Interim Results
07/02/2023 07:00
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RNS Number : 0882P Mattioli Woods PLC 07 February 2023
7 February 2023
Mattioli Woods plc
("Mattioli Woods", "the Company" or "the Group")
Interim Results
Mattioli Woods plc (AIM: MTW.L), the specialist wealth and asset management
business, today reports its interim results for the six months ended 30
November 2022.
Financial highlights for six months ended 30 November 2022:
· Revenue for the period up 10.0% to £54.9m (1H22: £49.9m):
- Resilient trading performance against challenging macroeconomic and
geopolitical backdrop;
- Organic revenue growth of 2.2% (1H22: +10.0%) with increased new business
pipeline, despite 2% fall in total client assets of the Group and its
associate 1 (#_ftn1) to £14.6bn at the period end;
- Positive performance in pension advice and administration, employee
benefits, property management and private equity management operating
segments;
- Revenue contribution from acquisitions completed since 1 January 2021 of
£20.2m (1H22: £19.4m); and
- Recurring revenues 2 (#_ftn2) represent 89.6% (1H22: 87.7%) of total
revenue;
· Operating profit before financing up 62.7% to £4.6m (1H22:
£2.8m);
· Adjusted EBITDA 3 (#_ftn3) of £15.0m (1H22: £15.8m) down 5.1%
due to;
- Change in revenue mix and market impact on revenues linked to asset values;
- Annualisation of employee benefit structure changes made in prior year and
strategic investment to develop capacity;
· Adjusted EBITDA margin 4 (#_ftn4) 27.3% (1H22: 31.6%);
· Profit before tax up 45.5% to £4.8m (1H22: £3.3m);
· Basic EPS up 68.6% to 5.9p (1H22: 3.5p);
· Adjusted EPS 5 (#_ftn5) 21.2p (1H22: 23.8p);
· Interim dividend up 6.0% to 8.8p (1H22: 8.3p);
· Continued focus on managing costs, achieving intra-group synergies
and improving profit margin in-line with stated medium-term goals; and
· Strong financial position, with cash of £38.3m at 30 November 2022
(31 May 22: £53.9m).
Operational highlights and recent developments
· Diversifying revenue mix through integrated model with 36% (1H22
restated: 38%) fee-based revenues 6 (#_ftn6) , uncorrelated and therefore
less sensitive to market performance;
· Gross discretionary Assets under Management ("AuM") 7 (#_ftn7) of
£4.9bn, a 4% decrease in the period, with gross inflows of £314.1m (1H22:
£384.8m) and net inflows 0.8% of opening AuM;
· Recent acquisitions continue to integrate well, strengthened by
realised revenue synergies from cross-selling, with a strong and value
accretive pipeline of new acquisition opportunities;
· Progressed digital client experience with launch of MWise online
investment platform; and
· Continued investment in technology and digital platforms to support
integration of acquired businesses and delivery of operational efficiencies in
client administration.
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, advancing key strategic
initiatives and improved operational efficiency complemented by strategic
acquisitions.
1. Includes £924.0m (31 May 2022: £1,100.5m) of funds under management by
the Group's associate, Amati Global Investors Limited, excluding £74.9m (31
May 2022: £93.6m) of Mattioli Woods' client investment and £12.6m (31 May
2022: £14.8m) of cross-holdings between the TB Amati Smaller Companies Fund
and the Amati AIM VCT plc.
2. Annual pension advice and administration fees; ongoing adviser charges;
level and renewal commissions; banking income; property, discretionary
portfolio and other annual and fund management charges.
3. Earnings before interest, taxation, depreciation, amortisation,
acquisition-related costs, contingent consideration treated as remuneration
and including share of profit from associates (net of tax).
4. Adjusted EBITDA divided by revenue.
5. Adjusted profit after tax used to derive adjusted EPS is calculated as
adjusted profit before tax less income tax at the blended standard rate of
20.0% (1H22: 19.0%).
6. Revenue for the six months ended 30 November 2022 was split 36% (1H22
restated: 38%) fixed, initial or time-based fees and 64% (1H22 restated: 62%)
ad valorem fees based on the value of assets under management, advice and
administration.
7. Includes £1,011.5m (31 May 2022: £1,208.9m) of funds under management by
Amati Global Investors Limited, including Mattioli Woods' client investment
and cross-holdings between TB Amati Smaller Companies Fund and Amati AIM VCT
plc.
Commenting on the results, Ian Mattioli MBE, Chief Executive Officer, said:
"The first six months of this financial year saw the Group deliver a resilient
trading performance against the challenging macroeconomic and geopolitical
backdrop that persisted throughout calendar year 2022. During the period, we
proactively balanced securing good financial outcomes for our clients with
ensuring the long-term growth and sustainability of our business, remaining
true to our purpose of putting clients first. We are pleased to report further
progress towards our strategic medium-term goals, achieving continued revenue
growth in the first half of this financial year.
"Revenue of £54.9m was 10% higher than the equivalent period last year (1H22:
£49.9m) driven by positive performances in our pensions advice and
administration, employee benefits, property management and private equity
management operating segments.
"The success of our new business initiatives and the strength of existing
client referrals resulted in organic revenue growth of over 2%, despite a 2%
fall in the value of total client assets. Clients' demand for advice and
proactive communications by our advisers in such uncertain times resulted in
an increase in advisory time, as well as the value of new clients on-boarded
in the first half more than 10% higher than the equivalent period last year.
The Group's strong, integrated business model facilitates multiple engagement
points in providing a holistic service to our clients and to generate multiple
revenue streams to facilitate future revenue growth.
"The eight acquisitions completed since 1 January 2021, including our two
largest acquisitions to date, Maven and Ludlow, contributed £20.2m (1H22:
£19.4m) of revenue in the period and continue to deliver revenue synergies.
The contributions of recent acquisitions, organic growth and continued cost
management were offset by the impact of market movement on ad valorem
revenues, resulting in adjusted EBITDA of £15.0m (1H22: £15.8m). Profit
before tax was up 45.5% to £4.8m (1H22: £3.3m) due to reduced deferred
consideration payments recognised as remuneration expense under IFRS 3 of
£3.9m (1H22: £4.6m) and lower acquisition-related costs of £0.5m (1H22:
£2.6m), while adjusted profit before tax of £13.5m was down 4.3%
(1H22: £14.1m) after adding back acquisition-related costs, deferred
consideration recognised as an expense and amortisation of acquired intangible
assets of £3.9m (1H22: £3.3m).
"We believe the benefits of operating a responsibly integrated business allows
us to secure great client outcomes, control clients' costs while delivering
strong, sustainable shareholder returns over the long-term. The Board remains
committed to growing the dividend, while maintaining an appropriate level of
dividend cover. Accordingly, the Board is pleased to announce an increased
interim dividend of 8.8p per share (1H22: 8.3p) up 6.0%, demonstrating our
desire to deliver value to shareholders and confidence in the financial
outlook for our business.
"The first half of the financial year has seen the Group deliver a resilient
trading performance against a complex macroeconomic and geopolitical backdrop.
We plan to build on this position, through investing in our people and our
systems to advance our key strategic initiatives: new business generation,
investing in our in-house training programmes, growth through the integration
of strategic acquisitions, developing new products and services, reviewing our
processes and investing in technology to deliver further operational
efficiencies. Our trading outlook for the year remains in line with
management's expectations and we believe the Group is well-positioned to
secure further growth to the benefit of all our stakeholders, driving
improvements in earnings, operating margin and shareholder returns".
Analyst presentation
There will be an analyst presentation held via webinar to discuss the results
at 09:30am today.
Those analysts wishing to attend are asked to contact Julia Tilley at Camarco
on +44 (0) 20 3757 4998 or at mtwplc@camarco.co.uk
(mailto:julia.tilley@camarco.co.uk) .
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018.
- Ends -
For further information please contact:
Mattioli Woods plc
Ian Mattioli MBE, Chief Executive Officer
Ravi Tara, Chief Financial Officer Tel: +44 (0) 116 240 8700
Michael Wright, Group Managing Director www.mattioliwoods.com (http://www.mattioliwoods.com)
Canaccord Genuity Limited (Nominated Advisor and Joint Broker)
Emma Gabriel Tel: +44 (0) 20 7523 8000
Tom Diehl www.canaccordgenuity.com (http://www.canaccordgenuity.com)
Singer Capital Markets (Joint Broker)
Justin McKeegan
Tom Salvesen Tel: +44 (0) 20 7496 3000
Alaina Wong www.singercm.com (http://www.singercm.com/)
Media enquiries:
Camarco
Julia Tilley Tel: +44 (0) 20 3757 4998
Alex Campbell www.camarco.co.uk
Interim business review
Introduction
The first six months of this financial year saw the Group deliver a resilient
trading performance against the challenging macroeconomic and geopolitical
backdrop that persisted throughout calendar year 2022. During the period, we
proactively balanced securing good financial outcomes for our clients with
ensuring the long-term growth and sustainability of our business, remaining
true to our purpose of putting clients first. We are pleased to report further
progress towards our strategic medium-term goals, achieving continued revenue
growth in the first half of this financial year.
Revenue of £54.9m was 10% higher than the equivalent period last year (1H22:
£49.9m) driven by positive performances in our pensions advice and
administration, employee benefits, property management and private equity
management operating segments. The Group benefits from a high level of
recurring revenue with more than a third being fee-based, rather than linked
to the value of assets under management, administration or advice 8 (#_ftn8)
, giving our business a revenue profile that is less sensitive to market
performance.
The success of our new business initiatives and the strength of existing
client referrals resulted in organic revenue growth of over 2%, despite a 2%
fall in the value of total client assets. In support of organic growth trends,
a combination of clients' demand for advice and proactive communications by
advisers in such uncertain times resulted in an increase in advisory time, as
well as the value of new clients on-boarded in the first half more than 10%
higher than the equivalent period last year.
The eight acquisitions completed since 1 January 2021, including our two
largest acquisitions to date, Maven and Ludlow, contributed £20.2m (1H22:
£19.4m) of revenue in the period. We realised revenue and cost synergies
including joint-fund raising on two deals with our Maven Private Equity
segment generating £0.6m in initial fees, clients of the Ludlow business have
invested over £56m in the Group's Discretionary Portfolio Management ("DPM")
proposition. In the period we streamlined administration and support processes
to realise cost synergies in line with acquisition plan through merging
support functions and combining the Group office estate. The positive
contributions of recent acquisitions, organic growth and continued cost
management were offset by the impact of market movement on ad valorem
revenues, resulting in adjusted EBITDA of £15.0m (1H22: £15.8m) falling by
5.1%. Profit before tax was up 45.5% to £4.8m (1H22: £3.3m) due to reduced
deferred consideration payments recognised as remuneration expense under IFRS
3 of £3.9m (1H22: £4.6m) and lower acquisition-related costs of £0.5m
(1H22: £2.6m), while adjusted profit before tax of £13.5m was down 4.3%
(1H22: £14.1m) after adding back acquisition-related costs, deferred
consideration recognised as an expense and amortisation of acquired intangible
assets of £3.9m (1H22: £3.3m).
We remain dedicated to our culture of putting clients first, developing our
service offering and building a business that is sustainable over the
long-term. Our focus remains on our clients' wellbeing and the preservation of
their wealth. We continue to balance the needs of our existing clients while
creating the capacity to deal with increased new business levels. Our
investment in technology allows our employees to combine an in-office presence
with remote working, whilst we have seen an increasing number of face-to-face
client meetings alongside the continued use of alternative channels which have
enabled greater contact with all our clients. The wellbeing of all our staff
remains a key focus with a range of workshops, educational and social forums
being promoted by our dedicated wellbeing support team.
