Final Results

Mattioli Woods PLC 04 September 2007 Press Release 4 September 2007 Mattioli Woods plc ('Mattioli Woods' or 'the Group') Final Results Mattioli Woods plc (AIM: MTW.L), the specialist pensions consultancy, today reports its Final Results for the year ended 31 May 2007. Highlights • Turnover increased by 18.9% to £9.00 million (2006: £7.57 million) • Profit before tax up 45.2% to £3.15 million (2006: £2.17 million) • Earnings per share up 28.0% to 12.8 pence (2006: 10.0 pence) • Proposed total dividend of 2.55 pence per share (2006: 1.4 pence per share) • Organic growth of 21.1% in SIPP numbers (2006: 19.1%) • Maturity and awareness of SIPPs continues to increase demand • Advising on funds under trusteeship of over £1 billion (2007: £818 million) • Strong client retention • Acquisition of Pension Consulting Limited ('PCL') completed in July 2007 Commenting on the Final Results, Bob Woods, Executive Chairman of Mattioli Woods, said: 'These results reflect our ability to deliver high levels of organic growth, whilst pursuing our strategy of accelerating this growth through targeted acquisitions. 'Providing excellent client service has maintained our strong record of client retention and we are proud to have reached the significant milestone of growing SSAS and SIPP funds under trusteeship to over £1 billion following the acquisition of PCL. 'The expansion in the SIPP market seen to date will be boosted as SIPPs are becoming a mainstream pension vehicle. I believe further regulatory and market changes over the next few years will present us with new growth opportunities and I'm confident we are well-positioned to take advantage of these. 'Trading since the year end has continued to be positive and I look forward to the future with enthusiasm.' For further information: 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 Tel: +44 (0) 116 240 8700 ian.mattioli@mattioli-woods.com www.mattioli-woods.com Nathan Imlach, Finance Director Tel: +44 (0) 116 240 8700 nathan.imlach@mattioli-woods.com www.mattioli-woods.com Evolution Securities Limited Joanne Lake, Corporate Finance Tel: +44 (0) 113 243 1619 joanne.lake@evosecurities.com www.evosecurities.com Media enquiries: Abchurch Georgina Bonham / Emma Johnson Tel: +44 (0) 113 203 1340 emma.johnson@abchurch-group.com www.abchurch-group.com Chairman's statement I am delighted with our performance for the year ended 31 May 2007 and the exciting prospects for our business going forward. In my opinion, strong growth seen in the self-invested personal pension ('SIPP') sector to date is likely to be boosted by further major changes in the pensions arena over the next few years. At the year end, we acted for over 1,600 small self-administered pension scheme ('SSAS') and SIPP clients throughout the UK, an 11.7% increase during the year, and funds under trusteeship had risen to over £818 million (2006: £728 million). Following the acquisition of Pension Consulting Limited in July 2007, our total funds under trusteeship now exceed £1 billion. Trading results In the year ended 31 May 2007, turnover increased by 18.9% to £9.00 million (2006: £7.57 million) and profit before tax increased by 45.2% to £3.15 million (2006: £2.17 million). Earnings per share were 12.8 pence (2006: 10.0 pence), and the Board is pleased to recommend a final dividend for the year of 1.7 pence per Ordinary Share (2006: 1.4 pence). Trading since the year end has continued to be positive. Our Chief Executive, Ian Mattioli, sets out an analysis of the last financial year in his review and hence my Chairman's statement focuses on the future and the key drivers in our core markets. Our approach The key differentiator between Mattioli Woods and many of our larger competitors is our holistic and proactive approach to the use of SIPPs (and other schemes) in developing clear pension strategies for our clients. We take the ' self-invested' out of self-invested personal pensions by providing our clients with a comprehensive 'hand-holding' service. This has led us to develop a number of complementary services in addition to our core pension consultancy and investment planning. These include the arrangement of exclusive current account and other banking facilities, syndicated property investments, structured products and related advisory services, such as inheritance tax and business planning. This approach appears to have struck a chord within our target market. Furthermore, we are now seeing the demand for our approach spreading from high net worth clients to a much wider audience. Market changes Whilst our market continues to be fuelled by increasing client demand for the greater control and flexibility afforded by SSASs and SIPPs, I believe there are two other major issues that could substantially increase the market's demand for SIPPs and, more importantly, the approach we take to their provision and administration. Defined benefit schemes The vast majority of funds within UK pensions are held in defined benefit or final salary schemes. Recent industry estimates put the figure as high as £1.5 trillion. However, a recent survey by the Association of Consulting Actuaries revealed 81% of defined benefit schemes are now closed to new members, and the number of schemes closed to the accrual of future service entitlement has increased to 14% (up from 10% two years ago). Defined benefit schemes are becoming less relevant in most employers' remuneration strategies. Many are showing funding deficits and can present enormous nuisance value