TIDMBRK
RNS Number : 5936R
Brooks Macdonald Group PLC
02 March 2023
BROOKS MACDONALD GROUP PLC
HALF-YEAR RESULTS FOR THE SIX MONTHSED 31 DECEMBER 2022
"Solid six months demonstrating continued organic growth, and a
robust underlying profit margin of 25%, supporting an 8% increase
in the interim dividend"
Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group")
today announces its half-year results for the six months ended 31
December 2022.
Solid financial performance with continuing organic growth
-- Total Funds under Management ("FUM") reached GBP16.2bn, up
3.6% over the half year (30 June 2022: GBP15.7 billion)
* Continuing positive net flows over the six months,
totalling GBP347 million (H1 FY22: GBP326 million),
with annualised net flows of 4.4% compared to 4.0%
for the same period last year, despite the volatile
macroeconomic backdrop
* Positive investment performance of 1.4% for the half
year, ahead of the benchmark index which saw a
decline of 0.3%.
-- The Group's core UK discretionary business had annualised net
flows of 7.8% for the period, driven by:
* Strong growth in Brooks Macdonald Investment
Solutions ("BMIS"), the firm's B2B offering for
advisers, and in Platform Managed Portfolio Service
("PMPS") which saw combined annualised net flows of
52.6%
* Partly offset by net outflows in our Bespoke
Portfolio Service ("BPS"), a reflection of weaker
investor sentiment and extended lead times.
* Revenue declined by 4.8% to GBP58.9 million (H1 FY22:
GBP61.9 million) driven by the impact of volatile
markets on average FUM, lower transaction-related
revenues, and the repricing of our Cornelian Risk
Managed Fund ("RMF") range, partly offset by
continuing positive net flows and higher interest
income.
* Underlying profit before tax was GBP14.5 million, in
line with prior guidance, compared to GBP17.6 million
in the same period last year, with underlying profit
margin at 24.6% (H1 FY22: 28.4%), continuing our
commitment to top quartile underlying profit margin.
* Statutory profit after tax was GBP8.2 million, versus
GBP10.2 million in H1 FY22.
* Underlying diluted earnings per share were 72.5p
compared to 85.4p in the same period last year.
* The Group has raised the interim dividend by 7.7% to
28.0p (H1 FY22: 26.0p), reflecting the results for
the period, the Group's strong capital position, and
the Board's continuing confidence in the firm's
prospects.
* The outlook for the year remains as per prior
guidance, with full year net flows expected to be
5-6%,
primarily driven by Platform MPS and BMIS.
Strategic progress
Selective high-quality acquisitions remaining a key pillar of
the Group's strategy
* The Group completed two acquisitions in the period,
both high-quality financial advice firms with strong
long-standing relationships with Brooks Macdonald:
* Integrity Wealth Solutions in Nuneaton, with a strong
West Midlands client base
* Adroit Financial Planning in Manchester, with a
broader franchise across the country focused on Court
of Protection and vulnerable clients.
Ongoing investment to deliver a comprehensive digital
transformation
* T he Group completed migration of all its adviser-
and client-facing processes to the SS&C platform, a
critical milestone in its digital transformation
* Progress now being made to embed the SS&C systems and
processes into the business, with a programme
of work under way to deliver the full efficiency benefits and, ultimately,
best-in-class client and intermediary experience
* Other elements of the Group's digital transformation
continued to progress, including replacing the core
financial planning system and preparing an upgrade to
the client relationship management system.
Andrew Shepherd, CEO, commented:
"I am encouraged by our underlying profit margin for the half
year remaining robust at close to 25%, a reflection of continued
cost discipline offsetting the impact of difficult markets on our
funds under management and hence our revenue. Overall, our
financial performance for the period was solid with positive net
flows demonstrating continuing intermediary and client demand for
our products and services. This performance enabled us to increase
our interim dividend by 8%, delivering continued returns for our
shareholders.
"Our purpose is realising ambitions and securing futures, and we
have stayed close to our clients and intermediaries when they have
needed us most. We are confident in our strategy, we are making
good progress and I remain optimistic about our long-term
prospects. Although the short-term macroeconomic outlook remains
uncertain, we are well positioned to take advantage of the growth
opportunities ahead."
Financial highlights: H1 FY23 H1 FY22 FY22
Underlying(1) profit before tax (GBPm) 14.5 17.6 34.5
Underlying(1) profit margin before tax
(%) 24.6 28.4 28.2
Statutory profit before tax (GBPm) 9.8 13.2 29.5
Statutory profit margin before tax (%) 16.6 21.3 24.1
Underlying(1) diluted earnings per share
(p) 72.5 85.4 168.7
Statutory diluted earnings per share
(p) 50.6 63.1 144.4
Interim (FY22 - final) dividend per share
(p) 28.0 26.0 71.0
------------------------------------------ ------- ------- -----
Business highlights: H1 FY23 H1 FY22 FY22
FUM (GBPbn) 16.2 17.3 15.7
Revenue (GBPm) 58.9 61.9 122.2
Total net assets (GBPm) 151.1 140.3 148.4
Cash balances (GBPm) 37.6 45.7 61.3
------------------------ ------- ------- -----
Revenue by segment: H1 FY22 H1 FY21 FY21
UK Investment Management (GBPm) 48.8 50.9 101.0
International (GBPm) 10.1 11.0 21.2
-------------------------------- ------- ------- -----
Financial calendar:
Results announcement 2 March 2023
Ex-dividend date for interim dividend 9 March 2023
Record date for interim dividend 10 March 2023
Interim dividend payment date 6 April 2023
------------------------------------- -------------
(1) The underlying figures represent the results for the Group's
activities excluding underlying adjustments as listed in the
Interim management report. The Board considers the underlying
profit to be an appropriate reflection of the Group's performance
compared to statutory profit. A reconciliation between the Group's
statutory and underlying profit before tax is also included in the
Interim management report.
An analyst meeting will be held at 10.30am on Thursday 2 March.
Please contact Iona Biggart at FTI Consulting on 07971 989065 or
e-mail brooksmacdonald@fticonsulting.com for further details.
Enquiries to:
Brooks Macdonald Group plc www.brooksmacdonald.com
Andrew Shepherd, CEO 020 7927 4816
Peel Hunt LLP (Nominated Adviser
and Broker)
Paul Shackleton / Andrew Buchanan
/ John Welch 020 7418 8900
FTI Consulting brooksmacdonald@fticonsulting.com
Ed Berry / Laura Ewart / Katherine 07703 330199 / 0 7711387085 /
Bell 07976 870961
Notes to editors
Brooks Macdonald Group plc, through its various subsidiaries,
provides leading investment management services in the UK and
internationally. The Group, which was founded in 1991 and began
trading on AIM in 2005, had discretionary Funds under Management of
GBP16.2 billion as at 31 December 2022.
Brooks Macdonald offers a range of investment management
services to private high net worth individuals, pension funds,
institutions, charities and trusts. The Group also provides
financial planning as well as international investment management,
and acts as fund manager to a range of onshore and international
funds.
The Group has fifteen offices across the UK and Crown
Dependencies including London, Birmingham, Cheltenham, East Anglia,
Exeter, Leeds, Manchester, Nuneaton, Southampton, Tunbridge Wells,
Scotland, Wales, Jersey, Guernsey and Isle of Man.
LEI: 213800WRDF8LB8MIEX37
www.brooksmacdonald.com / @BrooksMacdonald
Interim management report
Solid performance in H1
The six months to end 2022 saw solid performance for Brooks
Macdonald, with FUM growing to GBP16.2 billion, decent financial
results, and continued organic growth.
The Group's revenues fell by 4.8% to GBP58.9 million (H1 FY22:
GBP61.9 million). Underlying costs were broadly flat, up 0.2% to
GBP44.4 million (H1 FY22: GBP44.3 million), reflecting continued
strong cost discipline. This resulted in an underlying profit
before tax of GBP14.5 million, a 17.6% decline on the prior period
(H1 FY22: GBP17.6 million).
Our underlying profit margin remained robust at 24.6%,
reflecting our commitment to top quartile underlying profit margin
over the medium term, although it was down 3.8 percentage points
from the prior period's 28.4%. Similarly, underlying basic EPS was
down 16.0% to 74.4p (H1 FY22: 88.6p). Statutory profits declined
from GBP13.2 million to GBP9.8 million.
The Group is declaring an interim dividend of 28.0 pence per
share, a 7.7% uplift on the interim dividend paid last year, in
line with the solid results for the period and the Board's
continuing confidence in the firm's prospects.
Our investment performance remains good, with overall
performance of 1.4% over the period, compared to a 0.3% decline in
the MSCI PIMFA Private Investor Balanced Index. Over reasonable
investment time horizons, our Centralised Investment Process
("CIP") continues to achieve strong risk adjusted returns for
clients.
We completed the transition of our adviser- and client-facing
processes to the SS&C platform, a critical milestone in our
digital transformation, and are making good progress in embedding
the SS&C systems and processes into the business.
Our people agenda remains focused on Our Promise, which is the
consolidation of our commitment to our people across an inclusive
culture, fulfilling careers and great recognition for outstanding
performance.
Strategy delivering
The key strengths of our organisation are its client-centric
culture, strong adviser relationships, robust Centralised
Investment Process, comprehensive investment proposition, and
commitment to service and operational excellence. We aim to build
on these through our strategy, which is based on three key value
drivers:
-- Market-leading organic growth
-- Service and operational excellence
-- Selective high-quality acquisitions.
In the period, the Group announced ambitious medium-term targets
- delivering 8-10% net flows and top quartile underlying profit
margin in support of becoming a Top 5 wealth manager in the UK and
the Crown Dependencies. We expect the three key value drivers to
combine to achieve these targets.
Market-leading organic growth
The first half of our financial year saw continuing positive net
flows, running at an annualised rate of 4.4% for the period,
compared to 4.0% for the same period last year, supported by our
continued focus on clients and intermediaries.
Our UK Investment Management ("UKIM") business, under the
leadership of Robin Eggar, had a solid half. We saw particularly
good growth in our strategic focus areas of BM Investment Solutions
("BMIS"), our BRB offering for advisers, and Platform Management
Portfolio Services ("PMPS"), which saw combined annualised net
flows of 52.6%. We also continued to see progress in the
specialised variants of our Bespoke Portfolio Service, including
the Decumulation Service, which had FUM up c.25% over the period.
Overall, our core UK Investment Management discretionary business
had annualised net flows of 7.8% for the half year.
FUM in the UKIM Funds business declined by 2.4% in the period
with net outflows more than offsetting positive investment
performance, in line with experience across the industry.
International had pleasing investment performance, partly offset
by disappointing outflows, leading to a loss at the underlying
profit level. The Group continues to see a material market
opportunity in the Crown Dependencies and will continue to invest
in the islands, while reviewing options to improve the performance
of the business.
Markets remained volatile in the last six months of 2022 with
financial markets favouring different investment styles as the
period progressed, creating a difficult investment backdrop to
navigate. At a headline level, Brooks Macdonald investment
performance gained 1.4% versus a loss of 0.3% for the PIMFA
Balanced index. The longer-term returns of our Centralised
Investment Process also continue to be robust, with each of Brooks
Macdonald's Bespoke Portfolio Service ("BPS") risk profiles
outperforming their relevant ARC benchmarks over 10 years.
Service and operational excellence
SS&C Technologies ("SS&C"), a global provider of
software and technology services to the financial services
industry, is our technology partner. In H1, we completed the
transition of all client- and adviser-facing processes on to the
SS&C platform, which is a critical milestone in our digital
transformation. Progress is now being made to embed the SS&C
systems and processes into the business, with a programme of work
under way to deliver the full efficiency benefits and, ultimately,
best-in-class client and intermediary experience.
The Group is continuing to drive forward its digital
transformation, including upgrades to our financial planning and
client relationship management systems.
Selective high-quality acquisitions
Acquisitions form an important part of our strategy, essential
to achieve our ambitious medium-term target of becoming a Top 5
wealth manager in the UK and Crown Dependencies. As previously
disclosed, we have four strict criteria for acquisitions: (i) the
target must be a good business in its own right; (ii) there must be
clear strategic logic to the combination; (iii) it must be a good
cultural fit with Brooks Macdonald; and (iv) the economics of the
transaction must be compelling.
In the period at hand, we were pleased to complete two
acquisitions - Integrity Wealth Solutions in Nuneaton and Adroit
Financial Planning in Manchester. Both firms are high quality
financial advisers, with strong long-standing relationships with
Brooks Macdonald, who now bring further scale and capability to our
growing Private Clients business. Integrity have built a strong
client base in the West Midlands and Adroit have a broader
franchise across the country focused on Court of Protection and
vulnerable clients.
Positive medium-term outlook
The short-term geopolitical and macroeconomic outlook remains
uncertain, undermining investor sentiment, and at times, making
clients reluctant to commit funds. Nonetheless, the outlook for the
year remains as per prior guidance, with full year net flows
expected to be 5-6%, primarily driven by Platform MPS and BMIS. The
fundamental opportunity for the Group remains as strong as it has
ever been and we are confident in our long-term prospects building
on our ambitious organic and inorganic growth strategy, grounded in
our purpose of realising ambitions and securing futures.
Review of the results for the period
The Group delivered a solid set of results for the first half of
the financial year given the challenging macroeconomic environment.
Net flows and overall financial performance remained resilient
delivering an underlying profit for the period of GBP14.5 million
and an underlying profit margin of 24.6%. The Group also continued
to deliver on its ambitious growth strategy, completing the
acquisition of Integrity Wealth Solutions and Adroit Financial
Planning in the period.
The table below shows the Group's financial performance for the
six months ended 31 December 2022 with the comparative period and
provides a reconciliation between the underlying results, which the
Board considers to be an appropriate reflection of the Group's
underlying performance, and the statutory results. Underlying
profit represents an alternative performance measure ("APM") for
the Group. Refer to the Non-IFRS financial information section in
the Condensed consolidated financial statements for a glossary of
the Group's APMs, their definition, and the criteria for how
underlying adjustments are considered.
