Final Results

RNS Number : 4738Y

Mattioli Woods PLC

09 September 2015

9 September 2015

Mattioli Woods plc

("Mattioli Woods", "the Company" or "the Group")

Final results

Mattioli Woods plc (AIM: MTW.L), the specialist wealth management and employee benefits business, today reports its final results for the year ended 31 May 2015.

Financial highlights

· Revenue up 17.8% to £34.57m (2014: £29.35m)

· Recurring revenues represent 81.4% (2014: 78.1%)

· Adjusted EBITDA¹up 8.7% to £7.36m (2014: £6.77m)

· Adjusted EPS^2,³ up 0.8% to 27.54p (2014: 27.32p)

· Proposed total dividend up 15.4% to 10.50p (2014: 9.10p)

· Strong financial position with net cash of £10.57m (2014: £9.51m)

1 Earnings before interest, taxation, depreciation, amortisation and acquisition-related costs.

2 Basic EPS down 9.8% to 19.83p (2014: 21.98p).

3 Before acquisition-related costs, amortisation and impairment of acquired intangibles, and notional finance income and charges.

Operational highlights

· Total client assets up 16.8% to £5.41bn (2014: £4.63bn)

· Discretionary AuM up 36.5% to £1.01bn (2014: £0.74bn)

· Core businesses consolidated into one legal entity

· Two acquisitions completed in year:

- UK Wealth Management pension business in August 2014

- Torquil Clark pension business in January 2015

· £50.2m of new equity raised for Custodian REIT

Recent developments and outlook

· Placing in June 2015 raised gross proceeds of £18.6m to:

- Provide flexibility to pursue further acquisition opportunities

- Increase headroom on regulatory capital requirements

· Two wealth management and employee benefits businesses acquired since year end:

- Boyd Coughlan in June 2015

- Taylor Patterson in September 2015

· Strong pipeline of further acquisition opportunities

· Joanne Lake appointed as Deputy Chairman in June 2015

· Agreement to develop a new 60,000 sq ft office for Leicester operations

· Well positioned for future growth

Commenting on the final results, Bob Woods, Executive Chairman, said:

"I am pleased to report another year of growth, in line with our expectations. Revenue was up 17.8% to £34.57m (2014: £29.35m) as a result of strong growth in our wealth management business, with the Government's new pension freedoms creating additional demand for advice.

"Our total client assets under management, administration and advice increased by 16.8% to £5.41 bn at the year-end. Growth in fees based on the value of clients' assets under management and advice increased recurring revenues⁴ to 81.4% (2014: 78.1%) of revenue, with the value of discretionary assets under management now in excess of £1.01bn.

"The Board is pleased to recommend the payment of an increased final dividend of 7.16 pence per share (2014: 6.00 pence). This makes a proposed total dividend for the year of 10.50 pence (2014: 9.10 pence), a year-on-year increase of 15.4%, while maintaining an appropriate level of dividend cover.

"Acquisitions continue to be a core part of our growth strategy. Over the past 10 years, we have acquired 15 businesses and client portfolios and the acquisition of Taylor Patterson Group Limited and its subsidiaries (together "Taylor Patterson"), which we announced today, is another excellent strategic and cultural fit with our existing business. Taylor Patterson's wealth management operations include SSAS and SIPP administration, which together with its employee benefits capabilities, strengthen our existing client proposition.

"Further consolidation in the SIPP market appears likely, with increased regulatory capital requirements for SIPP operators coming into effect from 1 September 2016. We recently raised £18.6m (before expenses) by way of a placing, which provides us with the flexibility to make further earnings-enhancing acquisitions.

"Although volatility in financial markets may impact our investment and asset management revenues in the short term, a great strength of our business is that we can continue to derive income from investments in all asset classes, while ensuring our clients' investment strategies are appropriately aligned to the prevailing market conditions and suitable for their financial needs.

"The recently acquired businesses of Boyd Coughlan and Taylor Patterson offer real synergies with the wider Group and I believe our blend of wealth management and employee benefits, combined with the duality of being adviser and provider, positions us to secure further profitable growth over the coming years."

4 Annual pension consultancy and administration fees; adviser charges; level and renewal commissions; banking income; property and discretionary portfolio management charges.

For further information please contact:

Mattioli Woods plc
Bob Woods, Executive Chairman	Tel: +44 (0) 116 240 8700
bob.woods@mattioli-woods.com	www.mattioli-woods.com

Ian Mattioli, Chief Executive
ian.mattioli@mattioli-woods.com

Nathan Imlach, Finance Director
nathan.imlach@mattioli-woods.com

Canaccord Genuity Limited
Roger Lambert, Investment Banking	Tel: +44 (0) 20 7523 8350
Sunil Duggal, Investment Banking	www.canaccordgenuity.com

Media enquiries:

Camarco
Ed Gascoigne-Pees	Tel: +44 (0) 20 3757 4984
	www.camarco.com

Analyst presentation

There will be an analyst presentation to discuss the results at 10:30am today at Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR.

Those analysts wishing to attend are asked to contact Ed Gascoigne-Pees at Camarco on +44 (0) 20 3757 4984 or at ed.gascoigne-pees@camarco.co.uk.

Strategic report

Chairman's statement

I am pleased to report another year of growth, in line with our expectations. Revenue was up 17.8% to £34.57m (2014: £29.35m) as a result of strong growth in our wealth management business, with the Government's new pension freedoms creating additional demand for advice both during the reporting period and looking ahead. This growth more than offset the anticipated falls in banking income, caused by the implementation of new rules on liquidity cover further reducing the interest margins available from our banking partners, and employee benefit revenues, as the corporate pensions market transitions to a fee-based proposition prior to the abolition of provider commissions in April 2016.

The Group's total client assets under management, administration and advice increased by 16.8% to £5.41 bn at the year-end. Growth in fees based on the value of clients' assets under management and advice increased recurring revenues⁵ to 81.4% (2014: 78.1%) of revenue, with the value of discretionary assets under management now in excess of £1.01bn.

Acquisitions continue to be a core part of our growth strategy. We acquired the pension administration businesses of UK Wealth Management (now part of Towry) in August 2014 and Torquil Clark (now part of Bellpenny) in January 2015.

Following the year end, we raised £18.6m (before expenses) by way of a placing with institutional investors ("the Placing") to provide the Group with the flexibility to pursue further acquisition opportunities. At the same time, we announced the acquisition of Boyd Coughlan Limited ("Boyd Coughlan"), a business providing advice on over £240m of assets to both corporate and personal clients, generating strong margins and recurring revenues.

The acquisition of Taylor Patterson Group Limited and its subsidiaries (together "Taylor Patterson"), which we announced today, is another excellent strategic and cultural fit with our existing business. Taylor Patterson's wealth management operations include SSAS and SIPP administration, which together with its employee benefits capabilities strengthen our existing client proposition. The acquisition extends our geographic footprint into the North-West of England and gives us the opportunity to offer discretionary investment management to Taylor Patterson's clients, while realising synergies from the merger of its SSAS and SIPP business onto Mattioli Woods' bespoke pension administration platform.

Further consolidation in the SIPP market appears likely, with increased regulatory capital requirements for SIPP operators coming into effect from 1 September 2016. The Placing provides us with the flexibility to capitalise on further earnings-enhancing acquisition opportunities and we are seeing an increase in the pipeline of potential opportunities.

One of the Group's subsidiaries, Custodian Capital Limited ("Custodian Capital"), is the discretionary investment manager of Custodian REIT plc ("Custodian REIT"), a closed-ended property investment company listed on the Main Market of the London Stock Exchange. Custodian Capital's management fees are based on the net asset value of Custodian REIT, which now has a market capitalisation of over £200m following new share issues raising £50.2m in aggregate during the year.

Mattioli Woods was identified by the London Stock Exchange as one of its '1,000 Companies to Inspire Britain' in its 2015 report celebrating the UK's fastest-growing and most dynamic small and medium sized businesses. We were also delighted to be included as one of the 20 case studies in the 'AIM20' report celebrating the AIM market's 20^th anniversary earlier this year. The Group has again been shortlisted as 'Best SSAS Provider' at the Investment Life & Pensions Moneyfacts Awards 2015 and has also been shortlisted for the 'Best Retirement Adviser' award. This continued recognition is a great endorsement of our business.

5 Annual pension consultancy and administration fees; adviser charges; level and renewal commissions; banking income; property and discretionary portfolio management charges.

Market overview

These are exciting times for our clients and us, with the Government introducing the most radical changes to pensions in almost a century in April 2015. These changes offer individuals and their families control of their pension funds, both now and into the next generation. The freedom to access pension funds from age 55, and removal of the 55% tax-charge on death, reposition pensions at the centre of financial planning, providing a real sense of ownership and paving the way for the inheritance of pension funds.

However, hot on the heels of implementing these new pensions freedoms, the Chancellor announced yet more changes to pensions in July's Summer Budget, with a restriction of the annual allowance for high earners and the publication of a Green Paper on the possibility of a radical departure from the current tax regime, such as replacing upfront tax relief on pension contributions with tax-free pension payments. The new rules and transitional provisions are complex and the consultation on tax relief reform is expected to lead to heated debate.

While continual change (and talk of change) to the UK pensions system may work against the Government's aim to ensure all individuals save for their retirement, I expect it to drive sustained demand for advice, benefiting our core pensions business.

Changes in employee benefits as a result of auto-enrolment, the introduction of a charge cap on auto-enrolment pension schemes in April 2015 and the abolition of provider commissions in April 2016 are obliging many employers to review their benefit and reward strategies. The move away from up-front commissions has reduced our revenues on corporate pensions work, but I anticipate that we will see growing demand for ancillary services such as financial counselling and education from within the Group's corporate clientele. The Government and the Financial Conduct Authority ("FCA") have recently launched a joint review into consumer access to the financial advice market. The review will focus on how less wealthy people access advisers and consider ways to encourage people to seek financial advice, which may lead to further changes in the regulatory and legislative environment.

Assets under management, administration and advice

Total client assets under management, administration and advice increased by 16.8% to £5.41bn at 31 May 2015 (2014: £4.63bn) as follows:

	31 May 2015 £m	31 May 2014 £m
Direct pension	2,336.0	2,060.5
Third party administration	1,040.2	790.8

SIPP and SSAS funds under trusteeship	3,376.2	2,851.3

Employee benefits	1,059.4	926.2
Other personal and pension assets	974.8	848.7

Total assets under management, administration and advice⁶	5,410.4	4,626.2

6 Certain pension scheme assets, including clients' own commercial properties, are only subject to a statutory valuation at a benefit crystallisation event.

The acquisition of the UK Wealth Management and Torquil Clark pension businesses added £189.7m and £83.0m of client assets respectively, with net organic growth of £511.5m during the period split between:

· £252.2m in SIPP and SSAS funds under trusteeship and £126.1m in other personal and pension assets within our wealth management business; and

· £133.2m of corporate pension assets in our employee benefits business.

At 31 May 2015, our discretionary assets under management had increased to £1.01bn (2014: £0.74bn) on the continued expansion of our portfolio management service and the placing of a further £50.2m of new equity by Custodian REIT. Our discretionary portfolio management service allows us to deliver a more efficient wealth management service to our clients and in February 2015 we launched an innovative new product, the Mattioli Woods Personal Pension, streamlining our existing SIPP structure to provide a wrapper that allows smaller pension funds efficient access to our discretionary portfolio management service.

The Group also operates its own open-ended investment company ("OEIC"), the FP Thoroughbred Core Alpha Fund ("the Thoroughbred OEIC"), which held £61.8m of our clients' assets at 31 May 2015, the majority of which were under discretionary management.

Following the year end, we have added further assets under management, administration and advice of over £250m on the acquisition of Boyd Coughlan and £640m on the acquisition of Taylor Patterson.

Strategy

Our business is structured to deliver comprehensive wealth management to affluent clients across the UK, centred on their retirement planning needs. Our services include pension consultancy and administration, financial planning, discretionary and advisory investment management and employee benefits advice.

Our strategy remains focused on the pursuit of strong organic growth, supplemented by strategic acquisitions. All acquisitions completed to date have been earnings enhancing and have broadened or deepened the Group's expertise and services. Our objective is to integrate fully the businesses we acquire, believing that one brand and one vision will enable the Group to deliver holistic solutions across our wide and diverse client base. To achieve this, we have harmonised the Group's legal and operational structures, transferring the trade and assets of City Pensions Limited and Atkinson Bolton Consulting Limited ("Atkinson Bolton") into Mattioli Woods in October and December 2014 respectively, followed by the transfer of the trade and assets of Kudos Financial Services Limited into Mattioli Woods in February 2015.

We recognise the increasing consumer requirement for a strong advisory service blended with on-line functionality, visibility and product availability. Developing our technology is a key part of our strategy and we have extended the development of our bespoke pension administration and wealth management platform to include employee benefits, with the aim of enhancing the services we offer to clients and realising operational efficiencies across the Group as a whole. While the first phase of our new platform development has commenced testing, delays experienced by one of our technology partners on other projects have pushed back the launch of the trading side of the platform into the next calendar year. In the meantime, the Group's existing systems remain fit for purpose, with sufficient capacity to support further growth.

Acquisitions

Since our admission to AIM in 2005, we have acquired 15 businesses and client portfolios. We have developed considerable expertise and a strong track record in the execution and subsequent integration of such deals.

The acquisition of UKWM's pension business extended our existing relationship with Towry and its advisers (following the acquisition of Ashcourt Rowan's pension business in 2013), and Mattioli Woods was appointed to Bellpenny's panel of SIPP providers following our acquisition of the Torquil Clark pension business. As financial markets change, we believe there is an opportunity to enter into strategic partnerships with other financial services businesses to deliver better service and long term security for clients, while enhancing profitability.

In June 2015 we acquired Boyd Coughlan, a wealth management and employee benefits business based in Buckingham. The business has grown organically and now employs 30 staff, providing advice to both corporate and personal clients. Boyd Coughlan's experienced management team has been retained by Mattioli Woods following the acquisition, which is expected to be earnings enhancing in the first full year of ownership.

