Mattioli Woods Regulatory News (MTW)

12 September 2023

Mattioli Woods plc

("Mattioli Woods", "the Company" or "the Group")

Final results

Mattioli Woods plc (AIM: MTW.L), the specialist wealth and asset management business, is pleased to report its final results for the year ended 31 May 2023. 

Mattioli Woods is creating a responsibly integrated, full-service wealth management group, growing organically through its distribution network of 138 core consultants and investment management offering, and through the acquisition and integration of complementary businesses, with the aim of enhancing the Group's client proposition while delivering strong shareholder returns.

Financial highlights

· Total client assets of the Group and its associate[1] rose 2.7% to £15.3bn (2022: £14.9bn);

· Revenue increased 2.8% to £111.2m (2022: £108.2m) driven by combination of:

-  Continued organic revenue growth of 3.7% to £75.7m (2022: £72.9m) partially offset by the market impact on ad valorem, placement and performance fees;

-  Positive contribution from acquisitions up 0.7% to £35.5m (2022: £35.3m);

-  Increased total value of new client wins up 14.6% reflecting business development initiatives;

-  Improved new client lead generation with increased new business pipeline up 16.2% versus prior year;

· Recurring revenues[2],[3] represent 90.9% (2022: 86.8%) of total revenue, reflecting quality of organic growth underpinned by long-term client relationships;

· Adjusted EBITDA[4] increased 1.8% to £33.2m (2022: £32.6m);

· Adjusted EBITDA margin[5] of 29.8% (2022: 30.1%);

· Adjusted EPS3,[6] of 47.8p (2022: 48.3p) with organic growth offset by impact of new shares issuances for acquisitions in 4Q23;

· Proposed final dividend of 18.0p (2022: 17.8p), giving a total dividend up 2.7% to 26.8p (2022: 26.1p), keeping in-line with the Board's commitment to a progressive dividend policy;

· Strong cash position, with £45.1m of cash at 31 May 2023.

Operational highlights and recent developments

· Diversified revenue mix with 37% (2022: 35% restated) fixed, initial or time-based fees uncorrelated to market performance;

· Gross discretionary AuM[7] of £4.8bn (2022: £5.1bn), with net inflows of over £68.1m in the year;

· Increased number of core consultants in the year to 138 (2022:133);

· Acquisition of Doherty Pension & Investment Consultancy Limited ("Doherty") and 50.1% stake in White Mortgages Limited ("White");

· Recently acquired businesses including Maven Capital Partners LLP ("Maven"), Ludlow Wealth Management Group Limited ("Ludlow"), Richings Financial Management Limited, Doherty and White delivering organic growth, revenue synergies, product diversification and integrating well;

· Implementation of Xplan CRM and operating system progressing in line with plan to deliver improved operational efficiency and enhanced client service.

Trading outlook

· Outlook for the current year remains in line with management's expectations;

· Group remains well positioned for the year ahead with a strong platform and integrated model enabling multiple client engagement points to facilitate growth; and

· Continued focus on new business generation including synergies with acquired businesses, advancing key strategic initiatives and improved operational efficiency complemented by strategic acquisitions.

Governance changes

· Appointment of Michael Wright as Deputy Chief Executive Officer to lead and support the delivery of certain strategic goals alongside the Executive team while retaining his current responsibilities; and

· As part of our long-term strategic planning, David Kiddie stepping down as Non-Executive Chair at the next Annual General Meeting ("AGM") to take on a consultancy role with the Group given his extensive career in investment management to support the continued development and structure of the Group's investment proposition required for the next phase of growth.

· Anne Gunther currently our experienced senior independent, non-executive director becomes Group Non-Executive Chair, subject to regulatory approvals.

1 Includes £829.2m (2022: £1,100.5m) of funds under management by the Group's associate, Amati Global Investors Limited, excluding £73.0m (2022: £93.6m) of Mattioli Woods' client investment and £11.7m (2022: £14.8m) of crossholdings between the TB Amati Smaller Companies Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT plc.

2 Annual pension consultancy and administration fees; ongoing adviser charges; level and renewal commissions; banking income; property, discretionary portfolio and other annual management charges adjusted for Private Investor Club initial fees.

3 This is an alternative performance measure ("APM") the Group reports to assist stakeholders in assessing performance alongside the Group's results on a statutory basis. APMs may not be directly comparable with other companies' adjusted measures and are not intended to be a substitute for, or superior to, any IFRS measures of performance. Supporting calculations for APMs and reconciliations between APMs and their IFRS equivalents are set out in the alternative performance measure workings section of the Annual Report. See 'Alternative Performance Measures' section for further details of APMs.

4 Calculated as earnings before interest, taxation, depreciation, amortisation, acquisition-related costs, platform project costs, contingent consideration treated as remuneration and including share of profit from associates (net of tax).

5 Adjusted EBITDA divided by revenue.

6 Adjusted profit after tax used to derive adjusted EPS is calculated as adjusted profit before tax as defined above less income tax at the blended standard rate of 20% (2022: 19%).

7 Includes £913.9m (31 May 2022: £1,208.9m) of funds under management by Amati Global Investors Limited, including Mattioli Woods' client investment and crossholdings between TB Amati Smaller Companies Fund, TB Amati Strategic Metals Fund and Amati AIM VCT plc.

Commenting on the results, Ian Mattioli MBE, Chief Executive Officer, said:

"The last few years have been complex for our clients. This has reinforced our commitment to putting clients first and developing our service offering. We are building a business that is sustainable and ethical, but resilient over the long term, and I am pleased to report this approach has delivered revenue growth of 2.8% to £111.2m, reflecting the combined impact of organic growth of 3.7% and the revenue contribution of recent acquisitions being partially offset by the market impact on ad valorem, placement and performance fees. Adjusted EBITDA was up 1.8% to £33.2m and adjusted EBITDA margin was 29.8% with the positive impact of the change in revenue mix following the acquisitions made during the current and prior year being partially offset by inflationary increases in administrative expenditure.

"Basic EPS was up 79.9% to 14.9p and adjusted EPS of 47.8p was down (0.9%). The Board is pleased to propose a final dividend of 18.0p per share. This makes a proposed total dividend for the year of 26.8p a year-on-year increase of 2.7%, demonstrating our desire to deliver value to shareholders and confidence in the outlook for our business.  

"We expect the current macroeconomic conditions and recent legislative changes to drive continued demand for high quality advice as we expand capacity within our adviser training academy to train a greater number of advisers each year, seeking to capitalise on the current 'advice gap' and drive strong organic growth in our financial planning and specialist pension consultancy businesses.

"We are progressing our other strategic initiatives, including the roll-out of our new, Group-wide client relationship management system Xplan. We are confident in the resilience of our business model and excited by the opportunity to accelerate growth and make meaningful progress towards our strategic goals. While inflationary cost pressures and investment in our strategic initiatives may impact margins in the short term, we are confident that we will continue to deliver attractive, long-term sustainable shareholder returns.

"Our focus remains on delivering great client outcomes. We have continued to develop our client proposition, reviewing the range of investment management options we offer and identifying opportunities to enhance the proposition and realise revenue synergies across the Group. The implementation of Consumer Duty regulations brings a welcome focus to the value that clients derive from the various services we offer and accords with our principles of integrity and professionalism.

"Previously acquired businesses are integrating well, with synergies being realised and additional cross-sell opportunities targeted for the new financial year.

"There continues to be a high level of M&A activity in the wealth and asset management sector and we were pleased to complete the acquisition of Doherty and our investment in White during the year. We have a strong pipeline of bolt-on acquisition opportunities to assess, as well as potentially more substantial opportunities in the longer term. We plan to build on our track record of successful acquisitions by continuing to assess and progress opportunities that meet our strict criteria.

"Our Executive team continues to bring new ideas to drive further growth and generate sustainable shareholder returns. We were pleased to announce the appointment of Michael Wright as Deputy Chief Executive Officer to lead and support the delivery of certain strategic goals alongside his current responsibilities. I wish to thank David Kiddie for serving a 3-year term as Non-Executive Director and more recently as Non-Executive Chair as he steps down from this role at the next AGM as part of our long-term strategic planning. We are pleased to retain David's services in a consultancy role with the Group given his expertise and extensive career background in investment management. His insight will be invaluable to support the continued development and structure of the Group's investment proposition required to deliver our next phase of growth.

"Over 31 years since founding the Company, I continue to be thankful and humbled by the enduring culture of professionalism, positive mindset and commitment that our entire team continues to show when managing our clients' affairs throughout another complex year. I look forward to the future with confidence".

- Ends -

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Analyst presentation

There will be an analyst presentation to discuss Mattioli Woods' full year results at 09:30am today at Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR. This will also be held as a webinar and those analysts wishing to attend through either channel are asked to contact Camarco on +44 (0) 20 3757 4998 or at mtwplc@camarco.co.uk . 

Investor presentation

There will be an investor presentation to discuss Mattioli Woods' full year results at 12.30pm Friday 15 September 2023. 

The presentation is open to all existing and potential shareholders for which registration is free.

Questions can be submitted in advance to info@equitydevelopmment.com in addition to during the presentation and, if possible, will be addressed by the presenters at the end of the webinar.

To attend the event please register here. A recording will be available shortly after the webinar on www.equitydevelopment.co.uk

Strategic Report

Our vision and approach

Our business model

Mattioli Woods is a diversified wealth and asset management business. Our core proposition integrates asset management and financial planning to serve a market predominantly consisting of mass affluent individuals, controlling directors and owner-managed businesses, professionals, executives, families and retirees. We plan to continue to expand our reach to new client demographics as we continue developing both our advice and investment propositions.

Our vision

We strive to deliver exceptional outcomes for our clients' wealth and asset management needs in a responsible way, achieving continued growth across our core pillars of advice, investment and administration, specifically through:

1 New client wins and greater integration across the value-chain for existing clients;

2 Enhancing the Group's investment proposition;

3 Investing in developing the Group's digital platform and client portal;

4 Simplifying administration processes and improving productivity; and

5 Accelerating growth through strategic acquisitions. 

Our medium-term financial goals are for the Group to deliver:

· £300m Revenue

· £30bn Total client assets

· £100m EBITDA

We will continue to put our clients and their needs at the core of everything we do, with the objective of growing and preserving their assets, while giving them control and understanding of their overall financial position. At the same time, we aim to grow our business, both organically and through acquisition, to deliver strong, sustainable shareholder returns over the long-term.

Our focus on holistic planning, providing high levels of personal service and maintaining close multi-generational relationships with our clients has also been a key attribute of each of the financial planning businesses acquired in recent years. We plan to continue developing complementary services around our core specialisms, blending advice and investment management with specialist product provision to progress as a modern financial services business aligned to our clients' needs. We believe this will allow us to deliver great client outcomes while keeping clients' costs low, with our integrated model allowing us to address more of the value chain.

As we expand our client proposition to deliver our medium-term goals, the Board is reviewing the Group's operating structure and segmental reporting. In future years we intend to report the Group's results under three operating segments: financial planning and advice, investment management, and administration. The Group's current operating segments comprise the following:

Wealth and asset management

Our wealth and asset management business comprises four operating segments: pensions consultancy and administration, investment management, private equity asset management and property management. We provide services to individuals, families and institutions, embracing all aspects of financial planning and investment, including specialist pensions and estate planning, personal and trust investment, and fund management.

Pension consultancy and administration

Mattioli Woods is a leader in the provision of Self Invested Personal Pension ("SIPP") and Small Self-Administered Pension Scheme ("SSAS") arrangements, which are often central to our clients' life planning strategies. We have an established reputation for technical excellence, widely acknowledged within our industry. We maintain our technical edge through our in-depth understanding of UK pension legislation, which translates into meaningful advice given to clients by our consultancy team.

To support our advised and non-advised clients, we specialise in the provision of proactive and personalised pension administration, which differentiates us from our competitors. Our 11,000 SIPP and SSAS clients are supported by our proprietary MWeb pensions administration platform, into which additional investment is planned to further enhance our client experience and deliver operational efficiencies. MWeb will sit alongside the Xplan wealth management administration platform currently being installed across the Group. 

Investment management

The provision of bespoke investment advice sits at the heart of our investment proposition. The Group's investment services include discretionary portfolio management and in meeting our clients' needs we use third-parties' investment funds, but where we have a particular expertise we look to meet those needs in-house. This client-driven approach has led to the development of our internal investment management function and a range of products designed to meet our clients' needs, including direct UK equity management and a range of multi-asset funds.

In response to client demand, we launched the Mattioli Woods Responsible Equity Fund and Mattioli Woods Property Securities Fund, which are complemented by the alternative asset investments managed by the Group's subsidiaries, Maven Capital Partners UK LLP ("Maven") and Custodian Capital Limited ("Custodian Capital"), and the funds managed by our associate company Amati Global Investors Limited.

These offerings provide clients and third parties with access to a suite of public and private investment opportunities. We have well-developed plans to strengthen and expand upon these offerings to enhance our investment proposition, drive further organic growth and realise synergies with acquired businesses.

Private equity asset management

Maven is a leading private equity and alternative asset manager, providing a range of venture capital trusts ("VCT"), regional funds, and property and private equity investment opportunities, which expand the Group's investment options. Maven adds scale, geographies and new opportunities for Mattioli Woods clients and the ability to offer the Group's existing services to Maven's clients.

Post-acquisition, we have delivered both revenue and cost synergies with a number of joint deals taking place, including the launch and funding of the Milestone Fund, which facilitates investment into private equity investments with over £5m invested by Mattioli Woods clients. The integration of the Mattioli Woods and Maven property teams creates additional investment opportunities, with several deals already launched and a further pipeline of joint deals to be launched to meet client demand in the coming year. 

Property management

Custodian Capital facilitates direct property ownership on behalf of pension schemes and private clients and is the external discretionary fund manager of Custodian Property Income REIT ("CREIT"), a UK real estate investment trust listed on the Main Market of the London Stock Exchange. We believe investment in good quality properties with high grade tenants typically provides stable returns over the long term and our property team draws on many years of commercial property investment experience.

Employee benefits

The Group's advice offering also includes our employee benefits business. We assist our corporate clients with employee engagement, with the aim of improving recruitment, retention and workplace morale. Our services include consultancy in areas such as: defined contribution (DC) and defined benefit (DB) pension schemes, workplace savings, healthcare, international benefit solutions and risk benefits, in addition to the design, implementation and administration of these schemes.

The Group also offers total reward and flexible benefit systems, assisting clients to deliver these to their employees, together with advice, guidance and financial education. The importance of employee benefits is increasing as corporate clients look for new ways to engage, retain, reward and incentivise their workforces. Changes in legislation combined with increased utilisation of flexible working arrangements are increasing the demand for our financial education and wealth management services to be delivered through the workplace.

Our integrated business model allows our clients to benefit from the range of services Mattioli Woods provides across advice, investment and administration to better meet their needs and offer improved client outcomes. The Group enjoys strong client retention through its provision of a broad range of services throughout the client lifecycle, which in turn drives organic growth as long-term, multi-generational relationships expand over time and new clients are attracted to our diverse proposition. 

Strategic Report

Chair's statement

I am pleased to report a resilient performance and successful year for the Mattioli Woods Group. Revenue increased by 2.8% to £111.2m (2022: £108.2m), through a combination of organic revenue growth of 3.7% partially offset by the market impact on ad valorem, placement and performance fees in light of the complex market backdrop throughout the period, and the positive impact of recent acquisitions which grew by 0.7% in what will be my last year as Non-Executive Chair to Mattioli Woods before taking up a consultancy role to support the development and structure of the Group's investment proposition. Adjusted EBITDA was up 1.8% to £33.2m (2022: £32.6m). 

The acquisitions of Doherty Pension & Investment Consultancy Limited and the majority stake in White Mortgages Limited, together with those businesses acquired in the prior year contributed £35.5m (2022: £35.3m) in revenue. The Group's organic revenue[8] growth was driven by increased levels of new business partially offsetting the impact of negative market movements reflecting the complex market backdrop on the value of clients' assets during the year and the placement and performance fees generated by Maven.