We continue to review our remuneration structures to ensure they remain
competitive, with changes to the remuneration of fee-generating consultants
implemented in the last financial year and discretionary bonuses being paid to
other staff.
As in prior years, we anticipate that certain revenue will be more heavily
weighted towards the second half due to end of tax year advice, the launch of
new products and a higher proportion of client year-ends. Strategic
expenditure planned for the second half includes further IT infrastructure
investment, recruitment activity and marketing.
Our managed funds experienced some pressure on asset values, like many others
in the sector, but our multi-asset funds continue to offer high levels of
diversification as we seek to manage volatility in difficult investment
markets. Our discretionary managed funds performed in line with their
benchmarks and represented a combined value of £4.9bn at the period end,
including more than £1.0bn managed by the Group's associate company, Amati
Global Investors ("Amati"). The Amati team gained further recognition with the
Amati AIM VCT being named winner of the VCT AIM Quoted category at Investment
Week's Investment Company of the Year Awards 2022.
We believe the benefits of operating a responsibly integrated business allows
us to secure great client outcomes whilst controlling clients' costs through
economies of scale such as lower fund manager and platform charges, managing
clients' total expense ratios ("TERs") over time while maintaining our service
levels. In meeting our clients' investment needs we generally use third
parties' funds, but where we have a particular expertise and opportunity to
develop a more appropriate investment product, we look to meet those needs
in-house. This has led to the innovative development of our Private Investors
Club ("PIC"), Custodian Property Income REIT plc ("Custodian REIT"), the
Mattioli Woods Responsible Equity ("REF") and Property Securities ("PSF")
Funds.
Despite the industry wide trend of net out flows over the period, we achieved
modest aggregate net inflows (before market movements) of £38.1m (1H22:
£267.0m) in to our gross discretionary assets under management which were
down 4% and totalled £4.9bn (31 May 2022: £5.1bn) at the period end. The
value of assets held within our DPM service remained at £2.5bn (31 May 2022:
£2.5bn), of which £139.7m or 5.6% (31 May 2022: £127.5m or 5.1%) is
invested within funds managed by the Group and its associates.
Our growing consultancy team continues to generate new business. A total of
490 new clients (1H22: 587) chose to use Mattioli Woods during the period
reflecting the success of new business initiatives and strength of existing
client referrals, of which 406 (1H22: 515) were new SIPP, SSAS and personal
clients with assets totalling £91m (1H22: £87m).
These initiatives are also supporting our enquiry pipeline of 606 (1H22: 589)
new business opportunities with assets totalling £194m (1H22: £145m). Total
client assets under management, administration and advice by the Group and its
associate were £14.6bn at the period end (31 May 2022: £14.9bn).
The Group's strong, integrated business model facilitates multiple engagement
points in providing a holistic service to our clients. From the total client
asset base of £14.6bn, the Group is able to generate multiple revenue streams
to facilitate future revenue growth through our financial planning advice,
pensions administration, employee benefits, discretionary and premium
investment segments to an equivalent total client asset base of £22.5bn.
Consumer awareness and adoption of technology has accelerated in recent years,
with on-demand portfolio visibility now considered a standard. We developed
our online digital investment platform, MWise, which is now live and provides
an additional distribution channel for our discretionary investment management
service for new and existing clients. We are progressing our other strategic
initiatives, including the development of our proprietary MWeb pension
administration platform and the implementation of new third-party financial
planning and wealth management software, which will simplify existing
processes and deliver improved operational efficiency in future years. These
initiatives are in-line with our historic guidance on estimated additional
technology spend of circa. £2m per annum.
8. Revenue for the six months ended 30 November 2022 was split 36% (1H22
restated: 38%) fixed, initial or time-based fees and 64% (1H22 restated: 62%)
ad valorem fees based on the value of assets under management, advice and
administration.
Market overview
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. More than a decade of low interest rates, which is now reversing, and
evolving client preferences, including environmental, social and governance
("ESG") and responsible investing considerations, have created challenges for
people seeking to generate income while preserving and growing their
capital.
At the same time, the COVID-19 pandemic and subsequent events have created an
uncertain market backdrop that has heightened awareness of the gap between the
current level of UK savings and that which is necessary to provide a
reasonable standard of living in adverse circumstances or during retirement.
It has also served to highlight the general under-provision in the level of
protection policies established to ensure that individuals, their families and
their dependents are sheltered from the impact of adverse life events.
Employers continue to withdraw from defined benefit pension schemes, requiring
individuals to be self-reliant in planning for their own long-term needs.
Individuals who have generated substantial personal and family wealth are
increasingly seeking solutions that help them fulfil their personal ambitions,
and for financial planning advice to succeed wealth across multi-generations.
We believe these factors will continue to drive demand for the holistic
planning and expert advice we provide.
Recent economic data suggests inflationary pressures will continue to be a key
feature of the short and medium-term which could lead to increased financial
and liquidity pressures for individuals and households as wage increases fail
to keep pace with inflation. Our business faces similar challenges with wage
and cost inflation partially offset by our ability to review pricing
arrangements with our clients, continued management of all direct and
administrative expenditure and realisation of operational efficiencies and
economies of scale.
Regulation
The Financial Conduct Authority ("FCA") set out its priorities and long-term
expectations for the wealth management and advice industry during the period.
The regulator is focused on firms' operational and financial resilience,
including the preservation of client assets and money, and it expects firms to
take reasonable steps to ensure they continue to meet the challenges the
pandemic poses to customers and staff, particularly through their business
continuity plans.
We remain confident we have the right structures in place to ensure the
continued operation of our business in the most adverse of circumstances and
are able to balance the needs of our existing clients with creating the
capacity to deal with new business.
This has been expanded by the introduction of a new principle, the Consumer
Duty, whereby "A firm must act to deliver good outcomes for retail customers".
These requirements are intended to ensure our clients clearly understand the
products and services they are paying for, why these are appropriate for them
and that we are cognisant of the cost and value of products and services we
recommend. All the new requirements accord with our principles of integrity,
professionalism and a client-focused culture.
As the regulator focuses on protecting consumers, legislation is becoming
increasingly stringent and the level of public scrutiny on conduct and cost is
increasing, with clients able to understand the cost of the services they
receive more easily following the introduction of the Markets in Financial
Instruments Directive II ("MiFID II").
The recent FCA consultation paper for a new core investment advice regime to
allow firms to provide mass-market consumers with simplified advice on
investing into mainstream products, is one we are supportive of and will carry
out an in depth assessment of the opportunities that this may present for the
Group in providing simplified advice to new clients when the policy statement
is made in Spring 2023.
The introduction of the Investment Firm Prudential Regime ("IFPR") for UK
investment firms authorised under UK MiFID brought significant changes,
including UK investment firms now being subject to liquidity requirements
across the board, a new methodology for calculating capital requirements, plus
new remuneration and disclosure requirements. The Group continues to remain
well capitalised under the new regime.
Clients need long-term advice more than ever before. We will continue to
provide quality solutions, maintaining our focus on client service and
continuing to adapt our business model to the changing market, integrating
asset management and financial planning to build upon our established
reputation for delivering sound advice and consistent investment performance,
whilst providing value for clients.
Assets under management, administration and advice
Total client assets were £14.6bn as at 30 November 2022
(31 May 2022: £14.9bn):
Assets under management, administration and advice 9 (#_ftn9) SIPP and SSAS 10 (#_ftn10) Employee benefits Personal wealth and other assets Sub-total £m Amati 11 (#_ftn11) Private Equity Mgt Total
£m £m £m £m £m £m
At 1 June 2022 6,913.3 1,452.8 4,670.4 13,036.5 1,100.5 766.9 14,903.9
Net inflows/(outflows), including market movements (89.2) (19.2) (29.0) (137.4) (176.5) 12.7 (301.2)
At 30 November 2022 6,824.1 1,433.6 4,641.4 12,899.1 924.0 779.6 14,602.7
9. Certain pension scheme assets, including clients' own commercial
properties, are only subject to a statutory valuation at a benefit
crystallisation event.
10. Value of funds under trusteeship in SIPP and SSAS schemes administered by
Mattioli Woods and its subsidiaries.
11. Includes £924.0m (31 May 2022: £1,100.5m) of funds under management by
the Group's associate, Amati Global Investors Limited, excluding £74.9m (31
May 2022: £93.6m) of Mattioli Woods' client investment and £12.6m (31 May
2022: £14.8m) of cross-holdings between the TB Amati Smaller Companies Fund
and the Amati AIM VCT plc.
The £301.1m or 2.0% decrease in total client assets during the period is
analysed as:
· A £89.2m decrease (1H22: £150.2m increase) in SIPP and SSAS funds
under trusteeship, with a 0.6% decrease (1H22: 0.4% decrease) in the number
of schemes being administered at the period end, comprising a 0.3% (1H22:
1.0%) increase in the number of direct 12 (#_ftn12) schemes to 7,120 (31 May
2022: 7,098) offset by a 2.3% (1H22: 2.8%) decrease in the number of schemes
the Group operates on an administration-only basis to 3,894 (31 May 2022:
3,986). In recent years, we have been 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 alternative arrangements;
· A £19.2m decrease (1H22: £35.4m increase) in the value of assets
held in corporate pension schemes advised by our employee benefits business.
Revenues in our employee benefits business are not linked to the value of
client assets in the way that certain streams of our wealth management revenue
are linked;
· A £29.0m decrease (1H22: £2,005.2m increase) in personal wealth
and other assets under management and advice. The prior year's increase was
driven by the acquisitions of Ludlow and Richings in the period. The 206
(1H22: 2,971) new personal clients won during the period partially offset some
natural client attrition, resulting in a 0.2% (1H22: 62.6% increase driven by
acquisitions) decrease in the number of personal clients 13 (#_ftn13) . The
total number of personal clients at the period end to 10,682 (1H22: 10,708);
· A £176.5m decrease (1H22: £22.6m increase) in Amati's funds under
management (excluding Mattioli Woods' client investment), with falls in the
value of the Amati UK Smaller Companies Fund to £666.3m (31 May 2022:
£840.3m), the Amati AIM VCT to £213.7m (31 May 2022: £238.0m) and the
Strategic Metals Fund to £75.1m (31 May 2022: £77.6m), being partially
offset by assets in the IHT portfolio service increasing to £52.1m (31 May
2022: £51.8m); and
· A £12.7m increase in Maven's assets under management to £779.6m,
as explained under 'Segmental review' below.
12. SIPP and SSAS schemes where the Group acts as pension consultant and
administrator.
13. Includes personal wealth clients with SIPP and SSAS schemes operated by
third parties.
Trading results
The Group has developed a broader wealth management proposition in recent
years, grown from its strong pensions advisory and administration expertise,
with financial planning advice at the core.
We continue to build towards our strategic goals to grow the Group's
operations to £300m revenues, £30bn total client assets and £100m EBITDA.
We anticipate a continued focus on growing our adviser and client base,
realising further cross sell opportunities from our acquired businesses to
date and future strategic acquisitions.
To deliver this, we continue to invest in our people and our systems with the
aim of improving client outcomes, increasing operational efficiency and
increasing our capacity for organic growth, whilst driving a steady
improvement in earnings, operating margin and shareholder returns.
