 378 315
Total 1,992 1,729
The share-based payment expense in respect of the LTIP for the year ended 31
May 2022 included the impact of the modification of the performance period of
the 4 September 2019 Tranche B LTIP awards.
Long‑Term Incentive Plan
During the year, Mattioli Woods granted awards to the Company's executive
directors and certain senior employees under the Long-Term Incentive Plan
("LTIP"). Conditional share awards ("Equity-settled") grant participating
employees a conditional right to become entitled to options with an exercise
price of 1 pence over ordinary shares in the Company. Conditional cash
awards ("Cash-settled") grant participating employees a conditional right to
be paid a cash amount based on the proceeds of the sale of a specified number
of ordinary shares following the vesting of the award. Movements in the LTIP
scheme during the period were as follows:
LTIP options 2023 2022
Equity-settled Equity-settled
No. No.
Outstanding as at 1 June 1,051,127 933,809
Granted during the year 450,000 488,000
Exercised during the year (82,768) (353,182)
Forfeited during the year (20,422) (17,500)
Outstanding at 31 May 1,397,937 1,051,127
Exercisable at 31 May 117,937 81,027
The LTIP awards are subject to the achievement of corporate profitability
targets measured over a three to five-year performance period and will vest
following publication of the Group's audited results for the final performance
year.
The amounts shown above represent the maximum opportunity for the participants
in the LTIP.
Date of grant Exercise price At 1 June 2022 Granted during the period Forfeited & lapsed during the period Exercised during the period At 31 May 2023
No. No. No. No. No.
15 October 2015 £0.01 310 - - (310) -
6 September 2016 £0.01 35,659 - (20,122) (558) 14,979
5 September 2017 £0.01 9,358 - - (1,400) 7,958
6 September 2018 £0.01 35,700 - - (500) 35,200
4 September 2019 - Tranche A £0.01 98,000 - - - 98,000
4 September 2019 - Tranche B £0.01 139,800 - - (80,000) 59,800
1 June 2020 - Tranche A £0.01 132,550 - - - 132,550
1 June 2020 - Tranche B £0.01 111,750 - - - 111,750
24 December 2021 - Tranche A £0.01 144,400 - - - 144,400
24 December 2021 - Tranche B £0.01 343,600 - (300) - 343,300
26 October 2022 - Tranche A £0.01 - 230,500 - - 230,500
26 October 2022 - Tranche B £0.01 - 219,500 - - 219,500
1,051,127 450,000 (20,422) (82,768) 1,397,937
The weighted average share price at the date of exercise for share options
exercised during the year was £6.55 (2022: £8.43). For the share options
outstanding at 31 May 2023, the weighted average exercise prices ("WAEP") was
£0.01 (2022: £0.01), and the weighted average remaining contractual life is
2.14 years (2022: 2.20 years).
As a result of the exercise of 82,768 (2022: 353,182) share options and lapse
of 20,122 share options (2022: nil) during the year, the cumulative cost
recognised in equity share-based payment reserve in respect of these options
was transferred to retained earnings, increasing retained earnings by
£595,000 (2022: £2,175,000).
Income tax and employee National Insurance contributions payable by the
participant on exercise of a share option are borne by the participant,
employer National Insurance contributions payable on exercise are borne by the
Company and provided for over the vesting period (Note 26).
Valuation assumptions
The fair value of equity-settled share options granted is estimated as at the
date of grant using the Black Scholes Merton model, taking into account the
terms and conditions upon which the options were granted. The following
table lists the inputs to the model used to estimate the fair value of options
granted during the year ended 31 May 2023:
Tranche A Tranche B
Date of grant 26 October 2022 26 October 2022
Share price at date of grant £5.90 £5.90
Option exercise price £0.01 £0.01
Expected life of option (years) 6.5 4.5
Expected share price volatility (%) 25.0 25.0
Dividend yield (%) 4.75 4.75
Risk-free interest rate (%) 3.68 3.61
The expected volatility assumption is based on statistical analysis of the
historical volatility of the Company's share price.
The share price at 31 May 2023 and movements during the year are set out in
the Directors' Remuneration Report.
Share Incentive Plan
The Company operates the Mattioli Woods plc Share Incentive Plan ("the
SIP"). Participants in the SIP are entitled to purchase, at market value, up
to a prescribed number of new 1p ordinary shares in the Company each year for
which they will receive a like-for-like conditional 'matching share', subject
to their continued employment for the three years following award of the
matching share. These ordinary shares rank pari passu with existing issued
ordinary shares of the Company. Movements in the shares held in the SIP on
behalf of employees during the year were as follows:
SIP shares 31 May 2023 31 May 2022
No. No.
Scheme shares as at 1 June 783,365 701,259
Employee shares purchased 86,308 64,186
Matching shares awarded 86,308 64,186
Matching shares recycled (7,454) (8,006)
Reinvestment of dividends 38,921 19,240
Shares transferred out (92,320) (57,500)
Scheme shares at 31 May 895,128 783,365
Conditional matching shares at 31 May 184,222 149,667
A total of 494 (2022: 467) employees participated in the SIP during the
year.
21. Trade and other receivables (current)
Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
Trade receivables due from Group companies - 37,567 - 35,787
Other trade receivables 7,522 3,952 11,000 4,069
Other receivables 3,856 1,252 2,072 343
Prepayments and accrued income 19,011 13,409 15,374 10,684
30,389 56,180 28,446 50,883
Trade receivables due from Group companies are recognised at amortised cost,
eliminate on consolidation, and include £11.8m (2022: £12.1m) receivable
from subsidiary Mattioli Woods (New Walk) Limited on which interest is
incurred at the Bank of England's base rate plus a margin of 3%, and £17.4m
(2022: £16.3m) receivable from subsidiary LWMG Midco Limited on which
interest is incurred at the Bank of England's base rate plus a margin of
3.5%. All other balances due from Group companies incur no interest and are
due on demand. None of the trade receivables from Group companies were
overdue at the reporting date, and no provisions for impairment of receivables
from Group companies is required on review.
Other trade receivables are non-interest bearing and are generally on 30-90
days' terms. As at 31 May 2023, the nominal value of non-related party trade
receivables impaired and fully provided for, and movements in the lifetime
loss provision for impairment (with no 12-month expected credit losses or
transfers between stages) of receivables were as follows:
Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
As at 1 June 1,936 1,140 1,412 1,208
Charge for year 215 184 258 61
Utilised during the year (361) (99) 195 (129)
Acquired on acquisition - - 71 -
At 31 May 1,790 1,225 1,936 1,140
At 31 May 2023, the analysis of non-related party trade receivables that were
past due but not impaired is as follows:
Neither past due nor impaired Past due but not impaired
Total < 30 days 30-60 days 60-90 days >90 days
£000 £000 £000 £000 £000 £000
Gross carrying amount 9,312 3,775 2,046 476 260 2,755
Provisions for ECL (1,790) (138) (75) (22) (11) (1,544)
At 31 May 2023 7,522 3,637 1,971 454 249 1,211
Gross carrying amount 12,936 4,079 2,649 2,022 395 3,791
Provisions for ECL (1,936) (100) (99) (24) (14) (1,699)
At 31 May 2022 11,000 3,979 2,550 1,998 381 2,092
Prepayments and accrued income balances include the following contract assets
accrued under IFRS 15:
Group Company
Contract assets accrued £000 £000
At 1 June 2022 12,461 8,368
Arising from acquisitions 239 -
Net increase in contract assets accrued 2,733 2,422
At 31 May 2023 15,433 10,790
For all receivables above, including neither past due nor impaired, the
carrying amount is deemed to reflect the fair value.