The Group's profit before tax ("PBT") was up 48.4% to £11.9m (2022: £8.0m). Excluding the impact of acquisition-related costs, platform project costs and contingent consideration on acquisitions recognised as remuneration, adjusted PBT increased by 3.8% to £30.6m (2022: £29.5m).

The Board is committed to a progressive dividend policy while maintaining an appropriate level of cover to protect the Group's financial position and balance the interests of all stakeholders. Accordingly, the Board is pleased to propose an increased final dividend of 18.0p per share (2022: 17.8p), making a proposed total dividend for the year of 26.8p, up 2.7% (2022: 26.1p).

Our focus remains on delivering great client outcomes. We have continued to develop our client proposition, reviewing the range of investment management options we offer and identifying opportunities to enhance the proposition and realise revenue synergies across the Group. The implementation of Consumer Duty regulations brings a welcome focus to the value that clients derive from the various services we offer and accord with our principles of integrity, professionalism and having a client-focused culture providing a platform for continued growth.

We are also mindful of our social impact and continue to support our stakeholders and the communities in which we operate through a number of commercial and charitable arrangements including with our national charity partner, British Heart Foundation.

8 Total revenues excluding revenue growth from businesses acquired in the last 24 months.

Our strategy

Our strategy is to achieve sustainable levels of growth that both enhances shareholder value and broadens or deepens our expertise and services to better serve our clients.

There continues to be a high level of M&A activity in the wealth and asset management sector, and we were pleased to complete the acquisition of Doherty's and our holding in White Mortgages during the year. The Group has completed 35 acquisitions since the Initial Public Offering ("IPO") and maintains a strong pipeline of further acquisition opportunities. We are focused on transactions that deliver positive shareholder returns and extend the Group's existing client proposition or add to our distribution capacity and scale. A key feature of the last year has been the development of relationships between our recently acquired businesses, with Mattioli Woods and Ludlow advisory clients participating in new investment opportunities promoted by our Maven team, with more planned for the future. We will seek to build on our track record of successfully combining businesses that share the same culture and ethos of putting clients first, alongside continued organic growth. Recent increases in interest rates have increased the cost of capital for all, including for non-listed consolidators, which has the potential to increase the competitiveness of acquisitions for the Group. 

Our people

I am privileged to be part of a team that continually impresses me with their high levels of dedication when dealing with our clients' affairs. I would personally like to thank all our staff for their continued professionalism, commitment and focus on delivering high levels of service to our clients in the complex time in which we operate and during my time as Non-Executive Director and Chair. The culture we have established throughout our 32 years of serving our clients is totally aligned with the new consumer duty regulations introduced during the year, which sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers' needs first. 

We remain committed to investing in and developing our staff to build the expertise and capacity to deliver sustainable growth over the long term. Our culture is based on knowledge, professionalism and diversity, putting clients first and adopting a team-based, collegiate approach. Retaining the commitment, integrity, expertise and passion of our people is vital to our success and remains a priority of the Board.

Governance and the Board

We reviewed our governance framework at the beginning of the year, putting in place a structure that will better enable us to meet the diverse needs of our clients and other stakeholders and support our continued growth. Further details of these structural changes, which are designed to enable appropriate decision-making authority within the advice, administration and investment pillars of our business are detailed in the Governance Report.

The Company operates with a balanced Board, which we believe represents the right governance structure for the business. We strive for high standards in our corporate governance and disclosure and have adopted the Quoted Company Alliance ("QCA") Corporate Governance Code to facilitate this. The Board remains committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business.

During the year, the Board conducted a review of its effectiveness which was led by an external third-party. This review identified the strength and skills diversity of the Board and recommended that development plans be established for all Board members including on-going training for new and existing members.

Shareholders

During the year we have engaged with our shareholders through traditional face-to-face meetings and via virtual channels including webinars and group meetings. We are fortunate to have a group of supportive institutional shareholders with a significant investment in the Company and welcome the opportunity to talk to all our shareholders. We will continue to maintain a regular and constructive dialogue with our shareholders, while seeking to further broaden our shareholder base.

Outlook

The Board is pleased by the Group's performance in the year. We expect the current macroeconomic conditions and recent legislative changes to drive continued demand for high quality advice. We are expanding capacity within our adviser training academy to train a greater number of advisers each year, seeking to capitalise on the current 'advice gap' and drive strong organic growth in our financial planning and specialist pension consultancy businesses. In the last year we have grown our core consultant numbers from 133 to 138.

Notwithstanding the recent decline in inflation, the Board will continue to take a rigorous and proactive approach to managing costs while continuing to invest in our people, to create capacity or improve efficiency to support the long-term growth of the Group.

The increase in interest rates over the last year may lead to additional saving rather than increased investment inflows for some clients, and we have introduced a new pension banking proposition to offer our clients better interest rates.

We are also progressing our strategic initiatives, including the roll-out of our new, Group-wide client relationship management system Xplan. We are confident in the resilience of our business model and excited by the opportunity to accelerate growth and make meaningful progress towards our strategic goals. While inflationary cost pressures and investment in our strategic initiatives may impact margins in the short term, we are confident that we will continue to deliver attractive, long-term sustainable shareholder returns.

David Kiddie

Independent Non-Executive Chair

12 September 2023

Strategic report

Chief Executive's review

Introduction

The last few years have been complex for our clients. This has reinforced our commitment to putting clients first and developing our service offering, including nurturing our growing adviser network. We are building a business that is sustainable and ethical, but resilient over the long term, and I am pleased to report this approach has delivered both revenue and profit growth for the last financial year.

Revenue grew 2.8% to £111.2m (2022: £108.2m), reflecting the combined impact of organic growth of 3.7% and the revenue contribution of recent acquisitions being partially offset by the market impact on ad valorem, placement and performance fees.

The positive new business momentum generated in the first half of the year continued into the second half, despite the uncertain market backdrop. A total of 1,084 (2022: 1,233) new SIPP, SSAS and personal clients with assets totalling £244m (2022: £213m) chose to use Mattioli Woods during the year, representing 14.6% growth in the value of client assets won, which we anticipate will drive increased ad valorem fees over the medium-term.

Operating profit before financing grew 57.5% to £11.5m (2022: £7.3m) and profit before tax was up 48.8% to £11.9m (2022: £8.0m). Adjusted profit before tax of £29.9m was up 1.4%, primarily driven by organic revenue growth and continued close cost management. The profit growth achieved in our core business was partially offset by a reduced £1.0m (2022: £1.6m) share of profit from our 49% associate Amati, which had £0.8bn (2022: £1.1bn) of assets under management ("AuM") at the year-end. The performance of the AIM market has remained challenging, but Amati's investment performance continues to be recognised, with the Amati AIM VCT winning the VCT AIM Quoted Category at Investment Week's Investment Company of the Year Awards 2022.

Adjusted EBITDA was up 1.8% to £33.2m (2022: £32.6m) and adjusted EBITDA margin was 29.8% (2022: 30.1%) with the positive impact of the change in revenue mix following the acquisitions made during the current and prior year being partially offset by inflationary increases in administrative expenditure.

We continue working to realise the economies of scale and operational efficiencies our responsibly integrated model offers, while at the same time seeking ways to reduce clients' costs. As previously announced, despite some short-term impact to margins, the investment we are making in our platform infrastructure, including a Group-wide client relationship management system, will improve our client proposition while allowing us to realise operational efficiencies.

Our success has been based upon the delivery of quality advice, growing our clients' assets and enhancing their financial outcomes. We enjoy strong, intergenerational client retention and expect to see sustained client demand for advice over the last 12 months driven by the uncertainties caused by the current macroeconomic conditions and recent legislative changes. Navigating these headwinds becomes ever more complex and we are focused on delivering positive investment performance across both portfolios and funds. During the year we reviewed the range of investment management options we offer clients, identifying opportunities to realise revenue synergies across the Group while reducing clients' costs.

Gross discretionary AuM by the Group and its associate at the year-end were £4.8bn (2022: £5.1bn) with aggregate net inflows (before market movements) of £68.1m (2022: £341.4m) offset by negative market movements of (£442.6m) (2022: (£223.4m)), which included a (£90.0m) decrease (2022: £119.6m increase) in the value of properties held within CREIT to £437.6m.

Market overview

Mattioli Woods operates within the UK's financial services industry, which is subject to the effects of movements in financial markets, economic conditions and regulatory changes. Our markets remain fragmented and competitive, serviced by a wide range of suppliers offering diverse services to both individual and corporate clients.

The UK retail savings and investment market has demonstrated considerable growth in recent years. It remains dominated by pension schemes but is evolving as a result of societal, economic, regulatory, and technological changes. Sharp increases in the cost of living and evolving client preferences, including environmental, social and governance ("ESG") and responsible investing considerations, have created opportunities and challenges for people seeking to generate income while preserving and growing their capital.

The majority of defined benefit pension schemes have either closed to new members or to new accrual, requiring individuals to be self-reliant in planning for their own long-term needs against a backdrop of increases to state pension age, with further reviews planned. Individuals who have generated substantial personal and family wealth are increasingly seeking solutions that help them fulfil their personal ambitions.

We believe these current market dynamics and pending changes will continue driving demand and need for the holistic planning and expert advice we provide.

Regulation

The implementation of the Consumer Duty regulations brings a welcome focus to the value our clients derive from the services we offer. These requirements are intended to ensure consumers understand what products and services they are paying for, why these are appropriate for them and that providers are cognisant of the cost and value of the products and services they provide. All the new requirements accord with our principles of integrity, professionalism and having a client-focused culture.

As our teams have assessed our client proposition through the prism of the Consumer Duty regulations, this has afforded the opportunity to reflect on all aspects of our responsibly integrated business model and to affirm our belief that we deliver valued services to our clients, that we have systems and controls in place to identify any areas of potential harm, allowing appropriate action to be taken where necessary. We have also been able to reflect on some areas where action can be taken to garner further efficiencies which will serve to improve our client service delivery. These are principles that have remained at the core since the business was founded over 30 years ago.

The Financial Conduct Authority ("FCA") set out its expectations for the wealth management and advice industry in April this year, where the focus remains on firms' operational and financial resilience. Following the FCA's recent decision to pause its plans to create a simplified advice regime in the face of limited industry support, the regulator's attention in now on reviewing the boundary between guidance and advice. This review is intended to ensure consumers get the help they need, at the time they need it and at a cost which is affordable to them. We strongly support these aims, given the importance of advice to our clients.

Changes to the pension and tax regime

The Chancellor's March 2023 budget announced a range of reforms to pensions tax relief to encourage workers over 50 to extend their working lives, including increasing the annual allowance to £60,000, removing the Lifetime Allowance charge and freezing lump sum limits. While another UK general election within the next 18 months creates uncertainty around the future direction of pension reforms and UK tax rates, there are many financial planning opportunities for our clients to consider now, with any future changes in the tax regime expected to create further demand for our advisory services.

The recent launch of the Mansion House reforms, an agreement supported by the Chancellor and the Lord Mayor with the UK's nine largest defined contribution pension providers to commit five percent of assets in their funds to unlisted equities by 2030, could unlock £75 billion of investment for high growth businesses, creating new opportunities and deal flow within both our Maven and Amati businesses.

Outlook

Investment markets are likely to remain volatile for some time, and while we saw some improvement in market sentiment during the last quarter of the financial year, we expect flows to remain subdued while market conditions remain challenging. We continue working to drive greater efficiency in our business, as well as pursuing key initiatives to drive an acceleration in flows once market conditions normalise, including the migration of existing assets under advice to AuM as recently acquired business engage with the Group's expanded investment proposition. 

We will maintain our focus on client service and continue to adapt our business model to our clients' needs and the changing market, integrating asset management and financial planning to build upon our established brand, which is recognised for delivering holistic advice and bespoke asset or investment management options.

Our services

Our core pension and wealth management offering serves a wide demographic cross-section including affluent families and the higher end of the market, including controlling directors and owner-managed businesses, professionals, executives, and retirees.

We intend to extend our reach to new client demographics as we develop both our investment and service offerings. The Group's revenue mix changed as follows during the year, principally as a result of recent acquisitions:

· 45.7% investment and asset management (2022: 46.6%);

· 20.7% private equity asset management (2022: 24.2%);

· 21.3% pension consultancy and administration (2022: 18.2%);

· 6.2% property management (2022: 5.8%); and

· 6.1% employee benefits (2022: 5.2%).

We aim to operate a seamless structure to achieve continued growth across our core pillars of advice, investment and administration while delivering exceptional client outcomes, specifically through:

· New client wins and greater integration across the value-chain for existing clients;

· Enhancing the Group's investment proposition;

· Further investment in developing the Group's digital platform and client portal;

· Simplifying administration processes and improving productivity; and

· Accelerating growth through strategic acquisitions. 

Assets under management, administration and advice

Unlike many wealth managers, more than one third of the Group's revenues are fee-based, rather than being linked to the value of assets under management, administration or advice[9], giving our business a resilient revenue profile that is less sensitive to market performance. The total client assets of the Group and its associate of £15.3bn at 31 May 2023 (2022: £14.9bn) with over £11.4bn in advisory assets and summarised as follows:

The movement in total client assets is analysed as follows:

· A (£59.3m) decrease (2022: £172.2m increase) in SIPP and SSAS assets under administration driven by a 1.1% decrease (2022: 0.1% increase) in the number of schemes being administered at the year-end, comprising a 1.0% increase (2022: 2.7%) in the number of direct[13] schemes to 7,172 (2022: 7,098) and a planned (5.0%) (2022: (4.2%)) decrease in the number of schemes the Group operates on an administration-only basis to 3,785 (2022: 3,986). Some years' ago, the Group was appointed to operate or wind-up several SIPP portfolios following the failure of their previous operators, with the lower number of schemes due in part to the transfer of certain members of these distressed portfolios to more appropriate arrangements;

· A £187.1m increase (2022: £0.6m) in the value of assets held in corporate pension schemes advised by our employee benefits business following a number of new client wins and renewals in the year. These revenues are not linked to the value of client assets in the way that certain of our wealth management revenue streams are, although market performance and economic uncertainty can impact clients' ability to increase investment in their schemes. Our corporate client portfolio remains well diversified by sector and geographically;

· A £501.0m increase (2022: £1,936.3m) in personal wealth and other assets under management and advice, with the acquisition of Doherty Pension & Investment Consultancy Limited adding £631.7m of client assets. The 376 (2022: 511) new personal clients[14] won during the year was partially offset by some natural client attrition, with the addition of acquired clients resulting in a 13.5% increase (2022: 44.5% increase) in the total number of personal clients[15] to 11,925 (2022: 10,506);

· A (£271.3m) decrease (2022: (£95.6m)) in Amati's funds under management (excluding Mattioli Woods' client investments), primarily due to market falls reducing the value of funds within the TB Amati UK Smaller Companies Fund to £586.0m (2022: £840.3m), partially offset by positive growth in the TB Amati Strategic Metals Fund to £87.1m (2022: £77.6m) and the TB Amati Strategic Innovation Fund to £5.9m (2022: £1.1m) at the year-end; and

· A £50.9m increase to £817.9m in the value of assets managed by Maven. Growth was mainly driven by £26.8m of new investment into the Maven VCTs, additional commitments from existing regional fund mandates and new tender wins. This was complemented by an increase in the value of private equity investments through mix of valuation increases and net inflows, highlighting the quality of Maven's investment portfolio and further supporting the acquisition rationale.

9 Revenue for the year ended 31 May 2023 was split 37% (2022: 35% restated) fixed, initial or time-based fees and 64% (2022: 52%) ad valorem fees based on the value of assets under management, advice and administration.

10 Certain pension scheme assets, including clients' own commercial properties, are only subject to a statutory valuation at a benefit crystallisation event.

