REG - Mattioli Woods PLC - Interim Results
06/02/2024 07:00
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RNS Number : 0965C Mattioli Woods PLC 06 February 2024
6 February 2024
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 2023.
Financial highlights for six months ended 30 November 2023:
· Revenue for the period up 8% to £59.1m (1H23: £54.9m):
- Organic growth of 4.0% (1H23: 2.2%), with an increase in new business
partially offset by the market impact on ad valorem fees of a 0.4% reduction
in total client assets of the Group and its associate 1 (#_ftn1) to £15.2bn;
and
- Recurring revenues 2 (#_ftn2) represent 90.8% (1H23: 89.6%) of revenue,
with the quality of earnings underpinned by long-term client relationships
· Adjusted EBITDA 3 (#_ftn3) up 10% to £16.5m (1H23: £15.0m) due
to:
- Organic growth and revenue mix; and
- Positive impact of recent acquisitions and continued management of cost base
· Adjusted EBITDA margin 4 (#_ftn4) of 27.9% (1H23: 27.3%)
· Basic EPS 5 (#_ftn5) up 73% to 10.2p (1H23: 5.9p)
· Interim dividend up 2.3% to 9.0p (1H23: 8.8p)
· Financial position includes cash of £32.7m at 30 November 2023
Operational highlights and recent developments
· Increased demand for high-quality wealth management and financial
planning advice driven by proposed pension and investment reforms, and market
conditions
· Expanded 'MTW Adviser Academy' driving growth in adviser base to
148 (1H23: 132) revenue generating consultants
· Enhancing investment proposition including internal changes and
partnership with T Rowe Price
· Diverse revenue mix with 37% (1H23 restated: 39%) fixed, initial or
time-based revenues 6 (#_ftn6) , uncorrelated to market performance
· Gross discretionary Assets under Management ("AuM") 7 (#_ftn7) of
£4.6bn, with gross inflows of £326.4m (1H23: £314.1m)
· Pipeline of potential acquisition opportunities
· Continued growth of Maven with AuM increasing to £0.9bn (31 May
2023: £0.8bn) and a pipeline of opportunities
· Recent acquisitions integrating well and delivering revenue
synergies from access to expanded product offering, and
· Delivery of operational improvements and enhanced client service
through implementation of Xplan CRM progressing to plan
Trading outlook
· Outlook for the current year remains in line with management's
expectations
· Group's integrated model provides multiple client engagement points
to facilitate growth
· Continued focus on new business generation, advancing key strategic
initiatives including expanded MTW adviser academy, development of investment
proposition, combined with improved operational efficiency via Group-wide
administration platform and the integration of recent acquisitions
· Proactive management of costs to deliver intra-group synergies and
improve profit margin in-line with stated medium-term goals 8 (#_ftn8)
1 Includes £672.2m (31 May 2023: £829.2m) of funds under management by the
Groups associate, Amati Global Investors Limited, excluding £65.5m (31 May
2023: £73.0m) of Mattioli Woods' client investment and £10.7m (31 May 2023:
£11.7m) 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, platform project costs, contingent consideration
treated as remuneration and including share of profit from associates (net of
tax).
4 Adjusted EBITDA divided by revenue.
5 Profit after tax used to derive adjusted EPS is calculated as profit before
tax less income tax at the blended standard rate of 25.0% (1H23: 20.0%)
divided by the number of shares in issue.
6 Revenue for the six months ended 30 November 2023 was split 37% (1H23
restated: 39%) fixed, initial or time-based fees and 63% (1H23 restated: 61%)
ad valorem fees based on the value of assets under management, advice and
administration.
7 Includes £748.4m (31 May 2023: £913.9m) 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 and £0.9bn through our Maven Capital Partners ("Maven") team
8 Strategic goals to achieve £300m revenue, £100m earnings and £30bn client
assets.
Commenting on the results, Ian Mattioli MBE, Chief Executive Officer, said:
"The first six months of this financial year saw the Group deliver improved
organic growth despite the complex macroeconomic backdrop that persisted
throughout the period. Our priority remains the delivery of profitable organic
growth and we are pleased to report further progress towards our medium-term
strategic goals, with revenue of £59.1m up 8% on the equivalent period last
year (1H23: £54.9m) driven by positive performance across our pensions advice
and administration, employee benefits and investment management operating
segments".
"The success of our new business initiatives, combined with our expanding
product range and the strength of existing client referrals resulted in
organic revenue growth of 4% despite a 0.4% reduction in the value of total
client assets to £15.2bn. The Group's improved organic growth resulted from a
combination of clients' demand for advice and proactive communication by
advisers, with a 13% increase in the value of new clients on boarded in the
first half versus 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 combination of improved organic growth, positive contributions from
recent acquisitions and continued cost management delivered 10% growth in
adjusted EBITDA to £16.5m (1H23: £15.0m). Profit before tax was up 60% to
£7.6m (1H23: £4.8m), in part due to reduced deferred consideration payments
recognised as remuneration expense under IFRS 3 of £2.5m (1H23: £3.9m) and
lower acquisition-related costs of £0.3m (1H23: £0.5m), while adjusted
profit before tax was up 15% to £15.6m (1H23: £13.5m) after adding back
acquisition-related costs, platform project costs, deferred consideration
recognised as an expense and amortisation of acquired intangible assets of
£4.2m (1H23: £3.9m).
"We believe the benefits of operating a responsibly integrated business allows
us to secure great client outcomes while delivering strong, sustainable
shareholder returns over the long term. The Board remains committed to a
progressive dividend, while maintaining an appropriate level of dividend
cover. Accordingly, the Board is pleased to announce an interim dividend of
9.0p per share (1H23: 8.8p) up 2.3%, demonstrating our desire to deliver value
to shareholders.
"The first half of the financial year has seen the Group deliver a resilient
trading performance against a complex macroeconomic backdrop. We plan to build
on this position, advancing our key strategic initiatives: new business
generation, investing in our adviser academy training programmes, developing
our investment proposition, developing new products and services, reviewing
our processes, and investing in technology to deliver operational efficiencies
and growth through the integration of strategic acquisitions. Our trading
outlook for the year remains in line with management's expectations and we
believe the Group remains well-positioned to take advantage of the growth
opportunities in the UK wealth market and deliver sustainable returns for our
stakeholders".
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 mattioliwoodsplc@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, Deputy Chief Executive Officer www.mattioliwoods.com (http://www.mattioliwoods.com)
Canaccord Genuity Limited (Nominated Advisor and Joint Broker)
Emma Gabriel Tel: +44 (0) 20 7523 8000
Harry Pardoe www.canaccordgenuity.com (http://www.canaccordgenuity.com)
Singer Capital Markets (Joint Broker)
Tom Salvesen
Alaina Wong
Charles Leigh-Pemberton Tel: +44 (0) 20 7496 3000
James Moat 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 improved
organic growth despite the complex macroeconomic backdrop that persisted
throughout the period. Our priority remains the delivery of profitable organic
growth and we are pleased to report further progress towards our medium-term
strategic goals, with revenue of £59.1m up 8% on the equivalent period last
year (1H23: £54.9m) driven by positive performance across our pensions advice
and administration, employee benefits and investment management operating
segments. The Group benefits from circa 90% of revenue being recurring and
more than a third of revenue being fee-based, rather than linked to the value
of client assets 9 (#_ftn9) , making our business more robust through the
cycle, especially in periods of heightened volatility.
The success of our new business initiatives, combined with our expanding
product range and the strength of existing client referrals resulted in
organic revenue growth of 4% despite a 0.4% reduction in the value of total
client assets to £15.2bn. The Group's improved organic growth resulted from a
combination of clients' demand for advice and proactive communication by
advisers, with a 13% increase in the value of new clients on-boarded in the
first half versus the equivalent period last year.
The combination of improved organic growth, positive contributions from recent
acquisitions and continued cost management delivered 10% growth in adjusted
EBITDA to £16.5m (1H23: £15.0m) and improved Adjusted EBITDA margin of 27.9%
(1H23: 27.3%). Profit before tax was up 60% to £7.6m (1H23: £4.8m), in part
due to reduced deferred consideration payments recognised as remuneration
expense under IFRS 3 of £2.5m (1H23: £3.9m) and lower acquisition-related
costs of £0.3m (1H23: £0.5m).
Adjusted profit before tax was up 15% to £15.6m (1H23: £13.5m) after adding
back acquisition-related costs, platform project costs, deferred consideration
recognised as an expense and amortisation of acquired intangible assets of
£4.2m (1H23: £3.9m).
We remain dedicated to putting clients first, developing our client
proposition and building a business that is sustainable, ethical and
resilient. Our focus remains on delivering great client outcomes and we have
reviewed the range of investment management options we offer, identifying
opportunities to enhance our proposition and realise revenue synergies across
the Group. This has been supported by two senior appointments who bring a
wealth of investment management expertise in addition to a new partnership
with T Rowe Price. We are focusing positively on the implementation of the
FCA's Consumer Duty principles across the Group, which accord with our
principles of integrity and professionalism.
