Final Results
Mattioli Woods PLC
04 September 2007
Press Release 4 September 2007
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 2007.
Highlights
• Turnover increased by 18.9% to £9.00 million (2006: £7.57 million)
• Profit before tax up 45.2% to £3.15 million (2006: £2.17 million)
• Earnings per share up 28.0% to 12.8 pence (2006: 10.0 pence)
• Proposed total dividend of 2.55 pence per share (2006: 1.4 pence per share)
• Organic growth of 21.1% in SIPP numbers (2006: 19.1%)
• Maturity and awareness of SIPPs continues to increase demand
• Advising on funds under trusteeship of over £1 billion (2007: £818 million)
• Strong client retention
• Acquisition of Pension Consulting Limited ('PCL') completed in July 2007
Commenting on the Final Results, Bob Woods, Executive Chairman of Mattioli
Woods, said:
'These results reflect our ability to deliver high levels of organic growth,
whilst pursuing our strategy of accelerating this growth through targeted
acquisitions.
'Providing excellent client service has maintained our strong record of client
retention and we are proud to have reached the significant milestone of growing
SSAS and SIPP funds under trusteeship to over £1 billion following the
acquisition of PCL.
'The expansion in the SIPP market seen to date will be boosted as SIPPs are
becoming a mainstream pension vehicle. I believe further regulatory and market
changes over the next few years will present us with new growth opportunities
and I'm confident we are well-positioned to take advantage of these.
'Trading since the year end has continued to be positive and I look forward to
the future with enthusiasm.'
For further information:
Mattioli Woods plc
Bob Woods, Executive Chairman Tel: +44 (0) 116 240 8700
bob.woods@mattioli-woods.com www.mattioli-woods.com
Ian Mattioli, Chief Executive Tel: +44 (0) 116 240 8700
ian.mattioli@mattioli-woods.com www.mattioli-woods.com
Nathan Imlach, Finance Director Tel: +44 (0) 116 240 8700
nathan.imlach@mattioli-woods.com www.mattioli-woods.com
Evolution Securities Limited
Joanne Lake, Corporate Finance Tel: +44 (0) 113 243 1619
joanne.lake@evosecurities.com www.evosecurities.com
Media enquiries:
Abchurch
Georgina Bonham / Emma Johnson Tel: +44 (0) 113 203 1340
emma.johnson@abchurch-group.com www.abchurch-group.com
Chairman's statement
I am delighted with our performance for the year ended 31 May 2007 and the
exciting prospects for our business going forward. In my opinion, strong growth
seen in the self-invested personal pension ('SIPP') sector to date is likely to
be boosted by further major changes in the pensions arena over the next few
years.
At the year end, we acted for over 1,600 small self-administered pension scheme
('SSAS') and SIPP clients throughout the UK, an 11.7% increase during the year,
and funds under trusteeship had risen to over £818 million (2006: £728 million).
Following the acquisition of Pension Consulting Limited in July 2007, our
total funds under trusteeship now exceed £1 billion.
Trading results
In the year ended 31 May 2007, turnover increased by 18.9% to £9.00 million
(2006: £7.57 million) and profit before tax increased by 45.2% to £3.15 million
(2006: £2.17 million). Earnings per share were 12.8 pence (2006: 10.0 pence),
and the Board is pleased to recommend a final dividend for the year of 1.7 pence
per Ordinary Share (2006: 1.4 pence). Trading since the year end has continued
to be positive.
Our Chief Executive, Ian Mattioli, sets out an analysis of the last financial
year in his review and hence my Chairman's statement focuses on the future and
the key drivers in our core markets.
Our approach
The key differentiator between Mattioli Woods and many of our larger competitors
is our holistic and proactive approach to the use of SIPPs (and other schemes)
in developing clear pension strategies for our clients. We take the '
self-invested' out of self-invested personal pensions by providing our clients
with a comprehensive 'hand-holding' service. This has led us to develop a
number of complementary services in addition to our core pension consultancy and
investment planning. These include the arrangement of exclusive current account
and other banking facilities, syndicated property investments, structured
products and related advisory services, such as inheritance tax and business
planning.
This approach appears to have struck a chord within our target market.
Furthermore, we are now seeing the demand for our approach spreading from high
net worth clients to a much wider audience.
Market changes
Whilst our market continues to be fuelled by increasing client demand for the
greater control and flexibility afforded by SSASs and SIPPs, I believe there are
two other major issues that could substantially increase the market's demand for
SIPPs and, more importantly, the approach we take to their provision and
administration.
Defined benefit schemes
The vast majority of funds within UK pensions are held in defined benefit or
final salary schemes. Recent industry estimates put the figure as high as £1.5
trillion. However, a recent survey by the Association of Consulting Actuaries
revealed 81% of defined benefit schemes are now closed to new members, and the
number of schemes closed to the accrual of future service entitlement has
increased to 14% (up from 10% two years ago). Defined benefit schemes are
becoming less relevant in most employers' remuneration strategies. Many are
showing funding deficits and can present enormous nuisance value to the
sponsoring employer in terms of management time, operational cost and ongoing
financial liability.