to the sponsoring employer in terms of management time, operational cost and ongoing financial liability. However, deficits are being reduced, in some cases substantially, which I believe will create the impetus over the next five to ten years for increasing numbers of employers to wind-up their defined benefit schemes. This would give rise to an enormous flow of pension funds from such schemes to alternative individual plans and we expect the SIPP market to be a prime beneficiary. During the year we started to market our group scheme consultancy services to private companies with defined benefit schemes and early feedback supports the views expressed above. The regulatory environment The Financial Services Authority ('FSA') recently published its 'Review of Retail Distribution'. This promises to be one of the most comprehensive overhauls of consumer protection for many years, and is likely to heighten demand for the Group's services. At the heart of the review lie two diametrically opposed positions. On the one hand, the FSA believes standards should be raised for independent financial advisers ('IFAs'), demanding greater professional qualifications and a move to remuneration based on in-principle client agreement, rather than commission inducement from the product provider. I am pleased to report Mattioli Woods has operated this way since its formation. At the other end of the spectrum, the FSA is proposing that large institutions should be allowed to sell financial products with a reduced duty of care. The FSA acknowledges in its review this could lead to poor selling, but concludes that for the general public to be badly sold some product is better than them being sold none at all. I expect the likely outcome of this to be increased demand for trouble-shooting and specialist advisory services such as our own. Outlook I believe self-invested pensions represent the most efficient vehicle for the development of a pension strategy for almost anyone who is serious about retirement planning, providing control, investment flexibility and cost effectiveness. In my view, the demise of the defined benefit scheme combined with the opportunity presented by SIPPs suggests industry estimates of the future demand for SIPPs are likely to be considerably understated. I look forward to the future with enthusiasm. Bob Woods Chairman 3 September 2007 Chief Executive's Review Introduction Having established the business with Bob Woods as a partnership in 1991, I am proud we have been able to continue our track record of expansion and growth, whilst staying true to our core values of strong business ethics and excellent client service. We continue to invest in new systems that will enable us to advise our clients more efficiently and effectively, and have embraced the fundamental changes to the pensions market that were introduced on 5 April 2006 ('A-Day'). This has enabled us to access additional opportunities for our existing clients and to attract new clients who have benefited from changes under the new regime. Nature, objectives and strategies The Group's turnover is derived from three key revenue streams: time-based fees, investment planning and property syndicates. Time-based fees Mattioli Woods' core business is pension consultancy, involving the provision and administration of SIPPs and SSASs. Our client base for SIPP and SSAS services primarily comprises owner-managers, senior executives and professional persons. However, we also provide group scheme consultancy and personal financial planning as complementary services to our core business. Our main source of income is time-based fees earned for setting up and administering SIPP and SSAS schemes. Additional fees are generated from consultancy services provided for special one-off activities. Revenues from time-based fees have increased by 21.5% to £3,986,367 (2006: £3,281,859). The FSA's consultation paper in relation to how fees and commissions will be generated in the future by FSA regulated organisations is likely to lead to reduced commissions from product providers. Our revenues are already predominantly fee-based and we welcome the challenges that these changes will bring to the industry. Investment planning The key feature of our approach to pension consultancy is the impartial nature of our investment advice, with its focus on providing solutions tailored to each individual client's needs. Being primarily fee-based reinforces our ability to provide appropriate investment planning for our pension fund clients. Whilst our income streams are not directly dependent upon the performance of financial markets or the value of funds under trusteeship, movements in these can influence the appetite of our clients to make investments to secure their pension. Periods of volatility in a particular asset class may see changes in how our investment planning fees and commissions are derived. However, we can continue to derive income from investments in other asset classes, whilst ensuring our clients' investment strategies are appropriately aligned to the prevailing market conditions. Investment commissions grew by 22.3% in 2007 (2006: 19.9%). Property syndicates Mattioli Woods facilitates commercial property ownership for its clients by way of a syndicated property initiative. Properties introduced to the Group by our professional property contacts are referred to an independent property adviser, who either recommends or rejects the property for syndication. During the year we helped to facilitate