Revenue
The Company delivered another period of organic revenue growth of 2.2%
(1H22: 10.0%) despite challenging trading conditions. Total Group revenue of
£54.9m (1H22: £49.9m) was boosted by a full six months' contribution from
the acquisitions of Maven, Ludlow and Richings, with total revenue from
acquisitions completed since 1 January 2021 totalling £20.2m (1H22: £19.4m).
Employee benefits expense
The major component of the Group's operating costs is employee benefits
expense of £29.8m (1H22: £27.1m) representing 54.3% of revenue (1H22: 54.2%)
and we continue to actively manage staff related expenditure. The realisation
of operational efficiencies and securing economies of scale, in part through
synergies driven by the integration of acquired businesses and clients, are
key elements of our aim to maintain margin and enhance future earnings. The
further development of our proprietary MWeb pension administration platform
and the implementation of new third-party financial planning and wealth
management software, will deliver improved operational efficiency in future
years and lead to increased automation of client administration across the
Group and create capacity within the existing staff base.
An increase in average consultant and client relationship manager caseloads
was achieved partly through the migration of acquired pension portfolios onto
our bespoke MWeb administration platform, reaping some of the benefits of our
historic investment in technology, as well as through the integration and
streamlining of other processes across the Group.
The planned recruitment of consultants, client relationship managers, IT
developers and support staff resulted in the Group's total headcount
increasing to 877 (1H22: 832) at 30 November 2022. The financial impact of
the increased headcount was partially offset by a reduction in the quantum of
variable remuneration payable to the Maven team, with the level of
deal-specific performance and exit fees achieved in the equivalent period last
year not repeated this year due to the wider market factors.
The number of fee-generating consultants increased to 184 (1H22: 183) at the
period end. We continue to invest in our people and training programmes across
the Group to ensure we create the capacity for future growth.
Other administrative expenses
Other administrative expenses increased by 3% to £10.2m (1H22: £9.9m), with
the impact of recognising a full six months' costs on recent acquisitions,
plus increased marketing and IT costs, being partially offset by reduced
professional and regulatory costs and savings from reduced office occupancy
across the Group estate.
We continue to assess strategic opportunities to grow the Group through both
smaller bolt-on acquisitions and more substantial opportunities, provided they
meet our strict investment criteria and due diligence procedures. During the
period we progressed a number of opportunities, incurring acquisition-related
costs of £0.5m (1H22: £2.6m).
Share-based payments
Share-based payment costs of £0.9m (1H22: £0.6m) were higher than the
equivalent period last year due to new options awarded under the Mattioli
Woods 2021 Long Term Incentive Plan ("the LTIP") during the period and the
impact of updated performance and vesting assumptions.
Net finance costs
The Group maintained a positive net cash position throughout the period, with
net finance costs of £0.4m (1H22: £0.4m) reflecting notional finance charges
from the unwinding of discounts on deferred consideration payable of £0.5m
(1H22: £0.4m).
Taxation
The effective rate of taxation on profit on ordinary activities was 36.6%
(1H22: 48.0%), above the blended standard rate of tax of 20.0% (1H22: 19.0%),
primarily due to certain contingent consideration arrangements on acquisitions
accounted for as remuneration and other acquisition-related expenses being
non-deductible for tax purposes.
The net deferred taxation liability carried forward at 30 November 2022
reduced to £26.2m (1H22: £28.1m) as a result of the continuing amortisation
of intangible assets arising from acquisitions in the prior periods.
Alternative performance measures
The Group has identified certain measures it believes will assist in the
understanding of the performance of the business. Recurring revenues, adjusted
EBITDA, adjusted EBITDA margin, adjusted profit before tax ("adjusted PBT"),
adjusted profit after tax ("adjusted PAT") and adjusted earnings per share
("EPS") 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.
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 Note 19.
Profitability and earnings per share
Operating profit before financing was up 64.3% to £4.6m (1H22: £2.8m), with
the positive impact of increased revenue, lower acquisition-related costs of
£0.5m (1H22: £2.6m) and contingent consideration recognised as an expense
falling to £3.9m (1H22: £4.6m) being partially offset by a full period of
overheads associated with those businesses acquired in 1H22 and increased
investment in our people and IT. Adjusted EBITDA, adding-back
acquisition-related costs and contingent consideration recognised as an
expense and including the Group's share of profit from associates of £0.6m
(1H22: £0.9m), was down 5.1%, with adjusted EBITDA margin of 27.3%
(1H22: 31.6%).
Profit before tax of £4.8m (1H22: £3.3m) was up 45.5%, with adjusted profit
before tax of £13.5m (1H22: £14.1m) down 4.3%. The adjusted profit before
tax measure includes adjustments made for acquisition-related costs, the
recognition of contingent consideration as an expense under IFRS 3,
amortisation charges on acquired intangible assets of £3.9m (1H22: £3.3m)
and acquisition-related notional interest charges of £0.5m (1H22: £0.4m).
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 follows:
1H23 1H22
£m £m
Statutory operating profit before financing 4.6 2.8
Amortisation of acquired intangibles 3.9 3.3
Amortisation of software 0.3 0.2
Depreciation 1.2 1.4
EBITDA 10.0 7.7
Share of profit from associates, net of tax 0.6 0.9
Acquisition-related costs 0.5 2.6
Deferred consideration as remuneration 3.9 4.6
Adjusted EBITDA 14 (#_ftn14) 15.0 15.8
14. Figures in table may not add due to rounding.
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
1H23 1H23 1H22 1H22
£m pps £m pps
Statutory profit before tax 4.8 3.3
Income tax expense (1.7) (1.6)
Statutory profit after tax / Basic EPS 3.0 5.9 1.7 3.5
Statutory profit before tax 4.8 3.3
Amortisation of acquired intangibles 3.9 3.3
Acquisition-related costs 0.5 2.6
Acquisition-related notional finance costs 0.5 0.4
Deferred consideration as remuneration 3.9 4.6
Adjusted PBT 13.5 14.1
Income tax expense at blended standard rate (2.7) (2.7)
Adjusted PAT / Adjusted EPS 15 (#_ftn15) 10.8 21.2 11.5 23.8
15. Figures in table may not add due to rounding.
Client portfolios acquired through business combinations are recognised as
intangible assets. The amortisation charge for the period of £3.9m (1H22:
£3.3m) 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.
Basic EPS increased by 68.6% to 5.9p (1H22: 3.5p), while adjusted EPS of 21.2p
(1H22: 23.8p) reduced by 10.9%. EPS was negatively impacted by a high
effective tax rate of 36.6% (1H22: 48.0%), and the issue of 190,743 (1H22:
128,425) shares under the Company's share plans. The prior period also
included 5,325,705 shares issued as consideration for acquisitions during
1H22, and 16,969,697 shares issued as part of a placing. Diluted EPS was 5.9p
(1H22: 3.5p).
Dividends
The Board is pleased to announce an increased interim dividend of 8.8p per
share (1H22: 8.3p) up 6.0%, demonstrating our desire to deliver value to
shareholders and confidence in the financial outlook for our business. The
Board remains committed to growing the dividend, while maintaining an
appropriate level of dividend cover. The interim dividend will be paid on 24
March 2023 to shareholders on the register at the close of business on 17
February 2023, with an ex-dividend date of 16 February 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 interim dividend for the six months ended 30
November 2022, shareholders' instructions must be received by Link by the
close of business on 3 March 2023.
Cash flow
Cash balances at 30 November 2022 totalled £38.3m (1H22: £44.3m). Adjusted
cash generated from operations 16 (#_ftn16) , which excludes cashflows
related to the Group's acquisition activities was £7.2m (1H22: £11.0m),
representing 47.8% of Adjusted EBITDA (1H22: 69.6%). Cash generated from
operations was (£1.5m) or (15%) of EBITDA (1H22: £4.5m or 58.4%), driven by
an increase in the Group's working capital requirement 17 (#_ftn17) of
£16.6m (1H22: £8.4m) comprising:
· £9.8m (1H22: £3.4m) decrease in trade and other payables
primarily due to:
- £8.9m (1H22: £2.5m) decrease in accruals and deferred income including
£6.1m decrease in accrued bonuses (£10.2m paid offset by £4.1m accrued),
£1.0m decrease from property insurance renewal premiums invoiced and paid in
the period, £1.4m from other decreases on payment of accrued balances and
£0.4m decrease in deferred income on fees issued annually in advance to
certain clients;
- £0.1m (1H22: £1.3m) decrease in social security and other taxes
outstanding; and
- £0.8m decrease (1H22: £0.2m increase) in trade and other payables
including £0.2m payment of deferred consideration and £0.6m from catch up in
settlement of trade creditors; plus
· £2.1m decrease (1H22: £1.7m increase) in trade and other
receivables, primarily due to;
- £3.2m increase in property management fees and insurance premiums
invoiced to Custodian REIT and other property syndicates before November 2022;
and
- £1.1m decrease in other invoiced revenues compared to prior year; plus
· £8.9m (1H22: £3.3m) decrease in provisions, primarily due to:
- £8.5m of contingent consideration recognised as remuneration paid in the
period; and
- £0.4m decrease across other provisions, including provisions for
dilapidations charges and employers' NIC on share options.
Net cash outflows from investing activities reduced to £2.4m (1H22: £66.2m)
with £nil (1H22: £64.0m) of initial consideration paid on acquisitions
completed in the period and £1.6m (1H22: £0.6m) of contingent deferred
consideration paid on acquisitions completed in prior periods. Investment in
other investments reduced to £0.2m (1H22: £1.1m), with the prior period
including an increased stake in the Group's technology partner Tiller.
Net cash from financing activities resulted in a £9.3m outflow (1H22: £85.6m
inflow), with proceeds from the issue of share capital reducing to £0.4m
(1H22: £109.0m) following the placing of new ordinary shares in the prior
year in June 2021. This inflow was offset by the repayment of Ludlow's
borrowings post-acquisition of £nil (1H22: £15.9m) and dividends paid of
£9.1m (1H22: £6.8m) driven by the increased number of shares in issue and
the dividend per share paid increasing in line with the Group's progressive
dividend policy.
16. Cash generated from operations before acquisition-related costs paid and
contingent remuneration paid.
17. Working capital defined as trade and other receivables less trade and
other payables.
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 resources are 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 the 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 30 November 2022 the Company had significant headroom of £26.3m on its
regulatory capital requirement of £14.9m, a 176% surplus, giving the Board
the flexibility to pursue further acquisition opportunities.
Segmental review
The mix of income derived from the Group's five key revenue streams changed
during the period as follows:
· 45.2% investment and asset management (1H22: 46.9%);
· 19.9% pension advice and administration (1H22: 19.9%);
· 22.9% private equity management (1H22: 21.8%);
· 6.3% property management (1H22: 6.0%); and
· 5.7% employee benefits (1H22: 5.4%).
Changes in revenue mix driven by changing market conditions can impact margins
from period to period.
Investment and asset management
Investment and asset management revenues generated from advising clients on
both pension and personal investments increased 6.0% to £24.8m (1H22:
£23.4m).