Our investment in technology will facilitate increased digitisation and
greater levels of client interaction. We expect this investment will also
deliver improved operational efficiency as we continue to embrace flexible
working arrangements with a renewed focus on in-office collaboration for our
employees. The number of face-to-face client meetings has increased alongside
the continued use of alternative channels, enabling greater contact with all
our clients. The wellbeing of all our staff remains a focus with a range of
workshops, educational and social forums being promoted by a wellbeing support
team.
Consumer awareness and adoption of technology has accelerated in recent years,
with on-demand portfolio visibility now considered a standard. We have
developed our own online investment platform, MWise, which 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 Group-wide implementation of a common financial
planning and wealth management platform, Xplan and the development of our
proprietary MWeb pension administration platform. The cost of these
initiatives are in-line with our historic guidance of circa. £2-4m per annum,
with our technology spend in the first half of the year amounting to £0.7m.
As in prior years, we anticipate certain revenues will be more heavily
weighted towards the second half reflecting increasing demand from clients for
end of tax year advice, launch of new products and a higher proportion of
pension client year-ends.
A total of 409 new clients (1H23: 490) chose to use Mattioli Woods during the
period, with new business generated by our growing consultancy team and
through existing client referrals, of which 366 (1H23: 406) were new SIPP,
SSAS and personal clients with increased assets totalling £133m (1H23
restated: £108m) reflecting the focus of new business generation.
These initiatives are also supporting our enquiry pipeline of 610 (1H23: 606)
new business opportunities with assets totalling £235m (1H23: £194m). Total
client assets under management, administration and advice by the Group and its
associate were £15.2bn at the period end (31 May 2023: £15.3bn).
Our discretionary managed funds experienced some pressure on asset values,
like many others in the sector, but performed in line with their benchmarks
and represented a combined value of £4.6bn at the period end (31 May 2023:
£4.8bn), including more than £0.9bn managed by the Maven Capital Partners
("Maven") team and £0.7bn managed by the Group's associate company, Amati
Global Investors ("Amati").
Our gross discretionary assets under management saw a modest aggregate net
inflow (before market movements) of £4.6m (1H23: £38.1m) and totalled
£4.6bn (31 May 2023: £4.8bn) at the period end, down 3.2%. The value of
assets held within our discretionary portfolio management ("DPM") service was
£2.4bn (31 May 2023: £2.5bn) a reduction of 1.7%, of which £181.4m or 7.4%
(31 May 2023: £149.4m or 6.0%) was invested in funds managed by the Group
and its associate.
9 Revenue for the six months ended 30 November 2023 was split 37% (1H23
restated: 39%) fixed, initial or time-based fees and 63% (1H23 restated: 61%)
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. Individuals who have generated substantial personal and family wealth
are increasingly seeking solutions and trusted advice that help them fulfil
their personal ambitions in the near and longer term. We believe these current
market dynamics and pending changes will continue driving demand for the
holistic planning and expert advice we provide.
Whilst inflation has somewhat eased in the last six months, recent economic
data suggests that inflation will continue to exert financial and liquidity
pressures on individuals and households, at least in the short to medium term.
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.
The implementation of the Consumer Duty regulations brings a welcome focus to
the value our clients derive from the services we offer. Our teams have
assessed our client proposition through the prism of the Consumer Duty
regulations, affirming our belief that we deliver valued services to our
clients and have the systems and controls in place to identify any areas of
potential harm, allowing appropriate action to be taken where necessary. We
have also reflected on some areas where action can be taken to garner further
efficiencies that will serve to improve our client service delivery. These
principles have remained at the core of our business since it was founded over
30 years ago.
Changes to the pension and tax regime
The Chancellor's Autumn Statement created further demand for advice following
the announcement of a range of proposed reforms to pensions tax relief to
encourage workers over 50 to extend their working lives, including increasing
the annual allowance, removing the Lifetime Allowance charge and freezing lump
sum limits. While another UK general election within the next 12 months
creates uncertainty around the future direction of pension reforms and UK tax
rates, there are many financial planning opportunities for our clients to
consider now, with any future changes to the tax regime expected to create
further demand for our advisory services.
Assets under management, administration and advice
Total client assets of £15.2bn as at 30 November 2023
(31 May 2023: £15.3bn) were as follows:
Assets under management, administration, and advice 10 (#_ftn10) SIPP and SSAS 11 (#_ftn11) Employee benefits Personal wealth and other assets Sub-total £m Amati 12 (#_ftn12) Private Equity Mgt Total
£m £m £m £m £m £m
At 1 June 2023 6,854.0 1,639.8 5,171.5 13,665.3 829.2 817.9 15,312.3
Net inflows/(outflows), including market movements (130.8) 248.2 (52.9) 64.4 (157.0) 27.9 (64.6)
At 30 November 2023 6,723.2 1,888.0 5,118.6 13,729.7 672.2 845.7 15,247.7
The £64.6m or 0.4% decrease in total client assets during the period is
analysed as:
· A £130.8m decrease (1H23: £89.2m decrease) in SIPP and SSAS funds
under trusteeship, with a 2.2% (1H23: 0.6%) fall in the number of schemes
being administered at the period end, comprising a 1.5% decrease (1H23: 0.3%
increase) in the number of direct 13 (#_ftn13) schemes to 7,067 (31 May 2023:
7,172) and an expected 3.6% (1H23: 2.3%) decrease in the number of schemes the
Group operates on an administration-only basis to 3,647 (31 May 2023: 3,785).
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 £248.2m increase (1H23: £19.2m decrease) in the value of assets
held in corporate pension schemes advised by our employee benefits business.
The growth in the period has been driven by new client wins following recent
business development initiatives, although revenues in our employee benefits
business are not linked to the value of client assets;
· A £52.9m (1H23: £29.0m) decrease in personal wealth and other
assets under management and advice. The 194 (1H23: 206) new personal clients
won during the period partially offset some natural client attrition,
resulting in a 2.8% decrease (1H23: 1.7% increase driven by acquisitions) in
the total number of personal clients 14 (#_ftn14) at the period end to 11,594
(31 May 2023: 11,925);
· A £157.0m (1H23: £176.5m) decrease in Amati's funds under
management (excluding Mattioli Woods' client investment), with falls in the
value of the Amati UK Smaller Companies Fund to £477.4m (31 May 2023:
£586.0m), the Amati AIM VCT to £143.7m (31 May 2023: £178.0m), the
Strategic Metals Fund to £65.5m (31 May 2023: £87.1m) and the IHT portfolio
service £55.5m (31 May 2023: £56.9m), being partially offset by an increase
in the Strategic Innovation Fund to £6.3m (31 May 2023: £5.9m); and
· A £27.9m increase in Maven's assets under management to £845.7m,
as explained under 'Segmental review' below.
10 Certain pension scheme assets, including clients' own commercial
properties, are only subject to a statutory valuation at a benefit
crystallisation event.
11 Value of funds under trusteeship in SIPP and SSAS schemes administered by
Mattioli Woods and its subsidiaries.
12 Includes £672.2m (31 May 2023: £829.2m) of funds under management by the
Group's associate, Amati Global Investors Limited, excluding £65.5m (31 May
2023: £73.0m) of Mattioli Woods' client investment and £10.7m (31 May 2023:
£11.7m) of cross-holdings between the TB Amati Smaller Companies Fund and the
Amati AIM VCT plc.
13 SIPP and SSAS schemes where the Group acts as pension consultant and
administrator.
14 Includes personal wealth clients with SIPP and SSAS schemes operated by
third parties.
Strategy
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 its core. We continue to progress towards
our goal to become a leading financial solutions provider in the UK. We plan
to continue developing complementary services around our core specialisms,
blending advice, investment, and asset management, and have recently added
mortgage broking services.
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, while prioritising a steady improvement in earnings,
operating margin and shareholder returns.
Revenue
The Group delivered another period of growth, with total revenue of £59.1m
(1H23: £54.9m) up 7.7.% year-on-year. This included organic revenue growth of
4.0%, plus a full six months' combined revenue contribution of £2.0m from the
acquisitions of Doherty Pensions and Investment Consultancy ("Doherty") and
White Mortgages ("Whites") in the prior year. Pension consultancy and
administration revenue included £2.1m (1H23: £0.1m) of interest income on
pooled cash balances as a result of higher interest rates throughout the
period.
Employee benefits expense
The major component of the Group's operating costs is employee benefits
expense of £32.8m (1H23: £29.8m), which increased to 55.6% of revenue (1H23:
54.3%) reflecting the impact of recent inflationary pressures impacting costs
of living and recruitment activity. 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.
An increase in average consultant and client relationship manager caseloads in
the period was achieved partly through the integration and migration of
acquired client and pension portfolios onto our MWeb administration platform,
reaping some of the benefits of our historic and current investment in
technology, as well as through the streamlining of other processes across the
Group. The current investment into the Xplan client administration platform is
expected to lead to further efficiency improvements.