Six months Six months 12 months
to to to
31 Dec 2022 31 Dec 2021 30 Jun 2022
GBPm GBPm GBPm
-------------------------------------- ------------ ------------ ------------
Revenue 58.9 61.9 122.2
Fixed staff costs (21.5) (20.0) (40.5)
Variable staff costs (4.3) (8.3) (14.8)
-------------------------------------- ------------ ------------ ------------
Total staff costs (25.8) (28.3) (55.3)
FSCS levy - - (1.1)
Non-staff costs (18.6) (16.0) (31.3)
-------------------------------------- ------------ ------------ ------------
Total non-staff costs (18.6) (16.0) (32.4)
-------------------------------------- ------------ ------------ ------------
Total underlying costs (44.4) (44.3) (87.7)
Underlying profit before tax 14.5 17.6 34.5
Underlying adjustments (4.7) (4.4) (5.0)
-------------------------------------- ------------ ------------ ------------
Statutory profit before tax 9.8 13.2 29.5
Taxation (1.6) (3.0) (6.1)
-------------------------------------- ------------ ------------ ------------
Statutory profit after tax 8.2 10.2 23.4
-------------------------------------- ------------ ------------ ------------
Underlying profit margin before tax 24.6% 28.4% 28.2%
Underlying basic earnings per share 74.4p 88.6p 174.1p
Underlying diluted earnings per share 72.5p 85.4p 168.7p
Statutory profit margin before tax 16.6% 21.3% 24.1%
Statutory basic earnings per share 51.8p 65.5p 149.0p
Statutory diluted earnings per share 50.6p 63.1p 144.4p
Dividends per share 28.0p 26.0p 71.0p
-------------------------------------- ------------ ------------ ------------
Funds under management
The table below shows the opening and closing FUM position and
the movements during the period broken down by segment and by our
key services within UK Investment Management ("UKIM").
Six months ended 31 December
2022 (GBPm)
----------------------------------
Organic net new
business
Opening Closing
FUM FUM Total organic
1 Jul Total 31 Dec net new
22 Q1 Q2 Total inv. perf. 22 business Total mvmt
------- ------ ----- ------ ----------- ------- ------------- ----------
BPS 8,581 (6) (82) (88) 66 8,559 (1.0)% (0.3)%
MPS Custody 960 (3) 2 (1) 16 975 (0.1)% 1.6%
MPS Platform 2,053 243 297 540 39 2,632 26.3% 28.2%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
MPS total 3,013 240 299 539 55 3,607 17.9% 19.7%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
UKIM discretionary 11,594 234 217 451 121 12,166 3.9% 4.9%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
Funds - DCF 439 (14) (17) (31) (4) 404 (7.1)% (8.0)%
Funds - Other 1,418 (20) (24) (44) 35 1,409 (3.1)% (0.6)%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
Funds total 1,857 (34) (41) (75) 31 1,813 (4.0)% (2.4)%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
UKIM total 13,451 200 176 376 152 13,979 2.8% 3.9%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
International 2,216 (9) (20) (29) 60 2,247 (1.3)% 1.4%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
Total 15,667 191 156 347 212 16,226 2.2% 3.6%
------------------- ------- ------ ----- ------ ----------- ------- ------------- ----------
Total investment performance 1.4%
MSCI PIMFA Private Investor Balanced Index(1) (0.3)%
------------------------------------------------------------------------- ------------- ----------
1. Capital-only index.
During the period, the Group recorded positive net flows of
GBP0.3 billion or 2.2%. Positive investment performance of 1.4%,
ahead of the benchmark index (which recorded a decline of 0.3%),
added a further GBP0.2 billion. This resulted in a closing FUM of
GBP16.2 billion, an increase of 3.6% from the start of the
financial year (30 June 2022: GBP15.7 billion; 31 December 2021:
GBP17.3 billion).
Within UKIM, the BPS offering experienced net outflows in the
period of GBP0.1 billion, whilst Platform MPS (including BM
Investment Solutions) recorded strong net flows of GBP0.5 billion.
The Funds business saw outflows of GBP0.1 billion during the
period, primarily due to wider market conditions with outflows
across most funds in the sector.
International FUM remained broadly flat over the period with
marginal net outflows offset by positive investment
performance.
Revenue
Total revenue for the Group reduced by 4.8% to GBP58.9 million
in the first half of the financial year. Fee income declined by 13%
compared to the prior period driven by lower average FUM levels,
and the implementation of a new competitive rate card for the
Cornelian Risk Managed Funds range in order to drive higher levels
of growth. Transactional income reduced by GBP0.9 million due to
lower trading levels during the first quarter of the financial year
and the continuing trend of clients moving to the fee-only rate
card.
The decline in fee and transactional income was offset by higher
interest turn of GBP5.1 million (H1 FY22: GBP0.4 million) driven by
the rise in the Bank of England base rates.
Fees from Financial Planning in the period amounted to GBP2.4
million and recorded an increase of 9.1% on the previous period,
driven by the first contribution from the recently acquired
Integrity Wealth Solutions and Adroit Financial Planning businesses
of GBP0.4 million.
Revenue, yields and average FUM
Revenue Average FUM Yields
------------------------ ------------------------ ------------------------
H1 FY23 H1 FY22 Change H1 FY23 H1 FY22 Change H1 FY23 H1 FY22 Change
GBPm GBPm GBPm GBPm GBPm % bps bps bps
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
BPS fees 27.2 31.6 (4.4) 8,253 9,475 (12.9) 65.3 66.3 (1.0)
BPS non-fees (transactional) 4.4 4.9 (0.5) - - - 10.6 10.3 0.3
BPS non-fees (interest
turn) 3.8 0.3 3.5 - - - 9.1 0.6 8.5
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total BPS 35.4 36.8 (1.4) 8,253 9,475 (12.9) 85.0 77.2 7.8
MPS Custody 2.8 3.2 (0.4) 962 1,061 (9.3) 58.5 59.8 (1.3)
MPS Platform 2.3 1.6 0.7 2,347 1,665 41.0 19.3 19.1 0.2
MPS Custody non-fees
(interest turn) 0.5 0.1 0.4 - - - 9.5 1.9 7.6
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total MPS 5.6 4.9 0.7 3,309 2,726 21.4 33.4 35.7 (2.3)
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
UKIM discretionary 41.0 41.7 (0.7) 11,562 12,201 (5.2) 70.3 67.9 2.4
Funds 5.0 6.4 (1.4) 2,027 2,281 (11.1) 48.8 55.7 (6.9)
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total UKIM 46.0 48.1 (2.1) 13,589 14,482 (6.2) 67.1 65.9 1.2
International fees 8.1 9.8 (1.7) 2,213 2,554 (13.4) 72.6 76.1 (3.5)
International non-fees 2.0 1.3 0.7 - - - 26.8 15.5 11.3
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total International(1) 10.1 11.1 (1.0) 2,213 2,554 (13.4) 90.6 86.2 4.4
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total FUM-related
revenue 56.1 59.2 (3.1) 15,802 17,036 (7.2) 70.3 69.0 1.3
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Financial Planning(2) 2.4 2.2 0.2
Other income 0.4 0.5 (0.1)
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total non-FUM-related
revenue 2.8 2.7 0.1
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total Group revenue 58.9 61.9 (3.0)
----------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
MSCI PIMFA Private Investor Balanced
Index(3) 1,661 1,849 (10.2)
----------------------------------------------- ------ ------- ------- ------ ------- ------- ------
1. The yields on the Lloyds Channel Islands acquired businesses
are included within the International fees line in the above table
as these businesses are now
fully embedded.
2. Following a corporate restructure of the business in FY22,
fees earned on Financial Planning advice in the International
business are being wrapped up within the Annual Management Charge
and no longer billed separately. Comparatives have been updated to
reflect a like-for-like comparison with advice fees shown in the
International fees line for both years. As a result, the Financial
Planning revenue in the table above relates to solely UK Financial
Planning income and the H1 FY22 International yield has been
restated to ensure consistent reporting with the current
period.
3. Capital-only index.
The Group's average FUM fell by 7.2% from H1 FY22, which was
ahead of the movement in the MSCI PIMFA Private Investor Balanced
Index, which fell by 10.2% from 31 December 2021 to 31 December
2022.
The yield on BPS fees for UKIM decreased by 1bp to 65.3bps
during the period driven by a change in mix between fee-only and
fee and dealing accounts and rates achieved on new business.
The BPS non-fee transactional income yield increased marginally
by 0.3bps, whilst the yield on interest turn saw significant growth
from 0.6bps to 9.1bps driven by increase in the Bank of England
base rates during the period. This will now begin to stabilise as
we restart paying clients interest on cash balances.
The yields on MPS custody dropped by 1.3bps to 58.5bps as a
result of the change in mix within the portfolios, whilst the MPS
platform remained relatively stable when compared to the prior
period. These include the Brooks Macdonald Investment Solutions
offering that attracts relatively larger mandates, which benefit
from discounted tiered rates.
The Funds fee yields reduced by 6.9bps to 48.8bps during the
first half of the year. This was principally driven by the
Cornelian Risk Managed Fund range moving onto a more competitive
rate card in July 2022. As part of our growth strategy, we are
targeting a significant increase in market share with advisers and
networks that predominately use multi asset funds to deliver their
investment offering.
International fee income yield reduced by 3.5bps to 72.6bps
during the first half of the year as a result of the change in mix
and the impact of the timing of inflows and outflows during the
period. Non-fees income yield increased significantly by 11.3bps as
a result of the rise in rates earned on both GBP and foreign
currency account balances.
Underlying costs
Total underlying costs for the Group of GBP44.4 million were
broadly in line with last year (H1 FY22: GBP44.3 million) and
included GBP0.3 million in respect of the recent acquisitions of
Integrity Wealth Solutions and Adroit Financial Planning.
Staff costs
Total staff costs decreased by 8.8% from GBP28.3 million to
GBP25.8 million. Fixed staff costs increased by 7.5% to GBP21.5
million as a result of inflationary pay rises, the introduction of
higher National Insurance rates in April 2022 and the cost of new
hires from the recent two acquisitions.
Variable staff costs reduced by 48.2% to GBP4.3 million driven
by the reduction in pre-variable pay profit and a small number of
senior management exits. Within this, the share-based payments
charge was down GBP0.9 million on the prior period due to lapses
recognised in H1 FY23 and a reduction in the Group's share price
impacting the associated employer national insurance
contributions.
Non-staff costs
Non-staff costs amounted to GBP18.6 million, of which GBP0.1
million related to the recent acquisitions. Within this, the Group
incurred GBP1.3 million in relation to terminated M&A processes
and other one-off costs which are not expected to recur. Excluding
the impact of these and the acquired costs, non-staff costs for the
core business increased by GBP1.2 million or 7.5% on H1 FY22.
During the period, the Group successfully migrated the Group's
custody book onto the SS&C technology suite, delivering
brand-new capabilities and supporting the Group's digital
transformation whilst providing a scalable platform for future
growth. The platform migration resulted in a net increase of GBP0.6
million in the go-live year, comprising GBP1.3 million additional
spend on the enhanced capabilities, offset by a reduction in
computer software amortisation of GBP0.7 million following the full
amortisation in the prior year of the legacy operating platform
technology.
Profit before tax
Combined, the above gave rise to an underlying profit before tax
for the half year of GBP14.5 million, a decrease of 17.6% on the
prior period (H1 FY22: GBP17.6 million) resulting in a profit
margin of 24.6%, down by 3.8 points on last year (H1 FY22:
28.4%).
The Group's statutory profit before tax fell by GBP3.4 million
to GBP9.8 million (H1 FY22: GBP13.2 million). A breakdown of the
underlying adjustments together with an explanation of each is
included within the Reconciliation between underlying and statutory
profits section below.
Segmental analysis
The Group reports its results across two key operating segments:
UK Investment Management and International. The tables below
provide a breakdown of the half year performance broken down by
these segments, with comparatives.
UK Investment Group and
H1 FY23 (GBPm) Management International consolidation Total
---------------------------------------- ------------- ------------- -------------- ------
Revenue 48.8 10.1 - 58.9
Direct costs (20.7) (6.6) (17.3) (44.6)
---------------------------------------- ------------- ------------- -------------- ------
Operating contribution 28.1 3.5 (17.3) 14.3
Internal cost recharges and net finance
income (11.2) (3.7) 15.1 0.2
---------------------------------------- ------------- ------------- -------------- ------
Underlying profit/(loss) before tax 16.9 (0.2) (2.2) 14.5
---------------------------------------- ------------- ------------- -------------- ------
Underlying adjustments (2.1) (0.8) (1.8) (4.7)
---------------------------------------- ------------- ------------- -------------- ------
Statutory profit/(loss) before tax 14.8 (1.0) (4.0) 9.8
---------------------------------------- ------------- ------------- -------------- ------
Underlying profit/(loss) margin before
tax 34.6% (2.0)% n/a 24.6%
Statutory profit/(loss) margin before
tax 30.3% (9.9)% n/a 16.6%
---------------------------------------- ------------- ------------- -------------- ------
UK Investment Group and
H1 FY22 (GBPm) Management International consolidation Total
------------------------------------ ------------- ------------- -------------- ------
Revenue 50.9 11.0 - 61.9
Direct costs (20.1) (6.2) (18.0) (44.3)
------------------------------------ ------------- ------------- -------------- ------
Operating contribution 30.8 4.8 (18.0) 17.6
Internal cost recharges (11.9) (3.9) 15.8 -
------------------------------------ ------------- ------------- -------------- ------
Underlying profit/(loss) before tax 18.9 0.9 (2.2) 17.6
------------------------------------ ------------- ------------- -------------- ------
Underlying adjustments (2.2) (0.7) (1.5) (4.4)
------------------------------------ ------------- ------------- -------------- ------
Statutory profit/(loss) before tax 16.7 0.2 (3.7) 13.2
------------------------------------ ------------- ------------- -------------- ------
Underlying profit margin before tax 37.1% 8.2% n/a 28.4%
Statutory profit margin before tax 32.8% 1.8% n/a 21.3%
------------------------------------ ------------- ------------- -------------- ------
Restatement of segmental view
Over the past 12 months, the Group has undertaken a wide-ranging
review of its internal management information and management cost
allocations. The new branch and team level performance reporting is
driving a step change in performance management and business
insight and transforms the Group's management information
capabilities. As part of this change, the business has moved to
team and branch level compensation models based on contribution. In
order to ensure this change was delivering appropriate and
equitable results, a detailed review of the cost structure and
allocation methodology was carried out, which resulted in a more
appropriate reflection of internal resource usage. As a result, the
segmental results for the comparative period have been restated to
ensure consistent reporting with the current period. The impact of
this restatement has been an increase in Group allocations and
recharges to the International business.
