TIDMMTW
RNS Number : 4298M
Mattioli Woods PLC
21 September 2021
21 September 2021
Mattioli Woods plc
("Mattioli Woods", "the Company" or "the Group")
Final results
Mattioli Woods plc (AIM: MTW.L), the specialist wealth and asset
management business, today reports its final results for the year
ended 31 May 2021.
Mattioli Woods is creating a responsibly-integrated,
full-service financial services group achieving this organically
through its distribution network of 139 consultants and through
acquiring and integrating businesses that enhance the client
proposition of the Group.
Financial highlights
-- Revenue up 7% to GBP62.6m (2020: GBP58.4m)
-- Recurring revenues [1](, [2]) represent 92.7% (2020: 92.1%) of total revenue
-- Adjusted EBITDA(2, [3]) GBP17.3m down 8% (2020: GBP18.9m; 2019 pre-COVID-19 GBP14.1m)
-- Adjusted EBITDA margin ([4]) 27.7% (2020: 32.4%; 2019: 24.5%)
-- Operating profit before financing GBP4.2m down 65% (2020 restated: GBP12.2m; 2019: GBP9.2m):
- Significantly reduced discretionary staff bonuses paid in the
prior year due to COVID-19 with incremental GBP1.8m paid in 2021 to
GBP3.1m
- Acquisition related expenses of GBP2.6m (2020: GBP0.3m) on
eight acquisitions completed in or shortly after the year
-- Profit before tax GBP5.1m down 60% (2020 restated: GBP12.7m)
driven by IFRS 3 accounting policy
-- Adjusted profit before tax(2, [5]) GBP14.2m down 11% (2020 restated: GBP16.0m)
-- Basic EPS 5.1p down 85% (2020 restated: 34.9p)
-- Adjusted EPS(2, [6]) 41.1p (2020 restated: 47.6p)
-- Proposed final dividend of 13.5p (2020: 12.7p), giving a
total dividend of 21.0p up 5% (2020: 20.0p)
-- Strong financial position, with GBP21.9m (2020: GBP26.0m) of cash at 31 May 2021
Operational highlights and recent developments
-- Total client assets of the Group and its associate ([7]) up
30.4% to GBP12.1bn (2020: GBP9.3bn) at year-end
-- Gross discretionary AuM [8] of GBP4.1bn (2020: GBP2.6bn),
with net inflows of over GBP453m in year
-- Uninterrupted client service
-- Delivery throughout year demonstrating operational resilience
-- Continued investment in technology, compliance and training
-- Board appointments during the period strengthens strategic oversight
-- Recent acquisitions performing and integrating well
-- GBP112m fundraise in June to facilitate strategic acquisitions
-- Post year-end completion of Maven Capital Partners, Ludlow
Wealth Management and Richings Financial Management
acquisitions
1 Annual pension consultancy and administration fees; ongoing
adviser charges; level and renewal commissions; banking income;
property, discretionary portfolio and other annual management
charges adjusted for Private Investor Club initial fees. .
2 This is an alternative performance measure ("APM") the Group
reports to assist stakeholders in assessing performance alongside
the Group's results on a statutory basis. APMs may not be directly
comparable with other companies' adjusted measures and APMs are not
intended to be a substitute for, or superior to, any IFRS measures
of performance. Supporting calculations for APMs and
reconciliations between APMs and their IFRS equivalents are set out
in the Alternative performance measure workings section of the
Annual Report. See page 17 for further details of APMs.
3 Definition amended to add gain on bargain purchase and
contingent consideration as remuneration. Now calculated as
earnings before interest, taxation, depreciation, amortisation,
acquisition-related costs, gain on bargain purchase, contingent
consideration treated as remuneration and including share of profit
from associates (net of tax).
4 Adjusted EBITDA divided by revenue.
5 Definition amended to add back gain on bargain purchase,
deferred consideration as remuneration and acquisition related
finance expenses. Now calculated as profit before tax, adding back
amortisation and impairment of acquired intangibles,
acquisition-related costs, gain on bargain purchase, contingent
consideration treated as an expense, acquisition related finance
expenses .
6 Adjusted profit after tax used to derive adjusted EPS is
calculated as adjusted profit before tax as defined above less
income tax at the standard rate of 19% (2020: 19%).
7 Includes GBP1,196.0m (2020: GBP515.8m) of funds under
management by the Group's associate, Amati Global Investors
Limited, excluding GBP94.9m (2020: GBP54.1m) of Mattioli Woods'
client investment and GBP17.2m (2020: GBP11.5m) of cross-holdings
between the TB Amati Smaller Companies Fund, TB Amati Strategic
Metals Fund and the Amati AIM Venture Capital Trust ("VCT")
plc.
8 Includes GBP1,308.1m (31 May 2020: GBP581.4) of funds under
management by Amati Global Investors Limited, including Mattioli
Woods' client investment and cross-holdings between TB Amati
Smaller Companies Fund, TB Amati Strategic Metals Fund and Amati
AIM VCT plc.
Commenting on the results, Ian Mattioli MBE, Chief Executive
Officer, said:
" I am pleased to report that even in these unprecedented times
we continue to grow and develop the business. The Group's revenue
grew 7% to GBP62.6m (2020: GBP58.4m), driven by increased inflows
and the sustained performance of our discretionary management
proposition, combined with positive contribution of each of the
businesses acquired during the year.
" The uncertainty that we have all experienced over the last
year has served to enhance our commitment to maintaining our
culture of putting clients first, developing our service offering
and building a business that is sustainable over the long-term. Our
continued investment in technology has allowed the majority of our
team to continue working remotely, and for us to work in a new
operating environment with an increased number of new clients and
also generate an increased pipeline of new business
opportunities.
"The essence of what we do is looking after our clients' money
and there is an expectation that we should apply the same diligence
in looking after that of our business and our shareholders. Current
trading is in line with our expectations and the momentum that we
saw in the second half of last year continues in the current
year.
"Adjusted EBITDA was down 8% to GBP17.3m (2020: GBP18.9m) and
adjusted EBITDA margin of 27.7% (2020: 32.4%), primarily as a
result of the decision to reinstate discretionary staff bonuses,
and increased contribution from our associate company, Amati.
" Adjusted EPS reduced 2% to 41.1p (2020 restated: 47.6p). The
Board is pleased to recommend a final dividend of 13.5p per share
(2020: 12.7p). This makes a proposed total dividend for the year of
21.0p (2020: 20.0p) a year-on-year increase of 5.0% (2020: flat),
demonstrating our desire to deliver value to shareholders and
confidence in the outlook for our business.
"This has been a record year of acquisitions for the Group. In
June 2021, we announced the successful completion of a GBP112m
equity fundraise to facilitate the earnings enhancing acquisition s
of Maven, Ludlow, Richings, a pipeline of smaller bolt-on
acquisitions and to provide regulatory capital headroom. We also
completed the acquisitions of five businesses during the year, and
I am pleased that all are performing and integrating well.
"We will continue to seek to build on our track record of
successful acquisitions by continuing to assess and progress
opportunities that meet our strict criteria. Consolidation within
both wealth management and SIPP administration is expected to
continue for the foreseeable future with many more opportunities
coming to market.
"I am very grateful for the continued commitment, endeavour,
agility and professionalism that our people have shown in dealing
with our clients' affairs throughout a year characterised by a
sustained level of uncertainty.
"The easing of lockdown restrictions and continued roll out of
the COVID-19 vaccination programme are beginning to support
investor confidence. Investment markets have partially recovered
from the weakness seen at the outset of the COVID-19 pandemic but
look likely to remain volatile for some time. This provides a
significant opportunity for Mattioli Woods, as people seek to take
charge of their financial affairs and manage wealth through the
generations. At the same time, savings and investments are becoming
more complicated and regulatory requirements continue to increase.
Clients need long-term advice and strategies more than ever before.
We will continue to seek to understand our clients' needs and
provide quality solutions, maintaining our focus on client service
and continuing to adapt our business model to the changing market,
integrating asset management and financial planning to build upon
our established reputation for delivering sound advice and
consistent investment performance .
"We are confident our focus on addressing the changing needs of
our clients, developing the capabilities of the Group and continued
investment in our governance and infrastructure, will position us
well to deliver future growth, sustainable shareholder returns over
the long term and a business that is here for the long term".
For further information please contact:
Mattioli Woods plc
Ian Mattioli MBE, Chief Executive
Officer
Ravi Tara, Chief Financial Officer Tel: +44 (0) 116 240 8700
Michael Wright, Group Managing www.mattioliwoods.com
Director
Canaccord Genuity Limited (Nominated Adviser and Joint Broker)
Adam James Tel: +44 (0) 20 7523 8000
Thomas Diehl www.canaccordgenuity.com
Singer Capital Markets
(Joint Broker)
Justin McKeegan Tel: +44 (0) 20 7496 3000
Tom Salvesen www.singercm.com
Media enquiries:
Camarco
Julia Tilley Tel: +44 (0) 20 3757 4998
www.camarco.co.uk
Analyst presentation
There will be an analyst presentation held via webinar to
discuss Mattioli Woods' full year results at 09:30am today.
Those analysts wishing to attend are asked to contact Julia
Tilley at Camarco on +44 (0) 20 3757 4998 or at
julia.tilley@camarco.co.uk
Strategic report
Our vision and approach
Our business model
Mattioli Woods plc ("Mattioli Woods", "the Company" or "the
Group") is a diversified specialist wealth and asset management
business. Our core proposition integrates asset management and
financial planning to serve a market predominantly consisting of
the mass affluent, controlling directors and owner-managed
businesses, professionals, executives, individuals, families and
retirees. We plan to expand our reach to new client demographics as
we develop both our investment and product propositions as part of
our strategic plan.
Our vision
The Group's strategic vision is to drive continued growth whilst
delivering exceptional client outcomes focussed on five key
pillars:
1. New client wins and greater integration across the value-chain for existing clients;
2. Enhancing the Group's investment proposition;
3. Further investment in developing the Group's digital platform and client portal;
4. Simplifying administration processes and improved productivity; and
5. Accelerating growth through strategic acquisitions.
Our strategic goals for the Group are to deliver:
-- GBP300m Revenue
-- GBP30bn AuM
-- GBP100m EBITDA
-- Extended distribution by growing team to 250+ consultants
We continue to put our clients and their needs at the core of
everything we do, with the objective of growing and preserving
their assets, while giving them control and understanding of their
overall financial position. At the same time, we aim to grow our
business, both organically and by acquisition, to deliver strong,
sustainable shareholder returns over the long-term.
Our focus on holistic planning, providing high levels of
personal service and maintaining close multi-generational
relationships with our clients has also been a feature in each of
the acquisitions made this year. We plan to continue developing
complementary services around our core specialisms, blending
advice, investment and asset management with product provision to
progress as a modern financial services business aligned to our
clients' needs. This will allow us to continue to produce great
client outcomes including keeping clients' costs low, with our
integrated model allowing us to address more of the value
chain:
Adviser Administrator Platform Investment Product providers
manager
-- Trusted -- End to end -- Own MWeb -- Discretionary -- Innovative
expertise administration pension administration portfolio management new product
platform development
------------------ ------------------------ ---------------------- ------------------
-- Close client -- Proactive, -- Investing -- Bespoke -- Addressing
relationships personal service in technology advice clients' needs
------------------ ------------------------ ---------------------- ------------------
-- Own distribution -- 11,000+ -- Strategic -- Using best -- Extending
through team SIPP and SSAS partnerships of what we and distribution
of 139 consultants schemes with external other providers beyond advised
providers offer clients
------------------ ------------------------ ---------------------- ------------------
Wealth and asset management
Our wealth and asset management business comprises three
operating segments providing services to individuals and families,
embracing all aspects of financial planning, personal and trust
investment, pensions and estate planning.
Pension consultancy and administration
Mattioli Woods is a leader in the provision of Self Invested
Personal Pension ("SIPP") and Small Self-Administered Pension
Scheme ("SSAS") arrangements, which are often central to our
clients' life planning strategies. We have established a reputation
for technical excellence, widely acknowledged within our industry.
We maintain our technical edge through our in-depth understanding
of UK pension legislation, which translates into meaningful advice
given to clients by our consultancy team.
The provision of personalised and proactive administration
further differentiates us from our competitors.
Investment and asset management
Discretionary management and the provision of bespoke investment
advice sit at the heart of our investment proposition. In meeting
our clients' investment needs we use third parties' funds, but
where we have a particular expertise we look to meet those needs
in-house. This approach has led to the development of our internal
Investment management function that has successfully developed a
range of products and funds to meet our clients' needs including
the GBP1.6bn Multi-Asset Fund which has received external
recognition, as well as our Private Investors Club and Custodian
REIT plc. These are in addition to the funds managed by our
associate company Amati Global Investors Limited. Where
appropriate, we intend to expand upon these offerings in the future
to enhance our client service provision and drive further organic
growth.
The migration of client assets under advice to assets under
management allows us to deliver a more efficient wealth management
service to our clients. Our services are delivered by a dedicated
team, with many years' of investment experience.
Property management
Our subsidiary company Custodian Capital Limited facilitates
direct property ownership on behalf of pension schemes and private
clients and also manages the Mattioli Woods Private Investors Club,
which offers alternative investment opportunities to suitable
clients by way of private investment structures.
In addition, Custodian Capital is the discretionary fund manager
of Custodian REIT plc, a UK real estate investment trust listed on
the Main Market of the London Stock Exchange. We believe investment
in good quality properties with high grade tenants typically
provides stable returns over the long-term and our property team
draws on many years' experience in commercial property investment
to deliver this.
Employee benefits
The Group's fourth operating segment comprises its Employee
Benefits business assisting our corporate clients with employee
engagement, with the aim of improving recruitment, retention and
workplace morale. This encompasses consultancy and administration
in areas such as defined contribution and defined benefit pension
schemes, workplace savings, healthcare, international benefit
solutions and risk benefits, in addition to the design,
implementation and administration of these schemes.
The Group also offers total reward and flexible benefit systems,
assisting clients in the delivery of these to their employees,
along with advice, guidance and financial education. Recent changes
in legislation and the uncertainty caused by the current pandemic
are increasing demand for our financial education and wealth
management services to be delivered through employers.
Strategic report
Chairman's statement
I have now served on the Board of Mattioli Woods for nine years,
including as Chairman for the last five years, and this is my last
statement before I will step down at our forthcoming AGM on 29
October 2021. When I joined the Group on 31 July 2012, Mattioli
Woods was one of the smaller wealth management companies on the AIM
Market with a share price of 132p and a market capitalisation of
GBP33m. Since then, as a team, we have taken the Group on a journey
of transformation and growth, always centred around serving the
needs of our increasing number of clients. We have added to our
range of products and operating segments, enhanced our systems and
processes and developed our compliance and governance structures.
We have acquired 29 businesses over this period adding expertise to
our consultancy, investment and asset management and administration
teams and expanding our geographic reach across the UK. This last
year has been a particularly significant period in the development
of the Group, as we have continued to grow our client base
organically and have delivered compelling acquisitions on a major
scale together with a substantial GBP112m fundraise. We have also
strengthened and expanded our Board, bringing together an
experienced team with the expertise to lead the Group into the next
phase of its development. As at 20 September, the Group's share
price was 795p and our market capitalisation over GBP402m.
For the year ended 31 May 2021 I am pleased to report revenue
growth of 7% to GBP62.6m (2020: GBP58.4m), despite the continued
economic uncertainties that persisted throughout the period.
Adjusted EBITDA was down 8% to GBP17.3m (2020: GBP18.9m) after
normalising the prior year's result to reflect the impact of paying
no discretionary staff bonuses at year-end whilst we responded to
the unfolding impacts of the Coronavirus (COVID-19) pandemic.
The revenue contributions from the acquisitions of Hurley
Partners ("Hurley"), the Exempt Property Unit Trust ("EPUT")
administration business of BDO Northern Ireland, Montagu Limited
("Montagu"), Pole Arnold Financial Management ("Pole Arnold") and
Caledonia Asset Management ("Caledonia") during the year offset the
3.6% reduction in organic revenues ([9]) which reflected the
sustained impact of COVID-19 throughout the period.
9 Total revenues excluding the revenue growth from businesses
acquired in the last 24 months.
A reduction in fee-based revenues, primarily driven by lower
client activity in the first half and the suspension of certain
regulatory requirements for pension schemes, was more than offset
by an increase in revenues linked to the value of clients' funds
under management and advice following t he rise in market values
and improved investor sentiment in the second half.
We have remained focussed on our purpose, demonstrating
resilience despite the pandemic and operating our business in a
sustainable and responsible manner throughout. Our focus remains on
protecting both the health and wealth of our staff and clients,
whilst supporting all our stakeholders and the wider community. We
have maintained our focus on client service and continued to
develop our customer and business propositions, with the vast
majority of our team working remotely for most of the year. We are
mindful of our social impact and remained firm in our commitment to
not take support from the government and add to the burden that
will have to be met by the UK taxpayer as we emerge from the crisis
in the coming years. We recognise our long-term financial prudence
and decisive action taken at the beginning of the first lockdown in
March 2020, have placed the business on a strong and sustainable
footing.
As highlighted in our July trading update, financial performance
in the second half of the year benefitted from the easing of some
COVID-19 concerns, and a Brexit trade deal amongst other factors,
with increased client activity and sustained and higher inflows
into the Group's discretionary portfolio management services.
Following our decision to not pay staff bonuses in response to the
pandemic in the prior year, we reported an exceptional level of
profitability at that time. Our commitment to rewarding our
employees for their continued efforts by paying bonuses for all
staff in the current financial year, combined with our continued
investment in recruitment, infrastructure and capability, and
increases in specific costs resulted in profit before tax ("PBT")
of GBP5.1m (2020 restated: GBP12.7m). Excluding the impact of
acquisition related costs, adjusted PBT reduced by 11% year on
year.
The Board believes it is prudent to continue to protect the
Group's financial position and balance the interests of all
stakeholders, whilst recognising the importance of dividends to our
shareholders. We remain committed to growing the dividend while
maintaining an appropriate level of cover. Accordingly, the Board
proposes a final dividend of 13.5p per share (2020: 12.7p). This
makes a proposed total dividend for the year of 21.0p (2020:
20.0p).
Our strategy
Earlier this year we set out our revised medium-term growth
targets that reflect the Board's ambition for the Group which
include growing revenue to GBP300m and achieving EBITDA of GBP100m,
underpinned by total client assets of GBP30bn. As we work towards
these goals our strategy remains focused on achieving sustainable
levels of organic growth, supplemented by strategic acquisitions
that enhance value and broaden or deepen our expertise and services
to better serve our clients.
As a reflection of this renewed Group ambition, in June we were
pleased to complete our largest equity fundraise since Mattioli
Woods joined the AIM Market in 2005. The GBP112m fundraise was
required to fund the acquisitions of Maven Capital Partners UK LLP
("Maven"), Ludlow Wealth Management Group Limited ("Ludlow") and a
pipeline of smaller acquisitions whilst maintaining appropriate
levels of regulatory capital following these and the acquisitions
completed during the last financial year.
These most recent acquisitions represent significant milestones
in Mattioli Woods' journey and illustrate meaningful progress
toward our ambitious medium-term goals. These earning enhancing
transactions extend the Group's existing client proposition and add
to our distribution capacity and scale. We will seek to build on
our track record of successfully combining businesses that share
the same culture and ethos of putting clients first. Alongside the
expected return to organic growth, we continue to assess a diverse
pipeline of potential acquisition opportunities that meet our
strict criteria.
Our people
I very much appreciate our team's dedication in how they have
dealt with our clients' affairs throughout this uncertain period
and thank all our staff for their continued commitment to
delivering high levels of service to our clients, and for their
enthusiasm and professionalism, whilst the majority of our people
continue to work remotely.
We are committed to developing our staff and building the
capacity to deliver sustainable growth over the long-term. 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.
Our culture is based on professionalism, putting clients first
and adopting a collegiate approach. Retaining the integrity,
expertise and passion of our people remains a priority of the Board
and this is at the heart of our success.
Governance and the Board
We have substantially renewed and expanded our Board during the
course of the last financial year. In January 2021, three new
independent non-executive directors were appointed with David
Kiddie, Edward Knapp and Martin Reason joining the Group. Each of
our new non-executive directors strengthens our Board bringing
specialist financial services expertise to the governance of our
Group, including senior level experience in asset management and
investment oversight, technology, innovation and growth and
strategic planning and change management, as we continue to execute
against our ambitious plans for growth. Carol Duncumb stepped down
from the Board in March 2021 for personal reasons and we thank
Carol for her contributions over the period since her appointment
in September 2014.
Our executive team has also been expanded and strengthened with
the appointments of Ravi Tara, Chief Financial Officer in February
2021, Iain McKenzie, Chief Operating Officer in May 2021 and
Michael Wright, Group Managing Director in June 2021. These
appointments create an executive team that has the balance of
skills and capability required to effectively lead and govern the
Group's activities both now and for the future as we deliver our
medium-term strategic goals.
Following these appointments, the Company will continue to have
a balanced board, which we believe represents the right governance
structure for the business. We strive for high standards in our
corporate governance and disclosure and have adopted the QCA
Corporate Governance Code to facilitate this. The Board remains
committed to developing the corporate governance and management
structures of the Group to ensure they continue to meet the
changing needs of the business.
Shareholders
During the year we have engaged with our shareholders through
traditional face-to-face meetings when permitted as well as through
virtual channels including webinars, and group meetings. We were
also pleased to be able to engage with many of our shareholders
both existing and new as part of the recent equity fundraise
process.
We are fortunate to have a group of supportive institutional
shareholders with a significant investment in the Company and
welcome opportunities to talk to all our shareholders, large and
small, including our new shareholders who we welcome to the Group.
We will continue to maintain a regular and constructive dialogue
with them, while seeking to further broaden our shareholder base as
we continue to grow.
Outlook
The Board are pleased by the Group's performance in the year
despite the continued economic and market uncertainties that
persisted throughout the period. The Group has remained stable and
resilient, maintaining our focus on providing excellent client
outcomes and to protect their interests despite the external
influences and challenges.
We plan to build on this momentum, advancing key strategic
initiatives to drive further organic growth, such as the
development of a self-directed investment platform with our partner
Tiller Group. The acquisitions of Maven and Ludlow, completed post
year-end, together with our other acquisitions completed during the
period demonstrate meaningful progress towards our ambitious
strategic goals, and provide significant opportunities to further
broaden our scale, distribution reach and product offering to both
our existing and new clients.
The further easing of lockdown restrictions and continued roll
out of the COVID-19 vaccination programme are supporting investor
confidence and we expect the increased client inflows and new
business enquiries seen in the second half of the last financial
year to continue in the current period.
We are confident our focus on addressing the changing needs of
our clients, developing the capabilities of the Group and continued
investment in our governance and infrastructure, will position us
well to deliver future growth, sustainable shareholder returns over
the long term and a business that is here for the long term. We
look forward to the future with confidence and enthusiasm.
Joanne Lake
Chairman
20 September 2021
Strategic report
Chief Executive's review
Introduction
The uncertainty that we have all experienced over the last year
has served to enhance our commitment to maintaining our culture of
putting clients first, developing our service offering and building
a business that is sustainable over the long-term. I am pleased to
report that even in these unprecedented times we continue to grow
and develop the business. The Group's revenue grew 7% to GBP62.6m
(2020: GBP58.4m), driven by increased inflows and the sustained
performance of our discretionary management proposition, combined
with positive contribution of each of the businesses acquired
during the year.
The momentum of new business generation in the first half of the
year carried on in to the second half despite the ongoing economic
uncertainty. A total of 898 (2020: 558) new SIPP, SSAS and personal
clients with assets totalling GBP239m (2020: GBP155m) chose to use
Mattioli Woods during the year, with this new business being
generated primarily through virtual meetings but also through
traditional, face-to-face meetings when permitted. Our continued
investment in technology enabled us to host client and introducer
webinars which continue to attract larger attendee numbers than our
pre COVID-19 seminars. This new operating environment has enabled
us to work with an increased number of new clients and also
generate an increased pipeline of new business opportunities.
Operating profit before financing was down 66% to GBP4.2m (2020
restated: GBP12.2m) and profit before tax was down 40% to GBP5.1m
(2020 restated: GBP12.7m), compared to the exceptional result of
the prior year, following the re-instatement of discretionary staff
bonuses increasing employee bonus costs to GBP3.1m (2020: GBP1.3m),
increased acquisition related costs GBP2.6m (2020: GBP0.3m) and
deferred consideration reported as remuneration GBP3.8m (2020
restated: GBP0.8m). Adjusted profit before tax was enhanced by an
increased share of profit of GBP1.1m (2020: GBP0.6m) from our 49%
associate Amati, with the team achieving a significant milestone
with assets under management going through GBP1bn during the year
totalling GBP1.2bn at the year-end. Amati's strong investment
performance gained further recognition in being named both Boutique
Manager of the Year and Investment Company of the Year at
Investment Week's Specialist Investment Awards in November
2020.
Adjusted EBITDA was down 8% to GBP17.3m (2020: GBP18.9m) and
adjusted EBITDA margin of 27.7% (2020: 32.4%), primarily as a
result of the decision to reinstate discretionary staff bonuses
which were not paid in the prior year.
We believe the profit margins achieved in the year are
indicative of our sustainable longer-term targets. We continue
working to realise the economies of scale and operational
efficiencies that our responsibly integrated model offers, while
seeking ways to reduce clients' costs such as lower fund manager
and platform charges. Further investment in our platform
infrastructure will allow us to improve client outcomes and further
reduce clients' total expense ratios ("TERs").
Our success has been based upon the delivery of quality advice,
growing our clients' assets and enhancing their financial outcomes.
We continue to enjoy strong, intergenerational client retention and
we have seen sustained demand for advice from clients through the
year against an uncertain backdrop. Whilst our markets continue to
evolve, including the growth of self-administered advice for less
complex clients, we expect there to be continued demand for advice
driven by working and lifestyle changes, the impact of the pandemic
on financial planning matters, an uncertain investment environment,
increasing longevity, tax and other legislative changes, where
navigating these headwinds becomes more complex.
We continue to deliver strong investment performance across both
portfolios and funds. In meeting our clients' investment needs
where we have a particular expertise, we look to meet those needs
though our own investment management products and expertise
including Discretionary Portfolio Management ("DPM"), our Private
Investors Club and Custodian REIT plc ("Custodian REIT").
Alternatively we use third parties' funds where we believe these to
better meet our clients' investment needs. We expect that the
recent acquisition of Maven Capital Partners, where appropriate,
will provide access to a wider range of investment opportunities
for our clients.
Despite continued market uncertainty, we achieved significantly
higher aggregate net inflows (before market movements) of GBP452.9m
(2020: GBP200.2m) into the Group's bespoke investment services.
Gross discretionary assets under management by the Group and its
associate increased to GBP4.1bn (2020: GBP2.6bn) at the year-end in
part due to the acquisition of Hurley Partners ("Hurley") in July
2020 and the partial recovery of markets, including the value of
property held by Custodian REIT.
The value of assets held within our DPM service increased by
51.7% to GBP2.1bn (2020: GBP1.4bn), of which GBP144.0m or 6.7%
(2020: GBP128.0m or 9.1%) is invested within funds managed by the
Group and its associate. We plan to continue developing new
products and services to better deal with our clients' needs and in
conjunction with the Maven and Ludlow businesses acquired post
year-end, using the best of what we have and the best of what other
providers can offer.
Market overview
Mattioli Woods operates within the UK's financial services
industry, which is subject to the effects of volatile markets,
economic conditions and regulatory changes. Our markets are highly
fragmented and remain competitive, serviced by a wide range of
suppliers offering diverse services to both individual and
corporate clients.
The UK retail savings and investment market has demonstrated
considerable growth in recent years. It remains dominated by
pension schemes but is evolving as a result of societal, economic,
regulatory and technological changes. The impact of the COVID-19
pandemic, more than a decade of low interest rates and evolving
client preferences, including environmental, social and governance
("ESG") and Responsible Investing considerations, have created
challenges for people seeking to generate income, while preserving
and growing their capital. At the same time, the COVID-19 pandemic
has heightened awareness of the gap between the current level of UK
savings and that which is necessary to provide a reasonable
standard of living in adverse circumstances or during retirement.
Employers continue to withdraw from defined benefit pension
schemes, requiring individuals to be self-reliant in planning for
their own long-term needs. Individuals who have generated
substantial personal and family wealth are increasingly seeking
solutions that help them fulfil their personal ambitions, and we
believe events such as the current pandemic are likely to continue
driving demand for the holistic planning and expert advice we
provide.
In addition, there are a number of changes in regulation and
legislation that may shift the landscape of financial advice.
Regulation
The Financial Conduct Authority ("FCA") has been proactive in
its response to COVID-19, with the FCA's Executive Director of
Supervision setting out the FCA's priorities and long-term
expectations for the wealth management and advice industry in June
this year. The FCA's focus is on firms' operational and financial
resilience, including the preservation of client assets and money,
and it expects firms to take reasonable steps to ensure they
continue to meet the challenges the pandemic poses to customers and
staff, particularly through their business continuity plans.
Acting with integrity, charging appropriate fees for delivered
services and the prevention of fraud, financial crime and market
abuse are all important parts of this. The FCA has introduced new
rules aimed at making it easier for consumers to transfer fund
investments between platforms. We believe these changes should be
beneficial for advisers in ensuring that, subject to individual
suitability assessments, clients are on the most appropriate
platform for their needs.
As the demand for high-quality, personalised advice and the
potential market for our products and services continue to grow, so
do the costs of regulation. Previously, we reported increases in
the Financial Services Compensation Scheme ("FSCS") levy had
resulted in the Group's regulatory fees and levies more than
doubling to GBP0.8m for the 2019/20 year. The Group's regulatory
fees and levies for the 2020/21 year have increased to GBP1.3m,
driven by further increases in FSCS levy due to SIPP and pension
advice claims in the wider market, and we expect these costs will
continue to increase over the next few years.
As regulators focus on protecting consumers, legislation is
becoming increasingly stringent and the level of public scrutiny on
conduct and cost is increasing, with clients able to more easily
view the cost of the services they receive following the
introduction of the Markets in Financial Instruments Directive II
("MiFID II") last year.
The new Investment Firm Prudential Regime (IFPR) for UK
investment firms authorised under the UK Markets in Financial
Instruments Directive regime (MiFID) is expected to take effect
from January 2022. The IFPR aims to streamline and simplify the
prudential requirements for solo regulated investment firms in the
UK (FCA investment firms), taking into account their level of risk
and specific business requirements.
The new rules represent significant change. UK investment firms
will be subject to liquidity requirements across the board, a new
methodology for calculating capital requirements plus new
remuneration and disclosure requirements.
Brexit
As a UK business with no operations in other EU countries, no
material dependencies on goods or people from other EU countries
and a predominantly UK client base, the operational impacts of
Brexit on our business have been modest. We remain conscious that
the political situation could impact financial markets, interest
rates and consumer confidence, raising unexpected challenges,
including any broader impact that Brexit might have on the UK
economy or on the operation of European funds.
Changes to the tax regime
The Chancellor's March 2021 budget announced a rise in
corporation tax ("CT") for businesses with profits above GBP250,000
to move to 25% corporation tax from 2023, with profits between
GBP50,000 and GBP250,000 taxed on a tapered scale. This will lead
to an increase in the Group's effective tax rate in future
years.
For our clients, there will be many opportunities to manage
their tax positions effectively. The continuation of tax relief for
research and development, the new super deduction for plant and
machinery investment and of course, the continuation of tax relief
for employees putting money into pensions for retirement.
It was widely expected that a review of capital gains tax
("CGT") with particular reference to individuals and smaller
businesses would lead to increased charges. This did not
materialise in the March 2021 budget but we expect any future
changes in the tax regime to create further demand for our
financial planning and advisory services.
The need to comply with these and other regulatory changes means
we continue to invest in our people and technology, including our
strategic partnership with the Tiller Group to develop a
self-investment platform for new and existing clients.
Outlook
Investment markets have partially recovered from the weakness
seen at the outset of the COVID-19 pandemic but look likely to
remain volatile for some time. This provides a significant
opportunity for Mattioli Woods, as people seek to take charge of
their financial affairs and manage wealth through the generations.
At the same time, savings and investments are becoming more
complicated and regulatory requirements continue to increase.
Clients need long-term advice and strategies more than ever before.
We will continue to seek to understand our clients' needs and
provide quality solutions, maintaining our focus on client service
and continuing to adapt our business model to the changing market,
integrating asset management and financial planning to build upon
our established reputation for delivering sound advice and
consistent investment performance .
Our services
Our core pension and wealth management offering currently serves
a wide demographic cross-section including affluent families and
the higher end of the market, including controlling directors and
owner-managed businesses, professionals, executives and
retirees.
We intend to extend our reach to new client demographics as we
develop both our investment and product propositions as part of our
strategic plan including our partnership with the Tiller Group
Limited to develop a self-directed investment platform for new and
existing clients. The mix of income derived from the Group's four
operating segments changed slightly during the year, summarised as
follows:
-- 53.3% investment and asset management (2020: 45.9%);
-- 30.1% pension consultancy and administration (2020: 35.3%);
-- 8.8% employee benefits (2020: 9.6%); and
-- 7.8% property management (2020: 9.2%).
We aim to operate a seamless structure, allowing us to cover all
aspects of financial planning, wealth management and employee
benefits. Our key objectives are:
-- Maintaining long-term relationships and delivering great outcomes for our clients;
-- Proactively anticipating our clients' needs to deliver on their expectations;
-- Investing in our people and technology to service greater business volumes at a lower cost;
-- Sharing knowledge and ideas between ourselves and others for mutual benefit;
-- The development of our market standing through the integrity and expertise of our people;
-- Extending our range of products and services, seeking to
attract new clients both organically and via strategic
acquisitions; and
-- Being proud of our charitable and community spirit,
supporting staff and local and national charities.
Assets under management, administration and advice
Unlike many wealth managers, the majority of the Group's
revenues are fee-based, rather than being linked to the value of
assets under management, administration or advice [10] , giving our
business a revenue profile that is less sensitive to market
performance. The acquisitions of Hurley, EPUT, Montagu, Pole Arnold
and Caledonia during the year added GBP1.3bn of client assets, with
total client assets of the Group and its associate of GBP12.1bn at
31 May 2021 (2020: GBP9.3bn) summarised as follows:
Assets under
management, Personal wealth
administration and SIPP and SSAS [12] Employee benefits and other assets Sub-total Amati [13] Total
advice [11] GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------------------- ------------------ ------------------ ---------- ----------- ---------
At 1 June 2020 6,029.1 1,024.1 1,728.6 8,781.8 518.5 9,300.3
Acquisition during
the year 381.4 - 918.5 1,299.9 - 1,299.9
Net
inflows/(outflows),
including market
movements 330.6 428.0 87.1 845.7 677.6 1,523.3
At 31 May 2021 6,741.1 1,452.1 2,734.2 10,927.4 1,196.1 12,123.5
--------------------- ------------------- ------------------ ------------------ ---------- ----------- ---------
Our DPM service has continued to deliver targeted investment
performance relative to the market, with aggregate net inflows of
over GBP453m into this and the Group's other bespoke investment
services during the year. The movement in total client assets is
analysed as follows:
-- A GBP712.0m increase (2020: GBP22.6m fall) in SIPP and SSAS
assets under administration driven in part by the acquisition of
Hurley contributing GBP381.4m of the increase, with a 1.3% rise
(2020: 1.7% fall) in the number of schemes being administered at
the year end, comprising a 7.1% (2020: 0.7%) increase in the number
of direct [14] schemes to 6,912 (2020: 6,453) and a 7.2% (2020:
5.0%) decrease in the number of schemes the Group operates on an
administration-only basis to 4,159 (2020: 4,480). In recent years,
we have been appointed to operate or wind-up several SIPP
portfolios following the failure of their previous operators, with
the lower number of schemes due in part to the transfer of certain
members of these distressed portfolios to more appropriate
arrangements;
-- A GBP428.0m (2020: GBP172.5m decrease) increase in the value
of assets held in the corporate pension schemes advised by our
employee benefits business, following a restructure of our
corporate client portfolio and focus on the development and
expansion of both new and existing relationships. However, revenues
in our employee benefits business are not linked to the value of
client assets in the way that certain of our wealth management
revenue streams are and our corporate client portfolio remains well
diversified;
-- A GBP1,005.5m (2020: GBP6.1m) increase in personal wealth and
other assets under management and advice, with the acquisitions of
Hurley, EPUT, Montagu, Pole Arnold and Caledonia in the period
contributing GBP918.5m. The 357 (2020: 180) new personal clients
won during the year partially offset some natural client attrition,
resulting in a 23.3% increase (2020: 2.1% decrease) in the total
number of personal clients ([15]) to 7,270 (2020: 5,925); and
-- A GBP677.6m (2020: GBP106.8m) increase in Amati's funds under
management (excluding Mattioli Woods' client investments),
primarily through the growth of the TB Amati UK Smaller Companies
Fund to GBP980.9m (2020: GBP400.4m) and launch of the new TB Amati
Strategic Metals Fund in March 2021 which had grown to GBP25.1m
(2020: nil) at 31 May 2021.
Amati continues to perform strongly with gross funds under
management [16] increasing to GBP1,308.1m (2020: GBP581.4m) with
the Group's share of its profits increased to GBP1.1m (2020:
GBP0.6m). Co-managed by Amati's Chief Executive Dr Paul Jourdan,
David Stevenson and Anna Macdonald, the TB Amati UK Smaller
Companies Fund is a top-quartile performer in The Investment
Association UK Smaller Companies sector over three and five
years.
The post year-end acquisitions of Maven and Ludlow will
significantly enhance both the value and quality of the Group's
assets under management, administration and advice.
10 Revenue for the year ended 31 May 2021 was split 54% (2020:
53%) fixed, initial or time-based fees and 46% (2020: 47%%) ad
valorem fees based on the value of assets under management, advice
and administration.
11 Certain pension scheme assets, including clients' own
commercial properties, are only subject to a statutory valuation at
a benefit crystallisation event.
12 Value of funds under trusteeship in SIPP and SSAS schemes
administered by Mattioli Woods and its subsidiaries.
13 Assets under management of GBP1,196.0m (2020: GBP515.8m)
excludes GBP94.9m (2020: GBP54.1m) of Mattioli Woods' client
investment included within SIPP and SSAS, employee benefits and
personal wealth and other assets and excludes GBP17.2m (2020:
GBP11.5m) of cross-holdings between the TB Amati Smaller Companies
Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT plc.
14 SIPP and SSAS schemes where the Group acts as pension
consultant and administrator. SIPP and SSAS schemes administered by
SSAS Solutions reclassified as direct during the year.
15 Includes personal wealth clients' with SIPP and SSAS schemes
operated by third parties.
16 Includes Mattioli Woods' client investment and GBP20.0m
(2020: GBP11.5m) of cross-holdings between the TB Amati Smaller
Companies Fund, TB Strategic Metals Fund and the Amati AIM VCT
plc.
Key performance indicators
The directors consider the key performance indicators ("KPIs")
for the Group are as follows:
Strategy/objective Performance indicator Further explanation
---------------------------------- ---------------------------------------- ----------------------------------------
Organic growth and growth Revenue - total income (excluding VAT) See 'Our business model' and 'Revenue'.
by acquisition from
all revenue streams.
---------------------------------- ---------------------------------------- ----------------------------------------
Operating efficiency Adjusted EBITDA margin - profit See 'Profitability and earnings per
generated share'.
from the Group's operating activities
before
financing income or costs, taxation,
depreciation,
amortisation, impairment, gain on
bargain
purchase, deferred consideration as
remuneration
and acquisition-related costs,
including
share of profit from associates (net of
tax),
divided by revenue.
---------------------------------- ---------------------------------------- ----------------------------------------
Shareholder value and financial Adjusted Earnings Per Share ("EPS") - See 'Profitability and earnings per
performance total share'.
comprehensive income for the year, net
of
taxation, attributable to equity
holders
of the Company, adjusted to add back
acquisition-related
costs, acquisition related finance
costs,
the amortisation of acquired intangible
assets,
gain on bargain purchase and deferred
consideration
as remuneration divided by the weighted
average
number of ordinary shares in issue.
---------------------------------- ---------------------------------------- ----------------------------------------
Growth in the value of assets Assets under management, administration See 'Assets under management,
under management, administration and advice - the value of all client administration
and advice assets and advice'.
the business gives advice upon, manages
or
administers.
---------------------------------- ---------------------------------------- ----------------------------------------
Excellent client service and Client attrition - the number of direct See 'Segmental review'.
retention 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 See 'Cash flow'.
number
of days' sales outstanding in trade
receivables
at any time.
---------------------------------- ---------------------------------------- ----------------------------------------
Financial stability Surplus on regulatory capital See 'Regulatory capital'.
requirement
- this is the aggregate surplus on the
total
regulatory capital requirement of the
Group.
---------------------------------- ---------------------------------------- ----------------------------------------
Financial performance and future developments
Revenue
Group revenue was up 7% to GBP62.6m (2020: GBP58.4m), with
organic revenues supplemented by eleven months' revenues of GBP5.3m
from the Hurley Partners business acquired in July 2020, plus
GBP0.4m of revenues from Turris following its acquisition in the
prior year.
Revenue in the first half of the year was, as anticipated,
slightly lower than in the equivalent period in the prior year due
to the adverse impact of weaker financial markets and the
suspension of certain statutory requirements for pension schemes
resulting in lower fee-based revenues. The Group's revenue in the
second half of the year benefitted from an easing of some concerns
relating to COVID-19, and a Brexit trade deal amongst other
factors, resulting in increased investment activity, which together
with positive investment performance saw sustained and higher
inflows into the Group's DPM services and an increase in revenues
linked to the value of clients' assets.
We continue to focus on delivering great client outcomes and
addressing their evolving needs. In addition to delivering
increased efficiency and effectiveness across the Group through
increased client caseloads for our consultancy and administration
teams, we are working to streamline and automate our processes to
facilitate more efficient administration, through initiatives such
as the adoption of electronic signatures, maintaining a scalable
operating model and in doing so making Mattioli Woods easier to do
business with. We anticipate these changes will deliver improved
margins and cost savings for both us and our clients.
Employee benefits expense
As in previous years, the major component of the Group's
operating costs is our employee benefits expense of GBP34.1m (2020:
GBP27.6m) representing 54.5% of revenue (2020: 47.3%). The
mitigating actions taken to protect the Group's financial position
in response to the COVID-19 pandemic in the prior year included not
paying any year-end bonuses to staff, with the increase in employee
benefits expense this year primarily due to awarding discretionary
bonuses to all staff totalling GBP3.1m plus an additional GBP2.6m
cost from those business acquired during the year.
Securing economies of scale and operational efficiencies,
particularly through the integration of acquired businesses and
clients, are key elements of our aim to reduce clients' TERs. We
are pleased to have continued to increase average consultant and
client relationship manager caseloads during the year, partly
through the migration of acquired pension portfolios onto our
bespoke MWeb administration platform.
The Group's total headcount increased to 663 (2020: 597) at 31
May 2021, with the retention of the experienced teams at Hurley,
the EPUT business, Pole Arnold, Montagu and Caledonia adding 55
staff. The number of consultants increased to 139 (2020: 120) as we
recruited throughout the year to further expand upon our own
distribution network for existing and new clients.
We continue to invest in our infrastructure and capacity
including IT systems, compliance and training across all parts of
the Group, with the aim of delivering further operational
efficiencies and benefiting from further economies of scale as the
business continues to grow.
Other administrative expenses
Other administrative expenses increased to GBP13.3m (2020:
GBP10.9m), with additional professional, regulatory and compliance
costs incurred following the acquisitions completed during the year
offsetting over savings. Regulatory fees and levies incurred by the
Group increased to GBP1.3m (2020: GBP0.9m) representing an increase
of 46% or GBP0.4m. Further, acquisition related costs of GBP2.6m
(2020: GBP0.3m) increased by GBP2.3m following the increased number
of acquisitions completed during the year and post year-end.
Other overheads were broadly in line with the prior year with
increased infrastructure costs for IT, professional services and
insurances offset by strict control of compensation payments and
savings driven by lower employee travel and office occupancy.
Share-based payments
Share-based payments costs of GBP1.5m (2020: GBP1.3m) represent
the cost of options expected to vest under the Company's long-term
incentive plans and matching shares awarded to employees under the
Company's share incentive plan.
Net finance costs
The Group has maintained a positive net cash position throughout
the year, with increased net finance costs of GBP0.2m (2020
restated: GBP0.1m) reflecting credit interest of GBP0.03m (2020:
GBP0.10m) being offset by GBP0.1m (2020 restated: GBP0.1m) of
non-cash notional finance charges on the unwinding of discounts on
long--term provisions and GBP0.1m (2020: GBP0.1m) of interest on
the lease liabilities recognised under IFRS 16.
Taxation
The effective rate of taxation on profit on ordinary activities
was 73.0% (2020 restated: 25.5%), above the standard rate of tax of
19.0% (2020: 19.0%). This is primarily due to the revaluation of
deferred tax liabilities being recognised at an increased rate of
tax following the government's announced plans to increase the
standard rate of tax to 25.0% from 6 April 2023, as well as
significant non-deductible expenses from contingent consideration
arrangements accounted for as remuneration. Excluding the impact of
changes in tax rates, the effective income tax rate was 34.6%
(2020: 22.2%). In addition, certain expenses associated with
sponsorship and other business development activities were not
deductible for tax purposes.