The planned recruitment of additional client-facing and support staff resulted
in the Group's total headcount increasing to 949 (1H23: 877) at
30 November 2023. The number of revenue generating consultants increased to
148 (1H23: 132) at the period end. Our planned increase in the recruitment of
trainee consultants is being delivered, with 19 new recruits joining the
expanded adviser academy shortly after the period end in December 2023. We
expect this level of recruitment to grow in the current and future years as we
continue to invest in our people and training programmes to ensure we create
the capacity for future growth.
Other administrative expenses
Other administrative expenses decreased by 3% to £9.8m (1H23: £10.2m), with
the impact of a full six months' costs on recent acquisitions, additional
consultancy spend to support the Xplan project and increased occupancy costs
associated with increased use of the office estate being offset by reduced
professional and regulatory costs, marketing spend now planned for the second
half, lower acquisition-related costs and lower insurance costs as acquired
businesses integrate into the Group's coverage.
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 acquisition criteria and due diligence procedures. During the
period we progressed several smaller opportunities, incurring
acquisition-related costs of £0.3m (1H23: £0.5m).
Share-based payments
Share-based payment costs of £1.2m (1H23: £0.9m) 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 income of £0.2m (1H23: £0.4m cost) reflecting interest income on
cash balances partially offset by notional finance charges from the unwinding
of discounts on deferred consideration payable of £0.4m (1H23: £0.5m).
Taxation
The effective rate of taxation on profit on ordinary activities was 30.8%
(1H23: 36.6%), above the blended standard rate of tax of 25.0% (1H23: 20.0%),
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 2023
increased to £27.2m (1H23: £26.2m) as a result of recent acquisitions.
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 54.1% to £7.1m (1H23: £4.6m), with
the positive impact of increased revenue, lower acquisition-related costs of
£0.3m (1H23: £0.5m) and contingent consideration recognised as an expense
falling to £2.5m (1H23: £3.9m) being partially offset by a full period of
overheads associated with those businesses acquired in the prior financial
year and increased investment in our people. Adjusted EBITDA, adding back
acquisition-related costs and contingent consideration recognised as an
expense, platform project costs of £0.7m (1H23: nil) and including the
Group's share of profit from associates of £0.3m (1H23: £0.6m), was up
10.0%, with adjusted EBITDA margin of 27.9% (1H23: 27.3%).
Profit before tax was up 58.3% to £7.6m (1H23: £4.8m), with adjusted profit
before tax up 15.6% to £15.6m (1H23: £13.5m). The adjusted profit before tax
measure includes adjustments made for acquisition-related costs, the
recognition of contingent consideration as an expense under IFRS 3, platform
project costs, amortisation charges on acquired intangible assets of £4.2m
(1H23: £3.9m) and acquisition-related notional interest charges of £0.3m
(1H23: £0.5m).
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:
1H24 1H23
£m £m
Statutory operating profit before financing 7.1 4.6
Amortisation of acquired intangibles 4.2 3.9
Amortisation of software 0.2 0.3
Depreciation 1.2 1.2
EBITDA 12.8 10.0
Share of profit from associates, net of tax 0.3 0.6
Acquisition-related costs 0.3 0.5
Deferred consideration as remuneration 2.5 3.9
Platform project costs 0.7 -
Adjusted EBITDA 15 (#_ftn15) 16.5 15.0
15 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
1H24 1H24 1H23 1H23
£m pps £m pps
Statutory profit before tax 7.6 4.8
Income tax expense (2.4) (1.7)
Statutory profit after tax/Basic EPS 5.2 10.2 3.0 5.9
Statutory profit before tax 7.6 4.8
Amortisation of acquired intangibles 4.2 3.9
Acquisition-related costs 0.3 0.5
Acquisition-related notional finance costs 0.3 0.5
Deferred consideration as remuneration 2.5 3.9
Exceptional Project costs 0.7 -
Adjusted PBT 15.6 13.5
Income tax expense at blended standard rate (3.9) (2.7)
Adjusted PAT/Adjusted EPS 16 (#_ftn16) 11.7 22.7 10.8 21.2
16 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 £4.2m (1H23:
£3.9m) 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 73% to 10.2p (1H23: 5.9p), while adjusted EPS of 22.7p
(1H23: 21.2p) was up 7%. EPS was negatively impacted by a high effective tax
rate of 30.8% (1H23: 36.6%), and the issue of 240,976 (1H23: 190,743) shares
under the Company's share plans. Diluted EPS was 10.2p (1H23: 5.9p).
Dividends
The Board is pleased to announce an interim dividend of 9.0p per share (1H23:
8.8p) up 2.3%, demonstrating our desire to deliver value to shareholders. The
Board continues to review its dividend policy given the increased number of
shares in issue following recent acquisitions since the policy was
established, alongside the need to invest in scale, increased efficiency, and
acquisitions. The Board currently maintains a progressive dividend policy,
while maintaining an appropriate level of dividend cover. The interim dividend
will be paid on 22 March 2024 to shareholders on the register at the close of
business on 16 February 2024, with an ex-dividend date of 15 February 2024.
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 2023, shareholders' instructions must be received by Link by the
close of business on 1 March 2024.
Cash flow
Cash balances at 30 November 2023 totalled £32.7m (1H23: £38.3m). Adjusted
cash generated from operations 17 (#_ftn17) , which excludes cashflows
related to the Group's acquisition activities was £12.6m (1H23: £7.2m),
representing 76.4% of Adjusted EBITDA (1H23: 47.8%). Cash generated from
operations was £7.1m or 55.2% of EBITDA (1H23: -£1.5m or -15%), driven by a
decrease in the Group's working capital requirement 18 (#_ftn18) of £9.4m
(1H23: £16.6m) comprising:
· £6.6m decrease (1H23: £9.8m) in trade and other payables
primarily due to:
- £5.2m (1H23: £8.9m) decrease in accruals and deferred income including
£2.0m in accrued bonuses, £1.3m from property insurance renewal premiums
invoiced and paid in the period, £1.5m on payment of accrued balances and
£0.4m decrease in deferred income on fees issued annually in advance to
certain clients;
- £0.5m (1H23: £0.1m) decrease in social security and other taxes
outstanding; and
- £0.8m (1H23: £0.8m) decrease in trade and other payables, including
£0.4m payment of deferred consideration; plus
· £0.6m increase (1H23: £2.1m decrease) in trade and other
receivables, primarily due to;
- £1.6m decrease in property management fees and insurance premiums
invoiced to Custodian Property Income REIT and property syndicates before
November 2023; and
- £2.2m increase in other invoiced revenues compared to prior year; plus
· £2.2m decrease (1H23: £8.9m) in provisions, primarily due to:
- £5.5m of contingent consideration recognised as remuneration paid in the
period; and
- £3.3m increase across other provisions, including provisions for
dilapidations charges and employers' NIC on share options.
Net cash outflows from investing activities increased to £6.2m (1H23: £2.4m)
with £0.7m (1H23: £nil) of initial consideration paid on acquisitions
completed in the period and £5.5m (1H23: £1.6m) of contingent deferred
consideration paid on acquisitions completed in prior periods. Investment in
other investments reduced to £0.1m (1H23: £0.2m).
Net cash from financing activities resulted in a £9.4m outflow (1H23: £9.3m
outflow), with proceeds from the issue of share capital of £0.4m (1H23:
£0.4m) offset by dividends paid of £9.3m (1H23: £9.1m) increasing in line
with the Group's progressive dividend policy.
17 Cash generated from operations before acquisition-related costs paid and
contingent remuneration paid.
18 Working capital defined as trade and other receivables less trade and other
payables.
Regulatory capital
The Group and Company continue to enjoy 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.
The introduction of the Investment Firm Prudential Regime ("IFPR") reduced the
value of the Group's CET1 Capital 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 2023 the Company had significant headroom of £14.9m on its
regulatory capital requirement of £14.9m, a 100% surplus, giving the Group
the flexibility to pursue bolt-on acquisition opportunities.
Segmental review
The mix of income derived from the Group's five key revenue streams changed
during the period as follows:
· 46.0% investment and asset management (1H23: 45.2%);
· 22.3% pension advice and administration (1H23: 19.9%);
· 21.0% private equity management (1H23: 22.9%);
· 4.8% property management (1H23: 6.3%); and
· 5.9% employee benefits (1H23: 5.7%).
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 9.4% to £27.2m (1H23:
£24.8m).
The Group's gross discretionary AuM, including the multi-asset funds which sit
at the heart of our DPM service, Custodian Property Income REIT and the funds
managed by Maven and our associate company, Amati, totalled £4.6bn
(31 May 2023: £4.8bn), a decrease of 4.1% as follows:
Assets under management DPM Custodian Property Income REIT MW PSF & REF MW UKDF Cross-holdings in DPM(( 19 (#_ftn19) )) Cross-holdings in Amati funds(( 20 (#_ftn20) )) Net AuM
£m £m £m £m £m £m £m
Gross AuM
Amati Maven £m
£m £m
At 1 June 2023 2,485.2 437.6 78.1 - 913.9 835.3 4,750.1 (149.4) (11.7) 4,588.9
Inflows 117.0 - 4.7 35.4 60.2 109.2 326.4 - 0.1 326.5
Outflows (170.5) - (0.4) (0.0) (129.7) (21.2) (321.8) (32.0) - (353.9)
Market movements 10.4 (14.8) (1.6) 0.5 (96.0) (53.1) (154.7) - - (154.7)
At 30 Nov 2023 2,442.1 422.8 80.7 35.9 748.4 870.2 4,600.0 (181.4) (11.6) 4,406.9
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 (including associated ongoing
adviser charges) was £17.0m (1H23 restated: £13.8m) with £117.0m (1H23:
£131.5m) of inflows into our DPM service during the period.