[1]1 Value of funds under trusteeship in SIPP and SSAS schemes administered by Mattioli Woods and its subsidiaries.

[1]2 Assets under management of £829.2m (2022: £1,100.5m) excludes £73.0m (2022: £93.6m) of Mattioli Woods' client investment included within SIPP and SSAS, employee benefits and personal wealth and other assets and excludes £11.7m (2022: £14.8m) of crossholdings between the TB Amati Smaller Companies Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT plc.

13 SIPP and SSAS schemes where the Group acts as pension consultant and administrator. SIPP and SSAS schemes administered by SSAS Solutions reclassified as direct during the year.

14 New personal clients includes from acquired businesses.

[1]5 Includes personal wealth clients with SIPP and SSAS schemes operated by third parties.

Key performance indicators

The Directors consider the key performance indicators ("KPIs") for the Group are as follows:

Alternative performance measures

The Group has identified certain measures that it believes will assist in the understanding of the performance of the business. Recurring revenues, organic revenues, adjusted EBITDA, adjusted profit before tax ("adjusted PBT"), adjusted profit after tax ("adjusted PAT"), adjusted EPS and adjusted cash generated from operations are non-GAAP alternative performance measures, considered by the Board to provide additional insight into business performance compared with reporting the Group's results on a statutory basis only.

Accounting standards require the contingent consideration payable on certain acquisitions to be recognised as an expense in the income statement rather than as a capital payment. On certain acquisitions, the Board has included employment-related conditions for the payment of contingent consideration to protect shareholder value. While the Board accepts this is the required treatment for its reported results, adjusted measures of the Group's profitability, including adjusted EBITDA, adjusted PBT, adjusted PAT and adjusted EPS, have been amended to add-back items including £1.5m of acquisition-related costs and £6.9m of contingent consideration recognised as remuneration.

The Board has also included technology-related costs as an add-back given the specific investment currently being and planned to be made over the coming two years to migrate to a Group wide administration platform. These costs are specific to the migration project and are expected to reduce post-completion.

These alternative performance measures may not be directly comparable with other companies' adjusted measures and are not intended to be a substitute for, or superior to, any IFRS measures of performance. However, the Board considers them to be important measures for assessing underlying performance, used widely within the business and by research analysts covering the Company.

Supporting calculations for alternative performance measures and reconciliations between alternative performance measures and their IFRS equivalents are set out in the alternative performance measure workings section of the Annual Report.

Financial performance and future developments

Revenue

Group revenue was up 2.8% to £111.2m (2022: £108.2m), reflecting organic growth of 3.7% (2022: 10.0%) and new business wins, partially offset by the market impact on the value of client assets, placement and performance fees of acquisitions.

Revenue grew across most business segments, with growth in investment and asset management revenues driven by the contribution from recent acquisitions. This, together with the addition of private equity management fees from Maven, increased revenues linked to the value of clients' assets to 63% (2022: 65%) of total revenues.

Employee benefits expense

As in previous years, the major component of the Group's operating costs is our employee benefits expense of £60.8m (2022: £59.6m) representing 54.7% of revenue (2022: 55.0%), with the increase including discretionary staff bonuses totalling £4.7m (2022: £4.6m) and deferred consideration presented as remuneration £6.9m (2022: £9.7m).

The Group's total headcount increased to 896 (2022: 847) as at 31 May 2023, with retention of the experienced teams at each of the acquired businesses and net positive recruitment of consultants and support staff adding 49 staff. The number of core consultants increased to 138 (2022: 133) and we plan to continue this growth by increasing the size of the Mattioli Woods training academy to recruit, train and develop new consultants as well as experienced consultants to expand our distribution network.

We continue to invest in building capacity across our IT, administration and compliance teams, with further investment in training across all parts of the Group.

Other administrative expenses

Other administrative expenses decreased to £18.2m (2022: £19.8m), with £1.5m (2022: £3.7m) of costs incurred on prospective or completed acquisitions during the year and £0.9m invested in development of our new client relationship management system. Other overheads, including professional costs and software licence costs were impacted by inflationary cost increases. Management takes a rigorous and proactive approach to managing costs while continuing to invest in our people, technology and infrastructure to generate improved operational efficiency.

Share-based payments

Share-based payments costs of £2.0m (2022: £1.7m) represent the cost of options expected to vest under the Company's long-term incentive plans and the cost of matching shares awarded to employees under the Company's Share Incentive Plan.

Net finance costs

The Group maintained a positive net cash position throughout the year, with increased net finance costs of £0.6m (2022: £0.9m) reflecting credit interest of £1.1m (2022: £0.08m) offset by £1.0m (2022: £0.9m) of non-cash notional finance charges on the unwinding of discounts on long‑term provisions and £0.2m (2022: £0.1m) of interest on the lease liabilities recognised under International Financial Reporting Standards ("IFRS") 16.

Taxation

The effective rate of taxation on reported profit on ordinary activities was 35.4% (2022: 49.1%), above the standard rate of tax of 25% (2022: 19.0%). This is primarily due to consideration on acquisitions accounted for as remuneration and acquisition-related fees being non-deductible for tax purposes, together with certain expenses associated with sponsorship and other business development activities.

The net deferred taxation liability carried forward at 31 May 2023 was £28.1m (2022: £26.7m).

Profitability and earnings per share

Profit before tax was up 48.4% to £11.9m (2022: £8.0m), with adjusted profit before tax up 3.7% to £30.6m (2022: £29.5m). The increased revenues were partially offset by the impact on employee benefits expense of pay awards, recruitment and the impact of businesses acquired during the last two years and increased discretionary staff bonuses, professional fees and IT costs. These changes translated into an increase in operating profit before financing of 57.5% to £11.5m (2022: £7.3m) and adjusted EBITDA up 1.8% to £33.2m (2022: £32.6m), with adjusted EBITDA margin of 29.8% (2022: 30.1%).

We continue to focus on delivering great client outcomes and addressing their evolving needs. The implementation of a Group-wide client relationship management system will lead to improved operational efficiency such as increased client caseloads within our consultancy and administration teams and create additional business capacity in future periods. We are focused on streamlining and automating our administration processes through initiatives such as the adoption of electronic signatures, creating a scalable operating model and making Mattioli Woods easier to do business with. Over time, we anticipate these changes will deliver improved margins and cost savings for both us and our clients.

The Board considers adjusted EBITDA to be a relevant measure for investors who want to understand the underlying profitability of the Group, adjusting for items that are non-cash or affect comparability between periods as explained in the alternative performance measures section, as follows:

Adjusted PBT, adjusted PAT and adjusted EPS are additional measures the Board considers to be relevant for investors who want to understand the underlying earnings of the Group, excluding items that are non-cash or affect comparability between periods as follows:

As explained in Note 17, client portfolios and brand names acquired through business combinations are recognised as intangible assets. The amortisation charge for the year of £7.9m (2022: £7.2m) associated with these intangible assets has been excluded from adjusted PAT and adjusted EPS because the Board reviews the performance of the business before these charges, which are non-cash and do not apply evenly to all business units.

Adjusted EPS[18] of 47.8p (2022: 48.3p) was down (0.9%) and basic EPS was up 79.9% to 14.9p (2022: 8.3p), driven by the positive impact of organic growth, cost management and recent acquisitions. This includes an addback for other investment impairment which is considered as outside of normal trading. EPS was also impacted by a lower effective tax rate of 35.4% (2022: 48.8%) and the issue of 290,151 (2022: 489,788) shares under the Company's share plans. During the year, 325,998 (2022: 5,325,705) shares were issued as consideration for acquisitions. Diluted EPS was 14.5p (2022: 8.1p).

[1]6 Earnings before interest, taxation, depreciation, amortisation and impairment.

[1]7 Figures in table may not add due to rounding.

Dividends

The Board is pleased to recommend a final dividend of 18.0p per share (2022: 17.8p). This makes a proposed total dividend for the year of 26.8p (2022: 26.1p) a year-on-year increase of 2.7% (2022: 24.3%), demonstrating our desire to deliver value to shareholders and confidence in the outlook for our business.

The Board remains committed to a progressive dividend policy, while maintaining an appropriate level of dividend cover. If approved, the final dividend will be paid on 3 November 2023 to shareholders on the register at the close of business on 22 September 2023, with an ex-dividend date of 21 September 2023.

The Company offers its UK, Channel Islands and Isle of Man resident shareholders the option to invest their dividends in a Dividend Reinvestment Plan ("DRIP"). The DRIP is administered by the Company's registrar, Link Group ("Link"), which uses cash dividend payments to which participants in the DRIP are entitled to purchase shares in the market, which means the Company does not need to issue new shares and avoids diluting existing shareholdings.

For the DRIP to apply to the proposed final dividend for the year ended 31 May 2023, shareholders' instructions must be received by Link by close of business on 13 October 2023.

[1]8 Before acquisition-related costs, amortisation and impairment of acquired intangibles, gain on bargain purchase, deferred consideration as remuneration and acquisition-related finance costs.

Cash flow

Cash balances at 31 May 2023 totalled £45.1m (2022: £53.9m). Cash generated from operations was £36.7m or 160% of EBITDA (2022: £19.6m or 111%), including a decrease in the Group's working capital requirement[19] of £4.8m (2022: (£8.9m) increase), comprising:

· A £1.0m increase (2022: £1.8m increase) in trade and other payables, primarily due to:

-  £2.8m increase arising from the deferred tax liability from the acquisition of client portfolios in Doherty

-  (£2.0m) reduction in other payables relating to the payment of a balance of initial consideration payable for acquisitions in 2022; and

-  £0.2m increase across other balances within trade and other payables.

· A £1.2m increase (2022: £5.3m increase) in trade and other receivables, primarily due to:

-  (£3.5m) decrease in trade receivables due to the unwinding of invoices raised in subsidiaries Custodian Capital and Maven at year-end May 22;

-  £3.6m increase in prepayments and accrued income due to banking interest, block policy insurance, performance fee recognition and timing of premises payments; and

-  £0.9m increase in other receivables.

· A £4.9m increase in provisions during the year (2022: (£5.4m) reduction), primarily due to:

-  £5.4m increase in provisions for contingent remuneration following the previous acquisition of Maven, Doherty; and

-  (£0.5m) decrease across other provision balances, including increases to provisions for client claims.

Adjusted cash generated from operations[20], which excludes items that are incurred as a result of the Group's acquisition activities, increased by 55% to £48.1m (2022: £31.1m), representing 145% of Adjusted EBITDA (2022: 95%).

Outstanding trade receivables increased to 26 days (2022: 37 days), with credit management continuing to be an area of focus, as well as moving from fee invoicing to deduction of income from client's holdings with platform providers where the opportunity arises. Outstanding trade payables increased to 22 days (2022: 15 days).

Net cash outflows from investing activities decreased to £28.6m (2022: £65.3m) with £26.1m (2022: £64.0m) of initial consideration paid on acquisitions completed in the period net of cash acquired.

Net cash from financing activities resulted in a £13.8m outflow (2022: £81.0m inflow), with proceeds from the issue of share capital of £0.9m (2022: £109.4m) to fund acquisitions made in the year. This outflow primarily relates to dividends paid of £13.6m (2022: £11.0m) driven by the increased number of shares in issue following acquisitions made during the year and the dividend per share paid increasing in line with the Group's progressive dividend policy.

[1]9 Working capital defined as trade and other receivables less trade and other payables.

20 Cash generated from operations before acquisition-related costs paid and contingent remuneration paid.

Regulatory capital

The Group and Company continue to enjoy significant headroom on their regulatory capital and liquidity requirements.

The Group's regulatory capital requirements have increased as a result of further growth and diversification of its activities. In addition, the Group's capital is reduced when it makes acquisitions due to the requirement for intangible assets arising on consolidation in the Group's accounts, or investments in subsidiaries in the Company's accounts, to be deducted from Common Equity Tier 1 ("CET1") Capital.

In January 2022, following the introduction of the Investment Firm Prudential Regime ("IFPR"), the value of the Group's CET1 Capital was reduced due to the removal of reliefs on deduction of deferred tax assets and significant investments in financial services entities that were available under the previous regime. The FCA has approved the Company applying the Group Capital Test, which allows investment firms relief from some of the prudential consolidation requirements. This is a more straightforward capital treatment where the Company is simply required to hold enough regulatory capital to support its own capital requirements and its capital investment in its subsidiaries.

At 31 May 2023 the Company had headroom of £11.1m on its regulatory capital requirement of £14.9m, a 75% surplus, giving the Board the flexibility to pursue further acquisition opportunities.

Segmental review

Investment and asset management

The Group's gross discretionary assets, including the multi-asset funds that sit at the heart of our DPM service, Custodian Property Income REIT, the Mattioli Woods Property Securities and Responsible Equity funds, the funds managed by Maven and the Group's associate company, Amati, totalled £4.8bn (2022: £5.1bn) at the year-end, with movements during the year as follows:

Crossholdings comprises holdings in DPM[23],in Amati funds[24] and in other non-DPM crossholdings.

21 Mattioli Woods Property Securities Fund

22 Mattioli Woods Responsible Equities Fund

23 Comprises £12.0m (2022: £13.5m) in Custodian REIT, £66.3m (2022: £60.5m) in MW PSF and £55.2m (2022: £70.3m) in Amati funds.

24 Crossholdings between Multi-Asset Fund ("MAF"): TB Amati Smaller Companies Fund and the Amati AIM VCT plc £11.7m (2022: £16.4m) and non-MAF cross holdings £15.9m (2022: £8.9m).

Investment and asset management revenues generated from the Group's investment services, which include advising clients on both pension and personal investments, our DPM service and management of multi-asset and other specialist funds, increased 0.6% to £50.8m (2022: £50.4m). Fees for services provided by the Group's subsidiary Custodian Capital to Custodian Property Income REIT are included in the 'Property management' segment, with fees generated by the Group's subsidiary Maven included in the 'Private equity asset management' segment.

Income from initial and ongoing portfolio management charges decreased to £25.0m (2022: £26.4m), with lower gross inflows into our DPM service of £248.6m (2022: £482.8m) and the negative market impact on asset values during the year.

Annual management charges on the Mattioli Woods individual structured plans increased to £0.6m (2022: £0.4m) following the release of eight individual plans during the year, attracting investment totalling £31.8m. The prior year also included revenues for the Mattioli Woods Structured Products Fund which was wound down during the period.

Adviser charges based on gross assets under advice of £4.2bn (2022: £3.5bn) increased to £22.6m (2022: £20.9m), driven by new business wins, existing client inflows and the revenue contribution from the acquisition of Doherty during the year, which added assets under advice of £0.6bn.

Total assets under management and advice support the quality of earnings through an increase in recurring revenues, the proportion of the Group's total revenues which are recurring increased to 90.9% (2022: 86.8%) due to the organic growth with pensions consultancy and advice, the launch of two (2022: nil) private investor club and private syndicate investments during the year totalling £8.4m (2022: £nil) and the market impact on placement and performance fees with Maven during the year. As with other wealth and asset management firms, these income streams are linked to the value of funds under management and advice. Therefore they are affected by the performance of financial markets, with the negative impact of market movements on the value of client assets offset by the impact of acquisitions and positive net inflows during the year.

Pension consultancy and administration

Pension consultancy and administration revenues were up 20.3% to £23.7m (2022: £19.7m), with a total of 10,957 (2022: 11,084) SIPP and SSAS schemes administered by the Group, following a 1.0% increase in the number of advised pensions being offset by an expected (5.0%) reduction in the number of schemes operated on an administration-only basis.

Direct[25] pension consultancy and administration fees increased 24.8% to £20.1m (2022: £16.1m) driven by increased client activity during the year. Retirement planning remains central to many of our clients' wealth management strategies and the number of direct schemes increased to 7,172 (2022: 7,098), with 406 new schemes gained in the year (2022: 448). Our focus remains on the quality of new business, with the value of a new scheme averaging £0.3m (2022: £0.3m). We continue to enjoy strong client retention, with a slight reduction in the external loss rate[26] to 2.3% (2022 restated: 2.6%) and the overall attrition rate[27] remaining flat at 4.0% (2022 restated: 4.0%) driven by a changing mix of new clients as we continue to attract clients who we anticipate taking multiple service lines and increased product mix into their portfolios over the coming years, and integrate acquired portfolios.