The net deferred taxation liability carried forward at 31 May
2021 was GBP8.5m (2020: GBP3.6m).
Restatement of acquisition accounting
Following a review of IFRS Interpretations Committee ("IFRIC")
guidance regarding the interpretation of IFRS 3 Business
Combinations, the accounting treatment for acquisitions with
contingent consideration payable under certain circumstances has
been retrospectively corrected. This accounting change impacts five
acquisitions completed since 1 June 2010 but has no impact on
adjusted EBITDA, adjusted PBT, cash flows or tax position of the
Group.
To protect the goodwill and intangible assets being acquired
over the first few years of ownership, many of the Group's
acquisitions have been structured with an initial and a deferred
consideration, which is typically paid in cash over a two to four
year period following completion. The deferred consideration is
contingent on the acquired business meeting pre-agreed financial
performance targets over an agreed period. These payments are part
of the purchase consideration negotiated with the respective
sellers and are contractual payments in exchange for the shares or
assets of a business. However, on review of the IFRIC guidance
regarding the interpretation of IFRS 3, the accounting treatment
has been amended where former shareholders of an acquired business
are required to remain in employment with the Group. In people
businesses like Mattioli Woods, such provisions are an important
protection to ensure the successful transition of client
relationships and key personnel into the Group, preserving the
value of the goodwill and intangible assets acquired.
In accordance with the IFRIC guidance noted above, in such
circumstances, the contingent consideration is now recognised as
remuneration in the income statement, accrued over the deferred
consideration period. Previously, the fair value of the contingent
consideration was recognised in full at the date of acquisition,
forming part of the acquired goodwill. Accordingly, we have
restated our prior year accounts, as shown in the comparative
numbers within the financial statements. Further details are
provided in Note 2 to the accounts.
Alternative performance measures
The Group has identified certain measures that it believes will
assist in the understanding of the performance of the business.
Recurring revenues, organic revenues, adjusted EBITDA, adjusted
profit before tax ("adjusted PBT"), adjusted profit after tax
("adjusted PAT"), adjusted EPS and adjusted cash generated from
operations are non-GAAP alternative performance measures,
considered by the Board to provide additional insight into business
performance compared with reporting the Group's results on a
statutory basis only. Adjusted profit measures for the prior year
have been restated to recognise the financial impact of the actions
taken to protect the Group's financial position in light of the
COVID-19 pandemic, comprising a GBP0.2m cost saving through all plc
Board directors reducing their basic remuneration plus a further
GBP2.3m cost saving on year-end bonuses not being paid.
The change in accounting treatment outlined above means that for
certain acquisitions the contingent consideration has been treated
as an expense in the income statement rather than as a capital
payment. While the Board accepts this treatment is appropriate for
reported results, it introduced the employment conditions on the
deferred consideration to protect capital value.
Adjusted measures of the Group's profitability, including
adjusted EBITDA, adjusted PBT, adjusted PAT and adjusted EPS, have
therefore been amended to add-back the cost of discretionary staff
bonuses, gain on bargain purchase and deferred consideration as
remuneration.
These alternative performance measures may not be directly
comparable with other companies' adjusted measures and are not
intended to be a substitute for, or superior to, any IFRS measures
of performance. However, the Board considers them to be important
measures for assessing underlying performance, used widely within
the business and by research analysts covering the Company.
Supporting calculations for alternative performance measures and
reconciliations between alternative performance measures and their
IFRS equivalents are set out in the Alternative performance measure
workings section of the Annual Report.
Profitability and earnings per share
Profit before tax was down 60% to GBP5.1m (2020 restated:
GBP12.7m), with adjusted profit before tax up 1% to GBP17.2m (2020
restated: GBP17.1m), driven by increased revenues offset by the
full year impact on employee benefits expense of the businesses
acquired during the year, restoring discretionary staff bonuses,
increased regulatory and compliance costs and increased acquisition
related fees. These changes translated into a reduction in
operating profit before financing of 66% to GBP4.2m (2020 restated:
GBP12.2m) and adjusted EBITDA down 8% to GBP17.3m (2020: GBP18.9m),
with adjusted EBITDA margin of 27.7% (2020 restated: 32.4%).
The Board considers adjusted EBITDA to be a relevant measure for
investors who want to understand the underlying profitability of
the Group, adjusting for items that are non-cash or affect
comparability between periods as follows:
2020
2021 Restated
GBPm GBPm
--------------------------------------------- ------ ----------
Statutory operating profit before financing 4.2 12.2
Amortisation of acquired intangibles 2.8 2.1
Amortisation of software 0.3 0.4
Depreciation 2.8 2.5
EBITDA [17] (,) 10.1 17.2
Share of associate profits (net of tax) 1.1 0.6
Acquisition-related costs 2.6 0.3
Gain on bargain purchase (0.3) -
Deferred consideration as remuneration 3.8 0.8
Adjusted EBITDA [18] 17.3 18.9
--------------------------------------------- ------ ----------
Adjusted PBT, adjusted PAT and adjusted EPS are additional
measures the Board considers to be relevant for investors who want
to understand the underlying earnings of the Group, excluding items
that are non-cash or affect comparability between periods as
follows:
17 Earnings before interest, taxation, depreciation,
amortisation and impairment.
18 Figures in table may not add due to rounding.
Profit EPS
Profit EPS 2020 2020
2021 2021 Restated Restated
GBPm pps GBPm pps
-------------------------------------- ------- ------- ---------- ----------
Statutory profit before tax 5.1 18.4 12.7 46.9
Income tax expense (3.8) (13.4) (3.2) (11.9)
Other comprehensive income - 0.1 - (0.1)
Total comprehensive income
/ Basic EPS 1.4 5.1 9.5 34.9
-------------------------------------- ------- ------- ---------- ----------
Statutory profit before tax 5.1 18.4 12.7 46.9
Amortisation of acquired intangibles 2.8 9.9 2.1 7.6
Acquisition-related costs 2.6 9.3 0.3 1.2
Acquisition-related notional
finance cost 0.1 0.5 0.1 0.2
Gain on bargain purchase (0.3) (1.0) - -
Deferred consideration as
remuneration 3.8 13.6 0.8 2.8
Adjusted PBT 14.2 50.7 16.0 58.7
Income tax expense at standard
rate (2.7) (9.6) (3.0) (11.2)
Adjusted PAT / Adjusted EPS
[19] 11.5 41.1 12.9 47.6
-------------------------------------- ------- ------- ---------- ----------
As explained in Note 17, client portfolios acquired through
business combinations are recognised as intangible assets. The
amortisation charge for the year of GBP2.8m (2020: GBP2.1m)
associated with these intangible assets has been excluded from
adjusted PAT and adjusted EPS because the Board reviews the
performance of the business before these charges, which are
non-cash and do not apply evenly to all business units.
Adjusted EPS [20] was 41.1p down 13.7% (2020: 47.6p), while
basic EPS was down 85% to 5.1p (2020 restated: 37.9p), driven by
increased revenues offset by the significant cost increases
mentioned above. EPS was also impacted by the higher effective tax
rate of 73.0% (2020 restated: 25.5%) and the issue of 340,788
(2020: 169,497) shares under the Company's share plans. There were
970,409 (2020: nil) shares issued as consideration for acquisitions
during the year. Diluted EPS was 5.0p (2020 restated: 34.7p).
19 Figures in table may not add due to rounding.
20 Before acquisition-related costs, amortisation and impairment
of acquired intangibles, gain on bargain purchase, deferred
consideration as remuneration and acquisition related finance
costs.
Dividends
The Board is pleased to recommend a final dividend of 13.5p per
share (2020: 12.7p). This makes a proposed total dividend for the
year of 21.0p (2020: 20.0p) a year-on-year increase of 5.0% (2020:
flat), demonstrating our desire to deliver value to shareholders
and confidence in the outlook for our business.
The Board recognises the importance of dividends to shareholders
and remains committed to growing the dividend, while maintaining an
appropriate level of dividend cover. If approved, the final
dividend will be paid on 3 November 2021 to shareholders on the
register at the close of business on 1 October 2021, having an
ex-dividend date of 30 September 2021.
The Company offers its UK and Channel Islands' resident
shareholders the option to invest their dividends in a Dividend
Reinvestment Plan ("DRIP"). The DRIP is administered by the
Company's registrar, Link Group ("Link"), which uses cash dividend
payments to which participants in the DRIP are entitled to purchase
shares in the market, which means the Company does not need to
issue new shares and avoids diluting existing shareholdings.
For the DRIP to apply to the proposed final dividend for the
year ended 31 May 2021, shareholders' instructions must be received
by Link by close of business on 8 October 2021.
Cash flow
Cash balances at 31 May 2021 totalled GBP21.9m (2020: GBP26.0m).
Cash generated from operations was GBP20.4m or 202% of EBITDA (2020
restated: GBP13.9m or 81%), driven by a reduction in the Group's
working capital requirement [21] of GBP5.2m (2020: GBP5.4m
increase), comprising:
-- A GBP5.0m increase (2020: GBP4.5m decrease) in trade and other payables, primarily due to:
- GBP4.6m increase in accruals and deferred income following the
reinstatement of staff and directors' bonuses for the year ended 31
May 2021, to be paid following the year end, and significant
increase in accruals for acquisition-related costs invoiced
following the year end;
- GBP0.5m increase in other payables relating to the balance of
consideration payable for acquisitions; and
- GBP0.1m reduction across other balances within trade and other
payables.
-- A GBP1.0m reduction (2020: GBP0.8m increase) in trade and
other receivables, primarily due to:
- GBP0.7m reduction in trade receivables as we continue to
minimise aged debt exposure and move from fee invoicing to
deduction of income from client's holdings with platform
providers;
- GBP0.4m reduction in other receivables, including the impact
of collecting rental deposits on vacated properties and collecting
director loan balances following acquisitions; and
- GBP0.1m increase across other balances within trade and other
receivables.
-- A GBP0.7m decrease in provisions during the year (2020: GBPnil change), primarily due to:
- GBP0.6m reduction in provisions for contingent remuneration
following the previous acquisition of SSAS Solutions (UK) Ltd;
and
- GBP0.1m reduction across other provision balances, including
payment of dilapidations on exit of leased property and utilisation
of provisions for onerous contracts.
Adjusted cash generated from operations [22] , which excludes
items that are incurred as a result of the Group's acquisition
activities, increased by 51% to GBP21.7m (2020: GBP14.4m)
Outstanding trade receivables reduced to 30 days (2020: 34
days), with credit management continuing to be an area of focus, as
well as moving from fee invoicing to deduction of income from
client's holdings with platform providers where the opportunity
arises. Outstanding trade payables reduced to 14 days (2020: 21
days) with an increase in invoiced expenses borne by the business
as a result of acquisitions, and a small reduction in trade
payables outstanding at the end of the period.
The accelerated corporation tax payment regime introduced in the
prior year resulted in higher income tax paid in 2020. and this
reduced income taxes paid in the year reduced to GBP2.5m (2020:
GBP4.4m), with quarterly tax payments now all due within the
relevant accounting period, rather than two additional instalments
being paid in the prior year. This resulted in the Group paying
four quarterly instalments (2020: six) in the financial year.
Investing cashflows include GBP1.1m (2020: GBPnil) of contingent
consideration paid on previous acquisitions Broughtons Financial
Planning Limited and The Turris Partnership Limited acquisitions,
as well as net initial cash consideration of GBP13.0m (net of cash
acquired) on acquisitions completed during the year.
Capital expenditure of GBP0.8m (2020: GBP1.0m) comprised GBP0.3m
on the purchase of new company cars, GBP0.1m investment in new
computer hardware and office equipment and GBP0.4m on software
development.
21 Working capital defined as trade and other receivables less
trade and other payables.
22 Cash generated from operations before acquisition-related
costs paid and contingent remuneration paid
Regulatory capital
The Group's regulatory capital requirement has increased in
recent years. In addition, the Group's capital is reduced 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 headroom on its regulatory capital
requirement, and completion of the fundraise in June 2021 is
allowing us to pursue further acquisition opportunities (see Note
30).
In January 2022, following the introduction of the Investment
Firm Prudential Regime ("IFPR") it is estimated that the Group's
CET1 Capital will be reduced due to the removal of the reliefs on
deduction of deferred tax assets and significant investments in
financial services entities. The impact on the Group's regulatory
capital at May 2021 would be a reduction of GBP2.4m but the impact
on adoption of IFPR will be greater due to the impact of the
fundraise and post year-end acquisitions on the Group's regulatory
capital.
Segmental review
Investment and asset management
Investment and asset management revenues generated from advising
clients on both pension and personal investments increased 24% to
GBP33.4m (2020: GBP26.8m).
The Group's gross discretionary assets under management ("AuM"),
including the multi asset funds which sit at the heart of our DPM
service, Custodian REIT, the Mattioli Woods Structured Products
Fund ("MW SPF") and the funds managed by our associate company,
Amati, were GBP4.1bn (2020: GBP2.6bn) at the year end, with
movements during the year as follows:
Cross-holdings
Assets under DPM Custodian REIT MW SPF Amati Gross AuM Cross-holdings in Amati funds Net AuM
management GBPm GBPm GBPm GBPm GBPm in DPM ([23]) ([24]) GBPm
---------------- -------- --------------- ------- -------- ---------- --------------- --------------- --------
At 1 June 2020 1,412.6 354.5 204.0 581.5 2,552.6 (127.9) (11.5) 2,413.2
Acquisition
during the
year 438.6 - - - 438.6 - - 438.6
Inflows 204.2 0.6 1.3 401.1 607.2 (16.1) (5.7) 585.4
Outflows (105.9) - (36.9) (11.6) (154.4) - - (154.4)
Market
movements 193.6 52.9 29.0 337.1 612.6 - - 612.6
At 31 May 2021 2,143.1 408.0 197.4 1,308.1 4,056.6 (144.0) (17.2) 3,895.4
---------------- -------- --------------- ------- -------- ---------- --------------- --------------- --------
Income from both initial and ongoing portfolio management
charges increased to GBP23.1m (2020: GBP16.3m), with GBP204.2m
(2020: GBP173.5m) of inflows into our DPM service during the
year.
Fees for services provided by the Group's subsidiary Custodian
Capital Limited ("Custodian Capital") to Custodian REIT are
included in the 'Property management' segment. Annual management
charges on the MW SPF were GBP1.1m (2020: GBP1.3m) with the steep
sell-off and negative market movement in the last quarter of the
prior year partially recovering in the current year.
Adviser charges based on gross assets under advice of GBP2.6bn
(2020: GBP2.0bn) fell to GBP9.0m (2020: GBP9.2m). This was driven
by the part-year revenue contribution from acquisitions made in the
second half with gross assets under advice GBP0.4bn. The lower
revenue margin illustrates how we continue to reduce clients'
charges and TERs, particularly on those assets invested in
Custodian REIT, the MW SPF and Amati funds.
Growth in total assets under management and advice continues to
enhance the quality of earnings through an increase in recurring
revenues, with the proportion of the Group's total revenues which
are recurring increasing to 93.5% (2020: 92.1%). Notwithstanding
our fee-based advisory model, 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, with the initial impact of the COVID-19 pandemic in the
final quarter of the prior year and subsequent recovery of
financial markets in the current year resulting in an increase in
these income streams
23 Comprises GBP26.6m (2020: GBP25.2m) in Custodian REIT,
GBP44.0m (2020: GBP57.6m) in MW SPF and GBP73.3m (2020: GBP45.1m)
in Amati funds.
24 Cross-holdings between the TB Amati Smaller Companies Fund
and the Amati AIM VCT plc.
Pension consultancy and administration
Pension consultancy and administration revenues were down 9% to
GBP18.8m (2020: GBP20.6m), with an increase in the total number of
SIPP and SSAS schemes administered by the Group of 1% to 11,071
(2020: 10,933) offset by reduced levels of client activity and the
suspension of certain statutory requirements for pension
schemes.
Direct [25] pension consultancy and administration fees
decreased 8% to GBP15.0m (2020: GBP16.3m). Retirement planning
remains central to many of our clients' wealth management
strategies and the number of direct schemes increased to 6,912
(2020: 6,453), with 408 new schemes gained in the year (2020: 339).
Our focus remains on the quality of new business, with the value of
a new scheme averaging GBP0.3m (2020: GBP0.3m). We continue to
enjoy strong client retention, with a slight increase in the
external loss rate [26] to 2.3% (2020: 1.8%) and a reduction in
overall attrition rate [27] to 3.4% (2020: 3.6%).
The number of SSAS and SIPP schemes the Group operates on an
administration-only basis fell to 4,159 (2020: 4,480) at the year
end. In prior years the Group has been appointed to administer a
number of SIPPs following the previous operators' failure. Work
continues in connection with schemes previously administered by
Stadia Trustees Limited, HD Administrators, Pilgrim Trustees
Services Limited and The Freedom SIPP Limited, with third party
administration fees remaining at GBP3.8m despite the fall in scheme
numbers.
The Group's banking revenue was GBP 0.05m (2020: GBP0.5m) with
the Bank of England's base rate remaining at a historic low of
0.1%, our banking revenue is expected to be negligible going
forward.
Segment margin reduced to 30.8% (2020: 31.6 %) with the benefit
of the operational efficiencies and cost savings realised pre and
during COVID-19 offset by the reduction in segment revenues.
While we anticipate continued regulatory scrutiny of the pension
market, with some other SIPP and SSAS operators in the spotlight
due to issues arising with DB transfer and esoteric and
non-standard investments . However, the market opportunity remains
strong, with SIPP and SSAS arrangements still benefitting from the
introduction of the pension freedoms and being favoured as a way of
allowing individuals to have greater access, control, flexibility
and responsibility over their pension savings. SIPPs are
increasingly the pension vehicle of choice for the mass affluent
and having been appointed to administer SIPPs previously operated
by a number of failed operators in recent years there may be
similar opportunities in the future.
We take great pride in seeing our clients withdrawing funds to
enjoy in their retirement. Following the introduction of pension
freedoms and a broader market shift away from accumulation and
steady savings, we anticipate there will continue to be some
natural outflows from our clients' SIPP and SSAS schemes,
particularly as the "baby boom" generation reaches retirement. We
expect any such decumulation to have a positive impact on the
Group's results based on our multi-generational approach linking
our strength in the provision of advice around the cascading of
wealth through the generations, inheritance tax and other
planning.
25 SIPP and SSAS schemes where Mattioli Woods acts as pension
consultant and administrator.
26 Direct schemes lost to an alternative provider as a
percentage of average scheme numbers during the year.
27 Direct schemes lost as a result of death, annuity purchase,
external transfer or cancellation as a percentage of average scheme
numbers during the year.
Property management
Property management revenues were GBP4.9m (2020: GBP5.4m), with
our subsidiary Custodian Capital having assets under management and
administration of GBP516.9m (2020: GBP466.7m) at 31 May 2021, with
the impact of the sharp decline in commercial property valuations
at the end of the prior year on the value of Custodian REIT,
partially recovering during the year. Recurring annual management
charges represented 97.9% (2020: 91.4%) of property management
revenues, the majority of which are derived from the services
provided by Custodian Capital to Custodian REIT.
In addition, Custodian Capital continues to facilitate direct
property ownership on behalf of pension schemes and private clients
and manages our Private Investors Club, which offers alternative
investment opportunities to suitable clients by way of private
investor syndicates. This initiative continues to be well supported
however in response to the pandemic we took an early decision to
temporarily pause the launch of new opportunities given the level
of market, political and economic uncertainty at that time,
focusing on the preservation of wealth for our clients. We invested
GBP2.5m (2020: GBP16.6m) in one (2020: six) new syndicates in the
first half, with no new syndicates completed in the second half due
to the prevailing market conditions. Following the year-end a
number of new opportunities are in the pipeline, which will be
marketed to suitable clients.
Employee benefits
Employee benefits revenues were GBP5.5m (2020: GBP5.6m), with
market conditions driven in part by the COVID-19 pandemic, limiting
new client wins and the uptake of ad-hoc consultancy projects from
existing clients. This was offset by strong client retention
throughout the year and accretion in premiums for risk and
healthcare cover.
Employers are increasingly encouraging staff wellbeing and
retirement savings as part of remuneration packages and we believe
greater emphasis will be placed on these in a post COVID-19 world.
As workplaces start building occupancy towards pre-COVID levels, we
believe this focus on employee benefits and retention of key staff
will provide opportunities for growth over the coming years.
Acquisitions
We have developed considerable expertise and a strong track
record in the execution and subsequent integration of acquisitions.
At the year-end, we had invested over GBP92m since our admission to
AIM in 2005, bringing 29 businesses or client portfolios into the
Group, excluding the transactions announced following the
year-end.
In June 2021, we announced the successful completion of a
GBP112m equity fundraise to facilitate the earnings enhancing
acquisition s of Maven, Ludlow, a pipeline of smaller bolt-on
acquisitions and to provide regulatory capital headroom.
The acquisition of Maven, one of the UK's leading private equity
and alternative asset managers represents a complementary extension
of the Group's investment proposition. Maven's service offering,
inherent profitability and ability to extend existing and win new
investment mandates, coupled with the potential to enhance
projected returns through the delivery of material
performance-related fees, makes this a significant acquisition that
is well aligned to our stated strategic ambitions, with expected
revenue and cost synergies of at least GBP1.0 million when fully
realised .
The acquisition of Ludlow adds scale and critical mass in the
North West of England, extending the Group's distribution capacity
for existing and new client services . Ludlow provides a hub for
further acquisitions to take advantage of the significant
consolidation opportunity we see in the IFA sector. The acquisition
also offers opportunities for the elimination of duplicated costs
and to realise economies of scale , with expected revenue and cost
synergies of at least GBP1.0 million when fully realised .
We will continue to seek to build on our track record of
successful acquisitions by continuing to assess and progress
opportunities that meet our strict criteria. Consolidation within
both wealth management and SIPP administration is expected to
continue for the foreseeable future with many more opportunities
coming to market.
Relationships
The Group's performance and shareholder value 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. 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 senior management and the Group's Board are clearly
defined. The proper operation of the supporting processes and
controls are regularly reviewed by the Audit Committee and the Risk
and Compliance Committee and take into account ethical
considerations, including procedures for 'whistle-blowing'.
Our people
I am very grateful for the continued commitment, endeavour,
agility and professionalism that our people have shown in dealing
with our clients' affairs throughout a year characterised by a
sustained level of uncertainty, with the majority of our team
working remotely during this period.
As our business continues to evolve and grow into one which has
a long-term and successful future, the Board recognises the
continued importance of good communication and will ensure that the
strong client-centric behaviours that are embedded within the
business are preserved. We have made a number of changes to the
composition of our Board with new appointments to both the
executive and independent non-executive teams. Carol Duncumb has
stepped down from her role as independent non-executive director at
the end of her second term of office due to personal reasons and I
express the Board's thanks to Carol for her support, challenge and
insight over the last six years. We will be delighted to retain
Carol's services in a new role when circumstances allow. Outside of
board meetings, non-executive directors have held a number of
meetings with employees across the business to share experiences
more directly.
Our total headcount at 31 May 2021 had increased to 663 (2020:
597) and we remain committed to developing our people and
maintaining the capacity to deliver further growth. 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 end of the year 63% of eligible staff had
invested in the Plan (2020: 62%) and we continue to encourage
broader staff participation.
The Mattioli Woods Employee Benefit Trust ("the Trust") holds
shares for the benefit of the Group's employees and, in particular,
to satisfy the vesting of awards made under the Company's various
share schemes. The market purchase of shares by the Trust helps to
avoid dilution of shareholders by reducing the need for the Company
to issue new shares. As one of the early decisions taken in
response to the COVID-19 pandemic to ensure the strong financial
position of the Group, in April 2020 the monthly purchase of shares
was suspended and remained the case throughout the entire year.
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
The Board is ultimately responsible for risk management and
regularly considers the most significant and emerging threats to
the Group's strategy, as well as establishing and maintaining the
Group's systems of internal control and risk management and
reviewing the effectiveness of those systems. The Board and senior
management are actively involved in a continuous risk assessment
process as part of our risk management framework, supported by the
annual Internal Capital Adequacy Assessment Process ("ICAAP"),
which assesses the principal risks facing the Group. Stress tests
include consideration of the impact of a number of severe but
plausible events that could impact the business. The work also
takes account of the availability and likely effectiveness of
mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks.
Day-to-day, our risk assessment process considers both the
impact and likelihood of risk events which could materialise and
affect the delivery of the Group's strategic goals. Risk owners
regularly review and update where needed the controls in place to
mitigate the impact of the risks, with independent review and
challenge given by the Risk Management Team. Throughout the Group,
all employees have a responsibility for managing risk and adhering
to our control framework.
There are a number of potential risks which could hinder the
implementation of the Group's strategy and have a material impact
on its long--term performance. These arise from internal or
external events, acts or omissions which could pose a threat to the
Group. The principal risks identified as having a potential
material impact on the Group are detailed below, together with the
principal means of mitigation. 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
Change
in
Risk type Description Mitigating factors Chance Impact risk
------------ ------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
Changes in The ongoing impact High Medium No
investment of the COVID--19 pandemic * Majority of clients' funds held within registered change
markets and is affecting economic pension schemes or ISAs, where less likely to
poor and financial markets withdraw funds and lose tax benefits.
investment globally. Any resulting
performance volatility may adversely
affect trading and/or * Broad range of investment solutions enables clients
the value of the Group's to shelter from market volatility through
assets under management, diversification, while continuing to generate
administration and revenues for the Group.
advice, from which
we derive revenues.
* Market volatility is closely monitored by the Asset
Allocation Team, as delegated by the Investment
Committee, and includes monthly assessment of what is
changing in markets and the economic environment
globally; regular risk analysis, including a
sentiment survey of the individual members of the
multi asset team taking into account their own
analysis of external analysts' reports on a rolling
basis. There are also regular reviews of liquidity.
Further, performance is considered every month, in
detail, including attribution and contribution
analysis. Reports are then discussed at Investment
Committee every two months.
------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
ESG Failure to meet future Consequences High High No
ESG reporting requirements * Regulatory censure Change
MW is not recognised
as an ESG responsible * Loss of Client and shareholder confidence
company
ESG products offered * Clients look elsewhere for ESG focussed products
do not meet target
market
Existing Controls
Internal action plan in place to
deliver short, medium, and longer-term
initiatives
Planned Controls
Introduce a more ESG focussed investment
product. Continue to build MW positive
actions towards ESG, harnessing technology
and solutions across the business
which reduce our footprint.
------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
Climate Physical impacts include Consequences High Medium No
change the potential economic * Business disruptions - Damage to building and Change
- Physical costs and financial operations
impacts losses resulting from
the increasing severity
and frequency of extreme * Cost of improving resilience and adaptation
climate-change related
events, and longer-term
progressive shifts * Lower productivity/income/profits
in the climate.
Drivers
* Rising temperatures Existing Controls
* Resilient buildings that can withstand damage from
storms, strong winds and flooding
* Heavy and disruptive snowstorms
* DR/BCP in place to continue business as usual
* Higher sea levels
* Due to the Covid outbreak we support flexible working
* More destructive storms/ floods/ wildfires and work from home options which have been tested as
part of our continuity plans
--
------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
Climate Transition impacts Consequences High Medium No
change relate to the process * Business disruptions Change
- of adjusting to a
Transition low-carbon economy.
impacts Transition risks can * Cost of improving resilience and adaptation
occur when moving
towards a less polluting,
greener economy. Such * Lower productivity/income/profits
transitions could
mean that some sectors
of the economy face
big shifts in asset Existing Controls
values or higher costs
of doing business. * DR/BCP in place to continue business as usual
An example of such
a change in policy * We have adapted through Covid to help clients with
in the UK is the ban innovative solutions which aided the smooth running
on the sale of fossil-fuel-powered of their businesses in troubled times.
cars from 2040.
Drivers * Plans in place to offset negative impact of our
* Climate policy changes activities through initiatives such as the launch of
our Responsible Equity Fund, moving towards paperless
offices and transitioning towards an all-electric
* Innovations in technology fleet
* Shifts in consumer preferences
Clients' ability to
do business could
also be affected by
some of the physical
impacts which in turn
has an impact on MW
ability to deliver
profitable services
to them.
------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
Changing The Group operates High High No
markets in a highly competitive * The Group seeks to maintain strong working change
and environment with evolving relationships with clients underpinned by high levels
increased characteristics and of service, quality products and a continued focus on
competition trends. product development and innovation.
* Consolidating market position is enhancing the
Group's competitive advantage.
* 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.
* In response to COVID-19 our investment in people,
cloud-based technology and infrastructure allowed us
to move quickly to an operating model that includes
home working for circa 640 staff and specific shift
rotations for our people carrying out essential tasks
in our administration hubs across the country
* Harness efficiencies through our continued assessment
of the changes to working patterns and methods.
------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
Regulatory The Group may be adversely Medium Medium No
risk affected as a result * Strong compliance culture, with appropriate oversight / High change
of new or revised and reporting supported by training.
legislation or regulations
or by changes in the
interpretation or * External professional advisers are engaged to review
enforcement of existing and advise upon control environment.
laws and regulations.
* Business model and culture embraces FCA principles,
including treating clients fairly.
* Decision to withdraw from providing advice on
safeguarded pensions.
* Financial strength provides comfort should there be a
need to increase capital resource requirements.
------------------------------------------------- ------------------------------------------------------------ ------- ------- -------
Operational risks
----------------------------------------------------------------------------------------------------- ------- ------- -------
Change
in
Risk type Description Mitigating factors Chance Impact risk
----------------- --------------- ----------------------------------------------------------------- ------- ------- -------
Damage to the There is a Medium High No
Group's risk of * Strong compliance culture with a focus on positive change
reputation reputational customer outcomes.
damage
as a result of
employee * High level of internal controls, including checks on
misconduct, new staff.
failure
to manage
inside * Well-trained staff who ensure the interests of
information or clients are met in the services provided.
conflicts
of interest,
fraud,
improper
practice,
poor client
service
or advice.
--------------- ----------------------------------------------------------------- ------- ------- -------
Errors, Serious or High High No
breakdown prolonged * Ongoing review of data security, including change
or security breaches, penetration testing and "phishing" exercises.
breaches errors
in respect of or breakdowns
the in * IT performance, scalability and security are deemed
Group's software the Group's top priorities by the Board, with additional controls
or information software introduced during the year.
technology or information
systems technology
systems could * Experienced in-house team of IT professionals and
negatively established name suppliers.
impact
customer
confidence. * Audit of secure remote working, information security
It could also and operational resilience undertaken in response to
breach the COVID-19 pandemic.
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.
--------------- ----------------------------------------------------------------- ------- ------- -------
Business In addition to Medium Medium No
continuity the * Periodic review and approval of Business Continuity change
and operational failure of IT Plan, considering best practice methodologies.
resilience systems,
there is a
risk of * Periodic review and approval of Disaster Recovery
disruption to Plan and disaster recovery teams (including IT
the support) on call to deal with major incidents at
business as a short notice. Business impact analysis has been
result conducted by department.
of power
failure,
fire, flood, * Loss of revenue is covered by business interruption
acts insurance (subject to certain limits and exclusions).
of terrorism,
re-location
problems and * Response to COVID-19 pandemic demonstrates all Group
failure operations can move to "working from home" at short
of external notice, with little or no interruption to day-to-day
suppliers. business operations.
* Ongoing assessment of external suppliers' performance
--------------- ----------------------------------------------------------------- ------- ------- -------
Fraud risk There is a High Medium No
risk an * The Group ensures the control environment mitigates change
employee or against the misappropriation of client assets, with
third additional controls being introduced to safeguard
party defrauds client assets.
either
the Group or a
client. * The Group does not hold client money.
* Strong corporate controls require dual signatures or
online approvals for all payments. Executive
committee approval for all expenditure greater than
GBP10,000 and Board approval for all expenditure
greater than GBP100,000.
* Assessment of fraud risk every six months discussed
with the Audit Committee, 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, including audit of
secure remote working, information security and
operational resilience undertaken in response to the
COVID-19 pandemic.
* All staff are required to complete structured
training on Information Security, Cyber Crime,
Fighting Fraud and Anti Money Laundering each year.
--------------- ----------------------------------------------------------------- ------- ------- -------
Key personnel The loss of, Low Medium No
risk or inability * Succession planning is a key consideration throughout change
to recruit, the Group.
key personnel
could have a
material * Success of the Group should attract high calibre
adverse effect candidates.
on
the Group's
business, * Share-based schemes in operation to incentivise staff
results of and encourage retention.
operations
or financial
condition. * Recruitment programmes in place to attract
appropriate new staff.
* Cross functional acquisition team brought into
acquisition projects at an early stage.
* Ensuring the health and wellbeing of our people has
remained a priority throughout COVID-19. The way our
people work has changed, with the adoption of
training, talent and resource management and
leadership in a remote environment.
--------------- ----------------------------------------------------------------- ------- ------- -------
Litigation or Risk of High Medium No
claims liability * Appropriate levels of Professional Indemnity change
made against the related to insurance cover regularly reviewed with the Group's
Group litigation advisers.
from clients
or third
parties and * Comprehensive internal review procedures, including
assurance compliance sign-off, for advice and marketing
that a claim materials.
or claims
will not be
covered * Maintenance of three charging models; time cost,
by insurance fixed and asset based, which are aligned to specific
or, service propositions and agreed with clients.
if covered,
will
exceed the * Restricted status for our consultants to enable the
limits recommendation of our own products and others in the
of available market.
insurance
coverage, or
that
any insurer
will
become
insolvent
and will not
meet
its
obligations to
provide the
Group
with cover.
--------------- ----------------------------------------------------------------- ------- ------- -------
Reliance on Any regulatory High High No
third breach * Due diligence is part of the selection process for change
parties or or service key suppliers, including assurance on their controls
outsourcing failure over shared data.
risk on the part of
an
outsourced * Key contracts with third parties handling sensitive
service data are escalated for review and approval.
provider could
expose
the Group to * Service level agreements in place with key suppliers.
the
risk of
regulatory * Ongoing review of relationships and concentration of
sanctions and risk with key business partners.
reputational
damage.
* Review of outsourcing is a key area of focus in
Internal Audit plan.
* Our operational risk assessment considers the impact
of disruptions on critical business functions, with
the Business Continuity Plan updated to include an
infectious disease section specifically relating to
COVID- 19.
--------------- ----------------------------------------------------------------- ------- ------- -------
SIPP Risk that High Low No
administration through * The Group recognises the duty of care owed to these change
for non-advised the provision clients.
clients ("third of
party SIPP SIPP
administration") administration * Evidence of the suitability of advice where pension
services to investments are out of the ordinary (e.g. ensuring
clients that the client is a sophisticated investor).
with no
adviser or
a third party * Credentials of third party advisers are checked
adviser, against the FCA register.
we facilitate
the
client acting
with
no or bad
advice.
--------------- ----------------------------------------------------------------- ------- ------- -------
Strategic risk Risk that Low Low No
management * Experienced management team with successful track change
will pursue record to date.
inappropriate
strategies or
implement * Management has demonstrated a thorough understanding
the Group's of the market and monitors this through regular
strategy meetings with clients.
ineffectively.
--------------- ----------------------------------------------------------------- ------- ------- -------
Conduct risk The risk that Medium Medium No
we * Only appropriately authorised consultants can provide change
fail our advice.
clients
through the
flawed * Robust training and competence scheme in place.
design or
mis-selling
of our * Operation of 'three lines of defence' model,
products or including internal and external reviews of to monitor
services, or suitability of advice being given to clients.
poor
business
conduct * Compliance oversight by a dedicated team covering;
results in conduct, product, complaints and technical.
client
outcomes that
do * Non-standard investments require review and approval
not meet their by the Group's Non-Standard Investment team.
needs
and
circumstances. * Professional Indemnity ("PI") insurance in place.
--------------- ----------------------------------------------------------------- ------- ------- -------
Conduct risk The risk that High Low No
(acquisitions) acquired * Due diligence process used to identify and assess change
clients have risk in acquired client portfolios.
been
failed by the
acquired * Run-off PI insurance cover and specific indemnities
business provided by the sellers of acquired businesses to
through mitigate the Group's risk exposure.
the flawed
design
or mis-selling * Active dialog with the FCA, especially where we
of identify specific risks associated with the target
products or business.
services,
or poor
business
conduct
resulting
in outcomes
that
do not meet
their
needs and
circumstances.
--------------- ----------------------------------------------------------------- ------- ------- -------
Information The risk that High High No
security the * External security provider scans for intrusion change
(or cyber) risk security threats across our network 24/7.
controls
over our IT
systems * Electronic data is protected by user access controls.
are Data privacy training provided to all staff.
compromised by
internal or
external * Robust firewalls and patches maintained to prevent
influences, unauthorised access to IT systems, including
resulting utilisation of third party providers to protect
in corporate networks.
unauthorised
access
to our client * Electronic data is protected by user access controls.
or Data privacy training is provided across the Group.
corporate
confidential
data. * Compliance with the Data Protection Act and
registration with the Information Commissioner's
Office.
* Two step verification of any client instruction
received by email or post.
* Audit of secure remote working, information security
and operational resilience undertaken in response to
the COVID-19 pandemic.
--------------- ----------------------------------------------------------------- ------- ------- -------
Financial risks
----------------------------------------------------------------------------------------------- --------- ----------------
Change
in
Risk type Description Mitigating factors Chance Impact risk
-------------- ------------- ---------------------------------------------------------------- --------- --------- -------
Counterparty That the Medium Medium No
default counterparty * The Group trades only with recognised, creditworthy change
to a third parties.
financial
obligation
will default * Customers who wish to trade on credit terms are
on subject to credit verification procedures.
repayments.
* All receivables are reviewed on an ongoing basis for
risk of non-collection and any doubtful balances are
provided against.
------------- ---------------------------------------------------------------- --------- --------- -------
Bank default The risk Medium High No
that a bank * We only use banks with strong credit ratings. change
could fail.
* Client deposits spread across multiple banks.
* Regular review and challenge of treasury policy by
management.
------------- ---------------------------------------------------------------- --------- --------- -------
Concentration A component Medium Medium No
risk of credit * The client base is broad, without significant change
risk, exposure to any individual client or group of
arising from clients.
a lack of
diversity
in business * Broad service offering gives diversified revenue
activities streams.
or
geographical
risk.
------------- ---------------------------------------------------------------- --------- --------- -------
Emerging risks, including legislative and regulatory change,
have the potential to impact the Group and its strategy. The Board,
Audit Committee and Risk and Compliance Committee continue to
monitor emerging risks and threats to the financial services sector
including, for example, cyber threats, regulatory change, climate
change and scenarios potentially arising from political and
economic developments, including the COVID-19 pandemic and further
Brexit implications , and intend to continue to focus on
operational resilience and enhancing the control environment over
the next 12 months.
COVID-19
The COVID -- 19 pandemic has and continues to affect economic
and financial markets. We have considered the risks associated with
a general economic downturn, including financial market volatility,
deteriorating credit, liquidity concerns, government intervention,
increasing unemployment, furlough, redundancies and other potential
impacts. We have also implemented new systems and controls where
relevant to mitigate or reduce the impact of these risks on the
business.
Throughout the period, investment markets have continued to
recover from the position at the beginning of the financial year to
pre-COVID levels. The government sponsored stimulus measures
applied to both the UK and other global economies have contributed
to positive investor sentiment and returns.
There will undoubtedly be challenges ahead, as government
support reduces in tandem with the easing of restrictions that have
been in place for most of the last financial year. Long term
inflation concerns cannot be ignored and are being considered in
our investment and advisory support to clients. Our decisions are
being taken on the basis that COVID-19 and its impact on investment
markets will continue to be with us for some time. In the medium we
continue to believe the UK household savings ratio is likely to
rise, providing new opportunities for wealth and asset managers
like Mattioli Woods to provide quality advice to clients.
Brexit
Brexit remains likely to have a significant political and
economic impact on the UK. The rules governing the new relationship
between the EU and the UK took effect on 1 January 2021 by which
time it was hoped that an agreement on the cross-border operation
of financial services would be reached. The industry is however
still waiting for a Memorandum of Understanding to be legally
agreed between the EU and the UK to fully understand the
implications of the impact of Brexit on clients and financial
markets. We continue to monitor this and the potential impact on
the business and our clients with the help of our legal
advisors.
Section 172 statement
The Directors consider that in conducting the business of the
Company over the course of the year they have complied with Section
172(1) of the Companies Act 2006 ("the Act") by fulfilling their
duty to promote the success of the Company and act in the way they
consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a
whole.
Engaging with stakeholders
The continued success of our business is dependent on the
support of all of our stakeholders. Building positive relationships
with stakeholders that share our values is important to us and
working together towards shared goals assists us in delivering
long-term sustainable success.
To fulfil their duties the senior management team, the Directors
of each subsidiary company and the Directors of the Group itself
take care to have regard to the likely consequences on all
stakeholders of the decisions and actions they take, with a
long-term view in mind and with the highest standards of conduct,
in line with Group policies. Where possible, decisions are
carefully discussed with affected groups and are therefore fully
understood and supported when taken.
Reports are regularly made to the Board by the senior management
team about the strategy, performance and key decisions taken, which
provides the Board with assurance that proper consideration is
given to stakeholder interests in decision-making, and it uses this
information to assess the impact of decisions on each stakeholder
group as part of its own decision-making process.
The Group's governance structure allows the Board and the senior
management team to have due regard to the impact of decisions on
the following matters specified in Section 172 (1) of the Act:
Section 172 factor Approach taken
---------------------------------------------------------- ----------------------------------------------------------
(a) Consequences of any decision in the long term The business model and strategy of the Company is set out
within the Strategic Report. Any
deviation from or amendment to that strategy is subject
to Board and, if necessary, shareholder
approval.
At least annually, the Board considers a budget for the
delivery of its strategic objectives
based on a three year forecast model. The senior
management team reports non-financial and
financial key performance indicators to the Board each
month, including but not limited to
the measures set out in the 'Key performance indicators'
section of the Strategic report,
which are used to assess the outcome of decisions made.
The Board's commitment to keeping in mind the long term
consequences of its decisions underlies
its focus on risk, including risks to the long term
success of the business, leading to the
conclusion that during the current period of heightened
political and market uncertainty both
in the UK and globally, a conservative level of cash
resources should be maintained such that
the payment of dividends to shareholders and variable
remuneration to employees are balanced.
The strategy of the Group is focussed on positive client
outcomes that can deliver sustainable
shareholder returns over the long term and as such the
long term is firmly within the sights
of the Board when all material decisions are made.
---------------------------------------------------------- ----------------------------------------------------------
(b) Interests of employees The Group is committed to developing our people and
maintaining the capacity to deliver sustainable
growth. How the Directors have regard to the interests of
the individuals responsible for
delivery of its products and services is set out in the
'Our people' sections of the Strategic
report and 'Employees' section of the Directors' report.
Employees are represented on the Board by Martin Reason.
---------------------------------------------------------- ----------------------------------------------------------
(c) Fostering business relationships with suppliers, How the business manages relationships with suppliers,
customers and others clients and other counterparties is
set out in the 'Relationships' section of the Strategic
report. Suppliers and other counterparties
are typically professional firms such as banks,
investment houses, platform providers, accounting
firms and legal firms with which the senior management
team often has a longstanding relationship.
Where material counterparties are new to the business,
checks, including anti money laundering
checks are conducted prior to transacting any business to
ensure that no reputational or legal
issues would arise from engaging with that counterparty.
The Company also periodically reviews
the compliance of all material counterparties with
relevant laws and regulations such as the
Modern Slavery Act 2015. The Company pays suppliers in
accordance with pre-agreed terms.
Due to the Group's focus on holistic planning and
providing high levels of personal service
whilst maintaining close client relationships, it has
open lines of communication with clients
and can understand and resolve any issues promptly.
---------------------------------------------------------- ----------------------------------------------------------
(d) Impact of operations on the community and the The interaction of the Company with the wider community
environment is explained in the 'Relationships'
and 'Corporate Social Responsibility' sections of the
Strategic report.
The Group's impact on the environment is limited due to
the nature of the Group's business
operations as set out in the 'Environmental performance
and strategy' section of the Strategic
report and 'Environmental' section of the Directors'
report. However, the Board is committed
to limiting the impact of the business on the environment
where possible.
The Board takes overall responsibility for the Company's
impact on the local communities in
which we operate and the environment. The Company's
approach to sustainability, preventing
bribery, money laundering, slavery and human trafficking
is disclosed in the 'Corporate Social
Responsibility' section of the Strategic report.
---------------------------------------------------------- ----------------------------------------------------------
(e) Maintaining high standards of business conduct The Board believes that the ability of the Company to
conduct its business and finance its
activities depends in part on the reputation of the Board
and senior management team. The
risk of falling short of the high standards expected and
thereby risking its business reputation
is included in the Board's review of the Company's risk
register, which is conducted periodically.
The Board is responsible to shareholders for the proper
management of the Group and how the
Board discharges its duties is set out in the Corporate
governance report.
The principal risks and uncertainties facing the business
are set out in that section of the
Strategic report.
