Mattioli Woods Regulatory News (MTW)

23 Nov 2005 08:00

Mattioli Woods PLC23 November 2005 Press Release 23 November 2005 Mattioli Woods plc ("Mattioli Woods" or "the Company") First day of dealings on AIM Mattioli Woods plc, the specialist pensions consultancy, today announcescommencement of dealings of its Ordinary Shares on the AIM Market ("AIM") of theLondon Stock Exchange. Williams de Broe is acting as Nominated Adviser andBroker to the Company. The stock market EPIC is MTW. Placing StatisticsPlacing Price per Placing Share 132 penceTotal number of Placing Shares being placed on behalf of the Company 4,545,455Aggregate value of the Placing Shares being placed on behalf of the Company at the £6.0 millionPlacing PriceExpected net cash proceeds of the Placing receivable by the Company £5.4 millionNumber of Ordinary Shares in issue following the Placing 17,045,455Market capitalisation of the Company at the Placing Price following the Placing £22.5 millionPercentage of the Enlarged Share Capital being placed 26.7 per cent. The Placing of £6.0 million attracted high levels of institutional interestresulting in it being well oversubscribed. Reasons for Admission to AIM and use of proceeds of the Placing The net proceeds of the Placing amount to £5.4 million. The funds will be usedto repay directors' loans of £3 million and to provide resources for potentialfurther acquisitions and working capital of £2.4 million. It is a priority for the Group to continue to attract and retain appropriatelyqualified staff. The Directors consider that the enhanced profile resultingfrom Admission and the introduction of the Share Option Scheme will enable theGroup to attract new employees of appropriately high calibre and to incentiviseand retain key staff. Bob Woods, Executive Chairman of Mattioli Woods, said: "We are delighted that the flotation of the Company has been completedsuccessfully and with such strong institutional demand. The listing will enableus to take Mattioli Woods to the next stage of its development and maximise anyopportunities for the Group within the pensions consultancy market. We lookforward to working with our new shareholders in the future." Cobbetts acted as lawyers and Baker Tilly as reporting accountants to MattioliWoods. - Ends - For further information:Mattioli Woods plc Bob Woods, Executive Chairman Tel: +44 (0) 116 240 8700bob@mattioli-woods.com Ian Mattioli, Chief Executive www.mattioli-woods.comian@mattioli-woods.com Williams de Broe PlcJoanne Lake, Corporate Finance Tel: +44 (0) 113 243 1619joanne.lake@wdebroe.com www.wdebroe.com Media enquiries:AbchurchSarah Hollins/Katherine Murphy Tel: +44 (0) 207 398 7700sarah.hollins@abchurch-group.com www.abchurch-group.com Photography Both hard and soft copies of photographs of Bob Woods, Executive Chairman andIan Mattioli, Chief Executive are available from Abchurch. To arrange, pleasecontact Katherine Murphy at katherine.murphy@abchurch-group.com Introduction Mattioli Woods provides pensions consultancy and administration servicesprimarily to owner-managers, senior executives and professional persons. The Group's key activities include complex pensions consultancy, the provisionof self-invested personal pensions ("SIPP") and small self-administered pensionschemes ("SSAS") and advice on related business affairs. Its focus is at thehigher end of the market where clients require bespoke service and specialistadvice. Mattioli Woods operates across the UK from one site in Leicester and employs 76staff including 12 pension consultants. In the year ended 31 May 2005, Groupturnover was £6.4 million and normalised operating profit was £1.9 million. History In 1991, Ian Mattioli and Bob Woods formed a partnership to provide pensionsconsultancy services. With a strong network of contacts with accountants andsolicitors throughout the UK, the practice grew rapidly providing consultancyand pensioneer trustee services. In 1995, the Partnership developed its firstbespoke self-invested personal pension scheme. As the client base of the Partnership grew, an in-house graduate recruitment andtraining programme was established to recruit and train consultants and accountmanagers. A team of experienced and qualified pension scheme consultants andaccount managers was developed providing pensions consultancy to clients acrossthe UK. In September 2003, the business was incorporated via the acquisition of thebusiness and certain assets of the Partnership by the Company. In June 2005,Mattioli Woods acquired the client portfolio of Geoffrey Bernstein, a smallpractice providing pensioneer trusteeship in London and the Home Counties. On14 November 2005, the Company was re-registered as Mattioli Woods plc. Strategy Mattioli Woods' objective is to continue to grow the organisation in order toincrease its market share and also to enhance its reputation in the pensionsconsultancy market. The Directors have identified a number of specificopportunities for growth as follows: Pensions simplification Mattioli Woods has, from the outset, identified thepotential of serving the SIPP and SSAS markets. The Directors