Hits: 5

11 March 2020

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Mattioli Woods – Acquisition 

Share Price 790p

Mkt cap £222m

Conflict Disclosure: No Holding

  • Acquisition £25.6m acquisition of Hurley, a wealth management business with pension expertise. £17.6m up front paid 60% in cash. Hurley has £570m AUM so 4.5% of AUM appears full on the face of it but up front is 3.1% of AUM and the earn out targets are undisclosed. Net assets were £2.62m PBT is £0.75m but cost savings of £0.5m are expected by the end of first year.  Revenue synergies expected through new distribution channel.
  • Estimates The deal is expected to be earnings enhancing in the first full year of ownership. With only £7m of up front share issuance up front and £1.25m of pro forma profits coming in that adds c 10% to May 2021 pre tax estimates while share issuance is c 4%.
  • Valuation PER 18.8X Yield 3.5% pre acquisition
  • Conclusion This acquisition may help towards improving top line growth which has been lack lustre. Long term this quality situation will do well but in the short term it looks up with events..  

4 Februaury 2020

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Mattioli Woods– H1 Results 

Share Price 840p

Mkt Cap £225m

Conflict Disclosure: No Holding

  • Results Revenue up 3.8% to £30.3m. PBT up 7.1% to £6m but up 9.2% to £7.1m at the adjusted level. Adjusted EPS up 8.1% to 21.4p and interim dividend up 15.3% to 7.3p. Cash £20m. Total client assets are flat at £9.4bn though discretionary was up 3.8% to £2.7bn. Outlook is “in line”.
  • Estimates Anticipate 9.2% revenue growth and pre tax profit of £13.7m to May 2020. Going forward PBT growth is expected to fade to 10% in 2021 followed by 5%. ROE having been in decline for a number of years is now expected to start to increase to 13.3%
  • Valuation PER 20 Yield 2.6%
  • Culture The analyst meeting is one of the best attended as the passion exuded is always invigorating. So it is a surprise to see a poor Glassdoor score of 3.3. Interestingly some of the reviews say the culture has changed over the last 7 years as the company is larger and has become more fragmented. Growing pains I wonder.
  • Conclusion The company has perhaps been going through a period of indigestion as the ROE has been declining and growth stagnating.  It may be starting to improve again with further acquisitions planned and growth resuming but the rating is taking a lot on trust.

6 January 2020

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Mattioli Woods – Trading Update 

Share Price 815p

Mkt Cap £219m

Conflict Disclosure: No Holding

  • Update The H1 update to 30 November reports growth in revenue and EBITDA with improved margins following an operational restructure. £20m cash at period end and outlook in line with management expectations.
  • Culture: The company’s relentless and passionate focus on the client leads to a strategy of producing 20% operating margins through the vertically integrated model.
  • Estimates Last year revenues were flat but the EBITDA margin was 24.8%. This is anticipated to be 26% in the year to May 2020, which is 14% up.
  • Valuation PER 19.5X Yield 2.7%
  • Conclusion The high rating reflects the culture of the business.  With modest revenue growth and full margins the shares may be up with events in the short term having increased by 23% since October.

21 October 2020

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Mattioli Woods – AGM 

Share Price 665p

Mkt Cap £178m

Conflict Disclosure: No Holding

  • AGM The company say they have enjoyed a return to revenue growth in the first four months of the year, with SIPP and SSAS fees and property management growth offsetting the impact of ongoing market and political uncertainty including a lower level of net inflows. There has also been some margin improvement following a restructure of client facing operations. The profit outlook is “in line” with expectations.
  • Estimates £13.7m PBT is expected, representing a margin of 21% on the c £64m revenue. EPS 42.3p and DPS 22p.
  • Valuation PER to May 2020 is 15.7X and yield 3.3%
  • Conclusions: The shares have come back from their 810p high and are starting to look good value. Market conditions aren’t great but that is the time to be buying these companies.

21 October 2019

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Mattioli Woods – AGM 

Share Price 665p

Mkt Cap £178m

Conflict Disclosure: No Holding

  • AGM The company say they have enjoyed a return to revenue growth in the first four months of the year, with SIPP and SSAS fees and property management growth offsetting the impact of ongoing market and political uncertainty including a lower level of net inflows. There has also been some margin improvement following a restructure of client facing operations. The profit outlook is “in line” with expectations.
  • Estimates £13.7m PBT is expected, representing a margin of 21% on the c £64m revenue. EPS 42.3p and DPS 22p.
  • Valuation PER to May 2020 is 15.7X and yield 3.3%
  • Conclusions: The shares have come back from their 810p high and are starting to look good value. Market conditions aren’t great but that is the time to be buying these companies.