The number of SSAS and SIPP schemes the Group operates on an administration-only basis fell to 3,785 (2022: 3,986) at the year-end. In prior years, the Group has been appointed to administer a number of SIPPs following the previous operators' failure. Work continues in connection with schemes previously administered by Stadia Trustees Limited, HD Administrators, Pilgrim Trustees Services Limited and The Freedom SIPP Limited, with a 5.0% fall in scheme numbers however, third-party administration fees increased by 2.8% to £3.7m (2022: £3.6m) following alignment of fee structures across various portfolios.

25 SIPP and SSAS schemes where Mattioli Woods acts as pension consultant and administrator.

26 Direct schemes lost to an alternative provider as a percentage of average scheme numbers during the year.

27 Direct schemes lost as a result of death, annuity purchase, external transfer or cancellation as a percentage of average scheme numbers during the year.

The Group's banking revenue was £1.5m (2022: £0.05m) driven by a consecutive increase to the Bank of England's base rate from a historic low of 0.1% in the prior year to 4.5% at 31 May 2023. The Group's banking revenue is expected to increase as a result of further base rate increases following the year end and our introduction of a new pension banking proposition offering clients better interest rates and the Group an enhanced banking margin.

Segment margin increased to 32.0% (2022: 20.0%) driven by increased client activity, banking margin and new business wins with the prior year reflecting the impact of amended revenue share arrangements for our consultancy team as previously disclosed.

Due to the broader market shift away from accumulation and steady savings, we anticipate there will be some natural outflows from our clients' SIPP and SSAS schemes, particularly as the 'baby boom' generation reaches retirement. However, we expect any such decumulation to have a positive impact on the Group's results over this medium-term horizon, with our multi-generational approach, linking our strength in the provision of advice around the cascading of wealth down through the generations, inheritance tax and other planning.

Private equity asset management

Revenue in the year was £23.1m or 20.7% of Group revenue. Recurring revenues of £18.6m were supplemented by £4.5m of non-recurring, but repeatable revenues primarily generated from fund, VCT and investor partner performance and exit fees, highlighting the quality of Maven's investment team and product proposition.

During the year, we continued the integration of Maven's investment proposition across the Group, delivering a number of co-investment opportunities to qualifying Mattioli Woods, Ludlow and Maven clients. We also launched the Maven Milestone Fund, which enables pension clients to invest in forthcoming private equity opportunities, with the Group's advisory clients contributing £5.3m or 95.7% of the fund raise. Maven completed a further co-investment deal with a value of £5.1m with the Group's advisory client contributing £2.4m of the fund raise during the year and has a healthy pipeline of new co-investment opportunities to launch in the current year.

The quality of Maven revenue is underpinned by high recurring revenues of 80.3% (2022: 67.3%) in on-going management fees alongside deal arrangement and performance and exit fees. The deal track record of high-quality performance delivered £50.9m or 6.6% increase in AuM through a combination of net inflows, new tender wins and positive performance despite the market complexities over the last year, noting that several of the private equity investments are linked to markets such as FTSE AIM.

Property management

Property management revenues were £6.8m (2022: £6.3m), despite Custodian Capital's assets under management and administration falling to £529.8m (2022: £618.1m) at 31 May 2023. The decrease in Custodian Capital's AuM was primarily driven by Custodian Property Income REIT's portfolio experiencing an 11.8% like-for-like decline in valuations during the year of £91.6m (2022: increase of £94.0m) compared to a 17.0% market decrease. Since the year end, valuations appear to have largely stabilised and we have seen some optimism returning to real estate markets following a period of economic turbulence when property pricing reacted promptly to the new interest rate environment and to punishing refurbishment/build cost inflation.

Recurring annual management charges represented 88.7% (2022: 98.5%) of property management revenues, the majority of which are derived from Custodian Capital's services to CREIT, with the reduction versus the prior year driven by falls in the fund's net asset value during the period.

In addition, Custodian Capital continues to facilitate direct property ownership on behalf of pension schemes and private clients and manages our Private Investors Club alternative investments, which have been provided to suitable clients by way of private investor syndicates. We are in the process of merging the Private Investors Club with Maven Investor Partners ("MIP"), with a number of new opportunities in the pipeline.

Employee benefits

Employee benefits revenues were up 17.5% to £6.7m (2022: £5.7m), with positive market conditions driven in part by the continued post-pandemic recovery coupled with new client wins and increased uptake of strategic benefits consultancy projects from existing clients. The division's strong operating performance was supported by robust client retention and an accretion in premiums for risk and healthcare cover.

Increasingly, employers are encouraging staff wellbeing and retirement savings as part of their benefits packages and we expect greater emphasis on these as the adoption of flexible working becomes more commonplace, providing opportunities for further growth over the coming years.

Acquisitions

We have developed considerable expertise and a strong track record in the execution and subsequent integration of acquisitions. At the year-end, we had invested over £254m since our admission to AIM in 2005, bringing 35 businesses or client portfolios into the Group.

Previously acquired businesses are integrating well, with combined revenue and cost synergies being £1.3m for the full year, with additional cross-sell opportunities targeted for the new financial year.

There continues to be a high level of M&A activity in the wealth and asset management sector and we were pleased to complete the acquisition of Doherty's and our investment in White Mortgages during the year. We have a strong pipeline of bolt-on acquisition opportunities to assess, as well as potentially more substantial opportunities in the longer term. We plan to build on our track record of successful acquisitions by continuing to assess and progress opportunities that meet our strict criteria.

Relationships

The Group's performance and shareholder value are influenced by other stakeholders, principally our clients, suppliers, employees, regulators, the Government and our strategic partners. Our approach to all these parties is founded on the principle of open and honest dialogue, based on a mutual understanding of needs and objectives.

Relationships with our clients are managed on an individual basis through our client relationship managers and consultants. Employees have individual performance development reviews and employee forums also provide a communication route between employees and management. Mattioli Woods also participates in trade associations and industry groups, which give us access to client and supplier groups and decision-makers in the Government and other regulatory bodies. Mattioli Woods is a member of the Association of Member-directed Pension Schemes, Quoted Companies Alliance and World Broker Network.

Resources

The Group aims to safeguard the assets that give it competitive advantage, including its reputation for quality and proactive advice, its technical competency and its people.

Our core values provide a framework for integrity, leading to responsible and ethical business practices. Structures for accountability from our consultancy and administration teams through to senior management and the Group's Board are clearly defined. The proper operation of the supporting processes and controls are regularly reviewed by the Audit Committee and the Risk and Compliance Committee and take into account ethical, ESG and consumer duty considerations, including procedures for 'whistle-blowing'.

Our people

Over 31 years since founding the Company, I continue to be thankful and humbled for the enduring culture of professionalism, positive mindset and commitment that our entire team continues to show when managing our clients' affairs throughout another complex year.

Our Executive team continues to bring new ideas to drive further growth and generate sustainable shareholder returns. Following the year end, the Board was pleased to announce the appointment of Michael Wright as Deputy Chief Executive Officer. In this new role, Michael will lead and support the delivery of certain strategic goals alongside the Executive team, while retaining his current responsibilities.

The Board recognises the importance of good communication and will seek to ensure the strong client-centric behaviours embedded within the business are preserved. The benefit of changes made to our governance structure in the prior year are now being realised. Outside of board meetings, the Non-Executive Directors have held a number of meetings with employees and shareholders to share experiences more directly.

Total headcount at 31 May 2023 had increased to 896 (2022: 847), primarily as a result of recent acquisitions and the recruitment of consultants and support staff. We remain committed to investing in the training and professional development of our people to create capacity to deliver further growth. We continue to enjoy a strong team spirit and facilitate employee equity ownership through the Mattioli Woods plc Share Incentive Plan ("the Plan") and other share schemes. At the end of the year, 59% of eligible staff had invested in the Plan (2022: 65%) and we continue to encourage broader staff participation.

The Mattioli Woods Employee Benefit Trust ("the Trust") held shares for the benefit of the Group's employees and, in particular, to satisfy the vesting of awards made under the Company's various share schemes. The shares held by the Trust were sold in the final quarter of the year with proceeds set aside to be utilised for the benefit of staff who are experiencing financial hardship or other issues in their lives, or to provide financial benefit to staff members as deemed appropriate by the Executive Directors. 

Forward-looking statements

The Strategic Report is prepared for the members of Mattioli Woods and should not be relied upon by any other party for any other purpose. Where the report contains forward-looking statements, these are made by the Directors in good faith based on the information available to them at the time of their approval of this report. Consequently, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risks underlying such forward-looking statements and information. The Group undertakes no obligation to update these forward-looking statements.

Principal risks and uncertainties

The Board is ultimately responsible for risk management and regularly considers the most significant and emerging threats to the Group's strategy, as well as establishing and maintaining the Group's systems of internal control and risk management and reviewing the effectiveness of those systems. The Board and senior management are actively involved in a regular risk assessment process as part of our risk management framework, supported by the requirements of the Investment Firm Prudential Regime ("IFPR") internal capital and risk assessment ("ICARA") process. The ICARA assesses the principal risks facing the Group. Stress tests include consideration of the impact of a number of severe but plausible events that could impact the business. The ICARA also takes account of the availability and likely effectiveness of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks.

Day-to-day, our risk assessment process considers both the impact and likelihood of risk events that could materialise and affect the delivery of the Group's strategic goals. Risk owners regularly review and update where needed the controls in place to mitigate the impact of the risks, with independent review and challenge given by the Risk Management team. Throughout the Group, all employees have a responsibility for managing risk and adhering to our control framework.

There are a number of potential risks that could hinder the implementation of the Group's strategy and have a material impact on its long-term performance. These arise from internal or external events, acts or omissions that could pose a threat to the Group. The principal risks identified as having a potential material impact on the Group are detailed below, together with the principal means of mitigation. The risk factors mentioned do not purport to be exhaustive as there may be additional risks that materialise over time that the Group has not yet identified or deemed to have a potentially material adverse effect on the business:

Emerging risks, including legislative and regulatory change, have the potential to impact the Group and its strategy. The Board, Audit Committee and Risk and Compliance Committee continue to monitor emerging risks and threats to the financial services sector including, for example, the increased number of attempted cyber and phishing attacks, regulatory change, climate change and scenarios potentially arising from political and economic developments, including implications from ongoing world conflicts, and change in political leadership. We intend to continue to focus on operational resilience and enhancing the control environment over the next 12 months.

Section 172 statement

The Directors consider that in conducting the business of the Company over the course of the year they have complied with Section 172 (1) of the Companies Act 2006 ("the Act") by fulfilling their duty to promote the success of the Company and act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.

Engaging with stakeholders

The continued success of our business is dependent on the support of all of our stakeholders. Building positive relationships with stakeholders who share our values is important to us and working together towards shared goals assists us in delivering long-term sustainable success.

To fulfil their duties, the senior management team, the Directors of each subsidiary company and the Directors of the Group itself take care to have regard to the likely consequences on all stakeholders of the decisions and actions they take, with a long-term view in mind and with the highest standards of conduct, in line with Group policies. Where possible, decisions are carefully discussed with affected groups and are therefore fully understood and supported when taken.

Reports are regularly made to the Board by the senior management team about the strategy, performance and key decisions taken, which provides assurance that proper consideration is given to stakeholder interests in decision-making, and the Board uses this information to assess the impact of decisions on each stakeholder group as part of its own decision-making process.

The Group's governance structure allows the Board and the senior management team to have due regard to the impact of decisions on the following matters specified in Section 172 (1) of the Act:

Methods used by the Board

The main methods used by the Directors to perform their duties include:

· Board strategy days to review all aspects of the Group's business model and strategy and assess the long-term sustainable success of the Group and its impact on key stakeholders. An Executive team strategy day was held during the year, with a Board strategy day and a number of other strategy days and sessions planned to take place in the current year;

· The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs, such as acquisitions. Board members regularly meet with members of the senior management team;

· The Board is responsible for the Company's ESG activities set out in the Strategic Report. Iain McKenzie is appointed as the designated executive with responsibility for ESG;

· The Board's risk management procedures set out in the Corporate Governance Report identify the potential consequences of decisions in the short, medium and long term so mitigation plans can be put in place to prevent, reduce or eliminate risks to the Company and wider stakeholders;

· The Board sets the Company's purpose, values and strategy, detailed in the 'Our approach' and 'Strategy' sections of the Strategic Report, and the senior management team ensures they align with its culture;

· The Board carries out direct shareholder engagement via the AGM and Directors attend shareholder meetings on an ad hoc basis;

· External assurance is received through internal and external audits and reports from brokers and advisers; and

· Specific training for existing Directors and induction for new Directors is as set out in the Corporate Governance Report.

Principal decisions in the year

Mattioli Woods comprises a number of operating segments, through which the Executive team engages with each segment's unique stakeholders as well as other businesses in the Group. The governance framework in place during the year delegated day-to-day operational authority to a number of sub-committees covering all parts of the business including but not limited to advice, administration, investment management, operations, change management, risk and compliance, acquisition activity and integration management, all subject to a list of matters reserved for decision by the Executive Committee or the full Board only, up to defined levels of cost and impact.

The Board has a formal schedule of matters specifically reserved to it for decision, including strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business and approval of budgets and financial statements.

The principal non-routine decisions taken by the Board during the year were:

· The Board considered the strategic rationale for all acquisitions, the associated risks and the performance impact on the Group. Acquisitions during the year including Doherty Pension and Investment Consultancy Limited and the majority stake in White Mortgages Limited are further detailed in Note 3 to the financial statements;

· The review and decision not to progress with a number of other potential acquisitions during the year;

· Approval to sell shares held in the Employee Benefits Trust during the year with proceeds to be used for the benefit of staff;

· Each year the Board conducts a review of its effectiveness which was led by an external third-party during the year. The external facilitator recommended that development plans be established for all Board members including on-going training for new and existing members to ensure legislative and regulatory changes are communicated across all roles; 

· The appointment of Michael Wright as Deputy Chief Executive Officer. The Board considered that Michael's extensive experience and dedication made him the ideal candidate for this pivotal role; and

· Determination of dividend. The Board recommends a final dividend of 18.0p per share (2022: 17.8p). This decision was taken in conjunction with a review of returns to all key stakeholders, including staff in the form of salary awards and bonus payments.

Due to the nature of these decisions, a variety of stakeholders had to be considered as part of the Board's discussions. Each decision was announced at the time, so that all stakeholders were aware of the decisions.

Stakeholders

The Directors are aware there are a number of other stakeholders, in addition to shareholders, who will be affected by the actions of the Group. The below table outlines how we consider these stakeholders and how we engage with them:

Further information on the ways in which the Board engages with stakeholders is set out in the Corporate Governance Report and the Strategic Report.

Environmental, social and governance performance and strategy

As a Group, we take our environmental, social and governance commitments seriously, and have formed a dedicated Board Environmental, Social and Governance Committee, together with investing in our people and capabilities in these important areas.

Due to the Group's activities, Mattioli Woods impacts the local and global environment, and it is committed to monitoring the environmental performance of its assets and using this information to develop robust strategies to minimise its environmental impact where possible. The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 implement the Government's policy on streamlined energy and carbon reporting (SERC), requiring disclosure of the environmental performance of the Group's assets through calculating the Group's greenhouse gas ("GHG") emissions and subsequently, setting strategies to minimise these emissions. The following information summarises the Group's environmental performance over the year.

