Tavistock Regulatory News (TAVI)

28th November 2017

TAVISTOCK INVESTMENTS PLC

("Tavistock" or the "Company")

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

 The Company today announces its unaudited interim results for the six months ended 30 September 2017.

FINANCIAL HIGHLIGHTS

- 130% increase in discretionary FUM to £745m

- 40% increase in ongoing business revenues to £12.4m

- 426% increase in reported EBITDA to £137,000

- 23% increase in net assets to £18.3m

OPERATIONAL HIGHLIGHTS

- Level of discretionary FUM continued to rise at a significant pace, predominantly through organic growth

- Tavistock Wealth's revenue in the six-month period of £1.52m compares favourably with revenue of £1.66m for the full year to 31 March 2017

- Launched three new Acumen funds in June 2017, increasing the range of in-house funds to seven

- High degree of revenue visibility - high retention rate of FUM combined with high level of recurring advisory income

- Successfully completed disposal of a network subsidiary adding a further £1 million to the Group's cash resources and significantly reducing its regulatory capital requirement

Brian Raven, Group Chief Executive, said: "We are continuing to make extremely good progress. I am pleased with the interim results in general, and with the organic growth of FUM into Tavistock Wealth in particular. Our business model is now firmly established and the Company's prospects are excellent." 

Enquiries:

CHAIRMAN'S STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

I am pleased to report continued good progress for the business. The Tavistock Investments Group is made up of an investment management business, Tavistock Wealth, together with various financial advisory businesses. The key performance indicator for the Group is the performance of Tavistock Wealth.

Investment Management

Most of Tavistock Wealth's revenues are derived from funds being managed on a discretionary basis ("FUM"). As shown in the table below, the level of FUM continued to rise at a significant pace, predominantly through organic growth, with the level at the end of the period being some 130% higher than at the same stage in the previous year.

Tavistock Wealth's current average gross revenue is 0.44% of FUM per annum and during the six-month period it achieved revenue of £1.52 million. This compares favourably with revenue of £1.66 million for the full year to 31 March 2017.

We continue to be satisfied with investment performance in what have been uncertain market conditions. Tavistock Wealth launched three new Acumen funds in June 2017; the Acumen Bond Portfolio, the Acumen Equity Portfolio and the Acumen Strategic Portfolio. This increased the range of in-house funds to seven.

Advisory

The performance of the Group's ongoing advisory businesses is another key area of focus and gross revenues grew by 33% from £8.1 million, in the six-month period to 30 September 2016, to £10.8 million this period.

In August, the Company announced the disposal of a network subsidiary, Tavistock Financial Limited ("TFL"), to Sanlam UK for a cash consideration of £1 million. During the period, this now discontinued operation had gross revenues of £7.5 million and a loss from operations of £21,000.

TFL resulted from the acquisition of Standard Financial Group ("SFG") in February 2015. SFG owned Financial Limited, the 7th largest advisory network in the UK. Acquiring this business was a relatively inexpensive means of the Company attaining critical mass and establishing itself as a national operator, at an early stage in its development.

With the prior approval of the regulator, TFL was created in July 2015 in order to accommodate all staff and network members from Financial Limited. Having resolved all historic regulatory obligations, Financial Limited and the other businesses within SFG were then liquidated.

The Company invested a little under £1.2 million in acquiring SFG, establishing TFL, transferring all staff and advisers to it and liquidating SFG. The Company subsequently recovered some £1.6 million from the TFL business.

In addition, prior to announcement of the disposal, 58 advisers had transferred out of TFL into the other Group network, The Tavistock Partnership. These advisers are keen to develop a closer commercial relationship with the Company, including recommending the use of its centralised investment proposition to their clients when appropriate to do so.

Completion of the transaction, after the period end, has added a further £1 million to the Group's cash resources, and significantly reduced its regulatory capital requirement.