Fees for services provided by Custodian Capital to Custodian Property Income
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 £3.1m and £1.1m respectively in the period.
The MW UK Dynamic Fund ("MW UKDF") was launched in September 2023 and seeks to
deliver value through active management of a portfolio of UK equities over a
five-year horizon and achieved net inflows of £35.4m in the period.
Adviser charges based on gross assets under advice of £4.1bn (1H23: £3.6bn)
increased to £12.2m (1H23 restated: £10.9m), with the impact of inflows and
acquisitions partially offset by the impact of lower asset values and market
movements.
Growth in total assets under management and advice continues to underpin the
Group's quality of earnings with the proportion of total revenues that are
recurring being 90.8% (1H23: 89.6%) across all segments. Notwithstanding our
fee-based advisory model, as with other firms, the majority of these income
streams are linked to the value of funds under management and advice and are
therefore affected by the performance of financial markets.
19 Comprises £12.3m (31 May 2023 £12.0m) invested in Custodian REIT, £66.3m
(31 May 2023: £66.3m) in MW Property Securities Fund, £33.3m (31 May 2023:
nil) in MW UK Dynamic Fund and £49.9m (31 May 2023: £55.2m) in Amati funds.
20 Cross-holdings between TB Amati Smaller Companies Fund and Amati AIM VCT
plc.
Pension advice and administration
Pension advice and administration revenues increased 20.9% to £13.2m (1H23:
£10.9m) as a result of the strong demand for advice and increased banking
margin on cash balances. The total number of SIPP and SSAS schemes
administered by the Group decreased 2.2% to 10,714 (31 May 23: 10,957) due to
the continued wind-down of a number of SIPP schemes operated on an
administration-only basis.
Direct 21 (#_ftn21) pension advice and administration fees increased 21.9% to
£11.2m (1H23: £9.2m). Retirement planning remains central to many of our
clients' wealth management strategies, although the number of direct schemes
decreased to 7,067 (31 May 23: 7,172), with 149 new schemes gained in the
first half of the year (1H23: 186). We have maintained a high quality of new
business, with the value of new schemes averaging £0.6m (1H23: £0.3m), and
we continue to enjoy strong client retention, with an external loss rate 22
(#_ftn22) of 2.6% (1H23: 1.3%) and an overall attrition rate 23 (#_ftn23) of
3.3% (1H23: 2.2%).
Third-party administration fees also increased by 15.8% to £2.0m
(1H23: £1.7m). The number of active SSAS and SIPP schemes the Group operates
on an administration-only basis decreased as expected by 3.6% to 3,647 (31 May
23: 3,785) 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 £2.1m (1H23: £0.1m). The recent base rate
increases and our planned introduction of pooled banking for the Group's
clients provides an opportunity to enhance clients' rates, improve efficiency
of banking administration and when available, enable the Company to retain a
proportion of any interest.
Segment margin was 31.0% (1H23: 23.7%) with the positive impact of new
business, fee-based and transactional activity and banking revenue being
partially offset by client losses.
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.
21 SIPP and SSAS schemes where Mattioli Woods acts as pension consultant and
administrator.
22 Direct schemes lost to an alternative provider as a percentage of average
scheme numbers during the period.
23 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
£870.2m (31 May 23: £835.3m) at the period end, with revenues recognised
during the period of £12.4m (1H23: £12.6m) down 0.9%.
The Group realised a number of cross-sell revenue synergies, with the Maven
Investor Partner business completing five transactions supported by Mattioli
Woods' clients, generating £0.3m initial fees and embedding significant
future performance fee potential. Product expansion new continues with the
Maven public sector fund business securing new and extended contracts, with
further opportunities expected across the UK during 2024.
Property management
Property management revenues were £2.8m (1H23: £3.4m), a decrease of 18.1%,
with Custodian Capital's assets under management and administration falling
14.7% to £503.7m (31 May 2023: £529.8m) following a further decrease 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 6.5% 24 (#_ftn24) 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. As part of the
integration of Maven into the Group, the Private Investor Club is now managed
by Maven such that all new opportunities are being launched through the
private equity management segment.
24 Source: Numis Securities Limited, Investment Companies Datasheet dated 14
December 2023
Employee benefits
Employee benefits revenues grew 10.5% against the prior year to £3.5m (1H23:
£3.2m), with the Group having 765 corporate clients (31 May 2023: 785) at the
period end. New client wins, including some large clients 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 £255m in targeted acquisitions since our admission to AIM in
2005, bringing 36 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 ten 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 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 consider ethical considerations, including procedures
for 'whistle-blowing'.
Our people
We give our thanks and gratitude to all our staff for their continued
dedication, enthusiasm, and professionalism in dealing with our clients'
affairs during the first half of this financial year and for continuing to
maintain our culture of putting clients first, adopting an ethical and
collegiate approach. Retaining the integrity, expertise and passion of our
expert and diverse staff remains a priority of the Board and will continue to
be at the heart of our success as we grow. 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 55% (1H23: 61%) of eligible staff had
invested in the Plan and we continue to encourage broader staff participation.
Our Board
We remain committed to having a diverse and balanced Board. The Board
continues to review its composition to ensure it has the right experience and
expertise to create long-term shareholder value. The Board embraces diversity
in all forms and maintains on-going dialogue with key stakeholders to consider
future changes to ensure compliance with regulatory and stakeholder guidance.
We have made several recent changes to Board composition, including as
previously announced, Anne Gunther being appointed to the role of
Non-Executive Chair, following David Kiddie stepping down to take on a
consultancy role to support the continued development and structure of the
Group's investment proposition. We were pleased to announce the appointment of
Alison McKinna as an Independent Non-Executive Director in December 2023.
Alison brings new skills to the Board and a track record of delivering
successful, customer-focused business transformations and expertise in digital
innovation across several sectors.
The Board is also committed to regular reviews of the Group's corporate
governance structures. 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 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 growing 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 embrace 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 backdrop. We plan to build
on this position, advancing our key strategic initiatives: new business
generation, investing in our adviser academy training programmes, developing
our investment proposition, developing new products and services, reviewing
our processes, and investing in technology to deliver operational efficiencies
and growth through the integration of strategic acquisitions.
Our trading outlook for the year remains in line with management's
expectations and we believe the Group remains well-positioned to take
advantage of the growth opportunities in the UK wealth market and deliver
sustainable returns for all our stakeholders.