now believe thatfurther opportunities will be created by pensions simplification "A Day" inApril 2006 (further details of which are set out below), particularly at thebespoke end of the market. Expanding the consultancy team It is intended to continue to expand theconsultancy team through the in-house graduate training programme in order toincrease the number of clients that the Company is able to serve, whilstmaintaining the strong Mattioli Woods culture. Acquisition opportunities Following on from the successful acquisition of theGeoffrey Bernstein client portfolio, the Directors intend to identify andprogress other suitable acquisitions where the client portfolios can be takenover and advised by the Mattioli Woods consultancy team. In the fragmentedpensions consultancy market, the Directors believe that there are considerableopportunities for consolidation. Building the brand name Mattioli Woods has been building its reputation in thepensions consultancy market over many years. The Directors believe the flotationwill help to raise the profile of the Company both with intermediaries andpotential clients and will further strengthen awareness of the Mattioli Woodsbrand name. New product development Innovation has been a feature of many of Mattioli Woods'products and services and the Directors regard this as an importantdifferentiator relative to many other pensions consultancy practices. TheDirectors intend to build on this by continuing the focus on, and investment in,new product development and believe this will allow Mattioli Woods to increasethe range of services offered to its existing clients and those additionalclients gained through the acquisition of third party client portfolios. Market The UK's pensions industry has been beset by a number of complex problems suchas under-funding, exacerbated by the stock market crash, governance issues andhistorical pensions mis-selling. In the UK, successive governments havecreated piecemeal pensions related legislation. There are currently eightdifferent sets of rules in existence governing pensions, making the existingsystem both complicated and difficult for consumers to understand. This environment has led to a significant increase in the uptake of SIPPs andSSASs, primarily due to the greater control these products give to individualsover their own pensions arrangements. Self-Invested Personal Pension (SIPP) A SIPP is a type of personal pension plan which allows an individual to maketheir own investment decisions or to formulate their investment strategy inconjunction with their pensions adviser. A SIPP allows a wide range ofinvestments, including unit trusts, open ended investment companies andinvestment trusts, stocks and shares in the UK and overseas and commercialproperty, and therefore offers far greater flexibility than traditionaloccupational and personal pensions. The SIPP market is currently estimated to have £25bn of scheme assets. There areestimated to be 120,000 SIPPs in existence, with an average fund size of around£208,000. This is predicted to rise to 500,000 plans by 2010 (source: PensionsManagement June 2005). The market is split between insured and independentpractitioner arrangements. Small Self-Administered Scheme (SSAS) A SSAS is an occupational pension scheme with up to 11 members and isestablished by an employer for the benefit of some or all of its key employees.It is suited to most privately owned limited companies where the shares aremainly or wholly owned by directors employed in that business. A SSAS is established under trust by a company's directors who are both themembers and trustees of the pension scheme. It provides a tax-efficientenvironment in which a company's profits can be invested to provide retirementbenefits. A SSAS gives its members the opportunity to maximise their pensionfunds prior to retirement by giving them control over their investments. Unlikeother pension schemes, the members can invest their SSAS' funds in their owncompany through share purchase, unsecured loans for purchasing plant, machineryand commercial property to lease back to the company. Owner-managers can make their SSASs work for their business whilst building up asubstantial pension fund to benefit themselves in retirement. A SSAS is alsoring fenced from the company's creditors should the company become insolvent. Permitted SSAS investments include the commercial property occupied by thecompany, loans from the pension fund to the company, the borrowing of money tobuy an asset if the pension fund does not have the resources and up to 30 percent. of the shares in an unlisted company (including the company sponsoring theSSAS). Other acceptable investments are quoted shares, deposit accounts,copyrights, financial futures, commodity futures and traded options. It is currently a requirement that the member trustees must appoint aprofessional trustee, referred to as a pensioneer trustee, to support both theestablishment and administration of a SSAS. Pensioneer trustee status isafforded to approximately only 290 trustees in the UK by the Audit & PensionSchemes Services of