Final Results

RNS Number : 5796Y

Mattioli Woods PLC

08 September 2009

 



Press Release

8 September 2009

Mattioli Woods plc

('Mattioli Woods' or 'the Group')

Final Results

Mattioli Woods plc (AIM: MTW.L), the specialist pensions consultancy, today reports its Final Results for the year ended 31 May 2009.  

Highlights

• Revenue up 22.6% to £13.28m (2008: £10.83m) 

• Profit before tax and amortisation1 up 11.3% to £4.13m (2008: £3.71m)

• Adjusted EPS1,2 up 10.7% to 17.12p (2008: 15.46p)

• Proposed final dividend up 37.5% to 2.75p (2008: 2.00p)

• Advising on £1.46bn (2008: £1.35bn) of core funds under trusteeship 

• Core scheme numbers up 5.4% to 2,579 (2008: 2,446)

• Average core scheme value of £0.57m (2008: £0.55m)

• Cash at period end of £4.81m (2008: £2.54m)

1Before amortisation of intangible assets other than computer software.  

2Basic EPS up 10.3% to 15.76p (2008: 14.29p).  

Commenting on the Final Results, Bob Woods, Executive Chairman, said:

'I am delighted to report another year of strong results with continued growth in revenue and profits.  Against the backdrop of an almost unprecedented downturn in global markets, the growth in core scheme numbers and funds under trusteeship over the past twelve months highlights the resilience of our business model and the value that clients place on our proactive and impartial advice.  

'Revenue has more than doubled over the last four years, whilst the business has remained strongly cash generative.  Accordingly, the Board believes it is appropriate to significantly increase the dividend payout.  

'We are passionate about developing a business that can continue to deliver our highly-personalised services, but to a significantly higher number of clients.  I expect the continuing shift in responsibility for pension provision from the state and the employer to the individual, higher savings ratios and proposed regulatory changes to present us with additional new business opportunities.  

'Trading in the current period is in line with the Board's expectations and we remain confident the increase in marketing activity undertaken throughout the period will enhance our growth prospects.'

- Ends -

For further information please contact:

Mattioli Woods plc
Bob Woods, Executive Chairman	Tel: [phone]
[e-mail]	www.mattioli-woods.com

Ian Mattioli, Chief Executive	Tel: [phone]
[e-mail]	www.mattioli-woods.com

Nathan Imlach, Finance Director	Tel: [phone]
[e-mail]	www.mattioli-woods.com

Evolution Securities Limited
Joanne Lake, Corporate Finance	Tel: [phone]
[e-mail]	www.evosecurities.com

  Media enquiries:

Financial Dynamics Limited
Ed Gascoigne-Pees / Nick Henderson	Tel: [phone]
[e-mail]	www.fd.com

Notes to editors

Mattioli Woods is one of the UK's leading and fastest growing providers of specialist pension consultancy and retirement wealth management.  Its core services and advice are targeted towards the higher end of the market including controlling directors, professionals, owner-managed businesses and small to medium-sized PLCs.  

The Group has focused particularly on advice on the application and administration of self-invested personal pensions ('SIPPs') and small self-administered pension schemes ('SSASs').  

Mattioli Woods delivers the highest level of personal advice, maintaining very close relationships with its clients.  The strength of its personal relationships has led to high levels of client satisfaction, retention and referrals.  

Mattioli Woods provides clients with the following:

• Pensions and investment consultancy.

• Bespoke pension scheme administration and trusteeship, particularly for SIPP, SSAS and Group schemes.  

• In-house investment research and broking.  

• Property syndication.  

• Structuring of investment products tailored to a particular client's needs.  

• Assistance and advice with securing preferential banking arrangements for clients.  

For more information visit www.mattioli-woods.com 

Analyst presentation

There will be an analyst presentation to discuss the results at 9.30am today at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.  

Those analysts wishing to attend are asked to contact Kat Bloom at Financial Dynamics on [phone] or at [e-mail].

Chairman's statement

I am delighted to report we have achieved strong growth over the 12 months ended 31 May 2009, with revenue up 22.6% and profit before tax and amortisation1 up 11.3% compared to the prior year.  

The last 12 months have been a challenging period for many people contemplating how to fund and manage their retirement. Accordingly, we have focused our efforts on advising existing clients as proactively as possible. The cornerstone of this initiative was a series of client seminars held across the UK. This was very well attended and warmly received, with most clients being complimentary about the effectiveness of our retirement wealth investment strategies.  

Whilst the consultancy team has focused on existing clients' financial affairs following the almost unprecedented downturn in global markets, I am delighted we have attracted 236 new SSAS and SIPP schemes during the period (2008: 280). Core funds under trusteeship at 31 May 2009 totalled £1.46bn (2008: £1.35bn).  

1Before amortisation of intangible assets other than computer software.  

Market overview

Whilst it is clear there will be no rapid conclusion to the problems brought about by the credit crisis, with such poor returns available from the haven of cash based deposits, clients are increasingly seeking better investment opportunities, although most remain risk averse. This is leading to a growing appetite for structured products and other low risk alternatives to cash. We expect this trend to gather momentum as and when the economic recovery begins.  

The shift in responsibility for pension provision from the state and the employer to the individual is further underlined by the continuing demise of defined-benefit schemes.  I believe this will leave millions of employees needing professional advice and lead to more people managing their retirement savings through SIPPs and SSASs, due to the control, flexibility and cost-effectiveness these products offer.  There is an enormous shortage of independent advice in the UK, leaving ourselves well placed to take advantage of this opportunity as it unfolds.  