Anne Gunther
Non-Executive Chair
Ian Mattioli MBE
Chief Executive Officer
5 February 2024
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 2023 which comprises the interim condensed consolidated statement of
comprehensive income, the interim condensed consolidated statement of
financial position, the 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 2023 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 consolidated financial statements
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
5(th) February 2024
Interim condensed consolidated statement of comprehensive income
For the six months ended 30 November 2023
Unaudited Unaudited Six months ended Audited
Six months 30 Nov Year
ended 2022 ended
30 Nov 31 May
2023 2023
Note £000 £000 £000
Revenue 5 59,132 54,913 111,182
Employee benefits expense (32,837) (29,813) (60,864)
Other administrative expenses (9,848) (10,202) (18,249)
Share-based payments 14 (1,230) (856) (1,992)
Amortisation and impairment 11 (4,440) (4,279) (9,036)
Depreciation 9,10 (1,231) (1,216) (2,475)
Impairment loss on financial assets 1 (75) (215)
Profit/(loss) on disposal of property, plant and equipment 15 (10) 90
Loss on disposal of investment in own shares - - (116)
Deferred consideration presented as remuneration 16 (2,458) (3,850) (6,865)
Operating profit before financing 7,104 4,612 11,460
Finance revenue 958 175 545
Finance costs (747) (566) (1,126)
Net finance cost 211 (391) (581)
Share of profit from associate, net of tax 12 333 564 974
Profit before tax 7,648 4,785 11,853
Income tax expense 8 (2,352) (1,749) (4,201)
Profit for the period 5,296 3,036 7,652
(16) (24) (22)
Other comprehensive loss for the period, net of tax
Total comprehensive income for the period, net of tax 5,280 3,012 7,630
Attributable to:
Equity holders of the parent 5,272 3,012 7,626
Non-controlling interest (8) - (4)
Earnings per ordinary share:
Basic (pence) 6 10.2 5.9 14.9
Diluted (pence) 6 10.2 5.9 14.9
Proposed dividend per share (pence) 7 9.0 8.8 26.8
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 2023
Registered number: 03140521
Unaudited Unaudited Audited
30 Nov 2023 30 Nov 2022 31 May 2023
Note £000 £000 £000
Assets
Property, plant and equipment 9 13,870 13,877 13,992
Right of use assets 10 3,381 2,857 3,034
Intangible assets 11 205,661 195,288 208,381
Deferred tax asset 8 695 697 695
Investment in associate 12 4,453 4,693 4,128
Other investments 12 4,456 5,380 4,699
Total non-current assets 232,516 222,792 234,929
Trade and other receivables 31,028 26,578 30,389
Finance lease receivable 275 318 286
Investments 12 50 250 246
Cash and short-term deposits 32,669 38,324 45,101
Total current assets 64,022 65,470 76,022
Total assets 296,538 288,262 310,951
Equity
Issued capital 519 512 517
Share premium 145,198 144,029 144,638
Merger reserve 57,225 57,225 57,225
Equity - share-based payments 3,967 3,018 3,666
Capital redemption reserve 2,000 2,000 2,000
Own shares - (597) -
Non-controlling interest 485 - 477
Retained earnings 17,531 19,085 20,817
Total equity attributable to equity holders of the parent 226,925 225,272 229,340
Non-current liabilities
Deferred tax liability 8 27,859 26,862 28,873
Lease liability 2,979 2,655 2,600
Provisions 16 4,020 1,175 3,879
Total non-current liabilities 34,858 30,692 35,352
Current liabilities
Trade and other payables 16,862 15,485 23,447
Income tax payable 8 1,929 1,636 4,578
Lease liability 810 607 756
Provisions 16 15,154 14,570 17,478
Total current liabilities 34,755 32,298 46,259
Total liabilities 69,613 62,990 81,611
Total equity and liabilities 296,538 288,262 310,951
Interim condensed consolidated statement of changes in equity
For the six months ended 30 November 2023
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 changes in equity (continued)
For the six months ended 30 November 2023
Equity - share-based payments Capital redemption reserve Non-controlling interest
Issued Share Merger reserve £000 £000 Own shares £000 Retained Total
capital premium £000 £000 earnings equity
Note £000 £000 £000 £000
As at 30 November 2022 - Unaudited 512 144,029 57,225 3,018 2,000 (597) - 19,085 225,272
Profit for the period - - - - - - 4 4,616 4,620
Share of other comprehensive income from associates - - - - - - - 2 2
Total comprehensive income for period - - - - - - 4 4,618 4,622
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 5 609 1,969 - - - - 2,583
Share-based payment transactions 14 - - - 846 - - - 846
Deferred tax recognised in equity - - - 13 - - (162) (149)
Current tax taken to equity - - - 1 - - - 1
Reserves transfer - - (1,969) (212) - - 2,181 -
Disposal of investment in own shares - - - - - 597 - 597
Arising on acquisition - - - - - 473 (401) 72
Dividends 7 - - - - - - (4,504) (4,504)
As at 31 May 2023 - Audited 517 144,638 57,225 3,666 2,000 - 477 20,817 229,340
Interim condensed consolidated statement of changes in equity (continued)
For the six months ended 30 November 2023
Equity - share-based payments Capital redemption reserve Non-controlling interest
Issued Share Merger reserve £000 £000 Own shares £000 Retained Total
capital premium £000 £000 earnings equity
Note £000 £000 £000 £000
As at 31 May 2023 - Audited 517 144,638 57,225 3,666 2,000 - 477 20,817 229,340
Profit for the period - - - - - - 8 5,296 5,304
Share of other comprehensive income from associates - - - - - - - (16) (16)
Total comprehensive income for period - - - - - - 8 5,280 5,288
Transactions with owners of the Company, recognised directly in equity
Issue of share capital 2 560 - - - - - - 562
Share-based payment transactions 14 - - - 1,083 - - - - 1,083
Deferred tax recognised in equity - - - (5) - - - (5) (10)
Current tax taken to equity - - - (23) - - - - (23)
Reserves transfer - - - (754) - - - 754 -
Dividends 7 - - - - - - - (9,315) (9,315)
As at 30 November 2023 - Unaudited 519 145,198 57,225 3,967 2,000 - 485 17,531 226,925
Interim condensed consolidated statement of cash flows
For the six months ended 30 November 2023
Unaudited Six months ended Unaudited Six months ended Audited
30 Nov 30 Nov Year
2023 2022 ended
31 May
2023
Note £000 £000 £000
Operating activities
Profit for the period 5,296 3,012 7,652
Adjustments for:
Depreciation 9,10 1,231 1,216 2,474
Amortisation and impairment 11 4,440 4,279 9,036
Deferred consideration as remuneration 16 2,458 3,850 6,865
Finance revenue (958) (175) (545)
Finance costs 747 566 1,126
Share of profit from associate 12 (333) (564) (974)
Loss/(profit) on disposal of property, plant and equipment (15) 10 (25)
Profit on disposal of fixed asset investments - - 98
(Gain)/loss on revaluation of other investments (1) 260 -
Equity-settled share-based payments 14 1,230 856 1,992
Income tax expense 2,352 1,749 4,201
Cash flows from operating activities before changes in working capital and 16,447 15,059 31,900
provisions
(Increase)/decrease in trade and other receivables (629) 2,095 (1,197)
(Decrease)/increase in trade and other payables (6,584) (9,778) 809
Decrease in provisions 16 (2,184) (8,898) (5,920)
Cash generated from operations 7,050 (1,522) 25,592
Interest paid - (1) -
Income taxes paid (3,860) (2,370) (3,071)
Net cash inflows from operating activities 3,190 (3,893) 22,521
Investing activities
Proceeds from sale of property, plant and equipment 106 92 180
Purchase of property, plant and equipment 9 (696) (554) (1,396)
Purchase of software 11 (329) (288) (557)
Purchase of client portfolio - 46 -
Contingent consideration paid on acquisition of subsidiaries 16 (467) (1,555) (2,248)
Acquisition of subsidiaries (748) - (14,356)
Cash received on acquisition of subsidiaries 26 - 9,420
Contingent remuneration paid on acquisition of subsidiaries 16 (5,030) - (10,044)
Dividends received from associate 12 - - 980
Investment in other equity holdings (82) (195) (193)
Interest received 932 167 263
Proceeds from disposal of other investments 46 67 646
Loans advanced to investment syndicates - (594) -
Loan repayments from investment syndicates - 400 (195)
Net cash from investing activities (6,242) (2,414) (17,500)
Financing activities
Proceeds from the issue of share capital 385 432 851
Cost of own shares acquired - - 477
Dividends paid 7 (9,315) (9,094) (13,598)
Payment of lease liabilities (450) (619) (1,562)
Net cash from financing activities (9,380) (9,281) (13,832)
Net decrease in cash and cash equivalents (12,432) (15,588) (8,811)
Cash and cash equivalents at start of period 45,101 53,912 53,912
Cash and cash equivalents at end of period 32,669 38,324 45,101
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 2024.
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 2023, 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 2023 and the six
months ended 30 November 2022 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
2023 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.
Specifically, the Group reports cash reserves of £32.7m at 30 November 2023
and continues to be cash generative. The cash position at period end was
impacted by deferred consideration payments in the period of £5.5m. They
forecast cash generation to improve given that they are approaching the
maturity of deferred consideration payments from acquisitions in prior
periods. In addition, the Group maintains regulatory capital headroom against
requirements of basic and long-term liquidity.
The Directors 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 2023.
Standards not affecting the interim 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
IFRS 17 Insurance contracts (including amendments to IFRS 17) 1 January 2023
Amendments to IAS 1 'International tax reform - Pillar two model rules' 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
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
Amendments to IAS 1 'Classification of liabilities as current or non-current' 1 January 2024
Amendments to IFRS 16 'Lease liability in a sale and leaseback' 1 January 2024
The Directors do not expect the adoption of these standards and
interpretations listed above to have a material impact on the annual financial
statements or the interim condensed consolidated financial statements of the
Group in future periods.
Financial statements for the year ending 31 May 2024
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 2024, 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 2023, we have disclosed the sensitivities to the key areas
applicable to the six months to 30 November 2023 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 2023 the Directors identified indicators of potential impairment
arising from external factors including the reduction in the value of client
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 13.6% (31
May 2023: 11.5%) 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 2023: 5.0%),
thereafter extrapolating these cash flows using a long-term growth rate of
2.0% (31 May 2023: 2.0%), which management considers conservative against
industry average long-term growth rates.
The carrying amount at 30 November 2023 of client portfolios was £113.4m (31
May 2023: £117.7m) and brands was £1.7m (31 May 2023: £1.8m). No impairment
provisions have been made during the period (1H23: £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 13.6% (31 May 2023: 15.3%), 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 2023 was £90.3m (31 May
2023: £88.9m). No impairment provisions have been made during the period
(1H23: £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 2023 was
£13.9m (1H23: £8.2m) and contingent remuneration provided for at 30 November
2023 was £2.0m (1H23: £3.1m).
