A lot of working people are - or should be - worrying about what happens when they reach retirement age, assuming they're not made redundant before then. In which case, offering pensions advice should be a growth business.
- Growing demand for pensions advice
- Good client retention
- Strong finances
- Expanding through bolt-on acquisitions
- Kudos deal expensive on some reckonings
- Difficult to deal in shares
Mattioli Woods has built a reputation for providing pensions services, and proof of its success is the fact that this year the company clocked up its 20th successive year of rising turnover and profits. Set up in 1991 by Ian Mattioli and Bob Woods to provide a pensions trouble-shooting and advisory service aimed at directors and professionals, the company now acts for nearly 4,500 clients, mainly through small self-administered schemes (SSASs) and self-invested personal pension plans (Sipps). The core revenue stream is generated by charging a fee for its services and commission income. With the goal posts on pensions legislation forever moving, the company's attention to detail has been rewarded with a high level of client retention. Indeed, fee-based income for the year to May rose 22 per cent to £9m.
Management has also been increasing its presence and range of services through bolt-on acquisitions, picking up City Pensions and City Trustees from the Lighthouse Group last year, and more recently Kudos, an employee benefits and wealth management business based in Aberdeen. This cost £8.7m, with possible deferred consideration of up to £4.75m payable over three years, which some City analysts reckon is expensive. However, the acquisition offers cost savings as back offices merge, plus the scope to cross-sell products to a bigger client base. Besides, Mattioli's bosses expect the inclusion of Kudos to add to earnings this year.
| MATTIOLI WOODS | ||||
|---|---|---|---|---|
| ORD PRICE: | 238p | MARKET VALUE: | £42m | |
| TOUCH: | 230-238p | 12-MONTH HIGH: | 340p | LOW: 230p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 126p | NET CASH: | £4.6m | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 10.8 | 3.51 | 14.3 | 3.00 |
| 2009 | 13.3 | 3.90 | 15.8 | 3.90 |
| 2010 | 13.7 | 4.27 | 17.2 | 4.35 |
| 2011 | 15.4 | 4.55 | 18.9 | 4.95 |
| 2012* | 19.9 | 5.20 | 23.7 | 5.70 |
| % change | +29 | +14 | - | +15 |
Normal market size: 400 Market makers: 4 Beta: 0.1 *Keefe, Bruyette & Woods estimates (earnings are not comparable with earlier figures) | ||||
Mattioli had £4.6m of net cash in May and the business throws off cash, too. So, even after coughing up £2.75m in cash as part of the consideration for Kudos, analysts reckon the cash pile will be little changed by the end of the financial year. True, the shares are tightly held, with chairman Bob Woods and chief executive Ian Mattioli holding over 41 per cent of the equity. And while the dividend is rising briskly, too much cash profit is retained in the business to make the shares anything like a yield stock.
That's largely because Mattioli's bosses reckon there is much growth to fund via acquisitions and internal development. Work in progress includes setting up a discretionary fund management platform, which should be launched later this year. Management is also beefing up the property investment side, with the relative attraction of rental yields prompting clients to invest £16.3m into eight new syndicates; revenue from this source jumped from just £0.99m in 2009-10 to £1.49m.