Today, we are pleased to announce the acquisition of Taylor Patterson, a UK financial advisory firm based in Preston and employing 38 staff. Taylor Patterson provides wealth management, strategic financial planning, employee benefits and pension services to businesses and individuals. The acquisitions of Taylor Patterson and Boyd Coughlan bring new clients into the Group and I expect these clients to recognise the attraction of the broader and more flexible solutions we are able to offer.

We have also signed heads of terms for Mattioli Woods to be appointed to wind‑up a SIPP scheme administered by another SIPP operator, which will trigger a requirement to transfer members' existing arrangements into a new scheme. This transaction is expected to complete before the end of this calendar year.

With increasing complexity and continuing consolidation in both the SIPP market and other key sectors in which the business operates, I am confident there will be further opportunities to expand Mattioli Woods' operations by acquisition, accelerating the Group's growth.

Staff

We continue our transition from small to big, retaining our core principles as a business built on the integrity and expertise of our people. I would like to thank all our staff for their continued commitment, enthusiasm and professionalism in dealing with our new and existing clients' affairs. Maintaining capacity remains a key priority. Our total headcount at 31 May 2015 had increased to 406 (2014: 378) and we continue to invest in our graduate recruitment programme, with 14 (2014: 16) new graduates and eight (2014: two) apprentices joining the Group during the year.

We enjoy a strong team spirit and facilitate employee equity ownership through the Mattioli Woods plc Share Incentive Plan ("the Plan") and other share schemes. I am delighted the proportion of eligible staff investing via the Plan has increased to 59% (2014: 56%). The value of employee share holdings held via the Plan has now surpassed £2.50m and we will continue to encourage broader participation in the Plan.

To provide our staff with a modern working environment and capacity for further growth, we announced last month that a new subsidiary, Mattioli Woods (New Walk) Limited, had entered into a development agreement to build a new 60,000 square foot office on the site of the former Leicester City Council headquarters at New Walk, Leicester.

We have found, like many other progressive businesses, that as our number of clients and employees grows, being centrally located with all its associated infrastructure is better for both. The expected expenditure for the development is £14.6m including fit out costs, which we will fund through a combination of existing cash resources (excluding funds from recent placing), bank funding and future operating cashflows. This cash commitment will not reduce our existing headroom for future acquisitions. Construction is scheduled to commence in late 2015, with completion expected in spring 2017.

The development enables the Group to maintain its regulatory capital while efficiently using surplus cash not available for distribution to shareholders. While initial development costs are expected to reduce budgeted profit after tax by circa £0.10m in the current financial year, with further reductions of circa £0.40m and £0.20m in the following two years respectively, from then on we expect to benefit from future rental savings of approximately £0.85m per annum.

Board changes

We were pleased to announce the appointment of Joanne Lake as Deputy Chairman in June 2015. This role is an interim step prior to Joanne's proposed appointment as Non-executive Chairman at the Company's Annual General Meeting in October 2016. The Board is committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business. I believes this is the optimal timetable for the role of Chairman to be separated from executive responsibilities, which will enhance conformity with conventional corporate governance standards as Mattioli Woods continues to grow.

Joanne brings a broad understanding of financial services and 30 years of corporate finance and City experience to the role. She has been an independent Non-executive Director and Chairman of the audit committee at Mattioli Woods since July 2012.

I will continue as Executive Chairman through to October 2016 and will remain on the Board in a full-time executive role as Founder Director. My focus will be on acting as an ambassador for Mattioli Woods and on developing our profile as experts in our chosen markets. I will also support the development of the Group's high end corporate and private clients. The period between now and next year's Annual General Meeting provides for a considered handover of responsibilities.

Dividends

The Board is pleased to recommend the payment of an increased final dividend of 7.16 pence per share (2014: 6.00 pence). This makes a proposed total dividend for the year of 10.50 pence (2014: 9.10 pence), a year-on-year increase of 15.4% (2014: 30.0%). The Board remains committed to growing the dividend, while maintaining an appropriate level of dividend cover. If approved, the final dividend will be paid on 26 October 2015 to shareholders on the register at the close of business on 18 September 2015.

Outlook

I am delighted with the performance of our business in what has remained a rapidly-changing market. The Government's pension reforms have repositioned pensions at the forefront of financial planning, which together with the continued development of our consultancy team has driven strong growth in our wealth management business.

Further volatility in financial markets may impact how our investment and asset management revenues are derived in the short term. However, a great strength of our business is that we can continue to derive income from investments in all asset classes, while ensuring our clients' investment strategies are appropriately aligned to the prevailing market conditions and suitable for their financial needs.

The acquired businesses of Boyd Coughlan and Taylor Patterson are an excellent strategic fit, offering real synergies with the wider Group. Our recent capital raising has given us the flexibility to pursue both existing and new acquisition opportunities as they arise and I believe our blend of wealth management and employee benefits, combined with the duality of being adviser and provider, positions us to secure further profitable growth over the coming years.

Bob Woods

Chairman

8 September 2015

Strategic report

Chief Executive's review

Introduction

Since founding Mattioli Woods with Bob Woods in 1991, we have overseen its development from a specialist pension consultancy into a full service wealth management and employee benefits business. We continue our transition from small to big as a business built on the integrity and expertise of our people, with one of our key aims being to grow our clients' investment assets.

I am pleased to report another successful year, with revenue in the year ended 31 May 2015 up 17.8% to £34.57m (2014: £29.35m). Increased consultancy capacity has driven stronger new business flows and this, coupled with demand for advice following the announcement of changes in pension legislation, increased organic revenue growth to 16.6% (2014: 11.3%), with new client wins in both pension and non-pension areas underpinned by innovative product development and strong technical support.

This organic growth was supplemented by a full year's revenues of £3.23m (2014: £2.66m) from the business of Atkinson Bolton, acquired in July 2013, plus £0.23m of revenues generated by the pension administration businesses of UK Wealth Management and Torquil Clark acquired during the year.

EBITDA⁷ was up 7.1% to £7.09m (2014: £6.62m). As anticipated, we saw a fall in EBITDA margin to 20.5% (2014: 22.6%) with further investment in the infrastructure of our business and a fall in banking revenues, due to new banking rules on liquidity cover, and employee benefit revenues, as the corporate pensions market transitions to a fee-based proposition.

Basic EPS fell by 9.8% to 19.83p (2014: 21.98p), with 6.8% growth in operating profits offset by a significant increase in the effective rate of taxation to 24.0% (2014: 16.3%) and the impact of £0.17m of notional finance charges (2014: £0.15m income) on the unwinding of discounts on long term provisions. The effective tax rate in the prior period was distorted by the reversal of deferred tax liabilities on acquired intangibles following cuts in the UK corporation tax rate. Adjusted earnings per share⁸ were up 0.8% on the prior year, with £0.27m (2014: £0.16m) of acquisition-related costs incurred during the period.

Our success is based upon the delivery of quality advice, services and products, growing our clients' assets and enhancing their financial outcomes. The foundation of our success is the development of our people. I am delighted we have created a business our clients' are proud to be a part of, our people feel proud to work for and is one that recognises and rewards talent and hard work.

Our focus is on ensuring we continue to address our clients' changing needs and our ambition is to see our brand become an even stronger force in the UK financial services sector.

7 Earnings before interest, taxation, depreciation and amortisation.

8 Before acquisition-related costs, notional finance costs and amortisation and impairment of intangible assets arising on acquisitions.

Industry overview

Mattioli Woods operates within the UK's financial services industry, which is subject to the effects of volatile markets and economic conditions. In recent years, we have seen a period of unprecedented change in legislation, regulation and customer needs. We continue to be proactive in relation to the opportunities this creates, with our specialists dedicated to keeping up with the pace of change. Our entrepreneurial model allows us to adapt and advise our clients accordingly.

Our markets are serviced by a wide range of suppliers offering diverse services to individual and corporate clients. These markets are fragmented and remain highly competitive, although many commentators suggest that recent regulatory changes, particularly the abolition of provider commissions on corporate pensions in April 2016 and increased capital requirements for SIPP operators from 1 September 2016, will drive margin compression and industry consolidation.

In addition, some commentators believe the Government and FCA review into the financial advice market may lead to further regulatory or legislative pressure to reduce the cost to consumers. We expect margin pressure to lead other organisations in our sector to develop increasingly integrated business models, as they seek to access more value through the supply chain and offer a broader range of services. At the same time, we expect to see further consolidation as firms continue to pursue economies of scale.

Our services

Our core pension and wealth management offering serves the higher end of the market, including controlling directors and owner-managed businesses, professionals, executives and affluent retirees. Our broad range of employee benefit services is targeted towards medium-sized and larger corporates.

In recent years, the Group has developed a broader wealth management proposition, grown from its strong pensions advisory and administration expertise, with the Group's income now derived from five key service lines:

· Direct pension consultancy and administration;

· Third party pension administration;

· Investment and asset management;

· Employee benefits; and

· Property management.

Total pension consultancy and administration revenues were up 22.5% to £15.55m (2014: £12.69m). The number of SIPP and SSAS schemes administered by the Group increased 13.8% to 6,580 (2014: 5,782), with the two acquisitions completed during the financial year adding 566 new SIPP and 49 new SSAS schemes.

Direct pension consultancy and administration

Retirement planning is often central to our clients' wealth management strategies. We maintain our technical edge through our widely acknowledged understanding of UK pension legislation, which allows our consultancy team to deliver meaningful guidance to our clients. Our client base primarily comprises owner-managers, senior executives and members of the professions. Additional fees are generated from the provision of specialist ad hoc consultancy services.

Direct pension consultancy⁹ and administration revenues were up 18.2% to £12.48m (2014: £10.56m), representing 36.1% (2014: 36.0%) of Group revenues, of which 89.4% (2014: 95.6%) are recurring, with additional one-off revenues earned during the period on the preparation of new trust deeds to incorporate major changes in pension legislation.

The number of direct schemes administered by Mattioli Woods increased 8.8% to 3,850 (2014: 3,537), with 455 (2014: 316) new schemes gained in the year, representing 12.9% (2014: 9.3%) of schemes at the start of the year. An increase in activity due to legislative changes and the number of new schemes written led to increased fee income of £11.61m (2014: £9.43m). This was partially offset by an anticipated fall in banking revenues to £0.87m (2014: £1.13m) following further cuts in banking margin during the second half.

Our focus remains on the quality of new business, with an average new SIPP value of £0.38m (2014: £0.43m) and average new SSAS value of £0.72m (2014: £0.73m). We also maintained strong client retention, with an improved external loss rate¹⁰ of 2.8% (2014: 3.2%) and an overall attrition rate¹¹ of 3.0% (2014: 3.6%). We continue to build capacity in our consultancy and technical teams to take advantage of new business opportunities, with 81 consultants (2014: 72) at the year end having increased to 96 following the acquisitions of Boyd Coughlan and Taylor Patterson.

9 SIPP and SSAS schemes where Mattioli Woods acts as pension consultant and administrator.

10 Direct schemes lost to an alternative provider as a percentage of average scheme numbers during the period.

11 Direct schemes lost as a result of death, annuity purchase, external transfer or cancellation as a percentage of average scheme numbers during the period.

Third party pension administration

We have continued integrating our acquired businesses, with City Pensions Limited (trading as "City Trustees") being merged into Mattioli Woods on 31 October 2014. City Trustees generates income from the setting up and administration of pension schemes under an administration-only model, with its products being distributed via independent financial advisers, wealth managers and other intermediaries.

City Trustees has been awarded the Defaqto 5-star rating for its SIPP and continues to enjoy strong growth. Following the Group's acquisition of the UK Wealth Management and Torquil Clark pension businesses during the year, the number of SSAS and SIPP schemes administered by City Trustees had increased by 21.6% to 2,730 (2014: 2,245) at the year end. Revenues were up 44.1% to £3.07m (2014: £2.13m), representing 8.9% (2014: 7.2%) of total revenues, of which 72.8% (2014: 89.4%) are recurring. Administration fees increased to £2.75m (2014: £1.73m) and associated banking revenues were £0.32m (2014: £0.40m).

Overall, the Group's total banking revenue was £1.19m (2014: £1.53m). The introduction of new banking rules on liquidity cover makes it more onerous for banks to hold our clients' deposits, reducing the interest rates available. Accordingly, we expect to see a further reduction in banking revenue in the new financial year.

Investment and asset management

Investment and asset management revenues generated from advising clients on both pension and personal investments increased 27.3% to £11.43m (2014: £8.98m), representing 33.0% (2014: 30.6%) of total Group revenues. Income from initial and ongoing portfolio management charges increased to £5.45m (2014: £4.12m), as the value of assets held in clients' discretionary portfolios increased 39.0% to £0.82bn (2014: £0.59bn). The Group's total discretionary assets under management, including Custodian REIT and the Thoroughbred OEIC, totalled £1.01bn (2014: £0.74bn) at the year end.

Adviser charges (including legacy investment commissions and revenues from protection business) increased to £5.98m (2014: £4.86m), with adviser charges primarily based on the value of assets under advice during the period. Assets under advice include over £112.3m of clients' assets held in structured products and we expect continued growth in this area. Our structured product initiative has been a great success over the last 10 years, with our clients enjoying an average annual return on matured products of over 7%, with a 9.23% return on products maturing during the last year.

The growth of funds under management and advice has enhanced the quality of earnings through an increase in recurring revenues, with the proportion of investment and asset management revenues which are recurring increasing to 78.2% (2014: 76.9%). As with other firms, these income streams are linked to the value of funds under management and advice, and are therefore affected by the performance of financial markets.

Employee benefits

The introduction of a charge cap on auto-enrolment pension schemes in April 2015, soon to be followed by the abolition of provider commissions in April 2016, has resulted in a number of changes, challenges and opportunities within the employee benefits market.

As employers move from commission to fee arrangements, in addition to the obvious cost considerations, they are taking the opportunity to review which services are adding true value to their goal of engaging employees. We are seeing a growing awareness of the need to provide some form of financial education and advice at the same time as offering choice and flexibility.