---------------------------------------------------------- ----------------------------------------------------------
(f) Acting fairly between members The Company's shareholders are a very important
stakeholder group. The Board oversees a formal
investor relations programme which involves the Directors
and senior management team engaging
routinely with the Company's shareholders. The programme
is managed by the Company's brokers
and the Board receives prompt feedback from both its
brokers and its financial public relations
adviser on the outcomes of meetings.
The Board aims to be open with shareholders and available
to them, subject to compliance with
relevant securities laws. The Chairman of the Company and
other Non-Executive Directors make
themselves available for meetings as appropriate and all
attend the Company's Annual General
Meeting ("AGM").
The investor relations programme is designed to promote
formal engagement with investors and
is typically conducted after each half-yearly results
announcement. The equity fundraise in
the year afforded another opportunity to formally engage
with existing and new shareholders.
The Group also has open lines of communication with
existing investors who may request meetings
and with potential new investors on an ad hoc basis
throughout the year, including where prompted
by Company announcements. For the last two years the
Directors have also engaged with retail
shareholders through the Invest Meet Company platform as
an endorsed channel of communication
by the QCA. Shareholder presentations are made available
on the Company's website. The Company
has a single class of shares in issue with all members of
the Company having equal rights.
---------------------------------------------------------- ----------------------------------------------------------
Methods used by the Board
The main methods used by the Directors to perform their duties
include:
-- Board strategy days, which are held at least annually, to
review all aspects of the Group's business model and strategy and
assess the long-term sustainable success of the Group and its
impact on key stakeholders. A strategy day did not take place
during the year due to the restrictions on group meetings, with a
strategy day planned to take place in the current year;
-- The Board meets regularly throughout the year as well as on
an ad hoc basis, as required by time critical business needs.
Throughout the COVID-19 pandemic, as part of the equity fundraise
and in connection with recent acquisitions the Board and invited
members of the senior management team have met more regularly;
-- The Board is responsible for the Company's ESG activities set out in the Strategic report;
-- The Board's risk management procedures set out in the
Corporate governance report identify the potential consequences of
decisions in the short, medium and long term so that mitigation
plans can be put in place to prevent, reduce or eliminate risks to
the Company and wider stakeholders;
-- The Board sets the Company's purpose, values and strategy,
detailed in the 'Our approach' and 'Strategy' sections of the
Strategic report, and the senior management team ensures they align
with its culture;
-- The Board carries out direct shareholder engagement via the
AGM and Directors attend shareholder meetings on an ad hoc
basis;
-- External assurance is received through internal and external
audits and reports from brokers and advisers; and
-- Specific training for existing Directors and induction for
new Directors as set out in the Corporate governance report.
Principal decisions in the year
Mattioli Woods comprises a number of operating segments, through
which the Executive team extensively engage with each segments'
unique stakeholders as well as other businesses in the Group. The
governance framework delegates day-to-day operational authority to
the Management Engagement Committee, subject to a list of matters
which are reserved for decision by the Governance Committee or the
full Board only, up to defined levels of cost and impact.
The Board has a formal schedule of matters specifically reserved
to it for decision, including strategic planning, business
acquisitions and disposals, authorisation of major capital
expenditure and material contractual arrangements, setting policies
for the conduct of business and approval of budgets and financial
statements.
The principal non-routine decisions taken by the Board during
the year were:
-- The purchase of the EPUT business of BDO Northern Ireland,
which was an important strategic acquisition expanding the Group's
operations in Northern Ireland following the SSAS Solutions
acquisition in 2019. Following integration of the EPUT business its
clients and staff benefit from our strong ethos and culture,
combined with excellent administration and strong property
expertise. and the business has positively contributed to the
Group's financial results since acquisition, enhancing shareholder
returns. The Board considered the key risks, financial returns and
impact upon existing clients arising from the acquisition;
-- The acquisitions of Pole Arnold, Montagu and Caledonia all
represent important acquisitions, offering the clients of each
business the opportunity to access the wider service proposition
available as part of the Mattioli Woods Group. This, combined with
the Group's administration and compliance support, provide
additional capacity for these businesses to generate new business
and revenue growth. Each business has contributed positively to the
Group's results since acquisition and continue to integrate well.
These acquisitions are further detailed in Note 3 to the financial
statements. The Board considered the integration risk amongst other
risks, financial returns generated and impact on existing staff as
part of the decision;
-- On-going response to the COVID-19 pandemic. Our primary focus
was to help manage the health emergency, whilst continuing to
deliver an uninterrupted service to our clients and the wider
community. The Board maintained its position to not take advantage
of any of the government initiatives to assist businesses navigate
their way through the challenges and pressures that emerged,
reducing the burden that will have to be met by the UK taxpayer as
we emerge from the crisis and recognising that past financial
prudence had placed the Group on a strong footing. The Board
considered the health and financial risks to staff, clients and
stakeholders in the response to ensure safety and clear procedures
were maintained throughout;
-- Approval of the equity fundraise for GBP112m to fund the
acquisitions of Maven, Ludlow and a pipeline of bolt-on
acquisitions. The Board considered the strategic rationale for each
acquisition, the associated risks and the performance impact on the
Group;
-- Agreement of revised three-year sponsorship deal with
Leicester Tigers, giving Mattioli Woods naming rights to the
'Mattioli Woods Welford Road' stadium and continuation of the first
team kit sponsorship agreement. Details of the revised agreement
are provided in Note 28. The Board considered the financial risks,
brand awareness and commercial impact of the revised agreement
before approving;
-- The appointments of Ravi Tara, Iain McKenzie and post
year-end Michael Wright to the Board of Directors as executive
directors, in addition to the appointments of David Kiddie, Edward
Knapp and Martin Reason as independent non-executive directors. The
Board considered the balance of skills required for the respective
roles, the experience of each board member and the on-going
requirements of the business; and
-- Determination of dividend. The Board recommends a final
dividend of 13.5p per share (2020: 12.7p). This makes a proposed
total dividend for the year of 21.0p (2020: 20.0p) a year-on-year
increase of 5.0% (2020: flat), demonstrating the Board's desire to
deliver value to shareholders and confidence in the outlook for the
Group's business. This decision was taken in conjunction with a
review of returns paid to all key stakeholders including staff in
the form of salary awards and bonus payments.
Due to the nature of these decisions, a variety of stakeholders
had to be considered as part of the Board's discussions. Each
decision was announced at the time, so that all stakeholders were
aware of the decisions.
Stakeholders
The Directors are aware there are a number of other
stakeholders, in addition to shareholders, who will be affected by
the actions of the Group. The below table outlines how we consider
these stakeholders and how we engage with them:
Stakeholder Why we engage How we engage How we responded
Our clients Clients are We engage with our clients in a variety of ways, driven by Our clients' desire to have
the central their requirements and preferences, easier on-boarding and
focus of our including: better access to
business. By * regular meetings with consultants and investment information about their
engaging with managers; financial affairs resulted
them, we are in the Board supporting the
able to gain Group's investment in
a better * the use of video technology to enable virtual Tiller Technology
understanding engagement with clients; and their appointment to
of their needs develop a new digital,
and ensure self-investment platform.
that we can * virtual seminars held for clients and introducers;
provide them ESG has become an important
with bespoke topic for our clients and
solutions * investment updates and quarterly statements; and the launch of The Mattioli
to address Woods Responsible
their Equity Fund reflects this.
financial client portals, where investment management clients can
goals. view details of their investments.
--------------- ------------------------------------------------------------ ----------------------------
Employees Our people are We have a comprehensive internal communication programme to During the pandemic there
the key to our engage with and listen to our has been an increased focus
success, and people, including: on health and well-being,
we want them * the CEO and other members of the senior management in addition
to be team frequently leading staff forums ranging from all to development
successful staff video conferences to small group discussions; opportunities, pay,
individually benefits and flexible
and working arrangements.
as a team. * Martin Reason was appointed as the designated
Non-executive Director with responsibility for Our focus on the wellbeing
The Board engagement with the workforce; and of our staff enabled the
recognises successful transition to
that the remote working
firm's culture * we undertake regular employee engagement surveys, the during the COVID-19
and corporate results of which are closely monitored with the pandemic.
values Management Engagement Committee considering what
underpin the actions need to be taken in response.
effective
delivery
of its
strategy. Our
aim is to
continue to
attract,
retain,
develop and
motivate the
right
people for our
current and
future
business
needs.
--------------- ------------------------------------------------------------ ----------------------------
Shareholders As owners of We engage with our shareholders through the following We have provided regular
the Group we activities: updates on company
rely on our * regular meetings with our investors throughout the performance during
shareholders' year to discuss delivery of our strategy, current COVID-19, with dividends
support. Their performance and plans for the business through our maintained
opinions are Executive and Non-executive Directors ; and and paid during the year.
important
to us and we We have a number of
want to give * the provision of detailed financial reports and long-term, committed
them a better presentations on the business at the half-year and shareholders. The highly
understanding full-year. successful share placing
of our to fund the acquisition of
business. In Maven, Ludlow and a
addition, we pipeline of smaller
have bolt-ons reflects the
obligations as strong
an AIM-listed relationships we have built
company to with our shareholders.
provide
information to
our
shareholders.
--------------- ------------------------------------------------------------ ----------------------------
Suppliers We recognise We engage with our suppliers to develop mutually beneficial Key areas of focus have
the importance and lasting partnerships. Engagement included innovation,
of our various with suppliers is primarily through a series of enhancing our client
suppliers in interactions and formal reviews. propositions, health and
delivering safety and sustainability.
services to The Board recognises that relationships with suppliers are
clients and important to the Group's long-term
ensure we have success and is briefed on supplier feedback and issues on a
shared values. regular basis.
--------------- ------------------------------------------------------------ ----------------------------
Communities We seek both We engage with the communities in which we operate to build We continued to support a
to support our trust and understand the local number of national and
community and issues that are important to them. local charities during the
to reduce our year including
impact on the We seek our people's input on how we can support local LOROS and Alzheimer's
environment as causes and issues, create opportunities Research UK. In addition we
much to recruit and develop local people and help to look after supported over 30 local
as possible. the environment. charities as selected
by our staff teams across
We recognise We partner with local charities and organisations at an the UK, donating GBP0.1m
the individual office level to raise awareness during the year. A number
responsibility and funds. The impact of decisions on the environment both of planned events
we have to locally and nationally is considered were cancelled due to the
wider society with such considerations as the use of and disposal of COVID-19 restrictions which
and other key paper and plastic. had been a driver for
stakeholders. donations in the
We believe prior year.
that demanding
high levels of
corporate
responsibility
is the right
thing to do.
--------------- ------------------------------------------------------------ ----------------------------
Government We seek to We engage with the government and our regulator through a We held
and build positive range of industry consultations, regular
regulator relationships forums, meetings and conferences to communicate our views meetings
with to policy makers relevant to our with our
government and business. regulators
our regulator. during the
Government and Mattioli Woods is a member of the Association of year and
our regulator Member-directed Pension Schemes and the Quoted continue to
provide key Companies Alliance. have a
oversight of proactive
how we run our Key areas of focus are compliance with laws and and
business and regulations, health and safety. The Board transparent
we believe our is updated on legal and regulatory developments and takes relationship
clients' these into account when considering with them.
best interests future actions. We ensured
are served by our payment
our working terms with
constructively all
with them. suppliers
were fair
and in
compliance
with payment
practices.
We assessed
our key
suppliers
for
conformance
to the
Modern
Slavery Act
and
conducted a
risk
assessment
of our
supply
chain. Our
modern
slavery
statement is
reviewed and
updated by
the
Board
annually.
--------------- ------------------------------------------------------------ ----------------------------
Further information on the ways in which the Board engages with
stakeholders is set out in the Corporate governance report and
Strategic report.
Environmental performance and strategy
Due to the Group's activities, Mattioli Woods impacts the local
and global environment, and it is committed to monitoring the
environmental performance of its assets and using this information
to develop robust strategies to minimise its environmental impact
where possible. The Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018
implement the government's policy on Streamlined Energy and Carbon
Reporting, requiring disclosure of the environmental performance of
the Group's assets through calculating the Group's greenhouse gas
("GHG") emissions and subsequently, setting strategies to minimise
these emissions. The following information summarises the Group's
environmental performance over the year.
Methodology
GHG emissions are quantified and reported according to the
Greenhouse Gas Protocol. Consumption data has been collated and
converted into CO(2) equivalent ("CO(2) e") using the UK Government
2020 Conversion Factors for Company Reporting to calculate
emissions from corresponding activity data. To collect consumption
data, the Group has reviewed utility invoicing and its staff
expense software to track business mileage in Group-owned vehicles
and own vehicles.
This information has been prepared in accordance with the GHG
Protocol's Scope 2 Guidance on both location-based and market-based
Scope 2 emissions figures. Data collected relates to the most
recent 12 month period where data was available.
We have calculated energy intensity and emissions intensity
using total floor area which is considered to best represent the
scale of the business compared to using alternative measure such as
headcount, as the majority of energy usage is from buildings and
the COVID-19 pandemic is expected to make the level of fuel
consumption for Group vehicles volatile in the short-term.
As part of the data collection, a materiality assessment was
applied to determine which indicators were relevant to the Group.
We have assessed each indicator in terms of its impact on the Group
and its perceived importance to stakeholders.
Sustainability is a key priority for Mattioli Woods and we are
working towards putting in place an environmental vision and
strategy, including the development and implementation of key
performance indicators and long-term targets for Scope 1 and 2
emissions. No electricity or gas consumption is currently from
renewables. This strategy will also involve setting a plan of
building and car fleet optimisation opportunities.
Reporting boundaries and limitations
The GHG sources that constitute our operational boundary for the
reporting period are:
-- Scope 1 : Natural gas combustion within boilers, gas oil
combustion within generators and road fuel combustion within owned
vehicles.
-- Scope 2: Purchased electricity consumption for our own use.
-- Scope 3: Water consumption and fuel consumption from employee-owned cars for business use.
Fuel connected with employee train travel for business use has
been excluded as amounts are likely to be immaterial and we
consider it impractical to make estimations as only the cost of
travel is recorded in the Group's expense records. Fugitive gasses
from office air conditioning are also considered immaterial.
Assumptions and estimations
In some instances data is missing, including:
-- The utility costs for Group's Manchester, London and
Twickenham offices (which represent circa 7.5% of the Group's total
floor area), where utilities are included in rent payable; and
-- Water usage in the Group's Scottish offices has been
estimated as they pay rates rather than using meters.
In such cases, estimations have been applied to fill the gaps,
calculated either through extrapolation of available data from the
reporting period or through data from other similar offices as a
proxy.
Performance
The table below shows absolute performance of our Scope 1, 2 and
3 emissions for the year, which represents the Group's second year
of reporting under the Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations
2018:
GHG emissions (tCO(2) e) 2021 2020
Change
================================================ ======= ========= ========
Fuel consumption (gas office heating)
Scope 1 (kWh) 330,863 490,767 (33%)
Associated GHG (tCO(2) e) 61 90 (32%)
=============================================== ======= ========= ========
Fuel consumption (company vehicles)
(miles) 37,109 612,808 (94%)
Fuel consumption (company vehicles)
(MWh) 43 714 (94%)
Associated GHG (tCO(2) e) 10 175 (94%)
----------------------------------------------- ------- --------- --------
Electricity consumption (office
Scope 2 and company car electricity) (kWh) 704,925 1,036,440 (32%)
Associated GHG (tCO(2) e) 164 265 (38%)
=============================================== ======= ========= ========
Total Scope 1 & 2 emissions 235 530 (56%)
=============================================== ======= ========= ========
Fuel consumption (own cars for
Scope 3 business use) (miles) 11,471 147,569 (92%)
Fuel consumption (own cars for
business use) (MWh) 13 176 (92%)
Associated GHG (tCO(2) e) 3 42 (92%)
----------------------------------------------- ------- --------- --------
Water consumption (m3) 2,764 3,236 (15%)
Associated GHG (tCO(2) e) 3 3 (3%)
Total Scope 3 emissions 6 45 (87%)
=============================================== ======= ========= ========
Gross Scope 1, 2 and 3 emissions 241 575 (58%)
=============================================== ======= ========= ========
Total floor area (sqft) 90,742 90,742 -
=============================================== ======= ========= ========
Scope 1 & 2 emissions intensity
(tCO(2) e/sqft/yr) 0.0026 0.0058 (55%)
=============================================== ======= ========= ========
Scope 3 emissions intensity (tCO(2)
e/sqft/yr) 0.0001 0.0005 (87%)
=============================================== ======= ========= ========
Corporate social responsibility
Our commitment to operating responsibly
As we continue to work our way through the many challenges of
COVID-19, our dedicated team has allowed us to rise to these
challenges and continue making a positive contribution to our
stakeholders - our clients, shareholders, staff, suppliers and
chosen charity partners alike. We believe this is responsible
business in action.
Our approach to achieving good governance comes from a passion
to ensure we do the right things for our clients and this is
embedded in the culture of the Mattioli Woods team, where staff are
encouraged to thrive and develop in their roles and the business in
turn supports them in their own career development. Our record of
growing our own and promoting from within the Group adds to the
sense of teamship which underpins everything we do, reflected most
recently in the post year-end appointment to the Board of Michael
Wright, who joined the business as a graduate in 2004.
Sustainability
The Group has continued to grow over the last year and we
recognise that we have a responsibility to support our profitable
expansion by operating in a sustainable manner. As we continue to
deal with, and learn from, the impact of COVID-19, we have
demonstrated we can deliver great client outcomes in different
ways, with the majority of our staff currently working remotely as
they have for over a year. This will inform our thinking as to how
we can deliver strong and sustainable shareholder returns,
including investing in new technology to facilitate efficient
growth over the longer term.
Whilst our environmental footprint has inevitably reduced in the
last year, this does not detract from our focus on ensuring that,
wherever possible, we minimise any negative impact in this area.
The modern design and construction methods used in our Leicester
office means that we are harnessing the latest technology to
support our environmental aims and, whilst this is a major
contributor in itself, we recognise that smaller changes to how we
do things can make incremental contributions. These include
reducing the amount of paper we use through the adoption of new
technologies, including an on-line portal to deliver client
valuations, supporting our move to a paperless environment. In
addition, our consultancy team is making increasing use of hybrid
and efficient fuel technology in the vehicles they use.
We are also exploring how we can offer our clients access to
bespoke "ESG responsible" investment propositions, with a view to
adding such an option in the coming year.
Charities and communities
Making a difference within our local communities matters to us
and we continue to have a high level of engagement in this area.
Each year, we sponsor businesses, 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.
In 2019, we launched a national partnership with Alzheimer's
Research UK, a charity focused on boosting research, improving
treatments and raising awareness about dementia. Like many
charities, the impact of the COVID-19 pandemic on Alzheimer's
Research UK has been significant and some of the activities we had
planned to support them, such as members of the Mattioli Woods
family running the Virgin Money London Marathon, have had to be put
on hold, although two members of our consultancy team, Amit Joshi
and Chetan Mistry successfully took part in the "virtual" London
Marathon in 2020.
We believe dementia is one of the biggest problems facing health
services today and one that is impacting the lives of many of our
employees and clients. We will continue to explore ways of engaging
employees, clients and partners to raise money for the charity
where and when we can.
Every year, the Group's associate company Amati has a commitment
to donate 10% of its profits to good causes. We want to further
that tradition and this year asked our staff to suggest good causes
they felt deserving of a donation. This meant we could contribute
to numerous other charities throughout the UK that are local to
where our staff live, which has helped to further enhance our
impact on the communities where we live, with total charitable
donations by the Group and its employees (through payroll giving)
totalling GBP0.2m (2020: GBP0.6m) for the year.
We recognise that our tax contributions also play an important
role for the communities in which we operate, with the Group's
total tax contribution summarised as follows:
2021 2020
Total tax contribution GBP000 GBP000
------------------------------- ------- -------
Corporation tax 2,428 3,244
Other taxes borne:
Employer's National Insurance
Contributions 2,843 2,761
Apprenticeship levy 118 121
Business rates 570 514
Irrecoverable input VAT 909 799
Insurance premium tax 108 109
Stamp duty land and stamp
duty reserve tax 153 9
Taxes collected:
Income tax deducted under
PAYE 5,378 5,379
Employees' National Insurance
Contributions 1,630 1,610
Output VAT 4,579 4,688
18,716 19,234
------------------------------- ------- -------
Developing our people
The Group continues to create opportunities for new recruits and
we operate a trainee consultant programme for aspiring advisors. We
have continued to operate our 26-week plan to foster small groups
of trainee advisers in a classroom setting, two days a week and
have successfully delivered these remotely.
Each week is themed, including topics such as tax, pensions and
investments, and aims to get trainees who have been with the
Company for 18 months and have completed their level 4
qualification to the point where they are able to develop financial
plans.
Trainees work alongside consultants in administrative roles and
attend consultant-led client meetings. The scheme will continue to
be rolled out for new groups of employees who demonstrate the
potential to move into consultant roles at the firm. Mattioli
Woods' graduate and apprenticeship schemes have been running for a
number of years and, together with the trainee consultant
programme, highlight the firm's motivation to 'grow our own'. The
scheme will continue to be rolled out for new groups of employees
who demonstrate the potential to move into consultant roles at the
firm.
The group also operate a number of graduate and apprenticeship
schemes in other teams including Finance, HR and Marketing where on
the job learning is supported by study toward an externally
recognised qualification.
Diversity and inclusion
We are an equal opportunities employer and it is our policy to
ensure that all job applicants and employees are treated fairly and
on merit regardless of race, sex, marital/civil partnership status,
age, disability, religious belief, pregnancy, maternity, gender
reassignment or sexual orientation.
Modern slavery
Mattioli Woods is committed to preventing modern slavery and
human trafficking in all its activities, and to ensuring its supply
chains are free from modern slavery and human trafficking. We
welcomed the introduction of the Modern Slavery Act 2015 and a copy
of our Modern Slavery and Human Trafficking Statement can be found
on our website. We have also developed policies, reviewed our due
diligence processes for suppliers and provided training to
staff.
Anti-bribery policy
We value our reputation for ethical behaviour and upholding the
utmost integrity and we comply with the FCA's clients' best
interests rule. We understand that in addition to the criminality
of bribery and corruption, any such crime would also have an
adverse effect on our reputation and integrity.
Mattioli Woods has a zero tolerance approach to bribery and
corruption and we ensure all of our employees and suppliers are
adequately trained as to limit our exposure to bribery by:
-- S etting out clear anti-bribery and corruption policies;
-- Providing mandatory training to all employees;
-- Encouraging our employees to be vigilant and report any
suspected cases of bribery in accordance with the specified
procedures; and
-- Escalating and investigating instances of suspected bribery
and assisting the police or other appropriate authorities in their
investigations.
Gender pay reporting
The Equality Act 2010 (Gender Pay Gap Information) Regulations
2017 requires all employers with 250 or more employees in the UK to
publish details of their gender pay gap. Its aim is to achieve
greater transparency about gender pay difference. The analysis is
based on data as at 5 April of each year and shows the differences
in the average pay between men and women.
However, the Government Equalities Office and the Equality and
Human Right Commission have suspended gender pay gap reporting
regulations for the 2020-21 reporting year, due to the COVID-19
pandemic. The EHRC is encouraging employers to report ahead of the
usual deadlines. Ordinarily, the Group submits its data on gender
pay to the government each year and publishes these details on our
website.
Approval
The strategic report contains certain forward-looking
statements, which are made by the Directors in good faith based on
the information available to them at the time of their approval of
this annual report. Statements contained within the strategic
report should be treated with some caution due to the inherent
uncertainties (including but not limited to those arising from
economic, regulatory and business risk factors) underlying any such
forward-looking statements. The strategic report has been prepared
by Mattioli Woods to provide information to its shareholders and
should not be relied upon for any other purpose.
Pages 1 to 55 constitute the strategic report, which has been
approved by the Board of Directors and signed on its behalf by:
Ian Mattioli MBE
Chief Executive Officer
20 September 2021
Governance overview
The Board is committed to achieving high standards of corporate
governance, integrity and business ethics. We recognise the need to
ensure an effective governance framework is in place to give all
our stakeholders confidence that the business is effectively run,
ensuring good outcomes for our clients and looking after the
interests of the Group's shareholders and other stakeholders.
Board structure
The Board has established a sub-committee structure comprising
Risk and Compliance, Audit, Remuneration and Nomination Committees.
In the financial year ended 31 May 2019 the Group reviewed its
management and governance structure, implementing a number of
changes designed to improve the management and governance of the
Group's key areas of operation, illustrated as follows:
The executive management team is structured into two committees,
comprising the Governance Committee and the Management Engagement
Committee.
The Group's investment and asset management business is managed
through the Investment Committee, which ensures risk and investment
controls are applied consistently across our various products and
services.
Each operating subsidiary is managed by its own board, which
reports to the Management Engagement Committee. We believe this is
the optimal management structure to secure continued growth.
Corporate governance code
The Board has adopted the Quoted Companies Alliance ("QCA")
revised corporate governance code ("QCA Code"), which requires the
Group to apply 10 principles focused on the pursuit of medium to
long-term value for shareholders and also to publish certain
related disclosures.
Corporate governance principles applicable to the Group
The 10 QCA Code corporate governance principles, which apply to
the Group, are:
1. Establish a strategy and business model which promote long-term value for shareholders.
2. Seek to understand and meet shareholder needs and expectations.
3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation.
5. Maintain the Board as a well-functioning, balanced team led by the Chairman.
6. Ensure that between them the Directors have the necessary
up-to-date experience, skills and capabilities.
7. Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
8. Promote a corporate culture that is based on ethical values and behaviours.
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board.
10. Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant
stakeholders.
Application of the QCA Code and required disclosures
The QCA Code requires us to apply the principles set out above
and to publish certain related disclosures in our Annual Report, on
our website, or a combination of the two. We have followed the QCA
Code's recommendations and have provided disclosure relating to all
principles in a corporate governance statement on our website and
summarise our compliance with the following principles in this
Annual Report.
Strategy and business model - QCA Principle One
The Group's strategy and business model is described in our
Strategic Report.
Effective risk management - QCA Principle Four
The Group embeds risk management throughout the organisation and
this is described in the Corporate Governance report.
Board Balance and Skills - QCA Principles Five and Six
The Board, led by the Chairman, has the necessary skills and
knowledge to discharge their duties and responsibilities
effectively, setting clear expectations and ensuring stringent
measures for corporate governance standards are met, particularly
in relation to executive remuneration, risk, compliance and audit.
The Executive and Non-executive Directors' skill sets are
complementary, and together provide a blend of broad commercial,
operational, legal, and financial expertise. The skill set is
suitably broad and sufficiently high calibre such that all decision
making at Board level is robust and mindful of the fiduciary
responsibilities that need to be discharged to all
shareholders.
In addition, the Directors are aware of the importance of
keeping abreast of the industry's current activities and industry
conferences, webinars and events throughout the year to keep their
skills, contacts and knowledge current and simultaneously engage
with the regulator, other operators and service providers to the
financial services industry.
Board Effectiveness - QCA Principle Seven
The Board intends to undertake a self-evaluation during the
financial year ending 31 May 2022 and annually thereafter. The
criteria against which the Board collectively and individually will
be assessed includes Board composition, roles and responsibilities,
meetings and administration, Board committees,
Board discussions, Board relationships and stewardships,
monitoring and evaluation, strategy and internal control.
The aim of the Board evaluation is to review the effectiveness
of the Board's performance and assess its strengths as well as
areas for development. The Board has considered the Company's
approach to succession planning and will work with the Nomination
Committee on the Board evaluation process. The executive management
team and, at a more junior level, senior departmental managers
address progression of employees through annual appraisals and
competency reviews. The Group's structured 'Financial Assess'
training programme further assists key managers with training and
learning opportunities.
Board of directors
We have further strengthened our PLC Board during the year to
ensure that we continue to have a diverse and balanced board. In
January 2021, we announced the appointment of three new independent
Non-Executive Directors, David Kiddie, Edward Knapp and Martin
Reason, bringing significant asset management and investment
oversight expertise, financial services technology, innovation and
growth expertise and strategic planning and change management
expertise respectively. Following regulatory approval, we were
pleased to appoint Ravi Tara, Iain McKenzie and Michael Wright onto
the Board as Executive Directors.
As a result the Board currently comprises four executive
directors and five independent non-executive directors, including
the Chairman. The Company will continue to have a balanced board,
which we believe represents the right governance structure for the
business.
The Nominations Committee has commenced the selection process
for a new Non-Executive Chairman as part of a managed transition
which will see Joanne Lake step down at our forthcoming AGM in
October after nine years as an independent Non-Executive Director
including five as Chairman.
A short biography of each director is set out below.
Joanne Lake - Non-Executive Chairman
Appointed to the Board: 2012
Non-executive Chairman: 2016
Tenure at Mattioli Woods: 9 y ears
Brings to the Board :
-- 30+ years' experience in accountancy and investment banking
Previous roles :
-- Panmure Gordon
-- Evolution Securities
-- Williams de Broë
-- Price Waterhouse
Accreditations :
-- Chartered Accountant
-- Fellow of the Chartered Institute for Securities & Investment ("CISI")
-- Fellow of the Institute of Chartered Accountants in England and Wales ("ICAEW")
-- A member of the ICAEW's Corporate Finance Faculty
External appointments :
-- Deputy Chairman of Main Market-listed Henry Boot plc
-- Non-executive director of Gateley (Holdings) Plc
-- Non-executive director of Morses Club plc
-- Non-executive director of Honeycomb Investment Trust Plc
Ian Mattioli MBE - Chief Executive Officer
Co-founded Mattioli Woods in 1991
Tenure at Mattioli Woods: 30 years
Brings to the Board:
-- 35+ years' experience in financial services, wealth management and property businesses
-- Co-founded Mattioli Woods, with Bob Woods, in 1991
-- Vision and strategy
-- Development of investment proposition
-- Founder of Custodian REIT plc
Accreditations:
-- Awarded an MBE for services to business and the community in 2017
-- LSE AIM Entrepreneur of the Year Award, 2008
-- CEO of the Year Award, City of London Wealth Management Awards, 2018
-- Awarded Honorary Degree (Doctor of Laws), University of Leicester
-- Appointed High Sheriff of Leicestershire for 2021-22
External appointments:
-- Non-executive Chairman of K3 Capital Group plc
-- Non-independent director of Custodian REIT plc
Ravi Tara - Chief Financial Officer
Appointed to the Board: 2021
Tenure at Mattioli Woods: 2 years
Brings to the Board:
-- Strategic planning and value creation
-- Financial management and oversight of operations
-- Operational efficiency and improvement
-- Mergers & acquisitions and integration experience
-- Inspirating leadership and development of teams
-- Change management
Previous roles :
-- Capita plc
-- Weetabix Food Company
-- JP Morgan
-- Barclays Capital
-- PwC
Accreditations :
-- Chartered Accountant
-- Fellow of the Institute of Chartered Accountants in England and Wales ("ICAEW")
-- A member of the ICAEW's Corporate Finance Faculty
Iain McKenzie - Chief Operating Officer
Appointed to the Board: 2021
Tenure at Mattioli Woods: 3 years
Brings to the Board:
-- People and change management
-- Operational and process efficiency
-- Understanding of business functions and risk management
-- Strategic planning and project management
-- Data analysis and performance metrics
-- Organisational and leadership abilities
Previous roles:
-- Business consultancy
-- Senior management
Accreditations:
-- BA Design Management, De Montfort University, Leicester.
External appointments:
-- Director of Leicestershire Business Voice
Michael Wright - Group Managing Director
Appointed to the Board: 2021 [28]
Tenure at Mattioli Woods: 17 years
Brings to the Board:
-- Over 17 years' experience in financial services
-- Experienced adviser, assisting controlling directors,
owner-managers and affluent individuals
-- Inspiring leadership and operational management
-- Acquisition and integration expertise
-- Change and efficiency management
Accreditations:
-- Diploma in Financial Planning
-- LLB Law Degree, University of Leicester
28 Appointed to Board post year-end on 9th June 2021
Anne Gunther - Senior Independent Director and Chairman of Audit
Committee
Appointed to the Board: 2016
Tenure at Mattioli Woods: 5 years
Brings to the Board:
-- 40+ years' experience in retail financial services
-- Wide executive experience from lending to wealth management
-- FTSE 100 IPO experience
-- M&A experience
Previous roles:
-- Managing Director - Direct, Lloyds TSB
-- Chief Executive, Standard Life Bank
-- Chief Executive, Standard Life Healthcare
-- Member of group executive, Standard Life
-- Founding director, Standard Life Wealth
-- Chairman, Warwick Business School
Accreditations:
-- Honorary doctorate, Edinburgh University
-- Chartered Banker
-- MBA, Warwick Business School
-- BSc Hons Physics, Nottingham University
External appointments:
-- Non-executive director of Masthaven Bank Limited
-- Director of Water Plus Limited group (a jointly-owned
subsidiary of United Utilities plc and Severn Trent plc)
Edward Knapp - Non-Executive Director and Chairman of Risk
Committee
Appointed to the Board: 2021
Tenure at Mattioli Woods: 1 year
Brings to the Board:
-- Significant commercial and strategic insight and transformation expertise
-- Digital, technology and IT development within financial services
-- Risk and compliance oversight and control
-- Asset management and advisory expertise
Previous roles:
-- Managing Director and Global Head of Business Management, Technology, HSBC
-- Chief Operating Officer and Global Head of Business Management, Risk, Barclays
-- Senior Adviser, McKinsey & Company
Accreditations:
-- BA Mathematics, Balliol College, University of Oxford
External appointments:
-- Non-executive director of F&C Investment Trust Plc
-- Senior Advisor to Board of Revolut
-- Director of Asia House
David Kiddie - Non-Executive Director
Appointed to the Board: 2021
Tenure at Mattioli Woods: 1 year
Brings to the Board:
-- Significant experience and expertise in asset management and investment oversight
-- Strategic planning and leadership
-- Focus on governance, oversight and regulatory environment
Previous roles:
-- Chief Executive UK and Head of Institutional Business, BNP Paribas Investment Partners
-- Chief Investment Officer, AMP Capital Investors, ABN AMRO
Asset Management and Rothschild Asset Management
-- Head of Equities, Baring Asset Management
-- Group Executive, Perpetual Investments (Australia)
Accreditations:
-- BA Hons Economics, University of Kent
External appointments:
-- Non-executive director of Marlborough Fund Managers Ltd
-- Non-executive director of Marlborough Investment Management Ltd
-- Non-executive director of Investment Fund Services Ltd
Martin Reason - Non-Executive Director and Chairman of
Remuneration Committee
Appointed to the Board: 2021
Tenure at Mattioli Woods: 1 year
Brings to the Board:
-- Development of strategic plan focussing on client outcomes and marketing
-- Risk management and controls
-- Process design and operational efficiency
-- Remuneration and people strategies
Previous roles:
-- Chief Executive Officer, Melton Mowbray Building Society
-- MD, Merrill Lynch HSBC
-- HSBC/Midland Bank
-- MD, Pakawaste Group
Accreditations:
-- Associate of the Chartered Institute of Banking ("ACIB")
-- High performance leadership diploma, Cranfield School of Management
-- BSc Hons Banking and Finance
External appointments:
-- Director of Sitigrid Ltd
Time commitments of Board members
The Group embraces the benefits that are brought by a Board from
a range of business backgrounds and who are actively involved in
other businesses. The Board also recognises its members must be
able to dedicate sufficient time to the Company. The Board has
considered the time commitments of each director and is comfortable
that each has sufficient available capacity to carry out the
required duties for Mattioli Woods:
-- Joanne Lake's time commitment from her other directorships
averages nine to ten working days per month.
-- Ian Mattioli's time commitment from his roles as
Non-Executive Chairman of K3 Capital Group plc and Non-Executive
Director of Custodian REIT plc average two and one and a half
working days per month respectively.
-- Iain McKenzie's time commitment from other directorships averages two days per month
-- Anne Gunther's time commitment from her other directorships
averages four and a half working days per month.
-- Edward Knapp's time commitment from his other directorships
averages four working days per month.
-- David Kiddie's time commitment from his other directorships
averages three working days per month.
-- Martin Reason's time commitments his other directorship
averages four days per month respectively.
Corporate governance report
Operation of the Board
The Board is responsible to shareholders for the proper
management of the Group and has a formal schedule of matters
specifically reserved to it for decision. These include strategic
planning, business acquisitions and disposals, authorisation of
major capital expenditure and material contractual arrangements,
setting policies for the conduct of business and approval of
budgets and financial statements. As part of our ongoing focus on
corporate governance the Board reserved matters and committee terms
of reference were reviewed and updated during the year,
particularly in light of the updated QCA Corporate Governance Code
and an emerging focus on stakeholder engagement and linking a
company's purpose and values to its strategy.
Other matters are delegated to the executive management team,
supported by policies for reporting to the Board. The Company
maintains appropriate insurance cover in respect of legal action
against the Company's directors, but no cover exists in the event
that a director is found to have acted fraudulently or
dishonestly.
The agenda and relevant briefing papers are distributed by the
Company Secretary on a timely basis, usually a week in advance of
each Board meeting.
The roles of Chairman and Chief Executive are distinct, as set
out in writing and agreed by the Board. The Chairman is responsible
for the effectiveness of the Board, directing strategy and ensuring
communication with shareholders. The Chief Executive is responsible
for overseeing the delivery of this strategy and the day-to-day
management of the Group by the executive management team. 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.
The Non-Executive Directors are considered by the Board to be
independent of management and free from any relationship which
might materially interfere with the exercise of independent
judgement. The Board does not consider the Non-Executive Directors'
shareholdings to impinge on their independence. The Non-Executive
Directors provide a strong independent element to the Board and
bring experience at a senior level of business operations and
strategy. Anne Gunther is the Senior Independent Director.
All directors have access to the Company Secretary, who is
responsible for ensuring that Board procedures and applicable rules
and regulations are observed. Any director, on appointment and
throughout their service, is entitled to receive any training they
consider necessary to fulfil their responsibilities effectively
including training on quoted company requirements from the
Nominated Advisor, Canaccord Genuity Limited.
The Board meets regularly throughout the year as well as on an
ad hoc basis, as required by time critical business needs, and is
the principal forum for directing the business of the Group.
Board committees
The Board has delegated authority to four committees. The
Chairman of each committee provides a report of any meeting of that
committee at the next Board meeting. The Chairman of each committee
is present at the AGM to answer questions from shareholders.
Risk and Compliance Committee
The Risk and Compliance Committee comprises Edward Knapp
(Chairman), Anne Gunther, Joanne Lake, David Kiddie and Martin
Reason. Anne Gunther was Chairman of the Committee until 5 January
2021, handing the Chairman position to Edward Knapp. Committee
meetings are normally attended by George Houston (Group Compliance
Officer) as Compliance Oversight Function, the Chief Executive, the
Chief Financial Officer, and by representatives of the external and
internal auditors by way of invitation. In addition, senior
managers and representatives from the internal audit, risk and
compliance functions attend committee meetings as necessary.
The Risk and Compliance Committee is principally responsible for
monitoring identified risks and the effectiveness of mitigating
action, keeping risk assessment processes under review, reviewing
the impact of key regulatory changes on the Group, assessing
material breaches of risk limits and regulations as well as
reviewing client complaints.
Risk management framework
The Group's risk management framework is designed to ensure
risks are identified, managed and reported effectively. The Group
has been investing in its risk management framework to meet the
requirements of key regulatory changes and the risk management
framework remains subject to ongoing review.
We continue to apply a 'three lines of defence' model to support
our risk management framework, with responsibility and
accountability for risk management summarised as follows:
-- First line: Senior management and operational business units
are responsible for managing risks, by developing and maintaining
effective internal controls to mitigate risk. First-line systems
and controls are employed to ensure business activities are
conducted in compliance with internal policies and procedures.
First-line supervision teams carry out monitoring of business
activities on a day-to-day basis.
-- Second line: The risk, compliance and anti-money laundering
functions maintain a level of independence from the first line.
They are responsible for providing oversight and challenge of the
first line's day-to-day management, monitoring and reporting of
risks to both senior management and governing bodies.
-- Third line: The internal audit function is responsible for
providing independent assurance to both senior management and
governing bodies as to the effectiveness of the group's governance,
risk management and internal controls.
Output from first, second and third-line monitoring is reported
to the managers and management information is reported to the
Executive Risk and Compliance Committee and the Risk and Compliance
Committee.
Risk appetite
Risk appetite is defined as both the amount and type of risk the
Group is prepared to accept or retain in pursuit of our strategy.
Our appetite is subject to regular review to ensure it remains
aligned to our strategic goals. At least annually, the Board,
Executive Risk and Compliance Committee and the Risk and Compliance
Committee will formally review and approve the Group's risk
appetite statement and assess whether the firm has operated in
accordance with the stated risk appetite measures during the
year.
Notwithstanding its continued expectations for business growth,
the Board retains a relatively low overall appetite for risk,
ensuring that our internal controls mitigate risk to appropriate
levels.
Risk assessment process
Identified risks are tracked in a department-level risk register
and used as the basis for a consolidated risk register that
provides the Risk and Compliance Committee with an overview of the
key risks across the organisation. The Board and senior management
are actively involved in a continuous risk assessment process as
part of our risk management framework, supported by the annual
Internal Capital Adequacy Assessment Process ("ICAAP"), which
assesses the principal risks facing the Group.
Stress tests include consideration of the impact of a number of
severe but plausible events that could impact the business. The
work also takes account of the availability and likely
effectiveness of mitigating actions that could be taken to avoid or
reduce the impact or occurrence of the underlying risks.
The Group's risk assessment process considers both the impact
and likelihood of risk events which could materialise, affecting
the delivery of strategic goals and annual business plans. A
top-down and bottom-up approach ensures that our assessment of key
risks is challenged and reviewed on a regular basis throughout the
year, with the Board and its committees receiving regular reports
and information from senior management, operational business units
and the risk oversight functions.
Activities during the year
The committee met seven times during the year, with the
committee's activities during the year including:
-- Review and challenge of the key components of the Group's risk management framework;
-- Review and challenge of the ICAAP, exploring scenarios and
stress tests to determine an appropriate regulatory capital
requirement prior to recommendation to the Board;
-- Review and challenge of the Group's treating customers fairly ("TCF") policy and outcomes;
-- Review and challenge of the Group's vulnerable client processes;
-- Review of the Group's training and competence regime;
-- Review of the potential ongoing risks associated with Brexit
and the COVID-19 pandemic, including security and maintenance of
our IT systems and data: The recent changes in our IT environment
have increased the risk of a cyber-attack due to the number of
users accessing our systems while working from home and we have
experienced a heightened volume of phishing targeted at
employees;
-- Reviewed risks associated with the COVID-19 pandemic and
commissioned an internal audit of the Group's secure remote
working, information security and operational resilience;
-- Review of the risks associated with acquisitions and impact on regulatory capital; and
-- Review of recommendation of the Group's risk appetite
statement and tolerance for key risks to the Board and review of
the risk register.
Audit Committee
The Audit Committee comprises Anne Gunther (Chairman), Joanne
Lake, Edward Knapp and Martin Reason. Anne Gunther is a Chartered
Banker and the Board is satisfied that all members of the committee
have recent and relevant financial experience. The Board believes
the committee is independent, with all members being Non-Executive
Directors.
The key responsibilities of the Audit Committee are:
-- To review the reporting of financial and other information to
the shareholders of the Company and to monitor the integrity of the
financial statements;
-- To review the Group's accounting procedures and provide
oversight of significant judgement areas;
-- To review the firm's internal controls and effectiveness of the internal audit function;
-- To review the effectiveness of the external audit process and
the independence and objectivity of the external auditors;
-- To review audit fees and proposals for future years; and
-- To report to the Board on how it has discharged its responsibilities.
Committee meetings are normally attended by the Chief Executive,
Chief Financial Officer, Head of Financial Reporting, Chief
Operating Officer and by representatives of the external and
internal auditors by way of invitation. The presence of other
senior executives from the Group may be requested. The committee
meets with representatives of the internal and external auditors,
without management present, at least once a year.
Activities during the year
The committee met five times during the year, where it
considered the significant financial and audit issues, the
judgements made in connection with the financial statements and
reviewed the narrative within the Annual Report and the Interim
Report.
During the year the Audit Committee continued to monitor the
operation of the internal audit function which has been outsourced
to RSM Risk Assurance Services LLP since December 2018. In light of
an ever-changing regulatory environment, outsourcing gives the
Group access to greater skills externally, while having the ability
to shrink or expand our internal audit activities to meet the
ongoing demands of the business and in response to the impact of
the uncertainty created by the pandemic.
The committee also considered the appointment of, and fees
payable to, the external auditor and discussed with them the scope
of the interim review and annual audit.
Specific audit issues the committee discussed included:
-- Assessment of whether each entity and the Group as a whole
are going concerns, including whether forecast performance would
result in an adequate level of headroom over the Group's available
cash facilities, including the potential impacts of Brexit and the
COVID-19 pandemic;
-- Review of the whether any impairment needed to be recognised
in respect of the intangible assets of the Group, including the
assumptions underlying the calculation of the value in use of the
cash generating units tested for impairment;
-- Management's approach to estimating the recoverability of
WIP, including the recovery rate applied and the length of
historical data used to calculate that recovery rate;
-- Provisions recognised in respect of contingent consideration
payable on past business combinations and management's key
assumptions and estimates applied in reaching these recognition and
measurement decisions;
-- The purchase price allocation and fair value accounting for
the acquisition of Hurley Partners, Montagu, Pole Arnold,
Caledonia, Maven and Ludlow;
-- Consideration of how to improve controls to both improve key
financial processes and streamline the financial close and to
increase the controls reliance for the external audit; and
-- To recommend to the Board the upgrade of the financial
reporting platform operated by the Group to a single system.
