Release Date: November 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tatton Asset Management PLC (LSE:TAM, Financial) reported strong organic net inflows of GBP 2.3 billion for the year, with assets under management (AUM) reaching GBP 20.7 billion.
- The company achieved a compound annual growth rate (CAGR) of 17% in revenue and 22% in profits, showcasing robust financial performance.
- Tatton Asset Management PLC increased its interim dividend to 9.5p, reflecting confidence in its financial health and commitment to returning value to shareholders.
- The company maintained a high operating margin above 50%, demonstrating efficient cost management and operational effectiveness.
- Tatton Asset Management PLC's investment performance has been consistently strong, with 11 years of consistent investment returns, earning positive recognition from industry media like Citywire.
Negative Points
- The subdued mortgage market has slightly held back Tatton Asset Management PLC's overall performance, impacting growth potential in this segment.
- The company faces potential revenue impact from the expiration of its contract with Perspective in January 2026, although discussions are ongoing to renegotiate terms.
- Despite strong performance, the company acknowledges competitive pressures with over 200 MPS providers in the market, which could impact future growth.
- Tatton Asset Management PLC's reliance on the IFA channel means any downturn in this sector could affect its business model and growth trajectory.
- The company has no current M&A activity planned, which may limit opportunities for accelerated growth through acquisitions.
Q & A Highlights
Q: Can you please talk about the potential risks to your business in the short and long term that the senior management focus on? And can you talk about competitive pressures in this respect?
A: Paul Hogarth, CEO, explained that the main risk is executing their organic growth plan effectively. They focus on expanding their IFA network and attending numerous industry events. Regarding competition, there are over 200 MPS providers, but Tatton maintains a competitive edge with a 15 basis point charge, which they believe will become the industry norm.
Q: If your growth rate is far higher than the overall market, there must be some losers. Are you able to shed some light on which companies are the losers or the sorts of companies funds are flowing out of and into Tatton?
A: Paul Hogarth, CEO, stated that they are not taking business from other MPS providers but rather from IFAs who are outsourcing investment management for the first time. This is still Phase 1 of market development, with more IFAs choosing MPS over managing their own advisory models.
Q: If MPS currently makes up over 90% of your AUM, do you see this level of dominance continuing, or might BPS and funds make up a larger share going forward?
A: Paul Hogarth, CEO, believes MPS will continue to dominate and grow, supported by funds. BPS is expected to struggle, especially for traditional discretionary fund managers, while Tatton's low price point and platform presence will help maintain MPS growth.
Q: Adjusted margin is currently just over 50%. At the scale you were targeting of GBP 30 billion plus, how high can this margin get to?
A: Paul Hogarth, CEO, and Paul Edwards, CFO, indicated that the group margin could reach the late 50s as Tatton's assets grow. The Tatton investment margin is currently 63% and is expected to increase by 1-2 percentage points annually.
Q: Are you able to provide an update on acquisitions and what the pipeline looks like?
A: Paul Hogarth, CEO, confirmed that there are no current acquisition plans. Any M&A activity would need to be earnings enhancing and focused on the FUM side, but the current strategy is purely organic growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