I also believe a combination of market conditions and political change will heighten public awareness of the need to save more, leading to higher savings ratios than have been experienced in the UK for many years.  The Budget 2009 contained an announcement that the availability of higher-rate tax relief on pension contributions to registered pension schemes will be restricted from 6 April 2011 for those earning more than £150,000 a year.  The amount of tax relief available will be tapered so that those earning more than £180,000 will have tax relief at the basic rate only.  Whilst the details on how these restrictions will work in practice from 2011 are still to be consulted on, the arguments in favour of SIPPs and SSASs will remain compelling for many higher-rate taxpayers.  

We are passionate about developing a business that can continue to deliver our highly-personalised services, but to a significantly higher number of clients long-term.  

Compliance

It looks increasingly likely that the FSA's Review of Retail Distribution ('RDR') will bring fundamental changes to the sector.  The salient proposals are that advisors must agree a fee basis with their clients at the start of the professional relationship, meaning that product providers will not be permitted to pay commission, but will be allowed to facilitate the payment of the advisor's agreed remuneration through a 'one for one' increase in product costs.  

This proposed approach is similar to that embodied within our existing fees and services agreements, so we do not anticipate any difficulty in complying with these proposals. However, for many IFAs this may well prove to be difficult in moving conceptually from a commission to a fee culture. This is likely to reduce the number of truly independent advisors in the UK, particularly as the FSA is also proposing to 'up the ante' insofar as professional qualification requirements are concerned. So just at the time when there will be an increased need for independent advice, this initiative is likely to reduce the number of such advisors.

Most surprisingly the RDR also proposes making it easier for institutions providing 'restricted advice' or 'basic advice' to sell products to consumers by reducing the requirements for 'best advice' and knowledge of the client. In summary we believe these proposals, if they come to pass, would improve our competitive advantage.

Trading results

We achieved significantly increased revenues of £13.28m (2008: £10.83m) in the year ended 31 May 2009, with the two businesses acquired in 2008 contributing £1.78m of revenue during the period (2008: £1.00m).  The 'credit crisis' led to increased demand for advice from clients, particularly in the first half of the year. Revenues from our fee-based services increased by 35.3% to £6.48m (2008: £4.79m), representing 48.8% of total revenue (2008: 44.3%).  

Investment-related revenues were 42.8% of total revenue (2008: 40.4%), while property syndicate revenues fell to 8.4% (2008: 15.3%), with fewer new syndicates being completed during the period.  These changes illustrate how the revenue mix adjusts as we take account of changes in economic conditions and the underlying needs of our clients.  This resilience was illustrated in the second half of the financial year, when the adverse impact on our banking-related revenues of the Bank of England base rate falling to historic lows was offset by increased revenues from client investment in structured products and cash funds, which offer the prospect of higher yields.  

Earnings before interest, taxation, depreciation and amortisation ('EBITDA') increased by 16.9% to £4.29m (2008: £3.67m), with profit before tax up 11.1% to £3.90m (2008: £3.51m).  The EBITDA margin fell to 32.3% (2008: 33.9%) as a result of the changes in revenue mix during the period. Adjusted earnings per share (adding back amortisation on intangible assets other than computer software) increased by 10.7% to 17.12 pence (2008: 15.46 pence).  

Notwithstanding the increased time spent on existing clients' affairs, I am delighted with the organic growth achieved during the period.  We have introduced a wide range of new marketing initiatives, which will be added to over the coming financial year. As a result, I expect to see stronger organic growth over the next 12 months.  

We also continue to enjoy strong client retention, with an overall client attrition rate of 3.2% (2008: 2.3%).  

Staff

Our people continue to demonstrate an enormous amount of enthusiasm and professionalism in responding to the challenges created by the recent turmoil in financial markets.  I thank all our employees for their dedication and hard work over the last year, as it is their effort that differentiates Mattioli Woods from its competitors.  

We built upon this strong team spirit with the introduction of the Mattioli Woods plc Share Incentive Plan in June 2008, which facilitates wider equity participation throughout the organisation.  There has been an enthusiastic response with 76 eligible staff electing to invest via the plan to date.  

To accommodate our growth objectives, building capacity remains a high priority and our graduate recruitment programme remains on target with 10 new joiners during the year. Our increased business profile as a listed company continues to enhance our ability to recruit both new and experienced staff.  

We offer training and financial support for all staff pursuing relevant professional qualifications and encourage all our account managers to obtain the Certificate in Financial Planning within two years of joining.  

Dividends

When we floated the business on AIM, we set out our intention to pursue a progressive dividend policy that would reflect the long term earnings trend of the Group and allow the Group to maintain an appropriate level of dividend cover.  Revenue has more than doubled over the last four years, whilst the business has remained strongly cash generative.  The Board believes it is now appropriate to significantly increase the dividend payout.  Accordingly, the Board is pleased to recommend the payment of a final dividend for the year ended 31 May 2009 of 2.75 pence (2008: 2.00 pence) per ordinary share. If approved, the final dividend will be paid on 23 October 2009 to shareholders on the register at the close of business on 18 September 2009.  

The Board remains committed to growing the dividend sensibly, whilst maintaining an appropriate level of dividend cover.  

Shareholders

We continue to expand the excellent institutional shareholder base we have enjoyed since joining the AIM market.  We are also determined to develop broader private client interest and employee share participation.  We intend to communicate fully with all our shareholders and the wider market, building further awareness of Mattioli Woods over the coming years.  

Outlook

The 2009 financial result, achieved during a period of almost unprecedented turbulence in financial markets, demonstrates the resilience of our fee-based, advice-led approach to retirement planning. This reinforces my belief that we can achieve further growth despite difficult economic circumstances.  The market trends outlined above will lead to an increasing number of people with a lack of choice regarding sources of impartial advice, presenting us with a substantial and growing opportunity.  We are continuing to enhance our trading platforms to ensure we can take maximum advantage of this.  