Significant judgements and estimates
Significant critical accounting judgements and key estimates in
connection with the Group's financial statements for the year ended
31 May 2021 and other matters considered by the committee
included:
Goodwill and intangible assets
----------------------------------------------------------------------------------------------------------------------
As set out in Note 19 to the Group financial statements, The committee considered the impairment reviews carried
at 31 May 2021, the Group had goodwill out by management. These reviews focused
of GBP37.2m (2020: GBP21.1m) with other intangible on the assumptions underlying the calculation of the
assets relating to client portfolios amounting value in use of the cash generating units
in total to GBP40.6m (2020: GBP25.4m). Under IFRSs, tested for impairment. The underlying cash flow
these balances are assessed annually for assumptions were challenged by management
impairment. Impairment testing requires the application and the committee, having regard to historical
of judgement, largely around the assumptions performance. This was supported by the challenge
that are built into the calculation of the value in use to the Group's budgets earlier in the year.
of the cash generating unit being The main assumptions reviewed by the committee were the
tested for impairment. achievability of long-term business
plans and the discount rate used as outlined in Note 19.
These assumptions were subject to
sensitivity analysis by management which was also
reviewed by the committee.
The committee concluded that the carrying values of
goodwill and intangibles included in the
financial statements are appropriate.
--------------------------------------------------------- ---------------------------------------------------------
Revenue recognition
--------------------------------------------------------------------------------------------------------------------
The Group recognises accrued income in respect of time The committee considered management's approach to
costs and disbursements incurred on estimating the recoverability of WIP, including
clients' affairs during the accounting period, which the recovery rate applied and the length of historical
have not been invoiced at the reporting data used to calculate that recovery
date ("work in progress" or "WIP"). This requires an rate.
estimation of the recoverability of the The committee concluded that the valuation of accrued
time costs and disbursements incurred but not invoiced WIP in the financial statements is appropriate.
to clients. The carrying amount of
accrued time costs and disbursements at 31 May 2021 was
GBP4.2m (2020: GBP4.7m).
--------------------------------------------------------- ---------------------------------------------------------
Acquisition accounting
----------------------------------------------------------------------------------------------------------------------
Business combinations are accounted for using the The committee reviewed the purchase price allocations
purchase accounting method. This involves prepared by management on the purchase
assessing the fair value of the assets acquired and of Hurley Partners, Pole Arnold, Caledonia Asset
whether any assets acquired meet the criteria Management and Montagu during the year. These
for recognition as separately identifiable intangible reviews focused on the underlying cash flow assumptions
assets. Intangible assets are measured and the discount rate used to determine
on initial recognition at their fair value at the date of the present value of the cash flows attributable to the
acquisition. subject intangible assets.
Client portfolios are valued by discounting their The committee concluded that the fair values of the
expected future cash flows over their expected identifiable assets and liabilities of
useful lives, based on the Group's historical experience. these acquired businesses as at their respective dates of
Expected future cash flows are estimated acquisition included in the financial
based on the historical revenues and costs associated statements are appropriate.
with the operation of that client portfolio.
The discount rates used estimate the cost of capital,
adjusted for risk.
---------------------------------------------------------- ----------------------------------------------------------
Contingent consideration payable on acquisitions
----------------------------------------------------------------------------------------------------------------------
The Group has entered into certain acquisition agreements The committee considered management's assessment of the
that provide for a contingent consideration amounts that will be paid under the
to be paid. A financial instrument is recognised for all relevant acquisition agreements. These reviews focused on
amounts management anticipates will the assumptions underlying the cash
be paid under the relevant acquisition agreement. This flows covering the contingent consideration period.
requires management to make an estimate Following this review, the committee was satisfied that
of the expected future cash flows from the acquired the judgements exercised were appropriate
business and determine a suitable discount and that the contingent consideration payable on
rate for the calculation of the present value of any acquisitions was fairly stated in the financial
contingent consideration payments. The statements.
carrying amount of contingent consideration provided for
at 31 May 2021 was GBP12.9m (2020:
GBP2.8m).
---------------------------------------------------------- ----------------------------------------------------------
Other liability provisioning
----------------------------------------------------------------------------------------------------------------------
As detailed in Note 26, the Group recognises provisions The committee considered and challenged the nature of the
for client claims, commission clawbacks, provisions, the potential outcomes,
dilapidations, onerous contracts and other obligations any developments relating to specific claims, and the
which exist at the reporting date. prior history of obligations, provisions
These provisions are estimates and the actual amount and and claims in order to assess whether the provisions
timing of future cash flows are dependent recorded are prudent and appropriate.
on future events. The committee discussed with management the key elements
Management reviews these provisions at each reporting of judgement to assure themselves
date to ensure they are measured at as to the adequacy and appropriateness of the provisions.
the current best estimate of the expenditure required to Following this discussion, the committee
settle the obligation. Any difference was satisfied that the judgements exercised were
between the amounts previously recognised and the current appropriate and that the provisions were
estimate is recognised immediately fairly stated in the financial statements.
in the statement of comprehensive income.
---------------------------------------------------------- ----------------------------------------------------------
Use of alternative performance measures
----------------------------------------------------------------------------------------------------------------------
The Group has identified certain measures that it The committee considered the measures and felt that these
believes will assist in the understanding alternative performance measures
of the performance of the business. These measures are are those considered by management to be important
not defined under IFRS but can be used, comparables and key measures used within
subject to appropriate disclosure in the Annual Report the business for assessing performance. They are not
and Accounts. These alternative performance substitute for, or superior to any IFRS
measures are recurring revenue, adjusted EBITDA, adjusted measures.
profit before tax, adjusted profit The committee was also satisfied that the disclosure of
after tax and adjusted earnings per share as set out in the alternative performance measures
the Alternative performance measure was appropriate.
workings section of the Annual Report.
---------------------------------------------------------- ----------------------------------------------------------
Other matters
----------------------------------------------------------------------------------------------------------------------
In addition to the above matters, the committee assessed The committee considered whether the forecast financial
whether each entity and the Group performance would result in an adequate
as a whole are going concerns, including the potential level of headroom over the Group's available cash
impacts of the Brexit trade deal and facilities. The committee also discussed
the on-going COVID-19 pandemic during the year. the key assumptions underpinning the Group's forecast
The committee also reconsidered a number of other financial performance with management
judgements made by management including: regularly during the year and considered a range of
IFRS 15 'Revenue from contracts with customers', IFRS 9 sensitivities to those forecasts, together
'Financial instruments' and IFRS 16 with the feasibility and effectiveness of mitigating
'Leases'. factors. The committee concluded there
are no material uncertainties that cast doubt about the
Group's ability to continue as a going
concern and that the adoption of the going concern basis
is appropriate.
The committee considered management's approach, proposed
disclosures, assessment of impact
on the financials and the judgements made in relation to
impairment allowances and the factors
considered around expected credit losses on financial
instruments.
---------------------------------------------------------- ----------------------------------------------------------
External auditor
An analysis of fees payable to the external audit firm in
respect of audit and non-audit services during the year is set out
in Note 7 to the financial statements. The Company is satisfied the
external auditor remains independent in the discharge of their
audit responsibilities.
Following the conclusion of a competitive tender in line with
best practice in 2018, the Audit Committee appointed Deloitte LLP
as external auditors at the Company's AGM in October 2018.
Internal Audit
The internal audit function is responsible for providing
assurance on the internal controls related to the Group's key
activities. Our internal audit activity is based around a strategic
approach to cyclical internal audit along with consideration of the
Group's key priorities and risks. This approach is designed to
provide assurance over key areas of FCA oversight, including;
conduct risk management, complaints, outsourcing and financial
crime and whistleblowing. During the year the internal audit
function engaged in a number of activities, including:
-- Developing our internal audit plan based on an analysis of
the Group's corporate objectives, risk profile and assurance
framework, as well as other factors such as emerging issues in our
sector;
-- Audits over the Group's key financial controls, secure remote
working and information security and operational resilience, data
governance, risk management framework, discretionary portfolio
management, acquisitions management and Small Self-Administered
Schemes (SSAS). Each review identified control improvements to
enhance our business operations; and
-- Consultancy-style reviews, where internal audit has partnered
with the business to strengthen a number of key processes,
including providing assurance that the Group was prepared for the
implementation of the SMCR. The internal audit team also carried
out quarterly reviews of CREIT.
The Internal Audit function also conducted reviews in to
Training and Development, Governance and Wealth Management Services
in light of the continuation of remote working for the majority of
the team.
As the third line of defence, the internal audit function
(together with the external auditors in connection with their audit
of the financial statements) builds risk awareness within the
organisation by challenging the first and second lines of defence
to continue improving the controls framework.
Remuneration Committee
The Remuneration Committee comprises Martin Reason (Chairman),
Joanne Lake and Anne Gunther. Carol Duncumb was Chairman of the
Committee until March 2021 being the date that she stepped down
from the Board, handing the Chairman position to Martin Reason at
the same time. The committee meets not less than twice a year. It
is responsible for determining and reviewing the Group's policy on
executive remuneration and other benefits and terms of employment,
including performance related bonuses and share options. The
committee also administers the operation of the share option and
share incentive schemes established by the Company.
The members of the Remuneration Committee have no personal
interest in the outcome of their decisions and seek to serve the
interests of shareholders to ensure the continuing success of the
Company. The remuneration of the Non-Executive Directors is
determined by the Board itself. No director is permitted to
participate in decisions concerning their own remuneration.
The committee met five times during the year with key items
considered including:
-- The Group's remuneration policy;
-- Annual review of Executive Directors' and other senior
managers' base salaries and bonus arrangements;
-- Creation of a new share option scheme for Executives, senior
managers and consultants with the current share option scheme
expiring at the upcoming AGM in October 2021;
-- Awards to be granted under the share option and incentive
schemes established by the Company;
-- Trends and benchmarking of executive pay in the wider market; and
-- The implications new corporate governance requirements may
have for the design of the Group's remuneration policy and
remuneration disclosures.
The Committee continues to review the Group's long-term
incentive plans to ensure it can continue to attract, retain and
incentivise appropriately qualified staff to achieve its goals.
Nomination Committee
The Nomination Committee comprises Joanne Lake (Chairman ), Anne
Gunther and David Kiddie. The Committee is responsible for
reviewing the size, structure and composition of the Board,
establishing appropriate succession plans for the Executive
Directors and other senior executives in the Group and for the
nomination of candidates to fill Board vacancies where
required.
The committee works in close consultation with the Executive
Directors and met six times during the year, with the main items
being considered including Board structure, proposed changes to
Board membership, recruitment to expand the number of non-executive
directors on the Board and management succession.
Meetings and attendance
All directors are encouraged to attend all Board meetings and
meetings of Committees of which they are members. Directors'
attendance at meetings during the year (including the AGM) was as
follows:
Risk and
Compliance Audit Nomination
Meetings attended (eligible to attend) Board Committee Committee Remuneration Committee Committee
---------------------------------------- ------ ------------ ----------- ----------------------- -----------
Joanne Lake *7(7) 4(4) 5(5) 5(5) *6(6)
Ian Mattioli(1) 7(7) - - - 3(3)
Nathan Imlach(2) 2(2) - - - -
Carol Duncumb(3) 4(5) 4(4) 2(3) 4(4) 2(3)
Anne Gunther 7(7) 7(7) *5(5) 5(5) 6(6)
David Kiddie(4) 3(3) 2(3) - - 3(3)
Edward Knapp(4) 3(3) *3(3) 2(3) - -
Martin Reason(4) 3(3) 3(3) 1(1) *1(1) -
Ravi Tara(5) 2(2) - - - -
Iain McKenzie(6) 1(1) - - - -
Notes
* Denotes Committee Chairman
1. Ian Mattioli appointed to Nominations Committee on 4 January 2021
2. Nathan Imlach resigned as a director of the Company at the AGM held on 19 October 2020
3. Carol Duncumb resigned as a non-executive director of the
Company on 19 March 2021. Carol was Chairman of the Remuneration
Committee up to this date, with Martin Reason becoming Chairman on
the same date.
4. Edward Knapp, David Kiddie and Martin Reason appointed as
non-executive directors of the Company on 5 January 2021. Martin
Reason was appointed as Chairman of the Remuneration Committee on
15 March 2021. Edward Knapp was appointed as Chairman of the Risk
and Compliance Committee on 5 January 2021 taking over from the
previous Chairman Anne Gunther.
5. Ravi Tara appointed as a director of the Company on 17 February 2021 and
6. Iain McKenzie appointed as a director of the Company on 24 May 2021.
In addition, the Board held six weekly ad hoc meetings in
advance of the announced fundraise and acquisitions of Maven and
Ludlow prior to those completing or agreement being reached, and to
consider the integration of these business with the existing Groups
operations.
Other committees
These committees form part of the Corporate Governance framework
but are not sub-committees of the Board. The main committees
comprise the Governance Committee, the Management Engagement
Committee, the Investment Committee and the Executive Risk and
Compliance Committee.
Governance Committee
The Board strongly believes that robust governance and strong,
responsible, balanced leadership by the Board are critical to
creating long-term shareholder value and business success. The
committee's role is to assist the Board in shaping the strategy,
culture and ethical values of the Group, while supporting the
Management Engagement Committee in the day to day management of
Mattioli Woods and its subsidiaries.
The key responsibilities of the committee are to:
-- Take a leadership role in shaping the corporate governance
principles, culture and ethical values of the Group in line with
the Group's strategic priorities;
-- Oversee the brand and reputation of the Group, ensuring that
reputational risk is consistent with the risk appetite approved by
the Board and the creation of long-term shareholder value;
-- Develop strategy and growth initiatives, such as possible
acquisitions and new products and services;
-- Implement the agreed strategy and support the day-to-day
management of the Group by the Management Engagement Committee;
-- Review and discuss the annual business plan and budget prior
to its submission to the Board for approval;
-- Oversee the Group's compliance with its statutory and
regulatory obligations, including conduct of the firm and TCF;
and
-- Oversee the Group's conduct in relation to its corporate and
societal obligations, including setting the guidance, direction and
policies for the Group's TCF, corporate responsibility agenda and
related activities and advising the Board and management on these
matters.
The Governance Committee is Chaired by the Chief Executive and
comprises functional heads from the appropriate disciplines.
Committee meetings are normally attended by the Group Managing
Director, Chief Financial Officer, Chief Operating Officer and by
other senior executives from the Group as requested.
Management Engagement Committee
The Board has delegated its day-to-day operational authority to
the Management Engagement Committee, subject to a list of matters
which are reserved for decision by the Governance Committee or the
full Board only. The Management Engagement Committee is primarily
responsible for:
-- Managing and monitoring all aspects of the Group's business on a continuing basis;
-- Implementing the business strategy and business plans agreed by the Board from time to time;
-- Ensuring that day-to-day operations are conducted in
accordance with the relevant regulatory and statutory
requirements;
-- Monitoring the management and performance of the Group's
business units and operating subsidiaries (including their results
compared to budget, risks and regulatory compliance); and
-- Reviewing employee talent management and development
programmes, ensuring they consider the benefits of diversity,
including gender, social and ethnic backgrounds, cognitive ability
and personal strengths.
The Management Engagement Committee meets at least monthly but
more frequently if required. The committee is Chaired by the
Executive directors on behalf of the Chief Executive and committee
meetings may be attended by any number of a broad range of senior
managers from across the Group, depending on the meeting
agenda.
Investment Committee
The Board has delegated authority to the Investment Committee to
oversee the Group's investment management approach, developing the
'house view' on economics, investment markets and asset allocation;
and considering how the Group should best apply these views.
In particular, the Investment Committee is responsible for
developing and implementing the Group's asset management strategy,
for developing and monitoring all aspects of the Group's investment
business on a continuing basis, receiving reports from the board of
Custodian Capital, the Structured Products Fund Oversight Committee
and the Multi-Asset Team (including the Asset Allocation
Committee). The committee is also responsible for ensuring that the
Group's day-to-day investment and asset management operations are
conducted in accordance with the relevant regulatory and statutory
requirements through the investment research and investment
operations teams.
The Investment Committee meets at least six times a year but
more frequently if required. The committee is Chaired by the Chief
Investment Officer and comprises senior members of the investment,
wealth management, technical and compliance functions.
Executive Risk and Compliance Committee
The Board has delegated authority to the Executive Risk and
Compliance Committee to oversee the operation of the Group's risk
and compliance framework and activity. The Executive Risk and
Compliance Committee is responsible for ensuring that risk,
compliance and Internal Audit are considered, reviewed and actions
implemented across all areas of the Group including wealth
management advice, asset management, pension administration and
employee benefits. The committee is also responsible for ensuring
that risks are fully considered in context of the Group's ICAAP and
the impact on the Group's capital requirements.
The Executive Risk and Compliance Committee meets at least four
times a year but more frequently if required. The committee is
Chaired by the Compliance Oversight Function and comprises senior
members of the Group's management and risk and compliance
function.
Induction, training and performance evaluation
New directors receive an induction on their appointment covering
the activities of the Group, its key business and financial risks,
the terms of reference of the Board and its committees and the
latest financial information.
The Chairman ensures directors update their skills, knowledge
and familiarity with the Group as required to fulfil their roles on
the Board and its committees. Ongoing training is provided as
necessary and includes updates from the Company Secretary and
Nominated Adviser on changes to the AIM Rules, requirements under
the Companies Acts and other regulatory matters. All directors have
access to independent professional advice at the Company's expense
where they judge it necessary to discharge their duties, with
requests for such advice being authorised by the Chairman or two
other directors, one of whom is a Non-Executive.
Evaluation of the Board's performance
During the year ended 31 May 2018 an external review of the
Board's effectiveness was undertaken by an independent third party.
This involved one-to-one interviews with directors and a review of
Board and Board committee papers and minutes. The key points raised
in the review were around board composition and succession
planning.
The Board planned to undertake a self-evaluation during the
financial year ended 31 May 2021, but due to the ongoing COVID-19
pandemic, this process has been postponed until the year ending 31
May 2022 and is intended to be repeated annually thereafter.
Individual appraisal of each director's performance is
undertaken either by the Chief Executive Officer or Chairman each
year and involves meetings with each director on a one-to-one
basis. The Non-Executive Directors, led by the Senior Independent
Director, carry out an appraisal of the performance of the Chairman
and Chief Executive Officer.
Retirement and re-election
All directors are subject to election by shareholders after
their appointment and to re-election thereafter at intervals of no
more than three years under the Company's articles of association.
However, as a matter of good practice and as recommended under the
QCA Corporate Governance Code, board policy is for all directors to
stand for re-election at each AGM.
Non-Executive Directors' appointments are initially for 12
months and continue thereafter until terminated by either party
giving six months' prior written notice to expire at any time on or
after the initial 12 month period. The terms and conditions of
appointment of the Non-Executive Directors are available for
inspection at the Company's registered office during normal
business hours and prior to the AGM.
Communications with shareholders
The Board is committed to maintaining an ongoing dialogue with
the Company's shareholders. The principal methods of communication
with private investors remain the Annual Report and financial
statements, the Interim Report, the AGM and the Group's website (
www.mattioliwoods.com ).
It is intended that all directors will attend each AGM and
shareholders will be given the opportunity to ask questions at the
AGM on 29 October 2021. In addition, the Chairman, Chief Executive
Officer, Chief Financial Officer and Group Managing Director
welcome dialogue with individual institutional shareholders to
understand their views and feed these back to the Board. General
presentations are also given to analysts and investors covering the
annual and interim results.
Internal control and risk management
The Board is ultimately responsible for the Group's systems of
internal control and for reviewing its effectiveness. Such systems
are designed to manage rather than eliminate risks and can only
provide reasonable not absolute assurance against material
misstatement or loss.
In accordance with the guidance of the Turnbull Committee on
internal control, an ongoing process has been established for
identifying, evaluating and managing significant risks faced by the
Group. This process has been in place throughout the year under
review and up to the date of approval of the Annual Report and
financial statements.
The Board routinely reviews the effectiveness of the systems of
internal control and risk management to ensure controls react to
changes in the nature of the Group's operations.
The Group maintains appropriate insurance cover and reviews the
adequacy of the cover regularly, in conjunction with the Group's
insurance brokers.
There are clearly defined procedures for reviewing and approving
transactions, acquisitions, material expenditure and capital
expenditure within the Group.
On behalf of the Board
Ravi Tara
Chief Financial Officer
20 September 2021
Directors' remuneration report
In March 2020, recognising the likely impact of the COVID-19
pandemic on the Group and the markets it operates in, t he
Remuneration Committee, working alongside and taking
recommendations from the executive management team and external
resources, decided to protect the Group's financial position and
provide security for its clients and employees by adopting a
flexible approach to total remuneration arrangements. The Committee
determined that this level of prudence should be maintained until
at least December 2021 whilst the firm and wider market forces
reacted to the unprecedented financial and commercial conditions
caused by the pandemic.
The committee was fully aligned with the senior executive team
in recognising that there needed to be substantial individual
sacrifices both in the form of basic and variable pay structures
whilst uncertainty associated with the pandemic remained evident.
The committee therefore approved a package of measures that
included all directors at the time, reducing their basic salary or
fees by 50% until 30 November 2021.
Having communicated that remaining staff bonuses and all
directors' bonuses in respect of the year ended 31 May 2020 would
not be paid and recognising that variable pay awards for the new
financial year may be restricted, the Group has adjusted salary
structures for many of the key functions in the business,
recognising that security and engagement are paramount in retaining
a motivated workforce capable of guiding the business through a
period of continued uncertainty and lockdown restrictions. The
Group has committed to restoring discretionary bonuses for all
staff in the current year ending 31 May 2021 having not paid a
bonus for the first time in the Group's 30 year history in the last
financial year.
Remuneration policy
Mattioli Woods recognises the importance of its employees to the
success of the Group and consequently the remuneration policy is
designed to be market competitive to attract, motivate and retain
high calibre individuals. The main focus of the Group's
remuneration policy is to align the interests of the Executive
Directors with the Group's strategic priorities and the long-term
creation of shareholder value.
The Remuneration Committee reviews the regulatory and
legislative framework with the aim of ensuring that the
remuneration policy is in line with best practice, including the
FCA codes of practice ("the FCA Codes") which set out the standards
and policies that regulated firms are required to meet when setting
pay and bonus awards for staff . External data is used to validate
rather than to benchmark the total rewards granted and the
Remuneration Committee takes into consideration the current
economic climate, remuneration policies of comparable businesses
and pay and employment conditions elsewhere in the Group when
considering Executive Directors' and other senior managers'
pay.
The remuneration arrangements are designed to:
-- Promote value creation;
-- Support the business strategy;
-- Promote the long-term success of the Group;
-- Deliver a competitive level of pay for the Executive Directors and senior management;
-- Encourage the retention of staff through deferred variable compensation, where appropriate;
-- Ensure greater alignment between the interests of the
Executive Directors and the long-term interests of shareholders
through significant long-term equity participation;
-- Be fair for both the director and the Group, with some element of discretion;
-- Comply with financial services rules and regulations;
-- Discourage excessive risk taking and short-termism;
-- Encourage more effective risk management; and
-- Support positive behaviours and a strong and appropriate conduct culture.
The Group's policy is to remunerate Executive Directors and
senior management through basic salary and benefits, annual
performance-related discretionary bonuses and participation in
long-term incentive plans which promote the creation of sustainable
shareholder value. The total reward is designed to include a
balance of fixed and variable pay with an element of deferral
attached to a proportion of the variable pay element.
Fees for the Non-Executive Directors are determined by the Board
and are reviewed annually, having regard to fees paid to
non-executive directors in other UK quoted companies, the time
commitment and responsibilities of the role. Non-Executive
Directors do not receive bonuses or share entitlements. No director
is permitted to participate in decisions concerning their own
remuneration.
The effective date for annual changes in directors' remuneration
is 1 September, in line with the Group's other employees.
Shareholders will be asked to approve the Directors'
Remuneration Report, including the remuneration policy which
applies to the directors and employees of the Group, at the
Company's next AGM on 29 October 2021.
Single total figure of remuneration for each director
Directors' remuneration payable in respect of the years ended 31
May 2021 and 2020 was as follows:
Long-term Pension-related Share incentive
Salary and fees Benefits Bonus incentive plan benefits plan Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 (9) GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
GBP000
---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- -----------
Executives (1)
Ian Mattioli(2) 372 474 9 2 600 - 433 558 52 52 2 - 1,468 1,086
Nathan
Imlach(3,4) 72 263 7 16 - - 203 262 11 29 2 - 295 570
Ravi Tara(5) 57 - 1 - 190 - - - 3 - 2 - 253 -
Ian
McKenzie(4,6) 5 - 0 - 100 - - - 0 - - - 105 -
Murray Smith(3) - 66 - 6 - - - 221 - 3 - - - 296
---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- -------
Sub-total 506 803 17 24 890 - 636 1,041 66 84 6 - 2,121 1,952
---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- -------
Non-executives
Joanne Lake 95 91 - - - - - - - - - - 95 91
Carol
Duncumb(7) 38 46 - - - - - - - - - - 48 46
Anne Gunther 56 54 - - - - - - - - - - 56 54
David Kiddie(6) 17 - - - - - - - - - - - 17 -
Edward Knapp(6) 16 - - - - - - - - - - - 16 -
Martin
Reason(6) 17 - - - - - - - - - - - 17 -
---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- -------
Sub-total 239 191 - - - - - - - - - - 239 191
---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- -------
Total 745 994 17 24 890 - 636 1,041 66 84 6 - 2,360 2,143
---------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ------- ------- ------- -------
1. The benefit package of each Executive Director includes the
provision of life assurance under a group scheme;
2. The salary package of Ian Mattioli includes a car allowance;
3. Nathan Imlach ceased to be a director on 19 October 2020,
Murray Smith ceased to be a director on 21 October 2019;
4. The benefit packages of Nathan Imlach and Iain McKenzie
include the provision of a company car;
5. Ravi Tara appointed as a director of the Company on 17 February 2021;
6. Iain McKenzie appointed as a director of the Company on 24 May 2021;
7. Carol Duncumb resigned as a non-executive director of the Company on 19 March 2021;
8. Edward Knapp, David Kiddie and Martin Reason appointed as
non-executive directors of the Company on 5 January 2021; and
9. Total market price of shares under option vesting during the
year as at their vesting date, less any option exercise price
payable.
Notes to Directors' remuneration table
Salary
The base salaries of the Executive Directors are reviewed
annually having regard to personal performance, divisional or Group
performance, significant changes in responsibilities and
competitive market practice in their area of operation. In
recognition of the likely impact of the COVID-19 pandemic on the
Group and the markets it operates in, the committee approved an
interim review of salaries for the executive directors at the time
on 30 November 2020 having temporarily re-based salaries to
GBP200,000 per annum from 1 July 2020 to this date.
Fees
The Non-Executive Directors are only paid fees, which are not
pensionable. In addition to a basic fee, Non-Executive Directors
also receive additional responsibility fees in recognition of them
being a member of or Chairing a committee or being the senior
independent director.
Benefits
Benefits for Executive Directors principally relate to the
provision of cars, death in service cover and permanent health
insurance or cash allowances taken in lieu of such benefits.
Bonus
Bonus awards to Executive Directors and some other senior
employees of the Group for profit-related performance are made from
a pool of the Group's earnings before interest, taxation,
depreciation and amortisation after payment of bonuses payable to
all other staff. Executive Directors' bonuses in respect of the
year ending 31 May 2021 will be payable on a purely discretionary
basis as follows:
-- A discretionary personal performance award based on the
achievement of personal key objectives.
The maximum award as a proportion of salary and the actual award
payable in respect of the year ended 31 May 2021 are summarised as
follows:
Actual award as a Maximum award as a Linked to corporate Linked to personal
Director proportion of salary proportion of salary objectives objectives
Ian Mattioli 116.0% 100.0% 0% 100.0%
Ravi Tara 95.0% 100.0% 0% 100.0%
Iain McKenzie 50.0% 100.0% 0% 100.0%
The awards for the current year include an element linked to
corporate objectives in line with the discretionary bonus paid out
to all staff, and an additional award related to meeting personal
objectives linked to the successful completion of the equity
placing and completion of the five acquisitions in the year and two
acquisitions completing after the year-end. These awards are
reviewed and approved by the Remuneration Committee at the start of
each financial year, with the payment of personal awards being made
at the committee's discretion. In recognition of the likely impact
of the COVID-19 pandemic on the Group and the markets it operates
in, the Remuneration Committee has resolved that the new financial
year requires more flexible remuneration arrangements to protect
the Group's financial position and to retain talent. Executive
Directors' bonuses in respect of the year ending 31 May 2022 will
be payable on a purely discretionary basis, as follows:
Maximum award Linked to Linked to
as a proportion corporate personal
Director of salary objectives objectives
Ian Mattioli 100.0% 0% 100.0%
Michael Wright 100.0% 0% 100.0%
Ravi Tara 100.0% 0% 100.0%
Iain McKenzie 100.0% 0% 100.0%
Long--term incentive plan
To assist the Group to attract and retain appropriately
qualified staff, the Mattioli Woods 2010 Long-Term Incentive Plan
("the LTIP") was introduced to incentivise and reward certain of
its senior employees and Executive Directors. Awards made to the
Executive Directors under the LTIP are set out below.
Pension related benefits
Executive Directors may participate in the pension arrangements
of the Group or elect to have pension payments paid into a personal
pension plan or as cash in lieu of pension on the same basis as
other employees. Pension payments in respect of Executive Directors
are currently in line with all staff of up to 5% of base salary.
Pension payments for the Chief Executive are currently 10% of base
salary (before any temporary reductions).
Share Incentive Plan
The Mattioli Woods plc Share Incentive Plan ("the SIP") enables
employees to buy shares in the Company at an effective discount to
the Stock Exchange price by having an amount deducted from pre-tax
salary each month. In addition, the Company can grant participating
employees matching and/or free shares.
The consequent employee benefit is the value of the SIP matching
shares made in the year. Employees may contribute up to GBP150 per
month to buy partnership shares with contributions matched on a
one-for-one basis by the Company.
Mattioli Woods 2010 Long-Term Incentive Plan
The current LTIP was approved by shareholders at the Company's
2010 AGM. During the year ended 31 May 2021 the Remuneration
Committee granted further awards under the LTIP in respect of the
year ended 31 May 2020. The LTIP allows a significant element of
deferred variable remuneration to be paid in equity or a cash
equivalent award.
Eligibility
Any employee (including an Executive Director) of the Company or
any of its subsidiaries will be eligible to participate in the LTIP
at the discretion of the Remuneration Committee.
Form of award
Awards under the LTIP may be in the form of an option granted to
the participant to acquire ordinary shares with a nominal exercise
price of 1p. Alternatively, the Remuneration Committee may at its
discretion grant participants a right to receive a cash amount
which relates to the value of a certain number of notional
shares.
Performance conditions
Options granted under the LTIP are only exercisable subject to
the satisfaction of the following performance conditions which will
determine the proportion of the option that will vest at the end of
a three-year or five-year performance period:
Compound annual growth in EBITDA
over the performance period Percentage of maximum award vesting
--------------------------------- ------------------------------------
<5% Nil
5% 30%
12% 100%
The percentage of maximum award vesting will be calculated pro
rata between the minimum and maximum hurdles. If the performance
conditions are not met over the three or five financial years
commencing on 1 June before the date of grant, the options lapse.
The options will generally be exercisable after approval of the
financial statements for the financial year two years or four years
after the year of grant, or on a change of control (if
earlier).
The Remuneration Committee believes that extending the
performance period for awards under the LTIP to a five-year period
creates greater alignment between award-holders and shareholders
and will encourage a long-term perspective.
Individual and overall limits
The maximum award for any eligible employee under the LTIP for
any one year is 100% of salary. The LTIP is subject to an overall
limit on the total number of shares which may be issued within a 10
year period under the LTIP or any other employee share plan
operated by the Group of 10% of the issued ordinary share capital
of the Company.
Clawback
Vested and unvested LTIP awards are subject to a formal malus
and clawback mechanism.
Grant of equity share options under the LTIP
As at 31 May 2021, the Company had granted options to certain of
its senior employees and Executive Directors to acquire (in
aggregate) up to 3.31% (2020: 3.30%) of its share capital. The
maximum entitlement of any individual was 0.85% (2020: 0.89%). The
options are exercisable at 1p per share.
Terms of awards
Options may be granted over newly issued shares, treasury shares
or shares purchased in the market. Options are not transferable
other than on death. Shares acquired through the LTIP may be
delivered to participants by the trustees of the Mattioli Woods
2010 Employee Benefit Trust ("the EBT"), which was established for
this purpose. The trustees may either subscribe for new shares from
the Company or purchase shares on the market. The EBT may never
hold more than 5% of the ordinary share capital of the Company at
any time. At 31 May 2021 the EBT held 76,578 shares (2020: 76,578)
and the Company held no shares in treasury (2020: nil) having
suspended monthly purchases in response to the COVID-19 pandemic in
April 2020.
Directors' interest in share options
Outstanding share options granted to Executive Directors under
the 2010 LTIP are as follows:
Granted Exercised Forfeited
Exercise 31 May during during during 31 May
price 2020 the year the year the year 2021
Director GBP No. No. No. No. No.
----------------- --------- -------- ---------- ---------- ---------- --------
Ian Mattioli 0.01 230,016 10,000 - - 240,016
Ravi Tara(1) 0.01 - 7,500 - - 7,500
Iain McKenzie(2) 0.01 10,000 7,500 - - 17,500
Nathan Imlach(3) 0.01 103,943 10,000 (64,740) - 49,203
Total 343,959 35,000 (64,740) - 314,219
------------------ --------- -------- ---------- ---------- ---------- --------
Notes:
1. Ravi Tara appointed as a director of the Company on 17 February 2021;
2. Iain McKenzie appointed as a director of the Company on 24 May 2021; and
3. Nathan Imlach ceased to be a director on 19 October 2020.
Note 20 to the financial statements contains a detailed schedule
of all options granted to directors and employees as at 31 May
2021. All of the options were granted for nil consideration.
The Remuneration Committee expects to be able to grant
additional awards under the LTIP following the announcement of the
Group's trading update in respect of the year ended 31 May 2021 and
subject to compliance with Market Abuse Regulation
requirements.
Service contracts
It is the Group's policy for all Executive Directors to have
contracts of employment that contain a termination notice period
not exceeding 12 months. Ian Mattioli's appointment continues until
terminated by either party on giving not less than 12 months'
notice to the other party. The other Executive Directors'
appointments continue until termination by either party on giving
not less than six months' notice to the other party.
Joanne Lake, Anne Gunther, David Kiddie, Edward Knapp and Martin
Reason do not have service contracts. A letter of appointment
provides for an initial period of 12 months and continues until
terminated by either party giving six months' prior written notice
to expire at any time on or after the initial 12-month period.
Directors' shareholdings
As at 20 September 2021, the interest of the directors in the
issued shares of the Company, as shown in its register maintained
under section 809 (2) and (3) of the Companies Act 2006 were:
2021 [29] 2020
Director No. % No. %
--------------- ---------- ----- ---------- ------
Ian Mattioli 3,402,925 6.73 3,371,977 12.52
Ravi Tara 10,690 0.02 562 0.00
Iain McKenzie 4,459 0.01 447 0.00
Joanne Lake 4,100 0.01 4,100 0.02
Anne Gunther 11,576 0.02 4,000 0.01
David Kiddie 3,030 0.01 - -
Edward Knapp - - - -
Martin Reason 15,152 0.03 - -
Directors' shareholdings include any shareholdings of trusts or
family members deemed to be connected persons.
The mid-market closing price of the Company's ordinary shares at
31 May 2021 was 700.0p and the range during the financial year was
625.0p to 785.0p.
None of the directors had an interest in any contract of
significance in relation to the business of the Company or its
subsidiaries at any time during the financial year, other than
those disclosed in Note 29 to the financial statements.
There was no change in the directors' shareholdings or interests
in options between 1 June 2021 and 20 September 2021.
29 Shareholdings include additional shares subscribed as part of
the placing in June 2021. Percentage shareholdings are based upon
the total issued share capital of 50,578,773.
Total shareholder return performance graph
The graph below illustrates the total shareholder return ("TSR")
for the five years ended 31 May 2021 in terms of the change in
value of an initial investment of GBP100 invested on 1 June 2016 in
a holding of the Company's shares against the corresponding total
shareholder returns in hypothetical holdings of shares in the FTSE
All Share Index.
The Company is a member of the FTSE All Share Index and
considers this to be the most appropriate broad equity market index
for the purpose of measuring the Company's relative
performance.
On behalf of the Board
Martin Reason
Chairman of the Remuneration Committee
20 September 2021
Directors' report
Report and financial statements
The directors have pleasure in presenting their report together
with the audited financial statements for the year ended 31 May
2021. For the purposes of this report, the expression 'Company'
means Mattioli Woods plc and the expression 'Group' means the
Company and its subsidiaries.
Business review
The Group's principal activities continue to be the provision of
pension consulting and administration, wealth management, asset
management and employee benefits consultancy. The Strategic Report
includes further information about the Group's business model,
financial performance during the year and indications of likely
future developments.
The directors believe they have adequately discharged their
responsibilities under section 414(c) of the Companies Act 2006 to
provide a balanced and comprehensive review of the development and
performance of the business.
Statement by the directors under section 172 Companies Act
2006
The Directors consider that they have acted in the way they
consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole,
and in doing so having regard to the stakeholders and matters set
out in section 172(1)(a-f) of the Act in the decisions taken during
the year ended 31 May 2021. This is demonstrated in the Section 172
statement included in the strategic report.
Results and dividends
Revenue increased by 7% to GBP62.6m (2020: GBP58.4m), with
organic revenues supplemented by part year contributions from the
acquired businesses in the year: Hurley, EPUT, Montagu, Pole Arnold
and Caledonia, with all contributing positively to Group earnings
and integrating well since acquisition. Group profit for the year
before taxation decreasing to GBP5.1m (2020 restated: GBP12.7m),
due to the restoration of discretionary bonuses for all staff and
significant acquisition related expenses incurred in the year,
increased acquisition related costs and increase deferred
consideration reported as remuneration. The effective rate of
taxation was above the standard rate of tax at 73.0% (2020
restated: 25.5%), primarily due to the revaluation of deferred tax
liabilities being recognised at an increased rate of tax following
the government's announced plans to increase the standard rate of
tax to 25.0% from 6 April 2023, as well as significant
non-deductible expenses from contingent consideration arrangements
accounted for as remuneration.
The final dividend in respect of the year ended 31 May 2020 of
12.7p per share was paid in October 2020. An interim dividend in
respect of the year ended 31 May 2021 of 7.5p per share was paid to
shareholders in March 2021. In light of the uncertain trading
conditions and in order to protect the Group's financial position
and balance the interests of all stakeholders, the Board is pleased
to recommend a final dividend of 13.5p per share (2020: 12.7p).
This makes a proposed total dividend for the year of 21.0p (2020:
20.0p) a year-on-year increase of 5.0% (2020: flat). This has not
been included within the Group financial statements as no
obligation existed at 31 May 2021. If approved, the final dividend
will be paid on 3 November 2021 to ordinary shareholders whose
names are on the register at the close of business on 1 October
2021, having an ex-dividend date of 30 September 2021.
Share capital
Mattioli Woods plc is a public limited company incorporated in
England and Wales and its shares are quoted on the AIM market of
London Stock Exchange plc. The Company's authorised and issued
share capital during the year and as at 31 May 2021 is shown in
Note 23. The ordinary shares rank pari passu in all respects. Save
as agreed at the Annual General Meeting of the shareholders, the
ordinary shares have pre-emption rights in respect of any future
issues of ordinary shares to the extent conferred by section 561 of
the Companies Act 2006.
There are no restrictions on the transfer of ordinary shares in
the Company, other than:
-- Certain restrictions that may be imposed from time to time by
laws and regulations and pursuant to the Listing Rules of the FCA,
whereby certain directors, officers and employees of the Group
require the approval of the Group to deal in ordinary shares of the
Company;
-- Restrictions on the former shareholders of Hurley Partners as
a result of them entering into a lock-in agreement with Mattioli
Woods and Canaccord Genuity Limited, restricting sales of that part
of the consideration comprising 842,866 ordinary shares in Mattioli
Woods during the two years ending 31 July 2022.
-- Restrictions on the former shareholder of Montagu has entered
into a lock-in deed with Mattioli Woods and its nominated adviser
and broker, Canaccord Genuity Limited, restricting sales of that
part of the consideration comprising 40,161 ordinary shares in
Mattioli Woods during the two years ending 2 February 2023;
-- Restrictions on the former shareholders of Pole Arnold
Financial Management have entered into lock-in deeds with Mattioli
Woods and its nominated adviser and broker, Canaccord Genuity
Limited, restricting sales of that part of the consideration
comprising 72,940 ordinary shares in Mattioli Woods during the two
years ending 12 April 2023; and
-- Restrictions on the former shareholders of Caledonia Asset
Management have entered into lock-in deeds with Mattioli Woods and
its nominated adviser and broker, Canaccord Genuity Limited,
restricting sales of that part of the consideration comprising
12,724 ordinary shares in Mattioli Woods during the two years
ending 16 April 2023.
The Group is not aware of any other agreements between holders
of securities that may result in restrictions on the transfer of
ordinary shares.
Employee share trust
The Mattioli Woods 2010 Employee Benefit Trust ("the EBT") was
established to deliver shares for the benefit of employees and
former employees of the Group who have been granted an award under
one of the Group's employee share schemes. The trustee has agreed
to satisfy awards under the Group's employee share schemes. As part
of these arrangements the Group funds the EBT, from time to time,
to enable the trustee to acquire shares to satisfy these awards,
details of which are set out in Note 23 of the Financial
Statements. The trustee has waived its right to dividends on all
shares held within the trust.
During the year ended 31 May 2021 the EBT purchased no shares in
the Company (2020: 64,330) at a cost of GBPnil (2020:
GBP498,000).
At 20 September 2021, the Company had been notified of the
following interests representing 3% or more of its issued share
capital:
Number of Percentage
Shareholder ordinary shares holding [30]
--------------------------------------- ----------------- --------------
Liontrust Asset Management 3,912,961 7.74
Ian Mattioli 3,402,925 6.73
Investec Wealth & Investment 2,943,078 5.82
Schroder Investment Management 2,614,535 5.17
Bill Nixon 2,557,306 5.06
Gresham House 2,386,535 4.72
Standard Life Aberdeen plc 2,383,687 4.71
Chelverton Asset Management 2,284,091 4.52
Royal London Mutual Assurance Society 2,213,141 4.38
Octopus Investments 1,807,862 3.57
Tellworth Investments 1,744,934 3.45
Canaccord Genuity Group Inc 1,706,649 3.37
Unicorn Asset Management 1,540,538 3.05
In addition to the above shareholdings, 701,259 ordinary 1p
shares representing 1.4% of the issued share capital are held by
employees via the Mattioli Woods plc Share Incentive Plan ("the
SIP"). The Group intends to actively encourage wider share
ownership by its employees through the SIP and other share-based
incentive schemes.
30 Percentage shareholdings are based upon the total issued
share capital of 50,578,773.
Directors
A list of current serving directors and their biographies is
given. The Company's articles of association require that any
Director who held office at the time of the two preceding AGMs and
who did not retire at either of them shall retire from office at
the next AGM and may offer himself for re-election. As a matter of
good governance however, each of the Directors will stand for
re-election at this AGM with the exception of Joanne Lake who will
step down from her role as Non-Executive Chair.
The Board has a process for the evaluation of its own
performance and that of the individual Directors and, following the
evaluation of the performance of the Directors during the year
ended 31 May 2021, it was confirmed that each Director continues to
be an effective member of the Board and to demonstrate commitment
to the role.
Directors' interests
Directors' emoluments, beneficial interests in the shares of the
Company and their options to acquire shares are disclosed in the
Directors' Remuneration Report. During the period covered by this
report, no director had a material interest in a contract to which
the Company or any of its subsidiaries was a party (other than
their own service contract), requiring disclosure under the
Companies Act 2006.
Conflicts of interest
There are procedures in place to deal with any directors'
conflicts of interest arising under section 175 of the Companies
Act 2006 and such procedures have operated effectively since the
Company adopted new articles of association on 22 October 2009.
Directors' indemnity
All directors and officers of the Company have the benefit of
the indemnity provision contained in the Company's Articles of
Association. The provision, which is a qualifying third-party
indemnity provision, was in force throughout the last three
financial years and is currently still in force. The Group also
purchased and maintained throughout the financial period Directors'
and Officers' liability insurance in respect of itself and its
directors and officers, although no cover exists in the event
directors or officers are found to have acted fraudulently or
dishonestly.
Employees
The Group continues to involve its staff in the future
development of the business. Information is provided to employees
through briefing sessions, webinars, the Group's website and its
intranet, 'MWeb', which is continually updated. How the Group has
engaged with employees and had due regard to their interests in
considering the principal decisions taken during the year are
demonstrated in the Section 172 statement included in the strategic
report.