Employee benefits revenues decreased to £4.80m (2014: £5.65m), representing 13.9% of total revenue (2014: 19.3%), as the corporate pensions market transitions to a fee-based proposition prior to the abolition of provider commissions. In addition, revenues in the second half were adversely impacted by the effect of the fall in the oil price on corporate clients in the oil and gas industry and certain corporate pension providers "switching off" initial commission payments earlier than anticipated.

As anticipated, the changes in the corporate pensions market have reduced pension-related revenues in the short term but are leading to higher recurring revenues going forward, with 68.5% (2014: 47.4%) of employee benefits revenues now recurring.

We anticipate growing demand for ancillary services such as financial counselling and education from within the Group's corporate clientele, and expect the acquisitions of Boyd Coughlan and Taylor Patterson to bring new clients who will see the benefit of the broader and more flexible solutions the Group can offer.

Property management

Property management revenues increased to £2.79m (2014: £2.04m) or 8.1% of total revenue (2014: 6.9%), of which 90.3% (2014: 65.8%) represented recurring annual management charges. The majority of our property management revenues now come from the services provided by Custodian Capital as discretionary investment manager of Custodian REIT. Our strong income focus allows Custodian REIT to offer the highest yield¹² among its UK property investment company peer group, coupled with the potential for capital growth from a balanced portfolio of real estate assets.

In addition, Custodian Capital continues to facilitate direct property ownership on behalf of pension schemes and private clients and also manages a new initiative, the "Private Investors Club", which offers alternative investment opportunities to suitable clients by way of private investor syndicates. This has been well received by clients, with over £3.8m invested in the four new investments completed during the year.

12 Source: Numis Securities Limited, 13 January 2015

Key performance indicators

The directors consider the key performance indicators ("KPIs") for the Group are as follows:

Strategy/objective

Performance indicator

Organic growth and growth by acquisition

Revenue - total income (excluding VAT) from all revenue streams.

Operating efficiency

EBITDA margin - profit generated from the Group's operating activities before any financing income or costs, taxation, depreciation and amortisation as a proportion of revenue.

Shareholder value and financial performance

EBITDA - profit generated from the Group's operating activities before any financing income or costs, taxation, depreciation and amortisation.

Shareholder value and financial performance

Adjusted EPS - total comprehensive income for the year, net of taxation, attributable to equity holders of the Company, adjusted to add back acquisition-related costs, notional finance charges on the unwinding of discounts on long term provisions and the amortisation of acquired intangible assets, divided by the number of ordinary shares in issue.

Growth in the value of assets under management, administration and advice

Assets under management, administration and advice - the value of all client assets the business gives advice upon, manages or administers.

Excellent client service and retention

Client loss rate - the number of direct SSAS and SIPP schemes lost as a result of death, annuity purchase, external transfer or cancellation as a percentage of average scheme numbers during the period.

Financial stability

Debtors' days - this is the average number of days' sales outstanding in trade receivables at any time.

Financial performance and future developments

Group results

Revenues were up 17.8% to £34.57m (2014: £29.35m), with sustained demand for the Group's services. We are particularly pleased with the continued development of our broader wealth management proposition and integration of recently acquired businesses during the year. The mix between the Group's key revenue streams changed during the period, summarised as follows:

· 36.1% direct pension consultancy and administration (2014: 36.0%);

· 33.0% investment and asset management (2014: 30.6%);

· 13.9% employee benefits (2014: 19.3%);

· 8.9% third party pension administration (2014: 7.2%); and

· 8.1% property management (2014: 6.9%).

Unadjusted EBITDA increased 7.1% to £7.09m (2014: £6.62m), with an anticipated fall in EBITDA margin to 20.5% (2014: 22.6%) due to reduced employee benefits and banking revenues, costs associated with the completion and integration of recent acquisitions and further restructuring of the Group's legal structure.

To facilitate a like-for-like comparison with prior years, acquisition costs of £0.27m incurred on acquisitions during the year have been added back in calculating adjusted EBITDA and adjusted profit before tax. Adjusted EBITDA¹³ increased 8.7% to £7.36m (2014: £6.77m), while adjusted EBITDA margin fell to 21.3% (2014: 23.1%). As highlighted in my Industry Overview, I see both a market expectation and possible regulatory or legislative pressure to reduce product costs. Previously, I have set out our aim to reduce the total expense ratios incurred by clients and hence we will see some continued pressure on margins, which we plan to offset by securing operational efficiencies through the development of our IT platform.

13 Adding back £0.27m (2014: £0.15m) of acquisition-related costs.

Net finance costs

Net finance costs were £0.13m (2014: revenue of £0.04m) due to the impact of £0.17m (2014: £nil) of notional finance charges on the unwinding of discounts on long term provisions. The Group has maintained a positive net cash position, with average balances broadly in line with the prior year.

Taxation

The effective rate of taxation on profit on ordinary activities increased to 24.0% (2014: 16.3%) due to an increase in acquisition-related expenses not deductible for tax and the effective rate in the prior year being distorted by the reversal of deferred tax liabilities on acquired intangibles following cuts in the UK corporation tax rate. The net deferred taxation liability carried forward at 31 May 2015 was £1.92m (2014: £2.10m).

Earnings per share and dividend

Adjusted EPS¹⁴ was up 0.8% at 27.54p (2014: 27.32p), with basic EPS down 9.8% to 19.83p (2014: 21.98p), due to the impact of strong revenue growth and an increase in underlying operating profits being offset by notional finance charges on the unwinding of discounts on long term provisions and a significant increase in the effective tax rate for the year. Diluted earnings per share fell 9.6% to 19.60p (2014: 21.69p), with 181,407 new shares issued as deferred consideration on the Atkinson Bolton acquisition and the exercise of 91,152 options issued under the Company's share option plans during the period. A proposed increase of 15.4% in the total dividend for the year to 10.50p (2014: 9.10p) demonstrates our desire to deliver value to shareholders and confidence in the outlook for our business.

14 Before acquisition-related costs, amortisation and impairment of acquired intangibles, and notional finance income and charges.

Cash flow

Cash generated from operations increased to £7.58m or 107.0% of EBITDA (2014: £5.05m or 76.3%), with the cash conversion ratio improving due to:

· EBITDA for the period being stated after a £0.57m increase in non-cash costs, being a £0.40m increase in share-based payment costs and a £0.17m increase in notional interest costs, representing the unwinding of discounting on long term provisions; and

· A smaller increase in the Group's working capital requirement of £0.25m (2014: £2.02m), with a £1.70m increase in trade and other receivables being offset by a £1.44m increase in trade and other payables and a £0.01m increase in provisions.

New client wins and recent legislative changes led to increased activity and hence an increase in accrued income and trade receivables in our direct pension business (where fees are typically invoiced six months in arrears), with higher discretionary funds under management and later payment terms from our trading platform provider increasing accrued income in investment and asset management.

Trade and other payables increased due to an increase in accrued staff bonuses at the year end and an increase in deferred income following growth in our third party administration business, (where annual fees are typically paid annually in advance).

Net cash at 31 May 2015 was £10.57m (2014: £9.51m), with £2.38m (2014: £1.58m) of deferred consideration paid in cash on historic acquisitions plus £0.24m cash outflow (net of cash acquired) on the acquisition of the UK Wealth Management pension business (2014: £1.05m cash inflow on acquisition of Atkinson Bolton). A nominal cash consideration of £1 was paid on the acquisition of the Torquil Clark pension business, with £0.80m of contingent consideration payable on the acquisition of Atkinson Bolton settled through the issue of new ordinary shares in Mattioli Woods during the period.

Outstanding trade receivables fell to 52 days' sales (2014: 55 days), with a continued focus on credit control, and trade payables fell to 32 days' purchases (2014: 42 days) due to prompt payments being made to suppliers prior to the end of the year.

Capital expenditure in the year was £0.98m (2014: £0.94m), with the most significant costs being the purchase of new company cars following continued expansion of the consultancy team, and investment in new computer hardware and software. The continued development of the Group's technology infrastructure is a key part of our strategy. We have extended the development of our bespoke pension administration and wealth management platform to include employee benefits, with the aim of enhancing the services we offer clients and realising operational efficiencies across the Group as a whole. While the first phase of our new platform development has commenced testing, the expected 'go live' date of the trading side of the platform has been pushed into 2016 due to delays experienced by one of our core technology partners on other projects. As a result, we now expect the trading side of our new platform to go live in 2016. In the meantime, the Group's existing systems remain fit for purpose, with sufficient capacity to support further growth.

Bank facilities

The Group has renewed its borrowing facilities with Lloyds Bank plc ("Lloyds"), which comprise a £5.0m overdraft facility with interest payable at the bank's base rate plus 1.1875% on the first £0.50m and plus 1.375% on borrowings in excess of £0.50m. The Lloyds facility is repayable upon demand and renewable on 31 January 2016. At 31 May 2015, the Group had unused borrowing facilities of £5.0m (2014: £5.0m).

Capital structure

The Group's capital structure is as follows:

	2015 £000	2014 £000

Net funds	(10,570)	(9,514)
Shareholders' equity	39,467	35,544

Capital employed	28,897	26,030

The Group has remained negatively geared, with the gearing ratio increasing from (8.8)% to (6.6)% as a result of an increase in trade and other payables to £7.98m (2014: £6.39m) being partially offset by an increase in net cash balances to £10.57m (2014: £9.51m).

Regulatory capital

The Board considers it prudent for the Group to maintain headroom of at least 25% over the FCA regulatory capital requirement. The Group's regulatory capital requirement has increased in recent years, and in addition its capital is eroded when it makes acquisitions due to the requirement for intangible assets arising on acquisition to be deducted from Tier 1 Capital. To provide the flexibility to take advantage of further acquisition opportunities, the Company raised net proceeds of £17.9m pursuant to the Placing, which has been used as follows:

· £3.8m towards satisfaction of both the initial and deferred cash consideration payable in connection with the acquisition of Boyd Coughlan; and

· £5.8m to satisfy the cash consideration payable in connection with the acquisition of Taylor Patterson.

The balance of the Placing proceeds has given the enlarged Group greater headroom on its increased regulatory capital requirement following these acquisitions, allowing us to pursue further acquisition opportunities.

Acquisitions

The UK Wealth Management and Torquil Clark pension businesses acquired during the year continue to integrate well. We expect to see more acquisition opportunities within the SIPP market, as smaller operators look to exit prior to the introduction of increased regulatory capital requirements for SIPP operators in September 2016.

In June 2015 we acquired Boyd Coughlan, an employee benefits and wealth management business based in Buckingham, providing advice to both high net worth individuals and companies on all aspects of financial planning, for a total consideration of up to £7.0m, including up to £2.5m of deferred consideration payable in cash if certain financial targets are met based on EBITDA generated during the two years following completion.

We have followed this with the acquisition of Taylor Patterson, another financial advisory firm providing wealth management, strategic financial planning, employee benefits and pension services to businesses and individuals. A total consideration of up to £8.3m comprises an initial consideration of £5.0m, with £2.5m paid in cash plus £2.5m settled through the issue of new ordinary shares in Mattioli Woods on completion. Deferred consideration of up to £3.3m will be payable in cash in the three years following completion if certain financial targets are met, based on growth in revenues and EBITDA generated during that period.

These recent transactions provide the Group with a wider audience for its products and services and extend our wealth management and employee benefits capabilities and we are delighted the experienced management teams of both companies have remained part of the enlarged Group. Both acquisitions are expected to be earnings enhancing in the first full year of ownership.

Relationships

The Group's performance and value to our shareholders are influenced by other stakeholders, principally our clients, suppliers, employees, the Government and our strategic partners. Our approach to all these parties is founded on the principle of open and honest dialogue, based on a mutual understanding of needs and objectives.

Relationships with our clients are managed on an individual basis through our account managers and consultants. Employees have performance development reviews and employee forums also provide a communication route between employees and management. Mattioli Woods also participates in trade associations and industry groups, which give us access to client and supplier groups and decision-makers in Government and other regulatory bodies. Mattioli Woods is a member of the Association of Member-directed Pension Schemes and the Quoted Companies Alliance.

Resources

The Group aims to safeguard the assets that give it competitive advantage, including its reputation for quality and proactive advice, its technical competency and its people.

Our core values provide a framework for responsible and ethical business practices. Structures for accountability from our administration teams through to the operational management team and the Group's Board are clearly defined. The proper operation of the supporting processes and controls are regularly reviewed by the Audit Committee and take into account ethical considerations, including procedures for 'whistle-blowing'.

Forward-looking statements

The strategic report is prepared for the members of Mattioli Woods and should not be relied upon by any other party for any other purpose. Where the report contains forward-looking statements these are made by the Directors in good faith based on the information available to them at the time of their approval of this report. Consequently, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risks underlying such forward-looking statements and information. The Group undertakes no obligation to update these forward-looking statements.

Principal risks and uncertainties

There are a number of potential risks which could hinder the implementation of our strategy and have a material impact on our long term performance. These arise from internal or external events, acts or omissions which could pose a threat to the Group.

We are proud of our consistently high client retention rate, but continue seeking ways to strengthen this. We believe the most significant risk we face is potential damage to our reputation as a result of poor client service and we are determined not to let standards slip. We address this through ongoing quality control procedures and the provision of regular training for all our staff. Last year we strengthened our team through the appointment of a Customer Relations Officer, who has extensive customer management experience gained both within and outside of our sector.

Pension regulations will continue to be reviewed. Future changes may not produce an environment that is advantageous to the Group and any changes in regulation may be retrospective. To address this risk, we are committed to ensuring that our views are expressed during consultation exercises and that we respond positively and rapidly to new regulations.

We also recognise that a significant skills shortage would represent a risk to growth. We are mitigating this risk through investment in our graduate recruitment programme and by providing incentives to motivate and retain our existing employees.

One source of revenue is based on the value of cash balances held in clients' schemes. These balances are not included in the Consolidated or Company statements of financial position. Lower banking margins due to a continued low interest rate environment have resulted in a decline in these revenues. Although we work hard on developing our banking relationships to ensure we can access competitive interest rates for our clients, there is a risk that a further decline in interest turn or the value of balances held could result in lower earnings.