Trading in the current period is in line with the Board's expectations and we remain confident the increase in marketing activity undertaken throughout the period will enhance our growth prospects, as we continue to develop products tailored to the needs of our clients.

Bob Woods

Chairman

7 September 2009

Chief Executive's review 

Introduction

I introduced my 2008 review with the words 'I am proud we have continued our track record of growth whilst maintaining our strong business ethics and excellent client service'.  I am delighted our organisation has continued to meet our objectives for all three of these key parameters, despite a significantly different financial backdrop.  

Strong business ethics ensure we provide our clients with the most appropriate advice, in what many commentators suggest are the most difficult financial circumstances seen for at least a generation.  Our revenue mix has changed as our advice to clients has changed to take account of events in global markets.  This inbuilt flexibility of our business model has underpinned our ability to secure further growth despite the difficult economic circumstances.  

It is almost four years since Mattioli Woods was admitted to trading on AIM.  One of my key objectives upon flotation was to create a platform capable of supporting a much larger business.  I believe we have achieved this and I am very excited about the potential to further develop Mattioli Woods as a brand that is recognised as providing bespoke pension, retirement and investment advice to a growing client base.  

Business objective and strategy

Our objective is to continue to provide a bespoke, personalised service to clients in the retirement wealth market, achieving profitable growth year-on-year.  This is key to achieving the financial and non-financial measures that increase shareholder value.  

Revenue streams

The Group's turnover is derived from three key revenue streams: pension consultancy and administration, investment planning and property syndicates. 

Pension consultancy and administration

Mattioli Woods' core business is pension consultancy, involving the provision and administration of SIPPs and SSASs. Our client base primarily comprises owner-managers, senior executives and members of the professions.  We also provide group scheme consultancy and personal financial planning as complementary services to our core business.

Our main source of income is time-based fees earned for setting up and administering SIPP and SSAS schemes. Additional fees are generated from consultancy services for special one-off activities. Revenues from our fee-based services have increased by 35.3% to £6.48m (2008: £4.79m). The increase reflects the impact of this being the first full year of trading results from the Pension Consulting Limited ('PCL') and JB Group portfolios we acquired last year, coupled with an increased demand for advice from clients as a result of the significant downturn in financial markets seen during the first half of the financial year.  

Investment planning

The key feature of our approach to retirement wealth management is the impartial nature of our investment advice. We focus on providing solutions tailored to each individual client's needs and offer the whole of the market, including our own bespoke products.

Our rationale for any new product development is to enhance our clients' existing position.  Our clients' desire to protect their capital whilst retaining the possibility of capital growth linked to investment in more volatile and speculative indices led us to develop our capital-guaranteed bond programme.  The volatility seen in all major stock markets during the year has increased client demand for this type of structured product.  We launched 15 (2008: five) capital-guaranteed bonds during the year with clients subscribing a total of £46.7m (2008: £14.7m).  

Our fee-based model reinforces our ability to provide appropriate independent advice to our clients.  Whilst our income streams are not directly dependent upon the performance of financial markets or the value of funds under trusteeship, movements in these can influence the appetite of our clients to make investments. Periods of volatility in a particular asset class may see changes in how our investment planning revenues are derived.  However, a great strength of our business is that we can continue to derive income from investments in all asset classes, whilst ensuring our clients' investment strategies are appropriately aligned to the prevailing market conditions.  Investment planning revenues grew by 30.2% in 2009 to £5.69m (2008: £4.37m).

Property syndicates

Mattioli Woods facilitates commercial property ownership for its clients by way of a syndicated property initiative.  We believe commercial property is ideally suited as a retirement investment, with good quality properties typically providing stable long-term income streams.  Properties introduced to the Group by our professional property contacts are referred to an independent property adviser, who recommends appropriate properties for syndication.

Notwithstanding the outlook for commercial property over the short to medium term, demand remains within our client base for prime property with the benefit of long leases and strong tenant covenants.  

We facilitated the purchase of two (2008: six) new properties during the year with a combined value of £6.51m (2008: £23.03m), with the completion of fewer new property syndicates being offset by clients moving monies into other asset classes.  The total number of property syndicates using our administrative services at the year-end increased to 38 (2008: 36).  Total income from property syndicates was £1.11m (2008: £1.66m), with £0.75m (2008: £0.71m) of this being derived from our annual administration services.  The effect on revenue of completing fewer new syndicates during the period was offset by clients investing monies into other asset classes, such as structured products.  

Market conditions may lead to lower price expectations amongst prospective vendors, creating new buying opportunities.  We continue to monitor our clients' appetite for direct commercial property investment and will facilitate suitable opportunities when they are available.  

Market

Our markets are serviced by a wide range of suppliers offering diverse services to individual and corporate clients. These markets are fragmented and remain highly competitive, although some commentators suggest the regulatory changes outlined below may drive consolidation, particularly in the IFA sector.  We will continue to evaluate appropriate acquisition opportunities as they arise.  

I believe our holistic service offering, coupled with the introduction of innovative new products, is the most effective way to deliver the increasingly tailored solutions our clients demand.  

Regulatory environment 

Financial Services Authority

The Group is regulated by a number of different bodies.  Mattioli Woods is authorised and regulated by the FSA to provide investment advice and to establish, operate and wind-up personal pension schemes, including SIPPs.  The FSA's SIPP regulation regime introduced in 2007 affords additional protection to clients through capital adequacy requirements imposed on the providers of pension schemes. Throughout the period, we have complied with these requirements.  