Methodology

GHG emissions are quantified and reported according to the Greenhouse Gas Protocol. Consumption data has been collated and converted into CO2 equivalent ("CO2e") using the UK Government 2021 and 2022 Conversion Factors for Company Reporting to calculate emissions from corresponding activity data. To collect consumption data, the Group has reviewed utility invoicing and its staff expense software to track business mileage in Group-owned vehicles and employee-owned vehicles. All the Group's GHG emissions are attributable to the United Kingdom, as 100% of the Group's occur within the United Kingdom. Data disclosed relates to our financial reporting period, which is 1 June 2022 to 31 May 2023, as well as the comparative previous year in 2021 to 2022, presented as 2023 and 2022 respectively. We have calculated energy intensity and emissions intensity using the total floor area which is considered to best represent the scale of the business compared to using alternative measures such as headcount, as the majority of energy usage is from buildings.

In 2023, the Group instructed a new consultancy to prepare its SECR statement, which has resulted in a change to the methodology. This has improved data estimations to provide a more accurate and complete overview of the company's environmental impact. This includes estimating and gap filling instances where data was either partially or entirely unavailable, which was not completed in previous years. Further details on the estimation methodology and application is provided within the 'Assumptions and estimations' section. As part of the data collection, a materiality assessment was applied to determine which indicators were relevant to the Group. We have assessed each indicator in terms of its impact on the Group and its perceived importance to stakeholders. Further details on immaterial and excluded emissions are provided in the 'Reporting boundaries and limitations' section.

Sustainability is a key priority for Mattioli Woods and we are working towards putting in place an environmental vision and strategy, including the development and implementation of key performance indicators and long-term targets for Scope 1 and 2 emissions. No electricity or gas consumption is currently directly from renewables. This strategy will also involve setting a plan of building and car fleet optimisation opportunities.

Reporting boundaries and limitations

The GHG sources that constitute our operational boundary for the reporting period are:

· Scope 1: Natural gas combustion within boilers, gas oil combustion within generators and road fuel combustion within owned vehicles.

· Scope 2: Purchased electricity consumption for our own use.

· Scope 3: Fuel consumption from employee-owned cars for business use.

Business travel from third party operators, where the company is not responsible for purchasing fuels, has been excluded within this reporting, as it is considered immaterial and sufficient data to estimate this is not available. Fugitive emissions from refrigerant gases from office air conditioning are considered immaterial and have been excluded. The company leases the overwhelming majority of its buildings and therefore does not have responsibility for air conditioning systems, and no major leaks are known to have occurred in its owned buildings. Water consumption and waste generation are also considered immaterial and have been excluded from reporting. Sufficient collection processes and data quality are unavailable to support accurate reporting against these measures, and the impact of these sources is significantly lower than that of energy consumption.

Assumptions and estimations

Actual data from supplier invoices was prioritised for reporting however, in instances where this was not available partially or entirely, consumption data was estimated. While instances where no data was available at a building continue to be estimated, data completeness has been reviewed in 2023 to ensure there is full coverage over the reporting period. This has resulted in 48% of the 1,758,388 kWh of energy consumption from the operation of buildings being estimated.

The estimation method applied in each case was chosen based on the number of months in the reporting period for which actual data was available for each asset. When three or more months of consumption data was available, the missing months were gap filled based on the average consumption per month for the asset. When less than three months of actual data was available the Better Buildings Partnership ("BBP") 2020 Real Estate Environmental Benchmark ("REEB") intensities were used to estimate the annual consumption from the floor area.

During this reporting period, the Group continued to lease three assets which were vacant. When no consumption data was available, the average intensity of the vacant assets that did have invoice data was used to estimate the gaps. As quantities of fuel were unavailable for business travel, mileage data was used to convert business travel into both GHG emissions and energy consumption equivalent (kWh).

Performance

The table below shows absolute performance of our Scope 1, 2 and 3 emissions for the year, which represents the Group's third year of reporting under the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018:

Corporate social responsibility

Our commitment to operating responsibly

At Mattioli Woods we continue to work through the challenges placed in part by the ongoing level of market uncertainty. Our dedicated team has allowed us to rise to these challenges and continue making a positive contribution to our stakeholders - our clients, shareholders, staff, suppliers and chosen charity partners alike. We believe this is responsible business in action. In 2023, our Risk and Compliance Committee reviewed where the Group currently stands and has developed a strategy defining how we will prioritise and accelerate environmental, social and governance ("ESG") workstreams in the business. This included the appointment of dedicated roles and creation of an internal Executive ESG Committee to oversee and manage these workstreams.

Our approach to achieving good governance comes from a passion to ensure we do the right things for our clients, and this is embedded in the culture of the Mattioli Woods team, where staff are encouraged to thrive and develop in their roles and the business in turn supports them in their own career development. We have recently introduced a talent programme across the business and our record of growing our own and promoting from within adds to the sense of teamship which underpins everything we do, a prime example being the appointment of Michael Wright, who joined the business as a graduate in 2004, as Deputy CEO this year.

Sustainability

The Group continues to grow, and we recognise that we have a responsibility to support our profitable expansion by operating in a sustainable manner. As we continue to operate in a complex marketplace, we have demonstrated we can deliver great client outcomes in different and sustainable ways, with staff continuing to work flexibly throughout the year. This will inform our thinking as to how we can deliver strong and sustainable shareholder returns, including investing in new technology to facilitate sustainable growth over the longer term. We consider our ability to address ESG risks and Consumer Duty requirements for the business and consider how these could affect our stakeholders. Incorporating climate risks into our risk management framework enables us to effectively foresee potential climate related challenges. Additionally, this framework serves as a tool to evaluate risks and respond to possible weaknesses and hazards. By conducting scenario analysis, we aim to guarantee that our financial and strategic choices consider a diverse array of potential climate conditions and concerns.

Our environmental footprint has grown through the acquisitions completed in the last two years. We plan to consolidate our footprint as integration of acquired businesses continues, ensuring that wherever possible, we minimise any negative impacts in this area. The modern design and construction methods used in our Leicester office means we are harnessing the latest technology to support our environmental aims and, while this is a major contributor in itself, we recognise that smaller changes to how we do things can make incremental contributions on our journey to net zero. These include reducing the amount of paper we use through the adoption of technology, including an on-line portal to deliver client valuations, supporting our move to a paperless environment. In addition, our consultancy team is making increasing use of hybrid and efficient fuel technology in the vehicles they use. Alongside these commitments, we are committed to our journey to Net-Zero and our long-term vision now reflects our climate objectives to reach this goal. It is important to Mattioli Woods to ensure that the timescale we commit to reach our Net Zero goal is realistic and considers relevant information including accurate data collection and third-party advice. As we embark on this journey towards Net-Zero, we remain dedicated to transparency and accountability. We will keep our stakeholders informed of our progress through regular updates and reports, ensuring that our commitment to Net-Zero is tangible and measurable. We also recognise, while we may not have directly incorporated Biodiversity considerations into our previous initiatives, we are dedicated to driving positive change in this area. We believe that our role extends beyond financial transactions and encompasses a responsibility to contribute to the well-being of our planet and the communities that we are part of.

In 2023, we hired a full time ESG Partner who works to support the Group's Environmental Social and Governance Strategy. Our partner is committed to integrating sustainable and responsible practices into the company's operations. With an in-depth understanding of ESG factors and their implications, they have been hired to ensure that the business upholds the highest standards of sustainability. Alongside their work, they have also organised and created an ESG Engagement team which includes 20 members of staff from all office locations and departments to ensure the whole Group are included in decision making and suggestions regarding ESG and sustainable practices. The ESG Partner is also working towards disclosing our mandatory Task Force on Climate-related Financial Disclosure (TCFD) report in June 2024. Mattioli Woods knows that this TCFD disclosure is important for us to action because it helps us to assess and disclose our climate related risks and opportunities. It is also necessary for Mattioli Woods to comply with evolving regulatory requirements, meet investor's expectations and ensure that reputational expectations are maintained. We know that by committing to these requirements will position us for long-term sustainability and success in a rapidly changing world focused on addressing climate change.

The Mattioli Woods Responsible Equities Fund continues to perform well and our proprietary ESGi process seeks to score our underlying investments on the ESG risk they pose. This forms a key element of our investment research process across our product range. We are continuing to explore how we can offer our clients access to additional bespoke 'ESG responsible' investment propositions.

TCFD Integration

In recognition of the increasing significance of climate-related risks and opportunities to our business operations and stakeholders, the Group has worked to integrate the recommendations of TCFD into our annual report and broader business strategies. This is a journey Mattioli Woods is beginning and we are committed to being transparent with investors and stakeholders in our build up to producing the initial report in 2024.

Ahead of producing our TCFD report in 2024 and as part of our Net-Zero plans, we are continuing to work on specific targets and creating measurable performance indicators, such as:

1. Our ESG Task Force

2. Educating Employees

3. Engaging with Suppliers:

4. Development of regular Reporting and Monitoring

5. Stakeholder Engagement: Engage with clients, shareholders, and other stakeholders to communicate the company's commitment to Net Zero and gather feedback and suggestions for improvement

6. Continuous Improvement: Continually assess and reassess strategies and practices to identify areas for improvement. Stay up-to-date with evolving ESG trends and best practices, adjusting the Net Zero plan accordingly.

Other key principles that we are focussed on maintaining and developing include:

· Board Commitment: we have the full support of our Board and Executive teams. They have been key in ensuring the importance of challenging, assessing and addressing climate-related topics, as well as continuing to implement strong social and governance policies throughout the business. In 2023 we released our ESG policy which outlines our approach, goals and targets, reporting framework, and our roles and responsibilities. The policy was created alongside a new Executive ESG Committee which was also formed during the year. The committee ensures that ESG, particularly climate related topics, are considered across relevant business decisions.

· Continuous Learning and Capacity: As we mature and continue to develop our understanding of TCFD, we plan to provide training sessions and have partnered with industry experts to provide insights and knowledge, ensuring that our team is well-equipped to embed TCFD principles across the Group. Examples include utilising third party experts to run targeted workshops including Net-Zero in the future which initially to our senior leadership team and the ESG committee.

· Risk Management: Our integration of climate risks into our risk management framework allows us to appropriately anticipate climate risks. Alongside this, we use the framework to assess risk and act on potential vulnerabilities and threats. Through scenario testing, we plan to ensure that both our financial and strategic decisions account for a range of possible future climate states and issues.

· Data-Driven Decision Making: Data forms the foundation upon which our disclosures are built, serving as a guide for our strategic initiatives. We are committed to continue to invest in data collection methodologies, collaborative partnerships, working with third-party entities, and the implementation of management tools throughout the business.

· Opportunities: In addition to assessing risks, we are equally focused on identifying and leveraging climate-related opportunities that align with our business ethos. Our proprietary ESGi process seeks to score our underlying investments on the ESG risk they pose. This forms a key element of our investment research process across our product range.

For clients who wish to access our multi-asset strategies but have concerns with particular companies or industries, we have a range of Ethical multi-asset portfolios. We offer 9 risk-rated model portfolios, with criteria around 11 ethically contentious areas.

The impacts of these risks and opportunities are integrated into our business model and strategy, driving initiatives such as our Responsible Equity Fund, which seeks to invest in companies that promote the positive development of our world, in areas such as clean energy, improved nutrition, sustainable agriculture and inclusive and equitable education.

· Resilience Through scenario testing as part of our operational resilience programme of work, we ensure that both our financial and strategic decisions account for a range of possible future climate states and issues.

To help us achieve our goals, we are establishing targets and KPIs, to ensure that we stay on course. Examples include the ESG Scorecard which is distributed quarterly and reports and monitors base level sustainability metrics such as paper usage throughout the business, water usage and our Scope 1,2 and 3 emissions percentage change.

· Third-party Verification: we have enlisted a third-party company, to assist with validating and reporting on our commitment alongside aiding our journey to our TCFD disclosure in June 2024.

· A Pledge for Improvement: Acknowledging the dynamic and constantly shifting nature of the climate discourse, we hold steadfast in our commitment to an ongoing journey of refinement and enhancement. At the core of this unwavering dedication lies a structured framework of iterative processes that form the backbone of our continuous improvement plan.

We have established a robust system of feedback loops which act as channels for insights from our stakeholders. We also use internal reviews as a method of improving.

· Facilitating Change: As we embed TCFD recommendations within Mattioli Woods, we also champion their broader adoption within our industry. We understand that collective action is crucial to navigating the challenges posed by climate change. Our own Responsible Equity fund scores our underlying investments on the ESG risks that they pose for our clients.

  Our alignment with TCFD guidelines is a reflection of our commitment to the long-term sustainability of Mattioli Woods and the communities in which we operate.

Charities and communities

Making a difference within our local communities matters to us and we continue to have a high level of engagement in this area. Each year we sponsor businesses, sports and community awards. Over our history, our business has benefited from winning numerous awards and we feel it is right to help other businesses reap the rewards of such accolades. In addition, we sponsor a variety of local clubs, business and sports related events across the country.

In 2022 we announced British Heart Foundation ("BHF") as our national charity partner for the next two years, a charity that embodies the values and culture of the Group and who we support nationally, helping their mission to raise awareness of how to keep hearts healthy through lifestyle changes.

Every year, the Group's associate company Amati has a commitment to donate 10% of its profits to good causes. We engaged our staff to suggest charities and causes they felt deserving of a donation enabling the Group to support numerous charities throughout the UK, including those that are local to where our staff live. Total charitable donations by the Group and its employees (through payroll giving) were £0.2m (2022: £0.2m) for the year.

We have also been able to offer work experience placements and summer internships to provide individuals with experience in financial services, some of which have resulted in permanent employment.

We recognise our tax contributions also play an important role for the communities in which we operate, with the Group's total tax contribution summarised as follows:

Developing our people

The Group understands the importance of supporting and building the future for the next generation. We are proud of the positive relationships we have built with various schools, colleges and universities where we have supported with interview and CV skills, attended recruitment fairs and posted vacancies, allowing students to apply for roles within Mattioli Woods. We will continue with this programme, allowing more students leaving education to join Mattioli Woods on trainee and development programmes.

We continue to create opportunities for new recruits and greater emphasis in being put on our trainee consultant programme which is an 18-month programme for those aspiring to be successful advisers. We plan to significantly increase the number of applicants accepted by the Group as we encourage new talent to begin and develop their careers with us, many of whom will be direct applicants to the programme.

We have also continued to operate our 26-week plan to foster small groups of trainee advisers in a classroom style learning setting, for two days a week, and have successfully delivered these remotely. Each week themed topics, including topics such as tax, pensions and investments, aims to get trainees who have been with the Company for 18 months and completed their level 4 qualification to the point where they are able to develop financial plans.

Trainees work alongside successful consultants in administrative roles and attend consultant-led client meetings. This has been a successful scheme for Mattioli Woods and will continue to be rolled out for new groups of employees who demonstrate the potential to move into consultant roles at the firm. 

Mattioli Woods' graduate and apprenticeship schemes have been running for a number of years and, together with the trainee consultant programme, highlight the firm's motivation to 'grow our own', and we plan to increase the number of applicants accepted by the Group as we encourage new talent to begin and develop their careers with us.

The Group also operates graduate and apprenticeship schemes in other teams including Finance, HR and Change Management, where on the job learning is supported by study toward an externally recognised qualification.

Progression and retention are important to Mattioli Woods. More than ever we are passionate about retaining our valued employees, hence the development of a robust appraisal, and recent succession and development plan being embedded within the Group. In addition, all job opportunities are made available internally before being published externally and in all cases, we follow a fair and consistent process. In 2023, a total of 44 (2022: 54) internal moves successfully took place. 

We have refined our development training and mentoring programmes, which incorporate mentoring, coaching, a buddy system, work-based learning and, in some roles, with exams and course work. We continuously ensure our training and development standards are high, which has resulted in many successful promotions. A recent HR leadership academy was launched for new and existing leaders in the business, where training takes place in cohorts three times a year. We continue to work with training providers to support learning and knowledge building across the Group. 

We understand recognition is important and operate with a transparent approach to promotions. We review pay processes and base pay on fairness and on performance measures. We continue to regularly review and invest in improvements, including new technology and benchmarking to ensure remuneration is aligned across the Group.

