Growth, profitability, opportunity

Tatton, the UK's largest provider of on-platform discretionary fund management services to IFAs, has released its interim results for the six months to 30 September 2019 and showed successful delivery against nearly all key metrics. We believe the prospects to rapidly scale up AUM and boost profits because of the (already proven) opportunity for operational leverage justify a fair value of 300p / share. 

 

We believe the business is set to maintain its growth and profit trajectory because:

 

• There is a powerful market trend of IFAs moving more and more of their client assets onto discretionary fund management (DFM) platforms (a £48bn market , up from £5bn in 2011), avoiding the regulatory and risk burden of selecting investments for end-clients themselves;
• Tatton has carved out a market-leading proposition in this space, especially with respect to the two most important criteria advisers use to select a DFM: fees and investment performance;
• It has tried-and-tested methods of winning new clients and capturing a higher share of their AUM;
• Operational leverage should see margins improve further as the business scales;
• The adviser support services business complements the asset management business well and provides deep IFA market insights.