Strategic report

Chairman's statement

 

This is my first statement to shareholders since being appointed as the Group's new Chairman at our Annual General Meeting in October 2016.  On behalf of all of my colleagues, I would like to thank my predecessor and co-founder of Mattioli Woods, Bob Woods, for his immense contribution in building our business into one of the UK's leading providers of wealth management and employee benefit services. 

 

Review of the year

 

I am delighted to report another year of growth, driven by a strong flow of organic new business and continued demand for advice from clients, which together with acquisitions completed in this and the prior financial year has seen the Group achieve a significant milestone in generating annual revenues of over £50m. 

 

We have enjoyed further growth in our investment and asset management business, with gross discretionary assets under management⁴ ("AuM") increasing by £460m during the year, with £190m of new monies invested in our discretionary portfolio management service.  The Mattioli Woods Structured Products Fund was launched in November 2016 and its value now exceeds £100m.  Custodian REIT, the UK real estate investment trust managed by our subsidiary Custodian Capital, raised £76m of new monies during the year and now has a market capitalisation of almost £400m. 

 

One of our stated aims is to lower the cost of the range of services we provide to clients, while growing a long-term sustainable business.  We were delighted to reduce the custody charge for all those clients using our core investment platform from 1 August 2017, which followed our previous announcement that the terms of the Investment Management Agreement between Custodian Capital and Custodian REIT have been amended to secure both a cost reduction for investors in Custodian REIT and an important long-term revenue stream for the Group. 

 

Organic revenue growth of 11.6% (2016: 8.5%) or £4.4m was driven by our largely home-grown consultancy team, further accelerated by growth in our investment and asset management and property businesses.  We continue to see demand for advice from clients, driven by lifestyle, increasing longevity, tax and other legislative changes, including the pension freedoms that introduced a major shift in how people can access their pensions, which in turn has driven further growth in pension consultancy and administration revenues. 

 

Acquisitions continue to be a core part of our growth strategy.  Our purchase of 49% of Amati Global Investors Limited ("Amati"), which we announced in February, is an exciting extension to our asset management business.  Amati's total AuM has increased from £120m at acquisition to over £178m today. 

 

In September 2016 we were pleased to announce the acquisition of MC Trustees, which is an excellent fit with our existing pension business and has contributed positively to the Group's trading result for the year.  We believe further consolidation within our core markets remains likely and our strong balance sheet gives us the flexibility to make further value-enhancing acquisitions. 

 

Strong revenue growth in the year   translated into growth in Adjusted EPS of 11.4% to 34.1 pence (2016: 30.6 pence).  We are proud of the strong shareholder returns we have delivered and remain committed to growing the dividend, while maintaining an appropriate level of dividend cover.  Accordingly, the Board is pleased to recommend the payment of an increased final dividend of 9.4 pence per share (2016: 8.65 pence).  This makes a proposed total dividend for the year of 14.1 pence (2016: 12.5 pence), a year-on-year increase of 12.8% . 

 

4 Excludes assets under management by Amati Global Investors Limited. 

 

The market

 

The past 12 months have seen changes in many respects.  The General Election result created fresh speculation around the shape of 'Brexit' and regulatory changes continue at considerable pace.  Our immediate focus is on ensuring that we are fully compliant with those changes already in train, such as the Markets in Financial Instruments Directive II ("MiFID II"), the General Data Protection Regulations ("GDPR") and the Senior Managers Regime ("SMR"). 

 

The Financial Conduct Authority ("FCA") published its final report on the asset management market in June 2017, confirming its assessment that there is weak price competition in the asset management industry.  In addition, the FCA has said it will assess firms' vertical integration and the entire value chain of investing, as well as the platform market, in its upcoming platform market review. 

 

Improving client outcomes and reducing client costs are key objectives of ours and we strongly support the FCA's objectives of increased transparency and better alignment of interests between fund managers and investors. 

 

Our strategy

 

Our strategy remains focused on the pursuit of strong organic growth, supplemented by strategic acquisitions that enhance value and broaden or deepen our expertise and services .  Our distribution channels include our consultancy team, a nationwide network of professional introducers and, increasingly, our workplace financial educational programmes. 

Investment in our bespoke pension administration and wealth management platform continues in line with expected spend, while we continue to review the possibility of moving to a hosted IT infrastructure, which may offer improved data security, business continuity and scalability for future growth. 

 

Construction of our new central Leicester office, which will provide our staff with a modern working environment and capacity for further growth, remains scheduled to complete around the end of this calendar year, with the move from our existing offices scheduled for the second quarter of 2018.  Costs are in line with expectations. 

 

Our focus is on ensuring we continue to address our clients' changing needs and our ambition is to see our brand become an even stronger force in the UK financial services sector. 

 

Our people

 

As an Investors in People company we are committed to developing our people and building the capacity to deliver sustainable growth.  In the last financial year we moved into larger premises in London and opened a new office in Manchester, strengthening Mattioli Woods' position in the North West following the acquisition of Preston-based financial advisory firm Taylor Patterson in the prior financial year. 

 

I would like to thank all our staff for their continued commitment, enthusiasm and professionalism in dealing with our new and existing clients' affairs.  

 

Governance and the board

 

The Board is committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business.  Following my appointment as the Group's first independent Non-Executive Chairman, we carried out internal and external reviews of the effectiveness of the Board, its sub-committees and the Group's senior executive management framework.   We have created a new Senior Executive Team ("SET^GO") to execute the strategy determined by the Board, bringing together a senior team with responsibility for all our key operational areas.  In addition, we have reduced the size of our Board to eliminate duplication between the Board and SET^GO, ensuring clearer lines of responsibility within the management team and creating a balanced Board of three executive directors and three non-executive directors. 

 

As part of the implementation of these changes, Mark Smith and Alan Fergusson stepped down as directors in August 2017, with both remaining key members of SET^GO . 

 

We believe these changes give the business the optimal management structure to secure continued growth. 

 

Shareholders

 

We are fortunate to have a number of supportive institutional shareholders with a significant investment in the Group.  We welcome opportunities to talk to all shareholders, large and small, and we will continue to maintain a regular and constructive dialogue with them, while seeking to broaden our shareholder base. 

 

Outlook

 

We were delighted to see Bob and Ian recognised for their services to business and the community in Leicester through the award of MBEs in the Queen's New Year's Honours List. 

 

Throughout its 25 year history , Mattioli Woods has demonstrated that in both good and bad economic conditions we have a robust business model, which delivers organic growth by winning new clients and developing new revenue streams, and also through the careful acquisition of similar or complementary businesses. 