HM Revenue & Customs. The pensioneer trustee must be a partyto all transactions involving the SSAS and it has a primary responsibility toensure full compliance in all regards. With effect from April 2006, however,the requirement for a scheme to appoint a pensioneer trustee has been abolished. This will be replaced with a requirement for a formally appointed schemeadministrator. This role will be very similar to that of pensioner trustee, butwithout the same level of responsibility and, consequently, risk. The UK SSAS market is currently estimated to have £9.4bn of scheme assets.There are estimated to be over 21,500 SSASs in existence, with an average fundsize of around £430,000. Pensions simplification With effect from April 2006, the Government is introducing legislation tosimplify pensions. The key features of the new legislation are as follows: • The ability to build up a tax-exempt approved pension fund by retirement of a lifetime limit of up to £1.5 million (in today's terms) in a largely tax-exempt environment. • The ability for members to personally contribute up to 100 per cent. of their earnings with full tax relief and for additional employer contributions to be made up to a total of £215,000 (inclusive of any member's contributions). Neither the upper cap of £1.5 million nor the annual input limit is limited by reference to actual earnings. • Tax-free cash benefit at retirement to be calculated as 25 per cent. of the fund value, subject to the lifetime limit. • A 'light-touch' compliance regime which will make pension planning more flexible, particularly in taking away some of the irrevocable aspects of existing schemes. • Deregulation of permitted investments, including the ability to invest in residential property both at home and abroad. • The abolition of the compulsion to purchase annuities at age 75. This may pave the way for the inheritance of pension schemes by the next generation. In replacing all eight complex current tax regimes, the new legislation willintroduce a single simplified tax regime and greater investment freedoms. The greater investment freedoms and, in particular, the abolition of thecompulsion to purchase an annuity, are expected to significantly boost thepersonal pension market and the opportunities for specialist advisers,particularly those serving high net worth individuals, such as Mattioli Woods. Services and customers Mattioli Woods' key activities include pensions consultancy, the provision andadministration of SIPPs and SSASs, investment services and the facilitation andadministration of syndicated property schemes. Mattioli Woods' client base for SIPP and SSAS services primarily comprisesowner-managers, senior executives and professional persons. However, it alsoprovides group scheme consultancy and personal financial planning ascomplementary services to its core clients. Mattioli Woods has over 1,000 private individual SIPP clients in over 600 SIPPschemes with an average fund size of around £342,000, compared to the marketaverage of around £208,000 and over 500 corporate SSAS clients with an averagefund size of around £730,000, compared to the market average of around £430,000. The Directors believe that the key features of Mattioli Woods' approach topension consultancy are its development of informed investment strategies basedon macro economic analysis, the impartial nature of its investment advice andthe focus on providing solutions tailored to each individual client's needs. A team, led by Bob Woods, carries out a macro economic analysis of the UKeconomy and also considers possible developments in government legislation todetermine suitable investment strategies for its clients. Mattioli Woods has long believed that the compulsory purchase of an annuitywould eventually be abolished and accordingly its pension planning has focussedheavily on preserving any residual assets for the client's beneficiaries. Mattioli Woods reviews a wide range of third party investment products andselects those products that are believed to be most suitable for its clients'needs. The Company's income is deliberately primarily fee based, rather thancommission driven, reinforcing Mattioli Woods' ability to remain impartial inits choice and recommendation of investments. The Company also does notdirectly handle any client monies. The Company gives a significant amount of thought and attention to detail toeach individual client. Consultants take into account the wider context of aclient's strategic business planning when considering their pensionrequirements. The Company develops investment strategies tailored to individualclient needs. Mattioli Woods administers SSASs on behalf of the member trustees, provides allthe legal documentation required to set up the SSASs and liaises with HM Revenue& Customs in respect of both the initial and ongoing approval of the SSASs. Italso advises the member trustees on the regulations affecting their SSAS and therequirements of the relevant legislation. Mattioli Woods' subsidiaries, MWTrustees Limited, GB PensionTrustees Limited and Great Malborough Street Pension Trustees