However, deficits are being reduced, in some cases substantially, which I
believe will create the impetus over the next five to ten years for increasing
numbers of employers to wind-up their defined benefit schemes. This would give
rise to an enormous flow of pension funds from such schemes to alternative
individual plans and we expect the SIPP market to be a prime beneficiary.
During the year we started to market our group scheme consultancy services to
private companies with defined benefit schemes and early feedback supports the
views expressed above.
The regulatory environment
The Financial Services Authority ('FSA') recently published its 'Review of
Retail Distribution'. This promises to be one of the most comprehensive
overhauls of consumer protection for many years, and is likely to heighten
demand for the Group's services. At the heart of the review lie two
diametrically opposed positions. On the one hand, the FSA believes standards
should be raised for independent financial advisers ('IFAs'), demanding greater
professional qualifications and a move to remuneration based on in-principle
client agreement, rather than commission inducement from the product provider.
I am pleased to report Mattioli Woods has operated this way since its formation.
At the other end of the spectrum, the FSA is proposing that large institutions
should be allowed to sell financial products with a reduced duty of care. The
FSA acknowledges in its review this could lead to poor selling, but concludes
that for the general public to be badly sold some product is better than them
being sold none at all. I expect the likely outcome of this to be increased
demand for trouble-shooting and specialist advisory services such as our own.
Outlook
I believe self-invested pensions represent the most efficient vehicle for the
development of a pension strategy for almost anyone who is serious about
retirement planning, providing control, investment flexibility and cost
effectiveness. In my view, the demise of the defined benefit scheme combined
with the opportunity presented by SIPPs suggests industry estimates of the
future demand for SIPPs are likely to be considerably understated. I look
forward to the future with enthusiasm.
Bob Woods
Chairman
3 September 2007
Chief Executive's Review
Introduction
Having established the business with Bob Woods as a partnership in 1991, I am
proud we have been able to continue our track record of expansion and growth,
whilst staying true to our core values of strong business ethics and excellent
client service.
We continue to invest in new systems that will enable us to advise our clients
more efficiently and effectively, and have embraced the fundamental changes to
the pensions market that were introduced on 5 April 2006 ('A-Day'). This has
enabled us to access additional opportunities for our existing clients and to
attract new clients who have benefited from changes under the new regime.
Nature, objectives and strategies
The Group's turnover is derived from three key revenue streams: time-based fees,
investment planning and property syndicates.
Time-based fees
Mattioli Woods' core business is pension consultancy, involving the provision
and administration of SIPPs and SSASs. Our client base for SIPP and SSAS
services primarily comprises owner-managers, senior executives and professional
persons. However, 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 provided for special one-off activities. Revenues from
time-based fees have increased by 21.5% to £3,986,367 (2006: £3,281,859).
The FSA's consultation paper in relation to how fees and commissions will be
generated in the future by FSA regulated organisations is likely to lead to
reduced commissions from product providers. Our revenues are already
predominantly fee-based and we welcome the challenges that these changes will
bring to the industry.
Investment planning
The key feature of our approach to pension consultancy is the impartial nature
of our investment advice, with its focus on providing solutions tailored to each
individual client's needs.
Being primarily fee-based reinforces our ability to provide appropriate
investment planning for our pension fund 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 to secure their pension. Periods of volatility in a
particular asset class may see changes in how our investment planning fees and
commissions are derived. However, we can continue to derive income from
investments in other asset classes, whilst ensuring our clients' investment
strategies are appropriately aligned to the prevailing market conditions.
Investment commissions grew by 22.3% in 2007 (2006: 19.9%).
Property syndicates
Mattioli Woods facilitates commercial property ownership for its clients by way
of a syndicated property initiative. Properties introduced to the Group by our
professional property contacts are referred to an independent property adviser,
who either recommends or rejects the property for syndication.
During the year we helped to facilitate the purchase of seven properties with a
combined value of £19.1 million, taking the total number of property syndicates
using our administrative services at the year end to 30 (2006: 23).
During the last financial year, the property market did appear over-priced at
times, which resulted in us arranging a smaller number of syndicates than
expected. However, we believe commercial property prices are now looking like
better value and expect syndicate numbers to increase again this year. Our
clients are still showing strong appetite for the property syndicate initiative.
The total income from property syndicates was £932,916 (2006: £955,404), of
which £399,969 (2006: £244,495) was recurring income derived from our annual
administration services.
New product developments
Our rationale for any new product development is to enhance our clients'
existing position. We launched our first three capital-guaranteed investment
bonds during the year, where capital growth is linked to investment in more
volatile and speculative indices. We also developed a secondary market for
existing property syndicate investments, through which we have facilitated the
sale and purchase of £1.0 million worth of existing syndicate holdings since
December 2006.
Market
Most of our chosen markets are serviced by a range of suppliers offering
services directly to individual and corporate clients. These markets are
fragmented but remain competitive.