22. Cash and short-term deposits
For the purpose of the statement of cash flows, cash and cash equivalents
comprise the following at 31 May 2023:
Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
Cash at banks and in hand 45,101 18,423 53,912 25,864
Cash and cash equivalents 45,101 18,423 53,912 25,864
Cash at banks earns interest at floating rates based on daily bank deposit
rates. Short-term deposits are made for varying periods of between one day
and three months, depending on the immediate cash requirements of the Group,
and earn interest at the respective short-term deposit rates. The fair value
of cash and short-term deposits is £45.1m (2022: £53.9m).
23. Issued capital and reserves
Group and Company Ordinary shares Share capital Share premium Merger reserve
of 1p £000 £000 £000
Issued and fully paid
At 1 June 2021 28,251,029 283 33,834 17,458
Exercise of employee share options 350,212 4 - -
Shares issued under the SIP 139,606 1 1,098 -
Shares issued for placing 16,969,697 169 108,441 -
Shares issued for consideration 5,325,705 53 - 39,767
At 31 May 2022 51,036,249 510 143,373 57,225
Exercise of employee share options 85,768 1 - -
Shares issued under the SIP 204,383 2 1,265 -
Shares issued for consideration 325,998 3 - -
At 31 May 2023 51,652,398 517 144,638 57,225
Rights, preferences and restrictions on shares
All ordinary shares carry equal rights and no privileges are attached to any
shares in the Company. All the shares are freely transferable, except as
otherwise provided by law. However:
· The former members of Maven Capital Partners UK LLP have entered
into lock-in deeds with Mattioli Woods and its nominated adviser and broker,
Canaccord Genuity Limited, restricting sales of that part of the consideration
comprising 4,545,455 ordinary shares in Mattioli Woods during the four years
ending 30 June 2025;
· The former shareholders of Ludlow Wealth Management Group have
entered into lock-in deeds with Mattioli Woods and its nominated adviser and
broker, Canaccord Genuity Limited, restricting sales of that part of the
consideration comprising 780,250 ordinary shares in Mattioli Woods during the
two years ended 3 September 2023; and
· The former shareholders of Doherty Pension & Investment
Consultancy have entered into lock-in deeds with Mattioli Woods and its
nominated adviser and broker, Canaccord Genuity Limited, restricting sales of
that part of the consideration comprising 325,998 ordinary shares in Mattioli
Woods during the two years ending 19 April 2025.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company. All shares rank equally with regard to the Company's residual
assets.
Share schemes and Share Incentive Plan
The Company has two share schemes under which options to subscribe for the
Company's shares have been granted to certain executives and senior employees
(Note 20).
The Company also operates a Share Incentive Plan. Participants in the SIP
are entitled to purchase up to a prescribed number of new ordinary shares in
the Company in any year. At the Directors' discretion, the Company may also
award additional shares to participants in the SIP. Ordinary shares issued
under the SIP rank pari passu with existing issued ordinary shares of the
Company. Dividends paid on shares held within the SIP are used to buy new
ordinary shares in the Company of 1p each.
Own shares
Number of shares Own shares
£000
At 1 June 2021 and 31 May 2022 76,578 597
Disposed (76,578) (597)
At 31 May 2023 - -
Own shares represented the cost of the Company's own shares, either purchased
in the market or issued by the Company, that are held by the Company or in an
employee benefit trust to satisfy future awards under the Group's share-based
payment schemes (Note 20). At 31 May 2023 nil (2022: 76,578) shares were
held in the Mattioli Woods Employee Benefit Trust, representing nil% of issued
share capital (2022: 0.15%).
During the year to 31 May 2023, 76,578 (2022: nil) shares were disposed of by
the Mattioli Woods Employee Benefit Trust, giving rise to a loss on disposal
recognised in the statement of comprehensive income of £116,000, and the
proceeds of the disposal have been transferred to the Company.
Other reserves
Movements recognised in other reserves in the year are disclosed in the
statement of changes in equity. The following table describes the nature and
purpose of each reserve within equity:
Reserve Description and purpose
Share premium Amounts subscribed for share capital in excess of nominal value less any
associated issue costs that have been capitalised.
Merger reserve Where shares are issued as consideration for >90% of the shares in a
subsidiary, the excess of the fair value of the shares acquired over the
nominal value of the shares issued is recognised in the merger reserve.
Capital redemption reserve Amounts transferred from share capital on redemption of issued shares.
Equity - share-based payments The fair value of equity instruments granted by the Company in respect of
share-based payment transactions less options exercised (Note 20).
Own shares The cost of the Company's own shares, purchased in the market, that were held
in an employee benefit trust to satisfy future awards under the Group's
share-based payment schemes.
Revaluation reserve The cumulative changes in fair value of financial instruments designated as
fair value through other comprehensive income, including certain equity
investments (Note 18).
Non-controlling interest Proportion of net assets acquired, and retained profits post-acquisition,
attributable to minority shareholders of subsidiaries not wholly owned by the
Company.
Retained earnings All other net gains and losses and transactions attributable to the
shareholders of the Company (e.g. dividends) not recognised elsewhere.
The Company has issued options to subscribe for the Company's shares under two
employee share schemes (Note 20). The cost of exercised or lapsed share
options has been derecognised from equity share-based payments and
re-allocated to retained earnings as required by IFRS 2 'Share-based
Payments'.
24. Cash flows arising from financing liabilities
The financing liabilities of the Group are £3,357,000 (2022: £3,757,000),
comprising lease liabilities as disclosed in Note 27. Cash flows arising
from financing liabilities include payment of lease liabilities of £1,562,000
(2022: £1,298,000).
The financing liabilities of the Company are £1,686,000 (2022: £1,396,000),
comprising lease liabilities as disclosed in Note 27. Cash flows arising
from financing liabilities include payment of lease liabilities of £1,134,000
(2022: £910,000).
The net cash flows from financing activities of the Group and the Company, as
reported in the Statements of Cash Flows, relate entirely to financing
balances reported within equity.
25. Trade and other payables
Trade and other payables Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
Trade payables due to Group companies - 10,009 - 2,093
Other trade payables 1,254 653 1,027 751
Other taxation and social security 2,951 2,004 2,632 1,902
Other payables 541 407 647 465
Accruals and deferred income 18,703 9,677 20,749 10,278
Trade and other payables 23,449 22,750 25,055 15,489
Current 23,449 22,750 25,055 15,489
Non-current - - - -
Trade payables due to Group companies reported by the Company incur no
interest, are repayable on demand and eliminate on consolidation. Terms and
conditions of the other financial liabilities set out above are as follows:
· Trade payables are non-interest bearing and are normally
settled on 30-day terms;
· Other taxation and social security become interest bearing if
paid late and are settled on terms of one or three months; and
· Accruals and deferred income are non-interest bearing and are
normally settled monthly throughout the financial year.