Financial Performance

During the period, the Group's ongoing underlying businesses generated EBITDA of £297,000 on gross revenue of £12.4 million (six months to 30 September 2016 EBITDA loss of £42,000 on gross revenue of £8.9 million) and cash absorbed by operations was £36,000 (six months to 30 September 2016 cash absorbed by operations was £990,000).

The Group also incurred £160,000 of reorganisation costs, including costs associated with the disposal of TFL, which have adversely impacted the reported results.

For the six-month period ended 30 September 2017, the ongoing Group has therefore reported EBITDA of £137,000 and cash absorbed by operations of £196,000. The Company repaid £250,000 of debt and settled £1.35 million of deferred consideration obligations. It also entered into new leasing arrangements to cover the costs of opening two new offices and completing a refurbishment programme.

At the end of the period, the Group had net assets of £18.3 million (30 September 2016 £14.91 million) which included cash resources, prior to receipt of the £1 million TFL consideration, of £2.74 million (30 September 2016 £3.8 million).

The ongoing Group's results for the period can be summarised as follows:

*Excluding £1 million consideration received after period end.

Future Prospects

The Company has made great strides over the last three years. Its business model is now firmly established and its prospects are excellent.

It is anticipated that with continued organic growth, the EBITDA contribution from the Group's advisory businesses will become sufficient to cover all of the Group's operating costs. The Group's profitability will then be directly linked to the profitability of its investment management business.

The Group's investment management business has a relatively fixed overhead base and, as a consequence, the revenue resulting from increased levels of FUM has a direct impact on Group profitability.

The Company enjoys a high retention rate of FUM. Similarly, it enjoys a high level of recurring income within its advisory businesses. This combination gives the business a very high degree of revenue visibility.

Given this visibility, and because the Group is making rapid progress, it is useful to illustrate the potential profitability of the business model. For example, if the FUM managed by Tavistock Wealth were to increase to £1.5 billion and the continuing Group's underlying cost base were to remain unchanged, the EBITDA produced on an annualised basis would be over £5 million.

I look forward to updating you on further progress.

Oliver Cooke

Executive Chairman

27th November 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2017

The financial statements were approved by the Board and authorised for issue on 27th November 2017.

Oliver Cooke

Executive Chairman

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

1. ACCOUNTING POLICIES

Basis of preparation

The interim financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union. The accounts have been prepared in accordance with accounting policies that are consistent with the March 2017 Report and Accounts and that are expected to be applied in the Report and Accounts of the year ended 31 March 2018. There are new or revised standards or interpretations that apply to the period beginning 1 April 2017 but they do not have a material effect on the financial statements for the period ended 30 September 2017. This report is not prepared in accordance with IAS 34, which is not mandatory. The financial information does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts for Tavistock Investments Plc for the year ended 31 March 2017 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Disposal of Subsidiary and Discontinued Operations

On the 10 August 2017, the Company announced the sale of Tavistock Financial Limited ("TFL") to Sanlam UK. The gain on sale recognised in the period represents the consideration receivable less 1) the carrying value of assets sold, and 2) anticipated associated costs

As the entity represents a separate major line of business and was part of a single coordinated plan to sell, the results of TFL have been separately recognised on the statement of financial position as 'discontinued operations'.

2. SEGMENTAL INFORMATION

A segmental analysis of revenue and expenditure for the period is:

The segmental analysis above reflects the parameters applied by the Board when considering the Group's monthly management accounts. The Directors do not consider a division of the balance sheet to be appropriate or useful for the purposes of understanding the financial performance and position of the Group.

During the period under review the Group operated, and earned revenue exclusively within the UK.

6. EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

On 26th October 2017, the Company completed the sale of Tavistock Financial Limited to Sanlam UK and received total cash consideration of £1 million which will be used by the Group for working capital purposes.

As a consequence of the transaction, the Group's cash resources have been strengthened and simultaneously its regulatory capital requirement has been reduced.

The board currently anticipates that the transaction will have no material impact on the future profitability of the Group.