The Group operates 'MyWay', an online flexible benefits
platform. Employees can change elements of their benefits choice
annually or if they have any lifestyle events. MyWay offers a
variety of benefits covering health and wellbeing, finance and
lifestyle choices, in addition to a core benefits package, and
employees are able to purchase these benefits at group rates. MyWay
shows employees the value of their salary and all other benefits as
part of a total reward statement. The platform allows individuals
to select options to meet their personal needs and since its launch
we have seen an increasing take up of flexible benefits each
year.
The Group operates a Group Personal Pension plan available to
all employees and contributes to the pension schemes of directors
and employees. Following the introduction of auto-enrolment every
employer must automatically enrol eligible jobholders into a
workplace pension scheme. Employers are then required to make
contributions to pension schemes, adding to the savings made by
employees. Eligible employees may choose to opt out after they have
been automatically enrolled. Employers cannot avoid their
obligation to automatically enrol eligible employees into a
qualifying scheme.
The Group's pension scheme qualifies as an auto-enrolment
scheme, with the Group applying the following contribution
rates:
Minimum
Employer employee
Date contribution contribution
------------------------------ -------------- --------------
6 April 2018 to 5 April 2019 3% 3%
6 April 2019 onwards 5% 5%
The Group operates a Share Incentive Plan and Long-Term
Incentive Plan, details of which are given in the Directors'
Remuneration Report and the financial statements.
The Group is committed to the principle of equal opportunity in
employment, regardless of a person's race, creed, colour,
nationality, gender, age, marital status, sexual orientation,
religion or disability. Employment policies are fair, equitable and
consistent with the skills and abilities of the employees and the
needs of the business.
Applications for employment by disabled persons are always fully
considered. In the event of members of staff becoming disabled,
every effort is made to ensure that their employment with the Group
continues and that appropriate training is arranged. Group policy
is that the training, career development and promotion of disabled
persons should, as far as possible, be identical to that of other
employees.
Due to the impact of COVID-19 we have reopened our graduate
training programme having been on hold whilst the majority of
Mattioli Woods' employees continue to work from home. This along
with on-going recruitment to new roles which continued during the
pandemic have been great successes.
We believe in providing work experience and supporting school
leavers that may find it difficult to find work. We will continue
working in partnership with Gateway College Leicester, the YMCA and
University of Leicester to provide work experience, as well as
continuing with apprenticeships and our own work-based training to
develop new and existing staff across a range of business areas,
fulfilling the Group's commitment to creating opportunities that
offer a clear progression path both in the short and long-term.
We recognise that the pandemic is likely to have a lasting
impact on the way we work and we have already been through a review
of our current roles, training and engagement, allowing us to
introduce new roles where training can be provided.
We operate an eLearning platform in conjunction with the
Chartered Insurance Institute's Financial Assess for the continued
professional development of our staff. We are committed to
continual process improvement and intend to seek further business
improvements across our locations.
Research and development
In response to the need for an increasingly sophisticated
software solution to manage the broader range of products and
services offered by Mattioli Woods, the Group has continued to
develop its technology infrastructure, extending the development of
its bespoke pension administration and wealth management platform
to include employee benefits, with the aim of enhancing the
services offered to clients and realising operational efficiencies
across the Group as a whole. The costs of this development are
capitalised where they are recognised as having an economic value
that will extend into the future and they meet the criteria of IAS
38 to be capitalised.
Related party transactions
Details of related party transactions are given in Note 29.
Environmental
The Board believes good environmental practices, such as the
reducing the volume of printing, recycling of paper waste and
committing to purchasing hybrid, fuel-efficient motor vehicles,
will support its strategy by enhancing the reputation of the Group.
Due to the Group's activities, Mattioli Woods impacts the local and
global environment, but due to the nature of its business
generally, the Group does not have a significant environmental
impact. Environmental performance and strategy are summarised in
the Strategic Report.
Annual General Meeting
The AGM of the Company will be held on 29 October 2021. The
notice of the meeting together with details of the resolutions
proposed and explanatory notes will be made available on the
Group's website.
Principal risks and uncertainties
The directors' view of the principal risks and uncertainties
facing the business is summarised in the Chief Executive's
Review.
Financial risk management
The Company and certain of its subsidiaries are supervised in
the UK by the Financial Conduct Authority ("FCA"). The Group must
comply with the regulatory capital requirements set by the FCA and
manages its regulatory capital through continuous review of the
capital requirements of the Company and its regulated subsidiaries,
which are monitored by the Group's management and reported monthly
to the Board.
The Group's financial risk management is based upon sound
economic objectives and good corporate practice. The Board has
overall responsibility for risk management and internal control.
Our process for identifying and managing risks is set out in more
detail in the review of Corporate Governance. The key risks and
mitigating factors are set out in the Strategic report.
The Group seeks to manage financial risk, to ensure sufficient
liquidity is available to meet the identifiable needs of the Group
and to invest cash assets safely and profitably. If required,
short-term flexibility is achieved through the use of bank
overdraft facilities. The Group does not undertake any trading
activity in financial instruments. All activities are transacted in
Sterling. The Group does not engage in any hedging activities.
The Group reviews the credit quality of customers and limits
credit exposures accordingly. All trade receivables are subject to
credit risk exposure. However, there is no specific concentration
of credit risk as the amounts recognised represent a large number
of receivables from various customers.
Loans may be advanced to investment syndicates to secure new
investment opportunities. In the event that a syndicate fails to
raise sufficient funds to complete the investment, the Group may
either take up ownership of part of the investment or lose some, or
all, of the loan. However, to mitigate this risk, loans are only
approved by the Board under strict criteria, which include
confirmation of client demand for the investment.
Corporate governance
A full review of Corporate Governance appears in the Corporate
Governance report.
Auditor
T he Audit Committee has recommended to the Board that the
incumbent auditor, Deloitte LLP is reappointed for a further term.
Deloitte LLP have confirmed their willingness to continue in office
as the Group's auditor in accordance with Section 489 of the
Companies Act 2006. The Group is satisfied that Deloitte LLP are
independent and there are adequate safeguards in place to safeguard
their objectivity.
A resolution to approve the appointment of Deloitte LLP will be
put to shareholders at the Company's AGM on 29 October 2021.
Directors' statement as to disclosure of information to the
auditor
The directors who were members of the Board at the time of
approving the Directors' Report are listed in the overview of
corporate governance. Having made enquiries of fellow directors and
of the Company's auditor, each of these directors confirms
that:
-- To the best of each director's knowledge and belief, there is
no relevant audit information of which the Company's auditor is
unaware; and
-- Each director has taken all the steps they might reasonably
be expected to have taken to make themselves aware of any relevant
audit information and to establish that the auditor is aware of
that information.
Going concern
The Group's business activities, performance and position,
together with the risks it faces and the factors likely to affect
its future development are set out in the Strategic report. The
Board has assessed the Group's viability over a three-year period
from 1 June 2021 through to 31 May 2024. This period is aligned
with the Group's annual budgeting process, where the Board reviews
and challenges the Group's budget in advance of each new financial
year.
The Board has also considered the general business environment
and the potential threats to the Group's business model arising
from regulatory, demographic, political and technological changes.
The COVID -- 19 pandemic and the impact of Brexit continues to
affect economic and financial markets. The Board has carried out a
robust assessment of the principal risks facing the Group including
those associated with a general economic downturn, including
financial market volatility, deteriorating credit, liquidity
concerns, government intervention, increasing unemployment,
furlough, redundancies and other restructuring activities that
would threaten the sustainability of its business model, future
performance, solvency or liquidity. This assessment by the Board
extends to run a series of stress tests against the Group's
three-year plan, including a reverse stress scenario in which a
variety of external and internal events impact the three-year plan
and so enable the Directors to assess management's ability to take
management actions to mitigate the impact on the Group.
In assessing the future viability of the overall business, the
Board also considers the current and future strategy, the results
of the latest ICAAP, the risk management controls and procedures in
place.
As an example for this year, a Group stress under the market
scenario is based on the impact of a reduction in market value of
investment assets of approximately 10-20% as seen in the initial
stages of the COVID-19 pandemic in 2020. Subsequent management
actions ensures the Group still maintains sufficient net assets and
regulatory capital.
The directors believe the Group is well placed to manage its
business risks successfully as demonstrated by the stress tests.
The Group's forecasts and projections show that the Group should
continue to be cash generative, maintain a surplus on its
regulatory capital requirements and be able to operate within the
level of its current financing arrangements. Accordingly, the
directors continue to adopt the going concern basis for the
preparation of the financial statements. The Directors have
considered the Group's prospects for a period in excess of 12
months from the date on which the Financial Statements are
approved.
Events after the balance sheet date
Details of significant events occurring after the end of the
reporting period are given in Note 32.
Approved on behalf of the Board
Ravi Tara
Chief Financial Officer
20 September 2021
Directors' responsibilities for the financial statements
The directors are responsible for preparing the Directors'
Report, Strategic Report and the financial statements in accordance
with applicable law and regulations.
UK company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the group financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006. The financial
statements also comply with International Financial Reporting
Standards (IFRSs) as issued by the IASB.
The financial statements are required by law and IFRS to present
fairly the financial position of the Group and Company and the
financial performance of the Group. The Companies Act 2006 provides
in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and
fair view are references to their achieving a fair
presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period. In preparing each
of the Group and Company financial statements, the directors are
required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether they have been prepared in accordance with IFRSs adopted by the EU; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Mattioli
Woods plc website.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2021
2020
2021 Restated
Note GBP000 GBP000
------------------------------------------------------- ------ ----------- -----------
Revenue 4 62,615 58,407
Employee benefits expense 11 (34,141) (27,623)
Other administrative expenses (13,332) (10,897)
Share-based payments 20 (1,475) (1,335)
Amortisation and impairment 17 (3,078) (2,437)
Depreciation 15,16 (2,772) (2,547)
Impairment loss on financial assets 21 (25) (605)
Loss on disposal of property, plant and equipment (46) (18)
Gain on bargain purchase 3 288 -
Deferred consideration as remuneration 26,28 (3,803) (750)
Operating profit before financing 10 4,231 12,195
------------------------------------------------------- ------ ----------- -----------
Finance revenue 8 34 99
Finance costs 9 (258) (196)
Net finance costs (224) (97)
Share of profit from associate, net of tax 18 1,141 633
Profit before tax 5,148 12,731
Income tax expense 12 (3,757) (3,244)
Profit for the year 1,391 9,487
Items that will not be reclassified to profit or loss
Other comprehensive income for the year, net of tax 18 28 (15)
Total comprehensive income for the year, net of tax 1,419 9,472
------------------------------------------------------- ------ ----------- -----------
Attributable to:
Equity holders of the parent 1,419 9,472
Earnings per ordinary share:
Basic (pence) 13 5.1 34.9
Diluted (pence) 13 5.0 34.7
Proposed total dividend per share (pence) 14 21.0 20.0
------------------------------------------------------- ------ ----------- -----------
Details of the restatement to comparative financial information
are disclosed in Note 2.
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: 03140521
As at 31 May 2021
2021 2020 2019
Company Group Company Group Company
Group Restated Restated Restated Restated
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Assets
Property, plant and equipment 15 14,340 2,472 15,636 3,115 16,665 3,469
Right of use assets 16 2,180 1,823 2,584 2,188 - -
Intangible assets 17 60,468 60,555 37,393 36,638 38,025 38,505
Deferred tax asset 12 951 932 888 874 704 701
Investments in subsidiaries 18 - 39,805 - 13,141 - 11,410
Investment in associate 18 4,295 4,295 3,732 3,732 4,211 4,211
Other investments 18 500 500 - - 750 750
Total non-current assets 82,734 110,382 60,233 59,688 60,355 59,046
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Trade and other receivables 21 19,197 28,247 17,208 27,192 16,384 28,111
Income tax receivable 12 30 1,307 390 1,403 - -
Finance lease receivable 290 290 324 324 - -
Investments 18 26 26 40 40 80 80
Cash and short-term deposits 22 21,888 10,909 25,959 17,584 23,248 14,095
Total current assets 41,431 40,779 43,921 46,543 39,712 42,286
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Total assets 124,165 151,161 104,154 106,231 100,067 101,332
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Equity
Issued capital 23 283 283 269 269 268 268
Share premium 23 33,834 33,834 32,891 32,891 32,137 32,137
Merger reserve 23 17,458 17,458 10,639 10,639 10,639 10,639
Equity - share based payments 23 3,559 3,559 3,848 3,848 3,208 3,208
Capital redemption reserve 23 2,000 2,000 2,000 2,000 2,000 2,000
Own shares 23 (597) - (597) - (99) -
Retained earnings 23 29,550 31,975 32,460 37,236 28,202 33,108
Total equity attributable
to equity holders of the parent 86,087 89,109 81,510 86,883 76,355 81,360
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Non-current liabilities
Trade and other payables 25 - 28,143 - - - -
Lease liability 27 1,680 1,395 1,944 1,622 - -
Deferred tax liability 12 9,442 6,740 4,482 3,092 4,345 3,150
Provisions 26 1,545 1,545 944 914 1,244 1,219
Total non-current liabilities 12,667 37,823 7,370 5,628 5,589 4,369
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Current liabilities
Trade and other payables 25 15,515 14,651 9,923 8,706 14,527 12,806
Income tax payable 12 - - - - 536 -
Lease liability 27 905 820 964 880 - -
Provisions 26 8,991 8,758 4,387 4,134 3,060 2,797
Total current liabilities 25,411 24,229 15,274 13,720 18,123 15,603
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Total liabilities 38,078 62,052 22,644 19,348 23,712 19,972
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Total equities and liabilities 124,165 151,161 104,154 106,231 100,067 101,332
---------------------------------- ----- -------- -------- ---------- ---------- ---------- ----------
Details of the restatement to comparative financial information
are disclosed in Note 2.
The loss of the Company for the financial year, after taxation,
was GBP1.0m (2020 restated: GBP9.4m profit).
The financial statements were approved by the Board of directors
and authorised for issue on 20 September 2021 and are signed on its
behalf by:
Ian Mattioli MBE Ravi Tara
Chief Executive Officer Chief Financial Officer
Consolidated and Company Statements of Changes in Equity
For the year ended 31 May 2021
Equity -
share Capital Retained
Issued Share Merger based redemption earnings
capital premium reserve payments reserve Own shares Restated Total
(Note 23) (Note 23) (Note 23) (Note 23) (Note 23) (Note 23) (Note 23) equity
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
As at 1 June
2019 268 32,137 10,639 3,208 2,000 (99) 28,202 76,355
Profit for the
year - - - - - - 9,487 9,487
Share of other
comprehensive
income from
associates - - - - - - (15) (15)
--------------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Total
comprehensive
income - - - - - - 9,472 9,472
Transactions
with owners of
the Group,
recognised
directly in
equity
Issue of share
capital 1 754 - - - - - 755
Share-based
payment
transactions - - - 1,066 - - - 1,066
Deferred tax
recognised in
equity - - - (50) - - - (50)
Current tax
taken to
equity - - - 29 - - - 29
Reserves
transfer - - - (405) - - 405 -
Own shares - - - - - (498) - (498)
Dividends - - - - - - (5,619) (5,619)
As at 31 May
2020 269 32,891 10,639 3,848 2,000 (597) 32,460 81,510
Profit for the
year - - - - - - 1,391 1,391
Share of other
comprehensive
income from
associates - - - - - - 28 28
--------------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Total
comprehensive
income - - - - - - 1,419 1,419
Transactions
with owners of
the Group,
recognised
directly in
equity
Issue of share
capital 14 943 6,819 - - - - 7,776
Share-based
payment
transactions - - - 1,080 - - - 1,080
Deferred tax
recognised in
equity - - - (46) - - (32) (78)
Current tax
taken to
equity - - - 31 - - - 31
Reserves
transfer - - - (1,354) - - 1,354 -
Dividends - - - - - - (5,651) (5,651)
As at 31 May
2021 283 33,834 17,458 3,559 2,000 (597) 29,550 86,087
--------------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Details of the restatement to comparative financial information
are disclosed in Note 2.
Consolidated and Company Statements of Changes in Equity
For the year ended 31 May 2021 (continued)
Equity - Capital Retained
Issued Share Merger share based redemption earnings
capital premium reserve payments reserve Restated
(Note 23) (Note 23) (Note 23) (Note 23) (Note 23) (Note 23) Total equity
Company GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
As at 1 June
2019 268 32,137 10,639 3,208 2,000 33,108 81,360
Profit for the
year - - - - - 9,357 9,357
Share of other
comprehensive
income from
associates - - - - - (15) (15)
--------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
Total
comprehensive
income - - - - - 9,342 9,342
Transactions
with owners of
the Company,
recognised
directly in
equity
Issue of share
capital 1 754 - - - - 755
Share-based
payment
transactions - - - 1,066 - - 1,066
Deferred tax
recognised in
equity - - - (50) - - (50)
Current tax
taken to
equity - - - 29 - - 29
Reserves
transfer - - - (405) - 405 -
Dividends - - - - - (5,619) (5,619)
As at 31 May
2020 269 32,891 10,639 3,848 2,000 37,236 86,883
Loss for the
year - - - - - (960) (960)
Share of other
comprehensive
income from
associates - - - - - 28 28
--------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
Total
comprehensive
loss - - - - - (932) (932)
Transactions
with owners of
the Company,
recognised
directly in
equity
Issue of share
capital 14 943 6,819 - - - 7,776
Share-based
payment
transactions - - - 1,080 - - 1,080
Deferred tax
recognised in
equity - - - (46) - (32) (78)
Current tax
taken to
equity - - - 31 - - 31
Reserves
transfer - - - (1,354) - 1,354 -
Dividends - - - - - (5,651) (5,651)
As at 31 May
2021 283 33,834 17,458 3,559 2,000 31,975 89,109
--------------- ------------- ------------- ------------- ------------ ------------ ------------- -------------
Details of the restatement to comparative financial information
are disclosed in Note 2.
As permitted by s408 of the Companies Act 2006, no separate
profit or loss account or statement of comprehensive income is
presented in respect of the parent Company. The profit attributable
to the Company is disclosed in the footnote to the Company's
statement of financial position.
Consolidated and Company Statements of Cash Flows
For the year ended 31 May 2021
Group Company Group Company
2021 2021 2020 2020
Restated Restated
Note GBP000 GBP000 GBP000 GBP000
---------------------------------------------------- ------ --------- --------- ---------- ----------
Operating activities
Profit for the year
Adjustments for: 1,391 (960) 9,487 9,293
Depreciation 15,16 2,772 1,884 2,547 1,781
Amortisation 17 3,078 2,204 2,437 2,039
Impairment of investment in subsidiaries 18 - 21 - -
Gain on bargain purchase 3 (288) (288) - -
Deferred consideration as remuneration 26,28 3,803 3,803 750 750
Investment income 8 (34) (367) (99) (490)
Interest expense 9 258 448 196 177
Share of profit from associate 18 (1,141) (1,141) (633) (633)
Loss on disposal of property, plant and
equipment 46 46 18 16
Equity-settled share-based payments 20 1,475 1,475 1,335 1,335
Dividend income - (2,000) - (3,500)
Income tax expense 12 3,757 1,936 3,244 2,208
---------------------------------------------------- ------ --------- --------- ---------- ----------
Cash flows from operating activities before
changes in working capital and provisions 15,117 7,061 19,282 12,976
Decrease/(increase) in trade and other receivables 996 2,368 (806) 1,327
Increase/(decrease) in trade and other payables 4,962 6,002 (4,586) (3,998)
(Decrease)/increase in provisions (713) (613) 36 55
---------------------------------------------------- ------ --------- --------- ---------- ----------
Cash generated from operations 20,362 14,818 13,926 10,360
Interest paid (2) (11) - -
Income taxes paid (2,543) (2,255) (4,392) (3,863)
Net cash flows from operating activities 17,817 12,552 9,534 6,497
---------------------------------------------------- ------ --------- --------- ---------- ----------
Investing activities
Proceeds from sale of property, plant and
equipment 169 169 124 124
Purchase of property, plant and equipment 15 (419) (416) (818) (814)
Purchase of software 17 (391) (387) (173) (173)
Contingent consideration paid on acquisition
of subsidiaries 26 (1,111) (1,111) (600) (600)
Acquisition of subsidiaries 3 (17,736) (17,736) (861) (990)
Cash received on acquisition of subsidiaries 3 4,750 - 111 -
Investment in other equity holdings 18 (500) (500) - -
Cash received on hive up of group companies - 5,230 - -
Dividends received from associate undertakings 18 588 588 1,078 1,078
Proceeds from disposal of derivative financial
assets - - 750 750
Proceeds on disposal of other investments 18 8 8 45 45
Loans advanced to property syndicates (1,108) (1,108) (35) (35)
Loan repayments from property syndicates 20 20 44 44
Interest received 8 19 11 83 44
Dividends received - 2,000 - 3,500
Net cash flows from investing activities (15,711) (13,232) (252) 2,973
---------------------------------------------------- ------ --------- --------- ---------- ----------
Financing activities
Proceeds from the issue of share capital 551 551 487 487
Cost of own shares acquired - - (498) -
Dividends paid 14 (5,651) (5,651) (5,619) (5,619)
Payment of lease liabilities 27 (1,077) (895) (941) (849)
Net cash flows from financing activities (6,177) (5,995) (6,571) (5,981)
---------------------------------------------------- ------ --------- --------- ---------- ----------
Net (decrease)/increase in cash and cash
equivalents (4,071) (6,675) 2,711 3,489
Cash and cash equivalents at start year 22 25,959 17,584 23,248 14,095
Cash and cash equivalents at end of year 22 21,888 10,909 25,959 17,584
---------------------------------------------------- ------ --------- --------- ---------- ----------
Details of the restatement to comparative financial information
are disclosed in Note 2.
Notes to the financial statements
1 Corporate information
Mattioli Woods plc ("the Company") is a public limited company
incorporated and domiciled in England and Wales, whose shares are
publicly traded on the AIM market of the London Stock Exchange plc.
The nature of the Group's operations and its principal activities
are set out in the Chief Executive's Review.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards as issued by IASB.
The financial statements comprise the financial statements of
Mattioli Woods plc and its subsidiaries ("the Group") as at 31 May
each year. The financial statements have been prepared on the
historical cost basis, except for certain financial instruments
that are measured at fair value (Notes 18, 22 and 27), and are
presented in pounds, with all values rounded to the nearest
thousand pounds (GBP000) except when otherwise indicated.
The principal accounting policies adopted are set out in this
note and, unless otherwise stated, have been applied consistently
to all periods presented in the financial statements. The financial
statements were authorised for issue in accordance with a
resolution of the directors on 20 September 2021.
2.2 Restatement of comparative financial information
Following a review a decision has been made to change the
accounting treatment for acquisitions with contingent earn-out
consideration payable under certain circumstances. As a result of a
review, we have restated comparative financial information to
reflect a revised allocation of contingent consideration on certain
business combinations between acquisition costs and non-underlying
remuneration.
IFRS 3 Business Combinations lists a number of factors to
consider when assessing whether contingent consideration payable to
employees or management vendors should be treated as part of
acquisition cost or remuneration. These factors include terms
associated with post-acquisition employment, linkage to valuation
of the acquiree and other factors.
Following further review in the current year, and consideration
of the January 2013 IFRIC Update issued by the IFRS Interpretations
Committee, which sought to provide clarification on this area of
IFRS 3, we identified that certain of our previous acquisitions
which contained contingent consideration should have been
recognised separately as remuneration rather than acquisition cost.
The clarification to IFRS 3 centres on the existence of automatic
forfeiture of a management seller to their rights to contingent
deferred consideration in the event of the termination of their
employment, which supersedes all other factors we are asked to
consider under IFRS 3.
We have reviewed the legal documentation and acquisition
accounting for every acquisition made by the Group since the
adoption of IFRS 3, which for the Group is the period commencing 1
June 2010, five of which were found to contain clauses where rights
to contingent consideration are forfeit on termination of
employment. In these cases, we have treated the contingent
consideration payable to those management sellers as remuneration.
These contractual terms existed to help protect the value of the
intangible assets acquired in the business combination by
encouraging retention of key personnel and their client
relationships.
The historical acquisitions that have given rise to this
restatement are as follows:
-- TCF Global Independent Financial Services Limited acquired in August 2011;
-- Thoroughbred Wealth Management Limited acquired in July 2013;
-- Boyd Coughlan Limited acquired in June 2015;
-- Taylor Patterson Group Limited acquired in September 2015; and
-- SSAS Solutions (UK) Limited acquired in March 2019.
When classified as acquisition cost, the discounted value is
capitalised, with the discounting being unwound over the earn-out
period and recognised as a finance cost. By classifying contingent
consideration as remuneration, the cost of the contingent payments
are not capitalised as part of acquisition cost, but recognised as
a separately identifiable expense on the face of the statement of
comprehensive income over the period in which those services were
provided under the terms of the acquisition agreement. Treatment as
remuneration also reduces finance costs recognised in respect of
discounting the provisions for contingent consideration. Where the
reduction to acquisition cost results in acquisition costs being
lower than the fair value of separately identifiable assets
acquired, this gives rise to negative goodwill, which is recognised
as a gain on bargain purchase in the statement of comprehensive
income at acquisition.
The impact of the restatement on the comparative financial
statements of the Group are as follows:
2020 2020
As reported Restatement Restated
Group Statement of Financial Position GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------- ---------
Assets
Intangible assets 48,102 (10,709) 37,393
-------------------------------------- ------------ ------------- ---------
Total assets 114,863 (10,709) 104,154
-------------------------------------- ------------ ------------- ---------
Liabilities
Provisions 5,924 (593) 5,331
-------------------------------------- ------------ ------------- ---------
Total liabilities 23,237 (593) 22,644
-------------------------------------- ------------ ------------- ---------
Equity
Retained earnings 42,576 (10,116) 32,460
-------------------------------------- ------------ ------------- ---------
Total equity 91,626 (10,116) 81,510
-------------------------------------- ------------ ------------- ---------
Total equity and liabilities 114,863 (10,709) 104,154
-------------------------------------- ------------ ------------- ---------
2020 2020
As reported Restatement Restated
Group Statement of Comprehensive Income GBP000 GBP000 GBP000
---------------------------------------- ------------ ------------- ---------
Deferred consideration as remuneration - (750) (750)
---------------------------------------- ------------ ------------- ---------
Operating profit before financing 12,945 (750) 12,195
---------------------------------------- ------------ ------------- ---------
Finance costs (260) 64 (196)
---------------------------------------- ------------ ------------- ---------
Profit before tax 13,417 (686) 12,731
---------------------------------------- ------------ ------------- ---------
Profit for the year 10,173 (686) 9,487
---------------------------------------- ------------ ------------- ---------
2019 2019
As reported Restatement Restated
Group Statement of Financial Position GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------- ---------
Assets
Intangible assets 48,734 (10,709) 38,025
-------------------------------------- ------------ ------------- ---------
Total assets 110,776 (10,709) 100,067
-------------------------------------- ------------ ------------- ---------
Liabilities
Provisions 5,583 (1,279) 4,304
-------------------------------------- ------------ ------------- ---------
Total liabilities 24,991 (1,279) 23,712
-------------------------------------- ------------ ------------- ---------
Equity
Retained earnings 37,632 (9,430) 28,202
-------------------------------------- ------------ ------------- ---------
Total equity 85,785 (9,430) 76,355
-------------------------------------- ------------ ------------- ---------
Total equity and liabilities 110,776 (10,709) 100,067
-------------------------------------- ------------ ------------- ---------
The financial statements of the Company have also been restated,
with the value of investments in subsidiaries having been reduced
to reflect the lower acquisition costs recognised. The impact is
less than that of the impact on goodwill in the Group accounts as a
result of investments in subsidiaries impacted by this restatement
having been impaired in prior accounting periods. Goodwill
recognised by the Company is unchanged.
The impact of the restatement on the comparative financial
statements of the Company are as follows:
2020 2020
As reported Restatement Restated
Company Statement of Financial Position GBP000 GBP000 GBP000
---------------------------------------- ------------ ------------- ---------
Assets
Investments in subsidiaries 14,534 (1,393) 13,141
---------------------------------------- ------------ ------------- ---------
Total assets 107,624 (1,393) 106,231
---------------------------------------- ------------ ------------- ---------
Liabilities
Provisions 5,640 (592) 5,048
---------------------------------------- ------------ ------------- ---------
Total liabilities 19,940 (592) 19,348
---------------------------------------- ------------ ------------- ---------
Equity
Retained earnings 38,037 (801) 37,236
---------------------------------------- ------------ ------------- ---------
Total equity 87,684 (801) 86,883
---------------------------------------- ------------ ------------- ---------
Total equity and liabilities 107,624 (1,393) 106,231
---------------------------------------- ------------ ------------- ---------
2019 2019
As reported Restatement Restated
Company Statement of Financial Position GBP000 GBP000 GBP000
---------------------------------------- ------------ ------------- ---------
Assets
Investments in subsidiaries 12,803 (1,393) 11,410
---------------------------------------- ------------ ------------- ---------
Total assets 102,725 (1,393) 101,332
---------------------------------------- ------------ ------------- ---------
Liabilities
Provisions 5,294 (1,278) 4,016
---------------------------------------- ------------ ------------- ---------
Total liabilities 21,250 (1,278) 19,972
---------------------------------------- ------------ ------------- ---------
Equity
Retained earnings 33,223 (115) 33,108
---------------------------------------- ------------ ------------- ---------
Total equity 81,475 (115) 81,360
---------------------------------------- ------------ ------------- ---------
Total equity and liabilities 102,725 (1,393) 101,332
---------------------------------------- ------------ ------------- ---------
As a result of the restatement to comparative financial
information, we have presented a third statement of financial
position as at the beginning of the preceding period, as required
by IAS 1 Presentation of Financial Statements.
Performance measures impacted by the restatement to contingent
consideration costs have also been restated, including operating
profit before financing, EBITDA, EBITDA margin, profit before tax,
effective taxation rate, basic EPS and diluted EPS.
2.3 Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence. In
forming this view, the directors have considered the Company's and
the Group's prospects for a period of at least 12 months. Thus they
continue to adopt the going concern basis of accounting in
preparing the financial statements.
Further details of the consideration made by the directors can
be found in the Directors Report.
2.4 Developments in reporting standards and interpretations
Standards not affecting the financial statements
The following new and revised standards and interpretations have
been adopted in the current period:
Standard or interpretation Periods commencing on or after
---------------------------------------------------------------------- -------------------------------
IFRS 3 (amendments) Business Combinations 1 January 2020
IAS 1 and 8 (amendments) Definition of Material 1 January 2020
Amendments to References to the Conceptual Framework in IFRS standard 1 January 2020
Their adoption has not had any significant impact on the amounts
reported in these financial statements but may impact the
accounting for future transactions and arrangements or give rise to
additional disclosures.
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future annual periods and,
therefore, have not been applied in preparing these consolidated
financial statements. At the date of authorisation of these
financial statements, the following standards and interpretations
have not been applied in these financial statements were in issue
but not yet effective:
Standard or interpretation Periods commencing on or after
-------------------------------------------------------------------------------- -------------------------------
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 - Interest Rate Benchmark Reform 1 January 2021
Amendments to IFRS 16 - Covid-19 related rent concessions 1 January 2021
IFRS 17 Insurance contacts 1 January 2023
The Directors do not expect the adoption of these standards and
interpretations listed above to have a material impact on the
financial statements of the Group in future periods.
2.5 Principal accounting policies
Basis of consolidation
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of the subsidiaries are prepared
for the same reporting period as the parent company, using
consistent accounting policies. All intra-group balances, income
and expenses and unrealised gains and losses resulting from
intra-group transactions are eliminated in full.
Business combinations
Business combinations are accounted for using the purchase
accounting method. This involves assessing whether any assets
acquired meet the criteria for recognition as separately
identifiable intangible assets. Intangible assets are measured on
initial recognition at their fair value at the date of acquisition.
Client portfolios are valued by discounting their expected future
cash flows over their expected useful lives, based on the Group's
historical experience. Expected future cash flows are estimated
based on the historical revenues and costs associated with the
operation of that client portfolio. The discount rates used
estimate the cost of capital, adjusted for risk.
Contingent consideration payable to employees or selling
shareholders arising on business combination is assessed as to
whether it should be classified as part of acquisition costs or
remuneration for post-acquisition services, using the criteria as
defined in IFRS 3 Business Combinations to identify the appropriate
treatment. Where contingent consideration payable to employees or
selling shareholders is treated as remuneration, it is recognised
as an expense over the period over which the contingent
consideration is earned, and reported separately on the face of the
statement of comprehensive income.
Associates
The Company's share of profits from associates is reported
separately in the Statement of Comprehensive Income and the
investment is recognised in the Statement of Financial Position
using the equity method. The investment is initially recorded at
cost and subsequently adjusted to reflect the Company's share of
the cumulative profits of the associate since acquisition.
Appropriate adjustments to the Company's share of the profits or
losses after acquisition are made to account for additional
amortisation of the associate's amortisable assets based on the
excess of their fair values over their carrying amounts at the time
the investment was acquired.
Property, plant and equipment
Plant and equipment is stated at cost, excluding the costs of
day-to-day servicing, less accumulated depreciation and accumulated
impairment in value. Such cost includes the cost of replacing part
of the plant and equipment when that cost is incurred if the
recognition criteria are met.
Depreciation is provided on all property, plant and equipment at
rates calculated to write each asset down to its estimated residual
value over its expected useful life as follows:
-- Assets under construction 0% until asset becomes available for use;
-- Freehold buildings 2% per annum on cost;
-- Computer equipment 10-33% per annum on cost;
-- Office equipment 20% per annum on written down values;
-- Fixtures and fittings 20% per annum on written down
values;
-- Motor vehicles 33% per annum on written down values; and
-- Leasehold improvements Straight line over the remaining term
of the lease.
Assets under construction are not depreciated until construction
is complete and the asset is available for use. At the point when
the asset becomes available for use, it will be transferred to the
appropriate asset class and depreciated in line with the above
policy.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the
statement of comprehensive income in the year the asset is
derecognised.
The asset's residual values, useful lives and methods of
depreciation are reviewed, and adjusted if appropriate, at each
financial year end.
Investments
The Group accounts for its investments in subsidiaries using the
cost model and investments in associates using the equity
method.
Short-term investments
Short-term investments include units in private property
syndicates, which are measured at amortised cost.
Goodwill
Goodwill acquired in a business combination is initially
measured at cost, being the excess of the cost of the business
combination over the Group's interest in the net fair value of the
acquiree's identifiable assets, liabilities and contingent
liabilities. Following initial recognition, goodwill is measured at
cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group's
cash-generating units, or groups of cash-generating units, that are
expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the Group
are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is
allocated:
-- Represents the lowest level within the Group at which the
goodwill is monitored for internal management purposes; and
-- Is not larger than a segment based on the Group's reporting
format determined in accordance with IFRS 8 'Operating
Segments'.
If a cash generating unit was to be sold, the difference between
the selling price and the net assets and goodwill would be
recognised in the statement of comprehensive income. Where the
Group reorganises its reporting structure in a way that changes the
composition of one or more cash-generating units to which goodwill
has been allocated, the goodwill is reallocated to the units
affected.
Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at
cost less any accumulated amortisation and any accumulated
impairment losses. The useful lives of intangible assets are
assessed to be either finite or indefinite. Intangible assets
assessed as having finite lives are amortised over their useful
economic life as follows:
-- Purchased software 25% per annum on written down values;
and
-- Internally generated software Straight line over 10 years.
The Group amortises individual client portfolios acquired
through business combinations on a straight-line basis over an
estimated useful life based on the Group's historic experience.
Client portfolios acquired through business combinations are as
follows:
Client portfolio Date of acquisition Estimated useful life
Mattioli Woods Pension Consultants 2 September 2003 25 Years
("the Partnership Portfolio")
-------------------- ----------------------
Geoffrey Bernstein 20 June 2005 25 Years
-------------------- ----------------------
Suffolk Life 27 January 2006 25 Years
-------------------- ----------------------
PCL 10 July 2007 25 Years
-------------------- ----------------------
JBFS 18 February 2008 25 Years
-------------------- ----------------------
CP Pensions 30 April 2010 25 Years
-------------------- ----------------------
City Pensions 9 August 2010 20 Years
-------------------- ----------------------
Kudos 26 August 2011 20 Years
-------------------- ----------------------
Ashcourt Rowan 23 April 2013 10 Years
-------------------- ----------------------
Atkinson Bolton 29 July 2013 20 Years
-------------------- ----------------------
UK Wealth Management 8 August 2014 10 Years
-------------------- ----------------------
Torquil Clark 23 January 2015 10 Years
-------------------- ----------------------
Boyd Coughlan 23 June 2015 20 Years
-------------------- ----------------------
Taylor Patterson 8 September 2015 20 Years
-------------------- ----------------------
Lindley Trustees 5 October 2015 10 Years
-------------------- ----------------------
Maclean Marshall Healthcare 22 January 2016 10 Years
-------------------- ----------------------
Stadia Trustees 15 February 2016 10 Years
-------------------- ----------------------
MC Trustees 7 September 2016 20 Years
-------------------- ----------------------
Broughtons 8 August 2018 15 Years
-------------------- ----------------------
SSAS Solutions 27 March 2019 20 Years
-------------------- ----------------------
The Turris Partnership 19 December 2019 15 Years
-------------------- ----------------------
Exempt Property Unit Trust 14 January 2021 10 Years
-------------------- ----------------------
Montagu 2 February 2021 20 Years
-------------------- ----------------------
Pole Arnold 12 April 2021 20 Years
-------------------- ----------------------
Caledonia 16 April 2021 20 Years
-------------------- ----------------------
A summary of the policies applied to the Group's goodwill and
intangible assets is as follows:
Goodwill Client portfolios Software Other intangibles
Useful life Indefinite Finite Finite Finite
---------------------- ---------------------- ---------------------- ----------------------
Measurement method Annual impairment Amortised over a Amortised over a Amortised over a
used review useful economic life useful economic life useful economic life
of between 10 and 25 of four years on a of three years
years on a reducing balance
straight-line basis basis or 10 years
on a straight-line
basis if internally
generated
---------------------- ---------------------- ---------------------- ----------------------
Internally generated Acquired Acquired Both Both
or acquired
---------------------- ---------------------- ---------------------- ----------------------
Intangible assets assessed as having finite lives are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life is
reviewed at least at each financial year end. Changes in the
expected useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are accounted for by
changing the amortisation period or method, as appropriate, and
treated as changes in accounting estimates. The amortisation
expense on intangible assets with finite lives is recognised in the
statement of comprehensive income.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is any
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of an asset's, or cash
generating unit's fair value less cost to sell and its value in
use, and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent from
those of other assets or group of assets.
When the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money, and the risks specific to the asset. In determining
fair value less cost to sell, an appropriate valuation model is
used. These calculations are corroborated by valuation multiples or
other available fair value indicators.
Impairment losses of continuing operations are recognised in the
statement of comprehensive income.
For assets excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may
have decreased. If such indication exists, the Group makes an
estimate of the recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. If that is the case, the
carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the statement of comprehensive income
unless the asset is carried at the revalued amount, in which case
reversal is treated as a revaluation increase, except in relation
to goodwill.
The following criteria are also applied in assessing impairment
of specific non-financial assets:
Goodwill
Goodwill is reviewed for impairment, annually or more frequently
if events or changes in circumstances indicate that the carrying
value may be impaired. Impairment is determined for goodwill by
assessing the recoverable amount of the cash-generating unit (or
group of cash-generating units) to which the goodwill relates.
Where the recoverable amount of the cash-generating unit (or group
of cash-generating units) is less than the carrying amount of the
cash-generating unit (or group of cash-generating units) to which
goodwill has been allocated, an impairment loss is recognised.
Impairment losses relating to goodwill cannot be reversed in future
periods. The Group performs its annual impairment test of goodwill
as at 31 May.
Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets, which
have solely payments of principal and interest that are held with
the intention of collecting the cashflows. After initial
measurement, loans and receivables are subsequently carried at
amortised cost using the effective interest method, less any
allowance for impairment. Amortised cost is calculated taking into
account any discount or premium on acquisition and includes fees
and transaction costs. Gains and losses are recognised in the
statement of comprehensive income when the loans and receivables
are derecognised or impaired, as well as through the amortisation
process.
Cash and short-term deposits
Cash and short-term deposits in the statement of financial
position comprise cash at banks and in hand and short-term deposits
with an original maturity of three months or less. For the purpose
of the statement of cash flows, cash and cash equivalents consist
of cash and short-term deposits as defined above.
Impairment of non-derivative financial assets
At each reporting date the Group recognises loss allowances for
expected credit losses for all financial assets at amortised cost.
The Group measures loss allowances at an amount equal to lifetime
expected credit losses, except for bank balances for which credit
risk has not increased significantly since initial recognition,
which are measured at 12 month expected credit losses.
When estimating expected credit loss by determining whether
credit risk has increased significantly since initial recognition,
the Group considers reasonable and supportive information that is
relevant and available without undue cost or effort, including
historic rates of loss from the issue of credit notes or increases
in specific provisions for bad debt and will consider forward
looking factors where they may impact clients abilities to meet
cashflow obligations such as significant market movements impacting
the value of clients investments.
Trade receivables are deemed to be low credit risk as our
pension and investment products tend to attract high net worth
clients with a strong capacity to meet contractual cashflow
obligations in the near term and adverse changes in economic
conditions in the longer term may, but will not necessarily, reduce
their ability to fulfil cashflow obligations. Further details of
our credit risk management practices are included in Note 30.
Aged trade and other receivables are reviewed with specific
provisions or write offs recognise where recovery is uncertain,
such as balances owing from individuals who are declared bankrupt
or deceased, and balances due from pension schemes where the scheme
does not hold liquid or saleable assets. The carrying amount of the
receivable is reduced through use of an allowance account.
Credit losses are calculated based on the value of credit notes
issued, plus increases in specific provisions against trade
receivables. Credit losses rates are calculated separately for each
company within the Group based on credit losses divided by the
value of invoiced revenue over a rolling 12-month period.
Financial liabilities
Trade and other payables
Trade and other payables are recognised at cost, due to their
short-term nature. Accruals and deferred income are normally
settled monthly throughout the financial year, with the exception
of bonus accruals which are typically paid annually.
Leases
Lease agreements under which the Group is lessee give rise to
both a right-of-use asset and a lease liability.
The lease liability is recognised at the present value of future
lease payments under the lease, including any rental incentives,
and discounted at the incremental rate of borrowing of the lessee,
which is determined based on the risk-free rate and margin payable
on borrowing over a term equivalent to the lease. Right of use
asset assets are initially recognised at the value of the lease
liability.
Lease liabilities are subsequently measured by adjusting the
carrying amount to reflect the interest charge, the lease payments
made and any reassessment or lease modifications. Leases with a
remaining term less than 12 months at the reporting date are
assessed for a period of expected renewal, and where renewal is
expected the lease liability is remeasured to include the terms of
the expected renewal.
Right-of-use assets are subsequently depreciated on a
straight-line basis over the shorter of the expected life of the
asset and the lease term, adjusted for any remeasurements of the
lease liability and amendments to associated provisions for
dilapidation on property leases. Right-of-use assets are
derecognised on handing the leased asset back to the lessor of the
asset.
Lease agreements under which the Group is lessor are assessed to
determine if they represent operating or finance leases. The Group
has one lease agreement under which the Group is lessor, which is
classified as a finance lease, in respect of part of a property for
which the Group is also lessor.
Finance leases of leased assets under which the Group is lessor
give rise to both a finance lease receivable and the partial
de-recognition of the right-of-use asset in respect of the head
lease of the leased asset. De-recognition of right-of-use assets
are measured at an amount equal to the lease receivable.
Finance lease receivable is subsequently measured by adjusting
the carrying amount to reflect the interest income, the lease
payments received and any reassessment or lease modifications.
Where a lease has a term of less than 12 months or is of low
value, the Group applies the exemption not to recognise
right-of-use assets and liabilities for these leases. The Group
recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair
value of the consideration received less directly attributable
transaction costs. After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortised cost
using the effective interest method. Gains and losses are
recognised in the statement of comprehensive income when the
liabilities are derecognised as well as through the amortisation
process.
Contingent consideration
Contingent consideration payable to employees or selling
shareholders arising on business combination is assessed as to
whether it should be classified as part of acquisition costs or
remuneration for post-acquisition services.
Where classified as acquisition costs, a provision for
contingent consideration is recognised on acquisition for the
present value of the level of contingent consideration expected to
be paid. Subsequent changes to the fair value of the contingent
consideration are recognised in accordance with IFRS 9 in the
statement of comprehensive income.
Where classified as remuneration a provision for contingent
consideration is recognised based on the level of contingent
consideration expected to be paid and the period over which the
contingent consideration relates.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the
Group expects some or all of a provision to be reimbursed, for
example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is
presented in the statement of comprehensive income, net of any
reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate
which reflects, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passing of time is recognised as a finance cost.
Provisions include financial liabilities. Where the Group has
entered into certain acquisition agreements that provide for
contingent consideration to be paid the Board estimates the net
present value of contingent consideration payable.