UKIM saw revenue fall by 4.1% to GBP48.8 million, driven by
lower average FUM, whilst its total costs remained relatively flat
on the prior period. This resulted in an underlying profit before
tax of GBP16.9 million, down GBP2.0 million on the prior period and
an underlying profit margin of 34.6%, a reduction of 2.5
points.
International revenue reduced by GBP0.9 million to GBP10.1
million as a result of lower average markets and the impact of
outflows. Total costs increased marginally by 2.0% from GBP10.1
million to GBP10.3 million, driven primarily by higher legal costs.
This resulted in the International segment recording an underlying
loss of GBP0.2 million, down GBP1.1 million from the underlying
profit of GBP0.9 million in H1 FY22. The continued investment in
the Isle of Man branch in the current year resulted in an
underlying loss of GBP0.3 million, which is included within the
overall International loss of GBP0.2 million.
Reconciliation between underlying and statutory profits
Underlying profit before tax is considered by the Board to be an
appropriate reflection of the Group's performance when compared to
the statutory results as this excludes income and expense
categories, which are deemed of a non-recurring nature or a
non-cash operating item. Reporting at an underlying basis is also
considered appropriate for external analyst coverage and peer group
benchmarking, allowing a like-for-like comparison. Underlying
profit is deemed to be an alternative performance measure ("APM");
refer to the Non-IFRS financial information section in the
Condensed consolidated financial statements for a glossary of the
Group's APMs, their definitions, and the criteria for how
underlying adjustments are considered.
A reconciliation between underlying and statutory profit before
tax for the six months ended 31 December 2022, with comparatives is
shown in the following table:
Six months
to Six months 12 months
31 Dec to to
2022 31 Dec 2021 30 Jun 2022
GBPm GBPm GBPm
--------------------------------------------------- ---------- ------------ ------------
Underlying profit before tax 14.5 17.6 34.5
Amortisation of client relationships (2.8) (2.7) (5.5)
Dual running operating platform costs (1.6) (1.6) (2.4)
Acquisition and integration-related costs (0.3) - -
Changes in fair value and finance cost of deferred
contingent consideration - (0.1) (0.1)
Other non-operating income - - 3.0
--------------------------------------------------- ---------- ------------ ------------
Total underlying adjustments (4.7) (4.4) (5.0)
Statutory profit before tax 9.8 13.2 29.5
--------------------------------------------------- ---------- ------------ ------------
Amortisation of client relationships (GBP2.8 million charge)
These intangible assets are created in the course of acquiring
funds under management and are amortised over their useful life,
which have been assessed to range between 6 and 20 years. The
increase is due to the acquisitions of Integrity Wealth Solutions
and Adroit Financial Planning. This amortisation charge has been
excluded from the underlying profit since it is a significant
non-cash item. Refer to Note 10 of the Condensed consolidated
financial statements for more details.
Dual running operating platform costs (GBP1.6 million
charge)
The Group is in a partnership agreement with SS&C to
transform our adviser and client service including the onboarding
process and digital experience, as well as enhancing our operating
platform. The migration was executed at the end of July 2022,
however, as part of the transition process, the Group has incurred
net incremental costs in running two operating platforms
concurrently. The dual running costs have been excluded from
underlying profit in view of their non-recurring nature.
Acquisition and integration-related costs (GBP0.3 million
charge)
These represent costs incurred in relation to the acquisitions
of Integrity Wealth Solutions on 31 October 2022 and Adroit
Financial Planning on 15 December 2022. The costs incurred include
stamp duty and legal fees.
FY22 Changes in fair value and finance cost of deferred
contingent consideration (GBP0.1 million charge)
This comprises the fair value measurement arising on deferred
consideration payments from acquisitions carried out by the Group,
together with their associated net finance costs where applicable.
Refer to Note 15 of the Condensed consolidated financial statements
for more details.
FY22 Other non-operating income (GBP3.0 million credit)
During the year ended 30 June 2022, the Group received
confirmation from HMRC that the supply of certain Group services
was exempt from VAT. As a result, the Group received a refund from
HMRC in respect of VAT arising on those services over the period
from 1 July 2017 to 30 June 2020 of GBP3.0 million.
Taxation
The Group's Corporation Tax charge on underlying profits for the
period was GBP2.8 million (H1 FY22: GBP3.7 million) representing an
effective tax rate of 19.0% (H1 FY22: 21.1%). The reduction is
principally driven by an R&D credit arising on FY22 qualifying
expenditure and recognised as a prior period tax adjustment in H1
FY23. The statutory Corporation Tax charge was GBP1.6 million, down
46.7% from the prior period (H1 FY22: GBP3.0 million).
Earnings per share
The Group's basic statutory earnings per share for the six
months ended 31 December 2022 was 51.8p, which reduced by 13.7p
from H1 FY22. On an underlying basis, basic earnings per share
decreased by 16.0% to 74.4p (H1 FY22: 88.6p). Details on the basic
and diluted earnings per share are provided in Note 8 of the
Condensed consolidated financial statements.
Financial position and regulatory capital
The Group's financial position remains strong with net assets of
GBP151.1 million at 31 December 2022 (H1 FY22: GBP140.3 million;
FY22: GBP148.4 million). As at 31 December 2022, the Group had an
own funds adequacy ratio of 267.8% (H1 FY22: 285.7%). The own funds
adequacy ratio is defined as the Group's own funds as a proportion
of the fixed overhead requirement. The total net assets and the own
funds adequacy ratio calculation take into account the respective
period's interim profits (net of the declared interim dividends) as
these are deemed to be verified at the date of publication of the
half year results.
Brooks Macdonald Asset Management Limited, the Group's main
operating subsidiary, is an IFPRU 125k Limited Licence Firm
regulated by the Financial Conduct Authority ("FCA"). In view of
this, the Group is classified as a regulated group and subject to
the same regime. As required under FCA rules, and those of both the
Jersey and Guernsey Financial Services Commission, the Group
assesses its regulatory capital and liquidity on an ongoing basis
through the Internal Capital Adequacy and Risk Assessment ("ICARA")
and Adjusted Net Liquid Asset ("ANLA") assessments, which include
performing a range of stress tests and scenario analysis to
determine the appropriate level of regulatory capital and liquidity
that the Group needs to hold. Surplus levels of capital and
liquidity are forecast, taking into account known outflows and
proposed dividends to ensure that the Group maintains sufficient
capital and liquidity at all times.
The FY22 ICARA review was conducted for the period ended 30 June
2022 and signed off by the Board in December 2022. Regulatory
capital forecasts are performed monthly and take into account
expected dividends and intangible asset acquisitions and disposals
where applicable, as well as budgeted and forecast trading
results.
The Group's Pillar III disclosures are published annually on the
Group's website ( www.brooksmacdonald.com ) and provide further
details about the Group's regulatory capital resources and
requirements. The Group monitors a range of capital and liquidity
statistics on a daily and monthly basis.
Dividend
The Board recognises the importance of dividends to shareholders
and the benefit of providing sustainable shareholder returns. In
determining the level of dividend in any year, the Board considers
a number of factors such as the level of retained earnings, future
cash commitments, statutory profit cover, capital and liquidity
requirements and the level of profit retention required to sustain
the growth of the Group. The Board has declared an interim dividend
of 28.0p (H1 FY22: 26.0p). This represents an increase of 7.7%
compared to the previous period. The interim dividend will be paid
on 6 April 2023 to shareholders on the register as at 10 March
2023. Refer to Note 9 of the Condensed consolidated financial
statements for more details.
Cash flow and capital expenditure
The Group continues to have strong levels of cash generation
from operations. Total cash resources at the end of December 2022
fell by GBP23.7 million from the 30 June 2022 to GBP37.6 million
(H1 FY22: GBP45.7 million; FY22: GBP61.3 million). This reduction
was contributed by the Group financing the recent acquisitions of
Integrity Wealth Solutions and Adroit Financial Planning from its
own resources, resulting in a net cash out flow of GBP14.9 million.
Excluding this outflow, cash decreased by GBP8.8 million from 30
June 2022, with GBP7.0 million spent on the FY22 final dividend
during the current period. The Group continued to have no
borrowings at 31 December 2022.
During the six months ended 31 December 2022, the Group incurred
capital expenditure of GBP2.3 million. This comprised
technology-related development of GBP1.9 million and
property-related costs of GBP0.4 million. The technology-related
spend was primarily incurred in connection with our partnership
with SS&C and amortisation started at the end of July 2022
following the successful migration, with the capital expenditure
amortised over the remaining eight years of the ten-year agreement
entered into with SS&C.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2022
Six months
ended Year ended
31 Dec Six months
2022 ended 30 Jun 2022
31 Dec 2021
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
------------------------------------------ ---- ------------- ------------- ------------
Revenue 4 58,908 61,941 122,210
Administrative costs (49,287) (48,517) (95,288)
------------------------------------------ ---- ------------- ------------- ------------
Gross profit 9,621 13,424 26,922
Other gains/(losses) - net 5 2 28 (55)
Operating profit 9,623 13,452 26,867
Finance income 356 16 68
Finance costs (135) (229) (372)
Other non-operating income - - 2,983
------------------------------------------ ---- ------------- ------------- ------------
Profit before tax 9,844 13,239 29,546
Taxation 6 (1,657) (2,955) (6,135)
Profit for the period attributable to
equity holders of the Company 8,187 10,284 23,411
Other comprehensive income - - -
Total comprehensive income for the period 8,187 10,284 23,411
------------------------------------------ ---- ------------- ------------- ------------
Earnings per share
Basic 8 51.8p 65.5p 149.0p
Diluted 8 50.6p 63.1p 144.4p
------------------------------------------ ---- ------------- ------------- ------------
The accompanying notes form an integral part of these Condensed
consolidated financial statements.
Condensed consolidated statement of financial position
as at 31 December 2022
31 Dec
2022 31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
--------------------------------------- ---- ------------- ------------- -----------
Assets
Non-current assets
Intangible assets 10 102,500 88,241 85,887
Property, plant and equipment 11 2,222 2,527 2,202
Right-of-use assets 12 4,663 5,229 4,971
Financial assets at fair value through
other comprehensive income 13 500 500 500
Deferred tax assets 17 3,642 3,240 3,002
--------------------------------------- ---- ------------- ------------- -----------
Total non-current assets 113,527 99,737 96,562
Current assets
Trade and other receivables 13 32,844 29,769 30,473
Financial assets at fair value through
profit or loss 13 786 867 784
Cash and cash equivalents 13 37,573 45,715 61,328
--------------------------------------- ---- ------------- ------------- -----------
Total current assets 71,203 76,351 92,585
--------------------------------------- ---- ------------- ------------- -----------
Total assets 184,730 176,088 189,147
--------------------------------------- ---- ------------- ------------- -----------
Liabilities
Non-current liabilities
Other non-current liabilities 13 (400) (785) (570)
Lease liabilities 14 (3,641) (4,545) (4,075)
Deferred contingent consideration 15 (1,039) - -
Provisions 16 (304) (265) (326)
Deferred tax liabilities 17 (9,406) (8,398) (7,959)
--------------------------------------- ---- ------------- ------------- -----------
Total non-current liabilities (14,790) (13,993) (12,930)
Current liabilities
Trade and other payables 13 (15,286) (18,031) (23,861)
Current tax liabilities 13 (128) (118) (833)
Lease liabilities 14 (2,008) (1,437) (1,952)
Deferred contingent consideration 15 (333) (321) (327)
Provisions 16 (1,099) (1,933) (819)
--------------------------------------- ---- ------------- ------------- -----------
Total current liabilities (18,854) (21,840) (27,792)
--------------------------------------- ---- ------------- ------------- -----------
Net assets 151,086 140,255 148,425
--------------------------------------- ---- ------------- ------------- -----------
Equity
Share capital 19 163 162 162
Share premium 19 80,240 78,931 79,141
Other reserves 10,364 9,801 9,962
Retained earnings 60,319 51,361 59,160
--------------------------------------- ---- ------------- ------------- -----------
Total equity 151,086 140,255 148,425
--------------------------------------- ---- ------------- ------------- -----------
The Condensed consolidated financial statements were approved by
the Board of Directors and authorised for issue on 1 March 2023,
signed on their behalf by:
Andrew Shepherd
CEO
Company registration number: 4402058
The accompanying notes form an integral part of these Condensed
consolidated financial statements.