the purchase of seven properties with a combined value of £19.1 million, taking the total number of property syndicates using our administrative services at the year end to 30 (2006: 23). During the last financial year, the property market did appear over-priced at times, which resulted in us arranging a smaller number of syndicates than expected. However, we believe commercial property prices are now looking like better value and expect syndicate numbers to increase again this year. Our clients are still showing strong appetite for the property syndicate initiative. The total income from property syndicates was £932,916 (2006: £955,404), of which £399,969 (2006: £244,495) was recurring income derived from our annual administration services. New product developments Our rationale for any new product development is to enhance our clients' existing position. We launched our first three capital-guaranteed investment bonds during the year, where capital growth is linked to investment in more volatile and speculative indices. We also developed a secondary market for existing property syndicate investments, through which we have facilitated the sale and purchase of £1.0 million worth of existing syndicate holdings since December 2006. Market Most of our chosen markets are serviced by a range of suppliers offering services directly to individual and corporate clients. These markets are fragmented but remain competitive. This fragmentation reinforces my belief that our growth strategy, based on a combination of specifically targeted acquisitions and organic growth, including the introduction of innovative new products, continues to be the most effective way to deliver the increasingly tailored solutions our clients demand. Regulatory environment The Group is regulated by a number of different bodies. Mattioli Woods is authorised and regulated by the FSA, and is a member of the Association of Member-directed Pension Schemes. In March 2007, Mattioli Woods received authorisation from the FSA to establish and operate personal pension schemes, including SIPPs, under the new regulatory regime introduced with effect from 6 April 2007. We welcome the regulation of SIPPs and were pleased to be one of the first firms to receive approval from the FSA. This initiative from the regulator provides our clients with even greater confidence when selecting a SIPP as their preferred method of retirement planning. Additional protection is now afforded to clients following the introduction of significantly higher capital adequacy requirements for the providers of pension schemes. Our strong balance sheet allowed us to meet this FSA requirement without the need for any additional funding. Business objectives and strategies Our objective is to grow our organisation by increasing market share and enhancing Mattioli Woods' reputation in the pensions consultancy market. This is key to achieving the financial and non-financial measures that increase shareholder value. Current and future developments and performance Group results We have made significant progress towards our goals of delivering quality personal service that adds real value to clients, whilst maintaining high ethical standards and enhancing shareholder value. Sales revenues were £9.00 million (2006: £7.57 million), up 18.9% on the prior year. Organic growth continues to be the main driver of increased turnover. Operating profit before financing increased by 36.6% to £2.95 million (2006: £2.16 million). Cash generated from operations increased to £3.72 million (2006: £2.33 million) due to increased sales coupled with improved credit control. Operating margin of 32.8% (2006: 28.5%) was ahead of our expectations for the year. The improvement in operating margin was achieved through the realisation of operational efficiencies on the back of 'A-Day' legislation, investment in new systems and the benefits of operational gearing being realised as revenues increased, particularly on the two client portfolios acquired in 2006. Planned improvements in information systems and technology provide scope for further margin improvement and even better client service. Acquisitions Both client portfolios acquired in the financial year ended 31 May 2006 are now fully integrated within our core business and are performing in line with our aspirations. We are very pleased with the strong retention of clients within both these portfolios. Consistent with the growth strategy we set out on flotation, we acquired the entire issued share capital of Pension Consulting Limited ('PCL') for a total cash consideration of up to £1.925 million in July 2007. Established in 1999 and based in Leicester, PCL administers pension schemes on behalf of 145 SSAS and 213 SIPP clients. It has funds under trusteeship of over £185 million and its subsidiary company, PC Trustees Limited, acts as trustee to the schemes. PCL's experienced team of two consultants and 11 administration staff have been retained by the Group following the acquisition. PCL is a good cultural fit with Mattioli Woods. Like us, PCL has focused on attracting clients who require bespoke personal service and specialist advice. However, it did not provide the broad range of services that benefits Mattioli Woods' clients and this provides the opportunity to offer additional services, such as our syndicated property initiative and guaranteed investment products, to PCL's existing client base. Demand for pensions consultancy and administration in the SSAS and SIPP market is increasing