The Group's gross discretionary AuM, including the multi-asset funds which sit
at the heart of our DPM service, Custodian REIT, Individual Structured
Products ("MW ISPs") and the funds managed by Maven and our associate company,
Amati, totalled £4.9bn (31 May 2022: £5.1bn), a decrease of 4.5% as
follows:
Assets under management DPM Custodian REIT MW PSF MW REF Cross-holdings in DPM(( 18 (#_ftn18) )) Cross-holdings in Amati funds(( 19 (#_ftn19) )) Net AuM
£m £m £m £m £m £m £m
Gross AuM
Amati Maven £m
£m £m
At 1 June 2022 2,527.5 527.6 62.2 7.2 1,208.9 771.1 5,104.5 (153.2) (16.4) 4,934.9
Acquisitions - - - - - - - - - -
Inflows 131.5 - 19.1 1.3 116.6 45.5 314.0 13.5 3.8 331.3
Outflows (82.4) - (0.4) - (148.5) (44.7) (276.0) - - (276.0)
Market movements (75.3) (26.2) (15.8) (0.1) (165.5) 16.3 (266.6) - - (266.6)
At 30 Nov 2022 2,501.3 501.4 65.1 8.4 1,011.5 788.2 4,875.9 (139.7) (12.6) 4,723.6
18. Comprises £12.5m (31 May 2022: £13.5m) invested in Custodian REIT,
£64.8m (31 May 2022: £60.5m) in MW Property Securities Fund and £55.5m (31
May 2022: £70.3m) in Amati funds.
19. Cross-holdings between TB Amati Smaller Companies Fund and Amati AIM VCT
plc.
Our investment and asset management business, like many others in the sector
experienced some pressure on asset values which continued after the period end
and which impacts revenues linked to asset values. Income from both initial
and ongoing portfolio management charges was £13.3m (1H22: £13.8m) with
£131.5m (1H22: £417.5m) of inflows into our DPM service during the period.
Fees for services provided by Custodian Capital to Custodian REIT are included
in the 'property management' segment.
The MW Property Securities Fund ("MW PSF") and Responsible Equity Fund ("MW
REF") continue to grow with net inflows of £18.8m and £1.3m respectively in
the period.
Adviser charges based on gross assets under advice of £3.6bn (1H22: £3.7bn)
increased to £11.2m (1H22: £9.5m), with the higher revenue margin from
acquisitions partially offset by the impact of lower asset values and market
movements. We continue to focus on seeking to reduce clients' charges and
TERs, particularly on those assets invested in Custodian REIT, the MW PSF, MW
REF and Amati funds.
Growth in total assets under management and advice continues to underpin the
Group's quality of earnings with the proportion of total revenues which are
recurring being 89.6% (1H22 restated: 87.7%) across all segments.
Notwithstanding our fee-based advisory model, as with other firms, these
income streams are linked to the value of funds under management and advice
and are therefore affected by the performance of financial markets.
Pension advice and administration
Pension advice and administration revenues increased 10.8% to £10.9m (1H22:
£9.9m) as a result of the strong demand for advice, whilst the total number
of SIPP and SSAS schemes administered by the Group decreased 0.6% to 11,014
(31 May 22: 11,084) due to the continued wind-down of a number of SIPP
schemes operated on an administration-only basis.
Direct 20 (#_ftn20) pension advice and administration fees increased 13.1% to
£9.2m (1H22: £8.1m). Retirement planning remains central to many of our
clients' wealth management strategies and the number of direct schemes
increased to 7,120 (31 May 22: 7,098), with 186 new schemes gained in the
first half of the year (1H22: 209). We have maintained a high quality of new
business, with the value of new schemes averaging £0.3m (1H22: £0.3m), and
we continue to enjoy strong client retention, with an external loss rate 21
(#_ftn21) of 1.3% (1H22: 1.1%) and an overall attrition rate 22 (#_ftn22) of
2.2% (1H22: 1.8%).
Third-party administration fees were £1.7m (1H22: £1.7m). The number of
active SSAS and SIPP schemes the Group operates on an administration-only
basis decreased by 2.3% to 3,894 (31 May 22: 3,986) at the period 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.
The Group's banking revenue was £0.05m (1H22: £0.02m), with the Bank of
England increasing the base rate from 1.0% to 3.0% at the period end. The
recent base rate increases and our planned introduction of pooled client
banking will provide an opportunity to enhance clients' rates and increase the
Group's banking revenue at a time when clients' cash balances are higher than
in prior periods due to the wider market uncertainty.
Segment margin was 23.7% (1H22: 28.8%) with increased new business, fee-based
and transactional activity being offset by the impact of changes to
consultants' remuneration.
Regulatory and client scrutiny of the pension market continues, with certain
other SIPP and SSAS operators having been in the spotlight due to issues
arising with non-standard investments. However, the market opportunity is
strong, with SIPP and SSAS arrangements still benefitting from the
introduction of the pension freedoms and being favoured as a way of allowing
individuals to have greater access, control, flexibility and responsibility
over their pension savings.
We take pride in seeing our clients withdrawing funds to enjoy in their
retirement. We anticipate there will be some natural outflows from our
clients' SIPP and SSAS schemes, particularly as the 'baby boomer' generation
reaches retirement, but expect any such decumulation to have a positive impact
on the Group's results, linking-in with the provision of advice around the
transfer of wealth through the generations, inheritance tax and other
planning.
20. SIPP and SSAS schemes where Mattioli Woods acts as pension consultant and
administrator.
21. Direct schemes lost to an alternative provider as a percentage of average
scheme numbers during the period.
22. Direct schemes lost as a result of death, annuity purchase, external
transfer or cancellation as a percentage of average scheme numbers during the
period.
Private equity management
Maven enjoyed a healthy level of new deal flow across all segments of the
business, leading to increased transaction-based revenues and deal arrangement
fees, coupled with performance and exit fees on the successful realisation of
a number of Maven Investor Partner and VCT investments. Maven's AuM totalled
£788.2m (31 May 22: £771.1m) at the period end, with revenues recognised
during the period up by 15.3% to £12.6m (1H22: £10.8m).
The Group realised a number of cross-sell revenue synergies, with the Maven
Investor Partner business completing its first two property transactions with
the Mattioli Woods PIC, generating £0.6m initial fees and embedding
significant future performance fee potential. Product expansion continues with
Maven launching new offers for its client VCTs during the period. The Maven
public sector fund business also secured a new and enlarged extended contract
with existing client, and we anticipate there will be a number of interesting
new tender opportunities across the UK during 2023.
Maven continue to enjoy a strong deal pipeline, although we are seeing
timelines for transactions including new fundraises starting to extend,
in-line with industry peers.
The Maven managed funds along with the PIC and Amati collectively represent
the Group's premium investment offering with a broad base of AuM totalling
£1.9bn.
Property management
Property management revenues increased by 14.0% to £3.4m (1H22: £3.0m), with
Custodian Capital's assets under management and administration increasing to
£590.6m (1H22: £551.5m) at the period end following an increase in
commercial property market values. The majority of property management
revenues are derived from the services provided by Custodian Capital to
Custodian Property Income REIT, which currently offers a fully covered
dividend yield of 6.0% 23 (#_ftn23) coupled with the potential for capital
growth from a balanced portfolio of real estate assets.
In addition, Custodian Capital continues to facilitate direct property
ownership on behalf of pension schemes and private clients and manages our
"Private Investors Club", which offers alternative investment opportunities to
suitable clients by way of private investor syndicates. Two new syndicates
were launched (1H22: nil) attracting £7.6m (1H22: £nil) of investment during
the period, following the decision to pause the launch of new opportunities in
the prior year. There continues to be strong client interest in this
initiative with several new opportunities planned for launch in the second
half.
23. Source: Numis Securities Limited, Investment Companies Datasheet dated 9
January 2023.
Employee benefits
Employee benefits revenues grew 16.0% against the prior year to £3.1m (1H22:
£2.7m), with the Group having 782 corporate clients (31 May 2022: 783) at the
period end. New client wins were spread across a number of sectors, ensuring
the client portfolio remains well diversified.
Employers are increasingly encouraging staff wellbeing and retirement savings,
which we expect to drive sustained growth in the UK employee benefits market.
The continued Government emphasis on workplace advice represents an
opportunity for us to realise synergies between our employee benefits and
wealth management businesses.
Acquisitions
We have invested £239m in targeted acquisitions since our admission to AIM in
2005 bringing 33 businesses or client portfolios into the Group, and
developing considerable expertise and a strong track record in the execution
and subsequent integration of such transactions.
Of the nine acquisitions the Group has made since July 2020, all have
delivered earnings to support the full payment of any contingent
consideration. Each business is integrating well and contributing positively
to the Group's trading results.
Consolidation within the wealth management, pensions administration, asset
management and financial planning sectors continues apace, and we maintain a
strong pipeline of new acquisition opportunities. We will continue to assess
the pipeline with a disciplined approach, with any potential transaction
required to meet our strict investment criteria.
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. This has been evident through our close
relationships with our clients, where our primary focus has been to ensure the
health and subsequent management of their financial needs. This also includes
our employees and our commitment to provide a safe place to work, whether in
the office or at home, and to wellbeing support.
Our core values provide a framework for integrity, leading to responsible and
ethical business practices. Structures for accountability from our
administration and advice 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 Group Risk
and Compliance Committee and take into account ethical considerations,
including procedures for 'whistle-blowing'.
Our people
We extend our thanks and gratitude to all our staff for their continued
commitment, enthusiasm and professionalism in dealing with our clients'
affairs during the first half of this financial year and for continuing to
operate in an agile manner throughout. Our culture has and will be based on
putting clients first, professionalism and adopting an ethical and collegiate
approach. Retaining the integrity, expertise and passion of our staff remains
a priority of the Board and at the heart of our success. We are committed to
investing in and developing our people to create and maintain the capacity to
deliver sustainable growth.
We 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 period 61% (1H22: 64%) of eligible staff had
invested in the Plan and we continue to encourage broader staff
participation.
In May 2019 the Mattioli Woods Employee Benefit Trust ("the Trust") commenced
making market purchases of the Company's shares. The Trust holds 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
acquisition of shares by the Trust helps to avoid dilution of shareholders by
reducing the need for the Company to issue new shares and remains important to
the Board.
Our Board
We remain committed to having a diverse and balanced Board which we believe
represents the right governance structure for the Company. The Board continues
to review its composition to ensure it has the right experience and expertise
to create long-term shareholder value and recently completed an annual
effectiveness review that was led by an independent, third party business. The
Board embraces diversity in all forms and is considering a number of future
changes to ensure compliance with regulatory and stakeholder guidance.
The Board is also committed to regular reviews of the Group's corporate
governance structures, making changes as appropriate to support the Group's
growth. Key areas under consideration include strategic and commercial growth,
diversification of the Group's investment proposition, integration of
acquisitions and delivery of revenue and cost synergies, oversight and
compliance, risk management, and retaining and attracting people talent
through increased levels of employee engagement.
Shareholders
During the period we engaged with shareholders through various channels,
including company-hosted events, webinars, virtual group meetings and
one-to-one meetings in addition to traditional face-to-face meetings. We are
fortunate to have a number of supportive institutional shareholders with a
significant investment in the Group, including those who have supported the
Group for several years and those investors added to the register more
recently. We welcome opportunities to talk to all our shareholders, large and
small and we will continue to create and maintain a regular and constructive
dialogue with them, while seeking to broaden our shareholder base.
Outlook
The first half of the financial year has seen the Group deliver a resilient
trading performance against a complex macroeconomic and geopolitical backdrop.
We plan to build on this position, advancing our key strategic initiatives:
new business generation, investing in our in-house training programmes, growth
through the integration of strategic acquisitions, developing new products and
services, reviewing our processes and investing in technology to deliver an
improved digital client interface and further operational efficiencies. Our
trading outlook for the year remains in line with management's expectations
and we believe the Group is well-positioned to secure further growth to the
benefit of all our stakeholders, supporting sustainable shareholder returns.