Limited are threeof only approximately 290 pensioneer trustees in the UK. MW Trustees Limited isa member of the Association of Pensioneer Trustees and the SIPP Provider Groupwhich maintain an ongoing dialogue with the Audit & Pensions Schemes Services tohelp shape and interpret HM Revenue & Customs' practice for these types ofpension arrangement. Mattioli Woods facilitates commercial property ownership for its clients by wayof a syndicated property initiative. Potential properties for purchase areintroduced to Mattioli Woods by its network of professional property contacts.Mattioli Woods refers properties to an independent property adviser who eitherrecommends or rejects each property for syndication. Full details of recommended properties are then supplied to those MattioliWoods' clients who have previously confirmed an interest in commercial propertyownership. Clients form a syndicate; a newly formed company acquires theproperty, control of which lies with the clients. Mattioli Woods is engaged toprovide administration services to the property syndicates on an ongoing basis. Up until 31 May 2005, 14 syndicates had been established and the Directorsexpect that an additional six or seven schemes will be established each year. Sales and marketing Mattioli Woods generates new business leads from three main sources; clientreferrals, its network of professional contacts and its seminar programme. Mattioli Woods' existing client base is an important source of new business,with a large number of introductions to potential new clients starting as wordof mouth referrals. A significant proportion of new leads are generated from Mattioli Woods' networkof professional contacts. Its consultants have actively developed theirprofessional contacts throughout the UK, primarily with smaller to medium-sizedaccountancy practices and firms of solicitors. These types of firm serve thesame target market as Mattioli Woods and fulfil a general practitioner role inreferring their clients for specialist advice in areas such as pensions. The Company also has an ongoing marketing initiative to develop new and maintainexisting relationships with professional contacts. This is supported with abi-monthly newsletter, 'Exploring Pensions' and an extensive seminar programme. Seminars, directed at potential clients and intermediaries, are also a keysource of new business and are conducted throughout the UK. The programmeincludes general pension seminars, the current focus of which is on promotingawareness of pension simplification. In relation to pension simplification, Mattioli Woods will be conductingapproximately 30 to 40 seminars for intermediaries over a twelve month period,with delegate numbers averaging around 20 to 30 per seminar. Joint seminarscovering specific topics are also hosted with other professionals, typicallylawyers, accountants or property specialists. Compliance The Group is regulated by a number of different bodies. Mattioli Woods' businessis regulated and authorised by the FSA. The subsidiary companies of MattioliWoods are authorised (as pensioneer trustees) by the Audit & Pension SchemesServices of HM Revenue & Customs. As an administrator of SIPPs, the Company isregulated by HM Revenue & Customs: Savings & Pension Schemes ("SPS"). MattioliWoods is a member of the SIPP Provider Group and MW Trustees Limited is a memberof the Association of Pensioneer Trustees. Mattioli Woods has dedicated compliance teams for the above regulators. Inrespect of FSA regulation, a team of four is led by Mark Smith, Mattioli Woods'Compliance Officer. A team of three led by Alan Cowan is responsible for SIPPcompliance, with particular regard to SPS requirements. Systems are in place to proactively monitor client investments, consultancy andadministration services, investment advice, financial standing of suppliers,pension transfer advice, FSA rule book compliance, Audit & Pension SchemesServices compliance and SPS compliance. Competition The market for pensions consultancy services is fragmented, with a widevariation in the size of Mattioli Woods' competitors and in the scope ofservices they offer. Competition in volume terms comes from the large insurance companies andindependent financial advisers ("IFAs"). However, this type of business tends to be primarily "off the peg" and does notnecessarily have the level of individual advice offered by Mattioli Woods. Anumber of Mattioli Woods' existing clients have moved from its competitors insearch of a more bespoke service or following a "trouble shooting" exercisecarried out by Mattioli Woods. At the other end of the scale, there are many sole traders and partnershipsoperating small scale businesses serving a limited number of clients. Few havedeveloped the critical mass already achieved by Mattioli Woods and the Directorsbelieve that it is likely that the burden of regulation, coupled with thenecessary changes to systems arising from pensions simplification, will posethese small practices an increasing challenge. Mattioli Woods believes themarket may see some rationalisation. Key strengths The Group has the following