 

Our focus remains on ensuring the Group addresses our clients' changing needs and we continue to broaden our proposition through advice, innovative product development, organically and by acquisition.  We believe our vertically-integrated models for wealth management and employee benefits, blending our capabilities as trusted adviser, administrator, product provider and asset manager, allow us to deliver improved and sustainable client outcomes, and we look forward to continuing our success over the next 25 years.  

 

 

 

Joanne Lake

Chairman

4 September 2017

 

 

 

Strategic report

Chief Executive's review

 

Introduction - still at the beginning of our journey…after 25 years

 

I am pleased to report another successful year, with revenue for the 12 months ended 31 May 2017 up 17.4% to £50.5m (2016: £43.0m).  We are over half way towards our medium term goal of growing revenues to £100m and we continue to focus on delivering great outcomes for our clients , with one of our key aims being to reduce their total expense ratios ("TERs") while maintaining our target profit margin. 

 

Sustained demand for advice, driven by our clients' desire for a better understanding of their financial position, and the continued development of our investment and asset management proposition have driven strong new business flows, which together with acquisitions completed in the current and prior financial year increased total client assets under management, administration and advice by 17.5% to £7.77bn (2016: £6.61bn)   at the year end. 

 

Organic growth was supplemented by £ 1.2m of revenues generated by the MC Trustees pension administration business acquired in September 2016, plus full-year revenues of £7.1m (2016: £5.2m) from the five businesses acquired in the prior year.  

 

EBITDA⁵ was up 18.0% to £10.5m (2016: £8.9m) , maintaining EBITDA margin at 20.8% (2016: 20.7%) despite further investment in the infrastructure of our business and an expected fall in banking revenues.  

 

Adjusted EPS⁶ increased 11.4% to 34.1p (2016: 30.6p), while basic EPS was up 18.7% to 24.8p (2016: 20.9p), with growth in operating profits stated after £0.4m (2016: £0.3m) of acquisition-related costs and £0.3m (2016: £0.5m) of notional finance charges on the unwinding of discounts on long-term provisions.  The effective rate of taxation was 16.9% (2016: 16.6%) due to the reversal of deferred tax liabilities on acquired intangibles following further cuts in the substantively enacted rate of UK corporation tax. 

 

Our success is based upon the delivery of quality advice, services and products, growing our clients' assets and enhancing their financial outcomes.  The foundation of this success is the development of our people and I am delighted we have created a business our clients are proud to be a part of, our people feel proud to work for and is one that recognises and rewards talent and hard work. 

 

Our recent achievements have been recognised with a number of industry awards for individual and corporate achievements nationally and locally, including Best Corporate Pensions Advice Firm at the Retirement Planner Awards 2017, as well as being highly commended with a 5-star SSAS rating at the Moneyfacts Awards 2017.

 

In addition to being an Investors in People organisation, the Group continues to be recognised for creating opportunities for young people and recently won Apprenticeship Employer of the Year at the 2017 Leicester Apprenticeship Hub Graduation Ceremony.  

 

⁵ Earnings before interest, taxation, depreciation and amortisation. 

⁶  Before acquisition-related costs, notional finance costs and amortisation and impairment of intangible assets arising on acquisitions. 

Industry overview

 

Mattioli Woods operates within the UK's financial services industry, which is subject to the effects of volatile markets and economic conditions.  In recent years we have seen a period of unprecedented change in legislation and regulation.  As a result of changing customer needs the market for our services continues to grow, with there now estimated to be a record five million Britons paying higher or additional rate income tax⁷.  We continue to be proactive in relation to the opportunities this creates, with our specialists dedicated to keeping up with the pace of change.  Our entrepreneurial model allows us to adapt and advise our clients accordingly. 

 

Our markets are highly fragmented and serviced by a wide range of suppliers offering diverse services to both individual and corporate clients.  These markets remain highly competitive, with recent regulatory changes, including the abolition of provider commissions on corporate pensions in April 2016 and increased capital requirements for SIPP operators from 1 September 2016, driving further consolidation across the industry.  

 

The Financial Advice Market Review ("FAMR") published by the FCA and HM Treasury in March 2016 made a series of recommendations designed to tackle barriers to consumers engaging with financial advice and help the industry develop more cost-effective ways of delivering advice, particularly through the use of technology, while the FCA's recent review of the asset management market highlighted its concerns over pricing. 

 

We continue to invest in the development of our IT platform and anticipate that the entry of new competitors with innovative technology (such as 'robo-advice') may drive some margin compression in the wider market.  I expect this, coupled with regulatory and market concerns around the cost of financial services, to further validate our vertically-integrated model, where seeking operational efficiencies in administration and reducing investment management and administration costs are key elements of our drive to reduce our clients' TERs, while maintaining fair and sustainable profit margins for our shareholders. 

7 Source: HM Revenue & Customs - UK Income Tax Liabilities Statistics, 2016-17 projections. 

 

Our services

 

Our core pension and wealth management offering serves the higher end of the market, including controlling directors and owner-managed businesses, professionals, executives and retirees.  Our broad range of employee benefit services is targeted towards medium-sized and larger corporates.  In recent years, the Group has developed a broader wealth management proposition, grown from its strong pensions advisory and administration expertise, with the Group's income now derived from four key service lines:

 

·     Investment and asset management;

·     Pension consultancy and administration;

·     Employee benefits; and

·     Property management.

 

We aim to operate a seamless structure, allowing us to cover all aspects of wealth management and employee benefits, without confusing strategy for individual service lines, such as our advice-led SSAS and SIPP proposition. 

 

Medium-term goals

 

Our vision is to create a long-term sustainable business, built on integrity and trust, and delivered with passion.  Throughout our first 25 years we have stayed true to our core values, putting our clients at the heart of everything we do and doing what is right to build long-term shareholder value.  To assist in the achievement of our long-term objectives, in early 2014 we announced the following medium-term goals:

 

·     Revenue                                                                            £100m

·     Assets under management, administration and advice       £15bn

·     EBITDA margin                                                                  20%

 

We are making strong progress towards these goals and remain a business built on the integrity and expertise of our people.  We will continue to focus on delivering great outcomes for our clients , with one of our key aims being to grow and preserve their investment assets. 

 

SET^GO

 

The Board and Senior Executives have long debated the structure of our rapidly growing group.  When we announced our medium-term goals to the market we had annual revenues of £23m and assets under management, administration and advice of £3.6bn. 

 

The business has changed from a young, entrepreneurial business into what I now call 'a small, friendly corporate'.  Last year, my longstanding business partner Bob Woods stepped down after ten years in the role of Executive Chairman to focus on his client portfolio, new business development and acting as an ambassador for Mattioli Woods.  Bob and I have now worked closely together for over 30 years. 