26. Financial liabilities and provisions
Group Contingent consideration Client claims Dilapidations Clawbacks Employers' NIC on share options FSCS levy
£000 £000 £000 £000 £000 £000 Total
Contingent remuneration £000
£000
At 1 June 2021 2,881 3,991 2,360 521 60 614 109 10,536
Unwinding of discount 871 - - 33 - - - 904
Arising during the year 186 9,664 1,225 (56) 16 433 - 11,468
Arising on acquisitions 7,375 - - 324 65 - - 7,764
Paid during the year (1,554) (5,905) (209) (29) (59) (371) - (8,127)
Unused amounts reversed - - (111) - - - (109) (220)
Reclassification (475) - - - - - - (475)
At 31 May 2022 9,284 7,750 3,265 793 82 676 - 21,850
Unwinding of discount 960 - - 35 - - - 995
Arising during the year - 6,865 784 116 43 (150) - 7,658
Arising on acquisitions 5,326 - - - 21 - - 5,347
Paid during the year (2,248) (10,044) (1,343) (70) - (83) - (13,788)
Unused amounts reversed - - (664) (32) (8) - - (704)
Reclassification - - - - - - - -
At 31 May 2023 13,322 4,571 2,042 842 138 442 - 21,357
Current 2022 1,605 7,750 3,265 283 67 269 - 13,239
Non-current 2022 7,679 - - 510 15 407 - 8,611
At 31 May 2022 9,284 7,750 3,265 793 82 676 - 21,850
Current 2023 10,396 4,571 2,042 192 80 197 - 17,478
Non-current 2023 2,926 - - 650 58 245 - 3,879
At 31 May 2023 13,322 4,571 2,042 842 138 442 - 21,357
Company Contingent consideration Client claims Dilapidations Clawbacks Employers' NIC on share options FSCS levy Total
£000 £000 £000 £000 £000 £000 £000
Contingent remuneration
£000
At 1 June 2021 2,881 3,991 2,141 521 54 614 101 10,303
Finance costs 871 - - 25 - - - 896
Arising during the year 186 9,664 1,174 (96) 4 433 - 11,365
Arising on acquisitions 6,774 - - - - - - 6,774
Paid during the year (1,554) (5,905) (209) (29) (4) (371) - (8,072)
Unused amounts reversed - - (111) - - - (101) (212)
Reclassification (475) - - - - - - (475)
At 31 May 2022 8,683 7,750 2,995 421 54 676 - 20,579
Finance costs 960 - - 16 - - - 976
Arising during the year - 6,865 783 135 - (150) - 7,633
Arising on acquisitions 5,326 - - - - - - 5,326
Paid during the year (1,647) (10,044) (1,343) (70) - (83) - (13,187)
Unused amounts reversed - - (460) (33) - - - (493)
At 31 May 2023 13,322 4,571 1,975 469 54 443 - 20,834
Current 2022 1,605 7,750 2,995 285 54 269 - 12,958
Non-current 2022 7,078 - - 136 - 407 - 7,621
At 31 May 2022 8,683 7,750 2,995 421 54 676 - 20,579
Current 2023 10,396 4,571 1,975 187 54 197 - 17,380
Non-current 2023 2,926 - - 282 - 246 - 3,454
At 31 May 2023 13,322 4,571 1,975 469 54 443 - 20,834
Contingent consideration
The Group has entered into certain acquisition agreements that provide for
contingent consideration to be paid. Details of these agreements and the
basis of calculation of the net present value of the contingent consideration
are summarised in Note 3. The Group estimates the net present value of the
financial liability payable within the next 12 months is £10.8m (2022:
£1.6m) and the Group expects to settle the non-current balance of £4.6m
(2022: £7.7m) within the subsequent three-year period.
Contingent remuneration
Certain business acquisitions made by the Group include arrangements for
remuneration payable to selling shareholders, which is contingent upon certain
performance conditions including the financial performance of the acquired
business in meeting financial targets and links to continuing employment of
management sellers. Details of these agreements and the basis of calculation
of the net present value of the contingent remuneration are summarised in Note
28. The Group estimates remuneration payable within the next 12 months is
£4.6m (2022: £10.0m).
Client claims
A provision is recognised for the estimated potential liability when the Group
becomes aware of a possible client claim. The value of the provision
recognised is determined based on the nature of the potential liability, the
range of possible outcomes, the Group's historic experience and any insurance
recovery expected. No discount rate is applied to the projected cash flows
due to their short-term nature.
Dilapidations
Under the terms of the leases for the Group's premises, the Group has an
obligation to return the properties in a specified condition at the end of the
lease term. The Group provides for the estimated fair value of the cost of
any dilapidations.
Clawbacks
The Group receives certain initial commissions on indemnity terms and hence
the Group provides for the expected level of clawback, based on past
experience. No discount rate is applied to the projected cash flows due to
their short-term nature.
FSCS levy
The arrangements put in place by the Financial Services Compensation Scheme
("FSCS") to protect depositors and investors from loss in the event of failure
of financial institutions have resulted in significant levies on the industry
in recent years.
There is uncertainty over the level of future FSCS levies as they depend on
the ultimate cost to the FSCS of industry failures. The Group contributes to
the investment intermediation levy class and accrues levy costs for future
levy years when the obligation arises. A provision of £nil (2022: £nil)
has been made in these financial statements for FSCS interim levies expected
in relation to the year ended 31 May 2023.
27. Lease liability
2023 2022
Group £000 £000
Maturity analysis - Contractual undiscounted cash flows:
Less than one year 880 1,121
One to five years 2,422 2,365
More than five years 424 731
Total undiscounted cash flows 3,726 4,217
Total lease liabilities 3,356 3,757
Current 756 985
Non-current 2,600 2,772
2023 2022
Company £000 £000
Maturity analysis - Contractual undiscounted cash flows:
Less than one year 454 579
One to five years 1,260 767
More than five years 128 177
Total undiscounted cash flows 1,842 1,523
Total lease liabilities 1,687 1,396
Current 398 534
Non-current 1,289 862
28. Commitments and contingencies
Remuneration of management sellers including contingencies
Certain business acquisitions made by the Group include arrangements for
remuneration payable to selling shareholders, which is contingent upon certain
performance conditions including the financial performance of the acquired
business in meeting financial targets and links to continuing employment of
management sellers.
Following the acquisition of Maven Capital Partners UK LLP ("Maven") on 30
June 2021, management sellers will receive remuneration of up to £19,200,000
over a four-year earn out to 30 June 2025, subject to the achievement of
certain performance conditions including the financial performance of Maven
meeting financial targets and continuing employment of management sellers.
In the year to 31 May 2023, remuneration costs of £4,800,000 (2022:
£4,400,000) have been recognised in the statement of comprehensive income,
and provision of £4,400,000 (2022: £4,400,000) is recognised in Note 26.
Based on management's latest forecasts, we anticipate that a further
remuneration cost of £10,000,000, representing the maximum remuneration
available to management sellers, will be recognised over the remaining period
of contingency to 30 June 2025.
Following the acquisition of Richings Financial Management Limited
("Richings") on 26 August 2021, management sellers will receive remuneration
of up to £459,000 over a two-year earn out to 26 August 2023, subject to the
achievement of certain performance conditions including the financial
performance of Richings meeting financial targets and continuing employment of
management sellers. In the year to 31 May 2023, remuneration costs of
£230,000 (2022: £172,000) have been recognised in the statement of
comprehensive income, and provision of £171,000 (2022: £172,000) is
recognised in Note 26. Based on management's latest forecasts, we anticipate
that a further remuneration cost of £57,000, representing the maximum
remuneration available to management sellers, will be recognised over the
remaining period of contingency to 26 August 2023.
Capital commitments
At 31 May 2023, the Group had no capital commitments (2022: £nil).
Sponsorship agreement
As part of the Group's strategy to strengthen its brand awareness, the Group
has a sponsorship agreement with rugby giants Leicester Tigers. The
agreement includes exclusive naming rights to the 26,000 capacity Mattioli
Woods Welford Road stadium including full stadium, dugout and website
branding, shirt sponsorship on the Tigers' home and away shirts, corporate
hospitality rights and the provision of exclusive content to Tigers fans. In
October 2020, the Group entered into a new sponsorship agreement with
Leicester Tigers, which commenced in October 2020 and runs to June 2025, with
a total cost of £3.4m over the term of the agreement.
Client claims
The Group operates in a legal and regulatory environment that exposes it to
certain litigation risks. As a result, the Group occasionally receives
claims in respect of products and services provided and which arise in the
ordinary course of business. The Group provides for potential losses that
may arise out of these contingencies.
Transfers from defined benefit schemes
The FCA has been conducting an industry wide review of the advice being
provided on transfers from defined benefit to defined contribution schemes
since October 2015 ("the Review").
As previously reported, following consideration of the increasing costs of
professional indemnity insurance, additional regulatory controls and the
resources we would have to dedicate to this small part of our business, we
have stopped giving pension transfer advice to individuals with safeguarded or
defined benefits. The impact of this decision and the review on the Group's
financial performance is not expected to be material.