This fragmentation reinforces my belief that our growth strategy, based on a
combination of specifically targeted acquisitions and organic growth, including
the introduction of innovative new products, continues to be the most effective
way to deliver the increasingly tailored solutions our clients demand.
Regulatory environment
The Group is regulated by a number of different bodies. Mattioli Woods is
authorised and regulated by the FSA, and is a member of the Association of
Member-directed Pension Schemes.
In March 2007, Mattioli Woods received authorisation from the FSA to establish
and operate personal pension schemes, including SIPPs, under the new regulatory
regime introduced with effect from 6 April 2007.
We welcome the regulation of SIPPs and were pleased to be one of the first firms
to receive approval from the FSA. This initiative from the regulator provides
our clients with even greater confidence when selecting a SIPP as their
preferred method of retirement planning.
Additional protection is now afforded to clients following the introduction of
significantly higher capital adequacy requirements for the providers of pension
schemes. Our strong balance sheet allowed us to meet this FSA requirement
without the need for any additional funding.
Business objectives and strategies
Our objective is to grow our organisation by increasing market share and
enhancing Mattioli Woods' reputation in the pensions consultancy market. This
is key to achieving the financial and non-financial measures that increase
shareholder value.
Current and future developments and performance
Group results
We have made significant progress towards our goals of delivering quality
personal service that adds real value to clients, whilst maintaining high
ethical standards and enhancing shareholder value.
Sales revenues were £9.00 million (2006: £7.57 million), up 18.9% on the prior
year. Organic growth continues to be the main driver of increased turnover.
Operating profit before financing increased by 36.6% to £2.95 million (2006:
£2.16 million).
Cash generated from operations increased to £3.72 million (2006: £2.33 million)
due to increased sales coupled with improved credit control. Operating margin
of 32.8% (2006: 28.5%) was ahead of our expectations for the year. The
improvement in operating margin was achieved through the realisation of
operational efficiencies on the back of 'A-Day' legislation, investment in new
systems and the benefits of operational gearing being realised as revenues
increased, particularly on the two client portfolios acquired in 2006. Planned
improvements in information systems and technology provide scope for further
margin improvement and even better client service.
Acquisitions
Both client portfolios acquired in the financial year ended 31 May 2006 are now
fully integrated within our core business and are performing in line with our
aspirations. We are very pleased with the strong retention of clients within
both these portfolios.
Consistent with the growth strategy we set out on flotation, we acquired the
entire issued share capital of Pension Consulting Limited ('PCL') for a total
cash consideration of up to £1.925 million in July 2007.
Established in 1999 and based in Leicester, PCL administers pension schemes on
behalf of 145 SSAS and 213 SIPP clients. It has funds under trusteeship of over
£185 million and its subsidiary company, PC Trustees Limited, acts as trustee to
the schemes. PCL's experienced team of two consultants and 11 administration
staff have been retained by the Group following the acquisition.
PCL is a good cultural fit with Mattioli Woods. Like us, PCL has focused on
attracting clients who require bespoke personal service and specialist advice.
However, it did not provide the broad range of services that benefits Mattioli
Woods' clients and this provides the opportunity to offer additional services,
such as our syndicated property initiative and guaranteed investment products,
to PCL's existing client base.
Demand for pensions consultancy and administration in the SSAS and SIPP market
is increasing strongly, meaning organic growth is likely to maintain our overall
momentum. However, taking advantage of opportunities to grow our presence by
acquisition will continue to be an important element of our future growth.
Dividends
The Board is pleased to recommend the payment of a final dividend for the year
ended 31 May 2007 of 1.7 pence (2006: 1.4 pence) per Ordinary Share. It is our
intention to grow dividend distributions sensibly going forward. If approved,
the final dividend will be paid on 19 October 2007 to shareholders on the
Register at the close of business of 14 September 2007.
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, innovative and ethical yet
commercial business practices. Structures for accountability from our
administration teams through to the operational management team and then 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'.
Employees
The last year has been an exceptionally busy period for Mattioli Woods and it is
only through the hard work and dedication of our employees that I am able to
report on the positive progress we have achieved. We have added a number of key
people to the business, including the appointment of a Marketing and Sales
Manager to support the Marketing and Sales Director. We continue to invest
significant resources in our graduate recruitment campaign, which will give us
the capacity for future growth. Twelve new graduates joined us in 2007 (2006:
six), and another six graduates have joined since the year end.
The quality, knowledge and commitment of our people are key to providing our
clients with a consistently high level of personal service and attention to
detail. We now employ 115 people at our Leicester base and we would like to
thank everyone for their support, energy and commitment over the past year.
Mattioli Woods has always enjoyed a strong team spirit and commitment from all
its staff, and our aim is to strengthen that culture by facilitating wider
equity participation within the organisation.
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 with all these parties is founded on the
principles 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.
Financial position
Net financing income
Net financing income was £193,722 (2006: £9,721) reflecting the repayment of
debt in 2006. The Group has maintained a positive net cash position throughout
the financial year.