 

With Joanne Lake stepping into the Non-Executive Chairman role, it was a timely opportunity to look closely at the structure of the Group.  We added to the executive team with the appointments of Sara Andrews as Chief Business Officer and Simon Gibson as Chief Investment Officer and created SET^GO, our Senior Executive Team, with the 'go' highlighting that we are set, ready and moving forward.  The introduction of SET^GO gives all our people - clients, shareholders, employees and suppliers - a very clear operational structure that is enhancing our management of the Company and will enable it to further grow and develop.  The new SET^GO structure combined with a smaller Board is logical, practical and in all our people's best interests. 

 

Mark Smith and Alan Fergusson stepped down from the Board in August 2017, continuing in their full-time executive roles as key members of the SET^GO team.  Mark's and Alan's experience adds great value to the Group and both have given their support to these changes, for which I am truly grateful - it shows their long-term commitment to realising our ambitions. 

 

Assets under management, administration and advice

 

Total client assets under management, administration and advice increased by 17.5% to £7.77bn at 31 May 2017 (2016: £6.61bn) as follows:

 

Assets under management, administration and advice8	SIPP and SSAS9 £m	Employee benefits £m	Personal and other pension £m	Total £m
As at 1 June 2016	3,996.1	1,158.2	1,451.6	6,605.9
Acquisition of MC Trustees10	466.5	-	-	466.5
Net inflow/(outflow), including market movements	568.7	(55.9)	186.5	699.3
As at 31 May 2017	5,031.3	1,102.3	1,638.1	7,771.7

 

The a cquisition of MC Trustees during the year added £466.5m of client assets, with a net inflow of £699.3m during the year comprising:

 

·     An increase of £ 568.7 m in SIPP and SSAS funds under trusteeship , following a period of strong investment returns and net organic growth of 7.6% in the number of schemes being administered at the year end.  We enjoyed 11.8% net organic growth in direct¹¹ schemes, with 1.6% net organic growth in the number of schemes the Group operates on an administration-only basis (excluding the acquisition of MC Trustees). 

·     A £ 186.5 m increase in other personal and pension assets; and

·     A £ 55.9 m fall in the value of assets held in the corporate pension schemes advised by our employee benefits business, following the loss of a large client in the North Sea oil and gas industry, which has gone through a difficult period of cost-cutting and redundancies .  It should be noted that revenues in our employee benefits business are not linked to the value of client assets in the same way that certain of our wealth management revenue streams are. 

 

We have extended our asset management business through our purchase of 49% of Amati, an award-winning specialist fund management business based in Edinburgh, focusing on UK small and mid-sized companies.  Amati is the manager of the TB Amati UK Smaller Companies Fund; two AIM Venture Capital Trusts (Amati VCT plc and Amati VCT 2 plc); and an AIM IHT portfolio service.  Amati's total AuM had increased from £120m at acquisition to over £165m at the year end.  We anticipate further growth in the value of Amati's AuM, including the boards of the VCTs plans to launch a joint fundraising to raise around £20m between the two VCTs later this year. 

 

Mattioli Woods has the option to acquire the remaining 51% of Amati in the two years commencing 6 February 2019 for a mixture of cash and Mattioli Woods' ordinary shares. 

 

⁸ Certain pension scheme assets, including clients' own commercial properties, are only subject to a statutory valuation at a benefit crystallisation event.  

⁹ Value of funds under trusteeship in SIPP and SSAS schemes administered by Mattioli Woods and its subsidiaries. 

¹⁰ Value as at 31 May 2017. 

  ¹¹ SIPP and SSAS schemes where the Group acts as pension consultant and administrator. 

 

Segmental review

 

Investment and asset management

 

Investment and asset management revenues generated from advising clients on both pension and personal investments increased 23.5% to £21.0m (2016: £17.0m), representing 41.6% (2016: 39.6%) of total Group revenues.  Income from both initial and ongoing portfolio management charges increased to £10.7m (2016: £8.8m), as the value of clients' assets in discretionary portfolios increased 29.5% to £1.14bn (2016: £0.88bn).  The Group's gross discretionary assets under management, including Custodian REIT, the FP Mattioli Woods Balanced Fund (formerly the Thoroughbred OEIC) and the Mattioli Woods Structured Products Fund totalled £1.63bn (2016: £1.17bn) at the year end.  

 

The Mattioli Woods Structured Products Fund was launched in November 2016 and has raised over £100m to date, generating fund management charges of £0.2m during the year.  The fund has been designed around our core objective of delivering sustainable long-term returns to clients while lowering their costs and offers investors the benefits of collateralisation, instant diversification, continuous availability and liquidity. 

 

Adviser charges based on the value of assets under advice were £10.1m (2016: £8.2m).  The growth in funds under management and advice continues to enhance the quality of earnings through an increase in recurring revenues, with the proportion of investment and asset management revenues which are recurring being 81.0% (2016: 81.7%).  As with other firms, these income streams are linked to the value of funds under management and advice, and are therefore affected by the performance of financial markets. 

 

Pension consultancy and administration

 

Retirement planning is often central to our clients' wealth management strategies.  We maintain our technical edge through our widely acknowledged understanding of UK pension legislation, which allows our consultancy team to deliver meaningful guidance to our clients.  Our client base primarily comprises owner-managers, executives and members of the professions.  Additional fees are generated from the provision of specialist consultancy services.  

 

In July 2017, the work and pensions secretary announced that individuals born between 1970 and 1978 will now have to wait an extra year, until they are 68, to claim their state pension.  While continual change (and talk of change) to the UK pensions system may work against the Government's aim to ensure all individuals save for their retirement, I expect it to drive sustained demand for advice, benefiting our core pensions business. 

 

Pension consultancy and administration revenues were up 13.9% to £18.9m (2016: £16.6m), representing 37.4% (2016: 38.6%) of Group revenues of which 92.6% (2016: 82.6%) were recurring, with additional one-off revenues earned in the prior year following significant changes in pension legislation.  The growth in revenues was driven by the total number of SIPP and SSAS schemes administered by the Group increasing 27.3% to 10,021 (2016: 7,872) at the year end, with the acquisition of MC Trustees during the year adding 1,554 schemes. 