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2022
Retained
Share capital Share premium Other reserves earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---- ------------- ------------- -------------- --------- -------
Balance at 30 June 2021 161 78,703 8,467 46,672 134,003
--------------------------- ---- ------------- ------------- -------------- --------- -------
Comprehensive income
Profit for the period - - - 10,284 10,284
Other comprehensive income - - - - -
--------------------------- ---- ------------- ------------- -------------- --------- -------
Total comprehensive income - - - 10,284 10,284
Transactions with owners
Issue of ordinary shares 19 1 228 - - 229
Share-based payments - - 2,161 - 2,161
Share options exercised - - (1,957) 1,957 -
Purchase of own shares
by employee benefit trust - - - (1,300) (1,300)
Tax on share options - - 1,130 - 1,130
Dividends paid 9 - - - (6,252) (6,252)
--------------------------- ---- ------------- ------------- -------------- --------- -------
Total transactions with
owners 1 228 1,334 (5,595) (4,032)
Balance at 31 December
2021 162 78,931 9,801 51,361 140,255
--------------------------- ---- ------------- ------------- -------------- --------- -------
Comprehensive income
Profit for the period - - - 13,127 13,127
Other comprehensive income - - - - -
--------------------------- ---- ------------- ------------- -------------- --------- -------
Total comprehensive income - - - 13,127 13,127
Transactions with owners
Issue of ordinary shares 19 - 210 - - 210
Share-based payments - - 618 - 618
Share options exercised - - (537) 537 -
Purchase of own shares
by employee benefit trust - - - (1,800) (1,800)
Tax on share options - - 80 - 80
Dividends paid 9 - - - (4,065) (4,065)
--------------------------- ---- ------------- ------------- -------------- --------- -------
Total transactions with
owners - 210 161 (5,328) (4,957)
Balance at 30 June 2022 162 79,141 9,962 59,160 148,425
--------------------------- ---- ------------- ------------- -------------- --------- -------
Comprehensive income
Profit for the period - - - 8,187 8,187
Other comprehensive income - - - - -
--------------------------- ---- ------------- ------------- -------------- --------- -------
Total comprehensive income - - - 8,187 8,187
Transactions with owners
Issue of ordinary shares 19 1 1,099 - - 1,100
Share-based payments - - 1,953 - 1,953
Share options exercised - - (1,794) 1,794 -
Purchase of own shares
by employee benefit trust - - - (1,800) (1,800)
Tax on share options - - 243 - 243
Dividends paid 9 - - - (7,022) (7,022)
--------------------------- ---- ------------- ------------- -------------- --------- -------
Total transactions with
owners 1 1,099 402 (7,028) (5,526)
--------------------------- ---- ------------- ------------- -------------- --------- -------
Balance at 31 December
2022 163 80,240 10,364 60,319 151,086
--------------------------- ---- ------------- ------------- -------------- --------- -------
The accompanying notes form an integral part of these Condensed
consolidated financial statements.
Condensed consolidated statement of cash flows
for the six months ended 31 December 2022
Six months Six months
ended ended Year ended
31 Dec
2022 31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ---- ------------- ------------ ------------
Cash flow from operating activities
Cash generated from operations 18 5,515 10,485 32,826
Corporation Tax paid (2,605) (2,843) (5,269)
Tax refund - - 2,983
--------------------------------------------- ---- ------------- ------------ ------------
Net cash generated from operating activities 2,910 7,642 30,540
Cash flows from investing activities
Purchase of computer software 10 (1,911) (2,240) (2,912)
Purchase of property, plant and equipment 11 (414) (200) (289)
Purchase of financial assets at fair value
through profit or loss - - (215)
Deferred contingent consideration paid 15 - (6,000) (6,000)
Consideration paid 7 (14,865) - -
Interest received 356 16 68
--------------------------------------------- ---- ------------- ------------ ------------
Net cash used in investing activities (16,834) (8,424) (9,348)
Cash flows from financing activities
Dividends paid to shareholders 9 (7,022) (6,252) (10,317)
Payment of lease liabilities 14 (1,109) (1,079) (1,785)
Proceeds of issue of shares 19 1,100 229 439
Shares issued as consideration 7 (1,000) - -
Purchase of own shares by Employee Benefit
Trust 19 (1,800) (1,300) (3,100)
--------------------------------------------- ---- ------------- ------------ ------------
Net cash used in financing activities (9,831) (8,402) (14,763)
Net (decrease)/increase in cash and cash
equivalents (23,755) (9,184) 6,429
--------------------------------------------- ---- ------------- ------------ ------------
Cash and cash equivalents at beginning
of period 61,328 54,899 54,899
--------------------------------------------- ---- ------------- ------------ ------------
Cash and cash equivalents at end of period 37,573 45,715 61,328
--------------------------------------------- ---- ------------- ------------ ------------
The accompanying notes form an integral part of these Condensed
consolidated financial statements.
Notes to the condensed consolidated financial statements
for the six months ended 31 December 2022
1. General information
Brooks Macdonald Group plc (the "Company") is the Parent Company
of a group of companies (the "Group"), which offers a range of
investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts. The
Group also provides financial planning as well as international
investment management, and acts as fund manager to a range of
onshore and international funds.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom under the Companies Act 2006 and
listed on AIM. The address of its registered office is 21 Lombard
Street, London, EC3V 9AH.
The Interim Report and Accounts were approved for issue on 1
March 2023. The Condensed consolidated financial statements have
been independently reviewed but not audited.
2. Accounting policies
a) Basis of preparation
The Group's Condensed consolidated financial statements have
been prepared in accordance with UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting'. The
Financial statements have been prepared on the historical cost
basis, except for the revaluation of financial assets at fair value
through other comprehensive income, financial assets at fair value
through profit or loss and deferred contingent consideration such
that they are measured at their fair value.
The information in this Interim Report and Accounts does not
comprise statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The Group's financial
statements for the year ended 30 June 2022 have been reported on by
its auditors and delivered to the Registrar of Companies. The
Condensed consolidated financial statements should be read in
conjunction with the Group's audited financial statements for the
year ended 30 June 2022, which are prepared in accordance with
UK-adopted International Accounting Standards.
At the time of approving the Financial statements, the Directors
have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing these Financial statements.
Developments in reporting standards and interpretations
Standards and interpretations adopted during the current
reporting period
In the six months ended 31 December 2022, the Group did not
adopt any new standards or amendments issued by the International
Accounting Standards Board ("IASB") or interpretations by the IFRS
Interpretations Committee ("IFRS IC") that have had a material
impact on the Condensed consolidated financial statements.
Future new standards and interpretations
A number of new standards are effective for annual periods
beginning after 1 July 2022 and earlier application is permitted;
however, the Group has not early adopted the new or amended
standards in preparing these Condensed consolidated financial
statements. None of the standards not yet effective are expected to
have a material impact on the Group's Financial statements.
b) Changes in accounting policies
The accounting policies applied in these Condensed consolidated
financial statements are the same as those applied in the Group's
Consolidated financial statements as at and for the year ended 30
June 2022.
In the six months ended 31 December 2022, the Group did not
adopt any new standards or amendments issued by the IASB or
interpretations issued by the IFRS IC that have had a material
impact on the Condensed consolidated financial statements.
New standards, amendments and interpretations listed below were
newly adopted by the Group but have not had a material impact on
the amounts reported in these Financial statements. They may,
however, impact the accounting for future transactions and
arrangements.
-- COVID-19-related Rent Concessions (Amendment to IFRS 16)
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
-- Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-- Annual Improvements to IFRS Standards 2018-2020.
c) Critical accounting judgements and key sources of estimation
and uncertainty
The Group has reviewed the judgements and estimates that affect
its accounting policies and amounts reported in its Condensed
consolidated financial statements. These are unchanged from those
reported in the Group's Financial statements for the year ended 30
June 2022.
During the period, the Group acquired the entire share capital
of Integrity Wealth Bidco Limited and Integrity Wealth (Holdings)
Limited. The Group accounted for the transaction as a business
combination, as set out in Note 7. The payment of certain elements
of consideration was deferred, contingent on future revenue targets
being met by the acquired business. The Group continues to monitor
the forecast of consideration payable. A provision for the expected
consideration has been made.
Under the terms of the agreement, the deferred contingent
consideration can be a maximum possible payment of up to
GBP2,500,000. Management's best estimate of this award at 31
December 2022 was GBP1,275,000, based on forecast future revenues.
The maximum award of GBP2,500,000, would result in an increase in
fair value and charge to the Condensed statement of comprehensive
income for the period to 31 December 2022 of GBP998,000.
3. Segmental information
For management purposes, the Group's activities are organised
into two operating divisions: UK Investment Management and
International. These divisions are the basis on which the Group
reports its primary segmental information to the Executive
Committee, which is the Group's chief operating decision-maker. In
accordance with IFRS 8 'Operating Segments', disclosures are
required to reflect the information that the Board of Directors
uses internally for evaluating the performance of its operating
segments and allocating resources to those segments. The
information presented in this Note is consistent with the
presentation for internal reporting.
The UK Investment Management segment offers a range of
investment management services to private high net worth
individuals, pension funds, institutions, charities and trusts, and
also provides management services to high net worth individuals and
families, giving independent 'whole of market' financial advice
enabling clients to build, manage and protect their wealth. The
International segment is based in the Channel Islands and Isle of
Man, offering a similar range of investment management and
financial planning services as the UK Investment Management
segment.
Following the acquisitions of Integrity Wealth Solutions Limited
and Adroit Financial Planning Limited (Note 7), the activities
since the two acquisitions were completed have been included in the
UK Investment Management segment.
The Group segment principally comprises the Group Board's
management and associated costs, along with the consolidation
adjustments. Revenues and expenses are allocated to the business
segment that originated the transaction. Transactions between
segments are carried out at arm's length. Centrally incurred
expenses are allocated to business segments on an appropriate pro
rata basis.
Group and
UK Investment consolidation
Six months ended 31 December 2022 Management International adjustments Total
(unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- -------------- --------
Total revenue 52,271 10,121 - 62,392
Inter-segment revenue (3,484) - - (3,484)
----------------------------------------- ------------- ------------- -------------- --------
External revenue 48,787 10,121 - 58,908
Underlying administrative costs (20,723) (6,636) (17,285) (44,644)
----------------------------------------- ------------- ------------- -------------- --------
Operating contribution 28,064 3,485 (17,285) 14,264
Allocated costs (11,301) (3,794) 15,095 -
Net finance income 150 55 29 234
----------------------------------------- ------------- ------------- -------------- --------
Underlying profit/(loss) before
tax 16,913 (254) (2,161) 14,498
Amortisation of client relationship
contracts (793) (513) (1,451) (2,757)
Dual running costs of operating platform (1,420) (191) - (1,611)
Acquisition-related costs (23) - (244) (267)
Finance cost of deferred contingent
consideration - (6) (13) (19)
Profit/(loss) mark-up on Group allocated
costs 166 (166) - -
----------------------------------------- ------------- ------------- -------------- --------
Profit/(loss) before tax 14,843 (1,130) (3,869) 9,844
Taxation (1,657)
----------------------------------------- ------------- ------------- -------------- --------
Profit for the period attributable
to equity holders of the Company 8,187
----------------------------------------- ------------- ------------- -------------- --------
Group and
UK Investment consolidation
Management International adjustments Total
As at 31 December 2022 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------- ------------- -------------- --------
Total assets 88,078 27,691 68,961 184,730
Total liabilities 25,266 2,823 5,555 33,644
----------------------------------- ------------- ------------- -------------- --------
Net assets 62,812 24,868 63,406 151,086
----------------------------------- ------------- ------------- -------------- --------
Group and
UK Investment consolidation
Management International adjustments Total
Six months ended 31 December 2021
(unaudited)(1) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- -------------- --------
Total segment revenue 53,700 11,057 - 64,757
Inter-segment revenue (2,816) - - (2,816)
----------------------------------------- ------------- ------------- -------------- --------
External revenue 50,884 11,057 - 61,941
Underlying administrative costs (20,055) (6,235) (17,918) (44,208)
----------------------------------------- ------------- ------------- -------------- --------
Operating contribution 30,829 4,822 (17,918) 17,733
Allocated costs (11,763) (3,889) 15,652 -
Net finance (cost)/income (96) (18) 14 (100)
----------------------------------------- ------------- ------------- -------------- --------
Underlying profit/(loss) before
tax 18,970 915 (2,252) 17,633
Amortisation of client relationship
contracts (792) (513) (1,416) (2,721)
Dual running costs of operating platform (1,387) (202) - (1,589)
Finance cost of deferred contingent
consideration - (6) (78) (84)
Profit/(loss) mark-up on Group allocated
costs 134 (134) - -
----------------------------------------- ------------- ------------- -------------- --------
Profit/(loss) before tax 16,925 60 (3,746) 13,239
Taxation (2,955)
----------------------------------------- ------------- ------------- -------------- --------
Profit for the period attributable
to equity holders of the Company 10,284
----------------------------------------- ------------- ------------- -------------- --------
1. As discussed in the Interim management report, the segmental
results for the six months ended 31 December 2021 have been
restated to be consistent with the current period. For the six
months ended 31 December 2021, the reported UKIM segment allocated
costs have changed from GBP13,862,000 to GBP11,763,000, a movement
of GBP2,099,000, and underlying profit before tax changed from
GBP16,871,000 to GBP18,970,000, a movement of GBP2,099,000. The
reported International segment underlying administrative costs
changed from GBP6,852,000 to GBP6,235,000, a movement of
GBP617,000, allocated costs changed from GBP1,790,000 to
GBP3,889,000, a movement of GBP2,099,000, and underlying profit
before tax changed from GBP2,397,000 to GBP915,000, a movement of
GBP1,482,000. The reported Group segment underlying administrative
costs changed from GBP17,301,000 to GBP17,918,000, a movement of
GBP617,000, and underlying loss before tax changed from
GBP1,635,000 to GBP2,252,000, a movement of GBP617,000.
