Mattioli Woods: Solid H1, interim dividend +6% implies confidence

A solid set of interims in challenging market conditions. Management maintains a confident outlook, noting H2 is typically characterised by higher inflows and revenue (due to tax year-end and other effects), and have highlighted positive signals from some leading indicators.

My Equity Development note covering Mattioli Woods interims (to 30 Nov 22) is out. You can read the full note here with a short summary below.

Total client assets were unsurprisingly a touch down (-2%). Volatile markets and a weak economic environment isn’t exactly conducive to attracting new client assets.

Revenue was up 10% year-on-year. This was boosted by H1-23 including full-period revenues from Ludlow and Maven which were acquired in H1-22 (which included only part-period revenues from these two businesses), but organic revenue growth was still positive (+2%) which is encouraging.

Maven, the private equity business, seems to be purring along nicely. AUM was up 6% y-o-y and revenue 15%.

Pensions consultancy and administration saw an uptick in activity and demand for advice with revenue up 11%.

Property management (FTSE-listed REIT Custodian Capital) saw a 14% revenue increase on the back of increasing property valuations.

Employee Benefits (which was re-structured a few years ago) seems to be building momentum with the demand for new services driving a 16% revenue increase.

Amati, the asset management business which is 49% owned by MW and accounted for as an associate company, had a tough 6 months (like many pure-play asset managers) with AUM down 16% and MW’s share of its profits down 35%.

It’s worth expanding on Amati’s performance in the context of the group. Asset managers’ AUMs and revenues tend to be a bit more volatile than wealth managers, so Amati’s results would be expected to be more volatile than the overall MW group. This is because they typically house only parts of investor portfolios and an asset allocation switch (say away from UK small caps – a core offering of Amati’s) tends to be assets moved out of the asset management business itself. Wealth managers however, tend to house investor portfolios so an asset allocation switch would often take place ‘within’ the wealth management portfolio. 

The flip side of Amati suffering more than the group during a period of weak and volatile markets is that it could bounce back much faster than the wealth management assets in the group if investor sentiment turns in its favour. This is one worth watching.

MW Management have flagged a number of positive signals for the group’s H2 outlook (which is usually stronger than H1 anyway because of tax year-ends etc) and have backed up this confidence by raising the interim dividend by 6%.

Lastly, MW’s PE ratio is well below peers. It’s statutory profits can be distorted by acquisition accounting anomalies so the PE in the chart below has been calculated by using ‘adjusted after tax earnings’ which excludes non-cash items like amortisation of client portfolios acquired. It’s probably the best metric to use to compare to peers.

MW’s full-year trading update for FY23 (to 31 May 23) is scheduled for July 23. Subscribe to get notified when my note covering that drops. 

All of my previous research notes covering Mattioli Woods can be found at this link.

Disclosure: At the time of writing this blog, I was a shareholder of Mattioli Woods.

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