Mattioli Woods stays braced

The trials and tribulations in asset management have been well documented over the past 12 months. While the big companies have struggled, smaller players like Mattioli Woods (MTW) have held the line against wholesale asset price falls and customer withdrawals, though even MTW recorded a 2 per cent fall in client assets to £14.6bn in the six months to 30 November. In such a difficult market, the key differentiator seems to be whether asset managers also class themselves as general wealth managers, as this market segment has proved to be far more stable.

Mattioli Woods is no different in this regard. The company’s main strength continues to be the recurring fees it earns from managing client money stashed in pensions, or discretionary investments. Recurring revenues made up nearly 90 per cent of total sales, up from 88 per cent last year. This was a positive given that the half encompassed some of the worst of the market turmoil triggered by last autumn’s mini-Budget. The rising interest rate environment is also interesting for the company, which has the option of deploying its capital in the money broking market and earning better interest, whilst doing the same for its Sipp customers.  

The recurring fee strength is due to the company being able to earn fees from discretionary advice when markets are bad, while management says it is still pulling customers to its platform via referrals. Acquisitions have also played their part, with the company earning £20mn of revenue from businesses acquired since the end of 2021.

Mattioli offers an interesting combination of inherent operational gearing and resilient revenue streams through its advisory businesses. The shares have eased back slightly since the summer but the forward price/earnings ratio of 13, based on FactSet consensus, is unchanged, and so is our advice. Buy.

Last IC view: Buy, 660p, 13 Sep 2022