Group and
UK Investment consolidation
Management International adjustments Total
As at 31 December 2021 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------- ------------- -------------- --------
Total assets 88,823 32,171 55,094 176,088
Total liabilities 29,025 3,431 3,377 35,833
----------------------------------- ------------- ------------- -------------- --------
Net assets 59,798 28,740 51,717 140,255
----------------------------------- ------------- ------------- -------------- --------
Group and
UK Investment consolidation
Management International adjustments Total
Year ended 30 June 2022 (audited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- -------------- -----------------------
Total revenue 105,550 21,156 - 126,706
Inter-segment revenue (4,496) - - (4,496)
----------------------------------------- ------------- ------------- -------------- -----------------------
External revenue 101,054 21,156 - 122,210
Underlying administrative costs (43,469) (14,016) (29,932) (87,417)
----------------------------------------- ------------- ------------- -------------- -----------------------
Operating contribution 57,585 7,140 (29,932) 34,793
Allocated costs (25,129) (3,152) 28,281 -
Net finance costs (254) (15) - (269)
----------------------------------------- ------------- ------------- -------------- -----------------------
Underlying profit/(loss) before
tax 32,202 3,973 (1,651) 34,524
Amortisation of client relationship
contracts (1,586) (1,025) (2,832) (5,443)
Other non-operating income 2,983 - - 2,983
Dual running costs of operating platform (2,119) (309) - (2,428)
Finance cost of deferred contingent
consideration - (12) (78) (90)
Profit/(loss) mark-up on Group allocated
costs 214 (214) - -
----------------------------------------- ------------- ------------- -------------- -----------------------
Profit/(loss) before tax 31,694 2,413 (4,561) 29,546
Taxation (6,135)
----------------------------------------- ------------- ------------- -------------- -----------------------
Profit for the period attributable
to equity holders of the Company 23,411
----------------------------------------- ------------- ------------- -------------- -----------------------
Group and
UK Investment consolidation
Management International adjustments Total
As at 30 June 2022 (audited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- ------------- -------------- --------
Total assets 96,749 30,561 61,837 189,147
Total liabilities 32,198 4,372 4,152 40,722
----------------------------- ------------- ------------- -------------- --------
Net assets 64,551 26,189 57,685 148,425
----------------------------- ------------- ------------- -------------- --------
4. Revenue
UK Investment
Management International Total
Six months ended 31 December 2022 (unaudited) GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- ------------- -------
Investment management fees 32,558 6,114 38,672
Transactional income 4,325 1,405 5,730
Fund management fees 5,152 1,887 7,039
Wealth management fees 2,361 56 2,417
Interest turn 4,391 659 5,050
---------------------------------------------- ------------- ------------- -------
Total revenue 48,787 10,121 58,908
---------------------------------------------- ------------- ------------- -------
UK Investment
Management International Total
Six months ended 31 December 2021 (unaudited) GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- ------------- -------
Investment management fees 36,682 6,948 43,630
Transactional income 5,074 1,222 6,296
Fund management fees 6,594 2,368 8,962
Wealth management fees 2,180 463 2,643
Interest turn 352 56 408
Other income 2 - 2
---------------------------------------------- ------------- ------------- -------
Total revenue 50,884 11,057 61,941
---------------------------------------------- ------------- ------------- -------
UK Investment
Management International Total
Year ended 30 June 2022 (audited) GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- -------
Investment management fees 70,161 13,182 83,343
Transactional income 12,209 2,491 14,700
Fund management fees 13,187 4,441 17,628
Wealth management fees 4,082 832 4,914
Interest turn 1,377 210 1,587
Other income 38 - 38
---------------------------------- ------------- ------------- -------
Total revenue 101,054 21,156 122,210
---------------------------------- ------------- ------------- -------
Investment management fees
Investment management fees are earned for the management
services provided to clients. Fees are billed quarterly in arrears
but are recognised over the period the service is provided. Fees
are calculated based on a percentage of the value of the portfolio
at the billing date. Fees are only recognised when the fee amount
can be estimated reliably, and it is probable that the fee will be
received. Amounts are shown net of rebates paid to significant
investors.
Performance fees are earned from some clients when contractually
agreed performance levels are exceeded within specified performance
measurement periods. They are only recognised at the end of these
performance periods, when a reliable estimate of the fee can be
made and is virtually certain that it will be received.
Transactional income
Transactional income is earned through dealing and admin charges
levied on trades at the time a deal is placed for a client. Revenue
is recognised at the point of the trade being placed.
Foreign exchange trading fees are also included, that are
charged on client trades placed in non-base currencies, and
therefore requiring a foreign currency exchange in order to action
the trade. Revenue is recognised at the point of the trade being
placed.
Fund management fees
Fund management fees are earned for the management services
provided to several Open-Ended Investment Companies ("OEICs"). Fees
are billed monthly in arrears but are recognised over the period
the service is provided. Fees are calculated daily based on a
percentage of the value of each fund. Fees are only recognised when
the fee amount can be estimated reliably, and it is probable that
the fee will be received. Amounts are shown net of rebates paid to
significant investors.
Wealth management fees
Wealth management fees relate to fees for the provision of
financial advice. Fees are charged to clients using an hourly rate,
by a fixed fee arrangement, or by a fund-based arrangement whereby
fees are calculated based on a percentage of the value of the
portfolio at the billing date. All fees are recognised over the
period the service is provided. Commissions receivable and payable
are accounted for in the period in which they are earned.
Interest turn
Interest turn is bank interest earned on client cash deposits.
Income is recognised over the period for which the deposit is held
with the bank. Amounts shown are net of any interest passed on to
clients.
a) Geographic analysis
The Group's operations are located in the United Kingdom,
Channel Islands and Isle of Man. The following table presents
external revenue analysed by the geographical location of the Group
entity providing the service.
Six months
ended Year ended
31 Dec Six months
2022 ended 30 Jun 2022
31 Dec 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------- ------------- ------------- ------------
United Kingdom 48,787 50,884 101,054
Channel Islands 10,050 11,057 21,079
Isle of Man 71 - 77
---------------- ------------- ------------- ------------
Total revenue 58,908 61,941 122,210
---------------- ------------- ------------- ------------
b) Major clients
The Group is not reliant on any one client or group of connected
clients for the generation of revenues.
5. Other gains/(losses) - net
Other gains and losses represent the net changes in the fair
value of the Group's financial instruments and impairment of
intangible assets recognised in the Condensed consolidated
statement of comprehensive income.
Six months Six months
ended ended
31 Dec
2022 31 Dec 2021 Year ended
30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------------- ------------ ------------
Changes in fair value of financial assets at fair
value through profit or loss (Note 13) 2 28 (55)
-------------------------------------------------- -------------- ------------ ------------
Total other gains/(losses) - net 2 28 (55)
-------------------------------------------------- -------------- ------------ ------------
6. Taxation
The current tax expense for the six months ended 31 December
2022 was calculated based on the Corporation Tax rate of 20.5%,
applied to the taxable profit for the six months ended 31 December
2022 (six months ended 31 December 2021: 19.0%; year ended 30 June
2022: 19.0%).
Six months Six months
ended ended Year ended
31 Dec
2022 31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------ ------------- ------------ ------------
UK Corporation Tax 2,806 2,816 6,441
Over provision in prior years (830) - (307)
------------------------------------------------ ------------- ------------ ------------
Total current taxation 1,976 2,816 6,134
Deferred tax credits (194) (73) (211)
(Over)/under provision of deferred tax in prior
years (125) 212 212
------------------------------------------------ ------------- ------------ ------------
Total income tax expense 1,657 2,955 6,135
------------------------------------------------ ------------- ------------ ------------
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the time apportioned tax
rate applicable to profits of the consolidated entities in the UK
as follows, split out between underlying and statutory profits:
Underlying Underlying Statutory
profit profit adjustments profit
Six months ended 31 December 2022 (unaudited) GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ---------- ------------------- ---------
Profit before taxation 14,498 (4,654) 9,844
Profit multiplied by the standard rate of tax
in the UK of 20.5% 2,972 (954) 2,018
Tax effect of amounts that are not deductible/(taxable)
in calculating taxable income:
- Depreciation and amortisation 794 (145) 649
- Disallowable expenses 153 3 156
- Share-based payments (216) - (216)
- Lower tax rates in other jurisdictions in which
the Group operates (63) - (63)
- Overseas tax losses not available for UK tax
purposes 106 - 106
- Over provision in prior periods (958) - (958)
- Non-taxable income (35) - (35)
-------------------------------------------------------- ---------- ------------------- ---------
Income tax expense 2,753 (1,096) 1,657
-------------------------------------------------------- ---------- ------------------- ---------
Effective tax rate 19.0% n/a 16.8%
-------------------------------------------------------- ---------- ------------------- ---------
Underlying Underlying Statutory
profit profit adjustments profit
Six months ended 31 December 2021 (unaudited) GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ---------- ------------------- ---------
Profit before taxation 17,633 (4,394) 13,239
Profit multiplied by the standard rate of tax
in the UK of 19.0% 3,350 (835) 2,515
Tax effect of amounts that are not deductible/(taxable)
in calculating taxable income:
- Non-taxable income (3) - (3)
- Disallowable expenses 171 (15) 156
- Under provision of deferred tax in prior years 212 - 212
- Depreciation and amortisation 107 77 184
- Share-based payments 97 - 97
- Overseas tax losses not available for UK tax
purposes (206) - (206)
-------------------------------------------------------- ---------- ------------------- ---------
Income tax expense 3,728 (773) 2,955
-------------------------------------------------------- ---------- ------------------- ---------
Effective tax rate 21.1% n/a 22.3%
-------------------------------------------------------- ---------- ------------------- ---------
Underlying Underlying Statutory
profit profit adjustments profit
Year ended 30 June 2022 (audited) GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ---------- ------------------- ---------
Profit before taxation 34,524 (4,978) 29,546
Profit multiplied by the standard rate of tax
in the UK of 19.0% 6,560 (946) 5,614
Tax effect of amounts that are not deductible/(taxable)
in calculating taxable income:
- Depreciation and amortisation 609 (207) 402
- Non-taxable income (8) - (8)
- Overseas tax losses not available for UK tax
purposes (293) - (293)
- Disallowable expenses 309 15 324
- Lower tax rates in other jurisdictions in which
the Group operates (201) 92 (109)
- Share-based payments 315 - 315
- Over provision in prior periods (110) - (110)
-------------------------------------------------------- ---------- ------------------- ---------
Income tax expense 7,181 (1,046) 6,135
-------------------------------------------------------- ---------- ------------------- ---------
Effective tax rate 20.8% n/a 20.8%
-------------------------------------------------------- ---------- ------------------- ---------
On 11 March 2021, it was outlined in the Finance Bill 2021, and
substantively enacted having received royal ascent on 24 May 2021,
that the UK Corporation Tax rate would increase to 25.0% from 1
April 2023 and remain at 19.0% until that date. As a result, the
effective rate of Corporation Tax applied to the taxable profit for
the six months ended 31 December 2022 is 20.5% (six months ended 31
December 2021: 19.0%; year ended 30 June 2022: 19.0%). Deferred tax
assets and liabilities are calculated at the rate that is expected
to be in force when the temporary differences unwind.
7. Business combinations
Integrity
On 31 October 2022, the Group acquired Integrity Wealth Bidco
Limited and Integrity Wealth (Holdings) Limited, together with its
subsidiary Integrity Wealth Solutions Limited (IWS), (collectively
"Integrity"). The acquisition brings a successful and rapidly
growing Independent Financial Adviser ("IFA") business into the
Group and brings scale to the Group's Private Clients business,
adding distinctive expertise in their specialist area. The
acquisition consisted of acquiring 100% of the issued share capital
of Integrity Wealth (Holdings) Limited and Integrity Wealth Bidco
Limited (intermediate holding company), which was funded through
existing financial resources.
The acquisition was accounted for using the acquisition method
and details of the purchase consideration are as follows:
Note GBP'000
------------------------------------------------ ----- -------
Initial cash consideration 4,000
Shares consideration i 1,000
Excess for net assets ii 601
Deferred contingent consideration at fair value iii 1,026
------------------------------------------------ ----- -------
Total purchase consideration 6,627
------------------------------------------------------- -------
i. The Group issued 52,084 ordinary shares to the previous
shareholders of Integrity Wealth (holdings) Limited and Integrity
Wealth Bidco Limited at a price of GBP19.20 per share. The amount
of shares issued was based on the share price at the completion
date to provide the equivalent consideration value of
GBP1,000,000.
ii. In accordance with the Sale and Purchase agreement ("SPA"),
the Group was required to pay the difference between the available
capital and the required regulatory capital for Integrity.
iii. The total estimated cash deferred contingent consideration
is GBP1,275,000, payable in three years following completion, based
on revenue criteria of the acquired business. As outlined in the
SPA, the maximum cash deferred contingent consideration payable is
up to GBP2,500,000 if certain revenue criteria are met.
The fair value of the deferred contingent consideration
liability has been remeasured at 31 December 2022, and remains
unchanged. The revenue has been forecast using previous revenue
growth assumptions and aligned to the Group's Medium-Term Plan
("MTP"). The revenue growth is dependent on several unpredictable
variables, including client sentiment and market conditions.
Client relationship intangible assets of GBP2,543,000 were
recognised on acquisition in respect of the expected cash inflows
and economic benefit from the acquired business. An associated
deferred tax liability of GBP636,000 was recognised in relation to
the expected cash inflows on the acquired client relationship
intangible asset. Goodwill of GBP3,945,000 was recognised on
acquisition in respect of the expected growth in the acquired
business and associated cash inflows. The fair value of the assets
acquired were the gross contractual amounts and were all considered
to be fully recoverable. The fair value of the identifiable assets
and liabilities acquired, at the date of acquisition, are detailed
below.
Net assets acquired through business combination
GBP'000
-------------------------------------------------- -------
Trade and other receivables 270
Cash at bank 804
Trade and other payables (167)
Corporation tax payable (132)
-------------------------------------------------- -------
Total net assets recognised by acquired companies 775
Fair value adjustments:
- Client relationship contracts 2,543
- Deferred tax liabilities (636)
-------------------------------------------------- -------
Net identifiable assets 1,907
Goodwill 3,945
-------------------------------------------------- -------
Total purchase consideration 6,627
-------------------------------------------------- -------
The trade and other receivables were recognised at their fair
value, being the gross contractual amounts, deemed fully
recoverable.
Adroit
On 15 December 2022, the Group acquired Adroit Financial
Planning Limited ("Adroit"), a successful and rapidly growing
Independent Financial Adviser ("IFA") business. The acquisition
brings further scale to the Group's Private Clients business,
adding distinctive expertise in their specialist area. The
acquisition consisted of acquiring 100% of the issued share capital
of Adroit Financial Planning Limited, which was funded through
existing financial resources.