29. Related party disclosures
Custodian REIT plc
In March 2014, the Company's subsidiary, Custodian Capital, was appointed as
the discretionary investment manager of Custodian REIT, a closed-ended
property investment company listed on the Main Market of the London Stock
Exchange.
The Company's Chief Executive Officer, Ian Mattioli, is a non-independent
Non-Executive Director of Custodian REIT and the Company's former Chief
Financial Officer, Nathan Imlach, was Company Secretary of Custodian REIT
until he resigned from this position on 17 June 2020 to be replaced by Ed
Moore, Finance Director of the Group's subsidiary Custodian Capital Limited.
During the year, the Group received revenues of £4.4m (2022: £4.6m) in
respect of annual management charges, administration and marketing fees from
Custodian REIT. Custodian REIT owed the Group £1,795 at 31 May 2023 (2022:
£1,174,466).
Amati Global Investors Limited
The Company holds 49% of the issued share capital of Amati Global Investors
Limited ("Amati"), an independent specialist fund management business.
Two of the Company's senior management team have been appointed to the board
of Amati. Ian Mattioli is Deputy Chair and the Group's Chief Investment
Officer, Simon Gibson, is a Non-Executive Director.
On 14 August 2018, the Group entered into an agreement to sublet space in its
Edinburgh office to Amati for a term of five years. During the year, the
Group received rent of £82,595 (2022: £55,000) from Amati as lessee,
£19,370 (2022: £5,000) from the recharge of other property-related costs and
consultancy fees of £40,000 (2022: £47,000).
Gateley (Holdings) plc
The Company's former Chair, Joanne Lake, is a Non-Executive Director of
Gateley (Holdings) plc, which is the holding company of Gateley plc, a
provider of commercial legal services. During the year, the Group received
revenues of £61,384 (2022: £20,000) in respect of employee benefits services
provided to Gateley plc.
K3 Capital Group plc
The Company's Chief Executive Officer, Ian Mattioli, is a Non-Executive
Chairman of K3 Capital Group plc, a multi-disciplinary group of professional
services firms. During the year the Group paid fees of £nil (2022:
£26,927) to a subsidiary of K3 Capital Group plc in respect of R&D tax
credit consultancy fees.
Kanabo Group plc
During the year, the Company's Chief Executive Officer, Ian Mattioli, became a
Non-Executive Chairman of Kanabo Group plc, a health-tech company focused on
patient care. Maven Capital Partners UK LLP a group company, had at the year
ended 31 May 2023 an investment in Kanabo Group Plc of £38k.
Key management compensation
Key management personnel, representing those executive directors that served
throughout the year and 6 (2022: 8) other executives, received compensation in
the form of short-term employee benefits and equity compensation benefits (see
Note 11), which totalled £4.7m for the year ended 31 May 2023
(2022: £5.6m).
Total remuneration of key management personnel is included in "employee
benefits expense" and analysed as follows:
2023 2022
£000 £000
Wages and salaries 3,992 4,567
Social security costs 590 914
Pension 48 127
Benefits in kind 65 23
4,695 5,631
In addition, the cost of share-based payments, disclosed separately in the
statement of comprehensive income, to key management personnel was £0.9m
(2022: £0.8m).
Transactions with other related parties
Following the transfer of Mattioli Woods' property syndicate business to
Custodian Capital, the legal structure of the arrangements offered to
investors changed to a limited partnership structure, replacing the previous
trust-based structure. Each limited partnership is constituted by its
general partner and its limited partners (the investors), with the general
partner being a separate limited company owned by Custodian Capital (see Note
18).
The general partner and the initial limited partner enter into a limited
partnership agreement, which governs the operation of the partnership and sets
out the rights and obligations of the investors. The general partners have
appointed Custodian Capital as the operator of the partnerships pursuant to an
operator agreement between the general partner and Custodian Capital.
MW Properties No 25 Limited
The Group holds a 9.40% interest in MW Properties No 25 Limited, a nominee for
a property syndicate. As at 31 May 2023, the Group held an investment with a
market value of £55,094 (2022: £30,890) in the syndicate.
30. Financial risk management
Financial assets principally comprise trade and other receivables, cash and
short-term deposits, which arise directly from its operations. Financial
liabilities comprise certain provisions and trade and other payables. The
main risks arising from financial instruments are market risk (including
interest rate risk, foreign exchange risk and price risk), credit risk, and
liquidity risk. Each of these risks is discussed in detail below.
The Group monitors financial risks on a consolidated basis, with its financial
risk management based upon sound economic objectives and good corporate
practice. No hedging transactions have taken place during the years
presented.
Market risk
(a) Interest rate risk
Interest rate risk is the risk that the Group's financial performance will be
adversely impacted by movements in interest rates. The Group does not have
any derivative financial assets whose value is linked to interest rates,
therefore exposure to interest rate risk arises from financial assets and
liabilities incurring a market interest rate including cash and cash
equivalents, as well as certain intercompany loan agreements to which the
company is exposed. At 31 May 2023, the value of market interest bearing
financial instruments on the Group's statement of financial position exposed
to interest rate risk was £45.1m (2022: £53.9m), and Company £47.6m (2022:
£54.3m) (Note 31). This exposure is monitored to ensure the Group is
managing its interest earning potential within accepted liquidity and credit
constraints. Other than short-term overdrafts, the Group has no external
borrowings and as such is not exposed to interest rate or refinancing risk on
borrowings. Cash at bank earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are also made for varying periods of
between one day and three months depending on the immediate cash requirements
of the Group and earn interest at the respective fixed-term deposit rates.
A source of revenue is based on the value of client cash under
administration. The Group has an indirect exposure to interest rate risk on
these cash balances held for clients. These balances are not on the Company
or Group Statements of Financial Position.
The following table demonstrates the sensitivity to a 50bps (0.5%) change in
interest rates, with all other variables held constant, of the Group's and
Company's profit before tax (through the impact on floating rate deposits).
100bps is considered the appropriate impact to consider sensitivity given the
increases in the Bank of England's base rate from a historic low of 0.10% in
March 2020 to 4.50% as at 31 May 2023. There is no impact on the Group's
equity.
Increase/decrease in basis points Group Company
Effect on profit Effect on profit
before tax before tax
£000 £000
2023
£ sterling +100 451 476
£ sterling -100 (451) (476)
2022
£ sterling +100 540 544
£ sterling -100 (540) (544)
(b) Foreign exchange translation and transaction risk
Foreign currency risk is the risk that the Group will sustain losses through
adverse movements in currency exchange rates. With all of the Group's
business located within the UK, the Group has no material exposure to foreign
exchange translation or transaction risk and does not hedge any foreign
current assets or liabilities.
(c) Price risk
Price risk is the risk that a decline in the value of assets adversely impacts
the profitability of the Group as a result of an asset not meeting its
expected value.
Property administration fees, discretionary management charges and adviser
charges for intermediation are based on the value of client assets under
administration and hence the Group has an indirect exposure to security price
risk on investments held by clients. These assets are not on the Group's
statement of financial position. The risk of lower revenues is partially
mitigated by asset class diversification. The Group does not hedge its
revenue exposure to movements in the value of client assets arising from these
risks and so the interests of the Group are aligned to those of its clients.
Credit risk
The Group and Company trades only with third parties it recognises as being
creditworthy. In addition, receivable balances are monitored on an ongoing
basis and under the simplified approach, provisions for credit risk are
assessed under the lifetime losses approach as explained in Note 2, with all
assets assessed as one portfolio (Notes 21 and 31).
Credit risk from the other financial assets of the Group and Company, which
comprises cash and cash equivalents, arises from default of the counterparty,
with a maximum exposure equal to the carrying amount of these instruments.