 

Fees for direct pension consultancy and administration, where the Group deals directly with the client in all areas associated with their pension affairs, increased 11.0 % to £ 14.1 m (2016: £12.7m) , with sustained demand for advice as more people look to take advantage of pension freedoms .  The number of direct schemes administered by the Group increased 11.8% to 5,140 (2016: 4,598) , with 764 (2016: 665) new schemes gained in the year (excluding acquisitions), representing 16.6% (2016: 17.3%) of the number of schemes at the start of the year .  

 

Our focus remains on the quality of new business, with an average new SIPP value of over £0.3m and average new SSAS value of over £1.0m.  We also maintained strong client retention, with an external loss rate¹² of 2.1 % (2016: 2.4%) and an overall attrition rate¹³ of 3.6% (2016: 3.6%).  

 

Third party administration fees increased 31.4% to £4.6m (2016: £3.5m), with £1.2m of revenues generated by MC Trustees during the period .  The number of SSAS and SIPP schemes the Group operates on an administration-only basis increased to 4,881 (2016: 3,274) at the year end.  In recent years, Mattioli Woods has been appointed to operate or wind-up a number of distressed SIPP portfolios following the failure of the previous operator.  Lost schemes include the planned transfer of members of these distressed SIPP portfolios to alternative arrangements, with the 265 schemes lost during the period being more than offset by acquisition of MC Trustees' portfolio and organic growth. 

 

Strong growth in pension fees was offset by an anticipated fall of £0.2m in banking revenues to £0.2m (2016: £0.4m), following the cut in the Bank of England base rate to a historic low of 0.25% in August 2016. 

 

The introduction of i ncreased regulatory capital requirements for SIPP operators on 1  September 2016 and the accelerating pace of consolidation within the SIPP market is putting some smaller operators under increasing pressure to join forces with larger firms.

 

¹² Direct schemes lost to an alternative provider as a percentage of average scheme numbers during the period. 

¹³ Direct schemes lost as a result of death, annuity purchase, external transfer or cancellation as a percentage of average scheme numbers

     during the period.    

 

Property management

 

Property management revenues increased 26.8% to £ 5.2m (2016: £4.1m) or 10.3% of total revenue (2016: 9.5%), of which 90.4% (2016: 91.6%) represented recurring annual management charges.  Our subsidiary Custodian Capital is the external fund manager to Custodian REIT plc and also manages properties on behalf of pension schemes and private clients, managing an overall portfolio of property investments with a net asset value of £445.0m (2016: £328.1m) at the year end.  T he majority of our property management revenues are derived from the services provided to Custodian REIT, which now has a market capitalisation of almost £400m and offers one of the highest yields¹⁴ among its UK property investment company peer group, coupled with the potential for capital growth from a balanced portfolio of real estate assets. 

 

Custodian Capital manages our "Private Investors Club", which offers alternative investment opportunities to suitable clients by way of private investor syndicates.  This continues to be well received by clients, with £20.6m (2016: £9.9m) invested in seven (2016: eight) new syndicates completed during the year.  

 

As part of our strategy to create a single, strong identity across our Group, Custodian Capital will be renamed Mattioli Woods Capital in the first half of the 2018 calendar year. 

 

¹⁴  Dividend yield of 5.6% (peer group average of 4.9%) per Numis Securities Limited Datasheet, 1 September 2017. 

 

Employee benefits

 

At a time when the employee benefits market is going through extensive transition, we recognise the value that having a full employee benefits offering adds to the Group, allowing us to realise synergies between it and our wealth management business, with revenues of £0.7m (2016: £0.6m) generated in cross referrals between the two divisions during the last financial year. 

 

Employee benefits revenues were up 1.9 % to £ 5.4 m (2016: £5.3m), representing 10.7% of total revenue (2016: 12.3%).   I believe this is a major achievement, following the rebasing of our employee benefits business to create the platform to optimise our position in this market.  The move to a fee-based proposition has been well-received by corporate clients , with 75.9% (2016: 78.7%) of employee benefits revenues recurring, and I expect our Executive Financial Counselling, Boardroom Pay and Financial Education initiatives to continue to gather pace. 

 

There is rising recognition from organisations of the importance of investing in employee benefits.  Employers are increasingly encouraging staff wellbeing and retirement savings, which we expect to drive  a period of steady growth in the UK employee benefits market, and I am delighted over 100 new corporate clients were attracted to the Group's range of employee benefits services during the year. 

 

In addition, the employee benefits work of our Aberdeen business is stabilising following several years of localised contraction in the oil and gas industry.  Our membership of the Worldwide Broker Network, on which Alan Fergusson serves on the board, is driving an increasing number of referrals and we have grown our consultancy team to capitalise on these new opportunities. 

 

The FAMR highlighted concerns around a developing 'advice gap', driven by:

 

·     Increasing responsibility on individuals to manage their own financial affairs;

·     The ability of individuals to pay for advice; and

·     Advice needs arising from pensions' liberalisation and auto-enrolment. 

 

We believe the Government's emphasis on workplace advice presents new opportunities for us to realise further synergies between our employee benefits and wealth management businesses. 

 

Key performance indicators

 

The directors consider the key performance indicators ("KPIs") for the Group are as follows:

 

Strategy/objective	Performance indicator
Organic growth and growth by acquisition	Revenue - total income (excluding VAT) from all revenue streams.
Operating efficiency	Adjusted EBITDA margin - profit generated from the Group's operating activities before financing income or costs, taxation, depreciation, amortisation and acquisition-related costs, divided by revenue.
Shareholder value and financial performance	Adjusted EPS - total comprehensive income for the year, net of taxation, attributable to equity holders of the Company, adjusted to add back acquisition-related costs, notional finance charges on the unwinding of discounts on long?term provisions and the amortisation of acquired intangible assets, divided by the number of ordinary shares in issue.
Growth in the value of assets under management, administration and advice	Assets under management, administration and advice - the value of all client assets the business gives advice upon, manages or administers.
Excellent client service and retention	Client loss rate - the number of direct SSAS and SIPP schemes lost as a result of death, annuity purchase, external transfer or cancellation as a percentage of average scheme numbers during the period.
Financial stability	Debtors' days - this is the average number of days' sales outstanding in trade receivables at any time.
Financial stability	Surplus on regulatory capital requirement - this is the aggregate surplus on the total regulatory capital requirement of the Group.

 

Financial performance and future developments

 

Group results

 

Revenues were up 17.4% to £50.5m (2016: £ 43.0 m), with sustained demand for the Group's services.  We are particularly pleased with the continued development of our broader wealth management proposition and the integration of recently acquired businesses during the year.   The mix between the Group's key revenue streams changed during the period, summarised as follows: 

 

·     41.6 % investment and asset management (2016: 39.6%);

·     37.4 % pension consultancy and administration (2016: 38.6%);

·     10.7 % employee benefits (2016: 12.3%); and

·     10.3% property management (2016: 9.5%). 