Share-based payments
The Group engages in share-based payment transactions in respect
of services received from certain employees. In relation to equity
settled share-based payments, the fair value of services received
is measured by reference to the fair value of the shares or share
options granted on the date of grant and is recognised, together
with a corresponding increase in equity, as an expense over the
period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees
become fully entitled to the award ("the vesting date"). The fair
value of share options is determined using the Black Scholes Merton
pricing model.
The cumulative expense recognised for equity settled
transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has elapsed and the Group's
best estimate of the number of equity instruments that will
ultimately vest. The statement of comprehensive income charge or
credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance conditions are satisfied.
Where the terms of an equity-settled award are modified, the
minimum expense recognised is the expense if the terms had not been
modified. An expense is recognised for any modification that
increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee as measured
at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award, and designated as
a replacement award on the date it is granted, the cancelled and
new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per share
(further details are given in Note 13).
Own shares
Own shares consist of shares held within an employee benefit
trust. The Company has an employee benefit trust for the granting
of shares to applicable employees.
Own shares are recognised at cost as a deduction from equity
shareholders' funds. Subsequent consideration received for the sale
of such shares is also recognised in equity, with any difference
between the sale proceeds and the original cost being taken to
retained earnings.
Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration receivable for each contractual obligation, excluding
discounts, rebates, and other sales taxes or duty. Terms of
business with customers typically include payment periods of up to
60 days, although specific payment terms can be agreed between the
parties. The following information details the nature and timing of
the satisfaction of performance obligations in contracts with
customers.
Investment and asset management
Commission income and adviser charges are recognised as
follows:
-- At a point in time: Initial commission (less provision for
clawbacks, as explained in Note 26) and initial adviser charges are
recognised on a 'point in time' basis as being earned at the point
the performance obligation is met, being when an investment of
funds has been made by the client and submitted to the product
provider.
-- Over time: Ongoing adviser charges, based on the value of
assets invested, are recognised on an 'over time' basis during the
period the assets are held in the portfolio or investment fund,
with the contract performance obligation being the ongoing
management of investments in accordance with the applicable
investment mandate.
Discretionary portfolio management ("DPM") charges are
recognised as follows:
-- At a point in time: Initial charges on the placing of
investments are recognised on a 'point in time' basis as being
earned at the point when an investment of funds has been made by
the client and submitted to the product provider.
-- Over time: Ongoing DPM charges based on the value of assets
invested are recognised on an 'over time' basis during the period
the assets are held in the portfolio or investment fund, with the
contract performance obligation being the ongoing management of
investments in accordance with the applicable investment
mandate.
Our ongoing adviser and DPM charges have been compared to
observable rates from other providers on a stand-alone basis, with
initial charges being recognised by the residual approach, to
ensure that the allocation of the selling price remains
appropriate.
Pension consultancy and administration
Pension consultancy and administration fees are recognised as
follows:
-- At a point in time: Mattioli Woods generally invoices pension
clients on a six-monthly basis in arrears for costs incurred in
advising on and administering their affairs. Where revenue is
contingent on completion of a service, revenue is recognised on a
'point in time' basis at the point that those contractual
performance conditions are satisfied. No revenue is recognised if
there are significant uncertainties regarding recovery of the time
incurred.
-- Over time: To the extent that the Group has a contractual
right to invoice for services rendered, revenue is recognised on an
'over time' basis as time is incurred on the provision of services,
with an estimate being made of what proportion of uninvoiced time
costs will be recoverable. Recoverability is measured as a
percentage of the total time costs incurred on clients' affairs
compared to the proportion of historical time costs actually
invoiced.
Pension consultancy and administration fees have been compared
to observable rates from other providers on a stand-alone basis,
with establishment charges being recognised by the residual
approach, to ensure that the allocation of the selling price
remains appropriate.
Property management
Property management fees are recognised as follows:
-- At a point in time: Initial charges on the establishment of a
private investment syndicate are recognised on a 'point in time'
basis when the syndicate completes its investment.
-- Over time: Fund management and private investment syndicate
charges, including charges based on the value of assets held, are
recognised on an 'over time' basis during the period the assets are
held in the fund or syndicate.
Employee benefits
Employee benefits fees are recognised as follows:
-- At a point in time: Fee income from services provided on the
set up of an employee benefits scheme or provision of non-recurring
employee benefits services are recognised on a 'point in time'
basis on completion of rendering those services, being the point
that those contractual performance conditions are satisfied.
-- Over time: Ongoing management charges on employee benefits
schemes are recognised on an 'over time' basis over the period to
which they relate.
Interest income
Revenue is recognised as interest accrues (using the effective
interest method that is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
instrument to the net carrying amount of the financial asset).
Taxes
Current income tax
Current income tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered
from or repaid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or
substantively enacted by the reporting date.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of
comprehensive income.
Deferred income tax
Deferred income tax is provided using the liability method on
temporary differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for financial
reporting purposes. Deferred income tax balances are recognised for
all taxable temporary differences, except where the deferred income
tax balance arises from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible
temporary differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused
tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at
each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each
reporting date and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred income
tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantially enacted at the
reporting date.
Deferred income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of
comprehensive income. Deferred income tax assets related to
temporary differences arising on share-based payments to employees
are based on the market value of the Company's shares at the year
end.
Deferred income tax assets and deferred income tax liabilities
are offset, if a legally enforceable right exists to set off
current tax assets against current income tax liabilities and the
deferred income taxes relate to the same taxable entity and the
same taxation authority.
Sales tax
Revenues, expenses and assets are recognised net of the amount
of sales tax, except:
-- Where the sales tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which
case the sales tax is recognised as part of the cost of acquisition
of the asset or as part of the expense item as applicable; and
-- Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the statement of financial position.
Dividend recognition
Dividend distributions to the Company's shareholders are
recognised in the accounting period in which the dividends are
declared and paid, or if earlier, in the accounting period when the
dividend is approved by the Company's shareholders at the Annual
General Meeting.
Pension costs
The Group makes discretionary payments into the personal pension
schemes of certain employees. Contributions are charged to the
statement of comprehensive income as they are payable.
2.6 Critical accounting judgements and sources of significant estimation uncertainty
The preparation of the financial statements requires management
to make estimates and assumptions that affect the reported amount
of revenues, expenses, assets and liabilities and the disclosure of
contingent liabilities. If in the future such estimates and
assumptions, which are based on management's best judgement at the
date of preparation of the financial statements, deviate from
actual circumstances, the original estimates and assumptions will
be modified as appropriate in the period in which the circumstances
change. The areas where a higher degree of judgement or complexity
arises, or where assumptions and estimates are significant to the
consolidated financial statements, are discussed below.
Critical accounting judgements
Contingent payments to selling shareholders arising from a
business combination
Contingent consideration payable to employees or selling
shareholders arising on business combination is assessed as to
whether it should be classified as part of acquisition costs or
remuneration for post-acquisition services, using the criteria as
defined in IFRS 3 Business Combinations to identify the appropriate
treatment. Where contingent consideration payable to employees or
selling shareholders is treated as acquisition costs, its fair
value at acquisition forms part of the intangible assets arising on
acquisition. Where it is treated as remuneration, it is recognised
as an expense over the period over which the contingent
consideration is earned.
Two acquisitions were completed in the year ended 31 May 2021
which include contingent consideration classified as remuneration.
If these had been classified as part of acquisition cost, overhead
expenses would be lower by GBP3,178,000, finance costs would be
higher by GBP505,000, therefore profit before tax would be higher
by GBP2,673,000. In addition, goodwill would be higher by
GBP8,636,000 and provisions for contingent consideration would be
higher by GBP4,952,000.
Sources of significant estimation uncertainty
Acquisitions and business combinations
When an acquisition arises the Group is required under IFRS to
calculate the Purchase Price Allocation ("PPA"). The PPA requires
companies to report the fair value of assets and liabilities
acquired and it establishes useful lives for identified assets. The
identification and the valuation of the assets and liabilities
acquired involves estimation and judgement when determining whether
the recognition criteria are met.
Subjectivity is also involved in the PPA with the estimation of
the future value of brands, technology, customer relationships and
goodwill. The fair value of separately identifiable intangible
assets acquired during the year was GBP34.1m (2020: GBP1.6m), with
the key assumptions used to calculate these fair values being those
around the estimated useful lives of the acquired customer
relationships, the estimated future cash flows expected to arise
from these relationships and the appropriate discount rate to be
used to discount these cash flows to their present value.
Estimated useful life sensitivity of -5 years is used,
representing a severe but plausible rate of client attrition if
customer relationships acquired are damaged as a result of the
business combination. Growth rate sensitivities are set at a level
to either minimise or altogether remove the impact of assumed
growth in cashflows derived from the acquired portfolio. Discount
rate sensitivity of +1.0% represents a plausible variance in
discount rate as a result of a range of judgements used in
following the capital asset pricing model to determine an
appropriate weighted average cost of capital for the acquired
businesses.
The sensitivity of the fair value of the highest-valued customer
relationships acquired during the year to changes in the key
assumptions are as follows:
Increase/
(decrease)
Acquisition of Hurley Partners Change in in fair value
Limited Base assumption assumption GBP000
--------------------------------- ---------------- ------------ ---------------
Estimated useful life 15.7 years -5 years (1,381)
Short-term growth rate in years
2 to 3 2.0%-5.0% -5.0% (972)
Long-term growth rate from year
4 2.0% -2.0% (642)
Discount rate 11.2% +1.0% (642)
Increase/
(decrease)
Acquisition of Pole Arnold Financial Change in in fair value
Management Limited Base assumption assumption GBP000
-------------------------------------- ---------------- ------------ ---------------
Estimated useful life 20 years -5 years (487)
Short-term growth rate in years
2 to 5 2.5% -5.0% (438)
Long-term growth rate from year
6 2.5% -2.0% (113)
Discount rate 14.7% +1.0% (147)
Other areas of estimation uncertainty
The Group also notes the following other areas of estimation
uncertainty, which are not considered areas of significant
estimation uncertainty:
Impairment of intangible assets
For the purposes of impairment testing, acquired client
portfolios and goodwill are allocated to the group of
cash-generating units ("CGUs") that are expected to benefit from
the business combination.
The Group reviews whether acquired client portfolios are
impaired on an annual basis, or more frequently if events or
changes in circumstances indicate that the carrying value may be
impaired. This comprises an estimation of the fair value less cost
to sell and the value in use of the acquired client portfolios.
Value in use calculations are utilised to calculate recoverable
amounts of a CGU. Value in use is calculated as the net present
value of the projected pre-tax cash flows of the CGU in which the
client portfolio is contained. The net present value of cash flows
is calculated by applying a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to that asset, based on the Group's pre-tax Weighted
Average Cost of Capital ("WACC"). The Group has applied a WACC of
10.5% to each of its operating segments.
The key assumptions used in respect of value in use calculations
are those regarding growth rates and anticipated changes to
revenues and expenses during the period covered by the
calculations. Changes to revenue and costs are based upon
management's expectation. Forecast cashflows are derived from the
budget for the three years to 31 May 2024, extrapolated for a
further two years assuming medium-term growth of 5.0% (2020: 5.0%),
thereafter extrapolating these cash flows using a long-term growth
rate of 2.0% (2020: 2.5%), which management considers conservative
against industry average long-term growth rates.
The carrying amount of client portfolios at 31 May 2021 was
GBP40.6m (2020: GBP25.4m). No impairment provisions have been made
during the year (2020: GBPnil) based upon the Directors'
review.
The Group determines whether goodwill is impaired at least on an
annual basis. This requires an estimation of the value in use of
the CGUs to which the goodwill has been allocated. In assessing
value in use, the estimated future cash flows expected to arise
from the CGU are discounted to their present value using a pre-tax
discount rate of 10.5%, reflecting current market assessments of
the time value of money and the risks specific to that asset, based
on the Group's WACC.
The carrying amount of goodwill at 31 May 2021 was GBP 37.2 m
(2020 restated: GBP21.1m). No impairment provisions have been made
during the year (2020: GBPnil) based upon the Directors'
review.
The key assumptions used in respect of value in use calculations
are those regarding growth rates and anticipated changes to
revenues and costs during the period covered by the calculations,
based upon management's expectation, and discount rates.
Sensitivities to key assumptions are disclosed in Note 19. Of
these, the most sensitive assumption is the discount rate used to
measure the value in use. Increasing the discount rate by 1.0%
would reduce the value in use of the Group's operating segments by
GBP28.7m (2020: GBP14.6m), but would not result in an impairment
being recognised.
Contingent consideration and contingent remuneration payable on
acquisitions
Whether contingent consideration is classified as acquisition
cost or remuneration, provisions for contingent consideration and
contingent remuneration require an assessment of the future values
expected to be paid out.
Using forecasts approved by the Board covering the period of the
contingency, provisions for consideration and remuneration are
recognised based on the maximum expected value expected to fall
due. A material change to the carrying value would only occur if
the acquired business fell significantly short of the target
earnings, or if termination of employment of a management seller
results in forfeiture of rights to future contingent payments. The
carrying amount of contingent consideration provided for at 31 May
2021 was GBP2.9m (2020 restated: GBP1.5m) and contingent
remuneration provided for at 31 May 2021 was GBP4.0m (2020
restated: GBP0.8m)
The key assumption used in determining the value of these
provisions is the forecast financial performance as applied in the
terms of the contingent consideration arrangement. For all
acquisitions that have completed their contingent payment period,
contingent consideration has been paid in full.
Provisions
As detailed in Note 26, the Group recognises provisions for
client claims, contingent consideration payable on acquisitions,
commission clawbacks, dilapidations, onerous contracts and other
obligations which exist at the reporting date. These provisions are
estimates and the actual amount and timing of future cash flows are
dependent on future events. Management reviews these provisions at
each reporting date to ensure they are measured at the current best
estimate of the expenditure required to settle the obligation. Any
difference between the amounts previously recognised and the
current estimate is recognised immediately in the statement of
comprehensive income .
Recoverability of accrued time costs and disbursements
The Group recognises accrued income in respect of time costs and
disbursements incurred on clients' affairs during the accounting
period, which have not been invoiced at the reporting date. This
requires an estimation of the recoverability of the unbilled time
costs and disbursements.
The estimated rate of recovery of 67.8% (2020: 66.9%) is based
on historic actual recovery rates measured over a period of twelve
(2020: three) months, calculated based on the value of invoices,
net of credit losses, divided by the gross value of the charges
based on internal charge out rates. The period over which the
recovery rate was measured in the prior year was temporarily
reduced to three months as that was considered a more appropriate
reflection of any impact from the Covid-19 pandemic on valuation of
the unbilled time costs and disbursements at 31 May 2020. The
carrying amount of accrued time costs and disbursements at 31 May
2021 was GBP4.2m (2020: GBP4.8m).
The sensitivity of a 5.0% change in the estimated recoverability
of accrued time costs and disbursements is appropriate as rates
have fluctuated +/- 3.0% over the past 12 months, with 5.0%
representing a severe but plausible degradation of recovery rates.
Sensitivity to a 5.0% (2020: 5.0%) change with all other variables
held constant, is GBP0.3m (2020: GBP0.3m) of the Group's profit
before tax respectively. There is no material impact on the Group's
equity.
3. Business combinations
The Group completed five acquisitions during the year.
Acquisition related costs of GBP 2.6 m (2020: GBP0.3m) incurred
during the year to 31 May 2021 have been expensed and are included
in administrative expenses in the consolidated statement of
comprehensive income and operating cash flows in the consolidated
statement of cash flows in the period in which they were
incurred.
Acquisition of Hurley Partners Limited
On 31 July 2020, Mattioli Woods acquired the entire issued share
capital of Hurley Partners Limited ("Hurley"), a private client
adviser and asset management business with offices in London,
Surrey and Manchester.
The fair values of the assets and liabilities of Hurley as at
the date of acquisition are set out in the table below:
Fair value Previous
recognised Fair value carrying
on acquisition adjustments value
GBP000 GBP000 GBP000
----------------------------------------- ---------------- ------------- ----------
Property, plant and equipment 112 - 112
Right of use assets 606 606 -
Client portfolio 11,595 11,595 -
Trade and other receivables 825 - 825
Prepayments and accrued income 630 (41) 671
Cash at bank 2,271 - 2,271
Assets 16,039 12,160 3,879
----------------------------------------- ---------------- ------------- ----------
Trade and other payables (273) - (273)
Accruals and deferred income (71) 146 (217)
Other taxation and social security (116) - (116)
Income tax (275) - (275)
Lease liabilities (577) (577) -
Provisions (162) (162) -
Deferred tax liability (2,215) (2,203) (12)
Liabilities (3,689) (2,796) (893)
----------------------------------------- ---------------- ------------- ----------
Total identifiable net assets at
fair value 12,350
Goodwill 5,067
----------------
Acquisition cost 17,417
----------------------------------------- ----------------
Analysed as follows:
----------------------------------------- ----------------
Initial cash consideration 10,666
Net shares in Mattioli Woods 5,921
Contingent consideration 972
Discounting of contingent consideration (142)
Acquisition cost 17,417
----------------------------------------- ----------------
Cash outflow on acquisition:
----------------------------------------- ----------------
Cash paid 10,666
Cash acquired (2,271)
Acquisition related costs 293
Net cash outflow 8,688
----------------------------------------- ----------------
Founded in 2013, Hurley is an established wealth management
business with specialist pension expertise and a discretionary
investment management offering. It is an excellent cultural and
strategic fit with Mattioli Woods' existing business, providing
services to clients with assets at acquisition comprising
approximately:
-- GBP363m of discretionary funds under management;
-- GBP54m of non-discretionary assets; and
-- GBP125m of other pension assets.
The acquisition brings additional scale to Mattioli Woods'
existing operations and offers the opportunity to promote
additional services to existing and prospective clients of Hurley
Partners. In addition, the acquisition adds further specialist
expertise to the Group and Hurley Partners' experienced management
and staff have remained with the business. The goodwill recognised
above is attributed to the expected benefits from combining the
assets and activities of Hurley Partners with those of the Group.
The primary components of this residual goodwill comprise:
-- Revenue synergies expected to be available to Mattioli Woods as a result of the transaction;
-- Operational efficiencies expected to be realised on the
migration of Hurley Partners' SSAS portfolio onto Mattioli Woods'
proprietary pension administration platform;
-- The workforce;
-- The knowledge and know-how resident in Hurley Partners' modus operandi; and
-- New opportunities available to the combined business, as a
result of both Hurley Partners and the existing business becoming
part of a more sizeable listed company.
None of the recognised goodwill is expected to be deductible for
income tax purposes. The client portfolio will be amortised on a
straight-line basis over an estimated useful life based on the
Group's historic experience.
In addition to the acquisition cost, management sellers will
receive remuneration of up to GBP7.0m over a two year earn out to
31 July 2022, subject to the achievement of certain performance
conditions including the financial performance of Hurley meeting
financial targets, see Note 28 for further details of commitments
and contingencies.
Acquisition of the Exempt Property Unit Trust administration
business of BDO Northern Ireland
On 11 January 2021, Mattioli Woods completed the acquisition of
the Exempt Property Unit Trust ("EPUT") administration business of
BDO Northern Ireland ("BDO NI") for a nominal initial consideration
plus (capped) deferred consideration representing 50% of BDO NI
EPUT profits before tax for the 30 months following completion.
Mattioli Woods has also acquired the entire issued share capital of
Callender Street Nominees Limited ("CSNL") from Aqua Trust Company
Limited in Jersey as part of the transaction.
The provisional fair values of the assets and liabilities of the
EPUT business as at the date of acquisition are set out in the
table below:
Provisional
fair value Provisional Previous
recognised fair value carrying
on acquisition adjustments value
GBP000 GBP000 GBP000
----------------------------------------- ---------------- ------------- ----------
Client portfolio 537 537 -
Trade and other receivables - (15) 15
Prepayments and accrued income 138 - 138
Cash at bank - (66) 66
Assets 675 456 219
----------------------------------------- ---------------- ------------- ----------
Trade and other payables - 4 (4)
Accruals and deferred income - 12 (12)
Other taxation and social security - 10 (10)
Income tax - 11 (11)
Deferred tax liability (102) (102) -
Liabilities (102) (65) (37)
----------------------------------------- ---------------- ------------- ----------
Total identifiable net assets at
fair value 573
Goodwill (288)
----------------
Total acquisition cost 285
----------------------------------------- ----------------
Analysed as follows:
----------------------------------------- ----------------
Initial cash consideration 107
Contingent consideration 201
Discounting of contingent consideration (23)
Total acquisition cost 285
----------------------------------------- ----------------
Cash outflow on acquisition:
----------------------------------------- ----------------
Cash paid 107
Cash acquired -
Acquisition related costs 24
Net cash outflow 131
----------------------------------------- ----------------
EPUTs are complementary to Mattioli Woods' core SSAS and SIPP
proposition, widely used in Northern Ireland and the acquisition
expands Mattioli Woods' operations in the region. The EPUT
business's experienced team of three employees will join Mattioli
Woods and operate from the Group's existing office in Belfast. The
EPUT business provides trustee and administration services to over
100 EPUTs with total funds under trusteeship of over GBP233
million.
Negative goodwill of GBP288,000 has been recognised in the
statement of comprehensive income as a gain on bargain
purchase.
Acquisition of Montagu Limited
On 2 February 2021, Mattioli Woods acquired the entire issued
share capital of Montagu Limited ("Montagu"), a financial planning
and wealth management business based in Twickenham, London.
The provisional fair values of the assets and liabilities of
Montagu as at the date of acquisition are set out in the table
below:
Provisional Provisional Previous
fair value recognised fair value carrying
on acquisition adjustments value
GBP000 GBP000 GBP000
----------------------------------------- ----------------------- ------------- ----------
Property, plant and equipment 3 - 3
Right of use assets 53 53 -
Client portfolio 1,716 1,716 -
Trade receivables 74 - 74
Prepayments and accrued income 17 - 17
Cash at bank 1,173 - 1,173
Assets 3,036 1,769 1,267
----------------------------------------- ----------------------- ------------- ----------
Trade and other payables (1) - (1)
Accruals and deferred income (130) - (130)
Other taxation and social security (17) - (17)
Corporation tax (82) - (82)
Lease liability (53) (53) -
Provisions for deferred tax (326) (326) -
Liabilities (609) (379) (230)
----------------------------------------- ----------------------- ------------- ----------
Total identifiable net assets
at fair value 2,428
Goodwill arising on acquisition 800
Total acquisition cost 3,228
----------------------------------------- -----------------------
Analysed as follows:
----------------------------------------- -----------------------
Initial cash consideration 1,090
Net assets adjustment to initial
cash consideration 1,003
Initial share consideration 300
Contingent consideration 950
Discounting of contingent consideration (115)
----------------------------------------- -----------------------
Total acquisition cost 3,228
----------------------------------------- -----------------------
Cash outflow on acquisition:
----------------------------------------- -----------------------
Cash paid 2,093
Cash acquired (1,173)
Acquisition related costs 103
Net cash outflow 1,023
----------------------------------------- -----------------------
Montagu was established in 1996 and provides wealth management
advice and administration for over 150 private and corporate
clients with approximately GBP80 million of assets under
advice.
Like Mattioli Woods, the business specialises in the provision
of fee-based financial planning advice. The complementary product
offerings provide scope for potential revenue synergies, while
maintaining the strong cultural commitment of both companies to
putting clients first.
Acquisition of Pole Arnold Financial Management Limited
On 12 April 2021, Mattioli Woods acquired the entire issued
share capital of Pole Arnold Financial Management Limited ("Pole
Arnold"), a financial planning and wealth management business with
offices in Leicester and London.
The provisional fair values of the assets and liabilities of
Pole Arnold as at the date of acquisition are set out in the table
below:
Provisional
fair value Provisional Previous
recognised fair value carrying
on acquisition adjustments value
GBP000 GBP000 GBP000
---------------------------------- ---------------- ------------- ----------
Property, plant and equipment 13 - 13
Client portfolio 3,762 3,762 -
Trade and other receivables 99 - 99
Prepayments and accrued income 19 - 19
Cash at bank 1,039 - 1,039
Assets 4,932 3,762 1,170
---------------------------------- ---------------- ------------- ----------
Trade and other payables (16) - (16)
Accruals and deferred income (284) - (284)
Social security and other taxes (118) - (118)
Corporation tax (109) - (109)
Provisions (5) - (5)
Provisions for deferred tax (715) (715) (1)
Liabilities (1,247) (715) (533)
---------------------------------- ---------------- ------------- ----------
Total identifiable net assets at
fair value 3,684
Goodwill arising on acquisition 718
Total acquisition cost 4,402
---------------------------------- ----------------
Analysed as follows:
---------------------------------- ----------------
Initial cash consideration 3,500
Net assets adjustment to initial
cash consideration 399
Initial share consideration 503
Total acquisition cost 4,402
Cash outflow on acquisition:
---------------------------------- ----------------
Cash paid 3,899
Cash acquired (1,039)
Acquisition related costs 145
Net cash outflow 3,005
---------------------------------- ----------------
Pole Arnold is a firm of experienced financial advisers,
established in 2012 and providing highly personalised advice to
circa 360 private and corporate clients with approximately GBP245
million of assets under management and advice. Pole Arnold is based
in Leicester and employs an experienced team of 16 staff, all of
whom will remain with Mattioli Woods following completion.
Like Mattioli Woods, the business specialises in the provision
of fee-based financial planning, with the businesses complementary
product offerings providing scope for potential revenue synergies,
whilst maintaining the strong cultural commitment of both companies
to putting clients first.
In addition to the acquisition cost, management sellers will
receive remuneration of up to GBP3.0m over a two year earn out to
12 April 2023, subject to the achievement of certain performance
conditions including the financial performance of Pole Arnold
meeting financial targets, see Note 28 for further details of
commitments and contingencies.
Acquisition of Caledonia Asset Management Limited
On 12 April 2021, Mattioli Woods acquired the entire issued
share capital of Caledonia Asset Management Limited ("Caledonia"),
a financial planning and wealth management business based in
Edinburgh.
The provisional fair values of the assets and liabilities of
Caledonia as at the date of acquisition are set out in the table
below:
Provisional
fair value Provisional Previous
recognised fair value carrying
on acquisition adjustments value
GBP000 GBP000 GBP000
----------------------------------------- ---------------- ------------- ----------
Property, plant and equipment 7 - 7
Right of use assets 30 30 -
Client portfolio 680 680 -
Trade and other receivables 3 (18) 21
Prepayments and accrued income 24 - 24
Cash at bank 267 - 267
Assets 1,011 692 319
----------------------------------------- ---------------- ------------- ----------
Trade and other payables (25) - (25)
Accruals and deferred income (31) - (31)
Corporation tax (43) - (43)
Lease liability (30) (30) -
Provisions for deferred tax (129) (129) -
Liabilities (258) (159) (99)
----------------------------------------- ---------------- ------------- ----------
Total identifiable net assets at
fair value 752
Goodwill arising on acquisition 886
Total acquisition cost 1,638
----------------------------------------- ----------------
Analysed as follows:
----------------------------------------- ----------------
Initial cash consideration 860
Net assets adjustment to initial
cash consideration 111
Initial share consideration 105
Contingent consideration 640
Discounting of contingent consideration (78)
----------------------------------------- ----------------
Total acquisition cost 1,638
Cash outflow on acquisition:
----------------------------------------- ----------------
Cash paid 971
Cash acquired (267)
Acquisition related costs 89
Net cash outflow 793
----------------------------------------- ----------------
Founded in 2000, Caledonia provides wealth management services
to affluent individuals and families, encompassing lifestyle
financial planning, pensions and retirement planning, ISAs, life
assurance, critical illness, income protection and personal tax
planning, working with circa 150 private clients with over GBP55
million of assets under advice .
4. Revenue
The Group derives its revenue from the rendering of services
over time and at a point in time across all operating segments.
Further details of accounting policies for the recognition of
revenue are disclosed in Note 2. The timing of recognition of the
revenues of each operating segment is analysed as follows:
2021 2020
Timing of revenue recognition GBP000 GBP000
--------------------------------------- ------------ -------
At a point in time:
Investment and asset management 2,041 2,002
Pension consultancy and administration 1,018 1,097
Property management 104 464
Employee benefits 917 1,043
4,080 4,606
Over time:
Investment and asset management 31,329 24,846
Pension consultancy and administration 17,789 19,464
Property management 4,806 4,952
Employee benefits 4,611 4,539
58,535 53,801
--------------------------------------- ------------ -------
62,615 58,407
--------------------------------------- ------------ -------
The following table shows the aggregate amount of the
transaction price allocated to performance obligations that are
unsatisfied (or partially unsatisfied) as at the end of the
reporting period:
Group Group Company Company
2021 2020 2021 2020
Contract liabilities GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------- ------- ------- -------
Investment and asset management 52 - - -
Pension consultancy and administration 2,218 2,219 967 1,051
Property management 204 36 - -
Employee benefits 485 515 485 515
2,959 2,770 1,452 1,566
--------------------------------------- ------- ------- ------- -------
The Group expects that 100% of the transaction price allocated
to the unsatisfied contracts as at 31 May 2021 will be recognised
as revenue during the next reporting period, amounting to
GBP2,959,000.
The following table shows the movement in contract liabilities
in the period:
Group Company
Contract liabilities GBP000 GBP000
------------------------------------------------ ------- -------
At 1 June 2020 2,770 1,566
Revenue recognised on completion of performance
obligations (2,770) (1,566)
Consideration received allocated to performance
obligations that are unsatisfied at the period
end 2,959 1,452
At 31 May 2021 2,959 1,452
------------------------------------------------ ------- -------
5. Seasonality of operations
Historically, revenues in the second half-year have been
typically higher than in the first half. Time or activity-based
pension consultancy and administration fees are impacted by SSAS
scheme year ends being linked to the sponsoring company's year end,
which is often in December or March, coupled with there typically
being increased activity on SSAS and SIPP schemes prior to the end
of the fiscal year on 5 April.
Despite further diversification of the Group's wealth management
and employee benefits revenue streams, the directors believe there
is still some seasonality of operations, although a substantial
element of the Group's revenues are now geared to the prevailing
economic and market conditions.
6. Segment information
The Group's objective is to fully integrate the businesses it
acquires, to enable it to deliver holistic solutions across its
wide and diverse client base. The Group's operating segments
comprise the following:
-- Pension consultancy and administration - Fees earned by
Mattioli Woods for setting up and administering pension schemes.
Additional fees are generated from consultancy services provided
for special one-off activities and the provision of bespoke scheme
banking arrangements;
-- Investment and asset management - Income generated from the
management and placing of investments on behalf of clients;
-- Property management - Income generated where Custodian
Capital manages private investor syndicates, facilitates direct
commercial property investments on behalf of clients or acts as the
external discretionary manager for Custodian REIT plc; and
-- Employee benefits - Income generated from corporate clients
for consultancy and administration of employee benefits offering
including group personal pensions and other insurance products.
Each segment represents a revenue stream subject to risks and
returns that are different to other operating segments, although
each operating segment's products and services are offered to
broadly the same market. The Group operates exclusively within the
United Kingdom.
Operating segments
The operating segments defined above all utilise the same
intangible assets, property, plant and equipment and the segments
have been financed as a whole, rather than individually. The
Group's operating segments are managed together as one business.
Accordingly, certain costs are not allocated across the individual
operating segments, as they are managed on a group basis. Segment
profit or loss reflects the measure of segment performance reviewed
by the Board of Directors (the Chief Operating Decision Maker).
The following tables present revenue and profit information
regarding the Group's operating segments for the two years ended 31
May 2021 and 2020 respectively.
Investment Pension
and consultancy
asset and Property Employee Total Corporate
Year ended management administration management benefits segments costs Consolidated
31 May 2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ------------- --------------- ------------ ------------- ----------- ------------- --------------
Revenue
External
customers 33,370 18,807 4,910 5,528 62,615 - 62,615
Results
Segment
profit
before tax 9,195 5,787 605 755 16,342 (11,194) 5,148
------------- ------------- --------------- ------------ ------------- ----------- ------------- --------------
Investment Pension
and consultancy
asset and Property Employee Total Corporate
Year ended management administration management benefits segments costs Consolidated
31 May 2020 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ------------- --------------- ------------ ------------- ----------- ------------- --------------
Revenue
External
customers 26,848 20,561 5,416 5,582 58,407 - 58,407
Results
Segment
profit
before tax
(restated) 9,629 6,488 1,107 1,146 18,370 (5,639) 12,731
------------- ------------- --------------- ------------ ------------- ----------- ------------- --------------
Segment assets
The following table presents segment assets of the Group's
operating segments:
31 May
31 May 2020
2021 Restated
GBP000 GBP000
---------------------------------------- --------- ----------
Investment and asset management 46,042 22,153
Pension consultancy and administration 24,096 24,204
Property management 2,189 1,468
Employee benefits 5,511 6,220
Segment operating assets 77,838 54,045
Corporate assets 46,327 50,109
Total assets 124,165 104,154
----------------------------------------- --------- ----------
Segment operating assets exclude property, plant and equipment,
certain items of computer software, investments, current and
deferred tax balances and cash balances, as these assets are
considered corporate in nature and are not allocated to a specific
operating segment.
31 May
31 May 2020
2021 Restated
Reconciliation of assets GBP000 GBP000
----------------------------------- --------- ----------
Segment operating assets 77,838 54,045
Property, plant and equipment 14,340 15,636
Right of use assets 2,180 2,584
Intangible assets 1,666 1,579
Deferred tax asset 951 888
Prepayments and other receivables 4,956 2,709
Income tax receivable 30 390
Finance lease receivable 290 324
Investments 26 40
Cash and short-term deposits 21,888 25,959
Total assets 124,165 104,154
------------------------------------ --------- ----------
Acquired intangibles and amortisation thereon relate to a
specific transaction and are allocated between individual operating
segments based on the headcount or revenue mix of the cash
generating units at the time of acquisition. The subsequent
delivery of services to acquired clients may be across a number or
all operating segments, comprising different operating segments to
those the acquired intangibles have been allocated to.
Liabilities have not been allocated between individual operating
segments, as they cannot be allocated on anything other than an
arbitrary basis.
Corporate costs
Certain administrative expenses including acquisition costs,
amortisation of software, depreciation of property, plant and
equipment, irrecoverable VAT, legal and professional fees and
professional indemnity insurance are not allocated between segments
that are managed on a unified basis and utilise the same intangible
and tangible assets.
Finance income and expenses, gains and losses on the disposal of
assets, taxes, intangible assets and certain other assets and
liabilities are not allocated to individual segments as they are
managed on a group basis. Capital expenditure consists of additions
of property, plant and equipment and intangible assets.
2020
2021 Restated
Reconciliation of profit before tax GBP000 GBP000
---------------------------------------- --------- ----------
Total segments 16,342 18,370
Deferred consideration as remuneration (3,803) (750)
Depreciation (2,772) (2,547)
Acquisition-related costs (2,595) (334)
Irrecoverable VAT (981) (900)
Finance costs (258) (260)
Professional indemnity insurance (706) (610)
Amortisation and impairment (304) (359)
Bank charges (48) (24)
Loss on disposal of assets (46) (18)
Foreign exchange loss (3) -
Finance income 34 99
Gain on bargain purchase 288 -
Group profit before tax 5,148 12,731
Country-by-country reporting
HM Treasury has transposed the requirements set out under the
Capital Requirements Directive IV ("CRD IV") and issued the Capital
Requirements Country-by-Country Reporting Regulations 2013,
effective 1 January 2014. The legislation requires Mattioli Woods
plc (together with its subsidiaries) to publish certain additional
information split by country, on a consolidated basis, for the year
ended 31 May 2021.
Mattioli Woods plc and its subsidiaries (see Note 18) are all
incorporated in and operate from the United Kingdom. All employees
(see Note 11) of the Group hold contracts of employment in the
United Kingdom. All turnover (revenue) and profit before tax is
recognised on activities based in the United Kingdom. All tax paid
and any subsidies received are paid to and received from UK
institutions.
7. Auditor's remuneration
Remuneration paid by the Group to its auditor, Deloitte LLP, and
its associates for the audit of the financial statements, fees
other than for the audit of the financial statements and the total
of non-audit fees for the Group were as follows:
2021 2020
GBP000 GBP000
Audit services:
Audit of the financial statements of the Company 225 170
Audit of the financial statements of subsidiaries 37 30
262 200
Audit-related services:
Interim review 28 28
Other assurance - CASS reporting 20 20
48 48
Non-audit services:
Indirect tax advice - 12
Provision of indirect tax software for clients' VAT returns 19 39
19 51
Total 329 299
8. Finance revenue
2021 2020
GBP000 GBP000
Bank interest receivable 20 83
Unwinding of discount on finance lease receivable 14 16
34 99
9. Finance costs
2020
2021 Restated
GBP000 GBP000
Unwinding of discount on provisions 145 74
Unwinding of discount on lease liabilities 110 122
Interest payable 3 -
258 196
10. Operating profit
2021 2020
Included in operating profit before financing: GBP000 GBP000
Depreciation and impairment of tangible assets (Notes 15 and 16) (2,772) (2,547)
Amortisation and impairment of intangible assets (Note 17) (3,078) (2,437)
11. Employee benefits expense
The average monthly number of employees during the year was:
Group Group 2020 Company Company
2021 No. 2021 2020
No. No. No.
Executive directors 2 2 2 2
Non-executive directors 4 3 4 3
Consultants 133 120 116 115
Administrators 251 246 221 221
Support staff 246 230 220 210
636 601 563 551
Staff costs for the above persons were:
Group Group Company Company
2021 2020 2021 2020
GBP000 GBP000 GBP000 GBP000
Wages and salaries 28,817 23,253 25,220 21,402
Social security costs 3,118 2,321 2,650 2,168
Pension costs and life insurance 1,402 1,266 1,202 1,111
Other staff costs 804 783 776 780
34,141 27,623 29,848 25,461
In addition, the cost of share-based payments disclosed
separately in the consolidated statement of comprehensive income
was GBP1,475,000 (2020: GBP1,335,000), and the cost of contingent
consideration treated as remuneration disclosed separately in the
consolidated statement of comprehensive income was GBP3,803,000
(2020 restated: GBP750,000).
Details of the remuneration payable to each director in respect
of the year ended 31 May 2021 is disclosed in the Directors'
Remuneration Report.
2021 2020
GBP000 GBP000
Emoluments 1,707 1,078
Company contributions to personal pension schemes - -
Benefits in kind 17 24
Market value of share options vesting 636 1,041
2,360 2,143
Five directors (2020: three) accrued benefits under personal
pension schemes, or through an equivalent cash award when they have
reached their maximum lifetime allowance. During the year 20,000
share options were issued to directors (2020: 40,000) and directors
exercised 64,740 share options (2020: Nil). The aggregate amount of
gains made by directors on the exercise of share options during the
year was GBP433,000 (2020: GBPnil). For terms of share options
awarded, please see Note 20.
The amounts in respect of the highest paid director are as
follows:
2021 2020
GBP000 GBP000
Emoluments 1,026 526
Company contributions to personal pension schemes - -
Benefits in kind 9 2
Market value of share options vesting 433 558
1,468 1,086
The amount of gains made by the highest paid director on the
exercise of share options during the year was GBPnil (2020:
GBPnil).
The Group makes discretionary and contractual payments into the
personal defined contribution pension schemes of employees and
contributions are charged in the statement of comprehensive income
as they become payable. The charge for the year was GBP1,114,000
(2020: GBP1,006,000).
12. Income tax
The major components of income tax expense for the years ended
31 May 2021 and 2020 are:
2021 2020
Consolidated statement of comprehensive income GBP000 GBP000
Current tax 2,390 3,292
Under provision in prior periods 38 170
2,428 3,462
Deferred tax credit (498) (505)
Adjustments in respect of change in tax rate 1,974 424
Adjustments in respect of prior periods (147) (137)
Income tax expense reported in the statement of comprehensive income 3,757 3,244
The over provision for current tax in prior periods includes
GBP98,000 (2020: GBPnil) arising from a Research and Development
tax credit in respect of the financial year ending 31 May 2021
(2020: Nil).
For the year ended 31 May 2021 the current tax credit on the
Group's share-based payment arrangements recognised directly in
equity was GBP31,000 (2020: GBP29,000). The deferred tax charged on
the Group's outstanding share-based payment arrangements recognised
directly in equity was GBP46,000 (2020: GBP50,000).
Factors affecting the tax charge for the period
The tax charge assessed for the period is higher (2020: higher)
than the standard rate of corporation tax in the UK of 19.0% (2020:
19.0%). The differences are explained below:
2020
2021 Restated
GBP000 GBP000
Accounting profit before income tax 5,148 12,731
Multiplied by standard rate of UK corporation tax of 19.0% (2019: 19.0%) 978 2,419
Effects of:
Expenses not deductible for tax 1,180 473
Effects of changes in tax rates 1,974 424
Deferred tax on share options 7 16
Income not taxable (271) (121)
(Over)/under provision in prior periods (108) 33
Tax reliefs (1) -
Income tax expense for the year 3,757 3,244
Effective income tax rate 73.0% 25.5%
Deferred income tax
Deferred income tax at 31 May relates to the following:
Company Company
Group 2021 Group 2020 2021 2020
GBP000 GBP000 GBP000 GBP000
Deferred income tax liability
Temporary differences on:
Acquired intangibles (9,291) (4,305) (6,730) (3,038)
Accelerated capital allowances (151) (177) (10) (54)
Deferred tax liability (9,442) (4,482) (6,740) (3,092)
Deferred income tax asset
Temporary differences on:
Provisions 372 214 353 200
Share-based payments 579 674 578 674
Deferred tax asset 951 888 932 874
Net deferred tax liability (8,491) (3,594) (5,808) (2,218)
Changes to the future expected UK corporation tax rates were
enacted as part of The Finance (No. 2) Act 2021 which received
Royal Assent on 10 June 2021, in which the government announced
that the corporation tax main rate will remain at 19% for the years
starting 1 April 2021 and 2022 before increasing to 25% for the
year starting 1 April 2023 and thereafter. Deferred taxation assets
and liabilities have been remeasured at the blended average rates
at which they are expected to unwind.
The primary components of the entity's recognised deferred tax
assets include temporary differences related to share-based
payments, provisions and other items. The primary components of the
entity's deferred tax liabilities include temporary differences
related to property, plant and equipment and intangible assets. The
utilisation of the deferred tax asset is dependent on future
taxable profits in excess of the profits arising from the reversal
of existing taxable temporary differences.
The recognition of deferred tax in the statement of
comprehensive income arises from the origination and the reversal
of temporary differences and the effects of changes in tax rates.
The components of the deferred tax credit for the year ended 31 May
2021 are summarised as follows:
2021 2020
Deferred tax in statement of comprehensive income GBP000 GBP000
Effect of changes in the standard rate of tax 1,974 424
Deferred tax on share-based payments 35 (124)
Under/(over) provision for capital allowances in prior period 17 (6)
Deferred tax on derivative financial asset - (139)
Under provision for share-based payments (9) -
Deferred tax on provisions (11) -
Deferred tax on intangible assets (16) (18)
Under provision for intangibles (58) (92)
Deferred tax on capital allowances (69) 11
Under provision for provisions in prior period (97) (40)
Deferred tax on amortisation of client portfolios (437) (235)
Deferred tax charge/(credit) 1,329 (218)
The total deferred tax movement in the statement of financial
position is summarised as follows:
2021 2020
Deferred tax reconciliation GBP000 GBP000
Opening net deferred tax liability (3,594) (3,641)
(Debit)/Credit recognised in statement of comprehensive income (1,329) 218
Deferred tax charge recognised in equity (78) (50)
Movement arising from transfer of trade (102) -
Deferred tax arising on acquisitions or disposal of trade (3,388) (121)
Closing net deferred tax liability (8,491) (3,594)
There are no income tax consequences for the Group attaching to
the payment of dividends by Mattioli Woods plc to its shareholders
in either 2020 or 2021.
Impact of future tax changes
On 10 June 2021 The Finance (No. 2) Bill 2019-21 received Royal
Asset, enacting proposals that were announced in the 2021 budget.
The main rate of corporation tax will remain at 19% for the years
starting 1 April 2021 and 2022 before increasing to 25% for the
year starting 1 April 2023 and thereafter.
Deferred taxation assets and liabilities have been revalued
taking in to account the upcoming change in corporation tax
rates.
13. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net
profit for the year attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares
outstanding during the year, excluding own shares of 76,578 (2020:
76,578 ).
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The income and share data used in the basic and diluted earnings
per share computations is as follows:
2020
2021 Restated
GBP000 GBP000
Net profit and diluted net profit attributable to equity holders of the Company 1,419 9,472
Weighted average number of ordinary shares: 000s 000s
Issued ordinary shares at start of period 26,940 26,770
Effect of shares issued during the year ended 31 May 2020 - 127
Effect of shares issued during the year ended 31 May 2021 996 264
Basic weighted average number of shares 27,936 27,161
Effect of dilutive options at the statement of financial position date 235 150
Diluted weighted average number of shares 28,171 27,311
The Company has granted options under the Share Option Plan, the
Consultants' Share Option Plan and the LTIP to certain of its
senior managers and directors to acquire (in aggregate) up to 3.32%
of its issued share capital (see Note 20). Under IAS 33 'Earnings
Per Share', contingently issuable ordinary shares are treated as
outstanding and are included in the calculation of diluted earnings
per share if the conditions (the events triggering the vesting of
the option) are satisfied. At 31 May 2021 the conditions attached
to 702,238 options granted under the LTIP were not satisfied (2020:
630,940). If the conditions had been satisfied, diluted earnings
per share would have been 4.9p per share (2020 restated:
33.9p).