Equal opportunities employer including diversity and inclusion

We are committed to promoting equality of opportunity for all employees and job applicants. We aim to create a working environment in which all individuals are able to make best use of their skills, free from discrimination or harassment, and in which all decisions are based on merit.

At Mattioli Woods, we wish to ensure our employees can achieve their potential and therefore, we encourage promotions and to progress from within. We aim to ensure that no job applicant suffers discrimination because of any of the protected characteristics. Our recruitment procedures are reviewed regularly to ensure individuals are treated on the basis of their relevant merits and abilities. Job selection criteria are regularly reviewed to ensure they are relevant to the job and are not disproportionate.

We are an equal opportunities employer and understand that talent is not directed by ethnicity, race, gender/gender identity, sexual orientation, religion, age, disability, pregnancy, maternity, background or social class.

We seek to be the employer of choice where we offer training and development programmes which will encourage employees to retain employment at Mattioli Woods. We attract and employ diverse candidates through various sources:

· Structured training programmes for those wanting a career in financial services, which is open to internal and external applicants; 

· Mattioli Woods invests time in apprenticeships while training on the job, feeding into growing the talent and succession pool;

· We attend university and colleges, talking through the employment opportunities at Mattioli Woods. During FY23, we recruited 21 college and university leavers; and

· The Company currently has a total of 73 employees in a developmental role of which 28 identify as female and 45 as male.

Our vision is to have a respectful and supportive workplace that enables us to attract and retain a diverse and inclusive workforce that represents our clients and the communities across the country. We believe we can achieve this by attracting, retaining and developing a talented workforce, and recruiting candidates who believe in our vision and culture.

The principles of non-discrimination and equality of opportunity also apply to the way in which employees treat clients, customers, suppliers, shareholders and all other stakeholders.

We are extremely committed to our culture and continuously making conscious decisions to improve. We listen to our employees to include them in the positive changes that are made. This year saw the introduction of the Employee Engagement Group, a forum allowing our employees to have a voice in changes they would like to see, and better our two-way communication in creating a positive culture. Our long-term aim is to be an all-inclusive employer, enabling flexibility that works for both males and females. Our wellbeing programme, which is continuously improving with new initiatives, allows all employees to confidently seek support if and when required, ensuring our valued employees feel safe whether it be at work or in their personal life. Being an even more inclusive employer is our aim. 

Modern slavery

Mattioli Woods welcomed the introduction of the Modern Slavery Act 2015 and recognises it has a responsibility to take a robust approach and commitment to preventing modern slavery and human trafficking in all its activities, and in our supply chains.

To enable us to assess whether a particular activity is at high risk of facilitating modern slavery or human trafficking:

· Mattioli Woods holds a register of all its operations, regularly reviewing this in the context of its supply chain and business operations; and

· There are no high-risk activities identified which relate to modern slavery or human trafficking. The Group operates in the UK in financial services and does not source products or services from higher risk regions.

To understand and respond to potential modern slavery and human trafficking risks, our employees are given training while our suppliers are also made aware of our expectations. A copy of our Modern Slavery and Human Trafficking Statement can be found on our website.

We also review our salaries on an annual basis to ensure our employees are not paid below the national minimum wage. We are an established partner with Living Wage Foundation, priding ourselves on ensuring all our employees are paid above the national minimum wage. We provide a package of benefits to all employees, including pension auto-enrolment, income protection and health care, irrespective of the employee's role in the Group.

In September 2022, all employees' benefits were reviewed with some of the benefits being enhanced. In addition, there is an annual salary review which can result in the grant of a pay award, as well as a discretionary bonus.

Anti-bribery policy

We value our reputation for ethical behaviour and upholding the utmost integrity and we comply with the FCA's clients' best interests' rule. We understand that in addition to the criminality of bribery and corruption, any such crime would also have an adverse effect on our reputation and integrity.

Mattioli Woods has a zero-tolerance approach to bribery and corruption and we ensure all of our employees and suppliers are adequately trained as to limit our exposure to bribery by:

· Setting out clear anti-bribery and corruption policies;

· Providing mandatory training to all employees;

· Encouraging our employees to be vigilant and report any suspected cases of bribery in accordance with the specified procedures; and

· Escalating and investigating instances of suspected bribery and assisting the police or other appropriate authorities in their investigations.

Gender pay gap reporting

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 requires all employers with 250 or more employees in the UK to publish details of their gender pay gap. Its aim is to achieve greater transparency about gender pay difference. The analysis is based on data as at 5 April of each year and shows the differences in the average pay between men and women. We issued the latest Gender Pay Gap report in April 2023 which is readily available on our website. The next report will be issued in 2024.

Approval

The Strategic Report contains certain forward-looking statements which are made by the Directors in good faith based on the information available to them at the time of their approval of this Annual Report. Statements contained within the Strategic Report should be treated with some caution due to the inherent uncertainties (including but not limited to those arising from economic, regulatory and business risk factors) underlying any such forward-looking statements. The Strategic Report has been prepared by Mattioli Woods to provide information to its shareholders and should not be relied upon for any other purpose.

The above disclosures from financial highlights to this point constitute the Strategic Report, which has been approved by the Board of Directors and signed on its behalf by:

Ian Mattioli MBE

Chief Executive Officer

12 September 2023

Governance overview

The Board is committed to achieving high standards of corporate governance, integrity and business ethics. We recognise the need to ensure an effective governance framework is in place to give all our stakeholders confidence that the business is effectively run, ensuring good outcomes for our clients and looking after the interests of the Group's shareholders and other stakeholders.

Board structure

The Board has established a sub-committee structure comprising Risk and Compliance, Audit, Remuneration and Nomination Committees. During the financial year ended 31 May 2023 the Group undertook an internal review of the effectiveness of the Board, its sub-committees and the senior management framework. We continued the implementation of a revised governance structure designed to improve execution of strategy, corporate governance and risk management frameworks as determined by the Board, as well as bringing together a senior executive team with responsibility for operational oversight of all key areas in the Group, illustrated as follows:

The executive and senior management team is structured by a primary Executive Committee, which is supported by a structured number of commercial and operational committees across the Group.

The Group's investment and asset management business is managed through the Investment and Asset Management Committee, which ensures risk and investment controls are applied consistently throughout the Group, across all our various products and services.

Each operating subsidiary is managed by its own board, which reports to the relevant commercial and operational committee, with clear line of sight to the Executive Committee. We believe this is the optimal management structure to secure continued growth.

Corporate governance code

The Board has adopted the Quoted Companies Alliance ("QCA") revised Corporate Governance Code ("QCA Code"), which requires the Group to apply 10 principles focused on the pursuit of medium to long-term value for shareholders and also to publish certain related disclosures.

Corporate governance principles applicable to the Group

The 10 QCA Code corporate governance principles, which apply to the Group, are:

1 Establish a strategy and business model which promotes long-term value for shareholders.

2 Seek to understand and meet shareholder needs and expectations.

3 Consider wider stakeholder and social responsibilities and their implications for long-term success.

4 Embed effective risk management, considering both opportunities and threats, throughout the organisation.

5 Maintain the Board as a well-functioning, balanced team led by the Chair.

6 Ensure that between them, the Directors have the necessary up-to-date experience, skills and capabilities.

7 Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.

8 Promote a corporate culture that is based on ethical values and behaviours.

9 Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.

10 Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

Application of the QCA Code and required disclosures

The QCA Code requires us to apply the principles set out above and to publish certain related disclosures in our Annual Report, on our website, or a combination of the two. We have followed the QCA Code's recommendations and have provided disclosure relating to relevant principles in a corporate governance statement on our website and summarise our compliance with the following principles in this Annual Report.

Strategy and business model - QCA Principle One

The Group's strategy and business model is described in our Strategic Report.

Understand and meet shareholder needs and expectations - QCA Principle Two 

The Group remains committed to listening and communicating openly with its shareholders to ensure its strategy, business model and performance are clearly understood. Receiving analyst and investor feedback, and in turn providing an understanding of our business, is a key part of driving our business forward successfully. The principal methods of communication with investors remain the Annual Report and financial statements, the Interim Report, the Annual General Meeting ("AGM"), regulatory announcements and the results roadshow. 

Stakeholder and social responsibilities - QCA Principle Three 

Mattioli Woods believes its main stakeholders are its clients, employees, suppliers and relevant statutory authorities. To understand the needs and expectations of stakeholders, the Group encourages regular feedback from clients and employees through individual engagement, surveys and webinars. Mattioli Woods is also an active member of local business forums such as the Leicestershire Business Voice and professional networks to promote the local economy and contribute to regional growth.

Effective risk management - QCA Principle Four

The Group embeds risk management throughout the organisation and this is described in our Corporate Governance Report.

Board balance and skills - QCA Principles Five and Six

The Board, led by the Chair, has the necessary skills and knowledge to discharge their duties and responsibilities effectively, setting clear expectations and ensuring stringent measures for corporate governance standards are met, particularly in relation to executive remuneration, risk, compliance and audit. The Executive and Non-Executive Directors' skill sets are complementary, and together provide a blend of broad commercial, operational, investment, legal, and financial expertise, such that all decision making at Board level is robust and mindful of the fiduciary responsibilities that need to be discharged to all shareholders.

In addition, the Directors are aware of the importance of keeping abreast of the industry's current activities and industry conferences, webinars and events throughout the year to keep their skills, contacts and knowledge current and simultaneously engage with the regulator, other operators and service providers to the financial services industry.

Board effectiveness - QCA Principle Seven

The Board completed a self-evaluation during the financial year ended 31 May 2023 and will continue this annually. The criteria against which the Board collectively and individually will be assessed includes Board composition, roles and responsibilities, meetings and administration, Board committees, Board discussions, Board relationships and stewardships, monitoring and evaluation, strategy and internal control.

The aim of the Board evaluation is to review the effectiveness of the Board's performance and assess its strengths as well as areas for development. The Board has considered the Company's approach to succession planning and will work with the Nomination Committee on the Board evaluation process. The Executive Management team and, at a more junior level, senior departmental managers address progression of employees through annual appraisals and competency reviews. The Group's structured 'Financial Assess' training programme further assists key managers with training and learning opportunities which is complemented by the recent launch of a talent and succession framework that is being adopted and trained out to managers across the Group.

Ethical culture - QCA Principle Eight

The Group's client centric and ethical culture are discussed in the Chair's statement in the Chief Executive's ("CEO") review, and the business model is described in our Strategic Report.

Governance structures and communication with stakeholders - QCA Principles Nine and Ten

The governance structures and committees utilised across the Group are discussed in the Corporate Governance Report. Details of interactions with stakeholders are shown in the Section 172 Report. In addition, the Directors' Remuneration Report is shown.

Board of Directors

The Board is considered to be balanced and diverse, with plans to further enhance these aspects being developed. 

The Board currently comprises four executive Directors and four independent Non-Executive Directors, including the Chair. The Company has a balanced Board, which we believe represents the right governance structure for the business having previously been independent for several years with majority Independent Non-Executive Directors. The current Board includes a Senior Independent Director in addition to the other Non-Executive Directors. The Board also considers diversity of the Group senior management team, excluding the PLC Board, which currently comprises 42% female and 58% male membership, with consideration to be given to the other protected characteristics in the short term.

The Nominations Committee leads on the succession plan for all Board members as seen in the appointment of Michael Wright as Deputy Chief Executive Officer ("Deputy CEO").

A short biography of each Director is set out below.

David Kiddie - Independent Non-Executive Chair and Chair of the Nomination Committee

Appointed to the Board: 2021

Tenure at Mattioli Woods: 3 years

Brings to the Board:

· Significant experience and expertise in asset management and investment oversight

· Strategic planning and leadership

· Focus on governance, oversight and regulatory environment

Previous roles:

· Chief Executive UK and Head of Institutional Business, BNP Paribas Investment Partners

· Chief Investment Officer, AMP Capital Investors, ABN AMRO Asset Management and Rothschild Asset Management

· Head of Equities, Baring Asset Management

· Group Executive, Perpetual Investments (Australia)

Accreditations:

· BA Hons Economics, University of Kent

External appointments:

· Non-Executive Director of Marlborough Investment Management Ltd

Ian Mattioli MBE - Chief Executive Officer

Co-founded Mattioli Woods in 1991

Tenure at Mattioli Woods: 32 years

Brings to the Board:

· 35+ years' experience in financial services, wealth management and property businesses

· Co-founded Mattioli Woods, with Bob Woods, in 1991

· Vision and strategy

· Development of investment proposition

· Founder of Custodian REIT plc

Accreditations:

· Awarded an MBE for services to business and the community in 2017

· LSE AIM Entrepreneur of the Year Award, 2008

· CEO of the Year Award, City of London Wealth Management Awards, 2018

· Awarded Honorary Degree (Doctorate of Laws), University of Leicester, 2022

· Appointed High Sheriff of Leicestershire for 2021-22

External appointments:

· Non-independent Director of Custodian Property Income REIT plc

· Non-Executive Chair of Kanabo Group plc

Ravi Tara - Chief Financial Officer

Appointed to the Board: 2021

Tenure at Mattioli Woods: 4 years

Brings to the Board:

· Strategic planning and value creation

· Financial management and oversight of operations

· Investor relations management

· Operational efficiency and improvement

· Mergers and acquisitions and integration experience

· Inspiring leadership and development of teams

· Change management

Previous roles:

· Capita plc

· Weetabix Food Company

· JP Morgan

· Barclays Capital

· PwC

Accreditations:

· Chartered Accountant

· Fellow of the Institute of Chartered Accountants in England and Wales ("ICAEW")

· A member of the ICAEW's Corporate Finance Faculty

· BSc Hons Accounting and Finance, London School of Economics

Michael Wright - Deputy Chief Executive Officer

Appointed to the Board: 2021

Tenure at Mattioli Woods: 19 years

Brings to the Board:

· Over 18 years' experience in financial services

· Experienced adviser, assisting controlling directors, owner-managers and affluent individuals

· Inspiring leadership and operational management

· Acquisition and integration expertise

· Change and efficiency management

Accreditations:

· Diploma in Financial Planning

· LLB Law Degree, University of Leicester

External appointments:

· Vice-President of Gresley Male Voice Choir

Iain McKenzie - Chief Operating Officer

Appointed to the Board: 2021

Tenure at Mattioli Woods: 5 years

Brings to the Board:

· People and change management

· Operational and process efficiency

· Understanding of business functions and risk management

· Strategic planning and project management

· Data analysis and performance metrics

· Organisational and leadership abilities

Previous roles:

· Business consultancy - Consultant, Iain McKenzie Limited

· Senior management - Sports and Facility Management, Leicester City Council

Accreditations:

· BA Design Management, De Montfort University, Leicester

External appointments:

· Director of Leicestershire Business Voice

Anne Gunther - Senior Independent Director and Chair of the Audit Committee

Appointed to the Board: 2016

Tenure at Mattioli Woods: 7 years

Brings to the Board:

· 40+ years' experience in retail financial services

· Wide executive experience from lending to wealth management

· FTSE 100 IPO experience

· Mergers and acquisitions experience

Previous roles:

· Managing Director - Direct, Lloyds TSB

· Chief Executive, Standard Life Bank

· Chief Executive, Standard Life Healthcare

· Member of group executive, Standard Life

· Founding Director, Standard Life Wealth

· Chair, Warwick Business School

Accreditations:

· Honorary doctorate, Edinburgh University

· Chartered Banker

· MBA, Warwick Business School

· BSc Hons Physics, Nottingham University

External appointments:

· Non-Executive Director of The West Bromwich Building Society

Edward Knapp - Non-Executive Director and Chair of the Risk and Compliance Committee

Appointed to the Board: 2021

Tenure at Mattioli Woods: 3 years

Brings to the Board:

· Significant commercial and strategic insight and transformation expertise

· Digital, technology and IT development within financial services

· Risk and compliance oversight and control

· Asset management and advisory expertise

Previous roles:

· Managing Director and Global Head of Business Management, Technology, HSBC

· Chief Operating Officer and Global Head of Business Management, Risk, Barclays

· Senior Adviser, McKinsey & Company

Accreditations:

· BA Mathematics, Balliol College, University of Oxford

External appointments:

· Non-Executive Director of F&C Investment Trust Plc

· Senior Adviser to Board of Perenna Group Limited

· Member of UK Endorsement Board

· Director of Asia House

Martin Reason - Non-Executive Director and Chair of the Remuneration Committee

Appointed to the Board: 2021

Tenure at Mattioli Woods: 3 years

Brings to the Board:

· Development of strategic plan focusing on client outcomes and marketing

· Risk management and controls

· Process design and operational efficiency

· Remuneration and people strategies

· Treasury management

Previous roles:

· Chief Executive Officer, Melton Mowbray Building Society

· Managing Director, Merrill Lynch HSBC

· Senior manager, HSBC/Midland Bank

· Managing Director, Pakawaste Group

Accreditations:

· High performance leadership diploma, Cranfield School of Management

· BSc Hons Banking and Finance

External appointments:

· Chair of Sitigrid Ltd

Time commitments of Board members

The Group embraces the benefits that are brought by a Board from a range of business backgrounds and who are actively involved in other businesses. The Board also recognises its members must be able to dedicate sufficient time to the Company. The Board has considered the time commitments of each Director and is comfortable that each has sufficient available capacity to carry out the required duties for Mattioli Woods:

· David Kiddie's time commitment from his other Directorships averages three working days per month;

· Ian Mattioli's time commitment from his roles as Non-Executive Chair of Kanabo Group plc and Non-Executive Director of Custodian REIT plc average two and one and a half working days per month respectively;

· Michael Wright's time commitment from other Directorships averages one day per quarter;

· Iain McKenzie's time commitment from other Directorships averages two days per month;

· Anne Gunther's time commitment from her other Directorships averages four and a half working days per month;

· Edward Knapp's time commitment from his other Directorships averages four working days per month; and

· Martin Reason's time commitments from his other Directorship averages four days per month respectively.