 

EBITDA increased 18.0% to £10.5m (2016: £8.9m), with EBITDA margin of 20.8% (2016: 20.7%) despite further investment in the infrastructure and sustainability of our business, a fall in banking revenues and costs associated with the completion and integration of recent acquisitions. 

 

To facilitate a like-for-like comparison with prior years , acquisition costs of £ 0.4m (2016: £0.3m) incurred on acquisitions during the year have been added back in calculating adjusted EBITDA and adjusted profit before tax.  Adjusted EBITDA¹⁵ increased 17.2% to £10.9m (2016: £9.3m), while adjusted EBITDA margin was 21.6% (2016:  21.6 %) . 

 

Previously, I set out our aim to reduce the TERs incurred by clients and I see both a market expectation and possible regulatory or legislative pressure to reduce product costs, which could bring about some continued pressure on sector margins.  We plan to manage this by realising operational efficiencies through the development of our IT platform and securing further reductions in investment management and platform costs . 

¹⁵ Adding back £0.4m (2016: £0.3m) of acquisition-related costs. 

 

Net finance costs

 

The Group has maintained a positive net cash position throughout the year, with net finance costs of £0.2m (2016: £0.3m) due to the impact of £0.3m (2016: £0.5m) of notional finance charges on the unwinding of discounts on long?term provisions.  

 

Taxation

 

The effective rate of taxation on profit on ordinary activities of 16.9% (2016: 16.6%) was again below the standard rate of tax primarily due to the recalculation of deferred tax liabilities on acquired intangibles following a cut in the substantively enacted rate of UK corporation tax from 18% to 17%.  The net deferred taxation liability carried forward at 31 May 2017 was £2.8m (2016: £3.0m).

 

Earnings per share and dividend

 

Adjusted EPS¹⁶ was up 11.4% to 34.1p (2016: 30.6p) with strong revenue growth and an increase in operating profits.  Basic EPS increased 18.7% to 24.8p (2016: 20.9p), with a fall in the value of add backs to adjusted EPS as a result of a fall in notional finance charges on the unwinding of discounts on long?term provisions.  Diluted EPS increased 18.2% to 24.7p (2016: 20.9p), with the exercise of 226,841 options issued under the Company's share option plans during the year and the issue of 256,061 new shares as consideration for acquisitions. 

 

¹⁶ Before acquisition-related costs, amortisation and impairment of acquired intangibles, and notional finance income and charges. 

 

Dividends

 

The Board is pleased to recommend the payment of an increased final dividend of 9.4 pence per share (2016: 8.65 pence).  This makes a proposed total dividend for the year of 14.1 pence (2016: 12.5 pence), a year-on-year increase of 12.8 % (2016: 19.0%), demonstrating our desire to deliver value to shareholders and confidence in the outlook for our business.  The Board remains committed to growing the dividend, while maintaining an appropriate level of dividend cover.   If approved, the final dividend will be paid on 27  October 2017 to shareholders on the register at the close of business on 22  September 2017. 

 

Cash flow

 

Cash generated from operations fell to £10.5m or 100% of EBITDA (2016: £11.8m or 133%).  A £1.8m increase in cash flows from operating activities before changes in working capital and provisions to £12.3m (2016: £10.5m) was offset by a £1.8m increase in the Group's working capital requirement (2016: decrease of £1.3m) following a £2.0m (2016: £0.5m) increase in trade and other receivables and a £1.5m decrease (2016: £0.2m increase) in provisions after the settlement of contingent deferred consideration on acquisitions and cash settled share-based payment awards during the year.  The impact of the increase in receivables and decrease in provisions was partially offset by a £1.7m (2016: £1.6m) increase in trade and other payables, which was primarily due to:

 

·     A £1.3m increase in accrued staff bonuses at the year end, following another successful year and an increase in headcount across the Group; and

·     A £ 0. 6m increase in trade payables at the year end, with a £0.9m stage payment on the New Walk office development outstanding at the year end. 

 

The increase in trade and other receivables was due to:

 

·     A £0.9m increase in accrued income and prepayments as a result of the increase in assets under management and advice during the year;

·     A £0.7m increase in other receivables following an increase in property insurance premiums incurred by the Group to be recharged to clients at the year end; and

·     A £0.4m increase in trade receivables following strong growth in direct pension consultancy and administration fees. 

 

Net cash at 31 May 2017 was £23.0m (2016: £29.8m), with £2.8m of initial cash consideration paid and £0.2m cash acquired on the two transactions completed during the year, plus £2.3m (2016: £1.1m) of contingent deferred consideration paid in cash on historic acquisitions.

 

Outstanding trade receivables fell to 40 days' sales (2016: 46 days), with an increase in investment and asset management revenues and a continued focus on credit control, while trade payables remained at 52 days' purchases (2016: 52 days). 

 

Capital expenditure in the year was £ 9.1m (2016: £1.7m), with the most significant costs being £7.4m incurred on the development of the Group's new offices in Leicester, £1.1m investment in new computer hardware, software and office equipment and £0.5m on the purchase of new company cars following continued expansion of the consultancy team.  The continued development of the Group's technology infrastructure is a key part of our strategy and although taking longer than we initially anticipated, investment in our bespoke pension administration and wealth management platform continues in line with expected spend.  We are reviewing the possibility of moving to a hosted IT infrastructure, which may offer improved data security, business continuity and scalability for future growth. 

 

Bank facilities

 

The Group does not have an overdraft facility due to the headroom the Group's current cash balances provide on its working capital requirements.  Management will continue to review the level of bank facilities the Group may require going forward. 

 

Capital structure

 

The Group's capital structure is as follows:

	2017 £000	2016 £000
Net cash	( 22,979 )	(29,809)
Shareholders' equity	72,595	65,581
Capital employed	49,616	35,772

 

The Group continues to maintain a net cash position, with net cash balances falling to £23.0m (2016: £29.8m) due to capital expenditure during the year, coupled with the initial cash outflows on the acquisition of MC Trustees and the Group's investment in Amati. 

 

Regulatory capital

 

The Board considers it prudent for the Group to target headroom of circa 25% over the FCA regulatory capital requirement.  The Group's regulatory capital requirement has increased in recent years, and in addition its capital is eroded when it makes acquisitions due to the requirement for intangible assets arising on acquisition to be deducted from Tier 1 Capital.  

 

The Group continues to enjoy significant headroom on its increased regulatory capital requirement following the acquisition of MC Trustees and its investment in Amati during the year, allowing us to pursue further acquisition opportunities. 