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 2023.
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 2023.
3. Business combinations
On 18 September 2023, Ludlow Wealth Management Group Limited ("Ludlow"), a
subsidiary of Mattioli Woods Plc, completed the acquisition of 100% of the
share capital of Opus Wealth Management Limited ("Opus") for an initial
consideration of £0.71m.
Opus is based in Blackpool and provides financial planning and wealth
management services to circa 100 private client families with approximately
£53 million of assets under advice. In the year ended 30 April 2023, Opus
generated revenues of £0.37 million with a profit before taxation of £0.14
million. At 30 April 2023, Opus had net assets of £0.10 million.
The total consideration of £1.5m comprises an initial consideration of
£710,625 in cash, plus £30,933 in cash in relation to the net assets
acquired and deferred consideration of £710,625.
The fair values of the assets and liabilities of Opus as at the date of
acquisition are set out in the table below:
Fair value recognised on acquisition Fair value adjustments Previous carrying value
£000 £000 £000
Property, plant and equipment 7 - 7
Right of use assets - - -
Trade and other receivables 27 - 27
Cash at bank 25 - 25
Assets 59 - 59
Trade and other payables - - -
Lease liability - - -
Provisions (2) - (2)
Deferred tax liability (1) - (1)
Liabilities (3) - (3)
Total identifiable net assets at fair value 56
Goodwill 1,396
Total acquisition cost 1,452
Analysed as follows:
Initial cash consideration 711
Net asset excess 30
Contingent consideration 711
Total acquisition cost 1,452
Cash outflow on acquisition:
Cash paid 711
Cash acquired (25)
Net asset excess 25 (#_ftn25) 30
Acquisition costs 37
Net cash outflow 753
25 Net assets excess paid in 2H24
Acquisitions completed during the prior period
On 19 April 2023, the Company completed the acquisition of 100% of the share
capital of Doherty Pension & Investment Consultancy Limited ("Doherty"),
one of the largest financial planning and wealth management businesses in
Northern Ireland, providing specialist pension expertise and a discretionary
investment management offering to over 1,300 clients.
On 26 April 2023, the Company completed the acquisition of 50.1% of the share
capital of White Mortgages Limited ("White Mortgages"), an established
provider of independent mortgage advice and of bespoke protection advice,
based in Lincoln.
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 2023.
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:
Doherty White Mortgages Total
£000 £000 £000
Fair value recognised on acquisition:
Property, plant and equipment 134 8 142
Right of use assets - 96 96
Intangible assets - Client portfolio 11,509 - 11,509
Investments 5 - 5
Trade and other receivables 213 255 468
Cash at bank 8,619 801 9,420
Assets 20,480 1,160 21,640
Trade and other payables (187) (95) (282)
Lease liabilities - (94) (94)
Provisions - (21) (21)
Deferred tax liability (2,877) (2) (2,879)
Liabilities (3,064) (212) (3,276)
Total identifiable net assets at fair value 17,416 948 18,364
Non-controlling interest at acquisition - (473) (473)
Goodwill 4,685 722 5,407
Acquisition cost 22,101 1,197 23,298
Analysed as follows:
Initial cash consideration 6,780 425 7,205
Net asset excess 8,023 772 8,795
Net shares in Mattioli Woods 1,972 - 1,972
Deferred consideration 1,500 - 1,500
Contingent deferred consideration 4,062 - 4,062
Discounting of contingent deferred consideration (236) - (236)
Acquisition cost 22,101 1,197 23,298
Cash outflow on acquisition:
Cash paid 6,780 425 7,205
Net asset excess 8,023 772 8,795
Cash acquired (8,619) (801) (9,420)
Acquisition-related costs 341 170 511
Net cash outflow 6,525 566 7,091
In addition to the acquisition cost, management sellers of Doherty will
receive;
- deferred consideration of £1,500,000, payable in cash split in
equal amounts between the first and second anniversaries of completion; and
- contingent consideration of up to £4,768,000, payable in cash split
in equal amounts between the first and second anniversaries of completion,
subject to certain financial targets based on forecast earnings before
interest, tax, depreciation and amortisation ("EBITDA") generated during that
period.
Mattioli Woods also entered into an option agreement with the sellers that
entitles Mattioli Woods to acquire the remaining 49.9% of White Mortgages
("the Call Option"). The Call Option is exercisable by Mattioli Woods at any
time during the 24-month period commencing 27 April 2026 for a cash
consideration. If Mattioli Woods does exercise the Call Option, the
consideration payable on exercise will be up to £2.625m, dependent on the
attainment of specified targets in the 12 months prior to the exercise date.
See Note 18 for further details of commitments and contingencies.
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 2023 and 2022,
and the year ended 31 May 2023 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 2023 £000 £000 £000 management £000 segments £000 £000
£000 £000
Revenue 27,173 12,449 13,192 2,821 3,497 59,132 - 59,132
External customers
Results 5,310 2,934 4,087 639 506 13,476 (5,828) 7,648
Segment profit before tax
£000 £000 £000 £000 £000 £000 £000 £000
Unaudited
Six months ended 30 Nov 2022
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
Audited
Year ended 31 May 2023
Revenue 50,795 23,056 23,732 6,856 6,743 111,182 - 111,182
External customers
Results 10,173 5,295 7,327 2,274 1,258 26,327 (14,474) 11,853
Segment profit before tax
The following table presents segment assets of the Group's operating segments
as at 30 November 2023 and 2022, and at 31 May 2023 respectively:
Unaudited Unaudited Audited
30 Nov 30 Nov 31 May
2023 2022 2023
£000 £000 £000
Investment and asset management 99,177 87,888 105,454
Private equity management 97,736 99,784 96,433
Pension advice and administration 27,537 24,139 26,300
Property management 2,442 2,893 4,091
Employee benefits 7,748 5,419 7,130
Total segment assets 234,640 220,123 239,408
Property, plant and equipment 13,870 13,877 13,992
Right of use assets 3,381 2,857 3,034
Intangible assets 1,942 1,711 1,803
Deferred tax asset 695 697 695
Investment in associate 4,453 4,693 -
Finance lease receivable 275 318 285
Prepayments and other receivables 4,613 5,662 7,126
Investments - - -
Cash and short-term deposits 32,669 38,324 45,101
Corporate assets 61,898 68,139 72,036
Total assets 296,538 288,262 311,444
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. Additionally, costs incurred in relation
to the strategic investment in a new CRM solution have been allocated
centrally, and not split across the segments.
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
2023 2022 2023
Reconciliation of profit £000 £000 £000
Total segment profit before tax 13,476 11,982 26,327
Deferred consideration as remuneration (2,458) (3,850) (6,865)
Depreciation (1,231) (1,216) (2,476)
Acquisition-related costs (216) (462) (1,505)
Strategic investment in CRM (664) - -
solution
Irrecoverable VAT (812) (743) (1,349)
Professional indemnity insurance (789) (717) (1,404)
Finance costs (747) (566) (1,126)
Amortisation and impairment (191) (338) (1,178)
Loss on disposal of investment in own shares - (116)
Bank charges (24) (27) (54)
Loss on disposal of assets 15 (10) 90
Foreign exchange losses (2) (7) (10)
Finance income 958 175 545
Share of profit from associate, net of tax 333 564 974
Group profit before tax 7,648 4,785 11,853
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 (1H23: 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
2023 2022 2023
£000 £000 £000
Net profit and diluted net profit attributable to equity holders of the 5,280 4,435 7,634
Company
Weighted average number of ordinary shares: 000s 000s 000s
Issued ordinary shares at start period 51,652 51,036 51,036
Effect of shares issued during the year ended 31 May 2023 - - -
Effect of shares issued during the current period 24 22 84
Basic weighted average number of shares 51,676 51,058 51,120
Effect of dilutive options at the statement of financial position date 116 139 118
Diluted weighted average number of shares 51,792 51,197 51,238
The Company has granted options under the Mattioli Woods 2021 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 2023 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 9.9 pence per share
(1H23: 5.7 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 101,282 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
2023 2022 2023
£000 £000 £000
Paid during the period:
Equity dividends on ordinary shares:
- Final dividend for 2023: 18.0p (2022: 17.8p) 9,315 9,094 9,093
- Interim dividend for 2023: 8.8p (2022: 8.3p) - - 4,505
Dividends paid 9,315 9,094 13,598
Proposed for approval:
Equity dividends on ordinary shares:
- Interim dividend for 2024: 9.0p (2023: 8.8p) 4,668 4,505 -
- Final dividend for 2023: 18.0p (2022: 17.8p) - - 9,196
Dividends proposed 4,668 4,505 9,196
The interim dividend was approved on 5 February 2024.
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 2023 of £1.29m
(1H23: £0.6m) 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 2023 was £0.02m (1H23:
recognised £0.04m).
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 2023 was
calculated based on an effective income tax rate of 30.8% (1H23: 36.6%), as
compared to the blended standard rate of UK corporation tax at the reporting
date of 25% (1H23: 20.0%). 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.
