Tavistock Investments (TAVI:AIM), a top 10 UK financial adviser network, hit break-even in the second half of its financial year according to a trading update issued ahead of full year results.
Earnings before interest, tax, depreciation and amortisation (EBITDA), after excluding non-underlying items, is now expected to show a profit for the year to 31 March 2016, chief executive Brian Raven says.
Analyst Eric Burns at WH Ireland previously forecast a full year EBITDA loss of around £700,000 in an April 2016 research note.
'If I was giving this year a mark out of 10 it would be eight-and-a-half – and I don't tend to give 10s out very easily' said Raven.
Progress on profitability was backed up by good performance in two other areas Raven says are important to the company's success.
Customer service quality and the conversion of low margin assets under influence (AuI) into more valuable assets under management (AuM) are both key performance indicators for the business.
Tavistock services a network of 328 advisers managing a combined £4 billion of assets on behalf of their clients.
Around £430 million of these assets have so far been allocated into Tavistock's in-house discretionary fund management service which trades under the brand Tavistock Wealth.
Discretionary funds under management, where a provider is able to make investment decisions on behalf of its clients, is one of the more profitable areas in investment management and has been at the heart of the success of companies including Brooks Macdonald (BRK:AIM) since it joined AIM in 2005.
Tilney Bestinvest's £600 million acquisition of Towry Law in April valued the business at around 6.7% of funds under management, most of which were discretionary, though the deal looks expensive compared to peer group valuations.
Including shares potentially issued as deferred payment for recent acquisitions, Tavistock's market capitalisation of around £19.6 million is 4.6% of current discretionary funds under management.
Tavistock could be able to transition as much as £1 billion into its discretionary service by the year ending 31 March 2018, according to a forecast produced by analyst Burns at WH Ireland.
Prior to today's update, Burns pencilled in a 0.16p loss per share for the financial year just ended, with underlying post-tax profits of 0.23p and 0.49p per share for Tavistock's financial years to end-March 2017 and 2018.
Shares in Tavistock trade 11.8% higher at 4.75p.