Tatton Asset Management is targeting further acquisitions, with "several" potential opportunities currently under review, as the firm pursues its ambition to become a "true asset manager" through organic growth and M&A activity.
In October 2019, the group announced its first acquisition, buying Tenet Group subsidiary Sinfonia Asset Management for up to £2.7m, which has helped boost Tatton AM assets by £135m, according to its annual results for the year to 31 March, published today (16 June).
In the results, which revealed the group had seen yearly profits balloon to about £10.3m from £5.9m in the previous year, Tatton said it had "evaluated several acquisition opportunities" over the past year and was pursuing those it sees as "complementary, strategically aligned to the existing model, earnings enhancing and accretive to shareholder value".
It said: "Challenging market conditions create opportunities and threats in diverse areas and we are acutely conscious of the possibility of further consolidation in our industry.
"Our focus this year will be to consolidate our position as the leading DFM MPS provider of choice.
"We will look to leverage our competitive advantage as being a high value low cost DFM and further developing our AUM organically.
"However, it has always been our intention to become a true asset manager, building on the success of our MPS services and adapting to increased IFA demand for cost reducing multi-asset multi manager solutions.
"This ambition is achievable through a combination of organic and M&A activity, enhancing the value of our AUM and continuing to serve the demands of the IFA sector for improved client solutions."
The annual results also revealed a positive year for the group, with revenues up 22% to £21.4m, while discretionary assets under management increased 9.6% to £6.7bn largely due to organic net inflows of £1.1bn, an average of £94.1m per month.
Tatton increased its final dividend by 14.3% to 6.4p, giving a full year dividend of 9.6p per share, which is 1.9x covered by adjusted earnings per share.
The board targets a payout ratio in the region of 70% of annual adjusted earnings per share over the medium term.
With regard to the impact of the coronavirus pandemic in recent months, Tatton chairman Roger Cornick accepted that it had been difficult but reassured investors that the group has "a low-risk, high-margin business model, based on strong levels of recurring revenue."
He added: "Whilst it is still too early to estimate accurately the full financial impact of the pandemic, the group has a robust financial liquidity position with £12.8 million cash at 31 March 2020 and no debt; a £1.5 million overdraft facility which remains undrawn; and a highly efficient working capital cycle, ensuring strong operating cash conversion.
"The company also has indications of a good level of support from quality lending institutions, in the unlikely event that this will be required."
CEO Paul Hogarth said that "despite a complex macro backdrop", the group has continued to perform strongly and "delivered against all the challenging targets" it set amid its 2017 IPO.
He added: "We are committed to making Tatton a true asset manager and we are looking to enhance its investment product offering. As always, we rely on IFA feedback which enables us to shape and develop our proposition.
"[There] will, inevitably, be opportunities in our markets, as a result of this unprecedented disruption.
"TAM maintains its clear focus on delivering sustainable organic and acquisitive growth and is well placed to act should any appropriate opportunities arise."