Tatton Asset Management plc
Tatton Asset Management was founded in 2007 and provides three services to smaller, UK-based Independent Financial Advisers: discretionary asset management; regulatory and compliance consulting and outsourcing; and mortgage and protection insurance aggregation.
Tatton Asset Management Full Years Results Presentation June 20
The management team of Tatton Asset Management discuss their full year results, the impact coronavirus had on IFA activity, and how top quartile performance has helped deliver continued net inflows throughout the turbulence.
Resilience proven & growth trajectory intact
Tatton passed the March 2020 market-crash stress-test with flying colours. Financial advisers continued to trust it with their clients’ money – net fund inflows were £86m in March (just under the FY20 average of £94m pm) – at a time when many funds saw record outflows. Over FY20 Tatton recorded £1.1bn of inflows, and despite the market bottom nearly coinciding with the 31-Mar year-end, AUM closed 10% above FY19 on £6.7bn. Revenue grew 22% to £21.4m; adjusted operating profit was up 24% to £9.1m; PAT jumped 72% from £4.9m to £8.4m; and full-year dividend increased 14% from 8.4p to 9.6p, a yield of 3.3%. Tatton remains debt-free with £12.8m of net cash.
Client inflows have continued post year-end which, in combination with the recovery in markets, has seen AUM grow 10% in two months to £7.4bn on 31 May 2020. Tatton’s longer-term growth trajectory appears firmly intact, however further market volatility could cause significant fluctuations in AUM levels over the shorter-term. Operational leverage should see margins improve further as the business scales.
There is valuation upside if Tatton continues to deliver. Its PER of 22.5 is below high performing asset managers - and Tatton is a 1st quartile performer on most metrics: AUM inflows, revenue growth, operating margin, EPS growth and ROE. It’s current 295p price is roughly in line with our discounted cash flow valuation of 300p.Download Now Missing Out Get our research first
Inflows remain strong despite market crash
Tatton Asset Management continued to attract new client assets through the recent market turmoil: a notable achievement at a time when many investors flocked to cash and fled equity and even some bond funds at the fastest pace in decades.
Tatton attracted net inflows of £1.13bn for the FY ending 31 Mar 2020, £688m (61%) of this coming in H2 and £86m in March ’20 alone. But it wasn’t immune to the impact of COVID-19. AUM peaked in February at £7.8bn, well ahead of forecasts, but then dropped £1.2bn – mostly because of the market crash - to end the year on £6.7bn. March inflows were only slightly down on the FY monthly average of £94m.
However, bucking broader trends, Tatton expects FY20 results (expected mid-June) to be in line with analysts’ estimates. With such resilience, TAM shares at 248p, 16% down on their Feb peak, will seem attractive to many.Download Now Missing Out Get our research first
Tatton Asset Management presents at our Investor Forum
Growth, profitability, opportunity
- There is a powerful market trend of IFAs moving more and more of their client assets onto discretionary fund management (DFM) platforms (a Â£48bn market , up from Â£5bn in 2011), avoiding the regulatory and risk burden of selecting investments for end-clients themselves;
- Tatton has carved out a market-leading proposition in this space, especially with respect to the two most important criteria advisers use to select a DFM: fees and investment performance;
- It has tried-and-tested methods of winning new clients and capturing a higher share of their AUM;
- Operational leverage should see margins improve further as the business scales;
- The adviser support services business complements the asset management business well and provides deep IFA market insights.