David Kiddie
Non-Executive Chair
Ian Mattioli MBE
Chief Executive Officer
6 February 2023
Independent review report to Mattioli Woods plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
November 2022 which comprises the interim condensed consolidated statement of
comprehensive income, interim condensed consolidated statement of financial
position, interim condensed consolidated statement of changes in equity,
interim condensed consolidated statement of cash flows and associated notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 November 2022 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the AIM Rules of the London Stock Exchange.
Basis of conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued for use in the United Kingdom. A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted International Accounting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting'.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the AIM Rules of the London Stock Exchange.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the 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 company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity'
issued by the Financial Reporting Council for use in the United Kingdom. Our
work has been undertaken so that we might state to the Company those matters
we are required to state to them in an independent review report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Moore Kingston Smith LLP
London
6 February 2023
Interim condensed consolidated statement of comprehensive income
For the six months ended 30 November 2022
Unaudited Unaudited Six months ended Audited
Six months 30 Nov Year
ended 2021 ended
30 Nov 31 May
2022 2022
Note £000 £000 £000
Revenue 5 54,913 49,936 108,226
Employee benefits expense (29,813) (27,059) (59,571)
Other administrative expenses (10,202) (9,936) (19,803)
Share-based payments 14 (856) (566) (1,729)
Amortisation and impairment 11 (4,279) (3,444) (7,546)
Depreciation 9,10 (1,216) (1,415) (2,762)
Impairment loss on financial assets (75) (39) (258)
Profit on disposal of fixed asset Investments - - 406
(Loss)/profit on disposal of property, plant and equipment (10) (2) 3
Deferred consideration presented as remuneration 16 (3,850) (4,643) (9,664)
Operating profit before financing 4,612 2,832 7,302
Finance revenue 175 22 79
Finance costs (566) (461) (1,006)
Net finance cost (391) (439) (927)
Share of profit from associate, net of tax 12 564 862 1,614
Profit before tax 4,785 3,255 7,989
Income tax expense 8 (1,749) (1,563) (3,870)
Profit for the period 3,036 1,692 4,119
(24) - (19)
Other comprehensive loss for the period, net of tax
Total comprehensive income for the period, net of tax 3,012 1,692 4,100
Attributable to:
Equity holders of the parent 3,012 1,692 4,100
Earnings per ordinary share:
Basic (pence) 6 5.9 3.5 8.3
Diluted (pence) 6 5.9 3.5 8.3
Proposed dividend per share (pence) 7 8.8 8.3 26.1
The operating profit before financing for each period arises from the Group's
continuing operations.
Interim condensed consolidated statement of financial position
As at 30 November 2022
Registered number: 03140521
Unaudited Unaudited Audited
30 Nov 2022 30 Nov 2021 31 May 2022
Note £000 £000 £000
Assets
Property, plant and equipment 9 13,877 14,333 14,126
Right of use assets 10 2,857 3,908 3,322
Intangible assets 11 195,288 201,904 199,325
Deferred tax asset 8 697 1,146 776
Investment in associate 12 4,693 4,903 4,165
Other investments 12 5,380 5,541 5,509
Total non-current assets 222,792 231,735 227,223
Trade and other receivables 26,578 26,488 28,446
Finance lease receivable 318 273 354
Investments 12 250 26 253
Cash and short-term deposits 38,324 44,298 53,912
Total current assets 65,470 71,085 82,965
Total assets 288,262 302,820 310,188
Equity
Issued capital 512 507 510
Share premium 144,029 142,798 143,373
Merger reserve 57,225 57,225 57,225
Equity - share-based payments 3,018 3,761 2,804
Capital redemption reserve 2,000 2,000 2000
Own shares (597) (597) (597)
Retained earnings 19,085 24,782 24,784
Total equity attributable to equity holders of the parent 225,272 230,476 230,099
Non-current liabilities
Deferred tax liability 8 26,862 28,215 27,474
Lease liability 2,655 3,223 2,772
Provisions 16 1,175 8,138 8,611
Total non-current liabilities 30,692 39,576 38,857
Current liabilities
Trade and other payables 15,485 19,895 25,055
Income tax payable 8 1,636 1,055 1,953
Lease liability 607 1,174 985
Provisions 16 14,570 10,644 13,239
Total current liabilities 32,298 32,768 41,232
Total liabilities 62,990 72,344 80,089
Total equities and liabilities 288,262 302,820 310,188
Interim condensed consolidated statement of changes in equity
For the six months ended 30 November 2022
Equity - share-based payments Capital redemption reserve
Issued Share Merger reserve £000 £000 Own shares Retained Total
capital premium £000 £000 earnings equity
Note £000 £000 £000 £000
As at 31 May 2021 - Audited 283 33,834 17,458 3,559 2000 (597) 29,550 86,087
Profit for the period - - - - - - 1,692 1,692
Share of other comprehensive income from associates - - - - - - - -
Total comprehensive income for period - - - - - - 1,692 1,692
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 224 108,964 39,767 - - - - 148,955
Share-based payment transactions 14 - - - 367 - - - 367
Deferred tax recognised in equity - - - 167 - - - 167
Current tax taken to equity - - - 25 - - - 25
Reserves transfer - - - (357) - - 357 -
Dividends 7 - - - - - - (6,818) (6,818)
As at 30 November 2021 - Unaudited 507 142,798 57,225 3,761 2,000 (597) 24,782 230,476
Interim condensed consolidated statement of changes in equity (continued)
For the six months ended 30 November 2022
Equity - share-based payments Capital redemption reserve
Issued Share Merger reserve £000 £000 Own shares Retained Total
capital premium £000 £000 earnings equity
Note £000 £000 £000 £000
As at 30 November 2021 - Unaudited 507 142,798 57,225 3,761 2,000 (597) 24,782 230,476
Profit for the period - - - - - - 2,427 2,427
Share of other comprehensive income from associates - - - - - - (19) (19)
Total comprehensive income for period - - - - - - 2,408 2,408
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 3 575 - - - - - 578
Share-based payment transactions 14 - - - 925 - - - 925
Deferred tax recognised in equity - - - (180) - - - (180)
Current tax taken to equity - - - 116 - - - 116
Reserves transfer - - - (1,818) - - 1,818 -
Dividends 7 - - - - - - (4,223) (4,223)
As at 31 May 2022 - Audited 510 143,373 57,225 2,804 2,000 (597) 24,784 230,099
Interim condensed consolidated statement of changes in equity (continued)
For the six months ended 30 November 2022
Equity - share-based payments Capital redemption reserve
Issued Share Merger reserve £000 £000 Own shares Retained Total
capital premium £000 £000 earnings equity
Note £000 £000 £000 £000
As at 31 May 2022 - Audited 510 143,373 57,225 2,804 2,000 (597) 24,784 230,099
Profit for the period - - - - - - 3,036 3,036
Share of other comprehensive income from associates - - - - - - (24) (24)
Total comprehensive income for period - - - - - - 3,012 3,012
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 2 656 - - - - - 658
Share-based payment transactions 14 - - - 630 - - - 630
Deferred tax recognised in equity - - - (41) - - - (41)
Current tax taken to equity - - - 8 - - - 8
Reserves transfer - - - (383) - - 383 -
Dividends 7 - - - - - - (9,094) (9,094)
As at 30 November 2022 - Unaudited 512 144,029 57,225 3,018 2,000 (597) 19,085 225,272
Interim condensed consolidated statement of cash flows
For the six months ended 30 November 2022
Unaudited Six months ended Unaudited Six months ended Audited
30 Nov 30 Nov Year
2022 2021 ended
31 May
2022
Note £000 £000 £000
Operating activities
Profit for the period 3,012 1,692 4,119
Adjustments for:
Depreciation 9,10 1,216 1,415 2,762
Amortisation and impairment 11 4,279 3,444 7,546
Deferred consideration as remuneration 16 3,850 4,643 9,664
Finance revenue (175) (22) (79)
Finance costs 566 461 1,006
Share of profit from associate (564) (862) (1,614)
Loss/(profit) on disposal of property, plant and equipment 10 2 (3)
Profit on disposal of fixed asset investments - - (406)
Loss/(gain) on revaluation of other investments 260 (39) (32)
Equity-settled share-based payments 14 856 566 1,729
Income tax expense 1,749 1,563 3,870
Cash flows from operating activities before changes in working capital and 15,059 12,863 28,562
provisions
Decrease/(increase) in trade and other receivables 2,095 (1,695) (5,251)
(Decrease)/increase in trade and other payables (9,778) (3,385) 1,771
Decrease in provisions (8,898) (3,330) (5,441)
Cash generated from operations (1,522) 4,453 19,641
Interest paid (1) (4) (6)
Income taxes paid (2,370) (1,418) (3,258)
Net cash inflows from operating activities (3,893) 3,031 16,377
Investing activities
Proceeds from sale of property, plant and equipment 92 10 116
Purchase of property, plant and equipment 9 (554) (313) (1,001)
Purchase of software 11 (288) (165) (427)
Purchase of client portfolio 46 - (660)
Contingent consideration paid on acquisition of subsidiaries (1,555) (606) (1,554)
Acquisition of subsidiaries - (72,894) (72,894)
Cash received on acquisition of subsidiaries - 8,868 8,868
Dividends received from associate 12 - 245 1,715
Investment in other equity holdings (195) (1,132) (1,574)
Interest received 167 16 34
Proceeds from disposal of other investments 67 - 686
Loans advanced to investment syndicates (594) (284) (3)
Loan repayments from investment syndicates 400 17 1,348
Net cash from investing activities (2,414) (66,238) (65,346)
Financing activities
Proceeds from the issue of share capital 432 108,980 109,277
Dividends paid 7 (9,094) (6,818) (11,041)
Repayment of borrowings - (15,945) (15,945)
Payment of lease liabilities (619) (600) (1,298)
Net cash from financing activities (9,281) 85,617 80,993
Net (decrease)/increase in cash and cash equivalents (15,588) 22,410 32,024
Cash and cash equivalents at start of period 53,912 21,888 21,888
Cash and cash equivalents at end of period 38,324 44,298 53,912
Notes to the interim condensed consolidated 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. The nature of the Group's operations
and its principal activities are set out in the Corporate Statement and in
Note 5.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements have been prepared in
accordance with UK-adopted IAS 34 'Interim Financial Reporting'. The interim
condensed consolidated financial statements comprise the Company and its
subsidiaries ("the Group"). The interim condensed consolidated financial
statements were authorised for issue in accordance with a resolution of the
Directors on 6 February 2023.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements and
should be read in conjunction with the Group's financial statements for the
year ended 31 May 2022, which were prepared in accordance with UK-adopted
International Accounting Standards and interpretations issued by the
International Financial Reporting Interpretations Committee ("IFRIC") of the
IASB (together "IFRS"), and in accordance with the requirements of the
Companies Act applicable to companies reporting under IFRS.
The information relating to the six months ended 30 November 2022 and the six
months ended 30 November 2021 is unaudited and does not constitute statutory
financial statements within the meaning of section 434 of the Companies Act
2006. The Group's statutory financial statements for the year ended 31 May
2022 have been reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified and did not draw
attention to any matters by way of emphasis or contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The interim condensed consolidated financial statements have been reviewed by
the auditor and their report to the Board of Mattioli Woods plc is included
within this interim report.
2.2 Going concern
The Directors have, at the time of approving the interim condensed
consolidated 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 date of approval. Thus,
they continue to adopt the going concern basis of accounting in preparing the
interim condensed consolidated financial statements.
2.3 Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
May 2022.