As might be expected in the current economic environment, the FSA has been increasingly active and a summary of how the FSA's recent pronouncements impact the Group is set out below.  

FSA Code of practice on remuneration policies

In August 2009, the FSA published the FSA Code of practice on remuneration policies ('the FSA Code').  The remuneration structure for senior executives was put in place at the time of the Company's admission to AIM in November 2005 and has remained broadly unchanged.  We intend to undertake a full review our compensation policies in conjunction with external consultants, considering the general requirement and principles of the FSA Code.  

It is a priority for the Group to continue to attract and retain appropriately qualified staff.  The Remuneration Committee expects that a Long Term Incentive Plan ('LTIP') will be a key part of the revised remuneration structure.  The principal terms of any such plan are expected to be announced in the early months of 2010.  

Review of Retail Distribution

The FSA published a detailed consultation paper on 25 June 2009 setting out draft rules for how the retail investment industry will work from December 2012.  There has been relatively little change from the first draft published in July 2007.  Under the FSA's proposals, advisers will have to charge customers a fee rather than receiving commission from the companies whose products they recommend.  IFAs will be required to adopt a much stricter remuneration agreement at the outset of a new client relationship, divorced from a specific product sale, together with higher professional standards.  I believe the drive to 'adviser-led remuneration' means our well-established, fee-based billing model will give us a competitive advantage over much of the IFA sector.  

The implementation of the RDR will not be completed until 2012, although I expect firms to adopt some of the new requirements in the interim.  Mattioli Woods has a fee-based business model and provides clients with service and fee agreements at the outset, hence I do not expect the RDR's proposals will change significantly the way we deal with our clients.  

Quality of advice on pension switching

In December 2008, the FSA published a report summarising its thematic review 'Quality of advice on pension switching', which assessed the quality of advice since A-Day in relation to transfers of personal pensions or SIPPs.  As a result of the review highlighting significant failings at several firms, the FSA wrote to over 450 firms asking them to consider past and future sales in light of the review's findings.  This is being followed up with a series of visits and desk-based file reviews to assess whether firms have taken sufficient action in response to the FSA's request.  

Mattioli Woods was visited as part of this review in April 2007 and I am pleased to report the FSA has not asked for any further work to be undertaken as a result of its visit.  It is clear the FSA believes some operators have mis-sold personal pensions and SIPPs, which I believe may lead to negative press comment about the IFA sector in relation to SIPPs when the wider review is underway.

Review of the Prudential Rules for Personal Investment Firms

In November 2008, the FSA published its consultation paper 'Review of the Prudential Rules for Personal Investment Firms'. If enacted, the FSA's latest proposals are likely to increase the capital adequacy burden on many small and medium sized IFA firms, who may be forced to exit the market, creating new opportunities for Mattioli Woods.  

HM Revenue & Customs and The Pensions Regulator

A number of the Group's subsidiaries are registered with HM Revenue & Customs ('HMRC') as scheme administrators for pension schemes (including SSASs). All pension schemes must be registered with The Pensions Regulator.

Whilst concern was expressed in some quarters about Chancellor Alistair Darling's 2009 Budget proposals to restrict tax relief on pension contributions for people with taxable income of £150,000 or more to the basic rate of income tax with effect from 6 April 2011, we are confident this will have a negligible impact on our business. Retirement planning will still be required despite these changes and our focus continues to be on capturing existing retirement wealth, rather than having any significant reliance on new contributions.  Following the introduction of the lifetime allowance in April 2006, many high-earners have already stopped or substantially reduced their contribution levels to avoid overfunding their pension schemes.  

Legislative changes create complications, which inevitably lead to greater client advisory and planning opportunities for Mattioli Woods.  

Compliance

Strong compliance has always been at the heart of our business. We consider carefully all legislative changes and the findings of all FSA and HMRC reviews.  Where appropriate, we take action to ensure our systems and processes continue to represent best practice.  

We continue to invest in maintaining our staff's technical excellence and developing our administration systems.  The majority of our consultancy team joined us as graduate trainees and already hold high-level examinations obtained during their training with us.  

We maintain dedicated compliance teams, with systems to proactively monitor client investments, consultancy and administration services, investment advice, financial standing of suppliers, pension transfer advice, FSA rule book compliance and Audit & Pension Schemes Services compliance. 

Current and future developments and performance

Group results

Our goals continue to be the delivery of quality personal service that adds real value to clients, whilst maintaining high ethical standards and enhancing shareholder value.  

Sales revenues were £13.28m (2008: £10.83m), up 22.6% on the prior year.  The businesses of PCL and the JB Group acquired in 2008 contributed £1.78m of revenue during the period (2008: £1.00m). Organic revenue growth of 17.0% generated an additional £1.67m of income. Operating profit increased by 15.1% to £3.81m (2008: £3.31m).  

Cash generated from operations increased to £4.31m (2008: £3.08m) as a result of revenue growth and improved credit control.  The conversion of EBITDA to cash also improved to 100.3% (2008: 83.8%).  

The EBITDA margin of 32.3% (2008: 33.9%) was impacted by a change in sales mix and increased share-based payment costs of £0.20m (2008: £0.10m) following the introduction of the Mattioli Woods plc Share Incentive Plan ('the SIP') in June 2008.  Fee-based revenues increased to 48.8% of total revenue (2008: 44.3%), investment planning related revenues were 42.8% (2008: 40.4%) and property syndicate revenues fell to 8.4% (2008: 15.3%), due to the completion of fewer new syndicates during the period.  

Improvements in information systems and technology provide scope for future margin improvement and even better client service going forward.