Taxation
The effective rate of taxation on profit on ordinary activities is 30.3% (2006:
31.1%). The deferred taxation asset carried forward at 31 May 2007 was £143,936
(2006: £16,946).
Earnings per share and dividend
The basic and diluted earnings per share in the year were 12.8 pence (2006: 10.0
pence). The total dividend for the year of 2.55 pence per share (2006: 1.4
pence) demonstrates our desire to grow the dividend steadily.
Cash flow
The net cash generated from operations increased to £3.7 million (2006: £2.3
million) due to our strong earnings before interest, taxation, depreciation and
amortisation ('EBITDA') of £3.16 million (2006: £2.33 million). The Group
converted 117.4% (2006: 100.3%) of EBITDA into operating cash flow, primarily
due to the majority of staff bonuses being accrued but not paid at the year-end.
As at 31 May 2007 the Group was owed £1.95 million (2006: £1.92 million) by
property syndicates, of which £0.93 million has been repaid following the
year-end.
The cash inflow from working capital was £0.42 million (2006: outflow of £0.04
million). Trade debtor days were 48 days (2006: 65 days) and trade creditors
were 19 days (2006: six days). Trade debtor days were higher at 31 May 2006
primarily due to significant balances owed in respect of initial administration
fees on new property syndicates. Trade creditors were higher at 31 May 2007,
primarily due to balances owed to Touchstone Group for software consultancy.
Capital expenditure in the year was £243,046 (2006: £273,768), with continued
investment in the Group's information systems and technology planned for the
next year.
Net proceeds from new equity allotted in the year were £225,000 (2006: £5.4
million) following the exercise of options over 170,455 ordinary shares of 1p
each by W Deb MVL plc (formerly Williams de Broe plc) at an exercise price of
£1.32.
Bank facilities
The Group has bank overdraft facilities totalling £3.25 million. These
facilities consist of one overdraft facility of £2.25 million provided by the
Royal Bank of Scotland plc ('RBS') at 1.375% over the bank's base rate
(currently 5.75%) and another £0.75 million overdraft facility provided by RBS
at 1.5% over the bank's base rate. The Group also has an overdraft facility of
£0.25 million provided by Lloyds TSB plc ('Lloyds TSB') at 1.5% over the bank's
base rate (currently 5.75%).
The RBS facilities are repayable upon demand, and are subject to review on at
least an annual basis. The next review date for both RBS facilities is 20
December 2007. The Lloyds TSB facility is renewable on 31 March 2008.
At 31 May 2007 the Group had unused borrowing facilities of £3.1 million (2006:
£0.6 million).
Capital structure
The Group's capital structure is as follows:
2007 2006
£ £
Net (funds)/debt (2,697,876) (85,630)
Non-equity shareholders' funds (liability element) - -
(2,697,876) (85,630)
Shareholders' equity 11,856,900 9,659,225
Capital employed 9,159,024 9,573,595
On 17 October 2006, the Company allotted 170,455 ordinary shares of 1p at £1.32,
raising £225,000, following the exercise of options under the agreement dated 17
November 2005 made between the Company and Williams de Broe plc.
Gearing has fallen from 11.4% to (9.3)%, as a result of the repayment of debt in
2006 and strong cash generation during the year. The acquisition of PCL in July
2007 was funded out of existing cash resources.
Conclusion
Our achievements during the past year give us a great platform to continue
growing our business and trading since the year end has continued to be
positive. It is over a year since the Government introduced the 'A-Day' pension
simplification legislation and the SIPP is now accepted as the pension vehicle
of choice for a wider audience. We always believed 'A-Day' would not only boost
the rate of growth in the SIPP market, but also lead to rationalisation within
the sector. This has become apparent and we continue to look for further
opportunities to make strategic acquisitions. We also believe the ongoing
decline in defined benefit schemes will act as a driver of further growth in the
SIPP industry. We continue to invest in our graduate recruitment programme to
support further expansion of the Group. I am confident Mattioli Woods is well
positioned for the future.
Ian Mattioli
Chief Executive
3 September 2007
Consolidated income statement
For the year ended 31 May 2007
Note
2007 2006
£ £
Revenue 2 8,997,191 7,572,845
Employee benefits expense (4,219,130) (3,295,085)
Other administrative expenses (1,605,889) (1,950,019)
Depreciation and amortisation (213,359) (169,184)
Profit/(loss) on disposal of property, plant & equipment (7,407) -
Operating profit before financing 2,951,406 2,158,557
Financial income 194,734 103,731
Financial expenses (1,012) (94,010)
Net financing income/(costs) 193,722 9,721
Profit before taxation 3,145,128 2,168,278
Income tax expense (952,274) (674,585)
Profit for the year 2,192,854 1,493,693
Attributable to:
Equity holders of the parent 2,192,854 1,493,693
Earnings per ordinary share:
Basic (pence) 3 12.8p 10.0p
Diluted (pence) 3 12.8p 10.0p
Proposed total dividend per share (pence) 4 2.55p 1.40p
The operating profit for each period arises from the Group's continuing
operations. The parent company has taken advantage of section 230 of the
Companies Act 1985 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 £2,192,854 (2006: £1,493,693).