The Group has an indirect exposure to security price risk on investments held by clients, with discretionary portfolio management fees, adviser charges (including legacy investment commissions) and property management fees being based on the value of clients' assets under management, administration or advice. Periods of volatility in a particular asset class may see changes in how our investment revenues are derived. However, a great strength of our business is that we can continue to derive income from investments in all asset classes, while ensuring our clients' investment strategies are appropriately aligned to the prevailing market conditions and suitable for their financial needs.

The table below outlines the current risk factors for the business identified by the Group. The risk factors mentioned below do not purport to be exhaustive as there may be additional risks that materialise over time that the Group has not yet identified or deemed to have a potentially material adverse effect on the business:

Industry risks
Risk type	Risk	Mitigating factors
Changes in investment markets and poor investment performance	Volatility may adversely affect trading and/or the value of the Group's funds under administration and advice, from which we derive revenues.	· Majority of clients' funds held within registered pension schemes or ISAs, where less likely to withdraw funds and lose tax benefits. · Client banking arrangements enable clients to shelter from market volatility through diversification, while continuing to generate revenues for the Group. · Market volatility is closely monitored by the Investment Committee.
Changing markets and increased competition	The Group operates in a highly competitive environment with evolving characteristics and trends.	· Consolidating market position develops the Group's pricing power. · Control over scalable and flexible bespoke pension administration platform. · Experienced management team with a strong track record. · Loyal customer base and strong client retention. · Broad service offering gives diversified revenue streams.
Evolving technology	The Group's technology could become obsolete if we are unable to develop our systems to accommodate changing client needs, new products and the emergence of new industry standards.	· Track record of successful development. · High awareness of the importance of technology at Board level. · Expanded systems development with objective to create one Group-wide platform.
Regulatory risk	The Group may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations.	· Strong compliance culture. · External professional advisers are engaged to review and advise upon control environment. · Business model and culture embraces FCA principles, including treating clients fairly. · Financial strength provides comfort should capital resource requirements be increased.
Changes in tax law	Changes in tax legislation could reduce the attractiveness of long-term savings via pension schemes, particularly SSASs and SIPPs.	· The Government has a desire to encourage long-term savings to plan for an ageing population, which is currently under-provided for. · Changes in pension legislation create the need for clients to seek advice. · The development of the Groups' wealth management services reduces dependency on pension planning.

Operational risks
Risk type	Risk	Mitigating factors
Damage to the Group's reputation	There is a risk of reputational damage as a result of employee misconduct, failure to manage inside information or conflicts of interest, fraud, improper practice, poor client service or advice.	· Strong compliance culture with a focus on positive customer outcomes. · High level of internal controls, including checks on new staff. · Well trained staff who ensure the interests of clients are met in the services provided.
Errors, breakdown or security breaches in respect of the Group's software or information technology systems	Serious or prolonged breaches, errors or breakdowns in the Group's software or information technology systems could negatively impact customer confidence. It could also breach contracts with customers and data protection laws, rendering us liable to disciplinary action by governmental and regulatory authorities, as well as to claims by our clients.	· Ongoing review of data security. · IT performance, scalability and security are deemed top priorities by the Board. · Experienced in-house team of IT professionals and established name suppliers.
Business continuity	In addition to the failure of IT systems, there is a risk of disruption to the business as a result of power failure, fire, flood, acts of terrorism, re-location problems and the like.	· Periodic review of Business Continuity Plan, considering best practice methodologies. · Disaster recovery plan and a disaster recovery team in place. Business impact analysis has been conducted by department.
Fraud risk	There is a risk an employee defrauds either the Group or a client.	· The Group ensures the control environment mitigates against the misappropriation of client assets. · Strong corporate controls require dual signatures for all payments and Board approval for all expenditure greater than £10,000. · Assessment of fraud risk is reviewed every six months in conjunction with the external auditors. · Clients have view-only access to information and hence risk of fraud due to external attack on the Company's IT systems is assessed as low.
Key personnel risk	The loss of, or inability to recruit, key personnel could have a material adverse effect on the Group's business, results of operations or financial condition.	· Succession planning is a key consideration throughout the Group. · Success of the Group should attract high calibre candidates. · Share-based schemes in operation to incentivise staff and encourage retention. · Recruitment programmes in place to attract appropriate new staff. · Continued development of a cross functional acquisition team brought into acquisition projects at an early stage. · Keyman cover for company founders.
Litigation or claims made against the Group	Risk of liability related to litigation from clients or third parties and assurance that a claim or claims will not be covered by insurance or, if covered, will exceed the limits of available insurance coverage, or that any insurer will become insolvent and will not meet its obligations to provide the Group with cover.	· Appropriate levels of Professional Indemnity insurance cover regularly reviewed with the Group's advisers. · Comprehensive internal review procedures, including compliance sign-off, for advice and marketing materials. · Maintenance of three charging models; time cost, fixed and asset based, which are aligned to specific service propositions. · Restricted status for our consultants to enable the recommendation of our own products versus others in the market.
Reliance on third parties	Any regulatory breach or service failure on the part of an outsourced service provider could expose the Group to the risk of regulatory sanctions and reputational damage.	· Due diligence is part of the selection process for key suppliers. · Ongoing review of relationships and concentration of risk with key business partners.
Strategic risk	Risk that management will pursue inappropriate strategies or implement the Group's strategy ineffectively.	· Experienced management team with successful track record to date. · Management has demonstrated a thorough understanding of the market and monitors this through regular meetings with clients.
Financial risks
Risk type	Risk	Mitigating factors
Counterparty default	That the counterparty to a financial obligation will default on repayments.	· The Group trades only with recognised, creditworthy third parties. · All customers who wish to trade on credit terms are subject to credit verification procedures. · All receivables are reviewed on an ongoing basis for risk of non-collection and any doubtful balances are provided against.
Bank default	The risk that a bank could fail.	· We only use banks with strong credit ratings. · Client deposits spread across multiple banks. · Regular review and challenge of treasury policy by management.
Concentration risk	A component of credit risk, arising from a lack of diversity in business activities or geographical risk.	· The client base is broad, without significant exposure to any individual client or group of clients. · Broad service offering gives diversified revenue streams.
Liquidity risk	The risk the Group is unable to meet liabilities as they become due because of an inability to liquidate assets or obtain adequate funding.	· Cash generative business. · Group maintains a surplus above regulatory and working capital requirements. · Treasury management provides for the availability of liquid funds at short notice.
Interest rate risk	Risk of decline in earnings due to a decline in interest turn. Low interest rates make it harder to structure compelling capital-protected products for clients.	· Good relationships with key banking partners. · Access to competitive interest rates due to scale of our business.
Underwriting risk	When arranging new products for promotion to the Group's clients, the Group may need to guarantee a minimum aggregate investment to secure appropriate terms for the product. If actual client investment is less than the underwritten amount, we would incur the cost of either acquiring the unsold element of the product or unwinding any hedges underlying the unsold element of the product.	· New products created in line with client demand. · Potential costs are carefully considered by the Investment Committee prior to the launch of each product.

Corporate social responsibility

Mattioli Woods has a long-standing commitment to ensure our staff can engage with their local communities and charities. This social awareness is present throughout the business, from our employees to our clients, our professional connections and the suppliers we use.

The Group was delighted to sponsor the Rothley 10k, one of the most celebrated charity road running races in Leicestershire, as it celebrated its 30^th anniversary. Over the last three decades, the race has raised more than £250,000 for local charities, including Rainbows, LOROS Hospice, County Air Ambulance Service, Age UK, Eye Camps and the Royal National Lifeboat Institution.

In addition, we sponsor a variety of business and sports related events, including the Leicester Mercury New Business of the Year Award and a variety of local sports clubs across the country. We believe this brings many benefits to the local community and beyond. We also continue to sponsor wheelchair racer Sammi Kinghorn, who represented Scotland in the 2014 Commonwealth Games in Glasgow and hopes to represent Team GB at the Paralympic games in 2016.

One of Cambridgeshire's largest annual charity events, the Chariots of Fire relay race, has been supported by our Newmarket office for the past 12 years. Our colleagues in Aberdeen sponsor and participate in Glack Attack, a 5km obstacle mud run held on Glack Hill, Aberdeenshire. By sharing the success stories from events like these we hope to encourage other aspiring individuals and teams in the future.

We have recently chosen to support our first national charity, Breast Cancer Now, and expect to be involved in a number of activities to raise essential funding for this great cause.

In 2014, we were delighted to announce the creation of The Mattioli Woods Business Academy ("the Academy") in partnership with Gateway College, Leicester. The Academy has been developed to create opportunities locally for young people and assist the Group in recruiting and developing staff with the right skills, experience and values.

The Academy offers two-year placements to 10 of the brightest students each year, leading to Level 3 qualifications in Business and Finance and a wealth of workplace experience. In addition, Mattioli Woods has also taken on eight apprentices who are working in areas throughout the business, as well as expanding our Financial Services Development Scheme, which was previously aimed at graduates, to now include apprentices and school leavers, with plans to enrol up to 16 new apprentices this year.

Approval

In accordance with Section 414(c) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 the Company has prepared a Strategic Report, which includes information that would have been previously included in the Directors' Report.

The Strategic Report in its entirety has been approved by the Board of Directors and signed on its behalf by:

Ian Mattioli

Chief Executive

8 September 2015

Consolidated statement of comprehensive income

For the year ended 31 May 2015

	Note	2015 £000	2014 £000

Revenue	4	34,565	29,347

Employee benefits expense		(20,042)	(16,857)
Other administrative expenses		(6,604)	(5,423)
Share based payments		(790)	(386)
Amortisation and impairment	8	(1,279)	(1,176)
Depreciation		(387)	(367)
Loss on disposal of property, plant & equipment		(44)	(64)

Operating profit before financing		5,419	5,074

Finance revenue		46	43
Finance costs		(175)	(2)

Net finance revenue		(129)	41

Profit before tax		5,290	5,115
Income tax expense		(1,268)	(834)


Profit for the year		4,022	4,281
Other comprehensive income for the year, net of tax		-	-

Total comprehensive income for the year, net of tax		4,022	4,281

Attributable to:
Equity holders of the parent		4,022	4,281


Earnings per ordinary share:

Basic (pence)	6	19.83	21.98
Adjusted (pence)		27.54	27.32
Diluted (pence)	6	19.60	21.69

Proposed total dividend per share (pence)	7	10.50	9.10

The operating profit for each period arises from the Group's continuing operations. The profit of the Company for the financial year, after taxation, was £2.48m (2014: £3.47m).

Consolidated and Company statements of financial position Registered number: 3140521

As at 31 May 2015

		2015		2014
		Group	Company	Group	Company
	Note	£000	£000	£000	£000
Assets
Property, plant and equipment		1,430	1,430	1,326	1,165
Intangible assets	8	28,852	28,818	29,001	10,192
Deferred tax asset		422	422	367	298
Investments		-	17,617	-	19,623

Total non-current assets		30,704	48,287	30,694	31,278

Trade and other receivables		12,355	11,922	10,568	8,835
Investments		129	129	39	-
Cash and short-term deposits	10	10,570	8,545	9,514	3,181

Total current assets		23,054	20,596	20,121	12,016

Total assets		53,758	68,883	50,815	43,294

Equity
Issued capital	11	204	204	200	200
Share premium	11	8,689	8,689	8,001	8,001
Merger reserve	11	4,838	4,838	4,040	4,040
Equity - share based payments	11	997	976	1,046	1,040
Capital redemption reserve	11	2,000	2,000	2,000	2,000
Retained earnings	11	22,739	20,048	20,257	19,105

Total equity attributable to equity holders of the parent		39,467	36,755	35,544	34,386

Non-current liabilities
Deferred tax liability		2,339	2,332	2,464	284
Financial liabilities and provisions	12	2,393	21,195	1,781	1,334

Total non-current liabilities		4,732	23,527	4,245	1,618

Current liabilities
Trade and other payables		7,979	7,297	6,386	3,802
Income tax payable		624	348	632	-
Financial liabilities and provisions		956	956	4,008	3,488

Total current liabilities		9,559	8,601	11,026	7,290

Total liabilities		14,291	32,128	15,271	8,908

Total equities and liabilities		53,758	68,883	50,815	43,294

The financial statements were approved by the Board of directors and authorised for issue on 8 September 2015 and are signed on its behalf by:

Bob Woods	Nathan Imlach
Executive Chairman	Finance Director

Consolidated and Company statements of changes in equity

For the year ended 31 May 2015

Group	Issued capital (Note 11) £000	Share premium (Note 11) £000	Merger reserve (Note 11) £000	Equity - share based payments (Note 11) £000	Capital redemption reserve (Note 11) £000	Retained earnings (Note 11) £000	Total equity £000

As at 1 June 2013	188	8,616	-	777	2,000	17,519	29,100

Profit for the year	-	-	-	-	-	4,281	4,281
Total comprehensive income	-	-	-	-	-	4,281	4,281
Transactions with owners of the Group, recognised directly in equity
Issue of share capital	12	568	2,857	-	-	-	3,437
Share-based payments	-	-	-	94	-	-	94
Deferred tax taken to equity	-	-	-	129	-	-	129
Current tax taken to equity	-	-	-	46	-	-	46
Dividends paid	-	-	-	-	-	(1,543)	(1,543)
Reserves transfer	-	(1,183)	1,183	-	-	-	-

As at 31 May 2014	200	8,001	4,040	1,046	2,000	20,257	35,544

Profit for the year	-	-	-	-	-	4,022	4,022
Total comprehensive income	-	-	-	-	-	4,022	4,022
Transactions with owners of the Group, recognised directly in equity
Issue of share capital	4	688	798	-	-	-	1,490
Share-based payments	-	-	-	256	-	-	256
Deferred tax taken to equity	-	-	-	2	-	-	2
Current tax taken to equity	-	-	-	34	-	-	34
Dividends paid	-	-	-	-	-	(1,881)	(1,881)
Reserves transfer	-	-	-	(341)	-	341	-