Acquisitions

Clients acquired as part of the PCL and JB Group acquisitions completed in the previous financial year have continued to integrate well, benefitting from our more proactive approach.  Deferred and contingent consideration of up to £0.65m (2008: £1.23m) is payable on these acquisitions over the next two years.  

Prior to acquisition, neither PCL nor the JB Group provided the broad range of services that benefits Mattioli Woods' clients. This has allowed us to offer the acquired client bases additional services, such as our syndicated property initiatives and guaranteed investment products.  

We are particularly pleased with the strong retention of clients within each portfolio.  The average annualised 'core' revenues on retained ex-PCL and JB Group schemes (calculated as fee-based revenue plus investment commissions excluding banking, property syndicates and guaranteed investment products) increased during the period, reflecting an increased demand for advice during the 'credit crunch'.  

Growth in the SSAS and SIPP market means organic growth is likely to maintain our overall momentum.  However, I believe increased regulation will lead to new acquisition opportunities and our strong balance sheet will enable us, if appropriate, to take advantage of such opportunities as they arise.  Growing our presence by acquisition will continue to be an important element of our future growth strategy.  

Resources, risks and relationships

Resources

The Group aims to safeguard the assets that give it competitive advantage, including its reputation for quality, proactive advice, its technical competency and its people. 

Our core values provide a framework for responsible and ethical business practices. Structures for accountability from our administration teams through to the operational management team and the Group board are clearly defined. The proper operation of the supporting processes and controls are regularly reviewed by the Audit Committee and take into account ethical considerations, including procedures for 'whistle-blowing'.

Capacity

Our people continue to demonstrate an enormous amount of enthusiasm and commitment in responding to the challenges created by the recent turmoil in financial markets.  Maintaining capacity is crucial in an environment of growing demand and our graduate recruitment programme remains on target.  

A total of 10 new graduates joined the Group (2008: 12), increasing our total headcount at the end of the period to 164 (2008: 147).  The Group now employs a total of 21 pension consultants (2008: 20).  Our increased business profile as a public company continues to enhance our ability to recruit new and experienced staff.  

The development of a scalable technology platform remains a key objective for the Group. We are continuing to invest in developing our bespoke 'MWeb' system. This will facilitate enhanced pension administration services, including access to real-time valuation information.  

Staff

I have highlighted previously the strong team spirit and commitment we enjoy from all our staff. It remains our aim to build on that culture by continuing to facilitate wider equity participation within the organisation.  The introduction of the SIP in June 2008 was an important step towards this objective and has received a very positive reaction from our staff.

The SIP enables our employees to buy shares in the Company out of pre-tax income by having an amount deducted from their salary each month.  In addition, participating employees are granted matching shares on a one-for-one basis.  I believe employees with a vested interest in the success of the Group are more motivated and share incentive plans have proven to be an effective tool for staff retention.  

Principal risks and uncertainties 

We believe the most significant risk we face is potential damage to our reputation as a result of poor client service. We address this through ongoing quality control testing and the provision of regular training for all our staff.

Pension regulations will continue to be reviewed. Future changes may not produce an environment that is advantageous to the Group and any changes in regulation may be retrospective. To address this risk, we are committed to ensuring that our views are expressed during consultation exercises and that we respond positively and rapidly to new regulations.  

We also recognise that a significant skills shortage would represent a risk to growth. We are mitigating this risk through investment in our graduate recruitment programme and by providing incentives to motivate and retain our existing employees.  

Relationships

The Group's performance and value to our shareholders are influenced by other stakeholders, principally our clients, suppliers and employees; Government; and our strategic partners.  Our approach to all these parties is founded on the principle of open and honest dialogue based on a mutual understanding of needs and objectives.  

Relationships with our clients are managed on an individual basis through our account managers and consultants. Employees have performance development reviews and employee forums provide a communication route between employees and management.  Mattioli Woods also participates in trade associations and industry groups, which give us access to client and supplier groups and decision-makers in Government and other regulatory bodies.  

Mattioli Woods is a member of the Association of Member-directed Pension Schemes and the Quoted Companies Alliance.  

Financial position

Net financing income

Net financing income was £0.09m (2008: £0.20m). The Group has maintained a positive net cash position throughout the financial year, but net financing income was adversely impacted by falls in the Bank of England base rate to a low of 0.5% at the year-end.  

Taxation

The effective rate of taxation on profit on ordinary activities is 30.1% (2008: 29.7%). The net deferred taxation liability carried forward at 31 May 2009 was £0.13m (2008: £0.11m).

Earnings per share and dividend

The basic and diluted earnings per share for the year as per Note 12 were 15.76p (2008: 14.29p).  The 30.0% increase in the total dividend for the year of 3.90p per share (2008: 3.00p) represents a significant increase in the payout ratio. This demonstrates our desire to deliver value to shareholders and our confidence in the future outlook for the business. The Board remains committed to growing the dividend progressively, whilst maintaining an appropriate level of dividend cover.  

Cash flow

Net cash generated from operations was £4.31m (2008: £3.08m) with EBITDA of £4.29m (2008: £3.67m). The Group converted 100.3% (2008: 83.8%) of EBITDA into operating cash flow, with the increase being due to improved credit control.  As at 31 May 2009, the Group was owed £0.12m (2008: £0.53m) by property syndicates.  

The cash inflow from working capital was £0.21m (2008: £0.78m).  Headline trade debtor days were 70 days (2008: 83 days) and trade creditor days were 28 days (2008: 18 days).  The decrease in trade debtor days is primarily due to improved credit control, with the increase in trade creditor days due to an increase in amounts owed to suppliers at the year-end, primarily in respect of professional services procured on behalf of clients.  