Statement of recognised income and expense
For the year ended 31 May 2007
Group Company Group Company
2007 2007 2006 2006
£ £ £ £
Deferred tax on share-based payments 102,031 102,031 14,270 14,270
Income and expense recognised directly in equity 102,031 102,031 14,270 14,270
Profit for the year 2,192,854 2,192,854 1,493,693 1,493,693
Total recognised income and expense for the year 2,294,885 2,294,885 1,507,963 1,507,963
Balance sheets
2007 2006
Group Company Group Company
As at 31 May Note £ £ £ £
Assets
Property, plant and equipment 429,312 429,312 390,496 390,496
Intangible assets 5,804,209 5,804,209 5,835,970 5,835,970
Deferred income tax assets 143,936 143,936 16,946 16,946
Investments - 1,264 - 1,164
Total non-current assets 6,377,457 6,378,721 6,243,412 6,244,576
Trade and other receivables 3,179,978 3,179,814 3,189,183 3,189,168
Financial assets 1,954,315 1,954,315 1,915,994 1,915,994
Cash and cash equivalents 2,799,569 2,795,769 441,160 440,011
Total current assets 7,933,862 7,929,898 5,546,337 5,545,173
Total assets 14,311,319 14,308,619 11,789,749 11,789,749
Equity
Issued capital 172,159 172,159 170,455 170,455
Share premium 5 5,601,458 5,601,458 5,321,151 5,321,151
Other reserves 5 2,202,469 2,202,469 2,094,687 2,094,687
Retained earnings 5 3,880,814 3,880,814 2,072,932 2,072,932
Total equity attributable to equity 11,856,900 11,856,900 9,659,225 9,659,225
holders of the parent
Non-current liabilities
Deferred income tax liabilities - - - -
Provisions and other liabilities 127,446 127,446 144,443 144,443
127,446 127,446 144,443 144,443
Current liabilities
Trade and other payables 1,627,889 1,625,189 1,193,196 1,193,196
Current income tax liabilities 477,234 477,234 374,107 374,107
Bank overdraft 72,818 72,818 347,705 347,705
Provisions and other liabilities 149,032 149,032 71,073 71,073
2,326,973 2,324,273 1,986,081 1,986,081
Total liabilities 2,454,419 2,451,719 2,130,524 2,130,524
Total equities and liabilities 14,311,319 14,308,619 11,789,749 11,789,749
Cash flow statements
For the year ended 31 May 2007
Group Company Group Company
2007 2007 2006 2006
Note £ £ £ £
Cash flows from operating activities
Cash receipts from customers 9,006,546 9,006,546 6,927,700 6,927,700
Cash paid to suppliers and employees (5,290,352) (5,290,352) (4,593,019) (4,593,019)
Cash generated from operations 6 3,716,194 3,716,194 2,334,681 2,334,681
Interest paid (1,012) (1,012) (94,010) (94,010)
Income taxes paid (874,107) (874,107) (904,045) (904,045)
Net cash from operating activities 2,841,075 2,841,075 1,336,626 1,336,626
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 15,225 15,225 - -
Interest received 194,734 194,734 103,731 103,731
Acquisition of subsidiaries (231,892) (231,892) (1,164) (1,164)
Cash received on acquisition of subsidiaries 234,443 - 1,149 -
Acquisition of property, plant and equipment (164,853) (164,853) (259,923) (259,923)
Acquisition of software (78,193) (78,193) (13,845) (13,845)
Acquisition of other investments - - (1,091,316) (1,091,316)
New loans advanced to property syndicates (1,954,315) (1,954,315) (1,777,034) (1,777,034)
Loan repayments from property syndicates 1,915,994 1,915,994 95,540 95,540
Net cash from investing activities (68,857) (303,300) (2,942,862) (2,944,011)
Cash flows from financing activities
Proceeds from the issue of share capital 225,000 225,000 6,000,001 6,000,001
Payment of costs of share issue - - (576,385) (576,385)
Proceeds from new borrowings - - 1,200,000 1,200,000
Redemption of preference shares - - (2,000,000) (2,000,000)
Repayments of borrowings - - (1,200,000) (1,200,000)
Proceeds/(repayment) of Directors' loans 21,050 21,050 (3,011,473) (3,011,473)
Dividends paid (384,972) (384,972) - -
Dividends received - 231,792 - -
Net cash from financing activities (138,922) 92,870 412,143 412,143
Net increase/(decrease) in cash and cash
equivalents 2,633,296 2,630,645 (1,194,093) (1,195,242)
Cash and cash equivalents at start period 93,455 92,306 1,287,548 1,287,548
Cash and cash equivalents at end period 2,726,751 2,722,951 93,455 92,306
Notes
1. Basis of preparation
This is the first year in which the Company and Group have prepared their
financial statements under International Financial Reporting Standards ('IFRSs')
and the comparatives have been restated from UK GAAP to comply with IFRSs.