Liquidity risk
The Group monitors its risk to a shortage of funds by considering the maturity
of both its financial investments and financial assets (e.g. accounts
receivables, other financial assets) and projected cash flows from operations.
The Group's objective is to maintain a balance between continuity of funding
and flexibility through the possible use of bank overdrafts, bank loans and
leases. The table below summarises the maturity profile of the Group's and
the Company's financial liabilities at 31 May 2023 and 2022 based on
contractual payments:
Maturity of liability
Group On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
£000 £000 £000 £000 £000 £000
Trade and other payables - 17,698 - - - 17,698
Contingent consideration - 2,599 7,797 2,926 - 13,322
Lease liabilities - 189 567 2,186 414 3,356
At 31 May 2023 - 20,486 8,364 5,112 414 34,376
Trade and other payables - 19,226 - - - 19,226
Contingent consideration - 579 1,701 8,308 - 10,588
Lease liabilities - 308 813 2,365 731 4,217
At 31 May 2022 - 20,113 2,514 10,673 731 34,031
Maturity of liability
Company On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
£000 £000 £000 £000 £000 £000
Trade and other payables - 19,836 - - - 19,836
Contingent consideration - 2,599 7,797 2,926 - 13,322
Lease liabilities - 100 299 1,288 - 1,687
At 31 May 2023 - 22,534 8,096 4,214 - 34,844
Trade and other payables - 13,755 - - - 13,755
Contingent consideration - 579 1,100 8,308 - 9,987
Lease liabilities - 170 408 767 177 1,522
At 31 May 2022 - 14,504 1,508 9,075 177 25,264
Capital management
The Company and certain of its subsidiaries are supervised in the UK by the
Financial Conduct Authority ("FCA"). The Group manages its capital through
continuous review of the capital requirements of the Company and its regulated
subsidiaries, which are monitored by the Group's management and reported
monthly to the Board. The Group's objectives when managing capital are:
· To comply with the regulatory capital requirements set by the
FCA;
· To safeguard the Group's ability to continue as a going
concern so that it can continue to provide returns for shareholders and
benefits for other stakeholders; and
· To maintain a strong capital base to support the development
of its business.
Capital is defined as the total of share capital, share premium, retained
earnings and other reserves. Total capital of the Group at 31 May 2023 was
£310.9m (2022: £230.3m) and Company was £293.1m (2022: £239.1m). The
Group manages the capital structure and makes adjustments to it in light of
changes in economic conditions. To maintain or adjust the capital structure,
the Group may adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares.
Regulatory capital and capital resource requirements of the Group and Company
are determined in accordance with the requirements of the Investment Firms
Prudential Regime ("IFPR") prescribed in the UK by the FCA, which came into
effect 1 January 2022. Previously the Company had to comply with the
requirements of the Capital Requirements Directive ("CRD IV"). Both CRD IV
and IFPR require continual assessment of the Group's risks to ensure that
sufficient capital resources are maintained to remain financially viable
throughout the economic cycle, address potentially material harms from its
ongoing activities, and to enable the Company to conduct an orderly wind down
while minimising harm to customers.
The Group's regulatory capital comprises Tier 1 capital, which is the total of
issued share capital, retained earnings (net of foreseeable dividends) and
reserves created by appropriations of externally verified retained earnings,
net of the carrying value of goodwill, other intangible assets, deferred tax
assets and investment in associates. The Company's regulatory capital is
calculated on the same basis as that of the Group, with additional deduction
made for the carrying value of investments in financial sector entities and
certain other qualifying holdings outside the financial sector. Neither the
Group or Company hold any Tier 2 or Tier 3 capital.
The Company and regulated subsidiary companies submit quarterly returns to the
FCA relating to their capital resources. Including the audited results to 31
May 2023, shares issued during the year and admitted to Core Equity Tier 1
capital following the year end, the proposed final dividend and retained
earnings for the year, the total surplus on regulatory capital requirements
was as follows:
Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
Regulatory capital resources 31,288 26,045 41,273 40,104
Regulatory capital requirements 20,078 14,899 20,703 14,899
Surplus on regulatory capital requirements 11,210 11,146 20,570 25,205
All the regulated firms within the Group maintained surplus regulated capital
throughout the year. The regulated subsidiaries are limited in the
distributions that can be paid up to the Company by each of their individual
capital resource requirements.
31. Financial instruments
The carrying amount of financial assets and financial liabilities recorded by
category is as follows:
Financial assets Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
Cash and short-term deposits 45,101 18,423 53,912 25,864
Amortised cost loans and receivables (including trade and other receivables) 27,175 53,671 25,532 48,646
(Note 21)
Amortised cost financial assets 72,276 72,094 79,444 74,510
Fair value through profit or loss (Note 18) 4,108 26 4,262 26
Fair value through other comprehensive income (Note 18) 837 837 1,500 1,500
77,221 72,957 85,206 76,036
Financial liabilities Group Company Group Company
2023 2023 2022 2022
£000 £000 £000 £000
Amortised cost (including trade and other payables and loan notes payable) 17,698 19,836 19,226 10,125
Fair value through profit and loss (including contingent consideration) (Note 13,322 13,322 9,284 8,683
26)
31,020 33,158 28,510 18,808
Fair values
The Directors consider that the carrying value of financial instruments in the
Company's and the Group's financial statements is equivalent to fair value.
The following table summarises the fair value measurements recognised in the
statement of financial position by class of asset or liability, grouped into
different levels, defined as follows:
· Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities
· Level 2 - Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices)
· Level 3 - Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
Carrying amount as at 31 May 2023 Level 2 Level 3
Level 1
Group £000 £000 £000 £000
Financial assets
Fixed asset investments at fair value through profit or loss (Note 18) 4,108 2,733 - 1,375
Fixed asset investments at fair value through other comprehensive income (Note 837 - - 837
18)
At 31 May 2023 4,945 2,733 - 2,212
Financial liabilities
Contingent consideration (Note 26) 13,322 - - 13,322
At 31 May 2023 13,322 - - 13,322
Carrying amount as at 31 May 2023 Level 1 Level 2 Level 3
Company £000 £000 £000 £000
Financial assets
Fixed asset investments at fair value through profit or loss (Note 18) 26 - - 26
Fixed asset investments at fair value through other comprehensive income (Note 837 - - 837
18)
At 31 May 2023 863 - - 863
Financial liabilities
Contingent consideration (Note 26) 13,322 - - 13,322
At 31 May 2023 13,322 - - 13,322
The group has elected to designate its investment in Tiller Group Limited as a
fair value through other comprehensive income financial asset, due to the
Group's intention to retain this equity investment as part of its strategic
relationship with Tiller, held at a fair value of £837,000 (2022:
£1,500,000). Dividends from fixed asset investments designated as fair
value through other comprehensive during the year were £nil (2022: £nil).
The fair value of cash equivalents, accounts receivable and accounts payable
approximate their carrying values due to their short-term nature.
Contingent consideration
As set out in Note 3, the Group has entered into certain acquisition
agreements that provide for contingent consideration to be paid. The exact
amounts payable cannot be determined as these depend on the future performance
of the acquired businesses, but the basis on which the valuation is prepared,
along with detail of sensitivity to key assumptions, is set out in Note 2.
The Group estimates the fair value of contingent consideration payable on
acquisitions to be £13.3m (2022: £9.3m).