 

 

 

Acquisitions

 

We have invested £ 46 m since our admission to AIM in 2005 in bringing 20 businesses or client portfolios into the Group, developing considerable expertise and a strong track record in the execution and subsequent integration of such transactions. 

 

In September 2016, we were pleased to acquire MC Trustees, bringing additional scale and expertise to our pension administration business.  MC Trustees is a great fit culturally and strategically, serving a similar client base to the Group's existing business, while complementing our existing operations. 

 

The Group's strategic investment in Amati announced in February 2017 brings a new dimension to our asset management business, which we expect to deliver significant synergies for each business. 

 

The five businesses acquired during the previous financial year have integrated well and all have contributed positively to the Group's trading results since acquisition, increasing earnings and enhancing value.  With increasing complexity and continuing consolidation across the key markets in which we operate, we expect there will be further opportunities to accelerate our strong organic growth by acquisition. 

 

Relationships

 

The Group's performance and value to our shareholders are influenced by other stakeholders, principally our clients, suppliers, employees, the 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 client relationship managers and consultants.  Employees have performance development reviews and employee forums also provide a communication route between employees and management, including SET^GO.  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. 

 

Resources

 

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

 

Our core values provide a framework for integrity, leading to responsible and ethical business practices.  Structures for accountability from our administration and consultancy teams through to SET^GO   and the Group's Board are clearly defined.  The proper operation of the supporting processes and controls are regularly reviewed by the Audit , Risk and Compliance Committee and take into account ethical considerations, including procedures for 'whistle-blowing'. 

 

Our people

 

As we continue to grow, our previous "Small to Big" employee engagement theme has evolved into our new "Big to Better" initiative, which will enable us to retain our core principles as a business built on the integrity, expertise and passion of our people.  Our total headcount at 31 May 2017 had increased to 568 (2016: 504) and we continue to invest in our graduate recruitment programme, with 25 (2016: 25) new graduates and 16 (2016: 15) apprentices joining the Group during the year.  We are also developing programmes for 'life served' people seeking exciting opportunities for a change in career or a return to work.  We continue to expand our consultancy and technical teams to take advantage of new business opportunities, with the number of consultants having increased to 115 (2016: 104) at the year end.  

 

With continued growth in our investment and asset management business, and to support our growth ambitions, we strengthened our SET^GO team through the appointments of Simon Gibson as the Group's Chief Investment Officer and Sara Andrews as Chief Business Officer.  Simon is a well-respected fund manager with over 30 years' investing experience, while Sara brings more than 25 years' experience of developing people and managing change within fast-growing businesses. 

 

We also welcomed 26 employees to the Group as part of the MC Trustees acquisition .  As an Investors in People company we are committed to developing our people and building the capacity to deliver sustainable growth.  Recent expansion has seen us move into larger premises in London and Glasgow, and open a new office in Manchester. 

 

We enjoy a strong team spirit and facilitate employee equity ownership through the Mattioli Woods plc Share Incentive Plan ("the Plan") and other share schemes.  At the year end the proportion of eligible staff invested via the Plan remained high at 58 % (2016: 61%) and we will continue to encourage broader participation in the Plan. 

 

Forward-looking statements

 

The strategic report is prepared for the members of Mattioli Woods and should not be relied upon by any other party for any other purpose.  Where the report contains forward-looking statements these are made by the directors in good faith based on the information available to them at the time of their approval of this report.  Consequently, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risks underlying such forward-looking statements and information.  The Group undertakes no obligation to update these forward-looking statements. 

 

Principal risks and uncertainties

 

There are a number of potential risks which could hinder the implementation of our strategy and have a material impact on our long?term performance.  These arise from internal or external events, acts or omissions which could pose a threat to the Group. 

 

We are proud of our consistently high client retention rate, but continue seeking ways to strengthen this.  We believe the most significant risk we face is potential damage to our reputation as a result of poor client service and we are determined not to let standards slip.  We address this through ongoing quality control procedures 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, apprentice and life served recruitment programmes and by providing incentives to motivate and retain our existing employees.  Throughout the Group, we have introduced Financial Assess, a web-based training programme provided through the Chartered Insurance Institute, written specifically from a financial services perspective.  This training helps maintain staff competence and compliance within our organisation and brings a better understanding to all employees of the markets in which we operate. 

 

One source of revenue is based on the value of cash balances held in clients' schemes.  These balances are not included in the Consolidated or Company statements of financial position.  In recent years, lower banking margins due to a continued low interest rate environment have resulted in a decline in these revenues.  Following t he Bank of England's decision to cut the base rate to a historic low of 0.25% in August 2016 we have reviewed how we might enhance our client banking model and plan to launch a new pooled banking solution for our clients' pension scheme accounts later this year. 

 

The Group has an indirect exposure to security price risk on investments held by clients, with discretionary portfolio management fees, fund management fees, adviser charges (including legacy investment commissions) and property management fees being based on the value of clients' assets under management, administration or advice.  Periods of volatility in a particular asset class may see changes in how our investment revenues are derived.  However, a great strength of our business is that we can continue to derive income from investments in all asset classes, while ensuring our clients' investment strategies are appropriately aligned to the prevailing market conditions and suitable for their financial needs. 

 

The table below outlines the current risk factors for the business identified by the Group.  The risk factors mentioned do not purport to be exhaustive as there may be additional risks that materialise over time that the Group has not yet identified or deemed to have a potentially material adverse effect on the business:

 

Industry risks
Risk type	Risk	Mitigating factors
Changes in investment markets and poor investment performance	Volatility may adversely affect trading and/or the value of the Group's assets under management, administration and advice, from which we derive revenues.	·      Majority of clients' funds held within registered pension schemes or ISAs, where less likely to withdraw funds and lose tax benefits.  ·      Broad range of investment solutions enables clients to shelter from market volatility through diversification, while continuing to generate revenues for the Group.  ·      Market volatility is closely monitored by the Asset Management Executive Committee.
Changing markets and increased competition	The Group operates in a highly competitive environment with evolving characteristics and trends.	·      Consolidating market position develops the Group's pricing power. ·      Control over scalable and flexible bespoke pension administration platform. ·      Experienced management team with a strong track record.  ·      Loyal customer base and strong client retention. ·      Broad service offering gives diversified revenue streams.
Evolving technology	The Group's technology could become obsolete if we are unable to develop our systems to accommodate changing client needs, new products and the emergence of new industry standards.	·      We partner with leading software providers to assist in our systems development. ·      High awareness of the importance of technology at Board level. ·      Expanded systems development with phased implementation of Group-wide platform.
Regulatory risk	The Group may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations.	·      Strong compliance culture.  ·      External professional advisers are engaged to review and advise upon control environment.  ·      Business model and culture embraces FCA principles, including treating clients fairly.  ·      Financial strength provides comfort should capital resource requirements be increased.
Changes in tax law	Changes in tax legislation could reduce the attractiveness of long-term savings via pension schemes, particularly SSASs and SIPPs.	·      The Government has a desire to encourage long-term savings to plan for an ageing population, which is currently under-provided for.  ·      Changes in pension legislation create the need for clients to seek advice.  ·      The development of the Group's investment and asset management services has reduced dependency on pension planning.