The accounting policies set out below have been applied consistently to all
periods presented in these financial statements. They have also been applied in
preparing an opening IFRS balance sheet at 1 June 2005 for the purposes of the
transition to IFRSs, as required by IFRS 1.
2. Revenue
Revenue disclosed in the income statement is analysed as follows:
2007 2006
£ £
Rendering of services 4,920,093 4,237,263
Commission income 4,077,098 3,335,582
8,997,191 7,572,845
3. Earnings per ordinary share
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
2007 2006
£ £
Net profit and diluted net profit attributable to equity holders of the Company 2,192,854 1,493,693
Weighted average number of ordinary shares: Thousands Thousands
Issued ordinary shares at start period 17,045 12,500
Effect of shares issued in November 2005 - 2,366
Effect of shares issued in October 2006 107 -
Basic weighted average number of shares 17,152 14,866
Dilutive potential ordinary shares:
- non-employee share options 27 28
Diluted weighted average number of shares 17,179 14,894
4. Dividends paid and proposed
2007 2006
£ £
Declared and paid during the year:
Equity dividends on ordinary shares:
- Final dividend for 2006: 1.40p 238,636 -
- Interim dividend for 2007: 0.85p (2006: nil) 146,336 -
Dividends paid 384,972 -
Proposed for approval by shareholders at the AGM:
Final dividend for 2007: 1.70p (2006: 1.40p) 292,670 238,636
5. Reserves
Equity-share
based Share Capital
payments premium redemption Retained
£ account reserve earnings
Other reserves £ £ £
Group and Company
At 1 June 2005 - - - 2,654,239
Capitalised on bonus issue - - - (75,000)
Capitalised on redemption of preference shares - - 2,000,000 (2,000,000)
Arising on share issue - 5,954,546 - -
Costs of share issue - (633,395) - -
Share based payments 80,417 - - -
Deferred tax asset taken to equity 14,270 - - -
Profit for the financial year - - - 1,493,693
At 31 May 2006 94,687 5,321,151 2,000,000 2,072,932
Arising on share issue - 223,296 - -
Share based payments 62,762 - - -
Deferred tax asset taken to equity 102,031 - - -
Exercise of share options (57,011) 57,011 - -
Profit for the financial year - - - 2,192,854
Dividends - - - (384,972)
At 31 May 2007 202,469 5,601,458 2,000,000 3,880,814
6. Reconciliation of operating profit to operating cash flows
Group and Company 2007 2006
£ £
Profit on ordinary activities before financing 2,951,406 2,158,557
Amortisation of intangible assets 109,954 75,697
Depreciation of fixed assets 103,406 93,487
Share based payments 62,762 23,406
Provisions 60,962 18,620
Loss on disposal of fixed assets 7,407 -
Decrease/(increase) in receivables 9,354 (645,145)
Increase/(decrease) in payables 410,943 610,059
Net cash inflow from operating activities 3,716,194 2,334,681
7. Explanation of transition to IFRSs
An explanation of how the transition from UK GAAP to IFRSs has effected the
Group's financial position and financial performance is set out in the tables
and notes that accompany the tables in note 8.
8. Reconciliations between UK GAAP and IFRS
8.1 Reconciliation of balance
sheet at 1 June 2005
Notes 4 & 5 Note 6
Notes 1& 2 Note 3 IAS38 IAS8 IFRS
UK GAAP IAS1 IAS37 Intangible Restate- 1 June
1 June 2005 Reformat Provisions assets ment 2005
£ £ £ £ £ £
Assets
Property, plant and equipment 224,630 - - (2,219) - 222,411
Intangible assets - Goodwill 4,695,220 (2,348,090) - - - 2,347,130
Intangible assets - Other - 2,348,090 - 7,144 - 2,355,234
Total non-current assets 4,919,850 - - 4,925 - 4,924,775
Trade and other receivables 2,765,864 - 9,209 - - 2,775,073
Cash and cash equivalents 1,381,461 - - - - 1,381,461
Total current assets 4,147,325 - 9,209 - - 4,156,534
Total assets 9,067,175 - 9,209 4,925 - 9,081,309
Equity
Issued capital 50,000 - - - - 50,000
Retained earnings 2,680,694 - - 4,925 (31,380) 2,654,239
Total equity 2,730,694 - - 4,925 (31,380) 2,704,239
Non-current liabilities
Deferred income tax liabilities 8,225 - - - - 8,225
Provisions and other liabilities 47,966 (47,966) - - - -
-
56,191 (47,966) - - - 8,225
Current liabilities
Trade and other payables 593,711 - - - - 593,711
Current income tax liabilities 592,666 - - - - 592,666
Interest-bearing loans
and borrowings 5,000,000 - - - - 5,000,000
Bank overdraft 93,913 - - - - 93,913
Provisions and other liabilities 47,966 9,209 - 31,380 88,555
6,280,290 47,966 9,209 - 31,380 6,368,845
Total liabilities 6,336,481 - 9,209 - 31,380 6,377,070
Total equity and liabilities 9,067,175 - 9,209 4,925 - 9,081,309
8.1 Reconciliation of balance sheet at 1 June 2005 (continued)
Notes:
1. Under IFRS format £47,966 of client claim provision classified within
provisions for liabilities and charges under UK GAAP has been re-classified
as a provision within current liabilities.