key strengths: Strong track record of growth The business has achieved strong growth in both turnover and profits since thePartnership was established, through increasing the number of clients, the rangeof services offered and the average size of client portfolios. The Company now serves over 1,100 SIPP and SSAS schemes throughout the UK withan average scheme value, across all types of scheme, of around £520,000. Schemevalues range from £50,000 to in excess of £10 million. High proportion of repeat business The business benefits from a high proportion of repeat income, creating ahigh-quality income stream, with many clients choosing to buy additionalservices ancillary to scheme administration and consultancy. Long standing client relationships The business has built up its client base over the last 14 years. Often clientsinitially come to Mattioli Woods to resolve issues with their existing SIPPs andSSASs. In a number of cases, this trouble-shooting exercise then leads to a longterm client relationship. As the practice has grown, the Directors believe thatthe maintenance of people and partnership values has been a key element inMattioli Woods' success in retaining its loyal client base. Innovation Mattioli Woods has long been at the forefront of innovation and change in itschosen field. Bob Woods was responsible for the development of the second SIPPproduct to be launched in the UK in 1990 and Mattioli Woods has since developedfive SIPP products, in conjunction with other financial institutions. Theintegration of its pensions advice with broader business strategy planning is akey strength of the Company. Mattioli Woodshas developed effective investment strategies for its pension scheme clients,including a successful syndicated property initiative. Mattioli Woods' culture of client service and care Throughout the organisation, at all levels, there is an emphasis on providing ahigh level of client service. Individual administrator case loads are kept at manageable levels, allowing thetime to pro-actively manage each scheme. Effort is also made to ensurecontinuity. In some cases, schemes have had the same administrator for in excessof 10 years, helping to build a strong relationship with the client and athorough knowledge of the scheme, the client's pension background andrequirements. Each administrator also looks after all aspects of theadministration of a scheme, rather than different areas being departmentalised,enabling the client to benefit from having one point of contact for alladministration matters. Experienced and incentivised management team The Group's executive Directors, senior management team and consultancy teamhave extensive experience in the pensions industry and have developed anin-depth understanding of the pensions needs of their clients and how best toserve them within the regulatory framework. Each member of the senior managementteam maintains their own scheme case load, ensuring they have on-going contactwith clients and a thorough understanding of the Company's systems and procedures. History of staff development and retention Mattioli Woods started to develop its graduate recruitment and trainingprogramme in 1992. This has been successful, with a strong retention record. Ofthe Company's 76 staff, 25 have been recruited from this programme, includingten of Mattioli Woods' 12 consultants and 15 staff in junior andmiddle-management positions. Opportunities for bolt-on acquisitions in a fragmented market Within the pensions consultancy market, there are a large number of sole tradersand partnerships each serving a limited client base. Mattioli Woods recentlycompleted the acquisition of the client portfolios of sole trader, GeoffreyBernstein. The Directors believe that other opportunities of this type exist andthe proceeds of the Placing will, inter alia, provide the resources to enablethe Directors to identify and pursue these in due course. Financial record The summary financial record of Mattioli Woods set out below has been extractedas disclosed from the normalised financial information in the AdmissionDocument. Investors should read the whole of the Admission Document and notjust rely on this summarised information. Year ended 31 May 31 May 31 May 2003 2004 2005 £'000 £'000 £'000Turnover 3,731 6,139 6,442Normalised operating profit 561 1,141 1,929 The Group's turnover has grown year on year since the partnership wasestablished in 1991 and has been profitable and cash generative throughout. In the year to 31 May 2005, the Group's turnover comprised 61 per cent. feeincome and 39 per cent. commission income. On a product by product basis for thesame period, revenues related primarily to SSASs and SIPPs (being 33 per cent.and 25 per cent. respectively), 10 per cent. related to bank fees, 8 per cent.to property syndicates, 7 per cent. to fund based commissions and 5 per cent. togroup pension schemes. Current trading and prospects Trading remains buoyant with strong flows of new business enquiries. The firstfour months' trading of the current financial year shows the business as a wholeto be in line with