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.
Tatton Asset Management is engaged in providing a range of services to the Financial Conduct Authority ("FCA") directly authorized financial adviser ("DA IFA") marketplace encompassing discretionary fund management, regulatory and compliance services and mortgage services. Co.'s discretionary portfolio management ("DFM") service operates on ten United Kingdom adviser WRAP platforms and can be integrated into the growing number of adviser WRAP platforms in the market. Co. provides support services to independent financial advisors ("IFA"s), enabling DA IFA firms to provide compliant and effective investment portfolio management for their platform based clients.
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