As at 31 May 2015	204	8,689	4,838	997	2,000	22,739	39,467

Consolidated and Company statements of changes in equity

For the year ended 31 May 2015 (continued)

Company	Issued capital (Note 11) £000	Share premium (Note 11) £000	Merger reserve (Note 11) £000	Equity - share based payments (Note 11) £000	Capital redemption reserve (Note 11) £000	Retained earnings (Note 11) £000	Total equity £000

As at 1 June 2013	188	8,616	-	777	2,000	17,176	28,757

Profit for the year	-	-	-	-	-	3,472	3,472
Total comprehensive income	-	-	-	-	-	3,472	3,472
Transactions with owners of the Company, recognised directly in equity
Issue of share capital	12	568	2,857	-	-	-	3,437
Share-based payments	-	-	-	88	-	-	88
Deferred tax taken to equity	-	-	-	129	-	-	129
Current tax taken to equity	-	-	-	46	-	-	46
Dividends paid	-	-	-	-	-	(1,543)	(1,543)
Reserves transfer	-	(1,183)	1,183	-	-	-	-

As at 31 May 2014	200	8,001	4,040	1,040	2,000	19,105	34,386

Profit for the year	-	-	-	-	-	2,483	2,483
Total comprehensive income	-	-	-	-	-	2,483	2,483
Transactions with owners of the Company, recognised directly in equity
Issue of share capital	4	688	798	-	-	-	1,490
Share-based payments	-	-	-	241	-	-	241
Deferred tax taken to equity	-	-	-	2	-	-	2
Current tax taken to equity	-	-	-	34	-	-	34
Dividends paid	-	-	-	-	-	(1,881)	(1,881)
Reserves transfer	-	-	-	(341)	-	341	-

As at 31 May 2015	204	8,689	4,838	976	2,000	20,048	36,755

Consolidated and Company statements of cash flows

For the year ended 31 May 2015

		Group 2015	Company 2015	Group 2014	Company 2014
	Note	£000	£000	£000	£000
Operating activities
Profit for the year excluding dividends received Adjustments for:		4,022	736	4,281	1,972
Depreciation		387	339	367	290
Amortisation and impairment	8	1,279	2,775	1,176	405
Gain on bargain purchase		(92)	(92)	-	-
Investment income		(46)	(23)	(43)	(20)
Interest expense		175	411	2	2
Loss on disposal of property, plant and equipment		44	44	64	33
Equity-settled share-based payments		478	463	213	208
Cash-settled share-based payments		312	312	172	172
Income tax expense		1,268	927	834	485
Cash flows from operating activities before changes in working capital and provisions		7,827	5,892	7,066	3,547
Increase in trade and other receivables		(1,699)	(1,010)	(1,560)	(1,687)
Increase/(decrease) in trade and other payables		1,442	1,176	(90)	(28)
Increase/(decrease) in provisions		10	30	(366)	(65)
Cash generated from operations		7,580	6,088	5,050	1,767
Interest paid		(1)	(1)	(2)	(2)
Income taxes paid		(1,441)	(1,096)	(1,330)	(781)
Net cash flows from operating activities		6,138	4,991	3,718	984
Investing activities
Proceeds from sale of property, plant and equipment		69	69	37	37
Purchase of property, plant and equipment		(603)	(579)	(647)	(597)
Purchase of software	8	(374)	(374)	(294)	(294)
Consideration paid on acquisition of subsidiaries	3	(2,383)	(2,383)	(2,164)	(2,164)
Consideration paid on acquisition of business	3	(363)	-	-	-
Cash transferred on hive up of group companies		-	3,373	-	-
Cash received on acquisition of subsidiaries	3	32	-	1,628	-
Other investments		(90)	(90)	-	-
Loan repayments from property syndicates		-	-	239	235
Interest received		46	23	43	19
Dividends received		-	1,750	-	1,500
Net cash flows from investing activities		(3,666)	1,789	(1,158)	(1,264)
Financing activities
Proceeds from the issue of share capital		467	467	475	475
Payment of costs of share issue		-	-	(25)	(25)
Repayment of Directors' loans		(2)	(2)	-	-
Dividends paid	7	(1,881)	(1,881)	(1,543)	(1,543)
Net cash flows from financing activities		(1,416)	(1,416)	(1,093)	(1,093)

Net increase/(decrease) in cash and cash equivalents		1,056	5,364	1,467	(1,373)
Cash and cash equivalents at start year	10	9,514	3,181	8,047	4,554

Cash and cash equivalents at end of year	10	10,570	8,545	9,514	3,181

Notes to the financial statements

1 Corporate information

Mattioli Woods plc ("the Company") is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange plc. The financial statements have been prepared on a historical cost basis and are presented in pounds, with all values rounded to the nearest thousand pounds (£000) except when otherwise indicated. The financial statements were authorised for issue in accordance with a resolution of the Directors on 8 September 2015.

The financial statements comprise the financial statements of Mattioli Woods plc and its subsidiaries ("the Group") as at 31 May each year. The nature of the Group's operations and its principal activities are set out in the Chief Executive's Review.

2 Basis of preparation and accounting policies

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together "IFRS") as adopted by the European Union ("EU"), and in accordance with the requirements of the Companies Act applicable to companies reporting under IFRS.

The financial statements have been prepared on a consistent basis with the year ended 31 May 2014, with no changes to the accounting framework adopted or accounting policies applied. At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective:

Standard or interpretation		Periods commencing on or after

IFRS 9	Financial Instruments	1 January 2018
IFRS 10 (amended)	Consolidated Financial Statements	1 January 2016
IFRS 11 (amended)	Joint Arrangements	1 January 2016
IFRS 12	Disclosures of Interests in Other Entities	1 January 2015
IAS 16 (amended)	Property, Plant and Equipment	1 January 2016
IAS 27 (revised)	Separate Financial Statements	1 January 2016
IAS 28 (amended)	Investments in Associates and Joint Ventures	1 January 2016
IAS 32 (amended)	Offsetting Financial Assets and Financial Liabilities	1 January 2015
IFRS15	Revenue from Contracts with Customers	1 January 2017

Other than to expand certain disclosures within the financial statements, the Directors do not expect the adoption of the standards and interpretations listed above will have a material impact on the financial statements of the Group in the future periods.

The principal accounting policies adopted are set out below and have been applied consistently throughout the current and previous financial year.

2.2 Significant accounting policies

Basis of consolidation

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Business combinations

Business combinations are accounted for using the purchase accounting method. This involves assessing whether any assets acquired meet the criteria for recognition as separately identifiable intangible assets. Intangible assets are measured on initial recognition at their fair value at the date of acquisition. Client portfolios are valued by discounting their expected future cash flows over their expected useful lives, based on the Group's historic experience. Expected future cash flows are estimated based on the historic revenues and costs associated with the operation of that client portfolio. The discount rates used estimate the cost of capital, adjusted for risk.

Group re-organisation

During the year the trade and assets of City Pensions Limited, Thoroughbred Wealth Management Limited, Atkinson Bolton Consulting Limited and Kudos Financial Services Limited were transferred to the Company. The net asset and results for the transferred businesses are reflected in the parent company financial statements at the same values as they would have been reflected in the Group accounts had the transfer not taken place. Each transfer of trade and assets resulted in any goodwill, client portfolios recognised as intangible assets and associated deferred tax balances that arose on consolidation, being recognised in the parent company statement of financial position. The trade and assets were exchanged for loan notes attracting annual interest on the outstanding principal at a rate of 3% above the Bank of England base rate.

2.3 Key sources of judgements and estimation uncertainty

Impairment of client portfolios

The Group reviews whether acquired client portfolios are impaired at least on an annual basis. This comprises an estimation of the fair value less cost to sell and the value in use of the acquired client portfolios. In assessing value in use, the estimated future cash flows expected to arise from each client portfolio is discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset.

The key assumptions used in respect of value in use calculations are those regarding growth rates and anticipated changes to revenues and costs during the period covered by the calculations. Changes to revenue and costs are based upon management's expectation. The Group prepares its annual budget and five-year cash flow forecasts derived therefrom, thereafter extrapolating these cash flows using a terminal growth rate of 2.5% (2014: 2.5%), which management considers conservative against industry average long-term growth rates.

The key assumption used in arriving at a fair value less cost of sale are those around valuations based on earnings multiples and values based on assets under management. These have been determined by looking at valuations of similar businesses and the consideration paid in comparable transactions. Management has used a range of multiples resulting in an average of 7.5x EBITDA to arrive at a fair value.

The carrying amount of client portfolios at 31 May 2015 was £16.89m (2014: £17.24m). No impairments have been made during the year (2014: £nil) based upon the Directors' review.

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. In assessing value in use, the estimated future cash flows expected to arise from the cash-generating unit are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset.

The key assumptions used in respect of value in use calculations are those regarding growth rates and anticipated changes to revenues and costs during the period covered by the calculations, based upon management's expectation. The carrying amount of goodwill at 31 May 2015 was £10.77m (2014: £10.77m). No impairments have been made during the year (2014: £nil) based upon the Directors' review.

Capitalised software

The costs of internal software developments are capitalised where they are judged to have an economic value that will extend into the future and meet the recognition criteria in IAS38. Internally generated software is then amortised over an estimated useful life, assessed by taking into consideration the useful life of comparable software packages. The carrying amount of capitalised software at 31 May 2015 was £0.81m (2014: £0.65m).

Deferred tax assets

Deferred tax assets include temporary differences related to employee benefits settled via the issue of share options. Recognition of the deferred tax assets assumes share options will have a positive value at the date of vesting, which is greater than the exercise price. The carrying amount of deferred tax assets at 31 May 2015 was £0.42m (2014: £0.37m).

Recoverability of accrued time costs and disbursements

The Group recognises accrued income in respect of time costs and disbursements incurred on clients' affairs during the accounting period, which have not been invoiced at the reporting date. This requires an estimation of the recoverability of the time costs and disbursements incurred but not invoiced to clients. The carrying amount of accrued time costs and disbursements at 31 May 2015 was £4.46m (2014: £3.34m).

Accrued commission income

Accrued commission income is recognised in respect of commissions due to the Group on investments and bank deposits placed during the accounting period which have not been received at the reporting date. This requires an estimation of the amount of commission income that will be received subsequent to the reporting date in respect of the accounting period, which is based on the value of historic commission receipts and investments placed by clients under advice. The carrying amount of accrued commission income at 31 May 2015 was £0.24m (2014: £0.45m).

Contingent consideration payable on acquisitions

The Group has entered into certain acquisition agreements that provide for a contingent consideration to be paid. A financial instrument is recognised for all amounts management anticipates will be paid under the relevant acquisition agreement. This requires management to make a fair value estimate of the expected future cash flows from the acquired client portfolio and determine a suitable discount rate for the calculation of the present value of those cash flows. The carrying amount of contingent consideration provided for at 31 May 2015 was £1.45m (2014: £4.46m).

Acquisitions and business combinations

When an acquisition arises the Group is required under IFRS to calculate the Purchase Price Allocation ("PPA"). The PPA requires companies to report the fair value of assets and liabilities acquired and it establishes useful lives for identified assets. The identification and the valuation of the assets and liabilities acquired involves estimation and judgement when determining whether the recognition criteria are met.

Subjectivity is also involved in PPA with the estimation of the future value of brands, technology, customer relationships and goodwill.

Provisions

As detailed in Note 12, the Group recognises provisions for client claims, commission clawbacks and other obligations which exist at the reporting date. These provisions are estimates and the actual amount and timing of future cash flows are dependent on future events. Management reviews these provisions at each reporting date to ensure they are measured at the current best estimate of the expenditure required to settle the obligation. Any difference between the amounts previously recognised and the current estimate is recognised immediately in the statement of comprehensive income.

3. Business combinations

Acquisition of UK Wealth Management Limited's pension business

On 11 August 2014 the Company's subsidiary City Pensions Limited ("City Pensions") acquired the pension administration business of UK Wealth Management Limited ("UKWM"), a wholly owned subsidiary of Ashcourt Rowan plc ("Ashcourt Rowan" or "the Seller").

The acquisition comprised the trade and certain assets of Pension Administration Limited ("PAL"), 100% of the share capital of Ropergate Trustees Limited from PAL Group Holdings Limited ("PALGH"), 100% of the share capital of Simmonds Ford Trustees Limited and 100% of the share capital of Acomb Trustees Limited from ATL Group Limited ("ATL") (together "UKWM Pensions"). PAL, PALGH and ATL were wholly owned indirectly by UKWM and ultimately owned by Ashcourt Rowan.

The acquisition has been accounted for using the acquisition method. The fair value of the identifiable assets and liabilities of UKWM Pensions as at the date of acquisition was:

	Fair value recognised on acquisition £000	Fair value adjustments £000	Previous carrying value £000

Client portfolio	562	562	-
Trade and other receivables	48	-	48
Cash at bank	32	-	32

Assets	642	562	80

Accruals and deferred income	(152)	-	(152)
Provisions and other payables	(149)	(86)	(63)

Liabilities	(301)	(86)	(215)

Total identifiable net assets at fair value	341

Total acquisition cost	341

Analysed as follows:
Initial cash consideration	275
Deferred contingent consideration	80
Adjustment to initial consideration	(14)

Total acquisition cost	341

Cash outflow on acquisition	£000

Cash paid	275
Cash acquired	(32)
Acquisition costs	42

Net cash outflow	285

UKWM Pensions provides trustee and administration services to over 400 SIPP and SSAS schemes. The client portfolio will be amortised on a straight-line basis over an estimated useful life based on the Group's historic experience.

The acquisition brought additional SIPP and SSAS clients to the Group and further developed its relationship with Ashcourt Rowan (now Towry) following the Group's acquisition of the pension business of Ashcourt Rowan in April 2013. The Group expects to benefit from the realisation of synergies and other benefits from combining the assets and activities of UKWM Pensions with those of Mattioli Woods.

Deferred consideration of up to £0.08m is payable in cash over two years if certain financial targets, based on revenues, are met during the period. The Group estimates the net present value of the remaining contingent consideration payable at 31 May 2015 to be £0.08m.