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 'Cost of fulfilling a contract' 1 January 2022
Amendments to IAS 16 'Proceeds before intended use' 1 January 2022
Amendments to IFRS 3 'Reference to the conceptual framework' 1 January 2022
Annual improvements to IFRS 2018-2020 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 and interim periods and, therefore, have not
been applied in preparing these interim condensed consolidated financial
statements. At the date of authorisation of these financial statements, the
following standards and interpretations which have not been applied in these
financial statements were in issue but not yet effective:
Standard or interpretation Periods commencing on or after
IFRS 17 Insurance contracts (including amendments to IFRS 17) 1 January 2023
Amendments to IAS 1 'Classification of liabilities as current or non-current' 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
The Directors do not expect the adoption of these standards and
interpretations listed above to have a material impact on the annual financial
statements or the interim condensed consolidated financial statements of the
Group in future periods.
Financial statements for the year ending 31 May 2023
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements will be consistent with those to be followed
in the preparation of the Group's annual financial statements for the year
ending 31 May 2023, except for the adoption of new standards and
interpretations not yet issued.
2.4 Basis of consolidation
The interim condensed consolidated financial statements consolidate the
financial statements of the Company and its subsidiary undertakings as at 30
November each year.
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 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.
2.5 Critical accounting judgements and sources of estimation
uncertainty
The Group has reviewed the judgements and estimates that affect its accounting
policies and amounts reported in its financial statements. Although these are
unchanged from those reported in the Group's financial statements for the year
ended 31 May 2022, we have disclosed the sensitivities to the key areas
applicable to the six months to 30 November 2022 due to their significance to
the interim results reported.
Critical accounting judgements
Disclosure is required of judgements made by the Board in applying the
accounting policies that have a significant effect on the financial
statements. In the opinion of the Board, no new critical accounting judgements
were made during the period.
Sources of significant estimation uncertainty
Impairment of intangible assets
The Group reviews whether its intangible assets are impaired on an annual
basis, or more frequently if indicators of impairment as defined by IAS 36 -
Impairment of assets are identified.
At November 2022 the Directors identified indicators of potential impairment
arising from external factors including the reduction in the value of clients
assets, the reduction in value of Mattioli Woods' share price and increase in
interest rates, and the impact on the financial performance of the Group. An
updated estimation of the fair value less cost to sell and the value in use of
intangible assets has been prepared to review whether intangible assets are
impaired.
For the purposes of impairment testing, acquired client portfolios, brands,
software, goodwill and right of use assets are allocated to the group of
cash-generating units ("CGUs") that are expected to benefit from the business
combination.
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 pre-tax Weighted
Average Cost of Capital ("WACC"). The Group has applied a WACC of 12.6% (31
May 2022: 9.8%) 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 cashflows are derived from the
forecast for the two and a half years to 31 May 2025, extrapolated for a
further two years assuming medium-term growth of 5.0% (31 May 2022: 5.0%),
thereafter extrapolating these cash flows using a long-term growth rate of
2.0% (31 May 2022: 2.0%), which management considers conservative against
industry average long-term growth rates.
The carrying amount at 30 November 2022 of client portfolios was £108.2m (31
May 2022: £112.2m) and brands was £1.8m (31 May 2022: £1.9m). No impairment
provisions have been made during the period (1H22: £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 12.6% (31 May 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 30 November 2022 was £83.5m (31 May
2022: £83.5m). No impairment provisions have been made during the period
(1H22: £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 13.
Other areas of focus
The Group also notes the following other areas of estimation uncertainty,
which are not considered areas of significant estimation uncertainty:
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 contingency,
provisions for consideration and remuneration are recognised based on the
maximum 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 30 November 2022 was £8.2m
(1H22: £9.5m) and contingent remuneration provided for at 30 November 2022
was £3.1m (1H22: £5.1m).
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.
Recoverability of accrued time costs and disbursements
The nature of the accounting estimate remains unchanged, and the sensitivity
in the valuation of accrued time costs and disbursements remains in line with
sensitivities disclosed in the Annual Report for the year ended 31 May 2022.
Provisions
The nature of the accounting estimate remains unchanged, and the sensitivity
in the valuation of accrued time costs and disbursements remains in line with
sensitivities disclosed in the Annual Report for the year ended 31 May 2022.
3. Business combinations
The Group completed nil (1H22: three) acquisitions during the period.
Acquisition-related costs of £0.5m (1H22: £2.6m) incurred during the period
to 30 November 2022 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 prior period
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) (19,240)
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 18 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. Seasonality of operations
Historically, revenues in the second half-year have been typically higher than
in the first half. Time or activity-based pension advice 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 investment activity from pension schemes and
personal investors 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 and
timing of delivery of significant new investment opportunities for clients.
5. Segment information
The Group's operating segments comprise the following:
· Pension advice and administration - Fees earned 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 benefits offering 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 six months ended 30 November 2022 and 2021,
and the year ended 31 May 2022 respectively:
Unaudited Investment and asset management Private equity management Pension advice and administration Property Employee benefits Total Corporate costs Consolidated
Six months ended 30 Nov 2022 £000 £000 £000 management £000 segments £000 £000
£000 £000
Revenue 24,832 12,565 10,909 3,444 3,163 54,913 - 54,913
External customers
Results 4,542 3,300 2,582 1,074 484 11,982 (7,197) 4,785
Segment profit before tax
£000 £000 £000 £000 £000 £000 £000 £000
Unaudited
Six months ended 30 Nov 2021
Revenue 23,440 10,903 9,846 3,021 2,726 49,936 - 49,936
External customers
Results 7,070 1,901 2,838 843 399 13,051 (9,796) 3,255
Segment profit before tax
£000 £000 £000 £000 £000 £000 £000 £000
Audited
Year ended 31 May 2022
Revenue 50,425 26,153 19,718 6,273 5,657 108,226 - 108,226
External customers
Results 12,889 7,220 3,918 1,541 760 26,328 (18,339) 7,989
Segment profit before tax
The following table presents segment assets of the Group's operating segments
as at 30 November 2022 and 2021, and at 31 May 2022 respectively:
Unaudited Unaudited Audited
30 Nov 30 Nov 31 May
2022 2021 2022
£000 £000 £000
Investment and asset management 87,888 95,406 94,206
Private equity management 99,784 103,440 102,502
Pension advice and administration 24,139 23,720 23,803
Property management 2,893 3,659 4,889
Employee benefits 5,419 5,754 5,552
Total segment assets 220,123 231,979 230,952
Property, plant and equipment 13,877 14,333 14,126
Right of use assets 2,857 3,908 3,322
Intangible assets 1,711 1,665 1,761
Deferred tax asset 697 1,146 776
Investment in associate 4,693 - -
Finance lease receivable 318 273 354
Prepayments and other receivables 5,662 5,192 4,985
Investments - 26 -
Cash and short-term deposits 38,324 44,298 53,912
Total corporate assets 68,139 70,841 79,236
Total assets 288,262 302,820 310,188
Segment operating assets exclude property, plant and equipment, right of use
assets, certain items of computer software, certain investments, prepayments
and other receivables, finance lease receivable, current and deferred tax
asset 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 that 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.
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.
Unaudited Unaudited Audited
30 Nov 30 Nov 31 May
2022 2021 2022
Reconciliation of profit £000 £000 £000
Total segment profit before tax 11,982 13,051 26,328
Deferred consideration as remuneration (3,850) (4,643) (9,664)
Depreciation (1,216) (1,415) (2,762)
Acquisition-related costs (462) (2,598) (3,408)
Irrecoverable VAT (743) (723) (1,431)
Professional indemnity insurance (717) (650) (1,397)
Finance costs (566) (461) (1,006)
Amortisation and impairment (338) (166) (331)
Bank charges (27) (22) (36)
Loss on disposal of assets (10) (2) 3
Foreign exchange losses (7) - -
Finance income 175 22 79
Share of profit from associate, net of tax 564 862 1,614
Group profit before tax 4,785 3,255 7,989
6. 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 76,578 (1H22: 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:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2022 2021 2022
£000 £000 £000
Net profit and diluted net profit attributable to equity holders of the 4,435 1,591 4,100
Company
Weighted average number of ordinary shares: 000s 000s 000s
Issued ordinary shares at start period 51,036 28,251 28,251
Effect of shares issued during the year ended 31 May 2022 - 19,937 21,142
Effect of shares issued during the current period 22 - -
Basic weighted average number of shares 51,058 48,188 49,393
Effect of dilutive options at the statement of financial position date 139 372 81
Diluted weighted average number of shares 51,197 48,560 49,474
The Company has granted options under the Mattioli Woods 2010 Long Term
Incentive Plan ("the LTIP") to certain of its senior managers and Directors to
acquire (in aggregate) up to 2.77% of its issued share capital. Under IAS 33
'Earnings Per Share', contingently issuable ordinary shares are treated as
outstanding and included in the calculation of diluted earnings per share if
the conditions (the events triggering the vesting of the option) are
satisfied. At 30 November 2022 the conditions attaching to 1,280,000 options
granted under the LTIP are not satisfied. If the conditions had been
satisfied, diluted earnings per share would have been 5.7 pence per share
(1H22: 3.5 pence per share).
Adjusted earnings per share amounts are calculated by adding back amortisation
and impairment of acquired intangibles, changes in the fair value of
derivative financial assets and acquisition-related costs to the profit before
tax of the Company ('adjusted profit before tax') less income tax at the
blended standard rate of corporation tax for the period ('adjusted profit
after tax') and dividing adjusted profit after tax by the weighted average
number of ordinary shares outstanding during the period.
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 25,759 ordinary shares under the Mattioli Woods plc
Share Incentive Plan; and
· The issue of nil ordinary shares to satisfy the exercise of options
under the LTIP; and
7. Dividends paid and proposed
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2022 2021 2022
£000 £000 £000
Paid during the period:
Equity dividends on ordinary shares:
- Final dividend for 2022: 17.8p (2021: 13.5p) 9,094 6,818 6,818
- Interim dividend for 2022: 8.3p (2021: 7.3p) - - 4,223
Dividends paid 9,094 6,818 11,041
Proposed for approval:
Equity dividends on ordinary shares:
- Interim dividend for 2023: 8.8p (2022: 8.3p) 4,505 4,219 -
- Final dividend for 2022: 17.8p (2021: 13.5p) - - 9,079
Dividends proposed 4,505 4,219 9,079
The interim dividend was approved on 6 February 2023.
8. Income tax
Current tax
Current tax expense for the interim periods presented is the expected tax
payable on the taxable income for the period, calculated as the estimated
average annual effective income tax rate applied to the pre-tax income of the
interim period.
Current tax for current and prior periods is classified as a current liability
to the extent that it is unpaid. Any amounts paid in excess of amounts owed
would be classified as a current asset.
Deferred income tax
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
with deferred tax assets and liabilities recognised at the rate of corporation
tax enacted or substantively enacted at the reporting date.
The primary component of the Group's recognised deferred tax assets include
temporary differences related to share-based payments, provisions and other
items.
The primary components of the Group's deferred tax liabilities include
temporary differences related to intangible assets and property, plant and
equipment.
The recognition of deferred tax in the consolidated statement of comprehensive
income arises from the origination and the reversal of temporary differences
and the effects of changes in tax rates. The primary components of the
deferred tax credit for the six months ended 30 November 2022 of £0.6m
(1H22: £0.7m) are due to temporary differences on the amortisation of client
portfolios and depreciation on fixed assets during the period.