Capital expenditure for the year was £0.47m (2008: £0.53m), with significant expenditure on software and computer equipment associated with the continued development of MWeb. Further investment in the Group's information systems and technology is planned over the next year.

Bank facilities

The Group has renegotiated its borrowing facilities with Lloyds TSB Bank plc ('Lloyds TSB'), replacing its previous facilities with Lloyds TSB and the Royal Bank of Scotland plc ('RBS').  The RBS facilities consisted of an overdraft facility of £5.00m with interest payable at the bank's base rate (currently 0.5%) plus 1.0% on the first £1.5m, plus 1.25% on the next £1.5m and plus 1.375% on borrowings in excess of £3.00m.  The Lloyds TSB facilities consisted of an overdraft facility of £0.25m with interest payable at 1.0% over the bank's base rate (currently 0.5%).  

These arrangements have been replaced by a £3.00m overdraft facility with Lloyds TSB, with interest payable at the bank's base rate plus 1.0% on the first £0.25m and plus 1.375% on borrowings in excess of £0.25m. The Lloyds TSB facility is repayable upon demand and renewable on 31 January 2010.  

At 31 May 2009 the Group had unused borrowing facilities of £3.00m (2008: £5.25m).  

Capital structure

The Group's capital structure is as follows:

	2009 £	2008 £
Net funds	(4,801,359)	(2,528,985)
Shareholders' equity	16,458,508	14,027,062
Capital employed	11,657,149	11,498,077

Gearing has fallen from 4.9% to (11.5)%, with the Group becoming negatively geared as a result of strong cash generation during the period.  

Conclusion

The banking crisis and subsequent volatility in global markets led many people to become increasingly concerned about their retirement wealth.  We continued to deliver proactive advice throughout a period of great uncertainty, taking into account changes in economic conditions and the underlying needs of our clients.  

We continue to review our own business model, forging ahead with the changes required to ensure we can continue growing the business appropriately.  Our focus on putting in place a platform that will deliver our personalised, advice-led services to a much larger client-base is embodied in the 'Small to Big' project we are currently undertaking.  Trading in the period since the end of the financial year has continued in line with our expectations.  These are exciting times and we are passionate about engaging all our clients and staff to secure our future success.  

Ian Mattioli

Chief Executive

7 September 2009

Consolidated income statement

For the year ended 31 May 2009

	Note	2009 £	2008 £
Revenue	2	13,283,204	10,828,151
Employee benefits expense		(6,813,449)	(5,499,147)
Other administrative expenses		(1,941,255)	(1,537,507)
Share based payments		(199,905)	(104,659)
Amortisation		(299,099)	(224,313)
Depreciation		(183,178)	(142,636)
Loss on disposal of property, plant & equipment		(35,360)	(14,304)
Operating profit before financing		3,810,958	3,305,585
Finance revenue		91,599	219,033
Finance costs		(5,889)	(15,434)
Net finance revenue		85,710	203,599
Profit before tax		3,896,668	3,509,184
Income tax expense		(1,174,410)	(1,043,945)
Profit for the year		2,722,258	2,465,239
Attributable to:
Equity holders of the parent		2,722,258	2,465,239
Earnings per ordinary share:
Basic (pence)	3	15.76p	14.29p
Diluted (pence)	3	15.76p	14.29p
Proposed total dividend per share (pence)	4	3.90p	3.00p

The operating profit for each period arises from the Group's continuing operations.  The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The profit for the financial year of the Company after taxation was £2,722,258 (2008: £2,466,315).

Statement of recognised income and expense

For the year ended 31 May 2009

	Note	Group 2009 £	Company 2009 £	Group 2008 £	Company 2008 £
Deferred tax on share-based payments		(31,968)	(31,968)	65,114	65,114
Income and expense recognised directly in equity		(31,968)	(31,968)	65,114	65,114
Profit for the year		2,722,258	2,722,258	2,465,239	2,466,315
Total recognised income and expense for the year		2,690,290	2,690,290	2,530,353	2,531,429

  Balance sheets

As at 31 May 2009

		2009		2008
		Group	Company	Group	Company
	Note	£	£	£	£
Assets
Property, plant and equipment		638,634	638,634	733,101	733,101
Intangible assets		10,056,466	10,056,466	10,065,182	10,065,182
Deferred tax asset		127,805	127,805	166,328	166,328
Investments	5	15	41,682	15	41,682
Total non-current assets		10,822,920	10,864,587	10,964,626	11,006,293
Trade and other receivables		5,021,080	5,020,713	4,689,938	4,689,571
Financial assets		120,392	120,392	529,242	529,242
Cash and short-term deposits	6	4,808,179	4,804,379	2,537,894	2,534,094
Total current assets		9,949,651	9,945,484	7,757,074	7,752,907
Total assets		20,772,571	20,810,071	18,721,700	18,759,200
Equity
Issued capital	7	172,855	172,855	172,159	172,159
Share premium	7	5,769,149	5,769,149	5,601,458	5,601,458
Other reserves	7	2,456,341	2,456,341	2,372,242	2,372,242
Retained earnings	7	8,060,163	8,061,239	5,881,203	5,882,279
Total equity attributable to equity holders of the parent		16,458,508	16,459,584	14,027,062	14,028,138
Non-current liabilities
Trade and other payables		100,000	100,000	365,500	365,500
Interest-bearing loans and borrowings		-	-	10,030	10,030
Deferred tax liability		262,555	262,555	273,929	273,929
Provisions		242,599	242,599	353,326	353,326
Total non-current liabilities		605,154	605,154	1,002,785	1,002,785
Current liabilities
Trade and other payables		2,810,554	2,846,978	2,856,231	2,892,655
Interest-bearing loans and borrowings		-	-	18,212	18,212
Income tax payable		559,229	559,229	513,932	513,932
Provisions		339,126	339,126	303,478	303,478
Total current liabilities		3,708,909	3,745,333	3,691,853	3,728,277
Total liabilities		4,314,063	4,350,487	4,694,638	4,731,062
Total equities and liabilities		20,772,571	20,810,071	18,721,700	18,759,200