Governance changes

The Board regularly reviews the suitability of the Group's governance structure and reflecting the expansion of the Mattioli Woods proposition and increased size of the Group. Shortly after year-end in July 2023, the Board announced the appointment of Michael Wright as Deputy Chief Executive Officer. In this new role, Michael will lead and support the delivery of certain strategic goals alongside the Executive team, while retaining his current responsibilities. Michael was previously appointed Group Managing Director in 2019 and has been on the Board since 2021, having joined the Group 19 years ago and holding several senior advisory roles during this time.

As part of our long-term strategic planning to support the delivery of the Group's strategic goals, David Kiddie will step down as Non-executive Chair of the Group at the next Annual General Meeting on 26 October 2023 having served a 3-year term as a Non-Executive Director ("NED"). Given his extensive career background in investment management, the Group is pleased to announce that it will retain David's expertise in a consultancy role with the Group to support the continued development and structure of the Group's investment proposition to deliver a wider range of investment outcomes for clients and support the next phase of growth.

Anne Gunther, our experienced, senior independent, non-executive director becomes Chair of the Group following the AGM subject to regulatory approval. The Group is pleased to be able to continue to draw upon her extensive knowledge from her executive career and having served as a NED with Mattioli Woods for a number of years. 

Mattioli Woods is committed to diversity and inclusion across the Company and at the Board and continues to monitor and assess the balance of the Board and its effectiveness in line with a high level of commitment to governance standards.

Corporate Governance Report

Operation of the Board

The Board is responsible to shareholders for the proper management of the Group and has a formal schedule of matters specifically reserved to it for decision. These include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business and approval of budgets and financial statements. As part of our ongoing focus on corporate governance the Board reserved matters and committee terms of reference were reviewed and updated during the year, in light of the focus on stakeholder engagement and linking a company's purpose and values to its strategy.

Other matters are delegated to the Executive Management team, supported by policies for reporting to the Board. The Company maintains appropriate insurance cover in respect of legal action against the Company's Directors, but no cover exists in the event that a Director is found to have acted fraudulently or dishonestly.

The agenda and relevant briefing papers are distributed by the Company Secretary on a timely basis, usually a week in advance of each Board meeting.

The roles of Chair and Chief Executive are distinct, as set out in writing and agreed by the Board. The Chair is responsible for the effectiveness of the Board, directing strategy and ensuring communication with shareholders. The Chief Executive is responsible for overseeing the delivery of this strategy and the day-to-day management of the Group by the Executive Management team. The Board is committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business.

The Non-Executive Directors are considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgement. The Board does not consider the Non-Executive Directors' shareholdings to impinge on their independence. The Non-Executive Directors provide a strong independent element to the Board and bring experience at a senior level of business operations and strategy. Anne Gunther is the Senior Independent Director.

All Directors have access to the Company Secretary, who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. Any Director, on appointment and throughout their service, is entitled to receive any training they consider necessary to fulfil their responsibilities effectively including training on quoted company requirements from the Nominated Adviser, Canaccord Genuity Limited.

The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs, and is the principal forum for directing the business of the Group.

Board committees

The Board has delegated authority to four committees. The Chair of each committee provides a report of any meeting of that committee at the next Board meeting. The Chair of each committee is present at the AGM to answer questions from shareholders.

Risk and Compliance Committee

The Risk and Compliance Committee comprises Edward Knapp (Chair), Anne Gunther, David Kiddie, and Martin Reason. Committee meetings are normally attended by George Houston (Group Compliance Officer) as Compliance Oversight Function, the Chief Executive Officer, Deputy Chief Executive Officer, Chief Operating Officer, and by representatives of the external and internal auditors by way of invitation. In addition, senior managers and representatives from the internal audit, risk and compliance functions attend committee meetings as necessary.

The purpose of the Committee is to provide oversight and advice to the Board in relation to current and future risk exposure of the Company and its subsidiaries and the future risk strategy, including the determination of risk appetite and tolerance and the effectiveness of the risk management framework and (in conjunction with the Audit Committee) internal controls required to manage risk. The Committee shall also promote a risk awareness culture within the Company. 

The Risk and Compliance Committee is principally responsible for monitoring identified risks and the effectiveness of mitigating action, keeping risk assessment processes under review, reviewing the impact of key regulatory changes on the Group, assessing material breaches of risk limits and regulations as well as reviewing client complaints.

Risk management framework

The Group's risk management framework is designed to ensure risks are identified, managed and reported effectively. The Group has invested in its risk management framework to meet the requirements of key regulatory changes and the risk management framework remains subject to ongoing review.

We continue to apply a 'three lines of defence' model to support our risk management framework, with responsibility and accountability for risk management summarised as follows:

· First line: Senior management and operational business units are responsible for managing risks, by developing and maintaining effective internal controls to mitigate risk. First-line systems and controls are employed to ensure business activities are conducted in compliance with internal policies and procedures. First-line supervision teams carry out monitoring of business activities on a day-to-day basis.

· Second line: The risk, compliance and anti-money laundering functions maintain a level of independence from the first line. They are responsible for providing oversight and challenge of the first line's day-to-day management, monitoring and reporting of risks to both senior management and governing bodies.

· Third line: The internal audit function is responsible for providing independent assurance to both senior management and governing bodies as to the effectiveness of the group's governance, risk management and internal controls.

Output from first, second and third-line monitoring is reported to the managers and management information is reported to the Executive Risk and Compliance Committee and the Risk and Compliance Committee.

Risk appetite

Risk appetite is defined as both the amount and type of risk the Group is prepared to accept or retain in pursuit of our strategy. Our appetite is subject to regular review to ensure it remains aligned to our strategic goals. At least annually, the Board, Executive Risk and Compliance Committee and the Risk and Compliance Committee will formally review and approve the Group's risk appetite statement and assess whether the firm has operated in accordance with the stated risk appetite measures during the year.

Notwithstanding its continued expectations for business growth, the Board retains a relatively low overall appetite for risk, ensuring that our internal controls mitigate risk to appropriate levels.

Risk assessment process

Identified risks are tracked in a department-level risk register and used as the basis for a consolidated risk register that provides the Risk and Compliance Committee with an overview of the key risks across the organisation. The Board and senior management are actively involved in a continuous risk assessment process as part of our risk management framework, supported by the annual ICARA process which assesses the principal risks facing the Group.

Stress tests include consideration of the impact of a number of severe but plausible events that could impact the business. The work also takes account of the availability and likely effectiveness of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks.

The Group's risk assessment process considers both the impact and likelihood of risk events which could materialise, affecting the delivery of strategic goals and annual business plans. A top-down and bottom-up approach ensures our assessment of key risks is challenged and reviewed on a regular basis throughout the year, with the Board and its committees receiving regular reports and information from senior management, operational business units and the risk oversight functions.

Activities during the year

The committee met seven times during the year, with the committee's activities during the year including:

· Review the design, implementation and effectiveness of the risk management framework at least annually;

· Oversee and challenge the Consumer Duty implementation plan by assessing the adequacy and effectiveness of the measures and procedures put in place and the actions to address any deficiencies in the Company's compliance with its obligations;

· Review and challenge of the Group's treating customers fairly ("TCF"), Consumer Duty and conduct risk policies and outcomes;

· Review and challenge of the Group's vulnerable client processes;

· Review and challenge of the Group's product governance processes;

· Advise the Board on the Company's overall risk appetite tolerance and strategy, which shall also take into consideration environmental and economic factors;

· Review the consolidated ICARA for recommendation to the Board, and on an annual basis oversee and challenge the design and execution of stress and scenario testing, ensure a robust assessment of the emerging and principal risks facing the Company has been undertaken, that procedures are in place to identify emerging risks. To provide advice on the management and mitigation of those risks and the required capital is held by the Company to recognise the risk.

· Review of the Group's training and competence regime;

· Oversight of the implementation of Markets in Financial Instruments Directive 2 ("MiFID II"); and

· Approval of the annual regulatory monitoring plan.

Audit Committee

The Audit Committee comprises Anne Gunther (Chair), Edward Knapp and Martin Reason. Anne Gunther is a Chartered Banker and the Board is satisfied that all members of the committee have recent and relevant financial experience. The Board believes the committee is independent, with all members being Non-Executive Directors. The purpose of the Audit Committee is to assist the Board of the Company in carrying out its responsibilities relating to accounting policies, internal controls and financial reporting functions.

The key responsibilities of the Audit Committee are:

· To review the reporting of financial and other information to the shareholders of the Company and to monitor the integrity of the financial statements;

· To review the Group's accounting procedures and provide oversight of significant judgement areas;

· To review the firm's internal controls and effectiveness of the internal audit function;

· To review the effectiveness of the external audit process and the independence and objectivity of the external auditors;

· To review audit fees and proposals for future years; and

· To report to the Board on how it has discharged its responsibilities.

Committee meetings are normally attended by the Chief Executive Officer, Chief Financial Officer, Finance Director, Chief Operating Officer, Group Compliance Officer and by representatives of the external and internal auditors by way of invitation. The presence of other senior executives from the Group may be requested. The committee meets with representatives of the internal and external auditors, without management present, at least once a year.

Activities during the year

The committee met five times during the year, where it considered the significant financial and audit issues, the judgements made in connection with the financial statements and reviewed the narrative within the Annual Report and the Interim Report.

During the year the Audit Committee continued to monitor the operation of the internal audit function which has been outsourced to RSM Risk Assurance Services LLP since December 2018. In light of an ever-changing regulatory environment, outsourcing gives the Group access to greater skills externally, while having the ability to shrink or expand our internal audit activities to meet the ongoing demands of the business.

The committee also considered the tender and subsequent appointment of, and fees payable to, the external auditors and discussed with them the scope of the interim review and annual audit for the Group and subsidiaries of the Group.

Specific audit issues the committee discussed included:

· Following the appointment of a new auditor on 28 April 2022, monitoring the transition of external audit provider and subsequent effectiveness of the appointment;

· Assessment of whether each entity and the Group as a whole are going concerns, including whether forecast performance would result in an adequate level of headroom over the Group's available cash facilities;

· Review of the whether any impairment needed to be recognised in respect of the intangible assets of the Group, including the assumptions underlying the calculation of the value in use of the cash generating units tested for impairment;

· Management's approach to estimating the recoverability of WIP, including the recovery rate applied and the length of historical data used to calculate that recovery rate;

· Provisions recognised in respect of contingent consideration payable on past business combinations and management's key assumptions and estimates applied in reaching these recognition and measurement decisions;

· Review and approval of the internal audit plan;

· Monitoring the progress of previous issues raised by internal audit, to ensure a satisfactory completion and assurance level; and 

· Reviewing and stress testing the required submissions of the Internal Capital Adequacy Risk Assessment (ICARA) to ensure fulfilment of the regulatory standards.

Significant judgements and estimates

Significant critical accounting judgements and key estimates in connection with the Group's financial statements for the year ended 31 May 2023 and other matters considered by the committee included:

External auditor

An analysis of fees payable to the external audit firms in respect of audit and non-audit services during the year is set out in Note 7 to the financial statements. The Company is satisfied the external auditor is independent in the discharge of their audit responsibilities, following due diligence conducted as part of the appointment process.

Internal audit

The internal audit function is responsible for providing assurance over the design and operational effectiveness of the internal controls related to the Group's key activities. Our internal audit activity is based around a strategic, risk-based approach to cyclical internal audit with consideration of the Group's key strategic priorities and risks. This approach is designed to provide assurance over key areas including; governance, risk management and controls. During the year the internal audit function engaged in a number of activities, including: 

· Developing our internal audit plan based on an analysis of the Group's corporate objectives, risk profile and assurance framework, as well as other factors such as emerging issues in our sector; 

· Delivering audits providing assurance over the Group's governance arrangements, client invoicing, integration management, vulnerable clients, the closure of the Structured Products Fund, regulatory returns, conflicts of interest, consumer duty readiness, financial crime (Maven) and market abuse (Maven).

· The internal audit team has also continued to provide assurance activities in respect of the CREIT and going forward, will continue to extend coverage to Maven activities as required; and 

· A forward-looking plan to provide the Group with assurance over key areas of regulatory focus into 2022/23 including: the Investment Firms Prudential Regime (IFPR), ESG, vulnerable clients, consumer duty (post-implementation) operational resilience, financial controls and external client payroll, financial promotions and strategy and financial forecasting.

As the third line of defence, the internal audit function (together with the external auditors in connection with their audit of the financial statements) continues to build risk awareness within the organisation by challenging the first and second lines of defence to continue developing and enhancing the internal control framework.

Remuneration Committee

The Remuneration Committee comprises Martin Reason (Chair), David Kiddie and Anne Gunther. The committee meets not less than twice a year. It is responsible for determining and reviewing the Group's policy on executive remuneration and other benefits and terms of employment, including performance-related bonuses and share options. The committee also administers the operation of the share option and share incentive schemes established by the Company.

The members of the Remuneration Committee have no personal interest in the outcome of their decisions and seek to serve the interests of shareholders to ensure the continuing success of the Company. The remuneration of the Non-Executive Directors is determined by the Board itself. No Director is permitted to participate in decisions concerning their own remuneration.

The committee met twice during the year, with key items considered including:

· Review and approval of the Group's remuneration policy;

· Annual review of Executive Directors' and other senior managers' base salaries and bonus arrangements, including specific approvals for changes or payments made during the year;

· Awards to be granted under the share option and incentive schemes established by the Company; and

· Trends and benchmarking of executive pay in the wider market.

The Committee continues to review the Group's long-term incentive plans to ensure it can continue to attract, retain and incentivise appropriately qualified staff to achieve its goals.

Nomination Committee

The Nomination Committee comprises David Kiddie (Chair), Anne Gunther, Edward Knapp and Ian Mattioli. The Committee is responsible for reviewing the size, structure and composition of the Board, establishing appropriate succession plans for the Executive Directors and other senior executives in the Group and for the nomination of candidates to fill Board vacancies where required.