 

Operational risks
Risk type	Risk	Mitigating factors
Damage to the Group's reputation	There is a risk of reputational damage as a result of employee misconduct, failure to manage inside information or conflicts of interest, fraud, improper practice, poor client service or advice.	·      Strong compliance culture with a focus on positive customer outcomes. ·      High level of internal controls, including checks on new staff.  ·      Well-trained staff who ensure the interests of clients are met in the services provided.
Errors, breakdown or security breaches in respect of the Group's software or information technology systems	Serious or prolonged breaches, errors or breakdowns in the Group's software or information technology systems could negatively impact customer confidence.  It could also breach contracts with customers and data protection laws, rendering us liable to disciplinary action by governmental and regulatory authorities, as well as to claims by our clients.	·      Ongoing review of data security.  ·      IT performance, scalability and security are deemed top priorities by the Board. ·      Experienced in-house team of IT professionals and established name suppliers.
Business continuity	In addition to the failure of IT systems, there is a risk of disruption to the business as a result of power failure, fire, flood, acts of terrorism, re-location problems and the like.	·      Periodic review of Business Continuity Plan, considering best practice methodologies. ·      Disaster recovery plan and a disaster recovery team in place.  Business impact analysis has been conducted by department.
Fraud risk	There is a risk an employee or third party defrauds either the Group or a client.	·      The Group ensures the control environment mitigates against the misappropriation of client assets. ·      Strong corporate controls require dual signatures for all payments, SETGO approval for all expenditure greater than £5,000 and Board approval for all expenditure greater than £100,000.  ·      Assessment of fraud risk every six months discussed with the Audit, Risk and Compliance Committee and external auditors.  ·      Clients have view-only access to information.  ·      Ongoing review of risk of fraud due to external attack on the Group's IT systems.
Key personnel risk	The loss of, or inability to recruit, key personnel could have a material adverse effect on the Group's business, results of operations or financial condition.	·      Succession planning is a key consideration throughout the Group. ·      Success of the Group should attract high calibre candidates. ·      Share-based schemes in operation to incentivise staff and encourage retention. ·      Recruitment programmes in place to attract appropriate new staff.  ·      Cross functional acquisition team brought into acquisition projects at an early stage. ·      Keyman cover for company founders.
Litigation or claims made against the Group	Risk of liability related to litigation from clients or third parties and assurance that a claim or claims will not be covered by insurance or, if covered, will exceed the limits of available insurance coverage, or that any insurer will become insolvent and will not meet its obligations to provide the Group with cover.	·      Appropriate levels of Professional Indemnity insurance cover regularly reviewed with the Group's advisers.  ·      Comprehensive internal review procedures, including compliance sign-off, for advice and marketing materials.  ·      Maintenance of three charging models; time cost, fixed and asset based, which are aligned to specific service propositions and agreed with clients.  ·      Restricted status for our consultants to enable the recommendation of our own products and others in the market.
Reliance on third parties	Any regulatory breach or service failure on the part of an outsourced service provider could expose the Group to the risk of regulatory sanctions and reputational damage.	·      Due diligence is part of the selection process for key suppliers. ·      Ongoing review of relationships and concentration of risk with key business partners.
Strategic risk	Risk that management will pursue inappropriate strategies or implement the Group's strategy ineffectively.	·      Experienced management team with successful track record to date. ·      Management has demonstrated a thorough understanding of the market and monitors this through regular meetings with clients.
Corporate manslaughter risk	The risk of breaching corporate manslaughter laws as a result of management breach in duty of care.	·      Policies and procedures in place to provide employee guidance when driving on company business. ·      Company cars regularly maintained and serviced with reputable and vetted companies. ·      Adequate insurance cover. ·      Responsible employees.

 

Financial risks
Risk type	Risk	Mitigating factors
Counterparty default	That the counterparty to a financial obligation will default on repayments.	·      The Group trades only with recognised, creditworthy third parties.  ·      Customers who wish to trade on credit terms are subject to credit verification procedures.  ·      All receivables are reviewed on an ongoing basis for risk of non-collection and any doubtful balances are provided against.
Bank default	The risk that a bank could fail.	·      We only use banks with strong credit ratings.  ·      Client deposits spread across multiple banks.  ·      Regular review and challenge of treasury policy by management.
Concentration risk	A component of credit risk, arising from a lack of diversity in business activities or geographical risk.	·      The client base is broad, without significant exposure to any individual client or group of clients. ·      Broad service offering gives diversified revenue streams.
Liquidity risk	The risk the Group is unable to meet liabilities as they become due because of an inability to liquidate assets or obtain adequate funding.	·      Cash generative business. ·      Group maintains a surplus above regulatory and working capital requirements. ·      Treasury management provides for the availability of liquid funds at short notice.
Interest rate risk	Risk of decline in earnings due to a decline in banking margin or deposit rates received on surplus cash.  Low interest rates make it harder to structure compelling capital-protected products for clients.	·      Interest rates being at historic lows has resulted in associated income streams no longer being material.  ·      Good relationships with key banking partners.  ·      Access to competitive interest rates due to scale of business.
Underwriting risk	When arranging new products for promotion to the Group's clients, the Group may need to guarantee a minimum aggregate investment to secure appropriate terms for the product.    If actual client investment is less than the underwritten amount, we would incur the cost of either acquiring the unsold element of the product or unwinding any hedges underlying the unsold element of the product.	·      New products created in line with client demand. ·      Potential costs are carefully considered by the Investment Committee prior to the launch of each product.

 

 

 

Corporate social responsibility

 

We believe that running a profitable and growing business, which creates jobs and contributes to the economic success of the areas in which it operates, is a good platform for good corporate social responsibility. 

 

Mattioli Woods has a long-standing commitment to ensure our staff can engage with their local communities, playing a valuable role by forming innovative partnerships with other organisations and charities.  This social awareness is present throughout the business, from our employees to our clients, our professional connections and the suppliers we use.