Since the reporting date and the date of completion of these
financial statements the following transactions have taken place
involving ordinary shares or potential ordinary shares:
-- The issue of 16,969,697 ordinary shares on completion of the market placing (see Note 33);
-- The issue of 4,545,455 ordinary shares as initial
consideration payable on the acquisition of Maven Capital Partners
LLP (see Note 33);
-- The issue of 780,250 ordinary shares as initial consideration
payable on the acquisition of Ludlow Wealth Management Group (see
Note 33); and
-- The issue of 32,312 ordinary shares under the Mattioli Woods plc Share Incentive Plan.
14. Dividends paid and proposed
2021 2020
GBP000 GBP000
Declared and paid during the year:
Equity dividends on ordinary shares:
- Final dividend for 2020: 12.7p (2019: 13.67p) 3,547 3,660
- Interim dividend for 2021: 7.5 p (2020: 7.3 p) 2,103 1,959
Dividends paid 5,650 5,619
Proposed for approval by shareholders at the AGM:
Final dividend for 2021: 13.5 p (2020: 12.7p) 6,818 3,532
15. Property, plant and equipment
Computer and office
Land and buildings equipment Fixtures and fittings Motor vehicles Total
Group GBP000 GBP000 GBP000 GBP000 GBP000
Gross carrying amount:
At 1 June 2019 10,780 2,348 5,522 1,566 20,216
Additions - 308 154 356 818
Arising on acquisitions - 2 - - 2
Disposals - (4) - (291) (295)
At 31 May 2020 10,780 2,654 5,676 1,631 20,741
Additions - 93 18 307 418
Arising on acquisitions - 130 3 - 133
Disposals - (770) (725) (467) (1,962)
At 31 May 2021 10,780 2,107 4,972 1,471 19,330
Depreciation:
At 1 June 2019 168 1,483 1,365 535 3,551
Charged for the year 252 341 842 270 1,705
On disposals - (1) - (152) (153)
At 31 May 2020 420 1,823 2,207 653 5,103
Charged for the year 252 327 825 234 1,638
On disposals - (758) (705) (288) (1,751)
At 31 May 2021 672 1,392 2,327 599 4,990
Carrying amount:
At 31 May 2021 10,108 714 2,646 872 14,340
At 31 May 2020 10,360 831 3,469 978 15,638
At 31 May 2019 10,612 865 4,157 1,031 16,665
Computer and office equipment Fixtures and fittings Motor vehicles Total
Company GBP000 GBP000 GBP000 GBP000
Gross carrying amount:
At 1 June 2019 2,195 2,591 1,572 6,358
Additions 305 154 355 814
Disposals (1) - (291) (292)
At 31 May 2020 2,499 2,745 1,636 6,880
Additions 92 17 307 416
Disposals (770) (724) (467) (1,961)
Transfer between companies 68 7 - 7 5
At 31 May 2021 1,889 2,044 1,476 5,410
Depreciation:
At 1 June 2019 1,335 1,013 541 2,889
Charged for the year 338 420 271 1,029
On disposals (1) - (151) (152)
At 31 May 2020 1,672 1,433 661 3,766
Charged for the year 274 401 234 909
On disposals (752) (696) (289) (1,737)
At 31 May 2021 1,194 1,138 606 2,938
Carrying amount:
At 31 May 2021 695 906 870 2,472
At 31 May 2020 827 1,312 976 3,115
At 31 May 2019 860 1,578 1,031 3,469
16. Right of use assets
Computer and office equipment
Properties Total
Group GBP000 GBP000 GBP000
Gross carrying amount:
At 1 June 2020 2,706 717 3,423
Additions 64 - 64
Arising on acquisitions 689 - 689
Disposals (75) - (75)
At 31 May 2021 3,384 717 4,101
Depreciation:
At 1 June 2020 650 189 839
Charged for the period 734 233 967
On disposals (52) - (52)
Impairment 167 - 167
At 31 May 2021 1,499 422 1,921
Carrying amount:
At 31 May 2021 1,885 295 2,180
At 31 May 2020 2,056 528 2,584
Computer and office equipment
Properties Total
Company GBP000 GBP000 GBP000
Gross carrying amount:
At 1 June 2020 2,223 717 2,940
Additions 64 - 64
Transfer between companies 532 - 532
At 31 May 2021 2,819 717 3,536
Depreciation:
At 1 June 2020 563 189 752
Charged for the period 561 233 794
Impairment 167 - 167
At 31 May 2021 1,291 422 1,713
Carrying amount:
At 31 May 2021 1,528 295 1,823
At 31 May 2020 1,660 528 2,188
17. Intangible assets
Goodwill
Internally generated software Software Client portfolios Restated Other Total
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gross carrying amount:
At 1 June 2019 - Restated 1,573 1,927 38,544 9,506 35 51,585
Arising on acquisitions - - 712 920 - 1,632
Additions 173 - - - - 173
At 31 May 2020 - Restated 1,746 1,927 39,256 10,426 35 53,390
Arising on acquisitions - - 18,293 7,470 - 25,763
Additions 386 4 - - - 390
At 31 May 2021 2,132 1,931 57,549 17,896 35 79,543
Amortisation and impairment:
At 1 June 2019 709 1,025 11,791 - 35 13,560
Amortisation during the year 175 184 2,078 - - 2,437
At 31 May 2020 884 1,209 13,869 - 35 15,997
Amortisation during the year 187 117 2,774 - - 3,078
At 31 May 2021 1,071 1,326 16,643 - 35 19,075
Carrying amount:
At 31 May 2021 1,061 605 40,906 17,896 - 60,468
At 31 May 2020 - Restated 862 718 25,387 10,426 - 37,393
At 31 May 2019 - Restated 864 902 26,753 9,506 - 38,025
Internally generated software Software Client portfolios Goodwill Total
Company GBP000 GBP000 GBP000 GBP000 GBP000
Gross carrying amount:
At 1 June 2019 1,573 1,768 28,979 16,384 48,704
Additions 172 - - - 172
At 31 May 2020 1,745 1,768 28,979 16,384 48,876
Arising on acquisitions - - 537 - 537
Arising on hive up - - 13,065 12,132 25,197
Additions 387 - - - 387
At 31 May 2021 2,132 1,768 42,581 28,516 74,997
Amortisation and impairment:
At 1 June 2019 709 914 8,576 - 10,199
Amortisation during the year 175 185 1,679 - 2,039
At 31 May 2020 884 1,099 10,255 - 12,238
Amortisation during the year 187 114 1,903 - 2,204
At 31 May 2021 1,071 1,213 12,158 - 14,442
Carrying amount:
At 31 May 2021 1,061 555 30,423 28,516 60,555
At 31 May 2020 861 669 18,724 16,384 36,638
At 31 May 2019 864 854 20,403 16,384 38,505
Software
Software is amortised over its useful economic life of four
years on a reducing balance basis. Internally generated software
represents the development costs of the Group's bespoke customer
relationship management, administration and trading platform. The
directors believe this technology will be the principal technology
platform used throughout the Group for the foreseeable future.
Internally generated software is amortised on a straight-line basis
over an estimated useful life of 10 years.
Client portfolios
Client portfolios represent individual client portfolios
acquired through business combinations. Client portfolios are
amortised on a straight-line basis over an estimated useful life of
between 10 and 25 years, based on the Group's historic
experience.
Goodwill
Goodwill arises where the price paid for an acquisition is
greater than the fair value of the net assets acquired. Goodwill
arising on business combinations is subject to annual impairment
testing (see Note 19).
18. Investments
Investments in subsidiaries
Group Company
Investments in subsidiaries GBP000 GBP000
At 1 June 2019 - Restated - 11,410
Investment in The Turris Partnership Limited - 1,731
At 31 May 2020 - Restated - 13,141
Investment in Hurley Partners Limited - 17,417
Investment in Montagu Limited - 3,228
Investment in Pole Arnold Financial Management Limited - 4,402
Investment in Caledonia Asset Management Limited - 1,638
Reduction in value of Broughtons Financial Planning Limited - (21)
At 31 May 2021 - 39,805
Reduction in value of investment in Broughtons Financial
Planning Limited ("Broughtons") investment was recognised following
the hive-up of trade and assets of Broughtons to the Company 28
February 2021. As Broughtons had paid dividends to the Company
since its acquisition, the net assets of the subsidiary were lower
than the value of the investment recognised by the Company,
therefore once Broughtons' trade was transferred, the value of the
investment was no longer fully supported by its future cashflows
and a small impairment charge was recognised to write the value of
the investment down to the net assets of Broughtons. The impairment
charge recognised by the company was eliminated on
consolidation.
Details of the investments in subsidiaries which the Group and
the Company (unless indicated) holds 20% or more of the nominal
value of any class of share capital are as follows:
Voting Nature of
Subsidiary undertakings Share class held rights and shares held business
GB Pension Trustees Limited Ordinary 100% Trustee company
Great Marlborough Street Pension Ordinary 100% Trustee company
Trustees Limited
M.W. Trustees Limited Ordinary 100% Trustee company
SLT Trustees Limited Ordinary 100% Trustee company
Professional Independent Pension Ordinary 100% Trustee company
Trustees Limited
Pension Consulting Limited Ordinary 100% Holding company
PC Trustees Limited Ordinary 100% Trustee company
Bank Street Trustees Limited Ordinary 100% Trustee company
JB Trustees Limited Ordinary 100% Trustee company
Mayflower Trustees Limited Ordinary 100% Trustee company
Custodian Capital Limited Ordinary 100% Property and fund management
CP SSAS Trustees Limited Ordinary 100% Trustee company
CP SIPP Trustees Limited Ordinary 100% Trustee company
City Trustees Limited Ordinary 100% Trustee company
AR Pension Trustees Limited Ordinary 100% Trustee company
Robinson Gear (Management Ordinary 100% Trustee company
Services) Limited
Simmonds Ford Trustees Limited Ordinary 100% Trustee company
Acomb Trustees Limited Ordinary 100% Trustee company
Ropergate Trustees Limited Ordinary 100% Trustee company
Chapel Trustees Limited Ordinary 100% Trustee company
Mattioli Woods (New Walk) Limited Ordinary 100% Property development
Taylor Patterson Trustees Ltd Ordinary 100% Trustee company
Lindley Trustees Limited Ordinary 100% Trustee company
MWV Solutions Limited Ordinary 50% Dormant joint venture
Old Station Road Holdings Limited Ordinary 100% Holding company
M C Trustees (Pensions) Limited Ordinary and preference 100% Pension administration
M C Trustees (Administration) Ordinary 100% Pension administration
Limited
MCT (Properties) Limited Ordinary 100% Dormant
M C Trustees Limited Ordinary 100% Trustee company
MC Nominees Limited Ordinary 100% Dormant
Broughtons Financial Planning Ordinary 100% Wealth management
Limited
SSAS Solutions (UK) Ltd Ordinary 100% Pension administration
The Turris Partnership Limited Ordinary 100% Wealth management
MW Personal Equity (Harbinger Ordinary 100% Trustee company
Self Storage) Limited
MW Private Investors (102) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (103) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (105) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (106) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (Beech Ordinary 100% General Partner company
Properties) General Partner
Limited
MW Private Investors (Welbeck Ordinary 100% General Partner company
Land) General Partner Limited
MW Private Investors (CITU) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (Proseed) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (Prosperity Ordinary 100% General Partner company
Liverpool) General Partner
Limited
MW Private Investors (Heaton Ordinary 100% General Partner company
Group) General Partner Limited
MW Private Equity (Harbinger Self Ordinary 100% General Partner company
Storage) General Partner Limited
MW Private Investors (Tungsten Ordinary 100% General Partner company
Witney) General Partner Limited
MW Private Investors (Versant) Ordinary 100% General Partner company
General Partner Limited
MW Private Investors (The Square) Ordinary 100% Trustee company
Limited
MW Private Investors (Expedia) Ordinary 100% Trustee company
Limited
MW Private Investors (Belfast Ordinary 100% Trustee company
Expedia 2) Limited
MW Private Investors (Belfast Ordinary 100% Trustee company
Expedia 3) Limited
MW Private Investors (The Priest Ordinary 100% Trustee company
House Hotel) Limited
MW Private Investors (Walrus) Ordinary 100% Trustee company
Limited
MW Private Investors (103) EPUT Ordinary 100% Trustee company
Limited
MW Private Investors (Clear Ordinary 100% Trustee company
Nursery) Limited
MW Private Investors (Expedia Ordinary 100% General Partner company
Dental) General Partner Limited
MW Private Investors (Barwood Ordinary 100% General Partner company
Capital) General Partner Limited
MW Private Equity (Rotherhill) Ordinary 100% Trustee company
Limited
MW Private Equity (March Ordinary 100% Trustee company
Projects) Limited
MW Private Equity (Tungsten Ordinary 100% Trustee company
Handcross) Limited
MW Properties (Huntingdon Geared) Ordinary 100% Trustee company
Limited
MW Properties (Huntingdon Ordinary 100% Trustee company
Non-Geared) Limited
MW Properties (No 42) Limited Ordinary 100% Trustee company
MW Properties (No 46) Limited Ordinary 100% Trustee company
MW Properties (No 49) Limited Ordinary 100% Trustee company
MW Properties (No 60) Limited Ordinary 100% Trustee company
MW Properties No 17 Limited Ordinary 100% Trustee company
MW Properties No 20 Limited Ordinary 100% Trustee company
MW Properties No 25 Limited Ordinary 100% Trustee company
MW Properties No 32 Limited Ordinary 100% Trustee company
MW Properties No 35 Limited Ordinary 100% Trustee company
APUK14001 Limited Ordinary 100% Trustee company
APUK14002 Limited Ordinary 100% Trustee company
APUK15001 Limited Ordinary 100% Trustee company
APUK15002 Limited Ordinary 100% Trustee company
CC Private (202) Limited Ordinary 100% Trustee company
CC Private (204) Limited Ordinary 100% Trustee company
CC Private (205) Limited Ordinary 100% Trustee company
Brogan Group Investments Limited Ordinary 100% Trustee company
Eltek House Limited Ordinary 100% Trustee company
Welbeck Strategic Land III Ordinary 100% Trustee company
Limited
Hurley Partners Limited Ordinary 100% Wealth Management
Hurley Trustees Services Limited Ordinary 100% Trustee company
MW Private Investors Ordinary 100% General Partner company General
(AgriPartners) General Partner Ordinary 100% Partner company General Partner
Limited Ordinary 100% company Trustee company
MW Private Investors (Swift Ordinary 100% General Partner company General
Point) General Partner Limited Ordinary 100% Partner company
Custodian (Inland RCF) General Ordinary 100% General Partner company
Partner Limited Ordinary 100% Wealth Management
MW Private Investors (Barwood Ordinary 100% Holding company
Capital) EUUT Limited Ordinary 100% Trustee company
MW Private Investors (Dundalk) Ordinary 100% Trustee company
General Partner Limited Ordinary 100% Trustee company
MW Private Investors (Newstead Ordinary 100% Holding company
Relf) General Partner Limited Ordinary 100% Trustee company
MW Private Investors (Tungsten Ordinary 100% Trustee company
Frimley) General Partner Limited Ordinary 100% Holding company
Montagu Limited Ordinary 100% Trustee company
Callender Street Nominees Limited Ordinary 100% Trustee company
Callender Street Trustees Limited Ordinary 100% Holding company
Fitzwilliam Trustees Number 1 Ordinary 100% Trustee company
Limited Ordinary 100% Trustee company
Fitzwilliam Trustees Number 2 Ordinary 100% Holding company
Limited Ordinary 100% Trustee company
Fitzwilliam (Waltham Forest) Ordinary 100% Trustee company
Holdings Limited Ordinary 100% Holding company
Fitzwilliam Trustees Number 3 Ordinary 100%
Limited Ordinary 100% Trustee company
Fitzwilliam Trustees Number 4 Ordinary 100% Trustee company
Limited Ordinary 100% Wealth Management
Fitzwilliam (Ascot) Holdings Ordinary 100% Wealth Management
Limited
Fitzwilliam Trustees Number 5
Limited
Fitzwilliam Trustees Number 6
Limited
Fitzwilliam (President) Holdings
Limited
Fitzwilliam Trustees Number 7
Limited
Fitzwilliam Trustees Number 8
Limited
Fitzwilliam (GYLO) Holdings
Limited
Fitzwilliam Trustees Number 9
Limited
Fitzwilliam Trustees Number 10
Limited
Fitzwilliam Trustees (Marylebone
& Cotswold) Holdings Limited
Fitzwilliam Trustees Number 11
Limited
Fitzwilliam Trustees Number 12
Limited
Pole Arnold Financial Management
Limited
Caledonia Asset Management
Limited
The principal place of business of all the subsidiaries is the
United Kingdom. The Company accounts for its investments in
subsidiaries using the cost method. The registered office for all
subsidiary undertakings is 1 New Walk Place, Leicester, LE1 6RU
except for the following:
Subsidiary undertaking Registered office
Broughtons Financial Planning Limited 5a Swallowfield Courtyard, Wolverhampton Road, Oldbury,
West Midlands, B69 2JG
SSAS Solutions (UK) Ltd Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Callender Street Nominees Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Callender Street Trustees Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 1 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 2 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam (Waltham Forest) Holdings Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 3 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 4 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam (Ascot) Holdings Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 5 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 6 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam (President) Holdings Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 7 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 8 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam (GYLO) Holdings Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 9 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 10 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees (Marylebone & Cotswold) Holdings Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Limited
Fitzwilliam Trustees Number 11 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
Fitzwilliam Trustees Number 12 Limited Rivers Edge, 11 Ravenhill Road, Belfast, BT6 8DN
The Turris Partnership Limited 4(th) Floor, 120 West Regent Street, Glasgow, G2 2QD
Caledonia Asset Management Limited 4(th) Floor, 120 West Regent Street, Glasgow, G2 2QD
Investment in associate
The Group holds 49% of the ordinary share capital of Amati
Global Investors Limited ("Amati"), with the remaining 51% of the
ordinary share capital held by Amati Global Partners LLP.
Amati is an independent specialist fund management business
managing funds investing in small and mid-sized companies. Amati's
gross assets under management at 31 May 2021 had increased to
GBP1,308m (2020: GBP582m) comprising; Amati AIM VCT plc, TB Amati
UK Smaller Companies Fund, Amati AIM IHT Portfolio Service and TB
Amati Strategic Metals Fund.
The Group exercises significant influence by virtue of its
contractual right to appoint a minority of directors to Amati's
board of directors. The Group has no other rights which would allow
it to exercise control over Amati's operations. Therefore, the
Group is not judged to control Amati and it is not
consolidated.
Amati Global Investors Limited is incorporated in Scotland, and
its registered office is 8 Coates Crescent, Edinburgh, Scotland,
EH3 7AL.
The movement in the Group's investment in associate is as
follows:
2021 2020
Investment in associate - Group and Company GBP000 GBP000
At 1 June 3,732 4,211
Share of profit for the year 1,191 682
Amortisation of fair value intangibles (68) (68)
Share of other comprehensive income 28 (15)
Dividends received from associate (588) (1,078)
At 31 May 4,295 3,732
2021 2020
Share of profit from associates in statement of comprehensive income: GBP000 GBP000
Share of profit for the year 1,191 682
Amortisation of fair value intangibles (68) (68)
Elimination of transactions with associate 18 19
1,141 633
Other comprehensive income represents a movement in Amati's
revaluation reserve recognised directly in equity.
The results of Amati and its aggregated assets and liabilities
as at 31 May 2021 are as follows:
Assets Liabilities Revenue Profit
Name Country of incorporation GBP000 GBP000 GBP000 GBP000 Interest held
Amati Global Investors Limited Scotland 6,420 2,831 9,192 2,431 49%
Group's share of profit 1,191
The net assets of Amati as at 1 June 2020 were GBP2,302,000. At
31 May 2021 the net assets of Amati were GBP3,589,000 following
payment of dividends of GBP1,200,000 and other increases in net
assets of GBP2,487,000, increasing the Group's interest in the
associate (net of tax) by GBP1,219,000 during the year, comprising
Mattioli Woods' share of Amati's profit after tax recognised in the
statement of comprehensive income and Mattioli Woods' share of the
movement in Amati's revaluation reserve recognised directly in
equity.
Other Investments - Non-current
Group Company
GBP000 GBP000
At 1 June 2019 and 31 May 2020 - -
Investment in Tiller 500 500
At 31 May 2021 500 500
On 20 January 2021 the Group announced an investment in Tiller
Group Limited ("Tiller") as part of a new strategic relationship to
develop a digital, self-investment application. The investment sees
the Company take an initial shareholding of 4.1%, through a
subscription of new shares in Tiller, and has been accounted for at
cost.
Tiller provides a Software as a Service wealth management
platform designed specifically for wealth managers and other
regulated financial services businesses. We will work closely with
Tiller to develop its market-leading, automated investment
management platform that will extend our discretionary investment
management services to a new range of clients.
Other Investments - Current
Group Company
GBP000 GBP000
At 1 June 2019 80 80
Disposal (40) (40)
At 31 May 2020 40 40
Disposal (14) (14)
At 31 May 2021 26 26
The Company previously held a 2.04% interest in MW Properties
(Huntingdon Non-Geared) Limited, a nominee for a property
syndicate. During the year the Group's investment was disposed on
the wind-up of this syndicate, with the Group receiving a final
distribution of GBP7,957.
At 31 May 2021 the Company owned 9.40% (2020: 9.40%) of the
shareholding in MW Properties (No.25) Limited ("MWPS25"), acquired
at a total cost of GBP91,000. MWPS25 owns part of the Development
Land. At 31 May 2021 these shares are included within investments
at a value of GBP26,000 (2020: GBP26,000).
Mattioli Woods owns 15% (2020: 15%) of the issued share capital
of Mainsforth Developments Limited ("Mainsforth"), a company
incorporated in England and Wales with its principal activity being
the development and selling of real estate. Mainsforth had entered
into two conditional sale agreements ("the Agreements") to acquire
freehold land with vacant possession (the "Development Land").
However, the Agreements have been terminated and at 31 May 2021 the
Company's investment in Mainsforth was valued at GBPnil (2020:
GBPnil).
19. Impairment of goodwill and client portfolio intangible
assets
Goodwill and client portfolio intangible assets arising on
acquisitions are allocated to the cash generating units comprising
the acquired businesses. Allocation to cash-generating units is
based on headcount or revenues at the date of acquisition. Where
the Group reorganises its operating and reporting structures in a
way that changes the composition of one or more cash-generating
units to which goodwill and client portfolio assets have been
allocated, the goodwill and client portfolio assets are reallocated
to the units affected.
The cash-generating units comprise the same groups of assets as
the four operating segments, which represent the smallest
individual groups of assets generating cash flows. Goodwill and
client portfolio assets have been allocated between the Group's
operating segments for impairment testing, as follows:
Pension consultancy Investment and asset
and admin management Property management Employee benefits Total
Group GBP000 GBP000 GBP000 GBP000 GBP000
At 1 June 2019 -
Restated 14,978 15,153 271 5,857 36,259
Arising on
acquisitions - 1,632 - - 1,632
Amortisation during
the year (853) (820) (8) (397) (2,078)
At 31 May 2020 -
Restated 14,125 15,965 263 5,460 35,813
Arising on
acquisitions 2,166 23,060 537 - 25,763
Amortisation during
the year (933) (1,437) (8) (396) (2,774)
At 31 May 2021 15,358 37,588 792 5,064 58,802
Goodwill 5,489 11,581 188 638 17,896
Client portfolios 9,869 26,007 604 4,426 40,906
At 31 May 2021 15,358 37,588 792 5,064 58,802
Pension consultancy Investment and asset
and admin management Property management Employee benefits Total
Company GBP000 GBP000 GBP000 GBP000 GBP000
At 1 June 2019 10,794 16,847 271 8,875 36,787
Amortisation during the
year (632) (643) (8) (396) (1,679)
At 31 May 2020 10,162 16,204 263 8,479 35,108
Arising on acquisitions - - 537 - 537
Transferred to the
Company 2,834 22,363 - - 25,197
Amortisation during the
year (656) (842) (8) (397) (1,903)
At 31 May 2021 12,340 37,725 792 8,082 58,939
Goodwill 6,211 18,461 188 3,656 28,516
Client portfolios 6,129 19,264 604 4,426 30,423
At 31 May 2021 12,340 37,725 792 8,082 58,939
The determination of whether goodwill and client portfolio
assets are impaired requires an assessment of the fair value less
cost to sell and estimation of the value in use of the operating
segments to which the assets have been allocated. We have assessed
both the value in use of the operating segments, and fair value
less costs to sell, based on the enterprise value of the Group at
the year-end date, and determined that the value in use is higher
than the enterprise value.
In assessing value in use, the estimated future cash flows of
each operating segment are discounted to their present value using
a pre-tax discount rate of 10.5% (2020: 13.3%), reflecting current
market assessments of the time value of money and the risks
specific to these assets, based on the Group's WACC. The key
assumptions used in respect of value in use calculations are those
regarding growth rates and anticipated changes to revenues and
costs during the period covered by the calculations, based upon
management's expectation. The estimated cash flows for each segment
are derived from the budget for the three years to 31 May 2024,
extrapolated for a further two years assuming medium-term growth of
5.0% (2020: 5.0%) and a long-term growth rate of 2.0% (2020: 2.0%),
which management considers conservative against actual average
long-term growth rates.
The value in use calculated at 31 May 2021 was GBP267.3m.
Comparing this to the net asset value of the operating segments
identified above, the directors believe the value of goodwill is
not impaired at 31 May 2021. This accounting treatment resulted in
an impairment loss of GBPnil (2020: GBPnil).
Discount rate sensitivity of +1.0% represents a plausible
variance in discount rate as a result of a range of judgements used
in following the capital asset pricing model to determine an
appropriate weighted average cost of capital for the Group. Growth
rate sensitivities are set at a level to either minimise or
altogether remove the impact of assumed growth in pre-tax cashflows
derived from each operating segment.
The sensitivity of the value in use calculated at 31 May 2021 to
changes in the key assumptions is as follows:
Increase/(decrease) in value in use
Assumption Base assumption Change in assumption GBP000
Discount rate 10.5% +1.0% (28,703)
Years 1-3 cashflows Var. -5.0% (13,363)
Medium-term growth rate 5.0% -5.0% (20,141)
Long-term growth rate 2.0% -2.0% (48,111)
None of these individual sensitivities would result in an
impairment in the value in use of any operating segment.
The value in use calculations at 31 May 2021 indicate the
Employee Benefits operating segment continues to report less
headroom than the other operating segments. If the pre-tax discount
rate used to calculate the value in use of each segment increased
by 1.0%, with all other variables held constant, this would result
in an GBP 1.8 m reduction in the value in use, resulting in an
impairment loss of GBP nil (2020: GBPnil). If the short-term rate
of growth in cash flows generated by the Employee Benefits segment
in years two to five of the period covered by the calculations
reduced by 5.0%, with all other variables held constant, this would
result in an GBP3.2m reduction in the value in use, resulting in an
impairment loss of GBP nil (2020: 5.0%, GBP1.7m reduction in value,
GBPnil impairment).
The introduction of a charge cap on auto-enrolment pension
schemes in April 2015, followed by the abolition of provider
commissions in April 2016, resulted in a number of changes and
challenges within the employee benefits market, reducing corporate
pension revenues but leading to higher fee-based recurring revenues
going forward. The market continues to evolve with employers now
bound to provide pensions to almost all staff. Pricing in this area
remains competitive as the industry settles into a "post-RDR" fee
model, but management is confident the business can deliver further
improvement in the Employee Benefits segment's results. The
directors consider that reasonably likely changes in assumptions
would not create an impairment in any of the other operating
segments.
20. Share-based payments
Long--Term Incentive Plan
During the year, Mattioli Woods granted awards to the Company's
executive directors and certain senior employees under the LTIP.
Conditional share awards ("Equity-settled") grant participating
employees a conditional right to become entitled to options with an
exercise price of 1 pence over ordinary shares in the Company.
Conditional cash awards ("Cash-settled") grant participating
employees a conditional right to be paid a cash amount based on the
proceeds of the sale of a specified number of Ordinary Shares
following the vesting of the award. Movements in the LTIP scheme
during the period were as follows:
31 May 2021 31 May 2020
Equity-settled Equity-settled
LTIP options No. No.
Outstanding as at
1 June 889,504 757,463
Granted during the
year 255,800 248,800
Exercised during
the year (207,295) (66,418)
Forfeited during
the year (4,200) (50,341)
Outstanding at 31
May 933,809 889,504
Exercisable at 31
May 235,571 258,564
The LTIP awards are subject to the achievement of corporate
profitability targets measured over a three to five-year
performance period and will vest following publication of the
Group's audited results for the final performance year.
On 1 June 2020 the Remuneration Committee of the Group approved
the amendment to the performance period of those LTIP awards
granted 4 September 2019 under Tranche B, with the performance
period reduced from five to three years.
The amounts shown above represent the maximum opportunity for
the participants in the LTIP.
Forfeited Exercised during
Granted during during the the period
At 1 June 2020 the period period No. At 31 May 2021
Date of grant Exercise price No. No. No. No.
16 September
2014 GBP0.01 2,313 - - (2,313) -
15 October 2015 GBP0.01 49,754 - - (9,890) 39,864
6 September 2016 GBP0.01 206,497 - - (86,325) 120,172
5 September 2017 GBP0.01 184,502 - (200) (108,767) 75,535
6 September 2018 GBP0.01 198,638 - - - 198,638
4 September 2019
- Tranche A GBP0.01 108,000 - - - 108,000
4 September 2019
- Tranche B GBP0.01 139,800 - - - 139,800
1 June 2020 -
Tranche A GBP0.01 - 141,550 (4,000) - 137,550
1 June 2020 -
Tranche B GBP0.01 - 114,250 - - 114,250
889,504 255,800 (4,200) (207,295) 933,809
The weighted average share price at the date of exercise for
share options exercised during the year was GBP6.71 (2020:
GBP7.38). For the share options outstanding at 31 May 2021, the
weighted average exercise prices ("WAEP") was GBP0.01 (2020:
GBP0.01), and the weighted average remaining contractual life is
1.46 years (2020: 1.53 years).
Income tax and employee's National Insurance contributions
payable by the participant on exercise of a share option are borne
by the participant, employers National Insurance contributions
payable on exercise are borne by the Company and provided for over
the vesting period (Note 26).
Share Incentive Plan
The Company operates the Mattioli Woods plc Share Incentive Plan
("the SIP"). Participants in the SIP are entitled to purchase, at
market value, up to a prescribed number of new 1p ordinary shares
in the Company each year for which they will receive a like for
like conditional 'matching share', subject to their continued
employment for the three years following award of the matching
share. These ordinary shares rank pari passu with existing issued
ordinary shares of the Company. Movements in the shares held in the
SIP on behalf of employees during the year were as follows:
31 May 2021 31 May 2020
SIP shares No. No.
Scheme shares as at 1 June 599,662 586,399
Employee shares purchased 58,753 48,886
Matching shares awarded 58,753 48,886
Matching shares recycled (3,376) (12,370)
Reinvestment of dividends 19,364 17,677
Shares transferred out (31,896) (89,816)
Scheme shares at 31 May 701,259 599,662
Conditional matching shares at 31 May 144,483 121,980
A total of 389 (2020: 350) employees participated in the SIP
during the year.
Share-based payments expense
The amounts recognised in the statement of comprehensive income
in respect of share-based payments were as follows:
31 May 2021 31 May 2020
Equity-settled Equity-settled
GBP000 GBP000
LTIP 1,149 1,096
SIP 326 239
Total 1,475 1,335
The share-based payment expense in respect of the LTIP for the
year ended 31 May 2021 includes the impact of the modification of
the performance period of the 4 September 2019 Tranche B LTIP
awards.
Valuation assumptions
The fair value of equity-settled share options granted is
estimated as at the date of grant using the Black Scholes Merton
model, taking into account the terms and conditions upon which the
options were granted. The following table lists the inputs to the
model used to estimate the fair value of options granted or
modified during the year ended 31 May 2021:
Tranche B Tranche
(modified) Tranche A B
Date of grant 4 September 1 June 2020 1 June 2020
2019
Share price at date of grant GBP7.85 GBP7.85 GBP7.85
Option exercise price GBP0.01 GBP0.01 GBP0.01
Expected life of option (years) 3.8 6.5 4.5
Expected share price volatility
(%) 30.0 35.0 35.0
Dividend yield (%) 2.80 2.80 2.80
Risk-free interest rate (%) 0.00 0.00 0.00
The expected volatility assumption is based on statistical
analysis of the historical volatility of the Company's share
price.
The share price at 31 May 2021 and movements during the year are
set out in the Directors' Remuneration Report.
21. Trade and other receivables (current)
Group Company Group Company
2021 2021 2020 2020
GBP000 GBP000 GBP000 GBP000
Trade receivables due from Group companies - 13,093 - 13,366
Other trade receivables 5,184 3,801 5,498 4,571
Other receivables 2,625 1,447 1,443 231
Prepayments and accrued income 11,388 9,906 10,267 9,024
19,197 28,247 17,208 27,192
Trade receivables due from Group companies are recognised at
amortised cost, eliminate on consolidation, and include GBP12.6m
(2020: GBP12.9m) receivable from subsidiary Mattioli Woods (New
Walk) Limited on which interest is incurred at the Bank of
England's base rate plus a margin of 3%. All other balances due
from Group companies incur no interest and are due on demand. None
of the trade receivables from Group companies were overdue at the
reporting date.
Other trade receivables are non-interest bearing and are
generally on 30-90 days' terms. As at 31 May 2021, the nominal
value of non-related party trade receivables impaired and fully
provided for, and movements in the lifetime loss provision for
impairment (with no 12 month expected credit losses or transfers
between stages) of receivables were as follows:
Group Company Group Company
2021 2021 2020 2020
GBP000 GBP000 GBP000 GBP000
As at 1 June 1,753 1,346 1,332 1,084
Charge for year 25 50 605 332
Utilised during the year (366) (188) (184) (70)
Acquired on acquisition - - - -
At 31 May 1,412 1,208 1,753 1,346
At 31 May 2021, the analysis of non-related party trade
receivables that were past due but not impaired is as follows:
Past due but not impaired
Total Neither past due nor impaired < 30 days 30-60 days 60-90 days >90 days
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gross carrying amount 6,596 2,213 1,837 589 235 1,722
Provisions for ECL (1,412) (98) (69) (16) (13) (1,216)
At 31 May 2021 5,184 2,115 1,768 573 222 506
Gross carrying amount 7,251 2,040 1,793 1,208 265 1,945
Provisions for ECL (1,753) (94) (87) (97) (12) (1,463)
At 31 May 2020 5,498 1,946 1,706 1,111 253 482
Prepayments and accrued income balances include the following
contract assets accrued under IFRS 15:
Group Company
Contract assets accrued GBP000 GBP000
At 1 June 2020 10,267 9,024
Arising from acquisitions 497 -
Arising from hive up - 731
Net increase in contract assets accrued 624 151
At 31 May 2021 11,388 9,906
For all receivables above, including neither past due nor
impaired, the carrying amount is deemed to reflect the fair
value.
22. Cash and short-term deposits
For the purpose of the statement of cashflows, cash and cash
equivalents comprise the following at 31 May 2021:
Group Company Group Company
2021 2021 2020 2020
GBP000 GBP000 GBP000 GBP000
Cash at banks and on hand 21,888 10,909 25,959 17,584
Cash and cash equivalents 21,888 10,909 25,959 17,584
Cash at banks earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months, depending on the
immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates. The fair value of cash and
short-term deposits is GBP21.9m (2020: GBP26.0m).
23. Issued capital and reserves
Ordinary shares Share capital Share premium Merger reserve
Group and Company of 1p GBP000 GBP000 GBP000
Issued and fully paid
At 1 June 2019 26,770,365 268 32,137 10,639
Exercise of employee share options 66,418 - - -
Shares issued under the SIP 103,079 1 754 -
Shares issued for consideration - - - -
At 31 May 2020 26,939,862 269 32,891 10,639
Exercise of employee share options 207,295 2 - -
Shares issued under the SIP 133,493 2 943 -
Shares issued for consideration 970,409 10 - 6,819
At 31 May 2021 28,251,029 283 33,834 17,458
Rights, preferences and restrictions on shares
All ordinary shares carry equal rights and no privileges are
attached to any shares in the Company. All the shares are freely
transferable, except as otherwise provided by law. However:
-- The former shareholders of Hurley Partners have entered into
lock-in deeds with Mattioli Woods and its nominated adviser and
broker, Canaccord Genuity Limited, restricting sales of that part
of the consideration comprising 842,866 ordinary shares in Mattioli
Woods during the two years ending 31 July 2022;
-- The former shareholder of Montagu has entered into a lock-in
deed with Mattioli Woods and its nominated adviser and broker,
Canaccord Genuity Limited, restricting sales of that part of the
consideration comprising 40,161 ordinary shares in Mattioli Woods
during the two years ending 2 February 2023;
-- The former shareholders of Pole Arnold Financial Management
have entered into lock-in deeds with Mattioli Woods and its
nominated adviser and broker, Canaccord Genuity Limited,
restricting sales of that part of the consideration comprising
72,940 ordinary shares in Mattioli Woods during the two years
ending 12 April 2023; and
-- The former shareholders of Caledonia Asset Management have
entered into lock-in deeds with Mattioli Woods and its nominated
adviser and broker, Canaccord Genuity Limited, restricting sales of
that part of the consideration comprising 12,724 ordinary shares in
Mattioli Woods during the two years ending 16 April 2023.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All shares rank equally with
regard to the Company's residual assets.
Share schemes and share incentive plan
The Company has two share schemes under which options to
subscribe for the Company's shares have been granted to certain
executives and senior employees (Note 20).
The Company also operates a share incentive plan. Participants
in the SIP are entitled to purchase up to a prescribed number of
new ordinary shares in the Company in any year. At the Directors'
discretion, the Company may also award additional shares to
participants in the SIP. Ordinary shares issued under the SIP rank
pari passu with existing issued ordinary shares of the Company.
Dividends paid on shares held within the SIP are used to buy new
ordinary shares in the Company of 1p each.
Own shares
Own shares
Number of shares GBP000
At 1 June 2019 12,248 99
Acquired during the year 64,330 498
At 31 May 2020 and 31 May 2021 76,578 597
Own shares represent the cost of the Company's own shares,
either purchased in the market or issued by the Company, that are
held by the Company or in an employee benefit trust to satisfy
future awards under the Group's share-based payment schemes (Note
20). At 31 May 2021 76,578 (2020: 76,578) shares were held in the
Mattioli Woods Employee Benefit Trust, representing 0.27% of issued
share capital (2020: 0.28%).
Other reserves
Movements recognised in other reserves in the year are disclosed
in the statement of changes in equity. The following table
describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share premium Amounts subscribed for share capital in excess
of nominal value less any associated issue costs
that have been capitalised.
Merger reserve Where shares are issued as consideration for
>90% of the shares in a subsidiary, the excess
of the fair value of the shares acquired over
the nominal value of the shares issued is recognised
in the merger reserve.
Capital redemption reserve Amounts transferred from share capital on redemption
of issued shares.
Equity - share based payments The fair value of equity instruments granted
by the Company in respect of share-based payment
transactions less options exercised.
Own shares The cost of the Company's own shares, purchased
in the market, that are held in an employee
benefit trust to satisfy future awards under
the Group's share-based payment schemes (Note
20).
Retained earnings All other net gains and losses and transactions
with owners (e.g. dividends) not recognised
elsewhere.
The Company has issued options to subscribe for the Company's
shares under two employee share schemes (Note 20). The cost of
exercised or lapsed share options has been derecognised from
equity-share based payments and re-allocated to retained earnings
as required by IFRS 2 'Share-based Payments'.
24. Cash flows arising from financing liabilities
The financing liabilities of the Group are GBP2,585,000 (2020:
GBP2,908,000), comprising lease liabilities as disclosed in Note
28. Cash flows arising from financing liabilities include payment
of lease liabilities of GBP1,077,000.
The financing liabilities of the Company are GBP2,216,000 (2020:
GBP2,502,000), comprising lease liabilities as disclosed in Note
27. Cash flows arising from financing liabilities include payment
of lease liabilities of GBP895,000.
The net cash flows from financing activities of the Group and
the Company, as reported in the Statements of Cash Flows, relate
entirely to financing balances reported within equity.
25. Trade and other payables
Group Company Group Company
2021 2021 2020 2020
Trade and other payables GBP000 GBP000 GBP000 GBP000
Trade payables due to Group companies - 2,064 - 1,559
Loan notes due to subsidiary undertakings - 28,143 - -
Other trade payables 633 697 809 749
Other taxation and social security 2,052 1,810 1,691 1,499
Other payables 1,197 1,239 591 466
Accruals and deferred income 11,633 8,841 6,832 4,433
Trade and other payables 15,515 42,794 9,923 8,706
Current 15,515 14,651 9,923 8,706
Non-current - 28,143 - -
Trade payables due to Group companies reported by the Company
incur no interest, are repayable on demand and eliminate on
consolidation. Terms and conditions of the other financial
liabilities set out above are as follows:
-- Trade payables are non-interest bearing and are normally settled on 30-day terms;
-- Other taxation and social security become interest bearing if
paid late and are settled on terms of one or three months; and
-- Accruals and deferred income are non-interest bearing and are
normally settled monthly throughout the financial year.
Loan notes due to subsidiary undertakings
On 28 February 2021 the trade and assets of Broughtons Financial
Planning Limited and Hurley Partners Limited were transferred to
the Company. The trade and assets were exchanged for loan notes
equal to the book value of the assets and assumed liabilities of
Broughtons Financial Planning Limited and Hurley Partners Limited
as at the date of hive up, and attracting annual interest on the
outstanding principal at a rate of 3% above the Bank of England
base rate. During the year, interest costs of GBP218,000 (2020:
GBPnil) were borne by the Company with GBPnil (2020: GBPnil) impact
on consolidation.
The book value of the assets and liabilities recognised on hive
up from Broughtons Financial Planning Limited and Hurley Partners
Limited were as follows
Broughtons Financial Planning
Limited Hurley Partners Limited Combined carrying value
GBP000 GBP000 GBP000
Property, plant and equipment 6 66 72
Right of use assets 48 - 48
Intangible assets 3,394 21,804 25,198
Trade and other receivables 166 951 1,117
Cash and short-term deposits 1,429 3,801 5,230
Trade and other payables (275) (869) (1,144)
Deferred tax liability (361) (2,126) (2,487)
Provisions (81) (28) (109)
Net assets transferred 4,326 23,599 27,925
Consideration transferred 4,326 23,599 27,925
26. Financial liabilities and provisions
Employers'
NIC on
Contingent Contingent Client share Onerous FSCS
consideration remuneration claims Dilapidations Clawbacks options contracts levy Total
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 June 2019 -
Restated 1,252 125 1,484 348 123 602 220 150 4,304
Unwinding of
discount 61 - - 13 - - - - 74
Arising during
the year - 750 914 16 2 133 22 42 1,879
Arising on
acquisitions 741 - - - - - - - 741
Paid during the
year (600) - (422) - (45) (67) (97) (83) (1,314)
Unused amounts
reversed - (78) (96) - (22) (34) (123) - (353)
At 31 May 2020 -
Restated 1,454 797 1,880 377 58 634 22 109 5,331
Unwinding of
discount 133 - - 20 - - - - 153
Arising during
the year - 3,803 568 70 91 173 - 15 4,720
Arising on
acquisitions 2,405 - - 138 - - 29 - 2,572
Paid during the
year (1,111) (609) (519) (18) (89) (193) (51) (15) (2,605)
Unused amounts
reversed - - (19) (66) - - - - (85)
Reclassification - - 450 - - - - - 450
At 31 May 2021 2,881 3,991 2,360 521 60 614 - 109 10,536
Current 2020 1,085 797 1,881 - 58 436 22 109 4,387
Non-current 2020 369 - - 377 - 198 - - 944
At 31 May 2020 1,454 797 1,881 377 58 634 22 109 5,331
Current 2021 1,709 3,991 2,358 343 60 419 - 109 8,991
Non-current 2021 1,172 - - 178 - 195 - - 1,545
At 31 May 2021 2,881 3,991 2,358 521 60 614 - 109 10,536
Employers'
Contingent NIC on
Contingent remuneration Client share Onerous FSCS
consideration GBP000 claims Dilapidations Clawbacks options contracts levy Total
Company GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 June 2019 1,252 125 1,225 323 119 602 220 150 4,016
Finance costs 61 - - 13 - - - - 74
Arising during
the year - 750 859 11 - 133 22 34 1,809
Arising on
acquisitions 741 - 741
Paid during the
year (600) - (392) - (43) (67) (97) (83) (1,282)
Unused amounts
reversed - (78) (53) - (22) (34) (123) - (310)
At 31 May 2020 1,454 797 1,639 347 54 634 22 101 5,048
Finance costs 133 - - 19 - - - - 152
Arising during
the year - 3,803 568 72 88 173 - 15 4,718
Arising on
acquisitions 2,405 - - - - - - - 2,405
Transferred from
Group companies - - - 87 - - 7 - 94
Paid during the
year (1,111) (609) (503) (4) (88) (193) (29) (15) (2,551)
Unused amounts
reversed - - (13) - - - - (13)
Reclassification - - 450 - - - - - 450
At 31 May 2021 2,881 3,991 2,141 521 54 614 - 101 10,303
Current 2020 1,085 797 1,639 - 54 436 22 101 4,134
Non-current 2020 369 - - 347 - 198 - - 914
At 31 May 2020 1,454 797 1,639 347 54 634 22 101 5,048
Current 2021 1,709 3,991 2,141 343 54 419 - 101 8,758
Non-current 2021 1,172 - - 178 - 195 - - 1,545
At 31 May 2021 2,881 3,991 2,141 521 54 614 - 101 10,303
Contingent consideration
The Group has entered into certain acquisition agreements that
provide for contingent consideration to be paid. Details of these
agreements and the basis of calculation of the net present value of
the contingent consideration are summarised in Note 3. The Group
estimates the net present value of the financial liability payable
within the next 12 months is GBP 1.7m (2020 restated: GBP1.1m) and
the Group expects to settle the non-current balance of GBP 1.2m
(2020 restated: GBP0.4m) within the subsequent year.
