Tatton powers through the half year

The asset manager reporting season highlighted how diverse the sector is when comes to finding and maintaining stable levels of fund inflows. In this respect, model portfolio provider Tatton Asset Management (TAM) easily claimed the prize for best result of the season with net asset inflows (itself a rarity these days) of £910mn, broadly stable when compared year on year and translating into a steady inflow of £150mn per month. The fact that the company has maintained this rate for the past 18 months is a notable achievement.

Tatton’s model portfolio business, which has become the main driver of the company’s profitability, continued to add independent financial advisors (IFAs) to the model portfolio services (MPS) platform and the number of firms increased by 5.2 per cent to 914. MPS now generates over 82 per cent of the company’s sales. Tatton is also launching a cash savings product that aims to match the Bank of England’s base rate more closely in case volatility weariness sets in among investors.

One area with the potential to cause problems in the current economic climate is the mortgage business where approvals fell by 5.5 per cent to £6.9bn. Management said the fall was too small in the context of the overall group to cause problems for earnings.

Tatton’s steady growth, low capital base and high operating margins of above 50 per cent are a real standout in an otherwise struggling sector. Unsurprisingly, such a growth profile does not come cheap and broker Peel Hunt expects a year-end price/ earnings ratio of 23, with EV/Ebit of 15. However, if it can maintain its performance then any pullback in the shares should be used as way in. Buy.

Last IC View: Buy, 462p, 13 Jun 2023