MATTIOLI WOODS REPORTS ANOTHER YEAR OF PROFIT GROWTH

• Strong growth in adjusted EBITDA[1] and adjusted PBT[2] versus prior year
• Lowered costs for our clients while maintaining EBITDA margin ahead of 20% target
• Total client assets of the Group and its associate[3] increased to £9.4 billion at the year end
• Gross discretionary assets under management[4] of £2.6 billion, with net inflows of over £250 million during the year
• Recent acquisitions performing and integrating well
• Strong financial position, with cash of over £23 million
• Post-year end appointments of Chief Compliance and Risk Officer and Group Finance Director

Ian Mattioli, Chief Executive, comments:

“I am pleased to report another year of sustainable profit growth, despite the ongoing political and economic uncertainties and generally poor investor sentiment over the 12 months ended 31 May 2019.

“Our integrated business model allows us to address more of the value chain across advice, administration, platform, investment management and product provision. We have used the resultant economies of scale and operational efficiencies to reduce clients’ costs, while delivering sustainable returns for our shareholders.

“The Financial Conduct Authority’s evaluation of the Retail Distribution Review (“RDR”) and the Financial Advice Market Review (“FAMR”) may lead to regulatory pressure on the sector to reduce the cost to consumers. Our long-term aim continues to be to reduce clients’ total expense ratios towards 1%, meaning we are well-positioned as the market changes and evolves.

“Throughout the period we maintained our focus on client service and developing our proposition. As previously communicated, a combination of the Group reducing costs for our clients and the general market conditions led to slightly lower than expected revenue for the year. However, the financial impact of this has been more than offset by the realisation of operational efficiencies and other planned administrative cost savings, resulting in profit growth in line with expectations and EBITDA margin for the year tracking substantially ahead of our 20% target.

“By putting clients first we are able to build a business that is sustainable over the long term. The last year saw several operational achievements within the business, including:

A seamless move to our new freehold office in Leicester, incurring significantly lower downtime and relocation costs than anticipated. This development allows us to benefit from future rental savings of approximately £0.85 million per annum, whilst providing the capacity for future growth;

• The implementation of a cloud-hosted IT architecture across the Group;
• The introduction of an integrated human resource management and payroll system;
• The launch of a refreshed Mattioli Woods’ brand;
• Implementation of changes to the regulatory regime (General Data Protection Regulations (“GDPR”) and the Markets in Financial Instruments Directive II (“MiFID II”)) and preparation for the introduction of the Senior Managers and Certification Regime; and
• Continued investment to improve our client and service proposition.

“As part of our normal planning, we monitor the Group’s capabilities and assess what new skills are necessary to strengthen the business over time, taking account of the existing balance of knowledge, experience and diversity. This year, we have implemented a number of changes which place the business in a strong position.

“Following the completion of rigorous recruitment processes, I am delighted to announce the appointment of James Wilson as Chief Compliance and Risk Officer, and the appointment of Ravi Tara to the new role of Group Finance Director (a non-plc board position), reporting to the Chief Financial Officer.

“James has over 30 years’ financial services experience, including roles at the Law Society of Scotland, the Financial Services Authority and senior positions at IFG Group, Royal Bank of Scotland Group, Standard Life, TD Wealth International, Speirs & Jeffrey and FNZ, and has a strong background in pensions, investments, property and financial planning. His appointment will help us to build upon the strong compliance culture we already have in place.

“Following the further expansion of the Group and its operations we have created the new role of Group Finance Director, with responsibility for the oversight of the Group’s financial systems and controls. Ravi’s experience of improving operational delivery and cost efficiency in previous roles with Capita plc, Weetabix Food Company, JP Morgan, Barclays Capital and PwC, will add real value to our proposition as we position the Group for further growth.

“We have continued to progress our strategic initiatives and in March were delighted to announce the acquisition of SSAS Solutions (UK) Limited, which is based in Belfast and acts as SSAS practitioner to over 350 schemes with approximately £380 million of assets under administration. This followed the acquisition of Broughtons Financial Planning Limited in the first half of the financial year, which has integrated well and contributed positively to our trading results since acquisition. We will seek to build on our track record of successful acquisitions by continuing to assess opportunities that meet our strict criteria.

“Given the success of the joint venture, we believe the Group retaining a minority interest in Amati Global Investors Limited (“Amati”) is the optimal structure for all stakeholders and last month we announced the cancellation of our option to acquire the remaining 51% of Amati in return for a payment of £0.75 million from the management team. Amati is an excellent fund manager that has performed strongly since Mattioli Woods’ initial investment. Over this period, Amati has seen gross funds under management[5] grow from £120 million to over £452 million at the year end, won numerous industry awards, and the TB Amati UK Smaller Companies fund has been rated by three major fund research houses. As a result of Amati’s strong performance the Group’s share of its profits has increased year-on-year.”