The financial statements were approved by the board of directors and authorised for issue on 7 September 2009 and are signed on its behalf by:

Ian Mattioli                            Nathan Imlach

Chief Executive                        Finance Director

Cash flow statements

For the year ended 31 May 2009

		Group  2009	Company 2009	Group  2008	Company 2008
	Note	£	£	£	£
Operating activities
Cash receipts from customers		12,952,062	12,952,062	9,717,005	9,167,171
Cash paid to suppliers and employees		(8,644,073)	(8,644,073)	(6,639,453)	(6,434,356)
Cash generated from operations		4,307,989	4,307,989	3,077,552	2,732,815
Interest paid		(5,889)	(5,889)	(15,434)	(9,804)
Income taxes paid		(1,133,932)	(1,133,932)	(1,056,729)	(1,025,982)
Net cashflows from operating activities		3,168,168	3,168,168	2,005,389	1,697,029
Investing activities
Proceeds from sale of property, plant and equipment		2,545	2,545	12,400	12,400
Purchase of property, plant and equipment		(126,616)	(126,616)	(420,956)	(420,956)
Purchase of software		(345,133)	(345,133)	(104,457)	(104,457)
Acquisition of subsidiaries	1	(206,000)	(206,000)	(1,712,985)	(1,712,985)
Cash received on acquisition of subsidiaries		-	-	183,805	183,805
Acquisition of businesses	1	(234,048)	(234,048)	(1,311,327)	(1,351,730)
Acquisition of other investments		-	-	(15)	(15)
New loans advanced to property syndicates		(1,629,060)	(1,629,060)	(1,493,620)	(1,493,620)
Loan repayments from property syndicates		2,037,910	2,037,910	2,918,693	2,918,693
Interest received		91,599	91,599	219,033	221,584
Net cashflows from investing activities		(408,803)	(408,803)	(1,709,429)	(1,747,281)
Financing activities
Proceeds from the issue of share capital		84,549	84,549	-	-
Repayment of borrowings		(28,242)	(28,242)	-	-
Repayment of Directors' loans		(2,089)	(2,089)	(19,967)	(19,967)
Dividends paid	4	(543,298)	(543,298)	(464,850)	(464,850)
Dividends received		-	-	-	346,212
Net cashflows from financing activities		(489,080)	(489,080)	(484,817)	(138,605)
Net increase/(decrease) in cash and cash equivalents		2,270,285	2,270,285	(188,857)	(188,857)
Cash and cash equivalents at start period	6	2,537,894	2,534,094	2,726,751	2,722,951
Cash and cash equivalents at end period	6	4,808,179	4,804,379	2,537,894	2,534,094

Notes

1. Business combinations

Acquisition of Pension Consulting Limited

On 9 July 2007 the Group acquired 100% of the voting shares of Pension Consulting Limited ('PCL'). The total acquisition cost included deferred and contingent consideration of up to £450,000 payable in the two years following completion. During the period, the Group paid a total of £153,909 deferred and contingent consideration to the vendors of PCL.  The Directors estimate the net present value of deferred and contingent consideration outstanding at 31 May 2009 is £25,500 (2008: £177,500) and £80,000 (2008: £150,000) respectively.

Acquisition of the JB Group

On 18 February 2008 the Group acquired the trade and assets of John Bradley Financial Services ('JBFS') and North Star SIPP LLP (together 'the JB Group'). The total acquisition cost included deferred and contingent consideration of up to £1,340,000 payable in the three years following completion. During the period the Group paid a total of £233,505 deferred and contingent consideration to the vendors of the JB Group. The Directors estimate the net present value of deferred and contingent consideration outstanding at 31 May 2009 is £340,000 (2008: £640,000) and £200,000 (2008: £200,000) respectively.

2. Revenue

Revenue disclosed in the income statement is analysed as follows:	2009 £	2008 £
Rendering of services	7,588,818	6,454,651
Commission income	5,694,386	4,373,500
	13,283,204	10,828,151
No revenue was derived from exchanges of goods or services (2008: £nil).

3. 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. 

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 following reflects the income and share data used in the basic and diluted earnings per share computations:

	2009 £	2008 £
Net profit and diluted net profit attributable to equity holders of the Company	2,722,258	2,465,239
Weighted average number of ordinary shares:	Thousands	Thousands
Issued ordinary shares at start period	17,216	17,216
Effect of shares issued during the year	52	34
Basic weighted average number of shares	17,268	17,250
Dilutive potential ordinary shares:
- Employee share options	-	-
Diluted weighted average number of shares	17,268	17,250

The Company has granted options under the Share Option Plan and Consultants' Share Option Plan to certain of its senior managers and directors to acquire (in aggregate) up to 8.02% 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 31 May 2009 the conditions are not satisfied. If the conditions had been satisfied, diluted earnings per share would have been 14.59p per share (2008: 13.28p).  

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. 