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 2023 10,780 3,173 5,480 2,625 22,058
Additions - 240 29 427 696
Disposals - - - (286) (286)
At 30 November 2023 10,780 3,413 5,509 2,766 22,468
Depreciation:
At 1 June 2023 1,034 2,131 3,803 1,098 8,066
Charged for the period 21 206 293 209 729
On disposals - - - (197) (197)
At 30 November 2023 1,055 2,337 4,096 1,111 8,597
Carrying amount:
At 30 November 2023 9,725 1,076 1,413 1,656 13,870
At 30 November 2022 9,730 1,035 1,946 1,166 13,877
At 31 May 2023 9,746 1,042 1,677 1,527 13,992
10. Right of use assets
Computer and office equipment
Properties Total
Gross carrying amount: £000 £000 £000
At 1 June 2023 6,362 - 6,362
Additions 849 - 849
At 30 November 2023 7,211 - 7,211
Depreciation:
At 1 June 2023 3,328 - 3,328
Charged for the period 502 - 502
At 30 November 2023 3,830 - 3,830
Carrying amount:
At 30 November 2023 3,381 - 3,381
At 30 November 2022 2,857 - 2,857
At 31 May 2023 3,034 - 3,034
11. Intangible assets
Gross carrying amount: Internally generated software Software Client portfolios Goodwill Total
£000 £000 £000 £000 £000
Brand
£000
At 1 June 2023 2,559 2,039 147,464 1,951 88,923 242,936
Additions - 330 - - 1,390 1,720
Arising on acquisition - - - - - -
Disposals - - - - - -
At 30 November 2023 2,559 2,369 147,464 1,951 90,313 244,656
Amortisation and impairment:
At 1 June 2023 1,544 1,295 31,627 89 - 34,555
Amortisation for the period 142 49 4,249 - - 4,440
On disposals - - - - - -
At 30 November 2023 1,686 1,344 35,876 89 - 38,995
Carrying amount:
At 30 November 2023 873 1,025 111,588 1,862 90,313 205,661
At 30 November 2022 1,269 442 108,248 1,813 83,516 195,288
At 31 May 2023 1,015 744 115,837 1,862 88,923 208,381
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
2023 2022 2023
Investment in associate £000 £000 £000
At start of period 4,128 4,165 4,165
Share of profit for the period 333 585 1,029
Amortisation of fair value of intangibles - (34) (68)
Share of other comprehensive loss (8) (23) (18)
Dividends received - - (980)
At end of period 4,453 4,693 4,128
Share of profit from associates in statement of comprehensive income:
Share of profit for the period 367 585 1,029
Amortisation of fair value intangible assets (34) (34) (68)
Elimination of transactions with associate - 13 13
333 564 974
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 2023, 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 6,819 2,577 8,320 1,947 49%
Group's share of profit 367
The net assets of Amati as at 1 June 2023 were £3,526,000. At 30 November
2023 the net assets of Amati were £4,257,000 following payment of dividends
of £nil and other increases in net assets of £731,000, increasing the
Group's interest in the associate by £324,000 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 2023 4,945
Additions 82
Disposals (148)
Revaluation (373)
At 30 November 2023 4,506
Listed investments 2023 2,431
Unlisted investments 2023 2,075
At 30 November 2023 4,506
Current 2023 50
Non-current 2023 4,456
At 30 November 2023 4,506
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 consultancy and admin Investment and asset management Private equity asset management Property management Employee benefits
£000 £000 £000 £000 £000 Total
£000
Goodwill 5,490 42,820 39,787 188 638 88,923
Client portfolios 8,690 53,120 49,939 463 5,442 117,654
Brand - - 1,764 - - 1,764
Software 1,680 76 - 38 9 1,803
Right of use assets 446 1,056 1,057 89 386 3,034
Deferred tax liabilities on acquired intangible assets (802) (10,177) (12,228) - - (23,207)
Lease liabilities (490) (1,168) (1,109) (88) (501) (3,356)
At 31 May 2023 15,014 85,727 79,210 690 5,974 186,615
Goodwill 5,772 43,193 39,787 188 1,374 90,314
Client portfolios 8,268 51,276 48,245 432 5,184 113,405
Brand - - 1,715 - - 1,715
Software 1,808 55 - 71 8 1,942
Right of use assets 427 1,058 1,358 91 447 3,381
Deferred tax liabilities on acquired intangible assets (774) (9,890) (11,804) - - (22,468)
Lease liabilities (465) (1,188) (1,440) (95) (600) (3,788)
At 30 Nov 2023 15,036 84,504 78,162 687 6,413 184,501
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
13.6% (31 May 2023: 15.3%), 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 2023: 5.0%) and
a long-term growth rate of 2.0% (31 May 2023: 2.0%), which management
considers conservative against actual average long-term growth rates.
The value in use calculated at 30 November 2023 was £423.7m (31 May 2023:
£366.9m). Comparing this to the net asset value of the operating segments
identified above, the directors believe the value of goodwill is not impaired
at 30 November 2023. This accounting treatment resulted in an impairment loss
of £nil (1H23: £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 2023 to changes
in the key assumptions is as follows:
Assumption Base assumption Change in assumption Increase/(decrease) in value in use
£m
Discount rate 13.6% +1.0% (44.6)
Years 1-3 cashflows Var. -5.0% (21.2)
Medium-term growth rate 5.0% -5.0% (31.7)
Long-term growth rate 2.0% -2.0% (62.4)
None of these individual sensitivities would result in an impairment in the
value in use of any operating segment.
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 six-months ended 30 Nov 2023 Unaudited Audited
31 May 2023
Equity-settled 30 Nov 2022
Equity-settled
£000 Equity-settled
£000
£000
Long-Term Incentive Plan 1,050 756 1,614
Share Incentive Plan 180 100 378
Total 1,230 856 1,992
Long-Term Incentive Plan
During the period, Mattioli Woods plc 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 2023
30 Nov 2022 Equity-settled
31 May 2023
Equity-settled No. Equity-settled
No. No.
Outstanding at start of period 1,397,937 1,051,127 1,051,127
Granted during the period 549,054 450,000 450,000
Exercised during the period (118,181) (81,668) (82,768)
Forfeited during the period (22,868) (300) (20,422)
Outstanding at end of period 1,805,942 1,419,159 1,397,937
Exercisable at end of period 115,300 139,159 117,937
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 2023 Granted during the period Forfeited during the period Exercised during the period At 30 Nov 2023
No. No. No. No. No.
6 September 2016 £0.01 14,979 (300) (14,679) -
5 September 2017 £0.01 7,958 - - (7,958) -
6 September 2018 £0.01 35,200 - - (9,400) 25,800
4 September 2019 - Tranche A £0.01 98,000 - - - 98,000
4 September 2019 - Tranche B £0.01 59,800 - - (22,300) 37,500
1 June 2020 - Tranche A £0.01 132,550 - - - 132,550
1 June 2020 - Tranche B £0.01 111,750 - - (59,750) 52,000
24 December 2021 - Tranche A £0.01 144,400 - - - 144,400
24 December 2021 - Tranche B £0.01 343,300 - (10,568) (4,094) 328,638
26 October 2022 - Tranche A £0.01 230,500 - (2,000) - 228,500
26 October 2022 - Tranche B £0.01 219,500 - (10,000) - 209,500
18 September 2023 - Tranche A £0.01 - 245,300 - - 245,300
18 September 2023 - Tranche B £0.01 - 303,754 - - 303,754
1,397,937 549,054 (22,868) (118,181) 1,805,942
The weighted average share price at the date of exercise for share options
exercised during the period was £6.10 (31 May 2023: £6.56). For the share
options outstanding at 30 November 2023, the weighted average exercise prices
("WAEP") was £0.01 (31 May 2023: £0.01), and the weighted average remaining
contractual life is 2.43 years (31 May 2023: 2.14 years).
As a result of the exercise of 118,181 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 £754,000.
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 2023:
Tranche A Tranche B
Date of grant 18 September 2023 18 September 2023
Share price at date of grant 6.30 6.30
Option exercise price £0.01 £0.01
Expected life of option (years) 6.5 4.5
Expected share price volatility (%) 22.0 22.0
Dividend yield (%) 4.65 4.65
Risk-free interest rate (%) 4.33 4.46
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 91,342 (1H23: 106,075) new ordinary shares were issued to the 494
(1H23: 473) employees who participated in the SIP during the period. At 30
November 2023 986,374 (1H23: 853,456) shares were held in the SIP on their
behalf, of which 203,943 (1H23: 193,721) conditional matching shares were not
yet vested, and there were nil (1H23: 1,295) 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 2023 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) 3,528 2,458 - 1,070
Fixed asset investments at fair value through other comprehensive income (Note 978 - - 978
12)
At 30 November 2023 4,506 2,458 - 2,048
Financial liabilities
Contingent consideration (Note 16) 13,899 - - 13,899
At 30 November 2023 13,899 - - 13,899
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 2023 13,322 4,571 2,042 842 138 442 21,357
Arising during period - 2,458 - (7) - (29) 2,422
Arising on acquisition 711 - - - - - 711
Paid during the period (467) (5,030) (49) 13 - - (5,533)
Unwinding of discount 333 - - - - - 333
Unused amounts reversed - 1 (117) - - - (116)
At 30 Nov 2023 13,899 2,000 1,876 848 138 413 19,174
Current 10,907 2,000 1,876 194 79 98 15,154
Non-current 2,992 - - 654 59 315 4,020
At 30 Nov 2023 13,899 2,000 1,876 848 138 413 19,174
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 £10.9m (1H23:
£7.9m) and the Group expects to settle the non-current balance of £3.0m
(1H23: £0.3m) 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
£2.0m (1H23: £3.1m).