The acquisition was accounted for using the acquisition method
and details of the purchase consideration are as follows:
Note GBP'000
----------------------------- ----- -------
Initial cash consideration 10,991
Additional consideration i 270
----------------------------- ----- -------
Total purchase consideration 11,261
------------------------------------ -------
i. In accordance with the Sale and Purchase agreement ("SPA"),
the Group was required to pay an additional amount based on the
number of days between the date of exchange and date of
completion.
Client relationship intangible assets of GBP2,931,000 were
recognised on acquisition in respect of the expected cash inflows
and economic benefit from the acquired business. An associated
deferred tax liability of GBP733,000 was recognised in relation to
the expected cash inflows on the acquired client relationship
intangible asset. Goodwill of GBP8,541,000 was recognised on
acquisition in respect of the expected growth in the acquired
business and associated cash inflows. The fair value of the assets
acquired were the gross contractual amounts and were all considered
to be fully recoverable. The fair value of the identifiable assets
and liabilities acquired, at the date of acquisition, are detailed
below.
Net assets acquired through business combination
GBP'000
-------------------------------------------------- -------
Trade and other receivables 533
Cash at bank 193
Trade and other payables (204)
-------------------------------------------------- -------
Total net assets recognised by acquired companies 522
Fair value adjustments:
- Client relationship contracts 2,931
- Deferred tax liabilities (733)
-------------------------------------------------- -------
Net identifiable assets 2,198
Goodwill 8,541
-------------------------------------------------- -------
Total purchase consideration 11,261
-------------------------------------------------- -------
The trade and other receivables were recognised at their fair
value, being the gross contractual amounts, deemed fully
recoverable.
Acquisition impact on reported results
Directly attributable acquisition costs of GBP267,000 were
incurred in relation to the acquisitions, which were charged to
administrative costs in the Condensed consolidated statement of
comprehensive income but excluded from underlying profit.
In the period from acquisition to 31 December 2022, the two
acquisitions earned revenue of GBP443,000 and statutory profit
before tax of GBP108,000. Had the acquisitions been consolidated
from 1 July 2022, the Condensed consolidated statement of
comprehensive income would have included revenue of GBP2,176,000
and statutory profit before tax of GBP564,000.
Net cash outflow resulting from business combinations
GBP'000
---------------------------------------------------------- -------
Total purchase consideration 17,888
Less shares issued as consideration (1,000)
Less deferred cash contingent consideration at fair value (1,026)
---------------------------------------------------------- -------
Cash paid to acquire business combinations 15,862
Less cash held by acquired entities (997)
---------------------------------------------------------- -------
Net cash outflow - investing activities 14,865
---------------------------------------------------------- -------
8. Earnings per share
The Board of Directors considers that underlying earnings per
share provides an appropriate reflection of the Group's performance
in the period. Underlying earnings per share are calculated based
on 'underlying earnings', which is defined as earnings before
underlying adjustments listed below. The tax effect of these
adjustments has also been considered. Underlying earnings is an
alternative performance measure ("APM") used by the Group. Refer
the Non-IFRS financial information section for a Glossary of the
Group's APMs, their definition and criteria for how underlying
adjustments are considered.
Earnings for the period used to calculate earnings per share as
reported in these Condensed consolidated financial statements were
as follows:
Six months
ended
31 Dec Six months
2022 ended Year ended
31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------------- ------------- ------------
Earnings attributable to ordinary shareholders 8,187 10,284 23,411
Underlying adjustments
Amortisation of acquired client relationship contracts
(Note 10) 2,757 2,721 5,443
Dual running costs of operating platform 1,611 1,589 2,428
Acquisition-related costs 267 - -
Finance cost of deferred contingent consideration
(Note 15) 19 84 90
Other non-operating income - - (2,983)
Tax impact of adjustments (Note 6) (1,096) (773) (1,046)
------------------------------------------------------- ------------- ------------- ------------
Underlying earnings attributable to ordinary
shareholders 11,745 13,905 27,343
------------------------------------------------------- ------------- ------------- ------------
Basic earnings per share is calculated by dividing earnings
attributable to ordinary shareholders by the weighted average
number of shares in issue throughout the period. Included in the
weighted average number of shares for basic earnings per share
purposes are employee share options at the point all necessary
conditions have been satisfied and the options have vested, even if
they have not yet been exercised.
Diluted earnings per share represents the basic earnings per
share adjusted for the effect of dilutive potential shares issuable
on exercise of employee share options under the Group's share-based
payment schemes, weighted for the relevant period. The diluted
weighted average number of shares in issue and diluted earnings per
share considers the effect of all dilutive potential shares
issuable on exercise of employee share options. The potential
shares issuable includes the contingently issuable shares that have
not yet vested and the vested unissued share options that are
either nil cost options or have little or no consideration.
The weighted average number of shares in issue during the six
months ended 31 December 2022 were as follows:
Six months Six months
ended ended
31 Dec
2022 31 Dec 2021 Year ended
30 Jun 2022
(unaudited) (unaudited) (audited)
Number Number of Number of
of shares shares shares
--------------------------------------------------- ------------- ------------ ------------
Weighted average number of shares in issue 15,791,432 15,691,468 15,707,706
Effect of dilutive potential shares issuable on
exercise of employee share options 398,960 595,775 502,259
--------------------------------------------------- ------------- ------------ ------------
Diluted weighted average number of shares in issue 16,190,392 16,287,243 16,209,965
--------------------------------------------------- ------------- ------------ ------------
Six months
ended Year ended
31 Dec Six months
2022 ended 30 Jun 2022
31 Dec 2021
(unaudited) (unaudited) (audited)
p p p
------------------------------ ------------- ------------- ------------
Based on reported earnings:
Basic earnings per share 51.8 65.5 149.0
Diluted earnings per share 50.6 63.1 144.4
Based on underlying earnings:
Basic earnings per share 74.4 88.6 174.1
Diluted earnings per share 72.5 85.4 168.7
------------------------------ ------------- ------------- ------------
9. Dividends
Six months
ended
31 Dec Six months
2022 ended Year ended
31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- ------------
Final dividend paid on ordinary shares 7,022 6,252 6,251
Interim dividend paid on ordinary shares - - 4,066
----------------------------------------- ------------- ------------- ------------
Total dividends 7,022 6,252 10,317
----------------------------------------- ------------- ------------- ------------
An interim dividend of 28.0p (six months ended 31 December 2021:
26.0p) per share was declared by the Board of Directors on 1 March
2023. It will be paid on 6 April 2023 to shareholders who are on
the register at the close of business on 10 March 2023. In
accordance with IAS 10, this dividend has not been included as a
liability in the Condensed consolidated financial statements at 31
December 2022.
A final dividend for the year ended 30 June 2022 of 45.0p (year
ended 30 June 2021: 40.0p) per share was paid to shareholders on 4
November 2022.
10. Intangible assets
Acquired Contracts
client acquired
Computer relationship with fund
Goodwill software contracts managers Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- --------- ------------- ---------- -------
Cost
At 30 June 2021 51,887 11,398 70,011 3,521 136,817
Additions - 2,240 - - 2,240
-------------------------------------- -------- --------- ------------- ---------- -------
At 31 December 2021 51,887 13,638 70,011 3,521 139,057
Additions - 672 - - 672
Disposals - (7,380) - - (7,380)
-------------------------------------- -------- --------- ------------- ---------- -------
At 30 June 2022 51,887 6,930 70,011 3,521 132,349
Additions 12,486 1,911 5,474 - 19,871
-------------------------------------- -------- --------- ------------- ---------- -------
At 31 December 2022 64,373 8,841 75,485 3,521 152,220
-------------------------------------- -------- --------- ------------- ---------- -------
Accumulated amortisation and
impairment
At 30 June 2021 11,213 6,152 26,034 3,521 46,920
Amortisation charge - 1,175 2,721 - 3,896
-------------------------------------- -------- --------- ------------- ---------- -------
At 31 December 2021 11,213 7,327 28,755 3,521 50,816
Amortisation charge - 304 2,722 - 3,026
Accumulated amortisation on disposals - (7,380) - - (7,380)
-------------------------------------- -------- --------- ------------- ---------- -------
At 30 June 2022 11,213 251 31,477 3,521 46,462
Amortisation charge - 501 2,757 - 3,258
-------------------------------------- -------- --------- ------------- ---------- -------
At 31 December 2022 11,213 752 34,234 3,521 49,720
-------------------------------------- -------- --------- ------------- ---------- -------
Net book value
At 30 June 2021 40,674 5,246 43,977 - 89,897
At 31 December 2021 40,674 6,311 41,256 - 88,241
At 30 June 2022 40,674 6,679 38,534 - 85,887
-------------------------------------- -------- --------- ------------- ---------- -------
At 31 December 2022 53,160 8,089 41,251 - 102,500
-------------------------------------- -------- --------- ------------- ---------- -------
a) Goodwill
Goodwill acquired in a business combination is allocated at
acquisition to the cash-generating units ("CGUs") that are expected
to benefit from that business combination. The carrying amount of
goodwill in respect of these CGUs within the operating segments of
the Group comprises:
31 Dec
2022
31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ------------- ------------ -----------
Funds
Braemar Group Limited ("Braemar") 3,320 3,320 3,320
International
Brooks Macdonald Asset Management (International)
Limited and Brooks Macdonald Retirement Services
(International) Limited (collectively "International") 21,243 21,243 21,243
Cornelian
Cornelian Asset Managers Group Limited ("Cornelian") 16,111 16,111 16,111
Integrity
Integrity Wealth (Holdings) Limited ("Integrity") 3,945 - -
Adroit
Adroit Financial Planning Limited ("Adroit") 8,541 - -
Total goodwill 53,160 40,674 40,674
-------------------------------------------------------- ------------- ------------ -----------
During the six months ended 31 December 2022, the Group acquired
goodwill of GBP3,945,000 and GBP8,541,000 in relation to the
acquisitions of Integrity and Adroit respectively (Note 7).
The International CGU incurred a loss for the six months ended
31 December 2022 (Note 3), which triggered an impairment indicator.
As a result, the Group conducted an impairment review of the
International CGU as at 31 December 2022. The International CGU
recoverable amount was calculated as GBP53,492,000 at 31 December
2022, giving a surplus over the International CGU carrying amount
of GBP30,573,000 indicating that there is no impairment. The key
underlying assumptions of the calculation are the discount rate,
the medium-term growth in earnings and the long-term growth rate of
the business. A pre-tax discount rate of 13% has been used, based
on the Group's assessment of the risk-free rate of interest and
specific risks relating to Brooks Macdonald International.
There were no indicators that the carrying amount of goodwill in
relation to any of the Group's other CGUs should be impaired,
therefore no further calculations regarding recoverability have
performed.
b) Computer software
Computer software costs are amortised on a straight-line basis
over an estimated useful lives (four to eight years). Costs
incurred on internally developed computer software are initially
recognised at cost and, when the software is available for use the
costs are amortised on a straight-line basis over an estimated
useful life of four years. Capitalised costs incurred on the
Group's partnership with SS&C to transform the Group's client-
and intermediary-facing processes, launch a digital onboarding
solution and enhance the Group's operating platform are amortised
on a straight-line basis over the remaining agreement length with
SS&C of eight years, the estimated period the Group will
generate positive economic benefit from the capitalised costs.
c) Acquired client relationship contracts
This asset represents the fair value of future benefits accruing
to the Group from acquired client relationship contracts. The
amortisation of client relationships is charged to the Condensed
consolidated statement of comprehensive income on a straight-line
basis over their estimated useful lives (6 to 20 years).
During the six months ended 31 December 2022, the Group acquired
client relationship contracts totalling GBP2,543,000 and
GBP2,931,000, as part of the Integrity and Adroit acquisitions
respectively (Note 7), which were recognised as separately
identifiable intangible assets in the Condensed consolidated
statement of financial position, with useful economic lives of 15
years.
11. Property, plant and equipment
Fixtures,
fittings
Leasehold and office IT
improvements equipment equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------- ----------- ---------- -------
Cost
At 30 June 2021 2,630 724 1,942 5,296
Additions 95 16 89 200
-------------------------- ------------- ----------- ---------- -------
At 31 December 2021 2,725 740 2,031 5,496
Additions 51 12 26 89
Disposals (88) (11) (811) (910)
-------------------------- ------------- ----------- ---------- -------
At 30 June 2022 2,688 741 1,246 4,675
Additions 356 50 8 414
-------------------------- ------------- ----------- ---------- -------
At 31 December 2022 3,044 791 1,254 5,089
-------------------------- ------------- ----------- ---------- -------
Accumulated depreciation
At 30 June 2021 773 423 1,344 2,540
Depreciation charge 206 50 173 429
-------------------------- ------------- ----------- ---------- -------
At 31 December 2021 979 473 1,517 2,969
Depreciation charge 240 51 123 414
Depreciation on disposals (88) (11) (811) (910)
-------------------------- ------------- ----------- ---------- -------
At 30 June 2022 1,131 513 829 2,473
Depreciation charge 246 50 98 394
-------------------------- ------------- ----------- ---------- -------
At 31 December 2022 1,377 563 927 2,867
-------------------------- ------------- ----------- ---------- -------
Net book value
At 30 June 2021 1,857 301 598 2,756
At 31 December 2021 1,746 267 514 2,527
At 30 June 2022 1,557 228 417 2,202
-------------------------- ------------- ----------- ---------- -------
At 31 December 2022 1,667 228 327 2,222
-------------------------- ------------- ----------- ---------- -------
12. Right-of-use assets
Cars Property Total
GBP'000 GBP'000 GBP'000
------------------------- ------- -------- -------
Cost
At 30 June 2021 - 9,092 9,092
Additions 47 - 47
------------------------- ------- -------- -------
At 31 December 2021 47 9,092 9,139
Additions 281 333 614
------------------------- ------- -------- -------
At 30 June 2022 328 9,425 9,753
Additions 272 334 606
------------------------- ------- -------- -------
At 31 December 2022 600 9,759 10,359
------------------------- ------- -------- -------
Accumulated depreciation
At 30 June 2021 - 3,113 3,113
Depreciation charge 2 795 797
------------------------- ------- -------- -------
At 31 December 2021 2 3,908 3,910
Depreciation charge 35 837 872
------------------------- ------- -------- -------
At 30 June 2022 37 4,745 4,782
Depreciation charge 67 847 914
------------------------- ------- -------- -------
At 31 December 2022 104 5,592 5,696
------------------------- ------- -------- -------
Net book value
At 30 June 2021 - 5,979 5,979
At 31 December 2021 45 5,184 5,229
At 30 June 2022 291 4,680 4,971
------------------------- ------- -------- -------
At 31 December 2022 496 4,167 4,663
------------------------- ------- -------- -------
13. Financial instruments
The analysis of financial assets and liabilities into their
categories as defined in IFRS 9 'Financial Instruments' is set out
in the following table.