4. Dividends paid and proposed

	2009 £	2008 £
Declared and paid during the year:
Equity dividends on ordinary shares:
- Final dividend for 2008: 2.00p (2007: 1.70p)	344,788	292,670
- Interim dividend for 2009: 1.15p (2008: 1.00p)	198,510	172,180
Dividends paid	543,298	464,850
Proposed for approval by shareholders at the AGM:
Final dividend for 2009: 2.75p (2008: 2.00p)	475,890	344,788

5. Other investments

On 1 October 2007, Mattioli Woods subscribed £15 for 15% of the issued share capital of Mainsforth Developments Limited ('Mainsforth'), a company incorporated in England and Wales with its principal activity being the development and selling of real estate. On the same date, Mainsforth entered into two conditional sales agreements ('CSAs') to acquire freehold land.

The first CSA gives Mainsforth the right to acquire certain freehold land ('Land A') with vacant possession for a purchase consideration of £1.0m.  

The second CSA gives Mainsforth the right to acquire other freehold land adjacent to Land A ('Land B') with vacant possession for a purchase consideration of £2.8m, subject to an upwards and downwards adjustment if the consideration (the 'Development Consideration') payable to Mainsforth on the sale of Land A and Land B (together 'the Development Land') is greater or less than £10.0m, subject to the condition that the consideration payable for Land B shall not be reduced below £2.2m.  

The effective date of the agreements will be the date on which planning approval is granted for the development of the Development Land as a mixed use scheme where residential property comprises at least 50% of the built area. Any consideration payable by Mainsforth under the CSAs only becomes payable on completion of its sale of the Development Land. If planning approval has not been obtained by 1 December 2010 the agreements will lapse, although the termination dates may be extended to 1 December 2011 if certain conditions are fulfilled. 

6.    Cash and short-term deposits

For the purpose of the cashflow statements, cash and cash equivalents comprise the following at 31 May:

	2009 £	Group 2008 £	2009 £	Company 2008 £
Cash at banks and on hand	3,808,179	2,537,894	3,804,379	2,534,094
Short-term deposits	1,000,000	-	1,000,000	-
	4,808,179	2,537,894	4,804,379	2,534,094
Bank overdrafts	-	-	-	-
	4,808,179	2,537,894	4,804,379	2,534,094

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and short-term deposits is £4,808,179 (2008: £2,537,894).  

At 31 May 2009, the Group had available £3,000,000 (2008: £5,250,000) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.  

7. Issued capital and reserves

Share capital	Ordinary shares  of 1p	Ordinary shares of 1p £
Authorised
At 1 June 2008 and 31 May 2009	30,000,000	300,000
Issued and fully paid
At 1 June 2007 and 31 May 2008	17,215,910	172,159
Partnership shares issued under the SIP	34,604	346
Matching shares issued under the SIP	34,604	346
Dividend shares issued under the SIP	407	4
At 31 May 2009	17,285,525	172,855

Other reserves 

Group	Equity-share based payments £	Share premium account £	Capital redemption reserve £	Retained earnings £
1 June 2007	202,469	5,601,458	2,000,000	3,880,814
Share based payments	104,659	-	-	-
Deferred tax asset taken to equity	65,114	-	-	-
Profit for the financial year	-	-	-	2,465,239
Dividends	-	-	-	(464,850)
At 31 May 2008	372,242	5,601,458	2,000,000	5,881,203
Share based payments	116,067	-	-	-
Shares issued under Share Incentive Plan	-	167,691	-	-
Deferred tax asset taken to equity	(31,968)	-	-	-
Profit for the financial year	-	-	-	2,722,258
Dividends	-	-	-	(543,298)
At 31 May 2009	456,341	5,769,149	2,000,000	8,060,163

Company	£	£	£	£
At 1 June 2007	202,469	5,601,458	2,000,000	3,880,814
Share based payments	104,659	-	-	-
Deferred tax asset taken to equity	65,114	-	-	-
Profit for the financial year	-	-	-	2,466,315
Dividends	-	-	-	(464,850)
At 31 May 2008	372,242	5,601,458	2,000,000	5,882,279
Share based payments	116,067	-	-	-
Shares issued under Share Incentive Plan	-	167,691	-	-
Deferred tax asset taken to equity	(31,968)	-	-	-
Profit for the financial year	-	-	-	2,722,258
Dividends	-	-	-	(543,298)
At 31 May 2009	456,341	5,769,149	2,000,000	8,061,239

8. Events after the balance sheet date 

Fixed Term Deposits

The Group has entered into certain agreements with the Bank of Scotland plc, which govern the application of a pricing mechanism to be used in the calculation of credit interest rates that the Bank of Scotland plc pays to the Group.  

The Group and Bank of Scotland plc may agree any number of separate fixed term deposits subject to minimum and maximum periods of three months and 12 months respectively. If during the term of a fixed term deposit the aggregate of client deposits held under the Group's 'branch' arrangement with Bank of Scotland plc falls below the aggregate of all unexpired fixed term deposits, the Group is obliged to pay Bank of Scotland plc breakage costs of £250 per day for each unexpired fixed term deposit left uncovered.  

9. Distribution of the annual report and accounts to members

The announcement set out above does not constitute a full financial statement of the Group's affairs for the year ended 31 May 2008 or 2009.  The Group's auditors have reported on the full accounts of each year and have accompanied them with an unqualified report.  The accounts have yet to be delivered to the Registrar of Companies.

The annual report and accounts will be posted to shareholders in due course, and will be available on our web site (www.mattioli-woods.com) and for inspection by the public at the Group's Head Office address: MW House, 1 Penman Way, Grove Park, Enderby, Leicester LE19 1SY during normal business hours on any weekday.  Further copies will be available on request.

The Company's annual general meeting will take place on 22 October 2009 at the Group's head office.

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END

 

 

FR USASRKARKRAR