Tatton Asset Management plc (LON:TAM) results to March 2022 are in line with its April trading update, confirming profitable growth with high retention. Headlines are:
¨ Assets under management (“AUM”) rose 26.1% to £11.34bn (2021: £8.99bn)
- £1,277m net inflows (2021: £755m); average of £106/month; 14.2% of opening AUM
- Verbatim funds acquisition added £650m and the market a further £420m
¨ Paradigm grew its B2B network of IFAs and performed well
- Consulting member firms increasing 4.3% to 421 (2021: 407)
- Paradigm Mortgages completions rose 16.0% to £13.15bn (2021: £11.34bn); Member firms increased by 3.8% to 1,674 members (2021: 1,612)
¨ Cash on the balance sheet was £21.7m
In addition, these results reveal:
¨ 25.7% rise in Group revenue to £29.356m (Zeus forecast: £29.0m)
¨ 27.4% rise in adj operating profit to £14.526m (2021: £13.6m)
¨ 1.3 percentage point rise in adj operating profit margin to 49.5% (Zeus forecast: 47.1%)
¨ 26.3% rise in adj fully diluted EPS to 18.62p (Zeus forecast: 17.8p)
¨ 13.3% rise in final DPS to 8.5p, full year DPS of 12.5p (Zeus forecast: 12.5p)
¨ Tatton’s IFA firms increased by 11.7% to 746 (2021: 668) and the number of accounts increased 23.9% to 89,780 (2021: 72,450)
Outlook: Paul Hogarth, Founder & Group CEO, observed “We continue to go from strength to strength, as we build on the strong organic net inflows, which have been further enhanced by the recent acquisitions.”
Zeus view: We are pleased to see Tatton Asset Management meeting or beating our forecasts (Exhibit 1, page 2).
Lower financial markets will have depressed 1Q revenue. We take this opportunity to trim our revenue, profit and earnings forecast by 2% to reflect lower financial market levels. Consequently, we cut our FY23 DPS forecast by 4% to 14.4p (70% of fully diluted adj EPS).
Our forecasts do not include the acquisition of 8AM Global, which is yet to complete or be integrated. Interims in December should provide an opportunity to upgrade.
We draw investors’ attention to Tatton’s high AuM retention (Exhibit 2: 99% AuM retention) and potential to double AuM without adding new clients (Exhibit 3: Tatton’s opportunity update).
Valuation: Tatton Asset Management’s valuation should reflect its high client retention and ability to grow even in challenging markets. Tatton offers shareholders double digit revenue and profit growth, accompanied by an attractive 3.5% dividend yield.
Summary financials
| Price | 417.5p |
| Market Cap | £245.9m |
| Shares in issue | 58.9m |
| 12m Trading Range | 405p– 610p |
| Free float | 78.90% |
Financial forecasts
| Yr end Mar (£’m) | 2021A | 2022A | 2023E |
| Revenue | 23.3 | 29.4 | 33.3 |
| yoy growth (%) | 9 | 26.2 | 13.3 |
| EBITDA | 12.1 | 15.6 | 17.6 |
| EBIT | 11.4 | 14.9 | 16.9 |
| Adj. PBT | 11.2 | 14.5 | 16.5 |
| Adj. PAT | 9.1 | 11.5 | 12.8 |
| AuM at 31 Mar | 9,000 | 11,341 | 12,700 |
| EPS (p) ful dil. Adj. | 14.7 | 18.6 | 20.5 |
| DPS (p) | 11 | 12.5 | 14.4 |
| Net cash | 16.9 | 21.7 | 22 |
| P/E | 28.4 | 22.4 | 20.3 |
| EV / EBITDA | 18.9 | 14.4 | 12.7 |
| Div yield (%) | 2.6 | 3 | 3.5 |
Source: Audited Accounts and Zeus estimates