From the date of acquisition UKWM Pensions has contributed £0.16m to revenue and £0.03m to the Group profit for the period. If the combination had taken place at the beginning of the period, Group revenue from continuing operations would have been £34.60m and the profit for the period would have been £4.03m.

Transaction costs of £0.04m incurred during the course of the acquisition have been expensed and are included in administrative expenses in the consolidated statement of comprehensive income and consolidated statement of cash flows in the period in which they were incurred.

Acquisition of Torquil Clark Pensions

On 23 January 2015 the Group acquired the pension administration business of PS Employee Benefits Limited, a subsidiary of Capital Professional Limited ("Bellpenny"), including the entire issued share capital of Torquil Clark Pension Trustees Limited (together "Torquil Clark Pensions") for a total consideration of £1.

Torquil Clark Pensions provides trustee and administration services to 140 SIPP and SSAS schemes. The acquisition has been accounted for using the acquisition method. The fair value of the identifiable assets and liabilities of Torquil Clark Pensions as at the date of acquisition were:

	Fair value recognised on acquisition £000	Fair value adjustments £000	Previous carrying value £000

Client portfolio	194	194	-
Trade and other receivables	4	-	4

Assets	198	194	4

Provisions	(106)	(106)	-

Liabilities	(106)	(106)	-

Total identifiable net assets at fair value	92
Gain on bargain purchase recognised in administrative expenses in the statement of comprehensive income	(92)

Total acquisition cost	-

Analysed as follows:
Initial cash consideration	-

Total acquisition cost	-

Cash outflow on acquisition	£000

Cash paid	-
Acquisition costs	60

Net cash outflow	60

Torquil Clark Pensions was acquired for a consideration of £1, as the seller recognised the Group's ability to deal with the complexities associated with the winding up of the SIPP operated by Torquil Clark Pensions and transfer to alternative pension arrangements of its members, as required by the establisher of the SIPP. This resulted in a gain on bargain purchase of £0.09m arising on the acquisition, which has been recognised in the statement of comprehensive income.

Transaction costs of £0.06m incurred during the course of the acquisition have been expensed and are included in administrative expenses in the consolidated statement of comprehensive income and consolidated statement of cash flows in the period in which they were incurred.

From the date of acquisition Torquil Clark Pensions has contributed £0.05m to revenue and £0.02m to the Group profit for the period. If the combination had taken place at the beginning of the period, Group revenue from continuing operations would have been £34.7m and the profit for the period would have been £4.05m.

Contingent consideration

The Group has entered into certain acquisition agreements that provide for contingent consideration to be paid. These agreements and the basis of calculation of the fair value of the contingent consideration are summarised below. While it is not possible to determine the exact amount of contingent consideration (as this will depend on the performance of the acquired businesses during the period), the Group estimates the net present value of contingent consideration payable within the next 12 months is £0.14m (2014: £3.19m).

On 11 August 2014 the Group acquired UKWM Pensions for initial cash consideration of £0.28m (excluding cash acquired with the business) plus contingent consideration of £0.08m payable in cash in the two years following completion if certain revenue targets are met. The Group estimates the net present value of the remaining contingent consideration at 31 May 2015 to be £0.08m using cash flows approved by the Board covering the contingent consideration period and expects the maximum contingent consideration will be payable.

On 29 July 2013, Mattioli Woods acquired 100% of the voting equity interests of Thoroughbred Wealth Management Limited and its subsidiary Atkinson Bolton Consulting Limited (together "Atkinson Bolton"). The share purchase agreement ("the Agreement") stated contingent deferred consideration of up to £2.75m was payable in cash in the four years following completion if certain financial targets were met. However, to facilitate the earlier integration of Atkinson Bolton into the Group's wealth management and employee benefits divisions, the parties agreed to vary the Agreement on 26 August 2014 such that :

· £1.60m of contingent consideration was paid in September 2014 as £0.80m in cash and £0.80m through the allotment and issue of new ordinary shares in Mattioli Woods, following the achievement of certain financial targets based on growth in the EBITDA generated by Atkinson Bolton in the year from 1 August 2013 to 31 July 2014; and

· Up to £1.15m of contingent consideration will be payable in cash if certain financial targets are met based on compound annual growth in the EBITDA generated by Mattioli Woods in the three years from 1 August 2014 to 31 July 2017.

The Group estimates the fair value of the remaining contingent consideration at 31 May 2015 to be £0.98m using cash flows approved by the Board covering the contingent consideration period and expects the maximum contingent consideration will be payable.

On 23 April 2013, the Group acquired the trade and certain assets of Ashcourt Rowan Administration Limited, 100% of the share capital of Ashcourt Rowan Pension Trustees Limited and 100% of the share capital of Robinson Gear (Management Services) Limited for an initial cash consideration of £0.66m plus contingent consideration of up to £0.625m payable in cash in the five years following completion if certain targets are met based on growth in revenues and client retention during that period. The Group estimates the net present value of the remaining contingent consideration at 31 May 2015 to be £0.39m using cash flows approved by the Board covering the contingent consideration period.

On 26 August 2011 the Group acquired TCF Global Independent Financial Services Limited, the parent company of Kudos Financial Services Limited, for a total initial consideration of £5.52m (excluding cash acquired with the business) comprising £4.33m in cash and 462,572 ordinary shares in Mattioli Woods (which were valued at £1.19m based on the closing price of a Mattioli Woods share on 26 August 2011), plus contingent consideration of up to £4.75m payable in cash in the three years following completion if certain financial targets are met based on growth in recurring revenues and EBITDA generated during the period. The remaining contingent consideration was paid in full during the year.

4. Revenue

Revenue disclosed in the statement of comprehensive income is analysed as follows:

	2015 £000	2014 £000

Rendering of services	28,164	21,229
Commission income	6,401	8,118

	34,565	29,347

5. Segment information

The Group's operating segments remain unchanged and comprise the following:

· Direct pension consultancy and administration - fees earned by Mattioli Woods for setting up and administering pension schemes under an advice-led model. Additional fees are generated from consultancy services provided for special one-off activities and the provision of bespoke scheme banking arrangements;

· Third party pension administration - fees earned by City Trustees for setting up and administering pension schemes under an administration-only model. Additional fees are generated from provision of bespoke scheme banking arrangements;

· Investment and asset management - income generated from the management and placing of investments on behalf of clients;

· Property management - income generated where Custodian Capital manages collective property investment vehicles, facilitates direct commercial property investments on behalf of clients or acts as the external discretionary manager for Custodian REIT plc; and

· Employee benefits - income generated by the Group's employee benefits operations.

Each segment represents a revenue stream subject to risks and returns that are different to other operating segments, although each operating segment's products and services are offered to broadly the same market. The Group operates exclusively within the United Kingdom.

The pension consultancy, administration, investment and asset management operations of Mattioli Woods utilise the same intangible and tangible assets, and the segments have been financed as a whole, rather than individually. The Group's operating segments are managed together as one business. Accordingly, certain costs are not allocated across the individual operating segments, as they are managed on a group basis. Segment profit or loss reflects the measure of segment performance reviewed by the Board of Directors (the Chief Operating Decision Maker).

Operating segments

The following tables present revenue and profit information regarding the Group's operating segments for the two years ended 31 May 2015 and 2014 respectively.

Year ended 31 May 2015	Direct pension consultancy and administration £000	Third-party pension administration £000	Investment and asset management £000	Property management £000	Employee benefits £000	Total segments £000	Corporate costs £000	Consolidated £000

Revenue External client	12,475	3,070	11,430	2,790	4,800	34,565	-	34,565

Total revenue	12,475	3,070	11,430	2,790	4,800	34,565	-	34,565

Results Segment result	2,773	575	2,221	433	637	6,639	(1,349)	5,290

Year ended 31 May 2014	Direct pension consultancy and administration £000	Third-party pension administration £000	Investment and asset management £000	Property management £000	Employee benefits £000	Total segments £000	Corporate costs £000	Consolidated £000

Revenue External client	10,559	2,126	8,979	2,035	5,648	29,347	-	29,347

Total revenue	10,559	2,126	8,979	2,035	5,648	29,347	-	29,347

Results Segment result	2,023	460	2,195	209	1,128	6,015	(900)	5,115

Segment assets

The following table presents segment assets of the Group's operating segments:

	31 May 2015	31 May 2014
	£000	£000

Direct pension consultancy and administration	13,057	12,261
Third-party pension administration	5,014	4,007
Investment and asset management	11,088	9,214
Property management	1,196	697
Employee benefits	9,061	10,777


Total segments	39,416	36,956
Corporate assets	14,342	13,859

Total assets	53,758	50,815

Segment assets exclude property, plant and equipment, certain items of computer software, investments, current and deferred tax balances, and cash balances, as these assets are considered corporate in nature and are not allocated to a specific operating segment. Acquired intangibles and amortisation thereon relate to a specific transaction and are allocated between individual operating segments based on the headcount or revenue mix of the cash generating units at the time of acquisition. The subsequent delivery of services to acquired clients may be across a number or all operating segments, comprising different operating segments to those the acquired intangibles have been allocated to.

Liabilities have not been allocated between individual operating segments, as they cannot be allocated on anything other than an arbitrary basis.

Corporate costs

Certain administrative expenses including acquisition costs, amortisation of software, depreciation of property, plant and equipment, irrecoverable VAT, legal and professional fees and professional indemnity insurance cannot be allocated between segments because they are managed on a unified basis and utilise the same intangible and tangible assets.

Finance income and expenses, gains and losses on the disposal of assets, taxes, intangible assets and certain other assets and liabilities are not allocated to individual segments as they are managed on a group basis. Capital expenditure consists of additions of property, plant and equipment and intangible assets, including assets from the acquisition of subsidiaries.

	31 May 2015	31 May 2014
Reconciliation of profit	£000	£000

Total segments	6,639	6,015

Acquisition costs	(272)	(157)
Depreciation	(387)	(367)
Amortisation and impairment	(139)	(119)
Loss on disposal of assets	(44)	(34)
Unallocated overheads	(355)	(254)
Bank charges	(23)	(10)
Finance income	46	43
Finance costs	(175)	(2)

Group profit before tax	5,290	5,115

	31 May 2015	31 May 2014
Reconciliation of assets	£000	£000

Segment operating assets	39,416	36,956
Property, plant and equipment	1,430	1,326
Intangible assets	1,191	977
Investments	129	39
Deferred tax asset	422	367
Prepayments and other receivables	600	1,636
Cash and short-term deposits	10,570	9,514

Total assets	53,758	50,815

6. Earnings per ordinary share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The income and share data used in the basic and diluted earnings per share computations is as follows:

	2015 £000	2014 £000

Net profit and diluted net profit attributable to equity holders of the Company	4,022	4,281


Weighted average number of ordinary shares:	000s	000s

Issued ordinary shares at start period	19,990	18,813
Effect of shares issued during the year ended 31 May 2014	-	563
Effect of shares issued during the year ended 31 May 2015	297	101

Basic weighted average number of shares	20,287	19,477

Effect of dilutive options at the statement of financial position date	237	258

Diluted weighted average number of shares	20,524	19,735

The Company has granted options under the Share Option Plan, the Consultants' Share Option Plan and the LTIP to certain of its senior managers and directors to acquire (in aggregate) up to 4.10% of its issued share capital. Under IAS 33 Earnings Per Share, contingently issuable ordinary shares are treated as outstanding and included in the calculation of diluted earnings per share if the conditions (the events triggering the vesting of the option) are satisfied. At 31 May 2015 the conditions attached to 410,032 options granted under the LTIP were not satisfied (2014: 217,519). If the conditions had been satisfied, diluted earnings per share would have been 19.22p per share (2014: 21.46p).

Since the reporting date and the date of completion of these financial statements the following transactions have taken place involving ordinary shares or potential ordinary shares:

· A firm placing of 2,000,000 new ordinary shares in the Company (see Note 14);

· A conditional placing of 1,795,918 new ordinary shares in the Company (see Note 14);

· The issue of 235,742 shares issued as consideration for the acquisition of Boyd Coughlan Limited (see Note 14);

· The issue of 145,919 ordinary shares to satisfy the exercise of options under the Share Option Plan; and

· The issue of 30,378 ordinary shares under the Mattioli Woods plc Share Incentive Plan.

7. Dividends paid and proposed

	2015 £000	2014 £000

Declared and paid during the year:
Equity dividends on ordinary shares:
- Final dividend for 2014: 6.00p (2013: 4.67p)	1,202	925
- Interim dividend for 2015: 3.34p (2014: 3.10p)	679	618

Dividends paid	1,881	1,543
Proposed for approval by shareholders at the AGM:
Final dividend for 2015: 7.16p (2014: 6.00p)	1,790	1,202

8. Intangible assets

Group	Internally generated software £000	Software £000	Client portfolios £000	Goodwill £000	Other £000	Total £000
Gross carrying amount:
At 1 June 2013	595	653	17,171	8,734	35	27,188
Arising on acquisitions	-	1	3,785	2,037	-	5,823
Additions	214	80	-	-	-	294

At 31 May 2014	809	734	20,956	10,771	35	33,305

Arising on acquisitions	-	-	756	-	-	756
Additions	242	132	-	-	-	374
Disposals	-	-	-	-	-	-

At 31 May 2015	1,051	866	21,712	10,771	35	34,435

Amortisation and impairment:
At 1 June 2013	84	337	2,696	-	11	3,128
Amortisation during the year	71	74	1,020	-	11	1,176

At 31 May 2014	155	411	3,716	-	22	4,304

Amortisation during the year	88	72	1,106	-	13	1,279

At 31 May 2015	243	483	4,822	-	35	5,583

Carrying amount:
At 31 May 2015	808	383	16,890	10,771	-	28,852

At 31 May 2014	654	323	17,240	10,771	13	29,001

At 31 May 2013	511	316	14,475	8,734	24	24,060

Company	Internally generated software £000	Software £000	Client portfolios £000	Goodwill £000	Total £000
Gross carrying amount:
At 1 June 2013	595	513	7,124	4,335	12,567
Additions	214	80	-	-	294

At 31 May 2014	809	593	7,124	4,335	12,861

Transferred from group companies	-	41	12,340	6,436	18,817
Arising on acquisitions	-	-	194	-	194
Additions	242	132		-	374

At 31 May 2015	1,051	766	19,658	10,771	32,246

Amortisation and impairment:
At 1 June 2013	84	315	1,865	-	2,264
Amortisation during the year	71	49	285	-	405

At 31 May 2014	155	364	2,150	-	2,669

Amortisation during the year	88	53	618	-	759

At 31 May 2015	243	417	2,768	-	3,428

Carrying amount:
At 31 May 2015	808	349	16,890	10,771	28,818

At 31 May 2014	654	229	4,974	4,335	10,192

At 31 May 2013	511	198	5,259	4,335	10,303

Software

Software is amortised over its useful economic life of four years on a reducing balance basis. Internally generated software represents the development costs of the Group's bespoke customer relationship management, administration and trading platform. The directors believe this technology will be the principal technology platform used throughout the Group for the foreseeable future. Internally generated software is amortised on a straight-line basis over an estimated useful life of 10 years.