 

We have a high level of engagement within our local communities.  Each year, we sponsor both business, sports and community awards.  Our business has benefited greatly from winning numerous awards and we feel it's right to help other businesses reap the rewards of such accolades.  In addition, we sponsor a variety of local clubs, business and sports related events across the country.  We believe this brings many benefits to the local community and beyond. 

 

The Group is pleased to continue sponsoring the Rothley 10k, one of the most celebrated charity road running races in Leicestershire, which attracted almost 800 runners in 2017, a new record for the race, which again raised over £20,000 of essential funds for a variety of local causes, including LOROS, Rainbows, County Air Ambulance Service, Age UK, Eye Camps and RNLI. 

 

In 2015 we chose our first national charity, Breast Cancer Now, the UK's largest breast cancer charity dedicated to funding research into this devastating disease.  By tackling the disease in the labs, on the political agenda, through public health information and with the health service, it believes it can transform the outlook for everyone affected by breast cancer.  To date, the Group has raised over £127,000 for the charity. 

 

Employees across the country have been involved in a number of activities to raise essential funding for this great cause, including a group wide cycling challenge, Tough Mudder in the Midlands, the National Three Peaks Challenge, the London and Edinburgh marathons, Glack Attack in Aberdeen and numerous cake sales and challenges. 

 

We also continue to sponsor wheelchair racer Sammi Kinghorn, who won two gold medals at the world para athletics championships in London in 2017 and now has her sights set on the 2018 Commonwealth Games . 

 

In addition, we support many other smaller charities such as Newmarket's Open Door initiative, which provides vulnerable people with supported housing and training opportunities; Rainbow House in Preston, a comprehensive programme for children, young people and adults with neurological conditions and  Project Luangwa, an international charity supported by our Solihull team that provides education in Zambia through the construction of schools, sponsoring of students and provision of educational materials.

 

The Group continues to create opportunities for young people through both its Financial Services Development scheme and apprenticeship recruitment, recently winning Apprenticeship Employer of the Year at the 2017 Leicester Apprenticeship Hub Graduation Ceremony.  This year, we are looking to recruit 24 graduates and increase our apprentice intake to 25.  We have also given 21 students the opportunity to work with us to gain valuable work experience during the year. 

 

Finally, as our Chairman has stated, Bob and I were honoured in the Queen's New Year's Honours List and received MBEs for business and community services in Leicester - an honour greatly appreciated by us both.

 

Our friend and colleague, Ketan Radia

 

In September 2016, Mattioli Woods lost one of its very best.  Our friend and colleague, Ketan Radia, passed away shortly after playing football with his beloved two boys and family.  Ketan was a fantastic employee and ambassador for all things Mattioli Woods.  Ketan's friends within the Group continue to help and provide support to his wife Reena and the boys.  Ketan is so sadly missed. 

 

Approval

 

In accordance with Section 414(c) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, the Company has prepared a Strategic Report, which includes information that would have been previously included in the Directors' Report. 

 

The Strategic Report in its entirety has been approved by the Board of Directors and signed on its behalf by:

 

 

 

Ian Mattioli MBE

Chief Executive Officer

4 September 2017

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 May 2017

 

	Note	2017 £000	2016 £000
Revenue	4	50,533	42,950
Employee benefits expense		(28,711)	(24,552)
Other administrative expenses		(9,465)	(7,807)
Share based payments		(1,902)	(1,594)
Amortisation and impairment		(1,996)	(1,816)
Depreciation		(606)	(497)
Loss on disposal of property, plant & equipment		(61)	(56)
Operating profit before financing		7,792	6,628
Finance revenue		45	122
Finance costs		(291)	(459)
Net finance costs		(246)	(337)
Share of profit from associate, net of tax	9	103	-
Profit before tax		7,649	6,291
Income tax expense		(1,293)	(1,046)
Profit for the year		6,356	5,245
Other comprehensive income for the year, net of tax		-	-
Total comprehensive income for the year, net of tax		6,356	5,245
Attributable to:
Equity holders of the parent		6,356	5,245
Earnings per ordinary share:
Basic (pence)	6	24.8	20.9
Adjusted (pence)		34.1	30.6
Diluted (pence)	6	24.7	20.9
Proposed total dividend per share (pence)	7	14.1	12.5

 

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 statement of comprehensive income in these financial statements. 

 

 

Consolidated and Company Statements of Financial Position          Registered number: 3140521

As at 31 May 2017

 

		2017		2016
		Group	Company	Group	Company
	Note	£000	£000	£000	£000
Assets
Property, plant and equipment		9,671	2,209	1,997	1,924
Intangible assets	8	44,444	36,743	43,410	28,973
Deferred tax asset		798	777	737	731
Investments in subsidiaries		-	18,572	-	15,187
Investment in associate	9	3,476	3,476	-	-
Derivative financial asset	11	110	110	-	-
Total non-current assets		58,499	61,887	46,144	46,815
Trade and other receivables		15,692	22,767	13,495	14,010
Investments		86	86	79	79
Cash and short-term deposits	12	22,979	12,172	29,809	21,381
Total current assets		38,757	35,025	43,383	35,470
Total assets		97,256	96,912	89,527	82,285
Equity
Issued capital	13	258	258	252	252
Share premium	13	30,314	30,314	27,765	27,765
Merger reserve	13	8,781	8,781	8,531	8,531
Equity - share based payments	13	2,571	2,571	1,642	1,642
Capital redemption reserve	13	2,000	2,000	2,000	2,000
Retained earnings	13	28,671	23,892	25,391	22,487
Total equity attributable to equity holders of the parent		72,595	67,816	65,581	62,677
Non-current liabilities
Deferred tax liability		3,600	2,692	3,724	2,127
Financial liabilities and provisions	14	2,842	11,337	5,738	5,738
Total non-current liabilities		6,442	14,029	9,462	7,865
Current liabilities
Trade and other payables		12,862	10,501	10,047	8,397
Income tax payable		957	259	1,083	178
Financial liabilities and provisions	14	4,400	4,307	3,354	3,168
Total current liabilities		18,219	15,067	14,484	11,743
Total liabilities		24,661	29,096	23,946	19,608
Total equities and liabilities		97,256	96,912	89,527	82,285

 

The profit of the Company for the financial year, after taxation, was £4.5m (2016: £5. 1m). 

The financial statements were approved by the Board of directors and authorised for issue on 4 September 2017 and are signed on its behalf by:  

 

 

Ian Mattioli MBE                                                        Nathan Imlach

Chief Executive Officer                                                Chief Financial Officer