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 2023 the Group received revenues of
£2.0m (1H23: £2.3m) in respect of annual management charges, administration
and marketing fees from Custodian REIT. Custodian REIT owed the Group £5,095
(1H23: £13,256) at 30 November 2023.
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 2023 the Group received rent of £16,519 (1H23: £30,413)
from Amati as lessee, £4,016 (1H23: £7,500) from the recharge of other
property related costs and consultancy fees of £20,000 (1H23: £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 2023 the Group paid
fees of £Nil (2023: £Nil) to a subsidiary of K3 Capital Group Plc in respect
of R&D tax credit consultancy fees.
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 (1H23: six) other executives,
accrued total compensation of £1.9m for the six months ended 30 November
2023 (1H23: £1.9m). 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
2023 2022 2023
£000 £000 £000
Wages and salaries 1,648 1,546 4,198
Social security costs 227 272 621
Pension 20 25 48
Benefits in kind 22 20 65
1,917 1,863 4,932
In addition, the cost of share-based payments disclosed separately in the
statement of comprehensive income was £0.7m (1H23: £0.4m).
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 2023 remuneration
costs of £nil (1H23: £750,000) have been recognised in the statement of
comprehensive income, and provision of £nil (1H23: £1,000,000) is recognised
in Note 16. Based on management's latest forecasts we anticipate that no
further remuneration costs, are available to management sellers.
Following the acquisition of Maven Capital Partners UK LLP ("Maven") on 30
June 2021, management sellers will receive remuneration of up to £19,200,000
over a four year earn out to 30 June 2025, subject to the achievement of
certain performance conditions including the financial performance of Maven
meeting financial targets and continuing employment of management sellers. In
the six months ended 30 November 2023 remuneration costs of £2,400,00 (1H23:
£2,400,000) have been recognised in the statement of comprehensive income,
and provision of £2,000,000 (1H23: £2,000,000) is recognised in Note 16.
Based on management's latest forecasts we anticipate that a further
remuneration costs of £7,600,000, 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 2023 remuneration
costs of £57,375 (1H23: £115,000) have been recognised in the statement of
comprehensive income, and provision of £nil (1H23: £57,000) is recognised in
Note 16. Based on management's latest forecasts we anticipate that no further
remuneration costs are available to management sellers.
Capital commitments
As at 30 November 2023, the Group had £nil capital commitments (1H23: £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 1H24 1H23
£000 £000
At a point in time:
Investment and asset management 1,861 1,704
Private equity management 2,731 3,151
Pension advice and administration 612 258
Property management 6 192
Employee benefits 226 425
Non-recurring revenue 5,436 5,730
Over time:
Investment and asset management 25,312 23,128
Private equity management 9,718 9,414
Pension advice and administration 12,580 10,651
Property management 2,815 3,252
Employee benefits 3,271 2,738
Recurring revenue 53,696 49,183
Total revenue 59,132 54,913
Recurring revenue 90.8% 89.6%
Organic revenues
A measure of revenue excluding revenue from businesses acquired in the current
or prior year.
1H24 1H23
£000 £000
Total revenue 59,132 54,913
Revenue from acquisitions in the prior year (2,026) (18,456)
Revenue from acquisitions in the current year - -
Organic revenue 57,105 36,457
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.
1H24 1H23
£000 £000
Statutory operating profit before financing 7,104 4,612
Amortisation of acquired intangibles 4,249 3,940
Amortisation of software 191 339
Depreciation 1,231 1,216
EBITDA 12,775 10,107
Share of profit from associates, net of tax 333 564
Acquisition-related costs 250 462
Deferred consideration as remuneration 2,458 3,850
Other exceptional project costs 664 -
Adjusted EBITDA 16,480 14,983
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.
1H24 1H23
£000 £000
Statutory profit before tax 7,648 4,785
Amortisation of acquired intangibles 4,249 3,940
Acquisition-related costs 250 462
Acquisition-related notional interest charges 333 482
Deferred consideration as remuneration 2,458 3,850
Other exceptional project costs 664 -
Adjusted PBT 15,602 13,519
Adjusted PAT
A measure of profitability, net of taxation, based on Adjusted PBT and
deducting tax at the blended standard rate of 25% (1H23: 20.0%).
1H24 1H23
£000 £000
Adjusted PBT 15,602 13,519
Income tax expense at blended standard rate of 25% (1H23: 20.0%) (3,901) (2,704)
Adjusted PAT 11,701 10,815
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.
1H24 1H23
£000 £000
Adjusted PAT 11,701 10,815
Basic weighted average number of shares (see Note 6) 51,676 51,058
Adjusted EPS 22.7 21.2p
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.
1H24 1H23
Group £000 £000
Statutory cash generated from operations 7,050 (1,522)
Contingent remuneration paid on acquisition of subsidiaries (see Note 16) 5,030 8,543
Acquisition costs paid 492 137
Adjusted cash generated from operations 12,572 7,158
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 £672.2m (31 May 2023: £829.2m) of funds under
management by the Groups associate, Amati Global Investors Limited, excluding
£65.5m (31 May 2023: £73.0m) of Mattioli Woods' client investment and
£10.7m (31 May 2023: £11.7m) 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, platform project 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) Profit after tax used to derive adjusted EPS is calculated as
profit before tax less income tax at the blended standard rate of 25.0% (1H23:
20.0%) divided by the number of shares in issue.
6 (#_ftnref6) Revenue for the six months ended 30 November 2023 was split
37% (1H23 restated: 39%) fixed, initial or time-based fees and 63% (1H23
restated: 61%) ad valorem fees based on the value of assets under management,
advice and administration.
7 (#_ftnref7) Includes £748.4m (31 May 2023: £913.9m) 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 and £0.9bn through our Maven Capital Partners ("Maven")
team
8 (#_ftnref8) Strategic goals to achieve £300m revenue, £100m earnings and
£30bn client assets.
9 (#_ftnref9) Revenue for the six months ended 30 November 2023 was split
37% (1H23 restated: 39%) fixed, initial or time-based fees and 63% (1H23
restated: 61%) ad valorem fees based on the value of assets under management,
advice and administration.
10 (#_ftnref10) Certain pension scheme assets, including clients' own
commercial properties, are only subject to a statutory valuation at a benefit
crystallisation event.
11 (#_ftnref11) Value of funds under trusteeship in SIPP and SSAS schemes
administered by Mattioli Woods and its subsidiaries.
12 (#_ftnref12) Includes £672.2m (31 May 2023: £829.2m) of funds under
management by the Group's associate, Amati Global Investors Limited, excluding
£65.5m (31 May 2023: £73.0m) of Mattioli Woods' client investment and
£10.7m (31 May 2023: £11.7m) of cross-holdings between the TB Amati Smaller
Companies Fund and the Amati AIM VCT plc.
13 (#_ftnref13) SIPP and SSAS schemes where the Group acts as pension
consultant and administrator.
14 (#_ftnref14) Includes personal wealth clients with SIPP and SSAS schemes
operated by third parties.
15 (#_ftnref15) Figures in table may not add due to rounding.
16 (#_ftnref16) Figures in table may not add due to rounding.
17 (#_ftnref17) Cash generated from operations before acquisition-related
costs paid and contingent remuneration paid.
18 (#_ftnref18) Working capital defined as trade and other receivables less
trade and other payables.
19 (#_ftnref19) Comprises £12.3m (31 May 2023 £12.0m) invested in
Custodian REIT, £66.3m (31 May 2023: £66.3m) in MW Property Securities Fund,
£33.3m (31 May 2023: nil) in MW UK Dynamic Fund and £49.9m (31 May 2023:
£55.2m) in Amati funds.
20 (#_ftnref20) Cross-holdings between TB Amati Smaller Companies Fund and
Amati AIM VCT plc.
21 (#_ftnref21) SIPP and SSAS schemes where Mattioli Woods acts as pension
consultant and administrator.
22 (#_ftnref22) Direct schemes lost to an alternative provider as a
percentage of average scheme numbers during the period.
23 (#_ftnref23) Direct schemes lost as a result of death, annuity purchase,
external transfer or cancellation as a percentage of average scheme numbers
during the period.
24 (#_ftnref24) Source: Numis Securities Limited, Investment Companies
Datasheet dated 14 December 2023
.
25 (#_ftnref25) Net assets excess paid in 2H24
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