The committee works in close consultation with the Executive Directors and met twice during the year, with the main items being considered including Board structure (including proposed changes to Board composition), review of key matters (including Board and management succession planning), talent management and development and leadership development, undertaking a board evaluation during the year and considering engagement of an external service provider for the 2023 Board evaluation.

Meetings and attendance

All Directors are encouraged to attend all Board meetings and meetings of committees of which they are members. Directors' attendance at meetings during the year was as follows:

28 David Kiddie appointed as Independent Non-executive Chair on 14 March 2022

Other committees

These committees form part of the corporate governance framework but are not sub-committees of the Board. The main committees comprise the Executive Committee alongside a number of sub-committees, with membership typically comprising Executive Directors alongside the relevant senior managers. 

Executive Committee

The Board strongly believes that robust governance and strong, responsible, balanced leadership by the Board are critical to creating long-term shareholder value and business success. The committee's role is to assist the Board in shaping the strategy, culture and ethical values of the Group, while supporting the sub-committees in the day-to-day management of Mattioli Woods and its subsidiaries.

The key responsibilities of the committee are to:

· Take a leadership role in shaping and delivering the Group's strategic priorities, ensuring corporate governance principles, culture and ethical values remain appropriate;

· Oversee the brand and reputation of the Group, ensuring reputational risk is consistent with the risk appetite approved by the Board and the creation of long-term shareholder value;

· Develop strategy and growth initiatives, such as possible acquisitions and new products and services;

· Implement the agreed strategy and support the day-to-day management of the Group by the Management Engagement Committee;

· Review and discuss the annual business plan and budget prior to its submission to the Board for approval;

· Oversee the Group's compliance with its statutory and regulatory obligations, including conduct of the firm and consumer duty;

· Developing and implementing people policies and structures and reviewing talent management and development programmes, and

· Oversee the Group's conduct in relation to its corporate and societal obligations, including setting the guidance, direction and policies for the Group's consumer duty, ESG corporate responsibility agenda and related activities and advising the Board and management on these matters.

The Executive Committee is Chaired by the Deputy CEO and membership comprises the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer. Committee meetings are normally attended by other senior executives from the Group and functional heads from the appropriate disciplines as requested.

Investment Committee

The Board has delegated authority to the Investment Committee to oversee the Group's investment management approach, developing the 'house view' on economics, investment markets and asset allocation, and considering how the Group should best apply these views.

In particular, the Investment Committee is responsible for developing and implementing the Group's asset management strategy, for developing and monitoring all aspects of the Group's investment business on a continuing basis, receiving reports from the board of Custodian Capital, the Multi-Asset team (including the Asset Allocation Committee) and from the managers of the Group's single strategy Funds including Individual Structured Products. The Committee is also responsible for ensuring that the Group's day-to-day investment and asset management operations are conducted in accordance with the relevant regulatory and statutory requirements through the investment management, investment research and investment operations teams.

The Investment Committee meets at least six times a year but more frequently if required. The Committee is Chaired by the Chief Investment Officer and comprises senior members of the investment, wealth management, technical and compliance functions.

Operational Risk and Compliance Committee

The Board has delegated authority to the Operational Risk and Compliance Committee to oversee the operation of the Group's risk and compliance framework and activity. The Operational Risk and Compliance Committee is responsible for ensuring that risk, compliance and internal audit are considered, reviewed and actions implemented across all areas of the Group including wealth management advice, asset management, pension administration and employee benefits. The committee is also responsible for ensuring that risks are fully considered in context of the Group's ICARA and the impact on the Group's capital requirements.

The Operational Risk and Compliance Committee meets at least four times a year but more frequently if required. The committee is Chaired by the Compliance Oversight Function and comprises senior members of the Group's management and risk and compliance function.

Induction, training and performance evaluation

New Directors receive an induction on their appointment covering the activities of the Group, its key business and financial risks, the terms of reference of the Board and its committees and the latest financial information.

The Chair ensures Directors update their skills, knowledge and familiarity with the Group as required to fulfil their roles on the Board and its committees. Ongoing training is provided as necessary and includes updates from the Company Secretary and Nominated Adviser on changes to the AIM Rules, requirements under the Companies Acts and other regulatory matters. All Directors have access to independent professional advice at the Company's expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chair or two other Directors, one of whom is a Non-Executive.

Evaluation of the Board's performance

During the year ended 31 May 2023 a review of the Board's effectiveness was undertaken, working with an external third party and led by the Senior Independent Director. This involved one-to-one interviews with Directors, review of Board and Board committee papers and minutes and attendance at various Board or sub-committee meetings. The key points raised in the review were around Board composition, Board papers and succession planning.

Individual appraisal of each Director's performance is undertaken either by the Chief Executive Officer or Chair each year and involves meetings with each Director on a one-to-one basis. The Non-Executive Director Chair carries out an appraisal of the performance of the Chief Executive Officer, with the Senior Independent Director conducting the same exercise for the Chair.

Retirement and re-election

All Directors are subject to election by shareholders after their appointment and to re-election thereafter at intervals of no more than three years under the Company's articles of association. However, as a matter of good practice and as recommended under the QCA Corporate Governance Code, Board policy is for all Directors to stand for re-election at each AGM.

Non-Executive Directors' appointments are initially for 12 months and continue, thereafter, until terminated by either party giving three months', six months' for Chair, prior written notice to expire at any time on or after the initial 12-month period. The terms and conditions of appointment of the Non-Executive Directors are available for inspection at the Company's registered office during normal business hours and prior to the AGM.

Communications with shareholders

The Board is committed to maintaining an ongoing dialogue with the Company's shareholders. The principal methods of communication with private investors remain the Annual Report and financial statements, the Interim Report, the AGM and the Group's website (www.mattioliwoods.com).

It is intended that all Directors will attend each AGM and shareholders will be given the opportunity to ask questions at the AGM on 26 October 2023. In addition, the Chair, Chief Executive Officer, Chief Financial Officer and Deputy Chief Executive Officer welcome dialogue with individual institutional and retail shareholders to understand their views and feed these back to the Board. General presentations are also given to analysts and investors covering the annual and interim results as well as additional presentations dependent upon the circumstances and include for acquisition activity, investment in the Group or for fundraising. The Chair of the Remuneration Committee also engaged in dialogue with institutional shareholders during the year and fed back to the committee and Board directly.

Internal control and risk management

The Board is ultimately responsible for the Group's systems of internal control and for reviewing its effectiveness. Such systems are designed to manage rather than eliminate risks and can only provide reasonable not absolute assurance against material misstatement or loss.

In accordance with the guidance of the Turnbull Committee on internal control, an ongoing process has been established for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year under review and up to the date of approval of the Annual Report and financial statements.

The Board routinely reviews the effectiveness of the systems of internal control and risk management to ensure controls react to changes in the nature of the Group's operations.

The Group maintains appropriate insurance cover and reviews the adequacy of the cover regularly, in conjunction with the Group's insurance brokers.

There are clearly defined procedures for reviewing and approving transactions, acquisitions, material expenditure and capital expenditure within the Group.

On behalf of the Board

Ravi Tara

Chief Financial Officer

12 September 2023

DIRECTORS REMUNERATION REPORT

Statement from the Chair of the Remuneration Committee

I am pleased to present the Directors' Remuneration Report, which comprises my Annual Statement, the Directors' Remuneration Policy, and the Annual Report on Remuneration, which sets out remuneration paid to the Directors in respect of the financial year ended 31 May 2023 ("FY23") and how we intend to implement the policy for the financial year ending 31 May 2024 ("FY24").

Remuneration review and remuneration reporting

As well as dealing the normal 'business as usual' agenda items this year, the Committee has, over the last six months, carried out a detailed review of our overall approach to Executive Director remuneration and our remuneration reporting. As part of this review, I have reached out to our largest shareholders to provide an overview of our approach, to set out the rationale for some of our recent remuneration decisions and to offer the opportunity for engagement. I am grateful to those shareholders who provided feedback, which has been considered carefully by the Committee.

Our shareholders welcomed the opportunity for engagement and were pleased that, as a result of our remuneration review, the Committee is able to provide a clear and consistent Directors' Remuneration Policy framework within which to set the remuneration of our Executive Directors going forward. Shareholders were also supportive of our proposal to enhance our remuneration reporting considering the requirements of our AIM listing, market practice, the QCA Remuneration Guidance and the principles of consumer duty. The Committee will continue to provide shareholders with an advisory vote on our Remuneration Report in line with the approach of most AIM companies. However, we will keep market practice under review and consider the recommendations of the revised QCA Code when this is finalised.

Our approach to remuneration

The Committee firmly believes that the Executive Directors should receive a fair and appropriate level of remuneration for their role, reflecting their skills, responsibilities, experience, and contribution to the business. In addition, the Committee notes the importance of retaining key talent in a competitive market both in terms of sector and our geographic location. A further important consideration is the level of fixed pay in absolute terms and weighting to variable so that undue emphasis is not placed on variable pay elements but with sufficient pay at risk to drive and reward superior performance.

Remuneration outcomes for FY23

Salaries, pension and benefits

Our Deputy Chief Executive Officer, Chief Financial Officer and Chief Operating Officer were all appointed to the Board on salaries below market and below that of their predecessors. The Committee acknowledged, at the time of appointment, that base salaries would need to be reviewed and brought to market with timing dependent on both experience and performance. The salaries of all our Executive Directors were reviewed by the Committee in early 2022. Noting strong performance and increasing experience of the executive team, as well as the growth and complexity of the business, the salaries of the Group Managing Director, Chief Financial Officer and Chief Operating Officer were all increased to bring them to market. The increased salaries were effective from 1 March 2022. Our normal salary review date is 1 September and, therefore, no further increases were made for FY23 except for the Chief Executive Officer who received a 5% increase from 1 September 2022.

Our approach to benefits and pension is unchanged from prior years. Pension is aligned to the workforce and benefits are modest to include a company car or car allowance and the usual insured benefits.

Annual bonus

The Committee determined the Executive Directors' annual bonus considering performance across both financial and non-financial metrics. Following strong performance in both EBITDA growth and progress towards the Company's strategic targets, the Committee determined a bonus of 66% of salary for each of the Executive Directors and 121% of salary for the CEO.

FY20 Long Term Incentive Plan

Only our CEO holds a 2020 LTIP award that was granted to him as an Executive Director. The vesting of the award was assessed against long-term EBITDA growth targets, which were met in full. Further details are included in the Annual Report on Remuneration.

Operation of the policy for FY24

Base salary

For FY24, the Committee agreed a moderate increase of 3.5% of salary for all of the Executive Directors, except for the new role of Deputy Chief Executive Officer, which is below the 5% increase awarded to our workforce. With the appointment of Michael Wright as Deputy CEO, and noting his increased responsibilities and the strong performance, skills and experience he brings to his new role, the Committee increased his base salary effective from 1 July to £365,000, which is 7% above the workforce increase.

Annual bonus

Maximum bonus opportunity under our new remuneration policy is reduced from 200% of salary to 150% of salary for all four Executive Directors. 60% of the bonus will be based on EBITDA with the remaining 40% on strategic targets. The Committee has also introduced bonus deferral into the remuneration policy and therefore 50% of any bonus paid in excess of 100% of salary will be deferred into shares for two years.

Long Term Incentive Plan

Our policy maximum for LTIP awards is 150% of salary and actual award level for FY24 will be 100% of salary. Like many other financial services businesses, our incentives are weighted slightly more to the short term, focusing on critical short-term KPIs to deliver the business strategy. Our bonus deferral, LTIP awards at 100% of salary, LTIP post-vesting holding periods, and shareholding requirements provide alignment to longer-term sustainable performance, shareholder interests and the ability to operate clawback and malus.

100% of the award will be determined by long-term EBITDA growth targets achieved through successful delivery of our strategic goals.

The Committee notes that EBITDA is measured under the annual bonus and LTIP. However, the LTIP is focusing on longer-term sustainable three-year EBITDA growth. The Committee is keen to broaden the financial metrics under the LTIP for future grants and will keep the selection of measures under review.

The FY24 awards will also be subject to a two-year post-vesting holding period.

Conclusion

The Committee is comfortable that the remuneration outcomes for FY23 are aligned to Group performance and the shareholder experience.

The Committee has undertaken a considerable amount of work in respect of Executive Director remuneration over the last 12 months. The Committee is comfortable that, following its detailed remuneration review, it has a clear and consistent remuneration policy framework within which to set the Executive Directors' remuneration going forward. Following increases to base salary for FY23 and a review and resetting of incentive quantum, the Committee believes remuneration is aligned to market with no further significant changes envisaged at this time. The Committee has spent time reviewing incentive structures and our policy includes bonus deferral, LTIP post-vesting holding periods and a shareholding requirement. We have also reviewed incentive metrics and will continue to evolve our approach in this area. We have enhanced our remuneration reporting and will also keep this under review.

I hope shareholders are supportive of the changes we have introduced to our Executive Directors' remuneration structure and reporting. We will again provide shareholders with an advisory vote on our Directors' Remuneration Report and I hope you will support the resolution. If you have any questions, please do not hesitate to get in contact through our Company Secretary.

On behalf of the Board

Martin Reason

Chair of the Remuneration Committee

12 September 2023

DIRECTORS' REMUNERATION POLICY

The following table sets out each element of the Directors' remuneration and how it supports the Company's strategy.

Service contracts and letters of appointment

It is the Group's policy for all Executive Directors to have contracts of employment that contain a termination notice period not exceeding 12 months. All Executive Directors' appointments continue until terminated by either party on giving not less than 12 months' notice to the other party.

The Board Chair and Non-Executive Directors have letters of appointment and are appointed for an initial term of 12 months, subject to termination by either the Director or the Company on not less than six months' for the Chair and three months' for all other Non-Executive Directors prior written notice.

The letters of appointment and service contracts are available for inspection at the Company's registered office.

Payment for loss of office and variable pay

The termination arrangements agreed for an Executive Director who is leaving the business will depend upon the provisions of the Director's service contract, the rules of the relevant incentive schemes and the nature of the individual's departure. All termination payments are subject to approval by the Remuneration Committee. The Committee will consider the circumstances of each leaver on a case-by-case basis.

A Director's service contract may be terminated without notice and without any further payment or compensation, except for sums earned up to the date of termination, on the occurrence of certain events such as gross misconduct. In the event of termination of employment for other reasons, salary, pension and other benefits are payable for the duration of the notice period.

The annual bonus and unvested LTIP awards for "good" leavers will be pro-rated for service and paid at the usual time with performance measured at the usual time with Remuneration Committee discretion to apply an alternative treatment where exceptionally it deems it to be appropriate. For other types of leaver, incentives are forfeited.

Recruitment for new Directors

New Executive Directors will be offered remuneration packages in accordance with the terms of the Company's remuneration policy in force at the time of appointment.

The Committee may in exceptional circumstances look to recruit the best candidate for the role, and offer cash and/or share-based elements not explicitly referred to in the Remuneration Policy.

The Remuneration Committee may provide a buy-out award to compensate for outstanding incentive awards or other remuneration element forfeited on cessation of an Executive Director's previous employment. Any buyout award would be limited to what the Committee considers to be a fair estimate of the value foregone when leaving the former employer and will be structured to consider other key terms, such as vesting schedules and performance targets, of the awards foregone.

If considered necessary to recruit the best candidate, the Committee may agree to pay relocation and other expenses in connection with an appointment.

Any new Non-Executive Director appointed during the period covered by this remuneration policy will have their remuneration set in line with the provisions of the policy table above.

Legacy arrangements

Payments may be made to satisfy commitments made prior to the introduction of this Remuneration Policy.

ANNUAL REPORT ON REMUNERATION

Single total figure of remuneration for each Director (audited)

The total single-figure remuneration for the Directors during the year ended 31 May 2023 is set out below: