TEAM plc (LON:TEAM), the wealth, asset management and complementary financial services group, has today announced its final results for the year to 30 September 2022.
· Revenues increased 44% to £2.1 m (FY 21: £1.5m)
· Adjusted EBITDA a loss of £0.8m (FY 21: £0.8m)
· Net assets increased by 15% to £8.6 million (FY21: £7.4 million)
· Group assets under management / advice up 94% at £575m (FY 21: £297m)
· Annualized revenue run rate of £3.7m, as at 30 September 2022
· Increased headcount to 33 up from 16 at the outset of the year
· Completion of strategic acquisitions, now full set of capabilities in Jersey
· Starting to realising cost and revenue synergies
· Recurring asset inflows improved, while markets and outflows not expected to recur
· Good pipeline of acquisition opportunities
Commenting on the results Mark Clubb, Executive Chairman of TEAM, said:
“Our ambition remains to become a leading wealth and asset management business and these results reflect good progress towards this aim. In May we raised a further £2.7m to fund acquisitions and working capital. We have completed the acquisitions of Omega and Concentric both of which have bedded down well and our annualised revenues are now up to £3.7m. We have established a good base in Jersey and have an excellent pipeline of opportunities ahead of us as we enter 2023. We look forward to further developing our business in the coming year.”
Executive Chairman’s Statement
I am pleased to present the second set of full year results of TEAM plc (the “Company”) as a public quoted company. At the time of admission to trading on AIM in March 2021, we set out our ambition to become a leading wealth and asset management business. I am delighted to confirm that we continue to make significant progress towards this goal in spite of the market turbulence seen this year.
Savers and investors alike have been confronted with higher inflation and higher interest rates, coupled with geopolitical and domestic tensions. Our investment process, which is based on a systematic approach, diversification and active management, has demonstrated its value as we navigate these challenging markets and we are proud of our investor returns in the year. It is testament to the expertise and discipline of our Investment Committee, headed by Jason Jones, but more specifically, Craig Farley, our Head of Multi Assets.
Our financial results reflect the contribution made to the business from the first full year’s consolidation of JCAP as well as two months of contributions from Omega and Concentric. Group assets under management/advice for the year were up 94% from £297 million to £575 million. Results also mirror a period of sustained market turbulence which led to some net asset outflows. Group revenues increased by 44% from £1.5 million to £2.1 million and adjusted EBITDA, our preferred measure of profitability, was unchanged at a loss of £0.8 million, as contributions from acquisitions were offset by a decline in revenues in investment management. Net assets increased by 15% to £8.6 million (FY21: £7.4 million) and we are well placed to continue with our growth plans.
Investment and Fund Management
In 2022, our investment management business launched its model portfolio service across four platforms (Morningstar, 7IM, Quilter International and Novia Global). The investment track record continues to build with our multi-asset portfolios outperforming the MPI peer group across all four strategies.
This strong relative performance reflects the dedicated research efforts undertaken by the investment team during the first half of 2021 to overhaul TEAM’s investment philosophy and framework. Central to the process is that the financial market landscape during the next twenty-five years is highly unlikely to resemble that of the past twenty-five years which was an extraordinary period of history, defined by little-to-no inflation, zero interest rates, globalisation, and expanding central bank balance sheets. This is now behind us, with profound consequences for asset allocation. TEAM has responded by expanding our allocation menu to provide more sources of capital growth and income for our clients, whilst always seeking out genuine diversification. We have side-stepped a lot of volatility and downside this year by holding: –
a) Far less equity risk than our peers;
b) Zero conventional sovereign and investment grade bonds until Q4 2022 (until that point they represented ‘return-free risk’);
c) Consistent exposure to energy commodities, the standout sector of 2022; and
d) Healthy levels of cash, which has re-emerged as a strategic asset class after years in the wilderness.
Whilst TEAM Asset Management remains loss making, the path to break even is clear. Additional fee revenue will not require significant increases in costs. I am confident, given the investment performance and more focused and resourced business development, that we can achieve this. A Group Revenue committee has been established and we are encouraged by the asset flows coming from new and existing IFA clients.
With our entrepreneurial culture, we expect to continue to attract relationship managers as well as to identify further acquisition opportunities. The business is well placed to scale as it benefits from building its performance track record and attracts new clients and talent. We look forward to better opportunities ahead in 2023.
JCAP, our Treasury Services business, has benefited from increased focus on cash advisory services as interest rates have increased. The Bank of England raised interest rates 9 times since December 2021 and the base rate now stands at 3.5%. It is forecast to increase further and rates are expected to remain elevated in the UK, Eurozone and US into 2024.
We continue to extend our client base into the institutional and particularly Jersey trust market and have identified a number of significant opportunities, all helped by the “tailwind” of higher interest rates.
Financial Advice and Consultancy
Concentric and Omega are significantly integrated into the Group as we had been working closely with the respective teams and jointly planning projects as we awaited regulatory approvals. Much of the work to identify revenue and costs synergies, improve controls and improve client outcomes within these businesses has been started. There are clear revenue synergies and clients will be able to benefit from group investment management services. We anticipate that recruitment to meet both client demand and succession planning will be one of the biggest challenges that we need to address. However, we think that the entrepreneurial business environment we offer will be appealing to experienced practitioners and experienced staff have already been brought into the business.
Part of our growth strategy is to identify both targeted and opportunistic acquisitions to enhance the range and quality of services that we offer. In August 2022, we were able to complete the acquisition of Omega, a Jersey-based IFA specialising in retirement planning, mortgage advice, life assurance and bespoke investment advisory services for a headline consideration of £4 million. Somewhat frustrating was the time it took to receive regulatory approval which impacted the Group’s financial results for the year ended 30 September 2022. We are working through a remediation exercise over certain historic control and management matters identified by the Jersey Financial Services Commission (“JFSC”). Against this, Omega has continued to deliver strong financial results, but unfortunately we were only able to include two months’ trading in these results.
In the same month, we completed the acquisition of Concentric, a Jersey based financial planning and investment consultancy business focused on higher net-worth individuals both in Jersey and internationally. It is a very well managed business with strong processes and procedures, particularly regarding compliance, which will be used to strengthen the operating models of Omega and potentially other advisory businesses that we may acquire internationally.
Turning to ESG, our growing collaboration with BlackRock, a globally recognised analytics and reporting provider, has been very well received by existing and potential clients. BlackRock gives TEAM point-in-time analytics and reporting capabilities for our investment models. In addition to stand alone risk reporting and scenario analysis that seeks to measure the potential impact of disruptive events on our models, a key feature is our ability to extract an overall ESG score for each model, in addition to standalone ‘E’, ‘S’, and ‘G’ scores. For clients with specific ESG preferences or needs that may deviate slightly from TEAM’s core investment model offering, we can build tailored solutions and provide an external reporting capability to ensure expectations are being met.
TEAM Plc is a Jersey based company and we look to contribute to our community in a meaningful manner. This year we again supported the Jersey Action Against Rape fundraising competition, and the “Borrow a Bucket” initiative showing Jersey as an environmentally friendly destination that also has “Impact” initiatives.
TEAM is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres, our strategy is to build local businesses of scale around our core skill of providing investment management services. In May 2022, we raised £2.7m from new and existing shareholders to fund acquisitions and working capital. The acquisitions of Omega and Concentric have enhanced our range of products and broadened our financial advice services increasing the scale of our addressable market. We will continue to look to grow our adviser presence organically by recruitment and via acquisition. We have been and are actively engaged in many conversations. The Group continues to aim for its target of completing two acquisitions per financial year, of increasing scale, and I am confident that this will be achieved.
I believe that we have a settled, experienced management team with depth, and are at the beginning of our “path to progress.” I very much look forward to making further progress in the coming year while remaining mindful of the continuing macro-economic turbulence and market volatility. I remain confident in the Group’s longer-term prospects and the value we are building.
Since our IPO, and in keeping with the commitments that we made at that time, we have taken every opportunity to develop and grow our business to enhance our services for clients.
We will continue to seek opportunities to enable us to work towards our goal to become a leading wealth and asset management business both in Jersey as well as internationally. We have deep experience as a management team on integrating acquisitions and identifying ways to enhance revenue growth across the Group. Our ethos is entrepreneurial – our team is energetic and excited by the potential of being involved at the inception of a fast-growing future leader in the sector. I would like to thank the team for their commitment and hard work over the period and look forward to continued collaboration and success.
We expect to bring potential acquisitions to enhance TEAM and deliver the business plan to our shareholders, and further equity funding will be required to complete these transactions, and to fund the expected working capital requirements we forecast in the coming 12 months.
We look to build resilience, be courageous in our ambitions, establish new clients and business lines, continue to grow and improve our technology resources in a fast-moving world, and lastly develop, and grow our existing and new potential colleagues. Staff retention is about providing opportunity and support. We look to offer fulfilling careers across a diverse range of candidates and roles.
I very much look forward to the coming year while remaining mindful of the continuing macro-economic turbulence and market volatility. I remain confident in the Group’s longer-term prospects and the value we are building. This confidence has been, and will continue to be, evidenced by my ongoing purchase of TEAM Plc shares.
Mr J M Clubb
9 January 2023
Performance and Strategic Report
The Directors present their Strategic Report on the Group for the year ended 30 September 2022.
The Directors’ aim is to provide long term capital appreciation for Shareholders by building a profitable and sustainable business. Growth will be sought through winning new clients and targeted acquisitions, underpinned by investment in the support infrastructure.
The overall strategy is to promote the continued development of the Group into a leading wealth and asset management business. It is expected that the Group’s growth will be achieved through:
· an acquisition driven strategy to bring into the Group complementary offshore and onshore wealth and asset management businesses;
· a focus on delivering revenue and cost synergies, leveraging our increasing scale and breadth of services to gain a greater share of client wallet and economies of scale for clients and the Group.
· identifying complementary services such as specialist funds, cash management, and corporate services.
· the expansion into complementary locations – onshore UK, Crown Dependencies, other International Finance Centres, and
· AUM growth through team and selective hires and targeted business development.
The Directors believe that the successful execution of a buy and build strategy to acquire incremental scale is likely to have the most meaningful impact on the future value of the Group. The Directors believe that there are a number of asset managers who are significantly underperforming due to a variety of factors, including poor management, poor investment performance, increased regulatory and technology requirements, lack of capital and strategic vision.
Key Performance Indicators (KPIs)
As TEAM is in the initial stages of delivering the strategic plan for the business, the Board has yet to set longer term measures for the assessment of the performance of the business.
The key targets for the Directors are to:
· manage the business with a high standard of corporate governance;
· improve the operating performance of the Group to a cashflow positive position;
· build the business to scale within Jersey, which we define as AUM of over £500m and an operating surplus;
· integrate and deliver the cost and revenue synergies identified in the acquired businesses, and
· build and convert our pipeline of acquisition opportunities. This will enable the Directors to reapproach the shareholder base and potential investors for further funding to continue the Group’s inorganic growth plans. A necessary part of further acquisitions will be raising additional financing, which is expected to be required for any further acquisitions to be made by the Group.
These measures, along with revenue, cost and profitability measures, will be developed into longer term KPIs for the business, to which future Board remuneration will be aligned.
Principal risks and uncertainties
Risk appetite is established, reviewed, and monitored by the Board. The Group, through the operation of its Committee structure, considers all relevant risks and advises the Board as necessary. The Group and each operating entity maintains a comprehensive risk register as part of its risk management framework encouraging a risk-based approach to the internal controls and management of the Group.
The Group seeks to ensure that its risk management framework and control environment is continuously evolving which the Board monitors on an ongoing basis.
Liquidity and capital risk: the Group’s focus is on bringing the business to a positive cash flow position, whilst implementing its growth strategy. Before this goal is reached, the availability of sufficient liquid resources to meet the operating requirements of the business, and any deferred payments due to vendors of businesses to the Group, are closely monitored and a key element of any investment decisions taken.
Operational risk: operational risk is the risk of loss to the Group resulting from inadequate or failed internal processes, people, and systems, or from external events. Each trading entity conducts a business risk assessment to identify all risks faced, and to put in place effective mitigating controls and procedures. These are reviewed regularly.
Business continuity risk: the risk that serious damage or disruption may be caused as a result of a breakdown or interruption, from either internal or external sources, to the business of the Group. This risk is mitigated in part by the Group having business continuity and disaster recovery arrangements.
Credit risk: the Board takes active steps to minimise credit losses, including the close supervision of credit limits and exposures, and the proactive management of any overdue accounts. Additionally, risk assessments are performed on an ongoing basis on all deposit taking banks and custodians and our outsourced relationships.
Non-compliance with laws and regulations risk: the Group has Compliance and Operations functions resourced with appropriately qualified and experienced individuals. The Directors monitor changes and developments in the regulatory environment and ensure that sufficient resources are available for the Group to implement any required changes.
As a Jersey company, TEAM plc does not fall under the UK Companies Act 2006 (the “CA 2006”), but we do follow the requirements under section 172 CA 2006 by which the Directors have a duty to promote the success of the Company for the benefit of shareholders as a whole. In doing so, the Directors have regard to the likely consequences of any decision in the long-term; the desirability of the Company for maintaining a reputation for high standards of business conduct; and the need to act fairly as between members of the Company.
In this context, the Company is proposing to seek new revenue opportunities in developing an asset and wealth management business. The Board considers that its primary stakeholders are shareholders, employees, clients, suppliers and regulators. We set out below how we engage with our stakeholders:-
Shareholders – contact with our shareholders is through a number of avenues which include the Annual Report, Annual General Meeting, one-to-one meetings and telephone conversations. Matters under discussion include strategy and its execution and generating strong returns.
Employees – the Board engages with employees through a variety of methods, including regular face-to–face meetings with the management teams of the operating entities. The executive Directors are more actively engaged with the relatively small number of staff, all of whom (bar the CFO) live and work on Jersey, and are known personally to the management team.
Clients – the Company through its subsidiaries aims to provide investment products and advisory services that meet the needs of its clients. The Company’s subsidiary management teams update the Board on a regular basis on matters of client service and performance, and new client requirements.
Suppliers – the Company places reliance on external third party providers for certain activities and services. The selection process and engagement with these parties is undertaken by senior management to ensure the smooth operation and delivery of services to the Company.
Regulators – three of the Company’s subsidiaries are regulated by the JFSC. Regular ongoing communication with the JFSC is maintained by the boards of the respective operating companies, and regular management information is supplied as required. All Board members and key individuals of the regulated entities are approved in their roles by the JFSC.
The Performance and Strategic Report on pages 9 – 11 has been approved by the Board and signed on its behalf.
Mr M C Moore
CFO and COO
9 January 2023