31 Dec
2022 31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------------- ------------- -----------
Financial assets
Financial assets at fair value through profit
or loss:
- Investment in regulated OEICs 786 867 784
Financial assets at fair value through other comprehensive
income:
- Unlisted redeemable preference shares 500 500 500
Financial assets at amortised cost:
- Trade and other receivables 32,844 29,769 30,473
- Cash and cash equivalents 37,573 45,715 61,328
----------------------------------------------------------- ------------- ------------- -----------
Total financial assets 71,703 76,851 93,085
----------------------------------------------------------- ------------- ------------- -----------
Financial liabilities
Financial liabilities at fair value through profit
or loss:
- Deferred contingent consideration (Note 15) 1,372 321 327
Financial liabilities at amortised cost:
- Trade and other payables 15,286 18,031 23,861
- Current tax liabilities 128 118 833
- Provisions (Note 16) 1,403 2,198 1,145
- Lease liabilities (Note 14) 5,649 5,982 6,027
- Other non-current liabilities 400 785 570
----------------------------------------------------------- ------------- ------------- -----------
Total financial liabilities 24,238 27,435 32,763
----------------------------------------------------------- ------------- ------------- -----------
The table below provides an analysis of the financial assets and
liabilities that, subsequent to initial recognition, are measured
at fair value. These are grouped into the following levels within
the fair value hierarchy, based on the degree to which the inputs
used to determine the fair value are observable:
-- Level 1 - derived from quoted prices in active markets for
identical assets or liabilities at the measurement date;
-- Level 2 - derived from inputs other than quoted prices
included within level 1 that are observable, either directly or
indirectly; and
-- Level 3 - derived from inputs that are not based on observable market data.
There have been no transfers of assets or liabilities between
any levels of the fair value hierarchy used in measuring the fair
value of financial instruments in the current and previous
periods.
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- -------- --------
Financial assets
At 1 July 2021 624 - 500 1,124
Additions 215 - - 215
Net changes in fair value 28 - - 28
---------------------------------------------- -------- -------- -------- --------
At 31 December 2021 867 - 500 1,367
Net changes in fair value (83) - - (83)
---------------------------------------------- -------- -------- -------- --------
At 30 June 2022 784 - 500 1,284
Net changes in fair value 2 - - 2
---------------------------------------------- -------- -------- -------- --------
At 31 December 2022 786 - 500 1,286
---------------------------------------------- -------- -------- -------- --------
Comprising:
Financial assets at fair value through other
comprehensive income - - 500 500
Financial assets at fair value through profit
and loss 786 - - 786
---------------------------------------------- -------- -------- -------- --------
Total financial assets 786 - 500 1,286
---------------------------------------------- -------- -------- -------- --------
At 31 December 2022, the Group held an investment of 500,000
redeemable GBP1 preference shares in an unlisted company
incorporated in the UK. The preference shares carry an entitlement
to a fixed preferential dividend at a rate of 4% per annum.
Unlisted preference shares are classified as financial assets at
fair value through other comprehensive income. They have been
valued using a perpetuity income model, which is based upon the
preference dividend cash flows.
The Group holds 500,000 shares in five of the SVS Cornelian Risk
Managed Passive Funds. The Group's holding in the SVS Cornelian
Risk Managed Passive Funds at 31 December 2022 was GBP588,000.
The Group holds an investment in the Blueprint Multi Asset Fund
range across the various models within the fund range. During the
six months ended 31 December 2022, the Group recognised a gain on
these investments of GBP2,000. The Group's holding in the Blueprint
Multi Asset Fund range at 31 December 2022 was GBP198,000.
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Financial liabilities
At 1 July 2021 - - 6,237 6,237
Finance cost of deferred contingent consideration - - 84 84
Payments made during the period - - (6,000) (6,000)
-------------------------------------------------- -------- -------- -------- --------
At 31 December 2021 - - 321 321
Finance cost of deferred contingent consideration - - 6 6
-------------------------------------------------- -------- -------- -------- --------
At 30 June 2022 - - 327 327
Additions - - 1,026 1,026
Finance cost of deferred contingent consideration - - 19 19
-------------------------------------------------- -------- -------- -------- --------
At 31 December 2022 - - 1,372 1,372
-------------------------------------------------- -------- -------- -------- --------
Comprising:
Deferred contingent consideration (Note
15) - - 1,372 1,372
-------------------------------------------------- -------- -------- -------- --------
Total financial liabilities - - 1,372 1,372
-------------------------------------------------- -------- -------- -------- --------
Deferred contingent consideration is recognised at fair value
through profit or loss and is valued using the net present value of
the expected amounts payable based on management's forecasts and
expectations. For more details see Note 15.
14. Lease liabilities
Cars Property Total
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------- -------- -------
At 30 June 2021 - 6,869 6,869
Additions 47 - 47
Payments made against lease liabilities (2) (1,077) (1,079)
Finance cost of lease liabilities - 145 145
--------------------------------------------- ------- -------- -------
At 31 December 2021 45 5,937 5,982
Additions 281 333 614
Payments made against lease liabilities (39) (667) (706)
Finance cost of lease liabilities 5 132 137
--------------------------------------------- ------- -------- -------
At 30 June 2022 292 5,735 6,027
Additions 272 334 606
Payments made against lease liabilities (69) (1,040) (1,109)
Finance cost of lease liabilities 8 117 125
--------------------------------------------- ------- -------- -------
At 31 December 2022 503 5,146 5,649
--------------------------------------------- ------- -------- -------
Analysed as:
Amounts falling due within one year 165 1,843 2,008
Amounts falling due after more than one year 338 3,303 3,641
--------------------------------------------- ------- -------- -------
Total lease liabilities 503 5,146 5,649
--------------------------------------------- ------- -------- -------
15. Deferred contingent consideration
Deferred contingent consideration is split between non-current
liabilities and current liabilities to the extent that it is due to
be paid within one year of the reporting date. It reflects the
Directors' best estimate of amounts payable in the future in
respect of certain client relationships and subsidiary undertakings
that were acquired by the Group. Deferred contingent consideration
is measured at its fair value based on discounted expected future
cash flows. The movements in the total deferred contingent
consideration balance during the current and comparative periods
were as follows:
Six months
ended
31 Dec Six months
2022 ended Year ended
31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------- ------------- ------------
At beginning of period 327 6,237 6,237
Additions 1,026 - -
Finance cost of deferred contingent consideration 19 84 90
Payments made during the period - (6,000) (6,000)
-------------------------------------------------- ------------- ------------- ------------
At end of period 1,372 321 327
-------------------------------------------------- ------------- ------------- ------------
Analysed as:
Amounts falling due within one year 333 321 327
Amounts falling due after more than one year 1,039 - -
-------------------------------------------------- ------------- ------------- ------------
At end of period 1,372 321 327
-------------------------------------------------- ------------- ------------- ------------
During the year ended 30 June 2021, the Group completed the
Lloyds Channel Islands acquisition and part of the consideration
was to be deferred over a period of two years to 30 November 2022.
The deferred contingent criteria was met for the period and
therefore the full GBP333,000 deferred contingent consideration is
due, which was paid shortly after the 31 December 2022 reporting
period.
During the six months ended 31 December 2022, the Group
completed the Integrity acquisition (Note 7) and part of the
consideration is to be deferred over a period of three years. The
deferred consideration is payable at the end of November 2025 based
on the future revenue of the business acquired. The estimated fair
value of the deferred contingent consideration at acquisition was
GBP1,026,000. During the period from acquisition to 31 December
2022, the Group recognised a finance cost of GBP12,000 on the
Integrity deferred contingent consideration. The fair value of the
Integrity deferred contingent consideration at 31 December 2022 was
GBP1,039,000.
Deferred contingent consideration is classified as Level 3
within the fair value hierarchy, as defined in Note 13. The key
inputs in estimating the deferred contingent consideration include
forecast outcomes and an estimated implied borrowing rate. If the
implied borrowing rate increased by 2%, the deferred contingent
consideration at 31 December 2022 would decrease by GBP53,000.
16. Provisions
Exceptional
costs of
resolving Regulatory Leasehold
Client compensation legacy matters levies dilapidations Tax-related Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
At 30 June 2021 - 600 1,245 413 - 2,258
Charged to the Condensed
consolidated statement of
comprehensive income 160 - - 65 162 387
Transfer from trade and
other payables - - - - 1,217 1,217
Utilised during the period (126) - (1,145) (113) (280) (1,664)
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
At 31 December 2021 34 600 100 365 1,099 2,198
Charged to the Condensed
consolidated statement of
comprehensive income 238 - 1,304 61 - 1,603
Utilised during the period (160) (600) (1,018) (59) (819) (2,656)
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
At 30 June 2022 112 - 386 367 280 1,145
Charged to the Condensed
consolidated statement of
comprehensive income 809 - 34 55 - 898
Utilised during the period (222) - (418) - - (640)
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
At 31 December 2022 699 - 2 422 280 1,403
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
Analysed as:
Amounts falling due within
one year 699 - 2 118 280 1,099
Amounts falling due after
more than
one year - - - 304 - 304
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
Total provisions 699 - 2 422 280 1,403
--------------------------- ------------------- --------------- ---------- -------------- ----------- --------
a) Client compensation
Client compensation provisions relate to the potential liability
arising from client complaints against the Group. Complaints are
assessed on a case-by-case basis and provisions for compensation
are made where judged necessary. The amount recognised within
provisions for client compensation represents management's best
estimate of the potential liability. The timing of the
corresponding outflows is uncertain as these are made as and when
claims arise.
b) Regulatory levies
At 31 December 2022, provisions include an amount of GBP2,000
(at 31 December 2021: GBP100,000; at 30 June 2022: GBP386,000) in
respect of expected levies by the Financial Services Compensation
Scheme ("FSCS").
c) Leasehold dilapidations
Leasehold dilapidations relate to dilapidation provisions
expected to arise on leasehold premises held by the Group, and
monies due under the contract with the assignee of leases on the
Group's leased properties. The non-current leasehold dilapidations
provision relate to expected economic outflow at the end of lease
terms, with the longest lease term ending in four years from the
Condensed consolidated statement of financial position date.
d) Tax-related
Tax-related provisions relate to voluntary disclosures made by
the Group to HM Revenue and Customs ("HMRC") following an input VAT
review carried out by the Group during FY22.
17. Deferred income tax
Deferred income tax assets are only recognised to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. An
analysis of the Group's deferred assets and deferred tax
liabilities is shown below.
Six months
ended
31 Dec Six months
2022 ended Year ended
31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------- ------------- ------------
Deferred tax assets
Deferred tax assets to be settled after more than
one year 2,031 2,200 1,486
Deferred tax assets to be settled within one year 1,611 1,040 1,516
-------------------------------------------------- ------------- ------------- ------------
Total deferred tax assets 3,642 3,240 3,002
-------------------------------------------------- ------------- ------------- ------------
Deferred tax liabilities
Deferred tax liabilities to be settled after more
than one year (8,522) (7,958) (7,019)
Deferred tax liabilities to be settled within one
year (884) (440) (940)
-------------------------------------------------- ------------- ------------- ------------
Total deferred tax liabilities (9,406) (8,398) (7,959)
-------------------------------------------------- ------------- ------------- ------------
The gross movement on the deferred income tax account during the
period was as follows:
Six months
ended
31 Dec Six months
2022 ended Year ended
31 Dec 2021 30 Jun 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------------- ------------- ------------
At the start of the period (4,957) (6,166) (6,166)
Additional liability on acquisition of client relationship
intangible assets
(Note 7) (1,369) - -
Charge to the Condensed consolidated statement
of comprehensive income 319 (139) (1)
Credit recognised in equity 243 1,130 1,210
Adjustment on acquisition of business combination - 17 -
----------------------------------------------------------- ------------- ------------- ------------
At the end of the period (5,764) (5,158) (4,957)
----------------------------------------------------------- ------------- ------------- ------------
The change in deferred income tax assets and liabilities during
the period was as follows:
Trading Accelerated
Share-based losses carried capital
payments forward Dilapidations allowances Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- --------------- ------------- ----------- --------
Deferred tax assets
At 1 July 2021 1,856 641 29 210 2,736
(Under)/over provision in prior
years - (260) 48 - (212)
Charged to the Condensed consolidated
statement of comprehensive income (234) (154) (11) (15) (414)
Credit to equity 1,130 - - - 1,130
-------------------------------------- ----------- --------------- ------------- ----------- --------
At 31 December 2021 2,752 227 66 195 3,240
Charge to the Condensed consolidated
statement of comprehensive income (165) (94) (1) (58) (318)
Credit to equity 80 - - - 80
-------------------------------------- ----------- --------------- ------------- ----------- --------
At 30 June 2022 2,667 133 65 137 3,002
Over provision in prior years - 125 - - 125
Charge to the Condensed consolidated
statement of comprehensive income 74 67 10 121 272
Credit to equity 243 - - - 243
-------------------------------------- ----------- --------------- ------------- ----------- --------
At 31 December 2022 2,984 325 75 258 3,642
-------------------------------------- ----------- --------------- ------------- ----------- --------
The carrying amount of the deferred tax asset is reviewed at
each reporting date and is only recognised to the extent that it is
probable that future taxable profits of the Group will allow the
asset to be recovered.