The total deferred tax asset derecognised in the consolidated statement of
changes in equity for the six months ended 30 November 2022 was £0.04m (1H22:
recognised £0.17m).
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.
Reconciliation of effective tax rates
The income tax expense for the six months ended 30 November 2022 was
calculated based on an effective income tax rate of 36.6% (1H22: 48.0%), as
compared to the blended standard rate of UK corporation tax at the reporting
date of 20.0% (1H22: 19.0%). Differences between the effective income tax
rate and statutory rate include, but are not limited to, significant
non-deductible expenses from contingent consideration arrangements accounted
for as remuneration and non-deductible acquisition-related expenses. In
addition, certain expenses associated with sponsorship and other business
development activities were not deductible for tax purposes.
Impact of future tax changes
On 10 June 2021 The Finance (No. 2) Act 2021 received Royal Asset, enacting
proposals that were announced in the 2021 budget. The main rate of corporation
tax 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 were revalued in the year ended 31
May 2021, taking in to account the forthcoming increase in corporation tax
rates.
9. Property, plant and equipment
Computer and office equipment
Land and buildings Fixtures and fittings Motor vehicles
Total
Gross carrying amount: £000 £000 £000 £000 £000
At 1 June 2022 10,780 2,780 5,248 1,787 20,595
Additions - 227 29 298 554
Disposals - (25) (5) (219) (249)
At 30 November 2022 10,780 2,982 5,272 1,866 20,900
Depreciation:
At 1 June 2022 871 1,753 3,158 687 6,469
Charged for the period 179 214 170 138 701
On disposals - (20) (2) (125) (147)
At 30 November 2022 1,050 1,947 3,326 700 7,023
Carrying amount:
At 30 November 2022 9,730 1,035 1,946 1,166 13,877
At 30 November 2021 9,982 1,077 2,331 943 14,333
At 31 May 2022 9,909 1,027 2,090 1,100 14,126
10. Right of use assets
Computer and office equipment
Properties Total
Gross carrying amount: £000 £000 £000
At 1 June 2022 5,663 717 6,380
Changes in value 50 - 50
At 30 November 2022 5,713 717 6,430
Depreciation:
At 1 June 2022 2,403 655 3,058
Charged for the period 453 62 515
At 30 November 2022 2,856 717 3,573
Carrying amount:
At 30 November 2022 2,857 - 2,857
At 30 November 2021 3,730 178 3,908
At 31 May 2022 3,260 62 3,322
11. Intangible assets
Gross carrying amount: Internally generated software Software Client portfolios Goodwill Total
£000 £000 £000 £000 £000
Brand
£000
At 1 June 2022 2,559 1,931 135,954 1,951 83,516 225,911
Additions - 288 - - - 288
Arising on acquisition - - (46) - - (46)
Disposals - (449) - - - (449)
At 30 November 2022 2,559 1,770 135,908 1,951 83,516 225,704
Amortisation and impairment:
At 1 June 2022 1,290 1,438 23,769 89 - 26,586
Amortisation for the period - 339 3,891 49 - 4,279
On disposals - (449) - - - (449)
At 30 November 2022 1,290 1,328 27,660 138 - 30,416
Carrying amount:
At 30 November 2022 1,269 442 108,248 1,813 83,516 195,288
At 30 November 2021 1,118 547 114,812 1,911 83,516 201,904
At 31 May 2022 1,269 493 112,185 1,862 83,516 199,325
12. Investments
The movement in the Group's investment in associate is as follows:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2022 2021 2022
Investment in associate £000 £000 £000
At start of period 4,165 4,295 4,295
Share of profit for the period 585 886 1,672
Amortisation of fair value intangibles (34) (33) (68)
Share of other comprehensive loss (23) - (19)
Dividends received - (245) (1,715)
At end of period 4,693 4,903 4,165
Share of profit from associates in statement of comprehensive income:
Share of profit for the period 585 886 1,672
Amortisation of fair value intangible assets (34) (34) (68)
Elimination of transactions with associate 13 10 10
564 862 1,614
Other comprehensive income represents the Group's share of movements in
Amati's revaluation reserve recognised directly in equity.
The results of Amati from the beginning of the period and its aggregated
assets and liabilities as at 30 November 2022, and revenue and profit for
the six months then ended, are as follows:
Name Country of incorporation Assets Liabilities Revenue Profit Interest held
£000 £000 £000 £000
Amati Global Investors Limited Scotland 8,927 4,319 5,321 1,193 49%
Group's share of profit 585
The net assets of Amati as at 1 June 2022 were £3,462,000. At 30 November
2022 the net assets of Amati were £4,608,000 following payment of dividends
of £nil and other increases in net assets of £1,146,000, increasing the
Group's interest in the associate by £562,000 during the period, 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
£000
At 1 June 2022 5,762
Additions 195
Disposals (67)
Revaluation (260)
At 30 November 2022 5,630
Listed investments 2022 2,730
Unlisted investments 2022 2,900
At 30 November 2022 5,630
Current 2022 250
Non-current 2022 5,380
At 30 November 2022 5,630
13. Impairment of intangible assets
Goodwill and client portfolio intangible assets arising on acquisitions are
allocated to the cash generating units comprising the acquired businesses.
Allocation to cash-generating units is based on headcount or revenues at the
date of acquisition. 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 four
operating segments, which represent the smallest individual groups of assets
generating cash flows. Goodwill and client portfolio assets have been
allocated between the Group's operating segments for impairment testing, as
follows:
Group Pension advice and admin Investment and asset management Private equity asset management Property management Employee benefits
£000 £000 £000 £000 £000 Total
£000
At 1 June 2021 15,358 37,588 - 792 5,064 58,802
Arising on acquisitions - 48,494 96,221 - - 144,715
Additions - 1,261 - - - 1,261
Amortisation during the year (948) (2,684) (3,107) (80) (396) (7,215)
At 31 May 2022 14,410 84,659 93,114 712 4,668 197,563
Additions - (46) - - - (46)
Amortisation during the year (475) (1,543) (1,693) (30) (199) (3,940)
At 30 November 2022 13,935 83,070 91,421 682 4,469 193,577
Goodwill 5,489 37,414 39,787 188 638 83,516
Client portfolios 8,446 45,656 49,821 494 3,831 108,248
Brand - - 1,813 - - 1,813
At 30 November 2022 13,935 83,070 91,421 682 4,469 193,577
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
12.6% (31 May 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
forecast for the two and a half years to 31 May 2025, extrapolated for a
further two years assuming medium-term growth of 5.0% (31 May 2022: 5.0%) and
a long-term growth rate of 2.0% (31 May 2022: 2.0%), which management
considers conservative against actual average long-term growth rates.
The value in use calculated at 30 November 2022 was £381.0m (31 May 2022:
£548.7m). Comparing this to the net asset value of the operating segments
identified above, the directors believe the value of goodwill is not impaired
at 30 November 2022. This accounting treatment resulted in an impairment loss
of £nil (1H22: £nil).
Discount rate sensitivity of +1.0% 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 cashflows derived
from each operating segment.
The sensitivity of the value in use calculated at 30 November 2022 to changes
in the key assumptions is as follows:
Assumption Base assumption Change in assumption Increase/(decrease) in value in use
£m
Discount rate 12.6% +1.0% (33.7)
Years 1-3 cashflows Var. -5.0% (17.1)
Medium-term growth rate 5.0% -5.0% (29.0)
Long-term growth rate 2.0% -2.0% (57.9)
Under the sensitivity to long-term growth rate, the private equity management
cash-generating unit would report an impairment of £4.6m.
The private equity management cash-generating unit was created on the Group's
acquisition of Maven in June 2021. Since acquisition, the cash-generating unit
has performed in line with expectation, but the increase in discount rate to
30 November 2022 reduced the headroom over the carrying value of intangible
assets assigned to the cash-generating unit.
The headroom between carrying value and recoverable amount for the private
equity management cash-generating unit was calculated at £12.1m (31 May 2022:
£22.1m). The threshold beyond which each sensitivity would give rise to an
impairment charge is as follows:
Assumption Base assumption Change in assumption giving rise to an impairment charge Revised assumption giving rise to an impairment charge
Discount rate 12.6% +10.4% 23.0%
Years 1-3 cashflows Var. -18.4% Var.
Medium-term growth rate 5.0% -7.4% -2.4%
Long-term growth rate 2.0% -1.4% 0.6%
14. Share-based payments
Share-based payment expense
The amounts recognised in the statement of comprehensive income in respect of
share-based payments were as follows:
Unaudited 30 Nov 2022 Unaudited Audited
31 May 2022
Equity-settled 30 Nov 2021
Equity-settled
£000 Equity-settled
£000
£000
Long-Term Incentive Plan 756 411 1,414
Share Incentive Plan 100 155 315
Total 856 566 1,729
The share-based payment expense in respect of the LTIP for the six months
ended 30 November 2021 includes the impact of the modification of the
performance period of the 4 September 2020 Tranche B LTIP awards.
Long-Term Incentive Plan
During the period, 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. Movements in the LTIP
scheme during the period were as follows:
LTIP awards Unaudited Unaudited Audited
30 Nov 2022
30 Nov 2021 Equity-settled
31 May 2022
Equity-settled No. Equity-settled
No. No.
Outstanding at start of period 1,051,127 933,809 933,809
Granted during the period 450,000 - 488,000
Exercised during the period (81,668) (61,604) (353,182)
Forfeited during the period (300) - (17,500)
Outstanding at end of period 1,419,159 872,205 1,051,127
Exercisable at end of period 139,159 372,605 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 below represent the maximum opportunity for the participants
in the LTIP.
Date of grant Exercise price At 1 June 2022 Granted during the period Forfeited during the period Exercised during the period At 30 Nov 2022
No. No. No. No. No.
15 October 2015 £0.01 310 - - (310) -
6 September 2016 £0.01 35,659 - - (558) 35,101
5 September 2017 £0.01 9,358 - - (300) 9,058
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 A £0.01 - 219,500 - - 219,500
1,051,127 450,000 (300) (81,668) 1,419,159
The weighted average share price at the date of exercise for share options
exercised during the period was £6.56 (31 May 2022: £8.43). For the share
options outstanding at 30 November 2022, the weighted average exercise prices
("WAEP") was £0.01 (31 May 2022: £0.01), and the weighted average remaining
contractual life is 2.56 years (31 May 2022: 2.20 years).
As a result of the exercise of 81,668 share options 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 £383,000.
Income tax and employee's National Insurance contributions payable by the
participant on exercise of a share option are borne by the participant,
employers National Insurance contributions payable on exercise are borne by
the Company and provided for over the vesting period (Note 16).
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 period ended 30 November 2022:
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.
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.
A total of 106,075 (1H22: 66,821) new ordinary shares were issued to the 473
(1H22: 386) employees who participated in the SIP during the period. At 30
November 2022 853,456 (1H22: 731,269) shares were held in the SIP on their
behalf, of which 193,721 (1H22: 149,564) conditional matching shares were not
yet vested, and there were 1,295 (1H22: 326) forfeited shares not allocated to
any specific employee.
15. Financial instruments
The table below analyses the Group's financial instruments measured at fair
value into a fair value hierarchy based on the valuation technique used to
determine the fair value:
Carrying amount as at 30 Nov 2022 Quoted prices in active markets for identical instruments Significant other observable inputs Significant unobservable inputs
Level1 Level 2 Level 3
£000 £000 £000 £000
Financial assets
Fixed asset investments at fair value through profit or loss (Note 12) 4,130 2,730 - 1,400
Fixed asset investments at fair value through other comprehensive income (Note 1,500 - - 1,500
12)
At 30 November 2022 5,630 2,730 - 2,900
Financial liabilities
Contingent consideration (Note 16) 8,165 - - 8,165
At 30 November 2022 8,165 - - 8,165
The fair value of cash and short-term deposits, accounts receivable and
accounts payable approximate their carrying values due to their short-term
nature.
