Mattioli Woods confident in face of geopolitical risks

Specialist wealth management and employee benefits provider Mattioli Woods updated the market on its trading on Monday, ahead of its interim results for the six months ended 30 November, reporting “strong growth” in adjusted EBITDA and adjusted profit before tax year-on-year.

The AIM-traded company said its EBITDA margin in the first half was “substantially ahead” of its 20% target, while total client assets at period end were £8.8bn.

Gross discretionary assets under management as at 30 November totalled £2.4bn.

Mattioli Woods said its recent acquisitions were performing and integrating “well”, and said it was in a “strong” financial position, with cash of more than £16m.

Its profit outlook for the year was said to be in line with management's expectations.

“I am pleased to report the first half of this financial year represented a period of further sustainable profit growth in a complex market, notwithstanding a lower level of client activity over the last six months due to generally poor investment sentiment and prolonged uncertainty over Brexit,” said chief executive Ian Mattioli.

“Slightly lower than expected revenue growth is a combination of the group reducing our clients' costs and general market conditions.

“The impact of this has been more than offset by a continued focus on operational efficiencies and other administrative cost savings, resulting in strong profit growth and our EBITDA margin for the period tracking substantially ahead of our 20% target.”

Mattioli Woods did complete its move to its new Leicester office in October, which it said incurred “significantly lower” downtime and relocation costs than anticipated.

The more flexible working environment allowed it to continue growing the business and realise further operational efficiencies, whilst ensuring its client services remained first class, it said.

In addition, it would benefit from future rental savings of around £0.85m per annum.

“We also completed a number of other projects during the period, including the implementation of a cloud hosted IT architecture across the group, the introduction of an integrated human resource management and payroll system and the launch of a refreshed Mattioli Woods brand, with the one-off costs associated with these projects and the reorganisation of certain elements of our operations more than offset by cost savings recognised during the period,” said Ian Mattioli.

“We intend to continue managing the cost base against the backdrop of an uncertain market outlook.

“I have previously indicated that I believe fees for financial services in the UK are too expensive and have set out our aim to lower client costs, whilst building a long-term sustainable business.”

He said that securing operational efficiencies and economies of scale, particularly through the integration of acquired businesses and clients, were “key elements” of the company’s aim to reduce clients' total expense ratios and ensure sustainable returns for our shareholders.

Growth in profit for the period included a positive contribution from the Broughtons Financial Planning business the company acquired in August, as well as an increased share of profit from the group's associate company, Amati Global Investors, with the value of its gross funds under management increasing to more than £348m at period end.

“Amati was named the Best AIM IHT Portfolio Service for the third year running at the Investment Week Tax Efficient Awards in November, following on from Amati's Paul Jourdan being named best UK Smaller Companies Fund Manager at the FE Alpha Manager of the Year Awards in May,” Ian Mattioli noted.

“Since the group's purchase of 49% of Amati in February 2017 we have been reviewing how best to attract and retain talent within the Amati business.

“Given the success of the current arrangement, I believe the group retaining a minority interest in the joint venture offers the optimal structure for all its stakeholders.”

As a result, Mattioli said the group had agreed to cancel its option to acquire the remaining 51% of Amati in return for a payment of £0.75m, equivalent to the fair value of the option at 30 November.

The bespoke investment services the group had developed enjoyed aggregate net inflows - before market movements - of more than £140m, the with gross discretionary assets under management increasing to £2.4b at period end, the firm said.

“However, unlike many wealth managers, most of our revenues are fee-based, rather than being linked to the value of assets under management, administration or advice.

“The successful implementation of our cloud hosted IT architecture offers the group enhanced data security, business continuity and scalability for future growth, whilst our integrated human resource management and payroll system allows us to engage with all our people through one platform.

“We have reviewed our capital investment in IT, including how to continue to develop our CRM system and improve our client propositions, which has resulted in the accelerated amortisation of some of our existing IT systems.

“As previously stated, we intend to continue investing in a stronger infrastructure base and our IT spend remains in line with expectations.”

Ian Mattioli said that, with “many geopolitical uncertainties”, the company believed it was the time to engage with clients and ensure it addressed their changing needs and requirements for advice, administration and review.

“I believe our focus on client service and the inherent flex within our business model will allow us to continue to adapt to the changing wealth and asset management marketplace.

“Although there is some caution around markets, we believe the group is well placed to secure further growth, both organically and by acquisition, and further consolidation within our core markets remains likely.

“Our profit outlook for the year remains in line with management's expectations and I am confident we can secure further progress towards the ambitious longer-term goals we have set.”

Mattioli Woods said it would announce its half-year results to 30 November on 5 February.