strongly, meaning organic growth is likely to maintain our overall momentum. However, taking advantage of opportunities to grow our presence by acquisition will continue to be an important element of our future growth. Dividends The Board is pleased to recommend the payment of a final dividend for the year ended 31 May 2007 of 1.7 pence (2006: 1.4 pence) per Ordinary Share. It is our intention to grow dividend distributions sensibly going forward. If approved, the final dividend will be paid on 19 October 2007 to shareholders on the Register at the close of business of 14 September 2007. Resources, risks and relationships Resources The Group aims to safeguard the assets that give it competitive advantage, including its reputation for quality, proactive advice, its technical competency and its people. Our core values provide a framework for responsible, innovative and ethical yet commercial business practices. Structures for accountability from our administration teams through to the operational management team and then the Group 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'. Employees The last year has been an exceptionally busy period for Mattioli Woods and it is only through the hard work and dedication of our employees that I am able to report on the positive progress we have achieved. We have added a number of key people to the business, including the appointment of a Marketing and Sales Manager to support the Marketing and Sales Director. We continue to invest significant resources in our graduate recruitment campaign, which will give us the capacity for future growth. Twelve new graduates joined us in 2007 (2006: six), and another six graduates have joined since the year end. The quality, knowledge and commitment of our people are key to providing our clients with a consistently high level of personal service and attention to detail. We now employ 115 people at our Leicester base and we would like to thank everyone for their support, energy and commitment over the past year. Mattioli Woods has always enjoyed a strong team spirit and commitment from all its staff, and our aim is to strengthen that culture by facilitating wider equity participation within the organisation. Principal risks and uncertainties We believe the most significant risk we face is potential damage to our reputation as a result of poor client service. We address this through ongoing quality control testing and the provision of regular training for all our staff. 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. Relationships The Group's performance and value to our shareholders are influenced by other stakeholders, principally our clients, suppliers and employees; Government; and our strategic partners. Our approach with all these parties is founded on the principles 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 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. Financial position Net financing income Net financing income was £193,722 (2006: £9,721) reflecting the repayment of debt in 2006. The Group has maintained a positive net cash position throughout the financial year. Taxation The effective rate of taxation on profit on ordinary activities is 30.3% (2006: 31.1%). The deferred taxation asset carried forward at 31 May 2007 was £143,936 (2006: £16,946). Earnings per share and dividend The basic and diluted earnings per share in the year were 12.8 pence (2006: 10.0 pence). The total dividend for the year of 2.55 pence per share (2006: 1.4 pence) demonstrates our desire to grow the dividend steadily. Cash flow The net cash generated from operations increased to £3.7 million (2006: £2.3 million) due to our strong earnings before interest, taxation, depreciation and amortisation ('EBITDA') of £3.16 million (2006: £2.33 million). The Group converted 117.4% (2006: 100.3%) of EBITDA into operating cash flow, primarily due to the majority of staff bonuses being accrued but not paid at the year-end. As at 31 May 2007 the Group was owed £1.95 million (2006: £1.92 million) by property syndicates, of which £0.93 million has been repaid following the year-end. The cash inflow from working capital was £0.42 million (2006: outflow of £0.04 million). Trade debtor days were 48 days (2006: 65 days) and trade creditors were 19 days (2006: six days). Trade debtor days were higher at 31 May 2006 primarily due to significant balances owed in respect of initial administration fees on new property syndicates. Trade creditors were higher at 31 May 2007, primarily due to balances owed to Touchstone Group for software consultancy. Capital expenditure in the year was £243,046 (2006: £273,768), with continued investment in the Group's information systems and technology planned for the next year. Net proceeds from new equity allotted in the year were £225,000 (2006: £5.4 million) following the exercise of options over 170,455 ordinary shares of 1p each by W Deb MVL plc (formerly Williams de Broe plc) at an exercise price of £1.32. Bank facilities The Group has bank overdraft facilities totalling £3.25 million. These facilities consist of one overdraft facility of £2.25 million provided by the Royal Bank of Scotland plc ('RBS') at 1.375% over the bank's base rate (currently 5.75%) and another £0.75 million overdraft facility provided by RBS at 1.5% over the bank's base rate. The Group also has an overdraft facility of £0.25 million provided by Lloyds TSB plc ('Lloyds TSB') at 1.5% over the bank's base rate (currently 5.75%). The RBS facilities are repayable upon