Client portfolios

Client portfolios represent individual client portfolios acquired through business combinations. Client portfolios are amortised on a straight-line basis over an estimated useful life of between 10 and 25 years, based on the Group's historic experience.

Goodwill

Goodwill arises where the price paid for an acquisition is greater than the fair value of the net assets acquired. Goodwill arising on business combinations is subject to annual impairment testing.

Other intangibles

Other intangibles represent external costs incurred in obtaining a licence. Other intangibles are amortised on a straight-line basis over a useful economic life of three years.

9. Share based payments

Share Option Plan

The Company operates the Share Option Plan by which certain of the executive directors and other senior executives are able to subscribe for ordinary shares in the Company at an exercise price of £1.32 per share, equal to the placing price of the shares issued on 15 November 2005. The options vested when profit-based performance conditions were fulfilled. The contractual life of each option expires on 31 October 2015. At 31 May 2015 the total number of options outstanding and exercisable under the Share Option Plan was 52,950 (2014: 82,500).

Consultants' Share Option Plan

The Company also operates the Consultants' Share Option Plan by which certain senior executives are able to subscribe for ordinary shares in the Company. Options granted under the Consultants' Share Option Plan are summarised as follows:

Date of grant	Exercise price £	At 1 June 2014 No.	Granted during the year No.	Exercised during the year No.	Lapsed during the year No.	At 31 May 2015 No.

5 September 2006	2.21	151,877	-	(29,530)	-	122,347
4 September 2007	2.79	154,196	-	(12,072)	-	142,124
8 September 2009	2.16	127,842	-	(20,000)	-	107,842

		433,915	-	(61,602)	-	372,313

The exercise price of the options is equal to the market price of the shares at the close of business on the day immediately preceding the date of grant. The options vest when the option holders achieve certain individual performance hurdles. No options vested during the year as a result of the associated performance conditions being fulfilled. If the performance hurdles, which are linked to individual sales revenues, are not met over the five financial years commencing on 1 June before the date of grant, the options lapse.

Long Term Incentive Plan

During the period, Mattioli Woods granted awards to the Company's executive directors and certain senior employees under the LTIP. Conditional share awards ("Equity-settled") grant participating employees a conditional right to become entitled to options with an exercise price of 1 pence over ordinary shares in the Company. Conditional cash awards ("Cash-settled") grant participating employees a conditional right to be paid a cash amount based on the proceeds of the sale of a specified number of Ordinary Shares following the vesting of the award. Movements in the LTIP scheme during the period were as follows:

LTIP options	31 May 2015 Equity-settled No.	31 May 2015 Cash-settled No.	31 May 2014 Equity-settled No.	31 May 2014 Cash-settled No.

Outstanding as at 1 June	217,519	148,149	-	-
Granted during the year	235,901	118,501	217,519	148,149
Exercised during the year	-	-	-	-
Forfeited during the year	(43,388)	-	-	-

Outstanding at 31 May	410,032	266,650	217,519	148,149

Exercisable at 31 May	-	-	-	-

The LTIP awards are subject to the achievement of corporate profitability targets measured over a three year performance period and will vest following publication of the Group's audited results for the year. The amounts shown above represent the maximum opportunity for the participants in the LTIP.

Share Incentive Plan

The Company introduced the Mattioli Woods plc Share Incentive Plan ("the SIP") in July 2008. Participants in the SIP are entitled to purchase, at market value, up to a prescribed number of new 1p ordinary shares in the Company at the end of each month for which they will receive a like for like matching share. These ordinary shares rank pari passu with existing issued ordinary shares of the Company.

A total of 110,134 (2014: 79,646) new ordinary shares were issued to the 218 employees who participated in the SIP during the year. At 31 May 2015 the SIP held 484,070 shares on their behalf, with a further 2,095 of forfeited shares not allocated to any specific employee.

Share based payments expense

The expense for share based payments made in respect of employee services under the LTIP is recognised over the expected vesting period of the awards. The expense recognised during the year ended 31 May 2015 is £567,966 (2014: £253,771), of which £229,764 arises from equity-settled share based payment transactions and £338,202 arises from cash-settled share based payment transactions.

The expense for share based payments made in respect of employee services under the Share Option Plan and the Consultants' Share Option Plan is recognised over the expected vesting period of the awards. The expense recognised during the year ended 31 May 2015 is £nil (2014: £11,593), which arises entirely from equity-settled share based payment transactions.

The expense for share based payments in respect of "Matching shares" issued under the SIP is recognised in the period the shares are granted to the participating employee. The expense recognised during the year ended 31 May 2015 is £221,857 (2014: £120,279), which arises entirely from equity-settled share based payment transactions.

Summary of share options

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options during the year.

Share options	2015 No.	2015 WAEP £	2014 No.	restated 2014 WAEP £

Outstanding as at 1 June	733,934	2.23	709,870	2.17
Granted during the year	235,901	0.01	217,519	0.01
Exercised	(91,152)	1.99	(150,841)	1.97
Forfeited during the year	(43,388)	-	(42,614)	-

Outstanding at 31 May	835,295	1.17	733,934	1.57

Exercisable at 31 May	425,263	2.28	388,573	2.25

The weighted average share price at the date of exercise for share options exercised during the year was £4.45. For the share options outstanding as at 31 May 2015, the weighted average remaining contractual life is 3.4years (2014: 3.6 years). The WAEP for options outstanding at the end of the year was £1.17 (2014: £1.57), with the option exercise prices ranging from £0.01 to £2.79.

The fair value of equity-settled share options granted is estimated as at the date of grant using the Black Scholes Merton model, taking into account the terms and conditions upon which the options were granted. The share price at 31 May 2015 and movements during the year are set out in the Directors' Remuneration Report.

10. Cash and short-term deposits

For the purpose of the statement of cashflows, cash and cash equivalents comprise the following at 31 May:

	Group 2015 £000	Company 2015 £000	Group 2014 £000	Company 2014 £000

Cash at banks and on hand	10,570	8,545	9,514	3,181
Bank overdrafts	-	-	-	-

Cash and cash equivalents	10,570	8,545	9,514	3,181

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and short-term deposits is £10.57m (2014: £9.51m).

At 31 May 2015, the Group had £5.0m (2014: £5.0m) of undrawn committed borrowing facilities available, in respect of which all conditions precedent had been met.

11. Issued capital and reserves

Share capital	Ordinary shares of 1p	Ordinary shares of 1p £

Authorised

At 1 June 2013, 31 May 2014 and 31 May 2015	30,000,000	300,000

Issued and fully paid

At 1 June 2013	18,813,129	188,131
Exercise of employee share options	150,841	1,508
Shares issued under the SIP	79,646	797
Shares issued for consideration	946,256	9,463

At 31 May 2014	19,989,872	199,899

Exercise of employee share options	91,152	912
Shares issued under the SIP	110,134	1,101
Shares issued for consideration	181,407	1,814

At 31 May 2015	20,372,565	203,726

Rights, preferences and restrictions on shares

All ordinary shares carry equal rights and no privileges are attached to any shares in the Company. All the shares are freely transferable, except as otherwise provided by law. However:

· The former shareholders of Thoroughbred Wealth Management Limited ("the TWM Sellers") have entered into a lock-in deed with Mattioli Woods and its nominated adviser and broker, Canaccord Genuity Limited, restricting sales of that part of the consideration comprising 946,256 ordinary shares in Mattioli Woods during the four years ending 29 July 2017;

· The former shareholders of Boyd Coughlan Limited ("the BCL Sellers") have entered into a lock-in deed with Mattioli Woods and its nominated adviser and broker, Canaccord Genuity Limited, restricting sales of that part of the consideration comprising 235,742 ordinary shares in Mattioli Woods during the two years ending 23 June 2017; and

· The former shareholders of Taylor Patterson ("the Taylor Patterson Sellers") have entered into a lock-in deed with Mattioli Woods and its nominated adviser and broker, Canaccord Genuity Limited, restricting sales of that part of the consideration comprising 419,888 ordinary shares in Mattioli Woods during the three years ending 8 September 2018.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

Share schemes and share incentive plan

The Company has three share schemes under which options to subscribe for the Company's shares have been granted to certain executives and senior employees (Note 9).

The Company also operates a share incentive plan. Participants in the SIP are entitled to purchase up to a prescribed number of new ordinary shares in the Company in any year. At the Directors' discretion, the Company may also award additional shares to participants in the SIP. Ordinary shares issued under the SIP rank pari passu with existing issued ordinary shares of the Company. Dividends paid on shares held within the SIP are used to buy new ordinary shares in the Company of 1p each.

Other reserves

Group	Share premium £000	Merger Reserve £000	Capital redemption reserve £000	Equity - share based payments £000	Retained earnings £000

At 1 June 2013	8,616	-	2,000	777	17,519
Reserve transfer	(1,183)	1,183	-	-	-
Share based payments	-	-	-	94	-
Shares issued under the SIP	298	-	-	-	-
Shares issued on acquisition of TWM	-	2,857	-	-	-
Costs of issuing new shares	(25)	-	-	-	-
Shares issued on exercise of options	295	-	-	-	-
Deferred tax recognised in equity	-	-	-	129	-
Profit for the financial year	-	-	-	-	4,281
Dividends paid	-	-	-	-	(1,543)
Current tax charge taken to equity	-	-	-	46	-

At 31 May 2014	8,001	4,040	2,000	1,046	20,257

Reserve transfer	-	-	-	(341)	341
Share based payments	-	-	-	256	-
Shares issued under the SIP	508	-	-	-	-
Shares issued as deferred consideration for TWM	-	798	-	-	-
Shares issued on exercise of options	180	-	-	-	-
Deferred tax recognised in equity	-	-	-	2	-
Profit for the financial year	-	-	-	-	4,022
Dividends paid	-	-	-	-	(1,881)
Current tax charge taken to equity	-	-	-	34	-

At 31 May 2015	8,689	4,838	2,000	997	22,739

Company	Share premium £000	Merger reserve £000	Capital redemption reserve £000	Equity - share based payments £000	Retained earnings £000

At 1 June 2013	8,616	-	2,000	777	17,176
Reserve transfer	(1,183)	1,183	-	-	-
Share based payments	-	-	-	88	-
Shares issued as consideration	-	2,857	-	-	-
Costs of issuing new shares	(25)	-	-	-	-
Shares issued under the SIP	298	-	-	-	-
Shares issued on exercise of options	295	-	-	-	-
Deferred tax recognised in equity	-	-	-	129	-
Profit for the financial year	-	-	-	-	3,472
Dividends paid	-	-	-	-	(1,543)
Current tax charge taken to equity	-	-	-	46	-
		-
At 31 May 2014	8,001	4,040	2,000	1,040	19,105

Reserve transfer	-	-	-	(341)	341
Share based payments	-	-	-	241	-
Shares issued as deferred consideration for TWM	-	798	-	-	-
Shares issued under the SIP	508	-	-	-	-
Shares issued on exercise of options	180	-	-	-	-
Deferred tax recognised in equity	-	-	-	2	-
Profit for the financial year	-	-	-	-	2,483
Dividends paid	-	-	-	-	(1,881)
Current tax charge taken to equity	-	-	-	34	-

At 31 May 2015	8,689	4,838	2,000	976	20,048

In the year ended 31 May 2012 the Company issued new ordinary shares as consideration for the shares acquired in TCF Global Independent Financial Services Limited. The excess of the fair value of the shares acquired over the nominal value of the shares issued was re-allocated from share premium reserve to merger reserve as required by the Companies Act.

The company has issued options to subscribe for the Company's shares under three employee share schemes (Note 9). The cost of exercised or lapsed share options has been derecognised from equity-share based payments and re-allocated to retained earnings as required by IFRS2 Share-based Payments.

The following table describes the nature and purpose of each reserve within equity:

Reserve	Description and purpose

Share premium	Amounts subscribed for share capital in excess of nominal value less any associated issue costs that have been capitalised.

Merger reserve	Where shares are issued as consideration for shares in another company, the excess of the fair value of the shares acquired over the nominal value of the shares issued is recognised in the merger reserve.

Capital redemption reserve	Amounts transferred from share capital on redemption of issued shares.

Equity - share based payments	The fair value of equity instruments granted by the Company in respect of share based payment transactions.