2. Under IFRS format £2,348,090 of goodwill under UK GAAP has been reclassified
as client portfolios within intangible assets.
3. Under IFRS format £9,209 of clawback provision netted off against trade
receivables under UK GAAP has been re-classified as a provision within
current liabilities.
4. Under IAS38 Intangible Assets, software with a net book value of £2,219 has
been reclassified as intangible assets.
5. Under IAS38 Intangible Assets, salary costs of £4,925 incurred developing
internally generated software have been capitalised as intangible assets.
6. A review of provisions under IAS37 Provisions, Contingent Liabilities and
Contingent Assets identified an error in the financial statements for
periods up to 31 May 2005, which resulted in no provision for dilapidations
on the Group's former offices at Watling House, Hinckley being recognised
within current liabilities. The correction of this error in accordance
with IAS8 Accounting Policies, Changes in Accounting Estimates and Errors
resulted in adjustments to reduce retained earnings by £31,380 and increase
current liabilities by £31,380.
8. Reconciliations between UK GAAP and IFRS (continued)
8.2 Reconciliation of balance sheet at 31 May
2006 and 1 June 2006
Notes 6
Notes 1, 2, & 7
UK GAAP 3 & 4 Note 5 IAS38 Note 8 IFRS
1 June IAS1 IAS12 Intangible IAS8 1 June
2006 Reformat Taxation assets Restatement 2006
£ £ £ £ £ £
Assets
Property, plant and equipment 398,566 - - (8,070) - 390,496
Intangible assets - Goodwill 5,816,630 (3,469,500) - - - 2,347,130
Intangible assets - Other - 3,469,500 - 19,340 - 3,488,840
Deferred income tax assets 2,676 - 14,270 - - 16,946
Total non-current assets 6,217,872 - 14,270 11,270 - 6,243,412
Trade and other receivables 5,092,503 12,674 - - - 5,105,177
Cash and cash equivalents 441,160 - - - - 441,160
Total current assets 5,533,663 12,674 - - - 5,546,337
Total assets 11,751,535 12,674 14,270 - - 11,789,749
Equity
Issued capital 170,455 - - - - 170,455
Share premium 5,321,151 - - - - 5,321,151
Fair value and other reserves 2,080,417 - 14,270 - - 2,094,687
Retained earnings 2,111,662 - - 11,270 (50,000) 2,072,932
Total equity 9,683,685 - 14,270 11,270 (50,000) 9,659,225
Non-current liabilities
Deferred income tax liabilities - - - - - -
Provisions and other liabilities 152,842 (58,399) - - 50,000 144,443
152,842 (58,399) - - 50,000 144,443
Current liabilities
Trade and other payables 1,193,196 - - - - 1,193,196
Current income tax liabilities 374,107 - - - - 374,107
Bank overdraft 347,705 - - - - 347,705
Provisions and other liabilities - 71,073 - - - 71,073
1,915,008 71,073 - - - 1,986,081
Total liabilities 2,067,850 12,674 - - 50,000 2,130,524
Total equity and liabilities 11,751,535 12,674 14,270 11,270 - 11,789,749
8.2 Reconciliation of balance sheet at 31 May 2006 and 1 June 2006
(continued)
Notes:
1. Under IFRS format £47,966 of client claim provision within provisions for
liabilities and charges under UK GAAP has been re-classified as a provision
within current liabilities.
2. Under IFRS format £10,433 of deferred consideration classified within
provisions for liabilities and charges under UK GAAP has been re-classified
as a provision within current liabilities.
3. Under IFRS format £12,674 of clawback provision netted off against trade
receivables under UK GAAP has been re-classified as a provision within
non-current liabilities.
4. Under IFRS format £3,469,500 of goodwill under UK GAAP has been
reclassified as client portfolios within intangible assets.
5. Under IAS12 Income Taxes for employee share-based payment transactions the
difference between the tax base of the employee services rendered to date
(being the amount the taxation authorities will permit as a deduction in
future periods) and the carrying value of nil, is a deductible temporary
difference which results in a deferred tax asset of £14,270 recognised in
equity, in addition to the deferred tax asset recognised in the income
statement.
6. Under IAS38 Intangible Assets, software with a net book value of £8,070
has been reclassified as intangible assets.
7. Under IAS38 Intangible Assets, salary costs of £6,345 incurred during the
period developing internally generated software have been capitalised as
intangible assets.