Interest rate risk
The following table sets out the carrying amount after taking into account
provisions for impairment, by maturity, of the Company's and the Group's
financial instruments that are exposed to interest rate risk:
Group < 1 year 1-2 years 2-3 years 3-4 years 4-5 > 5 years Total
Floating rate £000 £000 £000 £000 years £000 £000
£000
Cash and cash equivalents 45,101 - - - - - 45,101
At 31 May 2023 45,101 - - - - - 45,101
Group < 1 year 1-2 years 2-3 years 3-4 years 4-5 > 5 years Total
Floating rate £000 £000 £000 £000 years £000 £000
£000
Cash and cash equivalents 53,912 - - - - - 53,912
At 31 May 2022 53,912 - - - - - 53,912
Company < 1 year 1-2 years 2-3 years 3-4 years 4-5 > 5 years Total
Floating rate £000 £000 £000 £000 years £000 £000
£000
Financial assets (current) 29,145 - - - - - 29,145
Cash and cash equivalents 18,423 - - - - - 18,423
At 31 May 2023 47,568 - - - - - 47,568
Company < 1 year 1-2 years 2-3 3-4 years 4-5 years > 5 years Total
Floating rate £000 £000 years £000 £000 £000 £000
£000
Financial assets (current) 28,443 - - - - - 28,443
Cash and cash equivalents 25,864 - - - - - 25,864
At 31 May 2022 54,307 - - - - - 54,307
Interest on financial instruments classified as floating rate is repriced at
intervals of less than one year. Other financial instruments of the Company
and Group that are not included in the above table are non-interest bearing
and therefore not subject to interest rate risk.
Credit risk
The Group's principal financial assets are cash and short-term deposits and
trade and other receivables.
The only significant concentrations of credit risk relate to the Group's bank
deposits and exposure to credit risk arising from default of the
counterparty. The maximum exposure is equal to the carrying amount of these
deposits. Credit risk mitigation practices employed by the Group include
monitoring of the creditworthiness of the financial institutions we hold
deposits with and spreading funds accordingly to reduce exposure to
institutions with lower credit ratings. At 31 May 2023, the Group's bank
deposits were held across the following banks: Royal Bank of Scotland plc,
HSBC Bank, Lloyds Bank plc, Bank of Scotland plc, Barclays Bank UK plc, Metro
Bank plc, Santander UK plc, Cater Allen Limited, Investec Bank plc, Northern
Bank Limited (Danske Bank) and Clydesdale Bank plc.
Given the nature of the Group's operations, it does not have significant
concentration of credit risk in respect of trade receivables, with exposure
spread over a large number of customers. Credit risk mitigation practices
employed by the Group include reviewing the credit quality of customers and
limiting credit exposures accordingly, arranging for the settlement of trade
receivables directly from customers' investments where possible, and
monitoring aged trade receivables and engaging with customers where trade
receivables become overdue.
A provision for lifetime expected credit losses on financial assets is made,
which based on previous experience, is evidence of a reduction in the
recoverability of the cash flows. The basis of our calculation of credit
loss experience and provisions for expected credit losses are explained in
Note 2, and details of financial assets and the associated provision for
impairment are disclosed in Note 21
(http://ar08.angloamerican.solutions.investis.com/financial_statements/notes/note20.html)
.
32. Ultimate controlling party
The Company has no ultimate controlling party.
Alternative performance measure workings
Recurring revenue
A measure of sustainable revenue, calculated as revenue earned from ongoing
services as a percentage of total revenue.
Timing of revenue recognition 2023 2022
£000 £000
At a point in time:
Investment and asset management 3,409 3,654
Private equity asset management 4,531 8,543
Pension consultancy and administration 507 607
Property management 776 92
Employee benefits 866 1,346
Non-recurring revenue 10,089 14,242
Over time:
Investment and asset management 47,386 46,771
Private equity asset management 18,524 17,610
Pension consultancy and administration 23,227 19,111
Property management 6,080 6,181
Employee benefits 5,876 4,311
Recurring revenue 101,093 93,984
Total revenue 111,182 108,226
Recurring revenue 90.9% 86.8%
Organic revenues
A measure of revenue excluding revenue from businesses acquired in the current
or prior year.
Group 2023 2022 restated
£000 £000
Total revenue 111,182 108,226
Revenue from acquisitions in the prior year (35,093) (35,270)
Revenue from acquisitions in the current year (419) -
Organic revenue 75,670 72,956
Adjusted EBITDA
A measure of the underlying profitability, excluding items that are non-cash
or affect comparability between periods, calculated as statutory operating
profit before financing income or costs, tax, depreciation, amortisation,
impairment and acquisition-related costs, share of profit from associates (net
of tax), contingent consideration recognised as remuneration and exceptional
project costs.
2023 2022
Group £000 £000
Statutory operating profit before financing 11,460 7,302
Amortisation of acquired intangibles 7,857 7,215
Amortisation of software 1,178 331
Depreciation 2,476 2,762
EBITDA 22,971 17,610
Share of profit from associates, net of tax 974 1,614
Acquisition-related costs 1,505 3,721
Deferred consideration presented as remuneration 6,865 9,664
Other exceptional project costs 871 -
Adjusted EBITDA 33,186 32,609
Adjusted PBT
A measure of profitability before taxation, excluding items that are non-cash
or affect comparability between periods, calculated as statutory profit before
tax, excluding amortisation of acquired intangibles and acquisition-related
costs, contingent consideration recognised as remuneration, exceptional
project costs and acquisition-related notional interest charges.
2023 2022
Group £000 £000
Statutory profit before tax 11,853 7,989
Amortisation of acquired intangibles 7,858 7,215
Acquisition-related costs 1,505 3,721
Deferred consideration presented as remuneration 6,865 9,664
Other exceptional project costs 871 -
Acquisition-related notional finance cost 960 872
Adjusted PBT 29,912 29,461
Adjusted PAT
A measure of profitability, net of taxation, based on Adjusted PBT and
deducting tax at the blended standard rate of 20% (2022: 19%).
2023 2022
Group £000 £000
Adjusted PBT 30,575 29,461
Income tax expense at blended standard rate (6,115) (5,598)
Adjusted PAT 24,460 23,863
Adjusted EPS
A measure of total comprehensive income for the year, net of taxation,
attributable to equity holders of the Company, adjusted to add back
amortisation of acquired intangibles and acquisition-related costs, contingent
consideration recognised as remuneration, exceptional project costs and
acquisition-related notional interest charges, divided by the weighted average
number of ordinary shares in issue.
2023 2022
Group £000 £000
Adjusted PAT 24,460 23,863
Basic weighted average number of shares (see Note 13) 51,120 49,393
Adjusted EPS 47.8p 48.3p
Adjusted cash generated from operations
A measure of operating cash flows, excluding items that are incurred as a
result of the Group's acquisition activities, calculated as statutory cash
generated from operations excluding contingent remuneration paid on
acquisition of subsidiaries, and acquisition-related costs paid.
2023 2022
Group £000 £000
Statutory cash generated from operations 34,746 19,641
Contingent remuneration paid on acquisition of subsidiaries (see Note 26) 10,044 5,905
Acquisition costs paid 1,428 5,587
Adjusted cash generated from operations 46,219 31,133
Related undertakings
The Companies Act 2006 requires disclosure of certain information about the
Group's related undertakings, which are set out in this note. Related
undertakings comprise subsidiaries, joint ventures, associates and other
significant holdings. Significant holdings are where the Group either has a
shareholding greater than or equal to 20% of the nominal value of any share
class, or a book value greater than 20% of the Group's assets.