Accelerated
capital
allowances
on research Intangible
and development asset amortisation Total
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ---------------- ------------------- -------
Deferred tax liabilities
At 1 July 2021 452 8,450 8,902
Credit to the Condensed consolidated statement
of comprehensive income (69) (435) (504)
----------------------------------------------------------- ---------------- ------------------- -------
At 31 December 2021 383 8,015 8,398
Charge/(credit) to the Condensed consolidated statement
of comprehensive income 6 (445) (439)
----------------------------------------------------------- ---------------- ------------------- -------
At 30 June 2022 389 7,570 7,959
Additional liability on acquisition of client relationship
intangible assets - 1,369 1,369
Charge/(credit) to the Condensed consolidated statement
of comprehensive income 523 (445) 78
----------------------------------------------------------- ---------------- ------------------- -------
At 31 December 2022 912 8,494 9,406
----------------------------------------------------------- ---------------- ------------------- -------
18. Reconciliation of operating profit to net cash inflow from
operating activities
Six months Six months
ended ended Year ended
31 Dec 31 Dec 2021 30 Jun 2022
2022 (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------------- ------------ ------------
Operating profit before tax 9,623 13,452 26,867
Adjustments for:
- Depreciation of property, plant and equipment 394 429 843
- Depreciation of right-of-use assets 914 797 1,669
- Amortisation of intangible assets 3,258 3,896 6,922
- Other (losses)/gains - net (2) (28) 55
- Increase in receivables (1,193) (1,320) (2,024)
- Decrease in payables (9,004) (9,079) (3,194)
- Decrease in provisions (258) (60) (1,113)
- Increase in other non-current liabilities (170) 237 22
- Share-based payments charge 1,953 2,161 2,779
------------------------------------------------ ----------------- ------------ ------------
Net cash inflow from operating activities 5,515 10,485 32,826
------------------------------------------------ ----------------- ------------ ------------
19. Share capital and share premium
The movements in share capital and share premium during the six
months ended 31 December 2022 were as follows:
Share Share
Number Exercise price capital premium Total
of shares p GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ----------------- -------- -------- --------
At 30 June 2021 16,181,138 161 78,703 78,864
Shares issued:
- on exercise of options 6,886 2,360.0 - 2,640.0 - 120 120
- to Sharesave Scheme 2,517 2,310.0 - 2,740.0 1 108 109
--------------------------------------- ---------- ----------------- -------- -------- --------
At 31 December 2021 16,190,541 162 78,931 79,093
Shares issued:
- on exercise of options - 1,629.8 - 2,260.0 - - -
- to Sharesave Scheme 15,001 1,400.0 - 2,300.0 - 210 210
--------------------------------------- ---------- ----------------- -------- -------- --------
At 30 June 2022 16,205,542 162 79,141 79,303
Shares issued:
- on exercise of options - - - - -
- to Sharesave Scheme 7,130 1,922.5 - 2,250.0 - 100 100
- of consideration for the acquisition
of Integrity 52,084 1,920.0 1 999 1,000
--------------------------------------- ---------- ----------------- -------- -------- --------
At 31 December 2022 16,264,756 163 80,240 80,403
--------------------------------------- ---------- ----------------- -------- -------- --------
The total number of ordinary shares issued and fully paid at 31
December 2022 was 16,264,756 (at 31 December 2021: 16,190,541; at
30 June 2022: 16,205,542).
Employee Benefit Trust
The Group established an Employee Benefit Trust ("EBT") on 3
December 2010 to acquire ordinary shares in the Company to satisfy
awards under the Group's Long-Term Incentive Scheme ("LTIS") and
Long-Term Incentive Plan ("LTIP"). At 31 December 2022, the EBT
held 552,889 (at 31 December 2021: 534,461; at 30 June 2022:
580,806) 1p ordinary shares in the Company, acquired for a total
consideration of GBP15,900,000 (at 31 December 2021: GBP12,300,000;
at 30 June 2022: GBP14,100,000) with a market value of
GBP11,700,000 (at 31 December 2021: GBP14,270,000; at 30 June 2022:
GBP12,923,000). They are classified as treasury shares in the
Condensed consolidated statement of financial position, their cost
being deducted from retained earnings within shareholders'
equity.
20. Equity-settled share-based payments
Share options granted during the six months ended 31 December
2022 under the Group's equity-settled share-based payment schemes
were as follows:
Exercise
price Fair value
-----------
Number
p p of options
------------------------- --------- ------------- -----------
Long-Term Incentive Plan - 1,696 - 1,822 233,885
------------------------- --------- ------------- -----------
No options were granted in respect of the Company's other
equity-settled share-based payment schemes during the six months
ended 31 December 2022. The charge to the Condensed consolidated
statement of comprehensive income for the six months ended 31
December 2022 in respect of all equity-settled share-based payment
schemes was GBP1,953,000 (six months ended 31 December 2021:
GBP2,161,000; year ended 30 June 2022: GBP2,779,000).
21. Related party transactions
There were no related party transactions during the six months
ended 31 December 2022 and no balances outstanding at 31 December
2022 owed to or from related parties.
22. Guarantees and contingent liabilities
In the normal course of business, the Group is exposed to
certain legal issues that, in the event of a dispute, could develop
into litigious proceedings and, in some cases, may result in
contingent liabilities. Similarly, a contingent liability may arise
in the event of a finding in respect of the Group's tax affairs,
including the accounting for VAT, which could result in a financial
outflow and/or inflow from the relevant tax authorities.
A claim for unspecified losses has been made by a client against
Brooks Macdonald Financial Consulting Limited, a subsidiary of the
Group, in relation to alleged negligent financial advice. The
claimant has not yet advised the quantum of their claim so it is
not possible to reliably estimate the potential impact of a ruling
in their favour. There remains significant uncertainty surrounding
the claim and the Group's legal advice indicates that it is not
probable that the claim will be upheld, therefore no provision for
any liability has been recognised at this stage.
Brooks Macdonald Asset Management Limited, a subsidiary company
of the Group, has an agreement with the Royal Bank of Scotland plc
to guarantee settlement for trading with CREST stock on behalf of
clients. The Group holds client assets to fund such trading
activity. Additional levies by the FSCS may give rise to further
obligations based on the Group's income in the current or previous
years. Nevertheless, the ultimate cost to the Group of these levies
remains uncertain and is dependent upon future claims resulting
from institutional failures.
There remains one outstanding claim against Brooks Macdonald
Asset Management (International) Limited relating to legacy
matters. With reference to the exemption in IAS 37 paragraph 92,
the Group will not disclose any further information about the
possible obligation arising from the outstanding claim. The
disclosure of such information could prejudice seriously the
position of and result in financial losses to the Group.
23. Principal risks and uncertainties
During the six months ended 31 December 2022 the principal risks
and uncertainties facing the Group have been reviewed by
management, and no additional emerging risks have been identified.
The Group risks are in line with those disclosed and included
within the Group's Annual Report and Accounts for the year ended 30
June 2022.
24. Events since the end of the period
No material events have occurred between the reporting date and
the date of signing the Condensed consolidated financial
statements.
Non-IFRS financial information
Non-IFRS financial information or Alternative Performance
Measures ("APMs") are used as supplemental measures in monitoring
the performance of the Group. The adjustments applied to IFRS
measures to compute the Group's APMs excludes income and expense
categories that are deemed of a non-recurring nature or a non-cash
operating item. The Board considers the disclosed APMs to be an
appropriate reflection of the Group's performance and considered
appropriate for external analyst coverage and peer group
benchmarking.
The Group follows a rigorous process in determining whether an
adjustment should be made to present an APM compared to IFRS
measures. For an adjustment to be excluded from underlying profit
as an APM compared to statutory profit, it must initially meet at
least one of the following criteria:
-- It is unusual in nature, e.g. outside the normal course of business and operations.
-- It is a significant item, which may be recognised in more than one accounting period.
-- It has been incurred as a result of either an acquisition,
disposal or a company restructure process.
The Group uses the below APMs:
APM Equivalent IFRS measure Definition and purpose
------------------------- ------------------------ -----------------------------------------------
Underlying profit Statutory profit before Calculated as profit before tax excluding
before tax tax income and expense categories that
are deemed of a non-recurring nature
or a non-cash operating item. It is
considered by the Board to be an appropriate
reflection of the Group's performance
and considered appropriate for external
analyst coverage and peer group benchmarking.
See the Interim management report for
a reconciliation of underlying profit
before tax and statutory profit before
tax and an explanation for each item
excluded in underlying profit before
tax.
------------------------- ------------------------ -----------------------------------------------
Underlying tax charge Statutory tax charge Calculated as the statutory tax charge,
excluding the tax impact of the adjustments
excluded from underlying profit.
See Note 6 Taxation.
------------------------- ------------------------ -----------------------------------------------
Underlying earnings Total comprehensive Calculated as underlying profit before
/ Underlying profit income tax less the underlying tax charge.
after tax See Note 8 for a reconciliation of
underlying profit after tax and statutory
profit after tax.
------------------------- ------------------------ -----------------------------------------------
Underlying profit Statutory profit margin Calculated as underlying profit before
margin before tax before tax tax over revenue for the period. This
is another key metric assessed by the
Board and appropriate for external
analyst coverage and peer group benchmarking.
------------------------- ------------------------ -----------------------------------------------
Underlying basic earnings Statutory basic earnings Calculated as underlying profit after
per share per share tax divided by the weighted average
number of shares in issue during the
period. This is a key management incentive
metric and is a measure used within
the Group's remuneration schemes.
See Note 8 Earnings per share.
------------------------- ------------------------ -----------------------------------------------
Underlying diluted Statutory diluted Calculated as underlying profit after
earnings per share earnings per share tax divided by the weighted average
number of shares in issue during the
period, including the dilutive impact
of future share awards. This is a key
management incentive metric and is
a measure used within the Group's remuneration
schemes.
See Note 8 Earnings per share.
------------------------- ------------------------ -----------------------------------------------
Underlying costs Statutory costs Calculated as total administrative
expenses, other net gains/(losses),
finance income and finance costs and
excluding income and expense categories
that are deemed of a non-recurring
nature or a non-cash operating item.
This is a key measure used in calculating
underlying profit before tax.
See the Interim management report for
details on underlying costs.
------------------------- ------------------------ -----------------------------------------------
Segmental underlying Segmental statutory Calculated as profit before tax excluding
profit before tax profit before tax income and expense categories that
are deemed of a non-recurring nature
or a non-cash operating item for each
segment.
See Note 3 Segmental information.
------------------------- ------------------------ -----------------------------------------------
Segmental underlying Segmental statutory Calculated as segmental underlying
profit before tax profit before tax profit before tax over segmental revenue.
margin margin
------------------------- ------------------------ -----------------------------------------------
Statement of Directors' responsibilities
The Directors confirm that the Interim Report and Accounts have
been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union
and that the interim management report includes a fair review of
the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the Condensed consolidated
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Report and Accounts.
The Directors of Brooks Macdonald Group plc are listed within
Further information.
By order of the Board of Directors
Andrew Shepherd
CEO
1 March 2023
Independent review report to Brooks Macdonald Group plc
for the six months ended 31 December 2022
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Brooks Macdonald Group plc's condensed
consolidated interim financial statements (the "interim financial
statements") in the Interim Report and Accounts of Brooks Macdonald
Group plc for the 6 month period ended 31 December 2022 (the
"period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the AIM Rules for Companies.
The interim financial statements comprise:
-- the Condensed consolidated statement of financial position as at 31 December 2022;
-- the Condensed consolidated statement of comprehensive income for the period then ended;
-- the Condensed consolidated statement of cash flows for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Report
and Accounts of Brooks Macdonald Group plc have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the AIM Rules for Companies.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Report and Accounts for the six months period ended 31 December
2022 and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Report and Accounts for the six months period ended
31 December 2022, including the interim financial statements, is
the responsibility of, and has been approved by the directors. The
directors are responsible for preparing the Interim Report and
Accounts for the six months period ended 31 December 2022 in
accordance with the AIM Rules for Companies which require that the
financial information must be presented and prepared in a form
consistent with that which will be adopted in the company's annual
financial statements. In preparing the Interim Report and Accounts
for the six months period ended 31 December 2022, including the
interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Report and Accounts for the six
months period ended 31 December 2022 based on our review. Our
conclusion, including our Conclusions relating to going concern, is
based on procedures that are less extensive than audit procedures,
as described in the Basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the AIM
Rules for Companies and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
1 March 2023
Further information
Directors
Richard Price Acting Chairman
Andrew Shepherd CEO
Robert Burgess Non-Executive Director
Dagmar Kershaw Non-Executive Director
John Linwood Non-Executive Director
Financial calendar
Interim results announced 2 March 2023
Ex-dividend date for interim 9 March 2023
dividend
Record date for interim dividend 10 March 2023
Payment date of interim dividend 6 April 2023
Company information
Secretary Phil Naylor
Company registration number 04402058
Registered office 21 Lombard Street, London, EC3V 9AH
Website www.brooksmacdonald.com
Cautionary statement
The Interim Report and Accounts for the six months ended 31
December 2022 has been prepared to provide information to
shareholders to assess the current position and future potential of
the Group. The Interim Report and Accounts contains certain
forward-looking statements concerning the Group's financial
condition, operations and business opportunities. These
forward-looking statements involve risks and uncertainties that
could impact the actual results of operations, financial condition,
liquidity, dividend policy and the development of the industry in
which the Group operates and differ materially from the impression
created by the forward-looking statements. Any forward-looking
statement is made using the best information available to the
Directors at the time of their approval of this report. Past
performance cannot be relied on as a guide to future
performance.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
IR EAFDFEFFDEAA
(END) Dow Jones Newswires
March 02, 2023 02:00 ET (07:00 GMT)
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