8. A review of provisions under IAS37 Provisions, Contingent Liabilities and
Contingent Assets identified in error in the financial statements for
periods up to 31 May 2006, which resulted in no provision for dilapidations
on the Group's offices at Watling House, Hinckley or Grove Park, Leicester
being recognised within liabilities. The correction of these errors has
resulted in adjustments to the opening balance sheet in accordance with
IAS8 Accounting Policies, Changes in Accounting Estimates and Errors. The
impact of these adjustments has been the release of a provision of £31,380
for dilapidations on the Group's offices at Watling House, Hinckley against
dilapidation costs incurred during the period, and a provision of £50,000
for dilapidations on the Group's offices at Grove Park, Leicester being
recognised within non-current liabilities.
8. Reconciliations between UK GAAP and IFRS (continued)
UK GAAP Note 1 Note 2 Note 3
31 May IAS1 IAS38 IAS8 IFRS
2006 Reformat Intangible Restatement 31 May
assets 2006
8.3 Reconciliation of profits for the year ended 31 May £ £ £ £ £
2006
Revenue 7,572,845 - - - 7,572,845
Employee benefits expense (3,278,024) (23,406) 6,345 - (3,295,085)
Other administrative expenses (1,954,805) 23,406 - (18,620) (1,950,019)
Depreciation and amortisation (169,184) - - - (169,184)
Operating profit before financing costs 2,170,832 - 6,345 (18,620) 2,158,557
Financial income 103,731 - - - 103,731
Financial expenses (94,010) - - - (94,010)
Net financing costs 9,721 - - - 9,721
Profit before tax 2,180,553 - 6,345 (18,620) 2,168,278
Income tax expense (674,585) - - - (674,585)
Profit for the period 1,505,968 - 6,345 (18,620) 1,493,693
Attributable to:
Equity holders of the parent 1,505,968 - 6,345 (18,620) 1,493,693
Notes:
1. Under IFRS format, £23,406 of share based payments classified as other
administrative expenses under UK GAAP have been re-classified as employee
benefits expense.
2. Under IAS38 Intangible Assets, £6,345 of salary costs incurred developing
internally generated software have been capitalised as intangible assets.
3 A review of provisions under IAS37 Provisions, Contingent Liabilities and
Contingent Assets identified in error in the financial statements for periods up
to 31 May 2006, which resulted in no provision for dilapidations on the Group's
former offices at Watling House, Hinckley and no provision for dilapidations on
the Group's offices at Grove Park, Leicester being recognised. The correction
of these errors has resulted in adjustments to the opening balances sheet in
accordance with IAS8 Accounting Policies, Changes in Accounting Estimates and
Errors. The impact of these adjustments is to increase other administrative
expenses by £18,620 following the release of the £31,380 provision for
dilapidations at Watling House and the recognition of a provision for
dilapidations at Grove Park of £50,000 within non-current liabilities.
9. Post balance sheet events
Taxation
During March 2007 the UK government announced Budget tax changes which, if
enacted in the proposed manner, will have a significant effect on the Group's
future tax position. At 31 March 2007 these changes to the UK tax system are
not regarded as 'substantively enacted' as they are still subject to
Parliamentary agreement and so their effect is not reflected in the Group's
balance sheet at 31 May 2007. However, it is proposed that the rate of UK
corporation tax will reduce from 30% to 28% from 1 April 2008. This rate change
will affect the amount of future cash tax payments to be made by the Group and
will also reduce the size of the Group's balance sheet deferred tax asset.
Changes to the UK capital allowances regime have also been proposed. The most
significant of these changes for the Group are the reduction in the rate of
capital allowances applicable to plant and machinery expenditure from 25% to 20%
per annum on a reducing balance basis from 1 April 2008, and the reduction in
the rate of capital allowances from 25% to 10% per annum on a reducing balance
basis from 1 April 2008 for certain items of plant and machinery that become
integral fixtures on a building.
Acquisition of Pension Consulting Limited
On 9 July 2007 Mattioli Woods plc acquired the entire issued share capital of
Pension Consulting Limited ('PCL') for a total consideration of up to
£1,925,000. PCL administers pension schemes on behalf of 145 small
self-administered pension scheme ('SSAS') and 213 self-invested personal pension
('SIPP') clients. It has funds under trusteeship of over £185 million and its
subsidiary company, PC Trustees Limited, acts as trustee to the schemes.
In the year ended 31 May 2007, PCL generated a profit on ordinary activities
before taxation of £302,108 on revenues of £811,743. PCL's net assets at 31 May
2007 were £321,244.
The total consideration includes an initial payment of £1,525,000 funded from
the Group's existing cash resources and deferred consideration of up to
£400,000, of which £240,000 will be paid in the two years following completion,
with the remaining payment of up to £160,000 being determined with reference to
an earn-out mechanism based on growth in scheme numbers during the two years
following completion.
10. 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 2006 or 2007. 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 at 10am on Thursday, 18
October 2007 at the Group's head office.
This information is provided by RNS
The company news service from the London Stock Exchange