Details of the Group's related undertakings along with the country of
incorporation, the registered address, the classes of shares held and the
effective percentage of equity owned at 31 May 2023 are as follows:
Company name Holding Holding % Nature of business
England and Wales
1 New Walk Place, Leicester, LE1 6RU
Acomb Trustees Limited Ordinary 100% Trustee company
APUK14002 Limited Ordinary 100% Trustee company
APUK15002 Limited Ordinary 100% Trustee company
AR Pension Trustees Limited Ordinary 100% Trustee company
Bank Street Trustees Limited Ordinary 100% Trustee company
Brogan Group Investments Ltd Ordinary 100% Trustee company
Broughtons Financial Planning Limited* Ordinary 100% Non-trading
CC Private (202) Limited Ordinary 100% Trustee company
CC Private (204) Limited Ordinary 100% Trustee company
CC Private (205) Limited Ordinary 100% Trustee company
Chapel Trustees Limited Ordinary 100% Trustee company
City Trustees Limited Ordinary 100% Trustee company
CP SIPP Trustees Limited Ordinary 100% Trustee company
CP SSAS Trustees Limited Ordinary 100% Trustee company
Custodian (Inland RCF) General Partner Limited Ordinary 100% General partner
Custodian Capital Limited* Ordinary 100% Asset management
Eltek House Limited Ordinary 100% Non-trading
GB Pension Trustees Limited Ordinary 100% Trustee company
Great Marlborough Street Pension Trustees Limited Ordinary 100% Trustee company
Hurley Partners Limited* Ordinary 100% Non-trading
Hurley Trustees Services Limited Ordinary 100% Trustee company
JB Trustees Limited Ordinary 100% Trustee company
Lindley Trustees Limited Ordinary 100% Trustee company
M C Trustees (Administration) Limited* Ordinary 100% Pension administration
M C Trustees (Pensions) Limited* Ordinary and preference 100% Pension administration
M C Trustees Limited Ordinary 100% Trustee company
M.W. Trustees Limited Ordinary 100% Trustee company
Mattioli Woods (New Walk) Limited* Ordinary 100% Property development
Maven Capital Partners UK LLP* Ordinary 100% Asset management
Mayflower Trustees Limited Ordinary 100% Trustee company
MC Nominees Limited Ordinary 100% Nominee company
MCT (Properties) Limited Ordinary 100% Dormant
Montagu Limited* Ordinary 100% Wealth management
MW Personal Equity (Harbinger Self Storage) Limited* Ordinary 100% Trustee company
MW Private Equity (Harbinger Self Storage Developments) General Partner Ordinary 100% General partner
Limited
MW Private Equity (Rotherhill) Limited Ordinary 100% Trustee company
MW Private Investors (102) General Partner Limited* Ordinary 100% General partner
MW Private Investors (103) EPUT Limited Ordinary 100% Trustee company
MW Private Investors (103) General Partner Limited Ordinary 100% General partner
MW Private Investors (105) General Partner Limited* Ordinary 100% General partner
MW Private Investors (106) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Beech Properties) General Partner Limited Ordinary 100% General partner
MW Private Investors (CITU) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Clear Nursery) Limited Ordinary 100% Trustee company
MW Private Investors (Expedia Dental) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Heaton Group) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Newstead Relf) General Partner Limited Ordinary 100% General partner
MW Private Investors (Proseed) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Prosperity Liverpool) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Swift Point) General Partner Limited Ordinary 100% General partner
MW Private Investors (The Priest House Hotel) Limited Ordinary 100% Trustee company
MW Private Investors (The Square) Limited Ordinary 100% Trustee company
MW Private Investors (Tungsten Witney) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Versant) General Partner Limited* Ordinary 100% General partner
MW Private Investors (Walrus) Limited Ordinary 100% Trustee company
MW Private Investors (Welbeck Land) General Partner Limited* Ordinary 100% General partner
MW Properties (No 42) Limited Ordinary 100% Trustee company
MW Properties (No 46) Limited Ordinary 100% Trustee company
MW Properties (No 49) Limited Ordinary 100% Trustee company
MW Properties (No 60) Limited Ordinary 100% Trustee company
MW Properties No 17 Limited Ordinary 100% Trustee company
MW Properties No 20 Limited Ordinary 100% Trustee company
MW Properties No 25 Limited Ordinary 100% Trustee company
MW Properties No 32 Limited Ordinary 100% Trustee company
MW Properties No 35 Limited Ordinary 100% Trustee company
Old Station Road Holdings Limited Ordinary 100% Holding company
PC Trustees Limited Ordinary 100% Trustee company
Pension Consulting Limited Ordinary 100% Holding company
Pole Arnold Financial Management Limited* Ordinary 100% Wealth management
Professional Independent Pension Trustees Limited Ordinary 100% Trustee company
Richings Financial Management Limited* Ordinary 100% Wealth management
Robinson Gear (Management Services) Limited Ordinary 100% Trustee company
Ropergate Trustees Limited Ordinary 100% Trustee company
Simmonds Ford Trustees Limited Ordinary 100% Trustee company
SLT Trustees Limited Ordinary 100% Trustee company
Taylor Patterson Trustees Ltd Ordinary 100% Trustee company
Welbeck Strategic Land III Limited Ordinary 100% Trustee company
6th Floor, Saddlers House, 44 Gutter Lane, London, England, EC2V 6BR
Dvest Nominees Limited Ordinary 100% Nominee company
Finance Durham GP Limited* Ordinary 100% General partner
Maven GPCO 1 Limited* Ordinary 100% Designated member services
Maven GPCO 2 Limited* Ordinary 100% Designated member services
Maven MEIF (EM) GP (ONE) Limited* Ordinary 100% General partner
Maven MEIF (WM) GP (ONE) Limited* Ordinary 100% General partner
Maven UK Regional Buyout 1 GP LLP* Partnership 100% General partner
Clarence House, Clarence Street, Manchester, England, M2 4DW
GMLF GP Limited* Ordinary 100% General partner
NPIF NW Equity (GP) Limited* Ordinary 100% General partner
172 Lord Street, Southport, Merseyside, PR9 0QA
Ludlow Wealth Management Group Limited* Ordinary 100% Wealth management
LWMG Midco Limited* Ordinary 100% Holding company
LWMG Topco Limited Ordinary 100% Holding company
City Office Park, Crusader Road, Lincoln, LN6 7AS
White Mortgages Limited Ordinary 50.1% Mortgage broking
Scotland
Kintyre House, 205 West George Street, Glasgow, Scotland, G2 2LW
GMLF GP A LLP* Partnership 100% General partner
Maven (CL) Limited* Ordinary 100% Designated member services
Maven Capital (TH) Limited* Ordinary 100% Trustee company
Maven Capital Cardiff Trustee Limited* Ordinary 100% Trustee company
Maven Capital GCM Limited* Ordinary 100% LLP corporate member
Maven Capital Investments Limited* Ordinary 100% Holding company
Maven Coinvest GP A LLP* Partnership 100% General partner
Maven Co-Invest B1 GP LLP* Partnership 100% General partner
Maven Co-Invest GP Limited* Ordinary 100% General partner
Maven MIP GP LLP* Partnership 100% General partner
Maven NEDF GP Limited* Ordinary 100% General partner
Maven Nominee Limited* Ordinary 100% Holding company
Maven Partners (ABZ) GP LLP* Partnership 100% General partner
Maven Partners (Ambassador Homes) GP LLP* Partnership 100% General partner
Maven Partners (Brighton) GP LLP* Partnership 100% General partner
Maven Partners (Carters Yard) GP LLP* Partnership 100% General partner
Maven Partners (Dalian House) GP LLP* Partnership 100% General partner
Maven Partners (Douglas House Glasgow) GP LLP* Partnership 100% General partner
Maven Partners (Goldcrest) GP LLP* Partnership 100% General partner
Maven Partners (HbH Manchester) GP LLP* Partnership 100% General partner
Maven Partners (Inverness) GP LLP* Partnership 100% General partner
Maven Partners (Inverness Finance) GP LLP Partnership 100% General partner
Maven Partners (Llandudno Finance) GP LLP Partnership 100% General partner
Maven Partners (Mansfield) GP LLP* Partnership 100% General partner
Maven Partners (Marketgait Dundee) GP LLP Partnership 100% General partner
Maven Partners (Middleton St George) GP LLP* Partnership 100% General partner