16. Provisions
Group Contingent consideration Contingent remuneration Client claims Dilapidations Clawbacks Employers' NIC on share options
£000 £000 £000 £000 £000 £000 Total
£000
At 31 May 2022 9,284 7,750 3,265 793 82 676 21,850
Arising during period - 3,850 352 - 44 (80) 4,166
Used during period (1,555) (8,543) (72) (70) (3) (82) (10,325)
Unwinding of discount 482 - - 17 - - 499
Unused amounts reversed (46) - (296) (103) - - (445)
At 30 Nov 2022 8,165 3,057 3,249 637 123 514 15,745
Current 7,853 3,057 3,249 85 123 203 14,570
Non-current 312 - - 552 - 311 1,175
At 30 Nov 2022 8,165 3,057 3,249 637 123 514 15,745
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 that the net present value of the
financial liability payable within the next 12 months is £7.9m (1H22: £2.1m)
and the Group expects to settle the non-current balance of £0.3m (1H22:
£7.4m) within the next four years.
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
18. The Group estimates remuneration payable within the next 12 months is
£3.1m (1H22: £5.1m).
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
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
each 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.
17. Related party transactions
Custodian REIT plc
The Company's subsidiary, Custodian Capital, is appointed as the discretionary
investment manager of Custodian REIT plc ("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.
During the six months ended 30 November 2022 the Group received revenues of
£2.3m (1H22: £2.2m) in respect of annual management charges, administration
and marketing fees from Custodian REIT. Custodian REIT owed the Group £13,256
(1H22: £1,169,000) at 30 November 2022.
Amati Global Investors Limited
The Company holds 49% of the issued share capital of Amati Global Investors
Limited ("Amati"). Two of the Company's senior management team are 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 six months
ended 30 November 2022 the Group received rent of £30,413 (1H22: £24,000)
from Amati as lessee, £7,500 (1H22: £5,000) from the recharge of other
property related costs and consultancy fees of £20,000 (1H22: £20,000) in
the period.
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 six months ended 30 November 2022 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.
Gateley (Holdings) plc
The Company's former Non-Executive Chairman, 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 period the Group
received revenues of £22,663 (1H22: £20,394) in respect of the employee
benefits services provided to Gateley Plc.
Key management compensation
Key management personnel receive compensation in the form of short-term
employee benefits and equity compensation benefits. Key management personnel,
representing the Executive Directors and six (1H22: eight) other executives,
accrued total compensation of £1.9m for the six months ended 30 November
2022 (1H22: £2.1m). Total remuneration is included in 'employee benefits
expense' and analysed as follows:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2022 2021 2022
£000 £000 £000
Wages and salaries 1,546 1,841 4,567
Social security costs 272 234 914
Pension 25 20 127
Benefits in kind 20 23 23
1,863 2,118 5,631
In addition, the cost of share-based payments disclosed separately in the
statement of comprehensive income was £0.4m (1H22: £0.2m).
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.
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.
18. 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 Pole Arnold Financial Management Limited ("Pole
Arnold") on 12 April 2021, management sellers will receive remuneration of up
to £3,000,000 over a two year earn out to 12 April 2023, subject to the
achievement of certain performance conditions including the financial
performance of Pole Arnold meeting financial targets and continuing employment
of management sellers. In the six months ended 30 November 2022 remuneration
costs of £750,000 (1H22: £750,000) have been recognised in the statement of
comprehensive income, and provision of £1,000,000 (1H22: £1,000,000) is
recognised in Note 16. Based on management's latest forecasts we anticipate
that a further remuneration costs of £500,000, representing the maximum
remuneration available to management sellers, will be recognised over the
remaining period of contingency to 12 April 2023.
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 six months ended 30 November 2022 remuneration costs of £2,400,000 (1H22:
£2,000,000) have been recognised in the statement of comprehensive income,
and provision of £2,000,000 (1H22: £2,000,000) is recognised in Note 16.
Based on management's latest forecasts we anticipate that a further
remuneration costs of £12,400,000, 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 six months ended 30 November 2022 remuneration
costs of £115,000 (1H22: £57,000) have been recognised in the statement of
comprehensive income, and provision of £57,000 (1H22: £57,000) is recognised
in Note 16. Based on management's latest forecasts we anticipate that a
further remuneration costs of £172,000, representing the maximum remuneration
available to management sellers, will be recognised over the remaining period
of contingency to 26 August 2023.
Capital commitments
As at 30 November 2022, the Group had £nil capital commitments (1H22: £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.
19. 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 1H23 1H22
£000 £000
At a point in time:
Investment and asset management 1,704 1,708
Private equity management 3,151 3,280
Pension advice and administration 258 618
Property management 192 2
Employee benefits 425 526
Non-recurring revenue 5,730 6,134
Over time:
Investment and asset management 23,128 21,733
Private equity management 9,414 7,622
Pension advice and administration 10,651 9,228
Property management 3,252 3,019
Employee benefits 2,738 2,200
Recurring revenue 49,183 43,802
Total revenue 54,913 49,936
Recurring revenue 89.6% 87.7%
Organic revenues
A measure of revenue excluding revenue from businesses acquired in the current
or prior year.
1H23 1H22
£000 £000
Total revenue 54,913 49,936
Revenue from acquisitions in the prior year (18,456) (13,955)
Revenue from acquisitions in the current year - -
Organic revenue 36,457 35,981
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) and contingent consideration recognised as remuneration.
1H23 1H22
£000 £000
Statutory operating profit before financing 4,612 2,832
Amortisation of acquired intangibles 3,940 3,278
Amortisation of software 339 166
Depreciation 1,216 1,416
EBITDA 10,107 7,692
Share of profit from associates, net of tax 564 862
Acquisition-related costs 462 2,598
Deferred consideration as remuneration 3,850 4,643
Adjusted EBITDA 14,983 15,795
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 and
acquisition-related notional interest charges.
1H23 1H22
£000 £000
Statutory profit before tax 4,785 3,255
Amortisation of acquired intangibles 3,940 3,278
Acquisition-related costs 462 2,598
Acquisition-related notional interest charges 482 362
Deferred consideration as remuneration 3,850 4,643
Adjusted PBT 13,519 14,136
Adjusted PAT
A measure of profitability, net of taxation, based on Adjusted PBT and
deducting tax at the blended standard rate of 20.0% (1H22: 19.0%).
1H23 1H22
£000 £000
Adjusted PBT 13,519 14,136
Income tax expense at blended standard rate of 20.0% (1H22: 19.0%) (2,704) (2,686)
Adjusted PAT 10,815 11,450
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 and acquisition-related notional
interest charges, divided by the weighted average number of ordinary shares in
issue.
1H23 1H22
£000 £000
Adjusted PAT 10,815 11,450
Basic weighted average number of shares (see Note 6) 51,058 48,188
Adjusted EPS 21.2p 23.8p
Adjusted cash generated from operations
A measure of operating cashflows, 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.
1H23 1H22
Group £000 £000
Statutory cash generated from operations (1,522) 4,453
Contingent remuneration paid on acquisition of subsidiaries (see Note 16) 8,543 3,514
Acquisition costs paid 137 3,040
Adjusted cash generated from operations 7,158 11,007
20. Copies of interim report
Copies of the interim report will be made available on the Group's website
www.mattioliwoods.com and from the Group's head office at: 1 New Walk Place,
Leicester, LE1 6RU.
1 (#_ftnref1) Includes £924.0m (31 May 2022: £1,100.5m) of funds under
management by the Group's associate, Amati Global Investors Limited, excluding
£74.9m (31 May 2022: £93.6m) of Mattioli Woods' client investment and
£12.6m (31 May 2022: £14.8m) of cross-holdings between the TB Amati Smaller
Companies Fund and the Amati AIM VCT plc.
2 (#_ftnref2) Annual pension advice and administration fees; ongoing adviser
charges; level and renewal commissions; banking income; property,
discretionary portfolio and other annual and fund management charges.
3 (#_ftnref3) Earnings before interest, taxation, depreciation,
amortisation, acquisition-related costs, contingent consideration treated as
remuneration and including share of profit from associates (net of tax).
4 (#_ftnref4) Adjusted EBITDA divided by revenue.
5 (#_ftnref5) Adjusted profit after tax used to derive adjusted EPS is
calculated as adjusted profit before tax less income tax at the blended
standard rate of 20.0% (1H22: 19.0%).
6 (#_ftnref6) Revenue for the six months ended 30 November 2022 was split
36% (1H22 restated: 38%) fixed, initial or time-based fees and 64% (1H22
restated: 62%) ad valorem fees based on the value of assets under management,
advice and administration.
7 (#_ftnref7) Includes £1,011.5m (31 May 2022: £1.208.9m) of funds under
management by Amati Global Investors Limited, including Mattioli Woods' client
investment and cross-holdings between TB Amati Smaller Companies Fund and
Amati AIM VCT plc.
8 (#_ftnref8) Revenue for the six months ended 30 November 2022 was split
36% (1H22 restated: 38%) fixed, initial or time-based fees and 64% (1H22
restated: 62%) ad valorem fees based on the value of assets under management,
advice and administration.
9 (#_ftnref9) Certain pension scheme assets, including clients' own
commercial properties, are only subject to a statutory valuation at a benefit
crystallisation event.
10 (#_ftnref10) Value of funds under trusteeship in SIPP and SSAS schemes
administered by Mattioli Woods and its subsidiaries.
11 (#_ftnref11) Includes £924.0m (31 May 2022: £1,100.5m) of funds under
management by the Group's associate, Amati Global Investors Limited, excluding
£74.9m (31 May 2022: £93.6m) of Mattioli Woods' client investment and
£12.6m (31 May 2022: £14.8m) of cross-holdings between the TB Amati Smaller
Companies Fund and the Amati AIM VCT plc.
12 (#_ftnref12) SIPP and SSAS schemes where the Group acts as pension
consultant and administrator.
13 (#_ftnref13) Includes personal wealth clients with SIPP and SSAS schemes
operated by third parties.
14 (#_ftnref14) Figures in table may not add due to rounding.
15 (#_ftnref15) Figures in table may not add due to rounding.
16 (#_ftnref16) Cash generated from operations before acquisition-related
costs paid and contingent remuneration paid.
17 (#_ftnref17) Working capital defined as trade and other receivables less
trade and other payables.
18 (#_ftnref18) Comprises £12.5m (31 May 2022: £13.5m) invested in
Custodian REIT, £64.8m (31 May 2022: £60.5m) in MW Property Securities Fund
and £55.5m (31 May 2022: £70.3m) in Amati funds.
19 (#_ftnref19) Cross-holdings between TB Amati Smaller Companies Fund and
Amati AIM VCT plc.
20 (#_ftnref20) SIPP and SSAS schemes where Mattioli Woods acts as pension
consultant and administrator.
21 (#_ftnref21) Direct schemes lost to an alternative provider as a
percentage of average scheme numbers during the period.
22 (#_ftnref22) Direct schemes lost as a result of death, annuity purchase,
external transfer or cancellation as a percentage of average scheme numbers
during the period.
23 (#_ftnref23) Source: Numis Securities Limited, Investment Companies
Datasheet dated 9 January 2023
.
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