Contingent remuneration
Certain business acquisitions made by the Group include
arrangements for remuneration payable to selling shareholders which
is contingent upon certain performance conditions including the
financial performance of the acquired business in meeting financial
targets and links to continuing employment of management sellers.
Details of these agreements and the basis of calculation of the net
present value of the contingent remuneration are summarised in Note
28. The Group estimates remuneration payable within the next 12
months is GBP 6.3m (2020 restated: GBP0.7m).
Client claims
A provision is recognised for the estimated potential liability
when the Group becomes aware of a possible client claim. The value
of the provision recognised is determined based on the nature of
the potential liability, the Group's historic experience and any
insurance recovery expected. No discount rate is applied to the
projected cash flows due to their short-term nature.
The balance of GBP450,000 reclassified in the year represented
potential liabilities for complaints previously reported within
Accruals and deferred income.
Dilapidations
Under the terms of the leases for the Group's premises, the
Group has an obligation to return the properties in a specified
condition at the end of the lease term. The Group provides for the
estimated fair value of the cost of any dilapidations.
Clawbacks
The Group receives certain initial commissions on indemnity
terms and hence the Group provides for the expected level of
clawback, based on past experience. No discount rate is applied to
the projected cash flows due to their short-term nature.
Onerous contracts
Provision for onerous contracts at 31 May 2020 and acquired
related software licence costs due on agreements under which the
Group has served, with the provisions fully utilised before 31 May
2021.
FSCS levy
The arrangements put in place by the Financial Services
Compensation Scheme ("FSCS") to protect depositors and investors
from loss in the event of failure of financial institutions have
resulted in significant levies on the industry in recent years.
There is uncertainty over the level of future FSCS levies as
they depend on the ultimate cost to the FSCS of industry failures.
The Group contributes to the investment intermediation levy class
and accrues levy costs for future levy years when the obligation
arises. A provision of GBP 0.1m (2020: GBP0.1m) has been made in
these financial statements for FSCS interim levies expected in
relation to the year ending 31 May 2021.
27. Lease liability
2021
Group GBP000
Maturity analysis - Contractual undiscounted cash flows:
Less than one year 989
One to five years 1,409
More than five years 442
Total undiscounted cash flows 2,840
Total lease liabilities 2,585
Current 905
Non-current 1,680
2021
Company GBP000
Maturity analysis - Contractual undiscounted cash flows:
Less than one year 894
One to five years 1,212
More than five years 309
Total undiscounted cash flows 2,415
Total lease liabilities 2,216
Current 821
Non-current 1,395
28. Commitments and contingencies
Remuneration of management sellers including contingencies
Certain business acquisitions made by the Group include
arrangements for remuneration payable to selling shareholders which
is contingent upon certain performance conditions including the
financial performance of the acquired business in meeting financial
targets and links to continuing employment of management
sellers.
Following the acquisition of SSAS Solutions (UK) Ltd ("SSAS
Solutions") on 27 March 2019, management sellers will receive
remuneration of up to GBP1,500,000 over an extended three year earn
out to 27 March 2022, subject to the achievement of certain
performance conditions including the financial performance of SSAS
Solutions meeting financial targets and continuing employment of
management sellers. In the year to 31 May 2021 remuneration costs
of GBP625,000 (2020 restated: GBP750,000) have been recognised in
the statement of comprehensive income, and provision of GBP813,000
(2020 restated: GBP797,000) is recognised in Note 26. Based on
management's latest forecasts we anticipate that a further
remuneration costs of GBP891,000, representing the maximum
remuneration available to management sellers, will be recognised
over the remaining period of contingency to 27 March 2022.
Following the acquisition of Hurley Partners Limited ("Hurley")
on 31 July 2020, management sellers will receive remuneration of up
to GBP7,028,000 over a two year earn out to 31 July 2022, subject
to the achievement of certain performance conditions including the
financial performance of Hurley meeting financial targets and
continuing employment of management sellers. In the year to 31 May
2021 remuneration costs of GBP2,928,000 (2020 restated: GBPnil)
have been recognised in the statement of comprehensive income, and
provision of GBP2,928,000 (2020 restated: GBPnil) is recognised in
Note 26. Based on management's latest forecasts we anticipate that
a further remuneration costs of GBP4,100,000, representing the
maximum remuneration available to management sellers, will be
recognised over the remaining period of contingency to 31 July
2022.
Following the acquisition of Pole Arnold Financial Management
Limited ("Pole Arnold") on 12 April 2021, management sellers will
receive remuneration of up to GBP3,000,000 over a two year earn out
to 12 April 2023, subject to the achievement of certain performance
conditions including the financial performance of Pole Arnold
meeting financial targets and continuing employment of management
sellers. In the year to 31 May 2021 remuneration costs of
GBP250,000 (2020 restated: GBPnil) have been recognised in the
statement of comprehensive income, and provision of GBP250,000
(2020 restated: GBPnil) is recognised in Note 26. Based on
management's latest forecasts we anticipate that a further
remuneration costs of GBP2,750,000, representing the maximum
remuneration available to management sellers, will be recognised
over the remaining period of contingency to 12 April 2023.
Capital commitments
At 31 May 2021 the Group had no capital commitments (2020:
GBPnil).
Sponsorship agreement
As part of the Group's strategy to strengthen its brand
awareness the Group has a sponsorship agreement with rugby giants
Leicester Tigers. The agreement includes exclusive naming rights to
the 26,000 capacity Mattioli Woods Welford Road stadium including
full stadium, dugout and website branding, shirt sponsorship on the
Tigers' home and away shirts, corporate hospitality rights and the
provision of exclusive content to Tigers fans. In October 2020 the
Group entered into a new sponsorship agreement with Leicester
Tigers, which commenced in October 2020 and runs to June 2025, with
a total cost of GBP3.4m over the term of the agreement.
Client claims
The Group operates in a legal and regulatory environment that
exposes it to certain litigation risks. As a result, the Group
occasionally receives claims in respect of products and services
provided and which arise in the ordinary course of business. The
Group provides for potential losses that may arise out of these
contingencies.
In-specie pension contributions
As has been widely reported in the media, HMRC has challenged
all SIPP providers on whether pension contributions could be made
in-specie. As a result there are a number of tax relief claims made
on behalf of our clients that have been challenged and we have
received or are awaiting assessment notices which are expected to
amount to GBP0.9m (2020: GBP0.9m). These assessments have been
appealed and we are currently awaiting a hearing date at the
First-tier Tribunal.
Irrespective of the result of this process, the impact on the
financial position of the Group is expected to be neutral, with any
liability expected to be recovered from the affected clients whose
tax liability it is.
Transfers from defined benefit schemes
The FCA has been conducting an industry wide review of the
advice being provided on transfers from defined benefit to defined
contribution schemes since October 2015 ("the Review").
As previously reported, following consideration of the
increasing costs of professional indemnity insurance, additional
regulatory controls and the resources we would have to dedicate to
this small part of our business, we have stopped giving pension
transfer advice to individuals with safeguarded or defined
benefits. The impact of this decision and the Review on the Group's
financial performance is not expected to be material.
29. Related party disclosures
Custodian REIT plc
In March 2014 the Company's subsidiary, Custodian Capital, was
appointed as the discretionary investment manager of Custodian
REIT, a closed-ended property investment company listed on the Main
Market of the London Stock Exchange.
The Company's Chief Executive Officer, Ian Mattioli, is a
non-independent Non-Executive Director of Custodian REIT and the
Company's former Chief Financial Officer, Nathan Imlach, was
Company Secretary of Custodian REIT until he resigned from this
position on 17 June 2020 to be replaced by Ed Moore, Finance
Director of the Group's subsidiary Custodian Capital Limited.
During the year the Group received revenues of GBP3.8m (2020:
GBP4.0m) in respect of annual management charges, administration
and marketing fees from Custodian REIT. Custodian REIT owed the
Group GBP2,733 at 31 May 2021 (2020: GBP1,000).
Amati Global Investors Limited
The Company holds 49% of the issued share capital of Amati
Global Investors Limited ("Amati"), an independent specialist fund
management business.
Two of the Company's senior management team have been appointed
to the board of Amati. Ian Mattioli is Deputy Chair and the Group's
Chief Investment Officer, Simon Gibson, is a Non-Executive
Director.
On 14 August 2018 the Group entered into an agreement to sublet
space in its Edinburgh office to Amati for a term of five years.
During the year the Group received rent of GBP48,000 (2020:
GBP48,000) from Amati as lessee, GBP16,000 (2020: GBP15,000) from
the recharge of other property related costs and consultancy fees
of GBP43,000 (2020: GBP39,000).
Gateley (Holdings) Plc
The Company's Chair, Joanne Lake, is a Non-Executive Director of
Gateley (Holdings) Plc, which is the holding company of Gateley
Plc, a provider of commercial legal services. During the year the
Group received revenues of GBP41,000 (2020: GBP40,000) in respect
of employee benefits services provided to Gateley Plc.
Key management compensation
Key management personnel, representing those Executive Directors
that served throughout the year and 8 (2020: 19) other executives,
received compensation in the form of short-term employee benefits
and equity compensation benefits (see Note 11) which totalled
GBP4.4m for the year ended 31 May 2021 (2020: GBP3.7m).
Total remuneration of key management personnel is included in
"employee benefits expense" and analysed as follows:
2021 2020
GBP000 GBP000
Wages and salaries 3,855 2,844
Social security costs 405 585
Pension 42 123
Benefits in kind 101 104
4,403 3,656
In addition, the cost of share-based payments, disclosed
separately in the statement of comprehensive income, to key
management personnel was GBP 0.7m (2020: GBP0.9m).
Transactions with other related parties
Following the transfer of Mattioli Woods' property syndicate
business to Custodian Capital, the legal structure of the
arrangements offered to investors changed to a limited partnership
structure, replacing the previous trust-based structure. Each
limited partnership is constituted by its general partner and its
limited partners (the investors), with the general partner being a
separate limited company owned by Custodian Capital (see Note
18).
The general partner and the initial limited partner enter into a
limited partnership agreement, which governs the operation of the
partnership and sets out the rights and obligations of the
investors. The general partners have appointed Custodian Capital as
the operator of the partnerships pursuant to an operator agreement
between the general partner and Custodian Capital.
MW Properties No 25 Limited
The Group holds a 9.40% interest in MW Properties No 25 Limited,
a nominee for a property syndicate. As at 31 May 2021 the Group
held an investment with a market value of GBP28,095 (2020:
GBP27,334) in the syndicate.
MW Properties (Huntingdon Non-Geared) Limited
The Company previously held a 2.04% interest in MW Properties
(Huntingdon Non-Geared) Limited, a nominee for a property
syndicate. During the year the Group's investment was disposed on
the wind-up of this syndicate, with the Group receiving a final
distribution of GBP7,957.
30. Financial risk management
Financial assets principally comprise trade and other
receivables, cash and short-term deposits, which arise directly
from its operations. Financial liabilities comprise certain
provisions and trade and other payables. The main risks arising
from financial instruments are market risk (including interest rate
risk, foreign exchange risk and price risk), credit risk, and
liquidity risk. Each of these risks is discussed in detail
below.
The Group monitors financial risks on a consolidated basis, with
its financial risk management based upon sound economic objectives
and good corporate practice. No hedging transactions have taken
place during the years presented.
Market risk
(a) Interest rate risk
Interest rate risk is the risk that the Group's financial
performance will be adversely impacted by movements in interest
rates. The Group does not have any derivative financial assets
whose value is linked to interest rates, therefore exposure to
interest rate risk arises from financial assets and liabilities
incurring a market interest rate including cash and cash
equivalents, as well as certain intercompany loan agreements to
which the company is exposed. At 31 May 2021 the value of market
interest bearing financial instruments on the Group's statement of
financial position exposed to interest rate risk was GBP21.9m
(2020: GBP26.0m), and Company GBP23.5m (2020: GBP30.5m). This
exposure is monitored to ensure that the Group is managing its
interest earning potential within accepted liquidity and credit
constraints. Other than short-term overdrafts, the Group has no
external borrowings and as such is not exposed to interest rate or
refinancing risk on borrowings. Cash at bank earns interest at
floating rates based on daily bank deposit rates. Short-term
deposits are also made for varying periods of between one day and 3
months depending on the immediate cash requirements of the Group
and earn interest at the respective fixed term deposit rates.
A source of revenue is based on the value of client cash under
administration. The Group has an indirect exposure to interest rate
risk on these cash balances held for clients. These balances are
not on the Company or Group Statements of Financial Position.
The following table demonstrates the sensitivity to a 50bps
(0.5%) change in interest rates, with all other variables held
constant, of the Group's and Company's profit before tax (through
the impact on floating rate deposits). 50bps is considered the
appropriate impact to consider sensitivity given the reduction in
the Bank of England's base rate to a historic low and the reduced
likelihood of increases in this rate over the coming financial
year. There is no impact on the Group's equity.
Group Company
Effect on profit Effect on profit
before tax before tax
Increase/decrease in basis points GBP000 GBP000
2021
GBP Sterling +50 109 117
GBP Sterling -50 (109) (117)
2020
GBP Sterling +50 130 116
GBP Sterling -50 (130) (116)
(b) Foreign exchange translation and transaction risk
Foreign currency risk is the risk that the Group will sustain
losses through adverse movements in currency exchange rates. With
all of the Group's business located within the UK, the Group has no
material exposure to foreign exchange translation or transaction
risk and does not hedge any foreign current assets or
liabilities.
(c) Price risk
Price risk is the risk that a decline in the value of assets
adversely impacts the profitability of the Group as a result of an
asset not meeting its expected value.
Property administration fees, discretionary management charges
and adviser charges for intermediation are based on the value of
client assets under administration and hence the Group has an
indirect exposure to security price risk on investments held by
clients. These assets are not on the Group's statement of financial
position. The risk of lower revenues is partially mitigated by
asset class diversification. The Group does not hedge its revenue
exposure to movements in the value of client assets arising from
these risks and so the interests of the Group are aligned to those
of its clients.
Credit risk
The Group and Company trades only with third parties it
recognises as being creditworthy. In addition, receivable balances
are monitored on an ongoing basis and under the simplified
approach, provisions for credit risk are assessed under the
lifetime losses approach as explained in Note 2, with all assets
assessed as one portfolio (Note 21).
Credit risk from the other financial assets of the Group and
Company, which comprise cash and cash equivalents, arises from
default of the counterparty, with a maximum exposure equal to the
carrying amount of these instruments.
Liquidity risk
The Group monitors its risk to a shortage of funds by
considering the maturity of both its financial investments and
financial assets (e.g. accounts receivables, other financial
assets) and projected cash flows from operations.
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the possible use of
bank overdrafts, bank loans and leases. The table below summarises
the maturity profile of the Group's and the Company's financial
liabilities at 31 May 2021 and 2020 based on contractual
payments:
Maturity of liability
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables - 12,695 - - 12,695
Contingent consideration - 44 1,730 1,329 - 3,103
Lease liabilities - 227 679 1,261 418 2,585
At 31 May 2021 - 12,966 2,409 2,590 418 18,383
Trade and other payables - 7,189 - - - 7,189
Contingent consideration - - 1,100 400 - 1,500
Lease liabilities - 241 723 1,746 496 3,206
At 31 May 2020 - Restated - 7,430 1,823 2,146 496 11,895
Maturity of liability
On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total
Company GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other payables - 13,194 - 28,143 - 41,337
Contingent consideration - 44 1,730 1,329 - 3,103
Lease liabilities - 205 616 1,100 294 2,215
At 31 May 2021 - 13,443 2,346 30,572 294 46,655
Trade and other payables - 7,140 - - - 7,140
Contingent consideration - - 1,100 400 - 1,500
Lease liabilities - 220 660 1,527 318 2,725
At 31 May 2020 - Restated - 7,360 1,760 1,927 318 11,365
Capital management
The Company and certain of its subsidiaries are supervised in
the UK by the Financial Conduct Authority ("FCA"). The Group
manages its capital through continuous review of the capital
requirements of the Company and its regulated subsidiaries, which
are monitored by the Group's management and reported monthly to the
Board. The Group's objectives when managing capital are:
-- To comply with the regulatory capital requirements set by the FCA;
-- To safeguard the Group's ability to continue as a going
concern so that it can continue to provide returns for shareholders
and benefits for other stakeholders; and
-- To maintain a strong capital base to support the development of its business.
Capital is defined as the total of share capital, share premium,
retained earnings and other reserves. Total capital of the Group at
31 May 2021 was GBP86.2m (2020 restated: GBP81.5m) and Company was
GBP89.2m (2020 restated: GBP86.9m). The Group manages the capital
structure and makes adjustments to it in light of changes in
economic conditions. To maintain or adjust the capital structure,
the Group may adjust the dividend payment to shareholders, return
capital to shareholders or issue new shares.
Regulatory capital is determined in accordance with the
requirements of the Capital Requirements Directive ("the CRD")
prescribed in the UK by the FCA. The Group's regulatory capital
comprises Tier 1 capital, which is the total of issued share
capital, retained earnings and reserves created by appropriations
of externally verified retained earnings, net of the book value of
goodwill and other intangible assets. The Group does not hold any
Tier 2 or Tier 3 capital.
All regulated entities within the Group are required to meet the
Pillar 1 Capital Resources Requirements set out in the CRD. The
latest version of the CRD legislation ("CRD IV") came into effect
on 1 January 2014. The Group is also required to comply with the
CRD's requirements under Pillar 2 (Operational Risk) and Pillar 3
(Disclosure). The CRD requires continual assessment of the Group's
risks to ensure that the higher of Pillar 1 and 2 requirements is
met. Under the Pillar 3 requirements, the Group must disclose
regulatory capital information and has done so by making the
disclosures available on the Group's website at
www.mattioliwoods.com .
The Company and regulated subsidiary companies submit quarterly
returns to the FCA relating to their capital resources. At 31 May
2021 the total regulatory capital requirement across the Group was
GBP11.9m (2020: GBP13.6m) and the Group had an aggregate surplus of
GBP9.9 m (2020: GBP22.6m), including: shares issued during the year
and admitted to Core Equity Tier 1 capital following the year end,
the proposed final dividend and retained earnings for the year. All
the regulated firms within the Group maintained surplus regulated
capital throughout the year. The regulated subsidiaries are limited
in the distributions that can be paid up to the Company by each of
their individual capital resource requirements.
31. Financial instruments
The carrying amount of financial assets and financial
liabilities recorded by category is as follows:
Group Company Group Company
2021 2021 2020 2020
Financial assets GBP000 GBP000 GBP000 GBP000
Cash and short-term deposits 21,888 10,909 25,959 17,584
Amortised cost loans and receivables (including trade and other receivables) (Note
21) 16,957 26,180 16,072 25,993
Amortised cost financial assets 38,845 37,089 42,031 43,577
Fair value through profit or loss - - - -
38,845 37,089 42,031 43,577
Group Company
Group Company 2020 2020
2021 2021 Restated Restated
Financial liabilities GBP000 GBP000 GBP000 GBP000
Amortised cost (including trade and other payables and loan notes payable) 12,695 41,337 7,189 7,140
Fair value through profit and loss (including contingent consideration)
(Note 26) 2,881 2,881 1,454 1,454
15,576 44,218 8,643 8,594
Fair values
The directors consider that the carrying value of financial
instruments in the Company's and the Group's financial statements
is equivalent to fair value. The following table summarises the
fair value measurements recognised in the statement of financial
position by class of asset or liability and categorised by level
according to the significance of the inputs used in making the
measurements:
Quoted prices in
active markets
for identical Significant other Significant
Carrying amount as at instruments observable inputs unobservable inputs
31 May 2021 Level 1 Level 2 Level 3
Group and Company GBP000 GBP000 GBP000 GBP000
Financial liabilities
Contingent
consideration (Note
26) 2,881 - - 2,881
At 31 May 2021 2,881 - - 2,881
The fair value of cash equivalents, accounts receivable and
accounts payable approximate their carrying values due to their
short-term nature.
Contingent consideration
As set out in Note 3, the Group has entered into certain
acquisition agreements that provide for contingent consideration to
be paid. The exact amounts payable cannot be determined as these
depend on the future performance of the acquired businesses, but
the basis on which the valuation is prepared, along with detail of
sensitivity to key assumptions, is set out in Note 2. The Group
estimates the fair value of contingent consideration payable on
acquisitions to be GBP2.9m (2020 restated: GBP1.5m).
Interest rate risk
The following table sets out the carrying amount after taking
into account provisions for impairment, by maturity, of the
Company's and the Group's financial instruments that are exposed to
interest rate risk:
4-5
Group < 1 year 1-2 years 2-3 years 3-4 years years > 5 years Total
Floating rate GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Financial assets (current) - - - - - - -
Cash and cash equivalents 21,888 - - - - - 21,888
At 31 May 2021 21,888 - - - - - 21,888
4-5
Group < 1 year 1-2 years 2-3 years 3-4 years years > 5 years Total
Floating rate GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Financial assets (current) - - - - - - -
Cash and cash equivalents 25,959 - - - - - 25,959
At 31 May 2020 25,959 - - - - - 25,959
Company 4-5
31 May 2021 < 1 year 1-2 years 2-3 years 3-4 years years > 5 years Total
Floating rate GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Financial assets (current) 12,576 - - - - - 12,576
Cash and cash equivalents 10,909 - - - - - 10,909
At 31 May 2021 23,485 - - - - - 23,485
Company 2-3
31 May 2020 < 1 year 1-2 years years 3-4 years 4-5 years > 5 years Total
Floating rate GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Financial assets (current) 12,915 - - - - - 12,915
Cash and cash equivalents 17,584 - - - - - 17,584
At 31 May 2020 30,499 - - - - - 30,499
Interest on financial instruments classified as floating rate is
repriced at intervals of less than one year. Other financial
instruments of the Company and Group that are not included in the
above table are non-interest bearing and therefore not subject to
interest rate risk.
Credit risk
The Group's principal financial assets are cash and short-term
deposits and trade and other receivables.
The only significant concentrations of credit risk relate to the
Group's bank deposits and exposure to credit risk arising from
default of the counterparty. The maximum exposure is equal to the
carrying amount of these deposits. Credit risk mitigation practices
employed by the Group include monitoring of the creditworthiness of
the financial institutions we hold deposits with, and spreading
funds accordingly to reduce exposure to institutions with lower
credit ratings. At 31 May 2021, the Group's bank deposits were held
across the following banks: Royal Bank of Scotland plc, Lloyds Bank
plc, Bank of Scotland plc, Barclays Bank UK plc, Metro Bank plc,
Santander UK plc, Cater Allen Limited, Investec Bank plc, Northern
Bank Limited (Danske Bank), Clydesdale Bank plc, Hinckley &
Rugby Building Society and Market Harborough Building Society.
Given the nature of the Group's operations, it does not have
significant concentration of credit risk in respect of trade
receivables, with exposure spread over a large number of customers.
Credit risk mitigation practices employed by the Group include
reviewing the credit quality of customers and limiting credit
exposures accordingly, arranging for the settlement of trade
receivables directly from customers investments where possible, and
monitoring aged trade receivables and engaging with customers where
trade receivables become overdue.
A provision for lifetime expected credit losses on financial
assets is made, which based on previous experience, is evidence of
a reduction in the recoverability of the cash flows. The basis of
our calculation of credit loss experience and provisions for
expected credit losses are explained in Note 2, and details of
financial assets and the associated provision for impairment are
disclosed in Note 21 .
32. Events after the reporting date
Completion of fundraise
On 26 May 2021 the Company announced the proposed acquisitions
of Maven Capital Partners UK LLP ("Maven") and LWMG Topco Limited
(the holding company of Ludlow Wealth Management Group Ltd)
("Ludlow Wealth Management") (together, the "Acquisitions"),
together with an equity fundraising to raise gross proceeds of
approximately GBP112m and an additional Broker Option (the
"Fundraise").
The Company has successfully raised gross proceeds of GBP112m,
before expenses, at an Issue Price of 660 pence per Ordinary Share,
comprising:
-- 2,800,800 Firm Placing Shares, raising gross proceeds of GBP18.5m;
-- 13,757,512 Conditional Placing Shares, conditionally raising gross proceeds of GBP90.8m;
-- 108,355 PrimaryBid Shares, conditionally raising gross proceeds of GBP0.7m; and
-- 303,030 Broker Option Shares, conditionally raising gross proceeds of GBP2.0m.
2,800,800 Firm Placing Shares were admitted to trading 2 June
2021, with the remaining 14,168,897 shares admitted to trading 17
June 2021.
Acquisition of Maven Capital Partners
On 30 June 2021 the Company completed the proposed acquisition
of 100% of the membership interests in Maven Capital Partners UK
LLP ("Maven") for an aggregate maximum consideration of up to
GBP100.0m (including, subject to certain conditions being
satisfied, up to GBP20.0 million of deferred consideration),
comprised of a combination of cash and new Ordinary Shares.
Maven is one of the UK's leading private equity and alternative
asset managers, providing funding options to UK SMEs, and offering
investment opportunities in VCTs, private equity and property. The
owner-led business comprises 12 partners, with a regionally based
team of 91 investment executives and support professionals. Maven
operates across 10 offices in Glasgow, Edinburgh, Manchester,
Birmingham, London, Newcastle, Bristol, Nottingham, Durham and
Reading.
Maven and its indirect subsidiary company Maven Property
Investments Limited ("MPIL") are authorised and regulated by the
FCA as Alternative Investment Fund Managers ("AIFMs"). Maven
Capital Investments Limited ("MCIL"), a direct subsidiary of Maven,
is an investment holding company with co-investment commitments
into a number of regional funds. MCIL also generates management
fees from property deals. MPIL is a subsidiary of MCIL and is the
regulated manager for property deals and generates monitoring and
accounting fees from those transactions.
Maven manages approximately GBP772m in AuM, comprising:
-- Four evergreen VCTs, listed on the London Stock Exchange,
providing growth capital for UK based younger companies.
-- Seven regional funds, providing equity and debt growth
capital for SMEs in specific UK regions
-- An MBO fund, supporting management buyouts in the UK smaller and lower mid-market
-- Maven Investor Partners ("MIP"), funding individual private
equity and property deals, on a deal by deal basis:
o Equity capital for smaller MBO transactions of later stage
SMEs across the UK
o Equity capital for the development of hotels, purpose-built
student accommodation, offices, residential construction and
strategic land transactions
Maven primarily generates revenue from management fees and
General Partner's Priority Share which are annual management
charges generated on the VCTs, regional funds, MBO fund and MIP
deals.
Performance fees may be generated on the VCT funds based on
increases in net asset value and is structured as carried interest
for MIP deals.
Other income is generated from director and monitoring fees,
third party administration and investment income.
The provisional fair values of the assets and liabilities of
Maven as at the date of acquisition are set out in the table
below:
Provisional
fair value Provisional Previous
recognised fair value carrying
on acquisition adjustments value
GBP000 GBP000 GBP000
----------------------------------------- ---------------- ------------- ----------
Tangible fixed assets 380 - 380
Intangible assets - Client portfolio 54,483 54,483 -
Intangible assets - Brand 1,951 1,951 -
Investments 3,422 - 3,422
Trade and other receivables 3,530 - 3,530
Net cash 4,408 - 4,408
----------------------------------------- ----------------
Assets 68,174 56,434 11,740
----------------------------------------- ----------------
Trade and other payables (1,746) - (1,746)
Provisions (683) - (683)
Non-current liabilities (628) - (628)
Deferred tax liability (13,851) (13,851) -
Liabilities (16,908) (13,851) (3,057)
----------------------------------------- ---------------- ------------- ----------
Total identifiable net assets at
fair value 51,265
Goodwill 38,105
----------------
Total acquisition cost 89,370
----------------------------------------- ----------------
Analysed as follows:
----------------------------------------- ----------------
Initial cash consideration 50,000
Net shares in Mattioli Woods 33,773
Net asset excess 5,000
Contingent consideration 800
Discounting of contingent consideration (203)
Total acquisition cost 89,370
----------------------------------------- ----------------
In addition to the acquisition cost, management sellers will
receive remuneration of up to GBP19.2m over a four year earn out to
30 June 2025, subject to the achievement of certain performance
conditions including the financial performance of Maven meeting
financial targets.
Acquisition of Richings Financial Management
On 26 August 2021 the Company completed the acquisition of 100%
of the share capital of Richings Financial Management Ltd
("Richings") for an initial consideration of GBP0.9 million and
potential further consideration of up to GBP0.9 million dependent
on the attainment of specified performance targets in the two years
after completion.
Founded in 1991, Richings is an established financial planning
and wealth management business, working with over 270 private
client families with approximately GBP70 million of assets under
advice. Richings is based in Iver and employs an experienced team
of four staff, all of whom will remain with Mattioli Woods
following completion.
In the year ended 30 April 2021, Richings generated revenues of
GBP0.66 million with a profit before taxation of GBP0.34 million.
At 30 April 2021 Richings' gross assets were GBP0.35 million and
net assets were GBP0.26 million. The acquisition is expected to be
earnings enhancing in the first full year of ownership.
The total consideration comprises:
-- An initial consideration of GBP0.9 million cash on a
cash-free, debt-free basis (subject to adjustment for the value of
net assets acquired); and
-- Contingent consideration of up to GBP0.9 million payable in
cash on the first and second anniversaries of completion, subject
to certain profit targets being met.
Payment of the initial cash consideration, deal costs and
estimated net asset completion adjustment has resulted in a net
cash outflow at completion of GBP0.9 million (net of estimated cash
received on acquisition).
Due to the proximity of the date of acquisition of Richings to
the date of announcement of the Group's final results for the year
ended 31 May 2021, the Directors are unable to provide the
disclosure requirements of IFRS 3 relating to acquisitions after
the end of the reporting period but before the financial statements
are authorised for issue.
Acquisition of Ludlow Wealth Management
On 3 September 2021 the Company completed the proposed
acquisition of 100% of the issued share capital of LWMG Topco
Limited (the holding company of Ludlow Wealth Management Group Ltd)
("Ludlow Wealth Management"), for an aggregate consideration and
other deferred payments of up to GBP43.5 million on a cash free,
debt free basis as at the agreed "locked box" balance sheet date of
30 September 2020. The amount payable in respect of the Ludlow
Wealth Management Acquisition includes, subject to the satisfaction
of certain performance conditions following completion of the
Ludlow Wealth Management Acquisition, up to GBP6.4 million of
deferred consideration and up to GBP1.0m of bonuses payable to
non-shareholder employees. In addition, in accordance with the
locked box adjustment mechanism, in respect of the period
commencing on the locked box date of 30 September 2020 and ending
on the date of completion of the Ludlow Wealth Management
Acquisition, the Company will pay to the sellers of Ludlow Wealth
Management an amount in respect of the estimated cash profits of
Ludlow Wealth Management during such post-locked box date period
calculated at a daily rate of GBP6,173.24 for the total number of
days during such period. The consideration for the Ludlow Wealth
Management Acquisition will be satisfied by a combination of cash
and new Ordinary Shares.
Established in 1993, Ludlow Wealth Management is one of the
largest providers of investment, financial planning and pension
advice in the North West of England. Ludlow Wealth Management has
61 employees, including 22 advisers operating from offices in
Fylde, Preston, Burnley, Liverpool and Southport.
Ludlow Wealth Management manages GBP1,622 million of assets
under advice ("AuA") as at 31 March 2021 for 3,371 clients, with an
average of GBP74 million AuA per adviser and an average client size
of GBP0.48 million AuA. Ludlow Wealth Management has delivered
growth, organically and by acquisition; completing 16 acquisitions
in the last 12 years, adding GBP588 million of AuA and GBP2.4
million of recurring revenue. Ludlow Wealth Management currently
outsources investment management.
In the year ended 30 September 2020, Ludlow Wealth Management
generated revenue of GBP9.4 million, of which 91 per cent. was
recurring. Adjusted EBITDA for the period was approximately GBP3.3
million (adding back monitoring and directors' fees incurred to
oversee private equity investment in business), with an associated
adjusted EBITDA margin of 35 per cent and a high cash conversion.
As at 30 September 2020, Ludlow Wealth Management had gross assets
of GBP16.8 million and net liabilities of GBP0.5 million (including
net debt of GBP13.7 million). Ludlow Wealth Management has
maintained momentum despite adverse market conditions and
management expects material profit growth for the year ending 30
September 2021.
The total consideration comprises:
-- An initial consideration of GBP36.1 million, calculated on a
cash free, debt free basis as at the agreed "locked box" balance
sheet date of 30 September 2020, and which will be satisfied as
follows:
o an aggregate amount of GBP30.3 million will be payable in cash
on Ludlow Wealth Management Completion in respect of consideration
for the acquisition of Ludlow Wealth Management and repayment of
indebtedness and borrowings of Ludlow Wealth Management; and
o GBP5.8 million will be satisfied by the issue of new Ordinary
Shares to certain individual sellers who are members of the Ludlow
Wealth Management management team; and, in addition
o in accordance with the locked boxed adjustment mechanism, in
respect of the period commencing on the locked box date of 30
September 2020 and ending on the date of completion of the Ludlow
Wealth Management Acquisition, the Company has agreed to pay to the
sellers of Ludlow Wealth Management an amount in respect of the
estimated cash profits of Ludlow Wealth Management during such
post-locked box date period calculated at a daily rate of
GBP6,173.24 for the total number of days during such period;
and
-- Deferred consideration, subject to the satisfaction of
certain performance conditions, up to GBP6.4 million and up to
GBP1.0m of bonuses payable to non-shareholder employees of Ludlow
Wealth Management, in each case, payable in cash and calculated on
the basis of (a) the amount of the adjusted EBITDA of Ludlow Wealth
Management for the 12 months ending 30 September 2023 multiplied by
8.25; less (b) the amount of the Initial Ludlow Wealth Management
Consideration; and less (c) the aggregate value of all
consideration paid or payable by Mattioli Woods in respect of any
eligible acquisition of any company or business that is integrated
into Ludlow Wealth Management and which completes between Ludlow
Wealth Management Completion and 30 September 2023.
Ludlow Wealth Management's experienced management team will be
retained by Mattioli Woods following the Ludlow Wealth Management
Acquisition, which is expected to be earnings enhancing in the
first full year of ownership. In addition, the Company expects to
realise revenue and cost synergies from first full year onwards,
including investment in Mattioli Woods' discretionary portfolio
management service and alternative investment strategies by certain
of Ludlow Wealth Management's clients.
Due to the proximity of the date of acquisition of Ludlow Wealth
Management to the date of announcement of the Group's final results
for the year ended 31 May 2021, the Directors are unable to provide
the disclosure requirements of IFRS 3 relating to acquisitions
after the end of the reporting period but before the financial
statements are authorised for issue.
33. Ultimate controlling party
The Company has no controlling party.
34. Financial information
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 May 2021 or
2020 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the registrar of companies, and those
for 2020 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
35. Distribution of the annual report and accounts to
members
The annual report and accounts will be posted to shareholders in
due course, and will be available on our website (
www.mattioliwoods.com ) and for inspection by the public at the
Group's registered office address: 1 New Walk Place, Leicester, LE1
6RU during normal business hours on any weekday. Further copies
will be available on request.
Alternative performance measure workings
Recurring revenue
A measure of sustainable revenue, calculated as revenue earned
from ongoing services as a percentage of total revenue.
2021 2020
Timing of revenue recognition GBP000 GBP000
--------------------------------------- ------- -------
At a point in time:
Investment and asset management 2,041 2,002
Pension consultancy and administration 1,018 1,097
Property management 104 464
Employee benefits 917 1,043
Non-recurring revenue 4,080 4,606
Over time:
Investment and asset management 31,329 24,846
Pension consultancy and administration 17,789 19,464
Property management 4,806 4,952
Employee benefits 4,611 4,539
Recurring revenue 58,535 53,801
--------------------------------------- ------- -------
Total revenue 62,615 58,407
--------------------------------------- ------- -------
Recurring revenue 93.5% 92.1%
--------------------------------------- ------- -------
Organic revenues
A measure of revenue excluding revenue from businesses acquired
in the current or prior year.
2021 2020
Group GBP000 GBP000
--------------------------------------------------- ------- -------
Total revenue 62,615 58,407
Increase in revenue from acquisitions in the prior
year (252) -
Revenue from acquisitions in the current year (6,050) -
Organic revenue 56,313 58,407
--------------------------------------------------- ------- -------
Adjusted EBITDA
A measure of the underlying profitability, excluding items that
are non-cash or affect comparability between periods, calculated as
statutory operating profit before financing income or costs, tax,
depreciation, amortisation, impairment and acquisition related
costs, share of profit from associates (net of tax), gain on
bargain purchase and contingent consideration recognised as
remuneration.
2020
2021 Restated
Group GBP000 GBP000
Statutory operating profit before financing 4,231 12,192
Amortisation of acquired intangibles 2,774 2,077
Amortisation of software 304 360
Depreciation 2,772 2,547
EBITDA 10,081 17,176
Share of profit from associates, net of tax 1,141 633
Acquisition related costs 2,595 334
Subtotal 13,817 18,143
Gain on bargain purchase (288) -
Deferred consideration as remuneration 3,803 750
Adjusted EBITDA 17,332 18,893
Adjusted PBT
A measure of profitability before taxation, excluding items that
are non-cash or affect comparability between periods, calculated as
statutory profit before tax excluding amortisation of acquired
intangibles and acquisition related costs, gain on bargain
purchase, contingent consideration recognised as remuneration and
acquisition related notional interest charges.
2020
2021 Restated
Group GBP000 GBP000
Statutory profit before tax 5,148 12,731
Amortisation of acquired intangibles 2,774 2,077
Acquisition related costs 2,595 334
Gain on bargain purchase (288) -
Deferred consideration as remuneration 3,803 750
Acquisition related notional finance cost 133 61
Adjusted PBT 14,165 15,953
Adjusted PAT
A measure of profitability, net of taxation, based on Adjusted
PBT and deducting tax at the standard rate of 19% (2020: 19%).
2020
2021 Restated
Group GBP000 GBP000
Adjusted PBT 14,165 15,953
Income tax expense at standard rate of 19% (2,691) (3,031)
Adjusted PAT 11,474 12,922
Adjusted EPS
A measure of total comprehensive income for the year, net of
taxation, attributable to equity holders of the Company, adjusted
to add back amortisation of acquired intangibles and acquisition
related costs, gain on bargain purchase, contingent consideration
recognised as remuneration and acquisition related notional
interest charges, divided by the weighted average number of
ordinary shares in issue.
2020
2021 Restated
Group GBP000 GBP000
Adjusted PAT 11,474 12,922
Basic weighted average number of shares (see Note 13) 27,936 27,161
Adjusted EPS 41.1p 47.6p
Adjusted cash generated from operations
A measure of operating cashflows, excluding items that are
incurred as a result of the Group's acquisition activities,
calculated as statutory cash generated from operations excluding
contingent remuneration paid on acquisition of subsidiaries, and
acquisition-related costs paid.
2020
2021 Restated
Group GBP000 GBP000
Statutory cash generated from operations 20,362 13,926
Contingent remuneration paid on acquisition of subsidiaries (see Note 26) 609 -
Acquisition costs paid 732 437
Adjusted cash generated from operations 21,703 14,363
[1] Annual pension consultancy and administration fees; ongoing
adviser charges; level and renewal commissions; banking income;
property, discretionary portfolio and other annual management
charges adjusted for Private Investor Club initial fees.
[2] This is an alternative performance measure ("APM") the Group
reports to assist stakeholders in assessing performance alongside
the Group's results on a statutory basis. APMs may not be directly
comparable with other companies' adjusted measures and APMs are not
intended to be a substitute for, or superior to, any IFRS measures
of performance. Supporting calculations for APMs and
reconciliations between APMs and their IFRS equivalents are set out
in the Alternative performance measure workings section of the
Annual Report. See Strategic report for further details of
APMs.
[3] Definition amended to add gain on bargain purchase and
contingent consideration as remuneration. Now calculated as
earnings before interest, taxation, depreciation, amortisation,
acquisition-related costs, gain on bargain purchase, contingent
consideration treated as remuneration and including share of profit
from associates (net of tax).
[4] Adjusted EBITDA divided by revenue.
[5] Definition amended to add back gain on bargain purchase,
deferred consideration as remuneration and acquisition related
finance expenses. Now calculated as profit before tax, adding back
amortisation and impairment of acquired intangibles,
acquisition-related costs, gain on bargain purchase, contingent
consideration treated as an expense, acquisition related finance
expenses.
[6] Adjusted profit after tax used to derive adjusted EPS is
calculated as adjusted profit before tax as defined above less
income tax at the standard rate of 19% (2020: 19%).
[7] Includes GBP1,196.0m (2020: GBP515.8m) of funds under
management by the Group's associate, Amati Global Investors
Limited, excluding GBP94.9m (2020: GBP54.1m) of Mattioli Woods'
client investment and GBP17.2m (2020: GBP11.5m) of cross-holdings
between the TB Amati Smaller Companies Fund, TB Amati Strategic
Metals Fund and the Amati AIM Venture Capital Trust ("VCT")
plc.
[8] Includes GBP1,308.1m (31 May 2020: GBP581.4)) of funds under
management by Amati Global Investors Limited, including Mattioli
Woods' client investment and cross-holdings between TB Amati
Smaller Companies Fund, TB Amati Strategic Metals Fund and Amati
AIM VCT plc.
[9] Total revenues excluding the revenue growth from businesses
acquired in the last 24 months
[10] Revenue for the year ended 31 May 2021 was split 54% (2020:
53%) fixed, initial or time-based fees and 46% (2020: 47%%) ad
valorem fees based on the value of assets under management, advice
and administration.
[11] Certain pension scheme assets, including clients' own
commercial properties, are only subject to a statutory valuation at
a benefit crystallisation event.
[12] Value of funds under trusteeship in SIPP and SSAS schemes
administered by Mattioli Woods and its subsidiaries.
[13] Assets under management of GBP1,196.0m (2020: GBP515.8m)
excludes GBP94.9m (2020: GBP54.1m) of Mattioli Woods' client
investment included within SIPP and SSAS, employee benefits and
personal wealth and other assets and excludes GBP17.2m (2020:
GBP11.5m) of cross-holdings between the TB Amati Smaller Companies
Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT plc.
[14] SIPP and SSAS schemes where the Group acts as pension
consultant and administrator. SIPP and SSAS schemes administered by
SSAS Solutions reclassified as direct during the year.
[15] Includes personal wealth clients' with SIPP and SSAS
schemes operated by third parties.
[16] Includes Mattioli Woods' client investment and GBP20.0m
(2020: GBP11.5m) of cross-holdings between the TB Amati Smaller
Companies Fund, TB Strategic Metals Fund and the Amati AIM VCT
plc.
[17] Earnings before interest, taxation, depreciation,
amortisation and impairment.
[18] Figures in table may not add due to rounding.
[19] Figures in table may not add due to rounding.
[20] Before acquisition-related costs, amortisation and
impairment of acquired intangibles, gain on bargain purchase,
deferred consideration as remuneration and acquisition related
finance costs.
[21] Working capital defined as trade and other receivables less
trade and other payables.
[22] Cash generated from operations before acquisition-related
costs paid and contingent remuneration paid
[23] Comprises GBP26.6m (2020: GBP25.2m) in Custodian REIT,
GBP44.0m (2020: GBP57.6m) in MW SPF and GBP73.3m (2020: GBP45.1m)
in Amati funds.
[24] Cross-holdings between the TB Amati Smaller Companies Fund and the Amati AIM VCT plc.
[25] SIPP and SSAS schemes where Mattioli Woods acts as pension
consultant and administrator.
[26] Direct schemes lost to an alternative provider as a
percentage of average scheme numbers during the year.
[27] Direct schemes lost as a result of death, annuity purchase,
external transfer or cancellation as a percentage of average scheme
numbers during the year.
[28] Appointed to Board post year-end on 9(th) June 2021
[29] Shareholdings include additional shares subscribed as part
of the placing in June 2021. Percentage shareholdings are based
upon the total issued share capital of 50,578,773.
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