4 July 2019

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Mattioli Woods – Trading Update  

Share Price 792p

Mkt Cap £212m

Conflict Disclosure: No Holding

  • News Strong EBITDA and PBT growth is anticipated for the year to May 2019. That looks in line with forecasts.  Murray Smith is leaving the board but staying with the group while a new Risk and Compliance Officer is appointed alongside a new Group Finance Director.
  • Estimates.Forecasts anticipate £60m revenue, £12.7m PBT and 39.6p EPS with a dividend of  18.9p for the tear to May 2019. That is modest revenue growth but 27% PBT growth following investment into the business.
  • Valuation PER is 17.9X and yield 2.6%. ROE is 11.2%.
  • Conclusion The company is well placed.  Unusually this company has the ability to reinvest its earnings in acquisitions over time. Which is the reason it would be nice to see the ROE going up over time. That would be the trigger to make these shares expensive. In the meantime they continue to look fairly valued as they have done for the last 12 months.

28 March 2019

Mattioli Woods – Acquisition 

Share Price 777p

Mkt Cap £206m

Disclosure – No holding

  • Acquisition £4m acquisition of SSAS Solutions (UK) Ltd. This is a pension advisory business in Belfast employing 12 people with £380m of SSAS AUA.  Revenue was £1.01m in the year to March 2018 and PBT was £0.6m with net assets of £0.74m So the price is 4X revenue, and 6.5X PBT.  
  • Estimates This looks like it could add 6% to profits but with some shares being issued perhaps we may expect 3% enhancement to earnings.
  • Valuation Mattioli trades at a PER 18X yield 2.6%
  • Conclusion What a lovely niche good return acquisition. Lets hope the 12 staff don’t retire to the Crown with their considerationlike I did when I went over to audit an Irish insurance broker.

5 February 2019

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Mattioli Woods – H1 Results 

Share Price 737p

Mkt Cap £195m

  • Results Revenue up 2.8% to £29.2m (2018A £28.4m).  Recurring revenue now accounts for a huge 89.7% of total revenue.  PBT was up 8.3% to £6.5m. EPS was up 9.2% (adjusted) to 20.1p and the dividend was increased 15.1% to 6.33p. Net cash is £16.4m and the outlook statement is “in line”
  • Estimates The inline outlook implies no changes to forecasts certainly at the PBT level although the reference to “profit outlook” tells us revenue estimates may come down a little as guided at the pre close statement.
  • Valuation Per 16.9 and yield 2.64% is pricey against the peer group following market declines but the shares are 14% down from their high in September
  • Conclusion This company has undergone a period of investment when some commentators (myself included) have questioned their declining ROCE.  EPS growth this year is expected to be 11% as the benefits of the investment come through followed by 10% in year to May 2020.  While not offering a winking light to the value investor this company should always be bought in bear markets like this. And it has the best attended analyst meeting of its peers despite no sticky buns.

7 January 2019

Mattioli Woods – Trading Update 

Share Price 660p

Mkt Cap £174m

  • Update Revenue is a little behind expectations due to market weakness and lower client activity in H2 but the EBITDA margin is substantially ahead of the company’s 20% target.  The outlook at the profit level is in line with expectations. Cash is £16m and the company has cancelled its option to buy the remaining 51% on Amati Global Investors in return for a payment of £750k which equates to the fair value of the option. The company relocated to its new freehold office in October saving £850k per year
  • Estimates PBT estimate unlikely to change although margins forecasts may increase while revenue may decrease
  • Valuation PER is 15.4X, yield 3%
  • Conclusion As the company starts to benefit from a period of investment earnings growth is now set to accelerate while the share price has fallen 23% from its September high. This is now looking persuasive

25 October 2018

Mattioli Woods – AGM  

Share Price 688p

Mkt Cap £181m

·         Statement  Mattioli reports further revenue growth and operational efficiencies which should reduce client TER’s. Lower client activity over the summer in common with other wealth managers is reported. However, administration cost savings results in EBITDA tracking “substantially ahead of target”. However the statement concludes with the profit outlook is “in line with management expectations”

·         Estimates Consensus estimates look for 12.5% PBT growth for the year to May 19 from 8% revenue growth. That looks assured given the scope for cost savings.

·         Valuation Current year PER is 18 and yield 2.6%.

·         Conclusion Not in the value camp, but looking reasonable now the shares have retreated 19% from their highs in May. Our target price is 850p