Retained earnings	All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

12. Financial liabilities and provisions

Group	Contingent consideration £000	Client claims £000	Dilapidations £000	Clawbacks £000	Employers' NIC on share options £000	Onerous contracts £000	LTIP cash liability £000	Other £000	Total £000

At 1 June 2014	4,464	525	185	294	149	-	172	-	5,789
Arising during the year	-	204	100	-	174	-	312	-	790
Acquisitions (Note 3)	80	35	-	-	-	80	-	140	335
Used during the year	(3,098)	(419)	-	-	(7)	(19)	-	-	(3,543)
Unused amounts reversed	-	-	-	-	-	-	-	(22)	(22)

At 31 May 2015	1,446	345	285	294	316	61	484	118	3,349

Current 2014	3,189	525	-	294	-	-	-	-	4,008
Non-current 2014	1,275	-	185	-	149	-	172	-	1,781

At 31 May 2014	4,464	525	185	294	149	-	172	-	5,789

Current 2015	138	345	-	294	-	61	-	118	956
Non-current 2015	1,308	-	285	-	316	-	484	-	2,393

At 31 May 2015	1,446	345	285	294	316	61	484	118	3,349

Company	Loan notes £000	Contingent consideration £000	Client claims £000	Dilapidations £000	Clawbacks £000	Employers' NIC on share options £000	Onerous contracts £000	LTIP cash liability £000	Other £000	Total £000

At 1 June 2014	-	4,015	377	100	9	149	-	172	-	4,822
Transferred from group companies	-	615	158	85	285	-	38	-	82	1,263
Acquisitions	-	-	25	-	-	-	23	-	58	106
Arising during the year	18,802	-	204	100	-	174	-	312	-	19,592
Used during the year	-	(3,184)	(419)	-	-	(7)	-	-	(11)	(3,621)
Unused amounts reversed	-	-	-	-	-	-	-	-	(11)	(11)

At 31 May 2015	18,802	1,446	345	285	294	316	61	484	118	22,151

Current 2014	-	3,102	377	-	9	-	-	-	-	3,488
Non-current 2014	-	913	-	100	-	149	-	172	-	1,334

At 31 May 2014	-	4,015	377	100	9	149	-	172	-	4,822

Current 2015	-	138	345	-	294	-	61	-	118	956
Non-current 2015	18,802	1,308	-	285	-	316	-	484	-	21,195

At 31 May 2015	18,802	1,446	345	285	294	316	61	484	118	22,151

Loan notes due to subsidiary undertakings

The loan notes attract annual interest on the outstanding principal at a rate of 3% above the Bank of England base rate.

Contingent consideration

The Group has entered into certain acquisition agreements that provide for contingent consideration to be paid. Details of these agreements and the basis of calculation of the net present value of the contingent consideration is summarised in Note 3. The Group estimates the net present value of the financial liability payable within the next 12 months is £0.14m (2014: £3.19m).

Client claims

A provision is recognised for the estimated potential liability when the Group becomes aware of a possible client claim. No discount rate is applied to the projected cash flows due to their short term nature.

Dilapidations

Under the terms of the leases for the Group's premises, the Group has an obligation to return the properties in a specified condition at the end of the lease term. The Group provides for the estimated net present value of the cost of any dilapidations. The discount rate applied to the cash flow projections is 5.0%.

Clawbacks

The Group receives certain initial commissions on indemnity terms and hence the Group provides for the expected level of clawback, based on past experience. No discount rate is applied to the projected cash flows due to their short term nature.

Onerous contracts

The Group acquired onerous contracts for the provision of certain IT systems on the acquisition of Ashcourt Rowan's pension business and on the acquisition of UKWM Pensions. Management has assessed the expected benefits and costs associated with these contracts and concluded that the costs of the obligation exceed the benefits to the extent that it is appropriate to provide against these contracts in full.

LTIP cash liability

The Group has granted cash settled options to certain Executive Directors. The amount of any cash entitlement on vesting of an award will be directly linked to the value of a specified number of the Company's shares at the vesting date.

Other

Prior to the Group's acquisitions of Ashcourt Rowan's pension business and UKWM Pensions, employees of the businesses to be acquired had been notified that the businesses were to be restructured, creating a potential liability for certain employee-related costs. Post-acquisition the Group became liable for those employee-related costs relating to each restructuring, which have now been paid in full.

13. Commitments and contingencies

Operating lease agreements - Group as lessee

Mattioli Woods plc has entered into three commercial leases for its premises at Grove Park, Enderby. The lease for the Head Office, MW House, has a duration of 20 years, from 10 June 2005. The amount of annual rental is to be reviewed at three-yearly intervals. The first lease for part of the ground floor of Gateway House (an office building adjacent to MW House) has a duration of ten years from 1 February 2008. A second lease for part of the ground floor of Gateway House has a duration of ten years from 1 December 2009. For both leases, the amount of annual rental is to be reviewed at the end of the fifth year.

Mattioli Woods plc has also entered into commercial leases for its premises at:

· 22 Park Street, London, which expires on 23 January 2016. The annual rental of £40,059 will not be reviewed;

· 8 Queens Terrace, Aberdeen, which has a duration of ten years from 1 June 2008. Following a review on 1 June 2013 the annual rental is £110,000; and

· Cheveley House, Fordham Road, Newmarket, which expires on 24 March 2016. The annual rental is £115,500.

As part of certain acquisitions, the Group acquired operating lease obligations for office equipment. No restrictions were placed upon the Group by entering into these leases. Future minimum rentals payable under non-cancellable operating leases as at 31 May are as follows:

	Office equipment		Land and buildings
Group	2015 £000	2014 £000	2015 £000	2014 £000

Not later than one year	7	28	634	667
After one year but not more than five years	8	51	1,635	1,935
More than five years	-	-	1,390	1,708

	15	79	3,659	4,310

	Office equipment		Land and buildings
Company	2015 £000	2014 £000	2015 £000	2014 £000

Not later than one year	7	-	634	388
After one year but not more than five years	8	-	1,635	1,216
More than five years	-	-	1,390	1,116

	15	-	3,659	2,720

Group operating lease charges during the year were £820,939 (2014: £653,561) for land and buildings and £14,632 (2014: £47,163) for office equipment.

Capital commitments

At 31 May 2015 the Group had capital commitments amounting to £94,487 (2014: £nil).

Client claims

The Group operates in a legal and regulatory environment that exposes it to certain litigation risks. As a result, the Group occasionally receives claims in respect of products and services provided and which arise in the ordinary course of business. The Group provides for potential losses that may arise out of contingencies (Note 12).

FSCS levy

From time to time the Financial Services Compensation Scheme ("FSCS") has raised interim levies on the Investment Intermediation sub-class arising from revisions to the FSCS' earlier estimates of the compensation it expected to pay out following the failure of firms in the Investment Intermediation and General Insurance Intermediation sub-classes.

In the year ended 31 May 2015 the FSCS raised an interim levy of £20m (2014: £nil) from investment intermediaries to pay for the costs of compensating clients in investment failures, to which the Group contributed £44,157 (2014: £nil). In the prior year there was no interim levy, so the Group was not required to contribute. No provision has been made in these financial statements for any FSCS interim levy in the year ending 31 May 2016.

14. Events after the reporting date

Placing

On 19 June 2015 the Company announced its intention to raise up to £18.6m (before expenses) by way of a firm placing of 2,000,000 new ordinary shares in the Company and a conditional placing of up to 1,795,918 new ordinary shares in the Company at an issue price of 490 pence per share ("the Placing").

At a general meeting on 7 July 2015 shareholders passed a special resolution to dis-apply statutory pre-emption rights and to authorise the directors to allot and issue the maximum of 1,795,918 new ordinary shares under the conditional placing on a non-pre-emptive basis.

The firm and conditional placing shares rank pari passu in all respects with existing ordinary shares.

Acquisition of Boyd Coughlan Limited

On 23 June 2015 the Group acquired the entire share capital of Boyd Coughlan Limited ("Boyd Coughlan") from its shareholders for a total consideration of up to £7.0m, to be satisfied partly in cash and partly through the issue of 235,742 new ordinary shares of 1p each in Mattioli Woods. The cash consideration is payable part on completion and in part over the period of two years following completion, subject to earnings targets being met.

Boyd Coughlan is an employee benefits and wealth management business founded in 1994. Based in Buckingham, Boyd Coughlan employs 30 staff, providing advice to both high net worth individuals and companies on all aspects of financial planning.

In the year ended 30 September 2014, Boyd Coughlan generated a profit before taxation of £1.3m on revenues of £2.5m. At 30 September 2014 Boyd Coughlan's net assets were £2.0m.

The total consideration consists of an initial consideration of £4.5m, comprising £3.3m in cash and 235,742 ordinary shares in Mattioli Woods, plus deferred consideration of up to £2.5m payable in cash in the two years following completion if certain financial targets are met based on EBITDA generated during the two years following completion.

The acquisition will be accounted for using the acquisition method. Transaction costs incurred during the year ended 31 May 2015 are included in administrative expenses in the consolidated statement of comprehensive income and operating cash flows in the statement of cash flows.

The fair values to be attributed to the assets acquired and liabilities assumed will be finalised during the 12 months following acquisition. The provisional fair values of the identifiable assets and liabilities of Boyd Coughlan as the date of acquisition was:

	Illustrative fair value to be recognised on acquisition (unaudited) £000	Previous carrying value (unaudited) £000

Property, plant and equipment	7	33
Client portfolio	4,558	-
Cash	2,656	2,656
Trade receivables	91	91
Other receivables and prepayments	53	53
Deferred tax	1	1

Assets	7,366	2,834

Trade creditors	(31)	(31)
Accruals and deferred income	(57)	(38)
Other payables	(42)	(42)
Social security and other taxes	(40)	(40)
Corporation tax	(121)	(121)
Provisions	(38)	-
Deferred tax liability	(912)	-

Liabilities	(1,241)	(272)

Total identifiable net assets at fair value	6,125
Goodwill	1,436

Total acquisition cost	7,561

Analysed as follows:
Initial cash consideration	(3,300)
Adjustment to initial consideration	(561)
New shares in Mattioli Woods	(1,200)
Deferred contingent consideration	(2,500)

Total acquisition cost	(7,561)

Cash outflow on acquisition	£000

Cash paid	(3,300)
Adjustment to initial consideration	(561)
Acquisition costs	(131)
Net cash acquired	2,656

Net cash outflow	(1,336)

The client portfolio will be amortised on a straight-line basis over an estimated useful life based on the Group's historic experience.

Acquisition of Taylor Patterson Group Limited

On 8 September 2015, Mattioli Woods acquired the entire share capital of Taylor Patterson Group Limited and its subsidiaries (together "Taylor Patterson") from its shareholders for a total consideration of up to £8.3m, to be satisfied partly in cash and partly through the issue of 419,888 new ordinary shares of 1p each in Mattioli Woods ("Ordinary Shares"). The cash consideration is payable in part on completion and in part over the period of three years following completion, subject to certain earnings and revenue targets being met.

Taylor Patterson is a financial advisory firm providing wealth management, strategic financial planning, employee benefits and pension services to businesses and individuals. Based in Preston, Taylor Patterson employs 38 staff providing advice to both high net worth individuals and companies on all aspects of financial planning.

In the year ended 31 July 2015, Taylor Patterson generated a profit before taxation of £0.90m on revenues of £3.21m. At 31 July 2015 Taylor Patterson's consolidated net assets were £0.79m.

The total consideration consists of an initial consideration of £5.0m, comprising £2.5m in cash and 419,888 Ordinary Shares, plus deferred consideration of up to £3.3m payable in cash in the three years following completion if certain financial targets are met based on growth in revenues and EBITDA generated during that period.

Due to the acquisition occurring after the end of the reporting period and the proximity of the date of acquisition to the date of issue of these consolidated financial statements, the Directors are unable to provide the full disclosures required to meet the requirements of IFRS3 relating to acquisitions after the end of the reporting period but before the financial statements are authorised for issue. Specifically, the purchase price allocation process is not yet complete, due to:

· Completion accounts setting out the financial position of Taylor Patterson as at the date of acquisition not yet having been prepared; and

· The impracticality of measuring each identifiable asset and liability acquired at its IFRS acquisition date fair value for inclusion in these consolidated financial statements before completion accounts have been agreed.

New Walk

On 17 August 2015 a new subsidiary of the Company, Mattioli Woods (New Walk) Limited ("MW New Walk") entered into a development agreement with Ingleby (1245) Limited ("Ingleby"), a company owned and controlled by Sowden Group Limited ("Sowden") to build a new 60,000 square foot office on the site of the former Leicester City Council ("LCC") headquarters at New Walk, Leicester.

The expected expenditure for the development is £14.6m including fit out costs, which will be funded through a combination of existing cash resources (excluding funds raised from the Placing), bank funding and future operating cashflows. Construction is scheduled to commence in late 2015, with completion expected in spring 2017.

Initial development costs are expected to reduce budgeted profit after tax by circa £0.10m in the current financial year, with further reductions of circa £0.40m and £0.20m in the following two years respectively.

Taxation

The UK Government has announced tax changes which will have a significant effect on the Group's future tax position. The rate of corporation tax reduced from 21% to 20% from 1 April 2015 and the summer budget of 8 July 2015 has announced further reductions to 19% in April 2017 and then 18% from April 2020. These rate changes will affect the amount of future cash tax payments to be made by the Group and will also reduce the size of deferred tax assets and liabilities in the Group's statement of financial position.

In addition, the Government announced a significant restriction to the relief available for goodwill and other customer-related intangible assets. Previously, companies have enjoyed tax relief on goodwill or other customer-related intangibles purchased when they acquire the trade and assets of another business ("amortisation relief"). Amortisation relief will no longer be available for acquisitions of such assets on or after 8 July 2015.

15. Distribution of the annual report and accounts to members

The announcement set out above does not constitute a full financial statement of the Group's affairs for the year ended 31 May 2014 or 2015. The Group's auditors have reported on the full accounts of each year and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies.

The annual report and accounts will be posted to shareholders in due course, and will be available on our website (www.mattioliwoods.com) and for inspection by the public at the Group's head office address: MW House, 1 Penman Way, Grove Park, Enderby, Leicester LE19 1SY during normal business hours on any weekday. Further copies will be available on request.

The Company's annual general meeting will take place on 15 October 2015 at the Group's head office.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR UWUORVVAKRUR

Companies

Mattioli Woods (MTW)

Friday, 7th June 2024

COMPANIES COVERED:

BWY CCR GPL

C&C Group sees shares tank after past profits are restated and the CEO steps down, Bellway edges higher off positive trading update, whilst Graft Polymer surges as business update hints at a range of new deals.

Full Archive

UK 100

Latest directors dealings

All directors dealings today