management's internal forecast. The Government's new pension simplification "A Day" legislation due to takeeffect in April 2006 is already providing a significant boost to the SIPP marketin particular. The Directors believe this will underpin continuing strong growthfor the foreseeable future. Dividends and dividend policy The Directors intend to pursue a progressive dividend policy in respect of theOrdinary Shares that will both reflect the long term earnings trend of the Groupand allow the Group to maintain an appropriate level of dividend cover. It islikely that interim dividends will be paid in each financial year following theannouncement of the interim results, with a final dividend being paid followingthe annual general meeting for the relevant year. In the absence of unforeseen circumstances, the first dividend payable isexpected to be declared in respect of the year ending 31 May 2006. Directors The Board comprises four executive and one non-executive directors. It isintended that the Board will appoint an additional non-executive director assoon as practicable following Admission. A short biography of each director isset out below. Robert (Bob) Woods - Chairman, age 51 Bob has worked in the pensions industry since graduating from Reading Universityin 1975. After initially working for Sun Alliance Insurance Group, in 1980, hejoined independent financial services pension consultant Pointon York, an earlymarket leader in SSAS, where, in 1983, he was appointed to the board withresponsibility for the promotion of pension related services to professionaladvisers. In 1986, he was appointed marketing director and director of PointonYork's corporate pensioneer trustee. In 1991, Bob founded the Mattioli Woodspartnership with Ian Mattioli. For the past 20 years Bob has specialised incontrolling-director pension planning and he is now responsible for developingGroup strategy and identifying new growth areas and opportunities. Ian Mattioli - Chief Executive, age 43 Ian has worked in the pensions industry since the age of 18. His earlyexperience was gained as a specialist pensions administrator with PhoenixAssurance. In 1983, he moved to Pointon York specialising in SSAS. From 1983 to1991, Ian progressed from senior administrator to consultant and then seniorconsultant advising on all aspects of establishing and running pension schemesfor owner-managed businesses and small to medium sized public companies. In1991, together with Bob Woods, he founded the Mattioli Woods Partnership. Ianis now responsible for the operational management of the Group. Nathan Imlach CA - Finance Director and Company Secretary, age 36 Nathan joined Mattioli Woods in September 2005 as part of the preparations forthe flotation. He qualified as a chartered accountant in 1993 with Ernst &Young. In 1994, he moved into Ernst & Young's corporate finance team, advisingon a broad range of transactions for quoted and unquoted corporate clients,latterly as an assistant director. In January 2003, he joined JohnstonCarmichael Corporate Finance, becoming a director and subsequently an associateof the firm and specialised in providing mergers and acquisitions advice. He isalso a member of the Securities and Investment Institute. Nathan will beresponsible for all financial aspects of Mattioli Woods' strategy andoperations. Murray Smith - Marketing and Sales Director, age 36 Murray was appointed by Mattioli Woods in 1995 and has worked in the financialservices industry since graduating with an MA in accountancy from AberdeenUniversity. Murray has achieved the full financial planning certificatequalification and is personally authorised by the FSA to give investment adviceand as a pension transfer specialist. He has responsibility for the Company'smarketing activities, which includes speaking at seminars on a range ofconsultancy issues, and is responsible for managing Mattioli Woods' team ofconsultants. John Redpath - Non-executive Director, age 60 John spent 29 years with the North Eastern Electricity Board, which becameNorthern Electric, the Northern Regional Health Authority and the NorthumbrianWater Authority. He was involved in the flotation of Northumbrian Water as humanresources director, including responsibility for pensions. In 1992, he led thebuyout of the subsidiary CPCR Limited, a human resources consultancyspecialising in leadership and partnership development where he was chairman andmanaging director until his retirement in 2003. John has been actively involvedin a number of community projects, including acting as chairman of NewcastleYouth Enterprises Centre between 1982 and 1984 and chairman of the governors atNewcastle College between 1998 and 2000. Currently he is a trustee and vicechairman of the Percy Hedley Foundation for cerebral palsy. John is a chartered member of the Institute of Personnel and Development and amember of the Institute of Administrative Management and the CharteredManagement Institute. John became a Director of the Company in September 2005. - Ends - This information is provided by RNS The company news service from the London Stock Exchange