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Growth slows at Mattioli Woods

The wealth manager is having to cut its way to higher profits
September 3, 2019

As their trailing beta score of 0.56 suggests, shares in Mattioli Woods (MTW) are far less volatile than the broader equity market, as well as wealth manager peers. This may have something to do with a wide bid-offer spread and thin liquidity. Steady, if slightly sluggish trading, underpinned by a defensive fee-based revenue model, offers another explanation.

IC TIP: Hold at 748p

Full-year results flesh out this picture. The top line was held in check by lower investment levels and a reduction in various charges, which Mattioli presented as £3.1m in client cost savings. Profits nonetheless climbed thanks to improving operational efficiency and a £0.5m contribution from associate venture Amati, up from £0.2m in the prior year. 

However, clients’ current propensity to sit on their hands has clearly sapped momentum. Founder and chief executive Ian Mattioli believes there are up to 1m Brits who are potential customers of his company, but organic business originations slimmed in the period, and Mr Mattioli expects Brexit and the broader economic backdrop to “continue to impact investor and consumer sentiment in the short term”.

What to do, then, but cut back further on costs? To this end, the period finished with staff headcount 6 per cent lower, leading analysts at Canaccord Genuity to upgrade their adjusted earnings before interest, tax, depreciation and amortisation by 5 per cent and 6 per cent for the next two financial years.

The broker expects adjusted pre-tax profits of £15.9m and EPS of 48.4p for the year to May 2020, up from £14.5m and 43.6p, respectively, in the prior year. 

MATTIOLI WOODS (MTW)  
ORD PRICE:748pMARKET VALUE:£200m
TOUCH:735-750p12-MONTH HIGH:865pLOW: 620p
DIVIDEND YIELD:2.7%PE RATIO:24
NET ASSET VALUE:319p*NET CASH:£23.2m
Year to 31 MayTurnover (£m)   Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201534.65.319.810.5
201643.06.320.912.5
201750.57.624.514.1
201858.79.830.817.0
201958.510.230.820.0
% change-0.3+5-+18
Ex-div:12 Sep   
Payment:25 Oct   
*Includes intangible assets of £48.7m, or 182p a share