Tavistock Investments, which is subject to a hostile takeover bid, has reported a "strong close" to the financial year with gross revenues of £24m, following an extensive reorganisation project and cost-cutting measures.
In a year-end trading update out this morning (April 8), the Tavistock board said some 80 per cent of the £24m gross revenues were recurring, highlighting recent IFA group acquisitions had been conducted at multiples of 3-3.5x recurring advisory revenue.
The board said it was limited to how much financial information it was permitted to release as it was considered to be in an ‘offer period’, “as a result of the unwelcome approach from TEAM” last month.
On March 23, a regulatory filing revealed a £15m offer from the Jersey-based firm had been rejected, leading to a strongly worded exchange between the firms.
Tavistock this morning said the “opportunistic approach” by TEAM had been an "unwelcome distraction" after making a potential bid at a price it believes to be significantly below the value of the company’s assets.
While Tavistock’s funds under management, as at March 31, 2021, remained similar to last year’s at approximately £1.1bn, the board noted that investment management businesses have recently changed ownership at values equivalent to between 2 per cent and 4 per cent of funds under management.
Given the mismatch in valuations, the Tavistock board said it has been exploring how the inherent value of its assets can be used to fund further development and deliver value for shareholders.
As part of its reorganisation, the group reviewed the performance of its investment funds leading to the appointment of chief investment officer John Leiper to replace Christopher Peel, who has since joined the TEAM bid.
It said under Leiper’s supervision, the performance of the funds “has improved significantly” with all six of its multi-asset Acumen funds sitting in the top-quartile of their sectors.
Furthermore, the launch of its lower-cost platform, the Tavistock Platform, in December 2020 had been well-received, according to the board, and is expected to attract significant assets over the next few years.
Finally, the reorganisation saw a risk and cost review of the company’s advice oversight regime resulting in “a more streamlined, cost and risk effective training and competence scheme, with improved management information”.
It added: “Each adviser now benefits from a tailored oversight and development plan, significantly improving the board’s confidence in ensuring good client outcomes.”
In the update, the board also noted that it had benefited from funds from the UK government’s furlough scheme during the Covid-19 pandemic, which would “clearly not be available in future years”.
However, the savings it has made by creating a "captive cell insurance facility" will more than compensate for the absence of ongoing furlough support, it added.
“This captive cell insurance facility enables the company to provide a proportion of its professional indemnity insurance requirement through an in-house insurer and thereby to save approximately £250,000 per annum compared to the cost of obtaining the same level of insurance cover as last year,” the board noted.