demand, and are subject to review on at least an annual basis. The next review date for both RBS facilities is 20 December 2007. The Lloyds TSB facility is renewable on 31 March 2008. At 31 May 2007 the Group had unused borrowing facilities of £3.1 million (2006: £0.6 million). Capital structure The Group's capital structure is as follows: 2007 2006 £ £ Net (funds)/debt (2,697,876) (85,630) Non-equity shareholders' funds (liability element) - - (2,697,876) (85,630) Shareholders' equity 11,856,900 9,659,225 Capital employed 9,159,024 9,573,595 On 17 October 2006, the Company allotted 170,455 ordinary shares of 1p at £1.32, raising £225,000, following the exercise of options under the agreement dated 17 November 2005 made between the Company and Williams de Broe plc. Gearing has fallen from 11.4% to (9.3)%, as a result of the repayment of debt in 2006 and strong cash generation during the year. The acquisition of PCL in July 2007 was funded out of existing cash resources. Conclusion Our achievements during the past year give us a great platform to continue growing our business and trading since the year end has continued to be positive. It is over a year since the Government introduced the 'A-Day' pension simplification legislation and the SIPP is now accepted as the pension vehicle of choice for a wider audience. We always believed 'A-Day' would not only boost the rate of growth in the SIPP market, but also lead to rationalisation within the sector. This has become apparent and we continue to look for further opportunities to make strategic acquisitions. We also believe the ongoing decline in defined benefit schemes will act as a driver of further growth in the SIPP industry. We continue to invest in our graduate recruitment programme to support further expansion of the Group. I am confident Mattioli Woods is well positioned for the future. Ian Mattioli Chief Executive 3 September 2007 Consolidated income statement For the year ended 31 May 2007 Note 2007 2006 £ £ Revenue 2 8,997,191 7,572,845 Employee benefits expense (4,219,130) (3,295,085) Other administrative expenses (1,605,889) (1,950,019) Depreciation and amortisation (213,359) (169,184) Profit/(loss) on disposal of property, plant & equipment (7,407) - Operating profit before financing 2,951,406 2,158,557 Financial income 194,734 103,731 Financial expenses (1,012) (94,010) Net financing income/(costs) 193,722 9,721 Profit before taxation 3,145,128 2,168,278 Income tax expense (952,274) (674,585) Profit for the year 2,192,854 1,493,693 Attributable to: Equity holders of the parent 2,192,854 1,493,693 Earnings per ordinary share: Basic (pence) 3 12.8p 10.0p Diluted (pence) 3 12.8p 10.0p Proposed total dividend per share (pence) 4 2.55p 1.40p The operating profit for each period arises from the Group's continuing operations. The parent company has taken advantage of section 230 of the Companies Act 1985 and has not included its own profit and loss account in these financial statements. The profit for the financial year of the Company after taxation was £2,192,854 (2006: £1,493,693). Statement of recognised income and expense For the year ended 31 May 2007 Group Company Group Company 2007 2007 2006 2006 £ £ £ £ Deferred tax on share-based payments 102,031 102,031 14,270 14,270 Income and expense recognised directly in equity 102,031 102,031 14,270 14,270 Profit for the year 2,192,854 2,192,854 1,493,693 1,493,693 Total recognised income and expense for the year 2,294,885 2,294,885 1,507,963 1,507,963 Balance sheets 2007 2006 Group Company Group Company As at 31 May Note £ £ £ £ Assets Property, plant and equipment 429,312 429,312 390,496 390,496 Intangible assets 5,804,209 5,804,209 5,835,970 5,835,970 Deferred income tax assets 143,936 143,936 16,946 16,946 Investments - 1,264 - 1,164 Total non-current assets 6,377,457 6,378,721 6,243,412 6,244,576 Trade and other receivables 3,179,978 3,179,814 3,189,183 3,189,168 Financial assets 1,954,315 1,954,315 1,915,994 1,915,994 Cash and cash equivalents 2,799,569 2,795,769 441,160 440,011 Total current assets 7,933,862 7,929,898 5,546,337 5,545,173 Total assets 14,311,319 14,308,619 11,789,749 11,789,749 Equity Issued capital 172,159 172,159 170,455 170,455 Share premium 5 5,601,458 5,601,458 5,321,151 5,321,151 Other reserves 5 2,202,469 2,202,469 2,094,687 2,094,687 Retained earnings 5 3,880,814 3,880,814 2,072,932 2,072,932 Total equity attributable to equity 11,856,900 11,856,900 9,659,225 9,659,225 holders of the parent Non-current liabilities Deferred income tax liabilities - - - - Provisions and other liabilities 127,446 127,446 144,443 144,443 127,446 127,446 144,443 144,443 Current liabilities Trade and other payables 1,627,889 1,625,189 1,193,196 1,193,196 Current income tax liabilities 477,234 477,234 374,107 374,107 Bank overdraft 72,818 72,818 347,705 347,705 Provisions and other liabilities 149,032 149,032 71,073 71,073 2,326,973 2,324,273 1,986,081 1,986,081 Total liabilities 2,454,419 2,451,719 2,130,524 2,130,524 Total equities and liabilities 14,311,319 14,308,619 11,789,749 11,789,749 Cash flow statements For the year ended 31 May 2007 Group Company Group Company 2007 2007 2006 2006 Note £ £ £ £ Cash flows from operating activities Cash receipts from customers 9,006,546 9,006,546 6,927,700 6,927,700 Cash paid to suppliers and employees (5,290,352) (5,290,352) (4,593,019) (4,593,019) Cash generated from operations 6 3,716,194 3,716,194 2,334,681 2,334,681 Interest paid (1,012) (1,012) (94,010) (94,010) Income taxes paid (874,107) (874,107) (904,045) (904,045) Net cash from operating activities 2,841,075 2,841,075 1,336,626 1,336,626 Cash flows from investing activities Proceeds from sale of property, plant and equipment 15,225 15,225 - - Interest received 194,734 194,734 103,731 103,731 Acquisition of subsidiaries (231,892) (231,892) (1,164) (1,164) Cash received on acquisition of subsidiaries 234,443 - 1,149 - Acquisition of property, plant and equipment (164,853) (164,853) (259,923) (259,923) Acquisition of software (78,193) (78,193) (13,845) (13,845) Acquisition of other investments - - (1,091,316) (1,091,316) New loans advanced to property syndicates (1,954,315) (1,954,315) (1,777,034) (1,777,034) Loan repayments from property syndicates 1,915,994 1,915,994 95,540 95,540 Net cash from investing activities (68,857) (303,300) (2,942,862) (2,944,011) Cash flows from financing activities Proceeds from the issue of share capital 225,000 225,000 6,000,001 6,000,001 Payment of costs of share issue - - (576,385) (576,385) Proceeds from new borrowings - - 1,200,000 1,200,000 Redemption of preference shares - - (2,000,000) (2,000,000) Repayments of borrowings - - (1,200,000) (1,200,000) Proceeds/(repayment) of Directors' loans 21,050 21,050 (3,011,473) (3,011,473) Dividends paid (384,972) (384,972) - - Dividends received - 231,792 - - Net cash from financing activities (138,922) 92,870 412,143 412,143 Net increase/(decrease) in cash and cash equivalents 2,633,296 2,630,645 (1,194,093) (1,195,242) Cash and cash equivalents at start period 93,455 92,306 1,287,548 1,287,548 Cash and cash equivalents at end period 2,726,751 2,722,951 93,455 92,306 Notes 1. Basis of preparation This is the first year in which the Company and Group have prepared their financial statements under International Financial Reporting Standards ('IFRSs') and the comparatives have been restated from UK GAAP to comply with IFRSs. The accounting policies set out below have been applied consistently to all periods presented in these financial statements. They have also been applied in preparing an opening IFRS balance sheet at 1 June 2005 for the purposes of the transition to IFRSs, as required by IFRS 1. 2. Revenue Revenue disclosed in the income statement is analysed as follows: 2007 2006 £ £ Rendering of services 4,920,093 4,237,263 Commission income 4,077,098 3,335,582 8,997,191 7,572,845 3. Earnings per ordinary share The following reflects the income and share data used in the basic and diluted earnings per share computations: 2007 2006 £ £ Net profit and diluted net profit attributable to equity holders of the Company 2,192,854 1,493,693 Weighted average number of ordinary shares: Thousands Thousands Issued ordinary shares at start period 17,045 12,500 Effect of shares issued in November 2005 - 2,366 Effect of shares issued in October 2006 107 - Basic weighted average number of shares 17,152 14,866 Dilutive potential ordinary shares: - non-employee share options 27 28 Diluted weighted average number of shares 17,179 14,894 4. Dividends paid and proposed 2007 2006 £ £ Declared and paid during the year: Equity dividends on ordinary shares: - Final dividend for 2006: 1.40p 238,636 - - Interim dividend for 2007: 0.85p (2006: nil) 146,336 - Dividends paid 384,972 - Proposed for approval by shareholders at the AGM: Final dividend for 2007: 1.70p (2006: 1.40p) 292,670 238,636 5. Reserves Equity-share based Share Capital payments premium redemption Retained £ account reserve earnings Other reserves £ £ £ Group and Company At 1 June 2005 - - - 2,654,239 Capitalised on bonus issue - - - (75,000) Capitalised on redemption of preference shares - - 2,000,000 (2,000,000) Arising on share issue - 5,954,546 - - Costs of share issue - (633,395) - - Share based payments 80,417 - - - Deferred tax asset taken to equity 14,270 - - - Profit for the financial year - - - 1,493,693 At 31 May 2006 94,687 5,321,151 2,000,000 2,072,932 Arising on share issue - 223,296 - - Share based payments 62,762 - - - Deferred tax asset taken to equity 102,031 - - - Exercise of share options (57,011) 57,011 - - Profit for the financial year - - - 2,192,854 Dividends - - - (384,972) At 31 May 2007 202,469 5,601,458 2,000,000 3,880,814 6. Reconciliation of operating profit to operating cash flows Group and Company 2007 2006 £ £ Profit on ordinary activities before financing 2,951,406 2,158,557 Amortisation of intangible assets 109,954 75,697 Depreciation of fixed assets 103,406 93,487 Share based payments 62,762 23,406 Provisions 60,962 18,620 Loss on disposal of fixed assets 7,407 - Decrease/(increase) in receivables 9,354 (645,145) Increase/(decrease) in payables 410,943 610,059 Net cash inflow from operating activities 3,716,194 2,334,681 7. Explanation of transition to IFRSs An explanation of how the transition from UK GAAP to IFRSs has effected the Group's financial position and financial performance is set out in the tables and notes that accompany the tables in note 8. 8. Reconciliations between UK GAAP and IFRS 8.1 Reconciliation of balance sheet at 1 June 2005 Notes 4 & 5 Note 6 Notes 1& 2 Note 3 IAS38 IAS8 IFRS UK GAAP IAS1 IAS37 Intangible Restate- 1 June 1 June 2005 Reformat Provisions assets ment 2005 £ £ £ £ £ £ Assets Property, plant and equipment 224,630 - - (2,219) - 222,411 Intangible assets - Goodwill 4,695,220 (2,348,090) - - - 2,347,130 Intangible assets - Other - 2,348,090 - 7,144 - 2,355,234 Total non-current assets 4,919,850 - - 4,925 - 4,924,775 Trade and other receivables 2,765,864 - 9,209 - - 2,775,073 Cash and cash equivalents 1,381,461 - - - - 1,381,461 Total current assets 4,147,325 - 9,209 - - 4,156,534 Total assets 9,067,175 - 9,209 4,925 - 9,081,309 Equity Issued capital 50,000 - - - - 50,000 Retained earnings 2,680,694 - - 4,925 (31,380) 2,654,239 Total equity 2,730,694 - - 4,925 (31,380) 2,704,239 Non-current liabilities Deferred income tax liabilities 8,225 - - - - 8,225 Provisions and other liabilities 47,966 (47,966) - - - - - 56,191 (47,966) - - - 8,225 Current liabilities Trade and other payables 593,711 - - - - 593,711 Current income tax liabilities 592,666 - - - - 592,666 Interest-bearing loans and borrowings 5,000,000 - - - - 5,000,000 Bank overdraft 93,913 - - - - 93,913 Provisions and other liabilities 47,966 9,209 - 31,380 88,555 6,280,290 47,966 9,209 - 31,380 6,368,845 Total liabilities 6,336,481 - 9,209 - 31,380 6,377,070 Total equity and liabilities 9,067,175 - 9,209 4,925 - 9,081,309 8.1 Reconciliation of balance sheet at 1 June 2005 (continued) Notes: 1. Under IFRS format £47,966 of client claim provision classified within provisions for liabilities and charges under UK GAAP has been re-classified as a provision within current liabilities. 2. Under IFRS format £2,348,090 of goodwill under UK GAAP has been reclassified as client portfolios within intangible assets. 3. Under IFRS format £9,209 of clawback provision netted off against trade receivables under UK GAAP has been re-classified as a provision within current liabilities. 4. Under IAS38 Intangible Assets, software with a net book value of £2,219 has been reclassified as intangible assets. 5. Under IAS38 Intangible Assets, salary costs of £4,925 incurred developing internally generated software have been capitalised as intangible assets. 6. A review of provisions under IAS37 Provisions, Contingent Liabilities and Contingent Assets identified an error in the financial statements for periods up to 31 May 2005, which resulted in no provision for dilapidations on the Group's former offices at Watling House, Hinckley being recognised within current liabilities. The correction of this error in accordance with IAS8 Accounting Policies, Changes in Accounting Estimates and Errors resulted in adjustments to reduce retained earnings by £31,380 and increase current liabilities by £31,380. 8. Reconciliations between UK GAAP and IFRS (continued) 8.2 Reconciliation of balance sheet at 31 May 2006 and 1 June 2006 Notes 6 Notes 1, 2, & 7 UK GAAP 3 & 4 Note 5 IAS38 Note 8 IFRS 1 June IAS1 IAS12 Intangible IAS8 1 June 2006 Reformat Taxation assets Restatement 2006 £ £ £ £ £ £ Assets Property, plant and equipment 398,566 - - (8,070) - 390,496 Intangible assets - Goodwill 5,816,630 (3,469,500) - - - 2,347,130 Intangible assets - Other - 3,469,500 - 19,340 - 3,488,840 Deferred income tax assets 2,676 - 14,270 - - 16,946 Total non-current assets 6,217,872 - 14,270 11,270 - 6,243,412 Trade and other receivables 5,092,503 12,674 - - - 5,105,177 Cash and cash equivalents 441,160 - - - - 441,160 Total current assets 5,533,663 12,674 - - - 5,546,337 Total assets 11,751,535 12,674 14,270 - - 11,789,749 Equity Issued capital 170,455 - - - - 170,455 Share premium 5,321,151 - - - - 5,321,151 Fair value and other reserves 2,080,417 - 14,270 - - 2,094,687 Retained earnings 2,111,662 - - 11,270 (50,000) 2,072,932 Total equity 9,683,685 - 14,270 11,270 (50,000) 9,659,225 Non-current liabilities Deferred income tax liabilities - - - - - - Provisions and other liabilities 152,842 (58,399) - - 50,000 144,443 152,842 (58,399) - - 50,000 144,443 Current liabilities Trade and other payables 1,193,196 - - - - 1,193,196 Current income tax liabilities 374,107 - - - - 374,107 Bank overdraft 347,705 - - - - 347,705 Provisions and other liabilities - 71,073 - - - 71,073 1,915,008 71,073 - - - 1,986,081 Total liabilities 2,067,850 12,674 - - 50,000 2,130,524 Total equity and liabilities 11,751,535 12,674 14,270 11,270 - 11,789,749 8.2 Reconciliation of balance sheet at 31 May 2006 and 1 June 2006 (continued) Notes: 1. Under IFRS format £47,966 of client claim provision within provisions for liabilities and charges under UK GAAP has been re-classified as a provision within current liabilities. 2. Under IFRS format £10,433 of deferred consideration classified within provisions for liabilities and charges under UK GAAP has been re-classified as a provision within current liabilities. 3. Under IFRS format £12,674 of clawback provision netted off against trade receivables under UK GAAP has been re-classified as a provision within non-current liabilities. 4. Under IFRS format £3,469,500 of goodwill under UK GAAP has been reclassified as client portfolios within intangible assets. 5. Under IAS12 Income Taxes for employee share-based payment transactions the difference between the tax base of the employee services rendered to date (being the amount the taxation authorities will permit as a deduction in future periods) and the carrying value of nil, is a deductible temporary difference which results in a deferred tax asset of £14,270 recognised in equity, in addition to the deferred tax asset recognised in the income statement. 6. Under IAS38 Intangible Assets, software with a net book value of £8,070 has been reclassified as intangible assets. 7. Under IAS38 Intangible Assets, salary costs of £6,345 incurred during the period developing internally generated software have been capitalised as intangible assets. 