Maven Partners (Murieston) GP LLP* Partnership 100% General partner
Maven Partners (Nottingham) GP LLP* Partnership 100% General partner
Maven Partners (Trongate Glasgow) GP LLP Partnership 100% General partner
Maven Partners (Westerhill Road) GP LLP* Partnership 100% General partner
Maven Property CI LLP Partnership 100% Limited partner
Maven Property Investments Limited* Ordinary 100% Asset management
Maven SLF FP Limited* Ordinary 100% Limited partner
Maven UK Regional Buyout 1 Founder Partner GP LLP* Partnership 100% General partner
MC Cardiff General Partner LLP* Partnership 100% General partner
MP (CPPI) GP LLP* Partnership 100% General partner
MP (Maidenhead) GP LLP* Partnership 100% General partner
MP (Shire Hall Durham) GP LLP* Partnership 100% General partner
SLF GP A LLP* Partnership 100% General partner
SLF GP Limited* Ordinary 100% General partner
The Turris Partnership Limited* Ordinary 100% Wealth management
Daerven Barrow LLP Partnership 30% Holding company
8 Coates Crescent, Edinburgh, Scotland, EH3 7AL
Caledonia Asset Management Limited* Ordinary 100% Wealth management
Amati Global Investors Limited* Ordinary 50% Asset management
Northern Ireland
Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Callender Street Nominees Limited* Ordinary 100% Holding company
Callender Street Trustees Limited* Ordinary 100% Trustee company
Fitzwilliam (Ascot) Holdings Limited Ordinary 100% Holding company
Fitzwilliam (GYLO) Holdings Limited Ordinary 100% Holding company
Fitzwilliam (President) Holdings Limited Ordinary 100% Holding company
Fitzwilliam (Waltham Forest) Holdings Limited Ordinary 100% Holding company
Fitzwilliam Trustees (Marylebone & Cotswold) Holdings Limited Ordinary 100% Holding company
Fitzwilliam Trustees Number 1 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 10 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 11 Limited Ordinary 100% Trustee company
Fitzwilliam Trustees Number 12 Limited Ordinary 100% Trustee company
Fitzwilliam Trustees Number 2 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 3 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 4 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 5 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 6 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 7 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 8 Limited* Ordinary 100% Trustee company
Fitzwilliam Trustees Number 9 Limited* Ordinary 100% Trustee company
SSAS Solutions (UK) Ltd* Ordinary 100% Pension administration
114-116 Royal Avenue, Belfast, BT1 1DL
Doherty Pension & Investment Consultancy Limited* Ordinary 100% Pension administration, wealth management
*Audited Entities
1 (#_ftnref1) Includes £829.2m (2022: £1,100.5m) of funds under management
by the Group's associate, Amati Global Investors Limited, excluding £73.0m
(2022: £93.6m) of Mattioli Woods' client investment and £11.7m (2022:
£14.8m) of crossholdings between the TB Amati Smaller Companies Fund, TB
Amati Strategic Metals Fund and the Amati AIM VCT plc.
2 (#_ftnref2) Annual pension consultancy and administration fees; ongoing
adviser charges; level and renewal commissions; banking income; property,
discretionary portfolio and other annual management charges adjusted for
Private Investor Club initial fees.
3 (#_ftnref3) This is an alternative performance measure ("APM") the Group
reports to assist stakeholders in assessing performance alongside the Group's
results on a statutory basis. APMs may not be directly comparable with other
companies' adjusted measures and are not intended to be a substitute for, or
superior to, any IFRS measures of performance. Supporting calculations for
APMs and reconciliations between APMs and their IFRS equivalents are set out
in the alternative performance measure workings section of the Annual Report..
4 (#_ftnref4) Calculated as earnings before interest, taxation,
depreciation, amortisation, acquisition-related costs, platform project costs,
contingent consideration treated as remuneration and including share of profit
from associates (net of tax).
5 (#_ftnref5) Adjusted EBITDA divided by revenue.
6 (#_ftnref6) Adjusted profit after tax used to derive adjusted EPS is
calculated as adjusted profit before tax as defined above less income tax at
the blended standard rate of 20% (2022: 19%).
7 (#_ftnref7) Includes £913.9m (31 May 2022: £1,208.9m) of funds under
management by Amati Global Investors Limited, including Mattioli Woods' client
investment and crossholdings between TB Amati Smaller Companies Fund, TB Amati
Strategic Metals Fund and Amati AIM VCT plc.
8 (#_ftnref8) Total revenues excluding revenue growth from businesses
acquired in the last 24 months.
9 (#_ftnref9) Revenue for the year ended 31 May 2023 was split 37% (2022:
35% restated) fixed, initial or time-based fees and 64% (2022: 52%) ad
valorem fees based on the value of assets under management, advice and
administration.
10 (#_ftnref10) Certain pension scheme assets, including clients' own
commercial properties, are only subject to a statutory valuation at a benefit
crystallisation event.
11 (#_ftnref11) Value of funds under trusteeship in SIPP and SSAS schemes
administered by Mattioli Woods and its subsidiaries.
12 (#_ftnref12) Assets under management of £829.2m (2022: £1,100.5m)
excludes £73.0m (2022: £93.6m) of Mattioli Woods' client investment included
within SIPP and SSAS, employee benefits and personal wealth and other assets
and excludes £11.7m (2022: £14.8m) of crossholdings between the TB Amati
Smaller Companies Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT
plc.
13 (#_ftnref13) SIPP and SSAS schemes where the Group acts as pension
consultant and administrator. SIPP and SSAS schemes administered by SSAS
Solutions reclassified as direct during the year.
14 (#_ftnref14) New personal clients includes from acquired businesses.
15 (#_ftnref15) Includes personal wealth clients with SIPP and SSAS schemes
operated by third parties.
16 (#_ftnref16) Earnings before interest, taxation, depreciation,
amortisation and impairment.
17 (#_ftnref17) Figures in table may not add due to rounding.
18 (#_ftnref18) Before acquisition-related costs, amortisation and
impairment of acquired intangibles, gain on bargain purchase, deferred
consideration as remuneration and acquisition-related finance costs.
19 (#_ftnref19) Working capital defined as trade and other receivables less
trade and other payables.
20 (#_ftnref20) Cash generated from operations before acquisition-related
costs paid and contingent remuneration paid.
21 (#_ftnref21) Mattioli Woods Property Securities Fund
22 (#_ftnref22) Mattioli Woods Responsible Equities Fund
23 (#_ftnref23) Comprises £12.0m (2022: £13.5m) in Custodian REIT, £66.3m
(2022: £60.5m) in MW PSF and £55.2m (2022: £70.3m) in Amati funds.
24 (#_ftnref24) Crossholdings between Multi-Asset Fund ("MAF"): TB Amati
Smaller Companies Fund and the Amati AIM VCT plc £11.7m (2022: £16.4m) and
non-MAF cross holdings £15.9m (2022: £8.9m).
25 (#_ftnref25) SIPP and SSAS schemes where Mattioli Woods acts as pension
consultant and administrator.
26 (#_ftnref26) Direct schemes lost to an alternative provider as a
percentage of average scheme numbers during the year.
27 (#_ftnref27) Direct schemes lost as a result of death, annuity purchase,
external transfer or cancellation as a percentage of average scheme numbers
during the year.
28 (#_ftnref28) David Kiddie appointed as Independent Non-executive Chair on
14 March 2022
29 (#_ftnref29) The post-tax discount rate used of 10.2% is based on sector
average capital structure and lower small company risk premium than the Group
WACC rate of 11.5% which is based upon an unlevered risk premium using the
average of comparable listed companies.
(#_ftnref30) 1. Following a review of our remuneration report and our
approach to reporting, LTIP awards, which have performance periods ending (or
substantially ending) in the year of report, are reported in the current year.
Our approach prior to this has been to report LTIP awards in the year they
vested
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