8. A review of provisions under IAS37 Provisions, Contingent Liabilities and Contingent Assets identified in error in the financial statements for periods up to 31 May 2006, which resulted in no provision for dilapidations on the Group's offices at Watling House, Hinckley or Grove Park, Leicester being recognised within liabilities. The correction of these errors has resulted in adjustments to the opening balance sheet in accordance with IAS8 Accounting Policies, Changes in Accounting Estimates and Errors. The impact of these adjustments has been the release of a provision of £31,380 for dilapidations on the Group's offices at Watling House, Hinckley against dilapidation costs incurred during the period, and a provision of £50,000 for dilapidations on the Group's offices at Grove Park, Leicester being recognised within non-current liabilities. 8. Reconciliations between UK GAAP and IFRS (continued) UK GAAP Note 1 Note 2 Note 3 31 May IAS1 IAS38 IAS8 IFRS 2006 Reformat Intangible Restatement 31 May assets 2006 8.3 Reconciliation of profits for the year ended 31 May £ £ £ £ £ 2006 Revenue 7,572,845 - - - 7,572,845 Employee benefits expense (3,278,024) (23,406) 6,345 - (3,295,085) Other administrative expenses (1,954,805) 23,406 - (18,620) (1,950,019) Depreciation and amortisation (169,184) - - - (169,184) Operating profit before financing costs 2,170,832 - 6,345 (18,620) 2,158,557 Financial income 103,731 - - - 103,731 Financial expenses (94,010) - - - (94,010) Net financing costs 9,721 - - - 9,721 Profit before tax 2,180,553 - 6,345 (18,620) 2,168,278 Income tax expense (674,585) - - - (674,585) Profit for the period 1,505,968 - 6,345 (18,620) 1,493,693 Attributable to: Equity holders of the parent 1,505,968 - 6,345 (18,620) 1,493,693 Notes: 1. Under IFRS format, £23,406 of share based payments classified as other administrative expenses under UK GAAP have been re-classified as employee benefits expense. 2. Under IAS38 Intangible Assets, £6,345 of salary costs incurred developing internally generated software have been capitalised as intangible assets. 3 A review of provisions under IAS37 Provisions, Contingent Liabilities and Contingent Assets identified in error in the financial statements for periods up to 31 May 2006, which resulted in no provision for dilapidations on the Group's former offices at Watling House, Hinckley and no provision for dilapidations on the Group's offices at Grove Park, Leicester being recognised. The correction of these errors has resulted in adjustments to the opening balances sheet in accordance with IAS8 Accounting Policies, Changes in Accounting Estimates and Errors. The impact of these adjustments is to increase other administrative expenses by £18,620 following the release of the £31,380 provision for dilapidations at Watling House and the recognition of a provision for dilapidations at Grove Park of £50,000 within non-current liabilities. 9. Post balance sheet events Taxation During March 2007 the UK government announced Budget tax changes which, if enacted in the proposed manner, will have a significant effect on the Group's future tax position. At 31 March 2007 these changes to the UK tax system are not regarded as 'substantively enacted' as they are still subject to Parliamentary agreement and so their effect is not reflected in the Group's balance sheet at 31 May 2007. However, it is proposed that the rate of UK corporation tax will reduce from 30% to 28% from 1 April 2008. This rate change will affect the amount of future cash tax payments to be made by the Group and will also reduce the size of the Group's balance sheet deferred tax asset. Changes to the UK capital allowances regime have also been proposed. The most significant of these changes for the Group are the reduction in the rate of capital allowances applicable to plant and machinery expenditure from 25% to 20% per annum on a reducing balance basis from 1 April 2008, and the reduction in the rate of capital allowances from 25% to 10% per annum on a reducing balance basis from 1 April 2008 for certain items of plant and machinery that become integral fixtures on a building. Acquisition of Pension Consulting Limited On 9 July 2007 Mattioli Woods plc acquired the entire issued share capital of Pension Consulting Limited ('PCL') for a total consideration of up to £1,925,000. PCL administers pension schemes on behalf of 145 small self-administered pension scheme ('SSAS') and 213 self-invested personal pension ('SIPP') clients. It has funds under trusteeship of over £185 million and its subsidiary company, PC Trustees Limited, acts as trustee to the schemes. In the year ended 31 May 2007, PCL generated a profit on ordinary activities before taxation of £302,108 on revenues of £811,743. PCL's net assets at 31 May 2007 were £321,244. The total consideration includes an initial payment of £1,525,000 funded from the Group's existing cash resources and deferred consideration of up to £400,000, of which £240,000 will be paid in the two years following completion, with the remaining payment of up to £160,000 being determined with reference to an earn-out mechanism based on growth in scheme numbers during the two years following completion. 10. 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 2006 or 2007. 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 web site (www.mattioli-woods.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 at 10am on Thursday, 18 October 2007 at the Group's head office. This information is provided by RNS The company news service from the London Stock Exchange

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